Food and Nutrition Service
Forest Service
Economic Analysis Bureau
International Trade Administration
National Institute of Standards and Technology
National Oceanic and Atmospheric Administration
Federal Energy Regulatory Commission
Children and Families Administration
National Institutes of Health
Coast Guard
Fish and Wildlife Service
Antitrust Division
Drug Enforcement Administration
Employment and Training Administration
National Endowment for the Arts
Internal Revenue Service
United States Mint
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.
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U.S. Small Business Administration.
Direct final rule.
This direct final rule extends the HUBZone map freeze mandated by the National Defense Authorization Act for Fiscal Year 2018 (NDAA 2018) from December 31, 2021, to June 30, 2023. The NDAA 2018 requires that certain certified HUBZone small business concerns shall maintain their HUBZone status until the HUBZone map is updated in accordance with the results of the 2020 census. SBA previously issued a rule to implement this provision and “freeze” the HUBZone map until December 31, 2021. However, SBA has learned that the data necessary to update the HUBZone map to reflect the 2020 census results will not be available to SBA until December 2022. Thus, SBA must extend the HUBZone “freeze” through June 30, 2023, which will permit SBA to process the data, update the HUBZone map, and provide adequate notice to the HUBZone small business community. This amendment is necessary to avoid public confusion about when certain HUBZone designations will be expiring.
This rule is effective on June 21, 2021 without further action, unless significant adverse comment is received by June 4, 2021. If significant adverse comment is received, SBA will publish a timely withdrawal of the rule in the
You may submit comments, identified by RIN: 3245-AH66, by any of the following methods:
•
•
SBA will post all comments on
Laura Maas, HUBZone Program, 409 Third Street SW, Washington, DC 20416, 202-205-7341,
Section 1701(i) of the National Defense Authorization Act for Fiscal Year 2018 (NDAA 2018), Public Law 115-91, December 12, 2017, provides that certain certified HUBZone small business concerns shall maintain their HUBZone status until the HUBZone map is updated in accordance with the results of the 2020 census. To implement this provision, on November 26, 2019, SBA published a final rule “freezing” the HUBZone map until the map could be updated based on the results of the 2020 census. 84 FR 65222. In the preamble to the final rule, SBA explained:
In enacting section 1701(i), Congress intended for small businesses located in expiring redesignated areas to retain their HUBZone eligibility until the date on which SBA updates the HUBZone maps in accordance with the broader changes described in section 1701. In other words, firms that were certified HUBZone small business concerns as of the date of enactment of the NDAA 2018 (December 12, 2017), and that had principal offices located in redesignated areas set to expire prior to January 1, 2020, shall remain certified HUBZone small business concerns until SBA updates the HUBZone maps after the 2020 decennial census . . . SBA notes that to implement this change, SBA will `freeze' the HUBZone maps with respect to qualified census tracts, qualified non-metropolitan counties, and redesignated areas. As a result, for all redesignated areas in existence on December 12, 2017, the expiration of their HUBZone treatment has been extended until December 31, 2021. SBA selected this date because SBA estimates that the HUBZone maps will have been updated to incorporate the results of the 2020 census and to reflect the broad changes mandated by section 1701 by that time, and selecting a specific date provides stability to program participants. SBA did not receive any comments on the proposed definition of `HUBZone small business concern' and is implementing the changes as proposed. (84 FR 65222, 65226).
In the time since the publication of this final rule, SBA has learned that the datasets necessary for SBA to update the HUBZone map based on the results of the 2020 census will not be available to SBA until approximately December 2022. These datasets include the Department of Housing and Urban Development's designation of qualified census tracts. Consequently, SBA must extend the HUBZone map freeze beyond December 31, 2021. SBA has determined that the map freeze should be extended through June 30, 2023, which will permit SBA to process the data, update the HUBZone map, and provide adequate notice to the HUBZone small business community.
In order to extend the map freeze through June 30, 2023, SBA must amend the date set forth in the definitions of the terms
The Office of Management and Budget (OMB) has determined that this direct final rule does not constitute a significant regulatory action under Executive Order 12866 (Regulatory Planning and Review).
This action meets applicable standards set forth in sections 3(a) and
For the purposes of Executive Order 13132 (Federalism), SBA has determined that this direct final rule 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. Therefore, for the purpose of Executive Order 13132, SBA has determined that this direct final rule has no federalism implications warranting preparation of a federalism assessment. If you believe this direct final rule has implications for federalism, please call or email the person listed in the
SBA has determined that this direct final rule would 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 direct final rule has implications for Indian tribes, please call or email the person listed in the
Executive Order 13563 (Improving Regulation and Regulatory Review) reaffirms the principles of Executive Order 12866 while calling for improvements in the nation's regulatory system to promote predictability, to reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. The executive order directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. Executive Order 13563 also requires that regulations be based on the open exchange of information and perspectives among state and local officials, affected stakeholders in the private sector, and the public as a whole. SBA has developed this rule in a manner consistent with these requirements. While developing this rule, SBA responded to specific inquiries from government officials and the public regarding the extension of the HUBZone map freeze.
SBA has determined that this direct final rule does not impose additional reporting or recordkeeping requirements under the Paperwork Reduction Act, 44 U.S.C., Chapter 35.
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires administrative agencies to consider the effect of their actions on small entities, small non-profit enterprises, and small local governments. Pursuant to the RFA, when an agency issues a rulemaking, the agency must prepare a regulatory flexibility analysis which describes the impact of the rule on small entities. However, section 605 of the RFA allows an agency to certify a rule, in lieu of preparing an analysis, if the rulemaking is not expected to have a significant economic impact on a substantial number of small entities. Within the meaning of RFA, SBA certifies that this direct final rule will not have a significant economic impact on a substantial number of small entities because it will directly impact only certified HUBZone small business concerns with principal offices located in Redesignated Areas.
SBA is publishing this rule as a direct final rule because SBA views this as a non-controversial administrative action because it merely changes a date in SBA's regulations to reflect updated information about when the 2020 Census results will be incorporated into the Department of Housing and Urban Development's designation of qualified census tracts. This rule will be effective on the date shown in the
Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (codified at 5 U.S.C. 801-808), also known as the Congressional Review Act (CRA), generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. SBA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States. Additionally, the CRA provides that a major rule under the CRA cannot take effect until 60 days after it is published in the
Administrative practice and procedure, Government procurement, Small businesses.
Accordingly, for the reasons stated in the preamble, SBA amends 13 CFR part 126 as follows:
15 U.S.C. 632(a), 632(j), 632(p), 644 and 657a; Pub. L. 111-240, 24 Stat. 2504.
Internal Revenue Service (IRS), Treasury.
Correcting amendments.
This document contains corrections to final regulations (Treasury Decision 9938) that were published in the
William McNally at (202) 317-5600 or Patrick Sternal at (202) 317-5800 (not toll-free numbers).
The final regulations (TD 9938) that are the subject of this correction are issued under section 4960 of the Internal Revenue Code.
As published on January 19, 2021 (86 FR 6196) the final regulations (TD 9938) contain errors that need to be corrected.
Excise taxes, Foundations, Investments, Lobbying, Reporting and recordkeeping requirements.
Accordingly, 26 CFR part 53 is corrected by making the following correcting amendments:
26 U.S.C. 7805 * * *
(b) * * *
(3) [Reserved]
Coast Guard, DHS.
Notification of enforcement of regulation.
The Coast Guard will enforce a special local regulation for the Miami Beach Air and Sea Show from Friday May 28, 2021 to Sunday May 30, 2021, from 9 a.m. to 5 p.m. to provide for the safety of life on navigable waterways during this event. During the enforcement periods, the operator of any vessel in the regulated area must comply with directions from the Patrol Commander or any Official Patrol displaying a Coast Guard ensign.
The regulation in 33 CFR 100.725 will be enforced from Friday May 28, 2021, to Sunday May 30, 2021, from 9 a.m. to 5 p.m.
If you have questions about this notice of enforcement, call or email Petty Officer Robert M. Olivas, Sector Miami Waterways Management Division, U.S. Coast Guard; telephone 305-535-4317, email
The Coast Guard will enforce a special local regulation in 33 CFR 100.725 for the Miami Beach Air and Sea Show to provide for the safety of life on navigable waterways during the event. Our regulation for the Miami Beach Air and Sea Show, § 100.725, specifies the location of the regulated area which encompasses a portion of the Atlantic Ocean east of Miami Beach. During the enforcement periods, if you are the operator of a vessel in the regulated area you must comply with directions from the Patrol Commander or any Official Patrol displaying a Coast Guard ensign.
In addition to this notification of enforcement in the
Coast Guard, Department of Homeland Security (DHS).
Notice of enforcement of regulation.
The Coast Guard will enforce a safety zone for the Tacoma Freedom Fair Air Show on Commencement Bay from 2 p.m. on July 3 through 12:30 a.m. on July 4, 2021. This action is necessary to ensure the safety of the public from inherent dangers associated with the annual aerial displays. During the enforcement periods, no person or vessel may enter or transit this safety zone unless authorized by the Captain of the Port Puget Sound (COTP) or their designated representative.
The regulations in 33 CFR 165.1305 will be enforced each day from 2 p.m. on July 3 through 12:30 a.m. on July 4, 2021.
If you have questions about this notice of enforcement, call or email Lieutenant Peter J. McAndrew, Sector Puget Sound Waterways Management Division, U.S. Coast Guard; telephone 206-217-6045, email
The Coast Guard will enforce the safety zone in 33 CFR 165.1305 for the Tacoma Freedom Air Show on Commencement Bay from 2 p.m. on July 3 through 12:30 a.m. on July 4, 2021. This action is being taken to provide for the safety of life on navigable waterways during the aerial demonstrations above the waterway. The safety zone resembles a rectangle protruding from the shoreline along Ruston Way and will be marked by the event sponsor. The specific coordinates of the safety zone location are listed in 33 CFR 165.1305.
As specified in § 165.1305(c), during the enforcement period, no vessel may transit the regulated area without approval from the COTP or a COTP designated representative. The COTP may be assisted by other federal, state, and local law enforcement agencies in enforcing this regulation.
In addition to this notice of enforcement in the
Federal Communications Commission.
Final rule.
In this document the Commission adopts a limit of 10 applications filed by any party during the upcoming 2021 window for new noncommercial educational (NCE) FM radio stations. The application cap is designed to provide a meaningful opportunity for applicants to file for new NCE FM stations and expand NCE service while, at the same time, deter speculative applications and procedural delays.
Effective June 4, 2021.
James Bradshaw,
This is a summary of the Commission's document, FCC 21-43, adopted and released April 21, 2021. The full text of this document is available for download at the FCC's Electronic Document Management System (EDOCS) website at
1.
2.
3. In the
4.
5. The document acknowledges that REC's proposed five-application cap could theoretically curb the number of MX applications, and therefore, have the benefit of simplifying and expediting the processing of applications. The Commission finds, however, that this benefit is outweighed by the fact that a five-application limit will also curtail the expansion of new NCE FM service, and therefore, disserve the public interest. The last NCE FM filing window was over 13 years ago, and accordingly, there is pent-up demand for new NCE FM channels, which is unlikely to be satisfied with a lower five-application cap.
6. The document acknowledges EMF's novel proposal, but concludes that the logistical and administrative challenges of implementing EMF's two-tiered approach are simply too cumbersome and create the potential for extraordinary procedural delays and the ultimate delay of new NCE FM service to the public. The Commission finds that adopting EMF's approach is not administratively feasible at this time. The time required to further revise the Commission's rules and forms to adopt the EMF proposal would significantly delay the initiation of the filing window
7. The document recognizes EMF's claim that its proposal would increase NCE FM service to rural areas and allow parties to file more applications to upgrade FM translators serving rural areas to protected full-power stations. The Commission notes, however, that EMF's proposal, which was not endorsed by any of the commenters, also has the drawback of increasing the potential for more MX groups, created by the secondary application filings, larger MX groups, and complicated application chains, which could lead to processing delays, and ultimately, delay the initiation of new NCE FM service to the public.
8. The Commission finds that the proven 10-application cap strikes the best balance of its multiple objectives of providing a meaningful opportunity for applicants to file for new NCE FM stations and expanding service while, at the same time, deterring speculative applications and procedural delays. The 10-application cap, employed during the 2007 NCE FM filing window, has proven, in practice, to be very effective.
9. The document adopts the proposal that an applicant may file no more than a total of 10 applications in the 2021 NCE FM filing window. Under existing precedent, this means that a party to an application filed in the 2021 NCE FM filing window may hold attributable interests in no more than a total of 10 applications filed in the window. If it is determined that any party to an application has an attributable interest in more than 10 applications, the Media Bureau will retain the 10 applications that were filed first—based on the date of application receipt—and dismiss all other applications.
10.
11.
12.
13.
14.
15.
16.
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18. The Commission is directed under law to describe any alternatives it considered, including alternatives not explicitly listed above. The adopted 10-application limit is intended to benefit all small NCE entities seeking to establish a new NCE FM service on a local or regional basis by preventing mass filings of speculative applications. This limit should benefit all applicants by expediting the review and processing of applications filed during the window. Based on the record in this proceeding, the Commission concludes that a lower limit would not effectively meet the demand for new NCE FM channels, whereas a higher limit would impose
19.
20. This document does not contain new or modified information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. In addition, therefore, it does not contain any new or modified information collection burden for small business concerns with fewer than 25 employees, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198,
21. The Commission has determined, and the Administrator of the Office of Information and Regulatory Affairs, Office of Management and Budget concurs, that this rule is “non-major” under the Congressional Review Act, 5 U.S.C. 804(2). The Commission will send a copy of this document to Congress and the Government Accountability Office pursuant to 5 U.S.C. 801(a)(1)(A).
Radio, Reporting and recordkeeping requirements
For the reasons set forth in the preamble, the Federal Communications Commission amends part 73 of chapter 1 of title 47 of the Code of Federal Regulations as follows:
47 U.S.C. 154, 155, 301, 303, 307, 309, 310, 334, 336, 339.
(g)
Federal Communications Commission.
Final rule.
This document amends the FM Table of Allotments, of the Commission's rules, by reinstating certain vacant FM allotments. These FM allotments are considered vacant because of the cancellation of the associated authorizations and licenses, or the dismissal of long-form auction applications. Theses vacant FM allotments have previously undergone notice and comment rule making. Reinstatement of the vacant allotments is merely a ministerial action to effectuate licensing procedures. Therefore, we find for good cause that further notice and comment are unnecessary.
Effective May 5, 2021.
Rolanda F. Smith, Media Bureau, (202) 418-2700.
This is a synopsis of the Commission's
Radio, Radio broadcasting.
For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 73 as follows:
47 U.S.C. 154, 155, 301, 303, 307, 309, 310, 334, 336, 339.
The additions read as follows:
(b) * * *
Fish and Wildlife Service, Interior.
Notification of findings.
We, the U.S. Fish and Wildlife Service (Service), announce findings that three salamander species, the Samwel salamander (
The findings in this document were made on May 5, 2021.
Detailed descriptions of the bases and supporting information for these findings is available on the internet at
Jenny Ericson, Field Supervisor, U.S. Fish and Wildlife Service, Yreka Fish and Wildlife Office, 1829 S Oregon St., Yreka, CA 96097; telephone 530-841-3115. If you use a telecommunications device for the deaf (TDD), please call the Federal Relay Service at 800-877-8339.
Under section 4(b)(3)(B) of the Act (16 U.S.C. 1531
Section 4 of the Act (16 U.S.C. 1533) and the implementing regulations at part 424 of title 50 of the Code of Federal Regulations (50 CFR part 424) set forth procedures for adding species to, removing species from, or reclassifying species on the Lists of Endangered and Threatened Wildlife and Plants (Lists). The Act defines “species” as including any subspecies of fish or wildlife or plants, and any distinct population segment of any species of vertebrate fish or wildlife which interbreeds when mature (16 U.S.C. 1532(16). The Act defines “endangered species” as any species that is in danger of extinction throughout all or a significant portion of its range (16 U.S.C. 1532(6)), and “threatened species” as any species that is likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range (16 U.S.C. 1532(20)). Under section 4(a)(1) of the Act, a species may be determined to be an endangered species or a threatened species because of any of the following five factors:
(A) The present or threatened destruction, modification, or curtailment of its habitat or range;
(B) Overutilization for commercial, recreational, scientific, or educational purposes;
(C) Disease or predation;
(D) The inadequacy of existing regulatory mechanisms; or
(E) Other natural or manmade factors affecting its continued existence.
These factors represent broad categories of natural or human-caused actions or conditions that could have an effect on a species' continued existence. In evaluating these actions and conditions, we look for those that may have a negative effect on individuals of the species, as well as other actions or conditions that may ameliorate any negative effects or may have positive effects.
We use the term “threat” to refer in general to actions or conditions that are known to or are reasonably likely to negatively affect individuals of a species. The term “threat” includes actions or conditions that have a direct impact on individuals (direct impacts), as well as those that affect individuals through alteration of their habitat or required resources (stressors). The term “threat” may encompass—either together or separately—the source of the action or condition or the action or condition itself. However, the mere identification of any threat(s) does not necessarily mean that the species meets the statutory definition of an “endangered species” or a “threatened species.” In determining whether a species meets either definition, we must evaluate all identified threats by considering the expected response by the species, and the effects of the threats—in light of those actions and conditions that will ameliorate the threats—on an individual, population, and species level. We evaluate each threat and its expected effects on the species, then analyze the cumulative effect of all of the threats on the species as a whole. We also consider the cumulative effect of the threats in light of those actions and conditions that will have positive effects on the species, such as any existing regulatory mechanisms or conservation efforts. The Secretary determines whether the species meets the definition of an “endangered species” or a “threatened species” only after conducting this cumulative analysis and describing the
The Act does not define the term “foreseeable future,” which appears in the statutory definition of “threatened species.” Our implementing regulations at 50 CFR 424.11(d) set forth a framework for evaluating the foreseeable future on a case-by-case basis. The term “foreseeable future” extends only so far into the future as the Service can reasonably determine that both the future threats and the species' responses to those threats are likely. In other words, the foreseeable future is the period of time in which we can make reliable predictions. “Reliable” does not mean “certain”; it means sufficient to provide a reasonable degree of confidence in the prediction. Thus, a prediction is reliable if it is reasonable to depend on it when making decisions.
It is not always possible or necessary to define foreseeable future as a particular number of years. Analysis of the foreseeable future uses the best scientific and commercial data available and should consider the timeframes applicable to the relevant threats and to the species' likely responses to those threats in view of its life-history characteristics. Data that are typically relevant to assessing the species' biological response include species-specific factors such as lifespan, reproductive rates or productivity, certain behaviors, and other demographic factors.
In conducting our evaluation of the five factors provided in section 4(a)(1) of the Act to determine whether the Samwel salamander (
We developed a species status assessment (SSA) (Service 2021a, entire) for the Shasta Complex salamanders that contains more detailed biological information, species' needs information, and information on the threats facing the three species and their habitat now and into the future. We also developed a species assessment form (Service 2021b, entire) that contains our analysis of the listing factors and documents our determination that these species do not meet the definition of an endangered species or a threatened species. This supporting information can be found on the internet at
On July 11, 2012, we received a petition from the Center for Biological Diversity to list 53 species of reptiles and amphibians, including the Shasta salamander (
The Shasta salamander was first described in 1953, as a single species (Gorman and Camp 1953, entire). Since that time the scientific community has determined that the Shasta salamander is made up of three separate individual species (Bingham
From 1953 to 2018, the Shasta salamander was recognized as a single species (Gorman and Camp 1953, entire; Gorman 1964, entire; Rovito 2010, entire). However, a high degree of variation in genetic structure and genetic divergence was found after both mitochondrial and nuclear DNA studies of the species were completed (Wake
The three species are strictly terrestrial for their entire lives and must remain moist in order for individuals to absorb oxygen through their skin. Consequently, the three salamanders are surface active only when it is moist and cool. Historically, the three species were thought to occur only in and around limestone rock outcrops or within limestone caves. In the last 25 years, the three species have been found in a broader range of habitats away from limestone, including other types of rock outcrops, and even habitats with no rock outcrop associations, such as areas with thick vegetative litter (Lindstrand 2000, pp. 259-261; Nauman and Olson 2004, pp. 35-38; Lindstrand
The historical range of the three species is restricted to unglaciated and non-volcanized forested areas within the lower McCloud River, Pit River, Sacramento River, and Squaw Creek watersheds in Shasta County, California, with Samwel salamander extending slightly further west. The absence of glaciation and volcanic activity has maintained the limestone and other rock outcrops and subsurface characteristics of the area occupied by the three species. Although current survey efforts have identified the distribution of the three species within their respective ranges, the exact distribution and abundance of the three species within the larger range of suitable geologic habitat around and near Shasta Lake is unknown, as surveys in such areas are difficult to obtain given the physical restrictions of accessing the terrain and difficulty of detecting individuals. The current range of the three species is similar to their historical range with likely some loss due to the construction of Shasta Dam and subsequent inundation from Shasta Lake in the 1950s.
We have carefully assessed the best scientific and commercial information available regarding the past, present, and future threats to the Samwel salamander, Shasta salamander, and Wintu salamander, and we evaluated all relevant factors under the five listing factors, including any regulatory mechanisms and conservation measures addressing these threats and the cumulative impact of these threats. Our analysis identified the threats from habitat loss, degradation, and modification due to vegetation management and wildfire (Factor A) and the effects of increased temperature and reduced moisture from climate change (Factor E) as the main threats currently facing the three species. We also identified the additional threat of the proposed action of raising Shasta Dam and the subsequent removal and inundation of habitat for the three species (Factor E).
Existing conservation measures for the species and their habitats include State and Federal protections and conservation measures. The Shasta salamander was listed by the State of California as a threatened species under the California Endangered Species Act (CESA) before it was split into three separate species. The State has not officially recognized the split; however, the State listing provides measures to protect and conserve all three species. For example, any road construction or maintenance actions associated with timber harvest plans or other roadways managed by Caltrans, the counties, or other private landowners undergo environmental compliance review with the State under CESA and the California Environmental Quality Act, to ensure that impacts to species listed as threatened by the State are mitigated. The three species are also managed by the U.S. Forest Service and Bureau of Land Management as sensitive species and currently receive protection through conservation measures and best management practices under the Northwest Forest Plan's Survey and Manage program and Sensitive Species programs. These measures reduce or eliminate impacts to rock outcrops, limestone areas, and known salamander occurrence sites during road construction and maintenance activities as well as any vegetation management actions.
After review of the threats identified above and cumulative effects facing the species, as well as existing conservation measures, we conclude that habitat loss or disturbance from various threats (
In determining potential future threats facing the three species, we evaluated various climate change projections using downscaled data for interior northern California, which includes the ranges of the three species. Our timeframe for review looked out approximately 15, 30, and 50 years based on the threat information identified below and climate change data. This was our timeframe for our threats analysis of future conditions for the three species to determine if they were likely to become endangered within the foreseeable future (
In our analysis of potential future conditions, we analyzed the future conditions related to vegetation management, future wildfire conditions, and projected climate change effects such as variability of precipitation events and timing, increased temperatures, reduced snowpack, and prolonged drought. We also identified the additional threat of the proposed action of raising Shasta Dam and the subsequent removal and inundation of habitat for the three species.
We anticipate that vegetation management activities and wildfire will have a similar degree of impact into the future as they do currently, and that they will not result in impacts to the three species at a level such that they would meet the Act's definition of “threatened species.” Although the potential raising of Shasta Dam would affect individuals and inundate or remove additional habitat for the three species, the extent of the potential loss of known detection sites and habitat areas that can support individuals is very limited relative to the overall number of detection sites and remaining available suitable habitat in each species' range.
We expect that existing regulatory mechanisms and conservation measures will continue to help ameliorate or reduce impacts of threats to the species and will protect Shasta Complex salamanders and their habitats now and into the foreseeable future (50 years) such that their resiliency, representation, and redundancy will support their ability to sustain populations in the wild over time.
We also reviewed whether there were any significant portions of the three species' ranges that may meet the definition of endangered or threatened. In our analysis, we did not find any portion of the Samwel, Shasta, or Wintu salamanders' ranges where the threats identified above are currently acting on the three species at a biologically meaningful scale such that the species may be endangered, or are likely to act on the species into the future such that they may be threatened. Therefore, no portion of the three species' ranges can provide a basis for determining that any one of the three species is in danger of extinction now or likely to become so in the foreseeable future in a significant portion of its range.
Our review of the best available scientific and commercial information indicates that the Samwel salamander, Shasta salamander, and Wintu salamander do not meet the definition of an endangered species or a threatened species in accordance with sections 3(6) and 3(20) of the Act. Therefore, we find that listing the Samwel salamander, Shasta salamander, and Wintu salamander as endangered or threatened species under the Act is not warranted at this time. A detailed discussion of the
We request that you submit any new information concerning the taxonomy of, biology of, ecology of, status of, or threats to the Samwel salamander, Shasta salamander, or Wintu salamander to the Yreka Fish and Wildlife Office (see
A list of the references cited in this petition finding is available on the internet at
The primary authors of this document are the staff members of the Species Assessment Team, Ecological Services Program.
The authority for this action is section 4 of the Endangered Species Act of 1973, as amended (16 U.S.C. 1531
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Inseason modification of 2021 management measures.
NMFS announces seven inseason actions in the 2021 ocean salmon fisheries. These inseason actions modified the commercial salmon fisheries in the area from the U.S./Canada border to the U.S./Mexico border.
The effective dates for the inseason actions are set out in this document under the heading Inseason Actions.
Christina Iverson at 360-742-2506, Email:
In the 2020 annual management measures for ocean salmon fisheries (85 FR 27317, May 8, 2020), NMFS announced management measures for the commercial and recreational fisheries in the area from U.S./Canada border to the U.S./Mexico border, effective from 0001 hours Pacific Daylight Time (PDT), May 6, 2020, until the effective date of the 2021 management measures, as published in the
Management of the salmon fisheries is generally divided into two geographic areas: North of Cape Falcon (NOF) (U.S./Canada border to Cape Falcon, OR) and south of Cape Falcon (SOF) (Cape Falcon, OR, to the U.S./Mexico border). The actions described in this document affected both NOF and SOF fisheries as set out under the heading Inseason Actions.
The fisheries affected by the inseason actions described below were authorized in the final rule for 2020 annual management measures for ocean salmon fisheries (85 FR 27317, May 8, 2020). At its March 10, 2021 meeting, the Council's Salmon Technical Team (STT) presented updated stock abundance forecasts for salmon stocks managed under the Pacific Coast Salmon Fishery Management Plan (FMP). Based on the STT's report, SOF ocean salmon fisheries will be constrained in 2021 by the low abundance forecast for Klamath River fall-run Chinook salmon (KRFC), which was determined to be overfished under the Magnuson-Stevens Fishery Conservation and Management Act (MSA) in 2018. The forecast of potential spawner abundance for KRFC in 2021 is 42,098 natural area spawners; which is below the 2020 potential spawner forecast of 48,274, and is 31 percent of the average forecast of potential KRFC spawners over the previous 9 years (2012-2020). To reduce ocean salmon fishery impacts on KRFC, NMFS took 9 inseason actions concurrent with the March Council meeting to restrict some fisheries that were previously scheduled to open prior to May 16, 2021 (86 FR 16540, March 30, 2021). At its April 6-15, 2021 meeting, the Council finalized development of its recommended 2021 ocean salmon management measures.
NMFS took additional inseason actions, described below, to manage and conserve SOF ocean salmon fishery impacts on overfished KRFC by reducing impacts in spring fisheries through closure or shortened fisheries in areas that impact KRFC consistent with its forecasted abundance in 2021 and conservation goals.
The NMFS West Coast Regional Administrator (RA) considered the abundance forecasts for Chinook salmon stocks and the impacts of the SOF ocean salmon fisheries, as modeled by the STT, and determined that the inseason actions, described below, were necessary to meet management and conservation goals set preseason. These inseason actions modify boundaries under 50 CFR 660.409(b)(1)(v) and fishing seasons under 50 CFR 660.409(b)(1)(i).
Consultation under 50 CFR 660.409(b) on these inseason actions occurred on April 15, 2021. Representatives from NMFS, ODFW, CDFW, and Council staff participated in this consultation.
The fisheries affected by the inseason actions described below were authorized in the final rule for 2020 annual management measures for ocean salmon fisheries (85 FR 27317, May 8, 2020). At the April 6-15, 2021 meeting, the Council finalized development of its recommended 2021 ocean salmon management measures. This included final model runs of exploitation rates based on a Chinook salmon retention size for NOF commercial fisheries of 27 inches. The results as modeled did not indicate a change in the exploitation rates previously modeled with the 28 inch retention size, and would continue to meet conservation objectives.
NMFS is taking these inseason actions to provide consistency between fisheries authorized under the 2020 management measures and fisheries adopted at the April Council meeting for 2021, which NMFS is expected to enact by May 16, 2021.
The NMFS West Coast Regional Administrator (RA) considered the abundance forecasts for Chinook salmon stocks and the impacts of the NOF ocean salmon fisheries, as modeled, and determined that the inseason actions, described below, were necessary to meet management and conservation goals set preseason. These inseason actions modify fishing seasons under 50 CFR 660.409(b)(1)(i).
Consultation under 50 CFR 660.409(b) on these inseason actions occurred on April 20, 2021. Representatives from NMFS, ODFW, WDFW, and Council staff participated in this consultation.
All other restrictions and regulations remain in effect as announced for the 2020 ocean salmon fisheries (85 FR 27317, May 8, 2020) and as modified by previous inseason actions (85 FR 31707, May 27, 2020; 85 FR 55784, September 10, 2020; 86 FR 13824, March 11, 2021; and 86 FR 16540, March 30, 2021).
The RA determined that these inseason actions were warranted based on the best available information on Pacific salmon abundance forecasts and anticipated fishery effort. The states manage the fisheries in state waters adjacent to the areas of the U.S. exclusive economic zone consistent with these Federal actions. As provided by the inseason notice procedures at 50 CFR 660.411, actual notice of the described regulatory action was given, prior to the time the action was effective, by telephone hotline numbers 206-526-6667 and 800-662-9825, and by U.S. Coast Guard Notice to Mariners broadcasts on Channel 16 VHF-FM and 2182 kHz.
NMFS issues these actions pursuant to section 305(d) of the MSA. These actions are authorized by 50 CFR 660.409, which was issued pursuant to section 304(b), and is exempt from review under Executive Order 12866—Regulatory Planning and Review.
Pursuant to 5 U.S.C. 553(b)(B), there is good cause to waive prior notice and an opportunity for public comment on these actions, as notice and comment would be impracticable and contrary to the public interest. Prior notice and opportunity for public comment on these actions was impracticable because NMFS had insufficient time to provide for prior notice and the opportunity for public comment between the time Chinook salmon abundance, catch, and effort information was developed and fisheries impacts were calculated, and the time the fishery modifications had to be implemented in order to ensure that fisheries are managed based on the best available scientific information, ensuring that conservation objectives and limits for impacts to overfished salmon stocks are not exceeded. As previously noted, actual notice of the regulatory action was provided to fishers through telephone hotline and radio notification. This action complies with the requirements of the annual management measures for ocean salmon
There is good cause under 5 U.S.C. 553(d)(3) to waive the 30-day delay in effective date, as a delay in effectiveness of these actions would allow fishing at levels inconsistent with the goals of the FMP and the current management measures.
16 U.S.C. 1801
Office of Energy Efficiency and Renewable Energy, Department of Energy.
Request for information; extension of public comment period.
On April 16, 2021, the U.S. Department of Energy (“DOE”) published a request for information (“RFI”) pertaining to the test procedure for commercial and industrial pumps (“pumps”). The notice provided an opportunity for submitting written comments, data, and information by June 1, 2021. On April 19, 2021, DOE received a request from Price Pump Company (“Price Pump”), and on April 20, 2021, DOE received requests from Grundfos and the Hydraulic Institute (“HI”) to extend the public comment period by 90 days. DOE has reviewed these requests and is granting a 30-day extension of the public comment period to allow public comments to be submitted until July 1, 2021.
The comment period for the RFI published on April 16, 2021 (86 FR 20075) is extended. DOE will accept comments, data, and information regarding this RFI received no later than July 1, 2021.
Interested persons are encouraged to submit comments using the Federal eRulemaking Portal at
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No telefacsimilies (“faxes”) will be accepted.
Although DOE has routinely accepted public comment submissions through a variety of mechanisms, including postal mail and hand delivery/courier, the Department has found it necessary to make temporary modifications to the comment submission process in light of the ongoing Covid-19 pandemic. DOE is currently suspending receipt of public comments via postal mail and hand delivery/courier. If a commenter finds that this change poses an undue hardship, please contact Appliance Standards Program staff at (202) 586-1445 to discuss the need for alternative arrangements. Once the Covid-19 pandemic health emergency is resolved, DOE anticipates resuming all of its regular options for public comment submission, including postal mail and hand delivery/courier.
The docket web page can be found at:
Mr. Jeremy Dommu, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE-2J, 1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: (202) 586-9870. Email:
Mr. Michael Kido, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: (202) 586-8145. Email:
For further information on how to submit a comment or review other public comments and the docket contact the Appliance and Equipment Standards Program staff at (202) 287-1445 or by email:
On April 16, 2021, DOE published a RFI seeking data and information regarding whether amended test procedures would more accurately or fully comply with the requirement that the test procedure produces results that measure energy use during a representative average use cycle for pumps without being unduly burdensome to conduct, or that reduce testing burden. 86 FR 20075. Interested parties in the matter, Price Pump (on April 19, 2021), HI (on April 20, 2021), and Grundfos (on April 20, 2021), requested a 90-day extension of the public comment period for the RFI. (Price Pump, No. 10 at p. 1; HI, No. 11 at p. 1; Grundfos, No. 12, at p. 1).
DOE has reviewed the requests and is extending the comment period to allow additional time for interested parties to submit comments. As noted, the RFI was issued as part of the preliminary stages of rulemaking to consider amendments to the test procedure for pumps. If DOE determines that amended test procedures may be appropriate, additional notices will be published (
This document of the Department of Energy was signed on April 27, 2021, by Kelly Speakes-Backman, Principal Deputy Assistant Secretary and Acting Assistant Secretary for Energy Efficiency and Renewable Energy, 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
Office of the Secretary of Transportation (OST); U.S. Department of Transportation (DOT).
Regulatory review.
As directed by Executive Order 13990, “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis,” and Executive Order 13992, “Revocation of Certain Executive Orders Concerning Federal Regulation,” the U.S. Department of Transportation (Department or DOT) is currently reviewing its existing regulations and other agency actions to determine whether they are consistent with the policies and National objectives set forth in these executive orders. As part of this review, the Department invites the public to provide input on existing rules and other agency actions for the Department's consideration regarding consistency with the policies and objectives of these executive orders.
Comments should be received on or before June 4, 2021. Late-filed comments will be considered to the extent practicable.
You may file comments identified by the docket number DOT-OST-2021-0036 by any of the following methods:
Elizabeth Kohl, Attorney-Advisor, U.S. Department of Transportation, 1200 New Jersey Ave. SE, Washington, DC 20590, 202-366- 7523 (phone),
On January 20, 2021, the President issued Executive Order (E.O.) 13990, “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis” (86 FR 7037; Jan. 25, 2021), and E.O. 13992, “Revocation of Certain Executive Orders Concerning Federal Regulation” (86 FR 7049; Jan. 25, 2021).
In E.O. 13990, the President acknowledged the Nation's “abiding commitment to empower our workers and communities, promote and protect our public health and the environment; and conserve our national treasures and monuments, places that secure our national memory.” The President also set forth the policy of the Administration to “listen to the science; to improve public health and protect our environment; to ensure access to clean air and water; to limit exposure to dangerous chemicals and pesticides; to hold polluters accountable, including those who disproportionately harm communities of color and low-income communities; to reduce greenhouse gas emissions; to bolster resilience to the impacts of climate change; to restore and expand our national treasures and monuments; and to prioritize both environmental justice and the creation of the well-paying union jobs necessary to deliver on these goals.” To that end, the President directed the heads of all executive departments and agencies, including DOT, to immediately review and, as appropriate and consistent with applicable law, address the promulgation of Federal regulations and other actions that conflict with these important national objectives, as well as to immediately commence work to confront the climate crisis.” E.O. 13990 specifically directed the Secretary of Transportation to review and consider publishing for notice and comment a proposed rule suspending, revising, or rescinding: “The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule Part One: One National Program,” and “The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light Trucks.” In a Fact Sheet issued by the President simultaneously with E.O. 13990, the President also directed DOT to review “Hazardous Materials: Liquefied Natural Gas by Rail” (
In E.O. 13992, the President set forth the Administration's policy “to use available tools to confront the urgent challenges facing the Nation, including the coronavirus disease 2019 (COVID-19) pandemic, economic recovery, racial
To respond to the President's direction in E.O. 13990 and E.O. 13992, the Department seeks input from the public on existing regulations or other agency actions for the Department's consideration regarding consistency with the policies and objectives of these executive orders. In recognition of the fact that safety is the Department's highest priority, DOT also seeks comment on those existing regulations or other agency actions that the Department can address without compromising, or to further improve, safety. The Department welcomes public comment on any of its regulations and other agency actions to achieve the goals of E.O. 13990 and E.O. 13992.
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United States Mint, Department of the Treasury.
Notice of proposed rulemaking.
The United States Mint proposes to revise its regulations relating to the exchange of uncurrent, bent, partial, fused, and mixed coins. The proposed revisions will enhance the integrity of the redemption process for bent and partial United States coins and prevent fraud.
Send comments on or before July 6, 2021.
The United States Mint invites comments on all aspects of this proposed revision. You may send comments by any of the following methods:
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Apryl Whitaker, Senior Legal Counsel, Office of the Chief Counsel, United States Mint, at (202) 354-7938 or
The Treasury Regulations appearing at 31 CFR part 100, subpart C, are promulgated under 31 U.S.C. 5120, and relate to the exchange of uncurrent, bent, partial, fused, and mixed coins. The last amendment to 31 CFR part 100, subpart C, was on December 20, 2017. Since then, the United States Mint has identified additional portions of the regulations in need of revision to further enhance the integrity of the redemption process for bent and partial United States coins.
For many years, the United States Mint has redeemed bent and partial coins for full face value. The policy's objective was always to maintain public confidence in United States coinage and protect the integrity of the currency by removing coins that were unfit for circulation through general wear and tear. However, in recent years, the volume of coins submitted for possible redemption has greatly increased. Additionally, the condition of many coins submitted for examination precludes effective authentication. Rather than removing damaged coins from general domestic coin circulation, as was the intended purpose, many participants are seeking to submit large quantities of coins that, in some cases, have already been removed from general circulation (
The first category of proposed revisions would update and improve the efficiency and security of the redemption process for bent and partial coins. These revisions would provide notice that the United States Mint will establish weight and shipment limits for at a maximum of 1,000 lbs. of coins per month per participant. To implement improved testing and authentication methods for determining the genuineness of coins, the United States Mint will process all future redemptions at its Philadelphia location, which has new equipment and staff capable of performing detailed analyses of coins submitted for redemption. Previously, the United States Mint directed approved bulk redeemers to ship submissions directly to authorized recyclers. Large shipments sent to our recyclers created storage and material control issues during the time necessary for sampling and authentication before melting. A 1,000 lb. limit is necessary to ensure effective controls so that each submission may be carefully reviewed to ensure that only genuine U.S. coinage is redeemed. Under these limits, participants are not guaranteed the right to submit 1,000 lbs. per month. The United States Mint Philadelphia facility's capacity to process mutilated coins is limited by physical storage capacity, caseload complexity, submission size, and workload. Improved authentication procedures extend the time required for sampling and evaluation, and the amount of time needed to properly authenticate and then process each submission varies. Given the intent of the program, which is to allow for the removal of bent or partial coins from circulation (and not recycling recovered coin from scrap or trash), the proposed weight limit and scheduling restrictions propose a reasonable balance between a discretionary service offered to the public to redeem bent or partial coins received in good faith in commerce and protection against fraud.
The second category of proposed revisions would prohibit redemption if a submission contains coins imported from outside of the United States. The United States Mint has learned of fraud schemes where large amounts of counterfeit coins are manufactured overseas in an attempt to defraud the Government. A high percentage of counterfeits have been identified in imported coins intercepted by law enforcement, as well in as several large submissions to the Mutilated Coin Redemption Program. It is extremely difficult to trace and verify the chain of custody of coins imported from outside of the United States given that the majority of coins coming from abroad are represented to have been found in scrap that has been processed and sold multiple times over. Another consideration is that such coins have been effectively removed from the domestic coin circulation for which the redemption program aims to replace bent or partial coins. A prohibition on imported coins reduces the risk of fraud on the program. The proposed revisions also clarify that coins damaged in industrial processes (such as shredders, burnishers, incinerators, exposure to elevated temperatures), or coins that have been drilled, punctured, ground, polished, etched, or chemically treated by any industrial or recycling process, are not eligible for redemption. Such coins present a high risk of being counterfeit because they are difficult and time-consuming to evaluate and require increased resources to determine whether they are genuine. The regulations already require coins to be readily and clearly identifiable as to genuineness and denomination. The proposed revisions seek to provide examples from the United States Mint's experience of coins that by their nature are difficult to evaluate and cannot be “readily and clearly identifiable” as genuine.
The third category of proposed revisions clarifies the roles and responsibilities of the United States Mint and participants. For example, the proposed revisions clarify under what circumstances a participant will have the opportunity to retrieve a rejected shipment, and under what circumstances an entire submission will be turned over to law enforcement authorities. The purpose is to clearly put members of the public on notice of the potential consequences of submitting coins for examination that are prohibited from redemption. For example, if a submission contains counterfeit coins, the United States Mint will turn the entire submission over to law enforcement.
The Office of Management and Budget has determined that this proposed rule does not constitute a “significant regulatory action” under Executive Order 12866 or Executive Order 13771.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) (PRA), the United States Mint is seeking approval for a new information collection of data and reporting requirements applicable to participants seeking to redeem bent or partial coins. The proposed collection of information described in this notice of proposed rulemaking has been submitted to the Office of Management and Budget (OMB) for review in accordance with the PRA under OMB No. 1525-NEW.
Comments on the collection of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, or via email to
In accordance with 5 CFR 1320.8(d)(1), the Department of the Treasury is soliciting comments from members of the public concerning this collection of information to:
(1) Evaluate 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) Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information;
(3) Enhance the quality, utility, and clarity of the information to be collected; and
(4) Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated collection techniques or other forms of information technology.
The form for OMB No. 1525-NEW proposed in the information collection rulemaking is as follows:
United States Mint Mutilated Coin Redemption Program Instructions and Application Form, Mint Form MF 6006:
The burden of the information collections in this proposed rule is estimated as follows:
Under the PRA, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget.
It is hereby certified that the proposed revisions will not have a significant economic impact on a substantial number of small entities. First and foremost, the regulations do not directly regulate any entities. The redemption of uncurrent, bent, or partial coins is a discretionary service offered to the public; participation is voluntary.
Second, the number of entities tendering significant quantities of coins for redemption is small. A large number of entities redeeming coins are individuals. A wide variety of businesses, such as municipal entities, recyclers, coin processors, amusement parks, auto shops, and waste management companies, also have applied for coins to be redeemed in the past. With the proposed limit of 1,000 lbs. per month, that is, at most, equivalent to $240,000 a year. In Fiscal Years (FY) 2014, 2013, and 2012, the United States Mint paid only nine entities more than $240,000. In FY 2011, there were 14, and FY 2010 there were 12. With respect to the proposed ban on coins imported from outside the United States, about 20 applicants listed “overseas” as the source of their coins on their applications submitted from 2018 to 2019. With respect to the proposed ban on coins that have been through industrial processes, about 20 applicants listed “recycling” as the source of their coins on their applications submitted from 2018 to 2019.
Even if each entity qualified as a “small entity” within the meaning of 5 U.S.C. 605(b), based on a review of past applications as described above, the United States Mint does not believe that the proposed revisions are likely to have a significant economic impact. The proposed rule does not change the redemption rates. Moreover, the regulations already require coins to be readily and clearly identifiable as to genuineness and denomination. The proposed revisions seek to provide guidance from the United States Mint's experience of coins that by their nature are difficult to evaluate and cannot be “readily and clearly identifiable” as genuine. Notwithstanding this certification, the United States Mint invites comments on the impacts this rule may have on small entities.
Before the proposed revisions to the Treasury Regulations at 31 CFR part 100, subpart C, are adopted as final regulations, the United States Mint will consider any comments that are submitted to the bureau as prescribed in this preamble under the
Coins.
For the reasons set forth in the preamble, the United States Mint proposes to amend 31 CFR part 100 as follows:
31 U.S.C. 321.
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(2) All submissions for review shall include an estimate of the value of the coins and an explanation of how the submission came to be bent or partial. The submission should also contain the
(3) Participants will be required to provide information for how the participant came into custody of the bent or partial coins. The United States Mint reserves the right to request additional information.
(4) The United States Mint reserves the right to test samples from any submission to authenticate the genuineness of the coins. The size of the sample will be limited to the amount necessary for authentication. Testing may result in partial or complete destruction of the sample.
(5) The United States Mint reserves the right to conduct site visits to verify information provided to the United States Mint.
(6) Each participant is limited to submitting no more than 1,000 lbs. of coins per month.
(7) No redemption will be made when:
(i) A submission contains any counterfeit coins;
(ii) A submission demonstrates a pattern of systematic or intentional mutilation or demonstrates an attempt to defraud the United States;
(iii) A submission appears to be part of, or intended to further, any criminal activity;
(iv) A submission contains a material misrepresentation of facts;
(v) Material presented is not identifiable as United States coins;
(vi) A submission contains any contaminant that could render the coins unsuitable for coinage metal or contains hazardous materials;
(vii) A submission contains more than a nominal amount of uncurrent coins;
(viii) A submission contains coins imported from outside of the United States; or
(ix) A submission, contains coins damaged in industrial or recycling processes (such as shredders, burnishers, incinerators, exposure to elevated temperatures), or coins that have been drilled, punctured, ground, polished, etched, or chemically treated.
(8) If redemption is denied on the basis of paragraph (c)(7)(i), (ii), (iii), or (iv) of this section, the entire submission will be turned over to law enforcement authorities. Counterfeit coins and the entire submission may be subject to forfeiture under 18 U.S.C. 492.
(9) If redemption is denied on the basis of paragraph (c)(7)(v), (vi), (vii), (viii), or (ix) of this section, the participant will be notified to retrieve the entire submission, at the participant's sole expense, within 30 days. If the submission is not retrieved in a timely manner, the entire submission will be treated as voluntarily abandoned property, pursuant to 41 CFR 102-41.80, and will be retained or disposed of by the United States Mint.
(10) The Director of the United States Mint, or designee, shall have final authority with respect to all aspects of redemptions of bent or partial coin submissions.
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(ii) The United States Mint will redeem $1 coins inscribed with a year after 1978 at the rate set forth at paragraph (d)(1)(iv) of this section unless such $1 coins are presented unmixed from $1 coins inscribed with a year before 1979. The United States Mint will redeem unmixed $1 coins inscribed with a year after 1978 at a rate of $56.00 per pound.
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(1) Bent and partial coins submitted in quantities less than or equal to a threshold established annually by the United States Mint will be redeemed only at the United States Mint at Philadelphia, P.O. Box 400, Philadelphia, PA 19105.
(2) Bent and partial coins submitted in quantities greater than a threshold established annually should be scheduled with the United States Mint, and the participant may be required to send the shipment directly to the authorized recycler(s) of the United States Mint.
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(a) Additional information and procedures about the United States Mint's redemption of bent or partial coins can be found on the United States Mint's website.
(b) Criminal penalties connected with the defacement or mutilation of U.S. coins are provided in 18 U.S.C. 331.
(c) Notwithstanding any other provision of this subpart, the Director of the United States Mint may provide information pertaining to any bent or partial coin submissions, or turn over the entire submission, to law enforcement officials or other third parties for purposes of investigating related criminal activity or for purposes of seeking a civil judgment.
(d) Whoever intentionally files a false claim seeking reimbursement for uncurrent, bent, or partial coins may be held criminally liable under a number of statutes including 18 U.S.C. 287 and 18 U.S.C. 1341 and may be held civilly liable under 31 U.S.C. 3729,
Coast Guard, DHS.
Notice of proposed rulemaking.
The Coast Guard proposes to authorize the Canadian National Railroad Bridge, mile 85.0, across the Rainy River to operate remotely. The
Comments and related material must reach the Coast Guard on or before July 6, 2021.
You may submit comments identified by docket number USCG-2020-0033 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
Rainy River and Rainy Lake serve as the border between the United States of America and Canada. This bridge is a single leaf, bascule type railroad bridge that provides a horizontal clearance of 125 feet. The water level on Rainy Lake and under the bridge is controlled by a hydro-electric dam facility at International Falls, Minnesota, thus charted datum is based on the water level surface of Rainy Lake when the gauge at Fort Frances, Canada reads 1107.0 feet resulting in a variable vertical clearance of 6 to 10 feet in the closed position. The railroad bridge carries significant train traffic across the international border. Rainer, Minnesota is a customs port-of-entry.
On April 8, 2020, we published a Temporary Deviation with request for comments in FR 2020-06822 and we did not receive any comments.
We developed this proposed rule after considering numerous statutes and Executive Orders related to rulemaking. Below we summarize our analyses 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 proposed rule intends to allow the bridge to be operated remotely. All other conditions in 33 CFR 117.664 shall remain.
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, 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
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.
The draw of the Canadian National Bridge, mile 85.0, at Rainer, may operate remotely, and shall open on signal; except that, from October 16 to April 30, the draw shall open on signal if at least 12-hours advance notice is provided. The commercial phone number to provide advance notice shall be posted on the bridge so that it is plainly visible to vessel operators approaching the up or downstream side of the bridge. The owners of the bridge shall provide and keep in good legible condition two board gauges painted white with black figures to indicate the vertical clearance under the closed draw at all water levels. The gauges shall be so placed on the bridge that they are plainly visible to operators of vessels approaching the bridge either up or downstream. The bridge shall operate and maintain a VHF-FM Marine Radio.
Fish and Wildlife Service, Interior.
Proposed rule.
We, the U.S. Fish and Wildlife Service (Service or USFWS), propose to remove the San Clemente Bell's sparrow (
We will accept comments received or postmarked on or before July 6, 2021. We must receive requests for public hearings, electronically, using the Federal eRulemaking Portal (see
You may submit comments by one of the following methods:
(1)
(2)
We request that you send comments only by the methods described above. We will post all comments on
Scott Sobiech, Field Supervisor, Carlsbad Fish and Wildlife Office, 2177 Salk Avenue, Suite 250, Carlsbad, CA 92008; telephone 760-431-9440. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Relay Service at 800-877-8339.
These species occur only on San Clemente Island, one of the Channel Islands off the southern coast of California. The entire island is owned and managed by the U.S. Department of the Navy (Navy). Historically, nonnative herbivores (goats, sheep, pigs, cattle, mule deer) severely degraded habitat on San Clemente Island, leading to the decline of endemic species. Since removal of these nonnative herbivores, the plant communities on San Clemente Island have been recovering. Removal of nonnative herbivores, along with restoration and management actions by the Navy, have led to the recovery of these five species to the point that they no longer require protections under the Act.
We intend that any final action resulting from this proposed rule will be based on the best scientific and commercial data available and be as accurate and as effective as possible. Therefore, we request comments or information from other concerned governmental agencies, Native American tribes, the scientific community, industry, or any other interested parties concerning this proposed rule.
We particularly seek comments concerning:
(1) Reasons we should or should not remove (delist) any of these species from the Lists.
(2) New information on the historical and current status, genetics, range, distribution, and population size of these species.
(3) New information on the known and potential threats to the species, including fire and changes in precipitation.
(4) New information regarding the life history, ecology, and habitat use of the species.
(5) The extent of protection and management that would be provided by the Navy to the five species if the protections of the Act (16 U.S.C. 1531
(6) Current or planned activities within the geographic range of these species that may have adverse or beneficial impacts on the species.
(7) Any planned change in military training, infrastructure needs, or land use on San Clemente Island that may affect the species.
(8) Considerations for post-delisting monitoring, including monitoring protocols and length of time monitoring is needed, as well as triggers for reevaluation.
Please include sufficient information with your submission (such as scientific journal articles or other publications) to allow us to verify any scientific or commercial information you include.
Please note that submissions merely stating support for, or opposition to, the action under consideration without providing supporting information, although noted, do not provide substantial information necessary to support a determination. Section 4(b)(1)(A) of the Act directs that determinations as to whether any species is an endangered species or a threatened species must be made “solely on the basis of the best scientific and commercial data available.”
Because we will consider all comments and information we receive during the comment period, our final determinations may differ from this proposal. Based on the new information we receive (and any comments on that new information), we may conclude that one or more of the species should remain listed as endangered or threatened instead of being removed from the Lists, we may conclude that one or more of the species should be reclassified from an endangered species to a threatened species, or we may conclude that one or more of the species should be reclassified from a threatened to an endangered species.
You may submit your comments and materials concerning this proposed rule by one of the methods listed in
If you submit information via
Comments and materials we receive, as well as supporting documentation we used in preparing this proposed rule, will be available for public inspection on
Section 4(b)(5) of the Act provides for a public hearing on this proposal, if requested. Requests must be received by the date specified in
Species status assessment (SSA) reports for the five species were prepared by Texas A&M Natural Resources Institute, in cooperation with the Service's San Clemente Island SSA team and the Navy. The SSA reports represent a compilation of the best scientific and commercial data available concerning the status of these species, including the impacts of past, present, and future factors (both negative and beneficial) affecting the species.
In accordance with our July 1, 1994, peer review policy (59 FR 34270; July 1, 1994), our August 22, 2016, Director's Memo on the Peer Review Process, and the Office of Management and Budget's December 16, 2004, Final Information Quality Bulletin for Peer Review (revised June 2012), we solicited independent scientific reviews of the information contained in each of the SSA reports. Table 1, below, indicates the number of independent peer reviewers we sent each SSA report to and the number of responses we received. You may view the peer review responses we received at
All five species were originally listed under the Act on August 11, 1977 (42 FR 40682). The four plant species were listed as endangered species, while the sparrow was listed as a threatened species. No critical habitat has been designated for any of the five species.
The taxonomies of the species have undergone revisions since the species were first listed, so that some are now referred to by different scientific and common names. Table 2, below, indicates the scientific and common names under which the species were originally listed as well as their currently accepted scientific names. These taxonomic and nomenclatural revisions have not altered the definition, distribution, or range of any of these species from what it was at the time of listing. In the remainder of this proposed rule, we will refer to the species by their currently accepted common names.
The Recovery Plan for Endangered and Threatened Species of the California Channel Island, which included the five species that are the subject of this proposed rule, was finalized in 1984 (USFWS 1984, pp. 1-165). Five-year status reviews were completed for each of these taxa and recommended reclassification from endangered to threatened species for all four of the plant taxa (USFWS 2007a, USFWS 2007b, USFWS 2007c, USFWS 2008).
On May 18, 2010, we received a petition from the Pacific Legal Foundation requesting that the Service delist or downlist six species, including San Clemente Island paintbrush, San Clemente Island lotus, and San Clemente Island bush-mallow. The subsequent status reviews resulted in downlisting the San Clemente Island paintbrush and San Clemente Island lotus from endangered to threatened (78 FR 45406; July 26, 2013) as indicated below in Table 2. San Clemente Island bush-mallow was not reclassified at the time because of uncertainty regarding the status of several occurrences that made up a large proportion of its range (77 FR 29078; May 16, 2012).
We published notices of initiation of periodic status reviews for the five species required under section 4(c)(2) of the Act in 2019 and 2020 (84 FR 36116, July 26, 2019; 85 FR 4692, January 27, 2020); this document serves as completion of those status reviews. The referenced documents and additional details can be found using the Service's Environmental Conservation Online System (ECOS):
The five species addressed in this proposed rule are endemic to San Clemente Island, the southernmost island of the California Channel Islands, located 64 miles (mi) (103 kilometers (km)) west of San Diego, California. The island is approximately 56 square mi (145 square km, 36,073 acres (ac), or 14,598 hectares (ha)) (Junak and Wilken 1998, p. 2) and is long and narrow: 21 mi (34 km) long by 1.5 mi (2.4 km) wide at the north end, and 4 mi (6.4 km) wide at the south end (USFWS 1984, p. 5). The island consists of a relatively broad open plateau that slopes gently to the west. Conspicuous marine terraces line the western slope of the island, while steep escarpments drop precipitously to the rocky coastline on the eastern side along the southern 75 percent of its coastline. Many canyons, some of which are up to 500 feet (ft) (152 meters (m)) deep, dissect the southern part of the island. Mount Thirst, the highest point on the island, rises to approximately 1,965 ft (599 m) (Navy 2013a, p. 1.4).
San Clemente Island is located in a Mediterranean climatic regime with a significant maritime influence. Average monthly temperatures range from 58 degrees Fahrenheit (°F) (14 degrees Celsius (°C)) to 66 °F (19 °C), with a monthly maximum temperature of 72 °F (27 °C) in August and a monthly minimum of 51 °F (10 °C) in December (Navy 2013a, p. 3.11). Average monthly relative humidity varies from 54 to 86 percent depending on location and time of year, and the island experiences dramatic fluctuations in annual rainfall, averaging 6.6 inches (in) (16.8 centimeters (cm)) (Navy 2013a, pp. 3.11, 3.13). Precipitation is received mainly from November through April, with little from May through October. In addition to precipitation, fog drip during the typical dry season is a vital source of moisture to the San Clemente Island (SCI) ecosystem (Navy 2013a, pp. 3.9, 3.13). The central plateau is characterized mainly by native and nonnative grassland communities. Marine terraces on the western side of the island support maritime desert scrub communities, and the steep eastern escarpment supports grassland and sagebrush communities. Deep canyons that incise both the east and the west sides of the island support limited canyon woodland communities.
A thorough review of the taxonomy, life history, and ecology of the San Clemente Bell's sparrow is presented in the SSA report (USFWS 2020a). The San Clemente Bell's sparrow (
The San Clemente (SC) Bell's sparrow has been close to extinction, with a low of 38 individual adults reported in 1984 (Hyde 1985, p. 30). The population was estimated to be 316 in 1981, 38 in 1984, and 294 in 1997 (Beaudry
At listing, the SC Bell's sparrow was primarily distributed within the lower marine terraces along the northwestern portion of SCI, in the maritime desert scrub plant communities, mostly dominated by boxthorn (Willey 1997, p. 219). However, the SC Bell's sparrow has more recently been found widely across the island, bringing recent estimates of potential available habitat from approximately 4,196 ha (10,369
Boxthorn habitat is still considered high-quality habitat, although moderate to high population densities are also found in sagebrush and shrub habitat near canyons and along the steep eastern slope. SC Bell's sparrows are present in significantly lower densities in mixed shrub, cactus, and grassland (grass/herb) habitats along the central plateau (Meiman
SC Bell's sparrows inhabit most plant communities on SCI, including Maritime Desert Scrub in
The SC Bell's sparrow is a ground gleaner and eats available insects and spiders, and also seeds taken from the ground and low vegetation. During the winter, SC Bell's sparrows feed on prickly pear and cholla cactus fruit and on moths (Hyde 1985, p. 24). The initiation of breeding activity and the length of the nesting season appear to be tied to precipitation patterns (Kaiser
Amounts and distribution of rainfall affect the timing and extent of vegetation growth and flowering. During drought years, SC Bell's sparrows may not reproduce at all or a subset of the population may suppress breeding (Kaiser
A thorough review of the taxonomy, life history, and ecology of the San Clemente Island bush-mallow is presented in the SSA report (USFWS 2020b). San Clemente Island bush-mallow (
The historical range and distribution of SCI bush-mallow on SCI is unknown because botanical studies were not conducted on the island prior to the introduction of ungulates beginning in the 1800s (Kellogg and Kellogg 1994, p. 4). At the time of listing, one site at Lemon Tank Canyon on the eastern side of the island and two additional locations of two to three small plants in China Canyon on the southern end of the island were known (42 FR 40682, August 11, 1977, p. 40683; USFWS 1984, p. 48). Since listing, new locations of SCI bush-mallow have been discovered among the generally southwesterly facing coastal terraces and their associated escarpments in the southern and middle regions of SCI (Junak and Wilken 1998, pp. 1-416, Geographic Information System (GIS) data; Junak 2006, pp. 1-176, GIS data; Tierra Data Inc. 2008, pp. 1-24, appendices and GIS data; San Diego State University Soil Ecology and Restoration Group (SERG) 2010a and 2010b, GIS data). Most of the known locations occur throughout the southwestern region of the island. The main southern distribution of SCI bush-mallow is disconnected from the Lemon Tank Canyon locality by approximately 4 mi (6.4 km). Many of these new locations have been documented since feral mammals were removed, suggesting that plants may have reemerged from underground stems that survived grazing by feral herbivores (Junak 2006, pers. comm. in 77 FR 29078, May 16, 2012, p. 29086), although experts doubt that rhizomes would be able to store enough energy to sprout after a long period of dormancy without sending up shoots in the interim (Munson 2019, pers. comm.; Rebman 2019, pers. comm.; Morse 2020, pers. comm.).
The current abundance and distribution of SCI bush-mallow is estimated to total approximately 5,611 individuals at 222 locations occupying 15 watersheds (see Figure 2, below) (USFWS 2020b, pp. 29-31). Because distinguishing genetically distinct individuals among groups of stems is difficult, counts or estimates of individuals have most often been used collectively to refer to both genetically distinct individuals (genets) and clones (ramets) (USFWS 2020b, p. 26). In the current estimate, individuals refer to individual plants and not necessarily to genetically distinct individuals. Because of access restrictions due to risk of unexploded ordnances, occurrences within areas subject to bombardment have not been assessed recently enough to be included in this estimate, but are likely still extant.
SCI bush-mallow occurs in a variety of habitats on SCI. Historically, it was observed on rocky canyon walls and ridges, presumably because foraging goats did not browse those areas. Since removal of nonnative feral ungulates, SCI bush-mallow has been found at the base of escarpments between coastal terraces on the western side of the island within maritime cactus scrub (Navy 2002, pp. D-19, D-20), and it can also occur on low canyon benches and in rocky grasslands. Moisture that collects in rock crevices and at the base of canyon walls and escarpments may provide favorable conditions for this species (Junak 2006, pers. comm. in 77 FR 29078, May 16, 2012, p. 29094). Based on its habitat range on the island and the ease of cultivating the plant, SCI bush-mallow appears to tolerate a broad
SCI bush-mallow flowers in the spring and summer, typically from March to August (Kearney 1951, p. 115; California Native Plant Society 2011). It is generally thought that SCI bush-mallow is pollinated by insects; potential pollinators incidentally observed in the wild include wasps and butterflies (USFWS 2007, p. 9). Although no specific pollinator for this species is known, the shape of the flowers suggest that it is not limited to a specific pollinator and instead can be pollinated by different pollinators (Muller and Junak 2011, p. 33).
While each plant is capable of making large numbers of seeds, recorded seed production in natural occurrences of SCI bush-mallow has been very low (Helenurm 1997, p. 51; Helenurm 1999, p. 39; Junak and Wilken 1998, p. 291). Germination rates in seed trials are also low, only 4 to 35 percent (Evans and Bohn 1987, p. 538; Junak and Wilken 1998, p. 291). Hypotheses for low seed set and germination rates include low pollinator visitation rates, reduced pollinator diversity, partial self-incompatibility (
SCI bush-mallow can reproduce vegetatively, or clonally, by sprouting from rhizomes (Evans and Bohn 1987, p. 538), as well as sexually by seeds, although sexual recruitment is likely low. The ability to spread vegetatively by underground rhizomes results in patches of spatially separate but genetically identical individuals (Evans and Bohn 1987, p. 538). Occurrences are likely a mix of both genetically unique individuals (genets) and clonal individuals (ramets) that are connected underground. Although difficult to discern between ramets and genets in the field, most groups of plants are comprised of ramets from an unknown number of genets, consistent with other plant species exhibiting strong clonal growth. Although growth and spread of the population has been thought to be mostly clonal (Muller and Junak 2011, p. 50), seedlings have on occasion been identified in the field by the presence of cotyledons (embryonic leaf in seed-bearing plants) (Munson 2019, pers. comm.). While the distribution of SCI bush-mallow is much greater than was known at the time of listing, difficulty and confusion with discerning between ramets and genets and low reproductive output create uncertainty about whether it is reproducing sexually or only clonally.
Two different studies of population genetics have been conducted (Helenurm 1997; Helenurm 1999). These genetic assessments along with field observations indicate that overall genetic diversity is low, but there is some genetic diversity within and among patches of SCI bush-mallow (
This species may be subject to drought stress to some extent (from 25 to 89 percent of individuals sampled), which may reduce flowering (Muller and Junak 2011, p. 58). This species may be drought deciduous as is a closely related species of bush-mallow,
Although there is no information regarding the fire tolerance of SCI bush-mallow, other species in the same genus are fire-tolerant and able to adapt (Rundel 1982, p. 86). Seed germination in other species in the genus is stimulated by fire, and there is evidence that fire may also have a positive effect on SCI bush-mallow. Because of its ability to resprout from rhizomes and the adaptation of other species in the genus to fire, it is thought that SCI bush-mallow is likely resistant to fire and that its seeds may even respond positively to fire (USFWS 2008b, p. 77).
A thorough review of the taxonomy, life history, and ecology of the San Clemente Island paintbrush is presented in the SSA report (USFWS 2020e).
San Clemente Island paintbrush (
SCI paintbrush is thought to have been relatively common on SCI in the 1930s, and subsequently declined as a result of unchecked grazing by introduced feral herbivores (Helenurm
Over time, the range of SCI paintbrush has expanded, and it now occupies a broad range of habitats across the island. SCI paintbrush is often associated with two major vegetation types: Canyon woodland (which encompasses approximately 696 ac (282 ha)), and maritime desert scrub (which encompasses approximately 6,228 ac (2,520 ha)). Aspect varies widely, but generally plants are found on flats and steep rocky slopes from 0-70 degrees (CNDDB 2019; Navy 2017, pp. 11-24; Vanderplank
All members of the genus
SCI paintbrush typically flowers between February and May, producing yellow bisexual flowers (Chuang and Heckard 1993, pp. 1016-1024; Navy 2013a, pp. 3-203). SCI paintbrush is likely self-incompatible (unable to produce viable seed through self-fertilization), as observed in other species of the genus (Carpenter 1983, p. 218; Junak and Wilken 1998, p. 84). Results of a population genetic study were consistent with an outcrossing breeding system (Helenurm
Although the lifespan of SCI paintbrush is unknown, its larger stature and woodier habit (general appearance or growth form) suggest it may be longer lived, which would be consistent with an estimated lifespan of 5-15 years based on observations made during repeat visits to occupied sites (Munson 2019, pers. comm.). Based on life-history, the persistence of interbreeding groups of plants may depend upon frequent production of seed (Dunwidde
A thorough review of the taxonomy, life history, and ecology of the San Clemente Island lotus is presented in the SSA report (USFWS 2020d).
San Clemente Island lotus (
SCI lotus is typically less than 4 ft (1.2 m) tall with slender erect green branches (Munz 1974, pp. 449-450; USFWS 1984, p. 59; Allan 1999, p. 82). Each leaf has three to five leaflets, each approximately 0.2 to 0.3 in (5 to 9 millimeters (mm)) long (USFWS 1984, p. 59; Allan 1999, p. 82). SCI lotus has small yellow flowers that are bisexual and arranged in one to five flowered clusters on stalks that arise from axils between the stem and leaf of terminal shoots (Junak and Wilken 1998, p. 256). Pistils are initially yellow, turning orange then red as the fruit matures (USFWS 1984, p. 59).
The 1977 listing rule mentioned that SCI lotus occurred at Wilson Cove on the north end of the island, but no other details were available (42 FR 40682, August 11, 1977, p. 40683). In the 1984 recovery plan, SCI lotus was considered to be restricted to six “populations” associated with rocky areas, with the largest number of plants growing in the Wilson Cove area (USFWS 1984, p. 59). Only a few herbarium specimens of SCI lotus exist, making historical distribution and condition difficult to assess. Based on herbarium records, California Natural Diversity Database (CNDDB) records, and the recovery plan, the historical range includes occurrences in the northern part of the island (Wilson Cove) down to the southern point (Pyramid Head). Since the final removal of all feral herbivores by 1992, the distribution of this taxon has steadily increased (77 FR 29078, May 16, 2012, p. 29110). By 1997, roughly 50 percent of documented occurrences of these plants were found in the vicinity of Wilson Cove and by 2004, 75 percent of the distribution of this taxon was found beyond this area and extended to the southern-most part of the island (USFWS 2007, pp. 4-5).
The most recent survey data show the distribution of SCI lotus spans the entire length of the island from Wilson Cove to the southern tip east of Pyramid Cove, a distance of approximately 19 mi (31 km) (Junak and Wilken 1998, p. 261; Junak 2006, Map A-C; Vanderplank
SCI lotus establishes on north- and east-facing slopes and ridges at elevations ranging from 25 to 1,400 ft (7.6 to 463 m) and is found in canyon bottoms or along ridgelines (Junak 2006, p. 125). It appears to preferentially establish and grow somewhat colonially around rock outcrops and among large boulders situated in grassland areas and along the interface between grassland and maritime sage scrub (Allan 1999, p. 84; Navy 2002, p. D-9); SCI lotus also readily occupies disturbed sites and locations close to buildings, roads, and pipelines (Navy 2013b, p. 3-201). It occurs on well-drained soils where adequate soil moisture is available to the plant (Junak and Wilken 1998, p. 256; Navy 2002, p. D-9) and occurs mostly on clay to rocky soils (Vanderplank et al. 2019, p. 7). SCI lotus
SCI lotus is short-lived, with a reported lifespan of less than 5 years (USFWS 2008, p. 113); however, individuals near Wilson Cove have been observed to live longer than 6 years (Emily Howe 2017, pers. comm. in Vanderplank
SCI lotus flowers between February and August, peaking from March to May (Junak and Wilken 1998, p. 256; USFWS 2008, p. 113), with halictid bees (a family of small solitary bees that typically nest in the ground), bumblebees, and small beetles observed foraging on the flowers (Junak and Wilken 1998, p. 257; Allan 1999, pp. 64, 85). A sister taxon (
On average, a single SCI lotus individual can produce approximately 36 to 64 flowering shoots, 118 to 144 flowers per shoot, and 4 to 6 seeds per fruit (Junak and Wilken 1998, p. 257). This information suggests that, under ideal conditions, an individual can produce a high volume of seeds (16,000 or more). Like most legumes, SCI lotus seeds require scarification (weakening or opening the seed coat to promote germination) or gradual seed coat degradation to germinate (Wall 2011, pers. comm. in 77 FR 29078, May 16, 2012, p. 29095). SCI lotus is thought to have high long-term survival in the seed bank. Germination rates for seed stored for 6 years only dropped from 80 percent to 76 percent; one seed lot displayed 65 percent germination after more than 30 years in storage (Cheryl Birker 2017, pers. comm. in Vanderplank
The majority (67 percent) of SCI lotus's genetic variability is found among, rather than within, occurrences (Allan 1999, p. 61). However, more recent genetic work (McGlauglin
The fire tolerance of SCI lotus is not well understood. Based on SCI lotus's growth characteristics and occurrence increases in areas affected by fire, and the fire adaptations of related taxa, SCI lotus may be resilient to at least occasional fire. Because it is short-lived and likely relies on its seed bank for recruitment, fire may benefit this taxon by opening up areas of bare ground for seedling germination (USFWS 2007, p. 7). However, frequent fires could exceed its tolerance of fire severity and frequency and exhaust the seed bank in repeatedly burned areas (USFWS 2007, p. 11; USFWS 2020d, pp. 20-21).
A thorough review of the taxonomy, life history, and ecology of the San Clemente Island larkspur is presented in the SSA report (USFWS 2020c). The San Clemente Island larkspur (
SCI larkspur is one of two subspecies of
The historical range and distribution of SCI larkspur on SCI is unknown because botanical studies were not completed before the plant's decline. The final listing rule (42 FR 40682, August 11, 1977) did not provide specific information regarding the SCI larkspur's distribution and abundance. The 1984 recovery plan noted that the subspecies occurred in 6 or 7 locations (USFWS 1984, pp. 17, 35). The true range and distribution of SCI larkspur on SCI is somewhat unknown due to the ambiguity of the subspecies classifications, particularly in the central areas of the island where SCI larkspur and Thorne's larkspur co-occur, as do plants exhibiting characteristics intermediate between the two subspecies. While various delineations have been used to classify mixed occurrences (USFWS 2020c, p. 22), SCI larkspur is generally found mid-island on gentle slopes on the eastern side of the island, although the species has also been detected at higher elevations on the west side of the island (see Figure 5, below). Since grazing pressure was removed on SCI, both subspecies of
SCI larkspur was once associated with two main vegetation types: California Broadleaf woodlands and forests (which encompasses approximately 43.5 ac (17 ha), or 0.12 percent, of the island), and California perennial grassland (which encompasses approximately 2,213.5 ac (895 ha), or 6.3 percent, of the island) (Navy 2013). The species is now found in a broad range of habitats within the same general vegetation types and is widespread across the island. SCI larkspur is generally found within mid- to high-elevation grasslands on the east side of the northern and central portions of the island where it occurs in clay, loam, and rocky soils with soil depths ranging from shallow to deep; however, it is more often associated with non-clay soils (Vanderplank
Flower production in
SCI larkspur generally flowers from March to April (California Native Plant Society 2001, in USFWS 2008a), but has been documented flowering from January to April (Koontz and Warnock 2012). Blue and white flowered
Like most other California larkspurs, SCI larkspur can survive below ground when conditions are unfavorable and may remain dormant and not appear above-ground for one or more years. The species begins to go dormant shortly after flowering, remaining dormant until early in the rainy season. Although we have no information on the lifespan of SCI larkspur, based on information regarding other species of larkspurs, it is likely that the subspecies is relatively long-lived (USFWS 2020c, p. 28). Because of the species' ability to go dormant, and additionally because flower production in
In comparison with other endemic plant species,
Little is known regarding the fire tolerance of SCI larkspur. However, its dormancy period (roughly May or June through November) and the fire season generally coincide (O'Connor 2019, pers. comm.; Navy 2009, p. 4.22). The possible benefits of fire to SCI larkspur include reduction in competitive shading and/or nutrient uptake, which would likely increase flowering and possibly visibility to pollinators.
Section 4(f) of the Act directs us to develop and implement recovery plans for the conservation and survival of endangered and threatened species unless we determine that such a plan will not promote the conservation of the species. Recovery plans must, to the maximum extent practicable, include objective, measurable criteria which, when met, would result in a determination, in accordance with the provisions of section 4 of the Act, that the species be removed from the Lists.
Recovery plans provide a roadmap for us and our partners on methods of enhancing conservation and minimizing threats to listed species, as well as measurable criteria against which to evaluate progress towards recovery and assess the species' likely future condition. However, they are not regulatory documents and do not substitute for the determinations and promulgation of regulations required under section 4(a)(1) of the Act. A decision to revise the status of a species, or to delist a species, is ultimately based on an analysis of the best scientific and commercial data available to determine whether a species is no longer an endangered species or a threatened species, regardless of whether that information differs from the recovery plan.
There are many paths to accomplishing recovery of a species, and recovery may be achieved without all of the criteria in a recovery plan being fully met. For example, one or more criteria may be exceeded while other criteria may not yet be accomplished. In that instance, we may determine that the threats are minimized sufficiently and that the species is robust enough that it no longer meets the definition of an endangered species or a threatened species under the Act. In other cases, we may discover new recovery opportunities after having finalized the recovery plan. Parties seeking to conserve the species may use these opportunities instead of methods identified in the recovery plan. Likewise, we may learn new information about the species after we finalize the recovery plan. The new information may change the extent to which existing criteria are appropriate for identifying recovery of the species. The recovery of a species is a dynamic process requiring adaptive management that may, or may not, follow all of the guidance provided in a recovery plan.
In 1984, we published the Recovery Plan for the Endangered and Threatened Species of the California Channel Islands (recovery plan) that addresses the five species addressed in this proposed rule, plus some additional species (USFWS 1984). The recovery plan preceded the 1988 amendments to the Act outlining required elements of recovery plans. As such, the recovery plan does not include recovery criteria, but followed guidance in effect at the time it was finalized. Rather than including specific criteria for determining when threats have been removed or sufficiently minimized, the recovery plan identifies six objectives to achieve recovery of the Channel Island species. Given the threats in common to the species addressed, the recovery plan is broad in scope and focuses on restoration of habitats and ecosystem function. The six objectives identified in the recovery plan are:
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•
•
•
•
•
The Navy has taken a variety of recovery actions to achieve the recovery plan's objectives. These include:
• Removal of all feral herbivores, which was achieved in 1992.
• Monitoring and control of the expansion of highly invasive, nonnative plant species on an ongoing basis since the 1990s (O'Connor 2019, pers. comm.).
• Implementing a nonnative wildlife program, which focuses on island-wide nonnative predator management, initiated by the Navy in 1992 (USFWS 2008, p. 172).
• Conducting and funding surveys, research, and monitoring to better understand the ecology and habitat requirements of sensitive species, and monitor their status and the effectiveness of recovery efforts.
• Conducting long-term vegetation monitoring studies.
• Conducting propagation and outplanting (transplant individuals from the greenhouse to vegetative communities) of native species through a contract with the San Diego State University Soil Ecology and Restoration Group (SERG) since 2001 (Howe 2009, pers. comm.; Munson 2013, pers. comm.). Although most of the restoration efforts were not specifically designed for the benefit of the species addressed in this proposed rule, restoration of the island's vegetation communities has helped to improve habitat suitability for the subject species by reducing the spread of invasive, nonnative plants and restoring ecological processes.
• Conducting annual reviews of fire management and fire occurrences, allowing for adaptive management to minimize the frequency and spread of fires. For example, in 2017, after a large fire that burned part of the eastern escarpment had seemingly gone out, the fire restarted the next day and response was therefore delayed. This prompted a change in how the Navy monitors fires that are thought to be out (O'Connor 2019, pers. comm.).
• Addressing training-related erosion through development of an erosion control plan (Navy 2013b, entire). The Navy incorporates erosion control measures into all site feasibility studies to minimize impacts from erosion and avoid impacts to listed species.
Contributions to meeting the recovery objectives include adoption and implementation of the SCI Integrated Natural Resources Management Plan (INRMP). The Navy adopted the SCI INRMP in 2002 (Navy 2002, entire) and updated it again in 2013 (Navy 2013a, entire). An INRMP is intended to guide installation commanders in managing their natural resources in a manner that is consistent with the sustainability of those resources, while ensuring continued support of the military mission (Navy 2002, p. 1-1). The INRMP identifies goals and objectives for specified management units and their natural resources, including measures to protect, monitor, restore, and manage special status species and their habitats. The Navy identifies and addresses threats to special status species during the INRMP planning process. If possible, threats are ameliorated, eliminated, or mitigated through this procedure.
The SCI INRMP outlines management actions for invasive species control island-wide, including near listed species; biosecurity protocols; restoration of sites that support sensitive plants; habitat enhancement for sensitive and listed species; fuel break installation to minimize fire spread; and fire suppression to protect endangered, threatened, and other priority species. The Navy also developed and implements specific plans for some management issues, including: SCI Wildland Fire Management Plan; Erosion Control Plan; and the Naval Auxiliary Landing Field San Clemente Island Biosecurity Plan. For additional details on the Navy's implementation of recovery efforts, see “Conservation Actions and Regulatory Mechanisms,” below.
Interim progress on achieving the recovery objectives resulted in improvements in the status of SCI paintbrush and SCI lotus such that our 2007 5-year reviews recommended reclassification (USFWS 2007a, b), and both species were subsequently reclassified from endangered species to threatened species (July 26, 2013; 78 FR 45406). We also recommended in our 2007 5-year review for SCI bush-mallow and 2008 5-year review for SCI larkspur that they be reclassified as threatened (USFWS 2007c; USFWS 2008).
While the recovery plan did not include specific metrics, the plan's objectives have largely been achieved for these five species through removal of nonnative herbivores and subsequent recovery of native plant communities, and through restoration and management actions implemented by the Navy to improve habitat and control threats related to erosion, invasive species, fire, and land use. As a result of these actions, habitat has been sufficiently restored and managed on the island and supports self-sustaining populations for each of these five taxa.
Section 4 of the Act (16 U.S.C. 1533) and its implementing regulations (50 CFR part 424) set forth the procedures for determining whether a species is an “endangered species” or a “threatened species.” The Act defines an endangered species as a species that is “in danger of extinction throughout all or a significant portion of its range,” and a threatened species as a species that is “likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range.” The Act requires that we determine whether any species is an “endangered species” or a “threatened species” because of any of the following factors:
(A) The present or threatened destruction, modification, or curtailment of its habitat or range;
(B) Overutilization for commercial, recreational, scientific, or educational purposes;
(C) Disease or predation;
(D) The inadequacy of existing regulatory mechanisms; or
(E) Other natural or manmade factors affecting its continued existence.
These factors represent broad categories of natural or human-caused actions or conditions that could have an effect on a species' continued existence. In evaluating these actions and conditions, we look for those that may have a negative effect on individuals of the species, as well as other actions or conditions that may ameliorate any negative effects or may have positive effects. We consider these same five factors in reclassifying a species from an endangered species to a threatened species or removing a species from the Lists (50 CFR 424.11(c) through (e)).
We use the term “threat” to refer in general to actions or conditions that are known to or are reasonably likely to negatively affect individuals of a species. The term “threat” includes actions or conditions that have a direct impact on individuals (direct impacts), as well as those that affect individuals through alteration of their habitat or required resources (stressors). The term “threat” may encompass—either together or separately—the source of the action or condition or the action or condition itself.
However, the mere identification of any threat(s) does not necessarily mean that the species meets the statutory definition of an “endangered species” or a “threatened species.” In determining whether a species meets either definition, we must evaluate all identified threats by considering the species' expected response and the effects of the threats—in light of those actions and conditions that will ameliorate the threats—on an individual, population, and species level. We evaluate each threat and its expected effects on the species, then analyze the cumulative effect of all of the threats on the species as a whole. We also consider the cumulative effect of the threats in light of those actions and conditions that will have positive effects on the species—such as any existing regulatory mechanisms or conservation efforts. The Secretary determines whether the species meets the definition of an “endangered species” or a “threatened species” only after conducting this cumulative analysis and describing the expected effect on the species now and in the foreseeable future.
The Act does not define the term “foreseeable future,” which appears in the statutory definition of “threatened species.” Our implementing regulations at 50 CFR 424.11(d) set forth a framework for evaluating the foreseeable future on a case-by-case basis. The term foreseeable future extends only so far into the future as we can reasonably determine that both the future threats and the species' responses to those threats are likely. In other words, the foreseeable future is the period of time in which we can make reliable predictions. “Reliable” does not mean “certain”; it means sufficient to provide a reasonable degree of confidence in the prediction. Thus, a prediction is reliable if it is reasonable to depend on it when making decisions.
It is not always possible or necessary to define foreseeable future as a particular number of years. Analysis of the foreseeable future uses the best scientific and commercial data available and should consider the timeframes applicable to the relevant threats and to the species' likely responses to those threats in view of its life-history characteristics. Data that are typically relevant to assessing the species' biological response include species-specific factors such as lifespan, reproductive rates or productivity, certain behaviors, and other demographic factors. In our analyses presented below, we expect the Navy's current level of training as well as its management of natural resources on SCI to continue well into the future, including management of threats, such as minimizing impacts of training, and managing erosion, invasive species, and wildland fire. However, as described below (see Climate Change), uncertainty regarding effects of a changing climate increases after 20-30 years, making reliable predictions after this time period difficult. We used this 20-30 year timeframe in developing our projections of future conditions in each of the species status assessments for the five species.
The SSA reports document the results of our comprehensive biological review of the best scientific and commercial data regarding the status of the species, including assessments of the potential threats to the species. The SSA reports do not represent our decisions on whether any of the species should be delisted or reclassified under the Act. They do, however, provide the scientific basis that informs our regulatory decisions, which involve the further application of standards within the Act and its implementing regulations and policies. The following is a summary of the key results and conclusions from the SSA reports; the full SSA reports can be found at Docket No. FWS-R8-ES-2020-0074 on
To assess species viability, we used the three conservation biology principles of resiliency, redundancy, and representation (Shaffer and Stein 2000, pp. 306-310). Briefly, resiliency supports the ability of the species to withstand environmental and demographic stochasticity (for example, wet or dry, warm or cold years); redundancy supports the ability of the species to withstand catastrophic events (for example, droughts, large pollution events); and representation supports the ability of the species to adapt over time to long-term changes in the environment (for example, climate changes). In general, the more resilient and redundant a species is and the more representation it has, the more likely it is to sustain populations over time, even under changing environmental conditions. Using these principles, we identified the species' ecological requirements for survival and reproduction at the individual, population, and species levels, and described the beneficial and risk factors influencing the species' viability.
The SSA process can be categorized into three sequential stages. During the first stage, we evaluated individual species' life-history needs. The next stage involved an assessment of the historical and current condition of the species' demographics and habitat characteristics, including an explanation of how the species arrived at its current condition. The final stage of the SSA involved making predictions about the species' responses to positive and negative environmental and anthropogenic influences. Throughout all of these stages, we used the best available information to characterize viability as the ability of a species to sustain populations in the wild over time. We use this information to inform our regulatory decisions.
Below, we review the biological condition of the species and their resources, and the threats that influence the species' current and future condition, in order to assess the species' overall viability and the risks to that viability.
Each of the five SCI species occurs as a single population with no natural division in their ranges. However, for assessing species resilience and for monitoring and tracking the plant species in the future, we divided the species' ranges into watershed units to quantify threats across the range. Watersheds were suggested for use in delineation for monitoring purposes by the Navy (Vanderplank
In assessing species resilience for SC Bell's sparrow, we followed the approach for surveys of annual sparrow densities. Those annual surveys divide the island into eight vegetation strata. Because densities vary greatly among these strata each year, and because these strata are used for annual monitoring, we assess the resiliency of the subspecies within each of these strata in terms of the estimated population size, but then scale up from these strata to the resiliency of the subspecies. These vegetation strata are not meant to represent “populations” in a biological sense; as with the plant species, these units were designed to subdivide the species' range in a way that facilitates assessing and reporting the variation in current and future resilience across the range.
Our SSA framework generally includes identifying the species' ecological requirements for survival and reproduction at the individual, population, and species levels. However, population-level and species-level needs, such as number of individuals or reproductive success necessary to maintain an occurrence, level of gene flow or dispersal, etc., are not well understood for any of the five species. Where information is lacking or incomplete, we make certain scientific assumptions based on principles of conservation biology in order to conduct our analyses. In each of the plant SSAs, we make the assumption that, for the plant species, numbers of individuals within a watershed correlates with greater resilience and, conversely, watersheds with fewer individuals or with only one location within the watershed have lower resiliency. Similarly, for SC Bell's sparrow, our models in the SSA assume that density correlates with greater resilience, and that vegetative strata with greater densities have greater resilience.
We reviewed the potential risk factors (
The current habitat conditions for listed species on SCI are partly the result of historical land use practices. SCI was used legally and illegally for sheep ranching, cattle ranching, goat grazing, and pig farming (77 FR 29078, May 16, 2012, p. 29093; Navy 2013a, p. 2-3). Goats and sheep were introduced early by the Europeans, and cattle, pigs, and mule deer were introduced in the 1950s and 1960s (Navy 2013a, p. 3-185). These nonnative herbivores greatly changed the vegetation of SCI and were the main cause of the SCI species' decline (42 FR 40682, August 11, 1977, p. 40683). Persistent grazing and browsing defoliated large areas of the island, and the animals caused trampling and trail proliferation, which exacerbated erosion, altering plant communities on SCI and leading to severe habitat degradation and loss of suitable habitat that likely curtailed the range of endemic plants and animals on the island. Grazing and ranching on the island also facilitated the introduction and spread of nonnative plants (Navy 2002, p. 3-31).
All nonnative ungulates were removed by 1992 (Keegan
SCI is owned by the Navy, and is the primary maritime training area for the Pacific Fleet and Sea Air and Land Teams (77 FR 29078, May 16, 2012). The island also supports training by the Marine Corps, the Air Force, the Army, and other military organizations. As the westernmost training range in the eastern Pacific Basin, where training operations are performed prior to troop deployments, portions of the island receive intensive use by the military (Navy 2008a, p. 2.2).
Infrastructure, including runways, buildings, and associated development, is concentrated at the northern end of the island. The remainder of the island is largely devoid of infrastructure, except for the ridge road running along the spine of the island. In addition to existing infrastructure, various training activities occur within training areas on the island, and have the potential to affect the SCI species (see Table 3, below). Altogether, 34.8 percent of the island's area is located in one of these training areas, although training does not occur uniformly within each area. Military training activities within some of these training areas can involve the movement of vehicles and troops over the landscape and can include live munitions fire, incendiary devices, demolitions, and bombardment.
The Shore Bombardment Area (SHOBA) occupies roughly the southern third of the island and encompasses approximately 13,824 ac (5,594 ha) (Navy 2008a, p. 2-7, Navy 2009, p. 2-4). Areas of intensive use within SHOBA include two Impact Areas and three Training Areas and Ranges (TARs). Impact Areas support naval gun firing, artillery firing, and air-to-ground bombing (Navy 2008a, p. 2-7; Navy 2013a, p. 2-8). Much of the remainder of SHOBA serves as a buffer around Impact Areas; thus, 59 percent of SHOBA is not within intensive training
Due to these various military training activities, land use has been considered a threat to listed species on SCI. Training and other land use activities have multiple potential impacts, including trampling or crushing individuals or groups of plants; disturbance of nesting birds or injury or mortality of nestlings; and habitat impacts including disturbances to soil and vegetation, spread of nonnative plant species, creation of road ruts and trails, compaction of soils, and fires (USFWS 2008b, pp. 96-99). Erosion, nonnative species, and fire are discussed separately from military training in this proposed rule.
Along with the introduction of feral, nonnative herbivores, many other nonnative species have been introduced to the island. While nonnative, feral grazers have been completely removed from SCI, other nonnative species have become established and have the potential to negatively affect species and their habitats. These include feral cats (
While nonnative plants, especially nonnative annual grasses, have the potential to adversely affect the listed plant species, nonnative grasses are present but not a dominant component of the plant communities at the majority of occurrences of the four SCI plant species. SCI paintbrush and SCI lotus are often associated with vegetation types where nonnative grasses are present but not a dominant component of the plant community (Tierra Data Inc. 2005, pp. 29-42; Junak and Wilken 1998, p. 261; USFWS 2007, pp. 6-7; Vanderplank
SCI larkspur occurs within grasslands that have experienced a proliferation of nonnative plant species, especially annual grasses. Surveys conducted between 2011 and 2017 found 13 of 74 locations of SCI larkspur in communities dominated by invasive grasses (Navy, unpublished data; Vanderplank
While nonnative plant species, including nonnative annual grasses, are extensively distributed across SCI both as a result of post-grazing colonization of weedy species in highly disturbed habitat and accidental introduction of new weeds through human activities, they do not seem to be impeding recovery. Since the removal of feral grazers, all vegetation communities have been recovering, and naturalized grasslands (the most fire-prone of nonnative vegetation communities) constitute a small proportion of the island at this time, approximately 10.6 percent of the island area (US Navy 2013a, p. 3.59). In addition, the island now has more intact habitats, reduced erosion, and a stronger suite of native competitor species, making the conditions less favorable to invasion. The Navy makes significant efforts to control highly invasive, nonnative perennial grasses and nonnative forbs to preclude their expansion into habitat areas and areas in which weed control would be difficult due to terrain and access challenges, and the Navy has monitored and controlled the expansion of highly invasive, nonnative plant species on an ongoing basis since the 1990s (O'Connor 2019, pers. comm.). Many conservation measures to limit the introduction and spread of nonnative plants are included in the INRMP (Navy 2013a, pp. 3.289-3.290). The recently completed Biosecurity Plan (Navy 2016, entire) will also more effectively control the arrival of potentially invasive propagules. The plan contains actions recommended to avoid introduction of new invasive species and works to prevent and respond to new introductions of nonnative species and bio-invasion vectors. Despite the existence of nonnative plants on SCI, the four SCI plant species have expanded in distribution and abundance since listing (42 FR 40682; August 11, 1977).
Degradation of the vegetation due to the browsing of feral goats and rooting of feral pigs modified the island's habitat significantly and resulted in increased erosion and soil loss over much of the island, especially on steep
In addition to erosion caused by past land uses, military training activities and the existing road network could lead to erosion that could impact species and their habitats. Erosion is a primary concern associated with use of the Assault Vehicle Maneuver Corridor (AVMC). To address this concern, the Navy is implementing the San Clemente Island Erosion Control Plan (Navy 2013b, entire), which includes best management practices to prevent, minimize, and restore impacts to sensitive resources within the AVMC. Implementation of this plan has resulted in prioritization of low-erosion areas within the AVMAs for assault vehicle use, and establishment of routes within the AVMAs, to reduce loss of vegetation cover and allow for better control of erosion (Vanderplank
The existing road network on SCI includes Ridge Road and approximately 188 linear miles of dirt and paved roadways. These roads can concentrate water flow, causing incised channels and erosion of slopes (Forman and Alexander 1998, pp. 216-217). Increased erosion near roads could potentially degrade habitat, especially along the steep canyons and ridges. On occasion after particularly heavy rainfall events, localized areas of high erosion stemming from roadways have been noted; however, regular road maintenance and repair of associated damage minimizes the potential for such problems to spread. The SCI INRMP includes a management strategy that addresses island-wide erosion. Implementation of the SCI INRMP as well as the Erosion Control Plan (Navy 2013b, entire), which include best management practices to prevent, minimize, and restore impacts to sensitive resources, is expected to prevent erosion from adversely affecting the SCI species and their habitats.
Potential for erosion to affect species depends on whether the species and their habitats occur on soils or topography prone to erosion, and on their proximity to activities that can cause or exacerbate erosion. The SSAs used a 30-m (100-ft) buffer around roads as an appropriate distance over which negative impacts to habitat could be perceptible and should be evaluated. Previously, we considered individuals that occur within 152 m (500 ft) of a paved or unpaved road vulnerable to habitat degradation (Forman and Alexander 1998, p. 217; 77 FR 29078, 29102, May 16, 2012). However, based on expert opinion and observations on SCI since 2012, increased erosion associated with roads does not extend as far from the road network as previously thought (O'Connor 2019, pers. comm.). Based on these observations, the buffer size was revised for our analysis.
The Navy monitors and evaluates soil erosion on SCI to assess priorities for remediation (SERG 2006, entire; SERG 2015, entire), and efforts are made through revegetation and outplanting to restore areas where erosion occurs (SERG 2016, p. 2). The INRMP requires that all projects with potential erosion impacts include soil conservation measures for best management practices, choosing sites that are capable of sustaining disturbance with minimum soil erosion, and stabilizing disturbed sites (Navy 2013a, pp. 3.33-3.37). In addition, the Erosion Control Plan includes specific guidelines for the development and application of best management practices to minimize soil erosion within these training areas, minimize offsite impacts, and prevent soil erosion from adversely affecting federally listed or proposed species or their habitats and other sensitive resources (Navy 2013b, entire).
Despite existing levels of soil erosion on the island, the distributions of all five species have increased since listing (42 FR 40682; August 11, 1977). Current erosion issues are localized, and erosion is generally decreasing on the island as the vegetation continues to recover. Only a small percentage of individuals
Fire is a natural component for regeneration and maintenance of many habitats; however, maritime desert scrub communities on SCI are not found to have been fire-dependent due to maritime-related humidity, limited natural ignition sources, and adaptations of specific indigenous plants. The history of fire on the island prior to 1979 is largely unknown, but fires were set intermittently during ranching to increase the cover of forbs and grasses (Navy 2009, p. 3-2; Navy 2013a, p. 3.47). After the island was purchased by the Navy in 1934, fire became a more common occurrence throughout much of the island. Since 1979, over 50 percent of the island has experienced at least one wildfire with smaller areas on the island having burned up to 10 times between 1979 and 2018 (Navy 2013a, p. 3-47; Navy, unpub. data).
The number and extent of fires (acres burned) varies annually, as does fire severity. Currently, most fires on the island are a result of military training and activities. Most large fires are ignited in the Impact Areas, with the majority of acreage burned concentrated in SHOBA (Navy 2013a, pp. 3-45). Fire severity data (2007 to present) indicate that most fires are classified as low severity, with vegetation considered lightly burned or scorched. However, 15.6 percent of the acreage burned has been of a severity class that has detrimental effects on shrubs, considered moderately severe to completely burned. At low severity levels, fires have little effect on shrubs, which resprout and recover easily (Navy 2009, pp. 4-52). Typically, due to the patchy nature of fires, not all areas within a fire footprint are burned uniformly; that is, not all plants in a burn polygon are necessarily burned or burned at the same severity (SERG 2012, p. 39). Although fire ignition points are concentrated in the military training areas, fires that escape these areas could potentially spread to other areas of the island. However, due to vegetation and topography, fires have generally been confined to the same areas (Munson 2019, pers. comm.).
