Agricultural Marketing Service
Forest Service
Rural Utilities Service
Foreign-Trade Zones Board
International Trade Administration
National Oceanic and Atmospheric Administration
Office of the Under-Secretary for Economic Affairs
Federal Energy Regulatory Commission
Centers for Disease Control and Prevention
Food and Drug Administration
Indian Health Service
National Institutes of Health
Coast Guard
Federal Emergency Management Agency
Fish and Wildlife Service
Land Management Bureau
National Park Service
Drug Enforcement Administration
National Endowment for the Arts
Federal Aviation Administration
Maritime Administration
Financial Crimes Enforcement Network
Foreign Assets Control Office
Internal Revenue Service
Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws.
To subscribe to the Federal Register Table of Contents electronic mailing list, go to https://public.govdelivery.com/accounts/USGPOOFR/subscriber/new, enter your e-mail address, then follow the instructions to join, leave, or manage your subscription.
Federal Aviation Administration (FAA), DOT.
Final rule; request for comments; correction.
The FAA is correcting an airworthiness directive (AD) that published in the
This correction is effective October 30, 2020. The effective date of AD 2020-21-09 remains October 30, 2020.
The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of October 30, 2020 (85 FR 65200, October 15, 2020).
The date by which the FAA must receive comments on AD 2020-21-09 remains November 30, 2020.
For material incorporated by reference (IBR) in this AD, contact the European Union Aviation Safety Agency (EASA), Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; phone: +49 221 8999 000; email:
You may examine the AD docket on the internet at
Sanjay Ralhan, Aerospace Engineer, Large Aircraft Section, International Validation Branch, FAA, 2200 South 216th St., Des Moines, WA 98198; phone and fax: 206-231-3223; email:
AD 2020-21-09, Amendment 39-21282 (85 FR 65200, October 15, 2020) (AD 2020-21-09), currently requires a general visual inspection of the main landing gear (MLG) sliding tubes for cracks, and replacement, if necessary. That AD applies to all Airbus SAS Model A318 series airplanes; Model A319 series airplanes; Model A320 series airplanes; and Model A321 series airplanes.
As published, paragraph (h)(3) of the regulatory text of AD 2020-21-09 contains a reference to paragraph (4) of EASA AD 2020-0193, dated September 7, 2020 (EASA AD 2020-0193). However, paragraph (h)(3) of AD 2020-21-09 is an exception to the reporting required by EASA AD 2020-0193. The correct reference to the reporting requirement is paragraph (3) of EASA AD 2020-0193.
EASA AD 2020-0193 describes procedures for a general visual inspection of the MLG sliding tubes for cracks, and replacement, if necessary. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
This document corrects an error and correctly adds the AD as an amendment to 14 CFR 39.13. Although no other part of the preamble or regulatory information has been corrected, the FAA is publishing the entire rule in the
The effective date of this AD remains October 30, 2020.
Since this action only corrects a paragraph reference located in the reporting exception, it has no adverse economic impact and imposes no additional burden on any person. Therefore, the FAA has determined that notice and public procedures are unnecessary.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration amends part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:
49 U.S.C. 106(g), 40113, 44701.
This AD becomes effective October 30, 2020.
None.
This AD applies to all the Airbus SAS airplanes identified in paragraphs (c)(1) through (4) of this AD, certificated in any category.
(1) Model A318-111, -112, -121, and -122 airplanes.
(2) Model A319-111, -112, -113, -114, -115, -131, -132, -133, -151N, -153N, and -171N airplanes.
(3) Model A320-211, -212, -214, -216, -231, -232, -233, -251N, -252N, -253N, -271N, -272N, and -273N airplanes.
(4) Airbus SAS Model A321-111, -112, -131, -211, -212, -213, -231, -232, -251N, -252N, -253N, -271N, -272N, -251NX, -252NX, -253NX, -271NX, and -272NX airplanes.
Air Transport Association (ATA) of America Code 32, Landing gear.
This AD was prompted by reports of cracks on the main landing gear (MLG) sliding tubes. The FAA is issuing this AD to address cracks on the MLG sliding tubes, which could cause MLG sliding tube fracture, and could possibly result in the MLG collapsing, damaging the airplane, and injuring occupants.
Comply with this AD within the compliance times specified, unless already done.
Except as specified in paragraph (h) of this AD: Comply with all required actions and compliance times specified in, and in accordance with, EASA AD 2020-0193, dated September 7, 2020 (EASA AD 2020-0193).
(1) Where EASA AD 2020-0193 refers to its effective date, this AD requires using the effective date of this AD.
(2) The “Remarks” section of EASA AD 2020-0193 does not apply to this AD.
(3) Paragraph (3) of EASA AD 2020-0193 specifies to report inspection results to Airbus within a certain compliance time. For this AD, report inspection results at the applicable time specified in paragraph (h)(3)(i) or (ii) of this AD.
(i) If the inspection was done on or after the effective date of this AD: Submit the report within 15 days after the inspection.
(ii) If the inspection was done before the effective date of this AD: Submit the report within 15 days after the effective date of this AD.
The following provisions also apply to this AD:
(1)
(2)
(3)
(4)
For more information about this AD, contact Sanjay Ralhan, Aerospace Engineer, Large Aircraft Section, International Validation Branch, FAA, 2200 South 216th St., Des Moines, WA 98198; phone and fax: 206-231-3223; email:
(1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.
(3) The following service information was approved for IBR on October 30, 2020 (85 FR 65200, October 15, 2020).
(i) European Union Aviation Safety Agency (EASA) AD 2020-0193, dated September 7, 2020.
(ii) [Reserved]
(4) For EASA AD 2020-0193, contact the EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email
(5) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. This material may be found in the AD docket on the internet at
(6) You may view this material that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, email
Internal Revenue Service (IRS), Treasury.
Final regulations.
This document contains final regulations under sections 1502 and 1503 of the Internal Revenue Code (Code). These regulations provide guidance implementing recent statutory amendments to section 172 of the Code
Justin O. Kellar at (202) 317-6720, Gregory J. Galvin at (202) 317-3598, or William W. Burhop at (202) 317-5363.
This Treasury decision amends the Income Tax Regulations (26 CFR part 1) under section 1502 of the Code. Section 1502 authorizes the Secretary of the Treasury or his delegate (Secretary) to prescribe regulations for an affiliated group of corporations that join in filing (or that are required to join in filing) a consolidated return (consolidated group) to reflect clearly the Federal income tax liability of the consolidated group and to prevent avoidance of such tax liability. See § 1.1502-1(h) (defining the term “consolidated group”). For purposes of carrying out those objectives, section 1502 also permits the Secretary to prescribe rules that may be different from the provisions of chapter 1 of the Code that would apply if the corporations composing the consolidated group filed separate returns. Terms used in the consolidated return regulations generally are defined in § 1.1502-1.
On July 8, 2020, the IRS published a notice of proposed rulemaking (REG-125716-18) in the
In connection with the proposed regulations, the IRS published on the same date temporary regulations under section 1502 (TD 9900) in the
The IRS received seven comments in response to the proposed regulations. Copies of the comments received are available for public inspection at
These final revisions implement certain statutory amendments to section 172 made by Public Law 115-97, 131 Stat. 2054 (December 22, 2017), commonly referred to as the Tax Cuts and Jobs Act (TCJA), and by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Public Law 116-136, 134 Stat. 281 (March 27, 2020). See generally the Background section of the preamble to the proposed regulations. As amended, section 172(a)(2) allows an NOL deduction for a taxable year beginning after December 31, 2020, in an amount equal to the sum of (A) the aggregate amount of pre-2018 NOLs that are carried to such taxable year, and (B) the lesser of (i) the aggregate amount of post-2017 NOLs that are carried to such taxable year, or (ii) the “80-percent limitation.” The 80-percent limitation is equal to 80 percent of the excess (if any) of (I) taxable income computed without regard to any deductions under sections 172, 199A, and 250 of the Code, over (II) the aggregate amount of pre-2018 NOLs carried to the taxable year. See section 172(a)(2)(B)(ii). For purposes of the foregoing computation, the term “pre-2018 NOLs” refers to NOLs arising in taxable years beginning before January 1, 2018, and the term “post-2017 NOLs” refers to NOLs arising in taxable years beginning after December 31, 2017.
The 80-percent limitation does not apply to the offset of income by NOLs in taxable years beginning before January 1, 2021. Section 172(a)(1). The 80-percent limitation also does not apply to limit the use of pre-2018 NOLs. Section 172(a)(2)(A).
Moreover, the 80-percent limitation does not apply to insurance companies other than life insurance companies (nonlife insurance companies). Section 172(f). Therefore, the taxable income of nonlife insurance companies may be fully offset by NOL deductions. In addition, under section 172(b)(1)(C) and (b)(1)(D)(i), losses of nonlife insurance companies arising in taxable years beginning after December 31, 2020, may be carried back two years and carried over 20 years. In contrast, losses (aside from farming losses) of other taxpayers arising in such taxable years may not be carried back but may be carried forward indefinitely. Section 172(b)(1). Thus, nonlife insurance companies are subject to special rules under section 172 both with respect to the amount of taxable income that may be offset by NOL deductions and with respect to the taxable years to which NOLs may be carried.
To implement the special rules under section 172 for nonlife insurance companies for a consolidated return year beginning after December 31, 2020, the proposed regulations provided that the application of the 80-percent limitation within a consolidated group to post-2017 NOLs depends on the status of the member that generated the income being offset. The proposed regulations further provided that the amount of post-2017 CNOLs that may be absorbed by one or more members of the group in such a consolidated return year (post-2017 CNOL deduction limit) is determined by applying the 80-percent limitation, section 172(f) (that is, the special rule for nonlife insurance companies), or both, to the group's consolidated taxable income (CTI) for that year. See proposed § 1.1502-21(a)(2)(ii)(A) and (B).
For consolidated groups comprised of both nonlife insurance companies and other members for a consolidated return year beginning after December 31, 2020, the proposed regulations adopted a two-factor computation (proposed
In formulating the proposed regulations, the Treasury Department and the IRS considered another approach (alternative approach). This alternative approach would have required a group to first offset income and loss items within a pool of nonlife insurance companies and a pool of other members for all purposes of section 172 applicable to taxable years beginning after December 31, 2020. In other words, the alternative approach would have applied a pooling concept beyond merely determining the group's post-2017 CNOL deduction limit, but would have required a group's CTI to be allocated between the operations of its nonlife insurance company members, which can be offset fully by CNOL deductions, and the operations of its other members subject to the 80-percent limitation. This alternative approach would also have applied similar rules to allocate CNOLs within groups including both nonlife insurance companies and other members to consistently identify the portions of CNOLs allocable to nonlife insurance company members, which are subject to different carryover rules than those of other members.
The alternative approach would have contrasted with the historical application of § 1.1502-21(b)(2)(iv)(B), under which a CNOL for a taxable year is attributed pro rata to all members of a group that produce net loss, without first netting among entities of the same type. In the preamble to the proposed regulations, the Treasury Department and the IRS requested comments regarding both the proposed approach and the alternative approach.
In response to the request for comments, the Treasury Department and the IRS received comments that uniformly approved the proposed approach. For example, two commenters commended the proposed regulations as implementing the statutory amendments to section 172 in a reasonable manner that is consistent with both the statute and consolidated return principles. Specifically, both commenters supported the proposed regulations' approach to computing a group's post-2017 CNOL deduction limit as well as the proposed regulations' retention of the historical pro rata approach under § 1.1502-21(b)(2)(iv)(B) to determine the amount of nonlife insurance company losses that can be carried to other taxable years.
In support of the proposed regulations, one commenter asserted that the proposed approach is more consistent with the treatment of CNOLs as consolidated items and with the current CNOL use and absorption rules in § 1.1502-21 than the alternative approach. The commenter further asserted that, because the alternative approach would depart from the general pro rata rules of § 1.1502-21 by first netting income and loss among entities of the same type within a consolidated group, the alternative approach could result in computational and compliance complications in circumstances that may be difficult to anticipate.
In response to the comments received, these final regulations retain the proposed approach to computing a consolidated group's post-2017 CNOL deduction limit.
One commenter recommended that, for consolidated groups with both nonlife insurance companies and life insurance companies, the amounts of the residual income pool and the nonlife income pool in proposed § 1.1502-21(a)(2)(iii)(C)(
Section 1.1502-11(a)(3) provides that the CTI for a consolidated return year is determined by taking into account, among other enumerated items, any consolidated capital gain net income. See generally § 1.1502-22(a) (providing rules for determining consolidated capital gain net income). Under § 1.1502-22(a), the determinations for a consolidated group under section 1222, including capital gain net income, are not made separately. Instead, such consolidated amounts are determined for the group as a whole.
Section 1.1502-11 does not provide explicit rules for allocating consolidated capital gain net income among members. Thus, one commenter requested that the final regulations clarify that, for groups that include nonlife insurance companies, consolidated capital gain net income under § 1.1502-11(a)(3) is allocated to the residual income pool and the nonlife income pool using a pro rata method based on the principles of § 1.1502-21(b)(2)(iv), as reflected in the general rule in § 1.1502-21(b)(1), for the use and absorption of CNOLs.
Section 1.1502-11 also does not provide explicit rules for determining the amount of each member's income that is offset by losses (whether incurred in the current year or carried over or back as a part of a CNOL or consolidated net capital loss). However, the Treasury Department and the IRS understand that, in the absence of express rules, consolidated return practitioners generally apply the principles of § 1.1502-21(b)(2)(iv) to make such determinations. The methodology for computing a consolidated group's post-2017 CNOL deduction limit is intended to implement the changes made to section 172(a) by the TCJA and the CARES Act in a manner that is flexible for taxpayers to apply and administrable for the IRS. The Treasury Department and the IRS have determined that specific rules regarding the allocation of consolidated capital gain net income to the residual income pool and the nonlife income pool under § 1.1502-21(a)(2)(iii)(C)(
Proposed § 1.1502-21(b)(2)(v)(F) (Example 6) contains an example that illustrates the application of section 172 to a CNOL incurred by a consolidated group (P group) that includes P, an includible corporation under section 1504(b) of a type other than a nonlife insurance company, and PC1, a nonlife insurance company. Both P and PC1 were incorporated in Year 1, a year beginning after December 31, 2020. In Year 1, the P group has $45 of CTI, $20 of which is attributable to P and $25 of which is attributable to PC1. In Year 2, the P group incurs a $16 CNOL that is attributable to PC1 and that is carried back to Year 1 under section 172(b)(1)(C)(i).
The example illustrates that, under proposed § 1.1502-21(a)(2)(iii)(C), the P group's post-2017 CNOL deduction limit for Year 1 is $41, which is the sum of the residual income pool ($16) and the nonlife income pool ($25), as described in proposed § 1.1502-21(a)(2)(iii)(C)(
Two commenters requested clarification as to how much taxable income in each pool is offset by a CNOL carryover or carryback if each pool has positive taxable income, as in Example 6. Specifically, commenters contended that a specific absorption rule is needed to determine how much taxable income in the residual income pool (which is subject to the 80-percent limitation) can be offset by subsequent CNOL carryovers or carrybacks to the same year. For example, assume the same facts as in Example 6, but that the P group also incurs a $30 CNOL in Year 3 that is entirely attributable to PC1 and that is eligible to be carried back to Year 1. Absent a rule specifying how much taxable income in each pool was offset in Year 1 by the $16 Year 2 CNOL carryback, the commenters questioned how to compute the residual income pool for purposes of determining how much of the P group's Year 3 CNOL carryback could be absorbed by the P group in Year 1.
As noted in part I.A of this Summary of Comments and Explanation of Revisions, the computation in section 172(a)(2)(B)(ii) is made “without regard to the deductions under [section 172] and sections 199A and 250.” Consistent with the statute, the amount of income in the residual income pool that is subject to the 80-percent limitation for a particular consolidated return year is not recomputed to reflect the amount of CNOLs carried over to and absorbed in that year. See § 1.1502-21(a)(2)(iii)(C)(
With regard to Example 6, if the P group were to incur a $30 CNOL in Year 3 that was eligible to be carried back to Year 1, the P group would redetermine the aggregate amount of the P group's post-2017 CNOLs that are carried to Year 1, but the P group would not recompute the amount of Year 1 income subject to the 80-percent limitation. Thus, an absorption rule is not needed to determine how much of the P group's Year 1 CTI can be offset by subsequent CNOL carrybacks. However, these final regulations provide additional facts in Example 6 to illustrate the computation of the amount of additional CNOL carryovers or carrybacks to the same consolidated return year that can be deducted to offset income in that year.
If a member of one consolidated group becomes a member of another consolidated group, § 1.1502-21(b)(3)(ii)(B) permits the acquiring group to make an irrevocable election to relinquish, with respect to all CNOLs attributable to the acquired corporation, the portion of the carryback period for which the acquired corporation was a member of another group (so long as any other corporation joining the acquiring group that was affiliated with the acquired corporation immediately before it joined the acquiring group also is included in the waiver).
A commenter noted that, pursuant to § 1.1502-21(b)(3)(ii)(B), an acquiring group may make a split-waiver election only with respect to acquired corporations that were members of a different consolidated group in a carryback year. The commenter recommended that § 1.1502-21(b)(3)(ii) be expanded to allow a split-waiver election if the acquired corporation was not a member of a consolidated group in the carryback year.
The Treasury Department and the IRS appreciate the commenter's suggestion and will continue to consider it in connection with the future finalization of the temporary regulations. However, this comment exceeds the scope of these final regulations, which adopt the provisions of the proposed regulations other than those for which the text was contained in the temporary regulations (specifically, § 1.1502-21(b)(3)(ii)(C) and (D)). Therefore, the Treasury Department and the IRS decline to adopt this recommendation in this Treasury decision.
The proposed regulations modify the separate return limitation year (SRLY) rules in § 1.1502-21(c) to take into account the limitations on NOL deductions under section 172, as amended by the TCJA and the CARES Act. See proposed § 1.1502-21(c)(1)(i)(E). A commenter recommended that this modification not apply for purposes of section 1503(d) (the dual consolidated loss (DCL) rules). In certain cases, the extent to which section 1503(d) restricts the use of a DCL, or requires the recapture of a DCL (or a related interest charge), depends on the application of the SRLY rules in § 1.1502-21(c), subject to certain adjustments. See §§ 1.1503(d)-4(c)(3) and 1.1503(d)-6(h)(2). In these cases, the adjusted SRLY rules are generally intended to ensure that a DCL may be used only to offset income of the dual resident corporation or separate unit that incurred the DCL, such that the use does not result in a “double dip” of the DCL.
The commenter recommended that the modification reflected in proposed § 1.1502-21(c)(1)(i)(E) not apply for purposes of the DCL rules because the modification addresses policies specific to the SRLY rules in § 1.1502-21(c) (replicating, to the extent possible, separate-entity usage of SRLY attributes), which differ from the policies underlying the DCL rules (preventing double dipping of losses). In addition, the commenter asserted that applying the rule in proposed § 1.1502-21(c)(1)(i)(E) for DCL purposes could distort the determination of whether double dipping could occur.
The Treasury Department and the IRS agree with the commenter. The final regulations therefore provide that § 1.1502-21(c)(1)(i)(E) does not apply for purposes of the DCL rules. See § 1.1503(d)-4(c)(3)(v).
In addition to the foregoing comments, a commenter recommended clarifying changes to proposed § 1.1502-21. The Treasury Department and the IRS appreciate these suggested clarifications and have incorporated many of them into the final regulations. However, the commenter also recommended deleting the reference to section 199A in proposed §§ 1.1502-21(a)(2)(iii)(A)(
The Treasury Department and the IRS also have made additional clarifying revisions based on further review of the proposed regulations. In particular, the final regulations contain corrections to scrivener's errors in the two-factor computation in proposed § 1.1502-21(a)(2)(iii). Specifically, the “lesser of” language in proposed § 1.1502-21(a)(2)(iii)(C)(
Additional edits have been made to enhance the consistency and clarity of the rules in proposed § 1.1502-21(a)(2). For example, language reflecting the “lesser of” comparison described in the preceding paragraph has been explicitly integrated into §§ 1.1502-21(a)(2)(iii)(B) and 1.1502-21(a)(2)(iii)(C)(
Likewise, in the absence of any other limitation, the taxable income of a taxpayer always constitutes a limit on the deductibility of NOLs. See generally section 172(b)(2). Without such limit, the deduction of NOLs in excess of taxable income would create an additional NOL. The Treasury Department and IRS have determined that explicitly providing the respective post-2017 CNOL and taxable income limitations on the deduction of NOLs to offset taxable income of nonlife insurance companies will enhance the clarity of the final regulations and the consistency of their application.
The proposed regulations updated the rules in § 1.1502-47 to reflect statutory changes enacted since these rules were promulgated. Commenters commended the Treasury Department and the IRS for updating these regulations. Additionally, several commenters expressed their understanding that another guidance project has been initiated to propose substantive changes to § 1.1502-47 and urged the Treasury Department and the IRS to give priority to this effort. These commenters argued that the objective of that guidance project should be the elimination of any provisions that depart from general consolidated return principles in life-nonlife consolidation, except to the extent non-conforming provisions are necessary to implement specific provisions of the Code. In particular, these commenters expressed concern about the treatment of consolidated capital gains and losses under § 1.1502-47 and requested simplification of the eligibility and tacking rules.
The Treasury Department and the IRS appreciate the commenters' input and welcome further comments regarding substantive changes to § 1.1502-47 for purposes of potential future guidance. However, such changes are beyond the scope of these final regulations.
Additionally, commenters recommended several clarifying changes to proposed § 1.1502-47. Many of these suggested clarifications have been incorporated into the final regulations. For example, these final regulations have added a cross-reference to the definition of “nonlife insurance company” in § 1.1502-1(k). However, one commenter recommended that § 1.1502-47(g)(3) of these final regulations be modified to more closely parallel § 1.1502-47(f)(3) of these final regulations. The commenter further requested that paragraph (d)(5) of these final regulations be modified to explicitly set forth the various rules (both statutory and regulatory) that apply to certain dividends received by an includible member from another member of the consolidated group. These comments exceed the scope of these final regulations, but the Treasury Department and the IRS will continue to consider these comments for purposes of potential future guidance regarding § 1.1502-47.
The final regulations in §§ 1.1502-1(k), 1.1502-21(a), (b)(1), (b)(2)(iv), and (c)(1)(i)(E), 1.1502-47, and 1.1503(d)-8(b)(8) apply to taxable years beginning after December 31, 2020. However, a taxpayer may choose to apply the rules in §§ 1.1502-1(k) and 1.1502-47 of these final regulations to taxable years beginning on or before December 31, 2020. If a taxpayer makes the choice described in the previous sentence with regard to the rules in § 1.1502-47, the corporation must apply those rules in their entirety and consistently with the provisions of the Internal Revenue Code applicable to the years at issue.
Executive Orders 13563, 13771, and 12866 direct agencies to assess costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility.
These final regulations have been designated as subject to review under Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Treasury Department and the Office of Management and Budget (OMB) regarding review of tax regulations. The Office of Information and Regulatory Affairs (OIRA) has designated the final regulations as economically significant under section 1(c) of the Memorandum of Agreement. Accordingly, OMB has reviewed the final regulations.
In general, taxpayers whose deductions exceed their income generate a net operating loss (NOL),
The TCJA and the Coronavirus Aid, Relief, and Economic Security (CARES) Act made several changes to section 172. First, the TCJA and the CARES Act disallowed the carry back of NOLs generated in taxable years beginning after 2020, except for farming losses and losses incurred by corporations that are insurance companies other than life insurance companies (nonlife insurance companies). Second, the TCJA and the CARES Act limited the NOL deduction in taxable years beginning after 2020 for NOLs generated in 2018 or later (post-2017 NOLs) to 80 percent of taxable income determined after the deduction for pre-2018 NOLs but before the deduction for post-2017 NOLs. This 80-percent limitation does not apply to nonlife insurance companies.
These final regulations implement the changes to section 172 in the context of consolidated groups. In particular, regulations are needed to address three issues related to consolidated groups that were not expressly addressed in the TCJA or the CARES Act. First, the final regulations describe how to determine the 80-percent limitation in the case of a “mixed” group—that is, a consolidated group containing nonlife insurance companies and other members. Second, the final regulations address the calculation and allocation of farming losses. Third, the final regulations implement the 80-percent limitation into existing regulations to determine the CNOL deduction attributable to losses from a member arising during periods in which that member was not part of that group. Part I.B of this Special Analyses describes the manner by which the final regulations addresses each of these issues.
Part I.B also describes an alternative approach that was contemplated by the Treasury Department and the IRS regarding the allocation of currently generated losses to nonlife insurance companies and other members. The Treasury Department and the IRS elected not to implement this approach.
In this part I.B the following terms are used. The term “P group” means a consolidated group of which P is the common parent. The term “P&C member” means a member of the P group that is a nonlife insurance company. The term “C member” means a member of the P group that is a C corporation other than a nonlife insurance company.
Under the statute, the general rule for determining the NOL deduction (for a taxable year beginning after December 31, 2020) effectively proceeds in two steps. First, the taxpayer deducts pre-2018 NOLs without limit. Second, the taxpayer deducts post-2017 NOLs up to 80 percent of the taxpayer's taxable income (computed without regard to the deductions under sections 199A and 250) determined after the deduction of pre-2018 NOLs (but, naturally, before the deduction for post-2017 NOLs). However, this 80-percent limitation does not apply for corporations that are nonlife insurance companies.
The application of the 80-percent limitation to the P group is straightforward if (i) there are no pre-2018 NOLs and (ii) both classes of P&C members and C members have positive income before the CNOL deduction. In that case, these final regulations provide, quite naturally, that the CNOL limitation is determined by adding (i) the pre-CNOL income generated by the class of C members (C member income pool), determined by applying the 80-percent limitation, plus (ii) 100 percent of the pre-CNOL income generated by the class of P&C members (P&C member income pool). This latter treatment reflects the rule in section 172(f) that nonlife insurance companies are not subject to the 80-percent limitation.
One complication arises when the pre-CNOL C member income pool is positive and the pre-CNOL P&C income pool is negative, and the P group has positive combined pre-CNOL taxable income. In this case (where the pre-CNOL income is generated by C members, rather than P&C members), these final regulations provide that the post-2017 CNOL deduction limit is determined by applying the 80-percent limitation to the income of the P group. If the situation were reversed, such that the P group had positive combined taxable income but the pre-CNOL income is generated by P&C members, rather than the C members, the post-2017 CNOL deduction limit is equal to the income of the P group (that is, determined without regard to the 80-percent limitation). In essence, in these situations, the amount of the P group's income able to absorb a post-2017 CNOL carryover is defined by the member pool (that is, the C member income pool or the P&C member income pool) that is generating the income.
The other complication occurs when there is a pre-2018 NOL. In this situation, it matters whether the pre-2018 NOL is treated as reducing the amount of the C member income pool or reducing the amount of P&C member income pool. Consider the following example (Example 1). In Example 1, the P group carries $50 in pre-2018 NOLs and $1000 in post-2017 NOLs to 2021. In 2021, the P&C members and the C members, respectively, earn (pre-CNOL) income of $100. If the pre-2018 NOL were treated as solely reducing the amount of C member income pool, then the limitation for the post-2017 CNOL deduction would be $100 plus 80 percent of $50 ($100 minus $50), equal to $140. If the pre-2018 NOL were treated as solely reducing the amount of the P&C member income pool, then the post-2017 CNOL deduction limit for the P group would be $50 ($100 minus $50) plus 80 percent of $100, or $130.
These final regulations allocate the pre-2018 NOL pro-rata to the C member income pool and the P&C member income pool in proportion to their current-year income. In Example 1, $25 of the pre-2018 NOL would be allocated to the C member income pool and $25 to the P&C member income pool. Therefore, the post-2017 CNOL deduction limit for the P group would be $75 ($100 minus $25) plus 80 percent of $75 ($100 minus $25), or $135.
Section 172 provides that NOLs arising in a taxable year beginning after December 31, 2020, may not be carried back to prior years, with two exceptions: (1) Farming losses and (2) nonlife insurance company losses. Section 172(b)(1)(B) defines a “farming loss” as the smaller of the actual loss from farming activities in a given year (that is, the excess of the deductions in farming activities over income in farming activities) and the total NOL generated in that year. This statutory provision means that if a taxpayer incurs a loss in farming activities but has overall income in other activities, the farming loss will be smaller than the loss in farming activities (and can possibly be zero).
Regulations were needed to clarify two issues that arise in the context of consolidated groups. First, these regulations clarify that the maximum amount of farming loss is the CNOL of the group rather than the NOL of the specific member generating the loss in farming activities. This approach follows closely regulations issued by the Treasury Department and the IRS in 2012 in an analogous setting.
Second, given the overlapping categories of carryback-eligible NOLs (farming losses and nonlife insurance companies), regulations are needed to allocate the farming loss to the various members to determine the total amount of CNOL that can be carried back. Consider the following example (Example 2). In Example 2, the P group consists of one C member and one P&C member. In 2021, the C member's only activity is farming and the C member incurs a loss of $30, while the P&C member incurs a loss of $10. The total farming loss is $30, since $30 is less than the P group CNOL of $40. If this farming loss were allocated entirely to the C member, then the total amount eligible for carryback would be $40 (that is, $30 for the farming loss and $10 for the loss incurred by the P&C member). By contrast, if the farming loss were allocated entirely to the P&C member, only $30 would be eligible to be carried back.
Again, following a similar rule as the 2012 regulations, these final regulations allocate the farming loss to each member of the group in proportion with their share of total losses, without regard to whether each member actually engaged in farming. In Example 2, this would allocate $7.50 (that is, one-fourth of $30) of the farming loss to the P&C member and the remaining $22.50 (that is, three-fourths of $30) to the C member. Therefore, the P group would be allowed to carry back $32.50 total (that is, the $10 of loss generated by the P&C member and the $22.50 of farming losses allocated to the C member).
To reduce “loss trafficking,” existing regulations under section 1502 limit the extent to which a consolidated group (that is, the P group) can claim a CNOL attributable to losses generated by some member (M) in years in which M was not a member. In particular, existing rules limit this amount of loss to the amount of the loss that would have been deductible had M remained a separate entity; that is, the rules are designed to preserve neutrality in loss use between being a separate entity or a member of a group. Existing rules operationalize this principle using the mechanic of a “cumulative register.” The cumulative register is equal to the (cumulative) amount of M's income that is taken into account in the P group's income. Income earned by M while a member of the P group increases the cumulative register, while losses (carried over or otherwise) taken into account by the group reduce the cumulative register. In general, the existing rules provide that M's pre-group NOLs cannot offset the P group's income when the cumulative register is less than or equal to zero.
The introduction of the 80-percent limitation in the TCJA and CARES Act necessitates an adjustment to this mechanism in order to retain this neutrality-in-loss-use property. In particular, these final regulations provide that any losses by M that are absorbed by the P group and subject to the 80-percent limitation cause a reduction to the register equal to the full amount of income needed to support that deduction. The following example (Example 3) demonstrates why this adjustment is necessary. In Example 3, P and S are each corporations other than nonlife insurance companies (that is, they are subject to the 80-percent limitation). Suppose in 2021, S incurs a loss of $800, which is the only loss ever incurred by S. In 2022, S incurs income of $400. If S were not a member of a consolidated group, its 2022 NOL deduction would be limited to $320 (80 percent of $400). Suppose instead that P acquires S in 2022 and that P has separate income of $600 in 2022, so the consolidated group has $1000 in pre-CNOL income in 2022. Before claiming any CNOLs, S's cumulative register would increase to $400 in 2022. Without any additional rules, the $400 cumulative register would allow P to claim a CNOL of $400 (bringing the register down to zero), greater than what would have been allowed had S remained a separate entity. By contrast, requiring the register to be reduced by 125 percent of the NOL (as under the final regulations) allows P to claim only a $320 CNOL, replicating the result if S were a separate entity.
In general, under the TCJA and CARES Act, taxpayers may not carry back any losses generated in tax years beginning after 2020, with the exception of losses generated by nonlife insurance companies and farming losses. Existing regulations clarify that CNOLs are allocated to each member in proportion to the total loss. This allocation rule can be illustrated by example (Example 4). In Example 4, the C member has a current loss of $10 (in a tax year beginning in 2021 or later). The P&C members are corporations PC1 and PC2. PC1 has a gain of $40 and PC2 has a loss of $40. Assume that the P group does not engage in any farming activities. The CNOL for the P group is $10. The $10 of CNOL is allocated to the C member and PC2 in proportion to their total losses. The C member has one-fifth of the total loss ($10 divided by $50) and PC2 has four-fifths. Therefore, under the existing regulations, the C member is allocated $2 ($10 times one-fifth) and PC2 is allocated $8 ($10 times four-fifths). In the end, $8 of the CNOL may be carried back in Example 4. The final regulations do not alter these existing regulations.
In formulating these final regulations, the Treasury Department and the IRS contemplated an alternative approach. Under this alternative, consolidated groups would be required to compute gain and loss by grouping P&C members and C members separately prior to allocating CNOL to members. The application of this approach can be seen by revisiting Example 4. Under this alternative approach, because the P&C members as a whole do not have a loss, no CNOL would be allocated to any P&C member regardless of the gain or loss of any of the individual P&C members. Thus, under the alternative approach, none of the $10 CNOL would be eligible for carryback in Example 4.
In this analysis, the Treasury Department and the IRS assess the benefits and costs of the final regulations relative to a no-action baseline reflecting anticipated Federal income tax-related behavior in the absence of these regulations.
The final regulations provide certainty and clarity to taxpayers regarding the treatment of NOLs under section 172 and the regulations under section 1502. In the absence of such guidance, the chance that different taxpayers would interpret the statute and the regulations differently would be exacerbated. Similarly situated taxpayers might interpret those rules differently, with one taxpayer pursuing an economic opportunity that another taxpayer might decline to make because of different interpretations of the ability of losses to offset taxable income. If this second taxpayer's activity were more profitable, the resulting economic decisions are inefficient. Such situations are more likely to arise in the absence of guidance. While no guidance can
To the extent that the specific provisions of the final regulations result in the acceleration or delay of the tax year in which taxpayers deduct an NOL relative to the baseline, those taxpayers may face a change in the present value of the after-tax return to new investment, particularly investment that may result in losses. The resulting changes in the incentives facing the taxpayer are complex and may lead the taxpayer either to increase, decrease, or leave unchanged the volume and risk level of its investment portfolio, relative to the baseline, in ways that depend on the taxpayer's stock of NOLs and the depreciation schedules and income patterns of investments they would typically consider, including whether the investment is subject to bonus depreciation. Because these elements are complex and taxpayer-specific and because the sign of the effect on investment is generally ambiguous, the Treasury Department and the IRS have not projected the specific effects on economic activity arising from the final regulations.
The Treasury Department and the IRS project that these regulations will have annual effects below $100 million ($2020) relative to the baseline. The effects are small because the regulations apply only to consolidated groups; in addition, several provisions of the final regulations apply only to the extent that a consolidated group contains a mix of member types. Moreover, the effects are small because: (i) For provisions of the final regulations that affect the deduction for pre-2018 NOLs, the effects are limited to the stock of the pre-2018 NOLs; and (ii) for provisions that affect the allowable rate of loss usage of post-2017 NOLs, the effect arises only from the 20 percentage point differential in the deduction for these NOLs. This latter effect in particular, to which the bulk of the provisions apply, is too small to substantially affect taxpayers' use of NOLs and thus too small to lead to meaningful changes in economic decisions.
The Treasury Department and the IRS did not estimate more precisely the economic effects of these regulations because (i) the effects are expected to be small and (ii) data or models that would address the effects of these regulations are not readily available. In the absence of quantitative estimates, the subsequent discussion provides qualitative analysis of these economic effects.
The proposed regulations solicited comments on the economic effects of the proposed regulations. No such comments were received.
The final regulations do not amend existing rules for the allocation of the CNOL within consolidated groups. The final regulations follow existing rules and allocate the CNOLs to each member of the group in proportion to the total loss.
The Treasury Department and the IRS considered an alternative approach that would have required groups to compute gain and loss at the subgroup level prior to allocating CNOL to members. Recall Example 4 in which the P&C subgroup had no gain or loss but the C subgroup had a loss of $10. Under this alternative approach, because the P&C subgroup as a whole does not have a loss, no CNOL would be allocated to any member in the P&C group regardless of the gain or loss of any of the individual members of PC. Thus, in Example 4, none of the $10 CNOL would be eligible for carryback.
The Treasury Department and the IRS recognize that as a result of the TCJA and the CARES Act, the final regulations may provide groups with an incentive to split their C members into several corporations—some with loss and some with gain; this potential incentive would not exist under the alternative regulatory approach. In certain circumstances, such a strategy would effectively enable some share of the losses generated by the other C members to be carried back. This change in the business structure of consolidated groups may entail economic costs because, to the extent this strategy is pursued, it would result from tax-driven rather than market-driven considerations. The Treasury Department and the IRS project, however, that the adopted approach will have lower compliance costs for taxpayers, relative to the alternative regulatory approach, because it generally follows existing regulatory practice for allocating losses within a consolidated group.
The Treasury Department and the IRS have not attempted to estimate the economic consequences of either of these effects but project them to be small. The effects are projected to be small because (i) only a small number of taxpayers are likely to be affected; (ii) any reorganization that occurs due to the final regulations will primarily be “on paper” and entail little or no economic loss; and (iii) the compliance burden of loss allocation, under either the final regulations or the alternative approach, is not high.
No additional substantive alternatives were raised by the comments.
The Treasury Department and the IRS project that these regulations will primarily affect consolidated groups that contain at least one nonlife insurance member and at least one member that is not a nonlife insurance company. Based on data from 2015, the Treasury Department and the IRS calculate that there were 1,130 such consolidated groups. Approximately 460 of these groups were of “mixed loss” status, meaning that at least one nonlife insurance member had a gain and one other member had a loss, or vice versa.
In sum, these regulations clarify the recent statutory changes to section 172 as they apply to consolidated corporate groups. The Treasury Department and IRS project the economic effect of these regulations to be small given that (1) the effect of NOL usage on investment incentives is of ambiguous sign, (2) these regulations are projected to have only a small effect on NOL usage, and (3) it is expected that most taxpayers would have come to a similar interpretation of the statute in the absence of these regulations.
Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that these final regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that these final regulations apply only to corporations that file consolidated Federal income tax returns, and that such corporations almost exclusively consist of larger businesses. Specifically, based on data available to the IRS, corporations that file consolidated Federal income tax returns represent only approximately two percent of all filers of Forms 1120 (U.S. Corporation Income Tax Return). However, these consolidated Federal income tax returns account for approximately 95 percent of the aggregate amount of receipts provided on all Forms 1120. Therefore, these final regulations would not create additional obligations for, or impose an economic impact on, small entities. Accordingly, the Secretary certifies that the final regulations will not have a significant economic impact on a substantial number of small entities.
Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking that preceded these final regulations was submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small business. No comments on the notice were received from the Chief Counsel for the Office of Advocacy of the Small Business Administration.
Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a state, local, or tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. In 2020, that threshold is approximately $156 million. This rule does not include any Federal mandate that may result in expenditures by state, local, or tribal governments, or by the private sector in excess of that threshold.
Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on state and local governments, and is not required by statute, or preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This rule does not have federalism implications, does not impose substantial direct compliance costs on state and local governments, and does not preempt state law within the meaning of the Executive Order.
The Administrator of OIRA has determined that this is a major rule for purposes of the Congressional Review Act (5 U.S.C. 801
The principal authors of these regulations are Justin O. Kellar, Gregory J. Galvin, and William W. Burhop of the Office of Associate Chief Counsel (Corporate). However, other personnel from the Treasury Department and the IRS participated in their development.
Income taxes, Reporting and recordkeeping requirements.
Accordingly, 26 CFR part 1 is amended as follows:
26 U.S.C. 7805 * * *
(k)
(l)
The revisions and additions read as follows:
(a)
(i) Any CNOLs (as defined in paragraph (e) of this section) of the consolidated group; and
(ii) Any net operating losses (or NOLs) of the members arising in separate return years.
(2)
(ii)
(B)
(C)
(iii)
(A)
(
(
(
(
(B)
(
(
(C)
(
(
(
(
(
(
(
(
(
(
(b) * * *
(1)
(2) * * *
(iv)
(B)
(
(C)
(
(
(
(D)
(E)
(v)
(D)
(
(E)
(F)
(
(
(
(
(G)
(
(
(
(3) * * *
(ii) * * *
(C)
(D)
(c) * * *
(1) * * *
(i)
(E) If a limitation on the amount of taxable income that may be offset under section 172(a) (see paragraph (a)(2) of this section) applies in a taxable year to a member whose carryovers or carrybacks are subject to a SRLY limitation (SRLY member), the amount of net operating loss subject to a SRLY limitation that is available for use by the group in that year is limited to the percentage of the balance in the cumulative register that would be available for offset under section 172(a) if the SRLY member filed a separate return and reported as taxable income in that year the amount contained in the cumulative register. For example, assume that a consolidated group has a SRLY member that is a corporation other than a nonlife insurance company, and that the SRLY member has a SRLY NOL that arose in a taxable year beginning after December 31, 2017 (post-2017 NOL). The group's consolidated taxable income for a consolidated return year beginning after December 31, 2020 is $200, but the cumulative register has a positive
(iii)
(A) * * *
(
(B) * * *
(
(
(
(
(
(D) * * *
(
(
(
(
(E) * * *
(
(
(
(
(
(F)
(
(
(
(
(2) * * *
(v)
(viii)
(B) * * *
(
(
(
(
(h) * * *
(9) For the applicability dates of paragraphs (b)(3)(ii)(C) and (b)(3)(ii)(D) of this section, see § 1.1502-21T(h)(9).
(10) The rules of paragraphs (a), (b)(1), (b)(2)(iv), and (c)(1)(i)(E) of this section apply to taxable years beginning after December 31, 2020.
The additions and revisions read as follows:
(a) * * *
(2)
(ii)
(b) * * *
(1)
(2) Nonlife
(3)
(4)
(5)
(10)
(11)
(13)
(14) * * *
(i) * * * S
(ii)
(d) * * *
(5)
(ii)
(7) * * *
(ii) Any taxes described in § 1.1502-2 (other than in § 1.1502-2(a)(1), (a)(6), and (a)(7)).
(f) * * *
(2) * * *
(iii)
(v) * * * For limitations on the use of nonlife carryovers to offset nonlife consolidated taxable income or consolidated LICTI, see § 1.1502-21.
(vi)
(vii)
(3) * * *
(ii)
(g)
(2)
(ii)
(iii)
(B)
(iv)
(v)
(3)
(ii)
(A) Life consolidated net capital loss is first carried back (or apportioned to the life members for separate return years) to be absorbed by life consolidated capital gain net income without regard to any nonlife subgroup capital losses and before the life consolidated net capital loss may serve as a life subgroup capital loss that sets off nonlife consolidated capital gain net income in the year the life consolidated net capital loss arose.
(B) If a life consolidated net capital loss is not carried back or is not a life subgroup loss that sets off nonlife consolidated capital gain net income in the year the life consolidated net capital loss arose, then it is carried over to the particular year under this paragraph (g)(3)(ii) first against life consolidated capital gain net income before it may serve as a life subgroup capital loss that sets off nonlife consolidated capital gain net income in that particular year.
(h) * * *
(2) * * *
(ii) * * * Additionally, the amount of consolidated LICTI that may be offset by nonlife consolidated net operating loss carryovers may be subject to limitation (see section 172 and § 1.1502-21).
(3) * * *
(iv) * * * The amount of consolidated LICTI that may be offset by nonlife consolidated net operating loss carryovers may be subject to limitation (see section 172 and § 1.1502-21).
(4)
(ii)
(B) Accordingly, under paragraph (e) of this section, consolidated taxable income is $165 (line 5(a) minus line 6(c)).
(iii)
(j) * * *
(2) * * *
(iii) Substitute the term “life consolidated net operating loss and consolidated operations loss carryovers” for “nonlife consolidated net operating loss”, and “paragraph (g)” for “paragraph (f)”.
(3)
(i)
(ii)
(iii)
(iv)
(v)
(n)
The addition reads as follows:
(c) * * *
(3) * * *
(v) The SRLY limitation is applied without regard to § 1.1502-21(c)(1)(i)(E) (section 172(a) limitation applicable to a SRLY member).
(b) * * *
(8)
Office of Foreign Assets Control, Treasury.
Final rule.
The Department of the Treasury's Office of Foreign Assets Control (OFAC) is amending the Cuban Assets Control Regulations to further implement portions of the President's foreign policy toward Cuba to deny the Cuban government access to funds in connection with remittances to Cuba.
This rule is effective November 26, 2020.
OFAC: Assistant Director for Licensing, 202-622-2480, Assistant Director for Regulatory Affairs, 202-622-4855, or Assistant Director for Sanctions Compliance & Evaluation, 202-622-2490.
This document and additional information concerning OFAC are available on OFAC's website (
The Department of the Treasury issued the Cuban Assets Control Regulations, 31 CFR part 515 (the “Regulations”), on July 8, 1963, under various authorities, including the Trading With the Enemy Act (50 U.S.C. 4301-41). OFAC has amended the Regulations on numerous occasions, including to implement the President's foreign policy toward Cuba as set forth in National Security Presidential Memorandum-5, “Strengthening the Policy of the United States Toward Cuba,” signed by the President on June 16, 2017.
Today, OFAC, in consultation with the State Department, is taking additional action to implement the Administration's foreign policy toward Cuba, as set forth in more detail below. This rule provides for a 30-day implementation period before it is effective in order to allow for technical implementation of these additional restrictions.
OFAC is amending the Regulations to remove from the scope of certain remittance-related general authorizations any transactions involving entities or subentities identified on the Cuba Restricted List, as maintained by the State Department and published in the
Because the amendment of the Regulations involves a foreign affairs function, the provisions of Executive Order 12866 and the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, opportunity for public participation, and delay in effective date, as well as the provisions of Executive Order 13771, are inapplicable. Because no notice of proposed rulemaking is required for this rule, the Regulatory Flexibility Act (5 U.S.C. 601-12) does not apply.
The collections of information related to the Regulations are contained in 31 CFR part 501 (the “Reporting, Procedures and Penalties Regulations”) and § 515.572 of this part. Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3507), those collections of information are covered by the Office of Management and Budget under control numbers 1505-0164, 1505-0167, and 1505-0168. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number.
Administrative practice and procedure, Banks, Banking, Blocking of assets, Cuba, Export, Financial transactions, Remittances, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Department of the Treasury's Office of Foreign Assets Control amends 31 CFR part 515 as follows:
22 U.S.C. 2370(a), 6001-6010, 7201-7211; 31 U.S.C. 321(b); 50 U.S.C. 4301-4341; Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); 22 U.S.C. 6021-6091; Pub. L. 105-277, 112 Stat. 2681; Pub. L. 111-8, 123 Stat. 524; Pub. L. 111-117, 123 Stat. 3034; E.O. 9989, 13 FR 4891, 3 CFR, 1943-1948 Comp., p. 748; Proc. 3447, 27 FR 1085, 3 CFR, 1959-1963 Comp., p. 157; E.O. 12854, 58 FR 36587, 3 CFR, 1993 Comp., p. 614.
The addition reads as follows:
A transaction relating to the collection, forwarding, or receipt of remittances involving an entity or subentity identified on the Cuba Restricted List is not authorized as a transaction ordinarily incident to a licensed transaction where the terms of the applicable general or specific license expressly exclude any such transactions.
The addition reads as follows:
(a) * * *
(7) A transaction relating to the collection, forwarding, or receipt of remittances involving any entity or subentity identified on the Cuba Restricted List, as published in the
The addition reads as follows:
(j)
(a) * * *
(3) * * * Nothing in this paragraph (a)(3) authorizes a transaction relating to the collection, forwarding, or receipt of remittances involving any entity or subentity identified on the Cuba Restricted List, as published in the
* * * Nothing in this paragraph authorizes a transaction relating to the collection, forwarding, or receipt of remittances involving any entity or subentity identified on the Cuba Restricted List, as published in the
Coast Guard, DHS.
Temporary final rule.
The Coast Guard is establishing a temporary special local regulation (SLR) for certain navigable waters of the Atlantic Intracoastal Waterway (AICW) and Beaufort Inlet in Morehead City, North Carolina. This SLR restricts vessel traffic on the AICW and Beaufort Inlet during high-speed boat races. The restriction of vessel traffic movement in the SLR protects participants and spectators from the hazards posed by these events. Entry of vessels or persons into this regulated area is prohibited unless specifically authorized by the Captain of the Port (COTP) North Carolina or a designated representative.
This rule is effective from 9 a.m. on October 23, 2020, to 5 p.m. to October 25, 2020. It will be enforced from 9 a.m. to 5 p.m. each day the rule is in effect.
To view documents mentioned in this preamble as being available in the docket, go to
If you have questions on this rule, call or email Chief Petty Officer Joshua O'Rourke, Waterways Management Division, U.S. Coast Guard Sector North Carolina, Wilmington, NC; telephone 910-772-2227, email
The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because it would be impracticable and contrary to the public interest. The Coast Guard was unable to publish an NPRM and hold a comment period for this rulemaking due to the short time period between event planners notifying the Coast Guard of the event and required publication of this rule. Immediate action is needed to protect persons and vessels from the hazards associated with this event. It is impracticable and contrary to the public interest to publish an NPRM because a final rule needs to be in place by October 23, 2020, to minimize potential danger to the participants and the public during the event.
Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the
The Coast Guard is issuing this rule under authority in 46 U.S.C. 70041. The COTP North Carolina has determined that potential hazards associated with the Crystal Coast Grand Prix World Championship race scheduled for 9 a.m. through 5 p.m. on October 23, 2020, and October 25, 2020, is a safety concern for mariners during a high speed boat race on portions of the Alantic Intra Coastal Waterway (AICW) and Beaufort Inlet in Morehead City, North Carolina. This rule is necessary to protect safety of life from the potential hazards associated with the high-speed boat race.
This rule establishes an SLR on a portion of the AICW and Beaufort Inlet from 9 a.m. on October 23, 2020 to 5 p.m. October 25, 2020. It will be enforced from 9 a.m. on October 23, 2020, and those same hours on October 25, 2020. The time of enforcement will be broadcast locally over VHF-FM marine radio. The SLR will include a race area on all navigable waters of the AICW and Beaufort Inlet, North Carolina, from approximate positions: Latitude 34°42′52″ N, longitude 076°43′16″ W, then east to latitude 34°42′52.2″ N, longitude 076°42′11.04″ W, then east to latitude 34°42′53.76″ N, longitude 076°41′38.04″ W, then southeast to latitude 34°42′10.8″ N, longitude 076°40′44.4″ W, then south to latitude 34°42′4.3″ N, longitude 076°40′48.1″ W, then northwest to latitude 34°42′47.34″ N, longitude 076°41′49″ W, then west to latitude 34°42′50″ N, longitude 076°43′16″ W, then north to the point of origin. This rule also temporarily establishes a portion of the AICW to be used as a spectator zone. The spectator area will be marked with temporary buoys and will be at least 100 yards from the race course, south of Sugarloaf Island, North Carolina, from approximate positions: Latitude 34°42′42″ N, longitude 076°43′15″ W, then east to latitude 34°42′41″ N, longitude 076°42′14″ W, then south to latitude 34°42′32″ N, longitude 076°42′14″ W, then west to latitude 34°42′32″ N, longitude 076°43′15″ W, then north to the point of origin. This rule also temporarily establishes a buffer area around the perimeter of the race area, from approximate positions: latitude 34°42′55″ N, longitude 076°43′15″ W, then east to latitude 34°42′56″ N, longitude 076°42′13″ W, then east to latitude 34°42′57″ N, longitude 076°41′41″ W, then east to latitude 34°42′57″ N, longitude 076°41′25″ W, then south east to latitude 34°42′23″ N, longitude 076°40′44″ W, then south to latitude 34°41′59″ N, longitude 076°40′43″ W, then north west to latitude 34°42′41″ N, longitude 076°42′05″ W, then west to latitude 34°42′42″ N, longitude 076°43′15″ W, then north to its point of origin.
The duration of this SLR is intended to protect participants and spectators on the navigable waters of the AICW and Beafort Inelt during the high-speed boat race. Vessels may request permission to pass through the SLR between race heats. No vessel or person will be permitted to enter the SLR without obtaining permission from the COTP North Carolina or a designated representative. The regulatory text appears at the end of this document.
We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.
Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. Executive Order 13771 directs agencies to control regulatory costs through a budgeting process. This rule has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB), and pursuant to OMB guidance it is exempt from the requirements of Executive Order 13771.
This regulatory action determination is based on the size, location, and duration of the SLR. Vessel traffic will not be allowed to enter or transit a portion of the AICW or Beaufort Inlet during an active race event from 9 a.m. through 5 p.m. October 23, 2020, and October 25, 2020. The Coast Guard will transmit a Broadcast Notice to Mariners via VHF-FM marine channel 16 regarding the enforcement period of the SLR. This rule allows vessels to request permission to pass through the regulated area between race heats.
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.
While some owners or operators of vessels intending to transit the SLR may be small entities, for the reasons stated in section IV.A above, this proposed rule would not have a significant economic impact on any vessel owner or operator.
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the
Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.
This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.
Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.
We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves an SLR in effect from 9 a.m. on October 23, 2020, to 5 p.m. on October 25, 2020, to be enforced during active race events from 9 a.m. to 5 p.m. on October 23, 2020, and October 25, 2020. It is categorically excluded from further review under paragraph L61 of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to call or email the person listed in the
Marine safety, Navigation (water), Reporting and recordkeeping requirements, Waterways.
46 U.S.C. 70041; 33 CFR 1.05-1.
(a)
(1) The Race Area is designated as all navigable waters of the AICW and Beaufort Inlet, North Carolina, from approximate positions: Latitude 34°42′52″ N, longitude 076°43′16″ W, then east to latitude 34°42′52.2″ N, longitude 076°42′11.04″ W, then east to latitude 34°42′53.76″ N, longitude
(2) The Spectator Area is designated as all waters of the AICW, North Carolina, from approximate positions: Latitude 34°42′42″ N, longitude 076°43′15″ W, then east to latitude 34°42′41″ N, longitude 076°42′14″ W, then south to latitude 34°42′32″ N, longitude 076°42′14″ W, then west to latitude 34°42′32″ N, longitude 076°43′15″ W, then north to the point of origin.
(3) The Buffer Area is designated as all waters of the AICW and Beaufort Inlet, North Carolina, from approximate positions: Latitude 34°42′55″ N, longitude 076°43′15″ W, then east to latitude 34°42′56″ N, longitude 076°42′13″ W, then east to latitude 34°42′57″ N, longitude 076°41′41″ W, then east to latitude 34°42′57″ N, longitude 076°41′25″ W, then south east to latitude 34°42′23″ N, longitude 076°40′44″ W, then south to latitude 34°41′59″ N, longitude 076°40′43″ W, then north west to latitude 34°42′41″ N, longitude 076°42′05″ W, then west to latitude 34°42′42″ N, longitude 076°43′15″ W, then north to its point of origin.
(b)
(c)
(2) Everyone other than particpants, including those engaged in spectating, may be directed by a designated representative to the regulated area described in section (a) of this section, where they must remain during the effective period unless otherwise authorized or directed by a designated representative.
(3) To seek permission to enter, contact the COTP by calling the Sector North Carolina Command Center at 910-343-3882 or contact the COTP's designated representative on Marine band Radio, VHF-FM channel 16 (156.8 MHz). Those in the regulated area must comply with all lawful orders or directions given to them by the COTP or the designated representative.
(d)
(e)
Coast Guard, DHS.
Temporary final rule.
The Coast Guard is establishing a temporary safety zone for the navigable waters of Tampa Bay, in the vicinity of the St. Petersburg Municipal Yacht Basin, St. Petersburg, Florida during the Firestone Grand Prix of St. Petersburg. The temporary safety zone is needed to protect the safety of race participants, spectators, and vessels on the surrounding waterway during the race. Persons and vessels are prohibited from entering, transiting through, anchoring in, or remaining within the regulated area unless authorized by the Captain of the Port St. Petersburg or a designated representative.
This rule is effective daily from 6 a.m. until 10 p.m., on October 23, 2020 through October 25, 2020.
To view documents mentioned in this preamble as being available in the docket, go to
If you have questions on this rule, call or email Marine Science Technician First Class Michael Shackleford, Sector St. Petersburg Prevention Department, Coast Guard; telephone (813) 228-2191, email
The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because it is impracticable. The Coast Guard received information regarding the need for a safety zone on October 2, 2020. Insufficient time remains to publish an NPRM and to receive public comments, as the event will occur before the rulemaking process would be completed. Because of the potential safety hazards associated with the race, the regulations is necessary to provide for the safety of race participants, spectators, and other vessels navigating the surrounding waterways. For those reasons, it would be impracticable to publish an NPRM.
Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30
The Coast Guard is issuing this rule under the authority in 46 U.S.C. 70034. The Captain of the Port St. Petersburg has determined that potential hazards associated with the race, will be a safety concern for race participants, spectators, and vessels. This rule is needed to ensure the safety of life for vessels and persons within the navigable waters of the safety zone during the Firestone Grand Prix of St. Petersburg, Florida.
This rule establishes a safety zone daily from 6:00 a.m. until 10:00 p.m., on October 23, 2020 through October 25, 2020. The safety zone will cover all navigable waters within a specified area of Tampa Bay, St. Petersburg, Florida. The duration of the zone is intended to ensure the safety of the public and designated navigable waters during the race event. No vessel or person will be permitted to enter, transit through, anchor in, or remain within the safety zone without obtaining permission from the Captain of the Port St. Petersburg or a designated representative.
Persons and vessels may request authorization to enter, transit through, anchor in, or remain within the regulated area by contacting the Captain of the Port St. Petersburg by telephone at (727) 824-7506, or a designated representative via VHF radio on channel 16. If authorization to enter, transit through, anchor in, or remain within the regulated area is granted by the Captain of the Port St. Petersburg or a designated representative, all persons and vessels receiving such authorization must comply with the instructions of the Captain of the Port St. Petersburg or a designated representative. The Coast Guard will provide notice of the safety zone by Local Notice to Mariners, Broadcast Notice to Mariners, and/or on-scene designated representatives.
We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.
Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. Executive Order 13771 directs agencies to control regulatory costs through a budgeting process. This rule has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB), and pursuant to OMB guidance it is exempt from the requirements of Executive Order 13771.
This regulatory action determination is based on the size, location, duration and available exceptions to the enforcement of the safety zone. The safety zone will be enforced for a limited period of time over the course of three days and is thus limited in duration. The safety zone is limited to only those areas in which race events will be occurring for the Firestone Grand Prix of St. Petersburg, Florida race event and is thus limited in size. Although persons and vessels are prohibited to enter, transit through, anchor in, or remain within the regulated area without authorization from the Captain of the Port St. Petersburg or a designated representative, they may operate in the surrounding area during the enforcement period. The rule allows for vessels to seek permission to enter the safety zone. The Coast Guard will provide advance notification of the safety zone to the local maritime community by Local Notice to Mariners and/or Broadcast Notice to Mariners.
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule would not have a significant economic impact on a substantial number of small entities.
While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator.
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the
Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.
This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.
Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this rule has implications for federalism or Indian tribes, please contact the person listed in the
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a
We have analyzed this rule under Department of Homeland Security Directive 023-01 and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a safety zone that will prohibit persons and vessels from entering, transiting through, anchoring in, or remaining within the regulated area during a three day high speed grand prix race event. It is categorically excluded from further review under paragraph L60(a) in Table 3-1 of U.S. Coast Guard Environmental Planning Implementing Procedures 5090.1. A Record of Environmental Consideration supporting this determination is available in the docket where indicated under
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the
Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways.
For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:
46 U.S.C. 70034; 46 U.S.C. 70051; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 0170.1.
(a)
(b)
(c)
(2) Designated representatives may control vessel traffic throughout the enforcement area as determined by the prevailing conditions.
(3) Persons and vessels may request authorization to enter, transit through, anchor in, or remain within the regulated areas by contacting the Captain of the Port St. Petersburg by telephone at (727) 824-7506, or a designated representative via VHF radio on channel 16. If authorization is granted by the Captain of the Port St. Petersburg or a designated representative, all persons and vessels receiving such authorization must comply with the instructions of the Captain of the Port St. Petersburg or a designated representative.
(d)
Coast Guard, DHS.
Temporary final rule.
The Coast Guard is establishing a temporary safety zone for all navigable waters within 200 yards of a worksite removing overhead electrical cables along a line crossing the Menominee River in Menominee, MI. The safety zone is needed to protect personnel, vessels, and the marine environment from potential hazards created by the removal of overhead electrical cables across the river. Entry of vessels or persons into this zone is prohibited unless specifically authorized by the Captain of the Port Lake Michigan or a designated representative.
This rule is effective from 7 a.m. through 5 p.m. on October 27 and 28, 2020.
To view documents mentioned in this preamble as being available in the docket, go to
If you have questions on this rule, call or email Chief Petty Officer Jeromy Sherrill, Sector Lake Michigan Waterways Management Division, U.S. Coast Guard; telephone 414-747-7148, email
The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision
Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the
The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034 (previously 33 U.S.C. 1231). The Captain of the Port (COTP) Lake Michigan has determined that potential and actual safety hazards associated with the process of removing electrical cables from above the Menominee River will be a safety concern for anyone within 200 yards from the work site. This work is scheduled to take place on October 27 and October 28, 2020, on the Menominee River between Menominee, MI, and Marinette, WI. This rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the safety zone while lines and electrical cables are being pulled across the river.
This rule establishes a safety zone from 7 a.m. through 5 p.m. on October 27 and October 28, 2020. The safety zone will cover all navigable waters of the Menominee River, between Menominee, MI and Marinette, WI, within 200 yards of a work site removing overhead electrical cables along a line crossing the river from coordinates 45.096326° N, 087.602092° W to 45.097197° N, 087.600601° W. The date and time of the enforcement period will be announced by the COTP Lake Michigan by Broadcast Notice to Mariners. The duration of the zone is intended to protect personnel, vessels, and the marine environment in these navigable waters while lines and electrical cables are being pulled across the river. Entry into, transiting, or anchoring within the safety zone is prohibited unless authorized by the COTP or a designated representative.
We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.
Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. Executive Order 13771 directs agencies to control regulatory costs through a budgeting process. This rule has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB), and pursuant to OMB guidance, it is exempt from the requirements of Executive Order 13771.
This regulatory action determination is based on the characteristics of the safety zone. The safety zone created by this rule will be relatively small and is designed to minimize its impact on navigable waters. This rule will prohibit entry into certain navigable waters of the Menominee River at Menominee, MI and Marinette, WI and is not anticipated to exceed two 10-hour periods in duration. Thus, restrictions on vessel movement within that particular area are expected to be minimal. Under certain conditions, moreover, vessels may still transit through the safety zone when permitted by the COTP Lake Michigan.
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.
While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator.
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the
Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.
This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.
Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.
We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a safety zone lasting for a total of 20 hours that will prohibit entry within 200 yards of a worksite crossing the Menominee River for the removal of overhead electrical cables crossing the river. It is categorically excluded from further review under paragraph L60(a) of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to call or email the person listed in the
Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways.
For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:
46 U.S.C. 70034, 70051; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 0170.1.
(a)
(b)
(c)
(2) This safety zone is closed to all vessel traffic, except as may be permitted by the COTP or a designated representative.
(3) The “designated representative” of the COTP is any Coast Guard commissioned, warrant, or petty officer who has been designated by the COTP to act on his or her behalf.
(4) Persons and vessel operators desiring to enter or operate within the safety zone must contact the COTP or designated representative to obtain permission to do so. The COTP or designated representative may be contacted via VHF Channel 16. Vessel operators given permission to enter or operate in the safety zone must comply with all directions given to them by the COTP or designated representative.
Environmental Protection Agency (EPA).
Final rule.
EPA is amending significant new use rules (SNURs) issued under the Toxic Substances Control Act (TSCA) for certain chemical substances, which were the subject of premanufacture notices (PMNs) and significant new use notices (SNUNs). As a result of EPA's review of SNUNs for these chemical substances and based on new and existing data, EPA is finalizing amendments to these SNURs. Specifically, this action amends the identified SNURs to allow certain new uses reported in the SNUNs without additional notification requirements and modify the significant new use notification requirements based on the actions and determinations for the SNUN submissions.
This rule is effective on December 28, 2020. For purposes of judicial review, this rule shall be promulgated at 1 p.m. (e.s.t.) on November 10, 2020.
You may be potentially affected by this action if you manufacture, process, or use the chemical substances contained in this rule. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers
• Manufacturers or processors of one or more subject chemical substances (NAICS codes 325 and 324110),
This action may also affect certain entities through pre-existing import certification and export notification rules under TSCA. Chemical importers are subject to the TSCA section 13 (15 U.S.C. 2612) import provisions promulgated at 19 CFR 12.118 through 12.127 and 19 CFR 127.28. Chemical importers must certify that the shipment of the chemical substance complies with all applicable rules and orders under TSCA, which would include the SNUR requirements. The EPA policy in support of import certification appears at 40 CFR part 707, subpart B. In addition, any persons who export or intend to export a chemical substance that is the subject of this rule are subject to the export notification provisions of TSCA section 12(b) (15 U.S.C. 2611(b)) and 40 CFR 721.20, and must comply with the export notification requirements in 40 CFR part 707, subpart D.
The docket includes information considered by the Agency in developing the proposed and final rules. The docket for this action, identified by docket identification (ID) number EPA-HQ-OPPT-2019-0263, is available at
Due to the public health concerns related to COVID-19, the EPA Docket Center (EPA/DC) and Reading Room is closed to visitors with limited exceptions. The staff continues to provide remote customer service via email, phone, and webform. For the latest status information on EPA/DC services and docket access, visit
EPA is issuing amendments to the SNURs for certain chemical substances in 40 CFR part 721, subpart E. A SNUR for a chemical substance designates certain activities as a significant new use. Persons who intend to manufacture or process the chemical substance for the significant new use must notify EPA at least 90 days before commencing that activity. The required notification (
Previously, in the
TSCA section 5(a)(2) (15 U.S.C. 2604(a)(2)) authorizes EPA to determine that a use of a chemical substance is a “significant new use.” EPA must make this determination by rule (
General provisions for SNURs appear in 40 CFR part 721, subpart A. These provisions describe persons subject to the final rule, recordkeeping requirements, exemptions to reporting requirements, and applicability of the rule to uses occurring before the effective date of the final rule. Provisions relating to user fees appear at 40 CFR part 700. According to 40 CFR 721.1(c), persons subject to these SNURs must comply with the same notice requirements and EPA regulatory procedures as submitters of PMNs under TSCA section 5(a)(1)(A). In particular, these requirements include the information submission requirements of TSCA sections 5(b) and 5(d)(1), the exemptions authorized by TSCA sections 5(h)(1), (h)(2), (h)(3), and (h)(5), and the regulations at 40 CFR part 720. Once EPA receives a SNUN, EPA must either determine that the significant new use is not likely to present an unreasonable risk of injury or take such regulatory action as is associated with an alternative determination before the manufacture or processing for the significant new use can commence. If EPA determines that the significant new use is not likely to present an unreasonable risk, EPA is required under TSCA section 5(g) to make public, and submit for publication in the
TSCA section 5(a)(2) states that EPA's determination that a use of a chemical substance is a significant new use must be made after consideration of all relevant factors, including:
• The projected volume of manufacturing and processing of a chemical substance.
• The extent to which a use changes the type or form of exposure of human beings or the environment to a chemical substance.
• The extent to which a use increases the magnitude and duration of exposure of human beings or the environment to a chemical substance.
• The reasonably anticipated manner and methods of manufacturing, processing, distribution in commerce, and disposal of a chemical substance.
In determining whether and how to modify the significant new uses for the chemical substances that are the subject of these SNURs, and as described in the preamble to the proposed rule, EPA considered relevant information about the toxicity of the chemical substance, likely human exposures and environmental releases associated with possible uses, and the four TSCA section 5(a)(2) factors listed in this unit.
By this rule, EPA is establishing certain significant new uses which have been claimed as CBI subject to Agency confidentiality regulations at 40 CFR part 2 and 40 CFR part 720, subpart E. Absent a final determination or other disposition of the confidentiality claim under 40 CFR part 2 procedures, EPA is required to keep this information confidential. EPA promulgated a
Under these procedures a manufacturer or processor may request EPA to determine whether a specific use would be a significant new use under the rule. The manufacturer or processor must show that it has a
If EPA determines that the use identified in the
EPA received three public comments on the proposed amendments. The Agency's responses to these comments are provided in a separate Response to Public Comments document that is available in the docket for this rule. EPA made one change to the final rule amending 40 CFR 721.10663 based on one comment. Specifically, EPA added language used in previous SNURs for other carbon nanotube chemicals identifying criteria where SNUR requirements do not apply. EPA agrees with the commenter that when the chemical substance meets any of these criteria, there is no unreasonable risk from exposure to the substance.
These amendments are based on EPA's determination under 40 CFR 721.185(a)(3) following review of significant new use notices (SNUNs) for the chemical substances submitted to EPA. After reviewing the SNUNs, EPA concluded that there is no need to require additional notice from persons who propose to engage in identical or similar activities. In those instances where EPA expanded the scope of the significant new use, the Agency identified concerns during review of the SNUNs, as discussed in Unit IV. of the proposed rule, associated with certain potential new uses. In addition to considering the factors discussed in Unit IV. of the proposed rule, EPA determined that those uses could result in changes in the type or form of exposure to the chemical substance, increased exposures to the chemical substance, and/or changes in the reasonably anticipated manner and methods of manufacturing, processing, distribution in commerce, and disposal of the chemical substance.
To establish a significant new use, EPA must determine that the use is not ongoing. EPA made this determination in issuing the original final rule for each chemical substance, and solicited additional comments on the proposed modifications to provide an opportunity for members of the public to indicate whether any of the uses which are not significant new uses under the current rules, but which would be regulated as “significant new uses” if the proposed rule is finalized, are ongoing. EPA received no comments that these uses were ongoing. Therefore, EPA concludes that the uses are not ongoing and designated April 1, 2020 (the date of publication of the proposed rule) as the cutoff date for determining whether the new use is ongoing.
In the unlikely event that a person began commercial manufacture or processing of the chemical substances for a significant new use identified as of the cutoff date, that person will have to cease any such activity upon the effective date of the final rule. To resume their activities, that person would have to first comply with all applicable SNUR notification requirements and wait until EPA has conducted a review of the notice, made an appropriate determination on the notice, and has taken such actions as are required with that determination.
EPA recognizes that TSCA section 5 generally does not require development of any particular new information (
In the absence of an applicable rule, order or consent agreement under TSCA section 4, or a TSCA section 5(b)(4) listing covering the chemical substance, persons are required only to submit information in their possession or control and to describe any other information known to or reasonably ascertainable by them (see 40 CFR 720.50). However, upon review of PMNs and SNUNs, the Agency has the authority to require appropriate testing.