Future increased fire frequency from intensified military use could lead to localized changes in vegetation. The Navy significantly expanded the number of locations where live fire and demolition training can take place in 2008 (USFWS 2008, pp. 21-37). However, while the number of acres that burn annually varies greatly, the frequency and extent of fire has decreased since the Navy began actively managing fire and implementing the Wildland Fire Management Plan (Navy 2009, entire; USFWS 2020a, p. 56; USFWS 2020b, pp. 53-54; USFWS 2020c, pp. 64-65; USFWS 2020d, pp. 45-47; USFWS 2020e, p. 48). The biggest fire years between the time of listing and now, in 1985 and 1994, burned more than twice the acreage than the two biggest fire years in the last 15 years (2012 and 2017) and since implementation of the Wildland Fire Management Plan (Navy 2009, entire; USFWS 2020a, p. 56; USFWS 2020b, p. 53-54; USFWS 2020c, pp. 64-65; USFWS 2020d, pp. 45-46; USFWS 2020e, p. 48).
Severe fires can kill shrubs and woody vegetation and alter the vegetation community, while frequent fires may not allow individuals and habitat to recover between fire events and have the potential to exceed a plant's capacity to sustain populations by depleting seed banks and reducing reproductive output (Zedler
Fires can impact plants on San Clemente, but have been generally localized, infrequent, and of low severity, and have burned mostly in regions where these taxa are not documented (USFWS 2020b, pp. 52, 56; USFWS 2020c, pp. 61, 66; USFWS 2020d, pp. 44, 50; USFWS 2020e, pp. 46, 52). In addition, rhizomes and seed banks can help these plants survive and persist post-fire. Though severe fires may kill SCI lotus, some plants are likely to survive and resprout after low intensity fires (USFWS 2020d, pp. 20). Severe fires may also kill individual SCI paintbrush plants, but plants are likely to survive and may benefit from low-intensity fires (UWFSW 2020e, pp. 23-24). SCI larkspur does not appear to be significantly affected by fire, likely due to its dormant period coinciding with periods when fires are more likely (USFWS 2020c, pp. 30-31). SCI bush-mallow may be tolerant of fire. Its continued presence in areas that have burned and documentation of resprouting and recovering after fires indicate it is at least somewhat tolerant of fires (USFWS 2020b, p. 25). All four plant species appear to have increased in distribution and population size under the current fire pattern and fire management.
While fires have the potential to burn most places on the island, land use, vegetation, and historical patterns indicate that fires are most likely to burn in the same areas they have historically. Table 5 indicates the number of locations of each of the plant species that have burned (USFWS 2020b, pp. 51-53; USFWS 2020c, pp. 61-65; USFWS 2020d, pp. 45-49; USFWS 2020e, pp. 47-51). The majority of habitat that support these four plant taxa has not burned and less than 10 percent of the occupied locations have burned more than once in the past 20 years (Table 5).
Given the historical patterns, most fires have burned outside locations where the four SCI plants species occur. Where plant locations have burned, most of those locations have burned infrequently over the last 20 years, during which period the four SCI plant species have increased in distribution and abundance. If fires become more frequent outside of the current fire footprint or more severe in the future, the species could be adversely affected in areas that burn. However, the Navy is expected to continue implementing its SCI Wildland Fire Management Plan (Navy 2009), and we expect that fires will continue to occur in similar areas and affect a limited number of individuals and locations of the four SCI plant species. That said, we are not concerned that fire is a threat to the listed plants, since they have expanded their ranges significantly with the removal of nonnative herbivores.
Based on current knowledge of habitat use, with the expansion of SC Bell's sparrows into a broader range of habitats, more of the subspecies' distribution is within areas we expect could be impacted by fire. However, the current fire patterns and severity indicate most fires typically start in the Impact Areas in SHOBA, away from the highest density areas for SC Bell's sparrow. Fires are generally of low severity and burn limited areas due to the application of firebreaks and fire suppression. To date, no fires have broken out and burned the high-density boxthorn habitat (USFWS 2020a, p. 57). The Navy is expected to continue implementing its SCI Wildland Fire Management Plan (Navy 2009), and we expect that fires will continue to occur in similar areas and at similar frequency and intensity to that observed between 2010 and 2020, and affect a limited number of individuals and locations of SC Bell's sparrow.
Since listing (42 FR 40682; August 11, 1977), the potential impacts of ongoing, accelerated climate change have become a recognized threat to the flora and fauna of the United States (Intergovernmental Panel on Climate Change (IPCC) 2007, pp. 1-52; Point Reyes Bird Observatory (PRBO) Conservation Science 2011, pp. 1-68). Climate change is likely to result in warmer and drier conditions with high overall declines in mean seasonal precipitation but with high variability from year to year (IPCC 2007, pp. 1-18; Cayan
Climate change models indicate an increase in average temperature by 2 to 3 degrees Celsius (°C) (4 to 6 degrees Fahrenheit (°F)) (Representative Concentration Pathway (RCP) 4.5) to 4 to 5 °C (7 to 9 °F) (RCP 8.5) for the San Diego Area of southern California by the end of the century (Jennings
Low-level temperature inversions are common along the California coast and Channel Islands, and these inversions form low cloud cover (fog), otherwise known as the marine layer, which has a strong influence on coastal ecosystems and SCI (Navy 2013a, pp. 3.13, 3.26). Although the island has a short rainy season, the presence of fog during the summer months helps to reduce drought stress for many plant species through shading and fog drip, and many species are restricted to this fog belt (Halvorson
Warming projections in California, particularly the possibility that the interior will experience greater warming than the coast (Cayan
Current trends based on meteorological information suggest climate change is already affecting southern California through sea level rise, warming, and extreme events like large storms associated with El Niño events (Sievanen
Less rainfall and warmer air temperatures could limit the range of plant species, and affect habitat and prey or forage for SC Bell's sparrow, although there is no direct research on the effects of climate change on any of the species. While SC Bell's sparrow's reproductive success is influenced by rainfall, and could be affected by longer term changes in climate, the relationship between reproductive output and rainfall and the impacts of droughts of varying duration and severity on the population are unclear, and the mechanisms driving these relationships are unknown (USFWS 2020a, pp. 58-63). Changes in temperature or rainfall patterns have the potential to affect biotic interactions, such as decoupling the timing of plant phenology versus insect activity. The likely persistence of the marine layer would be expected to help moderate the effects of climate change on the Channel Islands and would be expected to reduce its potential effects to island plants, including nesting and cover substrates for SC Bell's sparrows.
While we recognize that climate change is an important issue with potential effects to listed species and their habitats, information is not available to make accurate predictions regarding its effects to the SCI species addressed in this proposed rule. However, given the timeframe presented in climate change studies, major impacts from climate change are unlikely to occur in the next 20 to 30 years, the period for which we are able to make reliable predictions based on the available climate change data.
Genetic analysis suggests that SCI bush-mallow has very low genetic variation at both the species and population levels (Helenurm 1997, p. 50; Helenurm 1999, p. 39), and has been observed to have low seed production (Helenurm 1997, p. 50; Junak and Wilken 1998, p. 291; Helenurm 1999, p. 39). Low seed production, in combination with low genetic diversity, can contribute to observed low recruitment in populations (Huenneke 1991, pp. 37-40; Junak and Wilken 1998, p. 291; Helenurm 1999, pp. 39- 40). A reduction in occurrence size through years of grazing may have substantially lowered genetic variation (Helenurm 2005, p. 1221), which could decrease genetic fitness and compromise the species' ability to adjust to novel or fluctuating environments, survive disease or other pathogens, survive stochastic events, or maintain high levels of reproductive performance (Huenneke 1991, p. 40). However, data on the genetic variation that existed historically are lacking.
In recent years, the detected numbers of SCI bush-mallow have increased in abundance, although it is unknown how much of this growth can be attributed to clonal growth versus sexual reproduction and new genets. Successful seed collection in 2013 (SERG 2013, pp. 61-64) and the observation of cotyledons in the field provide anecdotal evidence that the species may be reproducing more often by sexual recombination. As the number of individuals (stems) increases, we would expect by probability alone more genetically distinct individuals over time because as the numbers of stems increase, the probability of cross-pollination is increased (Rebman 2019, pers. comm.). However, we do not know whether and how often new genets are produced in the population.
Patches of SCI bush-mallow on SCI contain many clones of individuals but also contain distinct genetic individuals, and there is at least some increase in distribution through seedling recruitment (Munson 2019, pers. comm.). However, it is still likely that many patches, especially the small or more isolated ones, are comprised of only closely related individuals that share alleles, impeding the likelihood of successful sexual reproduction (Helenurm 1999, pp. 39-40). The apparent historical loss of genetic diversity resulting in current low genetic variation is a potential threat for which there is no immediate solution or amelioration. However, currently, low genetic diversity does not seem to preclude the ability of the species to sustain populations over time on the island; historical diversity is unknown, and it may have always been low for this species. This species has increased in numbers and distribution from that known at the time of listing (42 FR 40682; August 11, 1977) and has sustained populations through current levels of habitat disturbance, and we expect genetic variants within and among patches are increasing, however slowly.
Pursuant to the Sikes Act (16 U.S.C. 670
The SCI INRMP outlines appropriate management actions necessary to conserve and enhance land and water resources, including: Invasive species control island-wide including near listed and sensitive species; biosecurity protocols; public outreach to promote compliance; restoration of sites that support sensitive plants; habitat enhancement for sensitive and listed species. In addition, the Fire Management Plan (Navy 2009) outlines a strategy to reduce the impacts from fires, including fuel break installation to minimize fire spread; and fire suppression inside and outside of SHOBA to protect endangered, threatened, and other priority species (Navy 2013a, p. 3.45; Vanderplank
While many conservation measures to limit the introduction and spread of nonnative plants are included in the INRMP (Navy 2013a, pp. 3.289-3.290), the recently completed Biosecurity Plan (Navy 2016, entire) will help more effectively control the arrival of potentially invasive propagules. The plan works to prevent and respond to new introductions of nonnative species and bio-invasion vectors. The Navy is currently working on an instruction that will contain feasible, enforceable measures from the plan. Through implementation of this plan and the ongoing island-wide nonnative plant control program, potential impacts from nonnative plants are expected to be minimized (O'Connor 2019, pers. comm.; Munson 2019, pers. comm.)
Final delineation of areas and management strategies will be identified within an SC Bell's sparrow management plan, which is currently being prepared in coordination with the Service (USFWS 2020a, p. 66). Although the management plan is not finalized, we anticipate completion by fall/winter 2020/2021. With the identification of core habitat areas in the INRMP, and management of these areas consistent with the management plan, we anticipate that the Navy will: (1) Preclude significant development within these areas, to the extent feasible; (2) prioritize these four areas for protection under fire management plans; and (3) prioritize these four areas for invasive species control, as needed (USFWS 2020a, p. 66) to help manage for the SC Bell's sparrow. While we expect that incorporation of SC Bell's sparrow core habitat areas into the INRMP will improve coordination of conservation measures for the SC Bell's sparrow, the Navy's current and ongoing management described above minimizes the impacts of threats to SC Bell's sparrow and its habitat under the existing training regime. Completion of a SC Bell's sparrow management plan will highlight important management areas to conserve and monitor to ensure the continued conservation of this taxon in the future.
At the time of listing (42 FR 40682; August 11, 1977), the biggest threat to the SCI species was habitat destruction and modification due to feral grazers. Since the removal of the last feral herbivores, vegetation is recovering, and habitat conditions have improved substantially. Currently, all five species are now more widely distributed on the island with greater estimated numbers of individuals than were previously known.
For the plant species, we assessed threats to individuals and habitat including land use, erosion, the spread of nonnatives, fire and fire management, and climate change. While full impacts of invasive species on the four plant species are unknown, the effects are likely minimal or localized, given the expansion of the species on the island despite the presence of invasive species. Climate change may influence the plant species by affecting germination or viability of adult plants if drought or increasing temperatures result in significant changes in vegetation communities on SCI. The magnitude of this rangewide threat and how it may affect the plant taxa is unknown at this time, but significant impacts from climate change are unlikely to occur in the next 20 to 30 years (USFWS 2020b, p. 57; USFWS 2020c, pp. 66-67; USFWS 2020d, p. 51; USFWS 2020e, p. 53).
For all four plant species, we considered major threats to be impacts of military training and fire. For SCI paintbrush, SCI lotus, and SCI larkspur, we also considered erosion as a result of training or proximity to roads to be a major threat; SCI bush-mallow does not occur in areas near roads or in training areas where potential erosion is a concern. We ranked the levels of these threats in each watershed to evaluate the extent to which the species are exposed to and potentially affected by these threats (USFWS 2020b, pp. 59-60; USFWS 2020c, pp. 69-70; USFWS 2020d, pp. 54-55; USFWS 2020e, pp. 56-57). Level of threats were categorized as none, low, or moderate. A low level of threats is defined as threats that could potentially affect less than 50 percent of the locations, individuals, or area within the watershed. A moderate level of threat is defined as threats that could potentially affect 50 percent or more of the locations, individuals, or area within the watershed. Table 6, below, indicates the percentages and numbers of watersheds, and the estimated individuals in those watersheds that were categorized as having no identified or low threats, or moderate threats. The majority of watersheds where plant taxa occur are in areas with no or low exposure to threats affecting less than half of the locations, individuals, or area occupied.
We assessed remaining threats to SC Bell's sparrow individuals and habitat, including predation, drought, climate change, military training, and fire. Ongoing predator control programs are implemented to control nonnative predator species on the island, and the population of SC Bell's sparrow has grown despite ongoing impacts. Drought could potentially affect SC Bell's sparrow, as reduced nesting success has been reported in drier years, especially if droughts become more frequent or severe. While the effects of drought on productivity of the island-wide population are not fully understood, and additional data are needed to clarify this relationship, the population has rebounded quickly from past droughts and is expected to retain its ability to do so in the future. Likewise, climate change may influence or affect vegetation and thus nesting and foraging habitat (USFWS 2020a, p. 63). The magnitude of this rangewide threat and how it may affect the SC Bell's sparrow is unknown at this time, but significant impacts from climate change are unlikely to occur in the next 20 to 30 years (USFWS 2020a, pp. 63-64).
Future military training impacts are expected to occur in the existing training footprint, and have the potential to impact a small percentage of the SC Bell's sparrow population, based on the estimated number of SC Bell's sparrows that inhabit the training footprint. Training within the current footprint that could have high-intensity impacts occurs on less than 20 percent of the island, and those areas that are intensively used are currently either unoccupied or already support low densities of SC Bell's sparrows. The largest potential known threat to the SC Bell's sparrow is fire. The Navy actively implements fire prevention and containment measures as part of the fire management plan. Thus, although fire currently impacts SC Bell's sparrows and their habitat, current fire patterns do not appear to pose a threat to SC Bell's sparrow population viability.
Here, we discuss the current condition of each species, taking into account the risks to those populations that are currently occurring, as well as management actions that are currently occurring to address those risks.
In our evaluation of current conditions, for each plant species and watershed, we developed and assigned condition categories. To assess the resiliency of plant species, we assessed the overall condition of the population by evaluating occupancy, locations, and individuals within each watershed. We categorized our assessed resiliency scores by watershed based on number of individuals: “very high” means populations with 500 or more individuals; “high” means populations with 100-499 individuals; “moderate” means populations with 10-99 individuals; and “low” means populations with fewer than 10 individuals. We also examined population trends, which indicate the ability of the species to withstand and recover from stochastic events.
Resiliency was considered higher within watersheds supporting a greater number of individuals over time; however, if all of the individuals within a watershed were in just one location, we assumed that they are less resilient than a watershed with the same number of individuals that are spread out across multiple locations, as plants will be more likely to sustain populations through stochastic events if one localized event is unable to affect all the plants in the entire watershed.
Because few comprehensive surveys have been conducted for plant species on SCI, data from 2011 and 2012, which represent the most recent comprehensive surveys, were supplemented with prior and subsequent data, following a rule set to exclude and buffer data that might result in double counting, and to exclude occurrence data more than 15 years old. Because of lack of pre- and post-fire surveys, numbers of individuals of SCI lotus and SCI paintbrush (the two species most likely to be negatively affected by severe fires) in watersheds that burned were adjusted to assume some mortality from two severe fires in the last 15 years (USFWS 2020d, pp. 56-57; USFWS 2020e, pp. 58-60). Adjusted numbers of locations and individuals were then used to categorize resiliency in each watershed as low, moderate, high, or very high (see Table 7, below).
The majority of individuals of each of the plant species occur in watersheds with high or very high resilience, which suggests that the majority of watersheds are likely to be able to withstand stochastic events. While all four plant species are considered to consist of one population, their distributions across multiple watersheds with a variety of habitat types, elevations, and slopes also make it unlikely that the entire population of any of the species would be affected by a catastrophic event. Genetic variation in SCI bush-mallow is considered to be low for an island endemic, which, coupled with its clonal nature, could potentially make the species less able to adapt to changing environmental conditions. However, low genetic diversity does not seem to be precluding the species from sustaining itself on the island.
The current population (2018) is estimated at 2,676 territories (5,284 individuals) island-wide. Overall, the population of SC Bell's sparrows on SCI has increased since listing and, for at least the past 5 years, has withstood current stochastic effects. Given these trends and the relatively large population size, we consider this population to currently be highly resilient to stochastic factors. While we consider SC Bell's sparrow to consist of a single population, its distribution across the island and ability to use a range of elevations and habitats indicate the species' adaptability and that it is unlikely that the entire population of the species would be affected by a single catastrophic event.
To assess current threats and future conditions, we evaluated the proportion of each population exposed to anthropogenic stressors under baseline conditions, and considered different future scenarios for impacts of military training and fire: status quo (baseline impacts), and moderate or high increases in fire severity and training within the existing frequent fire and training footprint. We also considered these scenarios assuming moderate and low recruitment for the plant species, and high and low densities for SC Bell's sparrow. While specific effects of climate change are uncertain and were not modeled, increases in fire severity, which could result from either increased training or from effects of climate change, and low recruitment/density serve as proxies for potential effects. We used a 20- to 30-year timeframe for modeling future conditions because beyond this timeframe, the impacts of climate change on SCI, specifically the persistence of the fog belt and the timing and patterns of fog and rainfall, are uncertain, making predictions unreliable.
As recovery of plant communities on SCI continues, the number of individuals within watersheds and number of occupied watersheds are expected to continue to increase. While existing data indicate that numbers and distribution of the plant species are greater than in the past, the rates at which groups of plants expand over time are unknown. Therefore, we modeled recruitment at moderate and low levels for SCI paintbrush and SCI lotus. Because SCI bush-mallow currently appears to be reproducing primarily clonally rather than through sexual reproduction and exhibits low seed production, we modeled low and no recruitment to account for this condition. Because of SCI larkspur's long dormancy periods, we do not know how many individuals are present at any point in time and did not include recruitment in the modeling to avoid overestimating growth (
To model fire severity, which could result from increased training or effects of climate change, we used the frequent fire footprint (burned 2 or more times) from the past 20 years to project where future fires are likely to occur. To model increases in fire severity, we assumed greater numbers of individuals would be affected by fire and removed from the population. Because SCI larkspur does not appear to be significantly affected by fire, likely due to its dormant period coinciding with periods when fires are more likely, we only included increased training in our modeling of future conditions for that plant.
To model effects of land use and training, we used the current footprint of training areas. Using the percent of individuals that occur either within a training area or near a road, we calculated the total number of individuals that could be affected by increased training in that watershed. We assumed an increasing number of locations and individuals would be affected by increased training intensity. The results are presented below in Table 8.
We modeled the future condition of SC Bell's sparrow over a 20- to 30-year time frame given two different scenarios of future impacts from military training and fire, the two most significant current and future threats. Using both a low and high density estimate (calculated by manipulating the lowest and highest density estimates for each habitat stratum measured between 2013 and 2018 by one standard error), we calculated the estimated number of territories for each stratum under two potential future scenarios: (1) A “status quo” scenario in which conditions remain similar to those observed between 2013 and 2018 (
Our models project numbers of watersheds and individuals for plants and numbers of territories and adults for SC Bell's sparrow under a range of possible future conditions. However, there are several limitations and uncertainties associated with our projections (USFWS 2020a, pp. 77-78; USFWS 2020b, pp. 68-69; USFWS 2020c, pp. 77-78; USFWS 2020d, pp. 69-70; USFWS 2020e, pp. 72-73). These include differences in survey methodologies over time and lack of information regarding demographic and life-history characteristics of the species, which required us to make several assumptions in our estimates and projections. We presumed that where surveys were not conducted since 2004, individuals from the four plant taxa continued to be present and that the four plant taxa are extant at those locations last reported in 2004. We also generally assumed that military training and fire would affect the same areas they have historically, and we made several assumptions about extent of future impacts within the same geographic footprint. We also concluded that the Navy will continue to manage and protect habitat where these five taxa occur on SCI. While there are a number of uncertainties and assumptions, our projections represent the best available scientific and commercial information and are useful predictions of the current and future viability of the species.
While all five species might experience reductions in numbers of individuals or occupied watersheds or habitat within the existing fire and training footprint under the most extreme scenarios considered, all species are expected to remain resilient. Each species would continue to occupy a broad distribution on the island across a variety of habitats under status quo and increased threat scenarios, so representation and redundancy are not expected to decrease significantly.
We note that, by using the SSA framework to guide our analyses of the scientific information documented in the SSA reports, we have not only analyzed individual effects on the species, but we have also analyzed their potential cumulative effects. We incorporated the cumulative effects into our SSA analyses when we characterized the current and future condition of the species. To assess the current and future conditions of the
Section 4 of the Act (16 U.S.C. 1533) and its implementing regulations (50 CFR part 424) set forth the procedures for determining whether a species meets the definition of an “endangered species” or a “threatened species.” The Act defines an endangered species as a species that is “in danger of extinction throughout all or a significant portion of its range,” and a threatened species as a species that is “likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range.” The Act requires that we determine whether a species meets the definition of an “endangered species” or a “threatened species” because of any of the following factors: (A) The present or threatened destruction, modification, or curtailment of its habitat or range; (B) overutilization for commercial, recreational, scientific, or educational purposes; (C) disease or predation; (D) the inadequacy of existing regulatory mechanisms; or (E) other natural or manmade factors affecting its continued existence.
After evaluating threats to the species and assessing the cumulative effect of the threats under the section 4(a)(1) factors, we found that the primary threats to SC Bell's sparrow, SCI paintbrush, SCI lotus, SCI larkspur, and SCI bush-mallow identified at the time of and since listing have been eliminated or reduced. At the time of listing (42 FR 40682; August 11, 1977), habitat destruction and modification caused by nonnative herbivores (Factor A) was considered to be the primary cause of decline for all five species. Since removal of all nonnative herbivores was completed in 1992, plant communities on the island are recovering, and habitat conditions are improving for all species. The current sizes and distributions of each of the species are greater than were previously known. Currently and in the future, individuals and habitat of each of the five species may be affected by military training activities (Factors A and E), erosion (Factor A), invasive species (Factors A and E), and fire and fire management (Factors A and E). These remaining threats to the species, including fire, erosion, and invasive species, are managed by the Navy through implementation of the SCI INRMP, Fire Management Plan, Erosion Control Plan for SCI, and other associated management plans. Implementation of avoidance and minimization measures and programs outlined in these plans is expected to continue regardless of the listing status of the five species. In addition, the Navy will continue to consider these five species and incorporate avoidance and minimization measures for land use activities, including infrastructure projects and military training proposals as part of the Site Approval and Project Review process. Thus, existing conservation programs and regulatory mechanisms, such as the INRMP, are expected to continue to provide protections to these species, regardless of listing status. Because the Channel Islands are not well addressed in current climate models and there is uncertainty regarding how climate change may affect habitats and species on SCI, we were not able to assess its long-term effects, but because of moderating effects of maritime influence on SCI, we do not expect major impacts over the next 20 to 30 years. Our evaluation of current and future conditions indicates all five species are likely to continue to maintain close to current levels of resiliency, redundancy, and representation.
In addition to threats in common to all five SCI species, small population size (Factor E) was formerly considered a threat to SC Bell's sparrow, with a low of 38 individuals reported in 1984. However, the species is now more widely distributed on the island, and population estimates have been consistently over 4,000 adults since 2013. Predation by black rats and feral cats (Factor C) was also considered a threat to SC Bell's sparrow at the time of listing. While predation on SC Bell's sparrow still occurs, the Navy implements predator control on SCI, and predation on SC Bell's sparrow does not appear to be limiting the population. The species is currently considered to be resilient and is expected to maintain close to current levels of resiliency, redundancy, and representation under a range of projected future conditions. Thus, after assessing the best available information, we determine that San Clemente Bell's sparrow is not in danger of extinction now or likely to become so in the foreseeable future throughout all of its range.
No additional threats beyond those common to all five SCI species have been identified for SCI paintbrush. With removal of nonnative herbivores, and conservation efforts implemented by the Navy, numbers and distribution of SCI paintbrush have increased. The SCI paintbrush population numbered approximately 1,000 individuals in 1984. The current island-wide population is estimated at 42,104 individuals across 87 watersheds. The majority of these individuals currently occur in watersheds with high or very high resiliency. Additionally, the species is expected to maintain close to current levels of resiliency, redundancy, and representation under a range of projected future conditions. Thus, after assessing the best available information, we determine that San Clemente Island paintbrush is not in danger of extinction now or likely to become so in the foreseeable future throughout all of its range.
No additional threats beyond those common to all five SCI species have been identified for SCI lotus. With removal of nonnative herbivores, and conservation efforts implemented by the Navy, numbers and distribution of SCI lotus have increased. While the historical range and distribution of SCI lotus is not known, its distribution has increased from the 6 locations noted in 1984 (USFWS 1984, pp. 17, 35). The current island-wide population is estimated at 21,251 individuals across 58 watersheds. The majority of these
No additional threats beyond those common to all five SCI species have been identified for SCI larkspur. While the historical range and distribution of SCI larkspur is not known, its distribution has increased from the 6 to 7 locations noted in 1984 (USFWS 1984, pp. 17, 35). The current island-wide population is estimated at 18,956 individuals within 22 watersheds. The majority of these individuals currently occur in watersheds with high or very high resiliency. Additionally, the species is expected to maintain close to current levels of resiliency, redundancy, and representation under a range of projected future conditions. Fire (Factors A and E) is thought to currently not significantly affect SCI larkspur, but changes in timing, frequency, or severity of fire could potentially negatively affect the species. However, the Navy's implementation of fire management is expected to continue to minimize the risk of fire to SCI larkspur. Thus, after assessing the best available information, we determine that San Clemente Island larkspur is not in danger of extinction now or likely to become so in the foreseeable future throughout all of its range.
In addition to threats common to all five SCI species, reduced genetic diversity (Factor E) has been identified as a potential threat for SCI bush-mallow. However, currently, low genetic diversity does not seem to be precluding the species' ability to sustain itself on the island. With removal of nonnative herbivores, and conservation efforts implemented by the Navy, numbers and distribution of SCI bush-mallow have increased. At the time of listing, SCI bush-mallow was only known from three locations (42 FR 40682; August 11, 1977). The current island-wide population is estimated at 5,611 individuals across 15 watersheds. The majority of these individuals currently occur in watersheds with high or very high resiliency. Additionally, the species is expected to maintain close to current levels of resiliency, redundancy, and representation under a range of projected future conditions. Thus, after assessing the best available information, we determine that San Clemente Island bush-mallow is not in danger of extinction now or likely to become so in the foreseeable future throughout all of its range.
Under the Act and our implementing regulations, a species may warrant listing if it is in danger of extinction or likely to become so in the foreseeable future throughout all or a significant portion of its range. Having determined that the SC Bell's sparrow, SCI paintbrush, SCI lotus, SCI larkspur, and SCI bush-mallow are not in danger of extinction or likely to become so in the foreseeable future throughout all of their ranges, we now consider whether any of these species may be in danger of extinction or likely to become so in the foreseeable future in a significant portion of its range—that is, whether there is any portion of the species' range for which it is true that both (1) the portion is significant, and (2) the species is in danger of extinction now or likely to become so in the foreseeable future in that portion. Depending on the case, it might be more efficient for us to address the “significance” question or the “status” question first. We can choose to address either question first. Regardless of which question we address first, if we reach a negative answer with respect to the first question that we address, we do not need to evaluate the other question for that portion of the species' range.
In undertaking this analysis for SC Bell's sparrow, SCI paintbrush, SCI lotus, SCI larkspur, and SCI bush-mallow, we choose to address the status question first—we consider information pertaining to the geographic distribution of both the species and the threats that the species faces to identify any portions of the range where the species is endangered or threatened.
The SC Bell's sparrow, SCI paintbrush, SCI lotus, SCI larkspur, and SCI bush-mallow are found solely on San Clemente Island, an area of approximately 56 square mi (145 square km, 36,073 acres (ac), or 14,598 hectares (ha)). Each of these species is a narrow endemic that functions as a single, contiguous population. While we divided each of the species' ranges into analysis units in order to quantify threats and analyze resiliency, these units are not meant to represent “populations” in a biological sense; rather, these units were designed to facilitate assessing and reporting current and future resilience. Given the species' small ranges, and the Navy's management to eliminate or reduce threats through implementation of the SCI INRMP and other associated management plans, there is no biologically meaningful way to break the limited ranges of these species into portions, and the threats that the species face affect the species throughout their entire ranges. This means that no portions of the species' ranges have a different status from their rangewide status. Therefore, no portion of the species' ranges can provide a basis for determining that the species are in danger of extinction now or likely to become so in the foreseeable future in a significant portion of their ranges, and we find that San Clemente Bell's sparrow, San Clemente Island paintbrush, San Clemente Island lotus, San Clemente Island larkspur, and San Clemente Island bush-mallow are not in danger of extinction now or likely to become so in the foreseeable future in any significant portion of their ranges. This is consistent with the courts' holdings in
Our review of the best available scientific and commercial information indicates that the San Clemente Bell's sparrow, San Clemente Island paintbrush, San Clemente Island lotus, San Clemente Island larkspur, and San Clemente Island bush-mallow do not meet the definition of an endangered species or a threatened species in accordance with sections 3(6), 3(20), and 4(a)(1) of the Act. Therefore, we propose to delist (remove) the San Clemente Bell's sparrow, San Clemente Island paintbrush, San Clemente Island lotus, San Clemente Island larkspur, and San Clemente Island bush-mallow from the Lists of Endangered and Threatened Wildlife and Plants.
This proposal, if made final, would revise 50 CFR 17.11(h) to remove San Clemente Bell's sparrow (
Section 4(g)(1) of the Act requires us to monitor for not less than 5 years the status of all species that are delisted due to recovery. Post-delisting monitoring refers to activities undertaken to verify that a species delisted due to recovery remains secure from the risk of extinction after the protections of the Act no longer apply. The primary goal of post-delisting monitoring is to monitor the species to ensure that its status does not deteriorate, and if a decline is detected, to take measures to halt the decline so that proposing it as an endangered or threatened species is not again needed. If at any time during the monitoring period data indicate that protective status under the Act should be reinstated, we can initiate listing procedures, including, if appropriate, emergency listing. At the conclusion of the monitoring period, we will review all available information to determine if relisting, the continuation of monitoring, or the termination of monitoring is appropriate.
Section 4(g) of the Act explicitly requires that we cooperate with the States in development and implementation of post-delisting monitoring programs. However, we remain ultimately responsible for compliance with section 4(g) and, therefore, must remain actively engaged in all phases of monitoring. We also seek active participation of other entities that are expected to assume responsibilities for the species' conservation after delisting, in this case, the Navy, an integral partner and the sole owner and manager of San Clemente Island.
We are currently coordinating with the Navy to develop and implement effective post-delisting monitoring (PDM) for the SC Bell's sparrow, SCI lotus, SCI paintbrush, SCI larkspur, and SCI bush-mallow. The Draft Post-Delisting Monitoring Plan for Five San Clemente Island Species (USFWS 2020f, entire) is available at
We currently appreciate any information on what should be included in post-delisting monitoring strategies for these species (see Information Requested, above). Given the Navy's past and current stewardship efforts, management for the species has been effective to date, and it is reasonable to expect that management will continue to be effective for the species and their habitats beyond a post-delisting monitoring period, and well into the future. In addition to post-delisting monitoring activities that would occur if this proposed rule becomes final, the Navy anticipates continued management of the species in accordance with the SCI INRMP and other management plans. Additional monitoring or research (beyond post-delisting monitoring requirements) may occur in the future for these and other rare endemics on SCI based on available resource levels. We will work closely with the Navy to ensure post-delisting monitoring is conducted if these species are delisted and to ensure future management strategies are implemented (as warranted) to benefit these species.
We are required by Executive Orders 12866 and 12988 and by the Presidential Memorandum of June 1, 1998, to write all rules in plain language. This means that each rule we publish must:
(1) Be logically organized;
(2) Use the active voice to address readers directly;
(3) Use clear language rather than jargon;
(4) Be divided into short sections and sentences; and
(5) Use lists and tables wherever possible.
If you feel that we have not met these requirements, send us comments by one of the methods listed in
We have determined that we do not need to prepare an environmental assessment or environmental impact statement, as defined in the National Environmental Policy Act (42 U.S.C. 4321
In accordance with the President's memorandum of April 29, 1994 (Government-to-Government Relations with Native American Tribal Governments; 59 FR 22951), Executive Order 13175 (Consultation and Coordination with Indian Tribal Governments), and the Department of the Interior's manual at 512 DM 2, we readily acknowledge our responsibility to communicate meaningfully with recognized Federal Tribes on a government-to-government basis. In accordance with Secretarial Order 3206 of June 5, 1997 (American Indian Tribal Rights, Federal-Tribal Trust Responsibilities, and the Endangered Species Act), we readily acknowledge our responsibilities to work directly with Tribes in developing programs for healthy ecosystems, to acknowledge that Tribal lands are not subject to the same controls as Federal public lands, to remain sensitive to Indian culture, and to make information available to Tribes. There are no Tribal lands associated with this proposed rule.
A complete list of references cited in this rulemaking is available on the internet at
The primary authors of this proposed rule are the staff members of the Fish and Wildlife Service's Species Assessment Team and the Carlsbad Fish and Wildlife Office.
Endangered and threatened species, Exports, Imports, Reporting and recordkeeping requirements, Transportation.
Accordingly, we propose to amend part 17, subchapter B of chapter I, title 50 of the Code of Federal Regulations, as set forth below:
16 U.S.C. 1361-1407; 1531-1544; and 4201-4245, unless otherwise noted.
Food and Nutrition Service (FNS), USDA.
Notice.
In accordance with the Paperwork Reduction Act of 1995, this notice invites the general public and other public agencies to comment on this proposed information collection. This collection is a revision of the currently approved collection for Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Infant and Toddler Feeding Practices 2 Study (ITFPS-2) [OMB Control Number 0584-0580]. The revision is to extend data collection on the original cohort of study participants by one more interview around their 9th birthday, which is four years after the end of their period of eligibility for WIC services. It also seeks to collect administrative data from WIC State agencies to examine the WIC participation patterns of participants who enrolled in the study but discontinued their participation during the first 5 years of the study (
Written comments must be received on or before July 6, 2021.
Comments may be sent to: Amanda Reat, Office of Policy Support, Food and Nutrition Service, USDA, 1320 Braddock Place, Alexandria, VA 22314. Comments may also be submitted via fax to the attention of Amanda Reat at 703-305-2576 or via email to
All responses to this notice will be summarized and included in the request for Office of Management and Budget approval. All comments will be a matter of public record.
Requests for additional information or copies of this information collection should be directed to Amanda Reat at
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 shall 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 that were 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 use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
The data will be used to estimate the type and prevalence of various feeding practices among children who received WIC program benefits, after their program eligibility ends. This study will also examine the circumstances and influences that shape caregivers' feeding decisions for their children, and will describe the impact of childhood WIC participation on subsequent dietary and health outcomes. In addition, the study will examine if those who left the longitudinal study are fundamentally different from those who remain in the study.
The study activities subject to this notice include: Inform 27 WIC State agencies and 80 local WIC sites of the data collection, and their role in the study; contact 27 WIC State agencies for administrative data on the participants who left the study before the child's fifth birthday; contact 3,020 caregivers before the 9-year interview to notify them of the study extension and for them to provide consent and contact information updates, and to send study reminders; administer an additional telephone interview to caregivers of children enrolled in the study when their child is 9 years old; administer a second dietary intake interview to a subsample of caregivers who complete the first interview; and obtain child's height and weight measurements around age nine, taken by their health care provider or at WIC sites, from caregivers.
The WIC State Agency and local WIC site staff will be invited to participate in a webinar that will highlight key study findings to date (from reports approved and published by FNS) and describe the data collection at age nine. The 27 State Agencies and 80 sites will participate in conference calls to discuss the follow-up activities. The 27 State Agencies will be asked to provide administrative data on the participants who left the study before the study child's fifth birthday.
Upon approval, the caregivers will be mailed a study announcement letter, consent form, and contact information
From the last submission of the ICR to this revision, the number of the respondents to the telephone interview and height and weight measurement collection has decreased. The burden on the caregivers has increased slightly because of the increase in the interview length and the contacts to obtain updated contact information. The burden on the State agencies has increased substantially because of the request to provide administrative data on the participants who left the study before the study child's fifth birthday, which is new to this data collection.
Forest Service, USDA.
Notice of meetings.
The Wenatchee-Okanogan Resource Advisory Committee (RAC) will hold a series of virtual meetings by phone and/or video conference. The committee is authorized under the Secure Rural Schools and Community Self-Determination Act (the Act) and operates in compliance with the Federal Advisory Committee Act. The purpose of the committee is to improve collaborative relationships and to provide advice and recommendations to the Forest Service concerning projects and funding consistent with Title II of the Act as well as make recommendations on recreation fee proposals for sites on the Okanogan-Wenatchee National Forest within Okanogan, Chelan, Kittitas, and Yakima Counties, consistent with the Federal Lands Recreation Enhancement Act. RAC information and virtual meeting information can be found at the following website:
The meetings will be held on:
• June 1, 2021, 9:00 a.m.-4:00 p.m., Pacific Daylight Time;
• June 4, 2021, 9:00 a.m.-4:00 p.m., Pacific Daylight Time; and
• June 16, 2021, 9:00 a.m.-4:00 p.m., Pacific Daylight Time.
All RAC meetings are subject to cancellation. For status of meetings prior to attendance, please contact the person listed under
The meetings will be held virtually via telephone and/or video. Written comments may be submitted as described under
RAC Coordinator Robin DeMario by phone at 509-664-9292 or via email at
Individuals who use telecommunication devices for the hearing-impaired (TDD) may call the Federal Information Relay Service (FIRS) at 1-800-877-8339 between 8:00 a.m. and 8:00 p.m., Eastern Daylight Time, Monday through Friday.
The purpose of the meeting is to:
1. Hear from Title II project proponents and discuss project proposals;
2. Make funding reccomendations on Tittle II projects;
3. Approve meeting minutes; and
4. Schedule the next meeting.
These meetings are open to the public. The agendas will include time for individuals to make oral statements of three minutes or less. Individuals wishing to make an oral statement at any of the meetings should request in writing by May 12, 2021, to be scheduled on the agenda for that particular meeting. Anyone who would like to bring related matters to the attention of the committee may file written statements with the committee staff before or after the meeting. Written comments and requests for time for oral comments must be sent to RAC Coordinator Robin DeMario, 215 Melody Lane, Wenatchee, Washington,
Forest Service, USDA.
Notice of meeting.
The Lynn Canal-Icy Strait (LCIS) Resource Advisory Committee (RAC) will hold a virtual meeting by phone and/or video conference. The committee is authorized under the Secure Rural Schools and Community Self-Determination Act (the Act) and operates in compliance with the Federal Advisory Committee Act. The purpose of the committee is to improve collaborative relationships and to provide advice and recommendations to the Forest Service concerning projects and funding consistent with Title II of the Act. The committee also makes recommendations on recreation fee proposals for sites on the Tongass National Forest within boroughs associated with the LCIS RAC, consistent with the Federal Lands Recreation Enhancement Act. General RAC information can be found at the following website:
The meeting will be held on Wednesday, June 16, 2021 from 1:00 p.m.-4:00 p.m. Alaska Daylight Time. All RAC meetings are subject to cancellation. For status of the meeting prior to attendance, please contact Robin Hasselquist by phone at 907-789-6212 or email at
The meeting will be held virtually via telephone and/or videoconference. The phone call-in number is 1-202-650-0123, Phone Conference ID: 771 850 094#. To have the video conference link emailed to you, please contact Robin Hasselquist by phone at 907-789-6212 or email at
Written comments may be submitted as described under
Robin Hasselquist, RAC Coordinator, by phone at 907-789-6212 or email at
Individuals who use telecommunication devices for the hearing-impaired (TDD) may call the Federal Information Relay Service (FIRS) at 1-800-877-8339 between 8:00 a.m. and 8:00 p.m., Eastern Daylight Time, Monday through Friday.
The purpose of the meeting is to:
1. Review/Approve meeting minutes;
2. Review current budget;
3. Hear from Title II project proponents and discuss project proposals;
4. Make funding reccomendations on Tittle II projects; and
5. Schedule the next meeting.
The meeting is open to the public. The agenda will include time for people to make oral statements of three minutes or less. Individuals wishing to make an oral statement should request in writing, by Friday, June 4, 2021, to be scheduled on the agenda. Anyone who would like to bring related matters to the attention of the committee may file written statements with the committee staff before or after the meeting. Written comments and requests for time for oral comments must be sent to Robin Hasselquist, 8510 Mendenhall Loop Road, Juneau, Alaska 99801, or by email to
Forest Service, USDA.
Notice of meeting.
The Daniel Boone Resource Advisory Committee (RAC) will hold a virtual meeting by phone and/or video conference. The committee is authorized under the Secure Rural Schools and Community Self-Determination Act (the Act) and operates in compliance with the Federal Advisory Committee Act. The purpose of the committee is to improve collaborative relationships and to provide advice and recommendations to the Forest Service concerning projects and funding consistent with Title II of the Act. RAC information and virtual meeting information can be found at the following website:
The meeting will be held on June 9, 2021 at 6:00 p.m., Eastern Daylight Time.
All RAC meetings are subject to cancellation. For status of the meeting prior to attendance, please contact the person listed under
The meeting will be held virtually via telephone and/or video conference.
Written comments may be submitted as described under
Tim Reed, Designated Federal Officer (DFO), by phone at 606-515-7942 or via email at
Individuals who use telecommunication devices for the hearing-impaired (TDD) may call the Federal Information Relay Service (FIRS) at 1-800-877-8339 between 8:00 a.m. and 8:00 p.m., Eastern Daylight Time, Monday through Friday.
The purpose of the meeting is to:
1. Elect a chairperson;
2. Approve operating guidelines;
3. Review new Title II project proposals;
4. Receive public input; and
5. Recommend Title II projects for funding.
The meeting is open to the public. The agenda will include time for people to make oral statements of three minutes or less. Individuals wishing to make an oral statement should request in writing by May 28, 2021, to be scheduled on the agenda. Anyone who would like to bring related matters to the attention of the committee may file written statements with the committee staff before or after the meeting. Written comments and requests for time for oral comments must be sent to Tim Reed, Designated Federal Officer, Stearns Ranger District, 3320 Highway 27 North, Whitley City, Kentucky, 42653; by email to
Forest Service, USDA.
Notice.
This notice lists the newspapers that will be used by the ranger districts, districts, forests, and regional office of the Rocky Mountain Region to publish legal notices. The intended effect of this action is to inform interested members of the public which newspapers the Forest Service will use to publish notices of proposed actions and notices of decision. This will provide the public with constructive notice of Forest Service proposals and decisions, provide information on the procedures to comment, object or appeal, and establish the date that the Forest Service will use to determine if comments or appeals/objections were timely.
Publication of legal notices in the listed newspapers will begin on the date of this publication and continue until further notice.
Lucy Aragon, Regional Administrative Review Coordinator (Acting), Rocky Mountain Region, 1617 Cole Blvd., Bldg. 17, Lakewood, CO 80401.
Lucy Aragon, Regional Administrative Review Coordinator (Acting), by telephone at (303) 275-5188 or by email at
The administrative procedures at 36 CFR parts 214, 218, and 219 require the Forest Service to publish notices in a newspaper of general circulation. The content of the notices is specified in 36 CFR parts 214, 218, and 219. In general, the notices will identify: The decision or project, by title or subject matter; the name and title of the official making the decision; how to obtain additional information; and where and how to file comments or appeals/objections. The date the notice is published will be used to establish the official date for the beginning of the comment or appeal/objection period. The newspapers to be used are as follows:
Forest Service, USDA.
Notice.
This notice lists the newspapers that will be used by the ranger districts, forests and regional office of the Intermountain Region to publish legal notices. The intended effect of this action is to inform interested members of the public which newspapers the Forest Service will use to publish notices of proposed actions and notices of decision. This will provide the public with constructive notice of Forest Service proposals and decisions, provide information on the procedures to comment, object or appeal, and establish the date that the Forest Service will use to determine if comments or appeals/objection were timely.
Publication of legal notices in the listed newspapers will begin on or after October 2020. The list of newspapers will remain in effect until September 2021 when another notice will be published in the
Pete Gomben, Regional Administrative Review and Litigation Coordinator, Intermountain Region, 324 25th Street, Ogden, UT 84401.
Pete Gomben, Regional Administrative Review and Litigation Coordinator, by telephone at (801) 625-5069 or by email at
The administrative procedures at 36 CFR 214, 219, and 218 require the Forest Service to publish notices in a newspaper of general circulation. The content of the notices is specified in 36 CFR 214, 219 and 218.
In general, the notices will identify: The decision or project, by title or subject matter; the name and title of the official making the decision; how to obtain additional information; and where and how to file comments or appeals/objection. The date the notice is published will be used to establish the official date for the beginning of the comment or appeal/objection period. The newspapers to be used are as follows:
U.S. Commission on Civil Rights.
Announcement of meeting.
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission) and the Federal Advisory Committee Act that the California Advisory Committee (Committee) will hold a meeting via web teleconference on Friday, May 21, 2021, from 1:00 p.m.-2:30 p.m. Pacific Time for the purpose of discussing potential civil rights focus to study.
The meeting will be held on:
Brooke Peery, Designated Federal Officer (DFO), at
Members of the public may listen to the discussion. This meeting is available to the public through the public WebEx registration link listed above. An open comment period will be provided to allow members of the public to make a statement as time allows. The conference call operator will ask callers to identify themselves, the organization they are affiliated with (if any), and an email address prior to placing callers into the conference room. Callers can expect to incur regular charges for calls they initiate over wireless lines, according to their wireless plan. The Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Persons with hearing impairments may also follow the proceedings by first calling the Federal Relay Service at 1-800-877-8339 and providing the Service with the conference call number and conference ID number.
Members of the public are also entitled to submit written comments; the comments must be received in the Regional Programs Unit within 30 days following the meeting. Written comments may be emailed to Brooke Peery at
Records generated from this meeting may be inspected and reproduced at the Regional Programs Unit Office, as they become available, both before and after the meeting. Records of the meeting will be available at:
Please click on the “Meeting Details” and “Documents” links. Persons interested in the work of this Committee are also directed to the Commission's website,
On August 29, 2019, in the U.S. District Court for the Southern District of Texas, Abel Hernandez, Jr. (“Hernandez”) was convicted of violating 18 U.S.C. 554(a). Specifically, Hernandez was convicted of fraudulently and knowingly exporting
Pursuant to Section 1760(e) of the Export Control Reform Act (“ECRA”),
BIS received notice of Hernandez's conviction for violating 18 U.S.C. 554(a), and has provided notice and opportunity for Hernandez to make a written submission to BIS, as provided in Section 766.25 of the Export Administration Regulations (“EAR” or the “Regulations”). 15 CFR 766.25.
Based upon my review of the record and consultations with BIS's Office of Exporter Services, including its Director, and the facts available to BIS, I have decided to deny Hernandez's export privileges under the Regulations for a period of 10 years from the date of Hernandez's conviction. The Office of Exporter Services has also decided to revoke any BIS-issued licenses in which Hernandez had an interest at the time of his conviction.
Accordingly, it is hereby
A. Applying for, obtaining, or using any license, license exception, or export control document;
B. Carrying on negotiations concerning, or ordering, buying, receiving, using, selling, delivering, storing, disposing of, forwarding, transporting, financing, or otherwise servicing in any way, any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or engaging in any other activity subject to the Regulations; or
C. Benefitting in any way from any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or from any other activity subject to the Regulations.
A. Export or reexport to or on behalf of the Denied Person any item subject to the Regulations;
B. Take any action that facilitates the acquisition or attempted acquisition by the Denied Person of the ownership, possession, or control of any item subject to the Regulations that has been or will be exported from the United States, including financing or other support activities related to a transaction whereby the Denied Person acquires or attempts to acquire such ownership, possession or control;
C. Take any action to acquire from or to facilitate the acquisition or attempted acquisition from the Denied Person of any item subject to the Regulations that has been exported from the United States;
D. Obtain from the Denied Person in the United States any item subject to the Regulations with knowledge or reason to know that the item will be, or is intended to be, exported from the United States; or
E. Engage in any transaction to service any item subject to the Regulations that has been or will be exported from the United States and which is owned, possessed or controlled by the Denied Person, or service any item, of whatever origin, that is owned, possessed or controlled by the Denied Person if such service involves the use of any item subject to the Regulations that has been or will be exported from the United States. For purposes of this paragraph, servicing means installation, maintenance, repair, modification or testing.
On August 30, 2019, in the U.S. District Court for the Southern District of Texas, Sergio Daniel Serrano-Lopez (“Serrano-Lopez”), was convicted of violating 18 U.S.C. 554(a). Specifically, Serrano-Lopez was convicted of fraudulently and knowingly exporting and sending, or attempting to export and send from the United States to Mexico, 4,500 rounds of 7.62x39mm caliber ammunition; 500 rounds of .38 Super caliber ammunition; one Glock .40 caliber magazine; three .38 Super caliber magazines; three MGB .380 caliber magazines; three 9mm Luger caliber magazines; one Ruger .223 caliber magazine; and three Ruger 7.62x39mm caliber magazines, in violation of 18 U.S.C. 554. Serrano-Lopez was sentenced to 40 months in prison and a $100 assessment.
Pursuant to Section 1760(e) of the Export Control Reform Act (“ECRA”),
BIS received notice of Serrano-Lopez's conviction for violating 18 U.S.C. 554(a), and has provided notice and opportunity for Serrano-Lopez to make a written submission to BIS, as provided in Section 766.25 of the Export Administration Regulations (“EAR” or the “Regulations”). 15 CFR 766.25.
Based upon my review of the record and consultations with BIS's Office of Exporter Services, including its Director, and the facts available to BIS, I have decided to deny Serrano-Lopez's export privileges under the Regulations for a period of 10 years from the date of Serrano-Lopez's conviction. The Office of Exporter Services has also decided to revoke any BIS-issued licenses in which Serrano-Lopez had an interest at the time of his conviction.
Accordingly, it is hereby
A. Applying for, obtaining, or using any license, license exception, or export control document;
B. Carrying on negotiations concerning, or ordering, buying, receiving, using, selling, delivering, storing, disposing of, forwarding, transporting, financing, or otherwise servicing in any way, any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or engaging in any other activity subject to the Regulations; or
C. Benefitting in any way from any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or from any other activity subject to the Regulations.
A. Export or reexport to or on behalf of the Denied Person any item subject to the Regulations;
B. Take any action that facilitates the acquisition or attempted acquisition by the Denied Person of the ownership, possession, or control of any item subject to the Regulations that has been or will be exported from the United States, including financing or other support activities related to a transaction whereby the Denied Person acquires or attempts to acquire such ownership, possession or control;
C. Take any action to acquire from or to facilitate the acquisition or attempted acquisition from the Denied Person of any item subject to the Regulations that has been exported from the United States;
D. Obtain from the Denied Person in the United States any item subject to the Regulations with knowledge or reason to know that the item will be, or is intended to be, exported from the United States; or
E. Engage in any transaction to service any item subject to the Regulations that has been or will be exported from the United States and which is owned, possessed or controlled by the Denied Person, or service any item, of whatever origin, that is owned, possessed or controlled by the Denied Person if such service involves the use of any item subject to the Regulations that has been or will be exported from the United States. For purposes of this paragraph, servicing means installation, maintenance, repair, modification or testing.
On May 16, 2018, in the U.S. District Court for the Southern District of New York, Mehmet Hakan Atilla (“Atilla”) was convicted of violating the International Emergency Economic Powers Act (“IEEPA”), 50 U.S.C § 1701,
The Export Administration Regulations (“EAR” or “Regulations”) are administered and enforced by the U.S. Department of Commerce's Bureau of Industry and Security (“BIS”).
BIS received notice of Atilla's conviction for violating IEEPA, and pursuant to Section 766.25 of the Regulations, has provided notice and an opportunity for Atilla to make a written submission to BIS. BIS has received and considered a written submission from Atilla.
Based upon my review of the record, including Atilla's written response, and consultations with BIS's Office of Exporter Services, including its Director, and the facts available to BIS, I have decided to deny Atilla's export privileges under the Regulations for a period of 10 years from the date of Atilla's conviction. The Office of Exporter Services has also decided to revoke any BIS-issued license in which Atilla had an interest at the time of his conviction.
Accordingly, it is hereby
A. Applying for, obtaining, or using any license, license exception, or export control document;
B. Carrying on negotiations concerning, or ordering, buying, receiving, using, selling, delivering, storing, disposing of, forwarding, transporting, financing, or otherwise servicing in any way, any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or engaging in any other activity subject to the Regulations; or
C. Benefitting in any way from any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or from any other activity subject to the Regulations.
A. Export or reexport to or on behalf of the Denied Person any item subject to the Regulations;
B. Take any action that facilitates the acquisition or attempted acquisition by the Denied Person of the ownership, possession, or control of any item subject to the Regulations that has been or will be exported from the United States, including financing or other support activities related to a transaction whereby the Denied Person acquires or attempts to acquire such ownership, possession or control;
C. Take any action to acquire from or to facilitate the acquisition or attempted acquisition from the Denied Person of any item subject to the Regulations that has been exported from the United States;
D. Obtain from the Denied Person in the United States any item subject to the Regulations with knowledge or reason to know that the item will be, or is intended to be, exported from the United States; or
E. Engage in any transaction to service any item subject to the Regulations that has been or will be exported from the United States and which is owned, possessed or controlled by the Denied Person, or service any item, of whatever origin, that is owned, possessed or controlled by the Denied Person if such service involves the use of any item subject to the Regulations that has been or will be exported from the United States. For purposes of this paragraph, servicing means installation, maintenance, repair, modification or testing.
Bureau of Economic Analysis, Commerce.
Notice of information collection, request for comment.
The Department of Commerce, in accordance with the Paperwork Reduction Act of 1995 (PRA), invites the general public and other Federal agencies to comment on proposed and continuing information collections, which helps us assess the impact of our information collection requirements and minimize the public's reporting burden. The purpose of this notice is to allow for 60 days of public comment preceding submission of the collection to OMB.
To ensure consideration, comments regarding this proposed information collection must be received on or before July 6, 2021.
Interested persons are invited to submit written comments to Christopher Stein, Chief, Services Surveys Branch, Bureau of Economic Analysis, at
Requests for additional information or specific questions related to collection activities should be directed to Christopher Stein, Chief, Services Surveys Branch, Bureau of Economic Analysis, (301) 278-9189, and
The Quarterly Survey of Transactions in Selected Services and Intellectual Property with Foreign Persons (Form BE-125) is a survey that collects data from U.S. persons who engage in covered transactions in selected services or intellectual property with foreign persons. A U.S. person means any individual, branch, partnership, associated group, association, estate, trust, corporation, or other organization (whether or not organized under the laws of any State), resident in the United States or subject to the jurisdiction of the United States. A U.S. person must report if they had combined sales of covered services or intellectual property to foreign persons that exceeded $6 million for the previous fiscal year, or are expected to exceed that amount during the current fiscal year, or if they had combined purchases of covered services or intellectual property from foreign persons that exceeded $4 million for the previous fiscal year, or are expected to exceed that amount during the current fiscal year.
The data are needed to monitor U.S. trade in services, to analyze the impact of these cross-border services on the U.S. and foreign economies, to compile and improve the U.S. economic accounts, to support U.S. commercial policy on trade in services, to conduct trade promotion, and to improve the ability of U.S. businesses to identify and evaluate market opportunities. The data are used in estimating the trade in services component of the U.S. international transactions accounts (ITAs) and national income and product accounts (NIPAs).
The Bureau of Economic Analysis (BEA) is proposing minor modifications to the existing transaction categories covered by the BE-125 survey and a change to the survey due date, beginning with reporting for first quarter 2022. The proposed modifications to the BE-125 survey would allow BEA to align its statistics more closely with international economic accounting guidelines and to increase the quality and usefulness of BEA's statistics on trade in services.
BEA proposes to eliminate the three transaction categories of other intellectual property. Rights to use other intellectual property (code 8.1), rights to reproduce and/or distribute other intellectual property (code 8.2), and outright sales or purchases of proprietary rights related to other intellectual property (code 8.3) would no longer be collected. BEA typically reclassifies transactions reported to BEA in these categories to research and development (R&D) services (transaction code 29.1, the provision of customized and non-customized R&D services; and, transaction code 29.2, other R&D services, including testing) and to other selected services (transaction code 42). With the elimination of the other intellectual property categories, respondents will be instructed to report transactions in these alternate categories.
BEA also proposes to change the due date of the survey to 30 days after the close of each quarter from 45 days for the three quarters that are not the final fiscal quarter of the year. For the final fiscal quarter of the year, reports would be due 45 days after the close of the quarter instead of 90 days. Shortening the reporting timeline will allow BEA to produce more accurate and complete trade in services statistics in preliminary estimates of the ITAs, which is critical information for policymakers' timely decisions on international trade policy. The earlier due date will allow BEA to use more reported data for preliminary statistics, improving the accuracy of both the aggregates and the country and service-type details, and reducing revisions in subsequent statistical releases. In addition, the proposed reporting deadlines are also consistent with the reporting deadlines of BEA's quarterly direct investment surveys.
BEA estimates there will be no change in the average number of burden hours per response, which is currently estimated to be 21 hours. While survey respondents will have to file earlier, the burden for the survey is unchanged because the same information will be required on the survey as in the past. The language in the instructions and definitions will be reviewed and adjusted as necessary to clarify survey requirements.
BEA contacts potential respondents by mail at the end of each quarter. Respondents would be required to file the completed BE-125 forms within 30 days after the end of each fiscal quarter that is not the final fiscal quarter of the year and within 45 days after the close of the final fiscal quarter of the year. Reports would be required from each U.S. person that had combined sales of covered services or intellectual property to foreign persons that exceeded $6 million for the previous fiscal year, or are expected to exceed that amount during the current fiscal year, or that had combined purchases of covered services or intellectual property from foreign persons that exceeded $4 million for the previous fiscal year, or that are expected to exceed that amount during the current fiscal year. Entities required to report will be contacted individually by BEA. Entities not contacted by BEA have no reporting responsibilities.
BEA offers its electronic filing option, the eFile system, for use in reporting on Form BE-125. For more information about eFile, go to
Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this ICR. 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 may 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.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) has received requests to conduct administrative reviews of various antidumping duty (AD) and countervailing duty (CVD) orders and findings with March anniversary dates. In accordance with Commerce's regulations, we are initiating those administrative reviews.
Applicable May 5, 2021.
Brenda E. Brown, AD/CVD Operations, Customs Liaison Unit, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230, telephone: (202) 482-4735.
Commerce has received timely requests, in accordance with 19 CFR 351.213(b), for administrative reviews of various AD and CVD orders and findings with March anniversary dates.
All deadlines for the submission of various types of information, certifications, or comments or actions by Commerce discussed below refer to the number of calendar days from the applicable starting time.
If a producer or exporter named in this notice of initiation had no exports, sales, or entries during the period of review (POR), it must notify Commerce within 30 days of publication of this notice in the
In the event Commerce limits the number of respondents for individual examination for administrative reviews initiated pursuant to requests made for the orders identified below, Commerce intends to select respondents based on U.S. Customs and Border Protection (CBP) data for U.S. imports during the POR. We intend to place the CBP data on the record within five days of publication of the initiation notice and to make our decision regarding respondent selection within 35 days of publication of the initiation
In the event Commerce decides it is necessary to limit individual examination of respondents and conduct respondent selection under section 777A(c)(2) of the Act, the following guidelines regarding collapsing of companies for purposes of respondent selection will apply. In general, Commerce has found that determinations concerning whether particular companies should be “collapsed” (
Pursuant to 19 CFR 351.213(d)(1), a party that has requested a review may withdraw that request within 90 days of the date of publication of the notice of initiation of the requested review. The regulation provides that Commerce may extend this time if it is reasonable to do so. Determinations by Commerce to extend the 90-day deadline will be made on a case-by-case basis.
Section 504 of the Trade Preferences Extension Act of 2015 amended the Act by adding the concept of a particular market situation (PMS) for purposes of constructed value under section 773(e) of the Act.
Neither section 773(e) of the Act nor 19 CFR 351.301(c)(2)(v) set a deadline for the submission of PMS allegations and supporting factual information. However, in order to administer section 773(e) of the Act, Commerce must receive PMS allegations and supporting factual information with enough time to consider the submission. Thus, should an interested party wish to submit a PMS allegation and supporting new factual information pursuant to section 773(e) of the Act, it must do so no later than 20 days after submission of initial responses to section D of the questionnaire.
In proceedings involving non-market economy (NME) countries, Commerce begins with a rebuttable presumption that all companies within the country are subject to government control and, thus, should be assigned a single antidumping duty deposit rate. It is Commerce's policy to assign all exporters of merchandise subject to an administrative review in an NME country this single rate unless an exporter can demonstrate that it is sufficiently independent so as to be entitled to a separate rate.
To establish whether a firm is sufficiently independent from government control of its export activities to be entitled to a separate rate, Commerce analyzes each entity exporting the subject merchandise. In accordance with the separate rates criteria, Commerce assigns separate rates to companies in NME cases only if respondents can demonstrate the absence of both
All firms listed below that wish to qualify for separate rate status in the administrative reviews involving NME countries must complete, as appropriate, either a separate rate application or certification, as described below. For these administrative reviews, in order to demonstrate separate rate eligibility, Commerce requires entities for whom a review was requested, that were assigned a separate rate in the most recent segment of this proceeding in which they participated, to certify that they continue to meet the criteria for obtaining a separate rate. The Separate Rate Certification form will be available on Commerce's website at
Entities that currently do not have a separate rate from a completed segment of the proceeding
Exporters and producers must file a timely Separate Rate Application or Certification if they want to be considered for respondent selection. Furthermore, exporters and producers who submit a Separate Rate Application or Certification and subsequently are selected as mandatory respondents will no longer be eligible for separate rate status
None.
During any administrative review covering all or part of a period falling between the first and second or third and fourth anniversary of the publication of an AD order under 19 CFR 351.211 or a determination under 19 CFR 351.218(f)(4) to continue an order or suspended investigation (after sunset review), Commerce, if requested by a domestic interested party within 30 days of the date of publication of the notice of initiation of the review, will determine whether AD duties have been absorbed by an exporter or producer subject to the review if the subject merchandise is sold in the United States through an importer that is affiliated with such exporter or producer. The request must include the name(s) of the exporter or producer for which the inquiry is requested.
For the first administrative review of any order, there will be no assessment of antidumping or countervailing duties on entries of subject merchandise entered, or withdrawn from warehouse, for consumption during the relevant “gap” period of the order (
Interested parties must submit applications for disclosure under administrative protective orders in accordance with the procedures outlined in Commerce's regulations at 19 CFR 351.305. Those procedures apply to administrative reviews included in this notice of initiation. Parties wishing to participate in any of these administrative reviews should ensure that they meet the requirements of these procedures (
Commerce's regulations identify five categories of factual information in 19 CFR 351.102(b)(21), which are summarized as follows: (i) Evidence submitted in response to questionnaires; (ii) evidence submitted in support of allegations; (iii) publicly available information to value factors under 19 CFR 351.408(c) or to measure the adequacy of remuneration under 19 CFR 351.511(a)(2); (iv) evidence placed on the record by Commerce; and (v) evidence other than factual information described in (i)-(iv). These regulations require any party, when submitting factual information, to specify under which subsection of 19 CFR 351.102(b)(21) the information is being submitted and, if the information is submitted to rebut, clarify, or correct factual information already on the record, to provide an explanation identifying the information already on the record that the factual information seeks to rebut, clarify, or correct. The regulations, at 19 CFR 351.301, also provide specific time limits for such factual submissions based on the type of factual information being submitted. Please review the
Any party submitting factual information in an AD or CVD proceeding must certify to the accuracy and completeness of that information using the formats provided at the end of the
Parties may request an extension of time limits before a time limit established under Part 351 expires, or as otherwise specified by Commerce.
These initiations and this notice are in accordance with section 751(a) of the Act (19 U.S.C. 1675(a)) and 19 CFR 351.221(c)(1)(i).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) finds that sales of finished carbon steel flanges (flanges) from Spain were made at less than normal value (NV) during the period of review (POR), June 1, 2018, through May 31, 2019.
Applicable May 5, 2021.
Marc Castillo or Mark Flessner, AD/CVD Operations, Office VI, Enforcement and Compliance, International Trade Administration, Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-0519 or (202) 482-6312, respectively.
On November 2, 2020, Commerce published the
The scope of the
All issues raised in the case and rebuttal briefs filed by parties in this review are addressed in the Issues and Decision Memorandum. A list of the issues addressed in the Issues and Decision Memorandum is in the appendix to this notice. The Issues and Decision Memorandum is a public document and is on file electronically via Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (ACCESS). ACCESS is available to registered users at
Based on our analysis of the comments received, and for the reasons explained in the Issues and Decision Memorandum, we made certain changes from the
For these final results, we determine that the following weighted-average dumping margins exist for the period June 1, 2018, through May 31, 2019:
For the rate for non-selected respondents in an administrative review, generally, Commerce looks to section 735(c)(5) of the Act, which provides instructions for calculating the all-others rate in a market economy investigation. Under section 735(c)(5)(A) of the Act, the all-others rate is normally “an amount equal to the weighted-average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero or
Commerce intends to disclose the calculations performed for these final results of review within five days of the date of publication of this notice in the
Commerce shall determine and U.S. Customs and Border Protection (CBP) shall assess antidumping duties on all appropriate entries. Commerce will instruct CBP to apply an
The following deposit requirements for estimated antidumping duties will be effective upon publication of the notice of these final results of review for all shipments of flanges from Spain entered, or withdrawn from warehouse, for consumption on or after the date of publication as provided by section 751(a)(2) of the Act: (1) The cash deposit rate for ULMA, Grupo Cunado, Tubacero, S.L., Ateaciones De Metales Sinterizados S.A., Transglory S.A., Central Y Almacenes, Friedrich Geldbach Gmbh, and Farina Group Spain will be 1.41 percent; (2) for merchandise exported by producers or exporters not covered in this review but covered in a prior segment of the proceeding, the cash deposit rate will continue to be the company-specific rate published for the most recent period; (3) if the exporter is not a firm covered in this review, a prior review, or the original investigation, but the producer is, then the cash deposit rate will be the rate established for the most recent period for the producer of the merchandise; (4) the cash deposit rate for all other producers or exporters will continue to be 18.81 percent,
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 duties prior to liquidation of the relevant entries during this POR. Failure to comply with this requirement could result in Commerce's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.
This notice also serves as the only reminder to parties subject to administrative protective order (APO) of their responsibility concerning the disposition 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 the terms of an APO is a sanctionable violation.
We are issuing and publishing this notice in accordance with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.213(h).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Notice; correction.
The Department of Commerce (Commerce) published a notice in the
Benito Ballesteros, AD/CVD Operations, Office V, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-7425.
In the
Pursuant to 19 CFR 351.213(d)(1), Commerce will rescind an administrative review, in whole or in part, if a party who requested the review withdraws the request within 90 days of the date of publication of notice of initiation. Mid Continent Steel & Wire, Inc. (the petitioner) withdrew its request for an administrative review on: Besco Machinery Industry (Zhejiang) Co., Ltd.; Cana (Tianjin) Hardware Industrial Co., Ltd.; Certified Products International Inc.; Chiieh Yung Metal Industrial Corporation; China Staple Enterprise (Tianjin) Co., Ltd.; Huanghua Jinhai Hardware Products Co. Ltd; Huanghua Xiong Hua Hardware Product Co., Ltd.; Huanghua Yufutai Hardware Products Limited; Jining Huarong Hardware Products; Liaocheng Minghui Hardware Products Co., Ltd.; Nanjing Yuechang Hardware Co., Ltd.; PT Enterprise Inc.; Shandong Oriental Cherry Hardware Group; Shandong Oriental Cherry Hardware Import & Export Co., Ltd.; Shandong Qingyun Hongyi Hardware Products Co., Ltd.; Shanghai Yueda Fasterners Co., Ltd.; Shanxi Tianli Enterprise Co., Ltd.; Shanxi Yuci Broad Wire Products Co., Ltd.; Smart (Tianjin) Technology Development Co., Ltd.; Tianjin Hongli Qiangsheng Import and Export Co., Ltd.; Tianjin Juxiang Metal Products Co.; Tianjin Lianda Group Ltd.
Accordingly, we are rescinding this review, in part, with respect to the companies identified above, pursuant to 19 CFR 351.213(d)(1).
In the
In the
In the
In the
However, this list was incorrect. Mingguang Abundant Hardware Products Co., Ltd., under its new name Mingguang Ruifeng Hardware Products Co., Ltd., and Qingdao D&L Group Co., Ltd., under Qingdao D&L Group Ltd., were granted separate rate status. For the remaining companies, except Tianjin Lianda Group Co., Ltd., Commerce has rescinded the review, as noted above.
For the
On March 20, 2017, Commerce published in the
This notice is issued and published in accordance with sections 751(a)(1) and 777(i) of the Tariff Act of 1930, as amended.
National Institute of Standards and Technology, Department of Commerce.
Announcement of meeting.
The National Advanced Spectrum and Communications Test Network (NASCTN) is hosting a public meeting on the conclusion of their project Characterizing User Equipment Emissions on May 13, 2021 at 10:00 a.m.-12:30 p.m. Mountain Daylight Time. The purpose of this meeting is to bring together federal, industry, and academic stakeholders; to disseminate NASCTN's findings; and to share information.
The NASCTN meeting on Characterizing User Equipment Emissions will take place on May 13, 2021 at 10:00 a.m.-12:30 p.m. Mountain Daylight Time.
The meeting will be held via web conference. For instructions on how to participate in the meeting, please see the
Matt Briel at
The National Advanced Spectrum and Communications Test Network (NASCTN) is hosting a public meeting on the conclusion of their project Characterizing User Equipment Emissions on May 13, 2021 at 10:00 a.m.-12:30 p.m. Mountain Daylight Time. The purpose of this meeting is to bring together federal, industry, and academic stakeholders; to disseminate NASCTN's findings; and to share information.
This project characterizes cellular emissions (LTE uplinks) to support interference models used to coordinate commercial carrier deployments in the AWS-3 band (1755-1780 MHz band) with Department of Defense systems that remain in the band. This effort consisted of two parts: (1) A Factor Screening effort which identified the key factors impacting emissions, and (2) characterization of factors impacting UE uplink emissions when closed-loop power control is enabled in the cell, and models of the emissions over operational scenarios. The output of this work can aid in the development of emissions models and interference calculations in the AWS-3 band and beyond.
More information about this project can be found on our website:
Individuals and representatives of organizations who would like to ask questions or offer suggestions related to the test are invited to request a place on the agenda. Approximately fifteen minutes will be reserved for public comments and speaking times will be assigned on a first-come, first-served basis. Public comments can be provided via email or by web conference
Anyone wishing to attend this meeting via web conference must register by 5:00 p.m. Mountain Daylight Time, May 11, 2021. Please submit your full name, email address, and phone number to Matt Briel at
15 U.S.C. 272.
National Institute of Standards and Technology, Commerce.
Notice of open meeting.
The National Institute of Standards and Technology (NIST) announces that the Manufacturing Extension Partnership (MEP) Advisory Board will hold an open meeting on Wednesday, June 30, 2021.
The meeting will be held on Wednesday, June 30, 2021 from 9:00 a.m. to 5:00 p.m. Central Time.
The meeting will be held at the Hyatt Regency Tulsa Downtown, 100 East Second Street, Tulsa, Oklahoma, 74103. Please note admittance instructions in the
Cheryl L. Gendron, Manufacturing Extension Partnership, National Institute of Standards and Technology, 100 Bureau Drive, Mail Stop 4800, Gaithersburg, Maryland 20899-4800; telephone number (301) 975-2785; email:
The MEP Advisory Board is authorized under Section 3003(d) of the America COMPETES Act (Pub. L. 110-69), as amended by the American Innovation and Competitiveness Act, Public Law 114-329 sec. 501 (2017), and codified at 15 U.S.C. 278k(m), in accordance with the provisions of the Federal Advisory Committee Act, as amended, 5 U.S.C. App. The Hollings Manufacturing Extension Partnership Program (Program) is a unique program consisting of Centers in all 50 states and Puerto Rico with partnerships at the federal, state and local levels. By statute, the MEP Advisory Board provides the NIST Director with: (1) Advice on the activities, plans and policies of the Program; (2) assessments of the soundness of the plans and strategies of the Program; and (3) assessments of current performance against the plans of the Program.
Background information on the MEP Advisory Board is available at
Pursuant to the Federal Advisory Committee Act, as amended, 5 U.S.C. App., notice is hereby given that the MEP Advisory Board will hold an open meeting on Wednesday, June 30, 2021 from 9:00 a.m. to 5:00 p.m. Central Time. The meeting agenda will include an update on the MEP programmatic operations, as well as provide guidance and advice on current activities related to the MEP National Network
Individuals and representatives of organizations who would like to offer comments and suggestions related to the MEP Advisory Board's business are invited to request a place on the agenda. Approximately 15 minutes will be reserved for public comments at the end of the meeting. Speaking times will be assigned on a first-come, first-served basis. The amount of time per speaker will be determined by the number of requests received but is likely to be no more than three to five minutes each. Requests must be submitted by email to
National Institute of Standards and Technology, Department of Commerce.
Announcement of meeting.
The National Advanced Spectrum and Communications Test Network (NASCTN) is hosting a public meeting on LTE impacts to Aeronautical Mobile Telemetry (AMT) as well as field and laboratory LTE waveform measurement on May 12, 2021 at 10:00 a.m.-12:30 p.m. Mountain Daylight Time. The purpose of this meeting is to bring together federal, industry, and academic stakeholders; to disseminate NASCTN's findings; and to share information.
The NASCTN meeting on LTE Impacts to AMT and LTE Waveform Measurement will take place on May 12, 2021 at 10:00 a.m.-12:30 p.m. Mountain Daylight Time.
The meeting will be held via web conference. For instructions on how to participate in the meeting, please see the
Matt Briel at
The National Advanced Spectrum and Communications Test Network (NASCTN) is hosting a public meeting on LTE impacts to AMT as well as field and laboratory LTE waveform measurement on May 12, 2021 at 10:00 a.m.-12:30 p.m. MDT. The purpose of this meeting is to bring together federal, industry, and academic stakeholders; to disseminate NASCTN's findings; and to share information.
This project builds on and extends a previous NASCTN project that measured the out-of-band (OoB) LTE evolved Node B (eNB) and User Equipment AWS-3 emissions into adjacent L and S frequency bands of AMT systems. While the previous test measured general LTE OoB emissions, this project specifically measures the impact to AMT systems. Results can be used to improve testing protocols that protect existing federal systems during new cellular deployments. More information about this project can be found on our website:
Individuals and representatives of organizations who would like to ask questions or offer suggestions related to the test are invited to request a place on the agenda. Approximately fifteen minutes will be reserved for public comments and speaking times will be assigned on a first-come, first-served basis. Public comments can be provided via email or by web conference attendance. The amount of time per speaker will be determined by the number of requests received. All those wishing to speak must submit their request by email to
Anyone wishing to attend this meeting via web conference must register by 5:00 p.m. Mountain Daylight Time, May 10, 2021. Please submit your full name, email address, and phone number to Matt Briel at
15 U.S.C. 272.
National Institute of Standards and Technology, Department of Commerce.
Notice of open meeting.
National Institute of Standards and Technology (NIST)'s Visiting Committee on Advanced Technology (VCAT or Committee) will meet on Tuesday, June 8, 2021, from 10:00 a.m. to 5:00 p.m. Eastern Time.
The VCAT will meet on Tuesday, June 8, 2021, from 10:00 a.m. to 5:00 p.m. Eastern Time.
The meeting will be a virtual meeting via webinar. Please note admittance instructions under the
Stephanie Shaw, VCAT, NIST, 100 Bureau Drive, Mail Stop 1060, Gaithersburg, Maryland 20899-1060, telephone number 240-298-4654. Ms. Shaw's email address is
15 U.S.C. 278, as amended, and the Federal Advisory Committee Act, as amended, 5 U.S.C. App.
Pursuant to the Federal Advisory Committee Act, as amended, 5 U.S.C. App., notice is hereby given that the VCAT will meet on Tuesday, June 8, 2021, from 10:00 a.m. to 5:00 p.m. Eastern Time. The meeting will be open to the public. The VCAT is composed of not fewer than 9 members appointed by the NIST Director, eminent in such fields as business, research, new product development, engineering, labor, education, management consulting, environment, and international relations. The primary purpose of this meeting is for the VCAT to review and make recommendations regarding general policy for NIST, its organization, its budget, and its programs within the framework of applicable national policies as set forth by the President and the Congress. The agenda will include an update on major programs, safety, and the status of the NIST Center for Neutron Research. It will also include discussions on the NIST budget and administration priorities including sessions on continuing efforts to strengthen diversity, equity, and inclusivity; NIST's role in the American Jobs Plan; and Standards, as well as an update on ongoing actions to implement NIST's Strategic Plan. The agenda may change to accommodate Committee business. The final agenda will be posted on the NIST website at
Individuals and representatives of organizations who would like to offer comments and suggestions related to the Committee's business are invited to request a place on the agenda. Approximately one-half hour will be reserved for public comments and speaking times will be assigned on a first-come, first-serve basis. The amount of time per speaker will be determined by the number of requests received but, is likely to be about 3 minutes each. The exact time for public comments will be included in the final agenda that will be posted on the NIST website at
All participants will be attending via webinar and must contact Ms. Shaw at
National Institute of Standards and Technology, Department of Commerce.
Notice of open meeting.
The National Construction Safety Team (NCST) Advisory Committee (Committee) will hold a virtual meeting via web conference on Thursday, June 10, 2021, from 11:00 a.m. to 3:30 p.m. Eastern Time and Friday, June 11, 2021, from 11:00 a.m. to 3:30 p.m. Eastern Time. The primary purpose of this meeting is to update the Committee on: The progress of the NCST investigation focused on the
The NCST Advisory Committee will meet on Thursday, June 10, 2021, from 11:00 a.m. to 3:30 p.m. Eastern Time and Friday, June 11, 2021, from 11:00 a.m. to 3:30 p.m. Eastern Time.
The meeting will be held via web conference. For instructions on how to participate in the meeting, please see the
Maria Dillard, Disaster and Failure Studies Program, Engineering Laboratory, NIST. Maria Dillard's email address is
The Committee was established pursuant to Section 11 of the NCST Act (Pub. L. 107-231, codified at 15 U.S.C. 7301
Pursuant to the Federal Advisory Committee Act, as amended, 5 U.S.C. App., notice is hereby given that the NCST Advisory Committee will meet on Thursday, June 10, 2021, from 11:00 a.m. to 3:30 p.m. Eastern Time and Friday, June 11, 2021, from 11:00 a.m. to 3:30 p.m. Eastern Time. The meeting will be open to the public and will be held via web conference. Interested members of the public will be able to participate in the meeting from remote locations. The primary purpose of this meeting is to update the Committee on the status of the NCST investigation focused on the impacts of Hurricane Maria on Puerto Rico and the implementation of recommendations from previous NCST investigations, including the Joplin tornado investigation. The agenda may change to accommodate Committee business. The final agenda will be posted on the NIST website at
Individuals and representatives of organizations who would like to offer comments and suggestions related to items on the Committee's agenda for this meeting are invited to request a place on the agenda. Approximately fifteen minutes will be reserved for public comments and speaking times will be assigned on a first-come, first-served basis. Public comments can be provided via email or by web conference attendance. The amount of time per speaker will be determined by the number of requests received. Questions from the public will not be considered during this period. All those wishing to speak must submit their request by email to the attention of Peter Gale at
Anyone wishing to attend this meeting via web conference must register by 5:00 p.m. Eastern Time, Friday, June 4, 2021, to attend. Please submit your full name, email address, and phone number to Peter Gale at
National Institute of Standards and Technology, Department of Commerce.
Notice of open meeting.
The Information Security and Privacy Advisory Board (ISPAB) will meet Wednesday, June 23, 2021 from 10:00 a.m. until 5:00 p.m., Eastern Time, and Thursday, June 24, 2021 from 10:00 a.m. until 5:00 p.m., Eastern Time. All sessions will be open to the public.
The meeting will be held on Wednesday, June 23, 2021 from 10:00 a.m. until 5:00 p.m., Eastern Time, and Thursday, June 24, 2021 from 10:00 a.m. until 5:00 p.m., Eastern Time.
The meeting will be a virtual meeting via webinar. Please note admittance instructions under the
Jeff Brewer, Information Technology Laboratory, National Institute of Standards and Technology, Telephone: (301) 975-2489, Email address:
Pursuant to the Federal Advisory Committee Act, as amended, 5 U.S.C. App., notice is hereby given that the ISPAB will hold an open meeting Wednesday, June 23, 2021 from 10:00 a.m. until 5:00 p.m., Eastern Time, and Thursday, June 24, 2021 from 10:00 a.m. until 5:00 p.m. Eastern Time. All sessions will be open to the public. The ISPAB is authorized by 15 U.S.C. 278g-4, as amended, and advises the National Institute of Standards and Technology (NIST), the Secretary of Homeland Security, and the Director of the Office of Management and Budget (OMB) on information security and privacy issues pertaining to Federal government information systems, including through review of proposed standards and guidelines developed by NIST. Details regarding the ISPAB's activities are available at
The agenda is expected to include the following items:
Note that agenda items may change without notice. The final agenda will be posted on the ISPAB event page at:
The ISPAB agenda will include a period, not to exceed thirty minutes, for submitted questions or comments from the public (Wednesday, June 23, 2021, between 4:30 p.m. and 5:00 p.m.). Submitted questions or comments from the public will be selected on a first-come, first-served basis and limited to five minutes per person.
Members of the public who wish to expand upon their submitted statements, those who had wished to submit a question or comment but could not be accommodated on the agenda, and those who were unable to attend the meeting via webinar are invited to submit written statements. In addition, written statements are invited and may be submitted to the ISPAB at any time. All written statements should be directed to the ISPAB Secretariat, Information Technology Laboratory by email to:
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of a public meeting; information regarding the agenda.
The National Marine Fisheries Service, Office of Sustainable Fisheries will host a virtual meeting of the Council Coordination Committee (CCC), consisting of the Regional Fishery Management Council (Council) chairs, vice chairs, and executive directors from May 18 to May 20, 2021. The intent of this meeting is to discuss issues of relevance to the Councils and NMFS, including issues related to the implementation of the Magnuson-Stevens Fishery Conservation and Management Reauthorization Act (MSA).
The meeting will begin at 1:30 p.m. Eastern Daylight Time (EDT) on Tuesday, May 18, 2021, recess at 5:30 p.m., reconvene at 1:30 p.m. EDT on Wednesday, May 19, 2021, recess at 5:30 p.m., and reconvene on the final day at 1:30 p.m. EDT, Thursday, May 20, 2021, adjourning at 5:30 p.m.
The meeting will be held online via WebEx. Attendees can find information on how to join at
Nicholas Pieper by email at
The 2007 reauthorization of the MSA established the CCC. The CCC consists of the chairs, vice chairs, and executive directors of each of the eight Regional Fishery Management Councils, or their respective proxies. All sessions are open to the public and time will be set aside for public comments at the end of each day and after specific sessions at the discretion of the meeting Chair. The meeting Chair will announce public comment times and instructions to provide comment at the start of each meeting day. Updates to this meeting and additional information will be posted on
The order in which the agenda items are addressed may be adjusted by the meeting Chair to stay on time. The CCC will meet as late as necessary to complete scheduled business.
If you have particular access needs please contact Nicholas Pieper at
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of SEDAR 68 Assessment Webinar V for Gulf of Mexico and Atlantic scamp grouper.
The SEDAR 68 assessment process of Gulf of Mexico and Atlantic scamp will consist of a series of data and assessment webinars, and a Review Workshop. See
The SEDAR 68 Assessment Webinar V will be held May 24, 2021, from 10 a.m. to 1 p.m., Eastern Time.
The meeting will be held via webinar. The webinar is open to members of the public. Those interested in participating should contact Julie A. Neer at SEDAR (see
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) a series of assessment webinars, and (3) A Review Workshop. The product of the Data Workshop is a report that compiles and evaluates potential datasets and recommends which datasets are appropriate for assessment analyses. The assessment webinars produce a 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 product of the Review Workshop is an Assessment 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 during the Assessment Webinar are as follows:
1. Using datasets and initial assessment analysis recommended from the data webinars, panelists will employ assessment models to evaluate stock status, estimate population benchmarks and management criteria, and project future conditions.
2. Participants will recommend the most appropriate methods and configurations for determining stock status and estimating population parameters.
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 that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the intent to take final action to address the emergency.
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; public meeting.
The Mid-Atlantic Fishery Management Council's Research Steering Committee (RSC) will hold a meeting.
The meeting will be held on Wednesday, June 2, 2021, beginning at 9 a.m. and conclude by 12 p.m. For agenda details, see
The meeting will be held via webinar. Details on the proposed agenda, webinar listen-in access, and briefing materials will be posted at the MAFMC's website:
Christopher M. Moore, Ph.D., Executive Director, Mid-Atlantic Fishery Management Council, telephone: (302) 526-5255.
The purpose of this RSC meeting is to discuss redevelopment of the research set-aside program. In doing so, the RSC will also discuss the outcomes of the March 2021 meeting, the Scientific and Statistical Committee Economic Working Group involvement, workshop participants, and future workshop agendas.
The meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Kathy Collins at the Mid-Atlantic Council Office, (302) 526-5253, 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; issuance of renewal incidental harassment authorization.
In accordance with the regulations implementing the Marine Mammal Protection Act (MMPA), as amended, notification is hereby given that NMFS has issued a Renewal incidental harassment authorization (IHA) to the Alaska Department of Transportation and Public Facilities (ADOT&PF) to incidentally harass marine mammals incidental to Phase I of the two-part ferry berth improvements and construction in Tongass Narrows, near Ketchikan, AK.
This authorization is effective from date of issuance through February 28, 2022.
Dwayne Meadows, Ph.D., Office of Protected Resources, NMFS, (301) 427-8401. Electronic copies of the original application, Renewal request, and supporting documents (including NMFS
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 such species or stocks for taking for certain subsistence uses (referred to here as “mitigation measures”). Monitoring and reporting of such takings are also required. The meaning of key terms such as “take,” “harassment,” and “negligible impact” can be found in section 3 of the MMPA (16 U.S.C. 1362) and the agency's regulations at 50 CFR 216.103.
NMFS' regulations implementing the MMPA at 50 CFR 216.107(e) indicate that IHAs may be renewed for additional periods of time not to exceed 1 year for each reauthorization. In the notice of proposed IHA for the initial authorization, NMFS described the circumstances under which we would consider issuing a Renewal for this activity, and requested public comment on a potential Renewal under those circumstances. Specifically, 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 activities as described in the Detailed Description of Specific Activity section of the initial IHA issuance notice is planned or (2) the activities as described in the Detailed Description of Specific Activity section of the initial IHA issuance notice would not be completed by the time the initial IHA expires and a Renewal would allow for completion of the activities beyond that described in the Dates and Duration section of the initial IHA issuance notice, provided all of the following conditions are met:
(1) 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);
(2) The request for renewal must include the following:
• 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 (
• 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; and
(3) 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.
An additional public comment period of 15 days (for a total of 45 days), with direct notice by email, phone, or postal service to commenters on the initial IHA, is provided to allow for any additional comments on the proposed Renewal. A description of the Renewal process may be found on our website at:
On March 1, 2020, NMFS issued two, consecutive IHAs to ADOT&PF to take marine mammals incidental to Phase I and II activity related to ferry berth improvements and construction in Tongass Narrows, near Ketchikan, AK (85 FR 673; January 7, 2020), the first one (for Phase 1) effective from March 1, 2020 through February 28, 2021. On December 28, 2020, NMFS received an application for the Renewal of the initial Phase I IHA. As described in the application for Renewal IHA, the activities for which incidental take is requested consist of activities that were covered by the initial Phase I authorization but were not completed prior to its expiration. As required, the applicant also provided a preliminary monitoring report (available at
ADOT&PF's planned construction activities includes a subset of the work activities under the 2020 initial IHA (Phase I) on the ferry berths in Tongass Narrows. The project is comprised of four permanent project components, identical to those described in the initial IHA: New Revilla ferry berth, new Gravina Island Shuttle Ferry Berth and Terminal Improvements, Gravina Airport Ferry Layup Facility, and the Gravina Freight.
This project will improve the reliability of the transportation system as well as access to Gravina Island and Ketchikan International Airport. This renewal authorization allows the completion of Phase I activities beyond the initial IHA's expiration, February 28, 2021.
ADOT&PF's renewal request initially included one minor change to the specified activity described in the initial IHA (other than the removal of the activities that have already been completed), specifically, the request described a higher maximum number of piles that may be installed per day via impact and vibratory driving (up from a
As described in the proposed Renewal, we noted a small increase in the number of days of temporary pile driving work that it took to complete the work that occurred at one site under the initial IHA. However, that change does not affect or change the previous analysis of the temporary pile driving work to be conducted at the remaining three sites under this Renewal.
Regarding the analysis of impacts, NMFS identified two changes in NMFS' recommended methods (not the applicant's activity) since the initial IHA that neither change the determinations nor change the take estimates in a manner such that they exceed those analyzed and authorized by the initial IHA. First, as noted by the MMC during the public comment period (see below), NMFS has updated its analytical method for assessing the impacts of down-the-hole (DTH) pile installation since the initial IHA was issued and newer methods were not applied in the proposed Renewal. While applying the alternative method would result in somewhat larger Level A harassment zones, as described below, a re-analysis of this activity under the alternative approach is not necessary or warranted in this situation, and therefore does not affect the analysis or findings from the initial IHA or the Renewal conditions being met.
Second, as previously described in the proposed Renewal, the driving of DTH holes for one of the structures (tension anchors) utilized in the applicant's activity and described in the initial IHA, was initially assessed by the applicant and NMFS as unlikely to result in the take of marine mammals because of the size of the holes, which are smaller than the holes for the structures specifically associated with take in the initial IHA (rock sockets). However, new sound source measurement data indicate source levels from DTH driving of tension anchors high enough to potentially result in the take of marine mammals. Accordingly, take from DTH driving of tension anchors is appropriately characterized and quantified the same as the DTH driving for rock sockets addressed in the initial IHA (though impacts are thought to be less, given the small size of the holes, which are 6-8 inches, as opposed to the smallest 24-in rock socket). Take in the initial IHA and Renewal IHA is estimated based on days of in-water work. Some of the driving days used to calculate take in the initial IHA included DTH for tension anchors, but where DTH drilling of tension anchors may occur on days without other driving, driving days have been added in the Renewal. Nonetheless, the total days of driving under the Renewal are still fewer than the total days of driving under the initial IHA, tension anchor driving activity was discussed in the initial IHA, quantitatively the impacts on marine mammals under the Renewal are less than those from the rock socket DTH under the initial IHA, and the mitigation for DTH remains the same and appropriate.
In summary, the activity is identical to the initial IHA and includes four methods of pile installation: Vibratory and impact hammers, DTH holes created for rock sockets for the piles and smaller DTH holes for the installation of tension anchors at some locations (see Tables 1 and 2). Moreover, Phase II activities will only begin upon the completion of Phase I, as stated in the 2020 initial IHA and proposed renewal (so there will be no overlap between the remaining Phase I activities under the Renewal IHA and the Phase II activities).
The amount of take requested for the Renewal IHA reflects the amount of remaining work under Phase I, the methods in the initial IHA (which remain appropriate for this Renewal), and consideration of marine mammal monitoring data from the 2020 construction activities indicating detection of notably fewer marine mammals within harassment zones than were authorized to be taken in the initial IHA. The potential effect of ADOT&PF's activities is to take a small number of eight species of marine mammals (Steller sea lion, harbor seal, harbor porpoise, Dall's porpoise, Pacific white-sided dolphin, killer whale, humpback whale, and minke whale) by Level B harassment and three (harbor seal, harbor porpoise, and Dall's porpoise), by Level A harassment incidental to underwater noise resulting from construction associated with the planned activities.
As discussed earlier, this is a Renewal to complete the subset of the activity not completed under the initial IHA (85 FR 673; January 7, 2020). Due to construction schedule delays, designated work was only conducted on 56 of the estimated 101 days of the initial IHA. ADOT&PF installed 11 temporary piles (of which one has already been removed) and 41 permanent piles over approximately 23 construction days in 2020. As of the submission of their Renewal request, ADOT&PF expected to drive pile for 40 more days and complete installation of 27 24-inch trestle piles, 5 24-inch bridge abutment piles, 15 24-inch floating fender dolphin piles, 27 remaining sheet piles, and 10 30-inch steel float piles for the Revilla New Ferry Berth and Upland Improvements between January 4 and February 28, 2021 under the 2020 initial IHA.
As of February 2, 2021, the following work remains to be completed during the one-year 2021 Renewal IHA: Installation of 192 piles, 73 rock sockets, and 78 tension anchors and installation (38) and removal (40) of temporary piles. This work is expected to take no more than 90 days of in-water piling activities. Although some work may have been completed between February 2 and the expiration of the initial IHA (February 28), the applicant requested authorization for the work remaining as of February 2 outlined in Tables 1 and 2. The Renewal IHA will be effective through February 28, 2022.
The effects of DTH driving were fully assessed in the initial IHA. At the time the initial IHA analysis was conducted, the DTH driving of the relatively smaller holes for tension anchors was described, but was not anticipated to produce sound levels that would result in the incidental take of marine mammals. However, NMFS' consideration of new monitoring data from the White Pass & Yukon Route project (Reyff, 2020) now suggests that sound levels from the DTH driving of the 6 to 8-inch holes for these particular structures may be high enough to result in take, and the take estimate in this Renewal considers this, as described above.
Regarding the number of days of temporary pile driving, the initial IHA application specified 7-11 total days of temporary pile driving would be needed to complete all projects during Phase I. The temporary pile driving at the Revilla New Ferry Berth required 7 days, instead of the 2-3 days listed in the IHA application, because of subsurface boulders and weather conditions. It is expected that, therefore, more total days than initially anticipated will be needed to complete the temporary pile driving over the entire Phase I period. However, the renewal application describes 5-8 days of temporary pile installation to complete the three remaining
Considering the information above, the total number of days of pile driving remaining (90) under the Renewal IHA is still fewer than included in the initial IHA (101).
The mitigation and monitoring will be identical to that of the 2020 initial IHA, with the indicated mitigation for the DTH driving of 24-in piles applied to DTH driving of the smaller tension anchors. A detailed description of the construction activities may be found in the notices of the proposed (84 FR 34134; July 17, 2019) and final initial IHAs (85 FR 673; January 7, 2020). All documents associated with the 2020 initial IHA (
A description of the marine mammals in the area of the activities for which take is authorized here, including information on abundance, status, distribution, and hearing, may be found in the
A description of the potential effects of the specified activity on marine mammals and their habitat for the activities for which take is authorized may be found in the
A detailed description of the methods and inputs used to estimate take for the specified activity are found in the
The rationale and take estimates presented in the initial proposed IHA (which were based on the likelihood of an individual or group entering the area some number of times during the activity, as opposed to being based on a species' density) remain applicable (Table 3). Further, the marine mammal detections reported in the preliminary monitoring report, which were very low as compared to the number authorized in relation to the activities conducted, do not suggest impacts of a scale or nature not previously analyzed or authorized.
The mitigation, monitoring, and reporting measures included as requirements in this authorization are identical to those included in the
The following measures are included in this renewal:
• Conduct briefings between construction supervisors and crews and the monitoring team prior to the start of all pile driving activity, and when new personnel join the work, to explain responsibilities, communication procedures, marine mammal monitoring protocol, and operational procedures;
• For in-water heavy machinery work other than pile driving/removal and drilling (
• Work must only occur during daylight hours, when visual monitoring of marine mammals can be conducted;
• For any marine mammal species for which take by Level B harassment has not been requested or authorized, in-water pile installation/removal and drilling will shut down immediately when the animals are sighted; and
• If take by Level B harassment reaches the authorized limit for an authorized species, pile installation will be stopped as these species approach the Level B harassment zone to avoid additional take of them.
The shutdown zones shown in Table 4 apply when a single piece of equipment is in use. In addition, ADOT&PF will implement a shutdown zone of 100 m for each vibratory hammer on days when it is anticipated that multiple vibratory hammers will be used.
When two or more pieces of equipment are used simultaneously, and the noise they produce is not continuous or is a combination of continuous and impulsive, Table 4, above, will be followed to define the Level A and Level B harassment monitoring zones for each piece of equipment.
On days when multiple pieces of equipment that produce continuous noise are used simultaneously, source levels will be determined as shown in Table 9, Table 10, Table 11, and Table 12 of the initial final IHA (85 FR 673; January 7, 2020) with the resulting harassment zones being defined in Table 4 of the final initial IHA and proposed Renewal IHA. The calculated source level will be used to determine the Level B harassment monitoring zones in accordance with values depicted in Table 14 of the initial final IHA (85 FR 673; January 7, 2020). The assumption stands that a minimum of two pieces of equipment will be used on 30 percent of construction days; therefore, decreasing the total number of pile installation days from 128 to 90 days as well as the number of days when the Level B harassment zone size could exceed 12,023 m.
Based on our evaluation of the applicant's required measures NMFS has determined that the mitigation measures provide the means of 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.
Monitoring and reporting requirements prescribed by NMFS should contribute to improved understanding of one or more of the following:
• 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.
Monitoring would be conducted 30 minutes before, during, and 30 minutes after pile driving/removal and drilling activities. In addition, observers shall record all incidents of marine mammal occurrence), 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 equipment is no more than 30 minutes.
There will be at least one PSO present at or near each construction site during in-water pile installation and removal so that all Level A harassment zones and shutdown zones are monitored by a dedicated PSO at all times. PSOs will not perform duties for more than 12 hours in a 24-hour period. PSOs will be land-based observers, positioned at the best practical vantage points. At least one other PSO for each active worksite will begin at the central worksite and travel along the Tongass Narrows until they have reached the edges of the monitoring zones, based on the Level B harassment zones. These PSOs will then monitor the edges of the monitoring zone and as much as possible of the rest of the monitoring zone, looking for animals entering the Level B harassment zone. If waters exceed a sea state that restricts the PSO's ability to make observations within the Level A harassment zones (
When combinations of one DTH hammer with a vibratory hammer, two DTH hammers, or two DTH hammers with a vibratory hammer are used simultaneously, creating a Level B harassment zone that is greater than 12,023 m in radius, one additional PSO (at least two total) will be stationed at the northernmost land-based location at the entrance to Tongass Narrows. One PSO will focus on Tongass Narrows, specifically watching for marine mammals that could approach or enter Tongass Narrows and the project area. The second PSO will look out into Clarence Strait, watching for marine mammals that could swim through the ensonified area. This monitoring requirement for concurrent driving scenarios was not included in the proposed initial IHA, but was included in the final initial IHA. No additional PSOs will be required at the southern-most monitoring location because the Level B harassment zones are truncated to the southeast by islands, which prevent propagation of sound in that direction beyond the confines of Tongass Narrows. Takes by Level B harassment will be recorded by PSOs and extrapolated based upon the number of observed takes and the
With this configuration, PSOs can have a full view of the Level A harassment zone and awareness of as much of the Level B harassment zone as possible. This monitoring will provide information on marine mammal occurrence within Tongass Narrows and how these marine mammals are impacted by pile installation and removal.
All PSOs will be trained in marine mammal identification and behaviors and are required to have no other project-related tasks while conducting monitoring. In addition, monitoring will be conducted by qualified observers, who will be placed at the best vantage point(s) practicable to monitor for marine mammals and implement shutdown/delay procedures when applicable by calling for the shutdown to the hammer operator. Qualified observers are trained and/or experienced professionals, with the following minimum qualifications:
• Independent observers (
• Observers must have their Curriculum Vitae/resumes submitted to and approved by NMFS;
• Advanced education in biological science or related field (
• Experience and ability to conduct field observations and collect data according to assigned protocols (this may include academic experience);
• At least one observer must have prior experience working as an observer;
• 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 no 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.
NMFS is requiring that ADOT&PF submit a preliminary marine mammal monitoring report for the work covered under the initial IHA and this renewal at least 4 months prior to beginning the work covered under their second IHA, referred to as Phase II (85 FR 673; January 7, 2020). This preliminary report must contain all items that would be included in the draft final report (see below). This will allow NMFS to assess the impact of the activities relative to the analysis presented here, and modify the IHA for Phase II if the preliminary monitoring report shows unforeseen impacts on marine mammals in the area. If needed, NMFS will publish an amended proposed IHA, describing any changes but referencing the original IHA for Phase II, and include an opportunity for the public to comment on the amended proposed authorization.
In addition to the preliminary monitoring report discussed above, separate draft marine mammal monitoring reports must be submitted to NMFS within 90 days after the completion of both Phase I and Phase II pile driving, pile removal, and drilling activities. These reports will include an overall description of work completed, a narrative regarding marine mammal sightings, and associated PSO data sheets. Specifically, the reports must include:
• Date and time that monitored activity begins and ends;
• Construction activities occurring during each daily observation period;
• Weather parameters (
• Water conditions (
• Species, numbers, and, if possible, sex and age class of marine mammals;
• Description of any observable marine mammal behavior patterns, including bearing and direction of travel and distance from pile driving activity;
• Distance from pile driving/removal activities to marine mammals and distance from the marine mammals to the observation point;
• Locations of all marine mammal observations; and
• An estimate of total take based on proportion of the monitoring zone that was observed.
If no comments are received from NMFS within 30 days, that phase's draft final report will constitute the final report. If comments are received, a final report for the given phase 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, ADOT&PF shall report the incident to the Office of Protected Resources, NMFS and to the Alaska Regional Stranding Coordinator as soon as feasible. The report must include the following information:
• 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.
A notice of NMFS' proposal to issue a Renewal IHA to ADOT&PF was published in the
As the MMC notes one of the conditions of a Renewal IHA is that there are no more than minor changes in the applicant's activities from those described and analyzed in the initial IHA. As described above, ADOT&PF withdrew their request to increase the maximum number of piles that could be installed by impact driving in a day.
Regarding the change in the DTH calculation methods for Level A harassment raised by the MMC, we first note that it is not a change in the applicant's planned activity, but rather a change in NMFS' approach since the initial IHA was issued. As a general matter, renewal conditions are focused on ensuring the activity is identical, or has no more than minor changes, and the absence of new information suggesting impacts of a nature or scale not initially analyzed and affecting the initial findings, not on changes in NMFS recommended methods.
As described in more detail in our recent response to a similar comment for the CTJV Renewal (86 FR 14609, March 17, 2021), the DTH data available to inform the analytical approach are limited and the updated interim methodology adopted by NMFS moving forward, and referenced in the MMC's comment, takes the most conservative approach to both Level A and Level B harassment estimation, with the expectation that take is likely overestimated using this method. The fact that NMFS is using the new approach moving forward does not mean the prior approach is unsound. Here, while the Level A harassment zones would be somewhat larger using the updated methodology, it would not change the take estimates for any species or stock, the nature of the expected impacts, or any of our findings. The take estimates in the initial IHA were based on the prediction that a very small number of three species may occasionally potentially approach close enough within a given amount of days/months (which are still fewer for this renewal than for the initial IHA) and stay long enough to incur PTS, rather than upon any density/area calculations. It is highly unlikely that a change in the Level A harassment zones would result in any change in the potential for any of this to occur. Further, as described below, the monitoring to date indicates that far fewer marine mammals are entering the activity area than expected, and the mitigation measures described in the initial IHA remain adequate and appropriate. Accordingly, as required under the Renewal conditions, upon review of the request for Renewal, the status of the affected species or stocks, the preliminary monitoring report, and any other pertinent information, we have determined that there are no changes in the activities, the mitigation and monitoring measures will remain the same and appropriate, and the findings in the initial IHA remain valid.
Regarding the preliminary monitoring information provided by the current IHA Holder and applicant for the Renewal, significantly fewer marine mammals of all species were detected and reported within harassment zones than were predicted and authorized (17 reported takes, less than 1 percent of the total take authorized across species, and no more than 3 percent of any species or stock) given the amount of activity conducted. Regarding the MMC's comment that ADOT&PF was required to extrapolate take based on the unseen portion of the zones, the requirement does not apply in this case because PSOs positioned themselves along the Narrows in a manner that enabled a full view of the entire Level B harassment zones. The Level B harassment zones were completely visible throughout the work conducted to date, and so extrapolation was not necessary as there were no unseen portions of the zones. The preliminary monitoring data provided by the applicant clearly does not indicate impacts of a scale or nature not previously analyzed or authorized.
As described above, despite development of an alternative approach to DTH pile driving since the initial IHA that is not necessary to apply here, this project qualifies for a renewal in that the applicant proposes to complete a subset of the initially analyzed activities with no changes, the preliminary monitoring shows no impacts of a scale or nature beyond those previously analyzed (in fact they were significantly less than that predicted), the total number of days of driving and the amount of take authorized are both less than that in the initial IHA, the mitigation and monitoring measures remain the same, and upon review NMFS has determined that the findings in the initial IHA remain valid. We therefore decline to accept the Commission's recommendation that we deny the renewal request.
Further, we note in prior responses to comments about IHA Renewals (
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 (IHAs with no anticipated serious injury or mortality) of the Companion Manual for NAO 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 determined that the issuance of the IHA Renewal qualifies to be categorically excluded from further NEPA review.
NMFS has concluded that there is no new information suggesting that our analysis or findings should change from those reached for the initial IHA. This includes consideration of all information discussed above, as well as stock abundance information. The estimated abundance of the West Coast Transient and Northern Resident Killer whale stocks and Steller sea lion Eastern U.S. stock have increased slightly, whereas, the Clarence Strait harbor seal stock decreased slightly. Based on the information and analysis contained here and in the referenced documents, NMFS has determined the following: (1) The required mitigation measures will effect the least practicable impact on marine mammal species or stocks and their habitat; (2) the authorized takes will have a negligible impact on the affected marine mammal species or stocks; (3) the authorized takes represent small numbers of marine mammals relative to the affected stock abundances; (4) ADOT&PF's activities will not have an unmitigable adverse impact on taking for subsistence purposes as no relevant subsistence uses of marine mammals are implicated by this action, and; (5) appropriate monitoring and reporting requirements are included.
Section 7(a)(2) of the Endangered Species Act of 1973 (ESA: 16 U.S.C. 1531
NMFS' Alaska Region issued a revised Biological Opinion to NMFS' Office of Protected Resources on December 19, 2019 which concluded that issuance of IHAs to ADOT&PF is not likely to jeopardize the continued existence of Mexico DPS humpback whales. Since then, the regional office determined that issuance of the renewal IHA will not alter take or require re-initiation of the consultation.
As a result of these determinations, NMFS has issued a Renewal IHA to ADOT&PF for the taking of marine mammals incidental to the remaining activities of Phase I of the two-phase ferry berth improvements and construction in Tongass Narrows, near Ketchikan, AK from the date of issuance through February 28, 2022, provided the previously described mitigation, monitoring, and reporting requirements are incorporated. The IHA can be found at
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of public meeting.
The South Atlantic Fishery Management Council (Council) will hold a meeting of its Private Recreational Reporting Workgroup evaluating reporting alternatives for the private recreational snapper grouper fishery.
The Workgroup meeting will be held via webinar from 9 a.m. to 12 p.m. on Wednesday, May 26, 2021.
Kim Iverson, Public Information Officer, SAFMC; phone: (843) 302-8440 or toll free: (866) SAFMC-10; fax: (843) 769-4520; email:
Meeting information, including the webinar link, agenda, and briefing book materials will be posted on the Council's website at:
Agenda items include:
Written comments may be submitted electronically via the Council's website at
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 that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the Council's intent to take final action to address the emergency.
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 of public meeting.
The Pacific Fishery Management Council's (Pacific Council) Ad Hoc Climate and Communities Core Team (CCCT) is holding an online meeting, which is open to the public.
The online meeting will be held Friday, May 21, 2021, beginning at 1:30 p.m., Pacific Time and continuing until business is completed.
This meeting will be held online. Specific meeting information, including directions on how to join the meeting and system requirements will be provided in the meeting announcement on the Pacific Council's website (see
At this meeting, the CCCT will discuss the drafting of a final report for the Fishery Ecosystem Plan Climate and Communities Initiative. The report will be based on a review of information generated during the Initiative and make recommendations on tools, products, and processes to build consideration of, and adaption to, climate change into ongoing Council processes. The report is scheduled for Council consideration at its September 2021 meeting. The CCCT will also discuss additional activities, including future meetings, related to completion of the report and the Initiative.
A meeting agenda will be posted on the Pacific Council website at least one week before the meeting date.
Although non-emergency issues not contained in the meeting agenda may be discussed, those issues may not be the subject of formal action during this meeting. Action will be restricted to those issues specifically listed in this document and any issues arising after publication of this document that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the intent to take final action to address the emergency.
Requests for sign language interpretation or other auxiliary aids should be directed to Mr. Kris Kleinschmidt, (
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of public online meeting.
The Pacific Fishery Management Council's (Pacific Council) Scientific and Statistical Committee's (SSC's) Economics and Groundfish Subcommittees will meet to review a new Quota Share Owners' Cost Survey to inform decisions on the west coast limited entry trawl catch shares program and to do some initial planning on an upcoming review of the limited entry fixed gear sablefish program.
The online meeting will be held Wednesday, May 26, 2021, from 9 a.m.to 1 p.m., Pacific Daylight Time.
This meeting will be held online. Specific meeting information, including directions on how to join the meeting and system requirements will be provided in the meeting announcement on the Pacific Council's website (see
John DeVore, Staff Officer, Pacific Council; telephone: (503) 820-2413.
The purpose of the SSC Economics and Groundfish Subcommittees' meeting will be to review a new Quota Shares Owners' Cost Survey proposed by the Northwest Fisheries Science Center to inform future management decisions on the west coast limited entry trawl catch shares program. The SSC Economics and Groundfish Subcommittees will also work with Pacific Council staff to plan the upcoming review of the limited entry fixed gear sablefish program. The SSC Economics and Groundfish Subcommittees' reports are scheduled to be presented to the full SSC and the Pacific Council at the June 2021 Pacific Council meeting.
Although non-emergency issues not contained in the meeting agenda may be discussed, those issues may not be the subject of formal action during this meeting. Action will be restricted to those issues specifically listed in this document and any issues arising after publication of this document that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the intent to take final action to address the emergency.
Requests for sign language interpretation or other auxiliary aids should be directed to Mr. Kris Kleinschmidt, (
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of SEDAR webinar I for SEDAR Procedural Workshop 8: Fishery Independent Index Development under changing survey design.
The SEDAR Procedural Workshop 8 for Fishery Independent Index Development will consist of a series of webinars, and an in-person workshop. See
The SEDAR Procedural Workshop 8 webinar I will be held May 20, 2021, 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.
Item(s) for discussion:
Participants will discuss what data available for use in SEDAR Procedural Workshop 8.
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 that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the intent to take final action to address the emergency.
The times and sequence specified in this agenda are subject to change.
16 U.S.C. 1801
National Advisory Committee on Institutional Quality and Integrity (NACIQI), U.S. Department of Education.
Request for student nominees for appointment to serve on the National Advisory Committee on Institutional Quality and Integrity (NACIQI).
At least one member of the National Advisory Committee on Institutional Quality and Integrity (NACIQI) must be a student who, at the time of the appointment by the Secretary of Education, is attending an institution of higher education.
Nominations must be received no later than Friday, May 28, 2021.
You may submit nomination(s), including attachments,
For questions, please contact the U.S. Department of Education, Committee Management Office at (202) 401-3677.
NACIQI's Statutory Authority and Function: The NACIQI is established under Section 114 of the HEA and is composed of 18 members who are appointed—
(A) On the basis of the individuals' experience, integrity, impartiality, and good judgment.
(B) From among individuals who are representatives of, or knowledgeable concerning, education and training beyond secondary education, representing all sectors and types of institutions of higher education; and
(C) On the basis of the individuals' technical qualifications, professional standing, and demonstrated knowledge in the fields of accreditation and administration of higher education.
The NACIQI meets at least twice a year and advises the Secretary of Education with respect to:
• The establishment and enforcement of the standards of accrediting agencies or associations under subpart 2 of part H of Title IV, HEA.
• The recognition of specific accrediting agencies or associations.
• The preparation and publication of the list of nationally recognized accrediting agencies and associations.
• The eligibility and certification process for institutions of higher education under Title IV of the HEA, together with recommendations for improvements in such process.
• The relationship between (1) accreditation of institutions of higher education and the certification and eligibility of such institutions, and (2) State licensing responsibilities with respect to such institutions.
• Any other advisory functions relating to accreditation and institutional eligibility that the Secretary may prescribe by regulation.
• A cover letter addressed to the Secretary of Education as follows: Honorable Miguel Cardona, Secretary of Education, U.S. Department of Education, 400 Maryland Avenue SW, Washington, DC 20202. In the letter, please note your reason(s) for submitting the nomination.
• A copy of the nominee's current resume.
• Contact information for the nominee (name, address, contact phone number, and email address).
In addition, the cover letter must include a statement affirming the nominee (if you are nominating someone other than yourself) has agreed to be nominated and is willing to serve on the NACIQI if appointed by the Secretary of Education. Student nominees should be broadly knowledgeable about higher education and accreditation.
You may also access documents of the Department published in the
Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection:
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j. Deadline for filing comments, motions to intervene, and protests, is 30 days from the issuance date of this notice by the Commission.
The Commission strongly encourages electronic filing. Please file comments, motions to intervene, and protests using the Commission's eFiling system at
The Commission's Rules of Practice and Procedure require all intervenors filing documents with the Commission to serve a copy of that document on each person whose name appears on the official service list for the project. Further, if an intervenor files comments or documents with the Commission relating to the merits of an issue that may affect the responsibilities of a particular resource agency, they must also serve a copy of the document on that resource agency.
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m. Individuals desiring to be included on the Commission's mailing list should so indicate by writing to the Secretary of the Commission.
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Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection:
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e.
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The Commission strongly encourages electronic filing. Please file comments, motions to intervene, and protests using the Commission's eFiling system at
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m. Individuals desiring to be included on the Commission's mailing list should so indicate by writing to the Secretary of the Commission.
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Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following electric securities filings:
Take notice that the Commission received the following electric reliability 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 Energy Regulatory Commission.
Notice of information collection and request for comments.
In compliance with the requirements of the Paperwork Reduction Act of 1995, the Federal Energy Regulatory Commission (Commission or FERC) is soliciting public comment on the currently approved information collections, FERC-65 (Notice of Holding Company Status), FERC-65A (Exemption Notification of holding Company Status), and FERC-65B (Waiver Notification of Holding Company Status), which will be submitted to the Office of Management and Budget (OMB) for a review of the information collection requirements.
Comments on the collection of information are due July 6, 2021.
You may submit comments (identified by Docket No. IC21-27-000) by either of the following methods:
Electronic filing through
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• For those unable to file electronically, comments may be filed by USPS mail or by hand (including courier) delivery:
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Ellen Brown may be reached by email at
The Pursuant to section 366.4 of the Commission's rules and regulations, persons who meet the definition of a holding company shall provide the Commission notification of holding company status. The FERC-65 is a one-time informational filing outlined in the Commission's regulations at 18 Code of Federal Regulations (CFR) 366.4. The FERC-65 must be submitted within 30 days of becoming a holding company.
While noting the previously outlined requirements of the FERC-65, the Commission has allowed for an exemption from the requirement of providing the Commission with a FERC-65 if the books, accounts, memoranda, and other records of any person are not relevant to the jurisdictional rates of a public utility or natural gas company; or if any class of transactions is not relevant to the jurisdictional rates of a public utility or natural gas company. Persons seeking this exemption file the FERC-65A, which must include a form of notice suitable for publication in the
If an entity meets the requirements in 18 CFR 366.3(c), they may file a FERC-65B waiver notification pursuant to the procedures outlined in 18 CFR 366.4. Specifically, the Commission waives the requirement of providing it with a FERC-65 for any holding company with respect to one or more of the following: (1) Single-state holding company systems; (2) holding companies that own generating facilities that total 100 MW or less in size and are used fundamentally for their own load or for sales to affiliated end-users; or (3) investors in independent transmission-only companies. Filings may be made in hardcopy or electronically through the Commission's website.
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 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 Energy Regulatory Commission, Department of Energy.
Notice of information collection and request for comments.
In compliance with the requirements of the Paperwork Reduction Act of 1995, the Federal Energy Regulatory Commission (Commission or FERC) is soliciting public comment on the currently approved information collection, FERC-725A (Mandatory Reliability Standards for the Bulk-Power System). This notice includes the burden totals for proposed Reliability Standard FAC-008-5.
Comments on the collection of information are due July 6, 2021.
You may submit copies of your comments (identified by Docket No. IC21-19-000) by one of the following methods:
Electronic filing through
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• For those unable to file electronically, comments may be filed by USPS mail or by hand (including courier) delivery:
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Ellen Brown may be reached by email at
On February 3, 2006, the Commission issued Order No. 672, implementing section 215 of the FPA.
On March 16, 2007, the Commission issued Order No. 693, a Final Rule adding part 40, a new part, to the Commission's regulations. The Final Rule states that this part applies to all users, owners and operators of the Bulk-Power System within the United States (other than Alaska or Hawaii). It also requires that each Reliability Standard identify the subset of users, owners and operators to which that particular Reliability Standard applies. The new regulations also require that each Reliability Standard that is approved by the Commission will be maintained on the ERO's internet website for public inspection.
In order that the Commission is able to perform its oversight function with regard to Reliability Standards that are proposed by the ERO and established by the Commission, it is essential that the Commission receive timely information regarding all or potential violations of Reliability Standards. While section 215 of the FPA contemplates the filing of the record of an ERO or Regional Entity enforcement action, FERC needs information regarding violations and potential violations at or near the time of occurrence. Therefore, it will work with the ERO and regional reliability organizations to be able to use the electronic filing of information so the Commission receives timely information. The new regulations also require that each Reliability Standard that is approved by the Commission will be maintained on the ERO's internet website for public inspection. In accordance with section 39.5 of the Commission's regulations, the ERO must file each Reliability Standard or a modification to a Reliability Standard with the Commission. The filing is to include a concise statement of the basis and purpose of the proposed Reliability Standard, either a summary of the Reliability development proceedings conducted by the ERO or a summary of the Reliability Standard development proceedings conducted by a Regional Entity together with a summary of the Reliability Standard review proceedings of the ERO and a demonstration that the proposed Reliability Standard is “just, reasonable, not unduly discriminatory or preferential, and in the public interest.
The proposed information collection changes in Docket No. RD21-4-000 relate to the proposed Reliability Standard FAC-008-05 (Facility Ratings) developed by the North American Electric Reliability Corporation (NERC), and submitted to the Commission for approval. The Commission received NERC's petition to approve the proposed Reliability Standards.
On February 19, 2021, NERC filed a petition seeking approval of proposed Reliability Standard FAC-008-5. NERC states that proposed Reliability Standard FAC-008-5 reflects the retirement of Requirement R7 of the currently effective standard. NERC notes that this proposal was recommended following the first phase of work under the NERC Standards Efficiency Review and that in its Order No. 873 remanding a previously proposed version of the FAC-008 Reliability Standard, the Commission agreed that the retirement of Requirement R7 from the standard would not result in a reliability gap.
In June 2019, following the conclusion of the standard development process, NERC submitted a series of standard retirement proposals to the Commission. Among the proposals, NERC submitted for Commission approval proposed Reliability Standard FAC-008-4, in which NERC proposed to retire Requirements R7 and R8 of currently effective Reliability Standard FAC-008-3. In September 2020, the Commission issued Order No. 873 regarding NERC's retirement proposals. In this order, the Commission remanded proposed Reliability Standard FAC-008-4 to NERC for further consideration, citing concerns with the proposed retirement of Requirement R8 of the currently effective standard. The standard drafting team determined to develop a new version of the Reliability Standard, proposed Reliability Standard FAC-008-5, in which only Requirement R7 of the currently effective standard would be proposed for retirement. Reliability Standard FAC-008-3 Requirement R7 requires Generator Owners and Transmission Owners to provide certain information to requesting Reliability Coordinator(s), Planning Coordinator(s), Transmission Planner(s), Transmission Owner(s), and Transmission Operator(s) regarding their Facilities, as follows:
In the years since Reliability Standard FAC-008-3 was developed, NERC has developed other Reliability Standards that render the data provision obligations of Requirement R7 redundant. Specifically, Reliability Standards MOD-032-1, IRO-010-2, and TOP-003-3 contain provisions to help ensure that the entities that have the responsibility to plan and operate the Bulk Power System have the data they need from Generator Owners and Transmission Owners for operations and planning. Requirement R1 of Reliability Standard MOD-032-1—Data for Power System Modeling and Analysis requires the Planning Coordinator and Transmission Planner to develop modeling data requirements and reporting procedures including the data listed in Attachment 1 to the standard. This data would include information on power capabilities and Facility Ratings. Requirement R2 requires the Generator Owner and Transmission Owner to provide the requested information. Requirement R1 of Reliability Standard IRO-010-2—Reliability Coordinator Data Specification and Collection requires the Reliability Coordinator to maintain a documented specification for the data necessary to perform its Operational Planning Analyses, Real-time monitoring, and Real-time Assessments. This data necessarily includes Facility Ratings as inputs to System Operating Limit monitoring. Requirement R3 requires the Transmission Owner and Generator Owner to provide requested data. Similarly, Requirement R1 of Reliability Standard TOP-003-3—Operational Reliability Data requires the Transmission Operator to maintain a documented data specification (Requirement R1) and for the Transmission Owner and Generator Owner to provide the requested data (Requirement R5).
The following table represents the current burden associated with all Mandatory Reliability Standards that fall under FERC-725A.
Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection:
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b.
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d.
e.
f.
g.
h.
i.
j.
The Commission strongly encourages electronic filing. Please file comments, motions to intervene, and protests using the Commission's eFiling system at
The Commission's Rules of Practice and Procedure require all intervenors filing documents with the Commission to serve a copy of that document on each person whose name appears on the official service list for the project. Further, if an intervenor files comments or documents with the Commission relating to the merits of an issue that may affect the responsibilities of a particular resource agency, they must also serve a copy of the document on that resource agency.
k.
l. In addition to publishing the full text of this document in the
m. Individuals desiring to be included on the Commission's mailing list should so indicate by writing to the Secretary of the Commission.
n.
o.
This is a supplemental notice in the above-referenced proceeding of Light Power & Gas LLC's application for market-based rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is May 19, 2021.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically may mail similar pleadings to the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426. Hand delivered submissions in docketed proceedings should be delivered to Health and Human Services, 12225 Wilkins Avenue, Rockville, Maryland 20852.
In addition to publishing the full text of this document in the
Office of Land and Emergency Management (OLEM), Environmental Protection Agency (EPA).
Notice of a modified system of records.
The U.S. Environmental Protection Agency's (EPA), Office of Land and Emergency Management (OLEM) is giving notice that it proposes to modify a system of records pursuant to the provisions of the Privacy Act of 1974. Environmental Assessments of Residential Properties (EARP) is being modified to clarify the nature of the information, and the ways in which that information may be used and shared with parties who are part of the evaluation and coordination process. This system of records contains information of individuals that is collected in the course of response and environmental assessment actions, including actions taken under a variety of EPA authorities. The information maintained under this System of
Persons wishing to comment on this system of records notice must do so by June 4, 2021. New routine uses for this modified system of records will be effective June 4, 2021.
Submit your comments, identified by Docket ID No. EPA-HQ-OLEM-2021-0038, by one of the following methods:
Out of an abundance of caution for members of the public and our staff, the EPA Docket Center and Reading Room are closed to the public, with limited exceptions, to reduce the risk of transmitting COVID-19. Our Docket Center staff will continue to provide remote customer service via email, phone, and webform. We encourage the public to submit comments via
Joseph Schaefer, Office of Land and Emergency Management (OLEM), Office of Superfund Remediation and Technology Information (OSRTI), Mail Code 205A-ERT, Raritan Depot, 2890 Woodbridge Avenue, Edison, NJ 08837; telephone number (732) 906-6920;
EPA created a Privacy Act system of records to allow the agency to maintain records that are necessary to conduct environmental assessments at residential properties in order to respond to emergency situations and during environmental assessment activities conducted by EPA under many different programs including Superfund (42 U.S.C. 9601
The original notice highlighted that EPA is often required to support or work closely with state and local agencies or other federal agencies evaluating the health and welfare of affected communities. This cooperation and coordination also extends to tribes and tribal agencies.
The original notice included a list of the types of information commonly gathered in environmental assessments and responses, including: Names of residents; address information; phone number or other contact information; test results from environmental sampling; information about the building structure, such as the age of the structure, information about the service lines, plumbing and pipe information, and building materials in the structure; information about the length of residence or ownership of the structure; and geographic information system (GIS) coordinates. This modified notice provides further examples of typical types of information that may be gathered: Age; medical and health information; property ownership and property management information; information about physical dimensions of the property and structures present on the property; information about wells on the property; information about how the property is used; information about
As described in more detail in the original notice, information and data collected in environmental assessments and responses will generally be stored in an agency-approved electronic database, which will be managed by EPA system administrators. Other associated records may also be stored in other agency-approved electronic or paper formats, such as Microsoft Excel spreadsheets, Microsoft Word documents or tables, or in file folders in secure locations. During the course of the assessment and response, records may also be temporarily stored off site in secure facilities such as incident command posts or EPA field offices which are maintained and secured by EPA staff.
The original notice identified the EPA staff and contractors who might have access to the information in the system of records. The notice also stated that in appropriate circumstances, limited access to the database systems may be provided to state and local public health authorities in conformity with federal, state, and local laws when necessary to protect the environment or public health or safety. To clarify and emphasize the value of inter-governmental coordination and communication, the original notice is now modified to allow for disclosure to any appropriate federal, state, local, and tribal authorities when necessary to protect the environment or public health or safety, including carrying out an investigation or response. Information may also be shared with state agencies and with the public as part of their participation in the Superfund evaluation and decision-making process. This may include public disclosure of addresses where EPA determines cleanup actions are required. In cases of emergency, EPA may also need to share information with members of the public to assure protection of the environment, and public health and safety.
Environmental Assessments of Residential Properties (EARP), EPA-74.
Unclassified.
The system will be managed by the EPA's Office of Emergency Response, OLEM, 1200 Pennsylvania Ave. NW, Mail Code 5103 T, Washington, DC 20460. Information maintained pursuant to this notice may be located at EPA Headquarters Offices or at EPA Regional Offices, or at field offices established as part of the residential assessment field work, depending upon the location where the environmental assessment is conducted or where computer resources are located. Databases may be hosted at the EPA's National Computer Center located at 109 T.W. Alexandra Drive, Durham, NC 27709, or in OLEM's emergency response cloud hosting environment.
Joseph Schaefer, Office of Land and Emergency Management (OLEM), Office of Superfund Remediation and Technology Information (OSRTI), Mail Code 205A-ERT, Raritan Depot, 2890 Woodbridge Avenue, Edison, NJ 08837; telephone number (732) 906-6920;
Resource Conservation and Recovery Act (RCRA), 42 U.S.C. 6981; Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. 9604, 9660; Clean Air Act (CAA), 42 U.S.C. 7403; Safe Drinking Water Act (SDWA), 42 U.S.C. 300i; 300j-1; Federal Water Pollution Control Act, (FWPCA) 33 U.S.C. 1254, 1318, 1321; Toxic Substances Control Act (TSCA), 15 U.S.C. 2609; Federal Insecticide, Fungicide, and Rodenticide Act, (FIFRA) 7 U.S.C. 136r.
The EPA has created a Privacy Act system of records to allow EPA to maintain records that are necessary to conduct environmental assessments at residential properties in order to respond to emergency situations and during environmental assessment activities conducted by EPA under many different programs including Superfund, RCRA, and the SDWA. This system of records promotes transparency, efficiency, and improved environmental and health outcomes by encompassing all of the records associated with EPA residential assessment and response work, including the database repositories, field documentation and analytical reports. Over the course of these assessments EPA is often required to support or work closely with state and local agencies or other federal agencies to evaluate the health and welfare of affected communities. EPA's environmental assessment activities at residential properties include: Obtaining and tracking legal access to the properties; gathering environmental data through sampling activities, such as sampling air, water, soil, or other environmental media at sites; collecting structural information such as the age of the structure, information about the service lines, plumbing and pipe information, and building materials in the structure, information about the length of residence or ownership of the structure, and GIS coordinates; and collecting residential contact information such as name, address, and phone number to allow response teams to correspond with individuals affected by environmental contamination.
Members of the public such as residents, property owners, property managers, and other individuals who may be associated with a property whose information needs to be collected as part of EPA's environmental assessment and response activities. In addition, EPA staff, contractors, grantees, or any other individuals engaged in response activities (including state, local, and tribal employees) may have their information in the system such as name, office address, and contact information to facilitate assessment and response activities.
The types of data collected in environmental assessments and responses include names of residents; names of property owners; tenant information; names of property managers; address information; phone number or other contact information; test results from environmental sampling; medical and health information; information about residential structures such as the age of the structure, information about the service lines, plumbing and pipe information, and building materials in the structure; information about the length of residence or ownership of the structure; GIS coordinates; age; property ownership and management information; information about physical dimensions of the property and structures present on the property; information about wells on the property; information about uses of the property; information about sampling locations; and information about prior environmental issues at the property, including prior test results and actions taken. Other site-specific data elements may also be collected if needed for the
Records within this system of records are obtained by EPA employees, contractors, or grantees collecting environmental assessment data and sample information at residential sites, or from state or local governments who have collected environmental assessment information as part of their response authorities. Environmental assessment data is received from interviews with residents, property owners, property managers, and other individuals who may be associated with a property, local public records such as property tax data, from inspections of residential properties, from residential property records or other public records, and from other on-site sources such as EPA or contracted laboratories and EPA or contracted GIS systems.
The routine uses below are both related to and compatible with the original purpose for which the information was collected. The following general routine uses apply to this system (73 FR 2245):
1. The Agency, or any component thereof;
2. Any employee of the Agency in his or her official capacity;
3. Any employee of the Agency in his or her individual capacity where the Department of Justice or the Agency have agreed to represent the employee; or
4. The United States, if the Agency determines that litigation is likely to affect the Agency or any of its components,
Is a party to litigation or has an interest in such litigation, and the use of such records by the Department of Justice or the Agency is deemed by the Agency to be relevant and necessary to the litigation provided, however, that in each case it has been determined that the disclosure is compatible with the purpose for which the records were collected.
The two routine uses below (L and M) are required by OMB Memorandum M-17-12.
These records are maintained electronically on computer storage devices such as computer tapes and disks. The computer storage devices are located at EPA, Office of Emergency Response, OLEM. Backup will be maintained at a disaster recovery site. Computer records are maintained in a secure password protected environment. Access to computer records is limited to those who have a need to know. Permission level assignments will allow users access only to those functions for which they are authorized. All records are maintained in secure, access-controlled areas or buildings.
Information may be retrieved by any collected data element, such as a resident's name or address, or information may be retrieved by GIS coordinates or by identifying numbers assigned to a person, sampling location, or residence.
Records maintained in this system are subject to record schedule 1036, which is still being finalized.
Security controls used to protect personal sensitive data in Environmental Assessments of Residential Properties are commensurate with those required for an information system rated MODERATE for confidentiality, integrity, and availability, as prescribed in National Institute of Standards and Technology (NIST) Special Publication, 800-53, “Security and Privacy Controls for Federal Information Systems and Organizations,” Revision 5.
Individuals seeking access to information in this system of records about themselves are required to provide adequate identification (
Requests for correction or amendment must identify the record to be changed and the corrective action sought. Complete EPA Privacy Act procedures are described in EPA's Privacy Act regulations at 40 CFR part 16.
Any individual who wants to know whether this system of records contains a record about him or her, should make a written request to the EPA, Attn: Agency Privacy Officer, MC 2831T, 1200 Pennsylvania Ave. NW, Washington, DC 20460,
None.
The original SORN for the EARP (EPA-74) was published in the
Environmental Protection Agency (EPA).
Notice.
In accordance with the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), EPA is issuing a notice of receipt of requests by registrants to voluntarily cancel certain dicloran (DCNA) registrations. EPA intends to grant these requests at the close of the comment period for this announcement unless the Agency receives substantive comments within the comment period that would merit its further review of the requests, or unless the registrants withdraw its requests. If these requests are granted, any sale, distribution, or use of products listed in this notice will be permitted after the registrations have been cancelled only if such sale, distribution, or use is consistent with the terms as described in the final order.
Comments must be received on or before June 4, 2021.
Users of these products who desire continued use on crops or sites being deleted should contact the applicable registrant on or before June 4, 2021.
Submit your withdrawal request, identified by docket identification (ID) number EPA-HQ-OPP-2016-0141, 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
Kent Fothergill, Pesticide Re-Evaluation Division (7508P), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460-0001; telephone number: (703) 347-8299; email address:
This action is directed to the public in general, and may be of interest to a wide range of stakeholders including environmental, human health, and agricultural advocates; the chemical industry; pesticide users; and members of the public interested in the sale, distribution, or use of pesticides.
The docket for this action, identified by docket ID number EPA-HQ-OPP-2016-0141, is available either electronically through
This notice announces receipt by the Agency of applications from registrants to delete uses in certain pesticide registrations. These registrations are listed in Table 1 of this unit by registration number, product name, active ingredient, and specific uses deleted.
Unless a request is withdrawn by the registrant or if the Agency determines that there are substantive comments that warrant further review of this request, EPA intends to issue an order in the
Table 2 of this unit includes the names and addresses of record for all registrants of the products listed in Table 1 of this unit, in sequence by EPA company number.
Section 6(f)(1) of FIFRA (7 U.S.C. 136d(f)(1)) provides that a registrant of a pesticide product may at any time request that any of its pesticide registrations be amended to delete one or more uses. FIFRA further provides that, before acting on the request, EPA must publish a notice of receipt of any such request in the
Section 6(f)(1)(B) of FIFRA (7 U.S.C. 136d(f)(1)(B)) requires that before acting on a request for voluntary cancellation, EPA must provide a 30-day public comment period on the request for voluntary cancellation or use termination. In addition, FIFRA section 6(f)(1)(C) (7 U.S.C. 136d(f)(1)(C)) requires that EPA provide a 180-day comment period on a request for voluntary cancellation or termination of any minor agricultural use before granting the request, unless:
1. The registrants request a waiver of the comment period, or
2. The EPA Administrator determines that continued use of the pesticide would pose an unreasonable adverse effect on the environment.
The registrants listed in Table 2 of Unit II have requested that EPA waive the 180-day comment period. Accordingly, EPA will provide a 30-day comment period on the proposed requests.
Registrants who choose to withdraw a request for use deletion must submit the withdrawal in writing to the person listed under
Existing stocks are those stocks of registered pesticide products that are currently in the United States and that were packaged, labeled, and released for shipment prior to the effective date of the cancellation action.
In any order issued in response to these requests for cancellation of product registrations EPA proposes to include the following provisions for the treatment of any existing stocks of the products listed in Table 1 of Unit II.
For all voluntary product cancellations, listed in Table 1 of Unit II, the registrants will be permitted to sell and distribute existing stocks of voluntarily canceled products for 1 year after the effective date of the cancellation, which will be the date of publication of the cancellation order in the
Persons other than the registrant may sell, distribute, or use existing stocks of the canceled products until supplies are exhausted, provided that such sale, distribution, or use is consistent with the terms of the previously approved labeling on, or that accompanied, the canceled products.
7 U.S.C. 136
Environmental Protection Agency (EPA).
Notice.
The U.S. Environmental Protection Agency (“EPA” or “Agency”) is providing notice of disclosure to all obligated parties under the Renewable Fuel Standard (“RFS”) program that have petitioned for a small refinery exemption and to all parties whose RFS information otherwise resides in EPA's Moderated Transaction System (“EMTS”). In response to a request by the U.S. Government Accountability Office (“GAO”), EPA will disclose information to GAO which has been submitted to the Agency that is claimed to be, or has been determined to be, confidential business information (collectively “CBI”). The information to be disclosed includes all documents, information, and data related to all small refinery exemption petitions received by EPA from the start of the RFS program through the present. These records include, but are not limited to: (a) All materials submitted by the small refineries as part of its petition; (b) any documentation sent by the Department of Energy (“DOE”) to EPA stating DOE's findings and score(s) associated with the petition(s) and any EPA responses thereto; (c) any EPA record addressing the subject of the exemption petition(s), including any analysis that EPA conducted in addition to DOE's findings; and (d) EPA's final exemption decision sent to the refinery. EPA also intends to disclose to GAO all RFS related transaction-level data contained in EMTS, including Renewable Identification Number (“RIN”) transactions under the RFS. This information is being produced to GAO pursuant to EPA's regulations pertaining to disclosure.
EPA will disclose the material discussed in this document to GAO, including any CBI therein, no later than 16 calendar days after publication of this notice in the
Karen Nelson, Environmental Protection Specialist, Compliance Division, Office of Transportation and Air Quality at
In connection with a review by the U.S. Government Accountability Office (“GAO”), the U.S. Environmental Protection Agency (“EPA” or “Agency”) received a request under 40 CFR 2.209(b) from GAO for records submitted to EPA under the Renewable Fuel Standard (“RFS”) program from the start of the program through the present. The information that will be disclosed to GAO includes all documents, information, and data related to all small refinery exemption petitions received by EPA from the start of the RFS program through the present. These records include, but are not limited to: (a) All materials submitted by the small refineries as part of its petition; (b) any documentation sent by the Department of Energy (“DOE”) to EPA stating DOE's findings and score associated with the petition; (c) any analysis that EPA conducted in addition to DOE's findings; and (d) EPA's final exemption decision sent to the refinery. The request also includes all RFS related transaction-level data contained in EPA's Moderated Transaction System (“EMTS”), including Renewable Identification Number (“RIN”) transactions under the RFS. This notice is being provided pursuant to 40 CFR 2.209(b)(2) to inform potentially affected businesses that EPA intends to transmit certain documents, which may contain information submitted by oil refiners and refineries, or any company associated therewith, that is claimed to be, or has been determined to be, confidential business information (collectively “CBI”) to GAO in response to its request for information. The disclosure of CBI is limited to GAO and further disclosure is generally restricted by 31 U.S.C. 716(e) and subject to criminal penalties under 18 U.S.C. 1905. Any objections to EPA's disclosure must be raised within 15 calendar days from publication of this notice.
Export-Import Bank of the United States.
Submission for OMB review and comments request.
The Export-Import Bank of the United States (EXIM), as a part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal Agencies to comment on the proposed information collection, as required by the Paperwork Reduction Act of 1995.
Comments should be received on or before July 6, 2021 to be assured of consideration.
Comments may be submitted electronically on
The form can be viewed at:
To request additional information, please Donna Schneider. 202-565-3612.
This collection of information is necessary, pursuant to 12 U.S.C. 635(a)(1), to determine eligibility of the export sales for insurance coverage. The Report of Premiums Payable for Financial Institutions Only is used to determine the eligibility of the shipment(s) and to calculate the premium due to Ex-Im Bank for its support of the shipment(s) under its insurance program. Export-Import Bank customers will be able to submit this form on paper or electronically.
This form will enable EXIM to identify the specific details of the proposed co-financing transaction between a U.S. exporter, EXIM, and a foreign export credit agency; the information collected includes vital facts such as the amount of U.S.-made content in the export, the amount of financing requested from EXIM, and the proposed financing amount from the foreign export credit agency. These details are necessary for approving this unique transaction structure and coordinating our support with that of the foreign export credit agency to ultimately complete the transaction and support U.S. exports—and U.S. jobs.
Export-Import Bank of the United States.
Submission for OMB review and comments request.
The Export-Import Bank of the United States (EXIM), as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal Agencies to comment on the proposed information collection, as required by the Paperwork Reduction Act of 1995.
Comments must be received on or before July 6, 2021 to be assured of consideration.
Comments may be submitted electronically on
The information collection tool can be reviewed at:
To request additional information, please Donna Schneider. 202-565-3612.
Pursuant to the Export-Import Bank Act of 1945, as amended (12 U.S.C. 635,
Federal Communications Commission.
Notice and request for comments.
As part of its continuing effort to reduce paperwork burdens, and as required by the Paperwork Reduction Act of 1995 (PRA), the Federal Communications Commission (FCC or Commission) invites the general public and other Federal agencies to take this opportunity to comment on the following information collections. Comments are requested concerning: Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; the accuracy of the Commission's burden estimate; ways to enhance the quality, utility, and clarity of the information collected; ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology; and ways to further reduce the information collection burden on small business concerns with fewer than 25 employees.
The FCC may not conduct or sponsor a collection of information unless it displays a currently valid Office of Management and Budget (OMB) control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid OMB control number.
Written PRA comments should be submitted on or before July 6, 2021. If you anticipate that you will be submitting comments but find it difficult to do so within the period of time allowed by this notice, you should advise the contact listed below as soon as possible.
Direct all PRA comments to Cathy Williams, FCC, via email to
For additional information about the information collection, contact Cathy Williams at (202) 418-2918.
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 the offices of the Board of Governors. This information may also be obtained on an expedited basis, upon request, by contacting the appropriate Federal Reserve Bank and from the Board's Freedom of Information Office 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 June 4, 2021.
1.
The notificants listed below have applied under the Change in Bank Control Act (Act) (12 U.S.C. 1817(j)) and § 225.41 of the Board's Regulation Y (12 CFR 225.41) to acquire shares of a bank or bank holding company. The factors that are considered in acting on the applications are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
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 the offices of the Board of Governors. This information may also be obtained on an expedited basis, upon request, by contacting the appropriate Federal Reserve Bank and from the Board's Freedom of Information Office 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 May 20, 2021.
A.
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B.
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C.
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Board of Governors of the Federal Reserve System.
The Board of Governors of the Federal Reserve System (Board) is adopting a proposal to extend for three years, with revision, the Government Securities Dealers Reports (FR 2004; OMB No. 7100-0003). The revisions will be effective with the first applicable as of date, January 5, 2022.
Federal Reserve Board Clearance Officer—Nuha Elmaghrabi—Office of the Chief Data Officer, Board of Governors of the Federal Reserve System, Washington, DC 20551, (202) 452-3829.
Office of Management and Budget (OMB) Desk Officer—Shagufta Ahmed—Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Room 10235, 725 17th Street NW, Washington, DC 20503, or by fax to (202) 395-6974.
On June 15, 1984, OMB delegated to the Board authority under the PRA to approve and assign OMB control numbers to collections of information conducted or sponsored by the Board. Board-approved collections of information are incorporated into the official OMB inventory of currently approved collections of information. The OMB
While aggregate data from certain of the forms in the FR 2004 series will be published, individually identifying information may be kept confidential under exemption 4 and, in certain circumstances, exemption 8 of the Freedom of Information Act (FOIA) (5 U.S.C. 552(b)(4) and (b)(8)). Individual respondent data collected through the FR 2004 may be considered confidential pursuant to FOIA exemption 4 to the extent these responses contain nonpublic commercial or financial information, which is both customarily and actually treated as private by the respondent. Moreover, to the extent that the information is “contained in or related to examination, operating, or condition reports prepared by, on behalf of, or for the use of [the Board],” the information may be withheld by the Board under FOIA exemption 8.
(1) Adding a row to the FR 2004A, B, SI, SD, and WI to account for the new 20 year Treasury bond,
(2) adding a row to the FR 2004A and two rows to FR 2004B to separately capture Mortgage-Backed Securities (MBS) To-Be-Announced (TBA) and specified pool classifications,
(3) adding 18 columns to the FR 2004C to capture a split by clearing venue, with maturity tenor applied to each venue classification,
(4) adding 5 lines to the FR 2004C to separately capture Federal Agency and Government-Sponsored Enterprise (GSE) Residential MBS and Federal Agency and GSE Commercial MBS, and to separate Total lines for Repo and Other Financing Activities,
(5) revising the FR 2004FA, FB, and FM to capture Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC) Uniform MBS (UMBS) and FNMA non-UMBS eligible securities settlement fails and transactions, separate from FHLMC non-UMBS eligible securities settlement fails and transactions, and
(6) modifying the instructions to provide additional guidance on report consolidation rules for primary dealers when the legal entity serving as a primary dealer is a branch or agency of a foreign banking organization (FBO) as well as some other minor corrections and edits for improved clarity.
The comment period for this notice expired on February 12, 2021. The Board received 2 comment letters from industry trade associations related to the changes to the FR 2004 reports. Both commenters requested that the effective date of the changes be extended, with one commenter requesting a phased approach beginning in the fourth quarter 2021 and the other commenter
Board of Governors of the Federal Reserve System.
Notice, request for comment.
The Board of Governors of the Federal Reserve System (Board) invites comment on a proposal to extend for three years, with revision, the International Applications and Prior Notifications under Subparts A and C of Regulation K (FR K-1; OMB No. 7100-0107).
Comments must be submitted on or before July 6, 2021.
You may submit comments, identified by
•
•
•
•
All public comments are available from the Board's website at
Additionally, commenters may send a copy of their comments to the Office of Management and Budget (OMB) Desk Officer—Shagufta Ahmed—Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Room 10235, 725 17th Street NW, Washington, DC 20503, or by fax to (202) 395-6974.
Federal Reserve Board Clearance Officer—Nuha Elmaghrabi—Office of the Chief Data Officer, Board of Governors of the Federal Reserve System, Washington, DC 20551, (202) 452-3829.
On June 15, 1984, OMB delegated to the Board authority under the PRA to approve and assign OMB control numbers to collections of information conducted or sponsored by the Board. In exercising this delegated authority, the Board is directed to take every reasonable step to solicit comment. In determining whether to approve a collection of information, the Board will consider all comments received from the public and other agencies.
A copy of the Paperwork Reduction Act (PRA) OMB submission, including the reporting form and instructions, supporting statement, and other documentation will be available at
The Board invites public comment on the following information collection, which is being reviewed under authority delegated by the OMB under the PRA. Comments are invited on the following:
a. Whether the proposed collection of information is necessary for the proper performance of the Board's functions, including whether the information has practical utility;
b. The accuracy of the Board's estimate of the burden of the proposed information collection, including the validity of the methodology and assumptions used;
c. Ways to enhance the quality, utility, and clarity of the information to be collected;
d. Ways to minimize the burden of information collection on respondents, including through the use of automated collection techniques or other forms of information technology; and
e. Estimates of capital or startup costs and costs of operation, maintenance, and purchase of services to provide information.
At the end of the comment period, the comments and recommendations received will be analyzed to determine the extent to which the Board should modify the proposal.
The applications and notifications comprising FR K-1 are required to obtain a benefit. Individual respondents may request that information submitted to the Board through the FR K-1 be kept confidential. If a respondent requests confidential treatment, the Board will determine whether the information is entitled to confidential treatment on a case-by-case basis. To the extent a respondent submits nonpublic commercial or financial information, which is both customarily and actually treated as private by the respondent, the respondent may request confidential treatment pursuant to exemption 4 of the Freedom of Information Act (FOIA).
Board of Governors of the Federal Reserve System.
The Board of Governors of the Federal Reserve System (Board) is adopting a proposal to extend for three years, without revision, the Survey of Consumer Finances (FR 3059; OMB 7100-0287).
Federal Reserve Board Clearance Officer—Nuha Elmaghrabi—Office of the Chief Data Officer, Board of Governors of the Federal Reserve System, Washington, DC 20551, (202) 452-3829.
Office of Management and Budget (OMB) Desk Officer—Shagufta Ahmed—Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Room 10235, 725 17th Street NW, Washington, DC 20503, or by fax to (202) 395-6974.
On June 15, 1984, OMB delegated to the Board authority under the PRA to approve and assign OMB control numbers to collections of information conducted or sponsored by the Board. Board-approved collections of information are incorporated into the official OMB inventory of currently approved collections of information. The OMB inventory, as well as copies of the PRA Submission, supporting statements, and approved collection of information instrument(s) are available at
It is expected that the data collected would be published in summary form in the
Board of Governors of the Federal Reserve System.
The Board of Governors of the Federal Reserve System (Board) is adopting a proposal to extend for three years, without revision, the Senior Financial Officer Surveys (FR 2023; OMB No. 7100-0223).
Federal Reserve Board Clearance Officer—Nuha Elmaghrabi—Office of the Chief Data Officer, Board of Governors of the Federal Reserve System, Washington, DC 20551, (202) 452-3829.
Office of Management and Budget (OMB) Desk Officer—Shagufta Ahmed—Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Room 10235, 725 17th Street NW, Washington, DC 20503, or by fax to (202) 395-6974.
On June 15, 1984, OMB delegated to the Board authority under the PRA to approve and assign OMB control numbers to collections of information conducted or sponsored by the Board. Board-approved collections of information are incorporated into the official OMB inventory of currently approved collections of information. The OMB inventory, as well as copies of the PRA Submission, supporting statements, and approved collection of information instrument(s) are available at
The questions asked on each survey will vary. The Board's ability to keep confidential responses to the FR 2023 must therefore be determined on a case-by-case basis. Much of the information collected is likely to constitute nonpublic commercial or financial information, which is both customarily and actually treated as private by the respondent, and may be kept
Board of Governors of the Federal Reserve System.
The Board of Governors of the Federal Reserve System (Board) is adopting a proposal to extend for three years, without revision, the Quarterly Report of Assets and Liabilities of Large Foreign Offices of U.S. Banks (FR 2502q; OMB No. 7100-0079).
Federal Reserve Board Clearance Officer—Nuha Elmaghrabi—Office of the Chief Data Officer, Board of Governors of the Federal Reserve System, Washington, DC 20551, (202) 452-3829.
Office of Management and Budget (OMB) Desk Officer—Shagufta Ahmed—Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Room 10235, 725 17th Street NW, Washington, DC 20503, or by fax to (202) 395-6974.
On June 15, 1984, OMB delegated to the Board authority under the PRA to approve and assign OMB control numbers to collections of information conducted or sponsored by the Board. Board-approved collections of information are incorporated into the official OMB inventory of currently approved collections of information. The OMB inventory, as well as copies of the PRA Submission, supporting statements, and approved collection of information instrument(s) are available at
The FR 2502q report is mandatory. To the extent that the information from this collection obtained by the Board constitutes nonpublic commercial or financial information, which is both customarily and actually treated as private by the financial institution, the financial institution may request confidential treatment pursuant to exemption 4 of the Freedom of Information Act.
The U.S. Department of Commerce Bureau of Economic Analysis provided comment that it was in strong support of the continued collection of the FR 2502q data.
Board of Governors of the Federal Reserve System.
Notice, request for comment.
The Board of Governors of the Federal Reserve System (Board) invites comment on a proposal to extend for three years, with revision, the Report of
Comments must be submitted on or before July 6, 2021.
You may submit comments, identified by FR 2420, by any of the following methods:
•
•
•
•
All public comments are available from the Board's website at
Additionally, commenters may send a copy of their comments to the Office of Management and Budget (OMB) Desk Officer—Shagufta Ahmed—Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Room 10235, 725 17th Street NW, Washington, DC 20503, or by fax to (202) 395-6974.
Federal Reserve Board Clearance Officer—Nuha Elmaghrabi—Office of the Chief Data Officer, Board of Governors of the Federal Reserve System, Washington, DC 20551, (202) 452-3829.
On June 15, 1984, OMB delegated to the Board authority under the PRA to approve and assign OMB control numbers to collections of information conducted or sponsored by the Board. In exercising this delegated authority, the Board is directed to take every reasonable step to solicit comment. In determining whether to approve a collection of information, the Board will consider all comments received from the public and other agencies.
A copy of the Paperwork Reduction Act (PRA) OMB submission, including the reporting form and instructions, supporting statement, and other documentation will be available at
The Board invites public comment on the following information collection, which is being reviewed under authority delegated by the OMB under the PRA. Comments are invited on the following:
a. Whether the proposed collection of information is necessary for the proper performance of the Board's functions, including whether the information has practical utility;
b. The accuracy of the Board's estimate of the burden of the proposed information collection, including the validity of the methodology and assumptions used;
c. Ways to enhance the quality, utility, and clarity of the information to be collected;
d. Ways to minimize the burden of information collection on respondents, including through the use of automated collection techniques or other forms of information technology; and
e. Estimates of capital or startup costs and costs of operation, maintenance, and purchase of services to provide information.
At the end of the comment period, the comments and recommendations received will be analyzed to determine the extent to which the Board should modify the proposal.
The Board proposes to add a data item to specify the day-count convention used for all interest rates reported on FR 2420. The Federal Reserve has identified limited instances of reporting institutions using multiple day-count conventions in calculating reported interest rates, specifically found in the reporting of Part C interest rates. The proposed revision would improve the accuracy of reported data, benefiting the Federal Reserve's monitoring of funding market conditions and strengthening the production of the EFFR and OBFR. The proposed data item would provide the following day-count conventions as options: Actual/360, actual/365, 30/360, 30/365, actual/actual, and other.
The Board proposes to include additional reference rates to which floating-rate time deposits and CDs are tied. The additional rates include the Secured Overnight Financing Rate (SOFR), other SOFR-based rates, and OBFR, all of which are published daily by the Federal Reserve Bank of New York (FRBNY). Other SOFR-based rates include the SOFR Index and the SOFR Averages over 30, 90, and 180 days. This revision would improve the ability of the Federal Reserve to monitor the progress of the transition from LIBOR to SOFR with respect to floating-rate money market instruments.
The Board proposes to change the deadline for submission of time deposit and CD data in Part C to 2 p.m. ET one business day (T+1) after the report date, rather than two business days (T+2) after the report date. This proposed change would provide more timely data and improve the Federal Reserve's monitoring of funding market conditions. The change would be particularly beneficial on occasions when market conditions change quickly, such as when a deterioration in time deposit and CD markets may produce spillovers to other markets.
The Board proposes to change the deadline for submission of Federal Funds Purchased, Eurodollars, and Selected Deposits data in Parts A, B, and D to 7 p.m. ET the same day (T+0) as the transaction date, rather than 7 a.m. ET one business day (T+1) after the transaction date. The proposed earlier reporting deadline would allow for more opportunity for data review and validation, reducing operational risk associated with the publication of the EFFR and OBFR.
The Board proposes other minor additions to the FR 2420 instructions to prevent confusion and errors on the part of reporting institutions. Guidance would be added for certain reciprocal deposits, including insured deposit cash sweeps and Certificate of Deposit Account Registry Service deposits (Part C). Additional guidance would be included on the correct reporting of brokered deposits (Part C) and certain securities lending transactions (Part D).
The FRBNY uses aggregate data from the FR 2420 to publish the EFFR, OBFR, and associated statistics daily. The information provided by individual respondents to the FR 2420 is nonpublic commercial or financial information, which is both customarily and actually treated as private by the respondents. Responses to the FR 2420 are therefore accorded confidential treatment pursuant to exemption 4 of the Freedom of Information Act (5 U.S.C. 552(b)(4)).
Division of Program Innovation, Office of Child Support Enforcement, Administration for Children and Families, HHS.
Request for public comment.
The Division of Program Innovation (DPI), Office of Child Support Enforcement (OCSE), Administration for Children and Families (ACF) is requesting a 3-year extension of the Access and Visitation Survey: Annual Report (OMB #0970-0204, expiration 10/31/2021). There are no changes requested to the form.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Sec.469B [42 U.S.C.669b]; 45 CFR part 303.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the National Institute of Biomedical Imaging and Bioengineering Special Emphasis Panel.
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.
National Institutes of Health, HHS.
Notice.
In compliance with the requirement of the Paperwork Reduction Act of 1995 to provide opportunity for public comment on proposed data collection projects, the National Institutes of Health (NIH) will publish periodic summaries of proposed projects to be submitted to the Office of Management and Budget (OMB) for review and approval.
Comments regarding this information collection are best assured of having their full effect if received within 60 days of the date of this publication.
To obtain a copy of the data collection plans and instruments, submit comments in writing, or request more information on the proposed project, contact: Andrew Hooper, Ph.D., NIMH Project Clearance Liaison, Science Policy and Evaluation Branch, Office of Science Policy, Planning and Communications, NIMH, Neuroscience Center, 6001 Executive Boulevard, MSC 9667, Bethesda, Maryland 20892, call (301) 480-8433, or email your request, including your mailing address, to
Section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires: Written comments and/or suggestions from the public and affected agencies are invited to address one or more of the following points: (1) Whether the proposed collection of information is necessary for the proper performance of the function 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,
OMB approval is requested for 3 years. There are no costs to respondents other than their time. The total estimated annualized burden hours are 490.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the National Institute of Biomedical Imaging and Bioengineering Special Emphasis Panel.
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,
Fish and Wildlife Service, Interior.
Notice of initiation of reviews; request for information.
We, the U.S. Fish and Wildlife Service, are conducting 5-year status reviews under the Endangered Species Act of 23 animal and plant species. A 5-year status review is based on the best scientific and commercial data available at the time of the review; therefore, we are requesting submission of any such information that has become available since the last review for the species.
To ensure consideration, we are requesting submission of new information no later than June 4, 2021. However, we will continue to accept new information about any listed species at any time.
For how to request or submit information, see Request for Information and How Do I Ask Questions or Provide Information? in the
For general information, please contact Angela Anders, via phone at 505-248-7953 or via email at
Under the Endangered Species Act of 1973, as amended (ESA; 16 U.S.C. 1531
A 5-year review considers all new information available at the time of the review. In conducting these reviews, we consider the best scientific and commercial data that have become available since the listing determination or most recent status review, such as:
(A) Species biology, including but not limited to population trends, distribution, abundance, demographics, and genetics;
(B) Habitat conditions, including but not limited to amount, distribution, and suitability;
(C) Conservation measures that have been implemented that benefit the species;
(D) Threat status and trends in relation to the five listing factors (as defined in section 4(a)(1) of the ESA); and
(E) Other new information, data, or corrections, including but not limited to taxonomic or nomenclatural changes, identification of erroneous information contained in the List, and improved analytical methods.
Any new information will be considered during the 5-year review and will also be useful in evaluating the ongoing recovery programs for the species.
The species in the following table are under active 5-year status review.
To ensure that a 5-year review is complete and based on the best available scientific and commercial information, we request new information from all sources. See What Information Do We Consider in Our Review? for specific criteria. If you submit information, please support it with documentation such as maps, bibliographic references, methods used to gather and analyze the data, and/or copies of any pertinent publications, reports, or letters by knowledgeable sources.
If you wish to provide information for any species listed above, please submit your comments and materials to the appropriate contact in the table above. You may also direct questions to those contacts. Individuals who are hearing impaired or speech impaired may call the Federal Relay Service at 800-877-8339 for TTY assistance.
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.
A list of all completed and currently active 5-year reviews can be found at
This document is published under the authority of the Endangered Species Act of 1973, as amended (16 U.S.C. 1531
Fish and Wildlife Service, Interior.
Notice of availability.
This notice announces our adoption of updated species-specific eagle exposure and collision probabilities used to generate fatality estimates for consideration in issuing eagle incidental take permits to wind-energy facilities under the Bald and Golden Eagle Protection Act. This action will improve our ability to carry out our statutory responsibility to ensure conservation of bald eagles and golden eagles when issuing those permits.
May 6, 2021.
Information related to this notice, including the public comments received in response to the previous
Brian Millsap, at 505-559-3963 (telephone), or
The Bald and Golden Eagle Protection Act (16 U.S.C. 668-668d; “Act”) prohibits take of bald eagles and golden eagles except pursuant to Federal regulations. The Act authorizes the Secretary of the Interior to issue regulations to permit the “taking” of eagles for various purposes, provided the taking is compatible with the preservation of eagles. Under regulations in part 22 of title 50 of the Code of Federal Regulations, we, the U.S. Fish and Wildlife Service (hereafter, “the Service”), issue permits to authorize take of eagles that is incidental to an activity (50 CFR 22.26).
In carrying out our responsibility to issue these types of permits for wind-energy facilities, we use a collision-risk model (CRM) to predict the number of bald and golden eagles that may be taken at facilities (USFWS 2013; New et al. 2015). The CRM allows the Service to produce conservative initial take estimates for new wind energy facilities, as well as to produce more precise updated estimates for operating facilities that have collected fatality monitoring data. The take estimates provided by the CRM allow the Service to ensure authorized eagle take numbers are within the eagle management unit take limits, and provide the data necessary to assess effects of take permits on local area eagle populations, both required actions under our Programmatic Environmental Impact Statement for eagle take permits (USFWS 2016a). The CRM incorporates prior information (priors) on eagle exposure and eagle collision probability, and these priors are updated as new information becomes available as part of the adaptive management process associated with eagle take permitting (USFWS 2016b).
In 2017 the Service undertook a review of newly available information and generated updated priors for the CRM. The Service announced the updated priors and availability of a report summarizing the analysis in a June 21, 2018,
In our notice of availability, we presented updated priors for golden eagle exposure and golden eagle collision probability. We also developed and presented for the first time priors for bald eagle exposure and collision probability. These updated and new priors incorporate substantial new information, and their adoption thus constitutes an improvement in the scientific information used by the Service to estimate the effects of our take permits on eagle populations.
The alternatives for both eagle species that we considered and presented for public comment are as follows:
Alternative 1—Use the updated species-specific priors, and use the 80th quantile of the CRM fatality estimates as the initial permitted take number for permits, as is the current practice.
Alternative 2—Use the updated species-specific priors, and because bald eagle populations are increasing and additional take is sustainable (U.S. Fish and Wildlife Service 2016a,c), accept a more risk-tolerant CRM approach for the initial permitted take number for bald eagles.
Alternative 3—Given the limitations in data available to inform the bald eagle priors, initiate an expert-elicitation process to further refine the bald eagle priors.
Of the 58 comments received during the two comment periods, we received substantive comments from several entities, including States, environmental organizations, and wind-energy organizations or companies. Many of the comments stated that the Service's CRM either overestimated or underestimated eagle fatalities, or stated that another method for estimating exposures and collisions should be adopted. Because the CRM has been the subject of three prior peer reviews and three rounds of public comment (February 18, 2011; May 2, 2013; May 6, 2016 [U.S. Fish and Wildlife Service 2011, 2013, 2016]), including being considered in detail as part of the 2016 revisions to the regulations pertaining to incidental take of eagles and eagle nests (81 FR 91494, December 16, 2016), we regarded these comments as outside the scope of this notice and we did not consider them further.
Most of the comments were in support of Alternative 1, use of the 80th quantile of the species-specific fatality distributions. However, many comments from the wind industry opposed Alternative 1 and asserted that approach was not based on best available science and results in unduly burdensome higher costs for eagle take that is unlikely to occur.
Industry largely objected to Alternative 2 because the underlying priors are still based on data that does not represent all locations in the United States. One energy coalition suggested that Alternative 2 should not be used because a confidence interval should not be prematurely selected until the Service has validated the model. This validation process should include public input to ensure that those impacted by the take estimates have an opportunity to evaluate and opine on the impacts of any confidence interval selected. A major trade association commented that Alternative 2 using the 50th or 60th quantile of the fatality distribution for bald eagles as the permitted take number would be preferable to the current use of the 80th quantile.
Industry rejected Alternative 3 on the grounds that available data and reports on eagle and wind interaction exist that could be used to inform a reasonable risk assessment approach without the need for eliciting scientific and technical judgments from experts. However, of the State fish and wildlife agencies that commented, most supported Alternative 3 because a further refined national bald eagle prior using expert elicitation would help to inform the uncertainty in the exposure and collision probability for bald eagles given their variable densities across the landscape.
The Service is adopting Alternative 2 as the best approach given currently available data and status of eagle populations. We will use the 80th quantile of the fatality distribution as the initial permitted take number for golden eagles and the 60th quantile of the fatality distribution as the initial permitted take number for bald eagles. We regard this approach as a suitable balance between the more secure status of bald eagles and the uncertainty in their take estimates that is consistent with our 2016 Programmatic Environmental Impact Statement (USFWS 2016a).
With regard to initiating an expert elicitation process, we agree with many States that gathering additional information from either experts or industry has the potential to further refine the bald eagle priors. For this reason, we may choose to engage in an expert elicitation process in the future. In the meantime, the best method to gain the information needed to develop a more accurate assessment is through fatality monitoring of permitted projects. The fatality-estimation process using the CRM is an exercise in adaptive management, and as more data are collected the Service will continue to revise and update the priors over time. Should it become apparent that a different risk balance is appropriate based on additional data, we will address that scenario in conjunction with a future update of the CRM. In order to streamline the adaptive management process and ensure rapid adoption of new scientific information going forward, in the future the Service will update and implement the updated priors for both eagle species as soon as sufficient new information becomes available to warrant an update. We will notify the public of future updates by posting them on the Service's Eagle Management web page (
Upon publication of this notice, we will use the following data and risk tolerances for initial fatality predictions at wind energy facilities: The updated species-specific exposure and collision priors for both eagle species; the 80th quantile of the fatality distribution as the permitted take number for golden eagles; and the 60th quantile of the fatality distribution as the permitted take number for bald eagles. We will use the updated priors for all eagle incidental take permits issued to wind facilities, including those issued under the Endangered Species Act (16 U.S.C. 1531
U.S. Fish and Wildlife Service. 2011. Migratory Birds; Draft Eagle Conservation Plan Guidance. 76:9529-9530.
U.S. Fish and Wildlife Service. 2013. Migratory Birds; Eagle Conservation Plan Guidance: Module 1—Land-Based Wind Energy, Version 2.
U.S. Fish and Wildlife Service. 2016a. Programmatic Environmental Impact Statement for the Eagle Rule Revision. Division of Migratory Bird Management, U.S. Fish and Wildlife Service, Washington, DC USA.
U.S. Fish and Wildlife Service. 2016b. Eagle Permits; Revisions to Regulations for Eagle Incidental Take and Take of Eagle Nests.
U.S. Fish and Wildlife Service. 2016c. Bald and golden eagles: Population demographics and estimation of sustainable take in the United States, 2016 update. Status Reports, Division of Migratory Bird Management, U.S. Fish and Wildlife Service, Washington, DC USA.
Bureau of Land Management, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995, the Bureau of Land Management (BLM) proposes to renew an information collection.
Interested persons are invited to submit comments on or before July 6, 2021.
Send your written comments on this information collection request (ICR) by mail to Darrin King, Information Collection Clearance Officer, U.S. Department of the Interior, Bureau of Land Management, Attention PRA Office, 440 W 200 S #500, Salt Lake City, UT 84101; or by email to
To request additional information about this ICR, contact Jennifer Spencer by email at
In accordance with the Paperwork Reduction Act of 1995 (PRA, 44 U.S.C. 3501
As part of our continuing effort to reduce paperwork and respondent burdens, we invite the public and other Federal agencies to comment on new, proposed, revised, and continuing collections of information. This helps us assess the impact of our information collection requirements and minimize the public's reporting burden. It also helps the public understand our information collection requirements and provide the requested data in the desired format.
We are especially interested in public comment addressing the following:
(1) Whether or not the collection of information is necessary for the proper performance of the functions of the agency, including whether or not the information will have practical utility;
(2) The accuracy of our estimate of the burden for this 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) How might the agency minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this ICR. 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.
An agency may not conduct or sponsor and, notwithstanding any other provision of law, a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.
The authority for this action is the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Bureau of Land Management, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995, the Bureau of Land Management (BLM) proposes to renew an information collection.
Interested persons are invited to submit comments on or before June 4, 2021.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
To request additional information about this ICR, contact Jennifer Spencer by
In accordance with the Paperwork Reduction Act of 1995 (PRA, 44 U.S.C. 3501
A
As part of our continuing effort to reduce paperwork and respondent burdens, we are again soliciting comments from the public and other Federal agencies on the proposed ICR that is described below. We are especially interested in public comment addressing the following:
(1) Whether or not the collection of information is necessary for the proper performance of the functions of the agency, including whether or not the information will have practical utility;
(2) The accuracy of our estimate of the burden for this 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) How might the agency minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Comments that you submit in response to this notice are a matter of public record. 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.
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On the basis of the record
The Commission instituted these reviews on September 1, 2020 (85 FR 54404) and determined on December 7, 2020 that it would conduct expedited reviews (86 FR 18295, April 8, 2021).
The Commission made these determinations pursuant to section 751(c) of the Act (19 U.S.C. 1675(c)). It completed and filed its determinations in these reviews on April 29, 2021. The views of the Commission are contained in USITC Publication 5190 (April 2021), entitled
By order of the Commission.
Notice is hereby given pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, Stipulation, and Competitive Impact Statement have been filed with the United States District Court for the District of Columbia in
Copies of the Complaint, proposed Final Judgment, and Competitive Impact Statement are available for inspection on the Antitrust Division's website at
Public comment is invited within 60 days of the date of this notice. Such comments, including the name of the submitter, and responses thereto, will be posted on the Antitrust Division's website, filed with the Court, and, under certain circumstances, published in the
The United States of America (“United States”), acting under the direction of the Attorney General of the United States, brings this civil antitrust action against Defendants Stone Canyon Industries Holdings LLC (“Stone Canyon”), SCIH Salt Holdings Inc. (“SCIH”), K+S Aktiengesellschaft (“K+S AG”), and Morton Salt, Inc. (“Morton”) to enjoin SCIH's proposed acquisition of assets including Morton from K+S AG. The United States complains and alleges as follows:
1. Pursuant to a Transaction Agreement dated October 5, 2020, SCIH intends to acquire assets including Morton from K+S AG for approximately $3.2 billion. As a result of the acquisition, SCIH would control both Morton and US Salt, which are the largest suppliers of certain evaporated salt products in the United States.
2. Together, Morton and US Salt would have a monopoly in the United States and Canada for pharmaceutical-grade salt, the purest grade of evaporated salt, which is used to make life-saving treatments and products for patients in need of dialysis fluid, intravenous saline solution, or other medical products.
3. Additionally, Morton and US Salt are two of only three companies that supply U.S. households with “round-can” table salt, a type of evaporated salt that is sold in 26-ounce round containers with a metal spout and used to flavor food.
4. Morton and US Salt are also two of only three major suppliers in the northeastern United States of bulk evaporated salt, which is used by food processors and chemical manufacturers to make pre-packaged food and everyday cleaning products.
5. Today, customers benefit from competition between Morton and US Salt in the form of lower prices, higher quality products, and/or improved service. The proposed transaction would eliminate this competition, driving the opposite result: Higher prices, lower quality products, and poorer service for customers of pharmaceutical-grade salt in the United States and Canada, for customers of round-can table salt in the United States, and for customers of bulk evaporated salt in the northeastern United States.
6. Accordingly, SCIH's acquisition of Morton would violate Section 7 of the Clayton Act, 15 U.S.C. 18, and should be enjoined.
7. K+S AG is a chemical company headquartered in Kassel, Germany. In 2020, K+S AG reported revenues of approximately $4.4 billion. K+S AG's Operating Unit Salt Americas business includes Morton as well as K+S Windsor Salt, which sells salt products in Canada, and Sociedad Punta de Lobos, which sells salt products in Chile.
8. Morton is a K+S AG subsidiary with approximately $1 billion in revenue in 2020. Morton is the largest supplier of pharmaceutical-grade salt in the United States and Canada, the largest supplier of round-can table salt in the United States, and one of only three suppliers of bulk evaporated salt in the northeastern United States.
9. Stone Canyon is an industrial holding company incorporated in Delaware and headquartered in Los Angeles, California. Stone Canyon acquired Kissner Group Holdings LP, which it later renamed SCIH, in April 2020.
10. SCIH is a subsidiary of Stone Canyon and is headquartered in Overland Park, Kansas. In 2020, SCIH had revenues of approximately $1 billion. SCIH is a leading supplier of salt products, including evaporated salt.
11. US Salt, a subsidiary of SCIH with approximately $95 million in revenues
12. Pursuant to a Transaction Agreement dated October 5, 2020, SCIH agreed to acquire K+S AG's Operating Unit Salt Americas business, including Morton, for approximately $3.2 billion.
13. The United States brings this action under Section 15 of the Clayton Act, 15 U.S.C. 25, to prevent and restrain Defendants from violating Section 7 of the Clayton Act, 15 U.S.C. 18.
14. Defendants' activities substantially affect interstate commerce. Defendants sell pharmaceutical-grade salt and round-can table salt throughout the United States and bulk evaporated salt throughout the northeastern United States. This Court has subject matter jurisdiction over this matter pursuant to Section 15 of the Clayton Act, 15 U.S.C. 25, and 28 U.S.C. 1331, 1337(a), and 1345.
15. Defendants have consented to venue and personal jurisdiction in this judicial district. Venue is proper under Section 12 of the Clayton Act, 15 U.S.C. 22, and 28 U.S.C. 1391(b) and (c)(2), for Stone Canyon, SCIH, and Morton, and venue is proper for K+S AG, a German corporation, under 28 U.S.C. 1391(c)(3).
16. Morton and SCIH's US Salt subsidiary both produce and sell evaporated salt. Evaporated salt is a type of sodium chloride produced through “vacuum evaporation.” In the vacuum evaporation process, water is pumped into a salt deposit where the salt dissolves, and the resulting brine is forced into an evaporator on the surface where it is boiled in a series of pans until only the salt remains. Evaporated salt is nearly 100% sodium chloride and contains almost no other trace minerals. Because of the evaporation process, individual grains of evaporated salt are also more consistent and regularly shaped than other forms of salt.
17. Evaporated salt is distinct from salt created through other production methods, such as rock salt and solar salt. Rock salt is mined and then crushed into smaller sizes before being transported to the surface. Rock salt is less expensive to produce than evaporated salt, but it is also coarser, irregularly shaped, and contains other minerals and impurities. As a result, rock salt is used for applications that have less demanding quality requirements such as de-icing roads. Solar salt is created when salt water is captured in shallow ponds where the sun evaporates most of the water. It can only be produced in warm climates where the evaporation rate exceeds the precipitation rate. Solar salt is less pure and not as uniform in shape as evaporated salt, but it is purer than rock salt. Solar salt is used for applications such as water softening.
18. Evaporated salt typically is used in applications that require the highest quality of salt, such as human consumption. There are different types of evaporated salt that have different characteristics, end uses, and customers. Three types of evaporated salt produced by Defendants constitute relevant product markets—pharmaceutical-grade salt, round-can table salt, and bulk evaporated salt.
19. Pharmaceutical-grade salt is the grade of salt with the highest percentage of sodium chloride and thus is the purest grade of evaporated salt. Pharmaceutical-grade salt is used in the pharmaceutical industry as a building block for a number of life-saving treatments and products, including dialysis fluid, intravenous saline solution, and other medical products. Pharmaceutical-grade salt must be evaporated from salt deposits of extremely high purity and then undergo post-production processing to ensure that it contains virtually no trace minerals or other impurities.
20. Because of these stringent standards, the mining and production process for pharmaceutical-grade salt must be extensively monitored and documented to ensure purity and consistency across production batches. This documentation must then be provided to customers as a validation of the quality and purity of the pharmaceutical-grade salt.
21. Rock salt and solar salt do not meet the purity requirements for pharmaceutical-grade salt. Other grades of evaporated salt—for example, salt used in food processing—also cannot serve as a substitute for pharmaceutical-grade salt. Pharmaceutical-grade salt must contain a higher percentage of sodium chloride than other types of evaporated salt. This ensures that it does not contain trace minerals that would impact the efficacy of pharmaceutical products made using pharmaceutical-grade salt. Pharmaceutical-grade salt also cannot contain additives such as anti-caking agents that are added during the processing of other types of evaporated salt. Because of these requirements, pharmaceutical-grade salt is more difficult to produce than other forms of evaporated salt.
22. In the event of a small but significant increase in price by a hypothetical monopolist of pharmaceutical-grade salt, substitution away from pharmaceutical-grade salt would be insufficient to render the price increase unprofitable. Pharmaceutical-grade salt is therefore a line of commerce, or relevant product market, for purposes of analyzing the effects of the acquisition under Section 7 of the Clayton Act, 15 U.S.C. 18.
23. Table salt is evaporated salt that is processed for human consumption. It is regulated by the Food and Drug Administration (“FDA”) and must meet high purity standards. Table salt also has a highly consistent size across granules and contains agents to prevent clumping and evaporation. Without additional processing—which raises price considerably—rock salt and solar salt cannot meet the same purity requirements or achieve the same consistent granule size as table salt. Pharmaceutical-grade salt meets the purity requirements for table salt but does not contain the necessary agents to prevent clumping and evaporation. As such, rock salt, solar salt, and pharmaceutical-grade salt are not substitutes for table salt.
24. In the United States, the packaging format strongly preferred by consumers for table salt is the round can, which is a 26-ounce cardboard cylinder with a paper label and a metal spout. The round-can's size, shape, material, and metal spout make it an easy receptacle to use one-handed without spilling while cooking or refilling a salt shaker, which is a product characteristic that is highly valued by consumers. Reflecting consumer preference, retailers like grocery stores dedicate shelf space specifically to round-can packaging. As a result, approximately 95% of the table salt sold to consumers in the United States is sold in a round can.
25. Table salt packaged in other containers, such as boxes or bags, is not a reasonable substitute for round-can table salt. Boxes without a metal spout and bags are more difficult to use and store and may spill once opened. Larger packages of table salt also are not reasonable substitutes for round-can table salt, as they contain significantly more salt than an individual can practically use.
26. In the event of a small but significant increase in price by a hypothetical monopolist of round-can table salt, substitution away from round-can table salt would be insufficient to render the price increase unprofitable. Round-can table salt is therefore a line of commerce, or relevant product market, for purposes of analyzing the effects of the acquisition under Section 7 of the Clayton Act, 15 U.S.C. 18.
27. Bulk evaporated salt is salt that is of sufficient purity to be used for human consumption that is sold in bulk form. Bulk evaporated salt is used to manufacture chemicals necessary to create essential everyday cleaning products such as disinfectants, soap, and bleach. Bulk evaporated salt is also an essential ingredient in nearly all processed pre-packaged foods, such as sauces, chips and other snacks, and frozen meals. Because bulk evaporated salt is incorporated into products end-consumers ingest or touch, it is regulated by the FDA and must meet stringent purity requirements.
28. Customers for bulk evaporated salt include chemical companies and large pre-packaged food manufacturers as well as smaller customers, such as bakeries, that use salt as an essential ingredient in their food products. To accommodate these customers, many of whom purchase thousands of tons of salt per year, evaporated salt is sold in bulk, by the truckload or in containers ranging from 50-pound bags to 2,000-pound “super-sacks.”
29. Bulk evaporated salt is distinct from evaporated salt used for other applications. Compared to other types of evaporated salt, it has unique end-uses, customers, and packaging. While pharmaceutical-grade salt and round-can table salt are of sufficient purity, they are priced too high and packaged in quantities that are too small to serve as substitutes for bulk evaporated salt. Bulk evaporated salt also is distinct from rock salt and solar salt, which have lower purity levels and non-uniform textures that make them unsuitable for chemical and food-production end uses. None of these types of salt can serve as a substitute to bulk evaporated salt.
30. In the event of a small but significant increase in price by a hypothetical monopolist of bulk evaporated salt, substitution away from bulk evaporated salt would be insufficient to render the price increase unprofitable. Bulk evaporated salt is therefore a line of commerce, or relevant product market, for purposes of analyzing the effects of the acquisition under Section 7 of the Clayton Act, 15 U.S.C. 18.
31. Pharmaceutical-grade salt is manufactured in only a few locations in the United States. From these locations, pharmaceutical-grade salt is shipped to customers throughout the United States and Canada.
32. While pharmaceutical-grade salt is shipped throughout the United States and Canada, shipping it from overseas is prohibitively expensive. This is because pharmaceutical-grade salt may not contain anti-caking agents. Without anti-caking agents, pharmaceutical-grade salt has a short shelf-life and may be damaged by the time and rigors of ocean-shipping. These limitations make ocean-shipping cost-prohibitive.
33. A hypothetical monopolist of pharmaceutical-grade salt in the United States and Canada could profitably impose a small but significant non-transitory increase in price for pharmaceutical-grade salt without losing sufficient sales to render the price increase unprofitable. Accordingly, the relevant geographic market for the purposes of analyzing the effects of the acquisition on pharmaceutical-grade salt under Section 7 of the Clayton Act, 15 U.S.C. 18, is the United States and Canada.
34. Competition among round-can table salt suppliers occurs at a national level. Retailers, many of which are grocery store chains, mass merchandisers, or convenience stores with large national footprints, purchase round-can table salt for all of their locations at once, and suppliers ship round-can table salt from coast to coast.
35. Round-can table salt is not imported from outside the United States. In addition to being heavy—and therefore expensive to transport—table salt in other countries is typically sold in bags or cardboard boxes. As such, foreign suppliers of table salt typically lack the production facilities to produce round cans for the United States market.
36. A hypothetical monopolist of round-can table salt in the United States could profitably impose a small but significant non-transitory increase in price for round-can table salt without losing sufficient sales to render the price increase unprofitable. Accordingly, the relevant geographic market for the purposes of analyzing the effects of the acquisition on round-can table salt under Section 7 of the Clayton Act, 15 U.S.C. 18, is the United States.
37. Bulk evaporated salt is a product that can be produced at a relatively low cost, but it is heavy and therefore expensive to transport. As a result, customers purchase from nearby suppliers to minimize shipping costs that can be high relative to the value of the bulk evaporated salt being purchased.
38. Both Morton and US Salt—along with only one other competitor—operate bulk evaporated salt production facilities in upstate New York. All three companies use these facilities to service customers in the northeastern United States, including Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont. Customers in the northeastern United States can economically procure bulk evaporated salt from only these three locations. Other more distant bulk evaporated salt facilities cannot compete successfully on a regular basis for customers in the northeastern United States because the suppliers are too far away, making transportation costs too great.
39. A hypothetical monopolist of bulk evaporated salt in the northeastern United States could profitably impose a small but significant non-transitory increase in price for bulk evaporated salt without losing sufficient sales to render the price increase unprofitable. Accordingly, the relevant geographic market for the purposes of analyzing the effects of the acquisition on bulk evaporated salt under Section 7 of the Clayton Act, 15 U.S.C. 18, is the northeastern United States.
40. The proposed transaction would lessen competition and harm customers for pharmaceutical-grade salt in the United States and Canada, round-can table salt in the United States, and bulk evaporated salt in the northeastern United States by eliminating the substantial head-to-head competition that currently exists between Morton and US Salt. Customers in each of these markets would pay higher prices and receive lower quality and service as a result of the acquisition.
41. Morton and US Salt are the only two suppliers of pharmaceutical-grade salt in the United States and Canada, with Morton currently having a market share of around 77% and US Salt a share of around 23%. The acquisition would thus give the combined firm a monopoly in the sale of pharmaceutical-
42. Morton and US Salt compete to sell pharmaceutical-grade salt on the basis of quality and surety of supply. This competition has resulted in higher quality, lower prices, and better customer service. The combination of Morton and US Salt would eliminate this competition and its future benefits to customers, including pharmaceutical companies. Post-acquisition, the combined Morton and US Salt likely would have the incentive and ability to increase prices and offer less favorable contractual terms.
43. The proposed acquisition, therefore, likely would substantially lessen competition in the production of pharmaceutical-grade salt in the United States and Canada in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
44. Morton and US Salt are two of the largest table salt suppliers in the United States and are two of only three suppliers of round-can table salt in the United States. Morton is the largest supplier of branded round-can table salt in the United States. US Salt is the largest supplier of private-label round-can table salt—which is made by US Salt but sold under the brands of retailers and other third-parties—in the United States. US Salt is also the second-largest supplier of branded round-can table salt, with around six percent of sales.
45. Today, US Salt's private-label and branded round-can table salt products compete directly with Morton's branded round-can table salt. Together, the combined firm would control at least 90% of the round-can table salt market in the United States.
46. The combination of Morton and US Salt would eliminate the head-to-head competition between Morton and US Salt and leave customers in the United States with only two alternatives for round-can table salt in the United States. Post-acquisition, the combined firm likely would have the incentive and ability to increase prices and offer less favorable contractual terms.
47. Morton and US Salt compete for sales of round-can table salt on the basis of quality, price, and contractual terms such as delivery times. This competition has resulted in higher quality, lower prices, and more reliable delivery. The combination of Morton and US Salt would eliminate this competition and its future benefits to customers, including grocery chains, big box stores, and discount stores.
48. The proposed acquisition, therefore, likely would substantially lessen competition in the production of round-can table salt in the United States in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
49. Three bulk evaporated salt suppliers—Morton, US Salt, and one additional competitor, each with production facilities in upstate New York—compete for bulk evaporated salt customers in the northeastern United States. The combination of Morton and US Salt would eliminate the head-to-head competition between the parties and result in only two remaining competitors in the region.
50. Bulk evaporated salt customers in the northeastern United States, including food processors and chemical manufacturers, have been able to secure lower prices and improved quality and service—such as more reliable delivery—by threatening to switch between Morton and US Salt. The elimination of this head-to-head competition would allow a combined Morton and US Salt to exercise market power to unilaterally increase prices and reduce the quality and service for bulk evaporated salt customers in the northeastern United States.
51. The proposed acquisition, therefore, likely would substantially lessen competition in the production of bulk evaporated salt in the northeastern United States in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
52. Entry of new competitors into pharmaceutical-grade salt in the United States would be difficult and time-consuming and is unlikely to prevent the harm to competition that is likely to result if the proposed transaction is consummated.
53. A potential pharmaceutical-grade salt entrant would need to acquire suitable land that includes a salt deposit of sufficient purity, obtain the permits necessary to construct an evaporation and processing facility, possess or obtain appropriate financing for a significant capital expenditure, and then design, construct, and qualify the facility. This process would likely take several years, at a minimum. No new evaporated salt facility has been constructed in the United States in over 20 years.
54. Even if an entrant was able to construct an evaporated salt production facility, before selling a single grain of pharmaceutical-grade salt, it would need to install and test additional equipment needed to meet the exacting purity requirements for pharmaceutical-grade salt. Reputational barriers make entry even more difficult, as customers would be reluctant to switch to an unproven supplier that could not guarantee access to high-quality pharmaceutical-grade salt. Thus, entry would not be timely, likely, or sufficient to mitigate the anticompetitive effects from SCIH's proposed acquisition of Morton.
55. Entry of new competitors into round-can table salt in the United States would be difficult and time-consuming and is unlikely to prevent the anticompetitive effects that are likely to result if the proposed transaction is consummated.
56. Even though table salt has lower purity requirements than pharmaceutical-grade salt, a round-can table salt entrant would still need to take all of the steps to construct a facility that a pharmaceutical-grade salt entrant would, including locating an appropriate salt deposit, and investing significant time and money to build the facility.
57. In addition, an entrant in round-can table salt would have to secure a round-can packaging line. The packaging process for round-can table salt, created decades ago, is based on technology from that era and has proven to be difficult to replicate in a price-competitive manner. As a result, potential entrants with access to suitable salt deposits have tried, and failed, to develop round-can packaging technology in the last five years.
58. Entry through the construction of a new round-can table salt facility therefore will not be timely, likely, or sufficient to mitigate the anticompetitive effects of SCIH's proposed acquisition of Morton.
59. Entry of new competitors into bulk evaporated salt in the northeastern United States would be difficult and time-consuming and is unlikely to prevent the harm to competition that is
60. Just as with pharmaceutical-grade salt or round-can table salt, a new entrant in bulk evaporated salt would need to invest significant time and money to acquire land and construct an evaporated salt processing facility. Entry into bulk evaporated salt in the northeastern United States is particularly difficult because this area has limited salt deposits, which are necessary serve the market.
61. Entry through the construction of a new bulk evaporated salt production facility will therefore not be timely, likely, or sufficient to mitigate the anticompetitive effects from SCIH's proposed acquisition of Morton.
62. SCIH's proposed acquisition of Morton is likely to substantially lessen competition in the production and sale of evaporated salt products, including pharmaceutical-grade salt in the United States and Canada, round-can table salt in the United States, and bulk evaporated salt in the northeastern United States, in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
63. The acquisition will likely have the following anticompetitive effects, among others, in the relevant markets:
a. Actual and potential competition between Morton and US Salt will be eliminated;
b. competition generally will be substantially lessened; and
c. prices will likely increase and quality and the level of service will likely decrease.
64. The United States requests that this Court:
a. Adjudge and decree SCIH's acquisition of Morton to be unlawful and in violation of Section 7 of the Clayton Act, 15 U.S.C. 18;
b. preliminarily and permanently enjoin Defendants and all persons acting on their behalf from consummating the proposed acquisition by SCIH of Morton or from entering into or carrying out any other contract, agreement, plan, or understanding, the effect of which would be to combine Morton with US Salt;
c. award the United States the costs for this action; and
d. grant the United States such other relief as the Court deems just and proper.
The Court has jurisdiction over the subject matter of and each of the parties to this action. The Complaint states a claim upon which relief may be granted against Defendants under Section 7 of the Clayton Act, as amended (15 U.S.C. 18).
As used in this Final Judgment:
A. “Stone Canyon” means Defendant Stone Canyon Industries Holdings LLC, a Delaware limited corporation with its headquarters in Los Angeles, California, its successors and assigns, and its subsidiaries, divisions, groups, affiliates, including SCIH, partnerships, and joint ventures, and their directors, officers, managers, agents, and employees.
B. “SCIH” means Defendant SCIH Salt Holdings Inc., an affiliate of Stone Canyon and a Delaware corporation with its headquarters in Overland Park, Kansas, its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships, and joint ventures, and their directors, officers, managers, agents and employees.
C. “US Salt” means US Salt LLC, a Delaware limited liability company with its headquarters in Overland Park, Kansas, its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships, and joint ventures, and their directors, officers, managers, agents, and employees. US Salt is an indirect, wholly-owned subsidiary of SCIH.
D. “K+S AG” means Defendant K+S Aktiengesellschaft, a German company with its headquarters in Hesse, Germany, its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships, and joint ventures, and their directors, officers, managers, agents, and employees.
E. “Morton” means Defendant Morton Salt, Inc., a Delaware corporation with its headquarters in Chicago, Illinois, its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships, and joint ventures, and their directors, officers, managers, agents, and employees.
F. “Acquirer” means the entity to which Defendants divest the Divestiture Assets.
G. “Divestiture Assets” means all of Defendants' rights, titles, and interests in US Salt, including:
1. The refinery and associated acreage located at 3580 Salt Point Road, Watkins Glen, NY 14891;
2. the leased warehouse located at 224 N Main Street, Horseheads, NY 14845;
3. all other real property, including fee simple interests and real property leasehold interests and renewal rights thereto, improvements to real property, and options to purchase any adjoining or other property, together with all buildings, facilities, and other structures;
4. all tangible personal property, including fixed assets, machinery and manufacturing equipment, tools, vehicles, inventory, materials, office equipment and furniture, computer hardware, and supplies;
5. all contracts, contractual rights, and customer relationships, and all other agreements, commitments, and understandings, including supply agreements, teaming agreements, and leases, and all outstanding offers or solicitations to enter into a similar arrangement;
6. all licenses, permits, certifications, approvals, consents, registrations, waivers, and authorizations issued or granted by any governmental organization, and all pending applications or renewals;
7. all records and data, including (a) customer lists, accounts, sales, and credits records, (b) production, repair, maintenance, and performance records, (c) manuals and technical information Defendants provide to their own employees, customers, suppliers, agents, or licensees, (d) records and research data concerning historic and current research and development activities, and (e) drawings, blueprints, and designs;
8. all intellectual property owned, licensed, or sublicensed, either as licensor or licensee, including (a) patents, patent applications, and inventions and discoveries that may be patentable, (b) registered and unregistered copyrights and copyright applications, and (c) registered and unregistered trademarks, trade dress, service marks, trade names, and trademark applications; and
9. all other intangible property, including (a) commercial names and d/b/a names, (b) technical information, (c) computer software and related documentation, know-how, trade secrets, design protocols, specifications for materials, specifications for parts, specifications for devices, safety procedures (
H. “Divestiture Date” means the date on which the Divestiture Assets are divested to Acquirer pursuant to this Final Judgment.
I. “Including” means including but not limited to.
J. “Relevant Personnel” means all full-time, part-time, or contract employees involved in the production or sale of evaporated salt, wherever located, for (1) US Salt, or (2) SCIH.