Unit IV. of the proposed rule lists potentially useful information for all SNURs addressed in this final rule. Descriptions are provided for informational purposes. The information identified in Unit IV. of the proposed rule will be potentially useful to EPA's evaluation of a chemical substance in the event that someone submits a SNUN for a significant new use pursuant to the SNURs addressed in this final rule. Companies who are considering submitting a SNUN are encouraged, but are not required, to develop the potentially useful information on the substance.
EPA strongly encourages persons, before performing any testing, to consult with the Agency. Furthermore, pursuant to TSCA section 4(h), which pertains to reduction of testing on vertebrate animals, EPA encourages consultation with the Agency on the use of alternative test methods and strategies (also called New Approach Methodologies, or NAMs), if available, to generate the recommended test data. EPA encourages dialogue with Agency representatives to help determine how best the submitter can meet both the data needs and the objective of TSCA section 4(h).
The potentially useful information identified in Unit IV. of the proposed rule may not be the only means of addressing the potential risks of the chemical substance. However, submitting a SNUN without any test data or other information may increase the likelihood that EPA will take action under TSCA sections 5(e) or 5(f). EPA recommends that potential SNUN
SNUN submitters should be aware that EPA will be better able to evaluate SNUNs that provide detailed information on the following:
• Human exposure and environmental release that may result from the significant new use of the chemical substances; and
• Information on risks posed by the chemical substances compared to risks posed by potential substitutes.
According to 40 CFR 721.1(c), persons submitting a SNUN must comply with the same notification requirements and EPA regulatory procedures as persons submitting a PMN under 40 CFR part 720, including submission of test data on health and environmental effects as described in 40 CFR 720.50. SNUNs must be submitted on EPA Form No. 7710-25, generated using e-PMN software, and submitted to the Agency in accordance with the procedures set forth in 40 CFR 721.25 and 720.40. E-PMN software is available electronically at
EPA has evaluated the potential costs of establishing SNUN requirements for potential manufacturers and processors of the chemical substances subject to this rule. EPA's complete economic analysis is available in the docket under docket ID number EPA-HQ-OPPT-2019-0614.
Additional information about these statutes and Executive Orders can be found at
This action modifies SNURs for several chemical substances that were the subject of PMNs and SNUNs. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011).
This action is not subject to Executive Order 13771 (82 FR 9339, February 3, 2017), because this action is not a significant regulatory action under Executive Order 12866.
This action does not impose any new information collection burden under the PRA (44 U.S.C. 3501
An agency may not conduct or sponsor, and a person is not required to respond to a collection of information that requires OMB approval under PRA, unless it has been approved by OMB and displays a currently valid OMB control number. The OMB control numbers for EPA's regulations in title 40 of the CFR, after appearing in the
If an entity were to submit a SNUN to the Agency, the annual burden is estimated to average between 30 and 170 hours per response. This burden estimate includes the time needed to review instructions, search existing data sources, gather and maintain the data needed, and complete, review, and submit the required SNUN. Send any comments about the accuracy of the burden estimate, and any suggested methods for minimizing respondent burden, including through the use of automated collection techniques, to the Director, Regulatory Support Division, Office of Mission Support (2822T), Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460-0001. Please remember to include the OMB control number in any correspondence, but do not submit any completed forms to this address.
Pursuant to the RFA section 605(b) (5 U.S.C. 601
Based on EPA's experience with proposing and finalizing SNURs, State, local, and Tribal governments have not been impacted by these rulemakings, and EPA does not have any reasons to believe that any State, local, or Tribal government will be impacted by this action. As such, EPA has determined that this action does not impose any enforceable duty, contain any unfunded mandate, or otherwise have any effect on small governments subject to the requirements of UMRA sections 202, 203, 204, or 205 (2 U.S.C. 1501
This action will not have a substantial direct effect on States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999).
This action does not have Tribal implications because it is not expected to have substantial direct effects on Indian Tribes. This action does not significantly nor uniquely affect the communities of Indian Tribal governments, nor does it involve or impose any requirements that affect Indian Tribes. Accordingly, the requirements of Executive Order 13175 (65 FR 67249, November 9, 2000), do not apply to this action.
This action is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because this is not an economically significant regulatory action as defined by Executive Order 12866, and this action does not address environmental health or safety risks disproportionately affecting children. EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that EPA has reason to believe may disproportionately affect children, per the definition of “covered regulatory action” in section 2-202 of the Executive Order.
This action is not subject to Executive Order 13211 (66 FR 28355, May 22, 2001), because this action is not expected to affect energy supply, distribution, or use and because this action is not a significant regulatory action under Executive Order 12866.
This action does not involve any technical standards and is therefore not subject to considerations under NTTAA section 12(d) (15 U.S.C. 272 note).
This action does not entail special considerations of environmental justice related issues as delineated by Executive Order 12898 (59 FR 7629, February 16, 1994).
This action is subject to the CRA (5 U.S.C. 801
Environmental protection, Chemicals, Hazardous substances, Reporting and recordkeeping requirements.
Therefore, for the reasons stated in the preamble, EPA amends 40 CFR part 721 as follows:
15 U.S.C. 2604, 2607, and 2625(c).
(a) * * *
(1) The chemical substance identified as 2-propen-1-one, 1-(4-morpholinyl)- (PMN P-95-169; SNUN S-08-7; SNUN S-14-1; and SNUN S-17-10; CAS No. 5117-12-4) is subject to reporting under this section for the significant new uses described in paragraph (a)(2) of this section. The requirements of this rule do not apply to quantities of the chemical substance after it has been completely reacted (cured) because 2-propen-1-one, 1-(4-morpholinyl)- will no longer exist.
(2) * * *
(i)
(A) Safety 4/4H EVOH/PE laminate, Ansell Edmont Neoprene number 865, and Solvex Nitrile Rubber number 275 gloves have been tested in accordance with the American Society for Testing Materials (ASTM) F739 method and found by EPA to satisfy the consent orders and § 721.63(a)(2)(i) requirements for dermal protection to 100 percent PMN substance. Gloves and other dermal protection may not be used for a time period longer than they are actually tested and must be replaced at the end of each work shift. For additional dermal protection materials, a company must submit all test data to the Agency and must receive written Agency approval for each type of material tested prior to use of that material as worker dermal protection. However, for the purposes of determining the imperviousness of gloves, up to 1 year after the commencement of commercial manufacture or import, the employer may use the method described in § 721.63(a)(3)(ii), thereafter, they must use the method described in § 721.63(a)(3)(i). For purposes of § 721.63(b), the concentration is set at 1.0%.
(B) Additional requirements for use as a monomer for stereolithography: Requirements as specified in § 721.63(a)(4) and (5), (a)(6)(v), and (c). When determining which persons are reasonably likely to be exposed as required for § 721.63(a)(4), engineering control measures (
(iii)
(a) * * *
(1) The chemical substance identified generically as butanoic acid, 3-mercapto-,1,1′-[2-(hydroxymethyl)-2-(substituted-1-oxoalkoxy)methyl)-1,3-propanediyl] ester (PMN P-10-136 and
(2) * * *
(i)
(a) * * *
(1) The chemical substance identified generically as butanoic acid, 3-mercapto-,1,1′-[2,2-bis[(substituted-1-oxoalkoxy)methyl]-1,3-propanediyl] ester (PMN P-10-136 and SNUN S-18-5, Chemical B) is subject to reporting under this section for the significant new uses described in paragraph (a)(2) of this section.
(2) * * *
(i)
(a) * * *
(1) The chemical substance identified generically as functionalized multi-walled carbon nanotubes (PMN P-12-44; SNUN S-18-4; and SNUN S-19-5) is subject to reporting under this section for the significant new uses described in paragraph (a)(2) of this section. The requirements of this section do not apply to quantities of the PMN substance that have been completely reacted (cured); incorporated or embedded into a polymer matrix that itself has been completely reacted (cured); embedded in a permanent solid polymer form that is not intended to undergo further processing except for mechanical process; or incorporated into an article.
(2) * * *
(i)
(ii)
(b) * * *
(1)
(a) * * *
(1) The chemical substance identified as coke (coal), secondary pitch. Definition: A carbon-containing residue from the coking of air blown pitch coke oil and/or pitch distillate; composed primarily of isotropic carbon, it contains small amounts of sulfur and ash constituents (PMN P-12-292, PMN P-17-217, and SNUN S-19-4; CAS No. 94113-91-4) is subject to reporting under this section for the significant new uses described in paragraph (a)(2) of this section.
(2) * * *
(iii)
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Temporary rule; emergency action; request for comments.
This emergency rule temporarily extends the 2020 sablefish primary fishery from October 31, 2020 to December 31, 2020. This action is necessary to provide operational flexibility so that vessels in the sablefish primary fishery are able to fully harvest their tier limits despite high economic uncertainty in 2020. This action would also extend the incidental halibut retention allowance provision for the sablefish primary fishery from October 31, 2020 to November 15, 2020 and set the halibut retention limit during this time period at 250 pounds (113 kilograms) dressed weight of Pacific halibut for every 1,000 pounds (454 kilograms) dressed weight of sablefish landed and up to 2 additional Pacific halibut in excess of the 250-pounds-per-1,000-pound limit per landing.
Effective October 27, 2020 until December 31, 2020. Comments must be submitted by November 27, 2020.
You may submit comments on this document, identified by NOAA-NMFS-2020-0133 by any of the following methods:
•
•
This emergency rule and supporting documents, including a Supplemental Information Report prepared for this action, are accessible via the internet at the Office of the Federal Register website at
Keeley Kent, phone: 206-247-8252, or email:
The primary sablefish fishery tier program is a limited access privilege program set up under Amendment 14 to the Pacific Coast Groundfish Fishery Management Plan (PCGFMP); which was approved by the Pacific Fishery Management Council (Council) in 2000 and was implemented by NMFS on August 2, 2001(66 FR 41152; August 7, 2001). Participants hold limited entry permits with a pot gear and/or longline gear endorsement and a sablefish endorsement.
Under Amendment 14, as set out in § 660.231, the permit holder of a sablefish-endorsed permit receives a tier limit, which is an annual share of the sablefish catch allocation to the primary fishery. NMFS sets three different tier limits through the biennial harvest specifications and management measures process (for the 2020 limits, see 83 FR 63970, December 12, 2018), and up to three permits may be stacked at one time on a vessel participating in the fishery. Stacked tier limits are combined to provide a cumulative catch limit for that vessel. After vessels have caught their full tier limits, they are allowed to move into other fisheries for sablefish, specifically the daily trip limit (DTL) fishery or the open access fishery, or fisheries for other species.
Under Amendment 14, the sablefish primary season has historically been open from April 1 through October 31 of each year, though individual permit holders may only fish up to their tier limits so may be required to cease fishing prior to October 31. These season dates were put into regulation during the development and implementation of the fishery under Amendment 14. Prior to the implementation of Amendment 14, the sablefish fishery had operated as a `derby' style fishery, with a season length lasting a few weeks to a few days. Under Amendment 14, the fishery began operating under a 7-month season. The 7-month season structure, as opposed to a year-long season, was intended to allow for timely catch accounting so that the sector allocation was not exceeded.
Vessels in the primary fishery north of Point Chehalis, Washington are also allowed to retain incidentally caught Pacific halibut up to a specific limit specified at § 660.231(b)(3)(iv). Halibut are encountered regularly in the normal operation of the sablefish primary fishery due to the co-occurrence of halibut and sablefish in the same environments, and the design and function of fixed gear. This retention is allowed until the sablefish primary season ends and it contributes additional economic value to this sector. Additionally, many vessels in the primary sablefish fishery also participate in sablefish and Pacific halibut fisheries in Alaska.
At the September 2020 Council meeting, industry participants requested an extension to the 2020 sablefish primary fishery. The Council's Groundfish Management Team (GMT) provided analysis of the 2020 sablefish primary fishery participation and performance compared to prior years of the fishery. The GMT demonstrated in their analysis that from 2011 to 2019, annual attainment averaged over 90 percent of total sablefish tier allocations, with 65 percent harvested between April and mid-September. By contrast, the GMT showed the fishery in 2020 has only attained 33 percent of its allocation as of mid-September. This underattainment is attributed to delays experienced in the Alaska fisheries, in which many vessels in the sablefish primary fishery also participate. These delays are due to local travel restrictions, postponed season start dates, and quarantine requirements, all related to the ongoing COVID-19 pandemic. The GMT estimated that if the primary sablefish fishery season closed on October 31, 2020, the fishery would only attain 46 percent of its allocation, which equates to about $2.86 million in lost ex-vessel revenue and additional economic benefits for coastal communities.
The Council reviewed the information provided by the GMT and by fishery stakeholders and discussed options to provide relief to commercial fishermen in the primary sablefish fishery from economic losses as a result of the recent unforeseen events associated with COVID-19 that began in approximately March 2020. These unforeseen events have adversely affected commercial fishermen throughout the Council's jurisdiction for an extended period of time. Commercial stakeholders informed the Council that the recent events have caused many individuals, businesses and communities to suffer significant economic hardships from lost or reduced income and fishing opportunities. These events have also caused serious management problems by making it more difficult to achieve optimum yield (OY) for sablefish.
At its September 2020 meeting, after evaluating the information provided to it, the Council recommended that NMFS initiate an emergency action to extend the sablefish primary fishery season from October 31, 2020 to December 31, 2020, to allow participants more time to harvest their full tier limits. As part of the emergency action, the Council also recommended an extension of the incidental halibut retention allowance north of Point Chehalis, Washington to November 15, 2020, and setting the retention limit at 250 pounds (113 kg) dressed weight of Pacific halibut for every 1,000 pounds (454 kg) dressed weight of sablefish landed and up to 2 additional Pacific halibut in excess of the 250-pounds-per-1,000-pound limit per landing. The retention allowance ensures additional economic benefits and reduces regulatory discards of commercially valuable incidental halibut.
Section 305(c) of the Magnuson-Stevens Fishery Conservation and
NMFS has evaluated all relief mechanisms and, given the limited time remaining in the primary fishery season, an emergency action to extend the season is the only mechanism sufficient to provide participants access to their quota. NMFS is issuing this emergency rule in compliance with the NMFS guidelines to prevent significant direct economic loss and preserve economic opportunities that otherwise might be foregone.
This emergency action will help the fishery achieve, but not exceed, the allocation of sablefish to the primary sablefish fishery, and the sablefish annual catch limit. As such, in evaluating the anticipated effects of this emergency action, NMFS determined that the effects fall within those described in the Environmental Assessment for the 2019-2020 Groundfish Harvest Specifications and Management Measures; which is tiered from the Harvest Specifications and Management Measures for 2015-2016 and Biennial Periods Thereafter Final Environmental Impact Statement (EIS) which discloses the longer-term framework and environmental impacts of the biennial specifications process. NMFS documented this decision-making process in a Supplemental Information Report (see
Effective October 27, 2020, this action temporarily extends the 2020 sablefish primary season for vessels registered to limited entry fixed gear, sablefish-endorsed permits North of 36° N lat., from October 31, 2020 to December 31, 2020. This action includes a small administrative change to allow an additional transfer of sablefish-endorsed limited entry permits so that these permits may be transferred up to two times within a calendar year. This change will allow fishery participants to appropriately take advantage of the extended season.
This action also extends the incidental halibut retention allowance for the sablefish primary fishery North of Point Chehalis, Washington, to November 15, 2020, which is the latest date allowed by the International Pacific Halibut Commission. Under these emergency measures, the incidental retention allowance limit is set at 250 pounds (113 kg) of dressed halibut per 1,000 pounds (454 kg) of dressed sablefish and up to 2 additional Pacific halibut in excess of the 250-pounds-per-1,000-pound limit per landing. After November 15, any incidental halibut would need to be discarded as a prohibited species.
The NMFS Assistant Administrator has determined that this emergency rule is consistent with the PCGFMP, Section 305(c) and other provisions of the Magnuson-Stevens Act, the Administrative Procedure Act (APA), the Northern Pacific Halibut Act of 1982, and other applicable law. Pursuant to 5 U.S.C. 553(b)(B), the Assistant Administrator for Fisheries finds good cause to waive prior notice and the opportunity for public comment because it would be impracticable and contrary to the public interest.
The Council did an emergency modification to their September 2020 meeting agenda to consider taking emergency action in response to requests from industry representatives, the Groundfish Advisory Subpanel, and the public. These entities raised concerns that many vessels would be unable to harvest their allocations before the primary season closed due to unforeseen issues resulting from restrictions associated with the COVID-19 pandemic. The Council considered and ultimately recommended NMFS initiate this action on September 17th, with less than 6 weeks remaining before the closure of the sablefish primary season on October 31. Providing prior notice through proposed rulemaking and public comment period in the normal rulemaking process would be counter to public interest by delaying implementation of emergency measures intended to provide relief for a time-sensitive management problem. Further delays to extend the season through emergency action would jeopardize the ability of sablefish primary fishery participants to land allocations, and avoid economic hardship. For the reasons outlined above, NMFS finds it impracticable and contrary to the public interest to provide prior opportunity to comment on these emergency measures.
Additionally, this rule is exempt from the 30-day delayed effectiveness provision of the APA under 5 U.S.C. 553(d)(1) because it relieves a restriction that would place fishery participants at an economic disadvantage. Waiving the 30-day delayed effectiveness for this rule is necessary to allow participants in the sablefish primary fishery under emergency rules to continue fishing operations with minimal interruption beyond the status quo closure date of October 31. Not extending the sablefish primary fishery season past October 31 would present immediate serious economic impacts without contributing to the economic goals of the sablefish tier program. Because this rule alleviates a restriction, which if continued would otherwise have serious and unnecessary economic harm on tier fishery vessels, it is not subject to the 30-day delayed effectiveness provision of the APA.
This action is being taken pursuant to the emergency provision of MSA and is exempt from OMB review. This rule is not significant.
This emergency rule is exempt from the procedures of the Regulatory Flexibility Act because the rule is issued without opportunity for prior notice and opportunity for public comment.
This emergency rule contains no information collection requirements under the Paperwork Reduction Act of 1995.
Fisheries, Fishing, and Indian Fisheries.
For the reasons set out in the preamble, 50 CFR part 660 is amended as follows:
16 U.S.C. 1801
(b) * * *
(4) * * *
(vii) * * *
(B) * * *
(
(
(d) * * *
(2) For participants in the sablefish primary season, the cumulative limit period to which this requirement applies is April 1 through October 31 (unless otherwise provided for at § 660.231(b)(1)(i)) or, for an individual vessel owner, when the tier limit for the permit(s) registered to the vessel has been reached, whichever is earlier.
(b) * * *
(1)
(i) Under emergency measures effective October 27, 2020 until December 31, 2020, notwithstanding any other section of these regulations, North of 36° N lat., the sablefish primary season for the limited entry, fixed gear, sablefish-endorsed vessels closes at 12 noon local time on December 31, or closes for an individual vessel owner when the tier limit for the sablefish endorsed permit(s) registered to the vessel has been reached, whichever is earlier, unless otherwise announced by the Regional Administrator through the routine management measures process described at § 660.60(c).
(ii) [Reserved]
(3) * * *
(iv) * * *
(A) Under emergency measures effective October 27, 2020, until November 15, 2020, notwithstanding any other section of these regulations, vessels authorized to participate in the sablefish primary fishery, licensed by the International Pacific Halibut Commission for commercial fishing in Area 2A (waters off Washington, Oregon, California), and fishing with longline gear north of Pt. Chehalis, WA (46°53.30′ N lat.) may possess and land up to 250 pounds (113 kg) dressed weight of Pacific halibut for every 1,000 pounds (454 kg) dressed weight of sablefish landed and up to 2 additional Pacific halibut in excess of the 250-pounds-per-1,000-pound limit per landing. Pacific halibut taken and retained in the sablefish primary fishery north of Pt. Chehalis may only be landed north of Pt. Chehalis and may not be possessed or landed south of Pt. Chehalis.
(B) [Reserved]
Agricultural Marketing Service, USDA.
Proposed rule; referendum order.
This document directs that a referendum be conducted among eligible growers of avocados grown in South Florida to determine whether they favor continuance of the marketing order regulating the handling of avocados produced in the production area.
The referendum will be conducted from November 30 through December 21, 2020. Only current growers of Florida avocados within the production area that produced avocados during the period April 1, 2019, through March 31, 2020, are eligible to vote in this referendum.
Copies of the marketing order may be obtained from the Southeast Marketing Field Office, Marketing Order and Agreement Division, Specialty Crops Program, AMS, USDA, 1124 First Street South, Winter Haven, FL 33880; Telephone: (863) 324-3375; or from the Marketing Order and Agreement Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW, STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-2491; or on the internet:
Abigail Campos, Marketing Specialist, or Christian D. Nissen, Regional Director, Southeast Marketing Field Office, Marketing Order and Agreement Division, Specialty Crops Program, AMS, USDA, 1124 First Street South, Winter Haven, FL 33880; Telephone: (863) 324-3375, Fax: (863) 291-8614, or Email:
Pursuant to Marketing Agreement and Order No. 915, as amended (7 CFR part 915), hereinafter referred to as the “Order,” and the applicable provisions of the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act,” it is hereby directed that a referendum be conducted to ascertain whether continuance of the Order is favored by growers. The referendum shall be conducted from November 30 through December 21, 2020, among Florida avocado growers in the production area. Only current Florida avocado growers who were engaged in the production of Florida avocados grown in the production area, during the period of period April 1, 2019, through March 31, 2020, may participate in the continuance referendum.
USDA has determined that continuance referenda are an effective means for determining whether growers favor the continuation of marketing order programs. The Order will continue in effect if two-thirds of the growers that cast votes, or growers representing two-thirds of the volume of Florida avocados voted in the referendum, cast ballots in favor of continuance. In evaluating the merits of continuance versus termination, USDA will not exclusively consider the results of the continuance referendum. USDA will also consider all other relevant information regarding the operation of the Order and relative benefits and disadvantages to growers, handlers, and consumers in determining whether continued operation of the Order would tend to effectuate the declared policy of the Act.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the ballots used in the referendum have been approved by the Office of Management and Budget (OMB) and have been assigned OMB No. 0581-0189, Fruit Crops. It has been estimated it will take an average of 20 minutes for each of the approximately 325 growers of Florida avocados to cast a ballot. Participation is voluntary. Ballots postmarked after December 21, 2020, will not be included in the vote tabulation.
Abigail Campos, Dolores Lowenstine, and Christian D. Nissen of the Southeast Marketing Field Office, Specialty Crops Program, AMS, USDA, are hereby designated as the referendum agents of the Secretary of Agriculture to conduct this referendum. The procedure applicable to the referendum shall be the “Procedure for the Conduct of Referenda in Connection with Marketing Orders for Fruits, Vegetables, and Nuts Pursuant to the Agricultural Marketing Agreement Act of 1937, as Amended” (7 CFR 900.400
Ballots will be mailed to all growers of record and may also be obtained from the referendum agents or their appointees.
Avocados, Marketing agreements, Reporting and recordkeeping requirements.
7 U.S.C. 601-674.
Board of Governors of the Federal Reserve System (“Board”); Financial Crimes Enforcement Network (“FinCEN”), Treasury.
Joint notice of proposed rulemaking.
The Board and FinCEN (collectively, the “Agencies”) are issuing this proposed rule to modify the threshold in the rule implementing the
Written comments on this proposed rule may be submitted on or before November 27, 2020.
Comments may be submitted by any of the following methods:
•
•
•
•
All public comments will be made available on the Board's website at
•
•
The Currency and Foreign Transactions Reporting Act of 1970, as amended by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”) (Pub. L. 107-56) and other legislation, is the legislative framework commonly referred to as the BSA. The Secretary of the Treasury (“Secretary”) has delegated to the Director of FinCEN (“Director”) the authority to implement, administer, and enforce compliance with the BSA and associated regulations.
The Annunzio-Wylie Anti-Money Laundering Act of 1992 (Pub. L. 102-550) (“Annunzio-Wylie”) amended the BSA framework. Annunzio-Wylie authorizes the Secretary and the Board to jointly issue regulations requiring insured depository institutions to maintain records of domestic funds transfers.
On January 3, 1995, the Agencies jointly issued a recordkeeping rule (the “Recordkeeping Rule”) that requires banks and nonbank financial institutions to collect and retain information related to funds transfers and transmittals of funds in amounts of $3,000 or more.
At the same time, FinCEN issued a separate rule—the “Travel Rule”—that requires banks and nonbank financial institutions to transmit information on certain funds transfers and transmittals of funds to other banks or nonbank financial institutions participating in the transfer or transmittal.
This proposed rule would amend both the Recordkeeping Rule and the Travel Rule. The Recordkeeping Rule is codified at 31 CFR 1020.410(a) and 1010.410(e)
The Recordkeeping Rule and Travel Rule collectively require banks and nonbank financial institutions to collect, retain, and transmit information on funds transfers and transmittals of funds in amounts of $3,000 or more.
Under the Recordkeeping Rule, the originator's bank or transmittor's financial institution must collect and retain the following information: (a) Name and address of the originator or transmittor; (b) the amount of the payment or transmittal order; (c) the execution date of the payment or transmittal order; (d) any payment instructions received from the originator or transmittor with the payment or transmittal order; and (e) the identity of the beneficiary's bank or recipient's financial institution. In addition, the originator's bank or transmittor's financial institution must retain the following information if it receives that information from the originator or transmittor: (a) Name and address of the beneficiary or recipient; (b) account number of the beneficiary or recipient; and (c) any other specific identifier of the beneficiary or recipient. The originator's bank or transmittor's financial institution is required to verify the identity of the person placing a payment or transmittal order if the order is made in person and the person placing the order is not an established customer.
Under the Travel Rule, the originator's bank or transmittor's financial institution is required to include information, including all information required under the Recordkeeping Rule, in a payment or transmittal order sent by the bank or nonbank financial institution to another bank or nonbank financial institution in the payment chain. An intermediary bank or financial institution is also required to transmit this information to other banks or nonbank financial institutions in the payment chain, to the extent the information is received by the intermediary bank or financial institution.
The existing requirements in 31 CFR 1020.410(a) and 31 CFR 1010.410(e) and (f) to collect, retain, and transmit information on funds transfers and transmittals of funds currently apply only to funds transfers and transmittals of funds in amounts of $3,000 or more. The Agencies are proposing to lower the threshold under the Recordkeeping Rule, and FinCEN is proposing to lower the threshold under the Travel Rule, to $250 for funds transfers and transmittals of funds that begin or end outside the United States.
Information available to the Agencies indicates that malign actors are using smaller-value cross-border wire transfers to facilitate or commit terrorist financing, narcotics trafficking, and other illicit activity, and that increased recordkeeping and reporting concerning these transactions would be valuable to
First, FinCEN analyzed data derived from approximately 2,000 SARs filed by money transmitters between 2016 and 2019 related to potential terrorist financing-related transmittals of funds.
FinCEN also reviewed a separate subset of 363 SARs filed by a money transmitter for the period between 2012 and 2018 that FinCEN determined to be potentially related to fentanyl trafficking.
In the 1995 rulemaking implementing the Travel Rule, the Treasury noted that it would monitor the effectiveness of financial institutions' suspicious transaction reporting protocols to determine whether potentially illicit transactions below the $3,000 threshold were being reported (and thus whether it might be unnecessary, from a law enforcement perspective, to lower the threshold).
Second, recent prosecutions show that individuals are sending and receiving funds to finance terrorist activity in amounts below (and in some cases, well below) the current $3,000 recordkeeping threshold. Those cases involved persons providing material support for terrorist activity to a designated Foreign Terrorist Organization (“FTO”). In one such case, during 2013, the defendant allegedly sent $1,500 to a co-defendant's financial account within the United States; the co-defendant was collecting money from his co-conspirators in support of an FTO fighter in Syria, ultimately transmitting those funds through money remitting businesses and intermediaries overseas.
Third, the Money Laundering and Asset Recovery Section (“MLARS”) of the Criminal Division of the Department of Justice (“DOJ”) has advised the Agencies that it supports lowering the dollar threshold for the Recordkeeping and Travel Rules. In 2006, MLARS (previously known as the Asset Forfeiture and Money Laundering Section) submitted a public comment to the Agencies in response to an Advance Notice of Proposed Rulemaking (“2006 ANPRM”) in which the Agencies sought comments on lowering the thresholds of the Recordkeeping and Travel Rules.
More recently, MLARS has advised the Agencies that it continues to support lowering the threshold, particularly if doing so would bring the Recordkeeping Rule and Travel Rule in line with international standards (which are further described immediately below). MLARS indicated that its views apply equally to funds transfers by banks and transmittals of funds by nonbank financial institutions. The DEA, the IRS, and the USSS have similarly expressed support for lowering the reporting threshold for purposes of the Recordkeeping Rule and Travel Rule.
Finally, the FATF has indicated that records of smaller-value transactions are valuable to law enforcement, particularly with respect to terrorist financing investigations.
Accordingly, the Agencies believe that mandating the collection, retention, and transmission of information for funds transfers and transmittals of funds of at least $250 that originate or terminate outside the United States would likely lead to the preservation of information that would benefit law enforcement and national security investigations. Given the usefulness of this information and the potential that financial institutions may not correctly identify a transaction as suspicious, as noted previously, the Agencies believe that it is appropriate to propose lowering the threshold of the Recordkeeping Rule, and FinCEN concludes that it is appropriate to propose lowering the threshold of the Travel Rule, even though financial institutions are subject to SAR reporting requirements through which they may report certain of these smaller-value transactions that fall below the current threshold.
The Agencies believe that the effect of lowering the $3,000 threshold on financial institutions and on the cost and efficiency of the payments system is likely to be low. As demonstrated by the SARs described in the preceding section, some financial institutions are already collecting information on at least a portion of transactions taking place under the current threshold for purposes of reporting suspicious transactions to FinCEN. FinCEN is also aware that some financial institutions already collect information on the originator and beneficiary for transmittals below the $3,000 threshold for reasons separate from reporting suspicious transactions to FinCEN, for instance because it is cost-effective to maintain a single set of processes for all transactions..
The Agencies note that in completing the 1995 rulemakings implementing the Recordkeeping and Travel Rules, and in obtaining comments from the industry in connection with the 2006 ANPRM, some financial institutions advised that they were already collecting information for smaller-value transmittals and that mandating recordkeeping requirements for such transactions would not have a material impact on the payment system. At the same time, other financial institutions expressed concern that imposing information collection requirements (especially for smaller-value transmittals) could increase regulatory compliance costs by mandating the use of new technologies and processes to collect the information, and that these costs could be passed on to consumers.
In deciding on a threshold of $3,000 in 1995, the Agencies balanced the value of data on funds transfers and transmittals of funds with the burden that the Recordkeeping Rule and Travel Rule imposed on both bank and nonbank financial institutions. The Agencies are proposing to lower the threshold because the current threshold may no longer represent the appropriate balance for transmittals originating or terminating outside the United States. As noted in the 2006 ANPRM, subsequent to 1995, the responsibilities of financial institutions under the BSA have expanded. For example, an MSB must now report suspicious transactions
The Recordkeeping Rule applies to funds transfers (
The Recordkeeping Rule's definition of “transmittal of funds” parallels the UCC Article 4A definition of “funds transfer,” with minor adjustments that allow the definition to apply to nonbank financial institutions. Specifically, the Recordkeeping Rule defines transmittal of funds as “[a] series of transactions beginning with the transmittor's transmittal order, made for the purpose of making payment to the recipient. .. .”
Accordingly, funds transfers and transmittals of funds involve an instruction to pay a “fixed or determinable amount of money.” The Recordkeeping Rule does not explicitly define the word “money.” However, in the preamble to the
In guidance issued in November 2010, FinCEN similarly explained that the Travel Rule “uses terms that are intended to parallel those used in UCC Article 4A, but that are applicable to all financial institutions, as defined within the Bank Secrecy Act's implementing regulations.” Similar to the Recordkeeping Rule, FinCEN's implementing regulations explain that a transmittal order “includes a payment order and is an instruction of a sender to a receiving financial institution, transmitted orally, electronically, or in writing, to pay, or cause another financial institution or foreign financial agency to pay, a fixed or determinable amount of money to a recipient[.]”
Since the Agencies issued the Recordkeeping Rule, and FinCEN issued the Travel Rule, a number of CVCs, such as Bitcoin and Ethereum, have been created. CVC is a medium of exchange (such as cryptocurrency) that either has an equivalent value as currency, or acts as a substitute for currency, but lacks legal tender status. Generally, CVCs can be exchanged instantaneously anywhere in the world through peer-to-peer payment systems (a distributed ledger) that allow any two parties to transact directly with each other without the need for an intermediary financial institution. However, in practice, many persons hold and transmit CVC using a third-party financial institution such as a “hosted wallet” or an exchange.
Public use of CVCs has grown significantly in recent years. Estimated transactions in Bitcoin alone were approximately $366 billion dollars in 2019 and $312 billion through in 2020 through August.
The Treasury, including FinCEN, has closely monitored illicit finance risks posed by CVCs. The Agencies note that malign actors have used CVCs to facilitate international terrorist financing, weapons proliferation, sanctions evasion, and transnational money laundering, as well as to buy and sell controlled substances, stolen and fraudulent identification documents and access devices, counterfeit goods, malware and other computer hacking tools, firearms, and toxic chemicals.
To mitigate illicit finance risks posed by CVC, the FATF has advised that countries should consider so-called virtual assets as “property,” “proceeds,”
In addition to CVCs, foreign governments—including Iran, Venezuela, and Russia—have created or expressed interest in creating digital currencies that could be used to engage in sanctions evasion. For example, the Venezuelan government developed a state-backed digital currency called the “petro,” which the government publicly indicated was designed for the purpose of evading U.S sanctions.
This proposed rule would define “money” in 31 CFR 1010.100(ll) and (eee) to make explicitly clear that both payment orders and transmittal orders include any instruction by the sender to transmit CVC or any digital asset having legal tender status to a recipient.
FinCEN is aware that the CVC industry is working on developing systems and processes to achieve full compliance with the Travel Rule as applied to virtual currency transactions as a result of the distinctive characteristics of CVCs. The Agencies welcome comment on these efforts and any costs related thereto.
This proposed rule would lower the Recordkeeping Rule and Travel Rule thresholds set forth in 31 CFR 1020.410 and 31 CFR 1010.410(e) and (f) for financial institutions. The thresholds would be lowered from $3,000 to $250, but only with respect to funds transfers and transmittals of funds that begin or end outside the United States. As set forth in the proposed revised sections below, a funds transfer or transmittal of funds would be considered to begin or end outside the United States if the financial institution knows or has reason to know that the transmittor, transmittor's financial institution, recipient, or recipient's financial institution is located in, is ordinarily resident in, or is organized under the laws of a jurisdiction other than the United States or a jurisdiction within the United States.
For this purpose, a financial institution would have “reason to know” that a transaction begins or ends outside the United States only to the extent such information could be determined based on the information the financial institution receives in the transmittal order, collects from the transmittor to effectuate the transmittal of funds, or otherwise collects from the transmittor or recipient to comply with regulations implementing the BSA.
Financial institutions are already required to retain the address of the transmittor and recipient under the Recordkeeping Rule for transactions subject to the current threshold, and may, as a matter of their own business practices, retain the addresses of other participants in a funds transfer or transmittal of funds. This proposed rule would not impose any new requirements to retain address information, other than those resulting from a change to the applicable thresholds.
This proposed rule also would revise the definitions of payment order and transmittal order set forth in the BSA regulations so that the Recordkeeping Rule and Travel Rule would explicitly apply to domestic and cross-border transactions in CVC and digital assets having legal tender status.
Both the Recordkeeping Rule and Travel Rule refer to a “payment order” (in the case of banks) and a “transmittal order” (in the case of financial institutions other than banks). These terms, in turn, use the term “money.” This proposed rule would clarify the meaning of money in 31 CFR 1010.100(ll) (payment order) and 1010.100(eee) (transmittal order), explaining that money includes (1) a medium of exchange currently authorized or adopted by a domestic or foreign government, including any digital asset that has legal tender status in any jurisdiction
The Agencies welcome comment on all aspects of this proposed rule. The Agencies encourage all interested parties to provide their views.
With respect to the effect of lowering the threshold for the requirement in 31 CFR 1020.410 and 31 CFR 1010.410(e) and (f) to collect, retain, and transmit information on funds transfers and transmittals of funds that begin or end outside the United States, the Agencies in particular request comment on the following questions from financial institutions and members of the public:
(1) To what extent would the proposed rule impose a burden on financial institutions, including with respect to information technology implementation costs? To what extent would the burden be different for thresholds such as $0, $500, or $1,000 for funds transfers and transmittals of funds that begin or end outside the United States? What would be the
(2) To what extent would the burden of the proposed rule on financial institutions and the public be mitigated were the Agencies to select a threshold of $250 but not require nonbank financial institutions to collect a social security number or employer identification number (“EIN”) for non-established customers engaging in transmittals of funds between $250 and $3,000 that begin or end outside the United States?
(3) To what extent would the burden of the proposed rule be reduced if the Agencies issued specific guidance about appropriate forms of identification to be used in conjunction with identity verification, including in regards to whether there are circumstances in which verification may be done remotely and what documents are acceptable as proof?
(4) To what extent would the burden of the proposed rule on financial institutions and the public be mitigated if the Agencies were to include in the regulation the standard described in Section IV.A for determining when an institution would be subject to the $250 threshold for cross-border transfers,
The Agencies request comment from law enforcement with respect to the following related questions:
(1) To what extent would the proposed rule benefit law enforcement? To what extent would these benefits be different for thresholds such as $0, $500, or $1,000 for funds transfers and transmittals of funds that begin or end outside the United States? What would be the impact on the benefits to law enforcement if the proposed threshold change were extended to all transactions, including domestic transactions?
(2) To what extent would the benefit of the proposed rule to law enforcement be compromised were the Agencies to select a threshold of $250 but not require that nonbank financial institutions collect a social security number or EIN for non-established nonbank customers engaging in transmittals of funds between $250 and $3,000 that begin or end outside the United States?
With respect to the effect of clarifying the meaning of “money” in the definitions of “payment order” and “transmittal order” in 31 CFR 1010.100, the Agencies in particular request comment on the following questions from law enforcement, financial institutions, and members of the public:
(1) Describe the additional costs, if any, from complying with the Recordkeeping Rule and Travel Rule in light of the clarification included in the proposed rule, including with respect to information technology costs.
(2) What mechanisms have persons that engage in CVC transactions developed to comply with the Recordkeeping Rule and Travel Rule and what is the impact of adopting these solutions on the CVC industry, including on other BSA compliance efforts?
Executive Orders 13563 and 12866 direct agencies to assess costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, and public health and safety effects; distributive impacts; and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This proposed rule has been designated a “significant regulatory action” under section 3(f) of Executive Order 12866. Accordingly, the proposed rule has been reviewed by the Office of Management and Budget (“OMB”).
FinCEN believes the primary cost of complying with the proposed rule is captured in its Paperwork Reduction Act (44 U.S.C. 3507(d)) (“PRA”) burden estimates described in detail below, which amount to 3,315,844 hours. FinCEN estimated in its recent OMB control number renewal for SAR requirements that the average labor cost of storing SARs and supporting documentation, weighed against the relevant labor required, was $24 per hour.
The benefits from the proposed rule include enhanced law enforcement ability to investigate, prosecute and disrupt the financing of international terrorism and other priority transnational security threats, as well as other types of transnational financial crime. The cost of terrorist attacks can be immense. For instance, one public report estimated the cost of terrorism globally at $33 billion in 2018, though this cost was primarily borne outside the United States.
Of course, the proposed rule would not simply reduce the probability of terrorism but also would contribute to the ability of law enforcement to investigate a wide array of other priority transnational threats and financial crimes, including proliferation financing, sanctions evasion, and money laundering.
FinCEN considered several alternatives to the proposed rule. First, FinCEN considered the possibility of modifying the proposed rule by applying the FATF's suggested
Second, FinCEN considered the possibility of implementing the proposed rule with a threshold of $0 for transactions beginning or ending outside of the United States. FinCEN's terrorism-related transaction analysis suggests that transactions potentially related to terrorism occur at values below the $250 level. Although FinCEN believes that a $0 threshold would lead to enhanced benefits in terms of capturing a larger universe of transactions, requiring collection and verification of transaction information for low-value transactions could impose a substantial burden on small financial institutions, such as small money services businesses. Nonetheless, FinCEN will carefully consider comments to determine whether a $0 threshold would be appropriate in a final rule. FinCEN will also consider in a final rule the extent to which the burden could be minimized by providing guidance on appropriate verification procedures for lower-value transactions.
Third, FinCEN considered applying the requirements of the proposed rule to all transactions, including those that begin and end within the United States. However, FinCEN's analysis identified that only approximately 17,000 of the approximately 1.29 million transactions included within its terrorism analysis dataset involved domestic-only transactions. Applying the requirements to all domestic transactions would therefore capture a relatively small number of additional transactions while resulting in significant additional recordkeeping burden for financial institutions. FinCEN believes that, at this time, it would therefore be appropriate to limit the proposed rule to transactions that begin or end outside the United States. Again, based on comments received, FinCEN will consider in a final rule the extent to which the benefits of extending the scope of the changes to the thresholds of the Recordkeeping Rule and Travel Rule to include domestic transactions would exceed the burdens.
With respect to the clarification of the definition of “money,” FinCEN considered the alternative of leaving the regulation as it was, but believed doing so would perpetuate uncertainty about the applicability of the Recordkeeping and Travel Rules to transactions involving CVC.
FinCEN requests comment on the benefits, and any estimates of costs, associated with the requirements of the proposed rule and the proposed alternatives.
Executive Order 13771 requires an agency to identify at least two existing regulations to be repealed whenever it publicly proposes for notice and comment or otherwise promulgates a new regulation. As described above, the proposed amendments to the Recordkeeping Rule and Travel Rule involve a national security function. Therefore, Executive Order 13771 does not apply.
The Regulatory Flexibility Act (“RFA”) (5 U.S.C. 601
The proposed changes to the Recordkeeping Rule and Travel Rule would reduce from $3,000 to $250 the threshold for the requirement to collect, retain, and transmit information on funds transfers and transmittal of funds for transactions that begin or end outside the United States. These changes are necessary because funds transfers and transmittals of funds related to terrorist financing, narcotics trafficking, and other crimes are occurring well below the current $3,000 threshold. It therefore would benefit law enforcement for this additional information to be collected, retained, and transmitted by financial institutions.
The clarifications regarding the meaning of “money” in the definitions of “payment order” and “transmittal order” in 31 CFR 1010.100 address urgent concerns regarding illicit finance, including the financing of international terrorism, sanctions evasion, and weapons proliferation through CVC. In the absence of clarification, some entities may not be aware of or may choose not to comply with the Recordkeeping Rule and the Travel Rule when engaging in transactions involving CVC. The Agencies are also clarifying that “money” includes digital assets with legal tender status.
The proposed changes to the Recordkeeping Rule and Travel Rule would apply to all financial institutions regulated under the BSA.
Although the proposed changes would apply to a substantial number of small entities, the Agencies believe that the changes would not have a significant economic impact on such entities for the reasons noted below. In the first year, the Agencies expect additional expense of time and resources to read and understand the regulations and train staff and implement technological changes.
In 2006, the Agencies solicited public comment on the potential benefits and burdens of reducing the threshold for the Recordkeeping Rule and Travel Rule requirements.
As noted previously, in May 2019, FinCEN issued guidance advising that CVC-based transfers effectuated by a nonbank financial institution may fall within the Recordkeeping and Travel Rules, on the grounds that such transfers involve the making of a “transmittal order” by the sender—
As described above, the proposed rule would also clarify the Agencies' existing interpretation that the Recordkeeping and Travel Rules apply to transactions involving a digital asset with legal tender status. The Agencies do not believe that any financial institutions currently facilitate transactions involving sovereign digital currencies.
Compliance costs for entities that would be affected by these regulations are generally, reporting, recordkeeping, and information technology implementation and maintenance costs. Data are not readily available to determine the costs specific to small entities and the Agencies invite comments about compliance costs, especially those affecting small entities.
These proposed changes (a) reduce the threshold for the Recordkeeping and Travel Rule requirements to collect, retain, and transmit information on funds transfers and transmittals of funds for transactions that begin or end outside the United States; and (b) clarify the application of the Recordkeeping and Travel Rule requirements to transactions involving CVC or digital assets with legal tender status. Banks and other financial institutions therefore would need to collect and retain the following information on funds transfers and transmittals of funds in amounts at or above the applicable threshold, including with respect to transactions involving CVC or digital assets with legal tender status: The name and address of the originator or transmittor; the amount and date of the transaction; any payment instructions received; and the identity of the beneficiary's bank or recipient's financial institution. In addition, for transactions at or above the applicable threshold, including with respect to transactions involving CVC or digital assets with legal tender status, an originator's bank or transmittor's financial institution would be required to verify the identity of the person placing a payment or transmittal order if the order is made in person and the person placing the order is not an established customer. An intermediary bank or intermediary financial institution, and the beneficiary's bank or recipient's financial institution, also would be required to retain originals or copies of payment or transmittal orders.
For funds transfers and transmittals of funds at or above the applicable threshold, including with respect to transactions involving CVC or digital assets with legal tender status, the originator's bank or transmittor's financial institution also would be required to include information, including all information required under the Recordkeeping Rule, in a payment or transmittal order sent by the bank or nonbank financial institution to another bank or nonbank financial institution in the payment chain. An intermediary bank or financial institution would also be required to transmit information to other banks or nonbank financial institutions in the payment chain, to the extent the information is received by the intermediary bank or financial institution.
The Agencies are unaware of any Federal rules that duplicate, overlap with, or conflict with the proposed changes to the Recordkeeping and Travel Rules, except that some financial institutions may already collect some of the information required by the proposed modifications as part of their existing implementation of their risk-based AML programs under the BSA and its implementing regulations.
The Agencies considered several alternatives to the proposed regulatory changes. First, the Agencies considered the possibility of modifying the proposed rule by applying the FATF's suggested
Second, the Agencies considered the possibility of implementing the proposed rule with a threshold of $0 for transactions that begin or end outside of the United States. Although this would expand the data available to law enforcement, and the Agencies will carefully consider comments to determine whether a $0 threshold would be appropriate in a final rule, the Agencies believed that a $0 threshold might impose a significant burden on small financial institutions and therefore are not proposing a $0 threshold at this time.
Third, the Agencies considered exempting small banks from the lower threshold requirement entirely. However, the Agencies believe that the number of transactions beginning or ending outside the United States is relatively low for most small banks, which should substantially reduce the burden on them from the proposed change in the threshold.
Finally, the Agencies considered the possibility of waiving the requirement that financial institutions obtain a social security number or EIN for funds transfers or transmittals of funds below a certain threshold by non-established customers. Adopting this alternative would primarily impact MSBs, many of which are small and more likely to deal with non-established customers. The Agencies have not adopted this alternative at this time because it would increase the likelihood of criminals using false identities to transmit funds. Although the Agencies have not adopted this alternative at this time, this proposed rule requests comment on the benefits and drawbacks of waiving the requirement to obtain a social security number or EIN below some threshold.
The Agencies welcome comment on the overall regulatory flexibility analysis, especially information about compliance costs and alternatives.
Section 202 of the Unfunded Mandates Reform Act of 1995 (“Unfunded Mandates Act”), Public Law 104-4 (March 22, 1995), requires that an agency prepare a budgetary impact statement before promulgating a rule that may result in expenditure by the state, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. If a budgetary impact statement is required, section 202 of the Unfunded Mandates Act also requires an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. See section VI.A for a discussion of the economic impact of this proposed rule.
The recordkeeping requirements contained in this proposed rule (31 CFR 1010.410 and 31 CFR 1020.410) have been submitted by FinCEN to OMB for review in accordance with the PRA. Written comments and recommendations for the proposed information collection can be submitted by visiting
Currently, financial institutions must collect, retain, and transmit certain information as part of funds transfers or transmittals of funds involving $3,000 or more (31 CFR 1020.410(a) and 31 CFR 1010.410(e) and (f)). This proposed rule would modify the thresholds in the rules implementing the BSA requiring financial institutions to collect and retain information on certain funds transfers and transmittals of funds. The modifications would reduce the threshold from the current $3,000 to $250 for funds transfers and transmittals of funds that begin or end outside the United States. The proposed rule likewise would modify the threshold in the rule requiring financial institutions to transmit to other financial institutions in the payment chain information on funds transfers and transmittals of funds from $3,000 to $250 for funds transfers and transmittals of funds that begin or end outside the United States. The proposed rule would also clarify the meaning of “money,” making more clear the transactions in relation to which financial institutions must comply with the Recordkeeping Rule and the Travel Rule.
Since FinCEN has authority to implement the Recordkeeping Rule and Travel Rule with respect to all respondents, FinCEN will be responsible for the entire paperwork burden associated with this information collection.
This proposed rule would reduce from $3,000 to $250 the threshold for the requirement to collect, retain, and transmit information on funds transfers and transmittals of funds that begin or end outside the United States. This threshold change is necessary because funds transfers and transmittals of funds related to terrorist financing, drug trafficking, and other crimes often occur well below the current threshold. It therefore would benefit law enforcement for this additional financial information to be collected, retained, and transmitted by financial institutions.
This proposed rule would reduce the threshold for the requirement to collect and retain information on transmittals of funds conducted by nonbank financial institutions that begin or end outside the United States.
This proposed rule would reduce the threshold for the requirement to transmit information on funds transfers and transmittals of funds conducted by financial institutions acting as the transmitting financial institution or the intermediary financial institution in funds transfers and transmittals of funds that begin or end outside the United States.
This proposed rule would reduce the threshold for the requirement to collect and retain information on funds transfers conducted by a bank acting as the transmitting, intermediary, or recipient bank when the funds transfer begins or ends outside the United States.
This proposed rule also would clarify the meaning of “money” as used in the Recordkeeping Rule and the Travel Rule. Specifically, the proposed rule would explicitly clarify that these rules apply to transactions involving (1) CVC, or (2) any digital asset having legal tender status. The clarification related to such transactions is necessary because many of these transactions present heightened terrorist financing, weapons proliferation, sanctions evasion, and money laundering risks due to their global nature, distributed structure, limited transparency, and speed. While these transactions pose some of the same risks as those made in traditional financial systems, in addition, a combination of features unique to CVC allows individual users to move value nearly instantaneously to anywhere in the world without ever having to pass through a regulated financial institution, thus increasing such risks. Although the clarification is consistent with FinCEN's interpretation of existing rules, the estimates below analyze the costs of compliance with this clarification against a baseline in which financial institutions are not complying with FinCEN's interpretation of the Recordkeeping Rule and Travel Rule for such transactions.
This proposed rule would explicitly include within the requirement to collect and retain information on transmittals of funds conducted by nonbank financial institutions transactions involving (1) CVC, or (2) any digital asset having legal tender status.
This proposed rule would explicitly include within the requirement to transmit information on funds transfers and transmittals of funds conducted by financial institutions acting as the transmittor's financial institution or an intermediary financial institution, funds transfers and transmittals of funds transactions involving (1) CVC, or (2) any digital asset having legal tender status.
FinCEN understands that banks, including credit unions, currently engage in very few, if any, funds transfers involving CVCs. For that reason, FinCEN therefore estimates that the proposed rule would add only 1 additional hour of burden per bank recordkeeper a year.
Because of the large volume of CVC transactions, FinCEN estimates that the 530 MSBs will process five times the volume of transmittals of funds involving CVC in comparison to the number of non-CVC transactions that will be conducted by MSBs as a result of the change in the threshold. For that reason, FinCEN estimates that the proposed rule would add an additional 180 hours of burden per nonbank recordkeeper a year (five multiplied by the new baseline of 36 hours).
This proposed rule would explicitly include transactions involving CVC or digital assets with legal tender status within the requirement to collect and retain information on funds transfers conducted by banks acting as the originator's bank, intermediary bank, or beneficiary's bank.
3,072,160 hours (lower threshold) + 243,684 hours (CVC transactions) = 3,315,844 hours.
The current estimated total burden hours for OMB control number 1506-0058 is 2,150,200 hours. 31 CFR 1010.410(e) and (f) are both included in OMB control number 1506-0058. The total estimated increase in burden hours as a result of this proposed rulemaking for this control number is 1,196,902 hours. (533,344 hours (31 CFR 1010.410(e)) + 663,558 hours (31 CFR 1010.410(f)).
The current estimated total burden hours for OMB control number 1506-0059 is 2,290,000 hours. 31 CFR 1020.410 is included in OMB control number 1506-0059. The total estimated
In addition to the questions listed above, FinCEN specifically invites comment on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of FinCEN, including whether the information will have practical utility; (b) the accuracy of the estimated burden associated with the proposed collection of information; (c) how the quality, utility, and clarity of the information to be collected may be enhanced; and (d) how the burden of complying with the proposed collection of information may be minimized, including through the application of automated collection techniques or other forms of information technology.
Administrative practice and procedure, Banks, Banking, Currency, Foreign banking, Foreign currencies, Investigations, Penalties, Reporting and recordkeeping requirements, Terrorism.
For the reasons set forth in the preamble, Parts 1010 and 1020 of Chapter X of Title 31 of the Code of Federal Regulations are proposed to be amended as follows:
12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314 and 5316-5332; Title III, sec. 314, Pub. L. 107-56, 115 Stat. 307; sec. 701, Pub. L. 114-74, 129 Stat. 599.
(ll)
(i) The instruction does not state a condition to payment to the beneficiary other than time of payment;
(ii) The receiving bank is to be reimbursed by debiting an account of, or otherwise receiving payment from, the sender; and
(iii) The instruction is transmitted by the sender directly to the receiving bank or to an agent, funds transfer system, or communication system for transmittal to the receiving bank.
(2) For purposes of this paragraph (ll), money means:
(i) A medium of exchange currently authorized or adopted by a domestic or foreign government, including any digital asset that has legal tender status in any jurisdiction. The term includes a monetary unit of account established by an intragovernmental organization or by agreement between two or more countries; or
(ii) A convertible virtual currency.
(3) For purposes of this paragraph (ll), convertible virtual currency means a medium of exchange (such as cryptocurrency) that either has an equivalent value as currency, or acts as a substitute for currency, but lacks legal tender status.
(eee)
(i) The instruction does not state a condition to payment to the recipient other than time of payment;
(ii) The receiving financial institution is to be reimbursed by debiting an account of, or otherwise receiving payment from, the sender; and
(iii) The instruction is transmitted by the sender directly to the receiving financial institution or to an agent or communication system for transmittal to the receiving financial institution.
(2) For purposes of this paragraph (eee), the term “money” means:
(i) A medium of exchange currently authorized or adopted by a domestic or foreign government, including any digital asset that has legal tender status in any jurisdiction. The term includes a monetary unit of account established by an intragovernmental organization or by agreement between two or more countries; or
(ii) A convertible virtual currency.
(3) For purposes of this paragraph (eee), convertible virtual currency means a medium of exchange (such as cryptocurrency) that either has an equivalent value as currency, or acts as a substitute for currency, but lacks legal tender status.
(e)
(f) Any transmittor's financial institution or intermediary financial institution located within the United States shall include in any transmittal order for a transmittal of funds in the amount of $3,000 or more, information as required in this paragraph (f). A financial institution also is subject to the requirements of this paragraph (f) with respect to a transmittal of funds in the amount of $250 or more that begins or ends outside the United States. For purposes of this paragraph (f), a transmittal of funds will be considered to begin or end outside the United States if a financial institution knows or has reason to know that the transmittor, transmittor's financial institution, recipient, or recipient's financial institution is located in, is ordinarily resident in, or is organized under the laws of a jurisdiction other than the United States or a jurisdiction within the United States.
12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314 and 5316-5332; title III, sec. 314, Pub. L. 107-56, 115 Stat. 307; sec. 701, Pub. L. 114-74, 129 Stat. 599.
(a) Each agent, agency, branch, or office located within the United States of a bank is subject the requirements of this paragraph (a) with respect to a funds transfer in the amount of $3,000 or more. A bank also is subject to the requirements of this paragraph (a) with respect to a funds transfer in the amount of $250 or more that begins or ends outside the United States. For purposes of this paragraph, a funds transfer will be considered to begin or end outside the United States if a bank knows or has reason to know that the originator, originator's bank, beneficiary, or beneficiary's bank is located in, is ordinarily resident in, or is organized under the laws of a jurisdiction other than the United States or a jurisdiction within the United States. For funds transfers subject to the requirements of this paragraph (a), each agent, agency, branch, or office located within the United States of a bank is required to retain either the original or a copy or reproduction of each of the following:
In concurrence: By the Department of the Treasury.
By order of the Board of Governors of the Federal Reserve System.
Coast Guard, DHS
Notice of proposed rulemaking.
The Coast Guard proposes to modify the operating schedule that governs the National Steel Corporation Railroad Bridge, mile 0.40, the Delray Connecting Railroad Bridge, mile 0.34, and the Delray Connecting Railroad Bridge, mile 0.80. Delray Connecting Railroad Company, the owner and operator of these three bridges, has requested to stop continual drawtender service and to operate the two bridges only while trains are crossing the bridge, and one bridge upon signal if a 4-hour advance notice is received.
Comments and related material must reach the Coast Guard on or before December 28, 2020.
You may submit comments identified by docket number USCG-2020-0513 using Federal e-Rulemaking Portal at
See the “Public Participation and Request for Comments” portion of the
If you have questions on this proposed rule, call or email: Mr. Lee D. Soule, Bridge Management Specialist, Ninth Coast Guard District; telephone 216-902-6085, email
The Delray Connecting Railroad requested to reduce drawtender staffing at their three bridges at Zug Island. The National Steel Corporation Railroad Bridge, mile 0.40, the Delray Connecting Railroad Bridge, mile 0.34, and the Delray Connecting Railroad Bridge, mile 0.80, currently open on signal and are required to be manned by a drawtender at each bridge. The reason for the request to stop continual drawtender service is that the primary customer, a steel mill on Zug Island, has been placed into caretaker status, significantly decreasing the rail traffic across these bridges. The operation of the bridges should however remain transparent to the vessels navigating the waterway.
The River Rouge is a commercial waterway that serves several heavy industries near the city of Detroit, MI. The U.S. Army Corps of Engineers in cooperation with the U.S. Environmental Protection Agency are currently improving the width and depth of the Rouge River, where both the swing and the bascule Delray Bridges are located. Originally, the River Rouge navigated two ninety-degree bends through the area that is referred to as the Old Channel before emptying into the Detroit River. In 1888 the Zug Island Improvement Company cut a channel through the south section of Zug Island locally called the Short Cut Channel creating Zug Island and allowing vessels to bypass the two ninety-degree bends in the Old Channel. This Short Cut Channel is the preferred path for large vessels. Currently the waterway is used by large commercial freighters and several tug and barge vessels. Recreational use of the waterway is very limited. There are twelve bridges across the River Rouge.
The National Steel Corporation Railroad Bridge, mile 0.40, is a single leaf bascule bridge, that provides an unlimited clearance in the open position and a vertical clearance of six feet above LWD in the closed position. The Delray Connecting Railroad Bridge, mile 0.34, is a single leaf bascule bridge, that provides an unlimited clearance in the open position and a vertical clearance of seven feet above LWD in the closed position. The Delray Connecting Railroad Bridge, mile 0.80, is a swing bridge that provides an unlimited clearance in the open position and a vertical clearance of seven feet above LWD in the closed position. All three bridges are owned by the Delray Connecting Railroad who is requesting the change.
The proposed rule will establish the procedures to move the bridge to allow rail traffic to cross the bridge while giving notice to the vessels transiting the waterway that the bridge will be lowering. Ten minutes before the bridge is lowered for train traffic a crewmember from the train will initiate a SECURITE call on VHF-FM Marine Channel 16 that the bridge will be lowering for train traffic and invite any concerned mariners to contact the drawtender on VHF-FM Marine Channel 12. The drawtender will also visually monitor for vessel traffic and listen for the standard bridge opening signal of one prolonged blast and one short blast from vessels already transiting the waterway. After the ten minute warning, one last SECURITE call will be made that the bridge will be lowering for rail traffic five minutes before lowering. Once the drawtender is satisfied that it is safe the bridge will be lowered for rail traffic. Once the rail traffic has cleared the bridge, the bridge will be raised and locked in the fully open to navigation position.
The Delray Connecting Railroad Bridge, mile 0.34, has had limited requests for openings and provides
We developed this proposed rule after considering numerous statutes and Executive Orders related to rulemaking. Below we summarize our analysis based on these statutes and Executive Orders and we discuss First Amendment rights of protestors.
Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. Executive Order 13771 directs agencies to control regulatory costs through a budgeting process. This NPRM has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, the NPRM has not been reviewed by the Office of Management and Budget (OMB) and pursuant to OMB guidance; it is exempt from the requirements of Executive Order 13771.
This regulatory action determination is based on the ability that vessels can still transit the bridge and the only change is the drawtender will only be in attendance to lower the bridge to allow rail traffic to cross and to raise the bridge after rail traffic has cleared the bridge.
The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. While some owners or operators of vessels intending to transit the bridge may be small entities, for the reasons stated in section IV.A above this proposed rule would not have a significant economic impact on any vessel owner or operator.
If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the
This proposed rule would call for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
A rule has implications for federalism under Executive Order 13132, (Federalism), if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this proposed rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.
Also, this proposed rule does not have tribal implications under Executive Order 13175, (Consultation and Coordination with Indian Tribal Governments) because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this proposed rule has implications for federalism or Indian tribes, please contact the person listed in the
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this proposed rule will not result in such an expenditure, we do discuss the effects of this proposed rule elsewhere in this preamble.
We have analyzed this rule under Department of Homeland Security Management Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning Policy COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f). The Coast Guard has determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This proposed rule promulgates the operating regulations or procedures for drawbridges. Normally such actions are categorically excluded from further review, under paragraph L49, of Chapter 3, Table 3-1 of the U.S. Coast Guard Environmental Planning Implementation Procedures.
Neither a Record of Environmental Consideration nor a Memorandum for the Record are required for this rule. We seek any comments or information that may lead to the discovery of a significant environmental impact from this proposed rule.
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the
We view public participation as essential to effective rulemaking, and will consider all comments and material received during the comment period. Your comment can help shape the outcome of this rulemaking. If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation.
We encourage you to submit comments through the Federal eRulemaking Portal at
We accept anonymous comments. All comments received will be posted without change to
Documents mentioned in this NPRM as being available in this docket and all public comments, will be in our online docket at
Bridges.
For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 117 as follows:
33 U.S.C. 499; 33 CFR 1.05-1; DHS Delegation No. 0170.1.
(a) The Delray Connecting Railroad Bridge, mile 0.34, need not have a drawtender in continued attendance at the bridge and shall open on signal if a 4-hour advance notice is provided.
(b) The Delray Connecting Railroad Bridge, mile 0.80, over the Old Channel need not have a drawtender in continued attendance at the bridge. The bridge will remain open ten minutes before the bridge is lowered for train traffic. A crewmember from the train will initiate a SECURITE call on VHF-FM Marine Channel 16 that the bridge will be lowering for train traffic and invite any concerned mariners to contact the drawtender on VHF-FM Marine Channel 12. The drawtender will also visually monitor for vessel traffic and listen for the standard bridge opening signal of one prolonged blast and one short blast from vessels already transiting the waterway. After the ten minute warning, another SECURITE call shall be made on VHF-FM Marine Channel 16 that the bridge will be lowering for rail traffic five minutes before lowering. Once the draw tender is satisfied that it is safe, the bridge will be lowered for rail traffic. Once the rail traffic has cleared the bridge, the bridge shall be raised and locked in the fully open to navigation position.
(c) The National Steel Corporation Railroad Bridge, mile 0.40, need not have a drawtender in continual attendance at the bridge. Ten minutes before the bridge is lowered for train traffic a crewmember from the train will initiate a SECURITE call on VHF-FM Marine Channel 16 that the bridge will be lowering for train traffic and invite any concerned mariners to contact the drawtender on VHF-FM Marine Channel 12. The drawtender will also visually monitor for vessel traffic and listen for the standard bridge opening signal of one prolonged blast and one short blast from vessels already transiting the waterway. After the ten minute warning, another SECURITE call shall be made on VHF-FM Marine Channel 16 that the bridge will be lowering for rail traffic five minutes before lowering. Once the drawtender is satisfied that it is safe, the bridge will be lowered for rail traffic. Once the rail traffic has cleared the bridge, the bridge shall be raised and locked in the fully open to navigation position.
(d) The draw of the Conrail Bridge, mile 1.48, is remotely operated, is required to operate a radiotelephone, and shall open on signal.
Environmental Protection Agency (EPA).
Proposed rule.
Pursuant to the Federal Clean Air Act (CAA or the Act), the Environmental Protection Agency (EPA) is proposing to disapprove elements of two State Implementation Plan (SIP) submissions from the State of Texas for the 2012 PM
Comments must be received on or before November 27, 2020.
Submit your comments, identified by Docket No. EPA-R06-OAR-2016-0611, at
Jennifer Huser, EPA Region 6 Office, Regional Haze and SO
Throughout this document, “we,” “us,” and “our” means the EPA.
Whenever a new or revised National Ambient Air Quality Standard (NAAQS) is promulgated, the Clean Air Act (CAA) requires states to submit a plan for the implementation, maintenance, and enforcement of the standard, commonly referred to as infrastructure requirements. One of the elements of an infrastructure SIP is found within section 110(a)(2)(D)(i)(II), often referred to as prong 4 or visibility transport. Prong 4 requires states to demonstrate that their SIP has adequate provisions in place to prohibit emissions from any source within a state from interfering with visibility protection measures of other states. In EPA's 2013 guidance for states regarding i-SIPs,
EPA has regulated particulate matter (PM) since 1971, when we published the first NAAQS for PM (36 FR 8186 (April 30, 1971)). Most recently, by notice dated January 15, 2013, following a periodic review of the NAAQS for fine particulate matter (PM
EPA has regulated ozone since 1971, when we published the first NAAQS for Photochemical Oxidants (36 FR 8186 (April 30, 1971)). Most recently, following a periodic review of the 2008 NAAQS for ozone, EPA revised the primary and secondary ozone NAAQS to 0.070 ppm.
On March 31, 2009, Texas submitted a regional haze SIP (the 2009 Regional Haze SIP) to the EPA that included reliance on Texas' participation in trading programs under the Clean Air Interstate Rule (CAIR) as an alternative to BART for sulfur dioxide (SO
Following issuance of CSAPR, EPA determined that CSAPR would achieve greater reasonable progress towards improving visibility than would source-specific BART in CSAPR states (a determination often referred to as “CSAPR Better-than-BART”).
In the same action that EPA determined that states could rely on CSAPR to address the BART requirements for EGUs, EPA issued a limited disapproval of a number of states' regional haze SIPs, including the 2009 Regional Haze SIP submittal from Texas, due to the states' reliance on
In December 2014, we proposed an action to address the remaining regional haze obligations for Texas.
On October 26, 2016, the EPA finalized an update to CSAPR to address the interstate transport requirements of CAA section 110(a)(2)(D)(i)(I) with respect to the 2008 ozone NAAQS (CSAPR Update).
On November 10, 2016, in response to the D.C. Circuit's remand of Texas' CSAPR SO
On October 17, 2017, we finalized our January 2017 proposed determination that Texas' participation in CSAPR's trading program for ozone-season NO
In June 2020, we affirmed our finding that Texas' participation in CSAPR to satisfy NO
On December 1, 2015, TCEQ submitted a SIP revision to address the infrastructure and transport requirements for the 2012 PM
On August 17, 2018, TCEQ submitted a SIP revision to address the CAA section 110(a)(1) and 110(a)(2) infrastructure and transport requirements for the 2015 ozone NAAQS. In its evaluation, TCEQ acknowledged that it does not have a SIP-approved regional haze program but asserted that EPA's October 17, 2017 FIP to address best available retrofit technology (BART) requirements for Texas EGUs sufficiently meets the requirements for visibility transport. In that October 17, 2017 action, EPA included a disapproval of Texas' interstate visibility transport SIP submittals for the 1997 eight-hour ozone, 1997 PM
Texas relied on the following points to support its conclusion that Texas meets the visibility transport provision for the 2015 ozone NAAQS: (1) EPA's finding that the October 2017 BART FIP meets the visibility transport provision for these other NAAQS; (2) the modeling analysis in the State's interstate transport SIP revision (as to “prongs 1 and 2” under section 110(a)(2)(D)(i)(I)) purportedly demonstrating that Texas does not significantly contribute to nonattainment or maintenance in another state for the 2015 ozone NAAQS; (3) the fact that the EPA has not established a separate visibility standard for ozone; and (4) Texas' inclusion in the Cross-State Air Pollution Rule (CSAPR) Update ozone season NO
Our 2013 infrastructure SIP guidance addresses the requirements for prong 4 and lays out two ways in which a state's infrastructure SIP submittal may satisfy these requirements.
In the absence of a fully approved Regional Haze SIP, the second method provided by the guidance to meet these
The 2015 i-SIP submittal for the 2012 PM
In Texas's 2018 i-SIP submittal for the 2015 Ozone NAAQS, TCEQ acknowledges the limited disapproval of its 2009 Regional Haze SIP submittal but explains that EPA's October 17, 2017 FIP to address BART requirements for Texas EGUs sufficiently meets the requirements for interstate visibility transport for the 2015 ozone NAAQS. However, the BART-alternative emission limitations in the FIP are not part of the approved
Texas points to its 2015 ozone NAAQS i-SIP submittal that purports to find that Texas emissions do not significantly contribute to nonattainment or interfere with maintenance in another state under section 110(a)(2)(D)(i)(I). The analysis in that SIP submittal focuses on the potential impact of ozone-precursor emissions at certain ozone monitor locations in other states as related to the attainment and maintenance of the ozone NAAQS and does not provide an analysis of
Texas stated that the EPA has not established a separate visibility transport standard for ozone because ozone does not directly impair visibility or substantially produce or contribute to the production of the secondary air contaminants that cause visibility impairment or regional haze. The visibility transport requirement found in CAA section 110(a)(2)(D)(i)(I) applies to all pollutants (including precursors) for which EPA has promulgated a NAAQS. As such, Texas is required to demonstrate to EPA that it has approved measures in its SIPs that ensure that ozone-precursor emissions within its jurisdiction do not interfere with other states' visibility protection plans. While it is true that ozone itself does not directly impair visibility or contribute to the production of secondary air contaminants that cause visibility impairment, ozone precursors (NO
Texas also points to the fact that they are included in the CSAPR Update for ozone season NO
In October 2017, EPA promulgated a BART FIP, as amended and affirmed in June 2020. In that FIP, EPA has established emission limitations under the Texas SO
Texas' obligations under prong 4 are being addressed through the October 2017 BART FIP, as amended and affirmed in June 2020 for the first planning period. This ensures that emissions from sources within Texas are not interfering with measures required to be included in other air agencies' plans to protect visibility. Under EPA's 2013 guidance, this is sufficient to satisfy prong 4 requirements for the first planning period.