K. “Transaction” means the proposed acquisition of Morton by SCIH.
A. This Final Judgment applies to Stone Canyon, SCIH, Morton, and K+S AG, as defined above, and all other persons in active concert or participation with any Defendant who receive actual notice of this Final Judgment.
B. If, prior to complying with Section IV and Section V of this Final Judgment, Defendants sell or otherwise dispose of all or substantially all of their assets or of business units that include the Divestiture Assets, Defendants must require any purchaser to be bound by the provisions of this Final Judgment. Defendants need not obtain such an agreement from Acquirer.
A. Defendants are ordered and directed, within 120 calendar days after the Court's entry of the Asset Preservation and Hold Separate Stipulation and Order in this matter, to divest the Divestiture Assets in a manner consistent with this Final Judgment to an Acquirer acceptable to the United States, in its sole discretion. The United States, in its sole discretion, may agree to one or more extensions of this time period not to exceed 60 calendar days in total and will notify the Court of any extensions.
B. Defendants must use best efforts to divest the Divestiture Assets as expeditiously as possible and may not take any action to impede the permitting, operation, or divestiture of the Divestiture Assets. Defendants must take no action that would jeopardize the divestiture ordered by the Court.
C. Unless the United States otherwise consents in writing, divestiture pursuant to this Final Judgment must include the entire Divestiture Assets and must be accomplished in such a way as to satisfy the United States, in its sole discretion, that the Divestiture Assets can and will be used by Acquirer as part of a viable, ongoing business in the production and sale of evaporated salt products and that the divestiture to Acquirer will remedy the competitive harm alleged in the Complaint.
D. The divestiture must be made to an Acquirer that, in the United States' sole judgment, has the intent and capability, including the necessary managerial, operational, technical, and financial capability, to compete effectively in the production and sale of evaporated salt products.
E. The divestiture must be accomplished in a manner that satisfies the United States, in its sole discretion, that none of the terms of any agreement between Acquirer and Defendants gives Defendants the ability unreasonably to raise Acquirer's costs, lower Acquirer's efficiency, or otherwise interfere in the ability of the Acquirer to compete effectively in the production and sale of evaporated salt products.
F. In accomplishing the divestiture ordered by this Final Judgment, Defendants promptly must make known, by usual and customary means, the availability of the Divestiture Assets. Defendants must inform any person making an inquiry relating to a possible purchase of the Divestiture Assets that the Divestiture Assets are being divested in accordance with this Final Judgment and must provide that person with a copy of this Final Judgment. Defendants must offer to furnish to all prospective Acquirers, subject to customary confidentiality assurances, all information and documents relating to the Divestiture Assets that are customarily provided in a due-diligence process;
G. Defendants must provide prospective Acquirers with (1) access to make inspections of the Divestiture Assets; (2) access to all environmental,
H. Defendants must cooperate with and assist Acquirer in identifying and, at the option of Acquirer, hiring all Relevant Personnel, including:
1. Within 10 business days following the filing of the Complaint in this matter, Defendants must identify all Relevant Personnel to Acquirer and the United States, including by providing organization charts covering all Relevant Personnel.
2. Within 10 business days following receipt of a request by Acquirer or the United States, Defendants must provide to Acquirer and the United States additional information relating to Relevant Personnel, including name, job title, reporting relationships, past experience, responsibilities, training and educational histories, relevant certifications, and job performance evaluations. Defendants also must provide to Acquirer and the United States current and accrued compensation and benefits, including most recent bonuses paid, aggregate annual compensation, current target or guaranteed bonus any retention agreement or incentives, and any other payments due, compensation or benefit accrued, or promises made to the Relevant Personnel. If Defendants are barred by any applicable law from providing any of this information, Defendants must provide, within 10 business days following receipt of the request, the requested information to the full extent permitted by law and also must provide a written explanation of Defendants' inability to provide the remaining information, including specifically identifying the provisions of the applicable laws.
3. At the request of Acquirer, Defendants must promptly make Relevant Personnel available for private interviews with Acquirer during normal business hours at a mutually agreeable location.
4. Defendants must not interfere with any effort by Acquirer to employ any Relevant Personnel. Interference includes offering to increase the compensation or improve the benefits of Relevant Personnel unless: (a) The offer is part of a company-wide increase in compensation or improvement in benefits that was announced prior to October 5, 2020; or (b) the offer is approved by the United States in its sole discretion. Defendants' obligations under this Paragraph will expire six months after the Divestiture Date.
5. For Relevant Personnel who elect employment with Acquirer within six months of the Divestiture Date, Defendants must waive all non-compete and non-disclosure agreements, vest all unvested pension and other equity rights that those Relevant Personnel have fully or partially accrued, provide any pay pro-rata, provide all other compensation and benefits that those Relevant Personnel have fully or partially accrued, and provide all other benefits that those Relevant Personnel otherwise would have been provided had the Relevant Personnel continued employment with Defendants, including any retention bonuses or payments. Defendants may maintain reasonable restrictions on disclosure by Relevant Personnel of Defendants' proprietary non-public information that is unrelated to the production and sale of evaporated salt products and not otherwise required to be disclosed by this Final Judgment.
6. For a period of 12 months from the Divestiture Date, Defendants may not solicit to rehire Relevant Personnel who were hired by Acquirer within six months of the Divestiture Date unless (a) an individual is terminated or laid off by Acquirer or (b) Acquirer agrees in writing that Defendants may solicit to re-hire that individual. Nothing in this Paragraph prohibits Defendants from advertising employment openings using general solicitations or advertisements and rehiring Relevant Personnel who apply for an employment opening through a general solicitation or advertisement.
I. Defendants must warrant to Acquirer that (1) the Divestiture Assets will be operational and without material defect on the date of their transfer to Acquirer; (2) there are no material defects in the environmental, zoning, or other permits relating to the operation of the Divestiture Assets; and (3) Defendants have disclosed all encumbrances on any part of the Divestiture Assets, including on intangible property. Following the sale of the Divestiture Assets, Defendants must not undertake, directly or indirectly, challenges to the environmental, zoning, or other permits relating to the operation of the Divestiture Assets.
J. Defendants must assign, subcontract, or otherwise transfer all contracts, agreements, and relationships (or portions of such contracts, agreements, and relationships) included in the Divestiture Assets, including all supply and sales contracts, to Acquirer;
K. Defendants must use best efforts to assist Acquirer to obtain all necessary licenses, registrations, and permits to operate the Divestiture Assets. Until Acquirer obtains the necessary licenses, registrations, and permits, Defendants must provide Acquirer with the benefit of Defendants' licenses, registrations, and permits to the full extent permissible by law.
L. At the option of Acquirer, and subject to approval by the United States in its sole discretion, on or before the Divestiture Date, Defendants must enter into a contract to provide transition services for back office, human resource, and information technology services and support for US Salt for a period of up to 12 months on terms and conditions reasonably related to market conditions for the provision of the transition services. Any amendment to or modification of any provision of a contract for transition services is subject to approval by the United States, in its sole discretion. The United States, in its sole discretion, may approve one or more extensions of this contract for transition services, for a total of up to an additional six months. If Acquirer seeks an extension of the term of any contract for transition services, Defendants must notify the United States in writing at least three months prior to the date the contract expires. Acquirer may terminate a contract for transition services, or any portion of a contract for transition services, without cost or penalty at any time upon 30 days' written notice. The employee(s) of Defendants tasked with providing transition services must not share any competitively sensitive information of Acquirer with any other employee of Defendants.
M. If any term of an agreement between Defendants and Acquirer, including an agreement to effectuate the divestiture required by this Final Judgment, varies from a term of this Final Judgment then, to the extent that Defendants cannot fully comply with both, this Final Judgment determines Defendants' obligations.
A. If Defendants have not divested the Divestiture Assets within the period specified in Paragraph IV.A, Defendants
B. After the appointment of a divestiture trustee by the Court, only the divestiture trustee will have the right to sell the Divestiture Assets. The divestiture trustee will have the power and authority to accomplish the divestiture to an Acquirer acceptable to the United States, in its sole discretion, at a price and on terms obtainable through reasonable effort by the divestiture trustee, subject to the provisions of Sections IV, V, and VI of this Final Judgment, and will have other powers as the Court deems appropriate. The divestiture trustee must sell the Divestiture Assets as quickly as possible.
C. Defendants may not object to a sale by the divestiture trustee on any ground other than malfeasance by the divestiture trustee. Objections by Defendants must be conveyed in writing to the United States and the divestiture trustee within 10 calendar days after the divestiture trustee has provided the notice of proposed divestiture required by Section VI.
D. The divestiture trustee will serve at the cost and expense of Defendants pursuant to a written agreement, on terms and conditions, including confidentiality requirements and conflict-of-interest certifications, that are approved by the United States, in its sole discretion.
E. The divestiture trustee may hire at the cost and expense of Defendants any agents or consultants, including investment bankers, attorneys, and accountants, that are reasonably necessary in the divestiture trustee's judgment to assist with the divestiture trustee's duties. These agents or consultants will be accountable solely to the divestiture trustee and will serve on terms and conditions, including terms and conditions governing confidentiality requirements and conflict-of-interest certifications, approved by the United States in its sole discretion.
F. The compensation of the divestiture trustee and agents or consultants hired by the divestiture trustee must be reasonable in light of the value of the Divestiture Assets and based on a fee arrangement that provides the divestiture trustee with incentives based on the price and terms of the divestiture and the speed with which it is accomplished. If the divestiture trustee and Defendants are unable to reach agreement on the divestiture trustee's compensation or other terms and conditions of engagement within 14 calendar days of the appointment of the divestiture trustee by the Court, the United States, in its sole discretion, may take appropriate action, including by making a recommendation to the Court. Within three business days of hiring an agent or consultant, the divestiture trustee must provide written notice of the hiring and rate of compensation to Defendants and the United States.
G. The divestiture trustee must account for all monies derived from the sale of the assets sold by the divestiture trustee and all costs and expenses incurred. Within 30 calendar days of the date of the sale of the assets sold by the divestiture trustee, the divestiture trustee must submit that accounting to the Court for approval. After approval by the Court of the divestiture trustee's accounting, including fees for unpaid services and those of agents or consultants hired by the divestiture trustee, all remaining money must be paid to Stone Canyon or SCIH and the trust will then be terminated.
H. Defendants must use best efforts to assist the divestiture trustee to accomplish the required divestiture. Subject to reasonable protection for trade secrets, other confidential research, development, or commercial information, or any applicable privileges, Defendants must provide the divestiture trustee and agents or consultants retained by the divestiture trustee with full and complete access to all personnel, books, records, and facilities of the Divestiture Assets. Defendants also must provide or develop financial and other information relevant to the Divestiture Assets that the divestiture trustee may reasonably request. Defendants must not take any action to interfere with or to impede the divestiture trustee's accomplishment of the divestiture.
I. The divestiture trustee must maintain complete records of all efforts made to sell the Divestiture Assets, including by filing monthly reports with the United States setting forth the divestiture trustee's efforts to accomplish the divestiture ordered by this Final Judgment. The reports must include the name, address, and telephone number of each person who, during the preceding month, made an offer to acquire, expressed an interest in acquiring, entered into negotiations to acquire, or was contacted or made an inquiry about acquiring any interest in the Divestiture Assets and must describe in detail each contact.
J. If the divestiture trustee has not accomplished the divestiture ordered by this Final Judgment within six months of appointment, the divestiture trustee must promptly provide the United States with a report setting forth: (1) The divestiture trustee's efforts to accomplish the required divestiture; (2) the reasons, in the divestiture trustee's judgment, why the required divestiture has not been accomplished; and (3) the divestiture trustee's recommendations for completing the divestiture. Following receipt of that report, the United States may make additional recommendations to the Court. The Court thereafter may enter such orders as it deems appropriate to carry out the purpose of this Final Judgment, which may include extending the trust and the term of the divestiture trustee's appointment by a period requested by the United States.
K. The divestiture trustee will serve until divestiture of all Divestiture Assets is completed or for a term otherwise ordered by the Court.
L. If the United States determines that the divestiture trustee is not acting diligently or in a reasonably cost-effective manner, the United States may recommend that the Court appoint a substitute divestiture trustee.
A. Within two business days following execution of a definitive agreement to divest the Divestiture Assets, Defendants or the divestiture trustee, whichever is then responsible for effecting the divestiture, must notify the United States of the proposed divestiture. If the divestiture trustee is responsible for completing the divestiture, the divestiture trustee also must notify Defendants. The notice must set forth the details of the proposed divestiture and list the name, address, and telephone number of each person not previously identified who offered or expressed an interest in or desire to acquire any ownership interest in the Divestiture Assets.
B. Within 15 calendar days of receipt by the United States of the notice required by Paragraph VI.A, the United States may request from Defendants, the proposed Acquirer, other third parties, or the divestiture trustee additional information concerning the proposed divestiture, the proposed Acquirer, and other prospective Acquirers. Defendants and the divestiture trustee must furnish the additional information requested within 15 calendar days of the receipt of the request, unless the United States provides written agreement to a different period.
C. Within 45 calendar days after receipt of the notice required by Paragraph VI.A or within 20 calendar days after the United States has been provided the additional information requested pursuant to Paragraph VI.B, whichever is later, the United States will provide written notice to Defendants and any divestiture trustee that states whether the United States, in its sole discretion, objects to the proposed Acquirer or any other aspect of the proposed divestiture. Without written notice that the United States does not object, a divestiture may not be consummated. If the United States provides written notice that it does not object, the divestiture may be consummated, subject only to Defendants' limited right to object to the sale under Paragraph V.C of this Final Judgment. Upon objection by Defendants pursuant to Paragraph V.C, a divestiture by the divestiture trustee may not be consummated unless approved by the Court.
D. No information or documents obtained pursuant to this Section VI may be divulged by the United States to any person other than an authorized representative of the executive branch of the United States except in the course of legal proceedings to which the United States is a party, including grand-jury proceedings, for the purpose of evaluating a proposed Acquirer or securing compliance with this Final Judgment, or as otherwise required by law.
E. In the event of a request by a third party for disclosure of information under the Freedom of Information Act, 5 U.S.C. 552, the United States Department of Justice's Antitrust Division will act in accordance with that statute, and the Department of Justice regulations at 28 CFR part 16, including the provision on confidential commercial information, at 28 CFR 16.7. Persons submitting information to the Antitrust Division should designate the confidential commercial information portions of all applicable documents and information under 28 CFR 16.7. Designations of confidentiality expire ten years after submission, “unless the submitter requests and provides justification for a longer designation period.”
F. If at the time a person furnishes information or documents to the United States pursuant to this Section VI, that person represents and identifies in writing information or documents for which a claim of protection may be asserted under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure, and marks each pertinent page of such material, “Subject to claim of protection under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure,” the United States must give that person ten calendar days' notice before divulging the material in any legal proceeding (other than a grand-jury proceeding).
Defendants may not finance all or any part of Acquirer's purchase of all or part of the Divestiture Assets.
Defendants must take all steps necessary to comply with the Asset Preservation and Hold Separate Stipulation and Order entered by the Court.
A. Within 20 calendar days of the filing of the Complaint in this matter, and every 30 calendar days thereafter until the divestiture required by this Final Judgment has been completed, each Defendant must deliver to the United States an affidavit signed by each Defendant's Chief Financial Officer and General Counsel, describing in reasonable detail the fact and manner of that Defendant's compliance with this Final Judgment. The United States, in its sole discretion, may approve different signatories for the affidavits.
B. Each affidavit must include: (1) The name, address, and telephone number of each person who, during the preceding 30 calendar days, made an offer to acquire, expressed an interest in acquiring, entered into negotiations to acquire, or was contacted or made an inquiry about acquiring, an interest in the Divestiture Assets, and describe in detail each contact with such persons during that period; (2) a description of the efforts Defendants have taken to solicit buyers for and complete the sale of the Divestiture Assets and to provide required information to prospective Acquirers; and (3) a description of any limitations placed by Defendants on information provided to prospective Acquirers. Objection by the United States to information provided by Defendants to prospective Acquirers must be made within 14 calendar days of receipt of the affidavit, except that the United States may object at any time if the information set forth in the affidavit is not true or complete.
C. Defendants must keep all records of any efforts made to divest the Divestiture Assets until one year after the Divestiture Date.
D. Within 20 calendar days of the filing of the Complaint in this matter, each Defendant must deliver to the United States an affidavit signed by each Defendant's Chief Financial Officer and General Counsel, describing in reasonable detail all actions that Defendants have taken and all steps that Defendants have implemented on an ongoing basis to comply with Section VIII of this Final Judgment. The United States, in its sole discretion, may approve different signatories for the affidavits.
E. If a Defendant makes any changes to the actions and steps described in affidavits provided pursuant to Paragraph IX.D, the Defendant must, within 15 calendar days after any change is implemented, deliver to the United States an affidavit describing those changes.
F. Defendants must keep all records of any efforts made to comply with Section VIII until one year after the divestiture has been completed.
A. For the purpose of determining or securing compliance with this Final Judgment or of related orders such as the Asset Preservation and Hold Separate Stipulation and Order, or of determining whether this Final Judgment should be modified or vacated, upon written request of an authorized representative of the Assistant Attorney General for the Antitrust Division, and reasonable notice to Defendants, Defendants must permit, from time to time and subject to legally recognized privileges, authorized representatives, including agents retained by the United States:
1. To have access during Defendants' office hours to inspect and copy, or at the option of the United States, to require Defendants to provide electronic copies of all books, ledgers, accounts, records, data, and documents in the possession, custody, or control of Defendants, relating to any matters contained in this Final Judgment; and
2. to interview, either informally or on the record, Defendants' officers, employees, or agents, who may have their individual counsel present, relating to any matters contained in this Final Judgment. The interviews must be subject to the reasonable convenience of the interviewee and without restraint or interference by Defendants.
B. Upon the written request of an authorized representative of the Assistant Attorney General for the Antitrust Division, Defendants must submit written reports or respond to written interrogatories, under oath if requested, relating to any matters contained in this Final Judgment.
C. No information or documents obtained by the United States pursuant to this Section X may be divulged by the
D. In the event of a request by a third party for disclosure of information under the Freedom of Information Act, 5 U.S.C. 552, the Antitrust Division will act in accordance with that statute, and the Department of Justice regulations at 28 CFR part 16, including the provision on confidential commercial information, at 28 CFR 16.7. Defendants submitting information to the Antitrust Division should designate the confidential commercial information portions of all applicable documents and information under 28 CFR 16.7. Designations of confidentiality expire ten years after submission, “unless the submitter requests and provides justification for a longer designation period.”
E. If at the time that Defendants furnish information or documents to the United States pursuant to this Section X, Defendants represent and identify in writing information or documents for which a claim of protection may be asserted under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure, and Defendants mark each pertinent page of such material, “Subject to claim of protection under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure,” the United States must give Defendants 10 calendar days' notice before divulging the material in any legal proceeding (other than a grand jury proceeding).
A. For a period of two years following the filing of this Proposed Final Judgment, Stone Canyon and SCIH must implement and maintain procedures to prevent any employees of Stone Canyon and SCIH from sharing competitively sensitive information relating to US Salt with personnel with responsibilities relating to Morton's production or sale of evaporated salt products.
B. Stone Canyon and SCIH, within 30 calendar days of the Court's entry of the Asset Preservation and Hold Separate Stipulation and Order, must submit to the United States a document setting forth in detail the procedures implemented to effect compliance with this Section XI. Upon receipt of the document, the United States will inform Stone Canyon and SCIH within 10 business days whether, in its sole discretion, the United States approves or rejects Stone Canyon and SCIH's compliance plan. Within 10 business days of receiving a notice of rejection, Stone Canyon and SCIH must submit a revised compliance plan. The United States may request that the Court determine whether Stone Canyon and SCIH's proposed compliance plan fulfills the requirements of Paragraph XI.A.
Defendants may not reacquire any part of or any interest in the Divestiture Assets during the term of this Final Judgment.
The Court retains jurisdiction to enable any party to this Final Judgment to apply to the Court at any time for further orders and directions as may be necessary or appropriate to carry out or construe this Final Judgment, to modify any of its provisions, to enforce compliance, and to punish violations of its provisions.
A. The United States retains and reserves all rights to enforce the provisions of this Final Judgment, including the right to seek an order of contempt from the Court. Defendants agree that in a civil contempt action, a motion to show cause, or a similar action brought by the United States relating to an alleged violation of this Final Judgment, the United States may establish a violation of this Final Judgment and the appropriateness of a remedy therefor by a preponderance of the evidence, and Defendants waive any argument that a different standard of proof should apply.
B. This Final Judgment should be interpreted to give full effect to the procompetitive purposes of the antitrust laws and to restore the competition the United States alleged was harmed by the challenged conduct. Defendants agree that they may be held in contempt of, and that the Court may enforce, any provision of this Final Judgment that, as interpreted by the Court in light of these procompetitive principles and applying ordinary tools of interpretation, is stated specifically and in reasonable detail, whether or not it is clear and unambiguous on its face. In any such interpretation, the terms of this Final Judgment should not be construed against either party as the drafter.
C. In an enforcement proceeding in which the Court finds that Defendants have violated this Final Judgment, the United States may apply to the Court for a one-time extension of this Final Judgment, together with other relief that may be appropriate. In connection with a successful effort by the United States to enforce this Final Judgment against a Defendant, whether litigated or resolved before litigation, that Defendant agrees to reimburse the United States for the fees and expenses of its attorneys, as well as all other costs including experts' fees, incurred in connection with that effort to enforce the Final Judgment, including in the investigation of the potential violation.
D. For a period of four years following the expiration of this Final Judgment, if the United States has evidence that a Defendant violated this Final Judgment before it expired, the United States may file an action against that Defendant in this Court requesting that the Court order: (1) Defendant to comply with the terms of this Final Judgment for an additional term of at least four years following the filing of the enforcement action; (2) all appropriate contempt remedies; (3) additional relief needed to ensure the Defendant complies with the terms of this Final Judgment; and (4) fees or expenses as called for by this Section XIV.
Unless the Court grants an extension, this Final Judgment will expire 10 years from the date of its entry, except that after five years from the date of its entry, this Final Judgment may be terminated upon notice by the United States to the Court and Defendants that the divestiture has been completed and continuation of this Final Judgment no longer is necessary or in the public interest.
Entry of this Final Judgment is in the public interest. The parties have complied with the requirements of the Antitrust Procedures and Penalties Act, 15 U.S.C. 16, including by making available to the public copies of this Final Judgment, and the Competitive Impact Statement, public comments thereon, and any response to comments by the United States. Based upon the record before the Court, which includes the Competitive Impact Statement and, if applicable, any comments and response to comments filed with the Court, entry of this Final Judgment is in the public interest.
In accordance with the Antitrust Procedures and Penalties Act, 15 U.S.C. 16 (the “APPA” or “Tunney Act”), the United States of America files this Competitive Impact Statement related to the proposed Final Judgment filed in this civil antitrust proceeding.
On October 5, 2020, Stone Canyon Industry Holdings LLC (“Stone Canyon”) and its portfolio company SCIH Salt Holdings Inc. (“SCIH”) agreed to acquire the K+S Aktiengesellschaft (“K+S AG”) Operating Unit Salt Americas business, a bundle of several subsidiaries including Morton Salt, Inc. (“Morton”). The United States filed a civil antitrust Complaint on April 19, 2021, seeking to enjoin the proposed acquisition. The Complaint alleges that the likely effect of this acquisition would be to substantially lessen competition in the production and sale of evaporated salt products, including pharmaceutical-grade salt in the United States and Canada, “round-can” table salt in the United States, and bulk evaporated salt in the northeastern United States, in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
At the same time the Complaint was filed, the United States filed a proposed Final Judgment and an Asset Preservation and Hold Separate Stipulation and Order (“Stipulation and Order”), which are designed to remedy the loss of competition alleged in the Complaint.
Under the proposed Final Judgment, which is explained more fully below, Defendants are required to divest SCIH's subsidiary, US Salt LLC (“US Salt”).
Under the terms of the Stipulation and Order, Defendants must take certain steps to ensure that US Salt is operated as a competitively independent, economically viable, and ongoing business concern, which must remain independent and uninfluenced by Defendants, and that competition is maintained during the pendency of the required divestiture. On April 22, 2021, the Court entered the Stipulation and Order.
The United States and Defendants have stipulated that the proposed Final Judgment may be entered after compliance with the APPA. Entry of the proposed Final Judgment will terminate this action, except that the Court will retain jurisdiction to construe, modify, or enforce the provisions of the proposed Final Judgment and to punish violations thereof.
Stone Canyon is an industrial holding company incorporated in Delaware and headquartered in Los Angeles, California. Stone Canyon acquired Kissner Group Holdings LP, which it later renamed SCIH, in April 2020.
SCIH is a subsidiary of Stone Canyon and is headquartered in Overland Park, Kansas. In 2020, SCIH had revenues of approximately $1 billion. SCIH is a leading supplier of salt products, including evaporated salt products.
K+S AG is a chemical company headquartered in Kassel, Germany. In 2020, K+S AG reported revenues of approximately $4.4 billion. K+S AG's Operating Unit Salt Americas business includes Morton as well as K+S Windsor Salt, which sells salt products in Canada, and Sociedad Punta de Lobos, which sells salt products in Chile.
Morton is a K+S AG subsidiary with approximately $1 billion in revenue in 2020. Morton is the largest supplier of pharmaceutical-grade salt in the United States and Canada, the largest supplier of “round-can” table salt in the United States, and one of only three suppliers of bulk evaporated salt in the northeastern United States.
Pursuant to a Transaction Agreement dated October 5, 2020, SCIH agreed to acquire K+S AG's Operating Unit Salt Americas business, including Morton, for approximately $3.2 billion.
Morton and SCIH's US Salt subsidiary both produce and sell evaporated salt. Evaporated salt is a type of sodium chloride produced through “vacuum evaporation.” In the vacuum evaporation process, water is pumped into a salt deposit where the salt dissolves, and the resulting brine is forced into an evaporator on the surface where it is boiled in a series of pans until only the salt remains. Evaporated salt is nearly 100% sodium chloride and contains almost no other trace minerals. Because of the evaporation process, individual grains of evaporated salt are also more consistent and regularly shaped than other forms of salt.
Evaporated salt is distinct from salt created through other production methods, such as rock salt and solar salt. Rock salt is mined and then crushed into smaller sizes before being transported to the surface. Rock salt is less expensive to produce than evaporated salt, but it is also coarser, irregularly shaped, and contains other minerals and impurities. As a result, rock salt is used for applications that have less demanding quality requirements such as de-icing roads. Solar salt is created when salt water is captured in shallow ponds where the sun evaporates most of the water. It can only be produced in warm climates where the evaporation rate exceeds the precipitation rate. Solar salt is less pure and not as uniform in shape as evaporated salt, but it is purer than rock salt. Solar salt is used for applications such as water softening.
Evaporated salt typically is used in applications that require the highest quality of salt, such as human consumption. There are different types of evaporated salt that have different characteristics, end uses, and customers. As alleged in the Complaint, three types of evaporated salt produced by Defendants constitute relevant product markets—pharmaceutical-grade salt, round-can table salt, and bulk evaporated salt.
Pharmaceutical-grade salt is the grade of salt with the highest percentage of sodium chloride and thus is the purest grade of evaporated salt. Pharmaceutical-grade salt is used in the pharmaceutical industry as a building block for a number of life-saving treatments and products, including dialysis fluid, intravenous saline solution, and other medical products. Pharmaceutical-grade salt must be evaporated from salt deposits of extremely high purity and then undergo post-production processing to ensure that it contains virtually no trace minerals or other impurities.
Because of these stringent standards, the mining and production process for pharmaceutical-grade salt must be extensively monitored and documented to ensure purity and consistency across production batches. This documentation must then be provided to customers as a validation of the quality and purity of the pharmaceutical-grade salt.
Rock salt and solar salt do not meet the purity requirements for pharmaceutical-grade salt. Other grades of evaporated salt—for example, salt used in food processing—also cannot serve as a substitute for pharmaceutical-grade salt. Pharmaceutical-grade salt must contain a higher percentage of sodium chloride than other types of
The Complaint alleges that, in the event of a small but significant increase in price by a hypothetical monopolist of pharmaceutical-grade salt, substitution away from pharmaceutical-grade salt would be insufficient to render the price increase unprofitable. Pharmaceutical-grade salt is therefore a line of commerce, or relevant product market, for purposes of analyzing the effects of the acquisition under Section 7 of the Clayton Act, 15 U.S.C. 18.
Table salt is evaporated salt that is processed for human consumption. It is regulated by the Food and Drug Administration (“FDA”) and must meet high purity standards. Table salt also has a highly consistent size across granules and contains agents to prevent clumping and evaporation. Without additional processing—which raises price considerably—rock salt and solar salt cannot meet the same purity requirements or achieve the same consistent granule size as table salt. Pharmaceutical-grade salt meets the purity requirements for table salt but does not contain the necessary agents to prevent clumping and evaporation. As such, rock salt, solar salt, and pharmaceutical-grade salt are not substitutes for table salt.
In the United States, the packaging format strongly preferred by consumers for table salt is the round can, which is a 26-ounce cardboard cylinder with a paper label and a metal spout. The round-can's size, shape, material, and metal spout make it an easy receptacle to use one-handed without spilling while cooking or refilling a salt shaker, which is a product characteristic that is highly valued by consumers. Reflecting consumer preference, retailers like grocery stores dedicate shelf space specifically to round-can packaging. As a result, approximately 95% of the table salt sold to consumers in the United States is sold in a round can.
Table salt packaged in other containers, such as boxes or bags, is not a reasonable substitute for round-can table salt. Boxes without a metal spout and bags are more difficult to use and store and may spill once opened. Larger packages of table salt also are not reasonable substitutes for round-can table salt, as they contain significantly more salt than an individual can practically use.
The Complaint alleges that, in the event of a small but significant increase in price by a hypothetical monopolist of round-can table salt, substitution away from round-can table salt would be insufficient to render the price increase unprofitable. Round-can table salt is therefore a line of commerce, or relevant product market, for purposes of analyzing the effects of the acquisition under Section 7 of the Clayton Act, 15 U.S.C. 18.
Bulk evaporated salt is salt that is of sufficient purity to be used for human consumption that is sold in bulk form. Bulk evaporated salt is used to manufacture chemicals necessary to create essential everyday cleaning products such as disinfectants, soap, and bleach. Bulk evaporated salt is also an essential ingredient in nearly all processed pre-packaged foods, such as sauces, chips and other snacks, and frozen meals. Because bulk evaporated salt is incorporated into products end-consumers ingest or touch, it is regulated by the FDA and must meet stringent purity requirements.
Customers for bulk evaporated salt include chemical companies and large pre-packaged food manufacturers as well as smaller customers, such as bakeries, that use salt as an essential ingredient in their food products. To accommodate these customers, many of whom purchase thousands of tons of salt per year, evaporated salt is sold in bulk, by the truckload or in containers ranging from 50-pound bags to 2,000-pound “super-sacks.”
Bulk evaporated salt is distinct from evaporated salt used for other applications. Compared to other types of evaporated salt, it has unique end-uses, customers, and packaging. While pharmaceutical-grade salt and round-can table salt are of sufficient purity, they are priced too high and packaged in quantities that are too small to serve as substitutes for bulk evaporated salt. Bulk evaporated salt also is distinct from rock salt and solar salt, which have lower purity levels and non-uniform textures that make them unsuitable for chemical and food-production end uses. None of these types of salt can serve as a substitute to bulk evaporated salt.
The Complaint alleges that, in the event of a small but significant increase in price by a hypothetical monopolist of bulk evaporated salt, substitution away from bulk evaporated salt would be insufficient to render the price increase unprofitable. Bulk evaporated salt is therefore a line of commerce, or relevant product market, for purposes of analyzing the effects of the acquisition under Section 7 of the Clayton Act.
Pharmaceutical-grade salt is manufactured in only a few locations in the United States. From these locations, pharmaceutical-grade salt is shipped to customers throughout the United States and Canada.
While pharmaceutical-grade salt is shipped throughout the United States and Canada, shipping it from overseas is prohibitively expensive. This is because pharmaceutical-grade salt may not contain anti-caking agents. Without anti-caking agents, pharmaceutical-grade salt has a short shelf-life and may be damaged by the time and rigors of ocean-shipping. These limitations make ocean-shipping cost-prohibitive.
The Complaint alleges that a hypothetical monopolist of pharmaceutical-grade salt in the United States and Canada could profitably impose a small but significant non-transitory increase in price for pharmaceutical-grade salt without losing sufficient sales to render the price increase unprofitable. Accordingly, the Complaint alleges that the relevant geographic market for the purposes of analyzing the effects of the acquisition on pharmaceutical-grade salt under Section 7 of the Clayton Act, 15 U.S.C. 18 is the United States and Canada.
Competition among round-can table salt suppliers occurs at a national level. Retailers, many of which are grocery store chains, mass merchandisers, or convenience stores with large national footprints, purchase round-can table salt for all of their locations at once, and suppliers ship round-can table salt from coast to coast.
Round-can table salt is not imported from outside the United States. In addition to being heavy—and therefore expensive to transport—table salt in other countries is typically sold in bags or cardboard boxes. As such, foreign suppliers of table salt typically lack the production facilities to produce round cans for the United States market.
The Complaint alleges that a hypothetical monopolist of round-can table salt in the United States could profitably impose a small but significant non-transitory increase in price for round-can table salt without losing
Bulk evaporated salt is a product that can be produced at a relatively low cost, but it is heavy and therefore expensive to transport. As a result, customers purchase from nearby suppliers to minimize shipping costs that can be high relative to the value of the bulk evaporated salt being purchased.
Both Morton and US Salt—along with only one other competitor—operate bulk evaporated salt production facilities in upstate New York. All three companies use these facilities to service customers in the northeastern United States, including Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont. Customers in the northeastern United States can economically procure bulk evaporated salt from only these three locations. Other more distant bulk evaporated salt facilities cannot compete successfully on a regular basis for customers in the northeastern United States because the suppliers are too far away, making transportation costs too great.
The Complaint alleges that a hypothetical monopolist of bulk evaporated salt in the northeastern United States could profitably impose a small but significant non-transitory increase in price for bulk evaporated salt without losing sufficient sales to render the price increase unprofitable. Accordingly, the Complaint alleges that the relevant geographic market for the purposes of analyzing the effects of the acquisition on bulk evaporated salt under Section 7 of the Clayton Act, 15 U.S.C. 18 is the northeastern United States.
The Complaint alleges that the proposed transaction would lessen competition and harm customers for pharmaceutical-grade salt in the United States and Canada, round-can table salt in the United States, and bulk evaporated salt in the northeastern United States by eliminating the substantial head-to-head competition that currently exists between Morton and US Salt. The Complaint further alleges that customers in each of these markets would pay higher prices and receive lower quality and service as a result of the acquisition.
As described in the Complaint, Morton and US Salt are the only two suppliers of pharmaceutical-grade salt in the United States and Canada, with Morton currently having a market share of around 77% and US Salt a share of around 23%. The acquisition would thus give the combined firm a monopoly in the sale of pharmaceutical-grade salt in the United States and Canada, leaving pharmaceutical companies and other customers without a competitive alternative for this critical ingredient in dialysis fluid, intravenous saline solution, and other medical products.
The Complaint alleges that Morton and US Salt compete to sell pharmaceutical-grade salt on the basis of quality and surety of supply. This competition has resulted in higher quality, lower prices, and better customer service. The combination of Morton and US Salt would eliminate this competition and its future benefits to customers, including pharmaceutical companies. Post-acquisition, the combined Morton and US Salt likely would have the incentive and ability to increase prices and offer less favorable contractual terms.
As alleged in the Complaint, the proposed acquisition, therefore, likely would substantially lessen competition in the production of pharmaceutical-grade salt in the United States and Canada in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
As described in the Complaint, Morton and US Salt are two of the largest table salt suppliers in the United States and are two of only three suppliers of round-can table salt in the United States. Morton is the largest supplier of branded round-can table salt in the United States. US Salt is the largest supplier of private-label round-can table salt—which is made by US Salt but sold under the brands of retailers and other third-parties—in the United States. US Salt is also the second-largest supplier of branded round-can table salt, with around six percent of sales.
The Complaint alleges that, today, US Salt's private-label and branded round-can table salt products compete directly with Morton's branded round-can table salt. Together, the combined firm would control at least 90% of the round-can table salt market in the United States.
The Complaint further alleges that the combination of Morton and US Salt would eliminate the head-to-head competition between Morton and US Salt and leave customers in the United States with only two alternatives for round-can table salt in the United States. Post-acquisition, the combined firm likely would have the incentive and ability to increase prices and offer less favorable contractual terms.
The Complaint also alleges that Morton and US Salt compete for sales of round-can table salt on the basis of quality, price, and contractual terms such as delivery times. This competition has resulted in higher quality, lower prices, and more reliable delivery. The combination of Morton and US Salt would eliminate this competition and its future benefits to customers, including grocery chains, big box stores, and discount stores.
As alleged in the Complaint, the proposed acquisition, therefore, likely would substantially lessen competition in the production of round-can table salt in the United States in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
As described in the Complaint, three bulk evaporated salt suppliers—Morton, US Salt, and one additional competitor, each with production facilities in upstate New York—compete for bulk evaporated salt customers in the northeastern United States. The combination of Morton and US Salt would eliminate the head-to-head competition between the parties and result in only two remaining competitors in the region.
The Complaint alleges that bulk evaporated salt customers in the northeastern United States, including food processors and chemical manufacturers, have been able to secure lower prices and improved quality and service—such as more reliable delivery—by threatening to switch between Morton and US Salt. The elimination of this head-to-head competition would allow a combined Morton and US Salt to exercise market power to unilaterally increase prices and reduce the quality and service for bulk evaporated salt customers in the northeastern United States.
As alleged in the Complaint, the proposed acquisition, therefore, likely would substantially lessen competition in the production of bulk evaporated salt in the northeastern United States in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
As alleged in the Complaint, entry of new competitors into pharmaceutical-grade salt in the United States would be difficult and time-consuming and is unlikely to prevent the harm to competition that is likely to result if the proposed transaction is consummated.
The Complaint alleges that potential pharmaceutical-grade salt entrant would need to acquire suitable land that includes a salt deposit of sufficient purity, obtain the permits necessary to construct an evaporation and processing facility, possess or obtain appropriate financing for a significant capital expenditure, and then design, construct, and qualify the facility. This process would likely take several years, at a minimum. No new evaporated salt facility has been constructed in the United States in over 20 years.
The Complaint alleges that, even if an entrant were able to construct an evaporated salt production facility, before selling a single grain of pharmaceutical-grade salt, it would need to install and test additional equipment needed to meet the exacting purity requirements for pharmaceutical-grade salt. Reputational barriers make entry even more difficult, as customers would be reluctant to switch to an unproven supplier that could not guarantee access to high-quality pharmaceutical-grade salt. Thus, as alleged in the Complaint, entry would not be timely, likely, or sufficient to mitigate the anticompetitive effects from SCIH's proposed acquisition of Morton.
As alleged in the Complaint, entry of new competitors into round-can table salt in the United States would be difficult and time-consuming and is unlikely to prevent the anticompetitive effects that are likely to result if the proposed transaction is consummated.
The Complaint alleged that, even though table salt has lower purity requirements than pharmaceutical-grade salt, a round-can table salt entrant would still need to take all of the steps to construct a facility that a pharmaceutical-grade salt entrant would, including locating an appropriate salt deposit, and investing significant time and money to build the facility.
The Complaint alleges that, in addition, an entrant in round-can table salt would have to secure a round-can packaging line. The packaging process for round-can table salt, created decades ago, is based on technology from that era and has proven to be difficult to replicate in a price-competitive manner. As a result, potential entrants with access to suitable salt deposits have tried, and failed, to develop round-can packaging technology in the last five years.
Thus, as alleged in the Complaint, entry through the construction of a new round-can table salt facility therefore will not be timely, likely, or sufficient to mitigate the anticompetitive effects of SCIH's proposed acquisition of Morton.
As alleged in the Complaint, entry of new competitors into bulk evaporated salt in the northeastern United States would be difficult and time-consuming and is unlikely to prevent the harm to competition that is likely to result if the proposed transaction is consummated.
The Complaint alleges that, just as with pharmaceutical-grade salt or round-can table salt, a new entrant in bulk evaporated salt would need to invest significant time and money to acquire land and construct an evaporated salt processing facility. The Complaint further alleges that entry into bulk evaporated salt in the northeastern United States is particularly difficult because this area has limited salt deposits, which are necessary serve the market.
As alleged in the Complaint, entry through the construction of a new bulk evaporated salt production facility will therefore not be timely, likely, or sufficient to mitigate the anticompetitive effects from SCIH's proposed acquisition of Morton.
The proposed Final Judgment requires Stone Canyon and its subsidiary, SCIH, to divest their entire evaporated salt business, US Salt, to proceed with their proposed acquisition of Morton. This divestiture allows a third-party buyer to step in as the owner of US Salt and use all of those assets to compete for the production and sale of pharmaceutical-grade salt in the United States and Canada, round-can table salt in the United States, and bulk evaporated salt in the northeastern United States. The proposed divestiture will thus establish an independent and economically viable competitor that will ensure competition in these markets going forward.
Paragraph IV(A) of the proposed Final Judgment requires Defendants, within 120 calendar days after the entry of the Stipulation and Order by the Court, to divest the Divestiture Assets to an Acquirer acceptable to the United States, in its sole discretion. The assets must be divested in such a way as to satisfy the United States, in its sole discretion, that the Divestiture Assets can and will be used by the Acquirer as part of a viable, ongoing business in the production and sale of evaporated salt products so that the Acquirer can compete effectively in the market for pharmaceutical-grade salt in the United States and Canada, round-can table salt in the United States, and bulk evaporated salt in the northeastern United States. Defendants must use best efforts to accomplish the divestiture of the Divestiture Assets quickly and must take no action to jeopardize the divestiture.
The Divestiture Assets include all of Defendants' rights, titles, and interests in US Salt, including two US Salt facilities (a refinery located in Watkins Glen, NY and a warehouse located in Horseheads, NY).
The proposed Final Judgment contains provisions intended to facilitate efforts by the Acquirer to hire certain employees. Specifically, Paragraph IV(H) of the proposed Final Judgment requires Defendants to provide the Acquirer and the United States with organization charts and information relating to these employees and to make them available for interviews. It also provides that Defendants must not interfere with any efforts by the Acquirer to hire these employees. In addition, for employees who elect employment with the Acquirer, Defendants must waive all non-compete and non-disclosure agreements, vest all unvested pension and other equity rights, provide any pay pro-rata, provide all other compensation and benefits that those employees have fully or partially accrued, and provide all other benefits that those employees otherwise would have been provided had those employees continued employment with Defendants, including any retention bonuses or payments.
Paragraph IV(H) further provides that Defendants may not solicit to hire any employees who elect employment with the Acquirer within a certain time after the divestiture is completed, unless an individual is terminated or laid off by the Acquirer or the Acquirer agrees in writing that Defendants may solicit or hire that individual. The non-solicitation period runs for 12 months from the date of the divestiture. Paragraph IV(H) does not prohibit Defendants from advertising employment openings using general
Paragraph IV(J) of the proposed Final Judgment will facilitate the transfer of customers and other contractual relationships from Defendants to the Acquirer. Defendants must transfer all contracts, agreements, and relationships to the Acquirer and must use best efforts to assign, subcontract, or otherwise transfer contracts or agreements that require the consent of another party before assignment, subcontracting, or other transfer.
The proposed Final Judgment contains provisions to ensure that the Acquirer will be able to operate US Salt and serve customers immediately upon completion of the divestiture. For example, Paragraph IV(L) of the proposed Final Judgment requires Defendants, at the Acquirer's option, to enter into a transition services agreement for back office, human resource, and information technology services and support for US Salt for a period of up to 12 months. The Acquirer may terminate the transition services agreement, or any portion of it, without cost or penalty at any time upon 30 days' written notice. Paragraph IV(L) further provides that the United States, in its sole discretion, may approve one or more extensions of the transition services agreement for a total of up to an additional six months and that any amendments to or modifications of any provisions of a transition services agreement between Defendants and Acquirer are subject to approval by the United States, in its sole discretion. Paragraph IV(L) also provides that employees of Defendants tasked with providing any transition services must not share any competitively sensitive information of the Acquirer with any other employee of Defendants.
Paragraph IV(K) requires Defendants to use best efforts to assist the Acquirer to obtain all necessary licenses, registrations, and permits to operate US Salt. Defendants must provide Acquirer with the benefit of Defendants' licenses, registrations, and permits until Acquirer obtains the necessary licenses, registrations, and permits,
Certain executives and employees of Stone Canyon and/or SCIH, who will remain with Stone Canyon and/or SCIH after the divestiture, have had access to competitively sensitive information about US Salt's business operations. In order to prevent Stone Canyon and SCIH from using that information, Paragraph XI(A) requires Stone Canyon and SCIH to implement a firewall. Specifically, Stone Canyon and SCIH must implement and maintain reasonable procedures to prevent the sharing of competitively sensitive information relating to US Salt with Defendants' personnel with responsibilities relating to Morton's production or sale of evaporated salt products. Such a firewall will prevent competitively sensitive information about US Salt—to which Stone Canyon will have had access prior to the divestiture—from being used to influence business decisions relating to Morton's production or sale of evaporated salt products or otherwise used to subvert competition. The implementation of these procedures for a two-year period will ensure that the information cannot be used while it is still competitively sensitive. After two years, any information will be sufficiently out of date to no longer pose a risk and the firewall can be eliminated. Under Paragraph XI(B), Stone Canyon and SCIH must, within 30 days of the entry of the Stipulation and Order, submit a document setting forth in detail the procedures Defendants have implemented to effect compliance with Section XI. The United States will determine, in its sole discretion, whether to approve or reject Stone Canyon and SCIH's proposed compliance plan.
If Defendants do not accomplish the divestiture within the period prescribed in Paragraph IV(A) of the proposed Final Judgment, Section V of the proposed Final Judgment provides that the Court will appoint a divestiture trustee selected by the United States to effect the divestiture. If a divestiture trustee is appointed, the proposed Final Judgment provides that Defendants must pay all costs and expenses of the trustee. The divestiture trustee's compensation must be structured so as to provide an incentive for the trustee based on the price and terms obtained and the speed with which the divestiture is accomplished. After the divestiture trustee's appointment becomes effective, the trustee must provide monthly reports to the United States setting forth his or her efforts to accomplish the divestiture. If the divestiture has not been accomplished within six months of the divestiture trustee's appointment, the United States may make recommendations to the Court, which will enter such orders as appropriate, in order to carry out the purpose of the proposed Final Judgment, including by extending the trust or the term of the divestiture trustee's appointment by a period requested by the United States.
The proposed Final Judgment also contains provisions designed to promote compliance with and make enforcement of the Final Judgment as effective as possible. Paragraph XIV(A) provides that the United States retains and reserves all rights to enforce the Final Judgment, including the right to seek an order of contempt from the Court. Under the terms of this paragraph, Defendants have agreed that in any civil contempt action, any motion to show cause, or any similar action brought by the United States regarding an alleged violation of the Final Judgment, the United States may establish the violation and the appropriateness of any remedy by a preponderance of the evidence and that Defendants have waived any argument that a different standard of proof should apply. This provision aligns the standard for compliance with the Final Judgment with the standard of proof that applies to the underlying offense that the Final Judgment addresses.
Paragraph XIV(B) provides additional clarification regarding the interpretation of the provisions of the proposed Final Judgment. The proposed Final Judgment is intended to remedy the loss of competition the United States alleges would otherwise be harmed by the transaction. Defendants agree that they will abide by the proposed Final Judgment and that they may be held in contempt of the Court for failing to comply with any provision of the proposed Final Judgment that is stated specifically and in reasonable detail, as interpreted in light of this procompetitive purpose.
Paragraph XIV(C) provides that if the Court finds in an enforcement proceeding that a Defendant has violated the Final Judgment, the United States may apply to the Court for a one-time extension of the Final Judgment, together with such other relief as may be appropriate. In addition, to compensate American taxpayers for any costs associated with investigating and enforcing violations of the Final Judgment, Paragraph XIV(C) provides that, in any successful effort by the United States to enforce the Final Judgment against a Defendant, whether litigated or resolved before litigation, the Defendant must reimburse the United States for attorneys' fees, experts' fees, and other costs incurred in connection with any effort to enforce the Final Judgment, including the investigation of the potential violation.
Paragraph XIV(D) states that the United States may file an action against a Defendant for violating the Final Judgment for up to four years after the Final Judgment has expired or been terminated. This provision is meant to address circumstances such as when evidence that a violation of the Final
Finally, Section XV of the proposed Final Judgment provides that the Final Judgment will expire 10 years from the date of its entry, except that after five years from the date of its entry, the Final Judgment may be terminated upon notice by the United States to the Court and Defendants that the divestiture has been completed and that continuation of the Final Judgment is no longer necessary or in the public interest.
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any person who has been injured as a result of conduct prohibited by the antitrust laws may bring suit in federal court to recover three times the damages the person has suffered, as well as costs and reasonable attorneys' fees. Entry of the proposed Final Judgment neither impairs nor assists the bringing of any private antitrust damage action. Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 16(a), the proposed Final Judgment has no prima facie effect in any subsequent private lawsuit that may be brought against Defendants.
The United States and Defendants have stipulated that the proposed Final Judgment may be entered by the Court after compliance with the provisions of the APPA, provided that the United States has not withdrawn its consent. The APPA conditions entry upon the Court's determination that the proposed Final Judgment is in the public interest.
The APPA provides a period of at least 60 days preceding the effective date of the proposed Final Judgment within which any person may submit to the United States written comments regarding the proposed Final Judgment. Any person who wishes to comment should do so within 60 days of the date of publication of this Competitive Impact Statement in the
Written comments should be submitted in English to: Katrina Rouse, Chief, Defense, Industrials, and Aerospace Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street NW, Suite 8700, Washington, DC 20530.
The proposed Final Judgment provides that the Court retains jurisdiction over this action, and the parties may apply to the Court for any order necessary or appropriate for the modification, interpretation, or enforcement of the Final Judgment.
As an alternative to the proposed Final Judgment, the United States considered a full trial on the merits against Defendants. The United States could have continued the litigation and sought preliminary and permanent injunctions against Stone Canyon and SCIH's acquisition of Morton. The United States is satisfied, however, that the relief required by the proposed Final Judgment will remedy the anticompetitive effects alleged in the Complaint, preserving competition for the production and sale of evaporated salt products in the markets alleged in the Complaint: Pharmaceutical-grade salt in the United States and Canada, round-can table salt in the United States, and bulk evaporated salt in the northeastern United States. Thus, the proposed Final Judgment achieves all or substantially all of the relief the United States would have obtained through litigation but avoids the time, expense, and uncertainty of a full trial on the merits.
Under the Clayton Act and APPA, proposed Final Judgments or “consent decrees” in antitrust cases brought by the United States are subject to a 60-day comment period, after which the Court shall determine whether entry of the proposed Final Judgment “is in the public interest.” 15 U.S.C. 16(e)(1). In making that determination, the Court, in accordance with the statute as amended in 2004, is required to consider:
(A) The competitive impact of such judgment, including termination of alleged violations, provisions for enforcement and modification, duration of relief sought, anticipated effects of alternative remedies actually considered, whether its terms are ambiguous, and any other competitive considerations bearing upon the adequacy of such judgment that the court deems necessary to a determination of whether the consent judgment is in the public interest; and
(B) the impact of entry of such judgment upon competition in the relevant market or markets, upon the public generally and individuals alleging specific injury from the violations set forth in the complaint including consideration of the public benefit, if any, to be derived from a determination of the issues at trial.
As the U.S. Court of Appeals for the District of Columbia Circuit has held, under the APPA a court considers, among other things, the relationship between the remedy secured and the specific allegations in the government's complaint, whether the proposed Final Judgment is sufficiently clear, whether its enforcement mechanisms are sufficient, and whether it may positively harm third parties.
The United States' predictions about the efficacy of the remedy are to be afforded deference by the Court.
Moreover, the Court's role under the APPA is limited to reviewing the remedy in relationship to the violations that the United States has alleged in its complaint, and does not authorize the Court to “construct [its] own hypothetical case and then evaluate the decree against that case.”
In its 2004 amendments to the APPA, Congress made clear its intent to preserve the practical benefits of using judgments proposed by the United States in antitrust enforcement, Public Law 108-237 § 221, and added the unambiguous instruction that “[n]othing in this section shall be construed to require the court to conduct an evidentiary hearing or to require the court to permit anyone to intervene.” 15 U.S.C. 16(e)(2);
There are no determinative materials or documents within the meaning of the APPA that were considered by the United States in formulating the proposed Final Judgment.
On June 21, 2019, a former Assistant Administrator, Diversion Control Division, Drug Enforcement Administration (hereinafter, DEA or Government), issued an Order to Show Cause and Immediate Suspension of Registration (hereinafter collectively, OSC) to Melanie Baker, N.P. (hereinafter, Respondent). Administrative Law Judge Exhibit (hereinafter, ALJX) 1 (Order to Show Cause), at 1. The OSC informed Respondent of the immediate suspension of her Certificate of Registration No. MV3148257 (hereinafter, registration) pursuant to 21 U.S.C. 824(d), because her continued registration constituted an imminent danger to the public health and safety.
The OSC alleged that “[f]rom at least February 2017 to May 2019, [Respondent] issued numerous prescriptions for Schedule IIN through Schedule IV controlled substances to five patients in violation of federal and state law.” OSC, at 3. The OSC alleged violations of 21 CFR 1306.04(a), Louisiana Statute Annotated § 40:978, and Louisiana Administrative Code tit. 46, Pt. LIII, § 2745(B)(1), and Pt. XLVII,
The OSC notified Respondent of the right to either request a hearing on the allegations or submit a written statement in lieu of exercising the right to a hearing, the procedures for electing each option, and the consequences for failing to elect either option.
By letter dated July 22, 2019, Respondent timely requested a hearing and proceeded
The hearing in this matter took place in New Orleans, Louisiana, and spanned two days.
Having considered the record in its entirety, I find that Respondent issued controlled substance prescriptions to five individuals beneath the applicable standard of care and outside of the usual course of the professional practice in Louisiana in violation of federal law, and I find that Respondent committed violations of state law. I agree with the ALJ that revocation is the appropriate sanction. RD, at 120. I make the following findings of fact.
The parties stipulated that Respondent is registered with DEA as a practitioner able to handle controlled substances in schedules IIN through V under DEA Certificate of Registration No. MV3148257, at 4480 General DeGaulle Drive, Suite 107, Executive Square, New Orleans, Louisiana 70131. RD, at 44; ALJX 6, Appendix A, at 1; and ALJX 4, Attachment A (Controlled Substance Registration Certificate). This registration expired on July 31, 2020.
The Government's documentary evidence consisted primarily of patient files and prescription records for five individuals prescribed controlled substances by Respondent between February 2017 and May 2019.
DI testified regarding her professional background and training, Tr. 27-28, and about her investigation-related actions in this matter.
DI further testified that DEA visited pharmacies where prescriptions issued by Respondent were filled to obtain copies of the prescriptions.
Dr. Chambers testified regarding his professional and educational background. Tr. 49-60; RD, at 56-57, 79-80. Dr. Chambers testified that he was a licensed physician and he was a board-certified addiction psychiatrist. GX 12, at 8; Tr. 49-50; RD, at 56. He testified that he maintained a clinical practice, which he had operated since the year 2000, and that approximately 50% of his work was clinical. Tr. 52; RD, at 56, 80. He further testified that he was a teacher, and from his resume it appears that he teaches at various institutions including as a tenured Associate Professor of Psychiatry and director of the addiction psychiatry specialty at the Indiana University School of Medicine. Tr. 53-54; GX 12, at 1; RD, at 56. Dr. Chambers testified that he has had the opportunity to teach nurses and to supervise nurse practitioners including providing oversight of their prescribing decisions. Tr. 53-54; RD, at 56. I agree with the ALJ's finding that “Dr. Chambers possesse[d] an impressive amount of study, experience, and expertise in th[e] relatively narrow field of addiction psychiatry.” RD, at 82.
Although Dr. Chambers is licensed in Indiana, he testified that he was familiar with the standard of care for prescribing controlled substances in Louisiana and had reviewed relevant sections of the Louisiana code. Tr. 60; RD, at 80. I agree with the ALJ that Dr. Chambers “demonstrated a formidable knowledge relating to the Louisiana standard of care involving the prescribing of controlled substances, and the requisite professional practices.” RD, at 82. Ultimately, Dr. Chambers “was offered and qualified as an expert in the field of addiction psychiatry and on the standard of care for prescribing controlled substances for psychiatric care in Louisiana.”
The ALJ conducted a thorough assessment of Dr. Chambers' credibility, with which I agree.
The Respondent's documentary evidence consisted of Respondent's Curriculum Vitae, Initial Psychiatric Evaluation and Medication Management forms implemented in Respondent's practice, starting in October 2018, following a quality review from an insurance company, and the practice's discharge policy. Respondent's Exhibits (hereinafter, RX), 1-4; Tr. 325-29. Respondent also provided eight scholarly articles in defense of her treatment practices.
Despite being instructed during the hearing that she could not present her case for the first time in closing, Respondent attempted to introduce a number of evidentiary “facts” in her posthearing brief
As there was no substantive testimony from Respondent or anyone affiliated with Respondent's practice, R.V. Psychiatric Services, L.L.C., it was difficult to determine the structure of the practice from the evidence at hand. It is clear, however, that all of the medical records prior to the year 2013 appear to be created by R.V.
In accordance with Dr. Chambers' credible and uncontroverted testimony and the record as a whole, I find that the standard of care for prescribing controlled substances in Louisiana requires the following: (1) An appropriate assessment and evaluation to make a diagnosis; (2) sound rationale for prescribing controlled substances related to that diagnosis; (3) ongoing monitoring to ensure that the desired outcome is achieved and undesirable side effects are not experienced; and (4) appropriate documentation. Tr. 69-70,
First, Dr. Chambers explained what a prescriber must do to satisfy the standard of care's requirement that there be an appropriate assessment and evaluation to make a diagnosis. To satisfy this requirement, a prescriber should conduct “a clinical interview that would cover psychiatric history, addiction history, social history, and demographics, in order to develop a hypothesis as to the correct diagnosis.” Tr. 71. To make a psychiatric diagnosis, “the standard of care is that the physician would evaluate for signs and symptoms that are consistent with that diagnosis and actually write them in the chart.”
Dr. Chambers also explained that a provider must conduct an appropriate assessment or evaluation to inform the diagnosis even when that provider is sharing in care or taking over care of a patient from a prior prescriber.
Dr. Chambers' opinion that the standard of care in Louisiana requires an appropriate assessment and evaluation to make a diagnosis is reflected in Louisiana law. La. Admin. Code tit. 46, Pt. XLVII, § 4513(D)(2)(b)(xi) (2019)
Second, Dr. Chambers explained what constitutes sound rationale for prescribing controlled substances related to a specific diagnosis. Throughout his testimony, he described sound rationale as having a “clear, strong basis.” Tr. 194. He explained that the standard of care required that new controlled substance prescriptions be justified in the medical records.
Dr. Chambers' opinion that the standard of care in Louisiana requires sound rationale for prescribing controlled substances is further supported by Louisiana law. La. Admin. Code tit. 46, Pt. XLVII, § 4513(D)(2)(b)(xi) states that “no APRN shall prescribe any controlled substance or other drug having addiction-forming or addiction sustaining liability without a good faith . . . medical indication.”
Third, Dr. Chambers explained what ongoing monitoring the standard of care required to ensure that the desired outcome of treatment is achieved and that negative side effects are avoided. With regard to monitoring, Dr. Chambers explained that an initial evaluation is comprehensive, and that at each subsequent visit a physician should “continuously [gather] new data to, A, confirm [you are] not running into trouble with your [prescribed medications], but B, are they working, or can you get rid of them, because maybe [the patient got] better.” Tr. 118. One “side effect” Dr. Chambers opined that practitioners should look for is diversion.
Fourth, Dr. Chambers explained what appropriate documentation was required to be in compliance with the standard of care. He explained that the record must document a comprehensive evaluation including a mental status or psychiatric exam, and the history including the psychiatric history, substance abuse history, and social history.
Dr. Chambers also explained that the standard of care requires that a prescriber act on data obtained from urine drug screening or the prescription drug monitoring program: “you [cannot] just gather that and put it in the chart.”
Dr. Chambers' opinion that the standard of care in Louisiana requires appropriate documentation is additionally supported by Louisiana law. La. Admin. Code tit. 46, Pt. XLVII, § 4513(D)(4) (2019) states that “[a]n APRN who prescribed a controlled substance shall maintain a complete record of the examination, evaluation and treatment of the patient which must include documentation of the diagnosis and reason for prescribing controlled substances.”
During his testimony, Dr. Chambers outlined some of the dangers of prescribing various classes of controlled substances
Regarding sedatives, benzodiazepines or downers, Dr. Chambers described the biggest danger as addiction.
Dr. Chambers testified extensively about the dangers of prescribing both an upper and a downer to the same individual, and stated that “[there is] no legitimate medical indication for that” combination.
Dr. Chambers also provided generally applicable testimony about controlled substance prescribing pitfalls for common mental health diagnoses. Regarding ADD diagnoses, Dr. Chambers explained that “virtually all [of] the major mental illnesses—schizophrenia, bipolar disorder, major depression, PTSD, some of the personality disorders—they all generate cognitive symptoms that look like ADD.” Tr. 131. He further explained that in a psychiatric practice, “someone who really [does not] know how to diagnose mental illness could readily diagnose every person that walks in the door with ADD, and if they just follow the FDA guideline, [you are] now delivering amphetamines to everybody who walks in your door with any mental illness.”
Between February 2018 and February 2019, Respondent issued twenty-three controlled substance prescriptions to F.A. for mixed amphetamine salts. GX 2 (Prescriptions Issued to F.A.); RD, at 88. Dr. Chambers testified that each of these twenty-three prescriptions was issued outside the usual course of professional practice and without a legitimate medical purpose. Tr. 102-03; RD, at 88.
In support of his opinion, Dr. Chambers testified that Respondent did not perform an appropriate assessment to diagnose the three-year-old patient with ADD. Tr. 88-92, 97; RD, at 89. Dr. Chambers explained that “normal children [that young] have behaviors that can look like ADD.” Tr. 89. Accordingly, Dr. Chambers explained, to diagnose a three-year-old with ADD, a practitioner must gather “more than one independent source of information.”
Dr. Chamber's opinion was further supported by Respondent's failure to provide sound rationale for her prescriptions to F.A. in the patient records. Tr. 91-92; RD, at 89-90. Specifically, Dr. Chambers opined that, “[i]t [was] not at all clear . . . that this child, based on this document, has ADD.” Tr. 92. This is because F.A.'s “symptoms describe problems that don't really fit the diagnosis of ADD . . . [they are] either inconsistent or outside the diagnosis of ADD.”
Dr. Chambers also noted that Respondent did not appropriately monitor F.A.'s use of the controlled substances she was prescribed. Dr. Chambers explained that you cannot rely on a three-year-old child to accurately report on her compliance with a controlled substance treatment regimen. Tr. 105. Although Dr. Chambers noted that basic vital signs, weight, and height were recorded appropriately,
As final support for his opinion that the alleged prescriptions were issued outside of the standard of care, Dr. Chambers opined that Respondent failed to appropriately document F.A.'s file. Tr. 91-92; RD, at 89. Dr. Chambers testified that the documentation had “distortions and insufficient data streams to inform a diagnosis of ADD.” Tr. 91. The documentation included shorthand references suggesting that Respondent analyzed what Dr. Chambers called the DSM-IV criteria, but stated there is “not substantial narrative evidence that any of those criteria were actually well supported.”
I find that, the twenty-three controlled substance prescriptions Respondent issued to F.A. between February 2018 and February 2019, were issued outside of the usual course of professional practice and beneath the applicable standard of care in Louisiana. This is because, based on Dr. Chambers' credible and uncontroverted expert testimony and the record as a whole, Respondent did not obtain sufficient information to diagnose, did not have sound rationale for the controlled substance prescriptions that were issued, did not monitor compliance with the prescription instructions, and failed to appropriately document any of the above in the patient file.
Between July 2017 and April 2019, Respondent issued twenty-three
In support of his opinion, Dr. Chambers testified that Respondent failed to provide sound rationale for the controlled substance prescriptions issued to K.W. to treat her diagnosed ADD, bipolar disorder, and insomnia. Tr. 115, 119-20, 122-23, 128, 132-33, 142, 144, 146, 150-53, 159; RD, at 89-90. First, Dr. Chambers opined that the amphetamine salt prescriptions were contraindicated because K.W. was diagnosed as being bipolar, an “[illness] that greatly increase[s] the risk of adverse effects of controlled substances and addiction.” Tr. 114; RD, at 92. Dr. Chambers explained that K.W.'s symptoms, “cutting, depression, quasi-psychotic hearing voices,” were coming from her mental illness, but “all of it could also be contributed to by the drugs. . . . if you put people on high-dose amphetamines you can actually cause them to get psychotic as if they have schizophrenia.” Tr. 159; RD, at 95. Moreover, Dr. Chambers testified that, “the patient [had] been using various drugs, street drugs, that are closely akin to the drugs that [Respondent] [was] prescribing.” Tr. 114. Dr. Chambers explained that K.W.'s use of illegal street drugs;
Second, Dr. Chambers opined that the benzodiazepine prescriptions were contraindicated. According to Dr. Chambers, “benzodiazepines can unleash out-of-control behavior, especially in people with . . . bipolar disorder who are already prone to that.” Tr. 128. K.W. exhibited those side effects while on benzodiazepines.
In addition to testifying that K.W. should have been prescribed neither the amphetamines nor the benzodiazepines by themselves, he explained the compounding impact of prescribing both at the same time. Tr. 151. Dr. Chambers testified, “[w]e have an upper, which is the amphetamine, and a downer [the benzodiazepine] being delivered to a patient with a mental illness [that is] defined by out-of-control ups and downs, bipolar disorder.”
In addition to not having sound rationale for prescribing, Dr. Chambers noted that Respondent did not appropriately monitor K.W.'s use of the controlled substances she was prescribed. As I found above based on Dr. Chamber's expert testimony, the standard of care requires monitoring of side effects and monitoring to ensure an appropriate outcome is reached.
As final support for his opinion that the alleged prescriptions were issued outside of the standard of care, Dr. Chambers opined that Respondent failed to appropriately document K.W.'s file. Tr. 124, 161; RD, at 93. Dr. Chambers testified that the documentation Respondent kept for K.W. was “a problem” because “[there was] no kind of detail.” Tr. 124. As an
I find that, the twenty-three controlled substance prescriptions Respondent issued to K.W. between July 2017 and April 2019, were issued outside of the usual course of professional practice and beneath the applicable standard of care in Louisiana. This is because, based on Dr. Chambers' credible and uncontroverted expert testimony and the record as a whole, Respondent did not have sound rationale for the controlled substance prescriptions that were issued, did not monitor compliance with the prescription instructions, and failed to appropriately document any of the above in the patient file.
Between February 2017 and May 2019, Respondent issued forty-two
In support of his opinion, Dr. Chambers found Respondent's diagnosis of M.G. with ADD to be problematic in-light-of the existing bipolar disorder diagnosis. Tr. 165-66; RD, at 96;
In further support of his opinion, Dr. Chambers testified that Respondent failed to provide sound rationale for the controlled substance prescriptions issued to M.G. to treat his diagnosed ADD and bipolar disorder.
In addition to not having sound rationale for prescribing, Dr. Chambers noted that Respondent did not appropriately monitor M.G.'s use of the controlled substances he was prescribed. For example, in May 2017, Dr. Chambers testified, Respondent was aware that M.G. was taking Norco prescribed by another practitioner and yet she issued to M.G. three months of prescriptions for Adderall and Klonopin. Tr. 173. First, Dr. Chambers opined that “you would expect the patient to be back in August, but we [did not] see that . . . then there [was] a note for October and the patient [was] a no-show.”
Dr. Chambers testified that, for M.G., “[t]here [was] not a single drug-screen in the record.”
As final support for his opinion that the alleged prescriptions were issued outside of the standard of care, Dr. Chambers opined that Respondent failed to appropriately document M.G.'s file. Tr. 164, 173, 175-76. Dr. Chambers explained that “there [was] no documentation of warnings” provided
I find that, the forty-two controlled substance prescriptions Respondent issued to M.G. between February 2017 and May 2019, were issued outside of the usual course of professional practice and beneath the applicable standard of care in Louisiana. This is because, based on Dr. Chambers' credible and uncontroverted expert testimony and the record as a whole, Respondent did not obtain sufficient information to diagnose, did not have sound rationale for the controlled substance prescriptions that were issued, did not monitor compliance with the prescription instructions, and failed to appropriately document any of the above in the patient file.
Between April 2017 and May 2019, Respondent issued seventy-two controlled substance prescriptions to F.P. for mixed amphetamine salts, Vyvanse, and lorazepam. GX 6 (Prescriptions Issued to F.P.); RD, at 99. Dr. Chambers testified that each of the seventy-two controlled substance prescriptions was issued outside the usual course of professional practice and without a legitimate medical purpose. Tr. 189-90, 192-94, 196-98; RD, at 100-01.
In support of his opinion, Dr. Chambers found that Respondent's diagnosis of F.P. with depressive disorder and post-traumatic stress disorder (hereinafter, PTSD) lacked sufficient supporting clinical evidence. Tr. 191-92, 200, 202; RD, at 101. On January 6, 2017, when F.P. was eleven years old, Respondent diagnosed F.P. with depressive disorder and the medical records reflected very little information—just “circles and check-marks, . . . father has leukemia.” Tr. 192; GX 5, at 39-40. According to Dr. Chambers, “father having leukemia is terrible, but that is not a diagnosis of depression” and “there is no clinical data that would” support the depression diagnosis. Tr. 192. Respondent continued to treat F.P. for depression throughout the time period relevant to this case (April 2017 to May 2019). GX 5, at 2-40. Additionally, Dr. Chambers explained that on April 27, 2017, “now suddenly [there was] a new psychiatric diagnosis, PTSD, for which there [was] not sufficient clinical evidence to support that diagnosis.” Tr. 200. Dr. Chambers noted that F.P.'s files demonstrated his father had died, “but that is not PTSD.”
In further support of his opinion, Dr. Chambers testified that Respondent failed to provide sound rationale for the controlled substance prescriptions issued to F.P. both individually and as a group of prescriptions.
As final support for his opinion that the alleged prescriptions were issued outside of the standard of care, Dr. Chambers opined that Respondent failed to appropriately document F.P.'s file. Tr. 202. As with the other medical records, Dr. Chambers commented on the insufficiency of Respondent's recordkeeping for F.P., which he describes and “just some circles and check-marks.”
I find that, the seventy-two controlled substance prescriptions Respondent issued to F.P. between April 2017 and May 2019, were issued outside of the usual course of professional practice and beneath the applicable standard of
Between May 2017 and April 2018, Respondent issued forty-three
In support of his opinion, Dr. Chambers questioned Respondent's diagnosis of M.H.
In further support of his opinion, Dr. Chambers testified that Respondent failed to provide sound rationale for the controlled substance prescriptions issued to M.H.
In addition to not having sound rationale for prescribing, Dr. Chambers noted that Respondent did not appropriately monitor M.H.'s use of the controlled substances that she was prescribed.
As final support for his opinion that the alleged prescriptions were issued outside of the standard of care, Dr. Chambers opined that Respondent failed to appropriately document M.H.'s file.
I find that, the forty-three controlled substance prescriptions Respondent issued to M.H. between May 2017 and April 2018, were issued outside of the usual course of professional practice and beneath the applicable standard of care in Louisiana. This is because, based on Dr. Chambers' credible and uncontroverted expert testimony and the record as a whole, Respondent did not obtain sufficient information to diagnose, did not have sound rationale for the controlled substance prescriptions that were issued, did not monitor compliance with the prescription instructions, and failed to appropriately document any of the above in the patient file.
In accordance with Dr. Chambers' testimony and the record as a whole, and in agreement with the ALJ, I find that, for each of the two-hundred and three prescriptions at issue, Respondent did not obtain sufficient information to diagnose, did not have sound rationale for the prescriptions that were issued, did not monitor compliance with the controlled substance prescriptions, and/or did not appropriately document the file.
Under Section 304 of the Controlled Substances Act, “[a] registration . . . to . . . dispense a controlled substance . . . may be suspended or revoked by the Attorney General upon a finding that the registrant . . . has committed such acts as would render his registration under section 823 of this title inconsistent with the public interest as determined by such section.” 21 U.S.C. 824(a)(4). In the case of a “practitioner,” defined in 21 U.S.C. 802(21) to include a “physician,” Congress directed the Attorney General to consider the following factors in making the public interest determination:
(1) The recommendation of the appropriate State licensing board or professional disciplinary authority.
(2) The applicant's experience in dispensing . . . controlled substances.
(3) The applicant's conviction record under Federal or State laws relating to the . . . distribution[ ] or dispensing of controlled substances.
(4) Compliance with applicable State, Federal, or local laws relating to controlled substances.
(5) Such other conduct which may threaten the public health and safety.
According to Agency decisions, I “may rely on any one or a combination of factors and may give each factor the weight [I] deem[ ] appropriate in determining whether” to revoke a registration.
In a likely attempt to argue that her continued registration was consistent with the public interest, Respondent stated that her practice occurred in a “Health Care Shortage Area, with very few providers accepting underserved populations,” and that her practice
Respondent also argued that “the [G]overnment failed to produce evidence of actual abuse or diversion [for] the 750,000 doses/year [prescribed] . . . by way of arrest records, law enforcement testimony, or drug rehabilitation admissions of patients.”
DEA regulations state, “[a]t any hearing for the revocation . . . of a registration, the . . . [Government] shall have the burden of proving that the requirements for such revocation . . . pursuant to . . . 21 U.S.C. [§ ] 824(a) . . . are satisfied.” 21 CFR 1301.44(e). In this matter, while I have considered all of the factors,
As to Factor Three, there is no evidence in the record that Respondent has a “conviction record under Federal or State laws relating to the manufacture, distribution, or dispensing of controlled substances.” 21 U.S.C. 823(f)(3). However, as Agency cases have noted, there are a number of reasons why even a person who has engaged in criminal misconduct may never have been convicted of an offense under this factor, let alone prosecuted for one.
According to the CSA's implementing regulations, a lawful controlled substance order or prescription is one that is “issued for a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice.” 21 CFR 1306.04(a).
Under the CSA, it is fundamental that a practitioner must establish and maintain a legitimate doctor-patient relationship in order to act “in the usual course of . . . professional practice” and to issue a prescription for a “legitimate medical purpose.”
Based on the credible expert testimony on the record, I found above that the standard of care for prescribing controlled substances in Louisiana requires the following: (1) An appropriate assessment and evaluation to make a diagnosis; (2) sound rationale for prescribing controlled substances related to that diagnosis; (3) ongoing monitoring to ensure that the desired outcome is achieved and undesirable side effects are not experienced; and (4) appropriate documentation.
Respondent, however, appears to have argued and believed that her actions were permissible and were supported by scientific evidence. Resp Posthearing, at 5-8. I have already rejected these arguments because they were based solely on facts that were not in evidence.
I have found that Respondent issued prescriptions for controlled substances without a “legitimate medical purpose” and outside of “the usual course of [her] professional practice” in violation of La. Admin. Code tit. 46, Pt. LIII, § 2745(B)(1) for the same reasons that I found she violated 21 CFR 1306.04(a). La. Admin. Code tit. 46, Pt. LIII, § 2745(B)(1). I also find that the record contains substantial evidence that Respondent's actions violated La. Admin. Code tit. 46, Pt. XLVII, § 4513(D), which addresses the prescriptive authority of advanced practice registered nurses in Louisiana.
Under that section, “no APRN shall prescribe any controlled substance or other drug having addiction-forming or addiction-sustaining liability without a good faith prior examination and medical indication.”
Moreover, even if Respondent had conducted a good faith examination and established a medical indication prior to prescribing the controlled substances, her failure to document appropriately is an independent violation of Louisiana law. Under Louisiana law, “[a]n APRN who prescribes a controlled substance shall maintain a complete record of the examination, evaluation and treatment of the patient which must include documentation of the diagnosis and reason for prescribing controlled substances.” La. Admin. Code tit. 46, Pt. XLVII, § 4513(D)(4)(a) (2019). Dr. Chambers repeatedly testified regarding the deficiencies in Respondent's documentation and explained that there was no documentation of Respondent's reasons for prescribing the controlled substances at issue. Tr. 213-14, 335. Specifically, Dr. Chambers described Respondent's documentation as “a façade,”
For all these reasons, I find that the record contains substantial evidence that Respondent violated La. Admin. Code tit. 46, Pt. LIII, § 2745(B)(1), and La. Admin. Code tit. 46, Pt. XLVII, § 4513(D).
In total, I find that the record contains substantial evidence that Respondent issued two-hundred and three controlled substance prescriptions without a legitimate medical purpose and outside of the usual course of professional practice and beneath the applicable standard of care in Louisiana in violation of 21 CFR 1306.04(a), La. Admin. Code tit. 46, Pt. LIII, § 2745(B)(1), and La. Admin. Code tit. 46, Pt. XLVII, § 4513(D). As Respondent issued these prescriptions without complying with her obligations under the CSA and Louisiana law, I find that Factors Two and Four weigh in favor of revocation.
As found above, there is substantial record evidence that Respondent issued controlled substance prescriptions outside the usual course of the professional practice and beneath the applicable standard of care in Louisiana and in violation of state law. I, therefore, have concluded that Respondent engaged in misconduct which supports the revocation of her registration.
For purposes of the imminent danger inquiry, my findings also lead to the conclusion that Respondent has “fail[ed] . . . to maintain effective controls against diversion or otherwise comply with the obligations of a registrant” under the CSA. 21 U.S.C. 824(d)(2). The uncontroverted, substantial evidence that Respondent repeatedly issued prescriptions without having a sound rationale or legitimate medical purpose for doing so establishes “a substantial likelihood of an immediate threat that death, serious bodily harm, or abuse of a controlled substance . . . [would] occur in the absence of the immediate suspension” of Respondent's registration.
Not only was Respondent prescribing highly addictive drugs with a potentially “deadly outcome” without a legitimate medical purpose for so doing, but she was prescribing combinations of controlled substances known to be “imminently lethal.”
Thus, as I have found above, at the time the Government issued the OSC/ISO, the Government had clear evidence of violations of law based on the two-hundred and three controlled substance prescriptions Respondent issued without obtaining sufficient information to diagnose, having sound rationale to prescribe, monitoring compliance with the controlled substance prescriptions, and appropriately documenting the file.
Where, as here, the Government has met its
The CSA authorizes the Attorney General to “promulgate and enforce any rules, regulations, and procedures which he may deem necessary and appropriate for the efficient execution of his functions under this subchapter.” 21 U.S.C. 871(b). This authority specifically relates “to `registration' and `control,' and `for the efficient execution of his functions' under the statute.”
In efficiently executing the revocation and suspension authority delegated to me under the CSA for the aforementioned purposes, I review the evidence and arguments Respondent submitted to determine whether or not she has presented “sufficient mitigating evidence to assure the Administrator that [s]he can be trusted with the responsibility carried by such a registration.”
The issue of trust is necessarily a fact-dependent determination based on the circumstances presented by the individual respondent; therefore, the Agency looks at factors, such as the acceptance of responsibility and the credibility of that acceptance as it relates to the probability of repeat violations or behavior and the nature of the misconduct that forms the basis for sanction, while also considering the Agency's interest in deterring similar acts.
Here, Respondent has presented no evidence on the record that I could consider as accepting responsibility and I agree with the ALJ's finding that “the Respondent has failed to unequivocally accept any responsibility in this matter.” RD, at 118. Respondent has maintained throughout these proceedings that she believes that her prescribing to the five individuals in question, was proper.
In all, Respondent failed to explain why, in spite of her misconduct, she can be entrusted with a registration. “The degree of acceptance of responsibility that is required does not hinge on the respondent uttering `magic words' of repentance, but rather on whether the respondent has credibly and candidly demonstrated that [s]he will not repeat the same behavior and endanger the public in a manner that instills confidence in the Administrator.”
Even if I were to consider her remedial measures, in spite of her complete lack of acceptance of responsibility,
The Agency also looks to the egregiousness and extent of the misconduct which are significant factors in determining the appropriate sanction.
Indeed, Respondent's found violations go to the heart of the CSA by not complying with the closed regulatory system devised to “prevent the diversion of drugs from legitimate to illicit channels.”
In sanction determinations, the Agency has historically considered its interest in deterring similar acts, both with respect to the respondent in a particular case and the community of registrants.
I will therefore order that Respondent's registration be revoked as contained in the Order below.
Pursuant to 28 CFR 0.100(b) and the authority vested in me by 21 U.S.C. 824(a), I hereby revoke DEA Certificate of Registration No. MV3148257 issued to Melanie Baker, N.P., and deny any pending applications for renewal or modification of that registration. This Order is effective June 4, 2021.
On December 4, 2019, the Drug Enforcement Administration (hereinafter, DEA or Government) Administrative Law Judge Mark M. Dowd (hereinafter, ALJ), issued a Recommended Rulings, Findings of Fact, Conclusions of Law, and Decision of the Administrative Law Judge (hereinafter, RD) on the action to revoke the DEA Certificate of Registration Number BM9434440 of Michele L. Martinho, M.D. The ALJ transmitted the record to me on January 7, 2020, and asserted that no exceptions were filed by either party. ALJ Transmittal Letter, at 1. Having reviewed and considered the entire administrative record before me, I adopt the ALJ's RD with minor modifications, where noted herein.*
Pursuant to 28 CFR 0.100(b) and the authority vested in me by 21 U.S.C. 824(a), I hereby dismiss the Order to Show Cause issued to Michele L. Martinho, M.D. This Order is effective immediately.
The Assistant Administrator, Diversion Control Division, Drug Enforcement Administration (DEA), issued an Order to Show Cause (OSC),
The issue ultimately to be adjudicated by the Acting Administrator, with the assistance of this recommended decision, is whether the record as a whole establishes by a preponderance of the evidence that the Respondent's subject registration with the DEA should be revoked pursuant to 21 U.S.C. 824(a)(5).
After carefully considering the testimony elicited at the hearing, the admitted exhibits, the arguments of counsel, and the record as a whole, I have set forth my recommended findings of fact and conclusions of law below.
In the OSC, the Government contends that the DEA should revoke the Respondent's DEA COR because she has been excluded from participation in a program pursuant to section 1320a-7(a) of Title 42.
Specifically, the Government alleges the following:
1. The Respondent is registered with the DEA as a practitioner in Schedules II through V under DEA COR BM9434440. The Respondent's COR expires by its terms on January 31, 2020.
2. On June 14, 2017, the Respondent was found guilty in the United States District Court for the District of New Jersey of “Transporting in Aid of-Travel Act-Accepting Bribes in Violation of the Travel Act.” Judgment was entered in
3. Based on the Respondent's conviction, the U.S. Department of Health and
Human Services, Office of Inspector General (“HHS/OIG”), by letter dated July 31, 2018, mandatorily excluded the Respondent from participation in Medicare, Medicaid, and all federal health care programs for a minimum period of five years pursuant to 42 U.S.C. 1320a-7(a), effective August 20, 2018. Notwithstanding the fact that the underlying conduct for which the Respondent was convicted had no nexus to controlled substances, mandatory exclusion from Medicare, Medicaid, and all federal health care programs by HHS/OIG warrants revocation of the Respondent's registration pursuant to 21 U.S.C. 824(a)(5).
In the Government's Opening Statement, the Government indicated that revocation is sought for the Respondent's COR involving Schedules II through V, pursuant to 21 U.S.C. 824(a)(5). Tr. 10. The facts in this matter are undisputed and have been stipulated to by the parties.
The Respondent asserted in her opening statement that this matter is not about controlled substances, and it has nothing to do with the issuance of prescriptions or record keeping for controlled substances.
Dr. Martinho completed courses of study in medical ethics before her criminal proceedings began.
Before presenting witnesses, the Government offered the sworn and notarized COR history for the Respondent, which was admitted without objection.
The DI is a Diversion Investigator for the DEA and has been employed by the DEA for two years, currently assigned to the New York Division. Tr. 20. He previously served with the New York City Police Department for 23 years, retiring as a Detective Sergeant.
The DI identified a screenshot from the OIG's website that demonstrated that the Respondent was still excluded from all federal health care programs as of the morning of October 3, 2019, the date of the hearing in this matter. Tr. 25-26; GX 4. He obtained this document by going to the OIG's website and taking a screenshot of the Respondent's information. Tr. 26. He verified the information on the morning of the hearing by going to the OIG's website, entering the Respondent's name, and confirmed that she was still excluded.
The Respondent currently lives in New York, where she has been licensed to practice medicine since 2005.
The Respondent explained the genesis of her involvement in the criminal activity for which she was convicted.
She was paid every month by the laboratory's representative with an envelope of cash.
The Respondent stopped taking the cash payments once the laboratory owner and a few laboratory representatives were arrested on April 13, 2013, for bribery.
The Respondent asserted that while she now understands that ignorance of the law is no excuse, at the time, she did not fully understand what bribery meant.
The Government's investigation into BTL resulted in the prosecution and conviction of a large number of physicians, including the Respondent.
The Respondent testified that her federal criminal case did not involve controlled substances, prescriptions for controlled substances, or record keeping for controlled substances.
The Respondent offered a letter from Dr. B.F., who is an orthopedic surgeon at MD Anderson. Tr. 34; RX 3. Dr. B.F. invited the Respondent to speak with his orthopedic fellows to tell her story and hopefully deter them from engaging in similar behavior for which she had been convicted. Tr. 34. It was submitted to the District Court in conjunction with the presentencing memorandum.
The Respondent offered a letter from J.W., an ethics professor from Ohio University. Tr. 36-37; RX 5. J.W. arranged for the Respondent to provide a radio presentation on NPR regarding her crime. Tr. 37. The Respondent offered a newspaper article from the Washington Post, featuring the Respondent and her presentation at Georgetown University. Tr. 38; RX 6. The Respondent offered certificates for completion of programs in health care ethics. Tr. 39-41; RX 7, 8. The Respondent offered the transcript of her sentencing hearing before the U.S. District Court conducted on June 14, 2017. Tr. 41; RX 9.
Finally, the Respondent offered a consent agreement between her and the New York State Department of Health State Board for Professional Medical Conduct. Tr. 42; RX 10. The Respondent explained that after her sentencing in the District Court, a pre-hearing was conducted with the New York State Department of Health, Office of Professional and Medical Conduct, and based upon her efforts at remediation, the Respondent was allowed to continue practicing medicine with no interruptions or restrictions placed on her state license. Tr. 44-45.
Following completion of her ethical course of study at Creighton University, the Respondent discovered that the prosecutor on her criminal case was going to law schools to discuss health care fraud. She offered to go with the prosecutor and tell her side of the story to the students. Tr. 60-61. While the prosecutor declined her invitation, she began to research medical schools, law schools, ethics societies, and medical societies to share her story to whomever would listen and would benefit from her presentation.
The Respondent discovered “restorative justice” during one of her medical ethics courses and began to focus on that.
The Respondent opened her presentation by giving her name, explaining that she is an internal medicine physician from New York, and that she was convicted of a crime in 2014, referring to herself as a felon.
The Respondent was questioned regarding whether the underlying criminal conduct was “aberrational” and how she can be entrusted to maintain her DEA COR.
When questioned, she indicated that while she had been ordered to complete thirty lectures by the sentencing judge, she had already completed twenty-six speaking engagements by the date of the sentencing hearing.
She further offered her cooperation to a number of government agencies as part of her remedial efforts. Tr. 85-87; RX 1, p. 463. She testified that she brought information concerning other potential criminal activity to approximately seven other state and federal law enforcement agencies across the federal government and two states, for which she received a 5K reduction letter for those efforts.
The Respondent indicated that she plans to reapply to participate in Medicare and Medicaid when her exclusion is over.
When I asked the Respondent if she had ever before taken the position that she did not commit the bribery, she responded, no, she had never taken that position, nor the position that bribery was not a serious offense warranting punishment.
I asked why she believed that the Acting Administrator should trust her with her COR.
P.R. is currently a professor at Temple University's Lewis Katz School of Medicine and the Center for Bioethics Urban Health and Policy.
P.R. met the Respondent through an email the Respondent sent to the Center for Urban Bioethics approximately one year before P.R. started at the Center.
P.R. described the Respondent's lecture and her presentation to the students.
P.R. expressed that the Respondent showed contrition during her presentation.
I asked P.R. if the Respondent appeared sincere in her presentations to students.
Dr. J.G. received her undergraduate degree from Stony Brook, her master's degree from Brooklyn College, and finally her medical degree at Ross University.
Dr. J.G. met the Respondent during medical school and they became close friends.
Dr. J.G. says that she has personally observed that the Respondent has accepted responsibility for the conduct which led to her conviction.
Dr. J.G. holds a DEA Certificate of Registration and is familiar with the responsibilities of being a registration holder.
The Government and the Respondent have agreed to five stipulations, which I recommend be accepted as fact in these proceedings:
1. Respondent is registered with the DEA as a practitioner in Schedules II through V under DEA Certificate of Registration BM9434440 with a registered address of 308A East 15 Street, New York, NY 10003, and a mailing address of 20 River Terrace, Apt. 23E, New York, NY 10282. Respondent's registration expired by its terms on January 31, 2020.
2. On June 14, 2017, Respondent was found guilty in the United States District Court for the District of New Jersey of “Transporting in Aid of Travel Act-Accepting Bribes in Violation of the Travel Act,” in violation of 18 U.S.C. 1952(a)(3) and 18 U.S.C. 2. Judgment was entered against Respondent in
3. Based on Respondent's conviction, the U.S. Department of Health and Human Services, Office of Inspector General (“HHS/OIG”), by letter dated July 31, 2018, mandatorily excluded Respondent from participation in Medicare, Medicaid and all federal health care programs for the minimum period of five years pursuant to 42 U.S.C. 1320a-7(a), effective August 20, 2018.
4. Reinstatement of eligibility to participate in Medicare, Medicaid and all federal health care programs after exclusion by HHS/OIG is not automatic.
5. Respondent is currently excluded from participation in Medicare, Medicaid and all federal health care programs.
The factual findings (FoF) below are based on a preponderance of the evidence, including the detailed, credible, and competent testimony of the aforementioned witnesses, the exhibits entered into evidence, and the record before me.
1. The Respondent currently holds DEA COR BM9434440 in Schedules II through V with a registered address of 308A East 15 Street, New York, NY 10003, and a mailing address of 20 River Terrace, Apt. 23E, New York, NY 10282. The Respondent's COR expires by its terms on January 31, 2020. ALJ Ex. 1, 9.
2. The Respondent received her undergraduate degree in psychology from New York University.
3. The Respondent attended Ross University for medical school and returned to the United States for her clinical rotations, from which she graduated in 2002.
4. The Respondent completed her residency at Mount Sinai Elmhurst Hospital with a focus in internal medicine.
5. The Respondent worked at a satellite clinic for the hospital for almost three years after her residency.
6. The Respondent went into private practice and eventually purchased the practice, which is an internal medicine practice on the Lower East Side of Manhattan.
7. The Respondent has been licensed to practice medicine in the state of New York since 2005.
1. The Respondent pled guilty to “[v]iolating the federal Travel Act for accepting bribes for sending [her patients'] blood work to a laboratory.” Tr. 30. She was sentenced to probation for a period of two years, of which the
2. The Respondent has never been disciplined or sanctioned concerning her prescribing of controlled substances. Tr. 30.
3. The Respondent's conviction did not involve any controlled substances.
4. After her sentencing in her criminal case, the New York State Department of Health, Office of Professional and Medical Conduct, allowed the Respondent “to continue to practice medicine with no interruption and no restriction.”
5. The Respondent accepted a referral fee or bribe to send her patients' blood work to Biodiagnostic Testing Labs. Tr. 50-51.
6. Every month the lab test representative would give the Respondent an envelope of cash as payment for her use of the lab.
7. Over the course of two and a half years, the Respondent received $155,000 in payments from the testing lab.
8. The Respondent knew it was wrong to take these payments at the time that she accepted them.
9. The Respondent eventually paid taxes on these payments and forfeited them.
10. The Respondent continued to accept the referral fees until the lab owner and some of the lab representatives were arrested on April 13, 2013.
11. When the lab owner was arrested, the Respondent knew that she was in trouble for accepting the cash payments, but that she did not know at the time that the referral fees were illegal.
12. The Respondent “never put a needle in anyone's arm to draw their blood for any reason except for medical necessity.”
13. The Respondent knew accepting the cash payments was wrong as a tax issue.
14. The rate of blood work the Respondent ordered was either less than before or “there was essentially no difference in the rate of ordering, in the types of tests” after she started taking the payments.
15. There were 29 doctors prosecuted in the Respondent's criminal case. Tr. 65.
1. The Respondent testified that “I blame myself only” and that “I was responsible for all of it.”
2. The Respondent admits that she violated her fiduciary duty to her patients.
3. The Respondent presented her cautionary story to medical students, practicing physicians, health care ethics students and educators.
4. The Respondent was ordered by the District Court to complete thirty speaking engagements as community service work over a period of two years. GX 2, p. 2.
5. The Respondent completed the thirty speaking engagements within six months. Tr. 73.
6. The Respondent has completed sixty-nine of these speaking engagements as of the date of the DEA hearing and continues to perform them.
7. The Respondent makes her presentations to provide “restorative justice” and “to try to make it up to my community.”
8. The Respondent refers to herself as a felon because it is part of her story and will never go away.
9. The Respondent accepts “one hundred percent” responsibility for the acts that led to her criminal conviction.
10. The Respondent has never taken the position that she did not commit the crime to which she eventually pled guilty.
11. The Respondent believes her criminal acts were serious violations of the law.
12. The Respondent is remorseful for her crime.
13. The Respondent has been excluded from Medicare and the State of New York's Medicaid program.
14. The Respondent plans to reapply to participate with Medicare and Medicaid when her exclusion is over.
15. Every doctor in the Respondent's criminal case went to prison except for her and she believes her speaking engagements made the difference in her avoiding jail time.
16. The Respondent completed her probation on June 14, 2019.
1. P.R. is a professor at Temple University's Lewis Katz School of Medicine and the Center for Bioethics Urban Health and Policy and also the Assistant Director of the master's program in Urban Bioethics.
2. The Respondent has spoken to several of P.R.'s classes including a PA class, a class at Temple University that included a variety of students, two MSW classes and two classes of undergraduate health care administration students at Drexel University.
3. The Respondent told these classes her cautionary story and shared that she is a convicted felon.
1. Dr. J.G. is a physician who practices in obstetrics and gynecology.
2. The Respondent is Dr. J.G.'s best friend and colleague, having met in medical school.
3. Dr. J.G. plans to join the Respondent in her office to practice gynecology.
4. The Respondent and Dr. J.G. refer many patients to each other.
5. When Dr. J.G. enters into a practice arrangement with Respondent, she expects they will share expenses equally for staff, rent and utilities.
6. According to Dr. J.G., the Respondent has accepted responsibility for her conduct. She is remorseful and has made remarkable efforts to correct her mistakes by cautioning others about these real pitfalls.
7. Dr. J.G. believes that the Respondent possesses the necessary ethics, intelligence and aptitude to properly hold a registration and administer and prescribe controlled substances.
The DI's uncontroverted testimony, while generally limited to the initiation of the investigation and authentication of the Government's exhibits in this matter, was consistent, genuine and credible. The DI effectively explained how the investigation of the Respondent began, and how the DI verified the fact of the Respondent's exclusion from all federal health care programs.
The DI, as a public servant, typically has no personal stake in the outcome of the instant investigation or in the revocation of the Respondent's registration. I noted no animus on the DI's part as to the Respondent. Although he may be viewed as being part of the prosecution team, I saw no indication from his testimony that any partiality interfered with his reliable testimony. Based on a complete review of the DI's presentation of testimony, I find his testimony to be entirely credible.
P.R. is currently a professor at Temple University's Lewis Katz School of Medicine and the Center for Bioethics Urban Health and Policy. Tr. 94. She also serves as the Assistant Director of the Master's program in Urban Bioethics.
She has gotten to know the Respondent throughout the course of the Respondent's presentations to P.R.'s students. P.R. expressed that the Respondent showed contrition during her presentation.
P.R. presented clear and candid testimony. She shared only a professional relationship with the Respondent. She appeared to be sincere in her description of the Respondent's presentations and corroborated the Respondent's testimony. I find her testimony to be entirely credible.
Dr. J.G. has prepared to move into the Respondent's private practice as a gynecologist after a career working in hospitals and academia.
Dr. J.G. reports that she has observed that the Respondent has accepted responsibility for her conduct leading to her conviction.
Dr. J.G. presented clear and candid testimony. She appeared to be sincere in her description of the Respondent's remorse and acceptance of responsibility, and corroborated the Respondent's testimony. Although they have been lifelong friends and soon-to-be business partners, I do not find that Dr. J.G. was unduly influenced by any personal relationship, or financial gain, or overt loyalty to the Respondent such that it interfered with her testimony. I find her testimony to be entirely credible.
The Respondent explained the circumstances leading up to her underlying criminal conviction. She met with a lab testing representative who offered the Respondent referral fees to send their laboratory bloodwork. Tr. 50-51. The Respondent was paid every month in cash by the representative.
The Respondent admitted that she knew it was wrong to accept the payments at the time she accepted them.
The Respondent presented clear and candid testimony. She appeared to be sincere in her remorse and acceptance of responsibility. Although the stakes are very high in this proceeding, as the Agency's investigation and prosecution could effectively preclude the Respondent from practicing medicine, the Respondent did not appear to color her testimony. She appeared sincere and authentic. Her commitment to remedial efforts in the form of numerous cautionary lectures to health care professionals and to medical students is probably the most convincing evidence of the Respondent's acceptance of responsibility, remorse, and evidence she is trustworthy of her responsibilities as a possessor of a DEA COR. She presented her testimony in a consistent and convincing manner, and I find her testimony to be entirely credible.
The Government alleges that the Respondent's COR should be revoked and any pending applications be denied because the Respondent has been excluded from all federal health care programs, pursuant to 21 U.S.C. 824(a)(5). The Agency has held that section 824(a)(5) authorizes the revocation of existing registrations, as well as the denial of applications.
In the adjudication of a revocation or suspension of a DEA COR, DEA has the burden of proving that the requirements for such revocation or suspension are satisfied. 21 CFR 1301.44(e) (2010). Where the Government has sustained its burden and made its
The Government has alleged that the Respondent has been excluded from participation in a program pursuant to section 1320a-7(a) of Title 42. The Government can meet its burden under § 824(a)(5) simply by advancing evidence that the registrant has been excluded from a federal health care program under 42 U.S.C. 1320a-7(a).
Additionally, the Agency has consistently held that the underlying conviction that led to mandatory exclusion does not need to involve controlled substances to support a revocation or denial.
Based upon my review of the allegations by the Government, it is necessary to determine if it has met its
It is clear from the stipulations, the Government's evidence, and the Respondent's position in this matter that there is no controversy between the parties that the Respondent was convicted of the underlying criminal charge in the U.S. District Court for the District of New Jersey, and was subsequently mandatorily excluded from all federal health care programs by HHS/OIG, pursuant to 42 U.S.C. 1320a-7(a). The Government's evidence clearly demonstrates the necessary elements of proof under 21 U.S.C. 824(a)(5) and I find that the Government has established a
Therefore, the remaining issue, and the central focus for determination in this matter, is whether the Respondent has sufficiently demonstrated that she has accepted responsibility for her actions, has demonstrated remorse, and has taken sufficient rehabilitative and remedial steps to demonstrate to the Acting Administrator that she can be entrusted to maintain her COR.
The Government's
Since the exposure of the “kick-back” scheme, the Respondent has maintained a consistent posture of acknowledging the impropriety and illegality of her actions, of cooperation with the Government and of truly commendable and extensive remedial efforts toward her goal of “restorative justice.” She has fully accepted responsibility for her conduct, which led to the underlying criminal conviction, both in her criminal prosecution, as well as in the instant proceeding. Tr. 83; FoF 33. The Respondent testified credibly during the hearing that “I blame myself only” and that “I was responsible for all of it.” Tr. 57; FoF 24. When directly asked by Government counsel during cross-examination if she accepted responsibility, she stated that she accepts “one-hundred percent” responsibility for the acts that led to her criminal conviction. Tr. 74, 83; FoF 32. The Respondent has further demonstrated remorse for her crime. Tr. 75; FoF 35. She has repaid the bribes, amended her tax returns, and paid the taxes on the money she took. Tr. 52; FoF 17. As for her speaking engagements, the Respondent has completed sixty-nine speaking engagements, far beyond the required thirty speaking engagements ordered by the District Court, and continues to complete speaking engagements even though she is no longer required to do so. Tr. 61-63, 66, 73; GX 2, p.2; FoF 26-29. She completed all requirements for her probation on June 14, 2019. Tr. 89-90; FoF 39. She has consistently demonstrated that she has taken the necessary steps to rehabilitate herself and has demonstrated contrition for her conduct that led to her underlying conviction.
During the underlying criminal proceedings, both the Assistant United States Attorney (AUSA) and the sentencing U.S. District Court Judge believed that the Respondent had accepted responsibility for her conduct. The AUSA stated during the Respondent's sentencing hearing that the Respondent “had demonstrated a level of contrition that has been unique among the many, many doctors that we've dealt with in this case.” Tr. 68-69; RX 9. Further, U.S. District Court Judge Stanley R. Chesler found that the
Although correcting improper behavior and practices is very important to establish acceptance of responsibility, conceding wrongdoing is critical to reestablishing trust with the Agency.
Where the Government has sustained its burden and established that a registrant has committed acts inconsistent with the public interest, that registrant must present sufficient mitigating evidence to assure the Acting Administrator that he can be entrusted with the responsibility commensurate with such a registration.
As demonstrated by the evidence presented in this matter, it is clear to me that the Respondent has unequivocally accepted responsibility for her conduct. She continues to not only improve herself, but works to ensure that current and future practitioners learn from her past criminal conduct and will not make the same choices. [I also find credible Respondent's statement that she would “never do anything to compromise [her] license ever again.” Tr. 122.] Her underlying criminal conduct did not relate to her handling of controlled substances and the Government has not alleged any deficiencies by the Respondent related to controlled substances. The Government argues that revocation in this matter is appropriate for its deterrent effect. *[ ]*[Further, although I am not bound by them in this case, I agree with the statements of] U.S. District Court Judge Chesler found that “in many ways your efforts may have as much, if not more, impact than the prosecutions per se because it sends out a message and it sends out a message from someone who has personally impacted by having made the wrong decision.” RX 9. It appears the Respondent's outreach to physicians, medical staff and to students has provided and continues to provide valuable deterrence to the medical community. The Respondent's efforts have greatly satisfied the need for deterrence. At sentencing, the AUSA stated that the Respondent's “efforts have been substantial, including the speaking engagements that she's been involved with. I can tell you, your Honor, that I have heard unsolicited from folks in the medical field about the work that she has been doing and folks who are involved in educating physicians and supervising physicians have reported to me that her efforts have made an impact in educating the community, which is meaningful thing from the government's perspective.” RX 9. *[In this case,] the Respondent has clearly demonstrated that she can be entrusted to properly maintain her COR.
Considering the entire record before me, the conduct of the hearing, and observation of the testimony of the witnesses presented, I find that the Government has met its burden of proof and has established a
December 4, 2019
On April 29, 2020, the Assistant Administrator, Diversion Control Division, Drug Enforcement Administration (hereinafter, DEA or Government), issued an Order to Show Cause (hereinafter, OSC) to Emmanuel Ayodele, M.D. (hereinafter, Applicant) of Compton, California. OSC, at 1. The OSC proposed the denial of Applicant's application for a DEA Certificate of Registration.
Specifically, the OSC alleged that the Medical Board of California (hereinafter, MBC) issued an order on February 3, 2020, revoking Applicant's California Physician's and Surgeon's Certificate.
The OSC notified Applicant of the right to request a hearing on the allegations or to submit a written statement, while waiving the right to a hearing, the procedures for electing each option, and the consequences for failing to elect either option.
On June 24, 2020, Applicant, through counsel, requested a hearing, stating that Applicant “has filed a writ of administrative mandate in the Superior Court of California, San Francisco Division . . . for judicial review of the decision of the Medical Board of California” and that “DEA should await the final judgment.” Request for a Hearing, at 1.
The Office of Administrative Law Judges put the matter on the docket and assigned it to Chief Administrative Law Judge John J. Mulrooney II (hereinafter, Chief ALJ), who issued an Order Directing the Filing of Government Evidence Regarding its Lack of State Authority Allegation and Briefing Schedule on June 25, 2020, with which the Government complied by filing a Motion for Summary Disposition (hereinafter, Govt Motion) on July 7, 2020.
In its Motion, the Government submitted evidence that the MBC “found [Applicant] non-compliant with the probationary terms of its June 2017 order, ultimately resulting in the revocation of his California Physician's and Surgeon's Certificate.” Govt Motion, at 3-4. Further, the Government noted that the MBC had denied Applicant's Petition for Review of his revocation on April 14, 2020.
On July 15, 2020, Applicant filed “Applicant's Reply” (hereinafter, App
On July 21, 2020, the Chief ALJ issued an Order Granting the Government's Motion for Summary Disposition, and Recommended Rulings, Findings of Fact, Conclusions of Law, and Recommended Decision of the Administrative Law Judge (hereinafter, Summary Disposition or SD). The Chief ALJ noted that, “[c]ontrary to the [Applicant's] assertions . . . the instant proceedings are, in fact, proceedings.” SD, at 4 (citations omitted). Further, the ALJ noted that it appeared that Applicant was not contesting the underlying facts surrounding the grounds for the proceedings.
By letter dated August 18, 2020, the ALJ certified and transmitted the record to me for final Agency action. In that letter, the ALJ advised that neither party filed exceptions. I find that the time period to file exceptions has expired.
I issue this Decision and Order based on the entire record before me. 21 CFR 1301.43(e). I make the following findings of fact.
On or about June 6, 2018, Applicant filed an application (Application Control No. H18074119C) for a DEA Certificate of Registration as a practitioner in schedules II-V, with the proposed registered location of 1406 W 134th Street, Compton, California 90222. Govt Motion Exhibit (hereinafter, GX) 2 (Certification of Registration History), at 1.
On February 3, 2020, the MBC revoked Applicant's medical license. GX 3 (MBC Order), at 19. According to the Order, Applicant was suspended by the MBC following Applicant's October 10, 2013 felony conviction for health care fraud.
According to the online records of the California Department of Consumer Affairs, of which I take official notice, Applicant's license remains revoked.
As the Chief ALJ noted, Applicant does not appear to contest the status of his medical license or his state authorization to handle controlled substances.
Applicant's application requests registration as a “practitioner” in California. GX 1 (Applicant's Application). With respect to a practitioner, the DEA has also long held that the possession of authority to dispense controlled substances under the laws of the state in which a practitioner engages in professional practice is a fundamental condition for obtaining and maintaining a practitioner's registration.
This rule derives from the text of two provisions of the Controlled Substances Act (hereinafter, CSA). Controlled Substances Act (hereinafter, CSA). Pursuant to section 303(f) of the CSA, a prerequisite to registration as a practitioner is authorization to dispense controlled substances under the laws of the state in which the Applicant seeks to be registered.
The Agency has long interpreted these statutory requirements strictly. The “controlling question” is “whether the Applicant is currently authorized to handle controlled substances in the state.”
According to California statute, “[n]o person other than a physician . . . shall write or issue a prescription.” Cal. Health & Safety Code § 11150 (West 2021). Further, “physician,” as defined by California statute, is a person who is “licensed to practice” in California.
Here, the undisputed evidence in the record is that Applicant currently lacks authority to practice medicine in California. As already discussed, a physician must be a licensed practitioner to dispense a controlled substance in California. Thus, because Applicant lacks authority to practice medicine in California and, therefore, is not authorized to handle controlled substances in California, Applicant is not eligible to be granted a DEA registration. Accordingly, I will order that Applicant's application for a DEA registration be denied.
Pursuant to 28 CFR 0.100(b) and the authority vested in me by 21 U.S.C. 823(f), I hereby deny the application submitted by Emmanuel Ayodele, M.D for a Certificate of Registration, Control Number H18074119C, as well as any other pending application of Emmanuel Ayodele, M.D. for additional registration in California. This Order is effective June 4, 2021.
In accordance with the Section 223 (19 U.S.C. 2273) of the Trade Act of 1974 (19 U.S.C. 2271,
In order for an affirmative determination to be made for workers of a primary firm and a certification issued regarding eligibility to apply for TAA, the group eligibility requirements under Section 222(a) of the Act (19 U.S.C. 2272(a)) must be met, as follows:
(1) The first criterion (set forth in Section 222(a)(1) of the Act, 19 U.S.C. 2272(a)(1)) is that a significant number or proportion of the workers in such workers' firm (or “such firm”) have become totally or partially separated, or are threatened to become totally or partially separated;
AND (2(A) or 2(B) below)
(2) The second criterion (set forth in Section 222(a)(2) of the Act, 19 U.S.C. 2272(a)(2)) may be satisfied by either (A) the Increased Imports Path, or (B) the Shift in Production or Services to a Foreign Country Path/Acquisition of Articles or Services from a Foreign Country Path, as follows:
(i) The sales or production, or both, of such firm, have decreased absolutely;
AND (ii and iii below)
(ii) (I) imports of articles or services like or directly competitive with articles produced or services supplied by such firm have increased; OR
(II)(aa) imports of articles like or directly competitive with articles into which one or more component parts produced by such firm are directly incorporated, have increased; OR
(II)(bb) imports of articles like or directly competitive with articles which are produced directly using the services supplied by such firm, have increased; OR
(III) imports of articles directly incorporating one or more component parts produced outside the United States that are like or directly competitive with imports of articles incorporating one or more component parts produced by such firm have increased;
AND
(iii) the increase in imports described in clause (ii) contributed importantly to such workers' separation or threat of separation and to the decline in the sales or production of such firm; OR
(i) (I) there has been a shift by such workers' firm to a foreign country in the production of articles or the supply of services like or directly competitive with articles which are produced or services which are supplied by such firm; OR
(II) such workers' firm has acquired from a foreign country articles or services that are like or directly competitive with articles which are produced or services which are supplied by such firm;
AND
(ii) the shift described in clause (i)(I) or the acquisition of articles or services described in clause (i)(II) contributed importantly to such workers' separation or threat of separation.
In order for an affirmative determination to be made for adversely affected secondary workers of a firm and a certification issued regarding eligibility to apply for TAA, the group eligibility requirements of Section 222(b) of the Act (19 U.S.C. 2272(b)) must be met, as follows:
(1) A significant number or proportion of the workers in the workers' firm or an appropriate subdivision of the firm have become totally or partially separated, or are threatened to become totally or partially separated;
AND
(2) the workers' firm is a supplier or downstream producer to a firm that employed a group of workers who received a certification of eligibility under Section 222(a) of the Act (19 U.S.C. 2272(a)), and such supply or production is related to the article or service that was the basis for such certification (as defined in subsection 222(c)(3) and (4) of the Act (19 U.S.C. 2272(c)(3) and (4));
AND
(3) either—
(A) the workers' firm is a supplier and the component parts it supplied to the firm described in paragraph (2) accounted for at least 20 percent of the production or sales of the workers' firm; OR
(B) a loss of business by the workers' firm with the firm described in paragraph (2) contributed importantly to the workers' separation or threat of separation determined under paragraph (1).
In order for an affirmative determination to be made for adversely affected workers in firms identified by the International Trade Commission and a certification issued regarding eligibility to apply for TAA, the group eligibility requirements of Section 222(e) of the Act (19 U.S.C. 2272(e))must be met, by following criteria (1), (2), and (3) as follows:
(1) The workers' firm is publicly identified by name by the International Trade Commission as a member of a domestic industry in an investigation resulting in—
(A) an affirmative determination of serious injury or threat thereof under section 202(b)(1) of the Act (19 U.S.C. 2252(b)(1)); OR
(B) an affirmative determination of market disruption or threat thereof under section 421(b)(1)of the Act (19 U.S.C. 2436(b)(1)); OR
(C) an affirmative final determination of material injury or threat thereof under section 705(b)(1)(A) or 735(b)(1)(A) of the Tariff Act of 1930 (19 U.S.C. 1671d(b)(1)(A) and 1673d(b)(1)(A));
AND
(2) the petition is filed during the 1-year period beginning on the date on which—
(A) a summary of the report submitted to the President by the International Trade Commission under section 202(f)(1) of the Trade Act (19 U.S.C. 2252(f)(1)) with respect to the affirmative determination described in paragraph (1)(A) is published in the
(B) notice of an affirmative determination described in subparagraph (B) or (C)of paragraph (1) is published in the
AND
(3) the workers have become totally or partially separated from the workers' firm within—
(A) the 1-year period described in paragraph (2); OR
(B) notwithstanding section 223(b) of the Act (19 U.S.C. 2273(b)), the 1-year period preceding the 1-year period described in paragraph (2).
The following certifications have been issued. The date following the company name and location of each determination references the impact date for all workers of such determination.
The following certifications have been issued. The requirements of Section 222(a)(2)(A) (Increased Imports Path) of the Trade Act have been met.
The following certifications have been issued. The requirements of Section 222(a)(2)(B) (Shift in Production or Services to a Foreign Country Path or Acquisition of Articles or Services from a Foreign Country Path) of the Trade Act have been met.
The following certifications have been issued. The requirements of Section 222(b) (supplier to a firm whose workers are certified eligible to apply for TAA) of the Trade Act have been met.
The following certifications have been issued. The requirements of Section 222(e) (firms identified by the International Trade Commission) of the Trade Act have been met.
In the following cases, the investigation revealed that the eligibility criteria for TAA have not been met for the reasons specified.
The investigation revealed that the requirements of Trade Act section 222(a)(1) and (b)(1) (significant worker total/partial separation or threat of total/partial separation), or (e) (firms identified by the International Trade Commission), have not been met.
The investigation revealed that the criteria under paragraphs (a)(2)(A)(i) (decline in sales or production, or both), or (a)(2)(B) (shift in production or services to a foreign country or acquisition of articles or services from a foreign country), (b)(2) (supplier to a firm whose workers are certified eligible to apply for TAA or downstream producer to a firm whose workers are certified eligible to apply for TAA), and (e) (International Trade Commission) of section 222 have not been met.
The investigation revealed that the criteria under paragraphs (a)(2)(A) (increased imports), (a)(2)(B) (shift in production or services to a foreign country or acquisition of articles or services from a foreign country), (b)(2) (supplier to a firm whose workers are certified eligible to apply for TAA or downstream producer to a firm whose workers are certified eligible to apply for TAA), and (e) (International Trade Commission) of section 222 have not been met.
After notice of the petitions was published in the
The following determinations terminating investigations were issued because the petitioner has requested that the petition be withdrawn.
The following determinations terminating investigations were issued in cases where the petition regarding the investigation has been deemed invalid.
The following determinations terminating investigations were issued because the petitioning group of workers is covered by an earlier petition that is the subject of an ongoing investigation for which a determination has not yet been issued.
I hereby certify that the aforementioned determinations were issued during the period of March 1, 2021 through March 31, 2021. These determinations are available on the Department's website
Employment and Training Administration, Labor.
Notice.
This notice announces a changes in benefit period eligibility under the EB program that have occurred since the publication of the
U.S. Department of Labor, Employment and Training Administration, Office of Unemployment Insurance Room S-4524, Attn: Thomas Stengle, 200 Constitution Avenue NW, Washington, DC 20210, telephone number (202) 693-2991 (this is not a toll-free number) or by email:
The trigger notice covering state eligibility for the EB program can be found at:
The duration of benefits payable in the EB program, and the terms and conditions on which they are payable, are governed by the Federal-State Extended Unemployment Compensation Act of 1970, as amended, and the operating instructions issued to the states by the U.S. Department of Labor. In the case of a state beginning an EB period, the State Workforce Agency will furnish a written notice of potential entitlement to each individual who has exhausted all rights to regular benefits and is potentially eligible for EB (20 CFR 615.13(c)(1)).
Persons who believe they may be entitled to EB, or who wish to inquire about their rights under the program, should contact their State Workforce Agency.
Signed in Washington, DC.
Petitions have been filed with the Secretary of Labor under Section 221(a) of the Trade Act of 1974 (“the Act”) and are identified in the Appendix to this notice. Upon receipt of these petitions, the Administrator of the Office of Trade Adjustment Assistance, Employment and Training Administration, has instituted investigations pursuant to Section 221(a) of the Act.
The purpose of each of the investigations is to determine whether the workers are eligible to apply for adjustment assistance under Title II, Chapter 2, of the Act. The investigations will further relate, as appropriate, to the determination of the date on which total or partial separations began or threatened to begin and the subdivision of the firm involved.
The petitioners or any other persons showing a substantial interest in the subject matter of the investigations may request a public hearing provided such request is filed in writing with the Administrator, Office of Trade Adjustment Assistance, at the address shown below, no later than May 17, 2021.
Interested persons are invited to submit written comments regarding the subject matter of the investigations to the Administrator, Office of Trade Adjustment Assistance, at the address shown below, not later than May 17, 2021.
The petitions filed in this case are available for inspection at the Office of the Administrator, Office of Trade Adjustment Assistance, Employment and Training Administration, U.S. Department of Labor, Room N-5428, 200 Constitution Avenue NW, Washington, DC 20210.
In accordance with Sections 223 and 284 (19 U.S.C. 2273 and 2395) of the Trade Act of 1974 (19 U.S.C. 2271,
The following Applications for Reconsideration have been received and granted. See 29 CFR 90.18(d). The group of workers or other persons showing an interest in the proceedings may provide written submissions to show why the determination under reconsideration should or should not be modified. The submissions must be sent no later than ten days after publication in
The following revised certifications of eligibility to apply for TAA have been issued. The date following the company name and location of each determination references the impact date for all workers of such determination, and the reason(s) for the determination.
The following revisions have been issued.
The following revised determinations on reconsideration, certifying eligibility to apply for TAA, have been issued. The date following the company name and location of each determination references the impact date for all workers of such determination.
The following revised determinations on reconsideration, certifying eligibility to apply for TAA, have been issued. The requirements of Section 222(a)(2)(A) (Increased Imports Path) of the Trade Act have been met.
The following revised determinations on reconsideration, certifying eligibility to apply for TAA, have been issued. The requirements of Section 222(a)(2)(B) (Shift in Production or Services to a Foreign Country Path or Acquisition of Articles or Services from a Foreign Country Path) of the Trade Act have been met.
I hereby certify that the aforementioned determinations were issued during the period of March 1, 2021 through March 31, 2021. These determinations are available on the Department's website
Notice of availability; request for comments.
The Department of Labor (DOL) is submitting this Employment and Training Administration (ETA)-sponsored information collection request (ICR) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995 (PRA). Public comments on the ICR are invited.
The OMB will consider all written comments that agency receives on or before June 4, 2021.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Comments are invited on: (1) Whether the collection of information is necessary for the proper performance of the functions of the Department, including whether the information will have practical utility; (2) if the information will be processed and used in a timely manner; (3) the accuracy of the agency's estimates of the burden and cost of the collection of information, including the validity of the methodology and assumptions used; (4) ways to enhance the quality, utility and clarity of the information collection; and (5) ways to minimize the burden of the collection of information on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Mara Blumenthal by telephone at 202-693-8538, or by email at
This ICR is the product of a joint effort among the DOL offices responsible for the following programs: WIOA Adult, WIOA Dislocated Worker, WIOA Youth, National Dislocated Worker Grants, Dislocated Worker Projects authorized under WIOA sec. 169(c), Wagner Peyser Employment Service, National Farmworker Jobs Program, Job Corps, YouthBuild, Indian and Native American Program, as well as non-WIOA covered programs, including Trade Adjustment Assistance (TAA), Reentry Employment Opportunities (REO), H-1B discretionary grants, Senior Community Service Employment Program (SCSEP), Apprenticeship grants, and the Jobs for Veterans' State Grants Programs. While H-1B grants, TAA, SCSEP, Apprenticeship grants and the REO programs are not authorized under WIOA, these programs will be utilizing the data element definitions and reporting templates proposed in this ICR. For additional substantive information about this ICR, see the related notice published in the
This information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an
DOL seeks PRA authorization for this information collection for three (3) years. OMB authorization for an ICR cannot be for more than three (3) years without renewal. The DOL notes that information collection requirements submitted to the OMB for existing ICRs receive a month-to-month extension while they undergo review.
44 U.S.C. 3507(a)(1)(D).
Office of Management and Budget, Executive Office of the President.
Request for Information (RFI).
Recent Executive Orders have charged the Office of Management and Budget (OMB), in partnership with the heads of agencies, to identify, by July 2021, effective methods for assessing whether agency policies and actions (
Responses to this RFI should be received by July 6, 2021.
You should submit comments via the Federal eRulemaking Portal at
Written responses should not exceed 20 pages, inclusive of a 1-page cover page as described below. Attachments or linked resources or documents are not included in the 20-page limit. Please respond concisely, in plain language, and in narrative format. You may respond to some or all of the questions listed in the RFI. Please ensure it is clear which question you are responding to. You may also include links to online material or interactive presentations but please ensure all links are publicly available. Each response should include:
• The name of the individual(s) and/or organization responding.
• The Area section(s) (1, 2, 3, 4 and/or 5) that your submission and materials support.
• A brief description of the responding individual(s) or organization's mission and/or areas of expertise, including any public-private partnerships with Federal, State, tribal, territorial, or local governments within the past three years that are relevant to this RFI.
• A contact for questions or other follow-up on your response.
By responding to the RFI, each participant (individual, team, or legal entity) warrants that they are the sole author or owner of, or has the right to use, any copyrightable works that the Submission comprises, that the works are wholly original (or is an improved version of an existing work that the participant has sufficient rights to use and improve), and that the Submission does not infringe any copyright or any other rights of any third party of which participant is aware.
By responding to the RFI, each participant (individual, team, or legal entity) consents to the contents of their submission being made available to all Federal agencies and their employees on an internal-to-government website accessible only to agency staffpersons.
Participants will not be required to transfer their intellectual property rights to OMB, but Participants must grant to the Federal government a nonexclusive license to apply, share, and use the materials that are included in the Submission. To participate in the RFI, each participant must warrant that there are no legal obstacles to providing the above-referenced nonexclusive licenses of participant rights to the Federal government.
Interested parties who respond to this RFI may be contacted for a follow-on strategic agency assessment dialogue, discussion, event, crowdsource campaign, or competition.
Issues regarding submission or questions on this RFI can be sent to Amira Boland at 202-395-5222 or to
E.O. 13985 states:
Within 200 days of the date of the E.O. (by August 8, 2021), agencies must submit to the Assistant to the President for Domestic Policy an assessment of the state of equity for underserved communities and individuals, including on the following points, for example:
• Barriers that underserved communities and individuals may face to enrollment in and access to benefits and services in Federal programs;
• Barriers that underserved communities and individuals may face in participation in agency procurement and contracting opportunities;
• Barriers that underserved communities and individuals may face in participation in agency grant programs and other forms of financial assistance;
• Opportunities in current agency policies, regulations, and guidance to address affirmatively and equitably the underlying causes of systemic inequities in society;
• Opportunities in agency community engagement processes to engage with and empower marginalized, vulnerable, or underserved communities more directly to advance equitable policymaking; and
• The operational status and level of institutional resources available to agency offices or divisions responsible for advancing civil rights or required to serve underrepresented or disadvantaged communities.
Within one year of the date of E.O. 13985 (by January 19, 2022), the head of each agency will develop a plan for addressing any barriers to full and equal participation in programs and procurement opportunities identified in its assessment. Such a plan could include establishing ongoing routines to assess and rectify gaps in full and equal participation in programs and procurement opportunities.
E.O. 13985 uses the following definitions, which OMB adopts for purposes of this RFI.
The term “equity” means the consistent and systematic fair, just, and impartial treatment of all individuals, including individuals who belong to underserved communities that have been denied such treatment, such as women and girls; Black, Latino, and Indigenous and Native American persons, Asian Americans and Pacific Islanders and other persons of color; persons facing discrimination or barriers on account of gender identity; members of religious minorities; lesbian, gay, bisexual, transgender, and queer (LGBTQ+) persons; persons with disabilities; persons who live in rural areas; and persons otherwise adversely affected by persistent poverty or inequality.
The term “underserved communities” refers to populations sharing a particular characteristic, as well as geographic communities, that have been systematically denied a full opportunity to participate in aspects of economic, social, and civic life, as exemplified by the list in the preceding definition of “equity.”
OMB seeks input in the following areas:
1. Equity Assessments and Strategies. Approaches and methods for holistic and program- or policy-specific assessments of equity for public sector entities, including but not limited to the development of public policy strategies that advance equity and the use of data to inform equitable public policy strategies.
2. Barrier and Burden Reduction. Approaches and methods for assessing and remedying barriers, burden, and inequities in public service delivery and access.
3. Procurement and Contracting. Approaches and methods for assessing equity in agency procurement and contracting processes.
4. Financial Assistance. Approaches and methods for assessing equity in the administration of agency grant programs and other forms of financial assistance.
5. Stakeholder and Community Engagement. Approaches and methods for accessible and meaningful agency engagement with underserved communities.
The descriptions below represent a non-exhaustive accounting of issues that may fall under each topic area. These may assist in the formulation of comments. The list is not intended to restrict submissions. For all prompts, OMB requests that commenters incorporate examples, data, and, in particular, research or academic literature whenever possible.
The work of advancing equity requires a holistic assessment of agency practices and policies. Some Federal agencies will need to implement new approaches to assess whether future proposed policies, budgets, regulations, grants, or programs will be effective in advancing equity. OMB welcomes submissions that provide resources, tools, and examples of how agencies might conduct effective equity assessments, with the goal of embedding equity throughout agency practices and policies. Submissions might consider questions such as:
• What are some promising methods and strategies for assessing equity in internal agency practices and policies? What knowledge, skills, or supports do practitioners need to use such tools effectively?
• What are some promising methods and strategies for identifying systemic inequities to be addressed by agency policy?
• Jurisdictions at the State, local, Tribal, and territorial level have implemented equity assessment tools to inform their policymaking, budgetary, or regulatory processes. What are the lessons these jurisdictions have learned from implementing or interacting with those tools?
• What are some promising methods and strategies for advancing equity on urgent or immediate agency priorities?
• What types of equity assessment tools are especially useful for agencies with national security, foreign policy or law enforcement missions?
• How might agencies collect data and build evidence in appropriate and protected ways to reflect underserved individuals and communities and support greater attention to equity in future policymaking?
• How might agencies build capacity and provide training and support for teams conducting this work?
• How can community engagement or feedback from underserved individuals with lived expertise on a given policy problem be integrated meaningfully in an agency's use of equity assessment methods?
Members of underserved communities may experience a variety of external factors that may disproportionately affect their access to information about programs or program eligibility, applying for benefits, conducting post-award reporting, and recertification of eligibility. These barriers may include, but are not limited to: Non-traditional or inflexible work hours, childcare needs, housing insecurity, limited transportation access, limited proficiency in English, disability, low literacy, income or other resource constraints, stigma in accessing public programs, and limited access to technology.
Other barriers are internal to the administration of programs. While certain program rules may ensure that benefits are awarded to eligible individuals or are otherwise required by law, others are not necessary for ensuring benefits are awarded to eligible individuals and may be remedied via administrative or regulatory changes. The latter category of program rules may include: Unnecessary questions or requirements to produce documentation; complex eligibility formulas; forms or web applications that are confusingly designed; complicated instructions; long delays between application and adjudication; the need for third-party (
Responses should include, but not be limited to, information on any or all of the following points:
• How can agencies address known burdens or barriers to accessing benefits programs in their assessments of benefits delivery?
• What data, tools, or evidence are available to show how particular underserved communities or populations disproportionately encounter these barriers? Which underserved communities experience multiple, cumulative barriers and are disproportionately burdened by specific administrative processes or requirements?
• Are there specific requirements or processes (
• How could agencies incorporate considerations of the psychological costs of qualifying or applying for Federal benefits programs into their assessments of equitable service delivery?
• What kinds of equity assessment tools are more useful for addressing urgent agency priorities versus making systemic change?
• What types of overarching metrics (
• How might an agency assess or balance prioritization of potentially competing values associated with program administration, such as program uptake, program integrity, privacy protection, and resource constraints, in the context of addressing equity for underserved individuals and communities?
• How might agencies assess if specific barriers (
• How might agencies incorporate into their equity assessments barriers or duplicative burdens a participant is likely to experience when seeking services from multiple agencies?
• How can agencies best balance collecting demographic information about program applicants and participants with the potential effect on program participation that these questions may cause? What does rigorous research show about the effect of demographic questions on program participation?
The Federal Government is the world's largest purchaser of goods and services, with acquisitions totaling over $650 billion per year. As the Federal Government's purchasing power is used to fight COVID-19, increase domestic productivity, combat climate change, and address other Administration priorities, agencies will need to assess opportunities to invest in underserved individuals and communities by promoting business diversity (including, but not limited to, professional services, financial services, and technology) and resiliency. Agencies will need to assess opportunities to direct more procurement and contracting dollars to underserved individuals and communities so that a broad cross-section of American businesses can share in the jobs and opportunities created by Federal buying activities. Economic research shows that investing in underserved communities and closing racial wealth gaps yields economic growth and job creation that benefits all Americans.
OMB welcomes submissions that address questions such as:
• How do we achieve equity in a procurement system that must balance competing economic and social goals, including the need to conduct procurements in a streamlined and rapid manner?
• What kinds of equity assessment tools might agencies use to identify inequity in their standard practices throughout the acquisition lifecycle, including, but not limited to, the development of requirements, market research (including outreach to businesses), selection of contract type, availability of financing, incentive structure, negotiation and evaluation of interested sources, debriefings of unsuccessful offerors, management of contracts, evaluation of contractor performance, and use of past performance in selection of sources?
• What kinds of tools might agencies use to determine when there is inequity in the award of subcontracts under prime contracts and the cause of such?
• How might agencies identify opportunities to engage with business owners and entrepreneurs who are members of underserved communities to promote doing business with the Federal Government? What kinds of training and capacity building within agency teams would support equitable procurement and contracting efforts?
• What kinds of benchmarks and assessment techniques might support equitable procurement and contracting efforts?
• What kinds of data should agencies collect and use to assess equity in their procurement practices?
Federal agencies run financial assistance programs, including grant opportunities, that have the potential, and in many cases, a stated intent, to channel resources to underserved communities. OMB welcomes submissions that address questions such as:
• How might agencies identify opportunities to adjust current practices in grants and other financial assistance programs to expand access for underserved communities and to achieve equity-oriented results? What are some promising approaches to the award and administration of Federal awards (including, for example, the integration of program planning and design) that should be considered?
• What are promising practices for equitable grantmaking and the administration of financial assistance programs that agencies should consider in the course of their equity assessments?
• How might agencies engage in outreach and stakeholder engagement to identify opportunities to make Federal grants and other financial assistance processes more accessible?
• What kinds of training and capacity building within agencies would support equitable grantmaking and financial assistance efforts?
• What kinds of benchmarks and assessment techniques would support equitable grantmaking and financial assistance efforts?
• What kinds of data should agencies collect and use to assess equity in their grantmaking and financial assistance practices?
Section 8 of E.O. 13985 instructs agencies to expand their use of stakeholder and community engagement in carrying out the Order. OMB seeks specific approaches to stakeholder and community engagement with underserved communities that others have successfully used and that Federal agencies could adapt or apply.
Accordingly, OMB welcomes submissions that address questions such as:
• What processes should agencies have in place to engage proactively with the underserved individuals and communities that will be most affected by agency programs, policies, rules, processes, or operations? How can agencies design and implement community engagement practices that are accessible to underserved communities? How might affected communities be engaged pro-actively and early to shape agency policy priorities and strategies?
• What tools and best practices might agencies deploy to establish advisory boards, task forces, and commissions that are inclusive of underserved communities?
• How can an agency assess the accessibility of the agency's rulemaking and policymaking commenting and engagement processes, including for individuals that experience barriers to participation? Examples of barriers may include limited language access assistance, online-only engagement, and minimal proactive notification of opportunities to provide comment.
• Do feedback mechanisms for customers, beneficiaries, and communities affected by Government programs exist to inform policy research and evaluation processes? If so, are these feedback mechanisms accessible to underserved communities? If not, what are best practices that agencies should consider?
• What tools could agencies develop for expanding stakeholder input into programmatic and regulatory changes to minimize barriers and burden? How may existing processes (
• What tools can agency offices, including communications, civic engagement, enforcement, and policymaking offices, use to better engage or reach underserved communities?
• What are some of the barriers or factors that challenge underserved communities' interactions with Federal agencies and programs?
• What practices should agencies put in place to reach underserved communities in rural areas or underserved communities that otherwise are not able to visit Washington, DC, to engage with policymakers?
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 NEA Panelist Profile Data. Copies of this ICR, with applicable supporting documentation, may be obtained by visiting
Interested persons are invited to submit comments 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.
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, (T) 202-395-7316.
The Office of Management and Budget (OMB) is particularly interested in comments which: (1) Evaluate 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) Evaluate 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) Enhance the quality, utility, and clarity of the information to be collected; and (4) Could help minimize the burden of the collection of information on those who are to respond, including through the use of electronic submission of responses through
The NEA's mission is “to strengthen the creative capacity of our communities by providing all Americans with diverse opportunities for arts participation.” With the advice of the National Council on the Arts and advisory panels, the Chairman establishes eligibility requirements and criteria for the review of applications for funding. Section 959(c) of the NEA's enabling legislation, as amended, directs
The legislation requires the Chairman “(1) to ensure that all panels are composed, to the extent practicable, of individuals reflecting a wide geographic, ethnic, and minority representation as well as to (2) ensure that all panels include representation of lay individuals who are knowledgeable about the arts . . .” These panels are considered to be committees under the Federal Advisory Committee Act (FACA), which also requires that committees be balanced geographically and ethnically. In addition, the membership of each panel must change substantially from year to year and each individual is ineligible to serve on a panel for more than three consecutive years. To assist with efforts to meet these legislated mandates regarding representation on advisory panels, the NEA has established a database of names, addresses, areas of expertise and other basic information on individuals who are qualified to serve as panelists for the NEA.
The Panelist Profile Data Collection, for which clearance is requested, is used to gather basic information from qualified individuals recommended by the arts community; arts organizations; Members of Congress; the general public; local, state and regional arts organizations; NEA staff, and others.
Weeks of May 3, 10, 17, 24, 31, June 7, 2021.
Commissioners' Conference Room, 11555 Rockville Pike, Rockville, Maryland.
Public and closed.
There are no meetings scheduled for the week of May 3, 2021.
There are no meetings scheduled for the week of May 17, 2021.
There are no meetings scheduled for the week of May 31, 2021.
For more information or to verify the status of meetings, contact Wesley Held at 301-287-3591 or via email at
The NRC Commission Meeting Schedule can be found on the internet at:
The NRC provides reasonable accommodation to individuals with disabilities where appropriate. If you need a reasonable accommodation to participate in these public meetings or need this meeting notice or the transcript or other information from the public meetings in another format (
Members of the public may request to receive this information electronically. If you would like to be added to the distribution, please contact the Nuclear Regulatory Commission, Office of the Secretary, Washington, DC 20555, at 301-415-1969, or by email at
The NRC is holding the meetings under the authority of the Government in the Sunshine Act, 5 U.S.C. 552b.
For the Nuclear Regulatory Commission.
Postal Regulatory Commission.
Notice.
The Commission is extending the comment deadline in this docket.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
On March 30, 2021, the Commission established Docket No. MC2021-78 to consider the Postal Service's request to transfer Bound Printed Matter Parcels from the market dominant product list to the competitive product list.
To give all interested parties sufficient time to review the responses to the information requests and formulate their comments, the Commission hereby extends the deadline for filing comments from May 7, 2021 to May 17, 2021.
1. Comments by interested persons are due by May 17, 2021.
2. The Secretary shall arrange for publication of this order in the
By the Commission.
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Sean Robinson, 202-268-8405.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on April 20, 2021, it filed with the Postal Regulatory Commission a
Pursuant to Section 19(b)(1)
The Exchange proposes to amend the Exchange's Price List regarding colocation services and fees to add further specificity as to how monthly fees for dedicated cabinets are calculated. The proposed rule change is available on the Exchange's website at
In its filing with the Commission, the self-regulatory organization 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 those 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 parts of such statements.
The Exchange proposes to amend its Price List regarding colocation services and fees
The Exchange offers Users
A User pays a monthly fee based on the power allocated to its dedicated cabinets. As previously indicated,
To further clarify how the fees are calculated, in a non-substantive change, the Exchange proposes to make the following edits to the Price List:
• Revise the title “Monthly Fee per Cabinet” to read “Monthly Fee for Cabinets”; and
• under the heading “Dedicated Cabinet,” add the following text: “Monthly fee is based on total kWs allocated to all of a User's dedicated cabinets”.
The Exchange does not propose to change the fees.
The proposed change is not expected to have any impact on Users. Users are currently subject to the described services and fees, none of which is new or novel. Current Users would not incur any new or changed fees and the Exchange does not expect to attract any new Users as a result of the proposed change. The change would simply add clarity to the Price List concerning the monthly fee for dedicated cabinets.
The proposed change is not targeted at, or expected to be limited in applicability to, a specific segment of market participant, as colocation is available to any market participant that wishes to be a User.
The proposed change is not otherwise intended to address any other issues, and the Exchange is not aware of any problems that member organizations would have in complying with the proposed change.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed rule change is reasonable because it would add clarity to the Price List regarding how the monthly fee for dedicated cabinets is calculated, clarifying that the monthly fee for dedicated cabinets is based on the aggregate number of kW allocated to all the User's dedicated cabinets, and not charged on a per-cabinet basis. It would add detail previously stated in rule filings with the Commission
The proposed change is equitable, as it would add clarity for all market participants with respect to how the monthly fee for dedicated cabinets is calculated. At the same time, it is a non-substantive change that would not impact the services available to Users or the fees charged for such services. The Exchange does not expect to attract any new Users as a result of the proposed change. The proposed change is not expected to have any impact on Users. Users are currently subject to the described services and fees, none of which is new or novel.
For the reasons above, the proposed changes do not unfairly discriminate between or among market participants that are otherwise capable of satisfying any applicable colocation fees, requirements, terms, and conditions established from time to time by the Exchange.
For these reasons, the Exchange believes that the proposal is consistent with the Act.
In accordance with Section 6(b)(8) of the Act,
For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
No written comments were solicited or received with respect to the proposed rule change.
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
At any time within 60 days of the filing of such 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
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)
The Exchange proposes to amend the NYSE American Equities Price List and Fee Schedule and the NYSE American Options Fee Schedule (together, the “Price List and Fee Schedule”) regarding colocation services and fees to add further specificity as to how monthly fees for dedicated cabinets are calculated. The proposed rule change is available on the Exchange's website at
In its filing with the Commission, the self-regulatory organization 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 those 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 parts of such statements.
The Exchange proposes to amend its Price List and Fee Schedule regarding colocation services and fees
The Exchange offers Users
A User pays a monthly fee based on the power allocated to its dedicated cabinets. As previously indicated,
To further clarify how the fees are calculated, in a non-substantive change, the Exchange proposes to make the following edits to the Price List and Fee Schedule:
• Revise the title “Monthly Fee per Cabinet” to read “Monthly Fee for Cabinets”; and
• under the heading “Dedicated Cabinet,” add the following text: “Monthly fee is based on total kWs allocated to all of a User's dedicated cabinets”.
The Exchange does not propose to change the fees.
The proposed change is not expected to have any impact on Users. Users are currently subject to the described services and fees, none of which is new or novel. Current Users would not incur any new or changed fees and the Exchange does not expect to attract any new Users as a result of the proposed change. The change would simply add clarity to the Price List and Fee Schedule concerning the monthly fee for dedicated cabinets.
The proposed change is not targeted at, or expected to be limited in applicability to, a specific segment of market participant, as colocation is available to any market participant that wishes to be a User.
The proposed change is not otherwise intended to address any other issues, and the Exchange is not aware of any problems that member organizations would have in complying with the proposed change.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed rule change is reasonable because it would add clarity to the Price List and Fee Schedule regarding how the monthly fee for dedicated cabinets is calculated, clarifying that the monthly fee for dedicated cabinets is based on the aggregate number of kW allocated to all the User's dedicated cabinets, and not charged on a per-cabinet basis. It would add detail previously stated in rule filings with the Commission
The proposed change is equitable, as it would add clarity for all market participants with respect to how the monthly fee for dedicated cabinets is calculated. At the same time, it is a non-substantive change that would not impact the services available to Users or the fees charged for such services. The Exchange does not expect to attract any new Users as a result of the proposed change. The proposed change is not expected to have any impact on Users. Users are currently subject to the described services and fees, none of which is new or novel.
For the reasons above, the proposed changes do not unfairly discriminate between or among market participants that are otherwise capable of satisfying any applicable colocation fees, requirements, terms, and conditions established from time to time by the Exchange.
For these reasons, the Exchange believes that the proposal is consistent with the Act.
In accordance with Section 6(b)(8) of the Act,
For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
No written comments were solicited or received with respect to the proposed rule change.
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
At any time within 60 days of the filing of such 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 under Section 19(b)(2)(B)
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)
The Exchange proposes a rule change to extend the effective date in Commentary .10 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) under NYSE Rule 1210 (Registration Requirements) applicable to member organizations, from April 30, 2021 to June 30, 2021. The Exchange does not anticipate providing any further extensions to the temporary relief identified in this proposed rule change beyond June 30, 2021.
In its filing with the Commission, the self-regulatory organization 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 extend the effective date in Commentary .10 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) under NYSE Rule 1210 (Registration Requirements) applicable to member organizations,
In response to COVID-19 global pandemic, last year FINRA began providing temporary relief by way of frequently asked questions (“FAQs”)
FINRA published the first FAQ on March 20, 2020, providing that individuals who were designated to function as principals under FINRA Rule 1210.04
On September 25, 2020, NYSE filed with the Commission a proposed rule change for immediate effectiveness to extend the temporary relief provided via the FAQ by adopting temporary Commentary .10 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) under NYSE Rule 1210 (Registration Requirements).
As mentioned in the prior filings, FINRA began providing, and then extended, temporary relief to address the interruptions in the administration of FINRA qualification examinations at Prometric test centers and the limited ability of individuals to sit for the examinations caused by the COVID-19 pandemic.
While there are signs of improvement, the COVID-19 conditions necessitating the temporary relief persist and FINRA has determined that there is a continued need for this temporary relief beyond April 30, 2021. Although Prometric has resumed testing in many of its U.S. test centers, Prometric's safety practices mean that currently not all test centers are open, some of the open test centers are at limited capacity, and some open test centers are delivering only certain examinations that have been deemed essential by the local government.
Although the COVID-19 conditions necessitating the temporary relief persist, in the FINRA Filing, FINRA stated that an extension of the relief is necessary only until June 30, 2021, because FINRA recently expanded the availability of online examinations. Prior to this expansion, the ongoing effects of the pandemic made it impracticable for FINRA members to ensure that the individuals who they had designated to function in a principal capacity, as set forth in FINRA Rule 1210.04, could successfully sit for and pass an appropriate qualification examination within the 120-calendar day period required under the rule.
These ongoing circumstances make it impracticable for member organizations to ensure that the individuals whom they have designated to function in a principal capacity, as set forth in NYSE Rule 1210.03, are able to successfully sit for and pass an appropriate qualification examination within the 120-calendar day period required under the rule, or to find other qualified staff to fill this position. Therefore, NYSE is proposing to extend the effective date of the temporary relief provided through SR-NYSE-2020-104 until June 30, 2021. The proposed rule change would apply only to those individuals who were designated to function as a principal prior to March 3, 2021. Any individuals designated to function as a principal on or after March 3, 2021, would need to successfully pass an appropriate
NYSE believes that this proposed continued extension of time is tailored to address the needs and constraints on a member organization's operations during the COVID-19 pandemic, without significantly compromising critical investor protection. The proposed extension of time will help to minimize the impact of COVID-19 on member organizations by providing continued flexibility so that member organizations can ensure that principal positions remain filled. The potential risks from the proposed extension of the 120-day period are mitigated by the member organization's continued requirement to supervise the activities of these designated individuals and ensure compliance with federal securities laws and regulations, as well as NYSE rules. NYSE has filed the proposed rule change for immediate effectiveness and has requested that the Commission waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing, so NYSE can implement the proposed rule change immediately.
The proposed rule change is consistent with Section 6(b) of the Exchange Act,
The proposed rule change is intended to minimize the impact of COVID-19 on member organization operations by extending the 120-day period certain individuals may function as a principal without having successfully passed an appropriate qualification examination under NYSE Rule 1210.03 until June 30, 2021. The proposed rule change does not relieve member organizations from maintaining, under the circumstances, a reasonably designed system to supervise the activities of their associated persons to achieve compliance with applicable securities laws and regulations, and with applicable NYSE rules that directly serve investor protection. In a time when faced with unique challenges resulting from the COVID-19 pandemic, NYSE believes that the proposed rule change is a sensible accommodation that will continue to afford member organizations the ability to ensure that critical positions are filled and client services maintained, while continuing to serve and promote the protection of investors and the public interest in this unique environment.
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 Exchange Act. As set forth in the prior filings, the proposed rule change is intended solely to extend temporary relief necessitated by the continued impacts of the COVID-19 pandemic and the related health and safety risks of conducting in-person activities. In its filing, FINRA noted that the proposed rule change is necessary to temporarily rebalance the attendant benefits and costs of the obligations under FINRA Rule 1210 in response to the impacts of the COVID-19 pandemic that would otherwise result if the temporary relief was to expire on April 30, 2021. The Exchange accordingly incorporates FINRA's abbreviated economic impact assessment by reference.
No written comments were solicited or received with respect to 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) normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative immediately upon filing. As noted above, the Exchange stated that the conditions necessitating the temporary relief continue to exist and the proposed extension of time will help minimize the impact of the COVID-19 outbreak on NYSE member organizations' operations by allowing them to keep principal positions filled and minimizing disruptions to client services and other critical responsibilities. Despite signs of improvement, the Exchange further stated that the ongoing extenuating circumstances of the COVID-19 pandemic make it impractical to ensure that individuals designated to act in these capacities are able to take and pass the appropriate qualification examination during the 120-calendar day period required under the rules.
The Exchange observed that, following a nationwide closure of all test centers earlier in the year, some test centers have re-opened, but are operating at limited capacity or are only delivering certain examinations that have been deemed essential by the local government.
For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest.
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)
The Exchange proposes a rule change to extend the effective date in Commentary .10 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) under NYSE American Rule 2.1210 (Registration Requirements) applicable to member organizations, Equity Trading Permit (“ETP”) Holders and American Trading Permit (“ATP”) Holders, from April 30, 2021 to June 30, 2021. The Exchange does not anticipate providing any further extensions to the temporary relief identified in this proposed rule change beyond June 30, 2021.
In its filing with the Commission, the self-regulatory organization 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 extend the effective date in Commentary .10 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) under NYSE American Rule 2.1210 (Registration Requirements) applicable to member organizations, ETP Holders and ATP
In response to COVID-19 global pandemic, last year FINRA began providing temporary relief by way of frequently asked questions (“FAQs”)
FINRA published the first FAQ on March 20, 2020, providing that individuals who were designated to function as principals under FINRA Rule 1210.04
On September 25, 2020, NYSE American filed with the Commission a proposed rule change for immediate effectiveness to extend the temporary relief provided via the FAQ by adopting temporary Commentary .10 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) under NYSE American Rule 2.1210 (Registration Requirements).
As mentioned in the prior filings, FINRA began providing, and then extended, temporary relief to address the interruptions in the administration of FINRA qualification examinations at Prometric test centers and the limited ability of individuals to sit for the examinations caused by the COVID-19 pandemic.
While there are signs of improvement, the COVID-19 conditions necessitating the temporary relief persist and FINRA has determined that there is a continued need for this temporary relief beyond April 30, 2021. Although Prometric has resumed testing in many of its U.S. test centers, Prometric's safety practices mean that currently not all test centers are open, some of the open test centers are at limited capacity, and some open test centers are delivering only certain examinations that have been deemed essential by the local government.
Although the COVID-19 conditions necessitating the temporary relief persist, in the FINRA Filing, FINRA stated that an extension of the relief is necessary only until June 30, 2021, because FINRA recently expanded the availability of online examinations. Prior to this expansion, the ongoing effects of the pandemic made it impracticable for FINRA members to ensure that the individuals who they had designated to function in a principal capacity, as set forth in FINRA Rule 1210.04, could successfully sit for and pass an appropriate qualification
These ongoing circumstances make it impracticable for Members to ensure that the individuals whom they have designated to function in a principal capacity, as set forth in NYSE American Rule 2.1210.03, are able to successfully sit for and pass an appropriate qualification examination within the 120-calendar day period required under the rule, or to find other qualified staff to fill this position. Therefore, NYSE American is proposing to extend the effective date of the temporary relief provided through SR-NYSEAMER-2020-85 until June 30, 2021. The proposed rule change would apply only to those individuals who were designated to function as a principal prior to March 3, 2021. Any individuals designated to function as a principal on or after March 3, 2021, would need to successfully pass an appropriate qualification examination within 120 days.
NYSE American believes that this proposed continued extension of time is tailored to address the needs and constraints on a Member's operations during the COVID-19 pandemic, without significantly compromising critical investor protection. The proposed extension of time will help to minimize the impact of COVID-19 on Members by providing continued flexibility so that Members can ensure that principal positions remain filled. The potential risks from the proposed extension of the 120-day period are mitigated by the Member's continued requirement to supervise the activities of these designated individuals and ensure compliance with federal securities laws and regulations, as well as NYSE American rules. NYSE American has filed the proposed rule change for immediate effectiveness and has requested that the Commission waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing, so NYSE American can implement the proposed rule change immediately.
The proposed rule change is consistent with Section 6(b) of the Exchange Act,
The proposed rule change is intended to minimize the impact of COVID-19 on Member operations by extending the 120-day period certain individuals may function as a principal without having successfully passed an appropriate qualification examination under NYSE American Rule 2.1210.03 until June 30, 2021. The proposed rule change does not relieve Members from maintaining, under the circumstances, a reasonably designed system to supervise the activities of their associated persons to achieve compliance with applicable securities laws and regulations, and with applicable NYSE American rules that directly serve investor protection. In a time when faced with unique challenges resulting from the COVID-19 pandemic, NYSE American believes that the proposed rule change is a sensible accommodation that will continue to afford Members the ability to ensure that critical positions are filled and client services maintained, while continuing to serve and promote the protection of investors and the public interest in this unique environment.
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 Exchange Act. As set forth in the prior filings, the proposed rule change is intended solely to extend temporary relief necessitated by the continued impacts of the COVID-19 pandemic and the related health and safety risks of conducting in-person activities. In its filing, FINRA noted that the proposed rule change is necessary to temporarily rebalance the attendant benefits and costs of the obligations under FINRA Rule 1210 in response to the impacts of the COVID-19 pandemic that would otherwise result if the temporary relief was to expire on April 30, 2021. The Exchange accordingly incorporates FINRA's abbreviated economic impact assessment by reference.
No written comments were solicited or received with respect to 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) normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative immediately upon filing. As noted above, the Exchange stated that the conditions necessitating the temporary relief continue to exist and the proposed extension of time will help minimize the impact of the COVID-19 outbreak on NYSE American Members' operations by allowing them to keep principal positions filled and minimizing disruptions to client services and other critical
The Exchange observed that, following a nationwide closure of all test centers earlier in the year, some test centers have re-opened, but are operating at limited capacity or are only delivering certain examinations that have been deemed essential by the local government.
For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest.
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.
All submissions should refer to File Number SR-NYSEAMER-2021-24. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website (
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 EDGX Exchange, Inc. (the “Exchange” or “EDGX”) is filing with the Securities and Exchange Commission (the “Commission”) a proposed rule change with respect to amendments to the Sixth Amended and Restated Bylaws (the “CGM Bylaws”) of
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.
Cboe has received a stockholder proposal submitted pursuant to Rule 14a-8 under the Act
In developing its proposal, Cboe generally tried to balance the relative weight of arguments for and against proxy access provisions. On the one hand, Cboe recognizes the significance of this issue to some investors, who see proxy access as an important accountability mechanism that allows them to participate in board elections through the nomination of stockholder candidates that are presented in a company's proxy statement. On the other hand, Cboe's proposed proxy access provision includes certain procedural requirements that are designed to help ensure, among other things, that Cboe and its stockholders will have full and accurate information about nominating stockholders and their nominees and that such stockholders and nominees will comply with applicable laws, regulations and other requirements. Additionally, the Exchange notes the proposed terms are common among companies that have adopted proxy access. The Exchange also notes that the parent companies of other exchanges have adopted substantively similar proxy access provisions and the Exchange does not believe such provisions are materially different than the Exchange's proposal.
The proposed rule change would add new Section 2.16 to the CGM Bylaws. Section 2.16 would permit a stockholder, or group of up to 20 stockholders, to nominate director nominees for the Cboe Board, so long as the stockholder(s) have owned at least three percent of Cboe's outstanding shares of capital stock continuously for at least three years. The director nominees would be included in Cboe's annual meeting proxy materials. The proposed provision would limit the number of proposed director nominees to the greater of (i) two or (ii) 20% of the number of Cboe directors in office (rounded down to the nearest whole number, but no less than two) provided that the stockholder(s) and nominee(s) satisfy the other conditions specified in the CGM Bylaws as described further below.
The Exchange first proposes to amend the CGM Bylaws to, as set forth in the first sentence of proposed Section 2.16(a), require the Corporation to include in its proxy statement, its form proxy and any ballot distributed at the stockholder meeting, the name of, and certain Required Information
Proposed Section 2.16(b) will provide that in order to utilize this provision, the Eligible Stockholder must expressly request at the time of providing a required notice to the Corporation of the proxy access nomination (the “Notice of Proxy Access Nomination”) to have its nominee included in the Corporation's proxy materials. Proposed Section 2.16(b) also establishes the deadline for a timely Notice of Proxy Access Nomination. Specifically, such a notice must be delivered to the Cboe's Secretary at the principal executive offices of the Corporation not earlier than the open of business on the one hundred fiftieth (150th) day and not later than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the date that Cboe first distributed its proxy statement to stockholders for the previous year's annual meeting of stockholders provided, however, that in the event the annual meeting is more than thirty (30) days before or after the anniversary date of the prior year's
Proposed Section 2.16(c) specifies that the maximum number (“the Permitted Number”) of Stockholder Nominees nominated by all Eligible Stockholders that will be included in Cboe's proxy materials with respect to an annual meeting of stockholders shall not exceed the greater of two or 20% of the total number of directors in office (rounded down to the nearest whole number) as of the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with the proxy access provision of the Bylaws (the “Final Proxy Access Nomination Date”). In the event that one or more vacancies for any reason occurs after the Final Proxy Access Nomination Date but before the date of the annual meeting and the Board resolves to reduce the size of the Board in connection therewith, the Permitted Number of Stockholder Nominees included in Cboe's proxy materials shall be calculated based on the number of directors in office as so reduced. In addition, the Permitted Number shall be reduced by (i) the number of individuals who will be included in the Corporation's proxy materials as director nominees recommended by the Board pursuant to an agreement, arrangement or other understanding with a stockholder or group of stockholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of stock from the Corporation by such stockholder or group of stockholders) and/or (ii) the number of directors in office as of the Final Proxy Access Nomination Date who were included in the Corporation's proxy materials as Stockholder Nominees for any of the two preceding annual meetings of stockholders (including any persons counted as Stockholder Nominees pursuant to the immediately succeeding sentence) and whose reelection at the upcoming annual meeting is being recommended by the Board. Any individual nominated by an Eligible Stockholder for inclusion in the proxy materials pursuant to the proxy access provision of the CGM Bylaws whom the Board decides to nominate as a nominee of the Board, and any individual nominated by an Eligible Stockholder for inclusion in the proxy materials pursuant to the proxy access provision but whose nomination is subsequently withdrawn, shall be counted as one of the Stockholder Nominees for purposes of determining when the Permitted Number of Stockholder Nominees has been reached. Any Eligible Stockholder submitting more than one Stockholder Nominee for inclusion in the proxy materials shall rank such Stockholder Nominees based on the order that the Eligible Stockholder desires such Stockholder Nominees to be selected for inclusion in the proxy statement in the event that the total number of Stockholder Nominees submitted by Eligible Stockholders pursuant to the proxy access provision exceeds the Permitted Number of nominees allowed. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to Section 2.16 exceeds the Permitted Number of nominees allowed, the highest ranking Stockholder Nominee who meets the requirements of the proxy access provision of the Bylaws from each Eligible Stockholder will be selected for inclusion in the proxy materials until the Permitted Number is reached, going in order of the amount (largest to smallest) of shares of Cboe's outstanding capital stock each Eligible Stockholder disclosed as owned in its respective Notice of Proxy Access Nomination submitted to Cboe. If the Permitted Number is not reached after the highest ranking Stockholder Nominee who meets the requirements of the proxy access provision of the Bylaws from each Eligible Stockholder has been selected, then the next highest ranking Stockholder Nominee who meets the requirements of Section 2.16 from each Eligible Stockholder will be selected for inclusion in the Corporation's proxy materials, and this process will continue as many times as necessary, following the same order each time, until the Permitted Number is reached. Additionally, notwithstanding anything to the contrary contained in proposed Section 2.16, Cboe will not be required to include any Stockholder Nominees in its proxy materials pursuant to Section 2.16 for any meeting of stockholders for which the Secretary receives a notice (whether or not subsequently withdrawn) that the Eligible Stockholder or any other stockholder intends to nominate one or more persons for election to the Board pursuant to Section 2.11 of the CGM Bylaws. Cboe believes it is reasonable to limit the Board seats available to proxy access nominees and to establish procedures for selecting candidates if the nominee limit is exceeded. The limitation on Board seats available to proxy access nominees ensures that proxy access cannot be used to take over the entire Board, which is not the stated purpose of proxy access campaigns. The procedures for selecting candidates if the nominee limit is exceeded establish clear and rational guidelines for an orderly nomination process to avoid the Corporation having to make arbitrary judgments among candidates.
Proposed Section 2.16(d) defines who may qualify as an “Eligible Stockholder”. Particularly, an Eligible Stockholder is a stockholder or group of no more than 20 stockholders
Proposed Section 2.16(e) clarifies, for the avoidance of doubt, how “ownership” will be defined for purposes of meeting the ownership requirements of the Required Shares. Specifically, an Eligible Stockholder shall be deemed to “own” only those outstanding shares of Cboe's capital stock as to which the stockholder possesses both: (i) The full voting and investment rights pertaining to the shares; and (ii) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (i) and (ii) shall not include any shares: That are (1) sold by such stockholder or any of its affiliates in any transaction that has not been settled or closed; (2) borrowed by such stockholder or any of its affiliates for any purposes or purchased by such stockholder or any of its affiliates pursuant to an agreement to resell; or (3) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar instrument or agreement entered into by such stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of Cboe's outstanding capital stock, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of: (A) Reducing in any manner, to any extent or at any time in the future, such stockholder's or its affiliates' full right to vote or direct the voting of any such shares; and/or (B) hedging, offsetting or altering to any degree any gain or loss realized or realizable from maintaining the full economic ownership of such shares by such stockholder or its affiliates.
Further, a stockholder shall “own” shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder's ownership of shares shall be deemed to continue during any period in which (i) the stockholder has loaned such shares provided that the stockholder has the power to recall such loaned shares on five (5) business days' notice and includes in the Notice of Proxy Access Nomination an agreement that it will (1) recall such loaned shares upon being notified that any of its Stockholder Nominees will be included in the Corporation's proxy materials and (2) will hold such shares through the date of the annual meeting or (ii) the stockholder has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the stockholder. Section 2.16(e) also clarifies that the terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of Cboe's capital stock are “owned” for these purposes shall be determined by the Board. For purposes of Section 2.16, the term “affiliate” or “affiliates” shall have the meaning ascribed thereto under the rules and regulations of the Act.
Proposed Section 2.16(f) sets forth the information that an Eligible Stockholder must provide to Cboe's Corporate Secretary in writing within the deadline discussed above in order to make a proxy access nomination. This information includes:
• A statement by the Eligible Stockholder (1) setting forth and certifying as to the number of shares it owns and has owned continuously for the Minimum Holding Period and (2) agreeing to continue to own the Required Shares through the date of the annual meeting;
• one or more written statements from the record holder of the Required Shares (and from each intermediary through which the Required Shares are or have been held during the Minimum Holding Period) verifying that, as of a date within seven calendar days prior to the date the Notice of Proxy Access Nomination is delivered to Cboe's Secretary at the principal executive offices of the Corporation, the Eligible Stockholder owns, and has owned continuously for the Minimum Holding Period, the Required Shares, and the Eligible Stockholder's agreement to provide, within five (5) business days after the record date for the annual meeting, written statements from the record holder and intermediaries verifying the Eligible Stockholder's continuous ownership of the Required Shares through the record date;
• a copy of the Schedule 14N that has been filed with the SEC as required by Rule 14a-18 under the Act;
• the information, representations and agreements and other documents that are required to be set forth in or included with a stockholder's notice of nomination given pursuant to Section 2.11 of the CGM Bylaws;
• the written consent of each Stockholder Nominee to being named in the proxy statement as a nominee and to serving as a director if elected;
• a representation that the Eligible Stockholder:
○ Acquired the Required Shares in the ordinary course of business and not with the intent to change or influence
○ has not nominated and will not nominate for election any individual as a director at the annual meeting, other than its Stockholder Nominee(s);
○ has not engaged and will not engage in, and has not and will not be a participant in another person's, “solicitation” within the meaning of Rule 14a-1(l) under the Act in support of the election of any individual as a director at the annual meeting, other than its Stockholder Nominee(s) or a nominee of the Board;
○ has not distributed and will not distribute to any stockholder of the Corporation any form of proxy for the annual meeting other than the form distributed by the Corporation;
○ has complied and will comply with all laws, rules and regulations applicable to solicitations and the use, if any, of soliciting material in connection with the annual meeting, and
○ has provided and will provide facts, statements and other information in all communications with Cboe and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;
• an undertaking that the Eligible Stockholder agrees to
○ Assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder's communications with the stockholders of the Corporation or out of the information that the Eligible Stockholder provided to the Corporation;
○ indemnify and hold harmless the Corporation and each of its Directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its Directors, officers or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section 2.16 or any solicitation or other activity in connection therewith; and
○ file with the Securities and Exchange Commission any solicitation or other communication with the stockholders of the Corporation relating to the meeting at which its Stockholder Nominee(s) will be nominated, regardless of whether any such filing is required under Regulation 14A of the Act or whether any exemption from filing is available for such solicitation or other communication under Regulation 14A of the Act;
• in the case of a nomination by a group of stockholders that together is an Eligible Stockholder, the designation by all group members of one group member that is authorized to receive communications, notices and inquiries from the Corporation and to act on behalf of all members of the group with respect to all matters relating to the nomination under this Section 2.16 (including withdrawal of the nomination);
• in the case of a nomination by an Eligible Stockholder consisting of a group of stockholders in which two or more funds are intended to be treated as one stockholder for purposes of qualifying as an Eligible Stockholder, documentation reasonably satisfactory to the Corporation that demonstrates that the funds are part of the same Qualifying Fund Group; and
• a written representation and agreement by the Stockholder Nominee that such person:
○ Will act as a representative of all of the stockholders of the Corporation while serving as a director;
○ will provide facts, statements and other information in all communications with the Corporation and its stockholders that are or will be true and correct in all material respects (and shall not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading);
○ is not and will not become a party to (i) any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity other than the Corporation in connection with service or action as a director of the Corporation that has not been disclosed to the Corporation, (ii) any Voting Commitment that has not been disclosed to the Corporation or (iii) any Voting Commitment
○ will abide by and comply with the CGM Bylaws, the Certificate of Incorporation and applicable policies of the Corporation including all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation, as well as the applicable provisions of the rules and regulations of the Securities and Exchange Commission and any stock exchange applicable to the Corporation.
In proposing the informational requirements for the Eligible Stockholder, Cboe's goal is to gather sufficient information about the Eligible Stockholder for both itself and its stockholders. Among other things, this information is designed to help ensure that Cboe is able to comply with its disclosure and other requirements under applicable law and that Cboe, its Board and its stockholders are able to assess the proxy access nomination adequately.
Proposed Section 2.16(g) establishes additional information the Stockholder Nominee must provide. Particularly:
• The Stockholder Nominee(s) must submit all completed and signed questionnaires required of directors and officers of the Corporation;
• the Corporation may require any proposed Stockholder Nominee to furnish any information:
○ That may reasonably be requested by the Corporation to determine whether the Stockholder Nominee would be independent under Section 3.3 and otherwise qualifies as independent under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded;
○ that could be material to a reasonable stockholder's understanding of the independence, or lack thereof, of such Stockholder Nominee;
○ that would be required to satisfy the requirements for qualification of directors under applicable foreign regulations; or
○ (that may reasonably be requested by the Corporation to determine the eligibility of such Stockholder Nominee to be included in the Corporation's proxy materials pursuant to this Section 2.16 or to serve as a director of the Corporation; and
• the Corporation may require the Eligible Stockholder to furnish any other information that may reasonably be requested by the Corporation to verify the Eligible Stockholder's continuous Ownership of the Required Shares for the Minimum Holding Period and through the date of the annual meeting.
Like the informational requirements for an Eligible Stockholder, which are set forth above, the informational requirements for the Stockholder
Proposed Section 2.16(h) provides that an Eligible Stockholder may provide, at its option, to the Secretary, at the time the Notice of Proxy Access Nomination is provided, a written statement, not to exceed 500 words, in support of its Stockholder Nominee(s)' candidacy (a “Supporting Statement”). Only one Supporting Statement may be submitted by an Eligible Stockholder (including any group of stockholders together constituting an Eligible Stockholder) in support of its Stockholder Nominee(s). Notwithstanding anything to the contrary contained in Section 2.16, the Corporation may omit from its proxy materials any information or Supporting Statement (or portion thereof) that it, in good faith, believes is untrue in any material respect (or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading) or would violate any applicable law, rule or regulation. The Exchange notes proposed Section 2.16(h) allows Cboe to comply with Rule 14a-9 under the Act
Pursuant to proposed Section 2.16(i), each Eligible Stockholder or Stockholder Nominee must promptly notify Cboe's Corporate Secretary of any information or communications provided by the Eligible Stockholder or Stockholder Nominee, as the case may be, to Cboe or its stockholders that when provided was not, or thereafter ceases to be, true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading and of the information that is required to correct any such defect. An Eligible Stockholder shall also provide immediate notice to the Corporation if the Eligible Stockholder ceases to own any of the Required Shares prior to the date of the annual meeting. In addition, any person providing any information to the Corporation pursuant to Section 2.16(i) shall be required to update or supplement such information, if necessary, so that all such information shall be true and correct as of the (i) as of the record date for determining the stockholders entitled to receive notice of the meeting and (ii) as of the date that is ten (10) business days prior to the meeting (or any postponement, adjournment or recess thereof), and such update shall be received by the Secretary at the principal executive offices of the Corporation (A) not later than five (5) business days after the record date for determining the stockholders entitled to receive notice of such meeting (in the case of an update required to be made under clause (i)) and (B) not later than seven (7) business days prior to the date for the meeting, if practicable, or, if not practicable, on the first practicable date prior to the meeting or any adjournment, recess or postponement thereof (in the case of an update required to be made pursuant to clause (ii)).
This provision further makes clear that providing any such notification, update or supplement, shall not be deemed to cure any defect in any previously provided information or communications or limit the remedies available to the Corporation relating to such defect (including the right to omit a Stockholder Nominee from its proxy materials). This provision is intended to protect Cboe's stockholders by requiring an Eligible Stockholder or Stockholder Nominee to give Cboe notice of information previously provided that is materially untrue. Cboe may then decide what action to take with respect to such defect, which may include, as noted above, omitting the relevant Stockholder Nominee from its proxy materials.
Proposed Section 2.16(j) provides that Cboe shall not be required to include a Stockholder Nominee in its proxy materials for any meeting of stockholders under certain circumstances. In these situations, the proxy access nomination shall be disregarded and no vote on such Stockholder Nominee will occur, even if Cboe has received proxies in respect of the vote. These circumstances occur when the Stockholder Nominee:
• Would not be an independent director under Section 3.3, under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board in determining and disclosing independence of the Corporation's directors, in each case as determined by the Board in its sole discretion;
• would not meet the audit committee independence requirements under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded;
• if elected, intended to resign as a director of the Corporation prior to the end of the full term for which he or she is standing for election;
• is or has been subject to any statutory disqualification under Section 3(a)(39) of the Act;
• is or has been subject to disqualification under 17 CFR 1.63;
• if elected, would cause the Corporation to be in violation of these Bylaws, the Certificate of Incorporation, the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded, or any applicable law, rule or regulation;
• is or has been, within the past three years, an officer or director of a competitor, as defined for purposes of Section 8 of the Clayton Antitrust Act of 1914;
• is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past 10 years;
• is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended;
• has provided any information to the Corporation or its stockholders that was untrue in any material respect or that omitted to state a material fact necessary to make the statements made, in light of the circumstances in which they were made, not misleading; or
• breaches or fails, or the Eligible Stockholder breaches or fails, to comply with its obligations pursuant to the CGM Bylaws, including, but not limited to, Section 2.16 and any agreement, representation or undertaking required by Section 2.16.
Cboe believes these provisions will protect the Corporation and its stockholders by allowing it to exclude certain categories of objectionable
Proposed Section 2.16(k) provides that notwithstanding anything to the contrary contained in the CGM Bylaws, if (i) a Stockholder Nominee and/or the applicable Eligible Stockholder breaches any of its agreements or representations or fails to comply with any of its obligations under this Section 2.16 or (ii) a Stockholder Nominee otherwise becomes ineligible for inclusion in the Corporation's proxy materials pursuant to this Section 2.16, or dies, becomes disabled or otherwise becomes ineligible or unavailable for election at the annual meeting, in each case as determined by the Board or the chairman of the meeting, (1) the Corporation may omit or, to the extent feasible, remove the information concerning such Stockholder Nominee and the related Supporting Statement from its proxy materials and/or otherwise communicate to its stockholders that such Stockholder Nominee will not be eligible for election at the annual meeting, (2) the Corporation shall not be required to include in its proxy materials any successor or replacement nominee proposed by the applicable Eligible Stockholder or any other Eligible Stockholder and (3) the chairman of the meeting shall declare such nomination to be invalid and such nomination shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Corporation. Cboe believes this provision protects the Corporation and its stockholders by providing the Board or the chairman of the stockholder meeting limited authority to disqualify a proxy access nominee when that nominee or the sponsoring stockholder(s) have breached an obligation under the proxy access provision.
Proposed Section 2.16(l) states that the following Stockholder Nominees who are included in the Corporation's proxy materials for a particular annual meeting of stockholders will be ineligible to be a Stockholder Nominee for the next two annual meetings: (i) Stockholder Nominee who withdraws from or becomes ineligible or unavailable for election at the annual meeting; or (ii) Stockholder Nominee who does not receive at least 25% of the votes cast in favor of such Stockholder Nominee's election. For the avoidance of doubt, Section 2.16(l) also clarifies that this provision shall not prevent any stockholder from nominating any person to the Board pursuant to Section 2.11 of the CGM Bylaws. Section 2.16(l) will save the Corporation and its stockholders the time and expense of analyzing and addressing subsequent proxy access nominations regarding individuals who were included in the proxy materials for a particular annual meeting but ultimately did not stand for election or receive a substantial amount of votes. After the next two annual meetings, these Stockholder Nominees would again be eligible for nomination through the proxy access provisions of the Bylaws.
Proposed Section 2.16(m) provides that notwithstanding the provisions of proposed Section 2.16, if the Eligible Stockholder providing notice (or a qualified representative of the Eligible Stockholder) does not appear in person (including virtually, in the case of a meeting held solely by means of remote communication) at the stockholder meeting to present the nomination of such Stockholder Nominee, such proposed nomination shall not be presented by the Corporation and shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.16, to be considered a qualified representative of the Eligible Stockholder providing notice, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting and such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, must be provided to the Corporation at least twenty-four (24) hours prior to the meeting.
In case there are matters involving a proxy access nomination that are open to interpretation, proposed Section 2.16(n) states that the Board (or any other person or body authorized by the Board) shall have exclusive power and authority to interpret the proxy access provisions of the Bylaws and make all determinations deemed necessary or advisable in connection with proposed Section 2.16 as to any person, facts or circumstances. In addition, all actions, interpretations and determinations of the Board (or any person or body authorized by the Board) with respect to the proxy access provisions shall be final, conclusive and binding on the Corporation, the stockholders and all other parties. While Cboe has attempted to implement a clear, detailed and thorough proxy access provision, there may be matters about future proxy access nominations that are open to interpretation. In these cases, Cboe believes it is reasonable and necessary to designate an arbiter to make final decisions on these points and that the Board is best-suited to act as that arbiter.
For the avoidance of doubt, proposed Section 2.16(o) states that the proxy access provisions outlined in proposed Section 2.16 shall be the exclusive means for stockholders to include nominees in the Corporation's proxy materials. Stockholders may, of course, continue to propose nominees through other means, but the Board will have final authority to determine whether to include those nominees in the Corporation's proxy materials.
Cboe also proposes to make conforming changes to Sections 2.10 and 2.11 to provide clarifications and prevent confusion. First, the Exchange proposes to add a reference to Section 2.11 and proposed Section 2.16 to clarify the exact bylaw provisions relating to stockholder nominees. Next, the Exchange proposes to amend Section 2.11. Section 2.11 currently describes the business that may be properly brought before an annual meeting of stockholders and the methods by which nominations of persons for election to the Board may be made at an annual meeting of stockholders. Cboe proposes to add proxy access nominations (
The Exchange believes the proposed rule change is consistent with 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 light of a shareholder proposal received from a stockholder, Cboe is proposing changes to its Bylaws to implement proxy access. The Exchange believes that this filing furthers the objectives of Section 6(b)(5) of the Act because the proposed rule change would be consistent with and facilitate a governance and regulatory structure that is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to, and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. Particularly, the Exchange believes that, by permitting an Eligible Stockholder of Cboe that meets the stated requirements to nominate directors and have its nominees included in Cboe's annual meeting proxy statement, the proposed rule change strengthens the corporate governance of the Exchange's ultimate parent company, which is beneficial to both investors and the public interest.
Additionally, the procedural requirements are designed to help protect investors by stating clearly and explicitly the procedures stockholders must follow in order to submit a proper proxy access nomination. The informational requirements are designed to enhance investor protection by helping to ensure among other things, that the Corporation and its stockholders have full and accurate information about nominating stockholders and their nominees and that such stockholders and nominees comply with applicable laws, regulations and other requirements. Moreover, as noted above, proxy access has become commonplace among companies and the Exchange believes its core provisions are common among companies that have adopted proxy access, including the parent companies of other exchanges that have adopted similar proxy access provisions.
Finally, the remaining changes to existing provisions of the CGM Bylaws are clarifying in nature, and they enhance investor protection and the public interest by preventing confusion with respect to the operation of the Bylaw provisions.
Because the proposed rule change relates to the governance of the Corporation and not to the operations of the Exchange, the Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not designed to address any competitive issue or have any impact on competition; rather, adoption of a proxy access bylaw by the Corporation is intended to enhance corporate governance and accountability to stockholders.
The Exchange neither solicited nor received comments on the proposed rule change.
Within 45 days of the date of publication of this notice in the
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 Exchange, Inc. (the “Exchange” or “Cboe Options”) is filing with the Securities and Exchange Commission (the “Commission”) a proposed rule change with respect to amendments to the Sixth Amended and Restated Bylaws (the “CGM Bylaws”) of its parent corporation, Cboe Global Markets, Inc. (“Cboe” or “Corporation”). 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.
Cboe has received a stockholder proposal submitted pursuant to Rule 14a-8 under the Act
In developing its proposal, Cboe generally tried to balance the relative weight of arguments for and against proxy access provisions. On the one hand, Cboe recognizes the significance of this issue to some investors, who see proxy access as an important accountability mechanism that allows them to participate in board elections through the nomination of stockholder candidates that are presented in a company's proxy statement. On the other hand, Cboe's proposed proxy access provision includes certain procedural requirements that are designed to help ensure, among other things, that Cboe and its stockholders will have full and accurate information about nominating stockholders and their nominees and that such stockholders and nominees will comply with applicable laws, regulations and other requirements. Additionally, the Exchange notes the proposed terms are common among companies that have adopted proxy access. The Exchange also notes that the parent companies of other exchanges have adopted substantively similar proxy access provisions and the Exchange does not believe such provisions are materially different than the Exchange's proposal.
The proposed rule change would add new Section 2.16 to the CGM Bylaws. Section 2.16 would permit a stockholder, or group of up to 20 stockholders, to nominate director nominees for the Cboe Board, so long as the stockholder(s) have owned at least three percent of Cboe's outstanding shares of capital stock continuously for at least three years. The director nominees would be included in Cboe's annual meeting proxy materials. The proposed provision would limit the number of proposed director nominees to the greater of (i) two or (ii) 20% of the number of Cboe directors in office (rounded down to the nearest whole number, but no less than two) provided that the stockholder(s) and nominee(s) satisfy the other conditions specified in the CGM Bylaws as described further below.
The Exchange first proposes to amend the CGM Bylaws to, as set forth in the first sentence of proposed Section 2.16(a), require the Corporation to include in its proxy statement, its form proxy and any ballot distributed at the stockholder meeting, the name of, and certain Required Information
Proposed Section 2.16(b) will provide that in order to utilize this provision, the Eligible Stockholder must expressly request at the time of providing a required notice to the Corporation of the proxy access nomination (the “Notice of Proxy Access Nomination”) to have its nominee included in the Corporation's proxy materials. Proposed Section 2.16(b) also establishes the deadline for a timely Notice of Proxy Access Nomination. Specifically, such a notice must be delivered to the Cboe's Secretary at the principal executive offices of the Corporation not earlier than the open of business on the one hundred fiftieth (150th) day and not later than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the date that Cboe first distributed its proxy statement to stockholders for the previous year's annual meeting of stockholders provided, however, that in the event the annual meeting is more than thirty (30) days before or after the anniversary date of the prior year's annual meeting, or if no annual meeting was held in the preceding year, to be timely, the Notice of Proxy Access Nomination must be received at the principal executive offices of the Corporation no earlier than one hundred fifty (150) days before such annual meeting and no later than the later of one hundred twenty (120) days before such annual meeting or the tenth (10th) day following the day on which public announcement (as defined in Section 2.11) of the date of such meeting is first made by the Corporation. Further Section 2.16 will provide that in no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period (or extend any time period) for the giving of a Notice of Proxy Access Nomination as described above. Cboe believes this notice period will provide stockholders an adequate window to submit nominees via proxy access, while also providing the Corporation adequate time to diligence a proxy access nominee before including them in the proxy statement for the next annual meeting of stockholders.
Proposed Section 2.16(c) specifies that the maximum number (“the Permitted Number”) of Stockholder Nominees nominated by all Eligible Stockholders that will be included in Cboe's proxy materials with respect to an annual meeting of stockholders shall not exceed the greater of two or 20% of the total number of directors in office (rounded down to the nearest whole number) as of the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with the proxy access provision of the Bylaws (the “Final Proxy Access Nomination Date”). In the event that one or more vacancies for any reason occurs after the Final Proxy Access Nomination Date but before the date of the annual meeting and the Board resolves to reduce the size of the Board in connection therewith, the Permitted Number of Stockholder Nominees included in Cboe's proxy materials shall be calculated based on the number of directors in office as so reduced. In addition, the Permitted Number shall be reduced by (i) the number of individuals who will be included in the Corporation's proxy materials as director nominees recommended by the Board pursuant to an agreement, arrangement or other understanding with a stockholder or group of stockholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of stock from the Corporation by such stockholder or group of stockholders) and/or (ii) the number of directors in office as of the Final Proxy Access Nomination Date who were included in the Corporation's proxy materials as Stockholder Nominees for any of the two preceding annual meetings of stockholders (including any persons counted as Stockholder Nominees pursuant to the immediately succeeding sentence) and whose reelection at the upcoming annual meeting is being recommended by the Board. Any individual nominated by an Eligible Stockholder for inclusion in the proxy materials pursuant to the proxy access provision of the CGM Bylaws whom the Board decides to nominate as a nominee of the Board, and any individual nominated by an Eligible Stockholder for inclusion in the proxy materials pursuant to the proxy access provision but whose nomination is subsequently withdrawn, shall be counted as one of the Stockholder Nominees for purposes of determining when the Permitted Number of Stockholder Nominees has been reached. Any Eligible Stockholder submitting more than one Stockholder Nominee for inclusion in the proxy materials shall rank such Stockholder Nominees based on the order that the Eligible Stockholder desires such Stockholder Nominees to be selected for inclusion in the proxy statement in the event that the total number of Stockholder Nominees submitted by Eligible Stockholders pursuant to the proxy access provision exceeds the Permitted Number of nominees allowed. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to Section 2.16 exceeds the Permitted Number of nominees allowed, the highest ranking Stockholder Nominee who meets the requirements of the proxy access provision of the Bylaws from each Eligible Stockholder will be selected for inclusion in the proxy materials until the Permitted Number is reached, going in order of the amount (largest to smallest) of shares of Cboe's outstanding capital stock each Eligible Stockholder disclosed as owned in its respective Notice of Proxy Access Nomination submitted to Cboe. If the Permitted Number is not reached after the highest ranking Stockholder Nominee who meets the requirements of the proxy access provision of the Bylaws from each Eligible Stockholder has been selected, then the next highest ranking Stockholder Nominee who meets the requirements of Section 2.16 from each Eligible Stockholder will be selected for inclusion in the Corporation's proxy materials, and this process will continue as many times as necessary, following the same order each time, until the Permitted Number is reached. Additionally, notwithstanding anything to the contrary contained in proposed Section 2.16, Cboe will not be required to include any Stockholder Nominees in its proxy materials pursuant to Section 2.16 for any meeting of stockholders for which the Secretary receives a notice (whether or not subsequently withdrawn) that the Eligible Stockholder or any other stockholder intends to nominate one or more persons for election to the Board pursuant to Section 2.11 of the CGM Bylaws. Cboe believes it is reasonable to limit the Board seats available to proxy access nominees and to establish procedures for selecting candidates if the nominee limit is exceeded. The limitation on Board seats available to proxy access nominees ensures that proxy access cannot be used to take over the entire Board, which is not the stated
Proposed Section 2.16(d) defines who may qualify as an “Eligible Stockholder”. Particularly, an Eligible Stockholder is a stockholder or group of no more than 20 stockholders
Proposed Section 2.16(e) clarifies, for the avoidance of doubt, how “ownership” will be defined for purposes of meeting the ownership requirements of the Required Shares. Specifically, an Eligible Stockholder shall be deemed to “own” only those outstanding shares of Cboe's capital stock as to which the stockholder possesses both: (i) The full voting and investment rights pertaining to the shares; and (ii) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (i) and (ii) shall not include any shares: That are (1) sold by such stockholder or any of its affiliates in any transaction that has not been settled or closed; (2) borrowed by such stockholder or any of its affiliates for any purposes or purchased by such stockholder or any of its affiliates pursuant to an agreement to resell; or (3) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar instrument or agreement entered into by such stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of Cboe's outstanding capital stock, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of: (A) Reducing in any manner, to any extent or at any time in the future, such stockholder's or its affiliates' full right to vote or direct the voting of any such shares; and/or (B) hedging, offsetting or altering to any degree any gain or loss realized or realizable from maintaining the full economic ownership of such shares by such stockholder or its affiliates.
Further, a stockholder shall “own” shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder's ownership of shares shall be deemed to continue during any period in which (i) the stockholder has loaned such shares provided that the stockholder has the power to recall such loaned shares on five (5) business days' notice and includes in the Notice of Proxy Access Nomination an agreement that it will (1) recall such loaned shares upon being notified that any of its Stockholder Nominees will be included in the Corporation's proxy materials and (2) will hold such shares through the date of the annual meeting or (ii) the stockholder has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the stockholder. Section 2.16(e) also clarifies that the terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of Cboe's capital stock are “owned” for these purposes shall be determined by the Board. For purposes of Section 2.16, the term “affiliate” or “affiliates” shall have the meaning ascribed thereto under the rules and regulations of the Act.
Proposed Section 2.16(f) sets forth the information that an Eligible Stockholder must provide to Cboe's Corporate Secretary in writing within the deadline discussed above in order to make a proxy access nomination. This information includes:
• A statement by the Eligible Stockholder (1) setting forth and certifying as to the number of shares it owns and has owned continuously for the Minimum Holding Period and (2) agreeing to continue to own the Required Shares through the date of the annual meeting;
• one or more written statements from the record holder of the Required Shares (and from each intermediary through which the Required Shares are or have been held during the Minimum Holding Period) verifying that, as of a
• a copy of the Schedule 14N that has been filed with the SEC as required by Rule 14a-18 under the Act;
• the information, representations and agreements and other documents that are required to be set forth in or included with a stockholder's notice of nomination given pursuant to Section 2.11 of the CGM Bylaws;
• the written consent of each Stockholder Nominee to being named in the proxy statement as a nominee and to serving as a director if elected;
• a representation that the Eligible Stockholder:
○ Acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control of Cboe, and does not presently have such intent;
○ has not nominated and will not nominate for election any individual as a director at the annual meeting, other than its Stockholder Nominee(s);
○ has not engaged and will not engage in, and has not and will not be a participant in another person's, “solicitation” within the meaning of Rule 14a-1(l) under the Act in support of the election of any individual as a director at the annual meeting, other than its Stockholder Nominee(s) or a nominee of the Board;
○ has not distributed and will not distribute to any stockholder of the Corporation any form of proxy for the annual meeting other than the form distributed by the Corporation;
○ has complied and will comply with all laws, rules and regulations applicable to solicitations and the use, if any, of soliciting material in connection with the annual meeting, and
○ has provided and will provide facts, statements and other information in all communications with Cboe and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;
• an undertaking that the Eligible Stockholder agrees to
○ assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder's communications with the stockholders of the Corporation or out of the information that the Eligible Stockholder provided to the Corporation;
○ indemnify and hold harmless the Corporation and each of its Directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its Directors, officers or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section 2.16 or any solicitation or other activity in connection therewith; and
○ file with the Securities and Exchange Commission any solicitation or other communication with the stockholders of the Corporation relating to the meeting at which its Stockholder Nominee(s) will be nominated, regardless of whether any such filing is required under Regulation 14A of the Act or whether any exemption from filing is available for such solicitation or other communication under Regulation 14A of the Act;
• in the case of a nomination by a group of stockholders that together is an Eligible Stockholder, the designation by all group members of one group member that is authorized to receive communications, notices and inquiries from the Corporation and to act on behalf of all members of the group with respect to all matters relating to the nomination under this Section 2.16 (including withdrawal of the nomination);
• in the case of a nomination by an Eligible Stockholder consisting of a group of stockholders in which two or more funds are intended to be treated as one stockholder for purposes of qualifying as an Eligible Stockholder, documentation reasonably satisfactory to the Corporation that demonstrates that the funds are part of the same Qualifying Fund Group; and
• a written representation and agreement by the Stockholder Nominee that such person:
○ Will act as a representative of all of the stockholders of the Corporation while serving as a director;
○ will provide facts, statements and other information in all communications with the Corporation and its stockholders that are or will be true and correct in all material respects (and shall not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading);
○ is not and will not become a party to (i) any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity other than the Corporation in connection with service or action as a director of the Corporation that has not been disclosed to the Corporation, (ii) any Voting Commitment that has not been disclosed to the Corporation or (iii) any Voting Commitment
○ will abide by and comply with the CGM Bylaws, the Certificate of Incorporation and applicable policies of the Corporation including all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation, as well as the applicable provisions of the rules and regulations of the Securities and Exchange Commission and any stock exchange applicable to the Corporation.
In proposing the informational requirements for the Eligible Stockholder, Cboe's goal is to gather sufficient information about the Eligible Stockholder for both itself and its stockholders. Among other things, this information is designed to help ensure that Cboe is able to comply with its disclosure and other requirements under applicable law and that Cboe, its Board and its stockholders are able to assess the proxy access nomination adequately.
Proposed Section 2.16(g) establishes additional information the Stockholder Nominee must provide. Particularly:
• The Stockholder Nominee(s) must submit all completed and signed
• the Corporation may require any proposed Stockholder Nominee to furnish any information:
○ That may reasonably be requested by the Corporation to determine whether the Stockholder Nominee would be independent under Section 3.3 and otherwise qualifies as independent under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded;
○ that could be material to a reasonable stockholder's understanding of the independence, or lack thereof, of such Stockholder Nominee;
○ that would be required to satisfy the requirements for qualification of directors under applicable foreign regulations; or
○ (that may reasonably be requested by the Corporation to determine the eligibility of such Stockholder Nominee to be included in the Corporation's proxy materials pursuant to this Section 2.16 or to serve as a director of the Corporation; and
• the Corporation may require the Eligible Stockholder to furnish any other information that may reasonably be requested by the Corporation to verify the Eligible Stockholder's continuous Ownership of the Required Shares for the Minimum Holding Period and through the date of the annual meeting.
Like the informational requirements for an Eligible Stockholder, which are set forth above, the informational requirements for the Stockholder Nominee ensure that both Cboe and its stockholders will have sufficient information about the Stockholder Nominee. Among other things, this information will ensure that Cboe is able to comply with its disclosure and other requirements under applicable law and that Cboe, its Board and its stockholders are able to assess the proxy access nomination adequately.
Proposed Section 2.16(h) provides that an Eligible Stockholder may provide, at its option, to the Secretary, at the time the Notice of Proxy Access Nomination is provided, a written statement, not to exceed 500 words, in support of its Stockholder Nominee(s)' candidacy (a “Supporting Statement”). Only one Supporting Statement may be submitted by an Eligible Stockholder (including any group of stockholders together constituting an Eligible Stockholder) in support of its Stockholder Nominee(s). Notwithstanding anything to the contrary contained in Section 2.16, the Corporation may omit from its proxy materials any information or Supporting Statement (or portion thereof) that it, in good faith, believes is untrue in any material respect (or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading) or would violate any applicable law, rule or regulation. The Exchange notes proposed Section 2.16(h) allows Cboe to comply with Rule 14a-9 under the Act
Pursuant to proposed Section 2.16(i), each Eligible Stockholder or Stockholder Nominee must promptly notify Cboe's Corporate Secretary of any information or communications provided by the Eligible Stockholder or Stockholder Nominee, as the case may be, to Cboe or its stockholders that when provided was not, or thereafter ceases to be, true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading and of the information that is required to correct any such defect. An Eligible Stockholder shall also provide immediate notice to the Corporation if the Eligible Stockholder ceases to own any of the Required Shares prior to the date of the annual meeting. In addition, any person providing any information to the Corporation pursuant to Section 2.16(i) shall be required to update or supplement such information, if necessary, so that all such information shall be true and correct as of the (i) as of the record date for determining the stockholders entitled to receive notice of the meeting and (ii) as of the date that is ten (10) business days prior to the meeting (or any postponement, adjournment or recess thereof), and such update shall be received by the Secretary at the principal executive offices of the Corporation (A) not later than five (5) business days after the record date for determining the stockholders entitled to receive notice of such meeting (in the case of an update required to be made under clause (i)) and (B) not later than seven (7) business days prior to the date for the meeting, if practicable, or, if not practicable, on the first practicable date prior to the meeting or any adjournment, recess or postponement thereof (in the case of an update required to be made pursuant to clause (ii)).
This provision further makes clear that providing any such notification, update or supplement, shall not be deemed to cure any defect in any previously provided information or communications or limit the remedies available to the Corporation relating to such defect (including the right to omit a Stockholder Nominee from its proxy materials). This provision is intended to protect Cboe's stockholders by requiring an Eligible Stockholder or Stockholder Nominee to give Cboe notice of information previously provided that is materially untrue. Cboe may then decide what action to take with respect to such defect, which may include, as noted above, omitting the relevant Stockholder Nominee from its proxy materials.
Proposed Section 2.16(j) provides that Cboe shall not be required to include a Stockholder Nominee in its proxy materials for any meeting of stockholders under certain circumstances. In these situations, the proxy access nomination shall be disregarded and no vote on such Stockholder Nominee will occur, even if Cboe has received proxies in respect of the vote. These circumstances occur when the Stockholder Nominee:
• Would not be an independent director under Section 3.3, under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board in determining and disclosing independence of the Corporation's directors, in each case as determined by the Board in its sole discretion;
• would not meet the audit committee independence requirements under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded;
• if elected, intended to resign as a director of the Corporation prior to the end of the full term for which he or she is standing for election;
• is or has been subject to any statutory disqualification under Section 3(a)(39) of the Act;
• is or has been subject to disqualification under 17 CFR 1.63;
• if elected, would cause the Corporation to be in violation of these Bylaws, the Certificate of Incorporation, the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded, or any applicable law, rule or regulation;
• is or has been, within the past three years, an officer or director of a competitor, as defined for purposes of Section 8 of the Clayton Antitrust Act of 1914;
• is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past 10 years;
• is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended;
• has provided any information to the Corporation or its stockholders that was untrue in any material respect or that omitted to state a material fact necessary to make the statements made, in light of the circumstances in which they were made, not misleading; or
• breaches or fails, or the Eligible Stockholder breaches or fails, to comply with its obligations pursuant to the CGM Bylaws, including, but not limited to, Section 2.16 and any agreement, representation or undertaking required by Section 2.16.