We are proposing to disapprove the interstate visibility transport elements of two SIP submissions from the State of Texas: One for the 2012 PM
This action is not a significant regulatory action and was therefore not submitted to the Office of Management and Budget for review.
This proposed action does not impose an information collection burden under the PRA because it does not contain any information collection activities.
I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. This action merely proposes to disapprove a SIP submission as not meeting the CAA.
This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. The action imposes no enforceable duty on any state, local or tribal governments or the private sector.
This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government.
This action does not have tribal implications as specified in Executive Order 13175. This action does not apply on any Indian reservation land, any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction, or non-reservation areas of Indian country. Thus, Executive Order 13175 does not apply to this action.
EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that the EPA has reason to believe may disproportionately affect children, per the definition of “covered regulatory action” in section 2-202 of the Executive Order. This action is not subject to Executive Order 13045 because it merely proposes to disapprove a SIP submission as not meeting the CAA.
This action is not subject to Executive Order 13211, because it is not a significant regulatory action under Executive Order 12866.
This rulemaking does not involve technical standards.
EPA believes the human health or environmental risk addressed by this action will not have potential disproportionately high and adverse human health or environmental effects on minority, low-income or indigenous populations. This action merely proposes to disapprove a SIP submission as not meeting the CAA.
Air pollution control, Environmental protection, Incorporation by reference, Intergovernmental relations, Nitrogen dioxide, Ozone, Particulate matter, Visibility transport.
42 U.S.C. 7401
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve a State Implementation Plan (SIP) revision submitted by the State of North Carolina, through the North Carolina Department of Environmental Quality, Division of Air Quality (DAQ), on July 10, 2019. The SIP revision seeks to modify the State's annual emissions reporting regulation by removing the annual emissions reporting requirement for certain non-Title V facilities in geographic areas that have been redesignated to attainment for the 1979 1-hour ozone national ambient air quality standards (“NAAQS” or “standards”) and in the areas listed in the rule that have been redesignated to attainment for the 1997 8-hour ozone
Comments must be received on or before November 27, 2020.
Submit your comments, identified by Docket ID No. EPA-R04-OAR-2019-0613 at
Tiereny Bell, Air Regulatory Management Section, Air Planning and Implementation Branch, Air and Radiation Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street SW, Atlanta, Georgia 30303-8960. The telephone number is (404) 562-9088. Ms. Bell can also be reached via electronic mail at
In 1979, EPA promulgated a NAAQS for ozone, setting the standard at 0.12 parts per million (ppm) averaged over a 1-hour time frame.
On November 6, 1991, EPA published designations and classifications for the 1979 1-hour ozone NAAQS.
North Carolina was required to develop nonattainment SIP revisions addressing the CAA requirements for its ozone nonattainment areas. Among other things, North Carolina was required to address the annual emissions reporting requirement in CAA section 182(a)(3)(B), which requires each state with an ozone nonattainment area to submit a SIP revision requiring stationary sources that emit 25 tons per year (tpy) or more of nitrogen oxides (NO
On August 1, 1997 (62 FR 41277), EPA approved the State's annual emissions reporting requirement at 15A NCAC Subchapter 02Q Section .0207,
Paragraph (c) of Section .0207 lists the geographic areas in North Carolina where owners or operators of certain non-title V facilities with actual emissions of 25 tons per year or more of NO
North Carolina's July 10, 2019, SIP revision
Currently, 55 facilities are required under paragraph (c) to submit annual emissions statements to North Carolina DAQ by June 30th of each year. The proposed rule change would remove the reporting requirement for 43 of these 55 facilities, thus reducing administrative reporting requirements for the 43 affected facilities. These facilities are still required to comply with their operating permits.
Section 110(l) of the CAA prevents EPA from approving a SIP revision that would interfere with any applicable requirement concerning attainment and reasonable further progress, or any other applicable CAA requirement. EPA proposes to determine that the changes described above are approvable because they would not interfere with attainment or maintenance of any NAAQS and because the geographic areas removed from the rule have been redesignated to attainment and are therefore no longer required to meet the emissions statement requirements in section 182(a)(3)(B) of the CAA.
Second, North Carolina's July 10, 2019, SIP revision makes changes to paragraph (d) of Section .0207 to update the calendar year that the emissions reporting requirement begins from 2007 to 2017 to coincide with the year during which North Carolina adopted the rule changes. EPA proposes to approve this change because it is administrative in nature.
Finally, the SIP revision makes minor grammatical changes in paragraphs (a) and (b) of Section .0207 and adds a citation in paragraph (e) that identifies the DAQ Director's statutory authority to require reporting. EPA proposes to approve these edits because they are minor changes that do not alter the meaning of the regulation.
In this proposed rule, EPA is proposing to include in a final EPA rule regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, EPA is proposing to incorporate by reference 15A NCAC Subchapter 02Q Section .0207,
EPA is proposing to approve the North Carolina SIP revision submitted on July 10, 2019, revising 15A NCAC Subchapter 02Q Section .0207,
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations.
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866;
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
The SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it impose substantial direct costs on tribal governments or preempt tribal law.
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations,
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve a state implementation plan (SIP) revision submitted by the State of Maryland. This revision pertains to the expansion in the use of Emission Reduction Credits (ERCs) when new or modified major stationary sources of ozone precursors are required to obtain emission offsets within the State of Maryland. This action is being taken under the Clean Air Act (CAA).
Written comments must be received on or before November 27, 2020.
Submit your comments, identified by Docket ID No. EPA-R03-OAR-2020-0127 at
Cynthia Stahl, Permits Branch (3AD10), Air & Radiation Division, U.S. Environmental Protection Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. The telephone number is (215) 814-2180. Ms. Stahl can also be reached via electronic mail at
On January 31, 2020, the State of Maryland submitted a revision to its SIP to allow the use of interprecursor trading (IPT) within the state to satisfy the emission offset requirements for new or modified major stationary sources under the New Source Review (NSR) program pertaining to ground level ozone. Volatile Organic Compound (VOC) and Nitrogen Oxide (NO
The revision consists of amendments to Code of Maryland Regulations (COMAR) 26.11.17, Nonattainment Provisions for Major New Sources and Major Modifications, Sections .01, Definitions, and .04, Creating Emission Reduction Credits, Air Quality. The revision is applicable to major new sources and major modifications of sources whose potential VOC and/or NO
On December 6, 2018, EPA finalized its ozone implementation rule pertaining to the 2015 Ozone NAAQS (83 FR 62998). With this rule, among other provisions, EPA described a discretionary IPT program that would allow any new or modified major stationary source located in an ozone nonattainment area to satisfy the nonattainment NSR emission offset requirements for ozone with emission reductions from VOC or NO
Maryland's revision to COMAR 26.11.17.01 adds the definition for interprecursor trading, which includes a reference to the new COMAR 26.11.17.04 regulation. Maryland's revision to COMAR 26.11.17.04 pertains to its Nonattainment New Source Review (NNSR) program, which requires that facilities obtain ERCs. COMAR 26.11.17.04 requires that the facilities seeking the option of IPT must meet the current requirements for ERCs including those pertaining to location, determination of the amount of ERCs needed for the new source via the baseline to actual emissions calculations, and eligibility determined by the date of creation of the ERCs. COMAR 26.11.17.04 further specifies that the IPT ratio must be determined by an approved EPA air quality modeling methodology and the IPT ratio cannot be less than the emission offset ratio specified in COMAR 26.11.17.03B(3). The approving authority for the interprecursor trade is the Maryland Department of the Environment and such approval is granted on a case-by-case and a permit specific basis.
EPA has reviewed the Maryland revisions to COMAR 26.11.17.01 and .04 and determined that they meet the EPA 2015 ozone implementation final rule published in the
EPA's review of this material indicates the Maryland amendments to COMAR 26.11.17.01 and .04, Air Quality: Nonattainment Provisions for Major New Sources and Major Modifications pertaining to
In this document, EPA is proposing to include in a final EPA rule regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, EPA is proposing to incorporate by reference COMAR 26.11.17.01, effective on April 9, 2018, and COMAR 26.11.17.04, effective on December 30, 2019 described in Sections II and III of this preamble
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this proposed action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because it is not a significant regulatory action under Executive Order 12866.
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, this proposed rulemaking, addressing the ozone interprecursor trading requirements in Maryland, does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because the SIP is not approved to apply in Indian country located in the State, and EPA notes that it will not impose substantial direct costs on tribal governments or preempt tribal law.
Environmental protection, Air pollution control, Incorporation by reference, Nitrogen dioxide, Ozone, Volatile organic compounds.
Environmental Protection Agency (EPA).
Notice of filing of petition and request for comment.
This document announces the Agency's receipt of an initial filing of a pesticide petition requesting the establishment or modification of regulations for residues of pesticide chemicals in or on various commodities.
Comments must be received on or before November 27, 2020.
Submit your comments, identified by docket identification (ID) number by one of the following methods:
•
•
•
Due to the public health concerns related to COVID-19, the EPA Docket Center (EPA/DC) and Reading Room is closed to visitors with limited exceptions. The staff continues to provide remote customer service via email, phone, and webform. For the latest status information on EPA/DC services and docket access, visit
Marietta Echeverria, Registration Division (7505P), main telephone number: (703) 305-7090, email address:
You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:
• Crop production (NAICS code 111).
• Animal production (NAICS code 112).
• Food manufacturing (NAICS code 311).
• Pesticide manufacturing (NAICS code 32532).
1.
2.
3.
EPA is announcing receipt of a pesticide petition filed under section 408 of the Federal Food, Drug, and Cosmetic Act (FFDCA), 21 U.S.C. 346a, requesting the establishment or modification of regulations in 40 CFR part 174 and/or part 180 for residues of pesticide chemicals in or on various food commodities. The Agency is taking public comment on the request before responding to the petitioner. EPA is not proposing any particular action at this time. EPA has determined that the pesticide petition described in this document contains data or information prescribed in FFDCA section 408(d)(2), 21 U.S.C. 346a(d)(2); however, EPA has not fully evaluated the sufficiency of the submitted data at this time or whether the data supports granting of the pesticide petition. After considering the public comments, EPA intends to evaluate whether and what action may be warranted. Additional data may be needed before EPA can make a final determination on this pesticide petition.
Pursuant to 40 CFR 180.7(f), a summary of the petition that is the subject of this document, prepared by the petitioner, is included in a docket EPA has created for this rulemaking. The docket for this petition is available at
As specified in FFDCA section 408(d)(3), 21 U.S.C. 346a(d)(3), EPA is publishing notice of the petition so that the public has an opportunity to comment on this request for the establishment or modification of regulations for residues of pesticides in or on food commodities. Further information on the petition may be obtained through the petition summary referenced in this unit.
1.
2.
3.
21 U.S.C. 346a.
U.S. Agency for International Development.
Notice; request for comment.
The U.S. Agency for International Development (USAID) as part of its continuing effort to reduce paperwork and respondent burden, is announcing an opportunity for public comment on a new proposed collection of information by the Agency. Under the Paperwork Reduction Act of 1995 (PRA), Federal Agencies are required to publish notice in the
Submit comments identified by Information Collection 3090-XXXX, Improving Customer Experience (OMB Circular A-11, Section 280 Implementation), by any of the following methods:
•
•
Requests for additional information should be directed to Melissa Taylor via email to
Under the PRA, (44 U.S.C. 3501-3520) Federal Agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes Agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA requires Federal Agencies to provide a 60-day notice in the
Whether seeking a loan, Social Security benefits, veteran's benefits, or other services provided by the Federal Government, individuals and businesses expect Government customer services to be efficient and intuitive, just like services from leading private-sector organizations. Yet the 2016 American Consumer Satisfaction Index and the 2017 Forrester Federal Customer Experience Index show that, on average, Government services lag nine percentage points behind the private sector.
A modern, streamlined and responsive customer experience means: Raising government-wide customer experience to the average of the private sector service industry; developing indicators for high-impact Federal programs to monitor progress towards excellent customer experience and mature digital services; and providing the structure (including increasing transparency) and resources to ensure customer experience is a focal point for agency leadership. To support this, OMB Circular A-11 Section 280 established government-wide standards for mature customer experience organizations in government and measurement. To enable Federal programs to deliver the experience taxpayers deserve, they must undertake three general categories of activities: Conduct ongoing customer research, gather and share customer feedback, and test services and digital products.
These data collection efforts may be either qualitative or quantitative in nature or may consist of mixed methods. Additionally, data may be collected via a variety of means, including but not limited to electronic or social media, direct or indirect observation (
The results of the data collected will be used to improve the delivery of Federal services and programs. It will include the creation of personas, customer journey maps, and reports and summaries of customer feedback data and user insights. It will also provide government-wide data on customer experience that can be displayed on performance.gov to help build transparency and accountability of Federal programs to the customers they serve.
USAID will collect this information by electronic means when possible, as well as by mail, fax, telephone, technical discussions, and in-person interviews. USAID may also utilize observational techniques to collect this information.
USAID invites comments on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency's estimate of the burden (including hours and cost) of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection; they also will become a matter of public record.
Department of Agriculture, Office of the Secretary.
Notice of public availability of FY 2018 Service Contract Inventories.
In accordance with Section 743, Division C of the Consolidated Appropriations Act of 2010, the Department of Agriculture is publishing this notice to advise the public of access to the FY 2018 Service Contract Inventory.
Contact Crandall Watson, Office of Contracting & Procurement, at (202) 720-7529, or
This inventory provides information on FY 2018 Service Contract actions with a dollar value above $150,000. The information is organized by function to show how contracted resources are distributed throughout the agency. The inventory was developed in accordance with guidance issued on September 7, 2018, by the Office of Management and Budget (OMB), Office of Federal Procurement Policy (OFPP). The Department of Agriculture has posted its inventory at the Office of Contracting and Procurement homepage. The 2018 inventory is accessible at the following link:
Forest Service, USDA.
Notice; request for comment.
In accordance with the Paperwork Reduction Act of 1995, the Forest Service is seeking comments from all interested individuals and entities on the renewal of a currently approved information collection, Generic Clearance for Recreation and Transportation.
Comments must be received in writing by December 28, 2020.
Send comments to USDA Forest Service, National Forest System, Pacific-Northwest Office, Attention: Eric M. White, Social Science and Economics Lead (Acting), Ecosystem Management System, 1220 SW 3rd Avenue, Suite 310, Portland, OR 97204. Comments also may be submitted via email to
The public may inspect comments received at USDA Forest Service, Pacific North West-Portland Office during normal business hours. Visitors are encouraged to call ahead to facilitate entry to the building at (503) 808-2468.
Eric M. White, Social Science and Economics Lead (Acting), Ecosystem Management System, National Forest Systems by telephone at (360) 999-0580 or by email at
Individuals who use telecommunication devices for the deaf may call the Federal Relay Service at 800-877-8339 between 8 a.m. and 8 p.m. eastern time, Monday through Friday.
This direct feedback is vital to establish or revise goals and objectives for FLMA recreation-related transportation system programs, inform land management plans, and facilitate interagency coordination across multijurisdictional landscapes. As a result of using this feedback, FLMAs are better able to meet the needs of the public and more effectively utilize the resources under FLMA management.
The benefits of an FLMA interagency generic information collection (IC) include significant public and agency time and cost savings. If multiple FLMAs in an area work jointly on one visitor feedback information collection under a generic clearance from OMB, there would be significant savings in government time and costs related to survey development, administration, and data processing. The public burden would be diminished as the public would only need to respond to one, jointly-sponsored, survey.
There are several authorities that obligate participating FLMAs to solicit public input to improve public lands management to better serve the public, including:
1. Forest Service Administration Organic Act of 1897 (16 U.S.C. 473-478, 479-482, and 551) as amended by the Transfer Act of 1905 (16 U.S.C. 472, 524, 554);
2. National Forest Management Act of 1976 (Pub. L. 94-588, 2(3), 6(d)), as amended;
3. Government Performance and Results Act of 1993 (Pub. L. 103-62) as amended;
4. National Park Services Act of 1916;
5. National Wildlife Refuge System Administration Act of 1966;
6. National Wildlife Refuge System Centennial Act (Pub. L. 106-408);
7. The Federal Land Policy and Management Act (FLPMA) of 1976; and
8. National Environmental Policy Act of 1969.
Respondents include visitors and potential visitors to FLMA units and residents of communities in or near FLMA units. Additionally, respondents may include state or local agency/organization staff who are involved with public lands management, as well as businesses near FLMA lands. Because many of the FLMA information collections may be similar in terms of the populations being surveyed, types of questions addressed, research methodologies, and data applications, the Forest Service is requesting renewal of this generic Interagency IC clearance from OMB to obtain quantitative and qualitative visitor and user feedback through surveys, focus groups, and/or interviews.
Information collection could occur at one location, several locations, across FLMA units, across regions, across the nation, and could be multi-jurisdictional at any of these levels. Information collection activities could occur once, could occur as iterative collections over a short time period, or could occur over long periods of time at some periodic, planned time interval. Individual, agency/organization, or business feedback could be collected through facilitated focus groups, surveys, individual interviews (qualitative or quantitative), and comment cards with information electronically-recorded or hand-written, via telephone, via mail-back survey, or via electronic means (
In general, questions will relate to the recreation experience at one or more specific locations (
1. Mobility and access (for example, different transportation modes used to access sites;
2. Satisfaction with transportation related services and facilities; use and satisfaction with traveler information; reasons for non-visitation);
3. Resource management (for example, support for different management approaches);
4. Safety (for example, safety-related incidents that occurred);
5. Environment (for example, visitor priorities with respect to natural and cultural resources; perceptions related to sound);
6. Economic development (for example, amount of money visitors spend within the area);
7. Trip characteristics (for example, length of trip, trip purpose, activities, and destinations); and
8. Visitor/user demographics (for example, home city and state, age group, gender, race, and number of people/vehicles in party).
Should any personally identifiable information (PII) be collected, to ensure anonymity, PII will not be stored with contact information at any time, and contact information will be redacted from researcher's files once data collections are completed.
Participation will be strictly voluntary. The information could be collected and analyzed by FLMA personnel, private contractors, other government agency partners, or universities or other educational institutions conducting the information collection on behalf of the FLMAs. All results will be aggregated so specific responses cannot be connected to specific respondents. The data collected would provide managers with statistically reliable visitor data necessary to help FLMA units provide their customers with better service and coordinate more effectively across jurisdictions. More specifically, the collected information can better inform strategic planning; allocations of physical, fiscal, or human resources; modification or refinement of various program management goals and objectives or management plan revisions; and future planning efforts focused on developing more effective and efficient delivery of program services, whether on one or several unit(s) or at an interagency, cross-jurisdictional scope. This information may also help FLMAs respond to queries from the general public and organizations including Congressional staffs, newspapers, magazines, and transportation or recreational trade organizations.
Without these joint, coordinated information collections, the FLMAs will lack the information necessary to identify and implement feasible and publicly accepted transportation, facility, and service improvements that protect public land resources and enhance visitor experience. These joint information collections will become more important as demand for access to FLMA recreation sites and opportunities continues to grow. Information from these collections will improve management of FLMA resources and visitor experiences while helping the FLMAs meet their various resource, recreation, and transportation management mandates.
Comments are invited on: (1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) the accuracy of the agency's estimate of the burden of the proposed collection of information including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
All responses to this notice will be summarized and included in the request for OMB approval. All comments will become a matter of public record.
Rural Utilities Service, USDA.
Notice and request for comments.
In accordance with the Paperwork Reduction Act of 1995, the United States Department of Agriculture's Rural Utilities Service (RUS), invites comments on this information collection for which the Agency intends to request approval from the Office of Management and Budget (OMB).
Comments on this notice must be received by December 28, 2020.
Kimble Brown, Management Analyst, Innovation Center, USDA Rural Development, 1400 Independence Avenue SW, Washington, DC 20250-1522. Telephone: (202) 720-6780, Email:
The OMB regulation (5 CFR 1320) implementing provisions of the Paperwork Reduction Act of 1995 (Pub. L. 104-13) requires that interested members of the public and affected agencies have an opportunity to comment on information collection and recordkeeping activities (see 5 CFR 1320.8(d)). This notice identifies an existing information collection that the Agency is submitting to OMB for extension. Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Agency, including whether the information will have practical utility; (b) the accuracy of the Agency's estimate of the burden of the proposed collection of information including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
Copies of this information collection can be obtained from Kimble Brown, Management Analyst, Innovation Center, Regulations Management Division, at (202) 720-6780; All responses to this notice will be summarized and included in the request for OMB approval. All comments will also become a matter of public record.
Office of Space Commerce, Department of Commerce.
Notice of a meeting.
The Office of Space Commerce (OSC) in the U.S. Department of Commerce announces an event to solicit input from the commercial space industry and the related information technology sector regarding the design, development, operation and governance for Space Policy Directive-3 (SPD-3): National Space Traffic Management Policy's Open Architecture Data Repository (OADR) requirement. The OADR will assist with managing the integrity of the space operating environment by
The West Coast Day meeting will be held on Monday, 23 November 2020 and the East Coast Day meeting will be held on Tuesday, 24 November 2020.
Prior registration through the event website is required at this link:
Mary Cull, Office of Space Commerce, U.S. Department of Commerce, Washington, DC 20030, phone 202-763-4051, or email
Space Policy Directive-3, National Space Traffic Management Policy (83 FR 28969) places responsibility for addressing commercial space situational awareness (SSA) and space traffic management (STM) services upon the Department of Commerce. To this end, the Department of Commerce announces an event to solicit input from the commercial space industry and the related information technology sector regarding the design, development, operation and governance for SPD-3 National Space Traffic Management Policy's Open Architecture Data Repository (OADR) requirement.
The event will be open to the public, up to the capacity of the virtual meeting hosting service that will be used for the event. Prior registration through the event website is required at this link:
It is recommended that confirmed attendees plan to log on a few minutes in advance.
The event will be organized as two days of meetings, as follows:
• 1:00 p.m. to 3:00 p.m. (Eastern Standard Time): Two-hour general session with a presentation by OSC representatives and time for questions and answers about SSA and STM and the OADR.
• 3:30 p.m. to 6:30 p.m. (Eastern Standard Time): Three-hour session with nine 15-minute one-on-one sessions between OSC representatives and industry stakeholders.
• 10:00 a.m. to 12:00 p.m. (Eastern Standard Time): Two-hour general session with a presentation by OSC representatives and time for questions and answers about SSA and STM and the OADR.
• 12:30 p.m. to 3:30 p.m. (Eastern Standard Time): Three-hour session with nine 15-minute one-on-one sessions between OSC representatives and industry stakeholders.
The agenda for the meetings will include the following topics:
Office of the Under Secretary for Economic Affairs, Department of Commerce.
Notice.
The Office of the Under Secretary for Economic Affairs (OUSEA) announces the appointment of members who will serve on the OUSEA Performance Review Board (PRB). The PRB is responsible for reviewing the appraisals and ratings recommended by the senior employees' supervisors and written responses from the senior employee, if any, as well as any other reviews requested, to ensure that recommended ratings are supported and appropriate in the OUSEA, Bureau of Economic Analysis and the US Census Bureau. The PRB provides recommendations to the Appointing Authority regarding the objectives and operation of the SES and ST performance appraisal and reward systems, as required. The purpose of the PRB is to provide fair and impartial review of senior executive service and senior professional performance ratings, bonus and pay adjustment recommendations and Presidential Rank Award nominations. The term of each PRB member will expire on December 31, 2021.
The effective date of service of appointees to the OUSEA Performance Review Board is based upon publication of this notice.
Angela Jones-Wilson, Acting Program Manager, Executive Resources Office, Human Resources Division, Census Bureau, 4600 Silver Hill Road, Washington, DC 20233, 301-763-6302.
The names and position titles of the members of the PRB are set forth below:
On June 24, 2020, HP International Trading B.V. (Puerto Rico Branch), LLC submitted a notification of proposed production activity to the FTZ Board for its facility within Subzone 61V, in Aguadilla, Puerto Rico.
The notification was processed in accordance with the regulations of the FTZ Board (15 CFR part 400), including notice in the
On June 24, 2020, the Greater Yuma Economic Development Corporation, grantee of FTZ 219, submitted a notification of proposed production activity to the FTZ Board on behalf of Barco Stamping Co., Inc. (Barco), within FTZ 219, in Yuma, Arizona.
The notification was processed in accordance with the regulations of the FTZ Board (15 CFR part 400), including notice in the
An application has been submitted to the Foreign-Trade Zones (FTZ) Board by the City of West Memphis, Arkansas Public Facilities Board, grantee of FTZ 273, requesting subzone status for the facility of Robert Bosch Tool Corporation, located in West Memphis, Arkansas. The application was submitted pursuant to the provisions of the Foreign-Trade Zones Act, as amended (19 U.S.C. 81a-81u), and the regulations of the FTZ Board (15 CFR part 400). It was formally docketed on October 22, 2020.
The proposed subzone (50 acres) is located at 2700 College Boulevard, West Memphis, Arkansas. No authorization for production activity has been requested at this time. The proposed subzone would be subject to the existing activation limit of FTZ 273.
In accordance with the FTZ Board's regulations, Camille Evans of the FTZ Staff is designated examiner to review the application and make recommendations to the Executive Secretary.
Public comment is invited from interested parties. Submissions shall be addressed to the FTZ Board's Executive Secretary and sent to:
A copy of the application will be available for public inspection in the “Reading Room” section of the FTZ Board's website, which is accessible via
For further information, contact Camille Evans at
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) is correcting the final results of the administrative review of the antidumping duty order on certain oil country tubular goods (OCTG) from India. The period of review (POR) is September 1, 2018 through August 31, 2019.
Applicable October 27, 2020.
Kathryn Turlo, AD/CVD Operations, Office VII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-3870.
On September 11, 2020, Commerce published in the
Commerce determines, and U.S. Customs Border and Protection (CBP) shall assess, antidumping duties on all appropriate entries of subject merchandise in accordance with these final results of review.
We intend to issue instructions to CBP 15 days after the date of the publication of the final results of this review.
The following cash deposit requirements will be effective for all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of this administrative review, as provided by section 751(a)(2)(C) of the Act: (1) The cash deposit rate for JSL will remain unchanged from the rate assigned to them in the most recently completed segment for the company;
Commerce clarifies that the “Assessment Rates” and “Cash Deposit Requirements” sections of the
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) is rescinding the administrative review, in part, of the antidumping duty order on certain cold-drawn mechanical tubing of carbon and alloy steel (cold-drawn mechanical tubing) from India for the period June 1, 2019, through May 31, 2020.
Applicable October 27, 2020.
Alexis Cherry or Samantha Kinney, AD/CVD Operations, Office VIII, Enforcement and Compliance, International Trade Administration, Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-0607 or 202-482-2285 respectively.
On June 2, 2020, Commerce published a notice of opportunity to request an administrative review of the antidumping duty order on cold-drawn mechanical tubing from India for the period June 1, 2019, through May 31, 2020.
On October 7, 2020, Pennar withdrew its request for administrative review of itself.
Pursuant to 19 CFR 351.213(d)(1), Commerce will rescind an administrative review, in whole or in part, if the party that requested the review withdraws its request within 90 days of the publication of the notice of initiation of the requested review.
Because Pennar's request for administrative review of itself was withdrawn within 90 days of the date of publication of the
Commerce will instruct U.S. Customs and Border Protection (CBP) to assess antidumping duties on all appropriate entries of cold-drawn mechanical tubing from India at a rate equal to the cash deposit of estimated antidumping duties required at the time of entry, or withdrawal from warehouse, for consumption, during the period June 1, 2019, through May 31, 2020, in accordance with 19 CFR 351.212(c)(1)(i). Commerce intends to issue appropriate assessment instructions to CBP 15 days after the publication of this notice in the
This notice serves as a final reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping and/or countervailing duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in Commerce's presumption that reimbursement of the antidumping duties occurred and the subsequent assessment of doubled antidumping duties.
This notice also serves as a reminder to parties subject to administrative protective order (APO) of their responsibility concerning the return or destruction of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3), which continues to govern business proprietary information in this segment of the proceeding. Timely written notification of the return or destruction of APO materials, or conversion to judicial protective order, is hereby requested. Failure to comply with the regulations and terms of an APO is a violation which is subject to sanction.
This notice is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.213(d)(4).
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; public meeting.
The New England Fishery Management Council (Council) is scheduling a public meeting of its Scallop Committee via webinar to consider actions affecting New England fisheries in the exclusive economic zone (EEZ). Recommendations from this group will be brought to the full Council for formal consideration and action, if appropriate.
This meeting will be held on Thursday, November 12, 2020 at 9:00 a.m. via webinar.
All meeting participants and interested parties can register to join the webinar at
Thomas A. Nies, Executive Director, New England Fishery Management Council; telephone: (978) 465-0492.
The Scallop Committee will discuss Framework 33; in particular review results of 2020 scallop surveys, and preliminary projections. The primary focus of this meeting will be to develop input on the range of potential specification alternatives for FY 2021 and FY 2022. Framework 33 will set specifications including ABC/ACLs, days-at-sea, access area allocations, total allowable catch for the Northern Gulf of Maine (NGOM) management area, targets for General Category incidental catch, General Category access area trips and trip accounting, and set-asides for the observer and research programs for fishing year 2020 and default specifications for fishing year 2021. Other business may be discussed, as necessary.
Although non-emergency issues not contained in this agenda may come before this group for discussion, those issues may not be the subject of formal action during these meetings. Action will be restricted to those issues specifically listed in this notice and any issues arising after publication of this notice that require emergency action under section 305(c) of the Magnuson-Stevens Act, provided the public has been notified of the Council's intent to take final action to address the emergency.
This meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Thomas A. Nies, Executive Director, at (978) 465-0492, at least 5 days prior to the meeting date. Consistent with 16 U.S.C. 1852, a copy of the recording is available upon request.
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; public meeting.
The Mid-Atlantic Fishery Management Council's (MAFMC's) Summer Flounder, Scup, and Black Sea Bass Monitoring Committee will hold a public meeting.
The meeting will be held on Monday, November 16, 2020, from 9 a.m. to 3 p.m. For agenda details, see
The meeting will be held via webinar, which can be accessed at:
Christopher M. Moore, Ph.D., Executive Director, Mid-Atlantic Fishery Management Council, telephone: (302) 526-5255.
The Summer Flounder, Scup, and Black Sea Bass Monitoring Committee will meet to develop recommendations for 2021 federal waters recreational management measures (
The meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to M. Jan Saunders at the Mid-Atlantic Council Office, (302) 526-5251, at least 5 days prior to the meeting date.
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of public meeting.
The New England Fishery Management Council's is convening its Scientific and Statistical Committee (SSC) via webinar to consider actions affecting New England fisheries in the exclusive economic zone (EEZ). Recommendations from this group will be brought to the full Council for formal consideration and action, if appropriate.
This webinar will be held on Thursday, November 12, 2020 at 9 a.m. Webinar registration URL information:
Thomas A. Nies, Executive Director, New England Fishery Management Council; telephone: (978) 465-0492.
The Scientific and Statistical Committee will meet to review recent stock assessment information from the 2020 management track assessments for northern and southern stocks of red hake and silver hake including offshore hake and information provided by the Council's Whiting Plan Development Team. Based on this information, it will recommend the overfishing limit (OFL) and acceptable biological. Other business will be discussed as necessary.
Although non-emergency issues not contained on the agenda may come before this Council for discussion, those issues may not be the subject of formal action during this meeting. Council action will be restricted to those issues specifically listed in this notice and any issues arising after publication of this notice that require emergency action under section 305(c) of the Magnuson-Stevens Act, provided the public has been notified of the Council's intent to take final action to address the emergency. The public also should be aware that the meeting will be recorded. Consistent with 16 U.S.C. 1852, a copy of the recording is available upon request.
This meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Thomas A. Nies, Executive Director, at (978) 465-0492, at least 5 days prior to the meeting date.
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of a public meeting.
The North Pacific Fishery Management Council (NPFMC) Ecosystem Committee will meet via webconference on November 12, 2020.
The meeting will be held on Thursday, November 12, 2020, from 9 a.m. to 4 p.m., Alaska time.
The meeting will be a webconference. Join online through the link at
Steve MacLean, Council staff; phone: (907) 271-2809 and email:
The agenda will include: (a) An update on the Local Knowledge, Traditional Knowledge, and Subsistence (LKTKS) Task Force; (b) an update on an EFH consultation for Norton Sound mining operations; (c) a summary of the Deep-Sea Coral three year research program for Alaska; (d) discussion of the committee tasks for the upcoming year; and (e) other business. The agenda is subject to change, and the latest version will be posted at
You can attend the meeting online using a computer, tablet, or smart phone; or by phone only. Connection information will be posted online at:
Public comment letters will be accepted and should be submitted electronically to
16 U.S.C 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; proposed incidental harassment authorization; request for comments on proposed authorization and possible renewal.
NMFS has received a request from Washington State Department of Transportation (WSDOT) for authorization to take marine mammals incidental to State Route 520 Pontoon Construction Site—Marine Piling Removal Project in Aberdeen, Grays Harbor County, Washington. Pursuant to the Marine Mammal Protection Act (MMPA), NMFS is requesting comments on its proposal to issue an incidental harassment authorization (IHA) to incidentally take marine mammals during the specified activities. NMFS is also requesting comments on a possible one-time, one-year renewal that could be issued under certain circumstances and if all requirements are met, as described in Request for Public Comments at the end of this notice. NMFS will consider public comments prior to making any final decision on the issuance of the requested MMPA authorizations and agency responses will be summarized in the final notice of our decision.
Comments and information must be received no later than November 27, 2020.
Comments should be addressed to Jolie Harrison, Chief, Permits and Conservation Division, Office of Protected Resources, National Marine Fisheries Service. Written comments should be submitted via email to
Bonnie DeJoseph, Office of Protected Resources, NMFS, (301) 427-8401. Electronic copies of the application and supporting documents, as well as a list of the references cited in this document, may be obtained online at:
The MMPA prohibits the “take” of marine mammals, with certain exceptions. Sections 101(a)(5)(A) and (D) of the MMPA (16 U.S.C. 1361
Authorization for incidental takings shall be granted if NMFS finds that the taking will have a negligible impact on the species or stock(s) and will not have an unmitigable adverse impact on the availability of the species or stock(s) for taking for subsistence uses (where relevant). Further, NMFS must prescribe the permissible methods of taking and other “means of effecting the least practicable adverse impact” on the affected species or stocks and their habitat, paying particular attention to rookeries, mating grounds, and areas of similar significance, and on the availability of the species or stocks for taking for certain subsistence uses (referred to in shorthand as “mitigation”); and requirements pertaining to the mitigation, monitoring and reporting of the takings are set forth.
The definitions of all applicable MMPA statutory terms cited above are included in the relevant sections below.
To comply with the National Environmental Policy Act of 1969 (NEPA; 42 U.S.C. 4321
This action is consistent with categories of activities identified in Categorical Exclusion B4 (incidental harassment authorizations with no anticipated serious injury or mortality) of the Companion Manual for NOAA Administrative Order 216-6A, which do not individually or cumulatively have the potential for significant impacts on the quality of the human environment and for which we have not identified any extraordinary circumstances that would preclude this categorical exclusion. Accordingly, NMFS has preliminarily determined that the issuance of the proposed IHA qualifies to be categorically excluded from further NEPA review.
We will review all comments submitted in response to this notice prior to concluding our NEPA process or making a final decision on the IHA request.
On November 20, 2019, NMFS received a request from WSDOT for an IHA to take marine mammals incidental to the removal of 19-steel piles by vibratory pile driving at the mouth of the Chehalis River where it enters Grays Harbor, WA. WSDOT submitted four revisions. Three between November 2019 and July 2020 and the last on August 17, 2020, subsequent to it being deemed adequate and complete on July 30, 2020. Their request is for take of a small number of Pacific harbor seals
WSDOT proposes to remove 19 steel piles and associated barge launch guide appurtenances from the footprint of the casting basin launch channel within the Washington State Department of Natural Resources (DNR) aquatic easement lease area in Grays Harbor (Figures 1 and 2). WSDOT must remove the 19 steel piles on state owned aquatic lands to comply with the terms and conditions of the lease agreement with the Washington DNR. The piles were used to guide completed pontoons out of the casting basin and into Grays Harbor for transport to Lake Washington for the replacement of the SR520 floating-bridge.
A vibratory extractor on a crane will be used to remove the piles over a six-day period with one day for mobilization and another day for demobilization on either end, for a total of eight days of in-water work. The crane will be located on a barge or flexi float, positioned near the piles. Sound in the water from vibratory pile driving may result in behavioral disturbance (or Level B harassment) of five marine mammal species.
WSDOT reports in-water work at the project location is limited by the seasonal presence of ESA-listed fishes. Pile removal is estimated to take 14.75 hours over a six-day period with one day for mobilization and another day for demobilization on either end, for a total of eight days (Table 1). The proposed IHA would be effective for one year from date of issuance.
The proposed project site is in Grays Harbor County, Washington (Figure 1), near where the Chehalis River enters Grays Harbor. Grays Harbor is an estuarine bay located in the Chehalis River Valley; 45 miles (mi) (72 kilometers (km)) north of the mouth of the Columbia River, on the Southwest Pacific coast of Washington state.
Grays Harbor is a large estuary fed by a 6734 square kilometers (km
The average water depth in Grays Harbor is less than 6.1 m (20 ft). However, depths up to 24.4 m (80 ft) have been measured at the mouth of the harbor. Grays Harbor has three main channels: the north channel, middle channel, and south channel. The north channel contains the Grays Harbor Navigation Channel, a 44 km (27.5 mi) channel that extends from the Pacific Ocean to Cosmopolis. The middle and south channels remain shoaled by erosion and sediment deposits. Numerous shallow channels created by ebb tide flows and river discharges are present throughout the harbor (Northwest Area Committee 2013). Net surface flow is seaward and dominated by tidal currents, with a mean tide rise of about 2.7 m (9 ft) (NOAA 2015). Tides of this height typically cover up to 94 square miles in Grays Harbor, while at mean lower low water, low tides typically cover fewer than 38 square miles, exposing large areas of mudflats, sandbars, and low islands dissected by multiple shallow channels (U.S. Army Corps of Engineers 2014 (ACE)). High flows on the Chehalis River can control currents in the upper portion of the harbor, especially during the winter when storms increase the flow in rivers and streams that feed Grays Harbor.
The form and structure of Grays Harbor are largely determined by differences in the capacity of harbor inflows (flood currents) and ocean waves that transport sediment into the harbor and outflows (ebb currents) that transport sediment out of the harbor. Sediment accumulation in the seaward portion of the harbor is controlled primarily by redistribution of harbor silt by wind and waves and deposition of ocean sands by tidal action; sediment accumulations in the interior harbor are controlled by river inputs (U.S. ACE 2014). Beyond the harbor to the west, the connection to the Pacific Ocean extends between two low-lying peninsulas. The ocean side of the inlet is protected by two rock jetties (north and south) that include above-water and submerged sections.
The inner harbor is heavily industrialized with major port facilities, an airport, pulp mills, landfills, sewage treatment plants, and log storage facilities. Grays Harbor provides commercial shipping access to cities and ports up the Chehalis River. Land use in the Aberdeen area is a mix of residential, commercial, industrial, and open space and/or undeveloped lands (Figure 1).
The proposed project will remove 19 steel piles and associated launch guide appurtenances from the casting basin launch channel within the DNR aquatic easement lease area of Grays Harbor (Table 1). The piles are various sizes (18-, 24 and 48-inch) and are located immediately waterward of the pontoon casting basin at water depths ranging from -3.1 to -9.9 ft mean lower low water (MLLW). A crane will be operated from a barge or flexi float positioned near the piles. The barge will be prohibited from disturbing the river substrate; it will be positioned in approximately 1.2—3.4 m (4—11 ft) of water during low tides, depending upon pile location. Piles will be removed with a single vibratory hammer rig on the barge and recovered to the same barge. See Table 1 for a detailed summary of pile activities. One day for mobilization and demobilization may be added on either end for a total of nine days of in-water work. Weather, unforeseen issues and shut-downs due to marine mammals entering the work site could also result in the pile removal activities extending beyond 7 days.
Proposed mitigation, monitoring, and reporting measures are described in detail later in this document (please see
Sections 3 and 4 of the application summarize available information regarding status and trends, distribution and habitat preferences, and behavior and life history, of the potentially affected species. Additional information regarding population trends and threats may be found in NMFS's Stock Assessment Reports (SARs;
Table 2 lists all species or stocks for which take is expected and proposed to be authorized for this action, and summarizes information related to the population or stock, including regulatory status under the MMPA and ESA and potential biological removal (PBR), where known. For taxonomy, we follow Committee on Taxonomy (2020). PBR is defined by the MMPA as the maximum number of animals, not including natural mortalities, that may be removed from a marine mammal stock while allowing that stock to reach or maintain its optimum sustainable population (as described in NMFS's SARs). While no mortality is anticipated or authorized here, PBR and annual serious injury and mortality from anthropogenic sources are included here as gross indicators of the status of the species and other threats.
Marine mammal abundance estimates presented in this document represent the total number of individuals that make up a given stock or the total number estimated within a particular study or survey area. NMFS's stock abundance estimates for most species represent the total estimate of individuals within the geographic area, if known, that comprises that stock. For some species, this geographic area may extend beyond U.S. waters. All managed stocks in this region are assessed in NMFS's U.S. Pacific SARs (
As indicated above, all five species (with five managed stocks) in Table 2 temporally and spatially co-occur with the activity to the degree that take is reasonably likely to occur, and we have proposed authorizing it. All species that could potentially occur in the proposed survey areas are included in Table 3-1 of the IHA application.
Gray whales occur along the eastern and western margins of the North Pacific. From mid-February to May, the Eastern North Pacific stock of gray whales can be seen migrating northward with newborn calves along the west coast of the United States In the fall, gray whales migrate from their summer feeding grounds, heading south along the coast of North America to spend the winter in their breeding and calving areas off the coast of Baja California, Mexico. During summer and fall, most whales in the Eastern North Pacific stock feed in the Chukchi, Beaufort and northwestern Bering Seas (Carretta
It is believed that some of the gray whale sightings in Grays Harbor are from the PCFG. Calambokidis and Quan's (1997) 1996 survey reported 27 gray whales in the harbor. A 13-year (1998-2010) collaborative study reported the most sightings in Grays Harbor and its surrounding coastal waters during the months of April and October, 40 and 27, respectively (Calambokidis
Harbor porpoise occur along the U.S. West Coast from southern California to the Bering Sea (Carretta
NMFS conducted aerial line-transect surveys between 2007 and 2012 (Forney
Adams
California sea lions occur from Vancouver Island, British Columbia, to the southern tip of Baja California. Sea lions breed on the offshore islands of southern and central California from May through July (Heath & Perrin 2008). During the non-breeding season, adult and sub adult males and juveniles migrate northward along the coast to central and northern California, Oregon, Washington, and Vancouver Island (Jefferson
Pupping occurs primarily on the California Channel Islands from late May until the end of June (Peterson & Bartholomew 1967). Weaning and mating occur in late spring and summer during the peak upwelling period (Bograd
Since the mid-1980s, increasing numbers of California sea lions have been documented feeding on fish along the Washington coast and, more recently, in the Columbia River as far upstream as Bonneville Dam, 233 km (145 mi) from the river mouth. All age classes of males are seasonally present in Washington waters (Jeffries
California sea lions do not avoid areas with heavy or frequent human activity, but rather may approach certain areas to investigate. This species typically does not flush from a buoy or haulout if approached.
Steller sea lions occur along the North Pacific Rim from northern Japan to California (Loughlin
The eastern stock of Steller sea lions has historically bred on rookeries located in Southeast Alaska, British Columbia, Oregon, and California. However, within the last several years a new rookery has become established on the outer Washington coast (at the Carroll Island and Sea Lion Rock complex), with >100 pups born there in 2015 (Muto
Pupping occurs from mid-May to mid-July (Pitcher & Calkins 1981) and peaks in June (Pitcher
Twenty-two haulouts (excluding most navigation buoys) occur in Washington. They are mainly distributed along the state's outer coast on offshore rocks, coastal islands, and jetties. Steller sea lions were not surveyed in Jeffries
The Navy adjusted the 2017 projected abundances of Steller sea lions to account for time spent hauled out in order to calculate the density of sea lions off the Washington coast. In the fall sea lions are anticipated to be in the water 53 percent of the time, and 64 percent of the time in the spring and winter (NMSDD 2019).
Five stocks of harbor seals (
Harbor seals are the most abundant breeding pinniped species in the Pacific Northwest (Peterson
Harbor seals mate at sea, and females give birth during the spring and summer, although, the pupping season varies with latitude. Pupping takes place at many locations, and rookery size varies from a few pups to many hundreds of pups. Pups are nursed for an average of 24 days and are ready to swim minutes after being born. Nursery areas in Grays Harbor are located in areas around Whitcomb Flats, Mid-Harbor Flats, Sand Island shoals, Sand Island, Goose Island, Chenoise Creek channels, and in North Bay. Peak harbor seal abundances occur during the pupping season (mid-April through June) and the annual molt (July through August) (Jeffries
With the exception of long-distance travels recorded by males belonging to the Washington Inland stock, adult harbor seals have been considered to have highsite fidelity. Specifically, those in the Pacific Northwest typically remain within <30 km of their primary haul-out site (Peterson
Hundreds of harbor seal haul-out sites have been identified along Washington's coastal and inland waters, including intertidal sand bars and mudflats in estuaries, intertidal rocks and reefs, sandy, cobble, and rocky beaches, islands, log booms, docks, and floats in all marine areas of the state. Fifteen are located on the intertidal mudflats and sand bars of Grays Harbor (Jeffries
Hearing is the most important sensory modality for marine mammals underwater, and exposure to anthropogenic sound can have deleterious effects. To appropriately assess the potential effects of exposure to sound, it is necessary to understand the frequency ranges marine mammals are able to hear. Current data indicate that not all marine mammal species have equal hearing capabilities (
The pinniped functional hearing group was modified from Southall
For more detail concerning these groups and associated frequency ranges, please see NMFS (2018) for a review of available information. Five marine mammal species (2 cetacean and 3 pinniped (2 otariid and 1 phocid) species) have the reasonable potential to co-occur with the proposed survey activities. Please refer to Table 2. Of the cetacean species that may be present, one is classified as a low-frequency cetacean (
This section includes a summary and discussion of the ways that components of the specified activity may impact marine mammals and their habitat. The Estimated Take section later in this document includes a quantitative analysis of the number of individuals that are expected to be taken by this activity. The Negligible Impact Analysis and Determination section considers the content of this section, the Estimated Take section, and the Proposed Mitigation section, to draw conclusions regarding the likely impacts of these activities on the reproductive success or survivorship of individuals and how those impacts on individuals are likely to impact marine mammal species or stocks.
The WSDOT's proposed activities using in-water pile removal could adversely affect marine mammal species and stocks by exposing them to elevated noise levels in the vicinity of the activity area.
Exposure to high intensity sound for a sufficient duration may result in auditory effects such as a noise-induced threshold shift—an increase in the auditory threshold after exposure to noise (Finneran
When animals exhibit reduced hearing sensitivity (
For marine mammals, published data are limited to the captive bottlenose dolphin, beluga, harbor porpoise, and Yangtze finless porpoise (Finneran
Lucke
Marine mammal hearing plays a critical role in communication with conspecifics, and interpretation of environmental cues for purposes such as predator avoidance and prey capture. Depending on the degree (elevation of threshold in dB), duration (
In addition, exposure to noise could cause masking at particular frequencies for marine mammals, which utilize sound for vital biological functions (Clark
Masking occurs at the frequency band that the animals utilize. Therefore, since noise generated from vibratory pile driving is mostly concentrated at low frequency ranges, it may have less effect on high frequency echolocation sounds by
Unlike TS, masking, which can occur over large temporal and spatial scales, can potentially affect the species at population, community, or even ecosystem levels, as well as individual levels. Masking affects both senders and receivers of the signals and could have long-term chronic effects on marine mammal species and populations. Recent science suggests that low frequency ambient sound levels have increased by as much as 20 dB (more than three times in terms of sound pressure level) in the world's ocean from pre-industrial periods, and most of these increases are from distant shipping (Hildebrand 2009). The noises from WSDOT's vibratory pile removal activities contribute to the elevated ambient noise levels in the project area; thus, increasing potential for or severity of masking.
Finally, marine mammals' exposure to certain sounds could lead to behavioral disturbance (Richardson
The onset of behavioral disturbance from anthropogenic noise depends on both external factors (characteristics of noise sources and their paths) and the receiving animals (hearing, motivation, experience, demography) and is also difficult to predict (Southall
The biological significance of many of these behavioral disturbances is difficult to predict, especially if the detected disturbances appear minor. However, the consequences of behavioral modification could be biologically significant if the change affects growth, survival, and/or reproduction, which depends on the severity, duration, and context of the effects.
In 2016, the Alaska Department of Transportation and Public Facilities (ADOT&PF) documented observations of marine mammals during construction activities (
WSDOT's construction activities could have localized, temporary impacts on marine mammal habitat and their prey by increasing in-water sound pressure levels and slightly decreasing water quality. Increased noise levels may affect acoustic habitat (see masking discussion above) and adversely affect marine mammal prey in the vicinity of the project area (see discussion below). During vibratory pile driving, elevated levels of underwater noise would ensonify a small section of Grays Harbor where both fishes and mammals occur and could affect foraging success. Additionally, marine mammals may avoid the area during construction, however, displacement due to noise is expected to be temporary and is not expected to result in long-term effects to the individuals or populations. Construction activities are of short duration and would likely have temporary impacts on marine mammal habitat through increases in underwater and airborne sound.
A temporary and localized increase in turbidity near the seafloor would occur in the immediate area surrounding the area where piles are installed or removed. In general, turbidity associated with pile installation is localized to about a 7.6 m (25 ft) radius around the pile (Everitt
Grays Harbor is an established food habitat for marine mammals, including as a BIA for gray whales. However, the project area is outside of their range at the back of the harbor where the mouth
Avoidance by potential prey (
Fish utilize the soundscape and components of sound in their environment to perform important functions such as foraging, predator avoidance, mating, and spawning (
Fish react to sounds which are especially strong and/or intermittent low-frequency sounds, and behavioral responses such as flight or avoidance are the most likely effects. Short duration, sharp sounds can cause overt or subtle changes in fish behavior and local distribution. The reaction of fish to noise depends on the physiological state of the fish, past exposures, motivation (
The most likely impact to fish from pile removal activities at the project area would be temporary behavioral avoidance of the area. The duration of fish avoidance of this area after pile driving stops is unknown, but a rapid return to normal recruitment, distribution and behavior is anticipated.
Construction activities, in the form of increased turbidity, have the potential to adversely affect forage fish and juvenile salmonid out migratory routes in the project area. Both herring and salmon form a significant prey base for many marine mammal species that occur in the project area. Increased turbidity is expected to occur in the immediate vicinity (on the order of 3 m (10 ft) or less) of construction activities. Given the limited area affected and high tidal and river flow dilution rates any effects on forage fish and salmon are expected to be minor or negligible.
In summary, given the short daily duration of sound associated with individual pile driving events and the relatively small areas being affected, pile removal activities associated with the proposed action are not likely to have a permanent, adverse effect on any fish habitat, or populations of fish species. Any behavioral avoidance by fish of the disturbed area would still leave significantly large areas of fish and marine mammal foraging habitat in the nearby vicinity. Thus, we conclude that impacts of the specified activity are not likely to have more than short-term adverse effects on any prey habitat or populations of prey species. Further, any impacts to marine mammal habitat are not expected to result in significant or long-term consequences for individual marine mammals, or to contribute to adverse impacts on their populations.
This section provides an estimate of the number of incidental takes proposed for authorization through this IHA, which will inform both NMFS' consideration of “small numbers” and the negligible impact determination.
Harassment is the only type of take expected to result from these activities. Except with respect to certain activities not pertinent here, section 3(18) of the MMPA defines “harassment” as any act of pursuit, torment, or annoyance, which (i) has the potential to injure a marine mammal or marine mammal stock in the wild (Level A harassment); or (ii) has the potential to disturb a marine mammal or marine mammal stock in the wild by causing disruption of behavioral patterns, including, but not limited to, migration, breathing, nursing, breeding, feeding, or sheltering (Level B harassment).
Authorized takes would be by Level B harassment only, in the form of disruption of behavioral patterns for individual marine mammals resulting from exposure to sound from vibratory pile removal. Based on the nature of the activity, Level A harassment is neither anticipated nor proposed to be authorized.
As described previously, no mortality is anticipated or proposed to be authorized for this activity. Below we describe how the take is estimated.
Generally speaking, we estimate take by considering: (1) Acoustic thresholds above which NMFS believes the best available science indicates marine mammals will be behaviorally harassed or incur some degree of permanent hearing impairment; (2) the area or volume of water that will be ensonified above these levels in a day; (3) the density or occurrence of marine mammals within these ensonified areas; and, (4) and the number of days of activities. We note that while these basic factors can contribute to a basic calculation to provide an initial prediction of takes, additional information that can qualitatively inform take estimates is also sometimes available (
NMFS recommends the use of acoustic thresholds that identify the
WSDOT's proposed activity includes the use of a continuous source (vibratory pile removal); therefore, the 120 dB re 1 μPa (rms) is applicable.
These thresholds are provided in the table below. The references, analysis, and methodology used in the development of the thresholds are described in NMFS 2018 Technical Guidance, which may be accessed at
Here, we describe operational and environmental parameters of the activity that will feed into identifying the area ensonified above the acoustic thresholds, which include source levels and transmission loss coefficient.
The sound field in the project area is the existing background noise plus additional construction noise from the proposed project. Marine mammals are expected to be affected via sound generated by vibratory pile removal.
Vibratory hammers produce constant sound when operating, and produce vibrations between 1,200 and 2,400 vibrations per minute that liquefy the sediment surrounding the pile, allowing it to be removed with an upward lift from the crane. The actual duration to remove each pile depends on the type and size of the pile, sediment characteristics, etc.
In order to calculate distances to the Level A harassment and Level B harassment sound thresholds for piles of various sizes being used in this project, NMFS used acoustic monitoring data from other locations to develop source levels for the various pile types, sizes and methods. NMFS derived the project sound source levels from reviewing vibratory pile driving source levels in the Naval Base Kitsap at Bangor Trident Support Facilities EHW-2 Project Acoustic Monitoring Report (2013), CALTRANS Compendium (2015), and Naval Base Kitsap at Bangor Test Pile Program Acoustic Monitoring Report (I&R 2012) (See Table 5). Since adequate data was not available for 18-inch steel piles the vibratory pile driving of 24-inch steel pile, with more than 100 data points, with a source level of 162 dB RMS was used as a proxy. NMFS believes the available data for 48-inch steel piles may be underestimated in comparison to more robust data for 30 and 36-inch steel piles. Hence, the 75th percentile of the sample was used rather than the median noise level (165 dB RMS) to ensure the selected source level is adequately representative of actual source levels.
Transmission loss (TL) is the decrease in acoustic intensity as an acoustic pressure wave propagates out from a source. TL parameters vary with frequency, temperature, sea conditions, current, source and receiver depth, water depth, water chemistry, and bottom composition and topography. The general formula for underwater TL is: TL = B * Log10 (R1/R2), where
TL = transmission loss in dB
B = transmission loss coefficient; for practical spreading equals 15
R1 = the distance of the modeled SPL from the driven pile, and
R2 = the distance from the driven pile of the initial measurement
The recommended TL coefficient for most nearshore environments is the practical spreading value of 15. This value results in an expected propagation environment that would lie between spherical and cylindrical spreading loss conditions, which is the most appropriate assumption for WSDOT's proposed activity.
Using the practical spreading model, WSDOT determined underwater noise would fall below the behavioral effects threshold of 120 dB rms for marine mammals. NMFS independently estimated the Level B harassment areas using geographic information system (GIS) tools to eliminate land masses and other obstacles that block sound propagation at high tide. Such topographic barriers limit the maximum distance from being attained in all directions as shown by the actual ensonified areas calculated (Figure 2). The estimated Level B harassment distances and associated areas (as limited by topographic barriers), summarized in Table 6, determines the maximum potential Level B harassment zones for the project.
When the NMFS Technical Guidance (2016) was published, in recognition of the fact that ensonified area/volume could be more technically challenging to predict because of the duration component in the new thresholds, we developed a User Spreadsheet that includes tools to help predict a simple isopleth that can be used in conjunction with marine mammal density or occurrence to help predict takes. We note that because of some of the assumptions included in the methods used for these tools, we anticipate that isopleths produced are typically going to be overestimates of some degree, which may result in some degree of overestimate of Level A harassment take. However, these tools offer the best way to predict appropriate isopleths when more sophisticated 3D modeling methods are not available, and NMFS continues to develop ways to quantitatively refine these tools, and will qualitatively address the output where appropriate. For stationary sources such as vibratory pile removal, NMFS User Spreadsheet predicts the distance at which, if a marine mammal remained at that distance the whole duration of the activity, it would incur PTS. Inputs used in the User Spreadsheet, and the resulting isopleths are reported below (Tables 7 and 8).
The above input scenarios lead to PTS isopleth distances (Level A thresholds) of 0.3 to 39 meters (128 ft), depending on the marine mammal group and scenario (Table 8).
In this section we provide the information about the presence, density, or group dynamics of marine mammals that will inform the take calculations.
Photo identification, monitoring data, and stranding data corroborates the presence of gray whales in Grays Harbor and the adjacent coastal waters, as described in the Description of Marine Mammals in the Area of Specified Activities section above. Yet, these sources do not provide density data specific to Grays Harbor. Calambokidis
Their group size is known to fluctuate by activity, which in turn correlates to season. During migration, they are solo or in small groups. On the feeding grounds, whales are customarily seen solo or in small, widely dispersed groups. Larger, loosely formed aggregations do occur on feeding and breeding grounds, but are in constant flux (Wursig
Without the species count breakdown of aerial surveys in Grays Harbor (Adam
The closest of the 116 California sea lion strandings reported in Grays Harbor and adjacent coastal area from August 2010 to February 2020, was located in Aberdeen, approximately 1.86 km (1.6 mi) from the project site (NMMSD 2020). Without a correction factor to incorporate those sea lions in the water during aerial haulout surveys of Grays Harbor (Jeffries
Because density data is not available for Grays Harbor, the NMSDD (2019) fall offshore density of 0.139 Steller sea lions/km
Because aerial surveys of harbor seals on land only produce a minimum assessment of the population a correction factor to account for the missing animals is necessary to estimate total abundance. The total counts from 2014 Grays Harbor aerial surveys (Jeffries
The density data specific to Grays Harbor (Jeffries
Here we describe how the information provided above is brought together to produce a quantitative take estimate.
Level A harassment take is not likely because of the small injury zones; the largest Level A harassment distance is 40 m (131 ft) from the source for high-frequency cetaceans (harbor porpoise). NMFS considers that WSDOT can effectively monitor such small zones to implement shutdown measures and avoid Level A harassment takes, and that harbor porpoise in particular are more likely to avoid the construction activity than remain within the zone for the full duration necessary to accumulate sufficient energy to incur injury. Therefore, no Level A harassment take of marine mammals is proposed or authorized.
Take numbers were calculated using the information aggregated in the NMSDD (U.S. Navy, 2019) for the harbor porpoise, California sea lion, and Steller sea lion. Where a low to high range of densities is given for a species, the high-end density value was used in the applicable season (
Specific adjustments for calculating take numbers for gray whales and harbor seals are provided below.
• Evaluated use of data value (offshore) and result is what we consider underestimate of value. Because recent data for gray whales in Grays Harbor does not provide enough information to derive a density value, and because the Level B harassment zone stretches across the length of Grays Harbor, and the flexible group size correlated to season, we propose Level B harassment take of 1 gray whale per day of construction activity 1 × 7 days = 7 gray whales.
• The density of harbor seals in Grays Harbor based on Jeffries'
In order to issue an IHA under section 101(a)(5)(D) of the MMPA, NMFS must set forth the permissible methods of taking pursuant to the activity, and other means of effecting the least practicable impact on the species or stock and its habitat, paying particular attention to rookeries, mating grounds, and areas of similar significance, and on the availability of the species or stock for taking for certain subsistence uses (latter not applicable for this action). NMFS regulations require applicants for
In evaluating how mitigation may or may not be appropriate to ensure the least practicable adverse impact on species or stocks and their habitat, as well as subsistence uses where applicable, we carefully consider two primary factors:
(1) The manner in which, and the degree to which, the successful implementation of the measure(s) is expected to reduce impacts to marine mammals, marine mammal species or stocks, and their habitat. This considers the nature of the potential adverse impact being mitigated (likelihood, scope, range). It further considers the likelihood that the measure will be effective if implemented (probability of accomplishing the mitigating result if implemented as planned), the likelihood of effective implementation (probability implemented as planned), and;
(2) The practicability of the measures for applicant implementation, which may consider such things as cost, impact on operations, and, in the case of a military readiness activity, personnel safety, practicality of implementation, and impact on the effectiveness of the military readiness activity.
The following mitigation measures are proposed in the IHA:
Timing restrictions would be used to avoid in-water work when ESA-listed salmonids are most likely to be present. Furthermore, work is planned to occur only during daylight hours, when visual monitoring of marine mammals can be effectively conducted (30 minutes after sunrise to 30 minutes before sunset).
WSDOT will establish a shutdown zone for all pile driving and removal activities. The purpose of a shutdown zone is generally to define an area within which shutdown of activity would occur upon sighting of a marine mammal (or in anticipation of an animal entering the defined area). Shutdown zones will vary based on the activity type and marine mammal hearing group (Error! Reference source not found.4). The largest shutdown zones are generally for high frequency cetaceans, as shown in Table 11.
For in-water heavy machinery activities other than pile driving, if a marine mammal comes within 10 m, operations must cease and vessels must reduce speed to the minimum level required to maintain steerage and safe working conditions. WSDOT must also implement shutdown measures if the cumulative total number of individuals observed within the Level B harassment monitoring zones for any particular species reaches the number authorized under the IHA and if such marine mammals are sighted within the vicinity of the project area and are approaching the Level B Harassment zone during in-water construction activities.
WSDOT will monitor the Level B harassment and the Level A harassment zones. Monitoring zones provide utility for observing by establishing monitoring protocols for areas adjacent to the shutdown zones. Monitoring zones enable observers to be aware of and communicate the presence of marine mammals in the project area outside the shutdown zone and thus prepare for a potential halt of activity should the animal enter the shutdown zone. Placement of Protected Species Observers (PSO) will allow PSOs to observe marine mammals within the Level B harassment zones.
Prior to the start of daily in-water construction activity, or whenever a break in pile removal of 30 minutes or longer occurs, PSOs will observe the shutdown and monitoring zones for a period of 30 minutes. The shutdown zone will be considered cleared when a marine mammal has not been observed within the zone for that 30-minute period. If a marine mammal is observed within the shutdown zone, operations cannot proceed until the animal has left the zone or has not been observed for 15 minutes. When a marine mammal for which Level B harassment take is authorized is present in the Level B harassment zone, activities may begin and Level B harassment take will be recorded. If work ceases for more than 30 minutes, the pre-activity monitoring of the shutdown zones will commence.
If a species enters or approaches the Level B harassment zone and that species is not authorized for take, pile driving and removal activities must shut down immediately. Activities must not resume until the animal has been confirmed to have left the area or an observation time period of 15 minutes has elapsed.
Based on our evaluation of the applicant's mitigation measures, NMFS has preliminarily determined that the required mitigation measures provide the means effecting the least practicable impact on the affected species or stocks and their habitat, paying particular attention to rookeries, mating grounds, and areas of similar significance.
In order to issue an IHA for an activity, section 101(a)(5)(D) of the MMPA states that NMFS must set forth requirements pertaining to the monitoring and reporting of such taking. The MMPA implementing regulations at 50 CFR 216.104 (a)(13) indicate that requests for authorizations must include the suggested means of accomplishing the necessary monitoring and reporting that will result in increased knowledge of the species and of the level of taking or impacts on populations of marine mammals that are expected to be present in the proposed action area. Effective reporting is critical both to compliance as well as ensuring that the most value is obtained from the required monitoring.
Monitoring and reporting requirements prescribed by NMFS
• Occurrence of marine mammal species or stocks in the area in which take is anticipated (
• Nature, scope, or context of likely marine mammal exposure to potential stressors/impacts (individual or cumulative, acute or chronic), through better understanding of: (1) Action or environment (
• Individual marine mammal responses (behavioral or physiological) to acoustic stressors (acute, chronic, or cumulative), other stressors, or cumulative impacts from multiple stressors;
• How anticipated responses to stressors impact either: (1) long-term fitness and survival of individual marine mammals; or (2) populations, species, or stocks;
• Effects on marine mammal habitat (
• Mitigation and monitoring effectiveness.
Marine mammal monitoring must be conducted in accordance with the Monitoring section of the application and Section 5 of the IHA. Marine mammal monitoring during pile removal must be conducted by NMFS-approved PSOs in a manner consistent with the following:
• Independent PSOs (
• At least one PSO must have prior experience performing the duties of a PSO during construction activity pursuant to a NMFS-issued incidental take authorization;
• Other PSOs may substitute education (degree in biological science or related field) or training for experience; and
• WSDOT must submit PSO Curriculum Vitae for approval by NMFS prior to the onset of pile driving.
PSOs must have the following additional qualifications:
• Ability to conduct field observations and collect data according to assigned protocols;
• Experience or training in the field identification of marine mammals, including the identification of behaviors;
• Sufficient training, orientation, or experience with the construction operation to provide for personal safety during observations;
• Writing skills sufficient to prepare a report of observations including but not limited to the number and species of marine mammals observed; dates and times when in-water construction activities were conducted; dates, times, and reason for implementation of mitigation (or why mitigation was not implemented when required); and marine mammal behavior; and
• Ability to communicate orally, by radio or in person, with project personnel to provide real-time information on marine mammals observed in the area as necessary.
Two PSOs will be employed. PSO locations will provide an unobstructed view of all water within the shutdown zone, and as much of the Level B harassment zones as possible. PSO locations are as follows:
(1) At the pile driving site or best vantage point practicable to monitor the shutdown zones; and
(2) On shore, south of Mid-harbor Flats or best vantage point to monitor the harbor seal haul-out site during construction activities.
Monitoring will be conducted 30 minutes before, during, and 30 minutes after pile driving/removal activities. In addition, observers shall record all incidents of marine mammal occurrence, regardless of distance from activity, and shall document any behavioral reactions in concert with distance from piles being driven or removed. Pile driving activities include the time to install or remove a single pile or series of piles, as long as the time elapsed between uses of the pile driving or drilling equipment is no more than 30 minutes.
A draft marine mammal monitoring report will be submitted to NMFS within 90 days after the completion of pile driving and removal activities, or 60 days prior to a requested date of issuance of any future IHAs for projects at the same location, whichever comes first. The report will include an overall description of work completed, a narrative regarding marine mammal sightings, and associated PSO data sheets. Specifically, the report must include:
• Dates and times (begin and end) of all marine mammal monitoring;
• Construction activities occurring during each daily observation period, including how many and what type of piles were removed;
• Environmental conditions during monitoring periods (at beginning and end of PSO shift and whenever conditions change significantly), including Beaufort sea state and any other relevant weather conditions including cloud cover, fog, sun glare, and overall visibility to the horizon, and estimated observable distance (if less than the harassment zone distance);
• The number of marine mammals observed, by species, relative to the pile location and if pile driving or removal was occurring at time of sighting;
• Age and sex class, if possible, of all marine mammals observed;
• PSO locations during marine mammal monitoring;
• Distances and bearings of each marine mammal observed to the pile being driven or removed for each sighting (if pile driving or removal was occurring at time of sighting);
• Description of any marine mammal behavior patterns during observation, including direction of travel and estimated time spent within the Level A and Level B harassment zones while the source was active;
• Number of marine mammals detected within the harassment zones, by species;
• Detailed information about any implementation of any mitigation triggered (
• Description of attempts to distinguish between the number of individual animals taken and the number of incidences of take, such as ability to track groups or individuals; and
• Submit all PSO datasheets and/or raw sighting data (in a separate file from the Final Report referenced immediately above).
If no comments are received from NMFS within 30 days, the draft final report will constitute the final report. If comments are received, a final report addressing NMFS comments must be submitted within 30 days after receipt of comments.
In the event that personnel involved in the construction activities discover an injured or dead marine mammal, WSDOT shall report the incident to the Office of Protected Resources (OPR), NMFS and to the regional stranding coordinator as soon as feasible. If the
• Time, date, and location (latitude/longitude) of the first discovery (and updated location information if known and applicable);
• Species identification (if known) or description of the animal(s) involved;
• Condition of the animal(s) (including carcass condition if the animal is dead);
• Observed behaviors of the animal(s), if alive;
• If available, photographs or video footage of the animal(s); and
• General circumstances under which the animal was discovered.
NMFS has defined negligible impact as an impact resulting from the specified activity that cannot be reasonably expected to, and is not reasonably likely to, adversely affect the species or stock through effects on annual rates of recruitment or survival (50 CFR 216.103). A negligible impact finding is based on the lack of likely adverse effects on annual rates of recruitment or survival (
To avoid redundancy this introductory discussion of our analyses applies to all of the species listed in Error! Reference source not found.0, given that many of the anticipated effects of this project on different marine mammal stocks are expected to be relatively similar in nature. Pile removal activities have the potential to disturb or displace marine mammals. Specifically, the project activities may result in take, in the form of Level B harassment from underwater sounds generated from pile removal. Potential takes could occur if individuals are present in the Level B harassment zone when these activities are underway.
In summary and as described above, the following factors primarily support our preliminary determination that the impacts resulting from this activity are not expected to adversely affect the species or stock through effects on annual rates of recruitment or survival:
• No mortality is anticipated or authorized;
• No takes by Level A harassment are anticipated or authorized. Takes by Level B harassment constitute less than 8 percent of the best available abundance estimates for all stocks;
• Take would occur over a short timeframe (6 days of active pile removal) during the IHA effective period) and not occur in places and/or times where take would be more likely to accrue to impacts on reproduction or survival, such as within ESA-designated or proposed critical habitat;
• Stock is not known to be declining or suffering from known contributors to decline (
• Monitoring reports from similar work from the Chehalis River Bridge Scour Repair Project have documented little to no effect on individuals of the same species impacted by the specified activities.
Based on the analysis contained herein of the likely effects of the specified activity on marine mammals and their habitat, and taking into consideration the implementation of the proposed monitoring and mitigation measures, NMFS preliminarily finds that the total marine mammal take from the proposed activity will have a negligible impact on all affected marine mammal species or stocks.