Cboe believes these provisions will protect the Corporation and its stockholders by allowing it to exclude certain categories of objectionable Stockholder Nominees from the proxy statement.
Proposed Section 2.16(k) provides that notwithstanding anything to the contrary contained in the CGM Bylaws, if (i) a Stockholder Nominee and/or the applicable Eligible Stockholder breaches any of its agreements or representations or fails to comply with any of its obligations under this Section 2.16 or (ii) a Stockholder Nominee otherwise becomes ineligible for inclusion in the Corporation's proxy materials pursuant to this Section 2.16, or dies, becomes disabled or otherwise becomes ineligible or unavailable for election at the annual meeting, in each case as determined by the Board or the chairman of the meeting, (1) the Corporation may omit or, to the extent feasible, remove the information concerning such Stockholder Nominee and the related Supporting Statement from its proxy materials and/or otherwise communicate to its stockholders that such Stockholder Nominee will not be eligible for election at the annual meeting, (2) the Corporation shall not be required to include in its proxy materials any successor or replacement nominee proposed by the applicable Eligible Stockholder or any other Eligible Stockholder and (3) the chairman of the meeting shall declare such nomination to be invalid and such nomination shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Corporation. Cboe believes this provision protects the Corporation and its stockholders by providing the Board or the chairman of the stockholder meeting limited authority to disqualify a proxy access nominee when that nominee or the sponsoring stockholder(s) have breached an obligation under the proxy access provision.
Proposed Section 2.16(l) states that the following Stockholder Nominees who are included in the Corporation's proxy materials for a particular annual meeting of stockholders will be ineligible to be a Stockholder Nominee for the next two annual meetings: (i) Stockholder Nominee who withdraws from or becomes ineligible or unavailable for election at the annual meeting; or (ii) Stockholder Nominee who does not receive at least 25% of the votes cast in favor of such Stockholder Nominee's election. For the avoidance of doubt, Section 2.16(l) also clarifies that this provision shall not prevent any stockholder from nominating any person to the Board pursuant to Section 2.11 of the CGM Bylaws. Section 2.16(l) will save the Corporation and its stockholders the time and expense of analyzing and addressing subsequent proxy access nominations regarding individuals who were included in the proxy materials for a particular annual meeting but ultimately did not stand for election or receive a substantial amount of votes. After the next two annual meetings, these Stockholder Nominees would again be eligible for nomination through the proxy access provisions of the Bylaws.
Proposed Section 2.16(m) provides that notwithstanding the provisions of proposed Section 2.16, if the Eligible Stockholder providing notice (or a qualified representative of the Eligible Stockholder) does not appear in person (including virtually, in the case of a meeting held solely by means of remote communication) at the stockholder meeting to present the nomination of such Stockholder Nominee, such proposed nomination shall not be presented by the Corporation and shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.16, to be considered a qualified representative of the Eligible Stockholder providing notice, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting and such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, must be provided to the Corporation at least twenty-four (24) hours prior to the meeting.
In case there are matters involving a proxy access nomination that are open to interpretation, proposed Section 2.16(n) states that the Board (or any other person or body authorized by the Board) shall have exclusive power and authority to interpret the proxy access provisions of the Bylaws and make all determinations deemed necessary or advisable in connection with proposed Section 2.16 as to any person, facts or circumstances. In addition, all actions, interpretations and determinations of the Board (or any person or body authorized by the Board) with respect to the proxy access provisions shall be final, conclusive and binding on the Corporation, the stockholders and all other parties. While Cboe has attempted to implement a clear, detailed and thorough proxy access provision, there may be matters about future proxy access nominations that are open to interpretation. In these cases, Cboe believes it is reasonable and necessary to designate an arbiter to make final decisions on these points and that the Board is best-suited to act as that arbiter.
For the avoidance of doubt, proposed Section 2.16(o) states that the proxy access provisions outlined in proposed Section 2.16 shall be the exclusive means for stockholders to include nominees in the Corporation's proxy materials. Stockholders may, of course, continue to propose nominees through other means, but the Board will have final authority to determine whether to include those nominees in the Corporation's proxy materials.
Cboe also proposes to make conforming changes to Sections 2.10 and 2.11 to provide clarifications and prevent confusion. First, the Exchange proposes to add a reference to Section 2.11 and proposed Section 2.16 to clarify the exact bylaw provisions relating to stockholder nominees. Next, the Exchange proposes to amend Section 2.11. Section 2.11 currently describes the business that may be properly brought before an annual meeting of stockholders and the methods by which nominations of persons for election to the Board may be made at an annual meeting of stockholders. Cboe proposes to add proxy access nominations (
The Exchange believes the proposed rule change is consistent with 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 light of a shareholder proposal received from a stockholder, Cboe is proposing changes to its Bylaws to implement proxy access. The Exchange believes that this filing furthers the objectives of Section 6(b)(5) of the Act because the proposed rule change would be consistent with and facilitate a governance and regulatory structure that is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to, and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. Particularly, the Exchange believes that, by permitting an Eligible Stockholder of Cboe that meets the stated requirements to nominate directors and have its nominees included in Cboe's annual meeting proxy statement, the proposed rule change strengthens the corporate governance of the Exchange's ultimate parent company, which is beneficial to both investors and the public interest.
Additionally, the procedural requirements are designed to help protect investors by stating clearly and explicitly the procedures stockholders must follow in order to submit a proper proxy access nomination. The informational requirements are designed to enhance investor protection by helping to ensure among other things, that the Corporation and its stockholders have full and accurate information about nominating stockholders and their nominees and that such stockholders and nominees comply with applicable laws, regulations and other requirements. Moreover, as noted above, proxy access has become commonplace among companies and the Exchange believes its core provisions are common among companies that have adopted proxy access, including the parent companies of other exchanges that have adopted similar proxy access provisions.
Finally, the remaining changes to existing provisions of the CGM Bylaws are clarifying in nature, and they enhance investor protection and the public interest by preventing confusion with respect to the operation of the Bylaw provisions.
Because the proposed rule change relates to the governance of the Corporation and not to the operations of the Exchange, the Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not designed to address any competitive issue or have any impact on competition; rather, adoption of a proxy access bylaw by the Corporation is intended to enhance corporate governance and accountability to stockholders.
The Exchange neither solicited nor received comments on the proposed rule change.
Within 45 days of the date of publication of this notice in the
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.
86 FR 23458, May 3, 2021.
Thursday, May 6, 2021 at 2:00 p.m.
The Closed Meeting scheduled for Thursday, May 6, 2021 at 2:00 p.m., has been changed to Friday, May 7, 2021 at 1:00 p.m.
For further information; please contact Vanessa A. Countryman from the Office of the Secretary at (202) 551-5400.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
Cboe BYX Exchange, Inc. (the “Exchange” or “BYX”) is filing with the Securities and Exchange Commission (the “Commission”) a proposed rule change with respect to amendments to the Sixth Amended and Restated Bylaws (the “CGM Bylaws”) of its parent corporation, Cboe Global Markets, Inc. (“Cboe” or “Corporation”). 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.
Cboe has received a stockholder proposal submitted pursuant to Rule 14a-8 under the Act
In developing its proposal, Cboe generally tried to balance the relative weight of arguments for and against proxy access provisions. On the one hand, Cboe recognizes the significance of this issue to some investors, who see proxy access as an important accountability mechanism that allows them to participate in board elections through the nomination of stockholder candidates that are presented in a company's proxy statement. On the other hand, Cboe's proposed proxy access provision includes certain procedural requirements that are designed to help ensure, among other things, that Cboe and its stockholders will have full and accurate information about nominating stockholders and their nominees and that such stockholders and nominees will comply with applicable laws, regulations and other requirements. Additionally, the Exchange notes the proposed terms are common among companies that have adopted proxy access. The Exchange also notes that the parent companies of other exchanges have adopted substantively similar proxy access provisions and the Exchange does not
The proposed rule change would add new Section 2.16 to the CGM Bylaws. Section 2.16 would permit a stockholder, or group of up to 20 stockholders, to nominate director nominees for the Cboe Board, so long as the stockholder(s) have owned at least three percent of Cboe's outstanding shares of capital stock continuously for at least three years. The director nominees would be included in Cboe's annual meeting proxy materials. The proposed provision would limit the number of proposed director nominees to the greater of (i) two or (ii) 20% of the number of Cboe directors in office (rounded down to the nearest whole number, but no less than two) provided that the stockholder(s) and nominee(s) satisfy the other conditions specified in the CGM Bylaws as described further below.
The Exchange first proposes to amend the CGM Bylaws to, as set forth in the first sentence of proposed Section 2.16(a), require the Corporation to include in its proxy statement, its form proxy and any ballot distributed at the stockholder meeting, the name of, and certain Required Information
Proposed Section 2.16(b) will provide that in order to utilize this provision, the Eligible Stockholder must expressly request at the time of providing a required notice to the Corporation of the proxy access nomination (the “Notice of Proxy Access Nomination”) to have its nominee included in the Corporation's proxy materials. Proposed Section 2.16(b) also establishes the deadline for a timely Notice of Proxy Access Nomination. Specifically, such a notice must be delivered to the Cboe's Secretary at the principal executive offices of the Corporation not earlier than the open of business on the one hundred fiftieth (150th) day and not later than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the date that Cboe first distributed its proxy statement to stockholders for the previous year's annual meeting of stockholders provided, however, that in the event the annual meeting is more than thirty (30) days before or after the anniversary date of the prior year's annual meeting, or if no annual meeting was held in the preceding year, to be timely, the Notice of Proxy Access Nomination must be received at the principal executive offices of the Corporation no earlier than one hundred fifty (150) days before such annual meeting and no later than the later of one hundred twenty (120) days before such annual meeting or the tenth (10th) day following the day on which public announcement (as defined in Section 2.11) of the date of such meeting is first made by the Corporation. Further Section 2.16 will provide that in no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period (or extend any time period) for the giving of a Notice of Proxy Access Nomination as described above. Cboe believes this notice period will provide stockholders an adequate window to submit nominees via proxy access, while also providing the Corporation adequate time to diligence a proxy access nominee before including them in the proxy statement for the next annual meeting of stockholders.
Proposed Section 2.16(c) specifies that the maximum number (“the Permitted Number”) of Stockholder Nominees nominated by all Eligible Stockholders that will be included in Cboe's proxy materials with respect to an annual meeting of stockholders shall not exceed the greater of two or 20% of the total number of directors in office (rounded down to the nearest whole number) as of the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with the proxy access provision of the Bylaws (the “Final Proxy Access Nomination Date”). In the event that one or more vacancies for any reason occurs after the Final Proxy Access Nomination Date but before the date of the annual meeting and the Board resolves to reduce the size of the Board in connection therewith, the Permitted Number of Stockholder Nominees included in Cboe's proxy materials shall be calculated based on the number of directors in office as so reduced. In addition, the Permitted Number shall be reduced by (i) the number of individuals who will be included in the Corporation's proxy materials as director nominees recommended by the Board pursuant to an agreement, arrangement or other understanding with a stockholder or group of stockholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of stock from the Corporation by such stockholder or group of stockholders) and/or (ii) the number of directors in office as of the Final Proxy Access Nomination Date who were included in the Corporation's proxy materials as Stockholder Nominees for any of the two preceding annual meetings of stockholders (including any persons counted as Stockholder Nominees pursuant to the immediately succeeding sentence) and whose reelection at the upcoming annual meeting is being recommended by the Board. Any individual nominated by an Eligible Stockholder for inclusion in the proxy materials pursuant to the proxy access provision of the CGM Bylaws whom the Board decides to nominate as a nominee of the Board, and any individual nominated by an Eligible Stockholder for inclusion in the proxy materials pursuant to the proxy access provision but whose nomination is subsequently withdrawn, shall be counted as one of the Stockholder Nominees for purposes of determining when the Permitted
Proposed Section 2.16(d) defines who may qualify as an “Eligible Stockholder”. Particularly, an Eligible Stockholder is a stockholder or group of no more than 20 stockholders
Proposed Section 2.16(e) clarifies, for the avoidance of doubt, how “ownership” will be defined for purposes of meeting the ownership requirements of the Required Shares. Specifically, an Eligible Stockholder shall be deemed to “own” only those outstanding shares of Cboe's capital stock as to which the stockholder possesses both: (i) The full voting and investment rights pertaining to the shares; and (ii) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (i) and (ii) shall not include any shares: That are (1) sold by such stockholder or any of its affiliates in any transaction that has not been settled or closed; (2) borrowed by such stockholder or any of its affiliates for any purposes or purchased by such stockholder or any of its affiliates pursuant to an agreement to resell; or (3) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar instrument or agreement entered into by such stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of Cboe's outstanding capital stock, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of: (A) Reducing in any manner, to any extent or at any time in the future, such stockholder's or its affiliates' full right to vote or direct the voting of any such shares; and/or (B) hedging, offsetting or altering to any degree any gain or loss realized or realizable from maintaining the full economic ownership of such shares by such stockholder or its affiliates.
Further, a stockholder shall “own” shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder's ownership of shares shall be deemed to continue during any period in which (i) the stockholder has loaned such shares provided that the stockholder has the power to recall such loaned shares on five (5) business days' notice and includes in the Notice of
Proposed Section 2.16(f) sets forth the information that an Eligible Stockholder must provide to Cboe's Corporate Secretary in writing within the deadline discussed above in order to make a proxy access nomination. This information includes:
• A statement by the Eligible Stockholder (1) setting forth and certifying as to the number of shares it owns and has owned continuously for the Minimum Holding Period and (2) agreeing to continue to own the Required Shares through the date of the annual meeting;
• one or more written statements from the record holder of the Required Shares (and from each intermediary through which the Required Shares are or have been held during the Minimum Holding Period) verifying that, as of a date within seven calendar days prior to the date the Notice of Proxy Access Nomination is delivered to Cboe's Secretary at the principal executive offices of the Corporation, the Eligible Stockholder owns, and has owned continuously for the Minimum Holding Period, the Required Shares, and the Eligible Stockholder's agreement to provide, within five (5) business days after the record date for the annual meeting, written statements from the record holder and intermediaries verifying the Eligible Stockholder's continuous ownership of the Required Shares through the record date;
• a copy of the Schedule 14N that has been filed with the SEC as required by Rule 14a-18 under the Act;
• the information, representations and agreements and other documents that are required to be set forth in or included with a stockholder's notice of nomination given pursuant to Section 2.11 of the CGM Bylaws;
• the written consent of each Stockholder Nominee to being named in the proxy statement as a nominee and to serving as a director if elected;
• a representation that the Eligible Stockholder:
○ Acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control of Cboe, and does not presently have such intent;
○ has not nominated and will not nominate for election any individual as a director at the annual meeting, other than its Stockholder Nominee(s);
○ has not engaged and will not engage in, and has not and will not be a participant in another person's, “solicitation” within the meaning of Rule 14a-1(l) under the Act in support of the election of any individual as a director at the annual meeting, other than its Stockholder Nominee(s) or a nominee of the Board;
○ has not distributed and will not distribute to any stockholder of the Corporation any form of proxy for the annual meeting other than the form distributed by the Corporation;
○ has complied and will comply with all laws, rules and regulations applicable to solicitations and the use, if any, of soliciting material in connection with the annual meeting, and
○ has provided and will provide facts, statements and other information in all communications with Cboe and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;
• an undertaking that the Eligible Stockholder agrees to
○ assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder's communications with the stockholders of the Corporation or out of the information that the Eligible Stockholder provided to the Corporation;
○ indemnify and hold harmless the Corporation and each of its Directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its Directors, officers or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section 2.16 or any solicitation or other activity in connection therewith; and
○ file with the Securities and Exchange Commission any solicitation or other communication with the stockholders of the Corporation relating to the meeting at which its Stockholder Nominee(s) will be nominated, regardless of whether any such filing is required under Regulation 14A of the Act or whether any exemption from filing is available for such solicitation or other communication under Regulation 14A of the Act;
• in the case of a nomination by a group of stockholders that together is an Eligible Stockholder, the designation by all group members of one group member that is authorized to receive communications, notices and inquiries from the Corporation and to act on behalf of all members of the group with respect to all matters relating to the nomination under this Section 2.16 (including withdrawal of the nomination);
• in the case of a nomination by an Eligible Stockholder consisting of a group of stockholders in which two or more funds are intended to be treated as one stockholder for purposes of qualifying as an Eligible Stockholder, documentation reasonably satisfactory to the Corporation that demonstrates that the funds are part of the same Qualifying Fund Group; and
• a written representation and agreement by the Stockholder Nominee that such person:
○ Will act as a representative of all of the stockholders of the Corporation while serving as a director;
○ will provide facts, statements and other information in all communications with the Corporation and its stockholders that are or will be true and correct in all material respects (and shall not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading);
○ is not and will not become a party to (i) any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity other than the Corporation in connection with service or action as a director of the Corporation that has not been disclosed to the Corporation, (ii) any Voting Commitment that has not been disclosed to the Corporation or (iii) any Voting Commitment
○ will abide by and comply with the CGM Bylaws, the Certificate of Incorporation and applicable policies of the Corporation including all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation, as well as the applicable provisions of the rules and regulations of the Securities and Exchange Commission and any stock exchange applicable to the Corporation.
In proposing the informational requirements for the Eligible Stockholder, Cboe's goal is to gather sufficient information about the Eligible Stockholder for both itself and its stockholders. Among other things, this information is designed to help ensure that Cboe is able to comply with its disclosure and other requirements under applicable law and that Cboe, its Board and its stockholders are able to assess the proxy access nomination adequately.
Proposed Section 2.16(g) establishes additional information the Stockholder Nominee must provide. Particularly:
• The Stockholder Nominee(s) must submit all completed and signed questionnaires required of directors and officers of the Corporation;
• the Corporation may require any proposed Stockholder Nominee to furnish any information:
○ That may reasonably be requested by the Corporation to determine whether the Stockholder Nominee would be independent under Section 3.3 and otherwise qualifies as independent under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded;
○ that could be material to a reasonable stockholder's understanding of the independence, or lack thereof, of such Stockholder Nominee;
○ that would be required to satisfy the requirements for qualification of directors under applicable foreign regulations; or
○ (that may reasonably be requested by the Corporation to determine the eligibility of such Stockholder Nominee to be included in the Corporation's proxy materials pursuant to this Section 2.16 or to serve as a director of the Corporation; and
• the Corporation may require the Eligible Stockholder to furnish any other information that may reasonably be requested by the Corporation to verify the Eligible Stockholder's continuous Ownership of the Required Shares for the Minimum Holding Period and through the date of the annual meeting.
Like the informational requirements for an Eligible Stockholder, which are set forth above, the informational requirements for the Stockholder Nominee ensure that both Cboe and its stockholders will have sufficient information about the Stockholder Nominee. Among other things, this information will ensure that Cboe is able to comply with its disclosure and other requirements under applicable law and that Cboe, its Board and its stockholders are able to assess the proxy access nomination adequately.
Proposed Section 2.16(h) provides that an Eligible Stockholder may provide, at its option, to the Secretary, at the time the Notice of Proxy Access Nomination is provided, a written statement, not to exceed 500 words, in support of its Stockholder Nominee(s)' candidacy (a “Supporting Statement”). Only one Supporting Statement may be submitted by an Eligible Stockholder (including any group of stockholders together constituting an Eligible Stockholder) in support of its Stockholder Nominee(s). Notwithstanding anything to the contrary contained in Section 2.16, the Corporation may omit from its proxy materials any information or Supporting Statement (or portion thereof) that it, in good faith, believes is untrue in any material respect (or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading) or would violate any applicable law, rule or regulation. The Exchange notes proposed Section 2.16(h) allows Cboe to comply with Rule 14a-9 under the Act
Pursuant to proposed Section 2.16(i), each Eligible Stockholder or Stockholder Nominee must promptly notify Cboe's Corporate Secretary of any information or communications provided by the Eligible Stockholder or Stockholder Nominee, as the case may be, to Cboe or its stockholders that when provided was not, or thereafter ceases to be, true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading and of the information that is required to correct any such defect. An Eligible Stockholder shall also provide immediate notice to the Corporation if the Eligible Stockholder ceases to own any of the Required Shares prior to the date of the annual meeting. In addition, any person providing any information to the Corporation pursuant to Section 2.16(i) shall be required to update or supplement such information, if necessary, so that all such information shall be true and correct as of the (i) as of the record date for determining the stockholders entitled to receive notice of the meeting and (ii) as of the date that is ten (10) business days prior to the meeting (or any postponement, adjournment or recess thereof), and such update shall be received by the Secretary at the principal executive offices of the Corporation (A) not later than five (5) business days after the record date for determining the stockholders entitled to receive notice of such meeting (in the case of an update required to be made under clause (i)) and (B) not later than seven (7) business
This provision further makes clear that providing any such notification, update or supplement, shall not be deemed to cure any defect in any previously provided information or communications or limit the remedies available to the Corporation relating to such defect (including the right to omit a Stockholder Nominee from its proxy materials). This provision is intended to protect Cboe's stockholders by requiring an Eligible Stockholder or Stockholder Nominee to give Cboe notice of information previously provided that is materially untrue. Cboe may then decide what action to take with respect to such defect, which may include, as noted above, omitting the relevant Stockholder Nominee from its proxy materials.
Proposed Section 2.16(j) provides that Cboe shall not be required to include a Stockholder Nominee in its proxy materials for any meeting of stockholders under certain circumstances. In these situations, the proxy access nomination shall be disregarded and no vote on such Stockholder Nominee will occur, even if Cboe has received proxies in respect of the vote. These circumstances occur when the Stockholder Nominee:
• Would not be an independent director under Section 3.3, under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board in determining and disclosing independence of the Corporation's directors, in each case as determined by the Board in its sole discretion;
• would not meet the audit committee independence requirements under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded;
• if elected, intended to resign as a director of the Corporation prior to the end of the full term for which he or she is standing for election;
• is or has been subject to any statutory disqualification under Section 3(a)(39) of the Act;
• is or has been subject to disqualification under 17 CFR 1.63;
• if elected, would cause the Corporation to be in violation of these Bylaws, the Certificate of Incorporation, the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded, or any applicable law, rule or regulation;
• is or has been, within the past three years, an officer or director of a competitor, as defined for purposes of Section 8 of the Clayton Antitrust Act of 1914;
• is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past 10 years;
• is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended;
• has provided any information to the Corporation or its stockholders that was untrue in any material respect or that omitted to state a material fact necessary to make the statements made, in light of the circumstances in which they were made, not misleading; or
• breaches or fails, or the Eligible Stockholder breaches or fails, to comply with its obligations pursuant to the CGM Bylaws, including, but not limited to, Section 2.16 and any agreement, representation or undertaking required by Section 2.16.
Cboe believes these provisions will protect the Corporation and its stockholders by allowing it to exclude certain categories of objectionable Stockholder Nominees from the proxy statement.
Proposed Section 2.16(k) provides that notwithstanding anything to the contrary contained in the CGM Bylaws, if (i) a Stockholder Nominee and/or the applicable Eligible Stockholder breaches any of its agreements or representations or fails to comply with any of its obligations under this Section 2.16 or (ii) a Stockholder Nominee otherwise becomes ineligible for inclusion in the Corporation's proxy materials pursuant to this Section 2.16, or dies, becomes disabled or otherwise becomes ineligible or unavailable for election at the annual meeting, in each case as determined by the Board or the chairman of the meeting, (1) the Corporation may omit or, to the extent feasible, remove the information concerning such Stockholder Nominee and the related Supporting Statement from its proxy materials and/or otherwise communicate to its stockholders that such Stockholder Nominee will not be eligible for election at the annual meeting, (2) the Corporation shall not be required to include in its proxy materials any successor or replacement nominee proposed by the applicable Eligible Stockholder or any other Eligible Stockholder and (3) the chairman of the meeting shall declare such nomination to be invalid and such nomination shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Corporation. Cboe believes this provision protects the Corporation and its stockholders by providing the Board or the chairman of the stockholder meeting limited authority to disqualify a proxy access nominee when that nominee or the sponsoring stockholder(s) have breached an obligation under the proxy access provision.
Proposed Section 2.16(l) states that the following Stockholder Nominees who are included in the Corporation's proxy materials for a particular annual meeting of stockholders will be ineligible to be a Stockholder Nominee for the next two annual meetings: (i) Stockholder Nominee who withdraws from or becomes ineligible or unavailable for election at the annual meeting; or (ii) Stockholder Nominee who does not receive at least 25% of the votes cast in favor of such Stockholder Nominee's election. For the avoidance of doubt, Section 2.16(l) also clarifies that this provision shall not prevent any stockholder from nominating any person to the Board pursuant to Section 2.11 of the CGM Bylaws. Section 2.16(l) will save the Corporation and its stockholders the time and expense of analyzing and addressing subsequent proxy access nominations regarding individuals who were included in the proxy materials for a particular annual meeting but ultimately did not stand for election or receive a substantial amount of votes. After the next two annual meetings, these Stockholder Nominees would again be eligible for nomination through the proxy access provisions of the Bylaws.
Proposed Section 2.16(m) provides that notwithstanding the provisions of proposed Section 2.16, if the Eligible Stockholder providing notice (or a qualified representative of the Eligible Stockholder) does not appear in person (including virtually, in the case of a meeting held solely by means of remote communication) at the stockholder meeting to present the nomination of such Stockholder Nominee, such proposed nomination shall not be
In case there are matters involving a proxy access nomination that are open to interpretation, proposed Section 2.16(n) states that the Board (or any other person or body authorized by the Board) shall have exclusive power and authority to interpret the proxy access provisions of the Bylaws and make all determinations deemed necessary or advisable in connection with proposed Section 2.16 as to any person, facts or circumstances. In addition, all actions, interpretations and determinations of the Board (or any person or body authorized by the Board) with respect to the proxy access provisions shall be final, conclusive and binding on the Corporation, the stockholders and all other parties. While Cboe has attempted to implement a clear, detailed and thorough proxy access provision, there may be matters about future proxy access nominations that are open to interpretation. In these cases, Cboe believes it is reasonable and necessary to designate an arbiter to make final decisions on these points and that the Board is best-suited to act as that arbiter.
For the avoidance of doubt, proposed Section 2.16(o) states that the proxy access provisions outlined in proposed Section 2.16 shall be the exclusive means for stockholders to include nominees in the Corporation's proxy materials. Stockholders may, of course, continue to propose nominees through other means, but the Board will have final authority to determine whether to include those nominees in the Corporation's proxy materials.
Cboe also proposes to make conforming changes to Sections 2.10 and 2.11 to provide clarifications and prevent confusion. First, the Exchange proposes to add a reference to Section 2.11 and proposed Section 2.16 to clarify the exact bylaw provisions relating to stockholder nominees. Next, the Exchange proposes to amend Section 2.11. Section 2.11 currently describes the business that may be properly brought before an annual meeting of stockholders and the methods by which nominations of persons for election to the Board may be made at an annual meeting of stockholders. Cboe proposes to add proxy access nominations (
The Exchange believes the proposed rule change is consistent with 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 light of a shareholder proposal received from a stockholder, Cboe is proposing changes to its Bylaws to implement proxy access. The Exchange believes that this filing furthers the objectives of Section 6(b)(5) of the Act because the proposed rule change would be consistent with and facilitate a governance and regulatory structure that is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to, and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. Particularly, the Exchange believes that, by permitting an Eligible Stockholder of Cboe that meets the stated requirements to nominate directors and have its nominees included in Cboe's annual meeting proxy statement, the proposed rule change strengthens the corporate governance of the Exchange's ultimate parent company, which is beneficial to both investors and the public interest.
Additionally, the procedural requirements are designed to help protect investors by stating clearly and explicitly the procedures stockholders must follow in order to submit a proper proxy access nomination. The informational requirements are designed to enhance investor protection by helping to ensure among other things, that the Corporation and its stockholders have full and accurate information about nominating stockholders and their nominees and that such stockholders and nominees comply with applicable laws, regulations and other requirements. Moreover, as noted above, proxy access has become commonplace among companies and the Exchange believes its core provisions are common among companies that have adopted proxy access, including the parent companies of other exchanges that have adopted similar proxy access provisions.
Finally, the remaining changes to existing provisions of the CGM Bylaws are clarifying in nature, and they enhance investor protection and the public interest by preventing confusion with respect to the operation of the Bylaw provisions.
Because the proposed rule change relates to the governance of the Corporation and not to the operations of the Exchange, the Exchange does not believe that the proposed rule change
The Exchange neither solicited nor received comments on the proposed rule change.
Within 45 days of the date of publication of this notice in the
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.
On March 1, 2021, Cboe BZX Exchange, Inc. (“BZX”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
Section 19(b)(2) of the Act
The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the comments received. Accordingly, pursuant to Section 19(b)(2) of the Act,
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act entitled the Payment, Clearing, and Settlement Supervision Act of 2010 (“Clearing Supervision Act”)
NSCC is filing this advance notice in order to (1) renew its 364-day committed revolving line-of-credit with a syndicate of commercial lenders (“Credit Facility”), as described below (hereinafter, “Current Renewal”), and (2) enter into future annual renewals of the Credit Facility on substantially similar terms and conditions as the Current Renewal without needing to file an advance notice, also described below (hereinafter, “Future Renewals”).
In its filing with the Commission, the clearing agency included statements concerning the purpose of and basis for the Advance Notice and discussed any comments it received on the Advance Notice. The text of these statements may be examined at the places specified in Item IV below. The clearing agency has prepared summaries, set forth in sections A and B below, of the most significant aspects of such statements.
NSCC has not solicited or received any written comments to this advance notice. NSCC will notify the Commission of any written comments are received by NSCC.
NSCC is filing this advance notice in order to enter into (1) the Current Renewal and (2) Future Renewals, as described below.
The Credit Facility is renewed annually, and from 2013 through 2017, NSCC and DTC each filed an advance notice each year with the Commission, pursuant to Section 806(e)(1) of the Clearing Supervision Act
In 2017, NSCC and DTC proposed and the Commission did not object to allowing NSCC and DTC to renew the Credit Facility, subject to specific conditions (“Evergreen Provisions”), without filing advance notices with the Commission.
Some of the Evergreen Provisions are specific to NSCC, some to DTC, and some to both.
For the Current Renewal, NSCC and DTC are seeking an aggregate commitment amount of no more than $12 billion for the entire Credit Facility, of which $1.9 billion would be committed to DTC as borrower and any remainder to NSCC as borrower, as provided in the Existing Agreement. Although NSCC and DTC are seeking an aggregate commitment amount of no more than $12 billion, the actual, final amount will depend on a number of factors, including the total commitment amount received from lenders (
NSCC and DTC would continue not to be jointly and severally liable and each lender would have a ratable commitment to each borrower. DTC and NSCC would continue to provide separate collateral to secure their respective borrowings.
As has been standard practice for the Credit Facility renewals, in connection with all Future Renewals, changes would not be made to (a) the financial institution acting as the primary administrative agent; or (b) the commitment period, which would continue to be 364 days.
However, as was established with the 2017 Filing,
So long as NSCC does not make changes to the terms described in items (a) and (b) above in any Future Renewal, and so long as any Future Renewal adheres to the conditions described in items (1) through (4) above (together with items (a) and (b) above, “Proposed Evergreen Provisions”), NSCC would consider such Future Renewal as being on substantially the same terms and conditions as the Current Renewal, such that NSCC proposes that it would not need to file an advance notice pursuant to Section 806(e)(1) of the Clearing Supervision Act
In the event that NSCC would have a Future Renewal that would not satisfy the Proposed Evergreen Provisions and, thus, would not be on terms and conditions that are substantially similar to the Current Renewal, such renewal would be subject to an advance notice filing by NSCC.
The Renewal Agreement and its substantially similar predecessor agreements have been in place since the introduction of same day funds settlement at NSCC. The Current Renewal and Future Renewals subject to the Proposed Evergreen Provisions (“Evergreen Renewals”) would continue to promote the reduction of liquidity risk to NSCC, its Members, and the securities market in general because they would help NSCC maintain sufficient liquidity resources to timely meet its settlement obligations with a high degree of confidence.
NSCC requires same day liquidity resources to cover the failure-to-settle of its Member, or affiliated family of Members, with the largest aggregate liquidity exposure. If a Member defaults on its end-of-day net settlement obligation, NSCC may borrow under the Credit Facility to enable it, if necessary, to fund settlement among non-defaulting Members, including
In addition to the Credit Facility and the Clearing Fund, NSCC has diversified its liquidity resources through the issuance of commercial paper and extendable notes, as well as certain term debt, as noted above.
Because the Renewal Agreement would preserve substantially similar terms and conditions to the Existing Agreement, and Evergreen Renewals would preserve substantially similar terms and conditions to the Renewal Agreement, NSCC believes that the Current Renewal and Evergreen Renewals would not otherwise affect or alter the management of risk at NSCC.
The objectives and principles of Section 805(b) of the Clearing Supervision Act are to promote of robust risk management, promote safety and soundness, reduce systemic risks, and support the stability of the broader financial system.
NSCC also believes that the changes proposed in this advance notice are consistent with the requirements of Rule 17Ad-22(e)(7)(i) and (ii) under the Exchange Act.
Rule 17Ad-22(e)(7)(i) requires a covered clearing agency, of which NSCC is one,
As described above, the Current Renewal would continue to provide NSCC with a readily available liquidity resource, enabling NSCC to continue to meet its respective obligations in a timely fashion in the event of a Member default, thereby helping to contain losses and liquidity pressures from that default. Additionally, because the Proposed Evergreen Provisions would
Rule 17Ad-22(e)(7)(ii) under the Exchange Act requires NSCC to “establish, implement, maintain and enforce written policies and procedures reasonably designed to . . . [e]ffectively measure, monitor, and manage liquidity risk that arises in or is borne by the covered clearing agency, including measuring, monitoring, and managing its settlement and funding flows on an ongoing and timely basis, and its use of intraday liquidity by, at a minimum . . . [h]olding qualifying liquid resources sufficient to meet the minimum liquidity resource requirement under [Rule 17Ad-22(e)(7)(i) described above] in each relevant currency for which the covered clearing agency has payment obligations owed to clearing members.”
As described above, the Current Renewal would permit NSCC to enter into a committed line of credit that is designed to help ensure that NSCC has sufficient, readily-available qualifying liquid resources to meet the cash settlement obligations of its largest family of affiliated Members. Similarly, because the Proposed Evergreen Provisions would ensure that any Future Renewals would be substantially similar to the Current Renewal, such renewals also would permit NSCC to enter into a committed line of credit that is designed to help ensure that NSCC has sufficient, readily-available qualifying liquid resources to meet the cash settlement obligations of its largest family of affiliated Members. Accordingly, NSCC believes that the changes proposed in this advance notice are consistent with Rule 17Ad-22(e)(7)(ii).
Because the Term Sheet was not finalized until approximately six weeks prior to the expected effective date of the Current Renewal (which is standard practice), NSCC respectfully requests, as it has done previously,
The proposed change may be implemented if the Commission does not object to the proposed change within 60 days of the later of (i) the date that the proposed change was filed with the Commission or (ii) the date that any additional information requested by the Commission is received. The clearing agency shall not implement the proposed change if the Commission has any objection to the proposed change.
The Commission may extend the period for review by an additional 60 days if the proposed change raises novel or complex issues, subject to the Commission providing the clearing agency with prompt written notice of the extension. A proposed change may be implemented in less than 60 days from the date the advance notice is filed, or the date further information requested by the Commission is received, if the Commission notifies the clearing agency in writing that it does not object to the proposed change and authorizes the clearing agency to implement the proposed change on an earlier date, subject to any conditions imposed by the Commission.
The clearing agency shall post notice on its website of proposed changes that are implemented.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the Advance Notice is consistent with the Clearing Supervision 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.
Although the Clearing Supervision Act does not specify a standard of review for an advance notice, its stated purpose is instructive: to mitigate systemic risk in the financial system
• Promote robust risk management;
• promote safety and soundness;
• reduce systemic risks; and
• support the stability of the broader financial system.
The Commission has adopted risk management standards under Section 805(a)(2) of the Act
As discussed below, the Commission believes that the changes proposed in the Advance Notice are consistent with Section 805(b) of the Act because they (i) promote robust risk management; (ii) are consistent with promoting safety and soundness; and (iii) are consistent with reducing systemic risks and promoting the stability of the broader financial system.
The Commission believes that the changes proposed in the Advance Notice are consistent with promoting robust risk management, in particular management of liquidity risk presented by NSCC. Renewing the Credit Facility would allow NSCC to continue to maintain it as a liquidity resource that it may use to resolve a member default. NSCC proposes to renew the Credit Facility at a $10.1 billion aggregate commitment, which is an amount less than the $12.1 billion aggregate commitment amount authorized in 2017, and outside the range that the Commission approved in the 2017 Notice of No Objection. However, NSCC has diversified and expanded its liquidity resources since 2017. Specifically, NSCC has expanded the amount that is available through its commercial paper program to $10 billion, and it has obtained authorization to issue certain term debt.
Moreover, allowing NSCC annually to renew the Credit Facility under certain specified circumstances without an additional advance notice, subject to the proposed Evergreen Provisions, would provide NSCC and market participants with greater certainty regarding a continuing source of committed liquidity to meet its settlement obligations and thus mitigate NSCC' liquidity risk. Further, because the proposed Evergreen Provisions would continue to ensure that any such annual renewals would be substantially similar to the currently proposed Credit Facility, the Commission believes that any such renewals would promote robust risk management by continuing to available liquidity resources that NSCC may use to resolve a member default in the same manner as the currently proposed Credit Facility. As such, the Commission believes that the proposal would promote robust risk management practices at NSCC, consistent with Section 805(b) of the Act.
The Commission also believes that the changes proposed in the Advance Notice are consistent with promoting safety and soundness. As described above, the currently proposed Credit Facility would continue to provide NSCC with a key liquidity resource in the event of a member default. This liquidity would promote safety and soundness for members because it would provide NSCC with a readily available liquidity resource that would enable it to continue to meet its respective obligations in a timely fashion in the event of a member default, thereby helping to contain losses and liquidity pressures from that default. Because the Proposed Evergreen Provisions would ensure that any annual renewals implemented without filing an advance notice would be substantially similar to the currently proposed Credit Facility, any such annual renewals would promote safety and soundness for the same reasons. As such, the Commission believes it is consistent with promoting safety and soundness as contemplated in Section 805(b) of the Act.
In addition, the Commission believes that the changes proposed in the Advance Notice are consistent with reducing systemic risks and promoting the stability of the broader financial system. As mentioned above, allowing NSCC to enter into the currently
The Commission believes the changes proposed in the Advance Notice are consistent with Rules 17Ad-22(e)(7)(i) and (ii), each promulgated under the Exchange Act,
Rule 17Ad-22(e)(7)(i) under the Exchange Act requires that a covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to maintain sufficient liquid resources at the minimum in all relevant currencies to effect same-day and, where appropriate, intraday and multiday settlement of payment obligations with a high degree of confidence under a wide range of foreseeable stress scenarios that includes, but is not limited to, the default of the participant family that would generate the largest aggregate payment obligation for the covered clearing agency in extreme but plausible market conditions.
As described above, the currently proposed Credit Facility renewal would provide NSCC with a readily available liquidity resource that would enable NSCC to continue to meet its obligations in a timely fashion in the event of a member default, thereby helping to contain losses and liquidity pressures from that default. Additionally, because the proposed Evergreen Provisions would ensure that any annual renewals would be substantially similar to the currently proposed Credit Facility, such future renewals would also continue to provide NSCC with a readily available liquidity resource that would enable it to continue to meet its respective obligations in a timely fashion in the event of a member default, thereby helping to contain losses and liquidity pressures from that default. Moreover, allowing NSCC annually to renew the Credit Facility pursuant to the proposed Evergreen Provisions without filing an additional advance notice would reduce the risk of gaps in liquidity coverage and better allow NSCC to continually maintain sufficient liquidity resources.
In addition, the currently proposed renewal of the Credit Facility would permit NSCC to maintain a single Credit Facility designed to help ensure that NSCC has sufficient, readily-available qualifying liquid resources to meet the cash settlement obligations of its largest family of affiliated members. Similarly, because the proposed Evergreen Provisions would ensure that any annual renewals would be substantially similar to the currently proposed renewal of the Credit Facility, such renewals also would permit NSCC to maintain a single Credit Facility designed to help ensure that NSCC has sufficient, readily-available qualifying liquid resources to meet the cash settlement obligations of their largest family of affiliated members. Therefore, the Commission believes that NSCC's proposal would support its ability to hold qualifying liquid resources sufficient to meet the minimum liquidity resource requirement under Rule 17Ad-22(e)(7)(i),
Accordingly, the Commission believes that the current renewal would be consistent with Rule 17Ad-22(e)(7)(i) and (ii) under the Exchange Act.
By the Commission.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act” or “Exchange Act”)
The Exchange proposes to amend Interpretation and Policy .13 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) to Exchange Rule 1900, Registration Requirements, to extend the expiration date of the temporary amendment set forth in SR-EMERALD-2020-21 from April 30, 2021 to June 30, 2021. The Exchange does not anticipate providing any further extensions to the temporary amendment identified in this proposed rule change beyond June 30, 2021.
The text of the proposed rule change is available on the Exchange's website at
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 amend Interpretation and Policy .13 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) to Exchange Rule 1900, Registration Requirements, to extend the expiration date of the temporary amendment set forth in SR-EMERALD-2020-21 from April 30, 2021 to June 30, 2021. The proposed rule change would extend the 120-day period that certain individuals can function as principals without having successfully passed an appropriate qualification examination through June 30, 2021,
In response to the COVID-19 global pandemic, last year FINRA began providing temporary relief by way of frequently asked questions (“FAQs”)
FINRA published the first FAQ on March 20, 2020, providing that individuals who were designated to function as principals under FINRA Rule 1210.04
Thereafter, on December 9, 2020, FINRA filed with the Commission a proposed rule change for immediate effectiveness to extend the limited period for registered persons to function as a principal through April 30, 2021.
The Exchange continues to closely monitor the impact of the COVID-19 pandemic on Members,
While there are signs of improvement, the COVID-19 conditions necessitating the temporary relief persist and the Exchange has determined that there is a continued need for this temporary relief beyond April 30, 2021. Although Prometric has resumed testing in many of its U.S. test centers, Prometric's safety practices mean that currently not all test centers are open, some of the open test centers are at limited capacity, and some open test centers are delivering only certain examinations that have been deemed essential by the local government.
Although the COVID-19 conditions necessitating the temporary relief persist, the Exchange believes that an extension of the relief is necessary only until June 30, 2021, because FINRA recently expanded the availability of online examinations. Prior to this expansion, the ongoing effects of the pandemic made it impracticable for Members to ensure that the individuals who they had designated to function in a principal capacity, as set forth in Exchange Rule 1900, Interpretation and Policy .04, could successfully sit for and pass an appropriate qualification examination within the 120-calendar day period required under the rules.
The Exchange believes that this proposed continued extension of time is tailored to address the needs and constraints on a Member's operations during the COVID-19 pandemic, without significantly compromising critical investor protection. The proposed extension of time will help to minimize the impact of COVID-19 on Members by providing continued flexibility so that Members can ensure that principal positions remain filled. The potential risks from the proposed extension of the 120-day period are mitigated by a Member's continued requirement to supervise the activities of these designated individuals and ensure compliance with federal securities laws and regulations, as well as Exchange and FINRA rules.
The Exchange has filed the proposed rule change for immediate effectiveness and has requested that the Commission waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing, so the Exchange can implement the proposed rule change immediately.
The Exchange believes that its proposed rule change is consistent with Section 6(b) of the Act
The proposed rule change is intended to minimize the impact of COVID-19 on Member operations by further extending the 120-day period certain individuals may function as a principal without having successfully passed an appropriate qualification examination under Exchange Rule 1900, Interpretation and Policy .04, until June 30, 2021. The proposed rule change does not relieve Members from maintaining, under the circumstances, a reasonably designed system to supervise the activities of their associated persons to achieve compliance with applicable securities laws and regulations, and with applicable Exchange and FINRA rules that directly serve investor protection. In a time when faced with unique challenges resulting from the COVID-19 pandemic, the Exchange believes that the proposed rule change is a sensible accommodation that will continue to afford Members the ability to ensure that critical positions are filled and client services maintained, while continuing to serve and promote the protection of investors and the public interest in this unique environment.
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 proposed rule change is intended to provide temporary relief given the impacts of the COVID-19 pandemic crisis and to also maintain consistency with the rules of other self-regulatory organizations (“SROs”) with respect to the registration requirements applicable to Members and their registered personnel. In that regard, the Exchange believes that any burden on competition would be clearly outweighed by providing Members with temporary
Written comments were neither solicited nor received.
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) normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative immediately upon filing. As noted above, the Exchange stated that the conditions necessitating the temporary relief continue to exist and the proposed extension of time will help minimize the impact of the COVID-19 outbreak on Members' operations by allowing them to keep principal positions filled and minimizing disruptions to client services and other critical responsibilities. Despite signs of improvement, the Exchange further stated that the ongoing extenuating circumstances of the COVID-19 pandemic make it impractical to ensure that individuals designated to act in a principal capacity are able to take and pass the appropriate qualification examination during the 120-calendar day period required under the rules.
The Exchange observed that, following a nationwide closure of all test centers earlier in the year, some test centers have re-opened, but are operating at limited capacity or are only delivering certain examinations that have been deemed essential by the local government.
For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest.
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 EDGA Exchange, Inc. (the “Exchange” or “EDGA”) is filing with the Securities and Exchange Commission (the “Commission”) a proposed rule change with respect to amendments to the Sixth Amended and Restated Bylaws (the “CGM Bylaws”) of its parent corporation, Cboe Global Markets, Inc. (“Cboe” or “Corporation”). 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.
Cboe has received a stockholder proposal submitted pursuant to Rule 14a-8 under the Act
In developing its proposal, Cboe generally tried to balance the relative weight of arguments for and against proxy access provisions. On the one hand, Cboe recognizes the significance of this issue to some investors, who see proxy access as an important accountability mechanism that allows them to participate in board elections through the nomination of stockholder candidates that are presented in a company's proxy statement. On the other hand, Cboe's proposed proxy access provision includes certain procedural requirements that are designed to help ensure, among other things, that Cboe and its stockholders will have full and accurate information about nominating stockholders and their nominees and that such stockholders and nominees will comply with applicable laws, regulations and other requirements. Additionally, the Exchange notes the proposed terms are common among companies that have adopted proxy access. The Exchange also notes that the parent companies of other exchanges have adopted substantively similar proxy access provisions and the Exchange does not believe such provisions are materially different than the Exchange's proposal.
The proposed rule change would add new Section 2.16 to the CGM Bylaws. Section 2.16 would permit a stockholder, or group of up to 20 stockholders, to nominate director nominees for the Cboe Board, so long as the stockholder(s) have owned at least three percent of Cboe's outstanding shares of capital stock continuously for at least three years. The director nominees would be included in Cboe's annual meeting proxy materials. The proposed provision would limit the number of proposed director nominees to the greater of (i) two or (ii) 20% of the number of Cboe directors in office (rounded down to the nearest whole number, but no less than two) provided that the stockholder(s) and nominee(s) satisfy the other conditions specified in the CGM Bylaws as described further below.
The Exchange first proposes to amend the CGM Bylaws to, as set forth in the first sentence of proposed Section 2.16(a), require the Corporation to include in its proxy statement, its form proxy and any ballot distributed at the stockholder meeting, the name of, and
Proposed Section 2.16(b) will provide that in order to utilize this provision, the Eligible Stockholder must expressly request at the time of providing a required notice to the Corporation of the proxy access nomination (the “Notice of Proxy Access Nomination”) to have its nominee included in the Corporation's proxy materials. Proposed Section 2.16(b) also establishes the deadline for a timely Notice of Proxy Access Nomination. Specifically, such a notice must be delivered to the Cboe's Secretary at the principal executive offices of the Corporation not earlier than the open of business on the one hundred fiftieth (150th) day and not later than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the date that Cboe first distributed its proxy statement to stockholders for the previous year's annual meeting of stockholders provided, however, that in the event the annual meeting is more than thirty (30) days before or after the anniversary date of the prior year's annual meeting, or if no annual meeting was held in the preceding year, to be timely, the Notice of Proxy Access Nomination must be received at the principal executive offices of the Corporation no earlier than one hundred fifty (150) days before such annual meeting and no later than the later of one hundred twenty (120) days before such annual meeting or the tenth (10th) day following the day on which public announcement (as defined in Section 2.11) of the date of such meeting is first made by the Corporation. Further Section 2.16 will provide that in no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period (or extend any time period) for the giving of a Notice of Proxy Access Nomination as described above. Cboe believes this notice period will provide stockholders an adequate window to submit nominees via proxy access, while also providing the Corporation adequate time to diligence a proxy access nominee before including them in the proxy statement for the next annual meeting of stockholders.
Proposed Section 2.16(c) specifies that the maximum number (“the Permitted Number”) of Stockholder Nominees nominated by all Eligible Stockholders that will be included in Cboe's proxy materials with respect to an annual meeting of stockholders shall not exceed the greater of two or 20% of the total number of directors in office (rounded down to the nearest whole number) as of the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with the proxy access provision of the Bylaws (the “Final Proxy Access Nomination Date”). In the event that one or more vacancies for any reason occurs after the Final Proxy Access Nomination Date but before the date of the annual meeting and the Board resolves to reduce the size of the Board in connection therewith, the Permitted Number of Stockholder Nominees included in Cboe's proxy materials shall be calculated based on the number of directors in office as so reduced. In addition, the Permitted Number shall be reduced by (i) the number of individuals who will be included in the Corporation's proxy materials as director nominees recommended by the Board pursuant to an agreement, arrangement or other understanding with a stockholder or group of stockholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of stock from the Corporation by such stockholder or group of stockholders) and/or (ii) the number of directors in office as of the Final Proxy Access Nomination Date who were included in the Corporation's proxy materials as Stockholder Nominees for any of the two preceding annual meetings of stockholders (including any persons counted as Stockholder Nominees pursuant to the immediately succeeding sentence) and whose reelection at the upcoming annual meeting is being recommended by the Board. Any individual nominated by an Eligible Stockholder for inclusion in the proxy materials pursuant to the proxy access provision of the CGM Bylaws whom the Board decides to nominate as a nominee of the Board, and any individual nominated by an Eligible Stockholder for inclusion in the proxy materials pursuant to the proxy access provision but whose nomination is subsequently withdrawn, shall be counted as one of the Stockholder Nominees for purposes of determining when the Permitted Number of Stockholder Nominees has been reached. Any Eligible Stockholder submitting more than one Stockholder Nominee for inclusion in the proxy materials shall rank such Stockholder Nominees based on the order that the Eligible Stockholder desires such Stockholder Nominees to be selected for inclusion in the proxy statement in the event that the total number of Stockholder Nominees submitted by Eligible Stockholders pursuant to the proxy access provision exceeds the Permitted Number of nominees allowed. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to Section 2.16 exceeds the Permitted Number of nominees allowed, the highest ranking Stockholder Nominee who meets the requirements of the proxy access provision of the Bylaws from each Eligible Stockholder will be selected for inclusion in the proxy materials until the Permitted Number is reached, going in order of the amount (largest to smallest) of shares of Cboe's outstanding capital stock each Eligible Stockholder disclosed as owned in its respective Notice of Proxy Access Nomination submitted to Cboe. If the Permitted Number is not reached after the highest ranking Stockholder Nominee who meets the requirements of the proxy access provision of the Bylaws from each Eligible Stockholder has been selected, then the next highest ranking Stockholder Nominee who meets the requirements of Section 2.16 from each Eligible Stockholder will be
Proposed Section 2.16(d) defines who may qualify as an “Eligible Stockholder”. Particularly, an Eligible Stockholder is a stockholder or group of no more than 20 stockholders
Proposed Section 2.16(e) clarifies, for the avoidance of doubt, how “ownership” will be defined for purposes of meeting the ownership requirements of the Required Shares. Specifically, an Eligible Stockholder shall be deemed to “own” only those outstanding shares of Cboe's capital stock as to which the stockholder possesses both: (i) The full voting and investment rights pertaining to the shares; and (ii) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (i) and (ii) shall not include any shares: That are (1) sold by such stockholder or any of its affiliates in any transaction that has not been settled or closed; (2) borrowed by such stockholder or any of its affiliates for any purposes or purchased by such stockholder or any of its affiliates pursuant to an agreement to resell; or (3) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar instrument or agreement entered into by such stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of Cboe's outstanding capital stock, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of: (A) Reducing in any manner, to any extent or at any time in the future, such stockholder's or its affiliates' full right to vote or direct the voting of any such shares; and/or (B) hedging, offsetting or altering to any degree any gain or loss realized or realizable from maintaining the full economic ownership of such shares by such stockholder or its affiliates.
Further, a stockholder shall “own” shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder's ownership of shares shall be deemed to continue during any period in which (i) the stockholder has loaned such shares provided that the stockholder has the power to recall such loaned shares on five (5) business days' notice and includes in the Notice of Proxy Access Nomination an agreement that it will (1) recall such loaned shares upon being notified that any of its Stockholder Nominees will be included in the Corporation's proxy materials and (2) will hold such shares through the date of the annual meeting or (ii) the stockholder has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the stockholder. Section 2.16(e) also clarifies that the terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of Cboe's capital stock are “owned” for these purposes shall be determined by the Board. For purposes of Section 2.16, the term “affiliate” or “affiliates” shall have the meaning ascribed thereto under the rules and regulations of the Act.
Proposed Section 2.16(f) sets forth the information that an Eligible Stockholder must provide to Cboe's Corporate Secretary in writing within the deadline discussed above in order to make a proxy access nomination. This information includes:
• A statement by the Eligible Stockholder (1) setting forth and certifying as to the number of shares it owns and has owned continuously for the Minimum Holding Period and (2) agreeing to continue to own the Required Shares through the date of the annual meeting;
• one or more written statements from the record holder of the Required Shares (and from each intermediary through which the Required Shares are or have been held during the Minimum Holding Period) verifying that, as of a date within seven calendar days prior to the date the Notice of Proxy Access Nomination is delivered to Cboe's Secretary at the principal executive offices of the Corporation, the Eligible Stockholder owns, and has owned continuously for the Minimum Holding Period, the Required Shares, and the Eligible Stockholder's agreement to provide, within five (5) business days after the record date for the annual meeting, written statements from the record holder and intermediaries verifying the Eligible Stockholder's continuous ownership of the Required Shares through the record date;
• a copy of the Schedule 14N that has been filed with the SEC as required by Rule 14a-18 under the Act;
• the information, representations and agreements and other documents that are required to be set forth in or included with a stockholder's notice of nomination given pursuant to Section 2.11 of the CGM Bylaws;
• the written consent of each Stockholder Nominee to being named in the proxy statement as a nominee and to serving as a director if elected;
• a representation that the Eligible Stockholder:
○ Acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control of Cboe, and does not presently have such intent;
○ has not nominated and will not nominate for election any individual as a director at the annual meeting, other than its Stockholder Nominee(s);
○ has not engaged and will not engage in, and has not and will not be a participant in another person's, “solicitation” within the meaning of Rule 14a-1(l) under the Act in support of the election of any individual as a director at the annual meeting, other than its Stockholder Nominee(s) or a nominee of the Board;
○ has not distributed and will not distribute to any stockholder of the Corporation any form of proxy for the annual meeting other than the form distributed by the Corporation;
○ has complied and will comply with all laws, rules and regulations applicable to solicitations and the use, if any, of soliciting material in connection with the annual meeting, and
○ has provided and will provide facts, statements and other information in all communications with Cboe and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;
• an undertaking that the Eligible Stockholder agrees to
○ assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder's communications with the stockholders of the Corporation or out of the information that the Eligible Stockholder provided to the Corporation;
○ indemnify and hold harmless the Corporation and each of its Directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its Directors, officers or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section 2.16 or any solicitation or other activity in connection therewith; and
○ file with the Securities and Exchange Commission any solicitation or other communication with the stockholders of the Corporation relating to the meeting at which its Stockholder Nominee(s) will be nominated, regardless of whether any such filing is required under Regulation 14A of the Act or whether any exemption from filing is available for such solicitation or other communication under Regulation 14A of the Act;
• in the case of a nomination by a group of stockholders that together is an Eligible Stockholder, the designation by all group members of one group member that is authorized to receive communications, notices and inquiries from the Corporation and to act on behalf of all members of the group with respect to all matters relating to the nomination under this Section 2.16 (including withdrawal of the nomination);
• in the case of a nomination by an Eligible Stockholder consisting of a group of stockholders in which two or more funds are intended to be treated as one stockholder for purposes of qualifying as an Eligible Stockholder, documentation reasonably satisfactory to the Corporation that demonstrates that the funds are part of the same Qualifying Fund Group; and
• a written representation and agreement by the Stockholder Nominee that such person:
○ Will act as a representative of all of the stockholders of the Corporation while serving as a director;
○ will provide facts, statements and other information in all communications with the Corporation and its stockholders that are or will be true and correct in all material respects (and shall not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading);
○ is not and will not become a party to (i) any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity other than the Corporation in connection with service or action as a director of the Corporation that has not been disclosed to the Corporation, (ii) any Voting Commitment that has not been disclosed to the Corporation or (iii) any Voting Commitment
○ will abide by and comply with the CGM Bylaws, the Certificate of Incorporation and applicable policies of the Corporation including all applicable publicly disclosed corporate governance, conflict of interest,
In proposing the informational requirements for the Eligible Stockholder, Cboe's goal is to gather sufficient information about the Eligible Stockholder for both itself and its stockholders. Among other things, this information is designed to help ensure that Cboe is able to comply with its disclosure and other requirements under applicable law and that Cboe, its Board and its stockholders are able to assess the proxy access nomination adequately.
Proposed Section 2.16(g) establishes additional information the Stockholder Nominee must provide. Particularly:
• The Stockholder Nominee(s) must submit all completed and signed questionnaires required of directors and officers of the Corporation;
• the Corporation may require any proposed Stockholder Nominee to furnish any information:
○ That may reasonably be requested by the Corporation to determine whether the Stockholder Nominee would be independent under Section 3.3 and otherwise qualifies as independent under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded;
○ that could be material to a reasonable stockholder's understanding of the independence, or lack thereof, of such Stockholder Nominee;
○ that would be required to satisfy the requirements for qualification of directors under applicable foreign regulations; or
○ (that may reasonably be requested by the Corporation to determine the eligibility of such Stockholder Nominee to be included in the Corporation's proxy materials pursuant to this Section 2.16 or to serve as a director of the Corporation; and
• the Corporation may require the Eligible Stockholder to furnish any other information that may reasonably be requested by the Corporation to verify the Eligible Stockholder's continuous Ownership of the Required Shares for the Minimum Holding Period and through the date of the annual meeting.
Like the informational requirements for an Eligible Stockholder, which are set forth above, the informational requirements for the Stockholder Nominee ensure that both Cboe and its stockholders will have sufficient information about the Stockholder Nominee. Among other things, this information will ensure that Cboe is able to comply with its disclosure and other requirements under applicable law and that Cboe, its Board and its stockholders are able to assess the proxy access nomination adequately.
Proposed Section 2.16(h) provides that an Eligible Stockholder may provide, at its option, to the Secretary, at the time the Notice of Proxy Access Nomination is provided, a written statement, not to exceed 500 words, in support of its Stockholder Nominee(s)' candidacy (a “Supporting Statement”). Only one Supporting Statement may be submitted by an Eligible Stockholder (including any group of stockholders together constituting an Eligible Stockholder) in support of its Stockholder Nominee(s). Notwithstanding anything to the contrary contained in Section 2.16, the Corporation may omit from its proxy materials any information or Supporting Statement (or portion thereof) that it, in good faith, believes is untrue in any material respect (or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading) or would violate any applicable law, rule or regulation. The Exchange notes proposed Section 2.16(h) allows Cboe to comply with Rule 14a-9 under the Act
Pursuant to proposed Section 2.16(i), each Eligible Stockholder or Stockholder Nominee must promptly notify Cboe's Corporate Secretary of any information or communications provided by the Eligible Stockholder or Stockholder Nominee, as the case may be, to Cboe or its stockholders that when provided was not, or thereafter ceases to be, true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading and of the information that is required to correct any such defect. An Eligible Stockholder shall also provide immediate notice to the Corporation if the Eligible Stockholder ceases to own any of the Required Shares prior to the date of the annual meeting. In addition, any person providing any information to the Corporation pursuant to Section 2.16(i) shall be required to update or supplement such information, if necessary, so that all such information shall be true and correct as of the (i) as of the record date for determining the stockholders entitled to receive notice of the meeting and (ii) as of the date that is ten (10) business days prior to the meeting (or any postponement, adjournment or recess thereof), and such update shall be received by the Secretary at the principal executive offices of the Corporation (A) not later than five (5) business days after the record date for determining the stockholders entitled to receive notice of such meeting (in the case of an update required to be made under clause (i)) and (B) not later than seven (7) business days prior to the date for the meeting, if practicable, or, if not practicable, on the first practicable date prior to the meeting or any adjournment, recess or postponement thereof (in the case of an update required to be made pursuant to clause (ii)).
This provision further makes clear that providing any such notification, update or supplement, shall not be deemed to cure any defect in any previously provided information or communications or limit the remedies available to the Corporation relating to such defect (including the right to omit a Stockholder Nominee from its proxy materials). This provision is intended to protect Cboe's stockholders by requiring an Eligible Stockholder or Stockholder Nominee to give Cboe notice of information previously provided that is materially untrue. Cboe may then decide what action to take with respect to such defect, which may include, as noted above, omitting the relevant Stockholder Nominee from its proxy materials.
Proposed Section 2.16(j) provides that Cboe shall not be required to include a Stockholder Nominee in its proxy materials for any meeting of stockholders under certain circumstances. In these situations, the proxy access nomination shall be disregarded and no vote on such Stockholder Nominee will occur, even if Cboe has received proxies in respect of the vote. These circumstances occur when the Stockholder Nominee:
• Would not be an independent director under Section 3.3, under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board in determining and disclosing independence of the Corporation's directors, in each case as determined by the Board in its sole discretion;
• would not meet the audit committee independence requirements under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded;
• if elected, intended to resign as a director of the Corporation prior to the end of the full term for which he or she is standing for election;
• is or has been subject to any statutory disqualification under Section 3(a)(39) of the Act;
• is or has been subject to disqualification under 17 CFR 1.63;
• if elected, would cause the Corporation to be in violation of these Bylaws, the Certificate of Incorporation, the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded, or any applicable law, rule or regulation;
• is or has been, within the past three years, an officer or director of a competitor, as defined for purposes of Section 8 of the Clayton Antitrust Act of 1914;
• is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past 10 years;
• is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended;
• has provided any information to the Corporation or its stockholders that was untrue in any material respect or that omitted to state a material fact necessary to make the statements made, in light of the circumstances in which they were made, not misleading; or
• breaches or fails, or the Eligible Stockholder breaches or fails, to comply with its obligations pursuant to the CGM Bylaws, including, but not limited to, Section 2.16 and any agreement, representation or undertaking required by Section 2.16.
Cboe believes these provisions will protect the Corporation and its stockholders by allowing it to exclude certain categories of objectionable Stockholder Nominees from the proxy statement.
Proposed Section 2.16(k) provides that notwithstanding anything to the contrary contained in the CGM Bylaws, if (i) a Stockholder Nominee and/or the applicable Eligible Stockholder breaches any of its agreements or representations or fails to comply with any of its obligations under this Section 2.16 or (ii) a Stockholder Nominee otherwise becomes ineligible for inclusion in the Corporation's proxy materials pursuant to this Section 2.16, or dies, becomes disabled or otherwise becomes ineligible or unavailable for election at the annual meeting, in each case as determined by the Board or the chairman of the meeting, (1) the Corporation may omit or, to the extent feasible, remove the information concerning such Stockholder Nominee and the related Supporting Statement from its proxy materials and/or otherwise communicate to its stockholders that such Stockholder Nominee will not be eligible for election at the annual meeting, (2) the Corporation shall not be required to include in its proxy materials any successor or replacement nominee proposed by the applicable Eligible Stockholder or any other Eligible Stockholder and (3) the chairman of the meeting shall declare such nomination to be invalid and such nomination shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Corporation. Cboe believes this provision protects the Corporation and its stockholders by providing the Board or the chairman of the stockholder meeting limited authority to disqualify a proxy access nominee when that nominee or the sponsoring stockholder(s) have breached an obligation under the proxy access provision.
Proposed Section 2.16(l) states that the following Stockholder Nominees who are included in the Corporation's proxy materials for a particular annual meeting of stockholders will be ineligible to be a Stockholder Nominee for the next two annual meetings: (i) Stockholder Nominee who withdraws from or becomes ineligible or unavailable for election at the annual meeting; or (ii) Stockholder Nominee who does not receive at least 25% of the votes cast in favor of such Stockholder Nominee's election. For the avoidance of doubt, Section 2.16(l) also clarifies that this provision shall not prevent any stockholder from nominating any person to the Board pursuant to Section 2.11 of the CGM Bylaws. Section 2.16(l) will save the Corporation and its stockholders the time and expense of analyzing and addressing subsequent proxy access nominations regarding individuals who were included in the proxy materials for a particular annual meeting but ultimately did not stand for election or receive a substantial amount of votes. After the next two annual meetings, these Stockholder Nominees would again be eligible for nomination through the proxy access provisions of the Bylaws.
Proposed Section 2.16(m) provides that notwithstanding the provisions of proposed Section 2.16, if the Eligible Stockholder providing notice (or a qualified representative of the Eligible Stockholder) does not appear in person (including virtually, in the case of a meeting held solely by means of remote communication) at the stockholder meeting to present the nomination of such Stockholder Nominee, such proposed nomination shall not be presented by the Corporation and shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.16, to be considered a qualified representative of the Eligible Stockholder providing notice, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting and such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, must be provided to the Corporation at least twenty-four (24) hours prior to the meeting.
In case there are matters involving a proxy access nomination that are open to interpretation, proposed Section 2.16(n) states that the Board (or any other person or body authorized by the Board) shall have exclusive power and authority to interpret the proxy access provisions of the Bylaws and make all determinations deemed necessary or advisable in connection with proposed Section 2.16 as to any person, facts or circumstances. In addition, all actions, interpretations and determinations of the Board (or any person or body authorized by the Board) with respect to the proxy access provisions shall be final, conclusive and binding on the
For the avoidance of doubt, proposed Section 2.16(o) states that the proxy access provisions outlined in proposed Section 2.16 shall be the exclusive means for stockholders to include nominees in the Corporation's proxy materials. Stockholders may, of course, continue to propose nominees through other means, but the Board will have final authority to determine whether to include those nominees in the Corporation's proxy materials.
Cboe also proposes to make conforming changes to Sections 2.10 and 2.11 to provide clarifications and prevent confusion. First, the Exchange proposes to add a reference to Section 2.11 and proposed Section 2.16 to clarify the exact bylaw provisions relating to stockholder nominees. Next, the Exchange proposes to amend Section 2.11. Section 2.11 currently describes the business that may be properly brought before an annual meeting of stockholders and the methods by which nominations of persons for election to the Board may be made at an annual meeting of stockholders. Cboe proposes to add proxy access nominations (
The Exchange believes the proposed rule change is consistent with 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 light of a shareholder proposal received from a stockholder, Cboe is proposing changes to its Bylaws to implement proxy access. The Exchange believes that this filing furthers the objectives of Section 6(b)(5) of the Act because the proposed rule change would be consistent with and facilitate a governance and regulatory structure that is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to, and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. Particularly, the Exchange believes that, by permitting an Eligible Stockholder of Cboe that meets the stated requirements to nominate directors and have its nominees included in Cboe's annual meeting proxy statement, the proposed rule change strengthens the corporate governance of the Exchange's ultimate parent company, which is beneficial to both investors and the public interest.
Additionally, the procedural requirements are designed to help protect investors by stating clearly and explicitly the procedures stockholders must follow in order to submit a proper proxy access nomination. The informational requirements are designed to enhance investor protection by helping to ensure among other things, that the Corporation and its stockholders have full and accurate information about nominating stockholders and their nominees and that such stockholders and nominees comply with applicable laws, regulations and other requirements. Moreover, as noted above, proxy access has become commonplace among companies and the Exchange believes its core provisions are common among companies that have adopted proxy access, including the parent companies of other exchanges that have adopted similar proxy access provisions.
Finally, the remaining changes to existing provisions of the CGM Bylaws are clarifying in nature, and they enhance investor protection and the public interest by preventing confusion with respect to the operation of the Bylaw provisions.
Because the proposed rule change relates to the governance of the Corporation and not to the operations of the Exchange, the Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not designed to address any competitive issue or have any impact on competition; rather, adoption of a proxy access bylaw by the Corporation is intended to enhance corporate governance and accountability to stockholders.
The Exchange neither solicited nor received comments on the proposed rule change.
Within 45 days of the date of publication of this notice in the
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule
• 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 BZX Exchange, Inc. (the “Exchange” or “BZX”) is filing with the Securities and Exchange Commission (the “Commission”) a proposed rule change with respect to amendments to the Sixth Amended and Restated Bylaws (the “CGM Bylaws”) of its parent corporation, Cboe Global Markets, Inc. (“Cboe” or “Corporation”). 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.
Cboe has received a stockholder proposal submitted pursuant to Rule 14a-8 under the Act
In developing its proposal, Cboe generally tried to balance the relative weight of arguments for and against proxy access provisions. On the one hand, Cboe recognizes the significance of this issue to some investors, who see proxy access as an important accountability mechanism that allows them to participate in board elections through the nomination of stockholder candidates that are presented in a company's proxy statement. On the other hand, Cboe's proposed proxy access provision includes certain procedural requirements that are designed to help ensure, among other things, that Cboe and its stockholders will have full and accurate information about nominating stockholders and their nominees and that such stockholders and nominees will comply with applicable laws, regulations and other requirements. Additionally, the Exchange notes the proposed terms are common among companies that have adopted proxy access. The Exchange also notes that the parent companies of other exchanges have adopted substantively similar proxy access provisions and the Exchange does not
The proposed rule change would add new Section 2.16 to the CGM Bylaws. Section 2.16 would permit a stockholder, or group of up to 20 stockholders, to nominate director nominees for the Cboe Board, so long as the stockholder(s) have owned at least three percent of Cboe's outstanding shares of capital stock continuously for at least three years. The director nominees would be included in Cboe's annual meeting proxy materials. The proposed provision would limit the number of proposed director nominees to the greater of (i) two or (ii) 20% of the number of Cboe directors in office (rounded down to the nearest whole number, but no less than two) provided that the stockholder(s) and nominee(s) satisfy the other conditions specified in the CGM Bylaws as described further below.
The Exchange first proposes to amend the CGM Bylaws to, as set forth in the first sentence of proposed Section 2.16(a), require the Corporation to include in its proxy statement, its form proxy and any ballot distributed at the stockholder meeting, the name of, and certain Required Information
Proposed Section 2.16(b) will provide that in order to utilize this provision, the Eligible Stockholder must expressly request at the time of providing a required notice to the Corporation of the proxy access nomination (the “Notice of Proxy Access Nomination”) to have its nominee included in the Corporation's proxy materials. Proposed Section 2.16(b) also establishes the deadline for a timely Notice of Proxy Access Nomination. Specifically, such a notice must be delivered to the Cboe's Secretary at the principal executive offices of the Corporation not earlier than the open of business on the one hundred fiftieth (150th) day and not later than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the date that Cboe first distributed its proxy statement to stockholders for the previous year's annual meeting of stockholders provided, however, that in the event the annual meeting is more than thirty (30) days before or after the anniversary date of the prior year's annual meeting, or if no annual meeting was held in the preceding year, to be timely, the Notice of Proxy Access Nomination must be received at the principal executive offices of the Corporation no earlier than one hundred fifty (150) days before such annual meeting and no later than the later of one hundred twenty (120) days before such annual meeting or the tenth (10th) day following the day on which public announcement (as defined in Section 2.11) of the date of such meeting is first made by the Corporation. Further Section 2.16 will provide that in no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period (or extend any time period) for the giving of a Notice of Proxy Access Nomination as described above. Cboe believes this notice period will provide stockholders an adequate window to submit nominees via proxy access, while also providing the Corporation adequate time to diligence a proxy access nominee before including them in the proxy statement for the next annual meeting of stockholders.
Proposed Section 2.16(c) specifies that the maximum number (“the Permitted Number”) of Stockholder Nominees nominated by all Eligible Stockholders that will be included in Cboe's proxy materials with respect to an annual meeting of stockholders shall not exceed the greater of two or 20% of the total number of directors in office (rounded down to the nearest whole number) as of the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with the proxy access provision of the Bylaws (the “Final Proxy Access Nomination Date”). In the event that one or more vacancies for any reason occurs after the Final Proxy Access Nomination Date but before the date of the annual meeting and the Board resolves to reduce the size of the Board in connection therewith, the Permitted Number of Stockholder Nominees included in Cboe's proxy materials shall be calculated based on the number of directors in office as so reduced. In addition, the Permitted Number shall be reduced by (i) the number of individuals who will be included in the Corporation's proxy materials as director nominees recommended by the Board pursuant to an agreement, arrangement or other understanding with a stockholder or group of stockholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of stock from the Corporation by such stockholder or group of stockholders) and/or (ii) the number of directors in office as of the Final Proxy Access Nomination Date who were included in the Corporation's proxy materials as Stockholder Nominees for any of the two preceding annual meetings of stockholders (including any persons counted as Stockholder Nominees pursuant to the immediately succeeding sentence) and whose reelection at the upcoming annual meeting is being recommended by the Board. Any individual nominated by an Eligible Stockholder for inclusion in the proxy materials pursuant to the proxy access provision of the CGM Bylaws whom the Board decides to nominate as a nominee of the Board, and any individual nominated by an Eligible Stockholder for inclusion in the proxy materials pursuant to the proxy access provision but whose nomination is subsequently withdrawn, shall be counted as one of the Stockholder Nominees for purposes of determining when the Permitted
Proposed Section 2.16(d) defines who may qualify as an “Eligible Stockholder”. Particularly, an Eligible Stockholder is a stockholder or group of no more than 20 stockholders
Proposed Section 2.16(e) clarifies, for the avoidance of doubt, how “ownership” will be defined for purposes of meeting the ownership requirements of the Required Shares. Specifically, an Eligible Stockholder shall be deemed to “own” only those outstanding shares of Cboe's capital stock as to which the stockholder possesses both: (i) The full voting and investment rights pertaining to the shares; and (ii) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (i) and (ii) shall not include any shares: That are (1) sold by such stockholder or any of its affiliates in any transaction that has not been settled or closed; (2) borrowed by such stockholder or any of its affiliates for any purposes or purchased by such stockholder or any of its affiliates pursuant to an agreement to resell; or (3) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar instrument or agreement entered into by such stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of Cboe's outstanding capital stock, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of: (A) Reducing in any manner, to any extent or at any time in the future, such stockholder's or its affiliates' full right to vote or direct the voting of any such shares; and/or (B) hedging, offsetting or altering to any degree any gain or loss realized or realizable from maintaining the full economic ownership of such shares by such stockholder or its affiliates.
Further, a stockholder shall “own” shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder's ownership of shares shall be deemed to continue during any period in which (i) the stockholder has loaned such shares provided that the stockholder has the power to recall such loaned shares on five (5) business days' notice and includes in the Notice of
Proposed Section 2.16(f) sets forth the information that an Eligible Stockholder must provide to Cboe's Corporate Secretary in writing within the deadline discussed above in order to make a proxy access nomination. This information includes:
• A statement by the Eligible Stockholder (1) setting forth and certifying as to the number of shares it owns and has owned continuously for the Minimum Holding Period and (2) agreeing to continue to own the Required Shares through the date of the annual meeting;
• one or more written statements from the record holder of the Required Shares (and from each intermediary through which the Required Shares are or have been held during the Minimum Holding Period) verifying that, as of a date within seven calendar days prior to the date the Notice of Proxy Access Nomination is delivered to Cboe's Secretary at the principal executive offices of the Corporation, the Eligible Stockholder owns, and has owned continuously for the Minimum Holding Period, the Required Shares, and the Eligible Stockholder's agreement to provide, within five (5) business days after the record date for the annual meeting, written statements from the record holder and intermediaries verifying the Eligible Stockholder's continuous ownership of the Required Shares through the record date;
• a copy of the Schedule 14N that has been filed with the SEC as required by Rule 14a-18 under the Act;
• the information, representations and agreements and other documents that are required to be set forth in or included with a stockholder's notice of nomination given pursuant to Section 2.11 of the CGM Bylaws;
• the written consent of each Stockholder Nominee to being named in the proxy statement as a nominee and to serving as a director if elected;
• a representation that the Eligible Stockholder:
○ Acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control of Cboe, and does not presently have such intent;
○ has not nominated and will not nominate for election any individual as a director at the annual meeting, other than its Stockholder Nominee(s);
○ has not engaged and will not engage in, and has not and will not be a participant in another person's, “solicitation” within the meaning of Rule 14a-1(l) under the Act in support of the election of any individual as a director at the annual meeting, other than its Stockholder Nominee(s) or a nominee of the Board;
○ has not distributed and will not distribute to any stockholder of the Corporation any form of proxy for the annual meeting other than the form distributed by the Corporation;
○ has complied and will comply with all laws, rules and regulations applicable to solicitations and the use, if any, of soliciting material in connection with the annual meeting, and
○ has provided and will provide facts, statements and other information in all communications with Cboe and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;
• an undertaking that the Eligible Stockholder agrees to
○ assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder's communications with the stockholders of the Corporation or out of the information that the Eligible Stockholder provided to the Corporation;
○ indemnify and hold harmless the Corporation and each of its Directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its Directors, officers or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section 2.16 or any solicitation or other activity in connection therewith; and
○ file with the Securities and Exchange Commission any solicitation or other communication with the stockholders of the Corporation relating to the meeting at which its Stockholder Nominee(s) will be nominated, regardless of whether any such filing is required under Regulation 14A of the Act or whether any exemption from filing is available for such solicitation or other communication under Regulation 14A of the Act;
• in the case of a nomination by a group of stockholders that together is an Eligible Stockholder, the designation by all group members of one group member that is authorized to receive communications, notices and inquiries from the Corporation and to act on behalf of all members of the group with respect to all matters relating to the nomination under this Section 2.16 (including withdrawal of the nomination);
• in the case of a nomination by an Eligible Stockholder consisting of a group of stockholders in which two or more funds are intended to be treated as one stockholder for purposes of qualifying as an Eligible Stockholder, documentation reasonably satisfactory to the Corporation that demonstrates that the funds are part of the same Qualifying Fund Group; and
• a written representation and agreement by the Stockholder Nominee that such person:
○ Will act as a representative of all of the stockholders of the Corporation while serving as a director;
○ will provide facts, statements and other information in all communications with the Corporation and its stockholders that are or will be true and correct in all material respects (and shall not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading);
○ is not and will not become a party to (i) any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity other than the Corporation in connection with service or action as a director of the Corporation that has not been disclosed to the Corporation, (ii) any Voting Commitment that has not been disclosed to the Corporation or (iii) any Voting Commitment
○ will abide by and comply with the CGM Bylaws, the Certificate of Incorporation and applicable policies of the Corporation including all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation, as well as the applicable provisions of the rules and regulations of the Securities and Exchange Commission and any stock exchange applicable to the Corporation.
In proposing the informational requirements for the Eligible Stockholder, Cboe's goal is to gather sufficient information about the Eligible Stockholder for both itself and its stockholders. Among other things, this information is designed to help ensure that Cboe is able to comply with its disclosure and other requirements under applicable law and that Cboe, its Board and its stockholders are able to assess the proxy access nomination adequately.
Proposed Section 2.16(g) establishes additional information the Stockholder Nominee must provide. Particularly:
• The Stockholder Nominee(s) must submit all completed and signed questionnaires required of directors and officers of the Corporation;
• the Corporation may require any proposed Stockholder Nominee to furnish any information:
○ That may reasonably be requested by the Corporation to determine whether the Stockholder Nominee would be independent under Section 3.3 and otherwise qualifies as independent under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded;
○ that could be material to a reasonable stockholder's understanding of the independence, or lack thereof, of such Stockholder Nominee;
○ that would be required to satisfy the requirements for qualification of directors under applicable foreign regulations; or
○ (that may reasonably be requested by the Corporation to determine the eligibility of such Stockholder Nominee to be included in the Corporation's proxy materials pursuant to this Section 2.16 or to serve as a director of the Corporation; and
• the Corporation may require the Eligible Stockholder to furnish any other information that may reasonably be requested by the Corporation to verify the Eligible Stockholder's continuous Ownership of the Required Shares for the Minimum Holding Period and through the date of the annual meeting.
Like the informational requirements for an Eligible Stockholder, which are set forth above, the informational requirements for the Stockholder Nominee ensure that both Cboe and its stockholders will have sufficient information about the Stockholder Nominee. Among other things, this information will ensure that Cboe is able to comply with its disclosure and other requirements under applicable law and that Cboe, its Board and its stockholders are able to assess the proxy access nomination adequately.
Proposed Section 2.16(h) provides that an Eligible Stockholder may provide, at its option, to the Secretary, at the time the Notice of Proxy Access Nomination is provided, a written statement, not to exceed 500 words, in support of its Stockholder Nominee(s)' candidacy (a “Supporting Statement”). Only one Supporting Statement may be submitted by an Eligible Stockholder (including any group of stockholders together constituting an Eligible Stockholder) in support of its Stockholder Nominee(s). Notwithstanding anything to the contrary contained in Section 2.16, the Corporation may omit from its proxy materials any information or Supporting Statement (or portion thereof) that it, in good faith, believes is untrue in any material respect (or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading) or would violate any applicable law, rule or regulation. The Exchange notes proposed Section 2.16(h) allows Cboe to comply with Rule 14a-9 under the Act
Pursuant to proposed Section 2.16(i), each Eligible Stockholder or Stockholder Nominee must promptly notify Cboe's Corporate Secretary of any information or communications provided by the Eligible Stockholder or Stockholder Nominee, as the case may be, to Cboe or its stockholders that when provided was not, or thereafter ceases to be, true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading and of the information that is required to correct any such defect. An Eligible Stockholder shall also provide immediate notice to the Corporation if the Eligible Stockholder ceases to own any of the Required Shares prior to the date of the annual meeting. In addition, any person providing any information to the Corporation pursuant to Section 2.16(i) shall be required to update or supplement such information, if necessary, so that all such information shall be true and correct as of the (i) as of the record date for determining the stockholders entitled to receive notice of the meeting and (ii) as of the date that is ten (10) business days prior to the meeting (or any postponement, adjournment or recess thereof), and such update shall be received by the Secretary at the principal executive offices of the Corporation (A) not later than five (5) business days after the record date for determining the stockholders entitled to receive notice of such meeting (in the case of an update required to be made under clause (i)) and (B) not later than seven (7) business
This provision further makes clear that providing any such notification, update or supplement, shall not be deemed to cure any defect in any previously provided information or communications or limit the remedies available to the Corporation relating to such defect (including the right to omit a Stockholder Nominee from its proxy materials). This provision is intended to protect Cboe's stockholders by requiring an Eligible Stockholder or Stockholder Nominee to give Cboe notice of information previously provided that is materially untrue. Cboe may then decide what action to take with respect to such defect, which may include, as noted above, omitting the relevant Stockholder Nominee from its proxy materials.
Proposed Section 2.16(j) provides that Cboe shall not be required to include a Stockholder Nominee in its proxy materials for any meeting of stockholders under certain circumstances. In these situations, the proxy access nomination shall be disregarded and no vote on such Stockholder Nominee will occur, even if Cboe has received proxies in respect of the vote. These circumstances occur when the Stockholder Nominee:
• Would not be an independent director under Section 3.3, under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board in determining and disclosing independence of the Corporation's directors, in each case as determined by the Board in its sole discretion;
• would not meet the audit committee independence requirements under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded;
• if elected, intended to resign as a director of the Corporation prior to the end of the full term for which he or she is standing for election;
• is or has been subject to any statutory disqualification under Section 3(a)(39) of the Act;
• is or has been subject to disqualification under 17 CFR 1.63;
• if elected, would cause the Corporation to be in violation of these Bylaws, the Certificate of Incorporation, the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded, or any applicable law, rule or regulation;
• is or has been, within the past three years, an officer or director of a competitor, as defined for purposes of Section 8 of the Clayton Antitrust Act of 1914;
• is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past 10 years;
• is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended;
• has provided any information to the Corporation or its stockholders that was untrue in any material respect or that omitted to state a material fact necessary to make the statements made, in light of the circumstances in which they were made, not misleading; or
• breaches or fails, or the Eligible Stockholder breaches or fails, to comply with its obligations pursuant to the CGM Bylaws, including, but not limited to, Section 2.16 and any agreement, representation or undertaking required by Section 2.16.
Cboe believes these provisions will protect the Corporation and its stockholders by allowing it to exclude certain categories of objectionable Stockholder Nominees from the proxy statement.
Proposed Section 2.16(k) provides that notwithstanding anything to the contrary contained in the CGM Bylaws, if (i) a Stockholder Nominee and/or the applicable Eligible Stockholder breaches any of its agreements or representations or fails to comply with any of its obligations under this Section 2.16 or (ii) a Stockholder Nominee otherwise becomes ineligible for inclusion in the Corporation's proxy materials pursuant to this Section 2.16, or dies, becomes disabled or otherwise becomes ineligible or unavailable for election at the annual meeting, in each case as determined by the Board or the chairman of the meeting, (1) the Corporation may omit or, to the extent feasible, remove the information concerning such Stockholder Nominee and the related Supporting Statement from its proxy materials and/or otherwise communicate to its stockholders that such Stockholder Nominee will not be eligible for election at the annual meeting, (2) the Corporation shall not be required to include in its proxy materials any successor or replacement nominee proposed by the applicable Eligible Stockholder or any other Eligible Stockholder and (3) the chairman of the meeting shall declare such nomination to be invalid and such nomination shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Corporation. Cboe believes this provision protects the Corporation and its stockholders by providing the Board or the chairman of the stockholder meeting limited authority to disqualify a proxy access nominee when that nominee or the sponsoring stockholder(s) have breached an obligation under the proxy access provision.
Proposed Section 2.16(l) states that the following Stockholder Nominees who are included in the Corporation's proxy materials for a particular annual meeting of stockholders will be ineligible to be a Stockholder Nominee for the next two annual meetings: (i) Stockholder Nominee who withdraws from or becomes ineligible or unavailable for election at the annual meeting; or (ii) Stockholder Nominee who does not receive at least 25% of the votes cast in favor of such Stockholder Nominee's election. For the avoidance of doubt, Section 2.16(l) also clarifies that this provision shall not prevent any stockholder from nominating any person to the Board pursuant to Section 2.11 of the CGM Bylaws. Section 2.16(l) will save the Corporation and its stockholders the time and expense of analyzing and addressing subsequent proxy access nominations regarding individuals who were included in the proxy materials for a particular annual meeting but ultimately did not stand for election or receive a substantial amount of votes. After the next two annual meetings, these Stockholder Nominees would again be eligible for nomination through the proxy access provisions of the Bylaws.
Proposed Section 2.16(m) provides that notwithstanding the provisions of proposed Section 2.16, if the Eligible Stockholder providing notice (or a qualified representative of the Eligible Stockholder) does not appear in person (including virtually, in the case of a meeting held solely by means of remote communication) at the stockholder meeting to present the nomination of such Stockholder Nominee, such proposed nomination shall not be
In case there are matters involving a proxy access nomination that are open to interpretation, proposed Section 2.16(n) states that the Board (or any other person or body authorized by the Board) shall have exclusive power and authority to interpret the proxy access provisions of the Bylaws and make all determinations deemed necessary or advisable in connection with proposed Section 2.16 as to any person, facts or circumstances. In addition, all actions, interpretations and determinations of the Board (or any person or body authorized by the Board) with respect to the proxy access provisions shall be final, conclusive and binding on the Corporation, the stockholders and all other parties. While Cboe has attempted to implement a clear, detailed and thorough proxy access provision, there may be matters about future proxy access nominations that are open to interpretation. In these cases, Cboe believes it is reasonable and necessary to designate an arbiter to make final decisions on these points and that the Board is best-suited to act as that arbiter.
For the avoidance of doubt, proposed Section 2.16(o) states that the proxy access provisions outlined in proposed Section 2.16 shall be the exclusive means for stockholders to include nominees in the Corporation's proxy materials. Stockholders may, of course, continue to propose nominees through other means, but the Board will have final authority to determine whether to include those nominees in the Corporation's proxy materials.
Cboe also proposes to make conforming changes to Sections 2.10 and 2.11 to provide clarifications and prevent confusion. First, the Exchange proposes to add a reference to Section 2.11 and proposed Section 2.16 to clarify the exact bylaw provisions relating to stockholder nominees. Next, the Exchange proposes to amend Section 2.11. Section 2.11 currently describes the business that may be properly brought before an annual meeting of stockholders and the methods by which nominations of persons for election to the Board may be made at an annual meeting of stockholders. Cboe proposes to add proxy access nominations (
The Exchange believes the proposed rule change is consistent with 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 light of a shareholder proposal received from a stockholder, Cboe is proposing changes to its Bylaws to implement proxy access. The Exchange believes that this filing furthers the objectives of Section 6(b)(5) of the Act because the proposed rule change would be consistent with and facilitate a governance and regulatory structure that is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to, and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. Particularly, the Exchange believes that, by permitting an Eligible Stockholder of Cboe that meets the stated requirements to nominate directors and have its nominees included in Cboe's annual meeting proxy statement, the proposed rule change strengthens the corporate governance of the Exchange's ultimate parent company, which is beneficial to both investors and the public interest.
Additionally, the procedural requirements are designed to help protect investors by stating clearly and explicitly the procedures stockholders must follow in order to submit a proper proxy access nomination. The informational requirements are designed to enhance investor protection by helping to ensure among other things, that the Corporation and its stockholders have full and accurate information about nominating stockholders and their nominees and that such stockholders and nominees comply with applicable laws, regulations and other requirements. Moreover, as noted above, proxy access has become commonplace among companies and the Exchange believes its core provisions are common among companies that have adopted proxy access, including the parent companies of other exchanges that have adopted similar proxy access provisions.
Finally, the remaining changes to existing provisions of the CGM Bylaws are clarifying in nature, and they enhance investor protection and the public interest by preventing confusion with respect to the operation of the Bylaw provisions.
Because the proposed rule change relates to the governance of the Corporation and not to the operations of the Exchange, the Exchange does not believe that the proposed rule change
The Exchange neither solicited nor received comments on the proposed rule change.
Within 45 days of the date of publication of this notice in the
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)
The Exchange proposes a rule change to extend the effective date in Commentary .10 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) under NYSE National Rule 2.1210 (Registration Requirements) applicable to ETP Holders, from April 30, 2021 to June 30, 2021. The Exchange does not anticipate providing any further extensions to the temporary relief identified in this proposed rule change beyond June 30, 2021.
In its filing with the Commission, the self-regulatory organization 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 extend the effective date in Commentary .10 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) under NYSE National Rule 2.1210 (Registration Requirements) applicable to ETP Holders,
In response to COVID-19 global pandemic, last year FINRA began providing temporary relief by way of frequently asked questions (“FAQs”)
FINRA published the first FAQ on March 20, 2020, providing that individuals who were designated to function as principals under FINRA Rule 1210.04
On September 25, 2020, NYSE National filed with the Commission a proposed rule change for immediate effectiveness to extend the temporary relief provided via the FAQ by adopting temporary Commentary .10 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) under NYSE National Rule 2.1210 (Registration Requirements).
As mentioned in the prior filings, FINRA began providing, and then extended, temporary relief to address the interruptions in the administration of FINRA qualification examinations at Prometric test centers and the limited ability of individuals to sit for the examinations caused by the COVID-19 pandemic.
While there are signs of improvement, the COVID-19 conditions necessitating the temporary relief persist and FINRA has determined that there is a continued need for this temporary relief beyond April 30, 2021. Although Prometric has resumed testing in many of its U.S. test centers, Prometric's safety practices mean that currently not all test centers are open, some of the open test centers are at limited capacity, and some open test centers are delivering only certain examinations that have been deemed essential by the local government.
Although the COVID-19 conditions necessitating the temporary relief persist, in the FINRA Filing, FINRA stated that an extension of the relief is necessary only until June 30, 2021, because FINRA recently expanded the availability of online examinations. Prior to this expansion, the ongoing effects of the pandemic made it impracticable for FINRA members to ensure that the individuals who they had designated to function in a principal capacity, as set forth in FINRA Rule 1210.04, could successfully sit for and pass an appropriate qualification examination within the 120-calendar day period required under the rule.
These ongoing circumstances make it impracticable for ETP Holders to ensure that the individuals whom they have designated to function in a principal capacity, as set forth in NYSE National Rule 2.1210.03, are able to successfully sit for and pass an appropriate qualification examination within the 120-calendar day period required under the rule, or to find other qualified staff to fill this position. Therefore, NYSE
NYSE National believes that this proposed continued extension of time is tailored to address the needs and constraints on an ETP Holder's operations during the COVID-19 pandemic, without significantly compromising critical investor protection. The proposed extension of time will help to minimize the impact of COVID-19 on ETP Holders by providing continued flexibility so that ETP Holders can ensure that principal positions remain filled. The potential risks from the proposed extension of the 120-day period are mitigated by the ETP Holder's continued requirement to supervise the activities of these designated individuals and ensure compliance with federal securities laws and regulations, as well as NYSE National rules. NYSE National has filed the proposed rule change for immediate effectiveness and has requested that the Commission waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing, so NYSE National can implement the proposed rule change immediately.
The proposed rule change is consistent with Section 6(b) of the Exchange Act,
The proposed rule change is intended to minimize the impact of COVID-19 on ETP Holder operations by extending the 120-day period certain individuals may function as a principal without having successfully passed an appropriate qualification examination under NYSE National Rule 2.1210.03 until June 30, 2021. The proposed rule change does not relieve ETP Holders from maintaining, under the circumstances, a reasonably designed system to supervise the activities of their associated persons to achieve compliance with applicable securities laws and regulations, and with applicable NYSE National rules that directly serve investor protection. In a time when faced with unique challenges resulting from the COVID-19 pandemic, NYSE National believes that the proposed rule change is a sensible accommodation that will continue to afford ETP Holders the ability to ensure that critical positions are filled and client services maintained, while continuing to serve and promote the protection of investors and the public interest in this unique environment.
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 Exchange Act. As set forth in the prior filings, the proposed rule change is intended solely to extend temporary relief necessitated by the continued impacts of the COVID-19 pandemic and the related health and safety risks of conducting in-person activities. In its filing, FINRA noted that the proposed rule change is necessary to temporarily rebalance the attendant benefits and costs of the obligations under FINRA Rule 1210 in response to the impacts of the COVID-19 pandemic that would otherwise result if the temporary relief was to expire on April 30, 2021. The Exchange accordingly incorporates FINRA's abbreviated economic impact assessment by reference.
No written comments were solicited or received with respect to 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) normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative immediately upon filing. As noted above, the Exchange stated that the conditions necessitating the temporary relief continue to exist and the proposed extension of time will help minimize the impact of the COVID-19 outbreak on NYSE National ETP Holders' operations by allowing them to keep principal positions filled and minimizing disruptions to client services and other critical responsibilities. Despite signs of improvement, the Exchange further stated that the ongoing extenuating circumstances of the COVID-19 pandemic make it impractical to ensure that individuals designated to act in these capacities are able to take and pass the appropriate qualification examination during the 120-calendar day period required under the rules.
The Exchange observed that, following a nationwide closure of all test centers earlier in the year, some test centers have re-opened, but are operating at limited capacity or are only delivering certain examinations that have been deemed essential by the local government.
For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest.
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)
The Exchange proposes a rule change to extend the effective date in Commentary .10 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) under NYSE Arca Rule 2.1210 (Registration Requirements) applicable to Equity Trading Permit (“ETP”) Holders, Options Trading Permit (“OTP”) Holders and OTP Firms, from April 30, 2021 to June 30, 2021. The Exchange does not anticipate providing any further extensions to the temporary relief identified in this proposed rule change beyond June 30, 2021.
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received
The Exchange proposes to extend the effective date in Commentary .10 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) under NYSE Arca Rule 2.1210 (Registration Requirements) applicable to ETP Holders, OTP Holders and OTP Firms (collectively, “Members”),
In response to COVID-19 global pandemic, last year FINRA began providing temporary relief by way of frequently asked questions (“FAQs”)
FINRA published the first FAQ on March 20, 2020, providing that individuals who were designated to function as principals under FINRA Rule 1210.04
On September 25, 2020, NYSE Arca filed with the Commission a proposed rule change for immediate effectiveness to extend the temporary relief provided via the FAQ by adopting temporary Commentary .10 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) under NYSE Arca Rule 2.1210 (Registration Requirements).
As mentioned in the prior filings, FINRA began providing, and then extended, temporary relief to address the interruptions in the administration of FINRA qualification examinations at Prometric test centers and the limited ability of individuals to sit for the examinations caused by the COVID-19 pandemic.
While there are signs of improvement, the COVID-19 conditions necessitating the temporary relief persist and FINRA has determined that there is a continued need for this temporary relief beyond April 30, 2021. Although Prometric has resumed testing in many of its U.S. test centers, Prometric's safety practices mean that currently not all test centers are open, some of the open test centers are at limited capacity, and some open test centers are delivering only certain examinations that have been deemed essential by the local government.
Although the COVID-19 conditions necessitating the temporary relief persist, in the FINRA Filing, FINRA stated that an extension of the relief is necessary only until June 30, 2021, because FINRA recently expanded the
These ongoing circumstances make it impracticable for Members to ensure that the individuals whom they have designated to function in a principal capacity, as set forth in NYSE Arca Rule 2.1210.03, are able to successfully sit for and pass an appropriate qualification examination within the 120-calendar day period required under the rule, or to find other qualified staff to fill this position. Therefore, NYSE Arca is proposing to extend the effective date of the temporary relief provided through SR-NYSEArca-2020-112 until June 30, 2021. The proposed rule change would apply only to those individuals who were designated to function as a principal prior to March 3, 2021. Any individuals designated to function as a principal on or after March 3, 2021, would need to successfully pass an appropriate qualification examination within 120 days.
NYSE Arca believes that this proposed continued extension of time is tailored to address the needs and constraints on a Member's operations during the COVID-19 pandemic, without significantly compromising critical investor protection. The proposed extension of time will help to minimize the impact of COVID-19 on Members by providing continued flexibility so that Members can ensure that principal positions remain filled. The potential risks from the proposed extension of the 120-day period are mitigated by the Member's continued requirement to supervise the activities of these designated individuals and ensure compliance with federal securities laws and regulations, as well as NYSE Arca rules. NYSE Arca has filed the proposed rule change for immediate effectiveness and has requested that the Commission waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing, so NYSE Arca can implement the proposed rule change immediately.
The proposed rule change is consistent with Section 6(b) of the Exchange Act,
The proposed rule change is intended to minimize the impact of COVID-19 on Member operations by extending the 120-day period certain individuals may function as a principal without having successfully passed an appropriate qualification examination under NYSE Arca Rule 2.1210.03 until June 30, 2021. The proposed rule change does not relieve Members from maintaining, under the circumstances, a reasonably designed system to supervise the activities of their associated persons to achieve compliance with applicable securities laws and regulations, and with applicable NYSE Arca rules that directly serve investor protection. In a time when faced with unique challenges resulting from the COVID-19 pandemic, NYSE Arca believes that the proposed rule change is a sensible accommodation that will continue to afford Members the ability to ensure that critical positions are filled and client services maintained, while continuing to serve and promote the protection of investors and the public interest in this unique environment.
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 Exchange Act. As set forth in the prior filings, the proposed rule change is intended solely to extend temporary relief necessitated by the continued impacts of the COVID-19 pandemic and the related health and safety risks of conducting in-person activities. In its filing, FINRA noted that the proposed rule change is necessary to temporarily rebalance the attendant benefits and costs of the obligations under FINRA Rule 1210 in response to the impacts of the COVID-19 pandemic that would otherwise result if the temporary relief was to expire on April 30, 2021. The Exchange accordingly incorporates FINRA's abbreviated economic impact assessment by reference.
No written comments were solicited or received with respect to 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) normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become
The Exchange observed that, following a nationwide closure of all test centers earlier in the year, some test centers have re-opened, but are operating at limited capacity or are only delivering certain examinations that have been deemed essential by the local government.
For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest.
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)
The Exchange proposes to amend the Fee Schedule of NYSE Chicago, Inc. (“Fee Schedule”) regarding colocation services and fees to add further specificity as to how monthly fees for dedicated cabinets are calculated. The proposed rule change is available on the Exchange's website at
In its filing with the Commission, the self-regulatory organization 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 those 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 parts of such statements.
The Exchange proposes to amend its Fee Schedule regarding colocation services and fees
The Exchange offers Users
A User pays a monthly fee based on the power allocated to its dedicated cabinets. As previously indicated,
To further clarify how the fees are calculated, in a non-substantive change, the Exchange proposes to make the following edits to the Fee Schedule:
• Revise the title “Monthly Fee per Cabinet” to read “Monthly Fee for Cabinets”; and
• under the heading “Dedicated Cabinet,” add the following text: “Monthly fee is based on total kWs allocated to all of a User's dedicated cabinets”.
The Exchange does not propose to change the fees.
The proposed change is not expected to have any impact on Users. Users are currently subject to the described services and fees, none of which is new or novel. Current Users would not incur any new or changed fees and the Exchange does not expect to attract any new Users as a result of the proposed change. The change would simply add clarity to the Fee Schedule concerning the monthly fee for dedicated cabinets.
The proposed change is not targeted at, or expected to be limited in applicability to, a specific segment of market participant, as colocation is available to any market participant that wishes to be a User.
The proposed change is not otherwise intended to address any other issues, and the Exchange is not aware of any problems that member organizations would have in complying with the proposed change.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed rule change is reasonable because it would add clarity to the Fee Schedule regarding how the monthly fee for dedicated cabinets is calculated, clarifying that the monthly fee for dedicated cabinets is based on the aggregate number of kW allocated to all the User's dedicated cabinets, and not charged on a per-cabinet basis. It would add detail previously stated in rule filings with the Commission
The proposed change is equitable, as it would add clarity for all market participants with respect to how the monthly fee for dedicated cabinets is calculated. At the same time, it is a non-substantive change that would not impact the services available to Users or
For the reasons above, the proposed changes do not unfairly discriminate between or among market participants that are otherwise capable of satisfying any applicable colocation fees, requirements, terms, and conditions established from time to time by the Exchange.
For these reasons, the Exchange believes that the proposal is consistent with the Act.
In accordance with Section 6(b)(8) of the Act,
For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
No written comments were solicited or received with respect to the proposed rule change.
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
At any time within 60 days of the filing of such 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 under Section 19(b)(2)(B)
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)
The Exchange proposes to amend the NYSE Arca Options Fees and Charges and the NYSE Arca Equities Fees and Charges (together, the “Fee Schedules”) regarding colocation services and fees to add further specificity as to how monthly fees for dedicated cabinets are calculated. The proposed rule change is available on the Exchange's website at
In its filing with the Commission, the self-regulatory organization 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 those 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 parts of such statements.
The Exchange proposes to amend its Fee Schedules regarding colocation services and fees
The Exchange offers Users
A User pays a monthly fee based on the power allocated to its dedicated cabinets. As previously indicated,
To further clarify how the fees are calculated, in a non-substantive change, the Exchange proposes to make the following edits to the Fee Schedules:
• Revise the title “Monthly Fee per Cabinet” to read “Monthly Fee for Cabinets”; and
• under the heading “Dedicated Cabinet,” add the following text: “Monthly fee is based on total kWs allocated to all of a User's dedicated cabinets”.
The Exchange does not propose to change the fees.
The proposed change is not expected to have any impact on Users. Users are currently subject to the described services and fees, none of which is new or novel. Current Users would not incur any new or changed fees and the Exchange does not expect to attract any new Users as a result of the proposed change. The change would simply add clarity to the Fee Schedules concerning the monthly fee for dedicated cabinets.
The proposed change is not targeted at, or expected to be limited in applicability to, a specific segment of market participant, as colocation is available to any market participant that wishes to be a User.
The proposed change is not otherwise intended to address any other issues, and the Exchange is not aware of any problems that member organizations would have in complying with the proposed change.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed rule change is reasonable because it would add clarity to the Fee Schedules regarding how the monthly fee for dedicated cabinets is calculated, clarifying that the monthly fee for dedicated cabinets is based on the aggregate number of kW allocated to all the User's dedicated cabinets, and not charged on a per-cabinet basis. It would add detail previously stated in rule filings with the Commission
The proposed change is equitable, as it would add clarity for all market participants with respect to how the monthly fee for dedicated cabinets is calculated. At the same time, it is a non-substantive change that would not impact the services available to Users or the fees charged for such services. The Exchange does not expect to attract any new Users as a result of the proposed change. The proposed change is not expected to have any impact on Users. Users are currently subject to the described services and fees, none of which is new or novel.
For the reasons above, the proposed changes do not unfairly discriminate between or among market participants that are otherwise capable of satisfying any applicable colocation fees, requirements, terms, and conditions established from time to time by the Exchange.
For these reasons, the Exchange believes that the proposal is consistent with the Act.
In accordance with Section 6(b)(8) of the Act,
For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
No written comments were solicited or received with respect to the proposed rule change.
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
At any time within 60 days of the filing of such 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 under Section 19(b)(2)(B)
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)
The Exchange proposes to amend the New York Stock Exchange Price List (“Price List”) regarding colocation services and fees to add further specificity as to how monthly fees for dedicated cabinets are calculated. The proposed rule change is available on the Exchange's website at
In its filing with the Commission, the self-regulatory organization 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 those 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 parts of such statements.
The Exchange proposes to amend its Price List regarding colocation services and fees
The Exchange offers Users
A User pays a monthly fee based on the power allocated to its dedicated cabinets. As previously indicated,
To further clarify how the fees are calculated, in a non-substantive change, the Exchange proposes to make the following edits to the Price List:
• Revise the title “Monthly Fee per Cabinet” to read “Monthly Fee for Cabinets”; and
• under the heading “Dedicated Cabinet,” add the following text: “Monthly fee is based on total kWs allocated to all of a User's dedicated cabinets”.
The Exchange does not propose to change the fees.
The proposed change is not expected to have any impact on Users. Users are currently subject to the described services and fees, none of which is new or novel. Current Users would not incur any new or changed fees and the Exchange does not expect to attract any new Users as a result of the proposed change. The change would simply add clarity to the Price List concerning the monthly fee for dedicated cabinets.
The proposed change is not targeted at, or expected to be limited in applicability to, a specific segment of market participant, as colocation is available to any market participant that wishes to be a User.
The proposed change is not otherwise intended to address any other issues, and the Exchange is not aware of any problems that member organizations would have in complying with the proposed change.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed rule change is reasonable because it would add clarity to the Price List regarding how the monthly fee for dedicated cabinets is calculated, clarifying that the monthly fee for dedicated cabinets is based on the aggregate number of kW allocated to all the User's dedicated cabinets, and not charged on a per-cabinet basis. It would add detail previously stated in rule filings with the Commission
The proposed change is equitable, as it would add clarity for all market participants with respect to how the monthly fee for dedicated cabinets is calculated. At the same time, it is a non-substantive change that would not impact the services available to Users or the fees charged for such services. The Exchange does not expect to attract any new Users as a result of the proposed change. The proposed change is not expected to have any impact on Users. Users are currently subject to the described services and fees, none of which is new or novel.
For the reasons above, the proposed changes do not unfairly discriminate between or among market participants that are otherwise capable of satisfying any applicable colocation fees, requirements, terms, and conditions established from time to time by the Exchange.
For these reasons, the Exchange believes that the proposal is consistent with the Act.
In accordance with Section 6(b)(8) of the Act,
For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
No written comments were solicited or received with respect to the proposed rule change.
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
At any time within 60 days of the filing of such 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 under Section 19(b)(2)(B)
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)
The Exchange proposes a rule change to extend the effective date in Interpretation and Policy .10 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) under NYSE Chicago Article 6, Rule 13 (Registration Requirements) applicable to Participants, from April 30, 2021 to June 30, 2021. The Exchange does not anticipate providing any further extensions to the temporary relief identified in this proposed rule change beyond June 30, 2021.
In its filing with the Commission, the self-regulatory organization 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 extend the effective date in Interpretation and Policy .10 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) under NYSE Chicago Article 6, Rule 13 (Registration Requirements) applicable to Participants,
In response to COVID-19 global pandemic, last year FINRA began providing temporary relief by way of frequently asked questions (“FAQs”)
FINRA published the first FAQ on March 20, 2020, providing that individuals who were designated to function as principals under FINRA Rule 1210.04
On September 25, 2020, NYSE Chicago filed with the Commission a proposed rule change for immediate effectiveness to extend the temporary relief provided via the FAQ by adopting temporary Interpretation and Policy .10 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) under NYSE Chicago Article 6, Rule 13 (Registration Requirements).
As mentioned in the prior filings, FINRA began providing, and then extended, temporary relief to address the interruptions in the administration of FINRA qualification examinations at Prometric test centers and the limited ability of individuals to sit for the examinations caused by the COVID-19 pandemic.
While there are signs of improvement, the COVID-19 conditions necessitating the temporary relief persist and FINRA has determined that there is a continued need for this temporary relief beyond April 30, 2021. Although Prometric has resumed testing in many of its U.S. test centers, Prometric's safety practices mean that currently not all test centers are open, some of the open test centers are at limited capacity, and some open test centers are delivering only certain examinations that have been deemed essential by the local government.
Although the COVID-19 conditions necessitating the temporary relief persist, in the FINRA Filing, FINRA stated that an extension of the relief is necessary only until June 30, 2021, because FINRA recently expanded the availability of online examinations. Prior to this expansion, the ongoing effects of the pandemic made it impracticable for FINRA members to ensure that the individuals who they had designated to function in a principal capacity, as set forth in FINRA Rule 1210.04, could successfully sit for and pass an appropriate qualification examination within the 120-calendar day period required under the rule.
These ongoing circumstances make it impracticable for Participants to ensure that the individuals whom they have designated to function in a principal capacity, as set forth in Interpretation and Policy .03 under Article 6, Rule 13, are able to successfully sit for and pass an appropriate qualification examination within the 120-calendar day period required under the rule, or to find other qualified staff to fill this position. Therefore, NYSE Chicago is proposing to extend the effective date of the temporary relief provided through SR-NYSECHX-2020-33 until June 30, 2021. The proposed rule change would apply only to those individuals who were designated to function as a principal prior to March 3, 2021. Any individuals designated to function as a principal on or after March 3, 2021, would need to successfully pass an appropriate qualification examination within 120 days.
NYSE Chicago believes that this proposed continued extension of time is tailored to address the needs and constraints on a Participant's operations during the COVID-19 pandemic, without significantly compromising critical investor protection. The proposed extension of time will help to minimize the impact of COVID-19 on Participants by providing continued flexibility so that Participants can ensure that principal positions remain filled. The potential risks from the proposed extension of the 120-day period are mitigated by the Participant's continued requirement to supervise the activities of these designated individuals and ensure compliance with federal securities laws and regulations, as well as NYSE Chicago rules. NYSE Chicago has filed the proposed rule change for immediate effectiveness and has requested that the Commission waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing, so NYSE Chicago can implement the proposed rule change immediately.
The proposed rule change is consistent with Section 6(b) of the Exchange Act,
The proposed rule change is intended to minimize the impact of COVID-19 on Participants' operations by extending the 120-day period certain individuals may function as a principal without having successfully passed an appropriate qualification examination under Interpretation and Policy .03 under Article 6, Rule 13 until June 30, 2021. The proposed rule change does not relieve Participants from maintaining, under the circumstances, a reasonably designed system to supervise the activities of their associated persons to achieve compliance with applicable securities laws and regulations, and with applicable NYSE Chicago rules that directly serve investor protection. In a time when faced with unique challenges resulting from the COVID-19 pandemic, NYSE Chicago believes that the proposed rule change is a sensible accommodation that will continue to afford Participants the ability to ensure that critical positions are filled and client services maintained, while continuing to serve and promote the protection of investors and the public interest in this unique environment.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not
No written comments were solicited or received with respect to 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) normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative immediately upon filing. As noted above, the Exchange stated that the conditions necessitating the temporary relief continue to exist and the proposed extension of time will help minimize the impact of the COVID-19 outbreak on NYSE Chicago Participants' operations by allowing them to keep principal positions filled and minimizing disruptions to client services and other critical responsibilities. Despite signs of improvement, the Exchange further stated that the ongoing extenuating circumstances of the COVID-19 pandemic make it impractical to ensure that individuals designated to act in these capacities are able to take and pass the appropriate qualification examination during the 120-calendar day period required under the rules.
The Exchange observed that, following a nationwide closure of all test centers earlier in the year, some test centers have re-opened, but are operating at limited capacity or are only delivering certain examinations that have been deemed essential by the local government.
For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest.
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” or “Exchange Act”)
The Exchange is filing a proposal to amend Interpretation and Policy .13 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) to Exchange Rule 1900, Registration Requirements, to extend the expiration date of the temporary amendment set forth in SR-MIAX-2020-42 from April 30, 2021 to June 30, 2021. The Exchange does not anticipate providing any further extensions to the temporary amendment identified in this proposed rule change beyond June 30, 2021.
The text of the proposed rule change is available on the Exchange's website at
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 amend Interpretation and Policy .13 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) to Exchange Rule 1900, Registration Requirements, to extend the expiration date of the temporary amendment set forth in SR-MIAX-2020-42 from April 30, 2021 to June 30, 2021. The proposed rule change would extend the 120-day period that certain individuals can function as principals without having successfully passed an appropriate qualification examination through June 30, 2021,
In response to the COVID-19 global pandemic, last year FINRA began providing temporary relief by way of frequently asked questions (“FAQs”)
FINRA published the first FAQ on March 20, 2020, providing that individuals who were designated to function as principals under FINRA Rule 1210.04
Thereafter, on December 9, 2020, FINRA filed with the Commission a proposed rule change for immediate effectiveness to extend the limited period for registered persons to function as a principal through April 30, 2021.
The Exchange continues to closely monitor the impact of the COVID-19 pandemic on Members,
While there are signs of improvement, the COVID-19 conditions necessitating the temporary relief persist and the Exchange has determined that there is a continued need for this temporary relief beyond April 30, 2021. Although Prometric has resumed testing in many of its U.S. test centers, Prometric's safety practices mean that currently not all test centers are open, some of the open test centers are at limited capacity, and some open test centers are delivering only certain examinations that have been deemed essential by the local government.
Although the COVID-19 conditions necessitating the temporary relief persist, the Exchange believes that an extension of the relief is necessary only until June 30, 2021, because FINRA recently expanded the availability of online examinations. Prior to this expansion, the ongoing effects of the pandemic made it impracticable for Members to ensure that the individuals who they had designated to function in a principal capacity, as set forth in Exchange Rule 1900, Interpretation and Policy .04, could successfully sit for and pass an appropriate qualification examination within the 120-calendar day period required under the rules.
The Exchange believes that this proposed continued extension of time is tailored to address the needs and constraints on a Member's operations during the COVID-19 pandemic, without significantly compromising critical investor protection. The proposed extension of time will help to minimize the impact of COVID-19 on Members by providing continued flexibility so that Members can ensure that principal positions remain filled. The potential risks from the proposed extension of the 120-day period are mitigated by a Member's continued requirement to supervise the activities of these designated individuals and ensure compliance with federal securities laws and regulations, as well as Exchange and FINRA rules.
The Exchange has filed the proposed rule change for immediate effectiveness and has requested that the Commission waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing, so the Exchange can implement the proposed rule change immediately.
The Exchange believes that its proposed rule change is consistent with Section 6(b) of the Act
The proposed rule change is intended to minimize the impact of COVID-19 on Member operations by further extending the 120-day period certain individuals may function as a principal without having successfully passed an appropriate qualification examination under Exchange Rule 1900, Interpretation and Policy .04, until June 30, 2021. The proposed rule change does not relieve Members from maintaining, under the circumstances, a reasonably designed system to supervise the activities of their associated persons to achieve compliance with applicable securities laws and regulations, and with applicable Exchange and FINRA rules that directly serve investor protection. In a time when faced with unique challenges resulting from the COVID-19 pandemic, the Exchange believes that the proposed rule change is a sensible accommodation that will continue to afford Members the ability to ensure that critical positions are filled and client services maintained, while continuing to serve and promote the protection of investors and the public interest in this unique environment.
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 proposed rule change is intended to provide temporary relief given the impacts of the COVID-19 pandemic crisis and to also maintain consistency with the rules of other self-regulatory organizations (“SROs”) with respect to the registration requirements applicable to Members and their registered personnel. In that regard, the Exchange believes that any burden on competition would be clearly outweighed by providing Members with temporary relief in this unique environment while also ensuring clear and consistent requirements applicable across SROs and mitigating any risk of SROs implementing different standards in these important areas. In its filings, FINRA provides an abbreviated economic impact assessment maintaining that the changes are necessary to temporarily rebalance the attendant benefits and costs of the obligations under FINRA Rule 1210 in response to the impacts of the COVID-19 pandemic that is equally applicable to the changes the Exchange proposes.
Written comments were neither solicited nor received.
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) normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative immediately upon filing. As noted above, the Exchange stated that the conditions necessitating the temporary relief continue to exist and the proposed extension of time will help minimize the impact of the COVID-19 outbreak on Members' operations by allowing them to keep principal positions filled and minimizing disruptions to client services and other critical responsibilities. Despite signs of improvement, the Exchange further stated that the ongoing extenuating circumstances of the COVID-19 pandemic make it impractical to ensure that individuals designated to act in a principal capacity are able to take and pass the appropriate qualification examination during the 120-calendar day period required under the rules.
The Exchange observed that, following a nationwide closure of all test centers earlier in the year, some test centers have re-opened, but are operating at limited capacity or are only delivering certain examinations that have been deemed essential by the local government.
For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest.
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”),
The Exchange proposes to amend the Exchange's Pricing Schedule at Options 7 to adopt pricing for index options on the Nasdaq 100 Micro Index, as described further below.
The text of the proposed rule change is available on the Exchange's website at
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 recently received approval to list index options on the Nasdaq 100 Micro Index (“XND”) on a pilot basis.
The Exchange now proposes to amend its Pricing Schedule to adopt pricing for XND. By way of background, certain proprietary products such as NDX and NDXP are commonly excluded from a variety of fee programs. The Exchange notes that the reason for such exclusion is because the Exchange has expended considerable resources developing and maintaining its proprietary products. Similar to NDX and NDXP, XND is a proprietary product. As such, the Exchange proposes to establish transaction fees for XND that are similarly structured to the transaction fees for NDX and NDXP with some differences as noted below. The Exchange also proposes to exclude XND from several pricing programs in the same manner as which NDX and NDXP are excluded today.
Today, the Customer
Today, as set forth in Options 7, Section 4, electronic (both simple and complex orders) and floor Options Transaction Charges for NDX and NDXP are $0.75 per contract for all Non-Customers.
The Exchange now proposes to establish a similar pricing structure for XND where all Non-Customers will be assessed a uniform Options Transaction Charge for electronic (simple and complex orders) and floor transactions, and Customers will not be assessed any Options Transaction Charges. Specifically, the Exchange proposes to assess Non-Customers a uniform electronic and floor Options Transaction Charge of $0.10 per contract in XND. As noted above, Customers will receive free executions in XND. The Exchange also proposes to assess Non-Customers a surcharge of $0.10 per contract in XND. The Exchange is proposing to assess a lower Options Transaction Charge and surcharge for XND as compared to NDX and NDXP because XND is based on 1/100 of the value of the Nasdaq 100 Index whereas both NDX and NDXP are based on the full value of the Nasdaq 100 Index. The Exchange therefore seeks to assess corresponding reduced fees for XND.
Today, NDX and NDXP are excluded from a variety of fee programs in Options 7, Section 4. The Exchange proposes to update Options 7, Section 4 to similarly exclude XND from these fee programs.
NDX and NDXP are currently excluded from the $0.12 per contract surcharge assessed to electronic Complex Orders that remove liquidity from the Complex Order Book and auctions, excluding PIXL, in Non-Penny Symbols.
Today, Lead Market Makers
Today, Firms
Today, the Exchange waives the Firm Floor Options Transaction Charges in Options 7, Section 4 for members executing facilitation orders pursuant to Options 8, Section 30 when such members are trading in their own proprietary account (including Cabinet Options Transaction Charges). The Firm Floor Options Transaction Charges will be waived for the buy side of a transaction if the same member or its affiliates under Common Ownership
Today, transactions in NDX and NDXP are excluded from the “Strategy Caps” in Options 7, Section 4. Strategy Caps limit the fees that otherwise apply to certain categories of market participants when they engage in floor options transactions while employing strategies set forth in the Pricing Schedule, namely dividend, merger, short stock interest, reversal and conversion, jelly roll, or box spread strategies. The Exchange proposes to likewise exclude transactions in XND from Strategy Caps.
Today, no Marketing Fees are assessed on transactions in NDX or NDXP. The Exchange proposes to likewise exclude XND transactions from the Marketing Fees.
Today, options overlying NDX and NDXP are not subject to Options 7, Section 6.A. PIXL Pricing.
Today, FLEX options are assessed the transaction fees set forth in Options 7,
The Exchange proposes to charge FLEX XND options in a similar manner. Specifically, the Exchange will apply the proposed XND options surcharge of $0.10 per contract to Non-Customers in FLEX XND options. Further, the Exchange will apply the proposed XND Options Transaction Charges of $0.10 per contract (Non-Customer) and $0.00 per contract (Customer) to FLEX XND options.
Today, as set forth in Options 7, Section 6.E, the Exchange provides MARS Payments to Phlx members that have System Eligibility
In connection with the foregoing changes to adopt pricing for XND, the Exchange proposes to relocate the pricing for NDX and NDXP and related notes presently set forth in Options 7, Section 4 regarding the Options Transaction Charges and the Non-Customer surcharge, and to group them with the proposed Options Transaction Charges and proposed Non-Customer surcharge for XND.
As shown above, the rates for NDX and NDXP are not changing; rather, the existing Options Transaction Charges and Non-Customer surcharges in Options 7, Section 4 are being relocated into Options 7, Section 5.A and grouped together with the proposed pricing for XND. The Exchange considers it appropriate to separate out NDX, NDXP, and XND pricing in the manner described above so that Phlx's pricing for these index options may be easily located within its Pricing Schedule. For the sake of clarity, the Exchange also proposes to amend the Options Transaction Charge header for Non-Penny Symbols in Options 7, Section 4, which already excludes NDX and NDXP, to add XND to the list of excluded Non-Penny Symbols that will not be subject to this fee. The Exchange further proposes to amend its Pricing Schedule to update all current references to Options 7, Section 4 NDX and NDXP pricing to Options 7, Section 5.A.
The Exchange also proposes non-substantive, clean-up changes in Options 7, Section 5 to restructure the existing rule text. With the changes proposed above to add new Section 5.A of Options 7 to set forth NDX, NDXP, and XND pricing, the Exchange proposes to set forth Singly Listed Options pricing in new Section 5.B. The Exchange also proposes to set forth FX Options pricing in new Section 5.C, and further proposes to relocate the language regarding U.S. dollar-settled foreign currency options into the new Section 5.C header. Accordingly, new Section 5.C will be titled, “FX Options: U.S. dollar-settled foreign currency options include XDB, XDE, XDN, XDS, XDA, XDZ and XDC.” The Exchange is not amending any of the existing rates for Singly Listed Options or FX Options with this proposal. Lastly, the Exchange proposes to retitle Options 7, Section 5 as “Index and Singly Listed Options (Includes options overlying FX Options, equities, ETFs, ETNs, and indexes not listed on another exchange).”
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Exchange's proposal to not pay the Customer Rebates in Options 7, Section 1.B on XND, but to count XND volume toward qualifying for a Customer Rebate Tier, similar to NDX and NDXP, is reasonable because the Exchange seeks to treat XND in the same manner as NDX and NDXP under this rebate program. NDX, NDXP, and XND represent similar options on the same underlying Nasdaq 100 Index. Further, it is reasonable to not pay Customer Rebates on XND in any rebate category because this index option will be exclusively listed on Phlx only. The original intent of the Customer Rebate Program was to pay rebates on electronically-delivered multiply-listed options. By definition, XND will not be a multiply-listed option, and the Exchange does not desire to pay rebates on XND because of the exclusivity of this option. While the Exchange will not pay any Customer Rebates on XND transactions, the Exchange also believes it is reasonable to count XND in the total volume to qualify a market participant for these rebates as market participants would be incentivized to transact in XND to qualify for the Customer Rebate Tiers.
The Exchange believes that its proposal to not pay Customer Rebates on XND, but to count XND volume toward the volume requirement to qualify for a rebate tier is equitable and not unfairly discriminatory because the Exchange would apply the rebate program as described uniformly for all market participants. Any market participant is eligible to earn a Customer Rebate.
The Exchange believes it is reasonable to assess the proposed Options Transaction Charge and Non-Customer surcharge as discussed above for XND because the proposed pricing reflects the exclusive and proprietary nature of this product. Similar to NDX and NDXP, the Exchange seeks to recoup the operational costs for listing proprietary products.
Further, the Exchange believes that the proposed rates for XND are reasonable because they are well within the range of fees assessed for the Exchange's other proprietary products, namely NDX and NDXP.
The Exchange's proposal to assess the $0.10 per contract Options Transaction Charge in XND is equitable and not unfairly discriminatory because the Exchange will assess this fee uniformly to all Non-Customers. The Exchange similarly believes that the proposed $0.10 per contract XND surcharge is equitable and not unfairly discriminatory because it will apply uniformly to all Non-Customers. The Exchange believes it is equitable and not unfairly discriminatory to assess no transaction fees to Customers for XND because Customer orders bring valuable liquidity to the market, which liquidity benefits other market participants. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Lead Market Makers and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants.
The Exchange believes that the proposed updates in Options 7, Section 4 in connection with the application of certain fee programs to XND are reasonable, equitable, and not unfairly discriminatory. Particularly, the Exchange believes that it is reasonable to exclude XND from the Non-Penny complex surcharge in note 7 of Options 7, Section 4, Monthly Market Maker Cap, Monthly Firm Fee Cap, Floor Options Transaction Charge waivers, Strategy Caps, and Marketing Fees in the same manner in which NDX and NDXP are currently excluded from the same programs today. The Exchange believes it is appropriate to update these fee programs in a manner that similarly situates XND with NDX and NDXP as these are all proprietary products that are based on the Nasdaq 100 Index. In addition, similar to NDX and NDXP, the Exchange seeks to recoup the operational costs for listing proprietary products by excluding XND from programs that cap or waive transaction fees for market participants. As it relates to the Marketing Fee, the Exchange believes it is reasonable to exclude XND from this fee, similar to NDX and NDXP today, because the purpose of the Marketing Fee is to generate more Customer order flow to the Exchange. Because XND will be an exclusively listed product on Phlx, the Exchange does not believe that applying a marketing fee is necessary for this product.
The Exchange's proposal to exclude XND from the various fee programs in Options 7, Section 4 as discussed above is equitable and not unfairly discriminatory because the programs will equally exclude in the same manner all market participants' orders in XND. The Exchange notes that its proposal does not alter any of the existing fee programs, but instead merely proposes to exclude XND in
The Exchange's proposal to exclude XND from PIXL pricing in Options 7, Section 6.A, and instead assess XND transactions in PIXL the proposed Options 7, Section 5.A pricing is reasonable because the Exchange intends to assess the same fees across the board for XND transactions (
The proposed changes are equitable and not unfairly discriminatory because the Exchange will uniformly exclude NDXP from PIXL pricing for all market participants, and instead uniformly charge them the Options 7, Section 5.A pricing.
The Exchange believes that its proposal to assess FLEX XND options the Options Transaction Charge and Non-Customer options surcharge in Options 7, Section 5.A is reasonable because the Exchange intends to assess the same fees across the board for XND transactions. Specifically, the Exchange will apply the proposed XND options surcharge of $0.10 per contract to Non-Customers in FLEX XND options. Further, the Exchange will apply the proposed XND Options Transaction Charges of $0.10 per contract (Non-Customer) and $0.00 per contract (Customer) to FLEX XND options. FLEX NDX and NDXP options are likewise assessed the same Options Transaction Charge and Non-Customer options surcharge that NDX and NDXP options are assessed today. The Exchange's proposal is equitable and not unfairly discriminatory because the Exchange will uniformly apply these fees to FLEX NDX and NDXP options to all similarly situated market participants.
The Exchange believes it is reasonable to exclude XND from Eligible Contracts for purposes of qualifying for a MARS Payment in the same manner in which NDX and NDXP are currently excluded today. The Exchange believes it is appropriate to update its MARS program in a manner that similarly situates XND with its other proprietary products, NDX and NDXP, which are all based on the Nasdaq 100 Index.
The Exchange believes that its proposal is equitable and not unfairly discriminatory because the Exchange will uniformly exclude XND from MARS for all market participants.
The Exchange believes that the proposed changes to relocate and group the transaction fees for NDX, NDXP, and XND within Options 7, Section 5.A, and all of the non-substantive changes related to the relocation, each as discussed above, are reasonable, equitable, and not unfairly discriminatory. The proposed changes are all intended to bring greater clarity, and will ensure that the Exchange's pricing for NDX, NDXP, and XND may be easily located within its Pricing Schedule. The Exchange further believes that the proposed non-substantive changes in Options 7, Section 5 to restructure the existing rule text and retitle various section headers are reasonable, equitable, and not unfairly discriminatory as they will facilitate the use of the Pricing Schedule by market participants.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. The Exchange notes that with its products, market participants are offered an opportunity to transact in NDX, NDXP, or XND, or separately execute options overlying QQQ. Offering these products provides market participants with a variety of choices in selecting the product they desire to utilize to transact in the Nasdaq 100 Index.
Further, the Exchange does not believe that the proposed rule change will impose any burden on intra-market competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed XND pricing will apply uniformly to all similarly situated market participants. Specifically, all Non-Customers will be assessed a uniform Options Transaction Charge and options surcharge while Customers receive free executions. As discussed above, Customer liquidity benefits all market participants by providing more trading opportunities, which attracts other market participants, thus facilitating tighter spreads and increased order flow.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) 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.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act” or “Exchange Act”)
The Exchange is filing a proposal to amend Interpretation and Policy .13 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) to Exchange Rule 3100, Registration Requirements, to extend the expiration date of the temporary amendment set forth in SR-PEARL-2020-36 from April 30, 2021 to June 30, 2021. The Exchange does not anticipate providing any further extensions to the temporary amendment identified in this proposed rule change beyond June 30, 2021.
The text of the proposed rule change is available on the Exchange's website at
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 amend Interpretation and Policy .13 (Temporary Extension of the Limited Period for Registered Persons to Function as Principals) to Exchange Rule 3100, Registration Requirements, to extend the expiration date of the temporary amendment set forth in SR-PEARL-2020-36 from April 30, 2021 to June 30, 2021. The proposed rule change would extend the 120-day period that certain individuals can function as principals without having successfully passed an appropriate qualification examination through June 30, 2021,
In response to the COVID-19 global pandemic, last year FINRA began providing temporary relief by way of frequently asked questions (“FAQs”)
FINRA published the first FAQ on March 20, 2020, providing that individuals who were designated to function as principals under FINRA Rule 1210.04
Thereafter, on December 9, 2020, FINRA filed with the Commission a proposed rule change for immediate effectiveness to extend the limited period for registered persons to function as a principal through April 30, 2021.
The Exchange continues to closely monitor the impact of the COVID-19 pandemic on Members,
While there are signs of improvement, the COVID-19 conditions necessitating the temporary relief persist and the Exchange has determined that there is a continued need for this temporary relief beyond April 30, 2021. Although Prometric has resumed testing in many of its U.S. test centers, Prometric's safety practices mean that currently not all test centers are open, some of the open test centers are at limited capacity, and some open test centers are delivering only certain examinations that have been deemed essential by the local government.
Although the COVID-19 conditions necessitating the temporary relief persist, the Exchange believes that an extension of the relief is necessary only until June 30, 2021, because FINRA recently expanded the availability of online examinations. Prior to this expansion, the ongoing effects of the pandemic made it impracticable for Members to ensure that the individuals who they had designated to function in a principal capacity, as set forth in Exchange Rule 3100, Interpretation and Policy .04, could successfully sit for and pass an appropriate qualification examination within the 120-calendar day period required under the rules.
The Exchange believes that this proposed continued extension of time is tailored to address the needs and constraints on a Member's operations during the COVID-19 pandemic, without significantly compromising critical investor protection. The proposed extension of time will help to minimize the impact of COVID-19 on Members by providing continued flexibility so that Members can ensure that principal positions remain filled. The potential risks from the proposed extension of the 120-day period are mitigated by a Member's continued requirement to supervise the activities of these designated individuals and ensure compliance with federal securities laws and regulations, as well as Exchange and FINRA rules.
The Exchange has filed the proposed rule change for immediate effectiveness and has requested that the Commission waive the requirement that the proposed
The Exchange believes that its proposed rule change is consistent with Section 6(b) of the Act
The proposed rule change is intended to minimize the impact of COVID-19 on Member operations by further extending the 120-day period certain individuals may function as a principal without having successfully passed an appropriate qualification examination under Exchange Rule 3100, Interpretation and Policy .04, until June 30, 2021. The proposed rule change does not relieve Members from maintaining, under the circumstances, a reasonably designed system to supervise the activities of their associated persons to achieve compliance with applicable securities laws and regulations, and with applicable Exchange and FINRA rules that directly serve investor protection. In a time when faced with unique challenges resulting from the COVID-19 pandemic, the Exchange believes that the proposed rule change is a sensible accommodation that will continue to afford Members the ability to ensure that critical positions are filled and client services maintained, while continuing to serve and promote the protection of investors and the public interest in this unique environment.
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 proposed rule change is intended to provide temporary relief given the impacts of the COVID-19 pandemic crisis and to also maintain consistency with the rules of other self-regulatory organizations (“SROs”) with respect to the registration requirements applicable to Members and their registered personnel. In that regard, the Exchange believes that any burden on competition would be clearly outweighed by providing Members with temporary relief in this unique environment while also ensuring clear and consistent requirements applicable across SROs and mitigating any risk of SROs implementing different standards in these important areas. In its filings, FINRA provides an abbreviated economic impact assessment maintaining that the changes are necessary to temporarily rebalance the attendant benefits and costs of the obligations under FINRA Rule 1210 in response to the impacts of the COVID-19 pandemic that is equally applicable to the changes the Exchange proposes.
Written comments were neither solicited nor received.
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) normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative immediately upon filing. As noted above, the Exchange stated that the conditions necessitating the temporary relief continue to exist and the proposed extension of time will help minimize the impact of the COVID-19 outbreak on Members' operations by allowing them to keep principal positions filled and minimizing disruptions to client services and other critical responsibilities. Despite signs of improvement, the Exchange further stated that the ongoing extenuating circumstances of the COVID-19 pandemic make it impractical to ensure that individuals designated to act in a principal capacity are able to take and pass the appropriate qualification examination during the 120-calendar day period required under the rules.
The Exchange observed that, following a nationwide closure of all test centers earlier in the year, some test centers have re-opened, but are operating at limited capacity or are only delivering certain examinations that have been deemed essential by the local government.
For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public
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”),
The Exchange proposes to amend Exchange Rule 515, Execution of Orders and Quotes; Rule 516, Order Types Defined; Rule 517 Quote Types Defined; Rule 605, Market Maker Orders; and Rule 612 Aggregate Risk Manager to eliminate Fill-or-Kill (FOK) Orders and FOK eQuotes from the rulebook and to delete references to same.
The text of the proposed rule change is available on the Exchange's website at
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 amend its rules to eliminate Fill-or-Kill Orders and Fill-or-Kill eQuotes. A Fill-or-Kill (“FOK”) Order is described by the Exchange as a limit order that is to be executed in its entirety at a single price as soon as it is received and, if not so executed is cancelled.
Specifically, the Exchange now proposes to amend paragraph (c)(1) of Exchange Rule 515 to remove the
MIAX Emerald is an affiliate exchange of the MIAX Options Exchange and offers similar functionality and similar order types as MIAX Options. MIAX Options Exchange Rule 516 states,
MIAX Options recently issued Regulatory Circulars indicating that FOK Orders and FOK eQuotes will no longer be available for use on the MIAX Options Exchange.
The Exchange believes that its proposed rule change is consistent with Section 6(b) of the Act
The Exchange believes that its proposal promotes just and equitable principles of trade and removes impediments to and perfects the mechanisms of a free and open market and a national market system and, in general, protects investors and the public interest by removing an order type from the Exchange that is not widely used by investors. Removing an infrequently used order type from the Exchange's rulebook benefits investors by simplifying the Exchange's rulebook.
Additionally, the Exchange believes that its proposal promotes just and equitable principles of trade and 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 by aligning functionality available on the Exchange to that of its affiliate exchange. Specifically, the Exchange believes that although MIAX Emerald rules may, in certain instances, intentionally differ from MIAX Options rules, the proposed change will promote uniformity with the MIAX Options Exchange and allow MIAX Emerald to provide functionality similar to MIAX Options. MIAX Emerald and MIAX Options may have a number of common Members, and where feasible the Exchange intends to provide consistency between MIAX Options and MIAX Emerald so as to avoid confusion among Members.
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 believes the proposed rule change will not impose any burden on intra-market competition because the rules of the Exchange apply equally to all Members. Members may still receive an immediate execution on the Exchange by using an Immediate-or-Cancel Order.
The Exchange does not believe that the proposed rule change will impose any burden on inter-market competition as the Exchange's proposal is not designed to address any competitive issues. The Exchange's proposal removes an infrequently used order type from the Exchange and aligns its functionality to its affiliate Exchange, MIAX Options. Additionally, the Exchange believes the proposed rule change will not impose any burden on inter-market competition as option exchanges offer a variety of order types and not every option exchange offers every order type.
Written comments were neither solicited nor received.
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
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act normally does not become operative for 30 days after the date of its filing. However, Rule 19b-4(f)(6)(iii)
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 change 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”),
The Exchange proposes to establish BOX Rule 7670 to adopt a Virtual Trading Floor on BOX. The text of the proposed rule change is available from the principal office of the Exchange, at the Commission's Public Reference Room and also on the Exchange's internet website at
In its filing with the Commission, the self-regulatory organization 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 self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to establish BOX Rule 7670 to adopt a Virtual Trading Floor on BOX. This is a competitive filing that is based on a proposal submitted by Cboe Exchange, Inc. (“Cboe”) and approved by the Commission.
On March 20, 2020, as a precautionary measure to prevent the potential spread of coronavirus (COVID-19), BOX closed the Trading Floor located in Chicago, Illinois for an indefinite period of time. As a result of the closure of the Trading Floor, BOX operated in an electronic only trading mode. The Exchange continued to operate in an all-electronic capacity until May 4, 2020, when the Exchange reopened its Trading Floor with continued safety guidelines, policies and procedures in place. However, given the uncertainty related to the ongoing pandemic, which includes the possibility of the Exchange having to close its Trading Floor again, and given the possibility that the Exchange's Trading Floor may be inoperable or at capacity for other reasons in the future, the Exchange believes it is appropriate to continue to review and enhance its rules with regard to its business continuity plans. While BOX continued to operate in an all-electronic capacity while the physical Trading Floor was closed, an all-electronic trading environment cannot fully replicate open outcry trading. Therefore, the Exchange continues to evaluate potential enhancements that it believes would permit open outcry trading while the Trading Floor is inoperable to more closely replicate its trading environment that exists during normal operations.
There are certain features of open outcry trading that are difficult to replicate in an electronic trading environment, particularly the human interaction that permits persons to negotiate pricing and to facilitate executions of larger orders and high-risk complicated strategies. For example, from January 2, 2020 through March 21, 2020 (the last day on which the Trading Floor was open), Complex Orders for options with more than four legs represented approximately 11.3% of the total complex order average daily volume (“ADV”) during that timeframe. However, from March 22, 2020 (the first day on which the Trading Floor was closed) through May 1, 2020 (the last day before the Trading Floor reopened), Participants executed zero complex orders for options with more than four legs.
The Exchange believes the proposed rule change would further enhance the Exchange's trading environment when the physical Trading Floor is inoperable by permitting market participants that generally operate on the Trading Floor to continue to interact in a substantially similar manner as they do on the Trading Floor. Specifically, the Exchange proposes to adopt Rule 7670(a) which details the Loss of Trading Floor. If the Exchange Trading Floor becomes inoperable and the Exchange does not make a Virtual Trading Floor available, the Exchange will continue to operate in an electronic only environment while the Trading Floor is inoperable. Open outcry trading will not be available in the event the Trading Floor becomes inoperable except as otherwise set forth in Rule 7670 discussed herein. The Exchange reiterates that the proposed Virtual Trading Floor will only be activated if the physical Trading Floor becomes inoperable. Further, the Exchange has the discretion to not activate the Virtual Trading Floor if the physical Trading Floor becomes inoperable.
The Exchange proposes to adopt Rule 7670(a)(1) which will allow the Exchange to make available an audio and video communication program to serve as a “Virtual Trading Floor” during regular trading hours. In the program, the Exchange will create a “Virtual Trading Pit.” In the Virtual Trading Pit, each Participant authorized to access the Virtual Trading Floor (as described below) that enters the Virtual Trading Pit will be visible to all other Participants in that Virtual Trading Pit. Additionally, all Participants in that Virtual Trading Pit may speak to each other through the program. This will allow the same communication capabilities Participants generally have on the physical Trading Floor so that they may conduct open outcry trading on the Virtual Trading Floor in the same manner as they do on the physical Trading Floor.
All rules related to open outcry trading will apply to open outcry trading on the Virtual Trading Floor in the same manner as they apply to open outcry trading on the physical Trading Floor, except as the context otherwise requires and as set forth in proposed subparagraph (a)(1)(A). Proposed subparagraph (a)(1)(A) lists certain terms in the rules related to open outcry trading on the physical Trading Floor that will be deemed to refer to corresponding terms related to open outcry trading on the Virtual Trading Floor. Specifically:
(i) References in the Rules to the “Floor,” “Trading Floor,” and “Exchange Floor” (and any other terms with the same meaning) will be deemed to refer to the “Virtual Trading Floor.”
(ii) References in the Rules to “Pit” and “Crowd Area” (and any other terms with the same meaning) will be deemed to refer to the “Virtual Trading Pit.”
(iii) The terms “in-crowd Floor Participant” mean a Floor Market Maker or a Floor Brooker representing an order in the Virtual Trading Pit on the Virtual Trading Floor.
Access to the Virtual Trading Floor will be substantially similar to access to the physical Trading Floor. Currently, admission to the physical Trading Floor is limited to Floor Participants, Exchange employees, Clerks employed by Floor Participants and registered with the Exchange, Exchange visitors that receive authorized admission to the Trading Floor pursuant to Exchange policy, and any other persons that the Exchange authorizes admission to the Trading Floor. Proposed Rule 7670(a)(1)(B) provides the same persons with access to the Virtual Trading Floor, except for visitors. While Clerks may access the Virtual Trading Floor, they may only perform the same functions for their associated organizations in connection with open outcry trading on the Virtual Trading Floor as they do for open outcry trading on the physical Trading Floor. The Exchange understands permitting Clerks to access the Virtual Trading Floor will provide them with access to the information that they normally have access to on the physical Trading Floor, which will make it more efficient for them to perform their tasks. Clerks will continue to be unable to enter into transactions on the Exchange. Additionally, as there is no physical equipment that would
As is the case with the physical Trading Floor, the Exchange will provide access to the Virtual Trading Floor to Participants the Exchange has approved to perform a Trading Floor function (including Floor Brokers and Floor Market Makers). This includes Participants (and individuals that represent Participant organizations) that are currently authorized to perform Trading Floor functions, as well as any additional Participants that receive such authorization in the future. Each authorized individual will receive one log-in to the Virtual Trading Floor. The Exchange currently requires at least one Market Maker to be present on the physical Trading Floor (prior to a Floor Broker announcing an order for execution)
Under this proposal, Floor Participants are not required to display badges on the Virtual Trading Floor, as the size of the view on the communication program may not permit badges to be visible.
As set forth in Rule 7660, and subject to the requirements in that Rule, Floor Participants may use any communication device on the physical Trading Floor (which it must register with the Exchange). Pursuant to proposed Rule 7670(a)(1)(C), Participants may use any equipment to access the Virtual Trading Floor. Prior to using a communications device for business purposes on the physical Trading Floor of the Exchange, Participants must register the communications device by identifying (in a form and manner prescribed by the Exchange) the hardware. Because individuals on the Virtual Trading Floor will not be on the Exchange premises (and thus will not be using Exchange provided bandwidth to be shared with all market participants and do not pose the same security risks), the proposed rule change will not require Participants to register devices they use while on the Virtual Trading Floor.
The Exchange will use a communication program that has audio and video capabilities, as well as “chat” functionality. Proposed Rule 7670(a)(1)(D) states that the Exchange may determine to require any Floor Market Maker or Floor Broker in the Virtual Trading Pit that wants to trade against an order represented for execution to express its bid or offer in a chat available in the Virtual Trading Pit.
The program also has a functionality that will permit Floor Brokers and Floor Market Makers on the Virtual Trading Floor to see an electronic blotter containing a running list of unexecuted orders that have been represented by Floor Brokers on the Virtual Trading Floor. Currently, Floor Brokers record the times at which they verbally represent orders on the Trading Floor by submitting their order to the Trading Host for execution. This information is generally only verbally available on the physical trading floor. However, similar
Further, pursuant to proposed Rule 7670(a)(1)(E), Floor Market Maker quotes will be considered firm in the event the Floor Market Maker is disconnected from the Virtual Trading Crowd and the parties have a Meeting of the Minds with respect to the terms of the transaction. A “Meeting of the Minds” means the contra-side(s) verbally confirmed participation in the trade. In the event that a Floor Market Maker is disconnected from the Virtual Trading Crowd, a Floor Market Maker quote would not be considered firm if the quote were provided and the parties did not have a Meeting of the Minds with respect to the terms of the transaction.
Today, a Floor Market Maker that experiences issues with internet connection, makes an error or otherwise is unaware of recent news in a particular option, would be held to a quote verbalized in open outcry. In the event that the negotiation continues and the terms change, the Floor Marker Maker would not be held to the new terms without additional acceptance of those terms. In the event that the transaction is not effectuated in the BOX Trading Host, the trade would not stand. To that end, the Exchange believes requiring quotes to remain firm once the parties have arrived at a Meeting of the Minds with respect to the terms of the transaction creates fair and equitable expectations for Participants trading in the Virtual Trading Crowd.
The Exchange notes that, regardless of whether it requires the chat function to be used, the Exchange will maintain records of all chats in the Virtual Trading Floor
Floor Officials will have access to the Virtual Trading Floor. Floor Officials will have the same authority to act in the Virtual Trading Floor as they do on the physical trading floor. Additionally, a BOX employee will be available to provide technical and operational support (in addition to regular Exchange support staff for floor operations) if Participants in the Virtual Trading Floor need assistance. If there was an issue with the communication program making the Virtual Trading Floor unavailable, the Exchange would operate in an all-electronic configuration (as it did earlier in 2020 when the physical Trading Floor was unavailable) until the communication program was available again.
While open outcry trading on the Virtual Trading Floor will occur with in-crowd market participants interacting with each other remotely through a computer communication program, all trading that occurs on the Virtual Trading Floor will occur in the same manner as it does on the physical Trading Floor. Specifically, open outcry trading on the Virtual Trading Floor will be subject to the same priority and allocation rules as open trading on the physical Trading Floor, as set forth in Rule 7600. Any risk controls and price protection mechanisms that apply to open outcry trading on the physical Trading Floor will apply in the same manner to open outcry trading on the Virtual Trading Floor. The Exchange will make the same order types and instructions available on the Virtual Trading Floor as it makes available on the physical Trading Floor. Floor Brokers will be subject to the responsibilities set forth in Rules 7570 and 7580 on the Virtual Trading Floor, as they are on the physical Trading Floor.
In addition, marker participants participating on the Virtual Trading Floor will be subject to the same regulatory requirements on the Virtual Trading Floor as they are on the physical Trading Floor, including those set forth in Rule Series 3000 and 4000. Orders must be systematized
Lastly, the Exchange notes that it has conducted meetings with Floor Participants in which the Exchange presented the functionality of the Virtual Trading Floor and has made the Virtual Trading Floor available for testing so that the Exchange will be ready to implement it if necessary. The Exchange has received positive feedback from Floor Participants regarding the Virtual Trading Floor and will continue to make updates as necessary and appropriate in response to comments it receives to make the Virtual Trading Floor replicate the open outcry trading
The Exchange believes that its proposal is consistent with Section 6(b) of the Act
The Exchange believes the proposed rule change will remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, as it will permit open outcry trading to continue in the event the Exchange's Trading Floor is inoperable. The Exchange again notes that the proposed Virtual Trading Floor will only be activated if the physical Trading Floor becomes inoperable. Further, the Exchange has the discretion to not activate the Virtual Trading Floor if the physical Trading Floor becomes inoperable. The Exchange believes that these factors, taken together, limit the scope of this proposal to extenuating circumstances that the Exchanges hopes to avoid. While the Exchange continues to believe that the physical Trading Floor is an essential function to BOX Market and hopes the physical Trading Floor does not become inoperable or require any closures in the future, the Exchange also believes it is appropriate to continue to review and enhance its rules with regard to its business continuity plans if the physical Trading Floor were to become inoperable. As such, the Exchange believes the adoption of a Virtual Trading Floor, which emulates the physical Trading Floor, is reasonable and appropriate given the circumstances the world faces today.
As discussed above, there are certain features of open outcry trading that are difficult to replicate in an all-electronic trading environment. The Exchange has observed, and understands from various market participants, that they have had difficulty executing certain orders, such as larger orders and high-risk and complicated strategies, in an all-electronic trading environment without the element of human interaction to negotiate pricing for these orders. The proposed rule change would provide an environment in which this interaction would be available despite the inoperability of the physical Trading Floor. The Exchange believes the proposed rule change may facilitate continued trading of these orders if and when the Trading Floor is inoperable. As a result, the Exchange believes providing continuous access to open outcry trading when the physical Trading Floor is inoperable will remove impediments to a free and open market and will ultimately benefit investors, particularly those desiring to execute high-risk and complex trading strategies.
The Exchange also believes the proposed rule change will promote just and equitable principles of trade, as open outcry trading on a Virtual Trading Floor will occur in accordance with the same trading rules and be subject to the same regulatory requirements that apply to open outcry trading on the physical Trading Floor, all of which have previously been filed with the Commission. The proposed rule change will merely permit this open outcry trading to occur in a virtual setting rather than a physical setting (which may be necessary and appropriate for health and safety purposes)—in other words, open outcry trading on a Virtual Trading Floor will occur while market participants operate remotely as they do when they trade electronically. Specifically, open outcry trading on the Virtual Trading Floor will be subject to the same priority and allocation rules as open trading on the physical Trading Floor, as set forth in Rule 7600 series. As is the case for open outcry trading on the physical Trading Floor, open outcry trading on the Virtual Trading Floor is consistent with Section 11(a) of the Act, as IM-7600-5 (which will apply to open outcry trading on the Virtual Trading Floor) requires Participants relying on Section 11(a)(1)(G) of the Act and Rule 11a1-1(T) thereunder (the so called “G exemption rule”) as an exemption must yield priority to any bid (offer) at the same price of Public Customer orders and broker-dealer orders resting in the Book, as well as any other bid (offer) that has priority over those Broker Dealer orders under this Rule. The Exchange may make the same order types and instructions available on the Virtual Trading Floor as it makes available on the physical Trading Floor. Floor Brokers will be subject to the responsibilities set forth in Rules 7570 and 7580 on the Virtual Trading Floor, as they are on the physical Trading Floor.
Additionally, Participants participating on the Virtual Trading Floor will be subject to the same regulatory requirements on the Virtual Trading Floor as they are on the physical Trading Floor, including those set forth in Rule Series 3000 and 4000. As previously noted, orders must be systematized and represented, and transactions reported, in connection with the Virtual Trading Floor in the same manner as they are when trading on the physical Trading Floor.
In addition, the Exchange believes the proposed rule change will not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers, as all individuals authorized to act on the physical Trading Floor (both Participant organizations authorized at the time the physical Trading Floor becomes inoperable and any Participant organization that becomes authorized after the physical Trading Floor becomes inoperable) will be provided with access to the Virtual Trading Floor.
Lastly, the Exchange notes that the proposed rule is a competitive response that is based on a proposal recently submitted by Cboe and approved by the Commission.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In this regard and as indicated above, the Exchange notes that the rule change is being proposed as a competitive response to a filing submitted by Cboe that was recently approved by the Commission. Further, 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, as all Participants authorized by the Exchange, or that become authorized by the Exchange, to transact on the Trading Floor will receive access to the Virtual Trading Floor. 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, as it relates solely to the location of open outcry trading on the Exchange. The proposed rule change will merely permit open outcry trading that generally occurs while market participants are located in the same physical setting to occur while market participants are in a remote setting, connected by a technological solution (as electronic trading does).
The Exchange believes that the proposed rule change will relieve any burden on, or otherwise promote, competition. The Exchange believes the proposed rule change will provide market participants with continuous access to open outcry trading when the physical Trading Floor is inoperable. The Exchange believes this may facilitate continued, competitive price negotiations and trading of orders that the Exchange understands are more difficult to execute in an all-electronic trading environment without human interaction. Additionally, the proposed rule change will provide customer orders represented for open outcry execution with access to the same pool of liquidity when the Trading Floor is inoperable to which those orders would have access when the Trading Floor is operating in its normal state. Maintenance of this level of liquidity at all times, even when the physical Trading Floor is inoperable, may promote competition by providing these customer orders with increased liquidity than may otherwise be available, and thus increased execution opportunities and price discovery.
The Exchange has neither solicited nor received comments on the proposed rule change.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be 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”) is filing with the Securities and Exchange Commission (the “Commission”) a proposed rule change with respect to amendments to the Sixth Amended and Restated Bylaws (the “CGM Bylaws”) of its parent corporation, Cboe Global Markets, Inc. (“Cboe” or “Corporation”). 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.
Cboe has received a stockholder proposal submitted pursuant to Rule 14a-8 under the Act
In developing its proposal, Cboe generally tried to balance the relative weight of arguments for and against proxy access provisions. On the one hand, Cboe recognizes the significance of this issue to some investors, who see proxy access as an important accountability mechanism that allows them to participate in board elections through the nomination of stockholder candidates that are presented in a company's proxy statement. On the other hand, Cboe's proposed proxy access provision includes certain procedural requirements that are designed to help ensure, among other things, that Cboe and its stockholders will have full and accurate information about nominating stockholders and their nominees and that such stockholders and nominees will comply with applicable laws, regulations and other requirements. Additionally, the Exchange notes the proposed terms are common among companies that have adopted proxy access. The Exchange also notes that the parent companies of other exchanges have adopted substantively similar proxy access provisions and the Exchange does not believe such provisions are materially different than the Exchange's proposal.
The proposed rule change would add new Section 2.16 to the CGM Bylaws. Section 2.16 would permit a stockholder, or group of up to 20 stockholders, to nominate director nominees for the Cboe Board, so long as the stockholder(s) have owned at least three percent of Cboe's outstanding shares of capital stock continuously for at least three years. The director nominees would be included in Cboe's annual meeting proxy materials. The proposed provision would limit the number of proposed director nominees to the greater of (i) two or (ii) 20% of the number of Cboe directors in office (rounded down to the nearest whole number, but no less than two) provided that the stockholder(s) and nominee(s) satisfy the other conditions specified in the CGM Bylaws as described further below.
The Exchange first proposes to amend the CGM Bylaws to, as set forth in the first sentence of proposed Section 2.16(a), require the Corporation to include in its proxy statement, its form proxy and any ballot distributed at the stockholder meeting, the name of, and certain Required Information
Proposed Section 2.16(b) will provide that in order to utilize this provision, the Eligible Stockholder must expressly request at the time of providing a required notice to the Corporation of the proxy access nomination (the “Notice of Proxy Access Nomination”) to have its nominee included in the Corporation's proxy materials. Proposed Section 2.16(b) also establishes the deadline for a timely Notice of Proxy Access Nomination. Specifically, such a notice must be delivered to the Cboe's Secretary at the principal executive offices of the Corporation not earlier than the open of business on the one hundred fiftieth (150th) day and not later than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the date that Cboe first distributed its proxy statement to stockholders for the previous year's annual meeting of stockholders provided, however, that in the event the annual meeting is more than thirty (30) days before or after the anniversary date of the prior year's annual meeting, or if no annual meeting was held in the preceding year, to be timely, the Notice of Proxy Access Nomination must be received at the principal executive offices of the Corporation no earlier than one hundred fifty (150) days before such annual meeting and no later than the later of one hundred twenty (120) days before such annual meeting or the tenth (10th) day following the day on which public announcement (as defined in Section 2.11) of the date of such meeting is first made by the Corporation. Further Section 2.16 will provide that in no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period (or extend any time period) for the giving of a Notice of Proxy Access Nomination as described above. Cboe believes this notice period will provide stockholders an adequate window to submit nominees via proxy access, while also providing the Corporation adequate time to diligence a proxy access nominee before including them in the proxy statement for the next annual meeting of stockholders.
Proposed Section 2.16(c) specifies that the maximum number (“the Permitted Number”) of Stockholder Nominees nominated by all Eligible Stockholders that will be included in Cboe's proxy materials with respect to an annual meeting of stockholders shall not exceed the greater of two or 20% of the total number of directors in office (rounded down to the nearest whole number) as of the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with the proxy access provision of the Bylaws (the “Final Proxy Access Nomination Date”). In the event that one or more vacancies for any reason occurs after the Final Proxy Access Nomination Date but before the date of the annual meeting and the Board resolves to reduce the size of the Board in connection therewith, the Permitted Number of Stockholder Nominees included in Cboe's proxy materials shall be calculated based on the number of directors in office as so reduced. In addition, the Permitted Number shall be reduced by (i) the number of individuals who will be included in the Corporation's proxy materials as director nominees recommended by the Board pursuant to an agreement, arrangement or other understanding with a stockholder or group of stockholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of stock from the Corporation by such stockholder or group of stockholders) and/or (ii) the number of directors in office as of the Final Proxy Access Nomination Date who were included in the Corporation's proxy materials as Stockholder Nominees for any of the two preceding annual meetings of stockholders (including any persons counted as Stockholder Nominees pursuant to the immediately succeeding sentence) and whose reelection at the upcoming annual meeting is being recommended by the Board. Any individual nominated by an Eligible Stockholder for inclusion in the proxy materials pursuant to the proxy access provision of the CGM Bylaws whom the Board decides to nominate as a nominee of the Board, and any individual nominated by an Eligible Stockholder for inclusion in the proxy materials pursuant to the proxy access provision but whose nomination is subsequently withdrawn, shall be counted as one of the Stockholder Nominees for purposes of determining when the Permitted Number of Stockholder Nominees has been reached. Any Eligible Stockholder submitting more than one Stockholder Nominee for inclusion in the proxy materials shall rank such Stockholder Nominees based on the order that the Eligible Stockholder desires such Stockholder Nominees to be selected for inclusion in the proxy statement in the event that the total number of Stockholder Nominees submitted by Eligible Stockholders pursuant to the proxy access provision exceeds the Permitted Number of nominees allowed. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to Section 2.16 exceeds the Permitted Number of nominees allowed, the highest ranking Stockholder Nominee who meets the requirements of the proxy access provision of the Bylaws from each Eligible Stockholder will be selected for inclusion in the proxy materials until the Permitted Number is reached, going in order of the amount (largest to smallest) of shares of Cboe's outstanding capital stock each Eligible Stockholder disclosed as owned in its respective Notice of Proxy Access Nomination submitted to Cboe. If the Permitted Number is not reached after the highest ranking Stockholder Nominee who meets the requirements of the proxy access provision of the Bylaws from each Eligible Stockholder has been selected, then the next highest ranking Stockholder Nominee who meets the requirements of Section 2.16 from each Eligible Stockholder will be selected for inclusion in the Corporation's proxy materials, and this process will continue as many times as necessary, following the same order each time, until the Permitted Number is reached. Additionally, notwithstanding anything to the contrary contained in proposed Section 2.16, Cboe will not be required to include any Stockholder Nominees in its proxy materials pursuant to Section 2.16 for any meeting of stockholders for which the Secretary receives a notice (whether or not subsequently withdrawn) that the Eligible Stockholder or any other stockholder intends to nominate one or more persons for election to the Board pursuant to Section 2.11 of the CGM Bylaws. Cboe believes it is reasonable to limit the Board seats available to proxy access nominees and to establish procedures for selecting candidates if the nominee limit is exceeded. The limitation on Board seats available to proxy access nominees ensures that proxy access cannot be used to take over the entire Board, which is not the stated
Proposed Section 2.16(d) defines who may qualify as an “Eligible Stockholder”. Particularly, an Eligible Stockholder is a stockholder or group of no more than 20 stockholders
Proposed Section 2.16(e) clarifies, for the avoidance of doubt, how “ownership” will be defined for purposes of meeting the ownership requirements of the Required Shares. Specifically, an Eligible Stockholder shall be deemed to “own” only those outstanding shares of Cboe's capital stock as to which the stockholder possesses both: (i) The full voting and investment rights pertaining to the shares; and (ii) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (i) and (ii) shall not include any shares: That are (1) sold by such stockholder or any of its affiliates in any transaction that has not been settled or closed; (2) borrowed by such stockholder or any of its affiliates for any purposes or purchased by such stockholder or any of its affiliates pursuant to an agreement to resell; or (3) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar instrument or agreement entered into by such stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of Cboe's outstanding capital stock, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of: (A) Reducing in any manner, to any extent or at any time in the future, such stockholder's or its affiliates' full right to vote or direct the voting of any such shares; and/or (B) hedging, offsetting or altering to any degree any gain or loss realized or realizable from maintaining the full economic ownership of such shares by such stockholder or its affiliates.
Further, a stockholder shall “own” shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder's ownership of shares shall be deemed to continue during any period in which (i) the stockholder has loaned such shares provided that the stockholder has the power to recall such loaned shares on five (5) business days' notice and includes in the Notice of Proxy Access Nomination an agreement that it will (1) recall such loaned shares upon being notified that any of its Stockholder Nominees will be included in the Corporation's proxy materials and (2) will hold such shares through the date of the annual meeting or (ii) the stockholder has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the stockholder. Section 2.16(e) also clarifies that the terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of Cboe's capital stock are “owned” for these purposes shall be determined by the Board. For purposes of Section 2.16, the term “affiliate” or “affiliates” shall have the meaning ascribed thereto under the rules and regulations of the Act.
Proposed Section 2.16(f) sets forth the information that an Eligible Stockholder must provide to Cboe's Corporate Secretary in writing within the deadline discussed above in order to make a proxy access nomination. This information includes:
• A statement by the Eligible Stockholder (1) setting forth and certifying as to the number of shares it owns and has owned continuously for the Minimum Holding Period and (2) agreeing to continue to own the Required Shares through the date of the annual meeting;
• one or more written statements from the record holder of the Required Shares (and from each intermediary through which the Required Shares are or have been held during the Minimum Holding Period) verifying that, as of a
• a copy of the Schedule 14N that has been filed with the SEC as required by Rule 14a-18 under the Act;
• the information, representations and agreements and other documents that are required to be set forth in or included with a stockholder's notice of nomination given pursuant to Section 2.11 of the CGM Bylaws;
• the written consent of each Stockholder Nominee to being named in the proxy statement as a nominee and to serving as a director if elected;
• a representation that the Eligible Stockholder:
○ Acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control of Cboe, and does not presently have such intent;
○ has not nominated and will not nominate for election any individual as a director at the annual meeting, other than its Stockholder Nominee(s);
○ has not engaged and will not engage in, and has not and will not be a participant in another person's, “solicitation” within the meaning of Rule 14a-1(l) under the Act in support of the election of any individual as a director at the annual meeting, other than its Stockholder Nominee(s) or a nominee of the Board;
○ has not distributed and will not distribute to any stockholder of the Corporation any form of proxy for the annual meeting other than the form distributed by the Corporation;
○ has complied and will comply with all laws, rules and regulations applicable to solicitations and the use, if any, of soliciting material in connection with the annual meeting, and
○ has provided and will provide facts, statements and other information in all communications with Cboe and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;
• an undertaking that the Eligible Stockholder agrees to
○ assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder's communications with the stockholders of the Corporation or out of the information that the Eligible Stockholder provided to the Corporation;
○ indemnify and hold harmless the Corporation and each of its Directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its Directors, officers or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section 2.16 or any solicitation or other activity in connection therewith; and
○ file with the Securities and Exchange Commission any solicitation or other communication with the stockholders of the Corporation relating to the meeting at which its Stockholder Nominee(s) will be nominated, regardless of whether any such filing is required under Regulation 14A of the Act or whether any exemption from filing is available for such solicitation or other communication under Regulation 14A of the Act;
• in the case of a nomination by a group of stockholders that together is an Eligible Stockholder, the designation by all group members of one group member that is authorized to receive communications, notices and inquiries from the Corporation and to act on behalf of all members of the group with respect to all matters relating to the nomination under this Section 2.16 (including withdrawal of the nomination);
• in the case of a nomination by an Eligible Stockholder consisting of a group of stockholders in which two or more funds are intended to be treated as one stockholder for purposes of qualifying as an Eligible Stockholder, documentation reasonably satisfactory to the Corporation that demonstrates that the funds are part of the same Qualifying Fund Group; and
• a written representation and agreement by the Stockholder Nominee that such person:
○ Will act as a representative of all of the stockholders of the Corporation while serving as a director;
○ will provide facts, statements and other information in all communications with the Corporation and its stockholders that are or will be true and correct in all material respects (and shall not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading);
○ is not and will not become a party to (i) any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity other than the Corporation in connection with service or action as a director of the Corporation that has not been disclosed to the Corporation, (ii) any Voting Commitment that has not been disclosed to the Corporation or (iii) any Voting Commitment
○ will abide by and comply with the CGM Bylaws, the Certificate of Incorporation and applicable policies of the Corporation including all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation, as well as the applicable provisions of the rules and regulations of the Securities and Exchange Commission and any stock exchange applicable to the Corporation.
In proposing the informational requirements for the Eligible Stockholder, Cboe's goal is to gather sufficient information about the Eligible Stockholder for both itself and its stockholders. Among other things, this information is designed to help ensure that Cboe is able to comply with its disclosure and other requirements under applicable law and that Cboe, its Board and its stockholders are able to assess the proxy access nomination adequately.
Proposed Section 2.16(g) establishes additional information the Stockholder Nominee must provide. Particularly:
• The Stockholder Nominee(s) must submit all completed and signed
• the Corporation may require any proposed Stockholder Nominee to furnish any information:
○ That may reasonably be requested by the Corporation to determine whether the Stockholder Nominee would be independent under Section 3.3 and otherwise qualifies as independent under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded;
○ that could be material to a reasonable stockholder's understanding of the independence, or lack thereof, of such Stockholder Nominee;
○ that would be required to satisfy the requirements for qualification of directors under applicable foreign regulations; or
○ (that may reasonably be requested by the Corporation to determine the eligibility of such Stockholder Nominee to be included in the Corporation's proxy materials pursuant to this Section 2.16 or to serve as a director of the Corporation; and
• the Corporation may require the Eligible Stockholder to furnish any other information that may reasonably be requested by the Corporation to verify the Eligible Stockholder's continuous Ownership of the Required Shares for the Minimum Holding Period and through the date of the annual meeting.
Like the informational requirements for an Eligible Stockholder, which are set forth above, the informational requirements for the Stockholder Nominee ensure that both Cboe and its stockholders will have sufficient information about the Stockholder Nominee. Among other things, this information will ensure that Cboe is able to comply with its disclosure and other requirements under applicable law and that Cboe, its Board and its stockholders are able to assess the proxy access nomination adequately.
Proposed Section 2.16(h) provides that an Eligible Stockholder may provide, at its option, to the Secretary, at the time the Notice of Proxy Access Nomination is provided, a written statement, not to exceed 500 words, in support of its Stockholder Nominee(s)' candidacy (a “Supporting Statement”). Only one Supporting Statement may be submitted by an Eligible Stockholder (including any group of stockholders together constituting an Eligible Stockholder) in support of its Stockholder Nominee(s). Notwithstanding anything to the contrary contained in Section 2.16, the Corporation may omit from its proxy materials any information or Supporting Statement (or portion thereof) that it, in good faith, believes is untrue in any material respect (or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading) or would violate any applicable law, rule or regulation. The Exchange notes proposed Section 2.16(h) allows Cboe to comply with Rule 14a-9 under the Act
Pursuant to proposed Section 2.16(i), each Eligible Stockholder or Stockholder Nominee must promptly notify Cboe's Corporate Secretary of any information or communications provided by the Eligible Stockholder or Stockholder Nominee, as the case may be, to Cboe or its stockholders that when provided was not, or thereafter ceases to be, true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading and of the information that is required to correct any such defect. An Eligible Stockholder shall also provide immediate notice to the Corporation if the Eligible Stockholder ceases to own any of the Required Shares prior to the date of the annual meeting. In addition, any person providing any information to the Corporation pursuant to Section 2.16(i) shall be required to update or supplement such information, if necessary, so that all such information shall be true and correct as of the (i) as of the record date for determining the stockholders entitled to receive notice of the meeting and (ii) as of the date that is ten (10) business days prior to the meeting (or any postponement, adjournment or recess thereof), and such update shall be received by the Secretary at the principal executive offices of the Corporation (A) not later than five (5) business days after the record date for determining the stockholders entitled to receive notice of such meeting (in the case of an update required to be made under clause (i)) and (B) not later than seven (7) business days prior to the date for the meeting, if practicable, or, if not practicable, on the first practicable date prior to the meeting or any adjournment, recess or postponement thereof (in the case of an update required to be made pursuant to clause (ii)).
This provision further makes clear that providing any such notification, update or supplement, shall not be deemed to cure any defect in any previously provided information or communications or limit the remedies available to the Corporation relating to such defect (including the right to omit a Stockholder Nominee from its proxy materials). This provision is intended to protect Cboe's stockholders by requiring an Eligible Stockholder or Stockholder Nominee to give Cboe notice of information previously provided that is materially untrue. Cboe may then decide what action to take with respect to such defect, which may include, as noted above, omitting the relevant Stockholder Nominee from its proxy materials.
Proposed Section 2.16(j) provides that Cboe shall not be required to include a Stockholder Nominee in its proxy materials for any meeting of stockholders under certain circumstances. In these situations, the proxy access nomination shall be disregarded and no vote on such Stockholder Nominee will occur, even if Cboe has received proxies in respect of the vote. These circumstances occur when the Stockholder Nominee:
• Would not be an independent director under Section 3.3, under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board in determining and disclosing independence of the Corporation's directors, in each case as determined by the Board in its sole discretion;
• would not meet the audit committee independence requirements under the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded;
• if elected, intended to resign as a director of the Corporation prior to the end of the full term for which he or she is standing for election;
• is or has been subject to any statutory disqualification under Section 3(a)(39) of the Act;
• is or has been subject to disqualification under 17 CFR 1.63;
• if elected, would cause the Corporation to be in violation of these Bylaws, the Certificate of Incorporation, the rules of the principal national securities exchange on which the outstanding capital stock of the Corporation is traded, or any applicable law, rule or regulation;
• is or has been, within the past three years, an officer or director of a competitor, as defined for purposes of Section 8 of the Clayton Antitrust Act of 1914;
• is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past 10 years;
• is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended;
• has provided any information to the Corporation or its stockholders that was untrue in any material respect or that omitted to state a material fact necessary to make the statements made, in light of the circumstances in which they were made, not misleading; or
• breaches or fails, or the Eligible Stockholder breaches or fails, to comply with its obligations pursuant to the CGM Bylaws, including, but not limited to, Section 2.16 and any agreement, representation or undertaking required by Section 2.16.
Cboe believes these provisions will protect the Corporation and its stockholders by allowing it to exclude certain categories of objectionable Stockholder Nominees from the proxy statement.
Proposed Section 2.16(k) provides that notwithstanding anything to the contrary contained in the CGM Bylaws, if (i) a Stockholder Nominee and/or the applicable Eligible Stockholder breaches any of its agreements or representations or fails to comply with any of its obligations under this Section 2.16 or (ii) a Stockholder Nominee otherwise becomes ineligible for inclusion in the Corporation's proxy materials pursuant to this Section 2.16, or dies, becomes disabled or otherwise becomes ineligible or unavailable for election at the annual meeting, in each case as determined by the Board or the chairman of the meeting, (1) the Corporation may omit or, to the extent feasible, remove the information concerning such Stockholder Nominee and the related Supporting Statement from its proxy materials and/or otherwise communicate to its stockholders that such Stockholder Nominee will not be eligible for election at the annual meeting, (2) the Corporation shall not be required to include in its proxy materials any successor or replacement nominee proposed by the applicable Eligible Stockholder or any other Eligible Stockholder and (3) the chairman of the meeting shall declare such nomination to be invalid and such nomination shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Corporation. Cboe believes this provision protects the Corporation and its stockholders by providing the Board or the chairman of the stockholder meeting limited authority to disqualify a proxy access nominee when that nominee or the sponsoring stockholder(s) have breached an obligation under the proxy access provision.
Proposed Section 2.16(l) states that the following Stockholder Nominees who are included in the Corporation's proxy materials for a particular annual meeting of stockholders will be ineligible to be a Stockholder Nominee for the next two annual meetings: (i) Stockholder Nominee who withdraws from or becomes ineligible or unavailable for election at the annual meeting; or (ii) Stockholder Nominee who does not receive at least 25% of the votes cast in favor of such Stockholder Nominee's election. For the avoidance of doubt, Section 2.16(l) also clarifies that this provision shall not prevent any stockholder from nominating any person to the Board pursuant to Section 2.11 of the CGM Bylaws. Section 2.16(l) will save the Corporation and its stockholders the time and expense of analyzing and addressing subsequent proxy access nominations regarding individuals who were included in the proxy materials for a particular annual meeting but ultimately did not stand for election or receive a substantial amount of votes. After the next two annual meetings, these Stockholder Nominees would again be eligible for nomination through the proxy access provisions of the Bylaws.
Proposed Section 2.16(m) provides that notwithstanding the provisions of proposed Section 2.16, if the Eligible Stockholder providing notice (or a qualified representative of the Eligible Stockholder) does not appear in person (including virtually, in the case of a meeting held solely by means of remote communication) at the stockholder meeting to present the nomination of such Stockholder Nominee, such proposed nomination shall not be presented by the Corporation and shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.16, to be considered a qualified representative of the Eligible Stockholder providing notice, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting and such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, must be provided to the Corporation at least twenty-four (24) hours prior to the meeting.
In case there are matters involving a proxy access nomination that are open to interpretation, proposed Section 2.16(n) states that the Board (or any other person or body authorized by the Board) shall have exclusive power and authority to interpret the proxy access provisions of the Bylaws and make all determinations deemed necessary or advisable in connection with proposed Section 2.16 as to any person, facts or circumstances. In addition, all actions, interpretations and determinations of the Board (or any person or body authorized by the Board) with respect to the proxy access provisions shall be final, conclusive and binding on the Corporation, the stockholders and all other parties. While Cboe has attempted to implement a clear, detailed and thorough proxy access provision, there may be matters about future proxy access nominations that are open to interpretation. In these cases, Cboe believes it is reasonable and necessary to designate an arbiter to make final decisions on these points and that the Board is best-suited to act as that arbiter.
For the avoidance of doubt, proposed Section 2.16(o) states that the proxy access provisions outlined in proposed Section 2.16 shall be the exclusive means for stockholders to include nominees in the Corporation's proxy materials. Stockholders may, of course, continue to propose nominees through other means, but the Board will have final authority to determine whether to include those nominees in the Corporation's proxy materials.
Cboe also proposes to make conforming changes to Sections 2.10 and 2.11 to provide clarifications and prevent confusion. First, the Exchange proposes to add a reference to Section 2.11 and proposed Section 2.16 to clarify the exact bylaw provisions relating to stockholder nominees. Next, the Exchange proposes to amend Section 2.11. Section 2.11 currently describes the business that may be properly brought before an annual meeting of stockholders and the methods by which nominations of persons for election to the Board may be made at an annual meeting of stockholders. Cboe proposes to add proxy access nominations (
The Exchange believes the proposed rule change is consistent with 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 light of a shareholder proposal received from a stockholder, Cboe is proposing changes to its Bylaws to implement proxy access. The Exchange believes that this filing furthers the objectives of Section 6(b)(5) of the Act because the proposed rule change would be consistent with and facilitate a governance and regulatory structure that is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to, and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. Particularly, the Exchange believes that, by permitting an Eligible Stockholder of Cboe that meets the stated requirements to nominate directors and have its nominees included in Cboe's annual meeting proxy statement, the proposed rule change strengthens the corporate governance of the Exchange's ultimate parent company, which is beneficial to both investors and the public interest.
Additionally, the procedural requirements are designed to help protect investors by stating clearly and explicitly the procedures stockholders must follow in order to submit a proper proxy access nomination. The informational requirements are designed to enhance investor protection by helping to ensure among other things, that the Corporation and its stockholders have full and accurate information about nominating stockholders and their nominees and that such stockholders and nominees comply with applicable laws, regulations and other requirements. Moreover, as noted above, proxy access has become commonplace among companies and the Exchange believes its core provisions are common among companies that have adopted proxy access, including the parent companies of other exchanges that have adopted similar proxy access provisions.
Finally, the remaining changes to existing provisions of the CGM Bylaws are clarifying in nature, and they enhance investor protection and the public interest by preventing confusion with respect to the operation of the Bylaw provisions.
Because the proposed rule change relates to the governance of the Corporation and not to the operations of the Exchange, the Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not designed to address any competitive issue or have any impact on competition; rather, adoption of a proxy access bylaw by the Corporation is intended to enhance corporate governance and accountability to stockholders.
The Exchange neither solicited nor received comments on the proposed rule change.
Within 45 days of the date of publication of this notice in the
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.
U.S. Small Business Administration.
Notice.
This is a notice of an Administrative declaration of a disaster for the State of Hawaii dated 04/29/2021.
Issued on 04/29/2021.
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 Administrator's disaster declaration, applications for disaster loans may be filed 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 16938 6 and for economic injury is 16939 0.
The State which received an EIDL Declaration # is Hawaii.
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 New Jersey (FEMA-4597-DR), dated 04/28/2021.
Issued on 04/28/2021.
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 04/28/2021, 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 16943 7 and for economic injury is 16944 0.
Notice of request for public comment.
The Department of State is seeking Office of Management and Budget (OMB) approval for the information collection described below. In accordance with the Paperwork Reduction Act of 1995, we are requesting comments on this collection from all interested individuals and organizations. The purpose of this notice is to allow 60 days for public comment preceding submission of the collection to OMB.
The Department will accept comments from the public up to
You may submit comments by any of the following methods:
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You must include the DS form number (if applicable), information collection title, and the OMB control number in any correspondence.
Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument and supporting documents, to Elizabeth Twerdahl, 1801 N Lynn Street, Arlington, VA 22209, who may be reached on 571-345-2187 or at
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We are soliciting public comments to permit the Department to:
• Evaluate whether the proposed information collection is necessary for the proper functions of the Department.
• Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used.
• Enhance the quality, utility, and clarity of the information to be collected.
• Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Please note that comments submitted in response to this Notice are public record. Before including any detailed personal information, you should be aware that your comments as submitted, including your personal information, will be available for public review.
This information is being collected in response to the Department's requirements under the Law Enforcement Officers Safety Act of 2004 (LEOSA), as amended and codified at 18 U.S.C. 926C, which exempts a “qualified retired law enforcement officer” carrying a LEOSA photographic identification card from most state and local laws prohibiting the carriage of concealed firearms, subject to certain restrictions and exceptions.
Applicants will fill out the application form either electronically or by hand and submit via email or mail.
Bogalusa Bayou Railroad, L.L.C. (BBR), a Class III railroad, filed a verified notice of exemption under 49 CFR 1150.41 to acquire title from Geaux Geaux Railroad, LLC, and to conduct common carrier operations over, two contiguous railroad line segments, totaling approximately 23.26 miles, extending between: (1) Milepost 0.0 at Slaughter, La., and a point lying westerly thereof at what would be milepost 11.0
The verified notice states that BBR has operated on the Line since 2015, and that it obtained Board authority to do so, less what is currently unregulated ancillary track from milepost 9.69 to milepost 11, in
BBR certifies that the proposed acquisition of the Line does not involve an interchange commitment. BBR further certifies that its projected annual revenues as a result of this transaction will not result in its becoming a Class II or Class I rail carrier and will not exceed $5 million.
The transaction may be consummated on or after May 19, 2021 (30 days after the verified notice of exemption was filed).
If the verified notice contains false or misleading information, the exemption is void ab initio. Petitions to revoke the exemption under 49 U.S.C. 10502(d) may be filed at any time. The filing of a petition to revoke will not automatically stay the effectiveness of the exemption. Petitions to stay must be filed no later than May 12, 2021 (at least seven days before the exemption becomes effective).
All pleadings, referring to Docket No. FD 36510, 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 BBR's representative, Bradon J. Smith, Fletcher & Sippel LLC,
According to BBR, this action is categorically excluded from environmental review under 49 CFR 1105.6(c) and from historic reporting requirements under 49 CFR 1105.8(b).
Board decisions and notices are available at
By the Board, Scott M. Zimmerman, Acting Director, Office of Proceedings.
Stillwater Central Railroad, L.L.C. (SCR), a Class III rail carrier, has filed a verified notice of exemption under 49 CFR 1150.41 to lease from the BNSF Railway Company (BNSF) and operate two rail line segments: (1) From milepost 549.01 on Line Segment 1003 at Wheatland easterly to milepost 540.65 on Line Segment 7405, immediately west of Shields Blvd.; and (2) from milepost 540.0 on Line Segment 1003 easterly to the end of BNSF ownership at milepost 536.4 on the same segment (including the North Yard) in Oklahoma County, Okla. (the Lines). The Lines total approximately 12.6 route miles.
According to the verified notice, SCR has leased and operated the Lines since 2005.
According to SCR, the amended lease between SCR and BNSF contains an interchange commitment that affects interchange with carriers other than BNSF.
SCR has certified that its projected annual revenues as a result of this transaction will not result in SCR's becoming a Class II or Class I rail carrier, but that its projected annual revenues are anticipated to exceed $5 million. Pursuant to 49 CFR 1150.42(e), if a carrier's projected annual revenues will exceed $5 million, it must, at least 60 days before this exemption is to become effective, post a notice of its intent to undertake the proposed transaction at the workplace of the employees on the affected lines, serve a copy of the notice on the national offices of the labor unions with employees on the affected lines, and certify to the Board that it has done so. However, SCR, concurrently with its verified notice of exemption, filed a petition for waiver of the 60-day advance labor notice requirement. SCR's waiver request will be addressed in a separate decision. The Board will establish the effective date of the exemption in its separate decision on the waiver request.
If the notice contains false or misleading information, the exemption is void ab initio. Petitions to revoke the exemption under 49 U.S.C. 10502(d) may be filed at any time. The filing of a petition to revoke will not automatically stay the effectiveness of the exemption. Petitions for stay must be filed no later than May 12, 2021.
All pleadings, referring to Docket No. FD 36445, should be filed with the Surface Transportation Board via e-filing on the Board's website. In addition, one copy of each pleading must be served on SCR's representative: Bradon J. Smith, Fletcher & Sippel LLC, 29 North Wacker Drive, Suite 800, Chicago, IL 60606.
According to SCR, this action is categorically excluded from environmental review under 49 CFR 1105.6(c) and from historic preservation reporting requirements under 49 CFR 1105.8(b).
Board decisions and notices are available at
By the Board, Scott M. Zimmerman, Acting Director, Office of Proceedings.
Notice of reporting requirements.
Departmental Offices, Department of the Treasury.
By this Notice, the Department of the Treasury is informing the public that it is conducting a mandatory survey of foreign ownership of U.S. securities as of June 30, 2021. This mandatory survey is conducted under the authority of the International Investment and Trade in Services Survey Act. This Notice constitutes legal notification to all United States persons (defined below) who meet the reporting requirements set forth in this Notice that they must respond to, and comply with, this survey. Additional copies of the reporting forms SHLA (2021) and instructions may be printed from the internet at:
U.S.-China Economic and Security Review Commission.
Notice of open public hearing.
Notice is hereby given of the following hearing of the U.S.-China Economic and Security Review Commission. The Commission is mandated by Congress to investigate, assess, and report to Congress annually on “the national security implications of the economic relationship between the United States and the People's Republic of China.” Pursuant to this mandate, the Commission will hold a public hearing in Washington, DC on May 20, 2021 on “China in Latin America and the Caribbean.”
The hearing is scheduled for Thursday, May 20, 2021, 9:30 a.m.
This hearing will be held with panelists and Commissioners participating in-person or online via videoconference. Members of the audience will be able to view a live webcast via the Commission's website at
Any member of the public seeking further information concerning the hearing should contact Jameson Cunningham, 444 North Capitol Street NW, Suite 602, Washington DC 20001; telephone: 202-624-1496, or via email at
The hearing will be co-chaired by Chairman Carolyn Bartholomew and Commissioner Derek Scissors. Any interested party may file a written statement by May 20, 2021 by transmitting to the contact above. A portion of the hearing will include a question and answer period between the Commissioners and the witnesses.
Congress created the U.S.-China Economic and Security Review Commission in 2000 in the National Defense Authorization Act (Pub. L. 106-398), as amended by Division P of the Consolidated Appropriations Resolution, 2003 (Pub L 108-7), as amended by Public Law 109-108 (November 22, 2005), as amended by Public Law 113-291 (December 19, 2014).
Dated: April 30, 2021.
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
In compliance with the Paperwork Reduction Act (PRA) of 1995, this notice announces that the Veterans Benefits Administration (VBA), Department of Veterans Affairs, will submit the collection of information abstracted below to the Office of Management and Budget (OMB) for review and comment. The PRA submission describes the nature of the information collection and its expected cost and burden and it includes the actual data collection instrument.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Maribel Aponte, Office of Enterprise and Integration, Data Governance Analytics (008), 1717 H Street NW, Washington, DC 20006, (202) 266-4688 or email
This is a reinstatement only with no substantive changes. The burden remains the same.
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 OMB control number. The
Notice.
The Department of Veterans Affairs (VA), Office of Public and Intergovernmental Affairs (OPIA), Office of Tribal Government Relations (OTGR), is seeking nominations of qualified candidates to be considered for appointment as a member of the Advisory Committee on Tribal and Indian Affairs (“the Committee”).
Nominations for membership on the Committee must be received no later than 5:00 p.m. EST on June 1, 2021.
All nomination packages (Application, should be mailed to the Office of Tribal Government Relations, 810 Vermont Ave. NW, Suite 915H (075), Washington, DC 20420 or email us at
Ms. Stephanie Birdwell and David “Clay” Ward, Office of Tribal Government Relations, 810 Vermont Ave. NW, Ste. 915H (075), Washington, DC 20420, Telephone (202) 461-7400. A copy of the Committee charter can be obtained by contacting Mr. David “Clay” Ward or by accessing the website managed by OTGR at
In carrying out the duties set forth, the Committee responsibilities include, but not limited to:
(1) Identify for the Department evolving issues of relevance to Indian tribes, tribal organizations and Native American Veterans relating to programs and services of the Department;
(2) Propose clarifications, recommendations and solutions to address issues raised at tribal, regional and national levels, especially regarding any tribal consultation reports;
(3) Provide a forum for Indian tribes, tribal organizations, urban Indian organizations, Native Hawaiian organizations and the Department to discuss issues and proposals for changes to Department regulations, policies and procedures;
(4) Identify priorities and provide advice on appropriate strategies for tribal consultation and urban Indian organizations conferring on issues at the tribal, regional, or national levels;
(5) Ensure that pertinent issues are brought to the attention of Indian tribes, tribal organizations, urban Indian organizations and Native Hawaiian organizations in a timely manner, so that feedback can be obtained;
(6) Encourage the Secretary to work with other Federal agencies and Congress so that Native American Veterans are not denied the full benefit of their status as both Native Americans and Veterans;
(7) Highlight contributions of Native American Veterans in the Armed Forces;
(8) Make recommendations on the consultation policy of the Department on tribal matters;
(9) Support a process to develop an urban Indian organization confer policy to ensure the Secretary confers, to the maximum extent practicable, with urban Indian organizations; and
(10) With the Secretary's written approval, conduct other duties as recommended by the Committee.
The Committee was established in accordance with section 7002 of Public Law 116-315 (H.R. 7105—Johnny Isakson and David P. Roe, M.D. Veterans Health Care and Benefits Improvement Act of 2020). In accordance with Public Law 116-315, the Committee provides advice and guidance to the Secretary of Veterans Affairs on all matters relating to Indian tribes, tribal organizations, Native Hawaiian organizations and Native American Veterans. The Committee serves in an advisory capacity and advises the Secretary on ways the Department can improve the programs and services of the Department to better serve Native American Veterans. Committee members make recommendations to the Secretary regarding such activities.
(1) At least one member of each of the 12 service areas of the Indian Health Service is represented in the membership of the Committee nominated by Indian tribes or tribal organization.
(2) At least one member of the Committee represents the Native Hawaiian Veteran community nominated by a Native Hawaiian Organization.
(3) At least one member of the Committee represents urban Indian organizations nominated by a national urban Indian organization.
(4) Not fewer than half of the members are Veterans, unless the Secretary determines that an insufficient number of qualified Veterans were nominated.
(5) No member of the Committee may be an employee of the Federal Government.
In accordance with Public Law 116-315, the Secretary determines the number and terms of service for members of the Committee, which are appointed by the Secretary, except that a term of service of any such member may not exceed a term of two years.
(1) Diversity in professional and personal qualifications;
(2) Experience in military service and military deployments (please identify your Branch of Service and Rank);
(3) Current work with Veterans;
(4) Committee subject matter expertise; and
(5) Experience working in large and complex organizations.
Individuals selected for appointment to the Committee shall be invited to serve a two-year term. All members will receive travel expenses and a per diem allowance in accordance with the Federal Travel Regulations for any travel made in connection with their duties as members of the Committee.
The Department makes every effort to ensure that the membership of its Federal advisory committees is fairly balanced in terms of points of view represented and the Committee's function. Every effort is made to ensure that a broad representation of geographic areas, males & females, racial and ethnic minority groups, and Veterans with disabilities are given consideration for membership. Appointment to this Committee shall be made without discrimination because of a person's race, color, religion, sex (including gender identity, transgender status, sexual orientation, and pregnancy), national origin, age, disability, or genetic information. Nominations must state that the nominee is willing to serve as a member of the Committee and appears to have no conflict of interest that would preclude membership. An ethics review is conducted for each selected nominee.
Centers for Medicare & Medicaid Services (CMS), Department of Health & Human Services (HHS).
Final rule.
This final rule sets forth payment parameters and provisions related to the risk adjustment program and cost-sharing parameters. It includes changes related to special enrollment periods; direct enrollment entities; the administrative appeals processes with respect to health insurance issuers and non-federal governmental group health plans; the medical loss ratio program; income verification by Exchanges; and other related topics. It also revises the regulation requiring the reporting of certain prescription drug information by qualified health plans or their pharmacy benefit managers.
These regulations are effective on July 6, 2021, with the exception of the amendments to §§ 155.320(c) and 158.221(b) which are effective May 5, 2021.
Jeff Wu, (301) 492-4305, Rogelyn McLean, (301) 492-4229, Grace Bristol, (410) 786-8437, Kiahana Brooks, (301) 492-5229, or Sara Rosta, (301) 492-4223 for general information.
Cam Clemmons, (206) 615-2338, for matters related to health insurance reform requirements for the group and individual insurance markets and administrative appeals for health insurance issuers and non-federal governmental group health plans.
Allison Yadsko, (410) 786-1740, or Jacquelyn Rudich, (301) 492-5211, for matters related to risk adjustment.
Isadora Gil, (410) 786-4532, or Colleen Gravens, (301) 492-4107, for matters related to EDGE discrepancies.
Joshua Paul, (301) 492-4347, for matters related to risk adjustment data validation.
Dan Brown, (301) 492-5146, for matters related to web-brokers or direct enrollment, other than the direct enrollment option for Federally-facilitated and State Exchanges.
Nicholas Eckart, (301) 492-4452, for matters related to termination notices.
Amanda Brander, (202) 690-7892, for matters related to income inconsistencies.