As noted above, only small numbers of incidental take may be authorized under sections 101(a)(5)(A) and (D) of the MMPA for specified activities other than military readiness activities. The MMPA does not define small numbers and so, in practice, where estimated numbers are available, NMFS compares the number of individuals taken to the most appropriate estimation of abundance of the relevant species or stock in our determination of whether an authorization is limited to small numbers of marine mammals. When the predicted number of individuals to be taken is fewer than one third of the species or stock abundance, the take is considered to be of small numbers. Additionally, other qualitative factors may be considered in the analysis, such as the temporal or spatial scale of the activities.
The amount of take NMFS proposes to authorize of all species or stocks is below one third of the estimated stock abundance (in fact, take of individuals is less than 8 percent of the abundance for all affected stocks). These are all likely conservative estimates because they assume all takes are of different individual animals which is likely not the case. Some individuals may return multiple times in a day, but PSOs would count them as separate takes if they cannot be individually identified.
Based on the analysis contained herein of the proposed activity (including the proposed mitigation and monitoring measures) and the anticipated take of marine mammals, NMFS preliminarily finds that small numbers of marine mammals will be taken relative to the population size of the affected species or stocks.
There are no relevant subsistence uses of the affected marine mammal stocks or species implicated by this action. Therefore, NMFS has determined that the total taking of affected species or stocks would not have an unmitigable adverse impact on the availability of such species or stocks for taking for subsistence purposes.
Section 7(a)(2) of the Endangered Species Act of 1973 (ESA: 16 U.S.C. 1531
No incidental take of ESA-listed species is proposed for authorization or
As a result of these preliminary determinations, NMFS proposes to issue an IHA to WSDOT for conducting State Route 520 Pontoon Pile Removal Project, Aberdeen, Grays Harbor County, Washington over approximately six days, provided the previously mentioned mitigation, monitoring, and reporting requirements are incorporated. A draft of the proposed IHA can be found at
We request comment on our analyses, the proposed authorization, and any other aspect of this notice of proposed IHA for the proposed removal of pilings. We also request at this time comment on the potential Renewal of this proposed IHA as described in the paragraph below. Please include with your comments any supporting data or literature citations to help inform decisions on the request for this IHA or a subsequent Renewal IHA.
On a case-by-case basis, NMFS may issue a one-time, one-year Renewal IHA following notice to the public providing an additional 15 days for public comments when (1) up to another year of identical or nearly identical, or nearly identical, activities as described in the Description of Proposed Activity section of this notice is planned or (2) the activities as described in the Description of Proposed Activity section of this notice would not be completed by the time the IHA expires and a Renewal would allow for completion of the activities beyond that described in the
• A request for renewal is received no later than 60 days prior to the needed Renewal IHA effective date (recognizing that the Renewal IHA expiration date cannot extend beyond one year from expiration of the initial IHA).
• The request for renewal must include the following:
(1) An explanation that the activities to be conducted under the requested Renewal IHA are identical to the activities analyzed under the initial IHA, are a subset of the activities, or include changes so minor (
(2) A preliminary monitoring report showing the results of the required monitoring to date and an explanation showing that the monitoring results do not indicate impacts of a scale or nature not previously analyzed or authorized.
Upon review of the request for Renewal, the status of the affected species or stocks, and any other pertinent information, NMFS determines that there are no more than minor changes in the activities, the mitigation and monitoring measures will remain the same and appropriate, and the findings in the initial IHA remain valid.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of SEDAR 68 Discard Mortality Webinar II for Gulf of Mexico and Atlantic scamp.
The SEDAR 68 assessment of Gulf of Mexico and Atlantic scamp will consist of a Data workshop, a series of assessment webinars, and a Review workshop. See
The SEDAR 68 Discard Mortality Webinar II will be held on November 12, 2020, from 1 p.m. to 3 p.m. Eastern.
Julie A. Neer, SEDAR Coordinator; (843) 571-4366; email:
The Gulf of Mexico, South Atlantic, and Caribbean Fishery Management Councils, in conjunction with NOAA Fisheries and the Atlantic and Gulf States Marine Fisheries Commissions have implemented the Southeast Data, Assessment and Review (SEDAR) process, a multi-step method for determining the status of fish stocks in the Southeast Region. SEDAR is a multi-step process including: (1) Data Workshop; (2) Assessment Process utilizing webinars; and (3) Review Workshop. The product of the Data Workshop is a data report that compiles and evaluates potential datasets and recommends which datasets are appropriate for assessment analyses. The product of the Assessment Process is a stock assessment report that describes the fisheries, evaluates the status of the stock, estimates biological benchmarks, projects future population conditions, and recommends research and monitoring needs. The assessment is independently peer reviewed at the Review Workshop. The product of the Review Workshop is a Summary documenting panel opinions regarding the strengths and weaknesses of the stock assessment and input data. Participants for SEDAR Workshops are appointed by the Gulf of Mexico, South Atlantic, and Caribbean Fishery Management Councils and NOAA Fisheries Southeast Regional Office, HMS Management Division, and Southeast Fisheries Science Center. Participants include data collectors and database managers; stock assessment scientists, biologists, and researchers; constituency representatives including fishermen, environmentalists, and NGO's; International experts; and staff of Councils, Commissions, and state and federal agencies.
The items of discussion for the webinar are as follows:
• Participants will discuss data available to inform discussions of discard mortality for use in the assessment of Gulf of Mexico and Atlantic scamp.
Although non-emergency issues not contained in this agenda may come before this group for discussion, those issues may not be the subject of formal action during this meeting. Action will be restricted to those issues specifically identified in this notice and any issues arising after publication of this notice
The meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to the Council office (see
The times and sequence specified in this agenda are subject to change.
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of a public meeting.
The South Atlantic Fishery Management Council (Council) will convene a meeting of the South Atlantic Selectivity Workgroup via webinar to address gear selectivity for fishery stock assessments for species managed by the Council.
The South Atlantic Selectivity Workgroup meeting will be held via webinar on Thursday, November 12, 2020, from 9 a.m. until 2 p.m.
The meeting will be held via webinar. The webinar is open to members of the public. Information, including a link to webinar registration and meeting materials will be posted on the Council's website at:
Chip Collier, Deputy Director for Science, SAFMC; phone: (843) 302-8444 or toll free: (866) SAFMC-10; fax: (843) 769-4520; email:
The South Atlantic Selectivity Workgroup consists of scientists with expertise in selectivity or gears used in fisheries in the South Atlantic region including members of the Council's Scientific and Statistical Committee chosen to participate. The Workgroup will provide recommendations on selectivity for species managed by the Council for consideration in upcoming stock assessments.
Agenda items include:
1. Provide recommendations on selectivity for Red Snapper, Vermilion Snapper; and Black Sea Bass;
2. Complete addressing the Terms of Reference for the Workgroup;
3. Review sections of the Workgroup report; and
4. Approve Workgroup report.
The meeting is physically accessible to people with disabilities. Requests for auxiliary aids should be directed to the Council office (see
The times and sequence specified in this agenda are subject to change.
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; public meeting.
The Mid-Atlantic Fishery Management Council's (MAFMC's) Bluefish Advisory Panel will hold a public meeting.
The meeting will be held on Thursday, November 12, 2020, from 10 a.m. to 11:30 a.m. For agenda details, see
The meeting will be held via webinar, which can be accessed at:
Christopher M. Moore, Ph.D., Executive Director, Mid-Atlantic Fishery Management Council, telephone: (302) 526-5255.
The Bluefish Advisory Panel will meet to comment on the current recreational management measures and offer on-the-water observations for discussion at the upcoming Monitoring Committee and Council meetings.
The meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to M. Jan Saunders at the Mid-Atlantic Council Office, (302) 526-5251, at least 5 days prior to the meeting date.
16 U.S.C. 1801
U.S. International Development Finance Corporation (DFC).
Notice of information collection; request for comment.
Under the provisions of the Paperwork Reduction Act, agencies are required to publish a Notice in the
DFC intends to begin use of this collection on December 22, 2020.
Comments must be received by November 27, 2020.
Comments and requests for copies of the subject information collection may be sent by any of the following methods:
•
•
Agency Submitting Officer: Joanna Reynolds, (202) 357-3979.
This notice informs the public that DFC will submit to OMB a request for approval of the following information collection.
The agencies received comments in response to the sixty (60) day notice published in
• Attach documentation on the Project's plans;
• clarify which language their policies and plans are in;
• clarify if the Project is associated with an OECD National Contact Point complaint;
• explain if the Project has a protocol to address threats of retaliation against grievance mechanism complaints;
DFC also made additional minor changes to the language and scope of questions and sections.
U.S. International Development Finance Corporation (DFC).
Notice of Information Collection; request for comment.
Under the provisions of the Paperwork Reduction Act, agencies are required to publish a Notice in the
DFC intends to begin use of this collection on December 22, 2020.
Comments must be received by November 27, 2020.
Comments and requests for copies of the subject information collection may be sent by any of the following methods:
•
•
Agency Submitting Officer: Joanna Reynolds, (202) 357-3979.
This notice informs the public that DFC will submit to OMB a request for approval of the following information collection.
The agencies received comments in response to the sixty (60) day notice published in
• Include information about past and ongoing complaints from the Project's grievance mechanism;
• clarify questions regarding Project compliance with contract conditions or local law to include social impacts and human rights;
• clarify if the Project is associated with an OECD National Contact Point complaint.
• explain if the Project has a protocol to address threats of retaliation against grievance mechanism complaints;
• clarify if the Project is associated with an OECD National Contact Point complaint;
DFC also made additional minor changes to the language and scope of questions and sections.
Office of Planning, Evaluation and Policy Development (OPEPD), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995, ED is proposing an extension of a currently approved information collection.
Interested persons are invited to submit comments on or before December 28, 2020.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Dale King, 202-453-5934.
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
Department of Energy.
Designation of Performance Review Board Chair.
This notice provides the Performance Review Board Chair designee for the Department of Energy. This listing supersedes all previously published lists of Performance Review Board Chair.
This appointment is effective as of September 30, 2020.
Dennis M. Miotla
This document of the Department of Energy was signed on October 9, 2020, by Patricia Barfield, Acting Director for Office of Corporate Executive Management, Office of the Chief Human Capital Officer, pursuant to delegated authority from the Secretary of Energy. That document with the original signature and date is maintained by DOE. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DOE Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication as an
official document of the Department of Energy. This administrative process in no way alters the legal effect of this document upon publication in the
Department of Energy.
Designation of Performance Review Board Standing Register.
This notice provides the Performance Review Board Standing Register for the Department of Energy. This listing supersedes all previously published lists of PRB members.
This appointment is effective as of September 30, 2020.
This document of the Department of Energy was signed on October 9, 2020, by Patricia Barfield, Acting Director for Office of Corporate Executive Management, Office of the Chief Human Capital Officer, pursuant to delegated authority from the Secretary of Energy. That document with the original signature and date is maintained by DOE. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DOE Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication as an official document of the Department of Energy. This administrative process in no way alters the legal effect of this document upon publication in the
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
The filings are accessible in the Commission's eLibrary system (
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified date(s). Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
On October 14, 2020, the City of Danville, Virginia (City) and Northbrook Virginia Hydro, LLC (Northbrook) filed jointly an application for partial transfer of license for the Pinnacles Hydroelectric Project No. 10896. The project is located on the Dan River, Patrick County, Virginia.
The applicants seek Commission approval to partially transfer the license for the Pinnacles Hydroelectric Project from the City as sole licensee to the City and Northbrook as co-licensees.
Applicants Contact: (For the City of Danville, Virginia) Mr. Ken Larking, City Manager, 427 Patton Street, Danville, Virginia 24541, Phone: (434) 799-5100, Email:
For Northbrook Virginia Hydro, LLC: Mr. Kyle Kroeger, Co-President, Northbrook Virginia Hydro, LLC, c/o North Sky Capital, 33 South 6th Street, Suite 4646, Minneapolis, MN 55402, Phone: (612) 435-7150, Email:
Deadline for filing comments, motions to intervene, and protests: 30 Days from the date that the Commission issues this notice. The Commission strongly encourages electronic filing. Please file comments, motions to intervene, and protests using the Commission's eFiling system at
In addition to publishing the full text of this notice in the
The staff of the Federal Energy Regulatory Commission (FERC or Commission) will prepare an environmental document, that will discuss the environmental impacts of the East Lateral XPress Project involving construction and operation of facilities by Columbia Gulf Transmission, LLC (Columbia Gulf) in St. Mary, Lafourche, Jefferson, and Plaquemines Parishes, Louisiana. The Commission will use this environmental document in its decision-making process to determine whether the project is in the public convenience and necessity.
This notice announces the opening of the scoping process the Commission will use to gather input from the public and interested agencies regarding the project. As part of the National Environmental Policy Act (NEPA) review process, the Commission takes into account concerns the public may have about proposals and the environmental impacts that could result from its action whenever it considers the issuance of a Certificate of Public Convenience and Necessity. This gathering of public input is referred to as scoping. The main goal of the scoping process is to focus the analysis in the environmental document on the important environmental issues. Additional information about the Commission's NEPA process is described below in the
By this notice, the Commission requests public comments on the scope of issues to address in the environmental document. To ensure that your comments are timely and properly recorded, please submit your comments so that the Commission receives them in Washington, DC on or before 5:00 p.m. Eastern Time on November 20, 2020. Comments may be submitted in written form. Further details on how to submit comments are provided in the
Your comments should focus on the potential environmental effects, reasonable alternatives, and measures to avoid or lessen environmental impacts. Your input will help the Commission staff determine what issues they need to evaluate in the environmental document. Commission staff will consider all written comments during the preparation of the environmental document.
If you submitted comments on this project to the Commission before the opening of this docket on September 24, 2020, you will need to file those comments in Docket No. CP20-527-000 to ensure they are considered as part of this proceeding.
This notice is being sent to the Commission's current environmental mailing list for this project. State and local government representatives should notify their constituents of this proposed project and encourage them to comment on their areas of concern.
If you are a landowner receiving this notice, a pipeline company representative may contact you about the acquisition of an easement to construct, operate, and maintain the proposed facilities. The company would seek to negotiate a mutually acceptable easement agreement. You are not required to enter into an agreement. However, if the Commission approves the project, the Natural Gas Act conveys the right of eminent domain to the company. Therefore, if you and the company do not reach an easement agreement, the pipeline company could initiate condemnation proceedings in court. In such instances, compensation would be determined by a judge in accordance with state law. The Commission does not subsequently grant, exercise, or oversee the exercise of that eminent domain authority. The courts have exclusive authority to handle eminent domain cases; the Commission has no jurisdiction over these matters.
Columbia Gulf provided landowners with a fact sheet prepared by the FERC entitled “An Interstate Natural Gas Facility On My Land? What Do I Need To Know?” which addresses typically asked questions, including the use of eminent domain and how to participate in the Commission's proceedings. This fact sheet along with other landowner topics of interest are available for viewing on the FERC website (
There are three methods you can use to submit your comments to the Commission. Please carefully follow these instructions so that your comments are properly recorded. The Commission encourages electronic filing of comments and has staff available to
(1) You can file your comments electronically using the
(2) You can file your comments electronically by using the
(3) You can file a paper copy of your comments by mailing them to the Commission. Be sure to reference the project docket number (CP20-527-000) on your letter. Submissions sent via the U.S. Postal Service must be addressed to: Kimberly D. Bose, Secretary, Federal Energy Regulatory Commission, 888 First Street NE, Room 1A, Washington, DC 20426. Submissions sent via any other carrier must be addressed to: Kimberly D. Bose, Secretary, Federal Energy Regulatory Commission, 12225 Wilkins Avenue, Rockville, Maryland 20852.
Additionally, the Commission offers a free service called eSubscription which makes it easy to stay informed of all issuances and submittals regarding the dockets/projects to which you subscribe. These instant email notifications are the fastest way to receive notification and provide a link to the document files which can reduce the amount of time you spend researching proceedings. Go to
Columbia Gulf proposes to construct and operate two new compressor stations, a new meter station, and other appurtenant facilities. The East Lateral XPress Project would create about 183 million standard cubic feet per day of incremental natural gas capacity. According to Columbia Gulf, the purpose of the proposed project is to provide a total of 725 million standard cubic feet per day of firm transportation capacity, through a combination of incremental and existing capacity on Columbia Gulf's interstate natural gas pipeline system, to supply feed gas for Venture Global LNG's Plaquemines LNG facility in Plaquemines Parish.
The East Lateral XPress Project would consist of the following facilities:
• 8.1 miles of 30-inch-diameter pipeline lateral within Barataria Bay in Jefferson and Plaquemines Parish, Louisiana;
• a new 23,470-horsepower (hp) compressor station at an existing Columbia Gulf abandoned compressor station site in St. Mary Parish, Louisiana (Centerville Compressor Station);
• a new 23,470-hp compressor station adjacent to an existing tie-in facility in Lafourche Parish, Louisiana (Golden Meadow Compressor Station);
• one new delivery meter station;
• one new tie-in facility in Barataria Bay; and
• two new mainline valves.
The general location of the project facilities is shown in appendix 1.
Construction of the proposed facilities would disturb about 744 acres of land for the aboveground facilities and the pipeline. Construction of the compressor stations would require a total of 29.3 acres of land, and construction of the pipeline facilities in Barataria Bay would require a total of 714.6 acres of open water/seafloor. Following construction, Columbia Gulf would maintain about 500 acres for permanent operation of the project's facilities; the remaining acreage would be restored and revert to former uses.
Any environmental document issued by the Commission will discuss impacts that could occur as a result of the construction and operation of the proposed project under the relevant general resource areas:
• Geology and soils;
• water resources and wetlands;
• vegetation and wildlife;
• threatened and endangered species;
• cultural resources;
• land use;
• socioeconomics;
• air quality and noise; and
• reliability and safety.
Commission staff have already identified issues that deserve attention based on a preliminary review of the proposed facilities and the environmental information provided by Columbia Gulf. This preliminary list of issues may change based on your comments and our analysis:
• Water resources; and
• essential fish habitat.
Commission staff will also evaluate reasonable alternatives to the proposed project or portions of the project and make recommendations on how to lessen or avoid impacts on the various resource areas. Your comments will help Commission staff identify and focus on the issues that might have an effect on the human environment and potentially eliminate others from further study and discussion in the environmental document.
Following this scoping period, Commission staff will determine whether to prepare an Environmental Assessment (EA) or an Environmental Impact Statement (EIS). The EA or the EIS will present Commission staff's independent analysis of the issues. If Commission staff prepares an EA, a
With this notice, the Commission is asking agencies with jurisdiction by law and/or special expertise with respect to the environmental issues of this project to formally cooperate in the preparation of the environmental document.
In accordance with the Advisory Council on Historic Preservation's implementing regulations for section 106 of the National Historic Preservation Act, the Commission is using this notice to initiate consultation with the applicable State Historic Preservation Office(s), and to solicit their views and those of other government agencies, interested Indian tribes, and the public on the project's potential effects on historic properties.
The environmental mailing list includes federal, state, and local government representatives and agencies; elected officials; environmental and public interest groups; Native American Tribes; other interested parties; and local libraries and newspapers. This list also includes all affected landowners (as defined in the Commission's regulations) who are potential right-of-way grantors, whose property may be used temporarily for project purposes, or who own homes within certain distances of aboveground facilities, and anyone who submits comments on the project and includes a mailing address with their comments. Commission staff will update the environmental mailing list as the analysis proceeds to ensure that Commission notices related to this environmental review are sent to all individuals, organizations, and government entities interested in and/or potentially affected by the proposed project.
If you need to make changes to your name/address, or if you would like to remove your name from the mailing list, please return the attached “Mailing List Update Form” (appendix 2).
Additional information about the project is available from the Commission's Office of External Affairs, at (866) 208-FERC, or on the FERC website at
Public sessions or site visits will be posted on the Commission's calendar located at
On August 6, 2020, Transcontinental Gas Pipe Line Company, LLC (Transco) filed an application in Docket No. CP20-507-000 requesting authorization pursuant to Section 7(b) of the Natural Gas Act to abandon certain natural gas pipeline facilities. The proposed project is known as the VR-22 to Shore Abandonment Project (Project) and consists of abandoning approximately 12.6 miles of 24-inch-diameter pipeline in Vermilion Parish, Louisiana, and in offshore waters of Louisiana State and Federal offshore waters.
On August 17, 2020, the Federal Energy Regulatory Commission (Commission or FERC) issued its Notice of Application for the Project. Among other things, that notice alerted agencies issuing federal authorizations of the requirement to complete all necessary reviews and to reach a final decision on a request for a federal authorization within 90 days of the date of issuance of the Commission staff's Environmental Assessment (EA) for the Project. This instant notice identifies the FERC staff's planned schedule for the completion of the EA for the Project.
If a schedule change becomes necessary, additional notice will be provided so that the relevant agencies are kept informed of the Project's progress.
Transco proposes to abandon approximately 12.6 miles of 24-inch-diameter natural gas transmission pipeline in Vermilion Parish, Louisiana, and in offshore waters of Louisiana State and Federal offshore waters. Of the 12.6 miles, Transco proposes to abandon approximately 9.9 miles in place, and abandon about 2.7 miles of pipeline by removal. Additionally, Transco would remove equipment associated with meter station 2278 and meter station 4640, located on the Vermilion Block 39 Platform and the VR-22 B Platform offshore, respectively. According to Transco, the facilities proposed for abandonment have not been utilized since 2019 and it does not anticipate that any additional gas flow through these facilities will occur in the future.
On August 26, 2020, the Commission issued a
In order to receive notification of the issuance of the EA and to keep track of all formal issuances and submittals in specific dockets, the Commission offers a free service called eSubscription. This can reduce the amount of time you spend researching proceedings by automatically providing you with notification of these filings, document summaries, and direct links to the documents. Go to
Additional information about the Project is available from the Commission's Office of External Affairs
The eLibrary link on the FERC website also provides access to the texts of formal documents issued by the Commission, such as orders, notices, and rule makings.
Take notice that on October 20, 2020, pursuant to section 292.402(a) of the Federal Energy Regulatory Commission's (Commission) Rules and Regulations,
Any person desiring to intervene or to protest in the above proceeding must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. It is not necessary to separately intervene again in a subdocket related to a compliance filing if you have previously intervened in the same docket. Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Anyone filing a motion to intervene or protest must serve a copy of that document on the Petitioners. In reference to filings initiating a new proceeding, interventions or protests submitted on or before the comment deadline need not be served on persons other than the Petitioners.
The Commission strongly encourages electronic filings of comments, protests and interventions in lieu of paper using the eFiling link at
Persons unable to file electronically should submit an original and 14 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First St. NE, Washington, DC 20426.
In addition to publishing the full text of this document in the
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system (
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Federal Communications Commission.
Notice.
In this document, the Consumer and Governmental Affairs Bureau announces the availability of the FCC order terminating, as dormant, certain docketed Commission proceedings.
The dockets are terminated as of October 27, 2020.
Zac Champ of the Consumer and Governmental Affairs Bureau, at (202) 418-1495 or at
The Commission's Order,
The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The public portions of the applications listed below, as well as other related filings required by the Board, if any, are available for immediate inspection at the Federal Reserve Bank(s) indicated below and at
Comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors, Ann E. Misback, Secretary of the Board, 20th Street and Constitution Avenue NW, Washington, DC 20551-0001, not later than November 27, 2020.
1.
Federal Trade Commission.
Notice.
In accordance with the Paperwork Reduction Act of 1995 (PRA), the Federal Trade Commission (FTC or Commission) is seeking public comment on its proposal to extend for an additional three years the Office of Management and Budget (OMB) clearance for information collection requirements in Trade Regulation Rule entitled Labeling and Advertising of Home Insulation (R-value Rule or Rule). That clearance expires on January 31, 2021.
Comments must be received on or before December 28, 2020.
Interested parties may file a comment online or on paper by following the instructions in the Request for Comments part of the
Hampton Newsome, Attorney, Division of Enforcement, Federal Trade Commission, Room CC-9528, 600 Pennsylvania Avenue NW, Washington, DC 20580, (202) 326-2889.
As required by section 3506(c)(2)(A) of the PRA, 44 U.S.C. 3506(c)(2)(A), the FTC is providing this opportunity for public comment before requesting that OMB extend the existing clearance for the information collection requirements contained in the Commission's R-value Rule.
The Rule's requirements include product testing, recordkeeping, and third-party disclosures on labels, fact sheets, advertisements, and other promotional materials. Based on information provided by members of the insulation industry, staff estimates that the Rule affects: (1) 150 Insulation manufacturers and their testing laboratories; (2) 1,615 installers who sell home insulation; (3) 125,000 new home builders/sellers of site-built homes and approximately 5,500 dealers who sell manufactured housing; and (4) 25,000 retail sellers who sell home insulation for installation by consumers.
Under the Rule's testing requirements, manufacturers must test each insulation product for its R-value. Based on past industry input, staff estimates that the test takes approximately two hours. Approximately 15 of the 150 insulation manufacturers in existence introduce one new product each year. Their total annual testing burden is therefore approximately 30 hours.
Staff further estimates that most manufacturers require an average of approximately 20 hours per year regarding third-party disclosure requirements in advertising and other promotional materials. Only the five or six largest manufacturers require additional time, approximately 80 hours each. Thus, the annual third-party disclosure burden for manufacturers is approximately 3,360 hours [(144 manufacturers × 20 hours) + (6 manufacturers × 80 hours)].
While the Rule imposes recordkeeping requirements, most manufacturers and their testing laboratories keep their testing-related records in the ordinary course of business. Staff estimates that no more than one additional hour per year per manufacturer is necessary to comply with this requirement, for an annual recordkeeping burden of approximately 150 hours (150 manufacturers × 1 hour).
Installers are required to show the manufacturers' insulation fact sheet to retail consumers before purchase. They must also disclose information in contracts or receipts concerning the R-value and the amount of insulation to install. Staff estimates that two minutes per sales transaction is sufficient to comply with these requirements. Approximately 2,000,000 retrofit insulations (an industry source's estimate) are installed by approximately 1,615 installers per year, and, thus, the related annual burden total is approximately 66,667 hours (2,000,000 sales transactions × 2 minutes). Staff anticipates that one hour per year per installer is sufficient to cover required disclosures in advertisements and other promotional materials. Thus, the burden for this requirement is approximately 1,615 hours per year. In addition, installers must keep records that
New home sellers must make contract disclosures concerning the type, thickness, and R-value of the insulation they install in each part of a new home. Staff estimates that no more than 30 seconds per sales transaction is required to comply with this requirement, for a total annual burden of approximately 10,750 hours (an estimated 1,290,000 new home sales per year
The Rule requires that the approximately 25,000 retailers who sell home insulation make fact sheets available to consumers before purchase. This can be accomplished by, for example, placing copies in a display rack or keeping copies in a binder on a service desk with an appropriate notice. Replenishing or replacing fact sheets should require no more than approximately one hour per year per retailer, for a total of 25,000 annual hours, industry-wide.
The Rule also requires specific disclosures in advertisements or other promotional materials to ensure that the claims are fair and not deceptive. This burden is very minimal because retailers typically use advertising copy provided by the insulation manufacturer, and even when retailers prepare their own advertising copy, the Rule provides some of the language to be used. Accordingly, approximately one hour per year per retailer should suffice to meet this requirement, for a total annual burden of approximately 25,000 hours.
Retailers who make energy savings claims in advertisements or other promotional materials must keep records that indicate the substantiation they are relying upon. Because few retailers make these types of promotional claims and because the Rule permits retailers to rely on the insulation manufacturer's substantiation data for any claims that are made, the additional recordkeeping burden is de minimis. The time calculated for disclosures, above, would be more than adequate to cover any burden imposed by this recordkeeping requirement.
To summarize, staff estimates that the Rule imposes a total of 132,707 burden hours, as follows: 150 recordkeeping and 3,390 testing and disclosure hours for manufacturers; 135 recordkeeping and 68,282 disclosure hours for installers; 10,750 disclosure hours for new home sellers; and 50,000 disclosure hours for retailers. The estimated total burden is approximately 132,707 burden hours.
The total annual labor cost for the Rule's information collection requirements is approximately $2,732,510, derived as follows: approximately $896 for testing, based on 30 hours for manufacturers (30 hours × $29.87 per hour for skilled technical personnel); $4,742 for manufacturers' and installers' compliance with the Rule's recordkeeping requirements, based on 285 hours (285 hours × $16.64 per hour for clerical personnel); $55,910 for manufacturers' compliance with third-party disclosure requirements, based on 3,360 hours (3,360 hours × $16.64 per hour for clerical personnel); and $2,670,962 for disclosure compliance by installers, new home sellers, and retailers (129,032 hours × $20.70 per hour for sales persons).
There are no significant current capital or other non-labor costs associated with this Rule. Because the Rule has been in effect since 1980, members of the industry are familiar with its requirements and already have in place the equipment for conducting tests and storing records. New products are introduced infrequently. Because the required disclosures are placed on packaging or on the product itself, the Rule's additional disclosure requirements do not cause industry members to incur any significant additional non-labor associated costs.
Pursuant to Section 3506(c)(2)(A) of the PRA, the FTC invites comments on: (1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of maintaining records and providing disclosures to consumers. All comments must be received on or before December 28, 2020.
You can file a comment online or on paper. For the FTC to consider your comment, we must receive it on or before December 28, 2020. Write “R-value Rule; PRA Comment: FTC File No. P072108” on your comment. Your comment—including your name and your state—will be placed on the public record of this proceeding, including the
Due to the public health emergency in response to the COVID-19 outbreak and the agency's heightened security screening, postal mail addressed to the Commission will be subject to delay. We encourage you to submit your comments online through the
If you prefer to file your comment on paper, write “R-value Rule; PRA Comment: FTC File No. P072108” on your comment and on the envelope, and mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex J), Washington, DC 20580; or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex J), Washington, DC 20024. If possible, submit your paper comment to the Commission by courier or overnight service.
Because your comment will become publicly available at
Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled “Confidential,” and must comply with FTC Rule 4.9(c). In particular, the written request for confidential treatment that accompanies the comment must include the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record.
The FTC Act and other laws that the Commission administers permit the collection of public comments to consider and use in this proceeding, as appropriate. The Commission will consider all timely and responsive public comments that it receives on or before December 28, 2020. For information on the Commission's privacy policy, including routine uses permitted by the Privacy Act, see
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice of a modified system of records.
In accordance with the requirements of the Privacy Act of 1974, as amended, the Department of Health and Human Services (HHS) is modifying a system of records maintained by the Centers for Disease Control and Prevention (CDC), 09-20-0170, National Select Agent Registry (NSAR)/Select Agent Transfer and Entity Registration Information System (SATERIS), HHS/CDC/COTPER. SATERIS is a national database registry containing the name of and location information about individuals possessing, using, or transferring select agents and toxins and characterization information about the agents and toxins, as required by the Public Health Security and Bioterrorism Preparedness and Response Act of 2002. HHS/CDC is changing the name of the system of records to “Electronic Federal Select Agent Program Portal (eFSAP Portal)” and making other updates, some of which result from an information technology (IT) system upgrade.
The modified system of records is applicable October 27, 2020, subject to a 30-day period in which to comment on the routine uses. Written comments must be received on or before November 27, 2020.
You may submit comments, identified by Docket No. CDC-2020-0089 by any of the following methods:
•
•
General questions about the modified system of records may be submitted to Beverly Walker, Chief Privacy Officer, CDC Privacy Unit, CyberSecurity Program Office (CSPO), Centers for Disease Control and Prevention, 4770 Buford Hwy, Mailstop S101, Atlanta, GA 30341, (770) 488-8524.
HHS/CDC and the U.S. Department of Agriculture, Animal and Plant Health Inspection Service (USDA/APHIS) jointly manage the Federal Select Agent Program (FSAP). FSAP oversees the possession, use, and transfer of biological select agents and toxins (BSAT), as outlined in the select agent regulations (42 CFR part 73, 9 CFR part 121, and 7 CFR part 331). BSAT have the potential to pose a severe threat to public, animal or plant health or to animal or plant products.
BSAT are divided into four categories based on whether an agent causes disease in humans, animals, plants, or a combination of humans and animals. HHS/CDC regulates the possession, use, and transfer of BSAT that have the potential to pose a severe threat to public health and safety. USDA/APHIS regulates the possession, use, and transfer of BSAT that pose a severe threat to animal or plant health or products. HHS/CDC and USDA/APHIS regulate overlapping BSAT that have the potential to pose a severe threat to both public health and safety and to animal health or products.
The information that FSAP collects in order to track possession, use, and transfer of BSAT includes: Registration records about a registered entity or individual, identifying BSAT at each of the registrant's locations or facilities and the individuals approved for access to BSAT at each location or facility; laboratory biosafety and security information for BSAT; information about transfers of BSAT; identification and final disposition of any BSAT contained in a specimen presented for diagnosis, verification, or proficiency testing; observations from the inspections of each registered individual or entity; and reports of any theft, loss, or release of BSAT.
The IT system used by FSAP to track possession, use, and transfer of BSAT has been upgraded to allow the regulated community to report required information or make requests to FSAP electronically, via a single web portal known as the eFSAP portal. The eFSAP portal is a single web-based information management system shared by HHS/CDC and USDA/APHIS.
As upgraded, the IT system will continue to utilize a secure database environment and to contain the same information that was included in SATERIS. Allowing electronic submissions from the regulated community will enable the regulated community to interact with FSAP more
HHS/CDC has made the following modifications to the system of records:
• Changed the name of the system of records to Electronic Federal Select Agent Program Portal (eFSAP Portal).
• Updated the System Location and System Manager information.
• Updated the Authority section to add “Subtitle A, Title II” and “42 U.S.C. 262a” before and after “Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (Pub. L. 107-188),” and to remove “The Agricultural Bioterrorism Protection Act of 2002” which authorizes maintenance of related USDA/APHIS records but not the HHS/CDC records covered in this system of records.
• Shortened and simplified the Purpose description.
• Revised the Categories of Individuals section by adding individual or sole proprietor applicants/registrants.
• Reorganized and expanded the Categories of Records section to list each category of record with a description or list of data elements specific to that category.
• Expanded the Record Source Categories section to include all applicable sources.
• Added five new routine uses.
○ New routine use 1 authorizes disclosures to USDA to provide comprehensive and effective oversight of BSAT, compliance with select agent regulations, and administration of FSAP.
○ New routine use 4 authorizes disclosures to agricultural authorities for the purpose of dealing more effectively with outbreaks of animal and plant diseases or other conditions of agricultural significance.
○ New routine use 8 authorizes disclosures of records that indicate a violation, or possible violation, of law to relevant law enforcement authorities. This routine use is necessary to cover instances in which the law enforcement agency is unaware of the violation or potential violation, so is unable to initiate a request for the records under subsection (b)(7) of the Privacy Act (5 U.S.C. 552a(b)(7)).
○ New routine use 9 authorizes disclosures to relevant government agencies and jurisdictions for the purpose of investigating potential fraud, waste, and abuse.
○ New routine use 10 authorizes disclosures to the National Archives and Records Administration (NARA) for records management inspections.
• Revised four routine uses.
○ Routine use 2, which authorizes disclosures to FSAP contractors, no longer mentions certain duties a contractor would perform but describes them as “the functions listed in the Purpose section.”
○ Routine use 3 now authorizes disclosures to “federal law enforcement authorities” (in addition to public health and cooperating medical authorities, previously the only authorities identified) for the purpose of dealing more effectively with “emergency events involving BSAT that may impact public health and safety” (rather than “outbreaks and conditions of public health significance”).
○ Routine use 5, which authorizes disclosures to assist federal agencies in determining an individual's trustworthiness to access biological select agents and toxins (BSAT), now uses the broader term “BSAT” instead of “select agents” and omits, as unnecessary, the word “recipient” before “federal agencies.”
○ Routine use 6 now permits disclosures not only to the Department of Justice but also to “a court or other adjudicative body,” for use not only in litigation but also in “other proceedings,” when relevant and necessary to the proceedings.
• Changed the description in the Storage section to state that the oldest inactive records are in paper form and that all other records are stored electronically, instead of describing particular storage media (“file folders, computer tapes and disks, CD-ROMs”).
• Updated the Retention section to identify the current disposition schedule, DAA-0442-2019-001, instead of the previous schedule cited, N1-442-06-01; and to move descriptions of secure destruction methods to the Safeguards section.
• Updated the Safeguards section to refer to current governing statutes, policies and guidelines, including the description of secure destruction methods, and to include additional safeguards (
• Updated the Access, Amendment, and Notification Procedures sections to allow a requester to provide a written certification to verify the requester's identity, and to state that an accounting of disclosures may also be requested.
Because some of these changes are significant, HHS provided advance notice of the modified system of records to the Office of Management and Budget and Congress as required by 5 U.S.C. 552a(r) and OMB Circular A-108.
Electronic Federal Select Agent Program Portal (eFSAP Portal), 09-20-0170.
Unclassified.
The address of the HHS component responsible for this system of records is: Division of Select Agents and Toxins (DSAT), Center for Preparedness and Response, Centers for Disease Control and Prevention (CDC), 1600 Clifton Rd. NE, Atlanta, GA 30329.
The System Manager is: Director, Division of Select Agents and Toxins (DSAT), Center for Preparedness and Response, CDC, 1600 Clifton Rd. NE, Atlanta, GA 30329, (404) 718-2000,
Subtitle A, Title II, Public Health Security and Bioterrorism Preparedness and Response Act of 2002, Public Law 107-188 (42 U.S.C. 262a).
The purpose of this system of records is to cover records about individuals, retrieved by personal identifier, that HHS/CDC uses in managing the Federal Select Agent Program (FSAP) to track the possession, use, and transfer of biological select agents and toxins (BSAT), in order to ensure that BSAT are managed appropriately to prevent potential threats to public health.
The records are about these categories of individuals:
• Individuals who in an individual (
• Individuals designated as an entity applicant's Responsible Official and Alternate Responsible Official.
• Other individuals identified in an application as requesting or needing
The system of records includes these categories of records, some of which are forms approved by the Office of Management and Budget (OMB):
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
The records in the system of records are obtained from the individuals and entities applying for or receiving a certificate of registration from FSAP to possess, use, and transfer BSAT or permit individuals to access BSAT; or from FSAP, or from BRAG.
In addition to other disclosures authorized directly in the Privacy Act at 5 U.S.C. 552a(b)(1) and (2) and (b)(4) through (11), HHS may disclose records about a subject individual from this system of records to parties outside HHS as described in these routine uses, without the individual's prior written consent.
1. Records may be disclosed to USDA to provide comprehensive and effective oversight of BSAT, compliance with select agent regulations, and administration of FSAP.
2. Records may be disclosed to contractors engaged to assist FSAP with performing the functions listed in the Purpose section above. Contractors are required to maintain Privacy Act safeguards with respect to such records.
3. Records may be disclosed to state health departments and other public health, cooperating medical or federal law enforcement authorities to deal more effectively with emergency events involving BSAT that may impact public health and safety.
4. Records may be disclosed to state agriculture departments and other agriculture cooperating authorities to deal more effectively with outbreaks of animal and plant diseases or other conditions of agriculture significance.
5. Personal information from this system of records may be disclosed as a routine use, to assist in making a determination concerning an individual's trustworthiness to access BSAT, to any federal or state agency where the purpose in making the disclosure is to prevent access to BSAT for use in domestic or international terrorism or for any criminal purpose; or to any federal or state agency to protect the public, animal, and plant health and public safety with regard to the possession, use, or transfer of BSAT.
6. Information may be disclosed to the Department of Justice (DOJ) or to a court or other adjudicative body in litigation or other proceedings when:
a. HHS or any of its components thereof, or
b. any employee of HHS acting in the employee's official capacity, or
c. any employee of HHS acting in the employee's individual capacity where the DOJ or HHS has agreed to represent the employee, or
d. the United States Government, is a party to the proceeding or has an interest in such proceeding and, by careful review, HHS determines that the records are both relevant and necessary to the proceeding.
7. Disclosure may be made to a congressional office from the record of an individual in response to a verified inquiry from the congressional office made at the written request of that individual.
8. Where a record, either alone or in conjunction with other information, indicates a violation or potential violation of law, whether civil, criminal, or regulatory in nature, and whether arising by general statute or by regulation, rule, or order issued pursuant thereto, the relevant records in the system of records may be referred, as a routine use, to the agency concerned, whether federal, state, Tribal, local, territorial, or foreign, charged with the responsibility of investigating or prosecuting such violation or charged with enforcing or implementing the statute, rule, regulation, or order issued pursuant thereto.
9. For the purpose of combatting fraud, waste, and abuse, records may be disclosed to a relevant federal agency or instrumentality of any governmental jurisdiction within or under the control of the United States for the purpose of investigating potential fraud, waste, or abuse.
10. Records may be disclosed to representatives of the National Archives and Records Administration (NARA) in records management inspections conducted pursuant to 44 U.S.C. 2904 and 2906.
11. Records may be disclosed to appropriate agencies, entities, and persons when (1) HHS suspects or has confirmed that there has been a breach of the system of records, (2) HHS has determined that as a result of the suspected or confirmed breach there is a risk of harm to individuals, HHS (including its information systems, programs, and operations), the federal government, or national security, and (3) the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with HHS's efforts to respond to the suspected or confirmed breach or to prevent, minimize, or remedy such harm.
12. Records may be disclosed to another federal agency or federal entity, when HHS determines that information from this system of records is reasonably necessary to assist the recipient agency or entity in (1) responding to a suspected or confirmed breach or (2) preventing, minimizing, or remedying the risk of harm to individuals, the recipient agency or entity (including its information systems, programs, and operations), the federal government, or national security, resulting from a suspected or confirmed breach.
The oldest inactive records are in paper form; all other records are stored electronically.
The records are retrieved by the subject individual's name or DOJ identification number.
Records are retained for 10 years, or until such time as the records are no longer needed for litigation or other records purposes and are then disposed of in accordance with FSAP disposition schedule DAA-0442-2019-0001. Records are transferred to a federal records center for storage when no longer in active use. Final disposition of records stored offsite at the federal records center is accomplished by a controlled process requesting final disposition approval from the HHS record owner prior to any destruction to ensure the records are not needed for litigation or other records purposes.
Safeguards conform to the HHS Information Security and Privacy Program,
• Security measures are implemented on government computers to control unauthorized access to the system. Attempts to gain access by unauthorized individuals are automatically recorded and reviewed by FSAP on a regular basis. Individuals who have routine access to these records are limited to staff (FTEs and contractors having security clearances at T3 (Non-Critical Sensitive positions requiring Secret clearance) or T4 (Non-Sensitive High Risk (Public Trust)) levels) who have responsibility for conducting regulatory oversight.
• Protection for computerized records includes programmed verification of valid user identification code and password prior to logging on to the system; mandatory password changes, limited number of log-in attempts, virus protection, encryption, firewalls, and intrusion detection systems, and user rights/file attribute restrictions. Password protection imposes username and password log-in requirements to prevent unauthorized access. Each username is assigned limited access rights to files and directories at varying levels to control file sharing. There are routine daily backup procedures, and backup files are securely stored off-site.
• Knowledge of individual tape passwords is required to access backups, and access to the system is limited to users obtaining prior supervisory approval. To avoid inadvertent data disclosure, a special additional procedure is performed to ensure that all Privacy Act data are removed from computer hard drives. Additional safeguards may also be built into the program by the system analyst as warranted by the sensitivity of the data set.
• FTEs and contractor employees who maintain records are instructed in specific procedures to protect the security of records and are to check with the system manager prior to making disclosure of data. When individually identifiable data are used in a room, admittance at either federal or contractor sites is restricted to specifically authorized personnel.
• Appropriate Privacy Act provisions and breach notification provisions are included in applicable contracts, and the CDC Project Director, contract officers, and project officers oversee compliance with these requirements. Upon completion of the contract, all data will be either returned to federal government or destroyed, as specified by the contract that includes breach notifications.
• Records that are eligible for destruction are disposed of using destruction methods prescribed by NIST SP 800-88. Hard copy records are placed in a locked container or designated secure storage area while awaiting destruction. Records are destroyed in a manner that precludes its reconstruction, such as secured cross shredding. Utilizing the HHS Security Rule Guidance Material found at
• Paper records are maintained in locked cabinets in restricted areas to which access is controlled by an electronic cardkey system and is limited to staff who have responsibility for conducting regulatory oversight.
• Electronic data files are stored in a restricted access location. The computer room is protected by an automatic sprinkler system and numerous automatic sensors (
An individual seeking access to records about that individual in this system of records must submit a written access request to the System Manager, identified in the “System Manager” section of this SORN. The request must contain the requester's full name, address, and signature, and DOJ identification number if known. To verify the requester's identity, the signature must be notarized or the request must include the requester's written certification that the requester is the individual who the requester claims to be and that the requester understands that the knowing and willful request for or acquisition of a record pertaining to an individual under false pretenses is a criminal offense subject to a fine of up to $5,000. An accounting of disclosures that have been made of the records, if any, may also be requested.
An individual seeking to amend a record about that individual in this system of records must submit an amendment request to the System Manager identified in the “System Manager” section of this SORN, containing the same information required for an access request. The request must include verification of the requester's identity in the same manner required for an access request; must reasonably identify the record and specify the information contested, the corrective action sought, and the reasons for requesting the correction; and should include supporting information to show how the record is inaccurate, incomplete, untimely, or irrelevant.
An individual who wishes to know if this system of records contains records about that individual should submit a notification request to the System Manager identified in the “System Manager” section of this SORN. The request must contain the same information required for an access request and must include verification of the requester's identity in the same manner required for an access request.
None.
72 FR 35993 (July 2, 2007); 76 FR 4483 (Jan. 25, 2011), 83 FR 6591 (Feb. 14, 2018).
Food and Drug Administration, HHS.
Notice of availability; withdrawal.
The Food and Drug Administration (FDA or the Agency) is announcing the availability of a final standard memorandum of understanding (MOU) entitled “Memorandum of Understanding Addressing Certain Distributions of Compounded Human Drug Products Between the [insert State Board of Pharmacy or Other Appropriate State Agency] and the U.S. Food and Drug Administration” (final standard MOU). The final standard MOU describes the responsibilities of a State Board of Pharmacy or other appropriate State agency that chooses to sign the MOU in investigating and responding to complaints related to drug products compounded in such State and distributed outside such State and in addressing the interstate distribution of inordinate amounts of compounded human drug products.
The announcement of the MOU is published in the
Submit electronic comments on the final standard MOU to Docket No. FDA-2015-N-0030. Submit written comments on the final standard MOU to the Dockets Management Staff (HFA-305), Food and Drug Administration, 5630 Fishers Lane, Rm.
Alexandria Fujisaki, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 51, Rm. 5169, Silver Spring, MD 20993-0002, 240-402-4078.
Section 503A of the Federal Food, Drug, and Cosmetic Act (FD&C Act) (21 U.S.C. 353a) describes the conditions that must be satisfied for drug products compounded by a licensed pharmacist or licensed physician to be exempt from the following sections of the FD&C Act: (1) Section 501(a)(2)(B) (21 U.S.C. 351(a)(2)(B)) (concerning current good manufacturing practice (CGMP) requirements), (2) section 502(f)(1) (21 U.S.C. 352(f)(1)) (concerning the labeling of drugs with adequate directions for use), and (3) section 505 (21 U.S.C. 355) (concerning the approval of drugs under new drug applications or abbreviated new drug applications).
One of the conditions to qualify for the exemptions listed in section 503A of the FD&C Act is that (1) the drug product is compounded in a State that has entered into an MOU with FDA that addresses the distribution of inordinate amounts of compounded drug products interstate and provides for appropriate investigation by a State agency of complaints relating to drug products distributed outside such State; or (2) if the drug product is compounded in a State that has not entered into such an MOU, the licensed pharmacist, pharmacy, or physician does not distribute, or cause to be distributed, compounded drug products out of the State in which they are compounded in quantities that exceed 5 percent of the total prescription orders dispensed or distributed by such pharmacy or physician (5 percent limit) (see section 503A(b)(3)(B)(i) and (ii) of the FD&C Act). Another condition to qualify for the exemptions listed in section 503A of the FD&C Act is that the drug is compounded for an identified individual patient based on the receipt of a valid prescription order or a notation, approved by the prescribing practitioner, on the prescription order that a compounded product is necessary for the identified patient (section 503A(a) of the FD&C Act). This MOU does not alter this condition.
Section 503A(b)(3)(B) of the FD&C Act directs FDA to develop, in consultation with the National Association of Boards of Pharmacy (NABP), a standard MOU for use by the States in complying with section 503A(b)(3)(B)(i).
FDA is withdrawing the revised draft standard MOU entitled “Memorandum of Understanding Addressing Certain Distributions of Compounded Drug Products Between the State of [insert State] and the U.S. Food and Drug Administration,” which was issued in September 2018 (2018 revised draft standard MOU). The 2018 revised draft standard MOU is superseded by the final standard MOU.
In the
In consultation with NABP, FDA has developed a final standard MOU. FDA considered the comments submitted on the 2015 draft standard MOU and 2018 revised draft standard MOU, as well as comments on the MOU provisions it received in connection with a draft guidance on section 503A of the FD&C Act entitled “Pharmacy Compounding of Human Drug Products Under Section 503A of the Federal Food, Drug, and Cosmetic Act” (2013 draft 503A guidance) (see 78 FR 72901, December 4, 2013). Below, FDA has summarized and discussed key provisions of the final standard MOU and, where appropriate, summarized changes that the Agency made in the final standard MOU. Drug products intended for veterinary use, repackaged drug products, biological products subject to licensure through a biologics license application under section 351 of the Public Health Service Act (42 U.S.C. 262), and drug products compounded by outsourcing facilities under section 503B of the FD&C Act are not the subject of the final standard MOU.
The final standard MOU provides that a State Board of Pharmacy or other appropriate State agency that enters into the MOU agrees to:
• Investigate complaints of adverse drug experiences and product quality issues relating to human drug products compounded at a pharmacy in the State and distributed outside the State. Investigations performed by the State Board of Pharmacy or other appropriate State agency under this MOU will include taking steps to assess whether there is a public health risk associated with the compounded drug product and whether such risk is adequately contained. Investigations will be performed pursuant to the State Board of Pharmacy's or other appropriate State agency's established investigatory policies and procedures, including those related to prioritizing complaints, provided they are not in conflict with the terms of the MOU;
• If the complaint is substantiated, take action that the State Board of Pharmacy or other appropriate State agency considers to be appropriate and warranted, in accordance with and as permitted by State law, to ensure that the relevant pharmacy investigates the root cause of the problem that is the subject of the complaint and undertakes sufficient corrective action to address any identified public health risk relating to the problem, including the risk that future similar problems may occur;
• Maintain records of the complaints it receives regarding adverse drug experiences or product quality issues relating to human drug products compounded at a pharmacy, the investigation of each complaint, and any response to or action taken as a result of a complaint, beginning when the State Board of Pharmacy or other appropriate State agency receives notice of the complaint. The State Board of Pharmacy or other appropriate State agency will maintain these records for at least 3 years. The 3-year period begins on the date of final action on a complaint, or the date of a decision that the complaint requires no action.
• Notify FDA by submission to an Information Sharing Network or by email to
• Share with FDA, as permitted by State law, the results of the investigation of a complaint after the State Board of Pharmacy or other appropriate State agency concludes its investigation of a complaint assessed to involve a serious adverse drug experience or serious product quality issue. This information includes the following: The State Board of Pharmacy's or other appropriate State agency's assessment of whether the complaint was substantiated, if available; and a description and the date of any actions the State Board of Pharmacy or other appropriate State agency has taken to address the complaint;
• Notify the appropriate regulator of physicians within the State of complaints of which the State Board of Pharmacy or other appropriate State agency receives that involve an adverse drug experience or product quality issue relating to human drug products compounded by a physician and distributed outside the State. The State Board of Pharmacy or other appropriate State agency will also notify FDA by submission to an Information Sharing Network or by email to
The types of complaints of compounded drug products that should be investigated include any adverse drug experience and product quality issues. Even non-serious adverse drug experiences and product quality issues can be indicative of problems at a compounding facility that could result in product quality defects leading to serious adverse drug experiences if not corrected. For example, inflammation around the site of an injection can indicate drug product contamination from inadequate sterile practices at the compounding pharmacy. If the pharmacy or physician has inadequate sterile practices, other more serious contamination could result in serious adverse drug experiences.
The final standard MOU does not include specific directions to the State Boards of Pharmacy or other appropriate State agencies relating to how to conduct their investigation of complaints. Rather, as recommended by comments submitted to FDA previously, the details of such investigations are left to the State Board of Pharmacy's or other appropriate State agency's discretion. For example, a State Board of Pharmacy or other appropriate State agency may review an incoming complaint describing an adverse drug experience and determine that such a complaint does not warrant further investigation. In other cases, a State Board of Pharmacy or other appropriate State agency may determine that an incoming complaint contains insufficient information and investigate further to determine appropriate action.
The State Board of Pharmacy or other appropriate State agency signing the final standard MOU would agree to notify FDA about certain complaints and provide FDA with certain information about the complaints so FDA could investigate the complaints itself, or take other appropriate action. The 2018 revised draft standard MOU provided that notification would occur as soon as possible, but no later than 3 business days of receipt of the complaint. The final standard MOU provides that notification will occur as soon as possible, but no later than 5 business days after the State Board of Pharmacy or other appropriate State agency receives the complaint. This period will continue to facilitate early Federal/State collaboration on serious adverse drug experiences and serious product quality issues that have the potential to affect patients in multiple States, while providing for notification in a timeframe that is more feasible for the State Boards of Pharmacy or other appropriate State agencies. FDA increased the time for notifying FDA in the final standard MOU in response to comments expressing concern about having sufficient time to process complaints and notify FDA. We note that FDA has staff on call 24 hours a day to receive information in emergency situations.
Comments on the 2015 draft MOU expressed concern with certain provisions regarding States entering into the MOU and agreeing to take action not permitted by State law or implying that, after taking action, the State made a legal determination that a complaint had been resolved. The revised draft standard MOU clarified that the State should investigate and take action that the State considers to be appropriate with respect to the complaint in accordance with and as permitted by State law. FDA also clarified that, by signing the MOU, the State agrees to take steps to assess whether there is a public health risk associated with the compounded drug product and whether such risk is adequately contained rather than make definitive determinations of risk or confirm containment. The final standard MOU retains these revisions that addressed the concerns from comments on the 2015 draft.
For purposes of the final standard MOU, a pharmacy has distributed an inordinate amount of compounded human drug products interstate if the number of prescription orders for compounded human drug products that the pharmacy distributed interstate during any calendar year is greater than 50 percent of the sum of the number of prescription orders for compounded human drug products that the pharmacy sent out of (or caused to be sent out of)
The final standard MOU provides that State Boards of Pharmacy or other appropriate State agencies that enter into the MOU will agree to:
• On an annual basis, identify, using surveys, reviews of records during inspections, data submitted to an Information Sharing Network, or other mechanisms available to the State Board of Pharmacy or other appropriate State agency, pharmacies that distribute inordinate amounts of compounded human drug products interstate.
• For pharmacies that have been identified as distributing inordinate amounts of compounded human drug products interstate during any calendar year, the State Board of Pharmacy or other appropriate State agency will identify, using data submitted to the Information Sharing Network or other available mechanisms, during that same calendar year:
○ The total number of prescription orders for sterile compounded human drug products distributed interstate;
○ The names of States in which the pharmacy is licensed;
○ The names of States into which the pharmacy distributed compounded human drug products; and,
○ Whether the State inspected for and found during its most recent inspection that the pharmacy distributed compounded human drug products without valid prescription orders for individually identified patients.
• Within 30 business days of identifying a pharmacy that has distributed inordinate amounts of compounded human drug products interstate, the State Board of Pharmacy or other appropriate State agency will notify FDA, by submission to an Information Sharing Network or by email to
○ Name and address of the pharmacy that distributed inordinate amounts of compounded human drug products interstate;
○ The number of prescription orders for compounded human drug products that the pharmacy sent out of (or caused to be sent out of) the facility in which the drug products were compounded during that same calendar year;
○ The number of prescription orders for compounded human drug products that were dispensed (
○ Total number of prescription orders for compounded human drug products distributed interstate during that same calendar year;
○ Total number of prescription orders for sterile compounded human drug products distributed interstate during that same calendar year;
○ The names of States in which the pharmacy is licensed as well as the names of States into which the pharmacy distributed compounded human drug products during that same calendar year; and
○ Whether the State Board of Pharmacy or other appropriate State agency inspected for and found during its most recent inspection that the pharmacy distributed compounded human drug products without valid prescriptions for individually identified patients during that same calendar year.
• If the State Board of Pharmacy or other appropriate State agency becomes aware of a physician who is distributing any amount of compounded human drug products interstate, it will notify the appropriate regulator of physicians within the State. The State Board of Pharmacy or other appropriate State agency will, within 30 days of identifying a physician who is distributing any amount of compounded human drug products interstate, also notify FDA by submission to an Information Sharing Network or by email to
Section 503A of the FD&C Act reflects Congress' recognition that compounding may be appropriate when it is based on receiving a valid prescription order or notation approved by the prescribing practitioner for an identified individual patient. However, drug products compounded under section 503A are not required to demonstrate that they are safe or effective, have labeling that bears adequate directions for use, or
In particular, Congress did not intend for compounders operating under these statutory provisions to grow into conventional manufacturing operations making unapproved drugs, operating a substantial proportion of their business interstate, without adequate oversight. Although other provisions of the FD&C Act (
Therefore, as a baseline measure, section 503A(b)(3)(B)(ii) of the FD&C Act limits the distribution of compounded drug products outside of the State in which they are compounded to 5 percent of the total prescription orders dispensed or distributed by a licensed pharmacist, pharmacy, or physician. It then directs FDA, in consultation with NABP, to develop a standard MOU that addresses the distribution of inordinate amounts of compounded drug products interstate and provides for appropriate investigation by a State agency of complaints relating to drug products compounded in and distributed outside such State. Development of the standard MOU involves FDA describing what inordinate amounts means and providing a mechanism for addressing distribution of inordinate amounts of compounded human drug products interstate, as long as the State agrees to appropriately investigate complaints relating to drug products compounded in and distributed out of the State. The 5 percent limitation in section 503A(b)(3)(B)(ii) does not apply to drug products compounded in a State that has entered into the standard MOU under section 503A(b)(3)(B)(i).
In the 2015 draft standard MOU, FDA proposed that distribution interstate up to a 30 percent limit would not be inordinate, and that States entering into the MOU would agree to take action regarding pharmacists, pharmacies, or physicians that distribute inordinate amounts of compounded drug products interstate. FDA received a number of comments indicating that certain pharmacies, such as pharmacies located near State borders and home infusion pharmacies, distribute more than 30 percent of their compounded human drug products to patients interstate because, for example, the patients are located in another nearby State, or because few pharmacies compound a particular drug product to treat an uncommon condition for patients dispersed throughout the country. The comments noted that the proposed definition of inordinate amounts and the proposed provision in which States agree to take action could prevent such pharmacies from fulfilling patients' medical needs for the drug products that they supply. Other comments expressed concern about instances in which pharmacies are located near a State border and distribute compounded drug products to the other side of that border. FDA also received general comments questioning the Agency's basis for the 30 percent limit and indicating that it was too low. Some comments suggested that FDA increase the limit, including a suggestion to increase it to 50 percent.
The 2018 revised draft standard MOU addressed these comments in two respects. First, it removed the provision in the 2015 draft standard MOU that States agree to take action with respect to the distribution of inordinate amounts of compounded human drug products interstate. Second, it changed what is considered “inordinate amounts” from a 30 percent limit to a 50 percent threshold. In the final standard MOU, the States are not agreeing to take action with respect to distribution of inordinate amounts of compounded human drug products interstate, but, instead, to notify FDA of pharmacies that have distributed an inordinate amount of compounded human drug products interstate. The Agency does not intend to take action against a pharmacy located in a State that has entered into the MOU solely because the pharmacy has exceeded the threshold for inordinate amounts. Rather, the State Board of Pharmacy or other appropriate State agency entering into the final standard MOU agrees to collect further information on pharmacies that have distributed inordinate amounts interstate and provide this information to FDA to help inform Agency inspectional priorities. The State Board of Pharmacy or other appropriate State agency also agrees to notify FDA and the appropriate state regulator of physicians if it becomes aware of physicians distributing any amount of compounded human drug products interstate.
We note that States generally have day-to-day oversight responsibilities over State-licensed pharmacies, pharmacists, and physicians. In general, FDA considers a State-licensed pharmacy or physician to be primarily overseen by the State, which is responsible both for regulation of the compounder and protection of its citizens who receive the compounded drug products. However, as discussed above, if a substantial proportion of a compounder's drug products is distributed outside a State's borders, adequate regulation of those drugs poses significant challenges to State regulators. In such cases, although State oversight continues to be critical, additional oversight by FDA may afford an important public health benefit.
As stated above, the final standard MOU uses 50 percent as the threshold beyond which the amount of compounded human drug products distributed interstate by a pharmacy would be considered inordinate. The 50 percent threshold is the threshold that, with regard to pharmacies, triggers an information identification and reporting obligation once it is reached. The Agency believes that more than 50 percent is an appropriate measure of “inordinate amounts” because it marks the point at which pharmacies are distributing the majority of their compounded human drug products interstate, and the regulatory challenges associated with interstate distributors discussed above become more pronounced. At this point, the risk posed by the distribution practices of the compounder may weigh in favor of additional Federal oversight in addition to State oversight.
FDA recognizes that, in some cases, pharmacies may distribute more than 50 percent of a small quantity of compounded human drug products to contiguous States. Although such pharmacies have exceeded the inordinate amounts threshold in the final standard MOU, FDA would
The calculation of inordinate amounts in the final standard MOU, with clarifying changes to the language, is the same as the calculation proposed in the 2018 revised draft standard MOU, with the exception of a change in the timeframe used in the calculation from 1 month to 1 year and removing drugs compounded by physicians from the calculation made by the State Board of Pharmacy or other appropriate State agency. The 2015 draft standard MOU provided that a compounder is considered to have distributed an inordinate amount of compounded drug products interstate if the number of units of compounded drug products distributed interstate during any calendar month is equal to or greater than 30 percent of the number of units of compounded and non-compounded drug products distributed or dispensed both intrastate and interstate by such compounder during that calendar month. FDA received comments noting that because the calculation includes both compounded and non-compounded drug products, in many cases, a substantial factor in whether a compounder has distributed an inordinate amount of compounded drug products interstate is whether the compounder offers non-compounded drug products. For example, under that policy, many specialty compounding pharmacies that engage in distribution of compounded human drug products interstate and only distribute compounded drug products would be able to distribute fewer compounded drug products interstate before reaching an inordinate amount than a pharmacy that also fills prescriptions for non-compounded drug products, even if both pharmacies produced the same amount of compounded drug products. After considering the public comments, FDA does not believe that including non-compounded drug products within the calculation of inordinate amounts would help address the public health concerns associated with sending compounded human drug products interstate that Congress sought to address in section 503A(b)(3)(B) of the FD&C Act. Non-compounded drug products were excluded from the calculation of inordinate amounts in the 2018 revised draft MOU. This final standard MOU maintains this exclusion.
FDA received comments on the 2018 revised draft MOU expressing concern about calculating inordinate amounts by calendar month. After considering these comments and recognizing the possibility for significant monthly fluctuations, we have provided for annual calculation of inordinate amounts in the final standard MOU.
This 50 percent threshold does not function as a limit on the distribution of compounded human drug products interstate, but, instead, is a threshold for triggering information gathering about pharmacy distribution of compounded drugs by the State Board of Pharmacy or other appropriate State agency and provision to FDA. The information gathered will be considered by the Agency for the purpose of helping to inform its risk-based inspection priorities.
Appendix A retains the definitions of “adverse drug experience,” “serious adverse drug experience,” “product quality issue,” and “serious product quality issue” from the 2018 revised draft standard MOU.
To clarify the meaning of “distribution of inordinate amounts of compounded drug products interstate,” the proposed definition of “distribution” in the 2018 revised draft standard MOU has been omitted and “distribution of compounded human drug products interstate” and “inordinate amounts” are defined. “Distribution of compounded human drug products interstate” means that a pharmacy or physician has sent (or caused to be sent) a compounded drug product out of the state in which the drug was compounded. A pharmacy has distributed an “inordinate amount” of compounded human drug products interstate if the number of prescription orders for compounded human drug products that the pharmacy distributed interstate during any calendar year is greater than 50 percent of the sum of: (1) The number of prescription orders for compounded human drug products that the pharmacy sent out of (or caused to be sent out of) the facility in which the drug products were compounded during that same calendar year; plus (2) the number of prescription orders for compounded human drug products that were dispensed (
We received a number of comments on the 2015 draft standard MOU and the 2018 revised draft standard MOU stating that distributing and dispensing are mutually exclusive activities, such that if a drug product is distributed, it is not also dispensed, and vice versa. Some comments asserted, in particular, that a compounded drug product should not be considered to be “distributed” when it is provided pursuant to a prescription. Other stakeholders, however, agreed with the inclusion of drug products provided pursuant to a prescription within the definition of “distribution” and maintained that this interpretation was important to protect the public health.
After considering these comments and the public health objectives of section 503A(b)(3)(B) of the FD&C Act, FDA
FDA believes that in-person dispensing, where the transaction between the compounder and the patient is completed at the facility in which the drug product was compounded, is appropriately overseen, primarily, by the State outside the context of the MOU, regardless of whether the compounded drug product subsequently leaves the State. Such an intrastate, local transaction generally indicates a close connection among the patient, compounder, and prescriber. By contrast, transactions by mail often have a less direct nexus among the patient, compounder, and prescriber than in-person pick-ups and would be considered “distribution.”
Drugs dispensed in-person that are later taken out of State will not contribute to reaching the threshold for inordinate amounts under the final MOU. Nor will complaints associated with compounded drug products dispensed this way and subsequently taken out of State be subject to the complaint investigation provisions of the final MOU. FDA expects that, in practice, the State in which the initial transaction occurred would handle such complaints. The State may, in its discretion, notify FDA of the complaint.
FDA is not persuaded by comments urging the Agency to interpret “distribution” and “dispensing” to be entirely separate activities for purposes of section 503A(b)(3)(B) of the FD&C Act. These comments recommend using definitions for these terms used elsewhere in the FD&C Act and FDA regulations, and generally conclude that distribution does not include the transfer of a drug pursuant to a prescription.
The conditions in section 503A, including section 503A(b)(3)(B), must be interpreted consistent with the prescription requirement in section 503A(a) of the FD&C Act. If we were to interpret the word “distribution” to apply only if a drug is provided without a prescription, it would mean that drug products compounded under section 503A of the FD&C Act are excluded from regulation under the MOU and the 5 percent limit, because to qualify for the exemptions under section 503A, a compounder must obtain a valid prescription order for an individually identified patient. For the reasons stated previously in this document, we believe this would achieve the opposite of what Congress intended. A compounded drug product may be eligible for the exemptions under section 503A of the FD&C Act only if it is, among other things, “compounded for an identified individual patient based on the receipt of a valid prescription order or a notation, approved by the prescribing practitioner, on the prescription order that a compounded product is necessary for the identified patient.”
Nor is there anything to suggest that Congress understood “distributed” and “dispensed” to be mutually exclusive categories rather than overlapping categories for purposes of section 503A. Section 503A(b)(3)(B) of the FD&C Act does not define “distribution” to exclude dispensing, which Congress has done elsewhere when that was its intention.
The 2018 revised draft standard MOU proposed that “States” would be the signatories of the MOU. In the final standard MOU, FDA clarifies the State party to the agreement, which is described as the “State Board of Pharmacy or other appropriate State agency.” FDA received comments expressing concerns that the State entity signing the MOU (
It is FDA's understanding that physicians who compound drugs generally do so for their own patients, within their own professional practice, and provide them intrastate. FDA believes that, generally, physicians are not engaged in compounding that results in routine distribution of compounded drug products interstate.
Additionally, several comments advised that State Boards of Pharmacy do not oversee physician compounding and would not be able to agree to the provisions under the 2018 revised draft standard MOU with respect to oversight of physician compounding (collecting additional information to identify whether a physician compounder is distributing inordinate amounts of compounded drug products interstate, etc.). Accordingly, under the final standard MOU, State Boards of Pharmacy or other appropriate State agencies would agree to (1) notify FDA and the appropriate regulator of physicians within the State when they receive complaints about adverse drug experiences or product quality issues associated with a human drug product compounded by a physician and distributed outside the State; and (2) if they become aware of a physician distributing any amount of compounded human drug products interstate, notify FDA and the appropriate regulator of physicians within the State. The information provided to FDA will help inform Agency inspectional priorities with respect to physicians who compound human drug products and provide information to State regulators of physicians for appropriate action.
A number of comments on the 1999 draft standard MOU, the 2013 draft 503A guidance, the 2015 draft standard MOU, and the 2018 revised draft MOU suggested that FDA negotiate MOUs with individual States, rather than develop a standard MOU. Section 503A of the FD&C Act requires the Agency to develop a standard MOU for use by the States. Furthermore, it would be impractical to develop an individualized MOU with every State, and creating individualized MOUs would create a patchwork of regulation of distribution of compounded human drug products interstate by compounders seeking for their drug products to qualify for the exemptions under section 503A of the FD&C Act. This would be confusing to the healthcare community, as well as regulators.
Some comments on the 2013 draft 503A guidance, the 2015 draft standard MOU, and the 2018 revised draft standard MOU requested that we consider exempting certain drug products or types of compounding entities from the threshold in the MOU and the 5 percent limit. For example, some comments recommended that we exempt nonsterile products.
American consumers rely on the FDA drug approval process to ensure that medications have been evaluated for safety and effectiveness before they are marketed in the United States. Drugs made by compounders, including those made at outsourcing facilities, are not FDA-approved. This means that they have not undergone premarket review of safety, effectiveness, or manufacturing quality. Therefore, when an FDA-approved drug is commercially available, FDA recommends that practitioners prescribe the FDA-approved drug rather than a compounded drug product unless the prescribing practitioner has determined that a compounded product is necessary for the particular patient and would provide a significant difference for the patient as compared to the FDA-approved commercially available drug product.
In section 503A of the FD&C Act, Congress enacted several conditions to differentiate compounders from conventional manufacturers and provided that only if the compounders meet those conditions can they qualify for the exemptions from the drug approval requirements in section 505 of the FD&C Act. One of those conditions relates to limitations and other measures to address distribution of compounded drug products interstate, and FDA intends to enforce those provisions to differentiate compounding that qualifies for the exemptions from conventional manufacturing in the guise of compounding that does not and will apply the conditions to all types of drugs and all categories of compounding.
The final standard MOU provides that State Boards of Pharmacy or other appropriate State agencies will agree to notify FDA of a complaint relating to a compounded human drug product distributed outside the State involving a serious adverse drug experience or serious product quality issue and provide information about those experiences and issues. The final standard MOU also provides that State Boards of Pharmacy or other appropriate State agencies will notify FDA if they identify a pharmacy that has distributed inordinate amounts of compounded human drug products interstate. In addition, State Boards of Pharmacy or other appropriate State agencies will notify FDA and the appropriate regulator of physicians within the State if the State entity becomes aware of a physician who is distributing any amount of compounded human drug products interstate, or if the State entity receives a complaint involving an adverse experience or product quality issue relating to a human drug product compounded by a physician and distributed outside the State.
FDA has entered into a cooperative agreement with NABP to establish an information sharing network that is intended to, in part, facilitate State information reporting to FDA by State Boards of Pharmacy or other appropriate State agencies that enter into the MOU with FDA addressing distribution of compounded drugs interstate.
In the 2013 draft 503A guidance, FDA stated that it does not intend to enforce the 5 percent limit on distribution of compounded human drug products outside of the State in which they are compounded until 90 days after FDA has finalized a standard MOU and made it available to the States for their consideration and signature. Most comments on the 2013 draft 503A guidance that raised this issue said this period was too short but did not recommend a specific alternative. A few comments recommended a different timeframe, one recommending 120 days and another recommending 365 days. The 1997 Senate Committee Report for the Food and Drug Administration Modernization Act suggests that a 180-day period for States to decide whether to sign might be appropriate.
This MOU refers to previously approved collections of information. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). The collections of information have been approved under OMB control number 0910-0800.
Persons with access to the internet may obtain the final standard MOU at either
Office of the Assistant Secretary for Health, Office of the Secretary, Department of Health and Human Services.
Notice.
As required by the Federal Advisory Committee Act, the Department of Health and Human Services (HHS) is hereby giving notice that the Tick-Borne Disease Working Group (TBDWG) will hold a virtual meeting. The meeting will be open to the public. For this meeting, the TBDWG will review chapters and the template for the 2020 report to the HHS Secretary and Congress. The 2020 report will address ongoing tick-borne disease research, including research related to causes, prevention, treatment, surveillance, diagnosis, diagnostics, and interventions for individuals with tick-borne diseases; advances made pursuant to such research; federal activities related to tick-borne diseases; and gaps in tick-borne disease research.
The meeting will be held online via webcast on November 17, 2020 from approximately 9:00 a.m. to 5:30 p.m. ET (times are tentative and subject to change). The confirmed times and agenda items for the meeting will be posted on the TBDWG web page at
James Berger, Designated Federal Officer for the TBDWG; Office of Infectious Disease and HIV/AIDS Policy, Office of the Assistant Secretary for Health, Department of Health and Human Services, Mary E. Switzer Building, 330 C Street SW, Suite L600, Washington, DC, 20024. Email:
The registration link will be posted on the website at
The public will have an opportunity to present their views to the TBDWG orally during the meeting's public comment session or by submitting a written public comment. Comments should be pertinent to the meeting discussion. Persons who wish to provide verbal or written public comment should review instructions at
Indian Health Service, HHS.
Notice; correction of Performance Review Board Membership.
The Indian Health Service published a notice in the
Nathan Anderson, Human Resources Specialist, 5600 Fishers Lane, Rockville, MD 20857, Phone: (605) 681-4940.
In the FR notice of October, 14, 2020, (85 FR 65062), the correction is to the alphabetical listing of Performance Review Board members:
In alphabetical order, Mr. Christopher Mandregan should be listed as a member of the Indian Health Service Performance Review Board. Membership should read as:
•
The other members listed remain as originally published.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Notice is hereby given of a change in the meeting of the National Institute of Mental Health Special Emphasis Panel, November 9, 2020, 12:00 p.m. to November 9, 2020, 05:00 p.m., National Institutes of Health, Neuroscience Center, 6001 Executive Boulevard, Rockville, MD, 20852 which was published in the
This notice is being amended to change the meeting date for ERB I-01 from November 9, 2020 to November 19, 2020. The time remains the same. The meeting is closed to the public.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Federal Emergency Management Agency, DHS
60 Day Notice and request for comments.
The Federal Emergency Management Agency (FEMA), as part of its continuing effort to reduce paperwork and respondent burden, invites the general public to take this opportunity to comment on a revision of a currently approved information collection. In accordance with the Paperwork Reduction Act of 1995, this notice seeks comments concerning FEMA's Hazard Mitigation Assistance (HMA) grant programs. While this information collection continues to include the Flood Mitigation Assistance (FMA) program, it includes updates to (1) introduce the Building Resilient Infrastructure and Communities (BRIC) program; and (2) establish the Pre-Disaster Mitigation (PDM) program as a legacy program. Under the FEMA's HMA grant programs, States, local communities, Tribes, and Territories (SLTTs) seek assistance to support disaster mitigation and provide opportunities to reduce or eliminate potential losses to SLTTs.
Written comments must be received on or before December 28, 2020.
Submit comments at
All submissions received must include the agency name and Docket ID, and will be posted, without change, to the Federal eRulemaking Portal at
Jennie Orenstein, Grants Policy Branch Chief, FIMA, FEMA, (202) 212-4071. You may contact the Records Management Division for copies of the proposed collection of information at email address:
This collection of information is necessary to implement grants for the Flood Mitigation Assistance (FMA) program, Pre-Disaster Mitigation (PDM), and Building Resilient Infrastructure and Communities (BRIC) program.
The FMA program is authorized pursuant to Section 1366 of the National Flood Insurance Act of 1968, 42 U.S.C. 4104c. The FMA program, under 44 CFR part 79, provides funding for measures taken to reduce or eliminate the long-term risk of flood damage to buildings, manufactured homes, and other structures insured under the National Flood Insurance Program (NFIP). FMA was created as part of the National Flood Insurance Reform Act (NFIRA) of 1994, Public Law 103-325. The Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12), Public Law 112-141, consolidated the Repetitive Flood Claims (RFC) and Severe Repetitive Loss grant (SRL) programs into FMA, and changed the cost-share requirements under FMA to allow more Federal funds for properties with repetitive flood claims.
The PDM program was authorized under Section 203 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), Public Law 93-288, 42 U.S.C. 5133, as amended by Section 102 of the Disaster Mitigation Act of 2000, Public Law 106-390. The PDM program provided grants for cost-effective mitigation actions prior to a disaster event to reduce overall risks to the population and structures, while also reducing reliance on funding from actual disaster declarations. Section 1234 of the Disaster Recovery Reform Act of 2018 (DRRA) amended Section 203 of the Stafford Act to authorize an updated program. As a result, FEMA is replacing the PDM program with the BRIC program and is establishing PDM as a legacy program. While the last cycle of the PDM program awards were made in Fiscal Year (FY) 2019, this information collection will continue through FY 2020-2021 for grant monitoring and closeout.
The BRIC program is designed to promote a national culture of preparedness and public safety through encouraging investments to protect the Nation's communities and infrastructure and through strengthening national mitigation capabilities to foster resilience. The BRIC program seeks to fund effective and innovative projects that will reduce risk, increase resilience, and serve as a catalyst to encourage the whole community to invest in and adopt policies related to mitigation.
The guiding principles of the BRIC program are to (1) support State and local governments, Tribes, and territories through capability and capacity-building to enable them to identify mitigation actions and implement projects that reduce risks posed by natural hazards; (2) encourage and enable innovation while allowing flexibility, consistency, and effectiveness; (3) promote partnerships and enable high-impact investments to reduce risk from natural hazards with a focus on critical services and facilities, public infrastructure, public safety, public health, and communities; (4) provide a significant opportunity to reduce future losses and minimize impacts on the Disaster Relief Fund; and (5) support the adoption and enforcement of building codes, standards, and policies that will protect the health, safety, and general welfare of the public, take into account future conditions, and have long-lasting impacts on community risk reduction, including for critical services and facilities and for future disaster costs. The BRIC program will distribute funds annually and apply a Federal/non-Federal cost share.
In accordance with 2 CFR 200.203, FEMA requires that all parties interested in receiving FEMA mitigation grants submit an application package for grant assistance. Applications and subapplications for the BRIC and FMA programs are submitted via the FEMA Grants Outcome (FEMA GO) system. Information necessary for the ongoing monitoring and closeout of the PDM program for FY 2019 and prior will be collected via the e-Grants system. The FEMA GO and e-Grants systems have been developed to meet the intent of the e-Government initiative, authorized by Public Law 106-107. This initiative requires that all Government agencies both streamline grant application processes and provide for the means to electronically create, review, and submit a grant application via the internet.
In order to increase transparency in decision-making while building capability and partnerships, FEMA will convene a National Review Panel to score applications and subapplications based on qualitative evaluation criteria. The qualitative criteria are narrative submissions to allow applicants and subapplicants the flexibility to fully explain the strengths of the proposed project. Qualitative evaluation criteria have graded scales of point scoring.
The BRIC program will solicit volunteers from SLTTs and Other Federal Agencies (OFAs) to review applications that are routed to the qualitative panel reviews. The volunteers will review and score applications based on a pre-determined scoring criteria.
Comments may be submitted as indicated in the
Fish and Wildlife Service, Interior.
Notice of receipt of permit applications; request for comments.
We, the U.S. Fish and Wildlife Service, invite the public to comment on applications to conduct certain activities with foreign species that are listed as endangered under the Endangered Species Act (ESA). With some exceptions, the ESA prohibits activities with listed species unless Federal authorization is issued that allows such activities. The ESA also requires that we invite public comment before issuing permits for any activity otherwise prohibited by the ESA with respect to any endangered species.
We must receive comments by November 27, 2020.
•
•
For more information, see Public Comment Procedures under
Brenda Tapia, by phone at 703-358-2185, via email at
We invite the public and local, State, Tribal, and Federal agencies to comment on these applications. Before issuing any of the requested permits, we will take into consideration any information that we receive during the public comment period.
You may submit your comments and materials by one of the methods in
When submitting comments, please specify the name of the applicant and the permit number at the beginning of your comment. Provide sufficient information to allow us to authenticate any scientific or commercial data you include. The comments and recommendations that will be most useful and likely to influence agency decisions are: (1) Those supported by quantitative information or studies; and (2) those that include citations to, and analyses of, the applicable laws and regulations.
You may view and comment on others' public comments at
If you submit a comment at
To help us carry out our conservation responsibilities for affected species, and in consideration of section 10(c) of the Endangered Species Act of 1973, as amended (ESA; 16 U.S.C. 1531
We invite comments on the following applications.
The applicant requests a permit to import biological samples derived from the following species, taken in Peru, for the purpose of scientific research:
• Wild Goeldi's monkeys (
• Bald uacari (
• Mantled howler monkeys (
• Yellow-tailed woolly monkeys (
This notification covers activities to be conducted by the applicant over a 5-year period.
The applicant requests a permit to import biological samples derived from wild and captive-bred Cuban crocodiles (
The applicant requests to amend their permit to purchase an additional captive-bred female African penguin (
The applicant requests authorization to import biological samples including but not limited to skin biopsies, blood, hair, and tissue from any endangered or threatened species for the purpose of scientific research. This notification covers activities to be conducted by the applicant over a 5-year period.
The applicant requests a permit to import a sport-hunted trophy of one male bontebok (
The applicant requests a captive-bred wildlife registration under 50 CFR 17.21(g) for Komodo island monitor (
The public is invited to comment on the following application for approval to conduct certain activities with a bird species covered under the Wild Bird Conservation Act of 1992 (16 U.S.C. 4901-4916). This notice is provided pursuant to section 112(4) of the Wild Bird Conservation Act of 1992 (50 CFR 15.26(c)).
The applicant wishes to amend the cooperative breeding program, CB042 Captive Breeding Program for under-represented
After the comment period closes, we will make decisions regarding permit issuance. If we issue permits to any of the applicants listed in this notice, we will publish a notice in the
We issue this notice under the authority of the Endangered Species Act of 1973, as amended (16 U.S.C. 1531
Bureau of Land Management, Interior
Notice of Availability.
In accordance with the National Environmental Policy Act of 1969, as amended, and the Federal Land Policy and Management Act of 1976, as amended, the Bureau of Land Management (BLM) has prepared a Final Environmental Impact Statement (EIS) and Proposed Resource Management Plan (RMP) Amendment for the proposed Wyoming Pipeline Corridor Initiative(WPCI) within the BLM Cody, Worland, Buffalo, Casper, Lander, Pinedale, Kemmerer, Rawlins and Rock Springs field offices. This notice identifies the initiation of the 30-day protest period and the 60-day Governor's consistency review period for the Proposed RMP Amendment.
BLM planning regulations state that any person who meets the conditions as described in the regulations may protest the BLM's Final Programmatic EIS and Proposed RMP Amendment. A person who meets the conditions and files a protest must file the protest within 30 days of the date that the Environmental Protection Agency publishes its Notice of Availability (NOA) in the
Requests for information regarding the Final EIS may be mailed to:
•
Copies of the Final EIS are available on the project website at:
Heather Schultz, Project Manager, telephone 307-775-6084; address 5353 Yellowstone Road Cheyenne Wyoming; email
The State of Wyoming is proposing a pipeline corridor network for carbon capture, utilization, and storage (CCUS), enhanced oil recovery (EOR), and other compatible uses to be designated on BLM-managed lands in Wyoming through the land use planning process. The State of Wyoming proposes that roughly 2,000 miles and 25 segments of pipeline corridors be designated on BLM-managed lands and in those lands' associated RMPs. The proposed WPCI corridors are divided into segments based on proposed width and the regions they will service. The BLM analyzed the State's proposal by preparing an EIS. Based on the findings of the EIS process, the BLM is proposing to amend the nine RMPs containing lands proposed for pipeline corridors to designate those corridors. If the BLM were to receive a right-of-way application for CCUS and EOR pipelines or related facilities in the future, project specific NEPA would be completed separately at that time. The analysis has identified issues to address within the planning area, including Greater Sage-Grouse; big game habitat (including migration corridors); potential conflicts with coal mining and other resource uses; air quality; transportation; vegetation and reclamation success; anticipated oil and gas development in the planning area; existing rights-of-way, valid existing rights and other authorizations that may not be permitted in the corridor; and opportunities to apply best management practices and design features.
The BLM analyzed five alternatives:
Instructions for filing a protest regarding the Proposed Land Use Plan Amendment/Final EIS may be found in the “Dear Reader” Letter of the Final EIS and Proposed Land Use Plan Amendment and at 43 CFR 1610.5-2.
A protest may raise only those issues which were submitted for the record during the planning process. The BLM will issue a Record of Decision no earlier than 30 days from the date of the Notice of Availability published by the Environmental Protection Agency.
All protests on the Proposed RMPA must be submitted in writing by any of the following methods:
The BLM encourages submission of protests using the ePlanning online tools rather than by mail.
Before including your address, phone number, email address or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
40 CFR 1506.6, 40 CFR 1506.10, 43 CFR 1610.2.
National Park Service, Interior.
Notice.
The National Park Service is soliciting electronic comments on the significance of properties nominated before October 10, 2020, for listing or related actions in the National Register of Historic Places.
Comments should be submitted electronically by November 12, 2020.
Comments are encouraged to be submitted electronically to
The properties listed in this notice are being considered for listing or related actions
Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
Nominations submitted by State or Tribal Historic Preservation Officers:
Additional documentation has been received for the following resources:
On the basis of the record
The Commission instituted these reviews on October 1, 2019 (84 FR 52129) and determined on January 6, 2020 that it would conduct full reviews (85 FR 3421, January 21, 2020). Notice of the scheduling of the Commission's reviews and of a public hearing to be held in connection therewith was given by posting copies of the notice in the Office of the Secretary, U.S. International Trade Commission, Washington, DC, and by publishing the
The Commission made these determinations pursuant to section 751(c) of the Act (19 U.S.C. 1675(c)). The Commission determined that these reviews were extraordinarily complicated and extended the review period by up to 90 days. It completed and filed its determinations in these reviews on October 21, 2020. The views of the Commission are contained in USITC Publication 5127 (October 2020), entitled
By order of the Commission.
Drug Enforcement Administration, Justice.
Notice of application.
Mylan Pharmaceuticals has applied to be registered as an importer of basic class(es) of controlled substance(s). Refer to Supplemental Information listed below for further drug information.
Registered bulk manufacturers of the affected basic class(es), and applicants therefore, may file written comments on or objections to the issuance of the proposed registration on or before November 27, 2020. Such persons may also file a written request for a hearing on the application on or before November 27, 2020.
Written comments should be sent to: Drug Enforcement Administration, Attention: DEA Federal Register Representative/DPW, 8701 Morrissette Drive, Springfield, Virginia 22152. All requests for a hearing must be sent to: Drug Enforcement Administration, Attn: Administrator, 8701 Morrissette Drive, Springfield, Virginia 22152. All requests for a hearing should also be sent to: (1) Drug Enforcement Administration, Attn: Hearing Clerk/OALJ, 8701 Morrissette Drive, Springfield, Virginia 22152; and (2) Drug Enforcement Administration, Attn: DEA Federal Register Representative/DPW, 8701 Morrissette Drive, Springfield, Virginia 22152.
In accordance with 21 CFR 1301.34(a), this is notice that on October 7, 2020, Mylan Pharmaceuticals, Incorporated, 3711 Collins Ferry Road, Morgantown, West Virginia 26505-2362, applied to be registered as an importer of the following basic class(es) of controlled substance(s):
The company plans to import finished dosage forms for analytical testing and distribution for clinical trials. No other activity for these drug codes is authorized for this registration.
Approval of permit applications will occur only when the registrant's business activity is consistent with what is authorized under 21 U.S.C. 952(a)(2). Authorization will not extend to the import of Food and Drug Administration-approved or non-approved finished dosage forms for commercial sale.
Drug Enforcement Administration, Justice.
Notice of application.
The Drug Enforcement Administration (DEA) is providing notice of an application it has received from an entity applying to be registered to manufacture in bulk basic class(es) of controlled substances listed in schedule I. DEA intends to evaluate this and other pending applications according to proposed regulations that, if finalized, would govern the program of growing marihuana for scientific and medical research under DEA registration.
Registered bulk manufacturers of the affected basic class(es), and applicants therefor, may file written comments on or objections to the issuance of the proposed registration on or before December 28, 2020.
Written comments should be sent to: Drug Enforcement Administration, Attention: DEA Federal Register Representative/DPW 8701 Morrissette Drive, Springfield, Virginia 22152. To ensure proper handling of comments, please reference Docket No -. DEA-738 in all correspondence, including attachments.
The Controlled Substances Act (CSA) prohibits the cultivation and distribution of marihuana except by persons who are registered under the CSA to do so for lawful purposes. In accordance with the purposes specified in 21 CFR 1301.33(a), DEA is providing notice that the entity identified below has applied for registration as a bulk manufacturer of schedule I controlled substances. In response, registered bulk manufacturers of the affected basic class(es), and applicants therefor, may file written comments on or objections of the requested registration, as provided in this notice. This notice does not constitute any evaluation or determination of the merits of the application submitted.
The applicant plans to manufacture bulk active pharmaceutical ingredients (APIs) for product development and distribution to DEA registered researchers. If the application for registration is granted, the registrant would not be authorized to conduct other activity under this registration aside from those coincident activities specifically authorized by DEA regulations. DEA will evaluate the application for registration as a bulk manufacturer for compliance with all applicable laws, treaties, and regulations and to ensure adequate safeguards against diversion are in place.
As this applicant has applied to become registered as a bulk manufacturer of marihuana, the application will be evaluated under the criteria of 21 U.S.C. 823(a). DEA proposes to conduct this evaluation in the manner described in the rule proposed at 85 FR 16292, published on March 23, 2020, if finalized.
In accordance with 21 CFR 1301.33(a), DEA is providing notice that on September 15, 2020, API Global LLC, 30 Hillview Road, Lincoln Park, New Jersey 07035, applied to be registered as a bulk manufacturer of the following basic class(es) of controlled substances:
The applicant noticed above applied to become registered with DEA to grow marihuana as a bulk manufacturer subsequent to a 2020 DEA notice of proposed rulemaking that provided information on how DEA intends to expand the number of registrations and described the way it would oversee those additional growers. If finalized, the proposed rule would govern persons seeking to become registered with DEA to grow marihuana as a bulk manufacturer, consistent with applicable law. The notice of proposed rulemaking is available at 85 FR 16292.
Criminal Justice Information Services Division, Department of Justice.
60-Day notice.
Department of Justice (DOJ), Federal Bureau of Investigation, Criminal Justice Information Services Division will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
Comments are encouraged and will be accepted for 60 days until December 28, 2020.
If you have additional comments especially on the estimated public burden or associated response time, suggestions, or need a copy of the proposed information collection instrument with instructions or additional information, please contact Gerry Lynn Brovey, Supervisory Information Liaison Specialist, Federal Bureau of Investigation, Criminal Justice Information Services Division, 1000 Custer Hollow Road, Clarksburg, WV 26306; phone: 304-625-4320 or email
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
1.
2.
3.
4.
5.
6.
Drug Enforcement Administration, Department of Justice.
30-Day notice.
The Department of Justice (DOJ), Drug Enforcement Administration (DEA), will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
Comments are encouraged and will be accepted for 30 days until November 27, 2020.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should
1.
2.
3.
4.
5.
6.
If additional information is required please contact: Melody Braswell, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Two Constitution Square, 145 N Street NE, Suite 3E.405B, Washington, DC 20530.
Drug Enforcement Administration, Department of Justice.
30-Day notice.
The Department of Justice (DOJ), Drug Enforcement Administration (DEA), will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
Comments are encouraged and will be accepted for 30 days until November 27, 2020.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
1.
2.
3.
4.
5.
6.
If additional information is required please contact: Melody Braswell, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Two Constitution Square, 145 N Street NE, Suite 3E.405B, Washington, DC 20530.
Drug Enforcement Administration, Department of Justice.
30-Day notice.
The Department of Justice (DOJ), Drug Enforcement Administration (DEA), will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
Comments are encouraged and will be accepted for 30 days until November 27, 2020.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
1.
2.
3.
4.
5.
6.
On October 21, 2020, the Department of Justice lodged a proposed modification to the consent decree with the United States District Court for the Northern District of Georgia in the lawsuit entitled
The United States and the State of Georgia filed this lawsuit in 2010 under the Clean Water Act. The complaint sought injunctive relief and civil penalties for violations in connection with the City's sanitary sewer system. The consent decree entered by the Court on December 13, 2011 provides for DeKalb County to perform injunctive measures as described in the consent decree, to pay a civil penalty split between United States and the State of Georgia, and to perform a supplemental environmental project. The proposed modification to the consent decree, among other things: (1) Extends the time period for DeKalb County to rehabilitate priority sewer areas, (2) requires additional injunctive relief, and (3) requires DeKalb County to pay a $1,047,000 civil penalty, which will be divided evenly between the United States and the State.
The publication of this notice opens a period for public comment on the modification to the consent decree. Comments should be addressed to the Assistant Attorney General, Environment and Natural Resources Division, and should refer to
During the public comment period, the modification to the consent decree may be examined and downloaded at this Justice Department website:
Please enclose a check or money order for $22 (25 cents per page reproduction cost) payable to the United States Treasury.
National Endowment for the Arts.
Notice of proposed collection; comment request.
The National Endowment for the Arts (NEA), as part of its continuing effort to reduce paperwork and respondent burden, conducts a preclearance consultation program to provide the general public and Federal agencies with an opportunity to comment on proposed and/or continuing collections of information in accordance with the Paperwork Reduction Act of 1995. This program helps to ensure that requested data can be provided in the desired format, reporting burden (time and financial resources) is minimized, collection instruments are clearly understood, and the impact of collection requirements on respondents can be properly assessed. Currently, the NEA is soliciting comments concerning the proposed information collection for the Generic Clearance for the Collection of Qualitative Feedback on Agency Service Delivery. Copies of this ICR, with applicable supporting documentation, may be obtained by visiting
Written comments must be submitted to the office listed in the address section below within 30 days from the date of this publication in the
Comments should be sent to the Office of Information and Regulatory Affairs, Attn: OMB Desk Officer for the National Endowment for the Arts, Office of Management and Budget, Room 10235, Washington, DC 20503 202/395-7316, within 30 days from the date of this publication in the
The proposed information collection activity provides a means to garner qualitative customer and stakeholder feedback in
The solicitation of feedback will target areas such as: Timeliness, appropriateness, accuracy of information, courtesy, efficiency of service delivery, and resolution of issues with service delivery. Responses will be assessed to plan and inform efforts to improve or maintain the quality of service offered to the public. If this information is not collected, vital feedback from customers and stakeholders on the Agency's services will be unavailable.
The Agency will only submit a collection for approval under this generic clearance if it meets the following conditions:
• The collections are voluntary;
• The collections are low-burden for respondents (based on considerations of total burden hours, total number of respondents, or burden-hours per respondent) and are low-cost for both the respondents and the Federal Government;
• The collections are non-controversial and do not raise issues of concern to other Federal agencies;
• Any collection is targeted to the solicitation of opinions from respondents who have experience with the program or may have experience with the program in the near future;
• Personally identifiable information (PII) is collected only to the extent necessary and is not retained;
• Information gathered is used only internally for general service improvement and program management purposes and is not intended for release outside of the agency;
• Information gathered is not used for the purpose of substantially informing influential policy decisions; and
• Information gathered yields qualitative information; the collections are not designed or expected to yield statistically reliable results or used as though the results are generalizable to the population of study.
Feedback collected under this generic clearance provides useful information, but it does not yield data that can be generalized to the overall population. This type of generic clearance for qualitative information will not be used for quantitative information collections that are designed to yield reliably actionable results, such as monitoring trends over time or documenting program performance. Such data uses require more rigorous designs that address: The target population to which generalizations will be made, the sampling frame, the sample design (including stratification and clustering), the precision requirements or power calculations that justify the proposed sample size, the expected response rate, methods for assessing potential non-response bias, the protocols for data collection, and any testing procedures that were or will be undertaken prior to fielding the study. Depending on the degree of influence the results are likely to have, such collections may still be eligible for submission for other generic mechanisms that are designed to yield quantitative results.
As a general matter, information collections will not result in any new system of records containing privacy information and will not ask questions of a sensitive nature, such as sexual behavior and attitudes, religious beliefs, and other matters that are commonly considered private.
2:00 p.m., Friday, October 30, 2020.
Via Conference Call.
Open.
Lakeyia Thompson, Special Assistant, (202) 524-9940;
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing for the Commission's consideration concerning a negotiated service agreement. This notice informs the public of the filing,
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the market dominant or the competitive product list, or the modification of an existing product currently appearing on the market dominant or the competitive product list.
Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request's acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request.
The public portions of the Postal Service's request(s) can be accessed via the Commission's website (
The Commission invites comments on whether the Postal Service's request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern market dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3030, and 39 CFR part 3040, subpart B. For request(s) that the Postal Service states concern competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3035, and 39 CFR part 3040, subpart B. Comment deadline(s) for each request appear in section II.
1.
This Notice will be published in the
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing for the Commission's consideration concerning a negotiated service agreement. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the market dominant or the competitive product list, or the modification of an existing product currently appearing on the market dominant or the competitive product list.
Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request's acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request.
The public portions of the Postal Service's request(s) can be accessed via the Commission's website (
The Commission invites comments on whether the Postal Service's request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern market dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3030, and 39 CFR part 3040, subpart B. For request(s) that the Postal Service states concern competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3035, and 39 CFR part 3040, subpart B. Comment deadline(s) for each request appear in section II.
1.
2.
This Notice will be published in the
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
Cboe EDGA Exchange, Inc. (“EDGA” or the “Exchange”) is filing with the Securities and Exchange Commission (the “Commission”) a proposed rule change to extend the current pilot program related to EDGA Rule 11.15, Clearly Erroneous Executions, to the close of business on April 20, 2021. The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The purpose of this filing is to extend the effectiveness of the Exchange's current rule applicable to Clearly Erroneous Executions to the close of business on April 20, 2021. Portions of Rule 11.15, explained in further detail below, are currently operating as a pilot program set to expire on October 20, 2020.
On September 10, 2010, the Commission approved, on a pilot basis, changes to EDGA Rule 11.15 that, among other things: (i) Provided for uniform treatment of clearly erroneous execution reviews in multi-stock events involving twenty or more securities; and (ii) reduced the ability of the Exchange to deviate from the objective standards set forth in the rule.
On December 26, 2018, the Commission published the proposed Eighteenth Amendment
The Exchange now proposes to amend EDGA Rule 11.15 to extend the pilot's effectiveness to the close of business on April 20, 2021. The Exchange understands that the other national securities exchanges and Financial Industry Regulatory Authority (“FINRA”) will also file similar proposals to extend their respective
The Exchange does not propose any additional changes to EDGA Rule 11.15. The Exchange believes the benefits to market participants from the more objective clearly erroneous executions rule should continue on a limited six month pilot basis. As the Plan was approved by the Commission to operate on a permanent, rather than pilot, basis the Exchange intends to assess whether additional changes should also be made to the operation of the clearly erroneous execution rules. Extending the effectiveness of EDGA Rule 11.15 for an additional six months should provide the Exchange and other national securities exchanges additional time to consider further amendments, if any, to the clearly erroneous execution rules.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In particular, the Exchange believes that extending the clearly erroneous execution pilot under EDGA Rule 11.15 for an additional six months would help assure that the determination of whether a clearly erroneous trade has occurred will be based on clear and objective criteria, and that the resolution of the incident will occur promptly through a transparent process. The proposed rule change would also help assure consistent results in handling erroneous trades across the U.S. equities markets, thus furthering fair and orderly markets, the protection of investors and the public interest. Based on the foregoing, the Exchange believes the amended clearly erroneous executions rule should continue to be in effect on a pilot basis while the Exchange and the other national securities exchanges consider and develop a permanent proposal for clearly erroneous execution reviews.
The Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, the Exchange understands that FINRA and other national securities exchanges will also file similar proposals to extend their respective clearly erroneous execution pilot programs. Thus, the proposed rule change will help to ensure consistency across market centers without implicating any competitive issues.
No comments were solicited or received on the proposed rule change.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed under Rule 19b-4(f)(6)
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
Cboe C2 Exchange, Inc. (the “Exchange” or “C2”) proposes to enhance its drill-through protections and make other clarifying changes. The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to enhance its drill-through protections for simple and complex orders and make other clarifying changes. Currently, pursuant to Rule 6.14(a)(4) and (b)(6), the System will execute a marketable buy (sell) order or complex order,
The Exchange proposes to permit orders to rest in the book or COB, as applicable, for multiple time periods and at more aggressive displayed prices during each time period.
For example, suppose the Exchange's market for a series in a class with a 0.05 minimum increment is 0.90-1.00, represented by a quote for 10 contracts on each side (the quote offer is Quote A). The following sell orders or quote offers for the series also rest in the book:
• Order A: 10 contracts at 1.05;
• Quote B: 10 contracts at 1.10;
• Order B: 10 contracts at 1.15; and
• Order C: 20 contracts at 1.25.
The market for away exchanges is 0.80-1.45. The Exchange's buffer amount for the class is 0.10, the drill-through resting time period is one second, and the number of time periods is three. The System receives an incoming order to buy 100 at 1.40, which executes against resting orders and quotes as follows: 10 Against Quote A at 1.00 (which is the national best offer), 10 against Order A at 1.05, and 10 against Quote B at 1.10. The System will not automatically execute any of the remaining 70 contracts from the incoming buy order against Order B, because 1.15 is more than 0.10 away from the national best offer at the time of order entry of 1.00 and thus exceeds the drill-through price check. The 70 unexecuted contracts then rest in the book for one second at a price of 1.10 (the initial drill-through price). No incoming orders are entered during that one-second time period to trade against the remaining 70 contracts. The System then re-prices the buy order in the book at a new drill-through price of 1.20 (drill-through price plus one buffer of 0.10). Ten contracts immediately execute against Order B at a price of 1.15 (the buy order is still handled as the “incoming order” that executes against the resting Order B, and thus receives price improvement to 1.15). An incoming order to sell 20 contracts at 1.20 enters the book and executes against 20 of the resting contracts at that price. At the end of the second one-second time period, there are 40 remaining contracts. These contracts then rest in the book at a price of 1.30 for the final one second time period. Twenty contracts immediately execute against Order C at a price of 1.25. No incoming orders are entered during that time period to trade against the remaining 20 contracts. At the end of the final one-second time period, the System cancels the remaining 20 contracts.
Currently, Users may establish a higher or lower buffer amount than the default amount set by the Exchange with respect to complex orders subject to the drill-through protection.
The proposed rule change also makes certain clarifying and nonsubstantive changes, including movement of certain terms and provisions within Rule 6.14(a)(4) and (b)(6) due to the proposed rule changes described above. First, the proposed rule change combines the provisions in current subparagraphs (A) and (B) of Rule 6.14(a)(4) into proposed subparagraph (A). The drill-through protection in the following subparagraphs of Rule 6.14(a)(4) (currently and as proposed) apply to orders that enter the Book at the conclusion of the opening auction and intraday in the same manner. Current Rule 6.14(a)(4)(B) (the second subparagraph (B) and (C) (proposed subparagraphs (B) and (C)) provide that the System handles orders not executed pursuant to current subparagraph (A) in accordance with those subparagraphs, inadvertently omitting that current subparagraphs (B) (the second subparagraph (C) [sic] and (C) (and proposed subparagraphs (B) and (C)) also apply to orders described in current first subparagraph (B).
Second, the proposed rule change adds clarifying language regarding how the System handles orders for which the limit price is equal to or less than (if a buy order) or greater than (if a sell order) the drill-through price. Current Rule 6.14(b)(6) contemplates that complex orders with limit prices equal to or less aggressive than the drill-through price will not be subject to the mechanism pursuant to which orders will rest in the COB for a time period and then be cancelled. Specifically, Rule 6.14(b)(6)(A) states if a buy (sell) complex order would execute or enter the COB at a price
The proposed rule change clarifies that notwithstanding the provisions described above regarding an order or complex order resting in the book or COB, respectively, for brief time periods at drill-through prices, if a buy (sell) order's limit price equals or is less (greater) than the drill-through price at any time during application of the drill-through mechanism, the order rests in the book or COB, as applicable, subject to a User's instructions,
Third, the proposed rule change corrects the market order reference in current and proposed Rule 6.14(a)(4)(C) (to limit order. That subparagraph relates to orders with times-in-force of day, GTC, or GTD that will rest in the book for a time period at the drill-through price. However, market orders by definition
Fourth, the proposed rule change clarifies in proposed Rule 6.14(b)(6)(B)(ii) that if the synthetic best bid or offer (“SBBO”) changes prior to the end of any time period but the complex order cannot leg into the simple book, and the new SBB or SBO, as applicable, crosses the drill-through price, the System changes the displayed price of the complex order to the new SBB or SBO, as applicable, plus or minus the applicable minimum increment for the class. The current Rule states that $0.01 is added to or subtracted from the new SBBO. However, a class may have a minimum increment other than $0.01 pursuant to Rule 5.4(b). Currently, the System adds or subtracts the applicable minimum increment. The proposed rule change corrects an inadvertent error in the Rules to conform to current System functionality and Rules regarding minimum increments for complex orders. The proposed rule change will ensure that a complex order will rest in the COB only with a displayed price in the applicable minimum increment applicable for the class of that complex order. The proposed rule change also clarifies that the complex order will rest in the COB (the current rule text says the complex order is not cancelled), and adds detail that the complex order rests at that displayed price, subject to a User's instructions, and if it was not the final period, any remaining time period(s) do not occur.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In particular, the Exchange believes the proposed enhancement to the drill-through mechanism removes impediments to and perfects the mechanism of a free and open market and a national market system, and, in general, protects investors and the public interest. The proposed rule change will permit orders (or unexecuted portions) to rest in the book or COB, as applicable, at different displayed prices for a brief but overall longer period of time, which will provide market participants' orders with additional execution opportunities while continuing to protect them against execution at potentially erroneous prices. The proposed enhancement to the drill-through protection is similar to current drill-through functionality. The Exchange may determine the buffer amount for orders and the time period in which orders may rest in the book or COB. The proposed rule change permits an order to rest at multiples of the buffer amount, which would have the same effect as the Exchange setting a larger buffer amount. For example, if the Exchange set a buffer amount of $0.75, that would allow orders to execute at any price no further than $0.75 away from the NBBO or SNBBO at the time of order entry (including at prices $0.25 and $0.50 away from the NBBO or SNBBO at the time of order entry). This allows for the same potential execution prices that would be possible if the Exchange set a buffer of $0.25 and three time periods under the proposed rule change. While the overall time period for which an order may rest in the book or COB may be longer than the currently permissible time period, the longer time period will still be relatively brief (maximum of 15 seconds). The Exchange notes it may maintain the same buffer amounts that are in place today. However, rather than increase the buffer amount at one time, the proposed rule change adds the overall larger
The Exchange believes the proposed clarifying and nonsubstantive changes to the drill-through protection rules protect investors by adding transparency to the rules regarding the drill-through functionality. These changes are consistent with current functionality and thus do not impact the applicability of the drill-through mechanism to orders.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that the proposed rule change will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because the enhanced drill-through protection will apply to all marketable orders in the same manner. Users may cancel orders resting on the Book during the drill-through time periods or set their own buffer with respect to complex orders if they do not want their orders resting for a longer period of time as proposed.
The Exchange does not believe that the proposed rule change will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because it relates solely to how and when marketable orders will rest on the Exchange's book or COB. The proposed enhancement to the drill-through protection is consistent with the current protection and provides orders subject to the protection with additional execution opportunities while providing continued protection against execution against potentially erroneous prices.
The Exchange believes the proposed rule change would ultimately provide all market participants with additional execution opportunities when appropriate while providing protection from erroneous execution. The Exchange believes the proposal will enhance risk protections, the individual firm benefits of which flow downstream to counterparties both at the Exchange and at other options exchanges, which increases systemic protections as well. The Exchange believes enhancing risk protections will allow Users to enter orders and quotes with further reduced fear of inadvertent exposure to excessive risk, which will benefit investors through increased liquidity for the execution of their orders. Without adequate risk management tools, such as the one proposed to be enhanced in this filing, Trading Permit Holders could reduce the amount of order flow and liquidity they provide. Such actions may undermine the quality of the markets available to customers and other market participants. Accordingly, the proposed rule change is designed to encourage Trading Permit Holders to submit additional order flow and liquidity to the Exchange. The proposed flexibility may similarly provide additional execution opportunities, which further benefits liquidity in potentially volatile markets. In addition, providing Trading Permit Holders with more tools for managing risk will facilitate transactions in securities because, as noted above, Trading Permit Holders will have more confidence protections are in place that reduce the risks from potential system errors and market events.
The proposed clarifying and nonsubstantive changes are consistent with current functionality and are intended to add clarity to the Rules, and thus the Exchange expects those changes to have no competitive impact.
The Exchange neither solicited nor received comments on the proposed rule change.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Rule 433 (17 CFR 230.433) governs the use and filing of free writing prospectuses under the Securities Act of 1933 (15 U.S.C. 77a
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number.
The public may view background documentation for this information collection at the following website:
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Rule 163 (17 CFR 230.163) provides an exemption from Section 5(c) (15 U.S.C. 77e(c)) under the Securities Act of 1933 (15 U.S.C. 77a
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number.
The public may view background documentation for this information collection at the following website:
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Rule 425 (17 CFR 230.425) under the Securities Act of 1933 (15 U.S.C. 77a
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number.
The public may view background documentation for this information collection at the following website:
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (“PRA”) (44 U.S.C. 3501
In response to an operational crisis in the securities industry between 1967 and 1970, the Commission adopted Rule 17a-11 under the Exchange Act on July 11, 1971. Rule 17a-11 requires broker-dealers that are experiencing financial or operational difficulties to provide notice to the Commission, the broker-dealer's designated examining authority (“DEA”), and the Commodity Futures Trading Commission (“CFTC”) if the broker-dealer is registered with the CFTC as a futures commission merchant. Rule 17a-11 is an integral part of the Commission's financial responsibility program which enables the Commission, a broker-dealer's DEA, and the CFTC to increase surveillance of a broker-dealer experiencing difficulties and to obtain any additional information necessary to gauge the broker-dealer's financial or operational condition.
Rule 17a-11 also requires over-the-counter (“OTC”) derivatives dealers and broker-dealers that are permitted to compute net capital pursuant to Appendix E to Exchange Act Rule 15c3-1 to notify the Commission when their tentative net capital drops below certain levels.
To ensure the provision of these types of notices to the Commission, Rule 17a-11 requires every national securities exchange or national securities association to notify the Commission when it learns that a member broker-dealer has failed to send a notice or transmit a report required under the Rule.
Compliance with the Rule is mandatory. The Commission will generally not publish or make available to any person notices or reports received pursuant to Rule 17a-11. The Commission believes that information obtained under Rule 17a-11 relates to a condition report prepared for the use of the Commission, other federal governmental authorities, and securities industry self-regulatory organizations responsible for the regulation or supervision of financial institutions.
The Commission expects to receive 343 notices from broker-dealers whose capital declines below certain specified levels or who are otherwise experiencing financial or operational problems and eleven notices each year from national securities exchange or national securities association notifying it that a member broker-dealer has failed to send the Commission a notice or transmit a report required under the Rule. The Commission expects that it will take approximately one hour to prepare and transmit each notice. Therefore, the Commission estimates the total annual reporting burden arising from this section of the rule will be approximately 354 hours.
Rule 17a-11 also requires broker-dealers engaged in securities lending or repurchase activities to either: (1) File a notice with the Commission and their DEA whenever the total money payable against all securities loaned, subject to a reverse repurchase agreement or the contract value of all securities borrowed or subject to a repurchase agreement, exceeds 2,500% of tentative net capital; or, alternatively, (2) report monthly their securities lending and repurchase activities to their DEA in a form acceptable to their DEA.
The Commission estimates that, annually, six broker-dealers will submit the monthly stock loan/borrow report. The Commission estimates each firm will spend, on average, approximately one hour per month (or twelve hours per year) of employee resources to prepare and send the report or to prepare the information for the FOCUS report (as required by the firm's DEA, if applicable). Therefore, the Commission estimates the total annual reporting burden arising from this section of the rule will be approximately 72 hours.
Therefore, the total annual reporting burden associated with Rule 17a-11 is approximately 426 hours.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number.
The public may view background documentation for this information collection at the following website:
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Regulation 506(e) of Regulation D (17 CFR 230.506(e)) under the Securities Act of 1933 (15 U.S.C. 77a
We estimate there are 19,908 respondents that will conduct a one-hour factual inquiry to determine whether the issuer and its covered persons have had pre-existing disqualifying events before September 23, 2013. Of those 19,908 respondents, we estimate that 220 respondents with disqualifying events will spend ten hours to prepare a disclosure statement describing the matters that would have triggered disqualification under 506(d)(1) of Regulation D, except that these disqualifying events occurred before September 23, 2013, the effective date of the Rule 506 amendments. An estimated 2,200 burden hours are attributed to the 220 respondents with disqualifying events in addition to the 19,908 burden hours associated with the one-hour factual inquiry. In sum, the total annual increase in paperwork burden for all affected respondents to comply with the Rule 506(e) disclosure statement is estimated to be approximately 22,108 hours of company personnel time.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number.
The public may view background documentation for this information collection at the following website:
Securities and Exchange Commission (“Commission”)
Temporary order and notice of application for a permanent order under section 9(c) of the Investment Company Act of 1940 (“Act”).
Applicants have received a temporary order (“Temporary Order”) exempting them from section 9(a) of the Act, with respect to a guilty plea entered on October 22, 2020 (“Guilty Plea”), by Goldman Sachs (Malaysia) Sdn. Bhd. (the “Pleading Entity” or “GS Malaysia”) in the United States District Court for the Eastern District of New York (the “District Court”) in connection with a plea agreement (“Plea Agreement”) between the Pleading Entity and the United States Department of Justice (“DOJ”), until the Commission takes final action on an application for a permanent order (the “Permanent Order,” and with the Temporary Order, the “Orders”). Applicants also have applied for a Permanent Order.
The application was filed on October 22, 2020.
An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by emailing the Commission's Secretary at
The Commission:
Kieran G. Brown, Senior Counsel, at (202) 551-6773 or David J. Marcinkus, Branch Chief, at (202) 551-6821
The following is a temporary order and a summary of the application. The complete application may be obtained via the Commission's website by searching for the file number, or an applicant using the Company name box, at
1. The Pleading Entity is a Malaysia Sendirian Berhad (private company limited by shares) that provides asset management and corporate finance services to clients in Malaysia and is a wholly-owned indirect subsidiary of Goldman Sachs Group, Inc. (“GS Group”). GS Group is a bank holding company and a financial holding company regulated by the Board of Governors of the Federal Reserve System (“FRB”).
2. GS&Co., a New York limited liability company, is registered as an investment adviser under the Investment Advisers Act of 1940 (the “Advisers Act”) and is a direct, wholly-owned subsidiary (as such term is defined in the Act) of GS Group. GS&Co. is also registered as a broker-dealer under the Securities Exchange Act of 1934 (the “Exchange Act”). GS&Co. serves as principal underwriter to the Funds
3. GSAM, a New York limited partnership, is registered as an investment adviser under the Advisers Act and is a wholly-owned indirect subsidiary of GS Group. GSAM serves as an adviser or subadviser to the Funds listed in Part 2 of Appendix A to the application.
4. GSAMI, a United Kingdom limited company, is registered as an investment adviser under the Advisers Act and is a wholly-owned indirect subsidiary of GS Group. GSAMI serves as an adviser or subadviser to the Funds listed in Part 3 of Appendix A to the application.
5. GSIS, a Delaware limited liability company, is registered as an investment adviser under the Advisers Act and is a wholly-owned indirect subsidiary of GS Group. GSIS serves as an adviser to the ESCs listed in Part 4 of Appendix A to the application.
6. While no existing company of which the Pleading Entity is an “affiliated person” within the meaning of section 2(a)(3) of the Act (“Affiliated Person”), other than GSIS, GS&Co., GSAM and GSAMI (together, the “Fund Servicing Applicants”), currently serves as an investment adviser (as defined in section 2(a)(20) of the Act) or depositor of any registered investment company, employees' securities company (“ESC”), or investment company that has elected to be treated as a business development company under the Act, or as principal underwriter (as defined in section 2(a)(29) of the Act) for any registered open-end investment company (“Open-End Fund”), registered unit investment trust (“UIT”), or registered face-amount certificate company (“FACC”) (such activities performed on behalf of such persons, collectively “Fund Servicing Activities”), Applicants request that any relief granted by the Commission pursuant to the application also apply to any other current or future Affiliated Person of the Pleading Entity other than GS Group (together with the Fund Servicing Applicants, the “Covered Persons”) with respect to any activity contemplated by section 9(a) of the Act.
7. On October 22, 2020, the DOJ filed a criminal information (the “Information”) in the District Court charging the Pleading Entity with one count of conspiracy to commit offenses against the United States, in violation of Title 18, United States Code, Section 371, that is, to violate the anti-bribery provisions of the Foreign Corrupt Practices Act of 1977 (“FCPA”), as amended,
8. Pursuant to the Plea Agreement, the Pleading Entity entered the Guilty Plea on October 22, 2020 in the District Court to the charge set out in the Information. Applicants state that, according to the Plea Agreement, the Pleading Entity agrees as follows: First, the Pleading Entity shall cooperate fully with the DOJ and the United States Attorney's Office for the Eastern District of New York (collectively, the “Offices”) in any and all matters relating to the conduct described in the Plea Agreement and the Statement of Facts and other conduct under investigation by the Offices or any other component of the DOJ at any time during the term of the DPA (the “Term”) until the later of the date upon which all investigations and prosecutions arising out of such conduct are concluded or the end of the Term. Second, at the request of the Offices, the Pleading Entity shall also cooperate fully with other domestic or foreign law enforcement and regulatory authorities and agencies, as well as the Multilateral Development Banks in any investigation of the Pleading Entity, GS Group, or any of its present or former officers, directors, employees, agents, and
9. The Applicants expect that the District Court will enter a judgment against the Pleading Entity (the “Judgment”) that will require remedies that are materially the same as set forth in the Plea Agreement. The individuals referenced in the Information as responsible for the Conduct are no longer employed by the Pleading Entity or any of its affiliates.
10. On October 22, 2020, the SEC instituted cease-and-desist proceedings against GS Group relating to the Conduct (the “SEC Order”). In anticipation of the institution of those proceedings, GS Group submitted an Offer of Settlement consenting to the entry of such order, which the Commission has accepted. The SEC Order includes findings that GS Group violated the following sections of the Exchange Act: Section 30A (the anti-bribery provisions of the FCPA), section 13(b)(2)(A) (the books and records provision of the FCPA), and section 13(b)(2)(B) (requiring Exchange Act registered companies to devise and maintain a sufficient system of internal accounting controls).
11. GS Group and its affiliates have entered into settlement agreements with other U.S. and non-U.S. regulatory or enforcement agencies related to the Conduct. The Board of Governors of the Federal Reserve System (“FRB”) entered a cease and desist order and order of assessment of a civil monetary penalty (the “FRB Order”) on October 22, 2020 against GS Group concerning unsafe and unsound banking practices relating to the 1MDB transactions that resulted from deficient policies, procedures and controls. The New York State Department of Financial Services (“DFS”) entered into a consent order (the “DFS Order”) on October 22, 2020 with GS Group as the parent company of Goldman Sachs Bank USA (“GS Bank”) (which operates in New York State and is licensed and regulated by the DFS) to settle DFS' investigations into alleged violations of New York banking law arising out of GS Bank's investments in 1MDB-related instruments. GS Group entered into a Settlement Agreement with the Government of Malaysia and 1MDB (the “Malaysian Settlement Agreement”) on August 18, 2020 to resolve all criminal and regulatory proceedings in Malaysia involving the Company, including pending criminal proceedings against subsidiaries of GS Group and certain of their current and former directors, relating to the 1MDB transactions and the Conduct. On October 22, 2020, the U.K. Financial Conduct Authority and the U.K. Prudential Regulation Authority each entered a warning notice (together, the “U.K. Notices”) against Goldman Sachs International (“GSI”), an indirect wholly owned subsidiary of GS Group, relating to GSI's failure to assess and manage the risks associated with the 1MDB transactions, properly record how GSI committees assessed and managed those risks and respond appropriately to allegations of bribery. The Hong Kong Securities and Futures Commission issued a Statement of Disciplinary Action (the “SFC Statement”) against Goldman Sachs (Asia) L.L.C. (“GS Asia”), an indirect wholly owned subsidiary of GS Group, on October 22, 2020, relating to GS Asia's failure to properly examine and address red flags in connection with the 1MDB transactions and to diligently supervise its senior personnel in connection with their participation in the 1MDB transactions. On October 22, 2020, the Singapore Commercial Affairs Department, at the direction of the Singapore Attorney General's Chambers, issued a Notice of Conditional Warning against Goldman Sachs (Singapore) Pte, an indirect wholly owned subsidiary of GS Group (“GS Singapore”), relating to the Conduct (the “Singapore Notice”). On October 22, 2020, the Monetary Authority of Singapore (the “MAS”) issued a letter of direction (the “MAS Letter”) requiring GS Singapore to appoint an independent auditor to review the effectiveness and sustainability of the remedial measures implemented by GS Singapore following the MAS' inspection.
1. Section 9(a)(1) of the Act provides, in pertinent part, that a person may not serve or act as an investment adviser or depositor of any registered investment company or as principal underwriter for any Open-End Fund, UIT, or FACC, if such person within ten years has been convicted of any felony or misdemeanor, including those arising out of such person's conduct as a broker, dealer or bank. Section 2(a)(10) of the Act defines the term “convicted” to include a plea of guilty. Section 9(a)(3) of the Act extends the prohibitions of section 9(a)(1) to a company, any affiliated person of which has been disqualified under the provisions of section 9(a)(1). Section 2(a)(3) of the Act defines “affiliated person” to include, among others, any person directly or indirectly controlling, controlled by, or under common control with, the other person. The Pleading Entity is an Affiliated Person of each of the other Applicants within the meaning of section 2(a)(3) of the Act. Therefore, the Applicants state that the Plea Agreement would result in a disqualification of each Fund Servicing Applicant for ten years under section 9(a)(3) were they to act in any of the capacities listed in section 9(a), by effect of a conviction described in section 9(a)(1).
2. Section 9(c) of the Act provides that: “[t]he Commission shall by order grant [an] application [for relief from the prohibitions of subsection 9(a)], either unconditionally or on an appropriate temporary or other conditional basis, if it is established [i] that the prohibitions of subsection 9(a), as applied to such person, are unduly or disproportionately severe or [ii] that the conduct of such person has been such as not to make it against the public interest or the protection of investors to grant such application.” Applicants have filed an application pursuant to section 9(c) seeking a Temporary Order and a Permanent Order exempting the Fund Servicing Applicants and other Covered Persons from the disqualification provisions of section 9(a) of the Act. The Covered Persons may, if the Orders are granted, in the future act in any of the capacities contemplated by section 9(a) of the Act subject to the applicable terms and conditions of the Orders.
3. Applicants believe they meet the standards for exemption specified in section 9(c). Applicants assert that (i) the scope of the misconduct was limited and did not involve any of the Applicants acting as an investment adviser, depositor or principal underwriter for any Fund, or any Fund with respect to which the Fund Servicing Applicants engage in Fund Servicing Activities, (ii) application of the statutory bar would impose significant hardships on the Funds and their shareholders, (iii) the prohibitions of section 9(a), if applied to the Fund Servicing Applicants, would be unduly or disproportionately severe and (iv) the Conduct did not constitute conduct that would make it against the public interest or protection of investors to grant the exemption from section 9(a).
4. Applicants represent that the Conduct did not involve any of Applicants acting in the capacity as an investment adviser, depositor or principal underwriter for any Fund. Applicants represent that the Conduct similarly did not involve any Fund with respect to which the Fund Servicing Applicants engage in Fund Servicing Activities.
5. Applicants acknowledge that the Conduct also reflected failures of GS Group control functions and that the Company's control functions and committees should have done more to follow up on red flags. The application states that five employees identified in the Statement of Facts as having been involved in these failures are employed by affiliates of the Pleading Entity that are not Covered Persons. Applicants represent, however, that none of these five employees has been, or will in the future be, employed by a Covered Person relying on the Orders or otherwise involved in the Fund Servicing Activities.
6. Applicants state that one of the employees discussed above was employed by a Fund Servicing Applicant before the 1MDB bond transactions, but was employed by an affiliate that is not a Fund Servicing Applicant at the time of the 1MDB bond transactions. Applicants state that this employee did not engage in the Conduct. Applicants further state that, after the 1MDB bond transactions were completed, the employee became aware of and failed to escalate information and concerns about bribery related to the bond transactions. Applicants state that this individual currently serves as a manager or director of a Fund Servicing Applicant and has had, and in the future will have, no day-to-day involvement in Fund Servicing Activities. Applicants state that this individual's role includes oversight of that Fund Servicing Applicant commensurate with the responsibilities of a manager or director.
7. Applicants state that GS Group is committed to promoting a general culture of compliance, including continuing to implement significant changes in connection with its relevant practices and controls, as summarized below and described in more detail in the application. Applicants assert that, in light of the limited scope of the Conduct, it would be unduly and disproportionately severe to impose a section 9(a) disqualification on the Fund Servicing Applicants. Applicants assert that the conduct of the Applicants has not been such to make it against the public interest or the protection of investors to grant the exemption from section 9(a).
8. Applicants assert that neither the protection of investors nor the public interest would be served by permitting the section 9(a) disqualifications to apply to the Fund Servicing Applicants because those disqualifications would deprive the Fund of the advisory or sub-advisory and underwriting services that shareholders expected the Funds would receive when they decided to invest in the Funds. Applicants also assert that the prohibitions of section 9(a) could operate to the financial detriment of the Funds and their shareholders, including by causing the Funds to spend time and resources to engage substitute advisers, subadvisers, and principal underwriters, which would be an unduly and disproportionately severe consequence given that the Conduct did not involve any of the Fund Servicing Activities.
9. Applicants assert that if the Fund Servicing Applicants were barred under section 9(a) from providing investment advisory services to the Funds and were unable to obtain the requested exemption, the effect on their businesses and employees would be severe. Applicants state that the Fund Servicing Applicants have committed substantial capital and other resources to establishing expertise in advising and sub-advising Funds with a view to continuing and expanding this business, which Applicants consider strategically important. Similarly, Applicants represent that if GS&Co. were barred under section 9(a) from continuing to provide underwriting services to the Funds and were unable to obtain the requested exemption, the effect on its current business and employees would be significant. GS&Co. has committed capital and other resources to establish expertise in underwriting the securities of the Funds and to establish distribution arrangements for Fund shares. Applicants further state that prohibiting the Fund Servicing Applicants from engaging in Fund Servicing Activities would not only adversely affect their business, but would also adversely affect their employees who are involved in these activities.
10. Applicants represent that: (1) None of the current or former directors, officers or employees of Applicants (other than certain former personnel of the Pleading Entity and GS&Co.
11. Applicants have agreed that none of GS Group, the Applicants or any of the other Covered Persons will employ the former employees of an affiliate of the Pleading Entity or any other person who subsequently may be identified by the Pleading Entity or any U.S. or non-U.S. regulatory or enforcement agencies as having been responsible for the Conduct in any capacity without first making a further application to the Commission pursuant to section 9(c).
12. Applicants have also agreed that GS Group and each Applicant and Covered Person will adopt and implement policies and procedures reasonably designed to ensure compliance with the terms and conditions of the Orders granted under section 9(c).
13. In addition, GS Group and each Applicant and Covered Person will comply in all material respects with the material terms and conditions of the Plea Agreement and with the material terms of the DPA, the FRB Order, the DFS Order, the SEC Order, the Malaysian Settlement Agreement, the U.K. Notices, the SFC Statement, the Singapore Notice, the MAS Letter, and any other orders issued by regulatory or enforcement agencies addressing the Conduct. Applicants note that in connection with the DPA, GS Group will represent that it has implemented and will continue to implement a compliance and ethics program designed to prevent and detect violations of the FCPA and other anti-corruption laws
14. Applicants further state that GS Group and its affiliates have undertaken certain other remedial measures, as described in greater detail in the application. These remedial measures include: Enhancing the scrutiny of senior personnel in high-risk areas and products, heightening the firm's focus on accountability when employee red flags are identified, and taking steps to ensure that employees are hearing about compliance expectations from the firm's executive management. Applicants state that GS Group has also been strengthening processes to heighten attention to potential red flags identified by deal teams and committees, increasing representation of the firm's control functions in key vetting groups and committees, and reviewing transactions earlier in the life cycle to reduce the possibility that later momentum in the deals could inappropriately carry them over the line for approval. Applicants also state that the firm has been continually improving its electronic surveillance to take advantage of recent technological advances and has increased its commitment to spending on compliance efforts and headcount in order to maintain the efficacy of the enhancements described above and to continue improving the firm's controls and systems.
15. As a result of the foregoing, the Applicants submit that absent relief, the prohibitions of section 9(a) would be unduly or disproportionately severe, and that the Conduct did not constitute conduct that would make it against the public interest or protection of investors to grant the exemption.
16. To provide further assurance that the exemptive relief being requested in the application would be consistent with the public interest and the protection of the investors, the Applicants agree that they will, as soon as reasonably practical, with respect to each of the Funds for which a Fund Servicing Applicant is the primary adviser, distribute to the boards of directors or trustees of the Funds (“Board”) written materials describing the circumstances that led to the Plea Agreement, as well as any effects on the Funds and the application. The written materials will include an offer to discuss the materials at an in-person meeting with the Board, including the directors who are not “interested persons” of the Funds as defined in section 2(a)(19) of the Act and their “independent legal counsel” as defined in rule 0-1(a)(6) under the Act, if any. With respect to each of the Funds for which a Fund Servicing Applicant is not the primary investment adviser, the relevant Fund Servicing Applicant will provide such materials to the Fund's primary investment adviser and offer to discuss the materials with such primary investment adviser. The Applicants undertake to provide the Boards with all information concerning the Plea Agreement and the application as necessary for those Funds to fulfill their disclosure and other obligations under the U.S. federal securities laws and will provide them a copy of the Judgment as entered by the District Court.
17. Certain Fund Servicing Applicants, as well as certain of their affiliates, have previously applied for exemptive orders under section 9(c) of the Act, as described in greater detail in the application. Applicants, however, note that none of the conduct underlying the previous section 9(c) orders granted to Fund Servicing Applicants involved the provision of Fund Servicing Activities.
Applicants agree that any order granted by the Commission pursuant to the application will be subject to the following conditions:
1. Any temporary exemption granted pursuant to the application will be without prejudice to, and will not limit the Commission's rights in any manner with respect to, any Commission investigation of, or administrative proceedings involving or against, Covered Persons, including, without limitation, the consideration by the Commission of a permanent exemption from section 9(a) of the Act requested pursuant to the application or the revocation or removal of any temporary exemptions granted under the Act in connection with the application.
2. None of GS Group, the Applicants or any of the other Covered Persons will employ the former employees of an affiliate of the Pleading Entity or any other person who subsequently may be identified by the Pleading Entity or any U.S. or non-U.S. regulatory or enforcement agencies as having been responsible for the Conduct in any capacity without first making a further application to the Commission pursuant to section 9(c).
3. GS Group and each Applicant and Covered Person will adopt and implement policies and procedures reasonably designed to ensure that it will comply with the terms and conditions of the Orders within 60 days of the date of the Permanent Order or, with respect to condition four, such later date or dates as may be contemplated by the Plea Agreement, the DPA, the FRB Order, the DFS Order, the SEC Order, the Malaysian Settlement Agreement, the U.K. Notices, the SFC Statement, the Singapore Notice, the MAS Letter or any other
4. GS Group and each Applicant and Covered Person will comply in all material respects with the material terms and conditions of the Plea Agreement and with the material terms of the DPA, the FRB Order, the DFS Order, the SEC Order, the Malaysian Settlement Agreement, the U.K. Notices, the SFC Statement, the Singapore Notice, the MAS Letter and any other orders issued by regulatory or enforcement agencies addressing the Conduct. In addition, within 30 days of each anniversary of the Permanent Order (until and including the third such anniversary), GS Group will submit a certification signed by its chief executive officer and its global head of regulatory affairs, confirming that the Pleading Entity has complied with the terms and conditions of the Plea Agreement in all material respects and that GS Group has complied with the terms and conditions of the DPA in all material respects. Each such certification will be submitted to the Chief Counsel of the Commission's Division of Investment Management with a copy to the Chief Counsel of the Commission's Division of Enforcement.
5. Applicants will provide written notification to the Chief Counsel of the Commission's Division of Investment Management with a copy to the Chief Counsel of the Commission's Division of Enforcement of a material violation of the terms and conditions of the Orders within 30 days of discovery of the material violation. In addition, GS Group will submit to the Chief Counsel of the Commission's Division of Investment Management, with a copy to the Chief Counsel of the Commission's Division of Enforcement, a copy of each report submitted to the Department of Justice pursuant to Paragraph 14 and Attachments C and D of the DPA within five days of the submission of each report to the Department of Justice. GS Group's first such report will be signed by its chief executive officer and global head of regulatory affairs.
The Commission has considered the matter and finds that Applicants have made the necessary showing to justify granting a temporary exemption.
Accordingly,
By the Commission.
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Securities Act Rule 173 (17 CFR 230.173) provides a notice of registration to investors who purchased securities in a registered offering under the Securities Act of 1933 (15 U.S.C. 77a
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number.
The public may view background documentation for this information collection at the following website:
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Rule 13e-3 (17 CFR 240.13e-3) and Schedule 13E-3 (17 CFR 240.13e-100)—Rule 13e-3 prescribes the filing, disclosure and dissemination requirements in connection with a going private transaction by an issuer or an affiliate. Schedule 13E-3 provides shareholders and the marketplace with material information concerning a going private transaction. The information collected permits verification of compliance with securities laws requirements and ensures the public availability and dissemination of the collected information. This information is made available to the public. Information provided on Schedule 13E-3 is mandatory. We estimate that Schedule 13E-3 is filed by approximately 77 issuers annually and it takes approximately 137.42 hours per response. We estimate that 25% of the 137.42 hours per response is prepared by the filer for a total annual reporting
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number.
The public may view background documentation for this information collection at the following website:
Dated: October 22, 2020.
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Regulation 14D (17 CFR 240.14d-1—240.14d-11) and Regulation 14E (17 CFR 240.14e-1—240.14f-1) and related Schedule 14D-9 (17 CFR 240.14d-101) require information important to security holders in deciding how to respond to tender offers. This information is made available to the public. Information provided on Schedule 14D-9 is mandatory. Schedule 14D-9 takes approximately 260.56 hours per response to prepare and is filed by 169 companies annually. We estimate that 25% of the 260.56 hours per response (65.14 hours) is prepared by the company for an annual reporting burden of 11,009 hours (65.14 hours per response × 169 responses).
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number.
The public may view background documentation for this information collection at the following website:
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
Cboe BZX Exchange, Inc. (the “Exchange” or “BZX Options”) proposes to enhance its drill-through protections and make other clarifying changes. The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to enhance its drill-through protections for orders and make other clarifying changes. Currently, pursuant to Rule 21.17(d), the System will execute a marketable buy (sell) order, respectively, up to a buffer amount above (below) the limit of the Opening Collar or the national best offer (“NBO”) (national best bid (“NBB”)), as applicable (the “drill-through price”). The System enters any order (or unexecuted portion) into the BZX Options Book at the drill-through price for a specified period of time (determined by the Exchange).
The Exchange proposes to permit orders to rest in the BZX Options Book for multiple time periods and at more
For example, suppose the Exchange's market for a series in a class with a 0.05 minimum increment is 0.90-1.00, represented by a quote for 10 contracts on each side (the quote offer is Quote A). The following sell orders or quote offers for the series also rest in the BZX Options Book:
• Order A: 10 contracts at 1.05;
• Quote B: 10 contracts at 1.10;
• Order B: 10 contracts at 1.15; and
• Order C: 20 contracts at 1.25.
The market for away exchanges is 0.80-1.45. The Exchange's buffer amount for the class is 0.10, the drill-through resting time period is one second, and the number of time periods is three. The System receives an incoming order to buy 100 at 1.40, which executes against resting orders and quotes as follows: 10 Against Quote A at 1.00 (which is the national best offer), 10 against Order A at 1.05, and 10 against Quote B at 1.10. The System will not automatically execute any of the remaining 70 contracts from the incoming buy order against Order B, because 1.15 is more than 0.10 away from the national best offer at the time of order entry of 1.00 and thus exceeds the drill-through price check. The 70 unexecuted contracts then rest in the BZX Options Book for one second at a price of 1.10 (the initial drill-through price). No incoming orders are entered during that one-second time period to trade against the remaining 70 contracts. The System then re-prices the buy order in the BZX Options Book at a new drill-through price of 1.20 (drill-through price plus one buffer of 0.10). Ten contracts immediately execute against Order B at a price of 1.15 (the buy order is still handled as the “incoming order” that executes against the resting Order B, and thus receives price improvement to 1.15). An incoming order to sell 20 contracts at 1.20 enters the BZX Options Book and executes against 20 of the resting contracts at that price. At the end of the second one-second time period, there are 40 remaining contracts. These contracts then rest in the BZX Options Book at a price of 1.30 for the final one second time period. Twenty contracts immediately execute against Order C at a price of 1.25. No incoming orders are entered during that time period to trade against the remaining 20 contracts. At the end of the final one-second time period, the System cancels the remaining 20 contracts.
The proposed rule change also makes certain clarifying and nonsubstantive changes, including movement of certain terms and provisions within Rule 21.17(d) due to the proposed rule changes described above. First, the proposed rule change combines the provisions in current subparagraphs (1) and (2) of Rule 21.17(d) into proposed subparagraph (1). The drill-through protection in the following subparagraphs of Rule 21.17(d) (currently and as proposed) apply to orders that enter the BZX Options Book at the conclusion of the opening auction and intraday in the same manner. Therefore, current (and proposed) subparagraph (d)(2) apply to all orders that enter the BZX Options Book as described in proposed subparagraph (d)(1) (current subparagraphs (d)(1) and (2)). The proposed rule change clarifies that the drill-through protection applies to all orders that would enter the BZX Options Book at prices worse than the drill-through price, including orders not executed during the opening auction and orders entered intraday. This is consistent with and a clarification of current functionality.
Second, the proposed rule change adds clarifying language regarding how the System handles orders for which the limit price is equal to or less than (if a buy order) or greater than (if a sell order) the drill-through price. Current Rule 21.17(d) contemplates that orders with limit prices equal to or less aggressive than the drill-through price will not be subject to the mechanism pursuant to which orders will rest in the BZX Options Book for a time period and then be cancelled. Specifically, Rule 21.17(d) states if a buy (sell) order would execute or post to the BZX Options Book at a price
The proposed rule change clarifies that notwithstanding the provisions described above regarding an order resting in the BZX Options Book for brief time periods at drill-through prices, if a buy (sell) order's limit price equals or is less (greater) than the drill-through price at any time during application of the drill-through mechanism, the order rests in the BZX Options Book, subject to a User's
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In particular, the Exchange believes the proposed enhancement to the drill-through mechanism removes impediments to and perfects the mechanism of a free and open market and a national market system, and, in general, protects investors and the public interest. The proposed rule change will permit orders (or unexecuted portions) to rest in the BZX Options Book at different displayed prices for a brief but overall longer period of time, which will provide market participants' orders with additional execution opportunities while continuing to protect them against execution at potentially erroneous prices. The proposed enhancement to the drill-through protection is similar to current drill-through functionality. The Exchange may determine the buffer amount for orders and the time period in which orders may rest in the BZX Options Book. The proposed rule change permits an order to rest at multiples of the buffer amount, which would have the same effect as the Exchange setting a larger buffer amount. For example, if the Exchange set a buffer amount of $0.75, that would allow orders to execute at any price no further than $0.75 away from the NBBO at the time of order entry (including at prices $0.25 and $0.50 away from the NBBO at the time of order entry). This allows for the same potential execution prices that would be possible if the Exchange set a buffer of $0.25 and three time periods under the proposed rule change. While the overall time period for which an order may rest in the BZX Options Book may be longer than the currently permissible time period, the longer time period will still be relatively brief (maximum of 15 seconds). The Exchange notes it may maintain the same buffer amounts that are in place today. However, rather than increase the buffer amount at one time, the proposed rule change adds the overall larger buffer amount incrementally over a potentially overall longer time period. While this may permit executions at prices farther away from the NBBO at the time of order entry, it will still never permit executions at prices through orders' limit prices. This will provide execution opportunities for orders at incremental amounts away from the NBBO over a slightly longer time period and thus against a potentially larger number of orders. Users also have the ability to cancel orders prior to the completion of the time periods if they do not want the orders resting for a longer period of time.
The Exchange believes the proposed clarifying and nonsubstantive changes to the drill-through protection rules protect investors by adding transparency to the rules regarding the drill-through functionality. These changes are consistent with current functionality and thus do not impact the applicability of the drill-through mechanism to orders.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that the proposed rule change will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because the enhanced drill-through protection will apply to all marketable orders in the same manner. Users may cancel orders resting on the BZX Options Book during the drill-through time periods.
The Exchange does not believe that the proposed rule change will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because it relates solely to how and when marketable orders will rest on the BZX Options Book. The proposed enhancement to the drill-through protection is consistent with the current protection and provides orders subject to the protection with additional execution opportunities while providing continued protection against execution against potentially erroneous prices.
The Exchange believes the proposed rule change would ultimately provide all market participants with additional execution opportunities when appropriate while providing protection from erroneous execution. The Exchange believes the proposal will enhance risk protections, the individual firm benefits of which flow downstream to counterparties both at the Exchange and at other options exchanges, which increases systemic protections as well. The Exchange believes enhancing risk protections will allow Users to enter orders and quotes with further reduced fear of inadvertent exposure to excessive risk, which will benefit investors through increased liquidity for the execution of their orders. Without adequate risk management tools, such as the one proposed to be enhanced in this filing, Trading Permit Holders could reduce the amount of order flow and liquidity they provide. Such actions may undermine the quality of the markets available to customers and other market participants. Accordingly, the proposed rule change is designed to encourage Trading Permit Holders to submit additional order flow and liquidity to the Exchange. The proposed flexibility may similarly provide additional execution opportunities, which further benefits liquidity in potentially volatile markets. In addition,
The proposed clarifying and nonsubstantive changes are consistent with current functionality and are intended to add clarity to the Rules, and thus the Exchange expects those changes to have no competitive impact.
The Exchange neither solicited nor received comments on the proposed rule change.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
U.S. Small Business Administration.
Notice.
This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of Oregon (FEMA-4562-DR), dated 10/20/2020.
Issued on 10/20/2020.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205-6734.
Notice is hereby given that as a result of the President's major disaster declaration on 10/20/2020, Private Non-Profit organizations that provide essential services of a governmental nature may file disaster loan applications at the address listed above or other locally announced locations.
The following areas have been determined to be adversely affected by the disaster:
The Interest Rates are:
The number assigned to this disaster for physical damage is 167105 and for economic injury is 167110.
On October 7, 2020, Somerset Railroad Corporation (SRC) filed with the Surface Transportation Board (Board) a petition under 49 U.S.C. 10502 for exemption from the prior approval requirements of 49 U.S.C. 10903 to abandon approximately 13.39 miles of rail line located in Niagara County, N.Y. (the Line). The Line extends from milepost 2.2 to a power plant located at the end of the line and traverses U.S. Postal Service Zip Codes 14012, 14008, 14108, and 14094. SRC states that there are no stations on the Line. (Pet. 5.)
According to SRC, the Line was constructed to provide rail service to the Somerset power generation station, which was decommissioned as of March 31, 2020, and had been the sole shipper on the Line. (Pet. 1-2.) SRC states that it last provided rail service to the power plant in December 2019 and that the Line cannot be used for overhead traffic because it is stub-ended. (
SRC states that, based on the information in its possession, the Line does not contain federally granted rights-of-way. (
The interest of railroad employees will be protected by the conditions set forth in
By issuing this notice, the Board is instituting an exemption proceeding pursuant to 49 U.S.C. 10502(b). A final decision will be issued by January 25, 2021.
Any offer of financial assistance (OFA) under 49 CFR 1152.27(b)(2) will be due no later than 120 days after the filing of the petition for exemption, or 10 days after service of a decision granting the petition for exemption, whichever occurs sooner. Persons interested in submitting an OFA must first file a formal expression of intent to file an offer by November 6, 2020, indicating the type of financial assistance they wish to provide (
Following abandonment, the Line may be suitable for other public use, including interim trail use. Any request for a public use condition under 49 CFR 1152.28 or for trail use/rail banking under 49 CFR 1152.29 will be due no later than November 16, 2020.
All pleadings, referring to Docket No. AB 1303X, should be filed with the Surface Transportation Board via e-filing on the Board's website. In addition, a copy of each pleading must be served on SRC's representative, Justin J. Marks, Clark Hill PLC, 1001 Pennsylvania Avenue NW, Suite 1300 South, Washington, DC 20004. Replies to the petition are due on or before November 16, 2020.
Persons seeking further information concerning abandonment procedures may contact the Board's Office of Public Assistance, Governmental Affairs, and Compliance at (202) 245-0238 or refer to the full abandonment regulations at 49 CFR part 1152. Questions concerning environmental issues may be directed to the Board's Office of Environmental Analysis (OEA) at (202) 245-0305. Assistance for the hearing impaired is available through the Federal Relay Service at (800) 877-8339.
An environmental assessment (EA) (or environmental impact statement (EIS), if necessary) prepared by OEA will be served upon all parties of record and upon any other agencies or persons who comment during its preparation. Other interested persons may contact OEA to obtain a copy of the EA (or EIS). EAs in abandonment proceedings normally will be made available within 60 days of the filing of the petition. The deadline for submission of comments on the EA generally will be within 30 days of its service.
Board decisions and notices are available at
By the Board, Allison C. Davis, Director, Office of Proceedings.
Maritime Administration, DOT.
Notice.
The Secretary of Transportation, as represented by the Maritime Administration (MARAD), is authorized to grant waivers of the U.S.-build requirements of the coastwise trade laws to allow the carriage of no more than twelve passengers for hire on vessels, which are three years old or more. A request for such a waiver has been received by MARAD. The vessel, and a brief description of the proposed service, is listed below.
Submit comments on or before November 27, 2020.
You may submit comments identified by DOT Docket Number MARAD-2020-0141 by any one of the following methods:
•
•
Russell Haynes, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE, Room W23-461, Washington, DC 20590. Telephone 202-366-3157, Email
As described by the applicant the intended service of the vessel UBUNTU is:
The complete application is available for review identified in the DOT docket as MARAD-2020-0141 at
Please submit your comments, including the attachments, following the instructions provided under the above heading entitled
Go to the docket online at
Yes. Be aware that your entire comment, including your personal identifying information, will be made publicly available.
If you wish to submit comments under a claim of confidentiality, you should submit three copies of your complete submission, including the information you claim to be confidential business information, to the Department of Transportation, Maritime Administration, Office of Legislation and Regulations, MAR-225, W24-220, 1200 New Jersey Avenue SE, Washington, DC 20590. Include a cover letter setting forth with specificity the basis for any such claim and, if possible, a summary of your submission that can be made available to the public.
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, to
49 CFR 1.93(a), 46 U.S.C. 55103, 46 U.S.C. 12121.
* * *
By Order of the Maritime Administrator.
Maritime Administration, DOT.
Notice.
The Secretary of Transportation, as represented by the Maritime Administration (MARAD), is authorized to grant waivers of the U.S.-build requirements of the coastwise trade laws to allow the carriage of no more than twelve passengers for hire on vessels, which are three years old or more. A request for such a waiver has been received by MARAD. The vessel, and a brief description of the proposed service, is listed below.
Submit comments on or before November 27, 2020.
You may submit comments identified by DOT Docket Number MARAD-2020-0139 by any one of the following methods:
•
•
Russell Haynes, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE, Room W23-461, Washington, DC 20590. Telephone 202-366-3157, Email
As described by the applicant the intended service of the vessel SEACLUSION is:
The complete application is available for review identified in the DOT docket as MARAD-2020-0139 at
Please submit your comments, including the attachments, following the instructions provided under the above heading entitled
Go to the docket online at
Yes. Be aware that your entire comment, including your personal identifying information, will be made publicly available.
If you wish to submit comments under a claim of confidentiality, you should submit three copies of your complete submission, including the information you claim to be confidential business information, to the Department of Transportation, Maritime Administration, Office of Legislation and Regulations, MAR-225, W24-220, 1200 New Jersey Avenue SE, Washington, DC 20590. Include a cover letter setting forth with specificity the basis for any such claim and, if possible, a summary of your submission that can be made available to the public.
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, to
49 CFR 1.93(a), 46 U.S.C. 55103, 46 U.S.C. 12121
By Order of the Maritime Administrator.
Maritime Administration, DOT
Notice and request for comments.
In compliance with the Paperwork Reduction Act of 1995, this notice announces that the Information Collection Request (ICR) abstracted below is being forwarded to the Office of Management and Budget (OMB) for review and comments. A
Comments must be submitted on or before November 27, 2020.
Written comments and recommendations for the proposed information collection should be sent to
Daniel Ladd, Director, 202-366-5769, Office of Financial Approvals, Maritime Administration, U.S. Department of Transportation, 1200 New Jersey Avenue SE, Washington, DC 20590.
The Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended; and 49 CFR 1.93
By Order of the Maritime Administrator.
Maritime Administration, DOT.
Notice.
The Secretary of Transportation, as represented by the Maritime Administration (MARAD), is authorized to grant waivers of the U.S.-build requirements of the coastwise trade laws to allow the carriage of no more than twelve passengers for hire on vessels, which are three years old or more. A request for such a waiver has been received by MARAD. The vessel, and a brief description of the proposed service, is listed below.
Submit comments on or before November 27, 2020.
You may submit comments identified by DOT Docket Number MARAD-2020-0140 by any one of the following methods:
•
•
Russell Haynes, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE, Room W23-461, Washington, DC 20590. Telephone 202-366-3157, Email
As described by the applicant the intended service of the vessel
The complete application is available for review identified in the DOT docket as MARAD-2020-0140 at
Please submit your comments, including the attachments, following the instructions provided under the above heading entitled
Go to the docket online at
Yes. Be aware that your entire comment, including your personal identifying information, will be made publicly available.
If you wish to submit comments under a claim of confidentiality, you should submit three copies of your complete submission, including the information you claim to be confidential business information, to the Department of Transportation, Maritime Administration, Office of Legislation and Regulations, MAR-225, W24-220, 1200 New Jersey Avenue SE, Washington, DC 20590. Include a cover letter setting forth with specificity the basis for any such claim and, if possible, a summary of your submission that can be made available to the public.
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, to
49 CFR 1.93(a), 46 U.S.C. 55103, 46 U.S.C. 12121
By Order of the Maritime Administrator.
Maritime Administration, DOT.
Notice and request for comments.
In compliance with the Paperwork Reduction Act of 1995, this notice announces that the Information Collection Request (ICR) abstracted below is being forwarded to the Office of Management and Budget (OMB) for review and comments. The information requested is needed by the Maritime Administration (MARAD) and the Department of Defense (DoD), including representatives from U.S. Transportation Command and its components, to assess respondents' eligibility for participation in the VISA program. A
Comments must be submitted on or before November 27, 2020.
Written comments and recommendations for the proposed information collection should be sent to
William McDonald, 202-366-0688, Office of Sealift Support, Maritime Administration, U.S. Department of Transportation, 1200 New Jersey Avenue SE, W25-310, Washington, DC, 20590.
The Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended; and 49 CFR 1.93
By Order of the Maritime Administrator.
Maritime Administration, DOT.
Notice and request for comments.
In compliance with the Paperwork Reduction Act of 1995, this notice announces that the Information Collection Request (ICR) abstracted below is being forwarded to the Office of Management and Budget (OMB) for review and comments. A
Comments must be submitted on or before November 27, 2020.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Barbara Jackson, (202) 366-0615, Office of Management and Administrative Services, Maritime Administration, U.S. Department of Transportation, 1200 New Jersey Avenue SE, Washington, DC 20590.
The Paperwork Reduction Act of 1995; 44 U.S.C. Chapter 35, as amended; and
49 CFR 1.93
By Order of the Maritime Administrator.
Department of the Treasury.
Notice of availability; Request for comments.
The Board of Trustees of the Carpenters Pension Trust Fund-Detroit & Vicinity Pension Fund, a multiemployer pension plan, has submitted an application to reduce benefits under the plan in accordance with the Multiemployer Pension Reform Act of 2014 (MPRA). The purpose of this notice is to announce that the application submitted by the Board of Trustees of the Carpenters Pension Trust Fund-Detroit & Vicinity Pension Fund has been published on the website of the Department of the Treasury (Treasury), and to request public comments on the application from interested parties, including participants and beneficiaries, employee organizations, and contributing employers of the Carpenters Pension Trust Fund-Detroit & Vicinity Pension Fund.
Comments must be received by December 11, 2020.
You may submit comments electronically through the Federal eRulemaking Portal at
Comments may be mailed to the Department of the Treasury, MPRA Office, 1500 Pennsylvania Avenue NW, Room 1224, Washington, DC 20220, Attn: Danielle Norris. Comments sent via facsimile, telephone, or email will not be accepted.
For information regarding the application from the Carpenters Pension Trust Fund-Detroit & Vicinity Pension Fund, please contact Treasury at (202) 622-1534 (not a toll-free number).
MPRA amended the Internal Revenue Code to permit a multiemployer plan that is projected to have insufficient funds to reduce pension benefits payable to participants and beneficiaries if certain conditions are satisfied. In order to reduce benefits, the plan sponsor is required to submit an application to the Secretary of the Treasury, which must be approved or denied in consultation with the Pension Benefit Guaranty Corporation (PBGC) and the Department of Labor.
On September 29, 2020, the Carpenters Pension Trust Fund-Detroit & Vicinity Pension Fund's Board of Trustees submitted an application for approval to reduce benefits under the plan. As required by MPRA, that application has been published on Treasury's website at
Comments are requested from interested parties, including participants and beneficiaries, employee organizations, and contributing employers of the Carpenters Pension Trust Fund-Detroit & Vicinity Pension Fund. Consideration will be given to any comments that are timely received by Treasury.
Department of the Treasury.
Notice of availability; Request for comments.
The Board of Trustees of the Arizona Bricklayers' Pension Trust Fund, a multiemployer pension plan, has submitted an application to reduce benefits under the plan in accordance with the Multiemployer Pension Reform Act of 2014 (MPRA). The purpose of this notice is to announce that the application submitted by the Board of Trustees of the Arizona Bricklayers' Pension Trust Fund has been published on the website of the Department of the Treasury (Treasury), and to request public comments on the application from interested parties, including participants and beneficiaries, employee organizations, and contributing employers of the Arizona Bricklayers' Pension Trust Fund.
Comments must be received by December 11, 2020.
You may submit comments electronically through the Federal eRulemaking Portal at
Comments may be mailed to the Department of the Treasury, MPRA Office, 1500 Pennsylvania Avenue NW, Room 1224, Washington, DC 20220, Attn: Danielle Norris. Comments sent via facsimile, telephone, or email will not be accepted.
For information regarding the application from the Arizona Bricklayers' Pension Trust Fund, please contact Treasury at (202) 622-1534 (not a toll-free number).
MPRA amended the Internal Revenue Code to permit a multiemployer plan that is projected to have insufficient funds to reduce pension benefits payable to participants and beneficiaries if certain conditions are satisfied. In order to reduce benefits, the plan sponsor is required to submit an application to the Secretary of the Treasury, which must be approved or denied in consultation with the Pension Benefit Guaranty Corporation (PBGC) and the Department of Labor.
On September 30, 2020, the Arizona Bricklayers' Pension Trust Fund's Board of Trustees submitted an application for approval to reduce benefits under the plan. As required by MPRA, that application has been published on Treasury's website at
Comments are requested from interested parties, including participants and beneficiaries, employee organizations, and contributing employers of the Arizona Bricklayers' Pension Trust Fund. Consideration will be given to any comments that are timely received by Treasury.
The Department of Veterans Affairs (VA) gives notice under the Federal Advisory Committee Act, that a virtual meeting of the Advisory Committee on Disability Compensation (the Committee) will begin and end as follows:
The virtual meeting is open to the public.
The purpose of the Committee is to advise the Secretary of Veterans Affairs on the maintenance and periodic readjustment of the VA Schedule for Rating Disabilities. The Committee is to assemble and review relevant information relating to the nature and character of disabilities arising during service in the Armed Forces, provide an ongoing assessment of the effectiveness of the rating schedule, and give advice on the most appropriate means of responding to the needs of Veterans relating to disability compensation.
The agenda will include overview briefings on the VA Schedule for Rating Disabilities, the Real Team, Benefits Delivery at Discharge (BDD) expansion, COVID-19 and examinations, and the Vocational Rehabilitation and Employment program.
No time will be allocated at this virtual meeting for receiving oral presentations from the public. Interested individuals may submit a one (1) to two (2) page summary of their written statements for the Committee's review. Public statements may be received no later than November 19, 2020, for inclusion in the official meeting record. Please send these to Sian Roussel of the Veterans Benefits Administration, Compensation Service at
Members of the public who wish to obtain a copy of the agenda should contact Sian Roussel at
For any public member who would like to attend the virtual meeting, please use the call-in number 1-800-767-1750; and access code:
Securities and Exchange Commission.
Final rule.
The Securities and Exchange Commission (the “SEC” or the “Commission”) is adopting amendments to Rule 15c2-11 (the “Rule”) under the Securities Exchange Act of 1934 (the “Exchange Act”), which governs the publication of quotations for securities in a quotation medium other than a national securities exchange,
Laura Gold, Special Counsel, John Guidroz, Branch Chief, James Curley, Theresa Hajost, Samuel Litz, Patrice Pitts, Special Counsels, Elizabeth Sandoe, Senior Special Counsel, Josephine Tao, Assistant Director, Office of Trading Practices, and Mark Wolfe, Associate Director, Office of Derivatives Policy and Trading Practices, and John Fahey, Senior Special Counsel, Office of Chief Counsel, Division of Trading and Markets, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549, at (202) 551-5777.
The Commission is adopting amendments to Rule 15c2-11 under the Exchange Act [15 U.S.C. 78a
The Commission is adopting amendments to Rule 15c2-11, which sets out certain requirements for a broker-dealer seeking to initiate (or resume) quotations for securities in the OTC market.
Securities that trade in the OTC market are primarily owned by retail investors.
Further, the OTC market has changed significantly since the Rule was initially adopted in 1971
Responding to these developments, and as part of the Commission's overall efforts to protect retail investors from fraud and manipulation,
The amended Rule continues to require a broker-dealer to obtain and review basic information about an issuer of an OTC security before initiating or resuming a quoted market in the issuer's security.
The information review requirement in the amended Rule includes additional provisions that are designed to enhance transparency of issuer information and help to foster the integrity of the OTC market. Importantly, the amended Rule requires that the documents and information that a broker-dealer or qualified IDQS reviews generally must be current and publicly available. The amended Rule specifies under paragraph (b) the documents and information that must
The amended Rule contains several exceptions to the information review requirement. The amended Rule continues to provide an exception that permits broker-dealers to publish a quotation for unsolicited customer orders without complying with the information review requirement.
The amended Rule also adds three new exceptions. First, the amended Rule adds an exception for highly liquid securities of well-capitalized issuers if the security meets a multi-prong test involving the security's worldwide average daily trading volume value and its issuer's total assets and shareholders' equity.
In addition, the amended Rule modifies the “piggyback” exception, which allows a broker-dealer to rely on the quotations of another broker-dealer that initially complied with the information review requirement.
Generally, under the amended Rule, broker-dealers, qualified IDQSs, and a national securities association must preserve the applicable documents and information they reviewed, including to demonstrate reliance on an exception and in relation to publicly available determinations, for at least three years, the first two years in an easily accessible place.
The amended Rule also adds definitions for the terms “company insider,” “current,” “publicly available,” “qualified interdealer quotation system,” and “shell company.”
In general, the final amendments: (1) Provide greater transparency to retail investors and other market participants regarding issuers of quoted OTC securities, (2) limit the use of certain exceptions under the Rule to better protect retail investors from fraud and manipulation, and (3) add new exceptions to reduce unnecessary burdens on broker-dealers and to enhance the efficiency of the OTC market. As discussed in greater detail below, commenters supported many aspects of the proposal. For example, commenters stated that the proposal would help to modernize the Rule, better protect investors by facilitating increased availability of issuer information for OTC securities and their issuers,
Other commenters, however, believed that the proposal would not be effective in deterring fraud and manipulation, including pump-and-dump schemes,
As discussed further below, the Commission agrees that there may be a negative impact on liquidity for dark issuers (
The Commission does not expect the amended Rule to affect the liquidity and pricing of securities in the entire OTC market, as this commenter stated. A delinquent reporting issuer's security could experience a discount in price resulting from the risk that the issuer may not file its required report within 180 days from the end of a specified period. In such case, as discussed below in Part II.D.1, broker-dealers would not be able to rely on the piggyback exception to publish or submit quotations for such issuer's security if its paragraph (b) information were not “current” and “publicly available.” This scenario involving a particular subset of OTC securities is not expected to affect the liquidity and pricing of all quoted securities in the OTC market because individual securities in the OTC market generally are not included in a market index or benchmark that would be affected by any one security's liquidity or pricing. Further, to the extent an OTC security is included in an index or benchmark, such an index or benchmark would require that issuer information be current and publicly available.
Other commenters stated that additional regulation would make it more expensive to trade OTC securities.
Some commenters stated that the Rule should be left as is.
Another commenter stated that, instead of amending the Rule, the Commission should focus on enforcing rules governing market makers.
While certain of the Commission's initiatives to protect investors involve addressing fraudulent conduct that has already occurred, such as through the Commission's examination and enforcement programs, the Commission has also been proactive in taking measures that are designed to prevent fraudulent activity before it occurs.
The Commission is adopting substantially as proposed several amendments to the Rule, as discussed above. However, the Commission has modified the proposed Rule in a number of respects. Summarized below are key modifications from the proposal:
•
•
•
•
•
•
The Commission is adopting, largely as proposed, the amendment that requires an issuer's paragraph (b) information to be current and publicly available
The Commission sought comment about the proposal's requirement that an issuer's paragraph (b) information be current and publicly available for a broker-dealer to publish or submit, after complying with the information review requirement or after relying on the review performed by a qualified IDQS,
As discussed below in relation to the piggyback exception, the Commission believes that the public availability of an issuer's paragraph (b) information helps to alleviate concerns that limited or no information for certain OTC issuers, such as catch-all issuers, exists or that such information is difficult for retail investors to find.
The Commission is expanding the scope of market participants that may comply with the information review requirement.
The Commission proposed to permit a qualified IDQS to make known to others the publication or submission of a qualified IDQS review quotation.
The Commission sought comment about the proposed amendment to permit qualified IDQSs to comply with the information review requirement.
A qualified IDQS's requirements under paragraph (a)(2) of the amended Rule mirror the requirements for broker-dealers under paragraph (a)(1) of the amended Rule.
The Commission is adopting a new provision in the amended Rule to allow broker-dealers to rely on a qualified IDQS's publicly available determination that it complied with the information review requirement.
The Commission sought comment about the proposal for an exception to permit a broker-dealer to publish or submit a qualified IDQS review quotation.
The Commission is adopting new paragraph (a)(1)(ii) of the amended Rule,
In response to a comment stating that entities other than a broker-dealer or a qualified IDQS should be able to comply with the information review requirement,
The Commission has determined to require a qualified IDQS or registered national securities association that makes certain publicly available determinations in accordance with the amended Rule to establish, maintain, and enforce reasonably designed written policies and procedures associated with making such a determination. Such publicly available determinations may pertain to whether: (1) An issuer's paragraph (b) information is current and publicly available for purposes of the unsolicited quotation exception,
Commenters expressed general concern that the proposal would weaken Commission oversight of compliance with the Rule.
Specifically, paragraph (a)(3) under the amended Rule requires a qualified IDQS or registered national securities association that makes a publicly available determination regarding whether issuer information is current and publicly available, and, in some instances, whether the requirements of an exception are met, to establish, maintain, and enforce reasonably designed written policies and procedures to determine whether: (1) Paragraph (b) information is current and publicly available, and (2) the requirements of the paragraph (f)(7) exception are met.
The Commission is adopting as proposed
In response to the proposal, one commenter expressed concern that the proposal imposed a requirement to wait three business days before publishing quotations,
This amendment is not designed to serve as a waiting period, as one commenter suggested,
To simplify the amended Rule and improve its readability, the Commission is breaking out the provisions governing paragraph (b) information for reporting issuers by addressing each type of issuer in a separate paragraph. This amendment would not have changed any substantive obligations for a broker-dealer under the Rule and would remove from the list of issuers those that are covered by Section 12(g)(2)(B) under the Exchange Act because such issuers have a reporting obligation under Section 13 or 15(d) under the Exchange Act and would, therefore, already be covered by paragraph (b)(3)(i) under the proposed Rule.
The Commission is also expanding the list of specified paragraph (b) information for catch-all issuers to include the identity of company officers and large shareholders, along with additional information that commenters suggested, and is lengthening the amount of time for all catch-all issuer information to be updated for such information to meet the definition of “current.”
The Commission sought comment about the proposal to expand the list of
Another commenter stated that the Rule's requirements for paragraph (b) information for catch-all issuers to be current and publicly available should not be as onerous as the disclosure obligations imposed on reporting companies and that information that is required to be current and publicly available should not be too complicated for an investor to read.
One commenter suggested that the list of persons described in paragraph (b)(5)(i)(K) of the proposed Rule include the word “executive” in front of the word “officer” because, according to the commenter, an issuer may employ many persons with the title of “officer” who do not direct company-wide policies and do not manage the company.
Finally, the Commission has determined not to adopt the proposed requirement that would have required certain catch-all issuer financial information—the issuer's profit and loss and retained earnings statements—to be as of a date less than six months before the publication or submission of a broker-dealer's quotation for a catch-all issuer's security if the issuer's balance sheet were not as of a date within six months before such publication or submission of a quotation.
To facilitate investor access to information, the amended Rule requires broker-dealers that comply with the information review requirement to make catch-all issuer information available upon the request of a person expressing an interest in a proposed transaction in the issuer's security, such as by providing the requesting person with appropriate instructions regarding how to obtain publicly available information electronically.
The Commission sought comment on this aspect of the proposal and received support.
Consistent with the Commission's efforts to increase transparency about OTC securities for all investors, the Commission is adopting, as proposed, the provision that specifies that an issuer would be a “catch-all issuer” if the documents and information specified in paragraphs (b)(1) through (b)(4) of the amended Rule do not apply to the issuer.
One commenter stated that the term “catch-all issuer” is a term that many market participants will not understand. Hamilton & Associates Letter. This term, however, is used only for purposes of this release to refer to issuers for which documents and information are specified in paragraph (b)(5) of the amended Rule.
The Commission sought comment about the provision in paragraph (b)(5)(ii) of the proposed Rule that specified the two circumstances in which an issuer would be a catch-all issuer: (1) If an issuer is not a type of reporting issuer enumerated in (b)(1) through (b)(4) of the proposed Rule, and (2) if the information required to be reported by the particular type of reporting issuer is not current because, for example, it is not timely filed. One commenter stated that a company with a reporting obligation that files a Form NT and provides notice that it will not file a periodic report on a timely basis may become a catch-all issuer and thus be ineligible for quoting pursuant to the piggyback exception because, under paragraph (b)(5)(i)(L) of the proposed Rule, its financial information would be older than six months.
The Commission has determined to modify the proposed provision that specified that a reporting issuer would be a catch-all issuer if its information is no longer “current,”
While proposed Rule 15c2-11(b)(5)(ii) would have required that “[p]aragraph (b)(5) of this section [ ] apply to
In the context of maintaining a quoted market for an issuer's security, this change from the proposal (
The Commission has determined to add paragraph (b)(3)(iii) to the amended Rule as a technical amendment to align the amended Rule with Regulation Crowdfunding
Paragraph (b)(3)(iii) of the amended Rule specifies that the applicable information for a crowdfunding issuer is the issuer's most recent annual report
To help support the integrity of the OTC market and to promote investor protection by helping to ensure that market participants consider material information prior to the initiation of a quoted market for an issuer's security, the Commission is extending the application of the Rule's obligations regarding supplemental information
The Commission sought comment on its proposed changes to the supplemental information requirement, including extending the requirement to qualified IDQSs and requiring records of transactions involving issuers and
A broker-dealer or qualified IDQS is required to consider and record other supplemental information only if such information: (1) Is provided to the broker-dealer or qualified IDQS by the person on whose behalf the quotation is published (
Another commenter stated that information regarding the identity of the retail end-customer is not required to be publicly disclosed, so it is difficult for a broker-dealer that receives orders from correspondent brokers to have this information in its records on a transaction-by-transaction basis.
This commenter also requested that the supplemental information regarding company insiders be limited to information that has come to the knowledge or possession of the broker-dealer or qualified IDQS.
The Commission continues to believe that certain supplemental information is relevant for a broker-dealer or qualified IDQS to evaluate in establishing a reasonable basis under the circumstances for believing that an issuer's paragraph (b) information is accurate in all material respects and from a reliable source.
The Commission is amending the Rule as proposed to require that the entity that complies with the information review requirement must have in its records the documents and information related to the identity of the person or persons for whom the quotation is being submitted or published, including whether such person is the issuer or a company insider
The Commission is adopting various amendments to the piggyback exception, paragraph (f)(3), as discussed below.
The Commission is requiring that an issuer's paragraph (b) information be current and publicly available, timely filed, or filed within 180 calendar days from a specified time frame,
The Commission sought comment about the proposed amendment, including whether to permit a broker-dealer to rely on the piggyback exception to publish or submit quotations for the securities of catch-all issuers only where the issuer's proposed paragraph (b) information is current and has been made publicly available within six months before the date of publication or submission of such quotation. Commenters who supported this aspect of the proposal stated that it would help to strengthen investor protections by offering the investing public access to information about OTC companies
One commenter suggested that the Commission should repeal the piggyback exception because, as the commenter stated, it is “a loophole that has permitted broker-dealers to solicit interest from and sell OTC securities to retail investors without verifying any of the details of the security, including, whether the issuer actually exists.”
Some commenters stated their concern that prohibiting quotations for securities of companies that do not provide current and publicly available information would not prevent fraud and manipulation
The Commission understands commenters' concern regarding the proposed Rule's impact on certain OTC companies that do not make their information publicly available. Under the amended Rule, the potential reduction in public price discovery in an OTC security due to the loss of a quoted market can reduce an issuer's ability to raise capital through stock issuances or through other channels,
Further, the Commission does not believe the fact that such companies have longstanding histories of operation and profit obviates the need for their information to be current and publicly available for a broker-dealer to publish quotations for such securities. The Commission does not believe that these issuers with operations and profitability will become “worthless”
However, the Commission understands that market participants may have unique facts and circumstances as to how the amended Rule affects their activities, and the Commission will consider requests from market participants, including issuers, investors, or broker-dealers, for exemptive relief from the amended Rule for OTC securities that are currently eligible for the piggyback exception yet may lose piggyback eligibility due to the amendments to the Rule.
In addition, the Commission believes that the amendments are appropriate to help protect investors against potential exposure to fraud and manipulation that can occur when current information about an issuer is not publicly available. The Commission recognizes that shareholders of OTC securities may incur costs related to a loss of liquidity when broker-dealers cannot rely on the piggyback exception because there is no current and publicly available paragraph (b) information. However, on balance, the Commission believes that any such costs would be warranted by the attendant benefits. The Commission continues to believe that requiring issuer information to be current and publicly available will facilitate investor protection and transparency that will assist retail investors in making better-informed investment decisions and will counteract misinformation that can proliferate through promotions and other channels, thereby helping to prevent fraud and manipulation. More specifically, the amended Rule's requirements could have a deterrent effect in inhibiting fraudulent activity related to quoted OTC securities. Investors could benefit from decreased exposure to investment losses as a result of diminished fraudulent activity in the OTC market.
Another commenter suggested that the Rule should explicitly except market makers who do not solicit retail customers and that other broker-dealers should not be permitted to piggyback on market makers relying on the piggyback exception.
Other commenters stated that the elimination of a quoted market for securities of issuers for which paragraph (b) information is not current and publicly available would disadvantage minority shareholders
Another commenter stated that certain OTC companies have decades of profits and cash yields without any operations or staff to manage the distribution of financial information, so the public distribution of financial information through a website, for example, would come directly at the expense of the cash yield to investors.
Some commenters opposed the requirement for current and publicly available information because, according to them, it is inconsistent with the fact that not all issuers have a reporting or disclosure obligation under the federal securities laws.
Commenters expressed concern regarding the potential for reduced access to capital for small companies that have chosen to “go dark” to reduce compliance costs.
Some commenters stated that broker-dealers should not be prohibited from relying on the piggyback exception to publish quotations for securities of delinquent reporting companies because, according to the commenter, price discovery that is created by publishing a quotation is “a significant and important function of the market.”
One commenter stated that the proposal would hurt valuation multiples for OTC securities because investors would be reluctant to invest in a company that might fall two quarters behind in its public disclosure requirements, which would lower share prices and trading volumes, thereby making it more difficult to meet the listing standards of exchanges.
Another commenter stated that to require yet another reporting layer at the holding company level for community banks could lead many to “decide they cannot afford to trade at all.”
Trading in the grey market, where no quoted prices are available for buyers and sellers to transact, will result in some costs from loss of liquidity
Some commenters who opposed a requirement for current and publicly available information stated that some dark companies provide information,
In response to the Commission's request for comment, one commenter stated that the securities of issuers that have undergone a reorganization, any major merger or acquisition, reverse merger, or significant restructuring should be eligible for the piggyback exception,
Another commenter stated that the proposal would not increase the availability of information that would help investors.
Some commenters provided examples of where they believed paragraph (b) information would be unnecessary to make an informed decision: Sophisticated investors with sufficient investment experience; active, self-directed traders that use professional products offered by electronic brokers; institutions and regulated investment advisers; broker-to-broker transactions; sales by all non-affiliate, retail investors;
Some commenters suggested that securities of companies that do not make their information publicly available or otherwise fail to meet an exception should be eligible for quoting on a market where quote distribution would be limited to “professional investors” and certain non-institutional investors would only be allowed to liquidate holdings.
In considering any such exemptive relief, the Commission preliminarily believes that any such expert market must not have the potential to develop into a parallel market for which quotations are accessible by retail investors and the general public. To protect retail investors from the harms resulting from incidents of fraud and manipulation in OTC securities for which no or limited publicly available information about the issuers exists to help counteract misinformation, such exemptive relief could focus on the types of investors that have the ability to assess an investment opportunity, including the ability to analyze the risks and rewards.
The Commission may consider any appropriate factors or conditions for any such expert market including certain safeguards such as, for example, requiring that any participating security: (1) Is of an issuer that has an active license from its state of incorporation or domicile to carry on any business for which a license is required; and (2) was the subject of a quotation that was published or submitted pursuant to either paragraph (f)(1) (the exchange-traded security exception) or (f)(3) (the piggyback exception) of the amended Rule on the business day preceding the initial quotation in any such expert market.
Some commenters stated that certain catch-all issuers provide their paragraph (b) information to their shareholders (
One commenter stated that the proposed piggyback exception would not be available for foreign private issuers that restrict access by U.S. persons to their disclosure documents,
As discussed above, the proposed Rule would have required that a catch-all issuer's financial information be current and publicly available within six months from a broker-dealer's publication or submission of a quotation for a broker-dealer to rely on the piggyback exception for the catch-all issuer. Some commenters specifically addressed the six-month requirement in the proposed Rule as too short an amount of time for a catch-all issuer's information to be current and publicly available.
The Commission has determined not to require catch-all issuer information to be current and publicly available within six months before the date of publication or submission of a broker-dealer's quotation for the broker-dealer to rely on the piggyback exception. Instead, for a broker-dealer to rely on the piggyback exception to publish or submit a quotation for a catch-all issuer's security, such issuer's balance sheet is current if its most recent balance sheet is as of a date less than 16 months
While the Commission recognizes investors' need for current financial information, the Commission is also cognizant of the anticipated costs to issuers of producing and updating paragraph (b) information. As discussed in Part II.B.3, a more frequent disclosure requirement for catch-all issuer financial information would require an allocation of resources to the preparation of financial statements that the Commission does not believe is justified in light of the fact that catch-all issuers may not have an ongoing reporting or disclosure obligation. In addition, the Commission believes that catch-all issuer information made publicly available on an annual basis, in addition to the expansion of the list of specified information for catch-all issuers,
As discussed above, the proposed Rule would have treated an issuer as a catch-all issuer if it were delinquent in its reporting or disclosure obligations as a result of not timely filing a report, as required by the Exchange Act or Securities Act. Accordingly, if an issuer had not timely filed a required report by the prescribed due date for such report, its information would not be current for purposes of the proposed Rule, and the issuer would be treated as a catch-all issuer until the issuer were to file its required report. In this instance, a broker-dealer would not have been able to rely on the piggyback exception to publish or submit a quotation for the issuer's security if the information specified in proposed paragraph (b)(5)(i)(L) for such issuer were not current and publicly available as of a date within six months from the publication or submission of the broker-dealer's quotation. This treatment of delinquent reporting issuers as catch-all issuers in the proposed Rule would have created different outcomes with respect to when information is current and publicly available for purposes of relying on the piggyback exception based on the frequency of Exchange Act or Securities Act reporting and disclosure obligations. For example, if an issuer did not file a required quarterly report by its prescribed due date, broker-dealers would continue to be able to publish a quotation in
The following table summarizes the time frames for which paragraph (b) information must be current and publicly available, timely filed, or filed within 180 calendar days from the specified period, as applicable, for purposes of piggyback exception eligibility:
To facilitate issuer transparency in connection with a broker-dealer's reliance on the piggyback exception to maintain a quoted market in the issuer's security, the amended Rule requires that an issuer's documents and information be filed within 180 calendar days from the end of the issuer's most recent fiscal year or any quarterly reporting period that is covered by a report required by Section 13 or 15(d) of the Exchange Act for reporting issuers for which documents and information are specified in paragraphs (b)(3)(i), (b)(3)(iv), and (b)(3)(v) of the amended Rule. The requirement under the amended Rule that an issuer's documents and information be filed within 180 calendar days from the specified period allows broker-dealers to continue to rely, for a limited period, on the piggyback exception to publish or submit quotations for securities of issuers that have not filed a required report by the prescribed due date for such report. Consistent with the proposed Rule, the amended Rule allows a broker-dealer to continue to rely on the piggyback exception to publish quotations, for a limited period, for a delinquent reporting issuer's security.
The reports referenced in the amended Rule for issuers with a reporting obligation under Regulation A (
Paragraph (f)(3)(i)(C)(1) under the amended Rule provides that the piggyback exception shall apply to the publication or submission of a quotation for a security of a reporting issuer (other than a crowdfunding issuer or an issuer that has a reporting obligation under Regulation A)
If an issuer with an annual filing obligation (
Paragraph (f)(3)(i)(C)(2) under the amended Rule provides that the piggyback exception shall apply to the publication or submission of a quotation for a security of an issuer with a reporting obligation under Regulation A or a crowdfunding issuer so long as the applicable paragraph (b) information is timely filed.
If a crowdfunding issuer, which has documents and information specified in paragraph (b)(3)(iii) under the amended Rule, were to timely file by April 30, 2021, an annual report for a fiscal year that ended on December 31, 2020 (
Paragraph (f)(3)(i)(C)(3) under the amended Rule provides that the piggyback exception shall apply to the publication or submission of a quotation for a security of an exempt foreign private issuer or a catch-all issuer, so long as the applicable paragraph (b) information is current and publicly available.
Finally, for a broker-dealer to publish or submit in an IDQS a quotation for the security of a catch-all issuer, which has documents and information specified in paragraph (b)(5) of the amended Rule, on or before February 1, 2023, the broker-dealer would comply with the requirements of paragraph (f)(3)(i)(C) of the piggyback exception if the information specified in paragraph (b)(5) of the amended Rule for such issuer were current and publicly available as of February 1, 2022 (a date that is within 12 months prior to the publication or submission of the broker-dealer's quotation), including if its balance sheet were dated as of October 1, 2021 (a date less than 16 months before the publication or submission of the quotation), and its profit and loss and retained earnings statements were for the 12 months preceding the date of the balance sheet. However, the broker-dealer's quotation for such issuer's security that was published or submitted on or after February 1, 2022, would not meet the requirements of paragraph (f)(3)(i)(C) of the piggyback exception if the issuer's paragraph (b) information were not current and publicly available as of February 1, 2021, including if its balance sheet were dated before October 1, 2020, and its profit and loss and retained earnings statements were for a period older than the 12 months preceding the date of the balance sheet, the specified information would not be current and publicly available within the time frame specified in paragraph (b)(5) of the amended Rule.
As discussed below, a qualified IDQS may make a publicly available determination that issuer information is current and publicly available, and broker-dealers may rely upon such publicly available determinations to submit or publish a quotation in an OTC security. In response to a comment requesting clarification as to whether a qualified IDQS's obligation to determine whether an issuer's paragraph (b) information is current and publicly available is ongoing,
To facilitate price discovery in a quoted market, the Commission is modifying the piggyback exception to require at least a one-way priced quotation (as opposed to adopting the proposed requirement that quotations represent both a bid and an offer at specified prices) for broker-dealers to rely on the piggyback exception. The Commission sought comment about the proposal to require that a security be the subject of both a bid and an offer at specified prices, in an IDQS, for a broker-dealer to rely on the piggyback exception to publish or submit a quotation for such security. Two commenters provided general support for this aspect of the proposal.
The Commission has determined to permit broker-dealers to rely on the piggyback exception for securities that have at least either a bid quotation at a specified price or an offer quotation at a specified price
A one-sided quotation at a specified price can contribute to price discovery and the commencement of a quoted market, each of which are important, especially in a thinly traded market, to an efficient and liquid OTC market. The Commission believes that expanding this part of the piggyback exception to require a one-sided quotation at a specified price rather than two-sided quotations at specified prices may avoid unduly impeding liquidity for investors and capital formation for issuers while still addressing the vulnerability of the piggyback exception to be used to facilitate potential fraud and manipulation. As amended, the multiple prongs of the piggyback exception, including the paragraph (f)(3)(i)(B) provision regarding shell companies and the paragraph (f)(3)(i)(C) provision regarding current and publicly available information for all issuers, both of which are discussed below, are designed to work together to help reduce the potential for fraudulent and manipulative activity when a broker-dealer relies on the piggyback exception, without unduly hampering liquidity in the OTC market.
In response to a Commission solicitation of comment about whether there is a certain price threshold below which the piggyback exception should not apply, one commenter stated it was generally opposed to the establishment of a price threshold because, according to the commenter, price thresholds interfere with the normal functioning of a market.
The Commission is eliminating the ability of a broker-dealer to rely on the piggyback exception during the first 60 calendar days after the termination of a Commission trading suspension under Section 12(k) of the Exchange Act, as proposed. The Commission sought comment on this aspect of the proposal. One commenter stated that requiring current and publicly available issuer information for a broker-dealer to rely on the piggyback exception, in conjunction with the proposed 60-calendar-day “cooling off” period following a trading suspension, should serve to enhance market transparency.
The Commission has determined to adopt, without modification, the proposal to eliminate the ability of a broker-dealer to rely on the piggyback exception during the first 60 calendar days after the termination of a trading suspension order issued by the
Although the 60-calendar-day period, as proposed, was intended to incorporate the 30-calendar-day timing requirement to establish piggyback eligibility under the proposed Rule,
The Commission has determined to adopt, with some modification, the proposal to prohibit broker-dealers from relying on the piggyback exception for shell companies. Specifically, under this modified approach, a broker-dealer may rely on the piggyback exception to quote the security of an issuer that the broker-dealer has a reasonable basis under the circumstances for believing is a shell company
The Commission sought comment about the proposal to eliminate the ability of a broker-dealer to rely on the piggyback exception for the securities of “shell companies.” Commenters who supported this limitation stated that it should reduce fraud and abuse of OTC securities,
As discussed below in Part II.J.2, a broker-dealer, qualified IDQS, or registered national securities association has a reasonable basis under the circumstances for determining that an entity is a shell company by relying on an issuer's self-identification as a shell company (or not) by reviewing, for example, the issuer's financial information, or, alternatively, by reviewing a description of its business, as specified in paragraph (b)(5)(i)(H) of the amended Rule or in any disclosures provided to the Commission pursuant to reporting obligations under the federal securities laws, without reviewing the issuer's financial information.
Further, consistent with Commission guidance regarding the definition of “shell company” for purposes of Rule 144(i)(1)(i), the Commission believes that it is appropriate in the context of this Rule to reiterate that startup companies, or companies that have a limited operating history, such as early-stage biotechnology companies with no or limited assets and revenues and substantial expenses,
As discussed above, the Commission believes that the amended Rule appropriately balances the promotion of investor protection and the facilitation of capital formation with respect to broker-dealers' reliance on the piggyback exception to publish or submit quotations for the securities of shell companies. For example, the Commission believes that permitting broker-dealers to publish or submit quotations for the securities of shell companies for a time-limited period of 18 months following the publication or submission of the initial priced quotation for such issuers' securities in an IDQS would facilitate capital formation and liquidity by permitting broker-dealers to maintain a quoted market in these securities during a defined period while limiting the risk that they could become the subject of a pump-and-dump scheme(s) if such quotations were permitted for an indefinite period. Further, even during the 18-month period that broker-dealers may rely on the piggyback exception to quote the securities of shell companies, broker-dealers are nevertheless subject to liability under the antifraud provisions of the securities laws, such as Exchange Act Section 10(b) and Rule 10b-5, if they publish quotations for the securities of shell companies with the intent to further a fraudulent or manipulative scheme.
Other commenters who opposed this part of the proposal stated that the proposal would prevent existing shareholders from being able to recover losses from investing in companies that become shell companies subsequent to purchasing shares in those companies.
Under the amended Rule, a broker-dealer may maintain a quoted market for the security of an issuer that the broker-dealer has a reasonable basis under the circumstances for believing is a shell company by relying on the piggyback exception during the 18-month period following the initial publication or submission of a priced bid or offer quotation for the security in an IDQS, assuming all other requirements of the piggyback exception are met.
Further, one commenter stated that this aspect of the proposal would harm the ability of privately held companies to become publicly traded issuers by engaging in a reverse merger,
The Commission believes that permitting broker-dealers to rely on the piggyback exception for the 18 months following the initial publication or submission of a bid or offer quotation at a specified price for an issuer's security provides a sufficient amount of time for a quoted shell company to engage in a reverse merger with a private operating company and is similar to the time frame specified in other Commission rules governing acquisitions and mergers.
Other commenters suggested, instead, that the regulation of quotations for shell companies should focus on insiders, affiliates, and enhanced corporate governance because the problems that the Commission identified in the proposal regarding shell companies are driven by insiders and affiliates.
In light of technological advances that have taken place since the Rule was last amended, the Commission is eliminating both the 12-business-day requirement and the 30-calendar-day window from the frequency of quotation requirement. The proposal would have replaced the requirement that quotations occur on each of at least 12 days within the previous 30 calendar days, with no more than four business days in succession without a quotation, with a requirement that quotations occur within the previous 30 calendar days, with no more than four business days in succession without a quotation. Commenters on this aspect of the proposal also requested the removal of the 30-calendar-day piggyback-eligibility period following an initial quotation for a security, given market-based solutions that render obsolete the need for a 30-calendar-day window.
The Commission has determined to adopt the proposed amendment to eliminate the 12-business-days frequency of quotation requirement because technological advances that have taken place since this provision was adopted have obviated the need for it, given that it is now easier for broker-dealers to continuously update and widely disseminate quotations and information about issuers to investors.
The frequency of quotation requirement is designed to permit a broker-dealer to rely on the piggyback exception only when quotations are continuous. A requirement that quotations occur with no more than four business days in succession without such a quotation generally requires one quotation per week. The presence or elimination of the 30-calendar-day window does not alter this requirement. For that reason, the Commission believes that the 30-calendar-day window is not necessary to ensure that quotations are continuous for purposes of the piggyback exception (assuming all other requirements of the exception are met).
The Commission believes that the elimination of the 30-calendar-day window could contribute to a more liquid, efficient market because broker-dealers could rely on the piggyback exception to publish or submit quotations immediately after a quoted market is initiated (
The Commission posed a question in the Proposing Release about whether the piggyback exception should include a grace period during which a broker-dealer could continue to publish or submit quotations following the expiration of the proposed six-month period specified in paragraph (f)(3)(ii) of the proposed Rule.
Several commenters offered solutions to address broker-dealer quotations that are no longer eligible for the piggyback exception. These commenters supported the idea of a “grace period” with respect to companies that are no longer eligible to be publicly quoted (
The Commission has determined to adopt a grace period in the piggyback exception to permit broker-dealers to continue quoting securities of any issuer for a limited period once the requisite information for such issuer is, depending on the regulatory status of the issuer, no longer current and publicly available, timely filed, or filed within 180 calendar days from a specified period.
Specifically, paragraph (f)(3)(ii) of the amended Rule provides a limited grace period to rely on the piggyback exception if issuer information is, depending on the regulatory status of the issuer, no longer current and publicly available, timely filed, or filed within 180 calendar days from a specified period—or, the time frames specified in paragraph (f)(3)(i)(C) of the amended Rule—so long as three conditions are met. First, a qualified IDQS or registered national securities association must make a publicly available determination that the specified information for such issuer is no longer current and publicly available, timely filed (with respect to an issuer for which documents and information are specified in paragraph (b)(3)(ii) or (b)(3)(iii) of the amended Rule), or filed within 180 calendar days from a specified period (with respect to an issuer for which documents and information are specified in paragraph (b)(3)(i), (b)(3)(iv), or (b)(3)(v) of the amended Rule)
Further, as discussed below in Part II.H, the Commission is requiring that any qualified IDQS or registered national securities association that makes a publicly available determination that a broker-dealer may rely on the piggyback exception must subsequently make a publicly available determination if that issuer's paragraph (b) information is no longer current and publicly available, timely filed, or filed within 180 calendar days from the specified period, as applicable. The qualified IDQS or registered national securities association must make such subsequent publicly available determination within the first four business days that such documents and information are no longer current and publicly available, timely filed, or filed within 180 calendar days.
Second, the grace period is conditioned on the broker-dealer's compliance with the requirements of paragraphs (d)(2) and (f)(3)(i), except for the requirement regarding the public availability of current issuer information, timely filed issuer information, or issuer information that is filed within 180 calendar days from the specified period, as applicable.
Lastly, paragraph (f)(3)(ii)(C) of the amended Rule specifies the duration of the grace period: The shorter of the period beginning with the date on which a qualified IDQS or registered national securities association makes a publicly available determination identified in paragraph (f)(3)(ii)(A) and ending on either (1) the specified issuer information being current and made publicly available or filed, or (2) the fourteenth calendar day following the date on which such publicly available determination was made.
The Commission is removing certain provisions of the former Rule's piggyback exception to streamline the piggyback exception under the amended Rule. The Commission sought comment about eliminating paragraphs (f)(3)(ii) and (f)(3)(iii) of the former Rule.
The Commission has determined to adopt the unsolicited quotation exception, substantially as proposed, with modifications from the proposal to enhance the effectiveness of the proposed amendments' investor protections and, specifically, to: (1) Prohibit reliance on the exception for a quotation on behalf of an affiliate of the issuer if the issuer's information is not current and publicly available, and (2) permit reliance on written representations that a customer is not a company insider or an affiliate of the issuer. The Commission sought comment about the proposal to require that certain issuer information be current and publicly available for a broker-dealer to rely on the unsolicited quotation exception to publish or submit a quotation on behalf of a company insider.
Some commenters supported this aspect of the proposal,
The Commission believes that imposing a limitation, such that the customer requesting that a quote be published is not a company insider or affiliate, helps to prevent misuse of the unsolicited quotation exception by company insiders and affiliates who may take advantage of access to information about the company that is not available to non-insiders. Therefore, the Commission has determined to make the unsolicited quotation exception in the amended Rule unavailable for company insiders and affiliates if the information required to be reviewed under the Rule is not current and publicly available.
Other commenters expressed the concern that the broker-dealer publishing a quotation might not have a direct relationship with a customer (
The first condition is that the broker-dealer publishing or submitting the quotation receives the written representation before, and on the same day that, the quotation representing the customer's unsolicited indication of interest is published or submitted. This condition is designed to promote the accuracy of the representation because a person's status as a company insider or an affiliate may change over time. The second condition is that the broker-dealer publishing or submitting the quotation has a reasonable basis under the circumstances for believing that the customer's broker is a reliable source.
The Commission believes that permitting a broker-dealer to rely on a written representation from the customer's broker that such customer is not a company insider or an affiliate is a more narrowly tailored approach to achieve the objectives of these amendments than requiring issuers or other market participants to comply with new disclosure requirements in other rules in an effort to alleviate burdens on broker-dealers for purposes of the unsolicited quotation exception. Further, as one commenter acknowledged, the suggestion to revise the disclosure requirements in other Commission rules is outside the scope of the amendments.
One commenter sought clarity regarding the ability of a broker-dealer that publishes or submits a quotation pursuant to the unsolicited quotation exception to rely on a qualified IDQS's determination that issuer information is current and publicly available for purposes of the unsolicited quotation exception.
To provide retail investors with greater price transparency, and to reduce burdens on broker-dealers in publishing quotations for highly liquid securities of well-capitalized issuers where the Rule's goals can be achieved through alternative means, the Commission is adopting the ADTV and asset test exception substantially as proposed, with modifications, as discussed below. Specifically, the proposed exception would have permitted a broker-dealer to publish or submit quotations without complying with the information review requirement where: (1) A security has a worldwide average daily trading volume value (the “ADTV value”) of at least $100,000 during the 60 calendar days immediately before the publication of a quotation for such security, and (2) the issuer of such security has at least $50 million in total assets and $10 million in unaffiliated shareholders' equity as reflected in the issuer's publicly available audited balance sheet issued within six months after the end of its most recent fiscal year.
Because a pump-and-dump scheme often involves a thinly traded security of an issuer with limited assets, this exception recognizes that such fraudulent and manipulative activity generally does not involve issuers with substantial assets.
Some commenters stated their view that identifying “unaffiliated” shareholders' equity can be difficult, if not impossible.
Some commenters suggested that certain parts of the test be replaced. One commenter suggested that market capitalization of $150 million should replace the unaffiliated shareholders' equity prong of the exception,
Paragraph (f)(5)(i) of the amended Rule has been modified from the proposed rule text to clarify that a security must have a “reported” worldwide ADTV value of at least $100,000 during the 60 calendar days immediately before the publication or submission of a quotation of such security. The addition of the term “reported” clarifies that the exception requires that the standard for determining ADTV value be based on information that is publicly available.
Further, the requirements of the exception, as adopted, have been streamlined. While paragraph (f)(5)(ii) of the proposed Rule also would have expressly required that the issuer's paragraph (b) information be current and publicly available,
The Commission has determined not to adopt certain other modifications suggested by commenters. One commenter requested a 30-calendar-day period to review the information required by the Rule if a quoted OTC security ceases to qualify for the ADTV and asset test exception and if the piggyback exception is unavailable.
One commenter suggested that the Rule exempt securities of issuers with over $10 million in equity, as demonstrated by audited financial statements no older than 18 months, and that have been trading for more than $10 per share since January 1, 2017.
Three commenters supported an exemption that would allow broker-dealers to publish quotations for the securities of exempt foreign private issuers that satisfy the ADTV test, are traded on an “offshore securities market” that meets the requirements in Securities Act Rule 902(b)(2), and are not suspended to trade by a foreign financial regulatory authority.
One commenter suggested that the exception be expanded to include other categories of issuers, such as banks and insurance companies that provide information to their regulators, companies that undergo bankruptcy proceedings and provide information to a bankruptcy court, and other issuers that have a verifiable operating history and revenues and that pay dividends.
To help expedite the availability of securities to retail investors in the OTC market following an underwritten offering, and to facilitate capital formation, the Commission is adopting the underwritten offering exception, as proposed. The Commission sought comment about an exception from the information review requirement that permits a broker-dealer to publish or submit quotations for a security issued in an underwritten offering if: (1) The broker-dealer is named as an underwriter in the registration statement or offering statement for the underwritten offering, and (2) the broker-dealer that is the named underwriter publishes or submits the quotation.
The Commission agrees and has determined to adopt the underwritten offering exception, as proposed, with a technical edit.
A comment suggested that the Commission broaden the exception to apply to: (1) Subscription rights, warrants, and units consisting of common stock and warrants, and (2) broker-dealers other than the underwriter.
Another commenter suggested that the exception be expanded to cover “any” broker-dealer (including the underwriter), assuming the requirements in paragraphs (a) and (b) of the Rule are met.
Accordingly, an underwriter typically conducts a due diligence review to mitigate potential liability for misstatements and omissions in the related prospectus or offering statement (and, therefore, is likely to have already conducted a review of the issuer).
The Commission has determined to adopt, with minor modifications, the proposal to permit a broker-dealer to rely on a publicly available determination by a qualified IDQS or a registered national securities association that certain exceptions are available. The proposed exception would have permitted broker-dealers to rely on the publicly available determination of a qualified IDQS or a registered national securities association that: (1) Paragraph (b) information is current and publicly available, or (2) a broker-dealer may rely on the proposed Rule's exchange-traded security exception, the piggyback exception, the municipal security exception, the ADTV and asset test exception, or the proposed qualified IDQS review exception. The Commission sought comment about this proposed exception to allow broker-dealers' reliance on publicly available determinations.
Commenters supported this aspect of the proposal,
One commenter stated that a broker-dealer should be permitted to publish a quotation pursuant to this exception in
Finally, in light of the adoption of the piggyback exception's grace period,
The Commission is adopting the recordkeeping requirement substantially as proposed, with slight modifications from the proposal. The Commission sought comment about the recordkeeping requirement for: (1) Broker-dealers and qualified IDQSs that comply with the information review requirement, and (2) broker-dealers, qualified IDQSs, and registered national securities associations to demonstrate that the requirements of an exception to the information review requirement are met. One commenter stated that it is reasonable for market participants to keep records that support their information review or reliance on an exception.
The Commission has determined to adopt the recordkeeping requirement substantially as proposed, with modifications to: (1) Make clarifying edits to align the provisions regarding publicly available determinations with the corresponding recordkeeping requirement, and (2) eliminate the provisions stipulating that a broker-dealer or qualified IDQS document the paragraph (b) information that it reviewed that is available on EDGAR.
The amendments to the recordkeeping requirement are designed to help facilitate the Commission's oversight of broker-dealers that rely on certain exceptions under the amended Rule. Paragraph (d)(1) of the amended Rule outlines the recordkeeping requirement associated with compliance by a broker-dealer or qualified IDQS with the information review requirement.
Paragraph (d)(1)(i) provides that the records to be preserved are the documents and information required to be obtained and reviewed under paragraphs (a), (b), and (c) of the amended Rule with respect to compliance with the information review requirement, while paragraph (d)(1)(ii) provides that a broker-dealer that publishes a quotation in reliance on a broker-dealer's compliance with the information review requirement need only preserve a record of the name of the qualified IDQS that made the publicly available determination. The retention period for such records is not less than three years, the first two years in an easily accessible place. Further, unlike in the proposed Rule, paragraph (d)(1) of the amended Rule does not require that a broker-dealer or qualified IDQS document the paragraph (b) information that it reviewed on EDGAR. The Commission believes that such documentation is unnecessary and could create regulatory redundancies. Lastly, for purposes of complying with the amended Rule, broker-dealers, qualified IDQSs, or registered national securities associations may comply with the amended Rule's recordkeeping requirement in the same manner as that described in Exchange Act Rule 17a-4(f).
Paragraph (d)(2) of the amended Rule applies to: (1) Any qualified IDQS or registered national securities association that makes a publicly available
Consistent with the proposal, the amended Rule limits the recordkeeping requirement for a broker-dealer that relies on a publicly available determination by a qualified IDQS or a registered national securities association that an exception is available or that an issuer's paragraph (b) information is current and publicly available.
In light of the amendments that the Commission is adopting, as discussed above, the Commission is also adopting definitions of certain terms that are used throughout these amendments.
The Commission is adopting a definition of “current” only for purposes of the amended Rule to mean that the paragraph (b) information of a prospectus issuer, a Reg. A issuer, an exempt foreign private issuer, or a catch-all issuer is current if it is filed, is published, or is as of a date in accordance with the time frames specified in the applicable subparagraph for such information (
The definition sets forth the time frames within which issuer information must be filed, be published, or be as of a certain date for the issuer's information to be current for purposes of the amended Rule. Paragraphs (b)(1) through (b)(5) of the amended Rule provide a comprehensive delineation of the documents and information that must be “current” for purposes of the amended Rule, depending on the regulatory status of the issuer, including with respect to a crowdfunding issuer.
• A prospectus specified by section 10(a) of the Securities Act for an issuer that filed a registration statement under the Securities Act, other than a registration statement on Form F-6, that became effective fewer than 90 calendar days before the day on which such
• An offering statement provided for under Regulation A for an issuer that has filed an offering statement under Regulation A that was qualified fewer than 40 calendar days before the day on which such broker-dealer publishes or submits the quotation to the quotation medium;
• An issuer's most recent annual report filed pursuant to Section 13 or 15(d) of the Exchange Act, together with any periodic or current reports that have been filed thereafter under the Exchange Act by the issuer, except for current reports filed during the three business days before the publication or submission of the quotation, provided that the issuer has filed all required annual and periodic reports within the time frames specified;
• An issuer's most recent annual report filed pursuant to Regulation A, together with any periodic and current reports filed thereafter under Regulation A by the issuer, except for any current reports filed during the three business days before the publication or submission of the quotation, provided that the issuer has filed all required annual and periodic reports within the time frames specified;
• An issuer's most recent annual report filed pursuant to Regulation Crowdfunding, provided that the issuer has filed the required annual report within the time frame specified;
• An issuer's most recent annual statement referred to in Section 12(g)(2)(G)(i) of the Exchange Act, together with any periodic and current reports filed thereafter under the Exchange Act, except for current reports filed during the three business days before the publication or submission of the quotation, provided that the issuer has filed all required annual and statements within the time frame specified;
• The information that, since the first day of its most recently completed fiscal year, the issuer has published as required to establish the exemption from registration under Section 12(g) of the Exchange Act pursuant to Exchange Act Rule 12g3-2(b);
• The information specified in paragraph (b)(5)(i)(A) though (P) (excluding paragraph (b)(5)(i)(L)) of the amended Rule that is as of a date within 12 months before the publication or submission of the quotation in addition to: (1) The issuer's most recent balance sheet that is as of a date less than 16 months before the publication or submission of the quotation for the issuer's security, and (2) the profit and loss and retained earnings statements for the 12 months preceding the date of the most recent balance sheet.
The Commission has determined to adopt the definition of a “shell company” as proposed, with a technical edit from the proposal.
Commenters who opposed the proposed definition stated that, although there is a need to curtail abusive reverse mergers that can be facilitated by shell companies, the proposed definition would be ambiguous and difficult to apply.
Some commenters advocated for more of a bright-line definition of “shell company”
The Commission has determined to adopt the definition of “publicly available” substantially as proposed, with a modification to expand the proposed definition's list of locations to include: (1) The website of a state or federal agency, and (2) an electronic information delivery system that is generally available to the public in the primary trading market of a foreign private issuer, as defined in Rule 3b-4 of the Exchange Act.
Commenters suggested that the list of websites in the definition of “publicly available” be expanded to include Canada's System for Electronic Document Analysis and Retrieval (“SEDAR”) or other similar foreign regulatory or exchange websites (so long as information is available in English and access is not restricted by user name, password, fees, or other restraints)
The expansion of the list of specified locations under the amended Rule to include the websites of state and federal agencies accommodates state and federal agency websites that routinely make paragraph (b) information available to the public (
While one commenter stated that the term “publicly available” correctly excludes websites that have barriers to access information,
Further, the definition of “publicly available” does not require that an issuer itself make its information available. Instead, the amended Rule defines the term “publicly available” as “available on . . . or through” a specified list of locations so that an investor could work with a broker-dealer or a qualified IDQS to make an issuer's information publicly available on the website of a broker-dealer or a qualified IDQS.
Some commenters suggested that companies make their information publicly available in an immediately downloadable form, from a centralized website or on their own website.
Finally, to ensure the free and wide availability to market participants and investors, including retail investors, of publicly available determinations by any qualified IDQSs or registered national securities association regarding the public availability of current paragraph (b) information and the applicability of certain of the amended Rule's exceptions,
The Commission has determined to adopt the definition of a qualified IDQS as proposed, with technical revisions.
The Commission sought comment regarding the proposal to define a “qualified interdealer quotation system” as any IDQS that meets the definition of an ATS, as defined under Rule 300(a) of Regulation ATS, and operates pursuant to the exemption from the definition of an “exchange” under Rule 3a1-1(a)(2) of the Exchange Act.
The Commission has determined to add a definition of the term “company insider.” Specifically, paragraph (e)(1) of the amended Rule defines the term “company insider” to mean any officer or director of the issuer, or person that performs a similar function, or any person who is, directly or indirectly, the beneficial owner of more than 10 percent of the outstanding units or shares of any class of any equity security of the issuer.
The Commission sought comment regarding whether the Rule should include the defined term “company insiders” to describe the list of persons specified in paragraphs describing the requirements for certain catch-all issuer information (
Under the amended Rule, this definition applies to the same list of persons that were individually described in paragraphs (b)(5)(i)(K), (c)(1), and (f)(2) of the proposed Rule while also applying to any person that performs a similar function to that of an officer or director. Though this definition does not explicitly include the terms “chief executive officer” and “member of the board of directors,” the definition nevertheless applies to such person so long as he or she is an officer, director, or person that performs a similar function.
The Commission is rescinding the Nasdaq security exception, as proposed, because the Nasdaq security exception is obsolete in light of Nasdaq's registration as a national securities exchange.
The Commission is also rescinding the requirement in former Rule 15c2-11(d)(1) that a broker-dealer that submits a quotation for the security of a catch-all issuer furnish to the IDQS, at least three business days before the quotation is published or submitted, the documents and information that the broker-dealer is required to maintain pursuant to paragraph (a)(5) of the former Rule. This requirement is unnecessary in light of the amendments to the recordkeeping requirement, which require that the applicable documents and information be preserved for a period of not less than three years, the first two years in an easily accessible place,
In addition, the Commission is rescinding the provision in the Rule that allowed a broker-dealer to comply with the requirement to obtain annual, quarterly, and current reports filed by the issuer where the broker-dealer has made arrangements to receive such reports when they are filed by the issuer and has regularly received reports from the issuer on a timely basis. As the Commission explained above and in the Proposing Release, this requirement is outdated because such reports can be obtained by broker-dealers through EDGAR.
Finally, the Commission is removing the “Preliminary Note” from the Rule and including new guidance to accompany the Rule. The Commission solicited comment on whether the Preliminary Note should be retained in its current form, in the form of guidance as proposed, or in a different form. The Commission received one comment in support of removing obsolete provisions from the Rule
The Commission is amending paragraph (g) to conform the standard for the amended Rule's exemptive authority to the provision for exemptive authority in Section 36 of the Exchange Act because the Commission believes that the appropriate standard for granting an exemption from Rule 15c2-11 should mirror the statutory standard. Specifically, paragraph (g) of the amended Rule provides that the Commission may grant, conditionally or unconditionally, an exemption from the Rule to the extent such exemption “is necessary or appropriate in the public interest, and is consistent with the protection of investors.” As discussed in the Proposing Release, Section 36 was enacted after the most recent substantive amendments to this Rule were adopted.
As discussed above in Parts II.A through II.K, and for the reasons discussed in the Proposing Release, the Commission is adopting non-substantive technical amendments to the Rule's text. The Commission solicited comment on the proposed technical amendments, including whether any additional technical amendments would be appropriate and whether any of the Rule's text should be revised to improve the Rule's effectiveness and clarity. The Commission received one comment in support of streamlining the Rule and making technical, non-substantive changes
Specifically, because the Commission is separating the review requirement from the Rule's specified information provisions, the Commission is re-lettering the Rule's provisions and making conforming edits to all cross-references within the Rule to reflect the re-lettering. The Commission is also alphabetizing defined terms under the Rule's definitional section and re-lettering the Rule's definitional provisions.
In addition, the Commission is adopting grammatical edits to the Rule. For example, the Commission is (1) amending the Rule's definition of “quotation” in paragraph (e)(7) by replacing the word “he” with “its,” (2) replacing the word “which” with the word “that” where appropriate, (3) adding and deleting commas in paragraph (b)(5)(i)(P) to provide clarity, (4) fixing typographical errors, (5) replacing the phrase “required by” with the phrase “specified in” with respect to paragraph (b) information, and (6)
Further, the Commission is adopting amendments to aid in the Rule's readability. For example, the Commission is amending the Rule by adding headings before certain of the Rule's provisions and by addressing instances of inconsistent letter capitalization (
The Commission also is adopting amendments to streamline and clarify the Rule's text. For example, the Commission is replacing the phrase “a record of the circumstance involved in” with the phrase “records related to” in paragraph (c)(1). The Commission also is replacing “customer's indication of interest and does not involve the solicitation of the customer's interest” in paragraph (f)(2) with “customer's unsolicited indication of interest” in paragraph (f)(2). The Commission is also replacing the list of “any director, officer or any person, directly or indirectly the beneficial owner of more than 10 percent of the outstanding units or shares of any equity security of the issuer” with the newly defined term “company insider.” Finally, the Commission is deleting the word “exact” from paragraphs (a)(5)(i) and (iv) of the former Rule and replacing the phrase “the nature” with the phrase “a description” in paragraphs (a)(5)(viii), (ix), and (x).
The Commission also is adopting amendments to avoid redundancy in the Rule's text. For example, the Commission is removing from the Rule all instances of the phrase “as defined in this section” because the text of the Rule's definitional section, paragraph (f), makes it sufficiently clear that all instances where a particular defined term is mentioned are for the purposes of the Rule, unless as otherwise specified. In addition, the Commission is deleting the word “said” from the former Rule's paragraph (d)(1) because the words “of this section” also appear in the text of the Rule. The Commission is also deleting the phrase “the issuer's most recent” from the phrase “a copy of the issuer's most recent” in paragraph (b)(3) and also replacing “[i]ssuer's most recent” with the word “[a]n” in the beginning of paragraphs (b)(3)(i) through (iv) to avoid a redundancy.
Finally, the Commission is adopting amendments to paragraph (b)(2) of the amended Rule to align with Regulation A, which requires that all issuers who conduct offerings pursuant to Regulation A electronically file an offering statement on Form 1-A, on EDGAR.
The Commission proposed to make conforming amendments to Rule 144(c)(2)
As discussed above, the Commission is removing the Preliminary Note from the former Rule and adopting as proposed the guidance that appears below. This guidance is based on the 1991 Adopting Release (the “1991 Guidance”) and the Appendix in the 1999 Reproposing Release (the “1999 Appendix”).
The Commission solicited comment on the guidance, including whether the 1999 Appendix should be incorporated into the new guidance. The 1999 Appendix provided guidance to broker-dealers on the scope of the review required by the Rule and offered examples of red flags that broker-dealers should look for when reviewing issuer information. Commenters suggested that the Commission provide updated guidance to the industry on the process involved in complying with the Rule's information review requirement, particularly with respect to any “red flags” regarding an issuer or its securities.
The Commission has determined to include the guidance, substantially as proposed, with a modification to include and update the red flags examples that were included in the 1999 Appendix. With one exception, the Commission continues to believe that all of the red flag examples from the 1999 Appendix, as updated, remain valid. The exception appeared in the section entitled, “Offerings under Rule 504 of Regulation D where [certain] factors are present.”
Broker-dealers and qualified IDQSs complying with the information review requirement under the amended Rule must have a reasonable basis under the circumstances for believing, based on a review of paragraph (b) information, together with any supplemental information required by paragraph (c), that: (1) The paragraph (b) information is accurate in all material respects, and (2) the sources of the paragraph (b) information are reliable.
The amended Rule requires that the broker-dealer or qualified IDQS must have a reasonable basis for believing that any source of the paragraph (b) information is reliable. In the absence of any red flag (
Occasionally, a broker-dealer or qualified IDQS may receive information specified in paragraph (b) and required by paragraph (c) of the amended Rule about an issuer from someone other than another broker-dealer, the issuer or its agents, or an independent information service. In such situations, while the broker-dealer or qualified IDQS might be aware of the identity of the immediate source of the specified information, it might not have any knowledge about the person that compiled such information. However, to comply with the amended Rule's requirement regarding source reliability, the broker-dealer or qualified IDQS is required to ascertain the reliability of the sources of the information. In this regard, when the immediate source represents that the information was compiled by the issuer, the broker-dealer generally should verify that representation by contacting the issuer directly.
If, however, the broker-dealer or qualified IDQS receives the information from an independent and objective source representing that it received the information directly from the issuer, the broker-dealer or qualified IDQS could rely on that representation absent countervailing information. When a red flag regarding the source's reliability exists, the broker-dealer or qualified IDQS should conduct the inquiry called for under the circumstances to
Once the broker-dealer or qualified IDQS has a reasonable belief as to the source's reliability, it should examine the materials in its records to make certain that all of the specified information has been obtained. Next, the broker-dealer or qualified IDQS should review the paragraph (b) information in the context of all other information, including supplemental information under paragraph (c), about the issuer that has come to its knowledge or is in its possession. Ordinarily, the broker-dealer or qualified IDQS need not take any further steps (
Where no red flags appear during this review process, the broker-dealer or qualified IDQS could have a reasonable basis for believing that the information is accurate. If red flags appear, the broker-dealer or qualified IDQS could attempt to reasonably address any red flags or decide not to publish or submit a quotation for the issuer's security. In such case, the specific efforts by the broker-dealer or qualified IDQS to satisfy the reasonable basis standard with respect to the accuracy of the information and the reliability of sources can vary with the circumstances and may require the broker-dealer or qualified IDQS to obtain additional information or seek to verify the accuracy of existing information. For example, the broker-dealer or qualified IDQS may have a reasonable basis to believe that the information is accurate in all material respects after questioning the issuer directly. When red flags are present such that they bring into question the reliability of an issuer or its officers and directors, attorneys, or accountants, as a source of information, the broker-dealer or qualified IDQS may need to consult independent sources, such as an attorney or accountant.
As discussed above, the amended Rule requires that a broker-dealer or qualified IDQS have a reasonable basis under the circumstances for believing that paragraph (b) information, in light of any other documents and information required by the amended Rule, such as paragraph (c) information, is accurate in all material respects. However, the amended Rule does not require that, before submitting or publishing quotations for a security, a broker-dealer or qualified IDQS conduct an independent “due diligence” investigation regarding the issuer or its business operations and financial condition such as the investigation expected to be conducted by an underwriter. A broker-dealer or qualified IDQS publishing quotations may have no relationship with or access to the issuer of the security. The amended Rule does not require that the broker-dealer or qualified IDQS develop such a relationship to obtain information about the issuer. Rather, as described above, the amended Rule specifies the information that must be gathered, and the information review requirement would be satisfied if the broker-dealer or qualified IDQS had a reasonable basis for believing that the information is accurate in all material respects and obtained from a reliable source, after reviewing that information.
In short, a reasonable basis for belief in the accuracy of the paragraph (b) information can be founded solely on a careful review of the paragraph (b) information together with paragraph (c) information, provided that the paragraph (b) information was obtained from sources reasonably believed to be reliable and there are no red flags. When red flags are initially present, the broker-dealer or qualified IDQS may, upon inquiry, obtain additional information that provides a reasonable basis for believing that the information is accurate in all material respects and that the sources are reliable.
The Commission is providing examples of red flags where the broker-dealer or qualified IDQS may want to apply additional scrutiny. These examples, however, are not exhaustive. Conversely, the presence of these or other red flags is not necessarily an indication of fraud or inaccurate information; it simply means that the broker-dealer or qualified IDQS should consider questioning whether the issuer information is accurate, and in certain cases, from a reliable source. The more red flags that are present, the more a broker-dealer or qualified IDQS may want to scrutinize the issuer information.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
o.
p.
q.
r.
s.
t.
u.
v.
w.
x.
The Commission is providing a compliance date that is nine months after the effective date of the amended Rule, except for the compliance date for paragraph (b)(5)(i)(M) of the amended Rule. The compliance date for paragraph (b)(5)(i)(M) of the amended Rule is two years after the effective date of the amended Rule.
After considering the comments received regarding the transition period for compliance with the amended Rule's provisions,
The Commission recognizes that there are market participants who are concerned about the loss of a quoted market for certain securities as a result of the amended Rule and that such market participants may wish to seek relief from the provisions of the amended Rule. The Commission encourages such persons to submit relief requests expeditiously during the nine-month transition period. The Commission notes, however, that it will consider relief requests at any time, including after the nine-month transition period.
On and after the nine-month transition period, broker-dealers that publish or submit quotations in a quotation medium, qualified IDQSs that make known to others certain broker-dealer quotations and make certain publicly available determinations, and registered national securities associations that make certain publicly available determinations would be required to comply with the amended Rule when they perform those activities. The Commission staff intends to offer assistance and support to covered entities during the transition period and thereafter, with the aim of helping to ensure that the investor protections and other benefits of the amended Rule are implemented in an efficient and effective manner.
The Commission is not making any changes in the regulatory structure around information repositories. The Commission solicited comment on the designation of certain entities as information repositories, including whether investors and other market participants would benefit from having access to proposed paragraph (b) information solely through a centralized location, such as an information repository. Two commenters supported the idea of a centralized location for paragraph (b) information,
Certain commenters urged the Commission to take additional or different regulatory and non-regulatory actions than the approach adopted, including actions that the Commission did not propose. These suggestions covered a variety of areas, including settlement cycles,
Some commenters advocated that persons complying with the information review requirement should have a reasonable basis for believing that the issuer's information is complete and from a reliable source, rather than accurate and from a reliable source.
In addition, some commenters stated their views regarding alternatives to the requirement that paragraph (b) information be current and publicly available
Pursuant to the Congressional Review Act,
If any of the provisions of these final rules, or the application thereof to any person or circumstance, is held to be invalid, such invalidity shall not affect other provisions or application of such provisions to other persons or circumstances that can be given effect without the invalid provision or application.
Certain provisions of the amended Rule impose “collection of information” requirements within the meaning of the Paperwork Reduction Act of 1995 (“PRA”).
The title for this collection of information is “Publication or submission of quotations without specified information.” In accordance with the PRA, the Commission submitted the collection of information for the proposed amendments to the Rule to the Office of Management and Budget (“OMB”) for review.
The Commission published notice and solicited comments on the collection of information requirements for the proposed amendments in the Proposing Release.
The Rule is designed to prevent broker-dealers from publishing or submitting quotations for OTC securities that may facilitate a fraudulent or manipulative scheme. Subject to certain exceptions, the Rule prohibits broker-dealers from publishing or submitting a quotation for a security, or submitting a quotation for publication, in a quotation medium, unless they have reviewed specified information regarding the issuer. The Commission is adopting amendments designed to modernize the Rule, promote investor protection, and help prevent incidents of fraud and manipulation by, among other things, requiring information about the issuers of securities that are quoted in the OTC market to be current and publicly available; narrowing certain exceptions from the Rule's requirements, including the piggyback exception and unsolicited quotation exception; adding new exceptions for the quotations of securities that may be less susceptible to fraud and manipulation; removing obsolete provisions; adding new definitions; and making technical amendments.
Generally, the Rule applies to broker-dealers that participate in the quoted market for OTC securities. The amendments modify some of the existing information collection burdens on broker-dealers and create new record retention obligations on broker-dealers that rely on exceptions to the Rule. The Commission believes that approximately 34 broker-dealers will be subject to the burdens associated with publishing or submitting a quotation without an exception,
The amendments permit a qualified IDQS to comply with the information review requirement in certain circumstances.
For the purposes of the analysis below, the Commission has made assumptions regarding how respondents would comply with the amended Rule.
The collections of information associated with the initial publication or submission of a quotation are intended to prevent broker-dealers from publishing or submitting quotations for OTC securities that may facilitate a fraudulent or manipulative scheme. In addition, information collections associated with recordkeeping and establishing, maintaining, and enforcing reasonably designed written policies and procedures under the amended Rule are intended to help ensure compliance with the Rule's exceptions.
Absent an exception, broker-dealers must comply with the information review requirement of the Rule before initiating the publication or submission of a quotation for an OTC security. The Commission believes that, as was the case with the former Rule, the information collections associated with the information review requirement and recordkeeping requirement under the amended Rule involve conducting a review of and maintaining the specified information.
A broker-dealer that initiates or resumes a quotation in an OTC equity security is subject to FINRA Rule 6432, which requires the broker-dealer to demonstrate compliance with, among other things, Rule 15c2-11 by filing a Form 211. Given the alignment of this FINRA requirement and the Rule, the Commission believes that the number of Forms 211 filed with FINRA in 2019 provides a reasonable baseline from which to estimate the burdens associated with the information review requirement under both the former Rule and the amended Rule. Based on information provided by FINRA, broker-dealers submitted a total of 384 Forms 211 to initiate the publication or submission of quotations of OTC securities in 2019: 87 of these Forms 211 concerned securities of prospectus issuers, Reg. A issuers, and reporting issuers; 253 concerned securities of exempt foreign private issuers; and 44 concerned securities of catch-all issuers. The Commission estimates that it takes approximately three hours to review, record, and retain the information pertaining to prospectus issuers, Reg. A issuers, and reporting issuers, and seven hours to review, record, and retain the information pertaining to exempt foreign private issuers and catch-all issuers.
The information review requirement is set forth in paragraphs (a), (b), and (c) of the amended Rule. The amendments change the information review requirement by adding, among other things, the requirement that paragraph (b) information be current and publicly available before the initial publication or submission of a quotation for an OTC security.
Modifications to the Rule, as well as several of the proposed changes to exceptions from the requirements of the Rule, do, however, affect the recordkeeping obligations of broker-dealers and qualified IDQSs. The impact of paragraph (a)(1)(ii) on the recordkeeping requirement in paragraph (d)(1)(i), as well as the recordkeeping requirements in paragraph (d)(2) for revised and new exceptions, is discussed in Part V.C.2 below.
As discussed above, the amendments would modify the piggyback exception in various ways, and these amendments would, in turn, impact the burdens associated with the information review requirement.
Based on the lack of quotes by broker-dealers for these securities in 2019, it is unclear whether broker-dealers would conduct the required review for most of these securities that would no longer be eligible for the piggyback exception provided under paragraph (f)(3)(i)(A). Taking a conservative approach in assessing the burden that may arise under this amendment, the Commission estimates that broker-dealers would comply with the information review requirement once annually for each security that would lose piggyback eligibility.
The Commission is increasing the estimated overall burdens related to the information review requirement based on the provision in paragraph (f)(3)(i)(C) of the amended Rule, which would allow broker-dealers to rely on the piggyback exception to publish quotations for the securities of (1) issuers for which documents and information are specified in paragraphs (b)(4) or (b)(5) if paragraph (b) information is current and publicly available, (2) issuers for which documents and information are specified in paragraphs (b)(3)(i), (b)(3)(iv), or (b)(3)(v) if paragraph (b) information is filed within 180 calendar days from a specified time frame,
To the extent that paragraph (b) information becomes current and publicly available after the loss of the piggyback exception, a broker-dealer or qualified IDQS would need to comply with the information review requirement in order to be able to publish or submit a quotation for such OTC security.
There were 3,095 securities of issuers of quoted OTC securities in 2019 without current and publicly available information.
The Commission is revising the estimates of current burdens of the information review requirement based on the provision in paragraph (f)(3)(i)(B) of the amended Rule, which eliminates piggyback eligibility for quotations for securities of shell companies that are published or submitted 18 months following the publication or submission of the initial priced quotation for such issuer's security in an IDQS and for securities within 60 calendar days following a trading suspension under Section 12(k) of the Exchange Act. With respect to shell companies, as stated in the Economic Analysis, the Commission believes that approximately 460 securities of shell companies that are quoted in the OTC market would lose piggyback eligibility. The Commission also believes that there are approximately 219 securities that were piggyback eligible within 60 calendar days following a trading suspension under Section 12(k) of the Exchange Act. As is the case in the context of one-way priced quotations, it is unclear whether broker-dealers would conduct the required review for securities of issuers subject to the provision in paragraph (f)(3)(i)(B) that lose piggyback eligibility. Taking a conservative approach in assessing the burden that may arise under this amendment to the piggyback exception, the Commission estimates that broker-dealers would comply with the information review requirement once annually for each such security that would lose piggyback eligibility. Accordingly, this amendment would increase burdens by 2,829 hours.
For securities of shell companies: (306 securities of SEC reporting companies/Reg. A issuers/other reporting issuers × 3 hours review and
For securities subject to trading suspensions: (175 securities of SEC reporting companies/Reg. A issuers/other reporting issuers × 3 hours review and recordkeeping) + (44 catch-all issuers × 7 hours review and recordkeeping) = (525) + (308) = 833 hours.
Grand total: (1,996) + (833) = 2,829 hours.
In summary, the amendments to the piggyback exception would impact the burdens associated with the information review requirement in various ways. Paragraph (f)(3)(i)(A) of the amended Rule permits broker-dealers to piggyback on one-way priced quotations. The Commission estimates that this amendment would increase the annual burden by 1,496 hours. The provision in paragraph (f)(3)(i)(C) of the amended Rule permits broker-dealers to piggyback quotations of the securities of certain issuers only if paragraph (b) information is, depending on the regulatory status of the issuer, (1) current and publicly available, (2) timely filed, or (3) filed within 180 calendar days from a specified period. The Commission estimates that this amendment would increase the annual burden by 17,789 hours. The provision in paragraph (f)(3)(i)(B) of the amended Rule eliminates piggyback eligibility for quotations for securities of shell companies that are published or submitted 18 months following the publication or submission of the initial priced quotation for such issuer's security in an IDQS and for securities within 60 calendar days following a trading suspension under Section 12(k) of the Exchange Act. The Commission estimates that this amendment would increase the annual burden by 2,829 hours.
Amendments to the Rule create a new exception that is intended to reduce burdens related to publishing or submitting quotations for OTC securities that are highly liquid and of an issuer that is well-capitalized. Specifically, paragraph (f)(5) of the amended Rule provides an exception for securities with a worldwide ADTV value of at least $100,000 during the 60 calendar days immediately before the date of the publication of a quotation for such security, and of an issuer with $50 million in total assets and $10 million in shareholder's equity as reflected in the issuer's publicly available audited balance sheet issued within six months after the end of its most recent fiscal year. The amendment is estimated to reduce the burden of information collection by creating an exception from the information review requirement under the Rule for broker-dealers publishing or submitting quotations for OTC securities that are less susceptible to fraud or manipulation.
The Commission estimates that approximately 180 of quoted OTC securities on an average day during calendar year 2019 would be eligible for the ADTV and asset test exception set forth in paragraph (f)(5) of the amended Rule.
The Commission also believes, however, that amendments to other Rule exceptions—namely, those set forth in paragraphs (f)(2)(ii) and (f)(6) of the amended Rule—do not impact the burden of the information review requirement. More specifically, paragraph (f)(2)(ii) of the amended Rule, which provides an exception for a broker-dealer to publish or submit a quotation by or on behalf of certain company insiders and affiliates of the issuer in reliance on the unsolicited quotation exception only if paragraph (b) information is current and publicly available,
Further, paragraph (f)(6) of the amended Rule provides an exception from the information review requirement for certain quotations of broker-dealers named as underwriters in the registration statement or offering statement of a security within the time frames specified in paragraphs (b)(1) or (b)(2) of the amended Rule, as applicable. The Commission believes that no broker-dealer would be required to comply with the information review requirement for quoted OTC securities that meet the requirements of the underwriter exception. While it is estimated that this amendment would result in a slight reduction in the number of times broker-dealers comply with the information review requirement annually, out of an abundance of caution given the lack of granular data, the Commission has not decreased the overall burden estimates associated with the information review requirement as a result of the underwritten offering exception provided in paragraph (f)(6) of the amended Rule.
The amendments also create burdens relating to recordkeeping obligations under the amended Rule. The amendments update the recordkeeping requirements under the Rule to require broker-dealers, qualified IDQSs, and registered national securities associations to keep records that demonstrate that the requirements of a Rule exception are met.
As shown in the Table 3 of the Economic Analysis, there are 9,895 unique issuers of quoted OTC securities for which broker-dealers would be required to maintain records to establish that paragraph (b) information is, depending on the regulatory status of the issuer, current and publicly available, timely filed, or filed within 180 calendar days from the specified period. Of these 9,895 issuers, 3,081 are SEC/Reg. A/Bank Reporting Obligation issuers, 4,413 are exempt foreign private issuers, and 2,401 are catch-all issuers.
The amendments would also create ongoing recordkeeping burdens for broker-dealers relying on exceptions under paragraphs (f)(2), (f)(3), (f)(5), (f)(6), or relying on a qualified IDQS's publicly available determination that it has complied with the information review requirement of the amended Rule (pursuant to paragraph (a)(1)(ii)).
Although there is current and publicly available information for many issuers of securities involving unsolicited customer order quotations, out of an abundance of caution, the Commission is basing its estimate of recordkeeping obligations under this exception on data regarding all unsolicited customer quotations, and assuming that the number would remain consistent on an annual basis. According to OTC Markets Group data, there were 5,782,286 quotations published in reliance on the unsolicited quotation exception in 2019. Therefore, it is estimated that there would be 5,782,286 quotations published in reliance on the unsolicited quotation exception annually that would require documentation and information to demonstrate that the quotation is not by or on behalf of a company insider or an affiliate of the issuer.
Further, it is estimated that it would take a broker-dealer approximately one minute to create a record regarding such unsolicited customer quotation or, pursuant to paragraph (f)(2)(iii) of the amended Rule, to review and document the written representation of a customer's broker that the quotation is not on behalf of a company insider or an affiliate of the issuer. Accordingly, it is estimated that annually, broker-dealers would spend approximately 96,371 hours
The Commission believes that broker-dealers would already have administrative systems and procedures, as well as personnel, in place to document and record the circumstances involved in unsolicited customer quotations, and that the initial burden of putting procedures in place to ensure compliance with this amendment would be three hours of internal burden per broker-dealer to reprogram systems and capture the requisite records relating to unsolicited quotations,
The piggyback exception requires that there be no more than four business days in succession without a bid or offer priced quotation. To comply with the recordkeeping requirement in paragraph (d)(2) of the amended Rule, broker-dealers relying on the piggyback exception, and each qualified IDQS or registered national securities association that makes publicly available determinations regarding the availability of the piggyback exception, must preserve documents and
Further, it is estimated that it would take a broker-dealer, a qualified IDQS, or a registered national securities association approximately one second to create a record regarding the frequency of a priced bid or offer quotation, pursuant to paragraph (f)(3)(i) of the amended Rule. The Commission believes that one second is an appropriate estimate regarding the time it will take to create such a record because the Commission believes that such a record will be created through an automated process that will require minimal direct human intervention, if any. Accordingly, it is estimated that, annually, broker-dealers, qualified IDQSs, and a registered national securities association would spend approximately 66,251 hours
A provision in paragraph (f)(3)(i)(B) of the amended Rule eliminates piggyback eligibility for quotations for securities of shell companies that are published or submitted 18 months following the publication or submission of the initial priced quotation for such issuer's security in an IDQS. To comply with the recordkeeping requirement in paragraph (d)(2) of the amended Rule, each broker-dealer relying on the piggyback exception, and each qualified IDQS or registered national securities association that makes publicly available determinations regarding the availability of the piggyback exception, must preserve documents and information regarding its determination that the issuer of a security is not a shell company. The Commission estimates that broker-dealers, qualified IDQSs, and registered national securities associations would make determinations regarding shell companies based on how frequently information for that issuer is filed or made current and publicly available. For example, a broker-dealer, qualified IDQS, or registered national securities association may determine that a reporting issuer is a shell company when its annual or periodic reports are filed. Similarly, a broker-dealer, qualified IDQS, or registered national securities association may determine that a catch-all issuer is a shell company on an annual basis.
The Commission estimates that broker-dealers, qualified IDQSs, and registered national securities associations would each spend, on average, one minute making a determination and preserving documents and information that demonstrate that an issuer of the OTC security is not a shell company. As stated above, one commenter stated that the Commission significantly underestimated the amount of time it would take a broker-dealer to determine whether an issuer is a shell company.
Broker-dealers currently rely on the piggyback exception to publish quotations for 9,895 individual issuers. The time it takes to determine whether an individual issuer is a shell company varies, however, depending on whether the issuer discloses its shell company status. In some instances, it may take less than one minute to assess whether a company is a shell company, while in other instances, it may take longer than one minute.
As stated in the Economic Analysis, there are 9,895 issuers of quoted OTC securities.
The amended Rule also limits the ability of a broker-dealer to rely on the piggyback exception with respect to a security that is the subject of a trading suspension order issued by the Commission pursuant to section 12(k) of the Exchange Act until 60 calendar days after the expiration of such order. The Commission believes that a broker-dealer, qualified IDQS, or registered national securities association would only create records for securities that have been the subject of a trading suspension issued by the Commission pursuant to section 12(k). In 2019, the Commission issued a trading suspension for 213 securities. Further, it is estimated that it would take a broker-dealer, qualified IDQS, or registered national securities association approximately one minute to create a record regarding whether a security has been subject to a trading suspension. Accordingly, it is estimated that, annually, broker-dealers, qualified IDQSs, and registered national securities associations would spend approximately 291 hours
The Commission believes that broker-dealers, qualified IDQSs, and registered national securities associations already have administrative systems and procedures as well as personnel in place to create records regarding whether a security has been subject to a trading suspension, and that the initial burden of putting procedures in place to ensure compliance with the amendments would be three hours of internal burden per broker-dealer, qualified IDQS, and registered national securities association, leading to an initial burden of 246 hours for these market participants to reprogram systems and capture the record relating to the prohibition for reliance on the piggyback exception until 60 calendar days after the expiration of a Commission trading suspension order issued pursuant to section 12(k) of the Exchange Act.
As stated in the Economic Analysis, it is estimated that there would be approximately 180 securities that would meet the amended Rule paragraph (f)(5) ADTV and asset tests. In addition to preserving documents and information that demonstrate paragraph (b) information is current and publicly available, as discussed above, the broker-dealer, qualified IDQS, or registered national securities association would need to preserve documents and information that demonstrate that the various requirements of the ADTV test and asset test have been met. It is estimated that it would take one minute to create documentation supporting the broker-dealer's reliance on the asset test prong of the exception and that broker-dealers would do this once annually per issuer.
Additionally, the Commission estimates that it would take one minute for a broker-dealer, qualified IDQS, or registered national securities association to preserve documents and information that demonstrate that the requirements of the ADTV test have been met and that each respondent would do this 252 times a year (
Paragraph (f)(6) of the amended Rule excepts from the information review requirement quotations for a security by a broker-dealer that is named as underwriter in a security's registration statement referenced in paragraph (b)(1) or in an offering statement referenced in paragraph (b)(2) of the amended Rule, subject to the time limitations contained in those sections of the amended Rule. Registration statements and offering statements are filed in EDGAR. Because the provision in paragraph (d)(2)(ii) of the amended Rule does not require broker-dealers to preserve paragraph (b) information that is available on EDGAR, the Commission is not estimating any initial or ongoing recordkeeping burden to be associated with this exception.
Amendments to the amended Rule provide exceptions for quotations for: (1) A security admitted to trading on a national securities exchange and which is traded on such an exchange on the same day as, or on the business day immediately preceding, the day of the quote (paragraph (f)(1)), and (2) a municipal security (paragraph (f)(4)). The Commission is not estimating any initial or ongoing burden with respect to these exceptions because the provision in paragraph (d)(2) of the amended Rule does not require broker-dealers, qualified IDQSs, or registered national securities association to preserve records under paragraph (d)(2) for the paragraph (f)(1) or paragraph (f)(4) exceptions.
Paragraph (a)(1)(ii) of the amended Rule allows broker-dealers to rely on a qualified IDQS's publicly available determination that it complied with the information review requirement. Paragraph (d)(1)(ii) of the amended Rule requires that broker-dealers maintain a record of the name of the qualified IDQS that made such publicly available determination. It is unclear for how many OTC securities qualified IDQSs might choose to comply with the information review requirement under the amended Rule.
This provision, which collapses the proposed qualified IDQS review exception into an unlawful activity provision of the amended Rule, pertains to the application of the information review requirement with respect to certain securities that are less likely to be targeted for fraudulent activity (
Under the amended Rule, a qualified IDQS or registered national securities association must establish, maintain, and enforce reasonably designed written policies and procedures to make certain publicly available determinations.
Paragraph (d)(2)(ii) of the amended Rule requires broker-dealers that rely on publicly available determinations described in paragraph (f)(2)(iii)(B) or (f)(3)(ii)(A) to preserve the name of the qualified IDQS or registered national securities association that made such a determination. Paragraph (d)(2)(ii) of the amended Rule also requires that broker-dealers that rely on publicly available determinations described in paragraph (f)(7) of the amended Rule preserve a record of the exception upon which the broker-dealer is relying and the name of the qualified IDQS or registered national securities association that determined that the requirements of that exception are met. The Commission estimates that broker-dealers would create documents as required by paragraph (d)(2)(ii) each trading day. The Commission estimates that each broker-dealer would spend approximately one second creating such a record. The Commission believes that one second is an appropriate estimate regarding the time it will take to create such a record because the Commission believes that such a record will be created through an automated process that will require minimal direct human intervention, if any. Accordingly, broker-dealers would spend approximately 808 hours
The information collections for the information review requirement and recordkeeping requirement are mandatory under the amendments to the Rule if a broker-dealer wishes to provide the initial publication or submission of a quotation for an OTC security. Additionally, the information collections involving documentation and information that demonstrate that the requirements for an exception have been met are mandatory under the amendments if a broker-dealer submits or publishes quotations that rely on an exception in paragraph (f) of the amended Rule.
The Commission would not typically receive confidential information as a result of this collection of information. To the extent that the Commission receives—through its examination and oversight program, through an investigation, or by some other means—records or disclosures from a qualified IDQS or registered broker-dealer that concern the information review requirement and that are not publicly available, such information would be kept confidential, subject to the provisions of applicable law. Likewise, to the extent that the Commission receives—through its examination and oversight program, or through an investigation, or by some other means—
Under paragraph (d)(1) of the amended Rule, a broker-dealer publishing or submitting a quotation, or a qualified IDQS that makes known to others the quotation of a broker-dealer pursuant to paragraph (a)(2) of the amended Rule, must preserve the documents and information for a period of not less than three years, the first two years in an easily accessible place. Under paragraph (d)(2) of the amended Rule, a broker-dealer publishing or submitting a quotation, or a qualified IDQS, or a registered national securities association that makes a publicly available determination pursuant to paragraphs (f)(2)(iii)(B), (f)(3)(ii)(A), or (f)(7) of the amended Rule must preserve the documents and information for a period of not less than three years, the first two years in an easily accessible place.
The amended Rule updates investor protection requirements in light of the substantial reductions in costs for information acquisition and dissemination due to modern technology. These changes are expected to better protect retail investors from incidents of fraud and manipulation in OTC securities, particularly the securities of issuers for which there is no or limited publicly available information. These amendments are also intended to reduce regulatory burdens on broker-dealers for publication of quotations of certain OTC securities that may be less susceptible to potential fraud and manipulation, such as highly liquid securities of certain well-capitalized issuers and securities that were issued in offerings underwritten by the broker-dealer publishing the quote.
The Commission is mindful of the costs imposed by and the benefits obtained from the Commission's rules. Exchange Act Section 3(f) requires the Commission, when engaging in rulemaking that requires consideration or determination of whether an action is necessary or appropriate in the public interest, also to consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation. Additionally, Exchange Act Section 23(a)(2) requires the Commission, when adopting rules under the Exchange Act, to consider the impact that any new rule will have on competition and not to adopt any rule that will impose a burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act.
The discussion below addresses the expected economic effects of these amendments, including the likely benefits and costs, as well as the likely effects of the amendments on efficiency, competition, and capital formation. The Commission has, where possible, quantified the economic effects that are expected to result from these amendments in the analysis below. However, the Commission is unable to quantify some of the potential effects discussed below.
First, it is unclear to what extent current and publicly available paragraph (b) information would influence OTC investors' investment decisions and how these decisions might affect the welfare of these investors.
The final amendments to the Rule would affect broker-dealers that publish or submit quotations for OTC securities. Besides broker-dealers and qualified IDQSs, affected parties include issuers of quoted OTC securities and investors in these securities (either investors already holding a position in OTC securities or those seeking to acquire such a position).
One commenter stated that the count of unique broker-dealers filing FINRA Form 211 does not accurately represent the concentration of broker-dealers conducting the initial information review because the vast majority of securities that were approved for trading were foreign securities that were already listed on a foreign exchange. In addition, the commenter stated that only four broker-dealers conducted the initial information review for the remaining domestic issuers and since 2018, three of these broker-dealers have ceased this activity.
Filing of FINRA Form 211 is associated with initiating or resuming quotations only. The Commission lacks data that would allow it to estimate the number of quotes that broker-dealers published pursuant to paragraph (a) or in reliance on the piggyback exception, national securities exchange, or municipal security exceptions to the Rule. Based on data from OTC Markets Group, broker-dealers published a total of approximately 3.8 billion quotations during calendar year 2019, of which 5,782,286 were published in reliance on the unsolicited quotation exception. See
Securities that are quoted on the OTC market differ from those listed on national securities exchanges. In particular, the average OTC security issuer is smaller, and its securities trade less, on average. Table 1 below compares quoted OTC securities to those listed on the New York Stock Exchange (“NYSE”) or Nasdaq.
Commenters generally agreed that the key difference between quoted OTC securities and those listed on national exchanges were size and trading volume.
Table 2 provides more detail on the characteristics of quoted OTC securities and their issuers for the 2019 calendar year.
All statistics in Table 1 represent characteristics of OTC securities and OTC issuers on a typical trading day and are computed by averaging across all trading days for the 2019 calendar year. The Commission identified 19,141 unique OTC securities for 16,059 unique companies from aggregated OTC Markets Group data for the calendar year 2019. Of these, 11,542 unique OTC securities had at least one published quotation and 9,895 unique companies had a security that was quoted at least once during the calendar year 2019. The Commission believes that OTC Markets Group data are reasonably representative of all OTC quoting and trading activity in the U.S.
Some OTC securities are traded without having published quotation.
Table 3 below provides detail on issuers of quoted OTC securities.
The Commission observed several instances in the data in which issuers of quoted OTC securities changed their reporting standard during 2019, for example, by switching from following an alternative reporting standard to the Exchange Act reporting standard. In these instances, for the computation of statistics in Table 3, the Commission attributed a reporting standard that the issuer followed for the majority of the days that its securities had published quotations during 2019.
The number the Commission computes here is a rough estimate as it is possible that some issuers of securities in the OTC Pink: Limited Information or OTC Pink: No Information tiers voluntarily release current and public information somewhere other than on the OTC Markets Group platform. In particular, some commenters stated that certain issuers of quoted OTC securities publish current financial information on their websites.
Of all the quoted securities that qualified for the piggyback exception in calendar year 2019, the Commission estimates that 69 percent of them had publicly available current disclosures based on data from OTC Markets Group.
Although current FINRA and Commission rules do not require the financial statements of non-SEC reporting OTC securities issuers to be audited, OTC Markets Group requires audited financials from OTC issuers with securities quoted in the OTCQX U.S.® and OTCQB® tiers. Issuers with securities quoted in the OTC Pink: Current Information tier must provide an Attorney Letter with Respect to Current Information if they do not file with the SEC and do not publish audited financial information.
Three percent of issuers with quoted OTC securities were shell companies, and broker-dealers were able to rely on the piggyback exception to publish or submit quotations for nearly all securities of shell companies (99 percent).
In its comment letter, OTC Markets Group stated that, as of December, 2019, 339 issuers of OTC securities have self-reported in their public filings as shell companies, as defined by Rule 405 of Regulation C. OTC Markets Group has flagged an additional 534 issuers as “shell risk,” based on the following annual financial metrics: (i) Revenue less than $100,000; (ii) total assets (less cash and cash equivalents) less than $100,000; (iii) gross profit or loss less than $100,000; and (iv) research and development costs under $50,000. See OTC Markets Group Letter 2.
The OTC market may be attractive to those seeking to engage in fraudulent practices, such as pump-and-dump schemes, due to a lack of publicly available current information about certain issuers of quoted OTC securities.
To highlight characteristics of securities and issuers in the OTC market that tend to involve risk of fraud and manipulation, the Commission examined quoted OTC securities that had been the subject of Commission-ordered trading suspensions and those that have been assigned a “caveat emptor” designation by OTC Markets Group during the 2019 calendar year.
Overall, 213 quoted OTC securities were the subject of Commission-ordered trading suspensions over the calendar year 2019.
In addition, the Commission examined 241 instances in which quoted OTC securities were flagged with the “caveat emptor” designation by OTC Markets Group to inform investors to exercise additional care when considering whether to transact in these securities. Most of these companies had Commission-ordered trading suspensions.
Increasing the availability of information about OTC issuers has the potential to counteract misinformation, which can proliferate through promotions and other channels. Several recent studies have examined the effects of stock promotions on investor trading in the OTC market.
One academic study has found that OTC stocks are owned primarily by retail investors rather than institutional investors.
In this section, the Commission discusses the expected costs and benefits of the amendments to Rule 15c2-11. These amendments modify
The amendments would affect OTC investors, issuers, and intermediaries such as broker-dealers. The Commission anticipates the principal economic effects of the amendments to be as follows. First, the transparency requirements could enable investors to learn more about the fundamental value of certain companies in the OTC market, which may direct their funds toward higher-return investments. These benefits are directly linked to modern technology that enables relatively low cost access to and dissemination of company filings. In addition, other investors could benefit from more efficient prices that are less susceptible to manipulation as a result of the trading activity of better-informed investors who acquire this information. Second, the amendments may reduce the incidence of fraudulent schemes, such as pump-and-dump activity, as a result of heightened information requirements and restrictions on the piggyback exception being applied to securities without current and publicly available information. Finally, broker-dealers could bear additional costs from the information review requirement as well as filing FINRA Forms 211 more frequently (
In specific circumstances, other provisions of the amended Rule seek to relieve broker-dealers of costs related to the information review requirement and filing FINRA Form 211. For example, the exception for issuers with ADTV value greater than $100,000, total assets greater than $50 million, and shareholder equity greater than $10 million will relieve broker-dealers of the information review requirement for larger, more liquid issuers which are potentially less susceptible to fraud.
Broker-dealers and investors could also incur costs and benefits associated with possible migration in trading activity from certain issuers and markets to others (
The costs and benefits associated with the specific amended Rule provisions are discussed below.
The costs and benefits discussed below pertain to the general requirements for paragraph (b) information to be current and publicly available to publish or submit quotations for, or to maintain a quoted market in, quoted OTC securities. They also pertain to the new public information requirements for the unsolicited quotation exception. The Commission expects that investors would benefit from easier access to paragraph (b) information through public media, such as EDGAR or the website of a qualified IDQS, a registered national securities association, the issuer, or a registered broker-dealer that publishes paragraph (b) information related to quoted OTC securities.
Presently, not all issuers of quoted OTC securities provide current and publicly available financial information.
Higher quality issuers (
Conversely, issuers may also incur costs associated with making paragraph (b) information publicly available before broker-dealers can publish or submit quotations for their securities. We focus our discussion below on the costs of providing current and publicly available information for non-transparent catch-all issuers as any issuers that make disclosures pursuant to reporting obligations other than those contained within the amended Rule would incur costs attributable to those obligations and not to Rule 15c2-11. These costs could include preparing and producing paragraph (b) information in document form and ensuring that the paragraph (b) information is publicly available.
Finally, there may also be indirect costs to OTC issuers of disclosing paragraph (b) information, such as costs of revealing sensitive financial information that might be exploited by competitor firms, as discussed by commenters.
Alternatively, OTC issuers, including dark catch-all issuers and delinquent reporting issuers, may elect not to provide paragraph (b) information to the public. The securities of these dark OTC issuers may exit from the quoted market as a result. A number of commenters stated that the absence of published quotes may limit liquidity in OTC securities without current and publicly available information and lead to losses for existing investors in these securities.
The Commission acknowledges that OTC investors may incur costs associated with a loss of liquidity and possible associated decrease in share value if OTC issuers elect not to provide current and publicly available paragraph (b) information. While these costs to investors may be significant, the Commission believes that deterring fraud and manipulation in OTC securities justifies the requirement for paragraph (b) information to be current and publicly available to maintain a quoted market in these securities. This loss in share value, if it occurred, could arise from an increase in the costs of resale associated with the OTC stock when migrating to the grey market. The Commission does not believe that the securities of issuers with operations and profitability (or the prospect of future profitability) will become “worthless” as a result of the amendments, as suggested by one commenter.
The Commission is unable to reasonably predict the extent to which OTC securities issuers that do not presently provide current and publicly available information will choose to do so, or continue not to, as a result of final amendments.
The Commission estimates that an average (median) quoted OTC security of a dark issuer reported a positive dollar trading volume for 70 (51) days during calendar year 2019, while an average (median) quoted OTC security of an issuer with current and publicly available information reported trading for 100 (71) days during the same period. Further, on an average trading day during 2019, trading in quoted OTC security of dark issuers accounted for approximately one percent of aggregate daily trading volume across all OTC securities. Among OTC securities of catch-all issuers only, trading in dark OTC securities accounted for 12 percent of aggregate daily trading.
In addition, the Commission finds that bid-offer spreads for dark OTC securities are significantly higher than those of OTC securities with current and publicly available information. In particular, during the average trading day during 2019, the average (median) bid-offer spread for a dark OTC security was 63 (50) percent, which was approximately 3 (8) times higher than the bid-offer spread for OTC security with current and publicly available information. Bid-offer spreads are computed as the absolute difference between best closing bid and closing offer prices, divided by the midpoint of the bid and offer prices. See
Lastly, based on data provided to the Commission by OTC Markets Group on the total counts of quote updates for each OTC security for calendar year 2019, the Commission finds that the mean (median) OTC security of a dark issuer saw 70 (6) times fewer quotation updates as compared to an OTC security of an issuer with current and publicly available information. Among OTC securities of catch-all issuers only, the mean (median) number of quotation updates during 2019 was 4 (3) times lower for OTC securities of dark issuers.
Some commenters were concerned that the amendments would encourage issuers to remain dark
Lastly, one commenter stated that a lack of quotations may make certain OTC securities more susceptible to manipulation.
The Commission estimates that the cost to a catch-all issuer in connection with preparing and publishing the information required by the amended Rule may be comparable to the cost of completing and filing a Form C-AR under Regulation Crowdfunding.
The number of issuer estimates here represents an upper bound on the number of issuers impacted by this amendment to the Rule for two reasons. First, certain issuers may be making current information publicly available (
Broker-dealers will also incur costs related to determining and documenting whether or not OTC issuers have current and publicly available paragraph (b) information. The Commission believes that broker-dealers could set up information systems to assess whether these conditions apply to OTC securities such that there would be a one-time cost plus an ongoing cost for each security. The Commission believes that the hours in all of the following compliance cost estimates will be borne by internal staff at a rate of $70 per hour.
Broker-dealers may also incur costs or accrue benefits from changes in the liquidity of quoted OTC securities as a result of changes in demand associated with new current and publicly available information within quoted markets. For example, there may be changes in trading volume which alter the number of transactions from which broker-dealers earn fees. As discussed below, there may be migration from the quoted market to the grey market for OTC issuers avoiding these requirements. Therefore, the proportion of rents earned by broker-dealers from the grey market for OTC securities may increase relative to the quoted market. The net effect of these changes on the profits of trading intermediaries is unclear. Some of these costs and benefits to broker-dealers may be passed on to investors in the form of higher or lower transaction costs and account fees. The Commission anticipates that costs and benefits would be passed on more readily as competition increases among broker-dealers for OTC transactions.
The following amendments to the piggyback exception would serve to limit the circumstances under which the exception would apply relative to the baseline: The requirement for paragraph (b) information to be, depending on the regulatory status of the issuer, filed within 180 calendar days from a specified period, timely filed, or current and publicly available for broker-dealers to continue to rely on the piggyback exception; the requirement that reliance on the piggyback exception be based upon priced quotations with either bid or offer prices; and the elimination of piggyback eligibility for quotations for securities of shell companies that are published or submitted 18 months following the publication or submission of the initial priced quotation for such issuer's security in an IDQS or for securities within 60 calendar days of a trading suspension. Such amendments generally would serve to draw quotation and trading activity away from less liquid and less transparent quoted OTC securities. Hence, these amendments to the piggyback exception are designed to provide narrowly tailored updates to prevent fraud and manipulation, while otherwise maintaining liquidity in OTC market.
Currently, broker-dealers may rely on the piggyback exception to publish or submit quotations for the vast majority of quoted OTC securities, but many issuers of these securities do not provide current and publicly available financial information.
Generally, these amendments could benefit investors by drawing their trading activity away from less liquid and less transparent quoted OTC securities that could attract fraudulent activity, thereby potentially deterring fraudulent activity. For example, the inability of broker-dealers to rely on the piggyback exception where there is no current and publicly available information about the issuer could draw trading activity away from these securities. Currently, many publications of quotations for quoted OTC securities associated with completely dark issuers are eligible for broker-dealers to rely on the piggyback exception. Potential fraudsters could incur costs in providing paragraph (b) information to perpetrate fraud in these dark issuers. Alternatively, quotations for OTC securities would not be easily accessible to retail investors if the issuer does not provide current and publicly available information, which could cause fraudsters to have more difficulty in driving up the price for an OTC security. In addition, higher quality issuers in the OTC market could benefit from greater access to capital to the extent that the change leads to a net increase in demand for higher quality OTC stocks and a net decrease in demand for less liquid quoted OTC securities that could attract fraudulent activity.
These amendments could also cause broker-dealers to incur additional costs. In particular, broker-dealers may need to comply with the information review requirement as well as file FINRA Forms 211 to resume a quoted market in securities that lose piggyback eligibility as a result of the amendments. The Commission estimates that it will take broker-dealers four hours to complete the information review and file Form 211 for prospectus issuers, Reg. A issuers, and reporting issuers and eight hours to do so for exempt foreign private issuers or catch-all issuers whenever a broker-dealer initiates the publication or submission of a quotation for an OTC security.
Of the 3,489 securities that would lose piggyback eligibility under these amendments, 1,220 were securities of prospectus issuers, Reg. A issuers, and reporting issuers, 216 were securities of exempt foreign private issuers, and 2,053 were securities of catch-all issuers.
The estimated number securities that would lose piggyback eligibility (as a result of their issuers' paragraph (b) information not being current and publicly available) represents an upper bound.
Broker-dealers will also incur costs related to determining and documenting whether or not these conditions apply to the issuer (
Alternatively, broker-dealers could withdraw from publishing or submitting quotations for certain OTC securities as a result of the requirements related to paragraph (b) information, including the requirements to review and retain this information, as suggested by commenters.
The amended requirement that reliance on the piggyback exception be conditioned on quotations with at least a bid or offer quotation at a specified price also could impose costs on broker-dealers and issuers of quoted OTC securities by possibly limiting the formation of an active quoted market for OTC securities for which broker-dealers initially publish unpriced quotes. The Commission estimates that, out of 345 quoted OTC securities for which broker-dealers could start relying on the piggyback exception to publish or submit quotations during the calendar year 2019, 34 (10 percent) had unpriced quotes only for the entire first 30-days of being quoted.
In contrast, eliminating from the piggyback exception the requirement for 12 days of quotations within the previous 30 calendar days has the potential to widen the circumstances under which broker-dealers may rely on the piggyback exception relative to the baseline. This amendment could make publishing quotations and trading easier in less liquid securities. Therefore, this amendment could, in principle, mitigate both the benefits and costs of the amendments described above. However, the Commission expects that eliminating the 12-day publication-of-quotations requirement would have an insignificant effect on the OTC market as it should only impact a small fraction of quoting activity. In particular, of all quoted OTC securities in the calendar year 2019, the Commission estimates that only 16 of more than 10,000 securities had fewer than 12 days of published quotations within the 30 previous calendar days, with no more than four business days in succession without a priced quotation.
Eliminating the 30-day requirement before OTC securities become eligible for the piggyback exception can increase price competition between broker-dealers. In particular, all broker-dealers would be able to rely on the piggyback exception to begin quoting an OTC security during the 30-day period after the initial quote under the amended Rule. This increased competition could decrease the cost of bid-offer spreads for OTC investors during this 30-day period. However, this increased competition may deter broker-dealers from conducting the initial information review and filing of FINRA Form 211. Therefore, the net effect on the liquidity of OTC securities and the trading costs of OTC investors is unclear.
These amendments also include changes to the exception for unsolicited customer quotations. In particular, the amendments limit reliance on the unsolicited quotation exception on behalf of company insiders and affiliates of the issuer when paragraph (b) information is not current and publicly available. These amendments could increase costs for broker-dealers because they may need to verify whether paragraph (b) information is current and publicly available. Broker-dealers could also be required to document and record the circumstances involved in an unsolicited customer quotation. Two commenters stated that it may be difficult for broker-dealers to determine whether quotations are submitted on behalf of company insiders or affiliates, especially in cases when market makers receive order flow from retail broker-dealers.
Consistent with the PRA section,
The costs incurred by broker-dealers related to the unsolicited quotation exception could be passed on to OTC investors. For example, OTC investors may be required to provide documentation supporting the fact that they are not a prohibited person within this exception. The magnitude of this potential cost to OTC investors could vary significantly depending on the manner in which the supporting documentation is or is not acquired by broker-dealers. However, the Commission believes that this cost could be minimal because there are means to provide documentation such as through attestations which would require minimal resources on the part of the investor. In addition, OTC investors seeking to transact using unsolicited orders may incur costs related to reduced liquidity if broker-dealers withdraw from quoting unsolicited customer orders as a result of costs. This reduced liquidity would pertain to certain OTC securities for which the issuer elects not to make paragraph (b)
There could also be benefits to OTC investors from the requirement for broker-dealers to obtain and review paragraph (b) information when the unsolicited quotation exception does not apply. For example, the review of paragraph (b) information in order to provide a quotation for an unsolicited customer quotation of a company insider or issuer affiliate could deter fraud by alerting broker-dealers to potential sales by company insiders or issuer affiliates related to fraud. In addition, as discussed above in relation to the new limitations on the piggyback exception, the costs and benefits to investors, issuers and broker-dealers would be qualitatively similar. OTC investors could benefit if quotations and trading activity migrate away from fraudulent investments. Higher quality issuers in the OTC market could also benefit from greater access to capital. Broker-dealers could also incur costs and benefits associated with possible migration in trading activity if unsolicited customer orders move from quoted to non-quoted markets. These costs and benefits could be passed on to OTC investors. Finally, there would be benefits and costs associated with the requirements pertaining to current and publicly available paragraph (b) information, as the unsolicited quotation exception for a company insider or issuer affiliate would be contingent on this information being current and publicly available.
The amended Rule introduces three new exceptions to except publications of quotations for certain OTC securities from the provisions of Rule 15c2-11, primarily the requirement for broker-dealers to obtain and review paragraph (b) information. The first of the three new exceptions would apply to securities with (1) a $100,000 ADTV value and where (2) the issuer of such security has $50 million total assets value and $10 million shareholders' equity on the issuer's publicly available audited balance sheet issued within six months after the end of the most recent fiscal year. This exception would apply only to securities for which paragraph (b) information is current and publicly available. This exception is meant to target more visible quoted OTC securities for which current and reliable information about the issuer is publicly available to investors, specifically for larger issuers, and for more liquid securities. Larger companies with greater trading activity may be less vulnerable to fraud for a number of reasons. For example, there may be a greater likelihood of arbitrage or information-based trading with higher trading activity, which can drive prices toward fundamental values. Larger issuers may also attract this type of trading activity through their visibility. In addition, companies with higher shareholder equity may be more expensive to acquire, making them less vulnerable to being purchased for the purposes of perpetrating a fraudulent scheme. The analysis in the baseline revealed no issuers that had financial information publicly available to investors and that had been the subject of Commission-ordered trading suspensions or assigned a “caveat emptor” designation by OTC Markets Group in calendar year 2019 would have met both the ADTV and assets test prongs of the ADTV and asset test exception.
Because delinquent filings may be the reason for the trading suspension, the Commission is aware that the Commission's analysis using data on total assets and shareholder equity of issuers with suspended OTC securities may rely on information which is outdated and no longer representative of issuer fundamentals.
The main economic effect of the ADTV and assets test exception should be to relieve broker-dealers from the information review requirement and filing a FINRA Form 211 to publish quotations in a quotation medium. As before, the Commission estimates that broker-dealers will incur relief from a monetized cost of $280 for prospectus issuers, Reg. A issuers, crowdfunding, and reporting issuers, $560 for exempt foreign private and catch-all issuers whenever a broker-dealer publishes or submits a quotation for issuers satisfying these requirements. Consistent with the PRA section,
The Commission estimates that approximately 180 (two percent) of quoted OTC securities on an average day during calendar year 2019 would be eligible for the ADTV and assets exception. Of these securities, approximately 35 percent were of reporting issuers, 63 percent were of exempt foreign private issuers and the remaining two percent were of catch-all issuers. Applying these proportions to the 384 OTC securities for which broker-dealers were required to conduct an information review for the initiation or the resumption of quotations, yields securities of two reporting issuers and four exempt foreign private or catch-all issuers.
There could be additional relief as a result of the ADTV and assets exception for broker-dealers quoting securities that end up losing piggyback eligibility under the paragraph (f)(3) exception. The Commission estimates that out of the 3,489 securities that would lose piggyback eligibility under these amendments five securities of prospectus issuers, Reg. A issuers, crowdfunding, and reporting issuers and one security of an exempt foreign private issuer would have satisfied the ADTV value and assets thresholds. The ability of broker-dealers to rely on the paragraph (f)(5) exception for securities for which they could no longer rely on the paragraph (f)(3) exception could lead to an additional relief of five × $240 + 1 × $480 = $1,680.
Some of these benefits and costs may be passed on to OTC investors. Certain issuers or securities that would meet the Rule's ADTV and asset test exception but that currently trade in the grey market may benefit from a broker-dealer establishing a quoted market without incurring costs associated with complying with the Rule's provisions. This migration may result in a benefit to investors to the extent that it may establish a new quoted market that facilitates price discovery and liquidity for higher quality securities previously traded in the grey market.
The second of the three new exceptions would apply to quotations following a registered or Regulation A offering, where the broker-dealer was named as an underwriter in the registration statement or offering circular and publishes or submits quotations for the same class of security in an IDQS within certain specified time frames. This exception is targeted towards those OTC securities that were recently offered in a transaction in which a regulated entity may have conducted a due diligence review. Because of the liability attached to underwriting activity, an underwriter typically conducts a due diligence review to mitigate potential liability associated with underwriting an offering of securities. Depending on its breadth and quality, this review may permit an underwriter to assert a defense to liability under Section 11 or Section 12(a)(2) of the Securities Act. As a result, underwriters of registered and Regulation A offerings are incentivized to confirm that the information provided to investors in the prospectus for a registered offering and offering circular for a Regulation A offering is materially accurate and obtained from a reliable source. Thus, excepting publications or submissions of quotations by underwriters from the Rule's provisions is expected to reduce the burden of complying with the Rule for such broker-dealers without sacrificing investor protection. The Commission does not currently have data that allow it to estimate the propensity with which broker-dealers are underwriting offerings for the same securities for which they are publishing quotations and thus quantify the effect of this exception on broker-dealers.
In addition, the Commission is adopting an exception for publications or submissions of quotations respecting securities where a qualified IDQS complies with the Rule's provisions. Broker-dealers could rely on a publicly available determination by a qualified IDQS that paragraph (b) information is current and publicly available for a given security, as well as whether a broker-dealer may rely on certain exceptions to the Rule. This exception is expected to reduce the burden on some broker-dealers with respect to publishing or submitting quotations for certain OTC securities. In particular, the Commission expects the main economic effect of this exception to be mitigating costs broker-dealers are expected to incur associated with determining certain characteristics about an issuer (
Lastly, the Commission is also adopting an exception for publications or submissions of quotations by broker-dealers that rely on publicly available determinations by a qualified IDQS or a registered national securities association that paragraph (b) information is current and publicly available, as well as whether a broker-dealer may rely on certain exceptions to the Rule. The Commission expects the main economic effect of this exception to be mitigating costs broker-dealers are expected to incur associated with determining certain characteristics about an issuer (
Under the amended Rule, a qualified IDQS or registered national securities association must also establish, maintain, and enforce reasonably designed written policies and procedures to make certain publicly available determinations.
In this section, the Commission discusses the impact that these amendments to Rule 15c2-11 may have on efficiency, competition, and capital formation. As discussed above, these amendments generally would increase transparency by requiring public availability of paragraph (b) information that is current to enable broker-dealers to publish or submit quotations for OTC securities. As a result, these amendments may cause capital to migrate from opaque to more transparent companies. A transfer of capital could occur as a result of OTC issuers without current and publicly available information either exiting the OTC market altogether because broker-dealers could no longer publish quotations for the securities of such issuer or migrating from the quoted OTC market to the grey market. Less liquid OTC securities could also migrate away from the quoted OTC market as a result of these restrictions on the piggyback exception pertaining to (1) shell companies, (2) recently suspended securities, and (3) securities without a sufficient prior history of either bid or offer prices. One academic study finds that valuations decrease when firms migrate from more liquid markets to less liquid markets, possibly as a result of decreased access to capital.
In addition, the transparency of the market for quoted OTC securities should generally improve, particularly for previously dark issuers where paragraph (b) information is made current and publicly available for broker-dealers to continue to publish quotations. Capital formation could improve as investors allocate funds toward more productive investments based on enhanced availability of paragraph (b) information in the quoted market for OTC securities. In particular, investors may be able to better discern the value of an OTC security from the financial and qualitative data contained in paragraph (b) information. As a result of these effects, these amendments could generally enhance the efficiency of capital allocation,
The efficiency of prices (
The heightened transparency that would arise from these amendments could increase competition among both broker-dealers and issuers of quoted OTC securities. For example, broker-dealers could access paragraph (b) information at a low cost and establish more competitive prices. Before these amendments, broker-dealers could have had differential access to paragraph (b) information in the quoted OTC market and potentially benefited from non-competitive pricing as a result. As mentioned previously, some broker-dealers may withdraw from quoting certain OTC securities (
Eliminating the 30-day requirement before OTC securities become eligible for the piggyback exception can increase price competition between broker-dealers. In particular, all broker-dealers can begin quoting an OTC security during the 30-day period after the initial quote based upon the piggyback exception under the amended Rule. However, this increased competition may deter broker-dealers from conducting the initial information review and filing of FINRA Form 211. Fewer OTC securities may remain in the grey market where there may be diminished price competition relative to the quoted market.
Issuers of quoted OTC securities may also need to price seasoned equity offerings more competitively because investors would have improved access to information and might be able to more easily compare the financials of OTC issuers when allocating their investment dollars. This information could again enable OTC investors to divert funds more easily from higher to lower cost issues. As a result, OTC issuers would have less ability to price their issues high relative to the fundamental value of the securities being offered.
In this section, reasonable alternatives to these amendments to Rule 15c2-11 are discussed.
The 1999 Reproposing Release proposed to eliminate the piggyback exception from Rule 15c2-11. This amendment would have required all broker-dealers to complete the information review requirement and file FINRA Form 211 before publishing or submitting a quotation in a quotation medium. One commenter also suggested this alternative.
First, review of paragraph (b) information could help broker-dealers increase price efficiency, while deterring fraudsters. Second, broker-dealers' withdrawal from publishing quotations for OTC securities could benefit investors by inhibiting fraudulent and manipulative schemes. Higher quality OTC issuers could also benefit from increased access to capital.
However, broker-dealers might also withdraw from publishing quotations
The Commission believes that the amended Rule more appropriately meets the Commission's policy goals because the alternative places the additional burdens upon broker-dealers and OTC issuers relative to these amendments. In particular, broker-dealers would incur additional costs associated with review of paragraph (b) information and filing FINRA Form 211 for all OTC securities they wish to quote. In addition, this alternative could raise the costs for OTC issuers and investors relative to these amendments.
A number of commenters suggested that the amended Rule include a greater set of OTC securities within the piggyback exception than the amended Rule permits. For example, commenters raised concerns about potential negative impacts on persons who are invested in OTC securities of well-established, non-reporting issuers that do not make their information current and publicly available.
Eliminating transparency requirements related to the piggyback exception for certain OTC securities may cause more OTC issuers to remain non-transparent relative to the amended Rule. These additional issuers would incur lower costs of providing current and publicly available paragraph (b) information as a result. In addition, OTC investors may incur costs from less informed investment and voting decisions as well as less efficient pricing.
Such an alternative would increase the number of OTC securities included within the piggyback exception relative to the amended Rule. Consequently, this alternative would be anticipated to decrease broker-dealer costs related to information review and filing FINRA Form 211 relative to the amended Rule. Some of these costs savings could be passed on to OTC investors. Fewer broker-dealers may withdraw from quoting OTC securities, which could increase liquidity for OTC investors and access to capital for OTC issuers. This alternative may also increase investors' exposure to fraud and manipulation in non-transparent securities or that may be the targeted for these activities. Indeed, risk of fraud and manipulation may be more pronounced in OTC securities without current and publicly available information, as discussed previously.
This alternative could also diminish possible costs associated with the ability of OTC firm insiders to manipulate the stock's price downward when seeking to repurchase shares by keeping their firm dark and causing migration to the grey market. However, the amended Rule provides a grace period of up to 15 calendar days for the piggyback exception to continue once a qualified IDQS or registered national securities association makes a publicly available determination that the requisite information is no longer current and/or publicly available. This grace period should allow existing investors in an OTC issuer to exit positions before such a potential manipulation could occur.
The proposed Rule presented an alternative to these amendments whereby the piggyback exception would be eliminated entirely for shell companies. Therefore, one possible alternative to the amended Rule would be to eliminate the piggyback exception for shell companies or maintain it under a stricter set of conditions (
Relative to these amendments, the first alternative of maintaining the piggyback exception for shell companies under a stricter set of conditions could increase the costs of broker-dealers that comply with the Rule's review, document collection, and recordkeeping provisions before publishing or submitting a quotation for an OTC security. These costs could be passed on to OTC investors. Alternatively, some broker-dealers could withdraw from publishing quotations for shell companies under these conditions in the OTC market as a result of the information review requirement, which could lead to the disappearance of a quoted market for their securities and their migration to the grey market. Both possible effects could benefit investors by imposing costs on potential fraudsters in the OTC market.
First, review of paragraph (b) information could help broker-dealers increase price efficiency, while deterring fraudsters. Second, broker-dealers' withdrawal from publishing quotations for OTC securities could benefit investors by inhibiting fraudulent and manipulative schemes. As discussed previously, pump-and-dump schemes are often targeted toward shell companies.
However, broker-dealers might withdraw from publishing quotations for securities of shell companies seeking to execute a reverse merger with an operating company seeking capital on the public markets. Therefore, eliminating the piggyback exception could increase capital raising costs for issuers, although it may benefit investors by limiting the potential for fraud arising from shell companies in the context of reverse mergers.
The second alternative of maintaining the piggyback exception for shell companies under a looser set of conditions could have the opposite effects listed above relative to the amended Rule. In particular, broker-dealers could benefit from diminished costs associated with information review and filing FINRA Form 211. Fewer broker-dealers may withdraw from quoting the OTC securities of shell companies and maintain liquidity in these securities as a result. Investors and issuers may benefit as result relative to
As discussed previously, the Commission believes that the amended Rule appropriately balances the promotion of investor protection and the facilitation of capital formation by allowing broker-dealers to maintain a quoted market for the securities of shell company issuers, which could become public companies as a result of engaging in a reverse merger, but providing this piggyback exception for a limited period of 18 months.
The 1999 Reproposing Release proposed to except publications of quotations from the provisions of Rule 15c2-11 for OTC securities with at least: (1) $100,000 ADTV value, (2) $50 million total assets value and $10 million shareholders' equity on the issuer's audited balance sheet or (3) $50 bid price. These exceptions were less restrictive than the ones in the current amendments as the exception would apply if an OTC security could conform to only one of these three conditions. Therefore, one possible alternative would be to establish thresholds which conform to these conditions from the 1999 Reproposing Release.
Relative to the baseline, the main economic effect of this alternative would be to relieve broker-dealers from complying with the Rule's provisions and filing FINRA Form 211 to publish quotations in a quotation medium. Some of these benefits may be passed on to OTC investors. Certain issuers or securities that would qualify for these exceptions but currently trade in the grey market may benefit from a broker-dealer establishing a quoted market without incurring costs associated with complying with the Rule's provisions. This migration may result in a benefit to investors to the extent that it may establish a new quoted market that facilitates price discovery and liquidity for quality securities previously trading in the grey market.
Relative to these amendments, however, this alternative may be more likely to except securities that may be targeted for fraudulent activity from the Rule's review and document collection provisions. For example, there were seven suspended OTC securities in 2019 with ADTV value in excess of $100,000 and three issuers of suspended OTC securities that exceeded the thresholds for $50 million in total assets and $10 million in shareholders' equity. Therefore, though trading suspensions are not necessarily indicative of fraud, investors may face greater exposure to fraud and manipulation under this alternative. In addition, companies may be able to circumvent thresholds based on stock price. For example, an OTC issuer could, in principle, conduct reverse share splits in order to achieve a share price that exceeds a given threshold. As a result, the Commission believes the amended Rule is better than the alternative. However, investors in higher quality OTC issuers could benefit in that a greater number would qualify for the quoted market relative to these amendments. In addition, broker-dealers would benefit from even greater relief from the Rule's provisions and from filing FINRA Form 211.
The proposed Rule provided an exception from the information review requirement for OTC securities with at least: (1) $100,000 ADTV value and (2) $50 million total assets value and $10 million unaffiliated shareholders' equity on the issuer's audited balance sheet. These previously proposed thresholds would potentially compel broker-dealers to conduct the specified information review for more OTC securities relative to the amended Rule as issuers with more than $10 million shareholders' equity (but less than $10 million unaffiliated equity) could be included in the requirement. As a result, the previous proposal would potentially increase broker-dealers' costs associated with information review, filing of FINRA Form 211, and their possible withdrawal from quoting activity relative to the amended Rule. These additional costs could be passed on to OTC investors. In addition, OTC issuers could incur additional costs associated with raising capital, and OTC investors could incur costs associated with diminished liquidity.
However, OTC investors may benefit from decreased exposure to fraud and manipulation relative to the amended Rule. In particular, the amended Rule may exempt OTC securities with small public float but total shareholder equity exceeding $10 million. Such securities may be prone to manipulation if they are controlled by insiders complicit with a fraudulent scheme. Nonetheless, the Commission believes that the thresholds of the amended Rule will still confine the exception to OTC securities not prone to fraudulent or manipulative activity. In particular, the Commission has found that zero issuers in 2019 that simultaneously met the $50 million total assets, $10 million shareholders' equity, and $100,000 ADTV value thresholds were subject to trading suspensions or caveat emptor status.
As pointed out by commenters, it can be difficult to accurately determine unaffiliated shareholder ownership.
One commenter also recommended replacing the previously proposed threshold for shareholder equity with a threshold of $150 million market capitalization. Similar to the amended Rule, this alternative would decrease broker-dealers' costs of complying with the Rule's provisions and filing FINRA Form 211 to publish quotations in a quotation medium relative to the baseline. Some of these benefits may be passed on to OTC investors. Certain issuers or securities that would qualify for these exceptions but currently trade in the grey market may benefit from a broker-dealer establishing a quoted market without incurring costs associated with complying with the Rule's provisions. This migration may result in a benefit to investors to the extent that it may establish a new quoted market that facilitates price discovery and liquidity for quality securities previously trading in the grey market.
Relative to the amended Rule, this alternative could possibly allow for more issuers that could be vulnerable to pump-and-dump schemes to be admitted within the exception, thus increasing investor exposure to fraud. Unlike shareholders' equity, which is based on book value, market capitalization can fluctuate with market share price and can be susceptible to volatility, especially in a fraudulent or manipulative scheme, such as a pump-and-dump scheme. Indeed, the Commission estimates that that approximately three percent of issuers with OTC securities that were the subject of Commission-ordered trading suspensions over the calendar year 2019 had a market capitalization in excess of $150 million.
The proposed Rule conditioned the piggyback exception on both bid and offer prices for the prior 30 calendar days with no gap in quoting of more
OTC investors in higher quality issuers could suffer from lower liquidity if this cost results in fewer securities remaining in the quoted market. However, this alternative may also cause less liquid securities to lose eligibility for piggyback quotations relative to the amended Rule. As a result, OTC investors may benefit from this alternative if these securities are more prone to fraud than securities with both bid and offer prices.
Nonetheless, the Commission believes that the amended Rule more appropriately meets the Commission's policy goals of reducing burdens on broker-dealers while retaining OTC securities in the quoted markets with a legitimate, independent market interest. One commenter stated that a priced bid is a valid price discovery mechanism and that existing self-regulatory organization rules require broker-dealers to trade at their publicly quoted prices (
Eliminating the 30-day requirement before OTC securities can become eligible for the piggyback exception can increase price competition between broker-dealers. In particular, broker-dealers can begin quoting in these securities during the initial 30-day period based on the piggyback exception under the amended Rule. This increased competition could decrease the cost of bid-offer spreads for OTC investors during this 30-day period. However, this increased competition may deter broker-dealers from conducting the initial information review and filing of FINRA Form 211. Therefore, the net effect on the liquidity of OTC securities and the trading costs of OTC investors is unclear.
The Commission has sought to align the amended Rule with existing regulatory requirements for publicly available information, as well as with private market solutions that have developed since the Commission last proposed to amend the Rule. Notwithstanding this, an alternative to these amendments would be to define paragraph (b) information as “current” for issuers based on a different lengths of time (
Increasing the frequency of publicly available information required to qualify as “current” relative to the amended Rule could benefit investors by improving the relevance of information used for investment and voting decisions relative to the information available under the existing Rule. Investors could also benefit from decreased exposure to loss from fraud as additional current and publicly available information that is more frequently provided could push trading activity in less transparent securities out of the OTC market or to the grey market. Higher quality OTC issuers could benefit from increased access to capital to the extent that more frequent information requirements lead to a net increase in demand for higher quality OTC stocks.
Although the amended Rule does not require any issuer to make paragraph (b) information current and publicly available, a broker-dealer could not publish a quotation in the absence of such information. OTC issuers would face increased costs of providing current and publicly available information if the amended Rule required such information to be provided more frequently. In particular, OTC issuers with no reporting obligations or minimal reporting obligations have to make current information publicly available more frequently under such an alternative. In order for a broker-dealer to continue to publish quotations, some OTC issuers might find they have to prepare current information and make it publicly available more frequently than their current annual or semi-annual reporting obligations as an issuer under the federal securities laws, such as reporting requirements under the Securities Act or exchange listing requirements under the Exchange Act. OTC issuers may find that they must prepare current information and make it available more often than they are required to do so under state law, as well. Broker-dealers, qualified IDQSs, and national securities associations may also be required to review paragraph (b) information more frequently under this alternative in order to initially publish or submit, or maintain, quotes in the OTC market. Some OTC issuers may opt not to provide information with a greater required frequency relative to the amended Rule. Similarly, more broker-dealers may withdraw from quoted OTC markets as a result of more frequent information review. Both effects could adversely affect OTC investors' liquidity and increase their trading costs. The Commission believes the amended Rule is better than the alternative because the additional benefits from more frequently available information are likely to be relatively minor, while the costs for issuers, broker-dealers, and other market participants could increase in proportion to the required frequency of making current information publicly available.
Decreasing the frequency of publishing current and publicly available information to relative to the amended Rule (
The Regulatory Flexibility Act (“RFA”)
A broker-dealer is a small entity if it has total capital (net worth plus subordinated liabilities) of less than $500,000 on the date in the prior fiscal year as of which its audited financial statements were prepared pursuant to § 240.17a-5(d), or, if not required to file such statements, has total capital of less than $500,000 on the last day of the preceding fiscal year (or in the time that it has been in business, if shorter); and is not affiliated with any person (other than a natural person) that is not a small business or small organization.
As discussed in the PRA and Economic Analysis sections above, the Commission believes that the proposed amendments will impact the 80 broker-dealers that publish or submit quotations on OTC Markets Group's systems.
For the foregoing reasons, the Commission certifies that the amendments to Exchange Act Rule 15c2-11 will not have a significant economic impact on a substantial number of small entities for purposes of the RFA.
The rule amendments are being adopted pursuant to sections 3, 10(b), 15(c), 15(h), 17(a), 23(a), and 36 of the Securities Exchange Act of 1934, 15 U.S.C. 78c, 78j(b), 78o(c), 78o(g), 78q(a), 78w(a), and 78mm.
Administrative practice and procedure, Reporting and recordkeeping requirements, Securities.
For the reasons set out in the preamble, the Commission is amending title 17, chapter II of the Code of the Federal Regulations as follows.
15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78
15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78
Section 240.15c2-11 also issued under 15 U.S.C. 78j(b), 78o(c), 78q(a), and 78w(a).
(a)
(1)
(i)(A) Such broker or dealer has in its records the documents and information specified in paragraph (b) of this section;
(B) Such documents and information specified in paragraph (b) of this section
(C) Based upon a review of the documents and information specified in paragraph (b) of this section, together with any other documents and information required by paragraph (c) of this section, such broker or dealer has a reasonable basis under the circumstances for believing that:
(
(
(ii)(A) The quotation medium is a qualified interdealer quotation system that made a publicly available determination that it has performed the activities described in paragraph (a)(2)(i) through (iii) of this section; and
(B) Such quotation is published or submitted for publication within three business days after such qualified interdealer quotation system makes such publicly available determination.
(2)
(i) Such qualified interdealer quotation system has in its records the documents and information specified in paragraph (b) of this section (excluding paragraphs (b)(5)(i)(N) through (P) of this section except where the qualified interdealer quotation system has knowledge or possession of this information);
(ii) Such documents and information specified in paragraph (b) of this section (excluding paragraphs (b)(5)(i)(N) through (P) of this section) are current and publicly available;
(iii) Based upon a review of the documents and information specified in paragraph (b) of this section (excluding paragraphs (b)(5)(i)(N) through (P) of this section, except where the qualified interdealer quotation system has knowledge or possession of this information), together with any other documents and information required by paragraph (c) of this section, such qualified interdealer quotation system has a reasonable basis under the circumstances for believing that:
(A) The documents and information specified in paragraph (b) of this section are accurate in all material respects; and
(B) The sources of the documents and information specified in paragraph (b) of this section are reliable; and
(iv) The qualified interdealer quotation system makes a publicly available determination that it has performed the activities described in paragraphs (a)(2)(i) through (iii) of this section; or
(3)
(i) The documents and information specified in paragraph (b) of this section are current and publicly available; and
(ii) The requirements of an exception under paragraph (f) of this section are met, if it makes a publicly available determination described in paragraph (f)(7) of this section.
(b)
(2) A copy of the offering circular provided for under Regulation A (§§ 230.251 through 230.263 of this chapter) for an issuer that has filed an offering statement under Regulation A that was qualified less than 40 calendar days prior to the day on which such broker or dealer publishes or submits the quotation to the quotation medium;
(3) A current copy of:
(i) An annual report filed pursuant to section 13 or 15(d) of the Act, together with any periodic and current reports that have been filed thereafter under the Act by the issuer, except for current reports filed during the three business days prior to the publication or submission of the quotation;
(ii) An annual report filed pursuant to Regulation A, together with any periodic and current reports filed thereafter under Regulation A by the issuer, except for current reports filed during the three business days prior to the publication or submission of the quotation;
(iii) An annual report filed pursuant to Regulation Crowdfunding (§§ 227.100 through 227.503 of this chapter);
(iv) An annual statement referred to in section 12(g)(2)(G)(i) of the Act (in the case of an issuer required to file reports pursuant to section 13 or 15(d) of the Act), together with any periodic and current reports filed thereafter under the Act by the issuer, except for current reports filed during the three business days prior to the publication or submission of the quotation;
(v) An annual statement referred to in section 12(g)(2)(G)(i) of the Act (in the case of an issuer of a security that falls within the provisions of section 12(g)(2)(G) of the Act); or
(4) A copy of the information that, since the first day of its most recently completed fiscal year, the issuer has published as required to establish the exemption from registration under section 12(g) of the Act pursuant to § 240.12g3-2(b) of this chapter, which the broker or dealer must make available upon the request of a person expressing an interest in a proposed transaction in the issuer's security with the broker or dealer, such as by providing the requesting person with appropriate instructions regarding how to obtain the information electronically; or
(5)(i) The following information, which must be (excluding paragraphs (b)(5)(i)(N) through (P) of this section) as of a date within 12 months prior to the publication or submission of the quotation, unless otherwise specified:
(A) The name of the issuer and any predecessors during the past five years;
(B) The address(es) of the issuer's principal executive office and of its principal place of business;
(C) The state of incorporation or registration of the issuer and of each of its predecessors (if any) during the past five years;
(D) The title, class, and ticker symbol (if assigned) of the security;
(E) The par or stated value of the security;
(F) The number of shares or total amount of the securities outstanding as of the end of the issuer's most recent fiscal year;
(G) The name and address of the transfer agent;
(H) A description of the issuer's business;
(I) A description of products or services offered by the issuer;
(J) A description and extent of the issuer's facilities;
(K) The name and title of all company insiders;
(L) The issuer's most recent balance sheet (as of a date less than 16 months before the publication or submission of the quotation) and profit and loss and retained earnings statements (for the 12 months preceding the date of the most recent balance sheet);
(M) Similar financial information for such part of the two preceding fiscal years as the issuer or its predecessors has been in existence;
(N) Whether the broker or dealer or any associated person of the broker or dealer is affiliated, directly or indirectly, with the issuer;
(O) Whether the quotation is being published or submitted on behalf of any other broker or dealer and, if so, the name of such broker or dealer; and
(P) Whether the quotation is being submitted or published, directly or indirectly, by or on behalf of the issuer or a company insider and, if so, the name of such person and the basis for any exemption under the federal securities laws for any sales of such securities on behalf of such person.
(ii) The broker or dealer must make the documents and information specified in paragraph (b)(5)(i) of this section available upon the request of a person expressing an interest in a proposed transaction in the issuer's security with the broker or dealer, such as by providing the requesting person with appropriate instructions regarding how to obtain such publicly available documents and information electronically. If such information is made available to others upon request pursuant to this paragraph, such delivery, unless otherwise represented, shall not constitute a representation by such broker or dealer that such information is accurate but shall constitute a representation by such broker or dealer that the information is current in relation to the day the quotation is submitted, the broker or dealer has a reasonable basis under the circumstances for believing the information is accurate in all material respects, and the information was obtained from sources that the broker or dealer has a reasonable basis under the circumstances for believing are reliable. The documents and information specified in paragraph (b)(5) of this section must be reviewed where paragraphs (b)(1) through (4) of this section do not apply to such issuer. For purposes of compliance with paragraph (a)(1)(i)(B) or (a)(2)(ii) of this section, the documents and information specified in paragraph (b)(5) of this section must be reviewed for an issuer for which the documents and information specified in paragraph (b)(1), (2), (3), or (4) of this section regarding such issuer are not current.
(c)
(1) Records related to the submission or publication of such quotation, including the identity of the person or persons for whom the quotation is being published or submitted, whether such person or persons is the issuer or a company insider, and any information regarding the transactions provided to the broker, dealer, or qualified interdealer quotation system by such person or persons;
(2) A copy of any trading suspension order issued by the Commission pursuant to section 12(k) of the Act regarding any securities of the issuer or its predecessor (if any) during the 12 months preceding the date of the publication or submission of the quotation or a copy of the public release issued by the Commission announcing such trading suspension order; and
(3) A copy or a written record of any other material information (including adverse information) regarding the issuer that comes to the knowledge or possession of the broker, dealer, or qualified interdealer quotation system before the publication or submission of the quotation.
(d)
(A) Any broker or dealer that publishes or submits a quotation pursuant to paragraph (a)(1) of this section for a security; or
(B) Any qualified interdealer quotation system that makes known to others the quotation of a broker or dealer pursuant to paragraph (a)(2) of this section for a security;
(ii) Any broker or dealer that publishes or submits a quotation pursuant to paragraph (a)(1)(ii) of this section shall preserve for a period of not less than three years, the first two years in an easily accessible place, the name of the qualified interdealer quotation system that made a publicly available determination that it has performed the activities described in paragraph (a)(2)(i) through (iii) of this section.
(2) The following persons shall preserve for a period of not less than three years, the first two years in an easily accessible place, the documents and information that demonstrate that the requirements for an exception under paragraph (f)(2), (3), (5), (6), or (7) of this section are met, except for the documents and information that are available on EDGAR:
(i) Any qualified interdealer quotation system or registered national securities association that makes a publicly available determination described in
(ii) Any broker or dealer that publishes or submits a quotation pursuant to paragraph (f) of this section;
(e)
(1)
(2)
(i) Paragraph (b)(1), (2), (4), or (5) of this section, filed, published, or are as of a date in accordance with the time frames specified in the applicable paragraph for such documents and information; or
(ii) Paragraph (b)(3) of this section, the most recently required annual report or statement filed pursuant to section 13 or 15(d) of the Act and any rule(s) thereunder, Regulation A, Regulation Crowdfunding, or section 12(G)(2)(g) of the Act, together with any subsequently required periodic reports or statements, filed pursuant to section 13 or 15(d) of the Act and any rule(s) thereunder, Regulation A, Regulation Crowdfunding, or section 12(G)(2)(g) of the Act.
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(i) No or nominal operations; and
(ii) Either:
(A) No or nominal assets;
(B) Assets consisting solely of cash and cash equivalents; or
(C) Assets consisting of any amount of cash and cash equivalents and nominal other assets.
(f)
(1) The publication or submission of a quotation for a security that is admitted to trading on a national securities exchange and that is traded on such an exchange on the same day as, or on the business day next preceding, the day the quotation is published or submitted.
(2)(i) The publication or submission by a broker or dealer, solely on behalf of a customer (other than a person acting as or for a dealer), of a quotation that represents the customer's unsolicited indication of interest;
(ii) Provided, however, that this paragraph (f)(2) shall not apply to a quotation:
(A) Consisting of both a bid and an offer, each of which is at a specified price, unless the quotation medium specifically identifies the quotation as representing such an unsolicited customer interest; or
(B) Published or submitted, directly or indirectly on behalf of a company insider or affiliate as defined in § 230.144(a)(1) of this chapter, unless the documents and information specified in paragraph (b) of this section are current and publicly available.
(iii) For purposes of paragraph (f)(2)(ii)(B) of this section, a broker or dealer that publishes or submits quotations may rely on either a:
(A) Written representation from the customer's broker that such customer is not a company insider or an affiliate if:
(
(
(B) Publicly available determination by a qualified interdealer quotation system or registered national securities association that the documents and information specified in paragraph (b) of this section are current and publicly available.
(3)(i)(A) The publication or submission, in an interdealer quotation system that specifically identifies as such unsolicited customer indications of interest of the kind described in paragraph (f)(2) of this section, of a quotation for a security that has been the subject of a bid or offer quotation (exclusive of any identified customer interests) in such a system at a specified price, with no more than four business days in succession without such a quotation;
(B) Provided, however, that this paragraph (f)(3) shall not apply to a quotation that is published or submitted
(
(
(C) Provided further, that this paragraph (f)(3) shall apply to the publication or submission of a quotation for a security of an issuer only if the documents and information regarding such issuer that are specified in:
(
(
(
(
(ii) If the documents and information specified in paragraph (b) of this section (excluding paragraphs (b)(5)(i)(N) through (P)) regarding an issuer are no longer current and publicly available, timely filed, or filed within 180 calendar days, as specified in paragraph (f)(3)(i)(C) of this section, a broker or dealer may continue to publish or submit a quotation for such issuer's security in an interdealer quotation system during the time frame specified in in paragraph (f)(3)(ii)(C) if:
(A) Within the first four business days that such documents and information are no longer current and publicly available, timely filed, or filed within 180 calendar days, as applicable, a qualified interdealer quotation system or registered national securities association makes a publicly available determination that:
(
(
(B) The broker or dealer complies with the requirements of paragraphs (d)(2) and (f)(3)(i) of this section, except for the requirement that the documents and information specified in paragraph (b) (excluding paragraphs (b)(5)(i)(N) through (P)) regarding such issuer be current and publicly available, timely filed, or filed within 180 calendar days, as applicable;
(C) Provided, however, that the provisions of this paragraph (f)(3)(ii) shall apply only during the shorter of the period beginning with the date on which a qualified interdealer quotation system or registered national securities association makes a publicly available determination identified in paragraph (f)(3)(ii)(A) and ending on:
(
(
(4) The publication or submission of a quotation for a municipal security.
(5) The publication or submission of a quotation for:
(i) A security with a worldwide average daily trading volume value of at least $100,000 reported during the 60 calendar days immediately before the publication of the quotation of such security; and
(ii) The issuer of such security has at least $50 million in total assets and $10 million in shareholders' equity as reflected in the issuer's publicly available audited balance sheet issued within six months after the end of its most recent fiscal year.
(6) The publication or submission of a quotation for a security by a broker or dealer that is named as an underwriter in a registration statement for an offering of that class of security referenced in paragraph (b)(1) of this section or in an offering statement for an offering of that class of security referenced in paragraph (b)(2) of this section;
(7) The publication or submission of a quotation by a broker or dealer that relies on a publicly available determination by a qualified interdealer quotation system or registered national securities association that the requirements of an exception provided in paragraph (f)(1), (f)(3)(i), or (f)(4) or (5) of this section are met;
(g)
By the Commission.
Coast Guard, DHS.
Notice of proposed rulemaking; request for comments.
In accordance with the Great Lakes Pilotage Act of 1960, the Coast Guard is proposing new base pilotage rates for the 2021 shipping season. This proposed rule would adjust the pilotage rates to account for changes in district operating expenses, an increase in the number of pilots, and anticipated inflation. Additionally, this proposed rule would make one change to the ratemaking methodology to account for actual inflation, in step 4, and two policy changes. The first policy change would be to always round up numbers, as opposed to rounding to the nearest whole integer, in the staffing model. The second policy change would be to exclude litigation fees incurred in litigation against the Coast Guard regarding ratemaking from necessary and reasonable pilot association operating expenses. The Coast Guard estimates that this proposed rule would result in a 4-percent net increase in pilotage costs compared to the 2020 season. Finally, the Coast Guard is requesting comments on how apprentice pilots (a mariner with a limited registration) should be compensated in future rulemakings.
Comments and related material must be received by the Coast Guard on or before November 27, 2020.
You may submit comments identified by docket number USCG-2020-0457 using the Federal eRulemaking Portal at
For information about this document, call or email Mr. Brian Rogers, Commandant (CG-WWM-2), Coast Guard; telephone 202-372-1535, email
The Coast Guard views public participation as essential to effective rulemaking, and will consider all comments and material received during the comment period. Your comment can help shape the outcome of this rulemaking. If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation.
We encourage you to submit comments through the Federal eRulemaking Portal at
We accept anonymous comments. All comments received will be posted without change to
We do not plan to hold a public meeting, but we will consider doing so if we determine from public comments that a meeting would be helpful. We would issue a separate
Pursuant to the Great Lakes Pilotage Act of 1960 (“the Act”),
To compute the rate for pilotage services, we use a ratemaking methodology that we have developed since 2016, in accordance with our statutory requirements and regulations. Our ratemaking methodology calculates the revenue needed for each pilotage association (operating expenses, compensation for the number of pilots, and anticipated inflation), and then divides that amount by the expected shipping traffic over the course of the coming year, to produce an hourly rate. This process is currently effected through a 10-step methodology, which is explained in detail in the Summary of Ratemaking Methodology in section V of the preamble to this notice of proposed rulemaking (NPRM).
As part of our annual review, in this NPRM we are proposing new pilotage rates for 2021 based on the existing methodology. The result is a decrease in rates for all areas. These changes are due to a combination of four factors: (1) A decrease in the amount of money needed for the working capital fund, (2) adjusting pilot compensation for inflation, (3) the net addition of three working pilots (“pilots”) at the beginning of the 2021 shipping season in District One, and (4) an increase in the average hours of traffic for each area. This increase in the average hours of traffic resulted in lower hourly rates despite a net increase in the amount of revenue needed by the pilot association, because when calculating the base hourly rates the total revenue needed is divided by the average hours of traffic annually (see Step 7 of the ratemaking process). The proposed rates for 2021 do not account for the impacts COVID-19 may have on shipping traffic in the Great Lakes, because we use the most recent 10-years of complete data in our average traffic calculations. For this proposed ratemaking, that means the years 2010 through 2019. The rates for 2022 will take into account the impact of COVID-19 on shipping traffic, because that ratemaking will include 2020 traffic data. The Coast Guard uses a 10-year average when calculating traffic to smooth out variations in traffic caused by global economic conditions, such as those caused by the COVID-19 pandemic.
In addition, the Coast Guard proposes one methodological change to the way we calculate the inflation of pilot compensation to account for actual inflation; modifying the way we round the numbers used in the staffing model (82
Based on the ratemaking model discussed in this NPRM, we are proposing the rates shown in table 1.
This proposed rule would impact 55 U.S. Great Lakes pilots, 3 pilot associations, and the owners and operators of an average of 279 oceangoing vessels that transit the Great Lakes annually. This proposed rule is not economically significant under Executive Order 12866 and would not affect the Coast Guard's budget or increase Federal spending. The estimated overall annual regulatory economic impact of this rate change is a net increase of $1,059,966 in estimated payments made by shippers during the 2020 shipping season. Because the Coast Guard must review, and, if necessary, adjust rates each year, we analyze these as single-year costs and do not annualize them over 10 years. Section IX of this preamble provides the regulatory impact analyses of this proposed rule.
The legal basis of this rulemaking is the Great Lakes Pilotage Act of 1960 (“the Act”),
The purpose of this NPRM is to propose new pilotage rates for the 2021 shipping season. The Coast Guard believes that the new rates would continue to promote pilot retention, ensure safe, efficient, and reliable pilotage services in order to facilitate maritime commerce throughout the Great Lakes and Saint Lawrence River System, and provide adequate funds to upgrade and maintain infrastructure.
Pursuant to the Act, the Coast Guard, in conjunction with the Canadian Great Lakes Pilotage Authority (GLPA), regulates shipping practices and rates on the Great Lakes. Under Coast Guard regulations, all vessels engaged in foreign trade (often referred to as “salties”) are required to engage U.S. or Canadian pilots during their transit through the regulated waters.
The U.S. waters of the Great Lakes and the St. Lawrence Seaway are divided into three pilotage districts. Pilotage in each district is provided by an association certified by the Coast Guard's Director of the Great Lakes Pilotage (“the Director”) to operate a pilotage pool. The Saint Lawrence Seaway Pilotage Association provides pilotage services in District One, which includes all U.S. waters of the St. Lawrence River and Lake Ontario. The Lakes Pilotage Association provides pilotage services in District Two, which includes all U.S. waters of Lake Erie, the Detroit River, Lake St. Clair, and the St. Clair River. Finally, the Western Great Lakes Pilotage Association provides pilotage services in District Three, which includes all U.S. waters of the St. Marys River; Sault Ste. Marie Locks; and Lakes Huron, Michigan, and Superior.
Each pilotage district is further divided into “designated” and “undesignated” areas, which is depicted in table 2 below. Designated areas, classified as such by Presidential Proclamation, are waters in which pilots must, at all times, be fully engaged in the navigation of vessels in their charge.
Each
Over the past 4 years, the Coast Guard has made adjustments to the Great Lakes pilotage ratemaking methodology. In 2016, we made significant changes to the methodology, moving to an hourly billing rate for pilotage services and changing the compensation benchmark to a more transparent model. In 2017, we added additional steps to the ratemaking methodology, including new steps that accurately account for the additional revenue produced by the application of weighting factors (discussed in detail in Steps 7 through 9 for each district, in Section VIII of this preamble). In 2018, we revised the methodology by which we develop the compensation benchmark, based upon U.S. mariners rather than Canadian working pilots. The current methodology, which was finalized in the Great Lakes Pilotage Rates-2020 Annual Review and Revisions to Methodology final rule (85 FR 20088), published April 9, 2020, is designed to accurately capture all of the costs and revenues associated with Great Lakes pilotage requirements and produce an hourly rate that adequately and accurately compensates pilots and covers expenses. The current methodology is summarized in the section below.
As stated above, the ratemaking methodology, outlined in 46 CFR 404.101 through 404.110, consists of 10 steps that are designed to account for the revenues needed and total traffic expected in each district. The result is an hourly rate, determined separately for each of the areas administered by the Coast Guard.
In Step 1, “Recognize previous operating expenses,” (§ 404.101) the Director reviews audited operating expenses from each of the three pilotage associations. Operating expenses include all allowable expenses minus wages and benefits. This number forms the baseline amount that each association is budgeted. Because of the time delay between when the association submits raw numbers and the Coast Guard receives audited numbers, this number is 3 years behind the projected year of expenses. So, in calculating the 2021 rates in this proposal, we begin with the audited expenses from the 2018 shipping season.
While each pilotage association operates in an entire district, the Coast Guard tries to determine costs by area. Thus, with regard to operating expenses, we allocate certain operating expenses to designated areas, and certain operating expenses to undesignated areas. In some cases, we can allocate the costs based on where they are actually accrued. For example, we can allocate the costs for insurance for applicant pilots who operate in undesignated areas only. In other situations, such as general legal expenses, expenses are distributed between designated and undesignated waters on a
In Step 2, “Project operating expenses, adjusting for inflation or deflation,” (§ 404.102) the Director develops the 2020 projected operating expenses. To do this, we apply inflation adjustors for 3 years to the operating expense baseline received in Step 1. The inflation factors are from the Bureau of Labor Statistics' (BLS) Consumer Price Index (CPI) for the Midwest Region, or, if not available, the Federal Open Market Committee (FOMC) median economic projections for Personal Consumption Expenditures (PCE) inflation. This step produces the total operating expenses for each area and district.
In Step 3, “Estimate number of working pilots,” (§ 404.103) the Director calculates how many pilots are needed for each district. To do this, we employ a “staffing model,” described in § 401.220, paragraphs (a)(1) through (a)(3), to estimate how many pilots would be needed to handle shipping during the beginning and close of the season. This number is helpful in providing guidance to the Director in approving an appropriate number of credentials for pilots.
For the purpose of the ratemaking calculation, we determine the number of pilots provided by the pilotage associations (see § 404.103), which is what we use to determine how many pilots need to be compensated via the pilotage fees collected.
In the first part of Step 4, “Determine target pilot compensation benchmark,” (§ 404.104) the Director determines the revenue needed for pilot compensation in each area and district. For the 2020 ratemaking, the Coast Guard updated the benchmark compensation model in accordance with § 404.104(b), switching from using the American Maritime Officers Union (AMOU) 2015 aggregated wage and benefit information, to the 2019 compensation benchmark. Based on our experience over the past two ratemakings, the Coast Guard has determined that the level of target pilot compensation for those years provides an appropriate level of compensation for American Great Lakes pilots. The Coast Guard, therefore, will not, at this time, seek alternative benchmarks for target compensation for future ratemakings and will instead simply adjust the amount of target pilot compensation for inflation. This benchmark has advanced the Coast Guard's goals of safety through rate and compensation stability while also promoting recruitment and retention of qualified U.S. pilots.
In order to further this goal, for the 2021 ratemaking, the Coast Guard is proposing to change the way inflation is calculated in this step to account for actual inflation instead of predicted inflation. See the Discussion of Proposed Methodological and Other Changes at section VI of this preamble for a detailed description of the changes proposed.
In the second part of Step 4, set forth in § 404.104(c), the Director determines the total compensation figure for each district. To do this, the Director multiplies the compensation benchmark by the number of pilots for each area and District (from Step 3), producing a figure for total pilot compensation.
In Step 5, “Project working capital fund,” (§ 404.105) the Director calculates a value that is added to pay for needed capital improvements and other non-recurring expenses, such as technology investments and infrastructure maintenance. This value is calculated by adding the total operating expenses (derived in Step 2) to the total pilot compensation (derived in Step 4), and multiplying that figure by the preceding year's average annual rate of return for new issues of high-grade corporate securities. This figure constitutes the “working capital fund” for each area and district.
In Step 6, “Project needed revenue,” (§ 404.106) the Director simply adds up the totals produced by the preceding steps. The projected operating expense for each area and district (from Step 2) is added to the total pilot compensation (from Step 4) and the working capital fund contribution (from Step 5). The total figure, calculated separately for each area and district, is the “needed revenue.”
In Step 7, “Calculate initial base rates,” (§ 404.107) the Director calculates an hourly pilotage rate to cover the needed revenue as calculated in Step 6. This step consists of first calculating the 10-year hours of traffic average for each area. Next, the revenue needed in each area (calculated in Step 6) is divided by the 10-year hours of traffic average to produce an initial base rate.
An additional element, the “weighting factor,” is required under § 401.400. Pursuant to that section, ships pay a multiple of the “base rate” as calculated in Step 7 by a number ranging from 1.0 (for the smallest ships, or “Class I” vessels) to 1.45 (for the largest ships, or “Class IV” vessels). As this significantly increases the revenue collected, we need to account for the added revenue produced by the weighting factors to ensure that shippers are not overpaying for pilotage services. We do this in the next step.
In Step 8, “Calculate average weighting factors by area,” (§ 404.108) the Director calculates how much extra revenue, as a percentage of total revenue, has historically been produced by the weighting factors in each area. We do this by using a historical average of the applied weighting factors for each year since 2014 (the first year the current weighting factors were applied).
In Step 9, “Calculate revised base rates,” (§ 404.109) the Director modifies the base rates by accounting for the extra revenue generated by the weighting factors. We do this by dividing the initial pilotage rate for each area (from Step 7) by the corresponding average weighting factor (from Step 8), to produce a revised rate.
In Step 10, “Review and finalize rates,” (§ 404.110) often referred to informally as “Director's discretion,” the Director reviews the revised base rates (from Step 9) to ensure that they meet the goals set forth in the Act and 46 CFR 404.1(a), which include promoting efficient, safe, and reliable pilotage service on the Great Lakes; generating sufficient revenue for each pilotage association to reimburse necessary and reasonable operating expenses; compensating trained and rested pilots fairly; and providing appropriate profit for improvements.
After the base rates are set, § 401.401 permits the Coast Guard to apply surcharges. As stated in the 2020 rulemaking, as the vast majority of working pilots are not anticipated to reach the regulatory required retirement age of 70 in the next 20 years, we continue to believe that the pilot associations are now able to plan for the costs associated with retirements without relying on the Coast Guard to impose surcharges.
For 2021, the Coast Guard is proposing one methodological change to the ratemaking model and two policy changes. The proposed changes, discussed in detail below, include changes to how we calculate inflation of pilot compensation in step 4, how we round numbers in the staffing model, and the proposed exclusion of legal expenses associated with lawsuits against the Coast Guard's ratemaking rulemakings from operating expenses. For consideration in a future rulemaking, we are also requesting comments on how to calculate compensation for apprentice pilots.
Based on public comments received on the 2020 proposed rule, the Coast Guard is proposing to change the inflation calculation in Step 4 of the ratemaking. This step discusses the use of the Federal Reserve's projected PCE data, as opposed to using historic BLS ECI data. Currently in Step 4, we adjust the existing target pilot compensation to account for inflation, following the procedures outlined in § 404.104(b), which require that PCE data only be used when ECI data is not available. In each year's ratemaking, the Coast Guard projects future values that requires forecasted inflation data. The BLS ECI only provides historic data; consequently we use PCE data, in accordance with § 404.104(b), as the PCE provides estimates of future inflation. The forecasted PCE inflation data is generated by the Federal Reserve. The Federal Reserve is responsible for setting monetary policy in the United States, which in turn influences inflation. The Federal Reserve bases these estimates on predictions of economic growth, the unemployment rate, other economic data, and the future policy path the Federal Reserve expects to take to meet its goals of maximizing employment and setting stable prices. The PCE is a reflection of the government's best prediction of what will happen, and the Coast Guard will continue to use it as our predicted inflation value in Step 4 of the ratemaking.
However, as the Coast Guard updates the previous year's target compensation value for inflation in each ratemaking, any differences between the predicted inflation rate and the actual inflation rate will be compounded with each ratemaking, if the predicted PCE value is continually higher or lower than actual inflation. Therefore, for this ratemaking, the Coast Guard is proposing to modify the way inflation is calculated in Step 4 of the ratemaking to account for the difference between the predicted inflation and actual inflation.
In this NPRM, the Coast Guard is proposing that the previous year's target compensation value would first be adjusted by the difference between predicted PCE inflation value and actual ECI inflation value, to ensure the target compensation value accounts for actual inflation. We would then multiply this adjusted target compensation value by the predicted future inflation value from the PCE to account for future inflation.
For 2020, the actual ECI inflation is 3.4 percent, which is 1.4 percent greater than the predicted PCE inflation of 2 percent. Therefore, this proposed use of the difference between predicted PCE inflation rates and historic ECI inflation data to account for actual inflation in § 401.104(b) would result in a 1.4 percent increase for the 2021 pilotage fees versus continuing to use the predicted PCE inflation value. In some years, however, it is possible that the actual ECI inflation will be lower than the predicted PCE inflation, resulting in a decrease for the pilotage fees.
The first policy change is to how we round numbers in the staffing model in 46 CFR 401.220(a)(2). This proposed rule would amend the text to always round up in the staffing model, instead of rounding to the nearest whole integer. We are proposing this change in response to three comments we received on the proposed rule, “Great Lakes Pilotage Rates—2020 Annual Review and Revisions to Methodology” (84 FR 58099, Oct. 30, 2019), which are posted within docket number USCG-2019-0736. The St. Lawrence Seaway Pilot's Association asserted that the regulatory burden on the three pilotage associations has increased substantially. The commenter suggested that rounding in the staffing model does not account for the administrative time and effort required of the three associations' Presidents and therefore one additional pilot per district is necessary to cover the President's pilotage duties. Lakes Pilots Association, Inc. also stated that the staffing model should include an additional pilot in the rate for administrative work of the president and committee members. Another commenter, on behalf of all pilots within the three pilot associations, made similar assertions that the pilot associations' presidents are spending more time at meetings, conferences, traveling, and facilitating communication between the pilots and Coast Guard. They requested that we authorize an administrative position for each district to account for these increased duties and prevent delays in responsiveness to the Coast Guard. We rejected the proposal to add an “administrative pilot” because this is
Rounding up in the staffing model would account for extra staff or extra time spent by the pilot associations' presidents, including attending meetings and conferences, providing additional financial and traffic information to increase transparency and accountability, overseeing and ensuring the integrity of the association training program, evaluating technology, and coordinating with the APA to implement and share best practices. Rounding up in the staff model is also consistent with industry standards, as is it not possible to have a portion of a person. Therefore, if the staffing model requires 8.1 pilots for an area, 9 pilots are actually needed. In addition, we currently estimate how many pilots each district needs for the upcoming year without taking into account the administrative work that takes the president of each association away from their role as a Great Lakes pilot. We believe rounding up is prudent with regard to maritime safety to help ensure enough pilots are allocated to each district to cover the extra hours the association's president spends engaged in the non-pilot tasks and administrative work discussed above. In sum, rounding down in the staffing model could result in too few pilots allocated to a district which, when coupled with the president's spending less time serving as pilot, may adversely impact recuperative rest goals for working pilots that are essential for safe navigation.
The Coast Guard agrees that, where the pilot associations' presidents are spending an increased amount of their time on administrative issues, the staffing model should account for that time and allow for additional staff to assist. In light of the information presented by the pilot association's comments, the Coast Guard is proposing to always round up the final number, rather than round to the nearest integer when determining the maximum number of pilots in the staffing model. For the 2021 ratemaking, this proposed change to the rounding in the staffing model would allow each association one additional pilot that would not have otherwise been allowed.
This is the second policy change. The Coast Guard is proposing to exclude legal fees incurred in litigation against the Coast Guard in relation to the ratemaking and oversight requirements in Title 46 of the United States Code (U.S.C.) at sections 9303, 9304, and 9305 from approved pilot associations' operating expenses used in the calculation of pilotage rates. We believe causing the shippers to pay for the pilots' litigation expenses against the Coast Guard's annual ratemaking is an undue burden, because the shippers are not responsible for the ratemaking and the pilots can be reimbursed through other means.
The Coast Guard acknowledges that many legal fees are appropriately included in the operating expenses of the pilot associations, and that excluding legal fees incurred in lawsuits against the Coast Guard related to ratemaking is a departure from our past policies. The regulations will still provide for the inclusion of the legal fees needed for the pilots to run their businesses, defend their licenses, and to protect their interests when the shippers litigate. To clarify, pilot associations who intervene as defendants alongside the Coast Guard in a shipper-initiated lawsuit related to the ratemaking would be able to continue to include those legal fees in their operating expenses, because they are not incurred in a lawsuit against the Coast Guard. As the U.S. District Court recently noted, “each year, it seems, either the shipping companies or the associations that supply the pilots sue the Coast Guard to challenge aspects of the rulemaking. The shippers perennially complain that the rates are too high, while the pilots gripe that they are too low.”
The Coast Guard is proposing to remove this expense from the ratemaking calculation, noting that under the Equal Access to Justice Act (EAJA), 28 U.S.C. 2412, the Coast Guard can reimburse pilots if they prevail on the merits. This more equitable solution places the burden of paying legal fees on the Coast Guard when the pilots prevail in such litigation. Excluding legal fees incurred by suing the Coast Guard from the operating expenses on the annual ratemaking is a change consistent with giving consideration to the public interest and the costs of providing the services, as the pilots would be eligible for reimbursement from the Coast Guard if their challenge prevails.
Additionally, shippers become a party in interest when the pilots sue the Coast Guard. In some cases, shipping companies have intervened as defendants in legal challenges to the ratemakings. Under the present scheme, pilots are reimbursed for their legal expenses when they sue the Coast Guard, irrespective of whether they win or lose. But it is not the Government that bears the expense—shippers pay the pilots' legal expenses, in the form of higher pilotage rates, when those legal expenses are included in the operating expenses.
The general proposition in the American system of jurisprudence is that litigants bears their own expenses for the litigation. “In the United States, the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys' fee from the loser.”
The pilots have alternative remedies to recoup their legal fees in lawsuits against the Coast Guard related to the ratemaking and oversight requirements. Under the EAJA, a prevailing party in a suit where the government agency is an opposing party can apply for its legal fees under certain conditions. To be considered a prevailing party entitled to an award of attorney fees under the EAJA, it is sufficient if the claimant prevails on an important matter that directly benefits them, but they need not prevail on all issues.
Excluding these legal fees from operating expenses in the ratemaking and regulatory function is consistent with “giving consideration to the public interest and the costs of providing the services,”
As such, we believe that repositioning the financial responsibility for legal fees on the proper entity by removing them from pilots' operating expenses is an equitable resolution that comports with our statutory mandate to give consideration to both the public interest and the costs of providing the services.
Our process to exclude the legal fees in our annual ratemaking would be as follows. First, the unreimbursed pilot associations' legal fees incurred in litigation against the Coast Guard would be identified as an individual line item in the operating expenses. Second, we would remove the same amount by way of a Director's adjustment in a later step. If the pilot association is not reimbursed at all by the EAJA or other settlement means, then the full unreimbursed cost of legal fees for that year would be listed as an operating expense, and then the same dollar amount would be excluded by a Director's adjustment. Where a pilot association's legal fees are reimbursed fully or partially by way of the EAJA or settlement, then the operating expense amount would be reduced to represent only the unreimbursed dollar amount, and that same dollar amount would be excluded by a Director's adjustment. Only the outstanding cost of legal fees incurred in litigation against the Coast Guard related to ratemaking and oversight would be listed, representing the true cost to the association. Listing the dollar amount of unreimbursed legal expenses and removing it from the operating expenses would provide transparency to the pilot associations of the exact amount of legal fees excluded by this proposed change.
For consideration in a future ratemaking, we are requesting comments on how we calculate compensation for apprentice pilots and pilots with a limited registration. We are requesting comments on setting the reimbursable cost associated with apprentice pilot salaries at a set amount based on a percentage of the previous year's target pilot compensation. This reimbursable cost would be included in the approved operating expenses for pilotage associations.
Apprentice pilot salaries are currently based on a Director's adjustment made in the 2019 rulemaking, which adjusted these salaries to approximately 36 percent of target pilot compensation. The Coast Guard is requesting comments on setting all future apprentice pilot salaries at a rate equivalent to 36 percent of target pilot compensation. This would align the compensation practices for apprentice pilots across all three districts. The Coast Guard believes setting this benchmark for apprentice pilot salaries would help recruit highly qualified mariners to join and remain with the pilot associations by providing apprentice pilots with the ability to earn an equitable income during the training process, which can last from 6 to 48 months. This could also ensure that the pilot associations have sufficient personnel to continue providing service, despite retirements and unscheduled turn-over.
We would like to hear any comments, suggestions, or questions you have pertaining to the Coast Guard's proposed recommendation to set future apprentice pilot salaries at an amount equivalent to 36 percent of the target pilot compensation. If you disagree with this proposed percentage, please address your concerns and provide a substitute amount or percentage along with your rationale supporting the proposed substitution. If you agree with the proposed percentage for different reasons than the Coast Guard noted above, please explain your rationale and reasoning.
In
First, the Coast Guard's longstanding position is that it has no statutory authority to retroactively recalculate rates. The District Court, in
Within the existing methodology, the Coast Guard includes an allowance for the discretionary adjustment of rates. In Step 10, “Review and finalize rates,” (§ 404.110), often referred to informally as Director's discretion, the Director of the Great Lakes Pilotage reviews the revised base rates (from Step 9) to ensure that they meet the goals set forth in the Act and in 46 CFR 404.1(a), which include promoting efficient, safe, and reliable pilotage service on the Great Lakes; generating sufficient revenue for each pilotage association to reimburse necessary and reasonable operating expenses; compensating trained and rested pilots fairly; and providing appropriate capital for improvements.
The Coast Guard has yet to exercise this discretion under the 2016 methodology, and generally believes that its discretion is properly limited to circumstances of clear error or mistake resulting in an unjust rate or extraordinary circumstances. The annual ratemaking ensures that the consequences of any error is limited in time. The 2016 methodology, as currently implemented, has survived legal challenge and is producing stable rates based on, among other factors, an ever-increasing amount of historical data.
The consideration of the impact of past rates includes the consequences of any identified errors. The Coast Guard clarifies that its longstanding policy against calculating retroactive rates does not prevent its estimation of correcting for past rates when reliable information for doing so is available, and it is in the public interest and provides for the cost of services. In considering whether to exercise our discretion to adjust current rates for issues in past rates, the Coast Guard takes a retrospective look for extraordinary circumstances associated with past rates that the Coast Guard concludes were both unjust and unreasonable.
Next, the Coast Guard will consider whether remedying any portion of the identified harms from the 2016 ratemaking final rule in this ratemaking is appropriate. More specifically, the Coast Guard will consider whether a prospective rate adjustment aligns with our mandate to consider the public interest and the costs of providing services per 46 U.S.C. 9303(f). Consistent with its longstanding position;
The Coast Guard exercises discretion to adjust the final rates in step 10, to produce adequate revenue for the upcoming year. Ensuring the rates are adjusted to sufficiently cover all the approved operating expenses is consistent with our mandate to consider the public interest and safety of navigating through the Great Lakes. Having considered all of the information before it carefully, the Coast Guard does not intend to make a prospective change in the 2021 rates to correct for 2016 errors for the following three reasons.
In this NPRM, based on the proposed changes to the existing methodology described in the previous section, we are proposing new pilotage rates for 2021. We propose to conduct the 2021 ratemaking as an “interim year,” as was done in 2020, rather than a full ratemaking as was conducted in 2018. Thus, the Coast Guard proposes to adjust the compensation benchmark pursuant to § 404.104(b) for this purpose, rather than § 404.104(a).
This section discusses the proposed rate changes using the ratemaking steps provided in 46 CFR part 404, incorporating the proposed changes discussed in section VI. We will detail all 10 steps of the ratemaking procedure for each of the 3 districts to show how we arrive at the proposed new rates.
Step 1 in our ratemaking methodology requires that the Coast Guard review and recognize the previous year's operating expenses (§ 404.101). To do so, we begin by reviewing the independent accountant's financial reports for each association's 2018 expenses and revenues.
As noted above, in 2016 the Coast Guard began authorizing surcharges to cover the training costs of applicant pilots. The surcharges were intended to reimburse pilot associations for training applicants in a more timely fashion than if those costs were listed as operating expenses, which would have required 3 years to reimburse. The rationale for using surcharges to cover these expenses, rather than including the costs as operating expenses, was so these non-recurring costs could be recovered in a more timely fashion, and so that retiring pilots would not have to cover the costs of training their replacements. Because operating expenses incurred are not actually recouped for a period of 3 years, the Coast Guard added a $150,000 surcharge per applicant pilot, beginning in 2016, to recoup those costs in the year incurred. Although the districts did not collect any surcharges for the 2020 shipping season, they did collect a surcharge for the 2018 season, which will need to be reflected in the operating expenses of the districts.
For District One, we propose several Director's adjustments. District One had two applicant pilots during the 2018 season. In total, the District paid these two pilots $594,521, or $297,261 each. The Coast Guard believes this amount is above what is necessary and reasonable for retention and recruitment. In the 2019 NPRM, the Coast Guard proposed to make an adjustment to District Two's request for reimbursement of $571,248 for two applicant pilots ($285,624 per applicant). Instead of permitting $571,248 for two applicant pilots, we proposed allowing $257,566, or $128,783 per applicant pilot based on discussions with other pilot associations at the time. This standard went into the final rule for 2019 and was not opposed. To determine this percentage, we reached out to several of the pilot associations throughout the United States to see what percentage they pay their applicant pilots, then factored in the sea time and experience required to become an applicant pilot on the Great Lakes. Finally, we discussed the percentage with the presidents of each association to determine if it was fair and reasonable. If we adopt this methodology, the Coast Guard would continue to use the same ratio of applicant-to-target compensation for all districts. For 2019, this was approximately 36 percent ($128,783 ÷ $359,887 = 35.78 percent), so the Coast Guard is proposing to use the rounded up value of 36.0 percent of target compensation as the benchmark for applicant pilot compensation, for a 2021 target pilot compensation of $132,151 ($367,085 × .36). This allows adjustments to applicant pilot compensation to fluctuate in line with target compensation.
The other Director's adjustments to expenses occurred because District One did not break out any costs associated with applicant pilots after the audit, and included these costs as part of pilotage costs. For transparency, the Coast Guard has included the applicant pilot costs as Director's adjustments and has then deducted the same amount to avoid any double counting of these costs. These costs are necessary and reasonable for district operations and should, therefore, be implemented in the rate.
A Director's adjustment has also been proposed for the amount collected using the 2018 surcharge. A final Director's adjustment is proposed for the amount of Coast Guard litigation legal fees. Other adjustments have been made by the auditors and are explained in the auditor's reports, which are available in the docket for this rulemaking where indicated under the Public Participation and Request for Comments portion of the preamble.
Having identified the recognized 2018 operating expenses in Step 1, the next step is to estimate the current year's operating expenses by adjusting those expenses for inflation over the 3-year period. We calculate inflation using the BLS data from the CPI for the Midwest Region of the United States for the 2019 inflation rate.
In accordance with the text in § 404.103, we estimate the number of registered pilots in each district. We determine the number of registered pilots based on data provided by the Saint Lawrence Seaway Pilots Association. Using these numbers, we estimate that there will be 18 registered pilots in 2021 in District One. Based on the seasonal staffing model discussed in the 2017 ratemaking (see 82 FR 41466), and our proposed changes to that staffing model, we assigned a certain number of pilots to designated waters and a certain number to undesignated waters, as shown in table 5. These numbers are used to determine the amount of revenue needed in their respective areas.
In
Next, we certify that the number of pilots estimated for 2021 is less than or equal to the number permitted under the proposed changes to the staffing model in § 401.220(a). The proposed changes to the staffing model suggest that the number of pilots needed is 18 pilots for District One, which is more than or equal to 18, the number of registered pilots provided by the pilot associations. In accordance with § 404.104(c), we use the revised target individual compensation level to derive the total pilot compensation by multiplying the individual target compensation by the estimated number of registered pilots for District One, as shown in table 7.
Next, we calculate the working capital fund revenues needed for each area. First, we add the figures for projected operating expenses and total pilot compensation for each area. Next, we find the preceding year's average annual rate of return for new issues of high-grade corporate securities. Using Moody's data, the number is 3.3875 percent.
In this step, we add all the expenses accrued to derive the total revenue needed for each area. These expenses include the projected operating expenses (from Step 2), the total pilot compensation (from Step 4), and the working capital fund contribution (from Step 5). We show these calculations in table 9.
Having determined the revenue needed for each area in the previous six steps, to develop an hourly rate we divide that number by the expected number of hours of traffic. Step 7 is a two-part process. In the first part, we calculate the 10-year average of traffic in District One, using the total time on task or pilot bridge hours.
Next, we derive the initial hourly rate by dividing the revenue needed by the average number of hours for each area. This produces an initial rate, which is necessary to produce the revenue needed for each area, assuming the amount of traffic is as expected. We present the calculations for each area in table 11.
In this step, we calculate the average weighting factor for each designated and undesignated area. We collect the weighting factors, set forth in 46 CFR 401.400, for each vessel trip. Using this database, we calculate the average weighting factor for each area using the data from each vessel transit from 2014 onward, as shown in tables 12 and 13.
In this step, we revise the base rates so that once the impact of the weighting factors is considered; the total cost of pilotage will be equal to the revenue needed. To do this, we divide the initial base rates calculated in Step 7 by the average weighting factors calculated in Step 8, as shown in table 14.
In this step, the Director reviews the rates set forth by the staffing model and ensures that they meet the goal of ensuring safe, efficient, and reliable pilotage. To establish this, the Director considers whether the proposed rates incorporate appropriate compensation for pilots to handle heavy traffic periods and whether there is a sufficient number of pilots to handle those heavy traffic periods. The Director also considers whether the proposed rates would cover operating expenses and infrastructure costs, including average traffic and weighting factions. Based on the financial information submitted by the pilots, the Director is not proposing any alterations to the rates in this step. We propose to modify the text in § 401.405(a) to reflect the final rates shown in table 15.
Step 1 in our ratemaking methodology requires that the Coast Guard review and recognize the previous year's operating expenses (§ 404.101). To do so, we begin by reviewing the independent accountant's financial reports for each association's 2018 expenses and revenues.
For District Two, we propose three Director's adjustments: (1) For the amount collected from the 2018 surcharge; (2) for the amount in Coast Guard litigation legal fees; and (3) for the amount paid to the District's applicant pilot. District Two had one applicant pilot during the 2018 season and paid $334,659 in salary. The Coast Guard believes this amount is above what is necessary and reasonable for retention and recruitment. In the 2019 NPRM, the Coast Guard proposed to make an adjustment to District Two's request for reimbursement of $571,248 for two applicant pilots ($285,624 per applicant). Instead of permitting $571,248 for two applicant pilots, we proposed allowing $257,566, or $128,783 per applicant pilot. This proposal went into the final rule for 2019 and was not opposed. Going forward, the Coast Guard will continue to use the same ratio of applicant to target compensation. For 2019, this was approximately 36 percent ($128,783 ÷ $359,887 = 35.78 percent), so the Coast Guard is proposing to use the rounded up value of 36.0 percent of target compensation as the benchmark for applicant pilot compensation, for a 2021 target pilot compensation of $132,151 ($367,085 × .36). This allows adjustments to applicant pilot compensation to fluctuate in line with target compensation. Other adjustments made by the auditors are explained in the auditors' reports (available in the docket where indicated in the Public Participation and Request for Comments portion of this document).
Having identified the recognized 2019 operating expenses in Step 1, the next step is to estimate the current year's operating expenses by adjusting those expenses for inflation over the 3-year period. We calculate inflation using the BLS data from the CPI for the Midwest Region of the United States for the 2019 inflation rate.
In accordance with the text in § 404.103, we estimate the number of working pilots in each district. We determine the number of registered pilots based on data provided by the Lakes Pilots Association. Using these numbers, we estimate that there will be 15 registered pilots in 2021 in District Two. Furthermore, based on the seasonal staffing model discussed in the 2017 ratemaking (see 82 FR 41466) and our proposed changes to that staffing model, we assign a certain number of pilots to designated waters and a certain number to undesignated waters, as shown in table 18. These numbers are used to determine the amount of revenue needed in their respective areas.
In this step, we determine the total pilot compensation for each area. As we are proposing an “interim” ratemaking this year, we propose to follow the procedure outlined in paragraph (b) of § 404.104, which adjusts the existing compensation benchmark by inflation. As stated in Section VI.A of the preamble, we are proposing to use a two-step process to adjust target pilot compensation for inflation. The first step adjusts the 2019 target compensation benchmark of $367,085
Next, we certify that the number of pilots estimated for 2021 is less than or equal to the number permitted under the proposed changes to the staffing model in § 401.220(a). The proposed changes to the staffing model suggest that the number of pilots needed is 16 pilots for District Two, which is more than or equal to 15, the number of registered pilots provided by the pilot associations.
Thus, in accordance with § 404.104(c), we use the revised target individual compensation level to derive the total pilot compensation by multiplying the individual target compensation by the estimated number of registered pilots for District Two, as shown in table 19.
Next, we calculate the working capital fund revenues needed for each area. First, we add the figures for projected operating expenses and total pilot compensation for each area. Next, we find the preceding year's average annual rate of return for new issues of high-grade corporate securities. Using Moody's data, the number is 3.3875 percent.
In this step, we add all the expenses accrued to derive the total revenue needed for each area. These expenses include the projected operating expenses (from Step 2), the total pilot compensation (from Step 4), and the working capital fund contribution (from Step 5). We show these calculations in table 21.
Having determined the needed revenue for each area in the previous six steps, to develop an hourly rate we divide that number by the expected number of hours of traffic. Step 7 is a two-part process. In the first part, we calculate the 10-year average of traffic in District Two, using the total time on task or pilot bridge hours.
Next, we derive the initial hourly rate by dividing the revenue needed by the average number of hours for each area. This produces an initial rate, which is necessary to produce the revenue needed for each area, assuming the amount of traffic is as expected. The calculations for each area are set forth in table 23.
In this step, we calculate the average weighting factor for each designated and undesignated area. We collect the weighting factors, set forth in 46 CFR 401.400, for each vessel trip. Using this database, we calculated the average weighting factor for each area using the data from each vessel transit from 2014 onward, as shown in tables 24 and 25.
In this step, we revise the base rates so that once the impact of the weighting factors are considered, the total cost of pilotage will be equal to the revenue needed. To do this, we divide the initial base rates calculated in Step 7 by the average weighting factors calculated in Step 8, as shown in table 26.
In this step, the Director reviews the rates set forth by the staffing model and ensures that they meet the goal of ensuring safe, efficient, and reliable pilotage. To establish this, the Director considers whether the proposed rates incorporate appropriate compensation for pilots to handle heavy traffic periods, and whether there is a sufficient number of pilots to handle those heavy traffic periods. The Director also considers whether the proposed rates would cover operating expenses and infrastructure costs, and takes average traffic and weighting factors into consideration. Based on this information, the Director is not proposing any alterations to the rates in this step. We propose to modify the text in § 401.405(a) to reflect the final rates shown in table 27.
Step 1 in our ratemaking methodology requires that the Coast Guard review and recognize the previous year's operating expenses (§ 404.101). To do so, we begin by reviewing the independent accountant's financial reports for each association's 2018 expenses and revenues.
For District Three, we propose two Director's adjustments. One would be for the amount collected from the 2018 surcharge and the other for the amount of Coast Guard litigation legal fees. Other adjustments made by the auditors are explained in the auditors' reports (available in the docket where indicated in the Public Participation and Request for Comments portion of this document).
We would make no adjustments to the District Three compensation for applicant pilots. In the 2019 NPRM, the Coast Guard proposed to make an adjustment to District Three's request for reimbursement of $571,248 for two applicant pilots ($285,624 per applicant). Instead of permitting $571,248 for two applicant pilots, we proposed allowing $257,566, or $128,783 per applicant pilot. This proposal went into the final rule for 2019 and was not opposed. Going forward, the Coast Guard will to continue to use the same ratio of applicant to target compensation for all districts. For 2019, this was approximately 36 percent ($128,783 ÷ $359,887 = 35.78 percent), so the Coast Guard will use 36 percent of target compensation as the benchmark for applicant pilot compensation. This allows adjustments to applicant pilot compensation to fluctuate in line with target compensation.
Having identified the recognized 2018 operating expenses in Step 1, the next step is to estimate the current year's operating expenses by adjusting those expenses for inflation over the 3-year period. We calculate inflation using the BLS data from the CPI for the Midwest Region of the United States for the 2019 inflation rate.
In accordance with the text in § 404.104(c), we estimate the number of working pilots in each district. We determine the number of registered pilots based on data provided by the Western Great Lakes Pilots Association. Using these numbers, we estimate that there will be 22 registered pilots in 2021 in District Three. Furthermore, based on the seasonal staffing model discussed in the 2017 ratemaking (see 82 FR 41466), and our proposed changes to that staffing model, we assign a certain number of pilots to designated waters and a certain number to undesignated waters, as shown in table 30. These numbers are used to determine the amount of revenue needed in their respective areas.
In this step, we determine the total pilot compensation for each area. As we are proposing an “interim” ratemaking this year, we propose to follow the procedure outlined in paragraph (b) of § 404.104, which adjusts the existing compensation benchmark by inflation. As stated in Section VI.A of the preamble, we are proposing to use a two-step process to adjust target pilot compensation for inflation. The first step adjusts the 2019 target compensation benchmark of $367,085 by 1.4 percent, for a total adjusted value of $372,224. This adjustment accounts for the difference between the predicted 2020 Median PCE inflation value of 2 percent and the actual 2020 ECI inflation value of 3.4 percent.
Next, we certify that the number of pilots estimated for 2021 is less than or equal to the number permitted under the proposed changes to the staffing model in § 401.220(a). The proposed changes to the staffing model suggest that the number of pilots needed is 23 pilots for District Three,
Thus, in accordance with § 404.104(c), we use the revised target individual compensation level to derive the total pilot compensation by multiplying the individual target compensation by the estimated number of registered pilots for District Three, as shown in table 31.
Next, we calculate the working capital fund revenues needed for each area. First, we add the figures for projected operating expenses and total pilot compensation for each area. Next, we find the preceding year's average annual rate of return for new issues of high grade corporate securities. Using Moody's data, the number is 3.3875 percent.
In this step, we add all the expenses accrued to derive the total revenue needed for each area. These expenses include the projected operating expenses (from Step 2), the total pilot compensation (from Step 4), and the working capital fund contribution (from Step 5). The calculations are shown in table 33.
Having determined the revenue needed for each area in the previous six steps, to develop an hourly rate we divide that number by the expected number of hours of traffic. Step 7 is a two-part process. In the first part, we calculate the 10-year average of traffic in District Three, using the total time on task or pilot bridge hours.
Next, we derive the initial hourly rate by dividing the revenue needed by the average number of hours for each area. This produces an initial rate, which is necessary to produce the revenue needed for each area, assuming the amount of traffic is as expected. The calculations for each area are set forth in table 35.
In this step, we calculate the average weighting factor for each designated and undesignated area. We collect the weighting factors, set forth in 46 CFR 401.400, for each vessel trip. Using this database, we calculate the average weighting factor for each area using the data from each vessel transit from 2014 onward, as shown in tables 36 and 37.
In this step, we revise the base rates so that once the impact of the weighting factors are considered, the total cost of pilotage will be equal to the revenue needed. To do this, we divide the initial base rates calculated in Step 7 by the average weighting factors calculated in Step 8, as shown in table 38.
In this step, the Director reviews the rates set forth by the staffing model and ensures that they meet the goal of ensuring safe, efficient, and reliable pilotage. To establish this, the Director considers whether the proposed rates incorporate appropriate compensation for pilots to handle heavy traffic periods and whether there is a sufficient number of pilots to handle those heavy traffic periods. The Director also considers whether the proposed rates would cover operating expenses and infrastructure costs, and takes average traffic and weighting factors into consideration. Based on this information, the Director is not proposing any alterations to the rates in this step. We propose to modify the text in § 401.405(a) to reflect the final rates shown in table 39.
We developed this proposed rule after considering numerous statutes and Executive orders related to rulemaking. A summary of our analyses based on these statutes or Executive orders follows.
Executive Orders 12866 (Regulatory Planning and Review) and 13563 (Improving Regulation and Regulatory Review) direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 13771 (Reducing Regulation and Controlling Regulatory Costs) directs agencies to reduce regulation and control regulatory costs and provides that “for every one new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations
The Office of Management and Budget (OMB) has not designated this proposed rule a significant regulatory action under section 3(f) of Executive Order 12866. Accordingly, OMB has not reviewed it. Because this proposed rule is not a significant regulatory action, it is exempt from the requirements of Executive Order 13771.
The purpose of this proposed rule is to establish new base pilotage rates. The Great Lakes Pilotage Act of 1960 requires that rates be established or reviewed and adjusted each year. The Act requires that base rates be established by a full ratemaking at least once every five years, and in years when base rates are not established, they must be reviewed and, if necessary, adjusted. The last full ratemaking was concluded in June of 2018.
Table 40 summarizes proposed changes with no cost impacts or where the cost impacts are captured in the proposed rate change. Table 41 summarizes the affected population, costs, and benefits of the proposed rate change.
The Coast Guard is required to review and adjust pilotage rates on the Great Lakes annually. See Sections IV and V of this preamble for detailed discussions of the legal basis and purpose for this rulemaking and for background information on Great Lakes pilotage ratemaking. Based on our annual review for this rulemaking, we are proposing to adjust the pilotage rates for the 2021 shipping season to generate sufficient revenues for each district to reimburse its necessary and reasonable operating expenses, fairly compensate trained and rested pilots, and provide an appropriate working capital fund to use for improvements. The rate changes in this proposed rule would decrease the rates for all three districts. In addition, the proposed rule would not implement a surcharge for the training of apprentice pilots as was last implemented in the 2019 ratemaking.
A detailed discussion of our economic impact analysis follows.
This rule would impact U.S. Great Lakes pilots, the 3 pilot associations, and the owners and operators of 279 oceangoing vessels that transit the Great Lakes annually. We estimate that there would be 55 pilots registered during the 2021 shipping season. The shippers affected by these rate changes are those owners and operators of domestic vessels operating “on register” (engaged in foreign trade) and owners and operators of non-Canadian foreign vessels on routes within the Great Lakes system. These owners and operators must have pilots or pilotage service as required by 46 U.S.C. 9302. There is no minimum tonnage limit or exemption for these vessels. The statute applies only to commercial vessels and not to recreational vessels. U.S.-flagged vessels not operating on register and Canadian “lakers,” which account for most commercial shipping on the Great Lakes, are not required by 46 U.S.C. 9302 to have pilots. However, these U.S. and Canadian-flagged lakers may voluntarily choose to engage a Great Lakes registered pilot. Vessels that are U.S.-flagged may opt to have a pilot for varying reasons, such as unfamiliarity with designated waters and ports, or for insurance purposes.
The Coast Guard used billing information from the years 2017 through 2019 from the Great Lakes Pilotage Management System (GLPMS) to estimate the average annual number of vessels affected by the rate adjustment. The GLPMS tracks data related to managing and coordinating the dispatch of pilots on the Great Lakes, and billing in accordance with the services. As described in Step 7 of the methodology, we use a 10-year average to estimate the traffic. We used 3 years of the most recent billing data to estimate the affected population. When we reviewed 10 years of the most recent billing data, we found the data included vessels that have not used pilotage services in recent years. We believe using 3 years of billing data is a better representation of the vessel population that is currently using pilotage services and would be impacted by this rulemaking. We found that 474 unique vessels used pilotage services during the years 2017 through 2019. That is, these vessels had a pilot dispatched to the vessel and billing information was recorded in the GLPMS. Of these vessels, 434 were foreign-flagged vessels and 40 were U.S.-flagged vessels. As previously stated, U.S.-flagged vessels not operating on register are not required to have a registered pilot per 46 U.S.C. 9302, but they can voluntarily choose to have one.
Numerous factors affect vessel traffic, which varies from year to year. Therefore, rather than using the total number of vessels over the time period, we took an average of the unique vessels using pilotage services from the years 2017 through 2019 as the best representation of vessels estimated to be affected by the rates in this rulemaking. From 2017 through 2019, an average of 279 vessels used pilotage services annually.
The proposed rate changes resulting from this adjustment to the rates would result in a net decrease in the cost of service to shippers. However, the proposed change in per unit cost to each individual shipper would be dependent on their area of operation.
The Coast Guard estimates the effect of the rate changes on shippers by comparing the total projected revenues needed to cover costs in 2020 with the total projected revenues to cover costs in 2021, including any temporary surcharges we have authorized.
The impacts of the rate changes on shippers are estimated from the district pilotage projected revenues (shown in tables 9, 21, and 33 of this preamble). The Coast Guard estimates that for the 2021 shipping season, the projected revenue needed for all three districts is $29,328,787.
To estimate the change in cost to shippers from this rule, the Coast Guard compared the 2021 total projected revenues to the 2020 projected revenues. Because we review and prescribe rates for the Great Lakes Pilotage annually, the effects are estimated as a single-year cost rather than annualized over a 10-year period. In the 2020 rulemaking, we estimated the total projected revenue needed for 2020 as $28,268,030.
The resulting difference between the projected revenue in 2020 and the projected revenue in 2021 is the annual change in payments from shippers to pilots as a result of the rate change imposed by this proposed rule. The effect of the rate change to shippers varies by area and district. After taking into account the change in pilotage rates, the rate changes would lead to affected shippers operating in District One experiencing an increase in payments of $470,190 over the previous year. District Two and District Three would experience an increase in payments of $136,306 and $454,261, respectively, when compared with 2020. The overall adjustment in payments would be an increase in payments by shippers of $1,060,757 across all three districts (a 4-percent increase when compared with 2020). Again, because the Coast Guard reviews and sets rates for Great Lakes Pilotage annually, we estimate the impacts as single-year costs rather than annualizing them over a 10-year period.
Table 43 shows the difference in revenue by revenue-component from 2020 to 2021 and presents each revenue-component as a percentage of the total revenue needed. In both 2020 and 2021, the largest revenue-component was pilotage compensation (68 percent of total revenue needed in 2020 and 71 percent of total revenue needed in 2021), followed by operating expenses (29 percent of total revenue needed in 2020 and 26 percent of total revenue needed in 2021).
As stated above, we estimate that there will be a total increase in revenue needed by the pilot associations of $1,060,757. This represents an increase in revenue needed for target pilot compensation of $1,711,480, and a decrease in the revenue needed for adjusted operating expenses and the working capital fund of $542,758 and $107,965, respectively. The proposed removal of legal fees associated with litigation against the Coast Guard would reduce the revenue needed in 2021 by $39,430. While the shippers would no longer reimburse the legal fees associated with litigation via the rate under the proposed rule, the pilot associations may still be reimbursed for these expenses by the Coast Guard under the EAJA.
The majority of the increase in revenue needed, $1,711,480, is the result of changes to target pilot compensation. These changes are due to three factors: (1) The proposed changes to adjust 2020 pilotage compensation to account for the difference between actual and predicted inflation; (2) the net addition of three additional pilots; and (3) inflation of pilotage compensation.
The proposed target compensation is $378,180 per pilot in 2021, compared to $367,085 in 2020. The proposed changes to modify the 2020 pilot compensation to account for the difference between predicted and actual inflation would increase the 2020 target compensation value by 1.4 percent. As show in table 43, this inflation adjustment would increase total compensation by $5,139 per pilot, and the total revenue needed by $282,655 when accounting for all 55 pilots.
The addition of 3 pilots to full registered status accounts for $1,119,122 of the increase in needed revenue. As shown in table 44, to avoid double counting, this value excludes the change in revenue resulting from the proposed
Finally, the remainder of the increase, $309,702, is the result of increasing compensation for the other 52 pilots to account for future inflation of 1.6 percent in 2021. This would increase total compensation by $5,965 per pilot.
Table 46 presents the percentage change in revenue by area and revenue-component, excluding surcharges, as they are applied at the district level.
This proposed rule would allow the Coast Guard to meet requirements in 46 U.S.C. 9303 to review the rates for pilotage services on the Great Lakes. The rate changes would promote safe, efficient, and reliable pilotage service on the Great Lakes by (1) ensuring that rates cover an association's operating expenses; (2) providing fair pilot compensation, adequate training, and sufficient rest periods for pilots; and (3) ensuring pilot associations produce enough revenue to fund future improvements. The rate changes would also help recruit and retain pilots, which would ensure a sufficient number of pilots to meet peak shipping demand, helping to reduce delays caused by pilot shortages.
Under the Regulatory Flexibility Act, 5 U.S.C. 601-612, we have considered whether this proposed rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.
For the proposed rule, the Coast Guard reviewed recent company size and ownership data for the vessels identified in the GLPMS, and we reviewed business revenue and size data provided by publicly available sources such as Manta
Of the 11 U.S. entities, 8 exceed the SBA's small business standards for small entities. To estimate the potential impact on the 3 small entities, the Coast Guard used their 2019 invoice data to estimate their pilotage costs in 2021. We increased their 2019 costs to account for the changes in pilotage rates resulting from this proposed rule and the Great Lakes Pilotage Rates—2020 Annual Review and Revisions to Methodology final rule (85 FR 20088). We estimated the change in cost to these entities resulting from this rule by subtracting their estimated 2020 costs from their estimated 2021 costs, and found the average costs to small firms would be approximately $1,226. We then compared the estimated change in pilotage costs between 2020 and 2021 with each firm's annual revenue. In all cases, their estimated pilotage expenses were below 1 percent of their annual revenue.
In addition to the owners and operators discussed above, three U.S. entities that receive revenue from pilotage services would be affected by this proposed rule. These are the three pilot associations that provide and manage pilotage services within the Great Lakes districts. Two of the associations operate as partnerships, and one operates as a corporation. These associations are designated with the same NAICS code and small-entity size standards described above, but have fewer than 500 employees. Combined, they have approximately 65 employees in total and, therefore, are designated as small entities. The Coast Guard expects no adverse effect on these entities from this rule because the three pilot associations would receive enough revenue to balance the projected expenses associated with the projected number of bridge hours (time on task) and pilots.
Finally, the Coast Guard did not find any small not-for-profit organizations that are independently owned and operated and are not dominant in their fields that would be impacted by this rule. We did not find any small governmental jurisdictions with populations of fewer than 50,000 people that would be impacted by this rule. Based on this analysis, we conclude this rulemaking would not affect a substantial number of small entities, nor have a significant economic impact on any of the affected entities.
Based on our analysis, this proposed rule would have a less than 1 percent annual impact on 3 small entities; therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this proposed rule would have a significant economic impact on it, please submit a comment to the docket at the address listed in the
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996, Public Law 104-121, we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking. If the proposed rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person in the
Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).
The Paperwork Reduction Act of 1995 (44 3501-3520) requires that the Coast Guard consider the impact of paperwork and other information collection burdens imposed on the public. According to the 1995 amendments to the Paperwork Reduction Act (5 CFR 1320(b)(2)(vi), an agency may not collect or sponsor the collection of information, nor may it impose an information collection requirement unless it displays a currently valid Office of Management and Budget (OMB) control number.
The Coast Guard has determined that there would be no new information collection associated with this proposed rule. Approval to collect such information previously was approved by OMB and was assigned OMB Control Number 1625-0086, Great Lakes Pilotage Methodology.
A rule has implications for federalism under Executive Order 13132 (Federalism) if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this proposed rule under Executive Order 13132 and have determined that it is consistent with the fundamental federalism principles and preemption requirements as described in Executive Order 13132. Our analysis follows.
Congress directed the Coast Guard to establish “rates and charges for pilotage services”. See 46 U.S.C. 9303(f). This regulation is issued pursuant to that statute and is preemptive of State law as specified in 46 U.S.C. 9306. Under 46 U.S.C. 9306, a “State or political
While it is well settled that States may not regulate in categories in which Congress intended the Coast Guard to be the sole source of a vessel's obligations, the Coast Guard recognizes the key role that State and local governments may have in making regulatory determinations. Additionally, for rules with implications and preemptive effect, Executive Order 13132 specifically directs agencies to consult with State and local governments during the rulemaking process. If you believe this rule has implications for federalism under Executive Order 13132, please contact the person listed in the
The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531-1538, requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100 million (adjusted for inflation) or more in any one year. Although this proposed rule would not result in such an expenditure, we do discuss the effects of this proposed rule elsewhere in this preamble.
This proposed rule would not cause a taking of private property or otherwise have taking implications under Executive Order 12630 (Governmental Actions and Interference with Constitutionally Protected Property Rights).
This proposed rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, (Civil Justice Reform), to minimize litigation, eliminate ambiguity, and reduce burden.
We have analyzed this proposed rule under Executive Order 13045 (Protection of Children from Environmental Health Risks and Safety Risks). This proposed rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children.
This proposed rule does not have tribal implications under Executive Order 13175 (Consultation and Coordination with Indian Tribal Governments), because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
We have analyzed this proposed rule under Executive Order 13211 (Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use). We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy.
The National Technology Transfer and Advancement Act, codified as a note to 15 U.S.C. 272, directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through OMB, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies.
This proposed rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards. If you disagree with our analysis or are aware of voluntary consensus standards that might apply, please send a comment explaining your disagreement or identifying appropriate standards to the docket using the method listed in the
We have analyzed this proposed rule under Department of Homeland Security Management Directive 023-01, Rev. 1 (DHS Directive 023-01), associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 1969 (42 U.S.C. 4321-4370f), and have made a preliminary determination that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. A preliminary Record of Environmental Consideration supporting this determination is available in the docket where indicated under the
This proposed rule meets the criteria for categorical exclusion (CATEX) under paragraphs A3 and L54 of Appendix A, Table 1 of DHS Instruction Manual 023-001-01, Rev. 1.
This proposed rule involves adjusting the pilotage rates to account for changes in district operating expenses, an increase in the number of pilots, and anticipated inflation. In addition, the Coast Guard is proposing how apprentice pilots will be compensated in future rulemakings. All of these proposed changes are consistent with the Coast Guard's maritime safety missions. We seek any comments or information that may lead to the discovery of a significant environmental impact from this proposed rule.
Administrative practice and procedure, Great Lakes; Navigation (water), Penalties, Reporting and recordkeeping requirements, Seamen.
Great Lakes, Navigation (water), Seamen.
For the reasons discussed in the preamble, the Coast Guard proposes to amend 46 CFR parts 401, and 404 as follows:
46 U.S.C. 2103, 2104(a), 6101, 7701, 8105, 9303, 9304; Department of Homeland Security Delegation No. 0170.1(II)(92.a), (92.d), (92.e), (92.f).
(a) * * *
(3) The number of pilots needed in each district is calculated by totaling the area results by district and rounding them up to a whole integer.* * *
(a) * * *
(1) The St. Lawrence River is $757;
(2) Lake Ontario is $428;
(3) Lake Erie is $566;
(4) The navigable waters from Southeast Shoal to Port Huron, MI is $577;
(5) Lakes Huron, Michigan, and Superior is $335; and
(6) The St. Marys River is $584.
46 U.S.C. 2103, 2104(a), 9303, 9304; Department of Homeland Security Delegation No. 0170.1(II)(92.a), (92.f).
(b) * * *
(6)
(b) In an interim year, the Director adjusts the previous year's individual target pilot compensation level by the Bureau of Labor Statistics' Employment Cost Index for the Transportation and Materials sector, or if that is unavailable, the Director adjusts the previous year's individual target pilot compensation level using a two-step process:
(1) First, the Director adjusts the previous year's individual target pilot by the difference between the previous year's Bureau of Labor Statistics' Employment Cost Index for the Transportation and Materials sector and the Federal Open Market Committee median economic projections for Personal Consumption Expenditures inflation value used to inflate the previous year's target pilot compensation.
(2) Second, the Director then adjusts that value by the Federal Open Market Committee median economic projections for Personal Consumption Expenditures inflation for the upcoming year.