Marisa Beatley, (301) 492-4307, for matters related to employer-sponsored coverage verification.
Carolyn Kraemer, (301) 492-4197, for matters related to special enrollment periods for Exchange enrollment under part 155.
Katherine Bentley, (301) 492-5209, for matters related to special enrollment period verification.
Rebecca Bucchieri, (301) 492-4400, for matters related to EHB-benchmark plans and defrayal of state-required benefits.
Aaron Franz, (410) 786-8027, for matters related to user fees.
Joshua Paul, (301) 492-4347 or Nora Simmons, (410-786-1981), for matters related to the premium adjustment percentage.
Ken Buerger, (410) 786-1190, for matters related to PBM transparency reporting requirements.
Nora Simmons, (410-786-1981), Adrianne Carter, (303) 844-5810, or Amber Bellsdale, (301) 492-4411, for matters related to disputes under 45 CFR 156.1210.
Nidhi Singh Shah, (301) 492-5110, for matters related to the Quality Rating System and the Qualified Health Plan Enrollee Experience Survey.
Alper Ozinal, (301) 492-4178, or Jacquelyn Rudich, (301) 492-5211, for matters related to financial program audits and civil money penalties.
Adrianne Patterson, 410-786-0696, or Nora Simmons, (410-786-1981), for matters related to netting of payments under 45 CFR 156.1215 and administrative appeals under 45 CFR 156.1220.
Christina Whitefield, (301) 492-4172, for matters related to the MLR program.
In the December 4, 2020
On January 28, 2021, President Biden issued Executive Order 14009, “Strengthening Medicaid and the Affordable Care Act,”
In compliance with Executive Order (E.O.) 14009 and as a result of HHS's review of the proposed 2022 Payment Notice and the January 19, 2021 final 2022 Payment Notice, HHS intends to issue rulemaking this spring to address policies finalized in the final 2022 Payment Notice published on January 19, 2021. Specifically, in future rulemaking, HHS intends to propose
American Health Benefit Exchanges, or “Exchanges,” are entities established under the Affordable Care Act (ACA)
In the December 4, 2020
Risk adjustment continues to be a core program in the individual and small group markets both on and off Exchanges, and some of the major proposals from the proposed rule included recalibrated parameters for the HHS-operated risk adjustment methodology. We also proposed changes to the risk adjustment models to include a two-stage specification in the adult and child models, add severity and transplant indicators interacted with hierarchical condition category (HCC) counts factors to the adult and child models, and proposed to modify the enrollment duration factors in the adult models. Additionally, we proposed clarifications to the process for HHS to audit issuers of risk adjustment covered plans and reinsurance-eligible plans and also proposed to establish authority for HHS to conduct compliance review of these issuers.
As we do every year in the HHS notice of benefit and payment parameters, we proposed updated parameters applicable in the individual and small group markets (including merged markets). We proposed the 2022 benefit year user fee rates for issuers offering plans through the Exchanges on the Federal platform. We proposed lowering the Federally-facilitated Exchange (FFE) and State-Exchange on the Federal platform (SBE-FP) user fees rates to 2.25 and 1.75 percent of total monthly premiums, respectively, in order to reflect enrollment, premium and HHS contract estimates for the 2022 plan year. We also proposed user fee rates of 1.5 percent of total monthly premiums for FFE and SBE-FP states that elect the Exchange DE option.
We proposed the 2022 benefit year premium adjustment percentage, required contribution percentage, and maximum annual limitations on cost sharing, including those for cost-sharing reduction (CSR) plan variations. For the 2023 benefit year and beyond, we proposed to publish these parameters in guidance annually, and if not in guidance, in the annual notice of benefit and payment parameters or another appropriate rulemaking. Additionally, we proposed clarifications to the process under which HHS conducts audits of QHP issuers to ensure compliance with federal requirements related to advance payments of the premium tax credit (APTC), CSRs, and user fees. We also proposed to establish authority for HHS to conduct compliance reviews of QHP issuers to ensure compliance with federal APTC, CSR and user fee requirements.
We proposed changes to the information that FFE-registered web-
Stable and affordable Exchanges with healthy risk pools are necessary for ensuring consumers maintain stable access to health insurance options. In order to minimize the potential for adverse selection in the Exchanges, we shared our future plans for rulemaking under which we will propose requirements related to Exchange verifications of whether applicants for QHP coverage with APTC or CSR have access to employer sponsored coverage that is affordable and offers minimum value. We proposed to extend our current enforcement posture under which Exchanges may exercise flexibility not to implement risk-based employer sponsored coverage verification and to remove the requirement that Exchanges select a statistically random sample of applicants when no electronic data sources are available.
We proposed new rules related to special enrollment periods. In addition, we proposed to require Exchanges to conduct special enrollment period verification for at least 75 percent of new enrollments through special enrollment periods granted to consumers not already enrolled in coverage through the applicable Exchange.
We also proposed minor procedural changes to provisions regarding administrative hearings in parts 150 and 156 to align with the Departmental Appeals Board's current practices for administrative hearings to appeal civil money penalties (CMPs).
We proposed to release additional data from the QHP Enrollee Experience Survey (QHP Enrollee Survey). We also solicited comments on potential changes to the framework for the Quality Rating System (QRS) to support alignment with other CMS quality reporting programs and to further balance the individual survey and clinical quality measures on the overall quality scores. We noted that we were considering ways to modify the hierarchical structure for the QRS, which is how the measures are organized together for maximum simplicity and understanding of the quality rating information provided by the QRS.
We proposed revisions to the regulations requiring the collection of certain prescription drug data from QHP issuers, and proposed to implement a requirement for the reporting of this data from pharmacy benefit managers (PBMs) when a QHP issuer contracts with a PBM to administer its prescription drug benefit.
We proposed to further regulate the standards related to QHP issuers' acceptance of payments for premiums and cost sharing. We also proposed to make clarifications to the network adequacy rules to reflect that § 156.230 does not apply to indemnity plans seeking QHP certification. These proposals were finalized in the final rule published on January 19, 2021 (86 FR 6138).
We proposed to establish a new Exchange DE option under which a State Exchange, State-based Exchange on the Federal platform or an FFE state (through an agreement with HHS) can leverage the potential of direct enrollment to offer consumers an enhanced QHP shopping experience. As proposed, instead of operating a centralized enrollment website, states could use direct enrollment technology to establish direct pathways to QHP issuers, web-brokers, and agents and brokers through which consumers would apply for and enroll in a QHP and receive a determination of eligibility for APTC and CSRs. The proposals for the Exchange DE option were finalized, with modifications, in the final rule published on January 19, 2021 (86 FR 6138).
We proposed to establish the definition of prescription drug rebates and other price concessions that issuers must deduct from incurred claims for medical loss ratio (MLR) reporting and rebate calculation purposes. We additionally proposed to explicitly allow issuers the option to prepay a portion or all of the estimated MLR rebate for a given MLR reporting year in advance of the deadlines set forth in §§ 158.240(e) and 158.241(a)(2) and the filing of the MLR Annual Reporting Form, and proposed to establish a safe harbor allowing such issuers, under certain conditions, to defer the payment of any remaining rebates owed after prepayment until the following MLR reporting year. We also proposed to allow issuers to provide MLR rebates in the form of a premium credit prior to the date that the rules previously provided. Lastly, we proposed to clarify MLR reporting and rebate requirements for issuers that choose to offer temporary premium credits during a public health emergency (PHE) declared by the Secretary of HHS in the 2021 benefit year and beyond, when such credits are permitted by HHS.
In the proposed rule, the Secretaries of HHS and the Department of the Treasury proposed to reference and incorporate specific guidance published in the
Title I of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) added a new title XXVII to the Public Health Service Act (PHS Act) to establish various reforms to the group and individual health insurance markets.
These provisions of the PHS Act were later augmented by other laws, including the ACA. Subtitles A and C of title I of the ACA reorganized, amended, and added to the provisions of part A of title XXVII of the PHS Act relating to group health plans
Section 2702 of the PHS Act, as added by the ACA, establishes requirements for guaranteed availability of coverage in the group and individual markets, including qualifying events that trigger special enrollment periods under section 2702(b) of the PHS Act.
Section 2718 of the PHS Act, as added by the ACA, generally requires health insurance issuers to submit an annual MLR report to HHS, and provide rebates to enrollees if the issuers do not achieve specified MLR thresholds.
Section 2723(b) of the PHS Act authorizes the Secretary to impose CMPs as a means of enforcing the individual and group insurance market requirements contained in Part A of title XXVII of the PHS Act with respect to health insurance issuers when a state does not have authority to enforce or
Section 1302 of the ACA provides for the establishment of an EHB package that includes coverage of EHBs (as defined by the Secretary), cost-sharing limits, and AV requirements. Section 1302(b) of the ACA directs that EHBs be equal in scope to the benefits provided under a typical employer plan, and that they cover at least the following 10 general categories: Ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.
To set cost-sharing limits, section 1302(c)(4) of the ACA directs the Secretary to determine an annual premium adjustment percentage, a measure of premium growth that is used to set the rate of increase for three parameters: (1) The maximum annual limitation on cost sharing (section 1302(c)(1) of the ACA); (2) the required contribution percentage used to determine whether an individual can afford minimum essential coverage (MEC) (section 5000A of the Internal Revenue Code of 1986 (the Code), as enacted by section 1501 of the ACA); and (3) the employer shared responsibility payment amounts (section 4980H of the Code, as enacted by section 1513 of the ACA).
Section 1302(d) of the ACA describes the various levels of coverage based on their AV. Consistent with section 1302(d)(2)(A) of the ACA, AV is calculated based on the provision of EHB to a standard population. Section 1302(d)(3) of the ACA directs the Secretary to develop guidelines that allow for
Sections 1311(b) and 1321(b) of the ACA provide that each state has the opportunity to establish an individual market Exchange that facilitates the purchase of insurance coverage by qualified individuals through QHPs and meets other standards specified in the ACA. Section 1321(c)(1) of the ACA directs the Secretary to establish and operate such Exchange within states that do not elect to establish an Exchange or, as determined by the Secretary on or before January 1, 2013, will not have an Exchange operable by January 1, 2014.
Section 1311(c)(1) of the ACA provides the Secretary the authority to issue regulations to establish criteria for the certification of QHPs, including network adequacy standards at section 1311(c)(1)(B) of the ACA. Section 1311(d) of the ACA describes the minimum functions of an Exchange. Section 1311(e)(1) of the ACA grants the Exchange the authority to certify a health plan as a QHP if the health plan meets the Secretary's requirements for certification issued under section 1311(c)(1) of the ACA, and the Exchange determines that making the plan available through the Exchange is in the interests of qualified individuals and qualified employers in the state. Section 1311(c)(6)(C) of the ACA establishes special enrollment periods and section 1311(c)(6)(D) of the ACA establishes the monthly enrollment period for Indians, as defined by section 4 of the Indian Health Care Improvement Act.
Section 1311(c)(3) of the ACA directs the Secretary to develop a system to rate QHPs offered through an Exchange, based on relative quality and price. Section 1311(c)(4) of the ACA requires the Secretary to establish an enrollee satisfaction survey that evaluates the level of enrollee satisfaction of members with QHPs offered through an Exchange, for each QHP with more than 500 enrollees in the prior year. Further, sections 1311(c)(3) and 1311(c)(4) of the ACA require Exchanges to provide this quality rating information
Section 1312(c) of the ACA generally requires a health insurance issuer to consider all enrollees in all health plans (except grandfathered health plans) offered by such issuer to be members of a single risk pool for each of its individual and small group markets. States have the option to merge the individual and small group market risk pools under section 1312(c)(3) of the ACA.
Section 1312(e) of the ACA directs the Secretary to establish procedures under which a state may permit agents and brokers to enroll qualified individuals and qualified employers in QHPs through an Exchange and to assist individuals in applying for financial assistance for QHPs sold through an Exchange.
Sections 1313 and 1321 of the ACA provide the Secretary with the authority to oversee the financial integrity of State Exchanges, their compliance with HHS standards, and the efficient and non-discriminatory administration of State Exchange activities. Section 1321 of the ACA provides for state flexibility in the operation and enforcement of Exchanges and related requirements.
Section 1321(a) of the ACA provides broad authority for the Secretary to establish standards and regulations to implement the statutory requirements related to Exchanges, QHPs and other components of title I of the ACA. Section 1321(a)(1) of the ACA directs the Secretary to issue regulations that set standards for meeting the requirements of title I of the ACA for, among other things, the establishment and operation of Exchanges. When operating an FFE under section 1321(c)(1) of the ACA, HHS has the authority under sections 1321(c)(1) and 1311(d)(5)(A) of the ACA to collect and spend user fees. Office of Management and Budget (OMB) Circular A-25 establishes federal policy regarding user fees and specifies that a user charge will be assessed against each identifiable recipient for special benefits derived from federal activities beyond those received by the general public.
Section 1321(c)(2) of the ACA provides that the provisions of section 2723(b) of the PHS Act shall apply to the enforcement of the Federal Exchange standards and authorizes the Secretary to enforce the Exchange standards using CMPs on the same basis
Section 1321(d) of the ACA provides that nothing in title I of the ACA must be construed to preempt any state law that does not prevent the application of title I of the ACA. Section 1311(k) of the ACA specifies that Exchanges may not establish rules that conflict with or prevent the application of regulations issued by the Secretary.
Section 1332 of the ACA provides the Secretary of HHS and the Secretary of the Treasury (collectively, the Secretaries) with the discretion to approve a state's proposal to waive specific provisions of the ACA, provided the state's section 1332 waiver plan meets certain requirements. The Department of Health and Human Services and the Department of the Treasury (collectively, the Departments) finalized implementing regulations on February 27, 2012 (76 FR 13553) and published detailed guidance on the Department's application of section 1332 to proposed state waivers on October 24, 2018 (83 FR 53575).
Section 1341 of the ACA provides for the establishment of a transitional reinsurance program in each state to help pay the cost of treating high-cost enrollees in the individual market in the 2014 through 2016 benefit years.
Section 1343 of the ACA establishes a permanent risk adjustment program to provide payments to health insurance issuers that attract higher-than-average risk populations, such as those with chronic conditions, funded by payments from those that attract lower-than-average risk populations, thereby reducing incentives for issuers to avoid higher-risk enrollees.
Section 1402 of the ACA provides for, among other things, reductions in cost sharing for EHB for qualified low- and moderate-income enrollees in silver level QHPs offered through the individual market Exchanges. This section also provides for reductions in cost sharing for American Indians enrolled in QHPs at any metal level.
Section 1411(c) of the ACA requires the Secretary to submit certain information provided by applicants under section 1411(b) of the ACA to other federal officials for verification, including income and family size information to the Secretary of the Treasury.
Section 1411(d) of the ACA provides that the Secretary must verify the accuracy of information provided by applicants under section 1411(b) of the ACA for which section 1411(c) of the ACA does not prescribe a specific verification procedure, in such manner as the Secretary determines appropriate.
Section 1411(f) of the ACA requires the Secretary, in consultation with the Secretary of the Treasury, the Secretary of Homeland Security, and the Commissioner of Social Security, to establish procedures for hearing and making decisions governing appeals of Exchange eligibility determinations.
Section 1411(f)(1)(B) of the ACA requires the Secretary to establish procedures to redetermine eligibility on a periodic basis, in appropriate circumstances, including eligibility to purchase a QHP through the Exchange and for APTC and CSRs.
Section 1411(g) of the ACA allows the use or disclosure of applicant information only for the limited purposes of, and to the extent necessary to, ensure the efficient operation of the Exchange, including by verifying eligibility to enroll through the Exchange and for APTC and CSRs.
Section 5000A of the Code, as added by section 1501(b) of the ACA, requires individuals to have MEC for each month, qualify for an exemption, or make an individual shared responsibility payment. Under the Tax Cuts and Jobs Act (Pub. L. 115-97, December 22, 2017) the individual shared responsibility payment has been reduced to $0, effective for months beginning after December 31, 2018. Notwithstanding that reduction, certain exemptions are still relevant to determine whether individuals age 30 and above qualify to enroll in catastrophic coverage under 45 CFR 155.305(h) or 45 CFR 156.155.
Section 1150A(a) of the Social Security Act (the Act) requires a health benefits plan or PBM that manages prescription drug coverage under a contract with a QHP issuer to provide certain prescription drug information to the Secretary at such times, and in such form and manner, as the Secretary shall specify. HHS will limit disclosure of the information disclosed by a health benefits plan or PBM under this section as required by section 1150A of the Act and may only disclose the information in a form which does not disclose the identity of a specific PBM or plan, or prices charged for specific drugs, except that for limited purposes, HHS may disclose the information to states to carry out section 1311 of the ACA. An issuer or PBM that fails to provide the information on a timely basis or that knowingly provides false information may be subject to a civil monetary penalty under section 1927(b)(3)(C) of the Act in the same manner as such provisions apply to a manufacturer with an agreement under that section.
1. Premium Stabilization Programs
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In the June 19, 2013
An interim final rule relating to the HIPAA health insurance reforms was published in the April 8, 1997
A proposed rule relating to Exchanges and Insurance Market Standards for 2015 and beyond was published in the March 21, 2014
On April 8, 1997 an interim final rule with comment period was published in the
We published a request for comment relating to Exchanges in the August 3, 2010
In the 2014 Payment Notice and in the Amendments to the HHS Notice of Benefit and Payment Parameters for 2014 interim final rule, published in the March 11, 2013
In the May 11, 2016
In the December 4, 2020
On December 16, 2011, HHS released a bulletin
The 2015 Payment Notice final rule, established a methodology for estimating the average per capita premium for purposes of calculating the premium adjustment percentage. Beginning with the 2015 benefit year, the premium adjustment percentage was calculated based on the estimates and projections of average per enrollee employer-sponsored insurance premiums from the National Health Expenditure Accounts (NHEA), which are calculated by the CMS Office of the Actuary. In the 2020 Payment Notice final rule, we amended the methodology for calculating the premium adjustment percentage by estimating per capita insurance premiums as private health insurance premiums, minus premiums paid for Medigap insurance and property and casualty insurance, divided by the unrounded number of unique private health insurance enrollees, excluding all Medigap enrollees. Additionally, in response to public comments to the proposed 2021 Payment Notice, the 2021 Payment Notice final rule included a policy stating that we will finalize payment parameters that depend on NHEA data, including the premium adjustment percentage, based on the data that are available as of the publication of the proposed rule for that benefit year, even if NHEA data are updated between the proposed and final rules.
In the December 15, 2020
We published a request for comment on section 2718 of the PHS Act in the April 14, 2010
The overall framework and elements of the rating methodology for the QRS were published in the November 19, 2013
Section 1332(a)(4)(B) of the ACA requires the Secretaries to issue regulations regarding procedures for State Innovation Waivers. On March 14, 2011, the Departments published the “Application, Review, and Reporting Process for Waivers for State Innovation” proposed rule
In the December 4, 2020
HHS has consulted with stakeholders on policies related to the operation of Exchanges and the risk adjustment and HHS-RADV programs. We have held a number of listening sessions with consumers, providers, employers, health plans, advocacy groups and the actuarial community to gather public input. We have solicited input from state representatives on numerous topics, particularly risk adjustment and the direct enrollment option for FFEs and State Exchanges.
We consulted with stakeholders through regular meetings with the National Association of Insurance Commissioners (NAIC), regular contact with states, and health insurance issuers, trade groups, consumer advocates, employers, and other interested parties. We considered all
The regulations outlined in this final rule are codified in 45 CFR parts 147, 150, 153, 155, 156, 158, and 184.
The changes to 45 CFR part 147 make technical and conforming amendments regarding limited and special enrollment periods in the individual market.
The changes to 45 CFR part 150 make minor procedural changes to the requirements for administrative appeals of CMPs by health insurance issuers and non-federal governmental group health plans to align with current practices for the Departmental Appeals Board. We are finalizing parallel changes to the requirements for administrative appeals of CMPs by QHP issuers under 45 CFR part 156, subpart J.
The changes to 45 CFR part 153 recalibrate the HHS risk adjustment models consistent with the approach outlined in the 2020 Payment Notice to transition away from the use of MarketScan® data. However, we are finalizing the policy to use the 3 most recent consecutive years of enrollee-level EDGE data that are available in time for incorporating into the coefficients in the proposed rule, which would utilize enrollee-level EDGE data from 2016, 2017 and 2018 for the 2022 model recalibration, the same data years used for the 2021 model recalibration.
We are clarifying risk adjustment reporting requirements for issuers that choose to offer premium credits, if such credits are permitted by HHS for future benefit years. In this final rule, we are also approving the requests from Alabama to reduce risk adjustment transfers by 50 percent in the individual (including catastrophic and non-catastrophic risk pools) and small group markets for the 2022 benefit year. Additionally, we clarify the process for HHS to audit issuers of risk adjustment covered plans and reinsurance-eligible plans and establish the authority for HHS to conduct compliance reviews of these issuers.
The provisions in part 153 also relate to the risk adjustment user fee for the 2022 benefit year. In this final rule, we revise the schedule for the collection of HHS-RADV charges and disbursement of payments such that these charges and disbursements will occur in the same calendar year in which HHS-RADV results are released. We also finalize provisions under part 153 to update the applicable regulations to reflect the previously established framework regarding when second validation audit (SVA) findings can be disputed or appealed, expand the conflict of interest standard for initial validation audit (IVA) Entities, and codify two previously established exemptions from the requirement to participate in HHS-RADV.
In part 155, we finalize the required contribution percentage for the 2022 benefit year. We amend the definition of direct enrollment technology provider and add a definition of QHP issuer direct enrollment technology provider in part 155 to recognize that QHP issuers may also use QHP issuer direct enrollment technology providers to facilitate participation in direct enrollment under §§ 155.221 and 156.1230, and make conforming amendments to the definition of web-broker. We also codify more specific operational readiness review requirements for web-brokers and direct enrollment entities. We also amend the marketing and display requirements for direct enrollment entities, and rescind text contained in § 155.320 to implement a federal court order invalidating certain requirements in the section.
We also finalize several amendments to special enrollment period policy. Specifically, we add new flexibility to allow current Exchange enrollees and their dependents to change to a QHP of a lower metal level if they qualify for a special enrollment period due to becoming newly ineligible for APTC; allow a qualified individual, enrollee, or dependent who did not receive timely notice of a triggering event and otherwise was reasonably unaware that a triggering event occurred to select a plan within 60 days of the date that he or she knew, or reasonably should have known, of the occurrence of the triggering event; and clarify that a special enrollment period will be available when a qualified individual or his or her dependent is enrolled in COBRA continuation coverage, and the employer contributions or government subsidies for such coverage completely cease.
In part 156, we set forth the premium adjustment percentage, maximum annual limitation on cost sharing and reduced maximum annual limitation on cost sharing for the 2022 benefit year. We also amend part 156 to establish that for the 2023 benefit year and beyond, we will publish the annual updates to the premium adjustment percentage, maximum annual limitation on cost sharing, reduced maximum annual limitation on cost sharing and required contribution percentage in guidance in January of the benefit year prior to the applicable benefit year, rather than in the applicable benefit year's annual HHS notice of benefit and payment parameters, as long as no change to the methodologies to calculate these amounts are proposed. We finalize a methodology for analyzing the impact of preliminary values of the reduced annual maximum limitations on cost sharing on the AVs of silver plan variations. Additionally, we clarify the process for HHS to audit QHP issuers related to compliance with federal requirements for APTC, CSRs, and user fees and establish authority for HHS to conduct compliance reviews of QHP issuers to ensure compliance with federal requirements for APTC, CSRs, and user fee standards.
The changes to part 158 establish the definition of prescription drug rebates and other price concessions that issuers must deduct from incurred claims for MLR reporting and rebate calculation purposes. The changes to part 158 also remove the option for issuers to report an amount equal to 0.8 percent of earned premium in the relevant State and market in lieu of reporting the issuer's actual expenditures for activities that improve health care quality for MLR reporting and rebate calculation purposes to implement a federal court order invalidating this provision. The changes to part 158 additionally explicitly allow issuers the option to prepay a portion or all of the estimated MLR rebate for a given MLR reporting year in advance of the deadlines set forth in §§ 158.240(e) and 158.241(a)(2) and filing the MLR Annual Reporting Form, and establish a safe harbor allowing such issuers, under certain conditions, to defer the payment of rebates remaining after prepayment until the following MLR reporting year. In addition, the changes to part 158 allow issuers to provide MLR rebates in the form of a premium credit prior to the date that the rules previously provided. Lastly, we clarify MLR reporting and rebate requirements for issuers that choose to offer temporary premium credits during a PHE declared by the Secretary of HHS in the 2021 benefit year and beyond when such credits are permitted by HHS.
The addition of part 184 requires PBMs under contract with an issuer of QHPs to report prescription drug data required by section 1150A of the Act.
In the December 4, 2020
In this final rule, we provide a summary of proposed provisions, a summary of the public comments received that directly related to those proposals, our responses to these comments, and a description of the provisions we are finalizing.
We first address comments regarding the publication of the proposed rule and the comment period.
We further recognize the importance of federal agencies reviewing and considering all relevant comments before issuing a final rule. The comment period for the proposed rule closed on December 30, 2020. HHS has had ample time to review and fully consider comments relevant to the rules and policies finalized under this final rule.
We also disagree that the rules and policies in this final rule will hamper access to Exchange coverage. First, based on a review of the comments as a whole, we believe comments that asserted the policies in the proposed 2022 Payment Notice would hamper access to Exchange coverage were largely relevant to proposals that were finalized in the January 19, 2021 final Payment Notice, including the Exchange DE option finalized under 45 CFR 155.221(j), and the changes to the regulations governing State Innovation Waivers under 31 CFR part 33 and 45 CFR part 155.
Section 147.104(b)(2) incorporates by reference certain Exchange special enrollment periods described in § 155.420, making those special enrollment periods applicable to non-grandfathered coverage offered in the individual market through or outside of an Exchange. We proposed amendments to § 147.104(b)(2) to clarify that paragraph (b)(2)(ii) does not apply to references in § 155.420(d)(4) (relating to errors of the Exchange), and to make a conforming amendment consistent with the proposal in § 155.420(c)(5) relating to special enrollment period availability for individuals who do not receive timely notice of a triggering event. We are finalizing these amendments as proposed.
Section 155.420(d)(4) establishes an Exchange special enrollment period for a qualified individual or their dependent if his or her enrollment or non-enrollment in a QHP is unintentional, inadvertent, or erroneous and is the result of the error, misrepresentation, misconduct, or inaction of an officer, employee, or agent of the Exchange or HHS, its instrumentalities, or a non-Exchange entity providing enrollment assistance or conducting enrollment activities. Section 147.104(b)(2)(ii) states that, when determining the application of a special enrollment period for individual market coverage offered outside the Exchange, a reference in § 155.420 to a “QHP” is deemed to refer to a plan, a reference to “the Exchange” is deemed to refer to the applicable state authority, and a reference to a “qualified individual” is deemed to refer to an individual in the individual market.
However, this paragraph was not intended to change the application of § 155.420(d)(4), which is specific to errors of the Exchange, not those of the applicable state authority. It would be inappropriate for the triggering event in this case to apply to errors of the applicable state authority because the state does not perform the same functions as the Exchange. For example, the state authority does not perform an enrollment function. Thus, basing the triggering event on errors of the state is inappropriate and could create different special enrollment periods in the individual market on and off of the Exchange.
Therefore, we proposed to clarify that § 147.104(b)(2)(ii) does not apply to references in § 155.420(d)(4). As a result, issuers offering health insurance coverage in the individual market must provide a limited open enrollment period under the same circumstances as described in § 155.420(d)(4).
In addition, we proposed a conforming amendment to § 147.104(b)(4)(ii), consistent with the proposal in § 155.420(c)(5), to establish that if an individual did not receive timely notice of a triggering event described in paragraph (b)(2) or (3) of § 147.104, and otherwise was reasonably unaware that such a triggering event occurred, an issuer of non-grandfathered
We received public comments on the proposed amendments to § 147.104. Comments related to the proposal in § 155.420(c)(5) regarding when an individual does not receive timely notice of a triggering event and otherwise was reasonably unaware that a triggering event occurred are summarized and addressed in the preamble to § 155.420. The following is a summary of and our response to the comments we received related to the proposal to clarify that paragraph (b)(2)(ii) does not apply to references in § 155.420(d)(4) (relating to errors of the Exchange).
Part 150 sets forth our enforcement processes for all the requirements of title XXVII of the PHS Act with respect to health insurance issuers and non-federal governmental group health plans. We proposed to make technical corrections to multiple sections of part 150. Specifically, we proposed to remove all references to “HIPAA” and replacing them with “PHS Act” to clarify that the part 150 processes are used for enforcing not only the requirements emanating from HIPAA, but also the ACA and other legislation enacted subsequent to HIPAA. These proposed wording changes were made in the February 27, 2013
We received one comment that acknowledged these technical corrections but made no other statement about them, and we are finalizing the clarifying amendments as proposed.
Additionally, we proposed certain procedural changes to part 150 sections regarding administrative hearings. The proposed changes are intended to align with the Departmental Appeals Board's (DAB's) current practices for administrative hearings to appeal CMPs. Specifically, we proposed changes to remove requirements to file submissions in triplicate and instead require electronic filing. This change is reflected in the proposed amendments to the definition of “Filing date” in § 150.401, to the introductory text in § 150.427(a), and to the service of submission requirements captured in § 150.427(b). We also proposed amendments to several provisions in part 150 to allow for the option of video conferencing as a form of administrative hearing in part 150 in addition to the forms already allowed. To capture this flexibility, we proposed amendments to the definition of “Hearing” in § 150.401 and to the requirements outlined in § 150.419(a) related to the forms for the hearing, § 150.441(e) related to prehearing conferences, and § 150.447(a) related to the record of the hearing. Finally, we proposed to update § 150.431 to allow the Administrative Law Judge (ALJ) to communicate the next steps for a hearing in either the acknowledgement of a request for hearing or on a later date. We proposed parallel amendments to the administrative hearings requirements under subpart J of part 156.
We received a small number of public comments on the proposed revisions to the administrative hearing requirements captured in part 150—CMS Enforcement in Group and Individual Markets and subpart J—Administrative Review of QHP Issuer Sanctions (§§ 156.901, 156.927, 156.931, 156.947). The following is a summary of the comments we received and our responses.
The DAB's Civil Remedies Division, which handles the administrative hearings on CMPs under part 150 and subpart J of part 156, fully transitioned from paper to electronic filing to increase administrative efficiency and provide greater access and convenience to parties. However, a party may request a written waiver from the requirement of using DAB E-File. See Civil Remedies Division Procedures § 6,
Therefore, because the changes were intended to reflect the DAB's current practices that incorporate a written waiver process, and because these changes do not affect the consumer appeals processes, we are finalizing the revisions as proposed.
Because DAB's current system already allows for these means of access and these changes align our regulations with the DAB's current practices, we are finalizing the revisions as proposed.
Subparts A, B, D, G, and H of part 153, provide standards for administering the risk adjustment program. The risk adjustment program is a permanent program created by section 1343 of the ACA that transfers funds from lower-than-average risk, risk adjustment covered plans to higher-than-average risk, risk adjustment covered plans in the individual and small group markets (including merged markets), inside and outside the Exchanges.
We proposed changes to our approach for identifying the 3 benefit years of enrollee-level EDGE data that would be used for purposes of the annual recalibration of the HHS risk adjustment models. We also proposed modeling updates to improve the models' predictive power for certain subgroups of enrollees, as well as proposed changes to the enrollment duration factors for the adult models, and we proposed to continue a pricing adjustment related to Hepatitis C drugs. We proposed to allow states to submit multi-year requests for reductions to transfer calculations under the state payment transfer formula and we outlined the 2022 benefit year reduction requests submitted by Alabama. Additionally, we proposed to clarify risk adjustment reporting requirements for issuers that choose to offer premium credits, if permitted by HHS for future benefit years, and to codify a materiality threshold for EDGE discrepancies. We proposed the risk adjustment user fee for the 2022 benefit year and to codify in regulation the previously established exemptions from HHS-RADV requirements for issuers with only small group market carryover coverage in the benefit year being audited and for sole issuers in a state market risk pool during the benefit year being audited. We also proposed to revise the schedule for the collection of HHS-RADV charges and disbursement of payments such that these charges and disbursements would occur in the same calendar year in which HHS-RADV results are released. Finally, we proposed to shorten the discrepancy reporting windows during HHS-RADV, clarify and expand the conflict of interest standards applicable to initial validation audit (IVA) entities, and update the risk adjustment regulations to more clearly reflect the previously established limitations on the ability to dispute or appeal SVA findings and clarify the timeframe for HHS-RADV appeals.
The HHS risk adjustment models predict plan liability for an average enrollee based on that person's age, sex, and diagnoses (also referred to as hierarchical condition categories (HCCs)), producing a risk score. The HHS risk adjustment methodology utilizes separate models for adults, children, and infants to account for clinical and cost differences in each age group. In the adult and child models, the relative risk assigned to an individual's age, sex, and diagnoses are added together to produce an individual risk score. Additionally, to calculate enrollee risk scores in the adult models, we added enrollment duration factors beginning with the 2017 benefit year, and prescription drug categories (RXCs) beginning with the 2018 benefit year.
The enrollment-weighted average risk score of all enrollees in a particular risk adjustment covered plan (also referred to as the plan liability risk score) within a geographic rating area is one of the inputs into the risk adjustment state payment transfer formula, which determines the state transfer payment or charge that an issuer will receive or be required to pay for that plan for the applicable state market risk pool. Thus, the HHS risk adjustment models predict average group costs to account for risk across plans, in keeping with the Actuarial Standards Board's Actuarial Standards of Practice for risk classification.
Consistent with the approach outlined in the 2020 Payment Notice to no longer rely upon MarketScan® data
Previously, we used the three most recent years of MarketScan® data available to recalibrate the 2016, 2017, and 2018 benefit year risk adjustment models. Then, starting with the 2019 benefit year, we began transitioning from using the MarketScan® data to using the enrollee-level EDGE data to recalibrate the risk adjustment models. The 2021 benefit year was the first year that we recalibrated the risk adjustment models using 3 years of enrollee-level EDGE data.
Some commenters to the proposed 2021 Payment Notice expressed concern about when the final blended coefficients would be available, asking that final coefficients be made available earlier. Having the risk adjustment coefficients for the upcoming benefit year available earlier allows issuers more time to incorporate this information when pricing their plans for the upcoming benefit year. Commenters offered suggestions for ways HHS could provide final coefficients sooner. Stakeholders submitted similar comments in prior years when the final coefficients were released in guidance after publication of the applicable benefit year's Payment Notice.
For these reasons, we proposed to use 2016, 2017, and 2018 benefit years' enrollee-level EDGE data for the 2022 benefit year model recalibration. We sought comment on our proposal to determine coefficients for the 2022 benefit year based on a blend of separately solved coefficients from the 2016, 2017, and 2018 benefit years' enrollee-level EDGE data and our proposed approach to identify the 3 most recent years of data available for the annual recalibration of the risk adjustment models moving forward. Additionally, we sought comment on whether we should instead maintain the approach that would use the 2017, 2018, and 2019 benefit years' data to recalibrate the risk adjustment models for the 2022 benefit year.
We also noted that the coefficients could change if the proposed recalibration policies, or other proposed modeling parameters, were not finalized or were modified in response to comments. In addition, we explained that, consistent with § 153.320(b)(1)(i), if we were unable to finalize the final coefficients in time for the final rule, we would publish the final coefficients for the 2022 benefit year in guidance soon after the publication of the final rule.
We received public comments on the proposed updates to data used for risk adjustment model recalibration and the proposed 2022 benefit year model recalibration approach. The following is a summary of these comments and our responses.
Other commenters did not support the proposed approach and recommended instead to maintain the approach used in previous years, which would lead to the use of the 2017, 2018, and 2019 benefit years enrollee-level EDGE data for model recalibration for the 2022 benefit year. These commenters stated that incorporating newer data was more important than having the model coefficients earlier, with several commenters expressing concern that the proposed approach would rely on older data that would not include the most up-to-date experience and would not accurately reflect the reality and actuarial risk of the applicable benefit year.
One commenter that opposed the proposed approach stated that because issuers are required to submit all claims information to their respective EDGE servers by April 30th following the end of a benefit year, there should be enough time to include the most recent year's enrollee-level EDGE data in the applicable benefit year's proposed payment notice. The commenter expressed the view that if the final coefficients are known by the end of March, issuers can properly incorporate risk adjustment coefficients for rate-setting for the following year. However, another commenter stated that they preferred having the final coefficients sooner, by the end of January, and expressed support for the proposed approach if the final coefficients incorporating the most recent year of data that becomes available are not expected to be ready within that timeframe.
Additionally, we clarify that while we may collect the most recent plan year's EDGE data prior to the publication of the proposed rule, the data are often not available in time for incorporation into the proposed coefficients until much later. This is because the process to prepare enrollee-level EDGE data for incorporation into risk adjustment model recalibration is rigorous and requires time for analysis and data quality checks. Therefore, we believe utilizing the 3 most recent consecutive years of enrollee-level EDGE data that are available in time for inclusion in the coefficients in the proposed rule promotes stability while ensuring data quality and avoids the delays in publication of the coefficients that stakeholders have continued to raise concerns about in comments on the annual payment notices. This policy will allow HHS to provide proposed coefficients in the proposed rule that reflects the same underlying data as will be utilized for the final rule. This approach will minimize changes between the proposed and final coefficients that result from differences in data years, particularly in cases where the risk adjustment models and any accompanying proposed updates are finalized without changes. As noted earlier, in the initial years of risk adjustment and implementation of the 2014 federal market reforms, the markets underwent rapid changes in which the relative impact of using the most recent data for recalibrating the risk adjustment models may have been more pronounced. However, in recent years, HHS has shifted from recalibrating the risk adjustment models using a blend of the three most recent years of large group market data to using data collected entirely from the risk adjustment population (enrollee-level EDGE data). This change has resulted in coefficients that better reflect underlying market conditions, and the markets have continued to mature and stabilize, thereby reducing the relative impact of the most recent data year on model coefficients.
This policy will also allow us to continue to use the 3 most recent consecutive years of enrollee-level EDGE data available to recalibrate the risk adjustment models. It also continues to use actual data from issuers' individual and small group (or merged) market populations and maintains year-to-year stability in risk scores as the recalibration would continue to use at least 2 years of enrollee-level EDGE data that were used in the previous year's models. Finally, since this approach could allow us to finalize the coefficients earlier, it could allow issuers more time to incorporate this information when pricing their plans for the upcoming benefit year.
The proposed coefficients that were published in the proposed rule reflected the other proposed risk adjustment model specification changes (that is, inclusion of a two-stage model specification in the adult and child models; addition of severity and transplant indicators interacted with HCC counts factors in the adult and child models; modification to the enrollment duration factors in the adult models; and removal of the current severity indicator and enrollment duration factors in the adult models). However, based on our decision to not finalize those proposed model specification changes at this time as described below, the proposed coefficients outlined in the proposed rule are not being finalized. Instead, as discussed in more detail below, we will continue to apply the current risk adjustment model specifications (that is, the enrollment duration factors for the adult models and the severity illness indicators in the adult models that were finalized in the 2021 Payment Notice will continue to apply for the 2022 benefit year, with trending adjustments made to project the data used to develop the factors forward to reflect the 2022 benefit year). The final coefficients outlined below reflect the use of the 2016, 2017, and 2018 benefit years enrollee-level EDGE data to develop blended, or averaged, coefficients from the 3 years of separately solved models, as proposed, and the maintenance of the current adult model severity indicators and enrollment duration factors, with trending adjustments made to reflect the
We considered the potential disruption to issuers' settled expectations and we explicitly sought comments from stakeholders on whether to finalize the proposed approach, or whether we should instead maintain the approach of using the 2017, 2018, and 2019 benefit years' data to recalibrate the risk adjustment models for the 2022 benefit year. As part of our analysis, we considered that it is appropriate for HHS to consider changes to program parameters through notice-and-comment rulemaking, including the proposed changes to the approach for the annual model recalibration. We further note that even if we were to maintain the approach suggested by commenters to utilize the 2017, 2018, and 2019 benefit years, changes in the underlying data would attenuate the relative impact of the most recent benefit year data on risk adjustment coefficients. This is because the coefficients also incorporate changes to the risk adjustment methodology for the applicable benefit year, updated plan design parameters, and certain other adjustments to the data, such as trending the data to reflect the applicable benefit year. Finally, as noted above, in the initial years of risk adjustment and implementation of the 2014 federal market reforms, the markets underwent rapid changes, however, in recent years the markets have continued to mature and stabilize. We believe the approach finalized in this rule will provide stability and easier price prediction for issuers for the 2022 benefit year and beyond. It is an appropriate and reasonable response to comments submitted by stakeholders over the years asking HHS to reevaluate these issues and find a way to release the coefficients earlier to align with issuer pricing cycles.
While we intend to make the proposed and final coefficients available as early as possible, we did not propose to delete and are still retaining the flexibility under § 153.320(b)(1)(i) that permits HHS to release the final coefficients in guidance after publication of the final rule. Consistent with prior years where we have invoked this flexibility, we intend any subsequent publication of final coefficients would occur either in the final rule or in guidance published soon after the publication of the final rule.
After consideration of the comments on these proposals, we are finalizing the approach to use the 3 most recent consecutive years of enrollee-level EDGE data that are available in time for incorporating the data in the recalibrated coefficients published in the proposed rule and to not update the coefficients for additional years of data between the proposed and final rules if an additional year of enrollee-level EDGE data becomes available. As a result, we will use 2016, 2017, and 2018 enrollee-level EDGE data to recalibrate the 2022 risk adjustment models.
Beginning with the 2022 benefit year, we proposed several updates to the risk adjustment models. These proposed updates include changes to the specifications for the adult and child models and updates to the enrollment duration factors in the adult models to improve the models' predictions. We also proposed to continue the market pricing adjustment for Hepatitis C drugs that has been in place since the 2020 benefit year.
We are not finalizing the proposed model specification changes and enrollment duration factor updates or the accompanying removal of the current severity illness indicators and enrollment duration factors in the adult models at this time. Therefore, the current adult model severity illness indicators and enrollment duration factors, with trending adjustments made to reflect the 2022 benefit year, will apply for the 2022 benefit year without the proposed specification changes. We are finalizing and will continue the market pricing adjustment for the Hepatitis C drugs that has been in place since the 2020 benefit year.
Beginning with the 2022 benefit year, we proposed to modify the adult and child models specifications to improve prediction for enrollees at both the low and highest ends of expected expenditures. The current HHS-HCC models are estimated by a weighted least squares regression.
As described in the 2021 Payment Notice, the current HHS-HCC models, which are linear models, underpredict plan liability for enrollees without HCCs (enrollees with low expected expenditures) and underpredict plan liability for enrollees with the highest HCC counts (enrollees with high expected expenditures).
Our initial analyses showed that the non-linear and HCC counts models would yield considerable gains in predictive accuracy in the adult models across several subgroups when compared to the current linear models.
For the two-stage specification, we explored calibrating the adult and child models in two stages: In the first-stage estimation, the model coefficients would be estimated using the current model specifications; and in the second stage, we would re-estimate the model weighted by the reciprocal of the predicted values of relative expenditures from the first step estimation with the same model specification.
We also explored how the addition of severity and transplant indicators interacted with HCC counts, wherein an indicator flagging the presence of at least one severity or transplant payment HCC is being interacted with counts of the enrollee's payment HCCs.
The purpose of adding severity and transplant indicators interacted with HCC counts factors is to account for the fact that costs of certain HCCs rise significantly when they occur with multiple other HCCs. To mitigate the incentive to upcode multiple HCCs, we only increased incremental risk scores in the presence of at least one of the selected HCCs in the severity or transplant indicator groups in Table 3 in the proposed rule. That is, an adult or child enrollee would have to have at least one HCC in the “severity” or “transplant” indicator groups in Table 3 in the proposed rule to receive the interacted HCC counts coefficient toward their risk score.
Under this approach, when an adult or child enrollee has a severity indicator HCC in Table 3 in the proposed rule, the enrollee's risk score would include the sum of: (1) Severity HCC variable coefficient;
For the transplant-related HCCs within the severity indicator HCC counts in Table 3 in the proposed rule, we found separating out transplant HCCs into their own additional indicator to interact HCC counts factors improved prediction for these high-cost enrollees. Therefore, for the transplant HCCs, we created a separate transplant indicator to interact with payment HCC counts of 4, 5, 6, 7, or 8+ for the adult models, and a single indicator variable of payment HCC counts of 4+ for the child models. For example, an adult enrollee with a transplant HCC 34 “Liver Transplant Status/Complications” in the transplant indicator group and three other payment HCCs received the following factors toward their risk score in the adult models: (1) The four coefficients for their individual HCCs (the three non-transplant HCCs and the HCC 34 transplant HCC coefficient), (2) severity interacted HCC counts of 4 coefficient, and (3) transplant interacted HCC counts of 4 coefficient.
As an alternative, we explored interacting the HCC counts factors with each selected severity and transplant HCC, but found it was sufficient to interact the HCC counts factors with a variable indicating the presence of at least one of the selected HCCs in each group to improve prediction for enrollees with these HCCs. We also explored different combinations of HCC counts to identify the counts factors for both indicator groups in the adult and child models that provided the best balance of reasonable sample sizes and relative cost differences between each counts factor. More specifically, in the adult models, we found that starting with 4+ HCCs for the transplant interacted factors improved predictions of enrollees at the very high end in terms of risk and cost and ending at 8+ HCCs instead of 10+ HCCs addressed the small sample sizes of enrollees with a transplant and 9 or more payment HCCs. For the child models, we found having one variable for 4+ payment HCCs provided more stable estimates as compared to separate variable for each payment HCC above that number, given the smaller sample sizes for children than those for adults.
Lastly, we tested combining these specifications into an alternative approach that incorporated both the two-stage specification and the severity and transplant indicators interacted HCC counts factors described above for the HHS adult and child models. We found this combined approach generally improved prediction for enrollees at both the low and highest ends of expected expenditures. Specifically, even though we found that the age-sex factors and some HCCs might have slightly worse predictive ratios under the proposed combined approach than the current linear models, we found that this combined approach improves predictive ratios in comparison to the current models in each decile of predicted plan liability. We also found that this combined approach improves R-squared in comparison to the current model and that even though the coefficients for the model factors that are most impacted by the combined approach (the age-sex factors and the severity and transplant HCCs) would be changing under the 2022 benefit year models compared to the 2021 benefit year models, the average enrollee's adult risk score in the recalibration sample in the silver metal level only increased slightly between 2021 benefit year models to 2022 benefit year models. Therefore, we proposed to modify the HHS risk adjustment model specifications for the adult and child models by combining a two-stage specification and adding interacted HCC counts factors beginning with the 2022 benefit year. For the two-stage specification, we proposed calibrating the adult and child models in two stages. The first stage of the weighted estimation method would involve a linear regression of simulated plan liability on age-sex factors and payment HCC factors for the adult and child models, with the addition of the enrollment duration and RXCs factors for the adult models. The second stage would use the reciprocal of prediction as weights from the first step as a second stage linear regression. To stabilize the weights from the first stage predictions, we proposed lower and upper bound caps on the predictions at the 2.5th and 97.5th percentiles in the adult models, and the 2.5th and 99.5th percentiles in the child models. This two-stage specification would be combined with the severity and transplant indicators from the interacted HCC counts factors. For the severity indicator group, we proposed to add separate count factors for one to 10+ payment HCCs counts factors (1, 2, . . ., 10+) for the adult models and one to 5, 6 or 7, and 8+ payment HCCs (1, 2, . . . . 5, 6 or 7, 8+) for the child models. The proposed HCCs that would flag the severity indicator are listed in Table 3 of the proposed rule.
We sought comment on these proposals, including on the HCCs selected for flagging as severity and transplant indicators listed in Table 3 of the proposed rule such as whether we should include HCC 18 Pancreas Transplant in the transplant indicator group, and the alternatives described above. We also requested comment on whether we should pursue both the interacted HCC counts factors and the two-stage specification beginning with the 2022 benefit year (as proposed), if we should implement one of the two approaches beginning with the 2022 benefit year (and if so, which one), or if we should wait to implement the proposed changes that combines the proposed model specification updates until the 2023 benefit year.
We are not finalizing the risk adjustment model specification changes as proposed at this time, but will further consider potential changes that could increase the predictive power of the HHS risk adjustment models. We also
We received public comments on the proposed updates to the model specification changes. The following is a summary of these comments and our responses.
Some commenters that opposed the proposed model specification changes were concerned the changes added complexity to the models and would hinder issuers' ability to price accurately, resulting in higher premiums. Other commenters recommended that HHS collect data to estimate the impact of the proposed model specification changes on risk adjustment transfers before finalizing them. Another commenter recommended evaluating model performance at the plan level instead of the enrollee level using the plan liability risk score predictive ratios because the transfer formula operates at the plan and rating level, wanting HHS to collect data to do this type of analysis.
A few commenters were concerned that the proposed model specification changes would reduce the quality of coverage available to consumers and would threaten the market's ability to support robust competition. One of these commenters recommended that we reconsider the goal of reducing under prediction for enrollees with low spending, because this commenter believed that plans that disproportionately attract sick enrollees tend to attract enrollees who are higher-than-average risk based on characteristics not captured in risk adjustment, and that therefore risk adjustment should underpay for low spending enrollees relative to payment for higher-risk enrollees.
However, other commenters supported our proposed model specifications changes. These commenters tended to support improving the predictive power of the risk adjustment models and were concerned about the potential for plans to lose money on enrollees with no HCCs under the current model specifications, discouraging issuers from enrolling healthier enrollees and resulting in excessive risk adjustment payments. One of these commenters reported engaging in their own analysis of the proposed model specification changes and found that they achieved HHS's goals of improving the models' prediction while mitigating modeling complexity and gaming concerns.
As previously mentioned, we believe it is appropriate to continue to analyze the two-stage specification and interacted HCC counts factors and are considering releasing a technical paper to provide our further assessment of potential changes to the risk adjustment models that could include these model specification changes or other options. In addition, we would pursue adoption of any of these model specification changes, or other options, for future benefit years through notice-and-comment rulemaking.
If he develops sepsis, which is an interacted “severity” HCC, his predicted cost would be: 0.605 + 9.394 (sepsis HCC) + −5.824 (interacted severity HCC counts factor for 2 total HCCs estimate) = 4.175.
If this enrollee also develops heart failure, his predicted cost would further rises: 0.605 + 9.394 + 1.874 (heart failure HCC) + −4.526 (interacted severity HCC counts factor for 3 total HCCs) = 7.347. As can be seen in these illustrative examples, although the interacted “severity” HCC counts factors are negative, the interacted “severity” HCC counts factor rise with the enrollee's total number of HCCs, increasing the enrollee's total predicted cost as his number of HCC diagnoses increases. In fact, the increasing risk scores with each additional HCC is consistent with the current models and predictions are higher for enrollees with many HCCs under the interacted counts specification than under the current model specification.
In developing the proposed interacted HCC counts factors, we also considered sample sizes of the various interacted HCC counts factors. We analyzed multiple years of enrollee-level EDGE data and we chose the model specifications that grouped all of the HCC counts interacted with individual severity and transplant HCCs into two sets of aggregated factors to maximize sample size, reduce concerns of overfitting the model, and reduce the number of factors being added to the models. The resulting sample size for the proposed interacted HCC counts factors were consistent with the sample size for individual HCCs in the risk adjustment models. Furthermore, by limiting the proposed interacted HCC counts factors to certain severity and transplant HCCs, we believe that the interacted HCC counts factors would restrict the scope for coding proliferation in accordance with the principles of risk adjustment.
As discussed in the 2021 Payment Notice, we considered using a counts model specification where all HCCs were subject to the counts model specifications, but, as stated in the proposed rule, we were concerned that the presence of counts across all HCCs may promote gaming in coding practices. This was our reasoning for investigating an interacted HCC counts model specification to find a way to get the benefits afforded by the HCC counts model while mitigating the potential for gaming. The proposed interacted HCC counts factors would have made changes primarily to the HCCs most associated with underprediction of high-cost cases in the model and would have only applied to less than two percent of the population thereby reducing the concern about additional coding incentives in comparison to a general HCC counts model.
We agree that stakeholders will benefit from additional time to analyze the proposed factors that we presented in the proposed rule to understand the incremental effects of the interacted HCC counts factors and consider the associated coding incentives. After consideration of comments received on these proposals, we are not finalizing the proposed model specification changes or the removal of the current severity illness indicator factors in the adult models at this time. However, we intend to continue to consider changes that can increase the predictive power of the HHS risk adjustment models in rulemaking for future benefit years and also intend to provide stakeholders with further information and additional analysis on potential model specifications changes.
In the proposed rule, we proposed changes to the enrollment duration factors in the adult risk adjustment models to improve the prediction for partial year enrollees with HCCs. After consideration of comments received, we are not finalizing the proposal to remove the current 11 enrollment duration factors of up to 11 months for all enrollees in the adult models, or the addition of new monthly enrollment duration factors of up to 6 months that would only apply for enrollees with payment HCCs in the adult models. For the 2022 benefit year, we will continue to apply the current 11 enrollment duration factors of up to 11 months for all enrollees in the adult models, with trending adjustments made to project the data used to develop the factors forward to reflect the 2022 benefit year. See Table 1. Similar to the other proposed model specification changes outlined elsewhere in this rule that we are not finalizing in this rule, we intend to continue to analyze potential changes to the enrollment duration factors to improve model prediction for partial year enrollees with HCCs.
As described in the proposed 2021 Payment Notice, we have been considering potential adjustments to the enrollment duration factors and previously analyzed the current factors using the 2016 and 2017 enrollee-level EDGE data.
Since the publication of the 2021 Payment Notice, we have reassessed enrollment duration factors for adults using the 2018 benefit year enrollee-level EDGE data. The additional data year's findings were consistent with our prior finding that partial year enrollees without HCCs do not have PMPM expenditures that are significantly different compared to full year enrollees without HCCs. Therefore, beginning with the 2022 benefit year, we proposed to remove the current 11 enrollment duration factors of up to 11 months for all enrollees in the adult models, and add new monthly enrollment duration factors of up to 6 months to the adult models that would only apply for enrollees with payment HCCs. Under the proposal, there would be no enrollment duration factors for adult enrollees without payment HCCs starting with the 2022 benefit year adult models. As part of this analysis, we also considered adoption of enrollment duration factors by market, but we did not find a meaningful distinction in relative costs between markets on average once we implemented the proposed enrollment duration factors of up to 6 months for adult enrollees with payment HCCs. Therefore, we did not propose enrollment duration factors for the adult models by market type at this time. We also proposed to continue to incorporate enrollment duration factors only in the adult models.
We are not finalizing the proposal to remove the current 11 enrollment duration factors of up to 11 months for all enrollees in the adult models, or to add new monthly enrollment duration factors of up to 6 months that would only apply for enrollees with payment HCCs in the adult models. We intend to consider proposing changes that increase the predictive power of the HHS risk adjustment models model in the future, including with respect to improving model prediction for partial year enrollees with HCCs. We received public comments on the proposed changes to the adult model enrollment duration factors. The following is a summary of the comments we received on these proposals and our responses.
A few commenters opposed the new enrollment duration factors because they believed that the current enrollment duration factors that apply to all adult enrollees help to offset under-prediction of healthy enrollees in the risk adjustment models and that the proposed enrollment duration factors would undermine this offset by only applying to adult enrollees with an HCC. Other commenters believed that the current enrollment duration factors helped mitigate some potential under-prediction issues in the small group market.
Some commenters wanted HHS to implement the proposed enrollment duration factors changes beginning with the 2022 benefit year. Other commenters recommended delaying implementation of the proposed enrollment duration factor changes to the 2023 benefit year, asking that HHS provide additional analysis on the enrollment duration factor changes in the interim to assist issuers with pricing their plans to reflect these changes. One commenter wanted HHS to implement the proposed enrollment duration factor changes now so that carriers are not deterred from enrolling people seeking coverage during special enrollment periods with millions of people losing employer-sponsored insurance due to COVID-19.
Therefore, we are also not finalizing the proposed changes to the enrollment duration factors at this time and will continue to apply the current 11 enrollment duration factors of up to 11 months, with trending adjustments made to reflect the 2022 benefit year, for all enrollees in the adult models. In addition, we are considering releasing a further analysis of potential changes to the risk adjustment models that could include updates to the adult model enrollment duration factors.
We also note that as part of our analysis of potential changes to the adult model enrollment duration factors, we considered creating factors for adult enrollees with HCCs for up to 9 months and tested this alternative model specification using 2018 enrollee-level EDGE data. We found that the estimated coefficients for the factors between 6 and 9 months were small and in some cases negative. We also did not find meaningful improvement in the predictive ratios when using enrollment duration factors up to 9 months. For these reasons, we proposed using enrollment duration factors of up to 6 months for enrollees with HCCs. However, as detailed above, we are not finalizing the proposed changes to the enrollment duration factors or the accompanying removal of the current enrollment duration factors in the adult models at this time.
After consideration of the comments received, we are not finalizing the proposed revisions to the enrollment duration factors at this time. For the 2022 benefit year, we will continue to apply the current 11 enrollment duration factors of up to 11 months, with trending adjustments made to reflect the 2022 benefit year, for all enrollees in the adult models.
For the 2022 benefit year models, we proposed to continue applying the market pricing adjustment to the plan liability associated with Hepatitis C drugs that has been in place beginning with the 2020 benefit year final risk adjustment models.
As explained in the proposed rule, we continue to believe this market pricing adjustment is necessary and appropriate to account for the significant pricing changes associated with the introduction of new and generic Hepatitis C drugs between the data years used for recalibrating the models and the applicable recalibration benefit year. We also continue to be cognizant that issuers might seek to influence provider prescribing patterns if a drug claim can trigger a large increase in an enrollee's risk score that is higher than the actual plan liability of the drug claim, and therefore, make the risk adjustment transfer results more favorable for the issuer. We previously stated that we intended to reassess this pricing adjustment with future benefit years' enrollee-level EDGE data.
We received public comments on the proposed continuation of the market pricing adjustment for Hepatitis C drugs for the 2022 benefit year. The following is a summary of the comments we received and our responses.
We note that if an enrollee in an issuer's risk adjustment covered plan has claims for gene therapy or other expensive treatments, that enrollee would be eligible for the high-cost risk pool payments if claims for that enrollee are over $1 million. We intend to assess the use of gene therapy drugs as additional data become available and consider whether model updates are warranted to address their anticipated costs in the future.
We further note that we also continuously assess the availability of drugs in the market and the associated mapping of those drugs to RXCs in the adult risk adjustment models. As a result of this on-going assessment, we make quarterly updates to the RXC Crosswalk to ensure drugs are being mapped to RXCs where appropriate, including adding and removing new and old drugs. In response to the comments regarding the potential different treatment of PrEP drugs in risk adjustment, we note that in January 2021, we announced that consistent with our treatment of other PrEP drugs, Descovy® would be removed from RXC 1 in the final Benefit Year (BY) 2020 Do it Yourself (DIY) update, released in April 2021, since it can be used as a preventive drug.
After consideration of the comments we received on this proposal, we are finalizing the proposal to continue the market pricing adjustment for Hepatitis C drugs.
The final 2022 benefit year risk adjustment model factors resulting from the equally weighted (averaged) blended factors from separately solved models using the 2016, 2017, and 2018 enrollee-level EDGE data, consistent with the policies finalized in this rulemaking, are shown in Tables 1 through 6.
We received public comments on the proposed list of factors to be employed in the 2022 benefit year risk adjustment models (§ 153.320). The following is a summary of the comments on these proposals and our responses.
Consistent with the risk adjustment principles described previously,
For all these reasons, we believe the proposed and final list of factors applicable to the 2022 benefit year includes the appropriate HCCs.
After consideration of comments on the proposed factors, we are finalizing the above list of final coefficients for the 2022 benefit year.
As noted above in the Pricing Adjustment for the Hepatitis C Drugs preamble, we continuously assess the availability of drugs in the market and the associated mapping of those drugs to RXCs in the adult risk adjustment models. As a result of this ongoing assessment, we make quarterly updates to the RXC Crosswalk to ensure drugs are being mapped to RXCs where appropriate, including adding and removing new and old drugs based on approval status, prescribing patterns, and expenditure data. In a recent update, HHS removed hydroxychloroquine from RXC 09 effective March 24, 2021, due to concerns regarding unrepresentative expenditures and off-label prescribing during the COVID-19 public health emergency.
We proposed to continue including an adjustment for the receipt of CSRs in the risk adjustment models to account for increased plan liability due to increased utilization of health care services by enrollees receiving CSRs in all 50 states and the District of Columbia. For the 2022 benefit year, to maintain stability and certainty for issuers, we proposed to maintain the CSR factors finalized in the 2019, 2020, and 2021 Payment Notices.
Consistent with the approach finalized in the 2017 Payment Notice,
We are finalizing the CSR adjustment factors as proposed, including the CSR adjustment factor of 1.12 for all Massachusetts wrap-around plans.
We received public comments on the proposed cost-sharing reduction adjustments. The following is a summary of the comments we received and our responses.
Furthermore, notwithstanding the cessation of federal CSR payments to issuers in October 2017, section 1402 of the ACA requires Exchange plans to provide CSRs for eligible enrollees, and plans face increased liability for silver plan enrollees receiving CSRs. As such, the CSR adjustment factors account for the higher plan liability of CSR plans, which is not experienced by other metal level plans. Therefore, we do not believe that the presence of CSR multipliers for CSR-eligible enrollees in silver plans automatically creates inaccurate risk differentials between CSR eligible and non-CSR eligible enrollees. Regardless, any refinements to the HHS-operated risk adjustment methodology, including any potential changes to the CSR adjustment factors for future benefit years, would be proposed through notice-and-comment rulemaking.
After consideration of the comments received, we are finalizing the CSR adjustment factors as proposed.
To evaluate risk adjustment model performance, we examined each model's R-squared statistic and predictive ratios. The R-squared statistic, which calculates the percentage of individual variation explained by a model, measures the predictive accuracy of the model overall. The predictive ratio for each of the HHS risk adjustment models is the ratio of the weighted mean predicted plan liability for the model sample population to the weighted mean actual plan liability for the model sample population. The predictive ratio represents how well the model does on average at predicting plan liability for that subpopulation.
A subpopulation that is predicted perfectly would have a predictive ratio of 1.0. For each of the HHS risk adjustment models, the R-squared statistic and the predictive ratios are in the range of published estimates for concurrent risk adjustment models.
We received comments on the model performance statistics outlined in the proposed rule. The following is a summary of the comments we received and our responses.
After consideration of the comments received on the model performance statistics and for the reasons stated in our responses, we are publishing the final R-squared statistic for each model above in Table 8.
On August 4, 2020, HHS adopted temporary policies of relaxed enforcement for the premium rules set forth at 45 CFR 147.102, 155.200(f)(4), 155.400(e) and (g), 155.706(b)(6)(1)(A), 156.80(d), 156.210(a), and 156.286(a)(2) through (4) to allow issuers in the individual and small group markets the flexibility, when consistent with state law, to temporarily offer premium credits for 2020 coverage.
In prior rulemaking,
We further proposed that HHS would use adjusted plan premiums for all enrollees to whom the issuer has actually provided premium credits as a reduction to the applicable benefit year premiums, when calculating transfers under the state payment transfer formula for the 2021 benefit year and beyond. This approach would also extend to the calculation of transfers under the state payment transfer formula in states that receive approval for a request to reduce transfers under § 153.320(d)—that is, the lower actual premiums for which plan enrollees would be responsible would be the amounts used in the calculations under the state payment transfer formula to reflect these temporary premium credits. As such, if an issuer in a state with an approved 50 percent small group market reduction request for a given benefit year chooses to provide temporary premium credits, the state average premium will decrease, and HHS would apply the 50 percent transfer reduction to the lower PMPM payment or charge transfer amount calculated under the state payment transfer formula for that state's small group market for that benefit year. As detailed further later in this preamble, we also proposed that issuers providing these temporary premium credits must report the lower, actual premium amounts billed to plan enrollees to their respective EDGE servers. We explained that we believe that the applicable definitions of plan average premium and state average premium retain the meaning previously finalized by reflecting the actual monthly premium billed to enrollees. The proposal would build on lessons learned from the COVID-19 PHE and would establish a framework to recognize premium credits as a reduction in premium for purposes of the HHS-operated risk adjustment program to align risk adjustment charges and payments under the state payment transfer formula with flexibilities HHS may provide to issuers and states in future benefit years during a declared PHE. The proposal would not change any other aspect of the state payment transfer formula or the method for calculating payments and charges under the HHS risk adjustment methodology (inclusive of the state payment transfer formula and high-cost risk pool parameters). We are finalizing this policy as proposed.
We summarize and address all the comments received on this proposal in the Risk Adjustment Data Requirements for Future Premium Credits (§ 153.710) preamble section below.
We proposed to continue to use the HHS state payment transfer formula that was finalized in the 2021 Payment Notice.
We previously defined the calculation of plan average actuarial risk and the calculation of payments and charges in the Premium Stabilization Rule.
Risk adjustment transfers (total payments and charges, including high-cost risk pool payments and charges) are calculated after issuers have completed their risk adjustment EDGE data submissions for the applicable benefit year. Transfers (payments and charges) under the state payment transfer formula are calculated as the difference
The denominators are summed across all risk adjustment covered plans in the risk pool in the market in the state.
The difference between the two premium estimates in the state payment transfer formula determines whether a plan pays a risk adjustment charge or receives a risk adjustment payment. The value of the plan average risk score by itself does not determine whether a plan would be assessed a charge or receive a payment-even if the risk score is greater than 1.0, it is possible that the plan would be assessed a charge if the premium compensation that the plan may receive through its rating (as measured through the combination of metal level AV, allowable rating factor, induced demand factor, and geographic cost factor) exceeds the plan's predicted liability associated with risk selection. Risk adjustment transfers under the state payment transfer formula are calculated at the risk pool level, and catastrophic plans are treated as a separate risk pool for purposes of the risk adjustment state payment transfer calculations.
We previously defined the cost scaling factor, or the statewide average premium term, as the sum of the average premium per member month of each plan
To account for costs associated with exceptionally high-risk enrollees, we previously added a high-cost risk pool adjustment to the HHS risk adjustment methodology. As finalized in the 2020 Payment Notice,
The high-cost risk pool adjustment amount is added to the state payment transfer formula to account for: (1) The payment term, representing the portion of costs above the threshold reimbursed to the issuer for high-cost risk pool payments (
We sought comment on the proposed HHS risk adjustment methodology for the 2022 benefit year and beyond and the proposed updates to § 153.320(c). We are finalizing these policies as proposed and will apply the proposed HHS risk adjustment methodology outlined in the proposed rule for the 2022 benefit year and beyond. We are also finalizing the update to § 153.320(c) as proposed.
We received public comments on the proposed 2022 benefit year HHS risk adjustment methodology, the proposal to apply the same methodology to future benefit years unless changed through notice-and-comment rulemaking, and the proposed updates to § 153.320(c). The following is a summary of the comments we received and our responses.
We also did not propose and are not finalizing changes to the 14 percent administrative cost reduction in the risk adjustment state payment transfer formula. As we noted in the 2018 Payment Notice,
In response to comments, we further clarify that the MLR Annual Reporting Form provides all the information we use to analyze the sufficiency of the 14 percent administrative cost reduction, including administrative and other non-claims expenses like quality improvement activity expenses, and taxes and fees that do not vary based on enrollee health risk. We believe that this is a sufficient and reasonable source for data to calculate and analyze the administrative cost reduction to the statewide average premium in the risk adjustment state payment transfer formula.
Furthermore, we did not propose and are not finalizing induced utilization factors that vary by market. We are concerned that adding different utilization factors based on market to the state payment transfer formula would make the formula much more complex, as this would double the number of induced utilization factors in the formula and make it more difficult for issuers to price for. We note that we intend to further consider the differences between markets and implications for risk adjustment, and that any related changes to the risk adjustment program would be proposed in notice-and-comment rulemaking.
After consideration of the comments received on these proposals, we are finalizing the proposed HHS risk adjustment methodology for the 2022 benefit year and beyond, unless changed through notice-and-comment rulemaking. We are also finalizing the accompanying proposed update to § 153.320(c).
In the 2019 Payment Notice, we provided states the flexibility to request a reduction to the otherwise applicable risk adjustment state transfers calculated by HHS under the state payment transfer formula, which is calibrated on a national dataset, for the
If the state requests that HHS not make publicly available certain supporting evidence and analysis because it contains trade secrets or confidential commercial or financial information within the meaning of the HHS Freedom of Information Act (FOIA) regulations at 45 CFR 5.31(d), HHS will only make available on the CMS website the supporting evidence submitted by the state that is not a trade secret or confidential commercial or financial information by posting a redacted version of the state's supporting evidence.
We received several general comments on the state flexibility request framework outlined in § 153.320(d). However, we did not propose any changes to that framework other than the proposal to allow multi-year state flexibility requests as explained below. As such, these general comments on the state flexibility request framework are out of scope of this rulemaking and will not be addressed in this rule.
For the 2022 benefit year, HHS received a request to reduce risk adjustment transfers calculated under the state payment transfer formula for the Alabama individual
We received public comments on Alabama's requests to reduce risk adjustment transfers for the 2022 benefit year. The following is a summary of the comments we received and our responses.
We recognize there is some level of uncertainty regarding future market dynamics, including their potential impact on future benefit year transfers. However, to align with the annual pricing cycle for health insurance coverage, the applicable risk adjustment parameters (including approval or denial of state flexibility reduction requests) must generally be finalized sufficiently in advance of the applicable benefit year to allow issuers to consider such information when setting rates. As such, there will always be an opportunity for some uncertainty regarding the precise impact of future methodological changes (such as the risk adjustment model changes applicable beginning with the 2020 and 2021 benefit years) or unforeseen events (such as the COVID-19 PHE and its impact on enrollment and utilization). With respect to Alabama's 2022 benefit year requests, HHS believes that the evidence submitted by Alabama in support of its transfer reduction requests was sufficient, along with other information available to HHS and timely submitted comments, for HHS to review and confirm that the requests meet the criteria for approval set forth in § 153.320(d)(4)(i)(B).
In addition, these commenters did not provide any data or supporting evidence during the public comment period to support their assertions. Our analysis of the information submitted as part of the state's request, along with other relevant factors, including the premium impact of the transfer reduction for the state market risk pool, showed that the transfer reduction requested by Alabama would have
Based on our review of the comments received on the proposed state flexibility reduction requests within the comment period and HHS's analysis of the requests submitted by Alabama,
We proposed several amendments to § 153.320(d) to allow states to request a reduction to otherwise applicable risk adjustment calculations under the state payment transfer formula for up to 3 years, beginning with the 2023 benefit year. Under current policy, states seeking to reduce risk adjustment state transfers in one or more of their market risk pools must submit a request to HHS each year describing the nature of their request and providing supporting documentation. HHS then reviews the request, sets forth the request in the applicable benefit year's HHS notice of benefit and payment parameters, and approves or denies it based on the evidence and analysis provided by the state in the request and the comments received to the applicable benefit year's proposed HHS notice of benefit and payment parameters.
Under § 153.320(d)(1), states must submit this request annually, and HHS publishes state requests in the applicable benefit year's proposed and final annual HHS notice of benefit and payment parameters. Stakeholders have requested that HHS allow states to request multi-year risk adjustment flexibility reductions. In recognition of these comments, we proposed to provide the flexibility for states to request a reduction to otherwise applicable risk adjustment state transfers under the HHS-operated risk adjustment methodology's state payment transfer formula for up to 3 years beginning with the 2023 benefit year.
We are not finalizing the proposed policies or accompanying proposed updates to § 153.320(d) to permit states to pursue multi-year state flexibility reduction requests. We are maintaining the existing language and framework, which permits states to submit annual requests to reduce the otherwise applicable risk adjustment calculations under the state payment transfer formula for its individual and small group (or merged) markets for a given benefit year to more precisely account for state-specific factors or other unique market characteristics.
We received public comments on the proposed policies and updates to § 153.320(d) to permit states to seek multi-year state flexibility requests for up to 3 years. The following is a summary of the comments we received and our responses.
After consideration of the comments on the policies and changes related to the multi-year state flexibility reduction requests, we are not finalizing the proposals or changes to § 153.320(d) related to such requests.
HHS recently completed the 2014 benefit year audits of a sample of issuers of ACA transitional reinsurance-eligible plans. During this process, HHS encountered significant challenges that impeded its ability to efficiently administer and complete the audits. More specifically, HHS experienced difficulties receiving requested audit data and materials in a timely fashion from some issuers, and had difficulty obtaining data from these issuers in a format that was usable by HHS. HHS is of the view that codifying additional audit requirements and parameters is an appropriate and necessary measure to ensure that 2015 and 2016 benefit year audits of ACA transitional reinsurance-eligible plans appropriately function to protect the integrity of our programs.
We proposed several amendments to § 153.410(d) to provide more clarity around the audit requirements for issuers of reinsurance-eligible plans. As proposed, the amendments explain the audit process, including what it means to properly comply with an audit and the consequences for failing to comply with audit requirements. We also proposed to expand the oversight tools available to HHS to also provide authority for HHS to conduct compliance reviews of issuers of
Specifically, we proposed to rename § 153.410(d) to “Audits and Compliance Reviews” in order to clarify that the authority described in this section would apply to audits and the proposed HHS compliance reviews to evaluate issuers of reinsurance-eligible plans' compliance with the applicable requirements in subparts E and H of part 153. We similarly proposed to update the introductory language in § 153.410(d) to incorporate a reference to HHS compliance reviews and to note that we would conduct these compliance reviews consistent with the standards set forth in § 156.715.
We also proposed to amend the existing introductory language in § 153.410(d) to remove the last sentence that discusses audit results and the accompanying requirements that an issuer must follow if an audit results in a finding of material weakness or significant deficiency. Additionally, as detailed further below, we proposed to replace this with a new proposed framework that captures more details on the audit process and requirements for reinsurance-eligible plans. As amended, the introductory language at § 153.410(d) would reflect the authority for HHS, or its designee, to audit or conduct a compliance review of an issuer of a reinsurance-eligible plan to assess its compliance with the applicable requirements of subparts E and H of part 153. We also proposed to move the existing introductory language in paragraph (d) requiring an issuer to ensure its relevant contractors, subcontractors, and agents cooperate with audits to a new proposed section, as detailed further below.
Also at § 153.410, we proposed to add new paragraph (d)(1) to establish notice and conference requirements for these audits. The introductory language in proposed paragraph (d)(1) reflects that HHS would provide at least 15 calendar days advance notice of its intent to conduct an audit of an issuer of a reinsurance-eligible plan. In proposed paragraph (d)(1)(i), we proposed to codify that all audits under this section would include an entrance conference at which the scope of the audit would be presented and an exit conference at which the initial audit findings would be discussed.
Further, we proposed to amend § 153.410(d) to add a new paragraph (d)(2) to capture the requirements issuers must meet to comply with an audit under this section. In proposed paragraph (d)(2)(i), we proposed to capture the requirement that currently appears in the introductory text of paragraph (d) for the issuer to ensure that its relevant contractors, subcontractors, and agents cooperate with any audit or compliance review under this section and also proposed to expand it to similarly require the issuer to ensure its relevant employees, downstream entities and delegated entities also cooperate with any audit or compliance review under this section. In new proposed paragraph (d)(2)(ii), we proposed to require issuers to submit complete and accurate data to HHS or its designees that is necessary to complete the audit. We explained that such data would need to support the appropriateness and accuracy of the reinsurance payments under review as part of the audit. For example, HHS may request that issuers of reinsurance-eligible plans provide enrollment and claims files, plan reference data, and associated enrollee data sufficient to show that reinsurance payments received were appropriate.
HHS encountered significant challenges in the 2014 benefit year audits when some issuers submitted data in a format that was not readable by HHS. To address this issue, we proposed in new paragraph (d)(2)(ii) that issuers must submit audit data in the format and manner specified by HHS no later than 30 calendar days after the initial deadline communicated and established by HHS at the entrance conference described in proposed paragraph (d)(1)(i). For example, HHS may require issuers to submit the requested audit data via Electronic File Transfer. Additionally, under proposed paragraph (d)(2)(iii), HHS proposed to require that issuers respond to any audit notices, letters, request, and inquiries, including requests for supplemental or supporting information, no later than 15 calendar days after the date of the notice, letter, request, or inquiry. We noted that we believe that the proposed requirements in paragraph (d)(2) are necessary and appropriate to ensure the timely completion of audits and to prevent waste that results from repeated, fruitless attempts by HHS to obtain data.
Recognizing that there may be situations that warrant an extension of the timeframes under § 153.410(d)(2)(ii) or (iii), as applicable, we proposed to also add a new paragraph (d)(2)(iv) to establish a process for issuers to request an extension for good cause. To request an extension, we proposed to require the issuer to submit a written request to HHS within the applicable timeframe established in paragraphs (d)(2)(ii) or (iii). The written request would have to detail the reasons for the extension request and good cause in support of the request. For example, good cause may include an inability to produce information in light of unforeseen emergencies, natural disasters, or a lack of resources due to a PHE. If the extension is granted, the issuer must respond within the timeframe specified in HHS's notice granting the extension of time.
Under § 153.410(d)(3), HHS proposed it would share its preliminary audit findings with the issuer, and further proposed that the issuer would then have 30 calendar days to respond to such findings in the format and manner specified by HHS. HHS would describe the process, format, and manner by which an issuer can dispute the preliminary findings in the preliminary audit report sent to the issuer. For example, if the issuer disagrees with the findings set forth in the preliminary audit report, HHS would require the issuer to respond to such findings by submitting written explanations that detail its dispute(s) or additional rebuttal information via Electronic File Transfer. Additionally, we proposed at paragraph (d)(3)(i) that if the issuer does not dispute or otherwise respond to the
We proposed to add a new paragraph § 153.410(d)(4) to capture the process and requirements related to final audit findings and reports. If an audit results in the inclusion of a finding in the final audit report, the issuer must comply with the actions set forth in the final audit report in the manner and timeframe established by HHS. We noted that the actions set forth in the final audit report could require an issuer to return reinsurance payments. We maintained the regulatory requirements related to corrective action plans for reinsurance audits that currently appear in paragraph (d) in proposed paragraph (d)(4), which stated that (1) the issuer must provide a written corrective action plan to HHS for approval within 30 calendar days of the issuance of the final audit report; (2) the issuer must implement the corrective action plan; and (3) the issuer must provide HHS with written documentation demonstrating the adoption and completion of the required corrective actions.
Lastly, if an issuer fails to comply with the audit requirements set forth in proposed § 153.410(d), HHS proposed in paragraph (d)(5)(i) that HHS would notify the issuer of reinsurance payments received that the issuer has not adequately substantiated, and under proposed paragraph (d)(5)(ii), HHS would notify the issuer that HHS may recoup any payments identified as not adequately substantiated. We explained that under this framework, the continued failure to comply with the audit requirements and provide the necessary information to substantiate the payments made could result in HHS recouping up to 100 percent of the reinsurance payments made to an issuer for the applicable benefit year(s) that are the subject of the audit.
We also clarified that reinsurance payment amounts recovered by HHS as a result of an audit under § 153.410(d) would be allocated, on a pro rata basis, as further payments to the U.S. Treasury under section 1341(b)(3)(B)(iv) of the ACA and further reimbursement of administrative expenses related to operating the reinsurance program under section 1341(b)(3)(B)(ii) of the ACA.
We sought comment on these proposals, including HHS's clarification of its compliance review authority, the proposed timeframes for issuers to respond to audit notices, reports, inquiries, and requests for supplemental information, and the process for issuers to request an extension to respond to such requests. We are finalizing the proposed updates to the audit and compliance reviews of issuers of reinsurance eligible plans in § 153.410(d), with modifications to certain audit timelines in response to comments stating that issuers would need more time to provide complete and accurate data for an audit and respond to HHS requests.
We received public comments on the proposed updates to audits and compliance reviews of issuers of reinsurance-eligible plans (§ 153.410(d)). The majority of the comments we received to this section were general comments that were also applicable to the similar amendments proposed in the below sections regarding audits and compliance reviews of issuers of risk adjustment covered plans (§ 153.620(c)) and audits and compliance reviews of APTC, CSRs, and user fees (§ 156.480(c)). We responded to these generally applicable comments in the below section on audits and compliance reviews of APTC, CSRs, and user fees (§ 156.480(c)). What follows is a summary and our responses to the comments we received that were specific to audits and compliance reviews of issuers of reinsurance-eligible plans.
After consideration of the comments related to the proposals regarding audits and compliance review of reinsurance-eligible plans, we are finalizing these provisions as proposed, with slight modifications to certain audit timelines in response to comments
We also clarify that we will recoup monies owed due to a finding as the result of an audit of a reinsurance-eligible plan using the same method with which we collect all debts. That is, to recoup the amount identified in § 153.410(d)(5)(i), we will first net using the process set forth in 45 CFR 156.1215, and we will then invoice issuers for the remaining debt (if any was owed).
Although currently HHS primarily uses the HHS-RADV process to audit issuers of risk adjustment covered plans, § 153.620(c) provides HHS with the authority to conduct audits of issuers of risk adjustment-covered plans outside of the HHS-RADV process. HHS intends to begin audits of issuers of risk adjustment covered plans to ensure the proper payment of high-cost risk pool payments and confirm compliance with applicable requirements. As such, similar to the proposals related to audits and compliance reviews of issuers of reinsurance-eligible plans and learning from our experience with those 2014 benefit year audits, we proposed to provide more clarity around the audit requirements for issuers of risk adjustment covered plans. These proposals sought to explain the audit process, including what it means to properly comply with an audit and the consequences for failing to comply with such requirements.
We also proposed to expand the oversight tools available to HHS beyond traditional audits to also provide authority for HHS to conduct compliance reviews of risk adjustment covered plans to assess compliance with the applicable requirements of subparts G and H of part 153. We explained that the proposed HHS compliance reviews would follow the standards set forth for compliance review of QHP issuers participating in FFEs established in 45 CFR 156.715. However, compliance reviews under this section would only be conducted in connection with confirming risk adjustment covered plans' compliance with the applicable requirements related to the risk adjustment program in subparts G and H of part 153. A compliance review may be targeted at a specific potential error and conducted on an ad hoc basis.
Specifically, we proposed to rename § 153.620(c) to “Audits and Compliance Reviews” to clarify that the authority described in this section would apply to audits and the proposed HHS compliance reviews to evaluate risk adjustment covered plans' compliance with the applicable requirements in subparts G and H of part 153. We similarly proposed to update the introductory language in paragraph (c) to incorporate a reference to HHS compliance reviews and to note that we would conduct these compliance reviews consistent with the standards set forth in 45 CFR 156.715.
We also proposed to amend the existing introductory language in § 153.620(c) to remove the last sentence that discusses audit results and the accompanying requirements that an issuer must follow if an audit results in a finding of material weakness or significant deficiency. As detailed further below, we proposed to replace this with a new proposed framework that captures more details on the audit process and requirements for risk adjustment covered plans. As amended, the introductory language at paragraph (c) would reflect the authority for HHS or its designee to audit or conduct a compliance review of an issuer of a risk adjustment covered plan to assess its compliance with the applicable requirements of subparts G and H of part 153. We also proposed to move the existing introductory language in paragraph (c) requiring an issuer to ensure its relevant contractors, subcontractors, and agents cooperate with audits to a new proposed section, as described further below.
We proposed to add new paragraph (c)(1) to establish notice and conference requirements for these audits. The introductory language in proposed paragraph (c)(1) reflects that HHS would provide at least 15 calendar days advance notice of its intent to conduct an audit of an issuer of a risk adjustment covered plan. In proposed paragraph (c)(1)(i), we proposed to codify that all audits under this section would include an entrance conference at which the scope of the audit would be presented and an exit conference at which the initial audit findings would be discussed.
Further, we proposed to amend § 153.620(c) to add paragraph (c)(2) to capture the requirements issuers must meet to comply with an audit under this section. In proposed paragraph (c)(2)(i), we would capture the requirement that currently appears in the introductory text of paragraph (c) for the issuer to ensure that its relevant agents, contractors, and subcontractors cooperate with any audit or compliance review under this section and also proposed to expand it to similarly require the issuer to ensure its relevant employees, downstream entities and delegated entities also cooperate with any audit or compliance review under this section. In proposed paragraph (c)(2)(ii), we proposed to require issuers to submit complete and accurate data to HHS or its designees that is necessary to complete the audit. We explained that such data would need to support the appropriateness and accuracy of the risk adjustment transfers (including high-cost risk pool payments and charges) under review as part of the audit. For example, HHS may request that issuers of risk adjustment covered plans provide enrollment and claims files and plan reference data and associated enrollee data.
In new paragraph (c)(2)(ii), we proposed that issuers must submit audit data, in the format and manner specified by HHS, no later than 30 calendar days after the initial deadline communicated and established by HHS at the entrance conference described in proposed paragraph (c)(1)(i). For example, HHS may require issuers to submit the requested audit data via Electronic File Transfer. Additionally, under proposed paragraph (c)(2)(iii), HHS proposed to require that issuers respond to any audit notices, letters, and inquires, including requests for supplemental or supporting information, no later than 15 calendar days after the date of the notice, letter, request, or inquiry. We noted that we believe that the proposed requirements in paragraph (c)(2) are necessary and appropriate to ensure the timely completion of audits and to prevent waste that results from repeated, fruitless attempts by HHS to obtain necessary data.
Recognizing that there may be situations that warrant an extension of the timeframes under § 153.620(c)(2)(ii) or (iii), as applicable, we proposed to also add a new paragraph (c)(2)(iv) to establish a process for issuers to request an extension for good cause. To request an extension, we proposed to require the issuer to submit a written request to
Under § 153.620(c)(3), HHS proposed that it would share its preliminary audit findings with the issuer, and further proposed that the issuer would then have 30 calendar days to respond to such findings in the format and manner specified by HHS. HHS would describe the process, format, and manner by which an issuer can dispute the preliminary findings in the preliminary audit report sent to the issuer. For example, if the issuer disagrees with the findings set forth in the preliminary audit report, HHS would require the issuer to respond to such findings by submitting written explanations that detail its dispute(s) or additional rebuttal information via Electronic File Transfer. Additionally, we proposed under paragraph (c)(3)(i) that if the issuer does not dispute or otherwise respond to the preliminary findings within 30 calendar days, the audit findings would become final. We proposed under paragraph (c)(3)(ii) that if the issuer timely responds and disputes any audit finding within 30 calendar days, HHS would review and consider such response and finalize the audit findings after such review. HHS would provide contact and other information necessary for an issuer to respond to the preliminary audit findings in the preliminary audit report sent to the issuer.
HHS proposed to add a new § 153.620(c)(4) to capture the process and requirements related to final audit findings and reports. If an audit results in the inclusion of a finding in the final audit report, the issuer must comply with the actions set forth in the final audit report in the manner and timeframe established by HHS. We noted that the actions set forth in the final audit reports could require an issuer to return risk adjustment (including high-cost risk pool) payments, or pay increased risk adjustment (including high-cost risk pool) charges. We maintained the regulatory requirements for corrective action plans for risk adjustment (including high-cost risk pool) audits that currently appear in § 153.620(c) in proposed paragraph (c)(4), which stated that (1) the issuer must provide a written corrective action plan to HHS for approval within 30 calendar days of the issuance of the final audit report; (2) the issuer must implement the corrective action plan; and (3) the issuer must provide HHS with written documentation demonstrating the adoption and completion of the required corrective actions.
Lastly, if an issuer fails to comply with the audit requirements set forth in proposed § 153.620(c)(2), HHS proposed in paragraph (c)(5)(i) that HHS would notify the issuer of payments received that the issuer has not adequately substantiated, and in proposed paragraph (c)(5)(ii), HHS would notify the issuer that HHS may recoup any payments identified as not adequately substantiated. We explained that under this framework, the continued failure to comply with the audit requirements and provide the necessary information to substantiate the transfer amounts under review could result in HHS recouping up to 100 percent of the risk adjustment (including high-cost risk pool) payments, or increased risk adjustment (including high-cost risk pool) charges, made to an issuer for the applicable benefit year(s) that are the subject of the audit.
We noted that any risk adjustment payments or charges recovered by HHS during an audit of a risk adjustment covered plan would be paid on a pro rata basis similar to the process for risk adjustment default charge allocations to the other issuers participating in the applicable state market risk pool in the applicable benefit year.
We sought comment on these proposals, including HHS's clarification of its compliance review authority, the proposed timeframes for issuers to respond to audit notices, reports, and requests for supplemental information, and the process for issuers to request an extension to respond to such requests. We are finalizing the proposed updates to the audit and compliance reviews of issuers of risk adjustment covered plans in § 153.620(c), with modifications to certain audit timelines in response to comments stating that issuers would need more time to provide complete and accurate data for an audit and respond to HHS requests. We will also adopt the approach outlined for distribution of risk adjustment payments or charges under the state payment transfer formula recovered by HHS during an audit of a risk adjustment covered plan would be paid on a pro rata basis similar to the process for risk adjustment default charge allocations to the other issuers participating in the applicable state market risk pool in the applicable benefit year.
We received public comments on the proposed updates to audits and compliance reviews of issuers of risk adjustment covered plans (§ 153.620(c)). The majority of the comments we received to this section were general comments that were also applicable to the similar amendments proposed in the sections regarding audits and compliance reviews of issuers of reinsurance-eligible plans (§ 153.410(d)) and audits and compliance reviews of APTC, CSRs, and user fees (§ 156.480(c)). We responded to these generally applicable comments in the below section regarding audits and compliance reviews of APTC, CSRs, and user fees (§ 156.480(c)). We received one comment specific to audits and compliance reviews of issuers of risk adjustment covered plans, and the following is a summary of this comment and our response.
After consideration of comments on these proposals, we are finalizing the majority of the audit and compliance review provisions as proposed, with slight modifications to certain audits timelines in response to comments
Finally, we clarify that we will recoup monies owed due to a finding as the result of an audit of a risk adjustment covered plan using the same method with which we collect all debts. That is, to recoup the amount identified in § 153.620(d)(5)(i), we will first net using the process set forth in 45 CFR 156.1215, and we will then invoice issuers for the remaining debt (if any is owed).
As stated in § 153.710(a) through (c), an issuer of a risk adjustment covered plan must provide to HHS, through their EDGE server,
HHS reviews all reported EDGE discrepancies to evaluate the implications of each incorrect data submission for risk adjustment transfers and risk adjustment data validation. For risk adjustment transfers calculated under the state payment transfer formula, HHS evaluates whether the reported EDGE discrepancy is material and has a process to address incorrect EDGE data submissions that have a material impact on risk adjustment transfers for a state market risk pool.
We proposed to amend § 153.710, by creating new paragraph (e) and redesignating paragraphs (e), (f) and (g), as (f), (g) and (h) respectively, to capture the proposed EDGE discrepancy materiality threshold and proposed to apply it beginning with the 2020 benefit year.
We also explained that while HHS generally only takes action on reported material EDGE discrepancies that are determined to harm other issuers, issuers must continue to report and describe any identified EDGE discrepancy to HHS in a format specified by HHS for each benefit year. Issuers must report all data discrepancies in order to permit HHS to determine whether such an error is material and actionable and to evaluate the impact on other issuers in the state market risk pool. We sought comment on the proposed EDGE discrepancy materiality threshold and the accompanying amendments to § 153.710. We are finalizing the EDGE discrepancy materiality threshold and the amendments to § 153.710 as proposed.
We received public comments on the proposed updates to the EDGE discrepancy materiality threshold. The following is a summary of the comments we received and our responses.
In assessing different EDGE discrepancy materiality thresholds, HHS analyzed the 2017 benefit year EDGE discrepancies. Specifically, we reviewed the discrepancy amounts and impacts on affected issuers in the impacted state market risk pools and considered a variety of threshold amounts. We found that $100,000 or one percent of the total estimated transfer amount in the applicable state market risk pool balanced reducing the number of reallocations involving small amounts with maintaining data integrity and confidence in the risk adjustment program.
After consideration of the comments on these proposals, for the 2020 benefit year and beyond, we are finalizing the EDGE discrepancy materiality threshold as proposed, including the accompanying proposed amendments to § 153.710, to reflect the amount in dispute must equal or exceed $100,000 or one percent of the total estimated transfer amount in the applicable state market risk pool, whichever is less. Where an identified material EDGE discrepancy negatively affects the issuer without having a negative effect on other issuers within the state market risk pool, issuers will be required to adhere to the initial data submission and accept the consequences of their data submission, even when the negative financial impact of the inaccuracy on the issuer submitting incorrect data is above this materiality threshold. Therefore, HHS will only take action on material discrepancies that harm other issuers in the same state market risk pool.
If a state is not approved to operate, or chooses to forgo operating, its own risk adjustment program, HHS will operate risk adjustment on its behalf. As noted previously in this final rule, for the 2022 benefit year, HHS will be operating the risk adjustment program in every state and the District of Columbia. As described in the 2014 Payment Notice, HHS's operation of risk adjustment on behalf of states is funded through a risk adjustment user fee.
OMB Circular No. A-25 established federal policy regarding user fees, and specifies that a user charge will be assessed against each identifiable recipient for special benefits derived from federal activities beyond those received by the general public. The risk adjustment program will provide special
In the 2021 Payment Notice, HHS calculated the federal administrative expenses of operating the risk adjustment program for the 2021 benefit year to result in a risk adjustment user fee rate of $0.25 PMPM based on our estimated costs for risk adjustment operations and estimated billable member months for individuals enrolled in risk adjustment covered plans. For the 2022 benefit year, we proposed to use the same methodology to estimate our administrative expenses to operate the program. These costs cover development of the model and methodology, collections, payments, account management, data collection, data validation, program integrity and audit functions, operational and fraud analytics, stakeholder training, operational support, and administrative and personnel costs dedicated to risk adjustment program activities. To calculate the user fee, we divided HHS's projected total costs for administering the risk adjustment programs on behalf of states by the expected number of billable member months in risk adjustment covered plans in states where the HHS-operated risk adjustment program will apply in the 2022 benefit year.
We estimate that the total cost for HHS to operate the risk adjustment program on behalf of states for the 2022 benefit year will be approximately $60 million, and the risk adjustment user fee would be $0.25 PMPM. The risk adjustment user fee costs for the 2022 benefit year are expected to remain steady from the prior 2021 benefit year estimates. However, we project a small decline in billable member months in the individual and small group markets overall in the 2022 benefit year based on the declines observed in the 2019 benefit year. We sought comment on the proposed risk adjustment user fee for the 2022 benefit year. We also explained that we would continue to examine the costs and enrollment projections for the 2022 benefit year, particularly as we receive more information on the impact of the coronavirus disease 2019 (COVID-19) PHE, and proposed to incorporate any such newly available data to update the final 2022 benefit year risk adjustment user fee rate that we would announce in the final rule. We sought comment on these estimates and the use of any newly available data to update the estimates to reflect any emerging cost or enrollment trends for the final 2022 benefit year user fee. We are finalizing the 2022 benefit year risk adjustment user fee as proposed.
We received public comments on the proposed risk adjustment user fee for 2022 benefit year (§ 153.610(f)) and accompanying solicitation of comments. The following is a summary of the comments we received on the proposed 2022 benefit year user fee and our responses.
After consideration of the comments on this proposal, we are finalizing the risk adjustment user fee for the 2022 benefit year as $0.25 PMPM as proposed.
To ensure the integrity of the HHS-operated risk adjustment program, HHS conducts risk adjustment data validation (HHS-RADV) under §§ 153.350 and 153.630 in any state where HHS is operating risk adjustment on a state's behalf. The purpose of HHS-RADV is to ensure issuers are providing accurate and complete risk adjustment data to HHS, which is crucial to the purpose and proper functioning of the HHS-operated risk adjustment program. HHS-RADV also ensures that risk adjustment transfers reflect verifiable actuarial risk differences among issuers, rather than risk score calculations that are based on poor data quality, thereby helping to ensure that the HHS-operated risk adjustment program assess charges to issuers with plans with lower-than-average actuarial risk while making payments to issuer with plans with higher-than-average actuarial risk. HHS-RADV consists of an initial validation audit and a second validation audit.
In 2020 Payment Notice, we codified several exemptions from the HHS-RADV requirements. In this rule, we proposed to codify the previously established exemption
We also proposed to codify the previously established exemption
We noted that these exemptions do not introduce new policies; instead, the proposed amendments to § 153.630(g) were simply to codify these previously established exemptions in regulation. We also clarified that any issuer that qualifies for the small group carryover coverage exemption in new proposed paragraph (g)(4) would not have its risk score and its associated risk adjustment transfers adjusted due to its own risk score error rate, as the issuer would not have participated in HHS-RADV for the benefit year in which it only offered the small group carryover coverage. However, that issuer's risk score and resulting risk adjustment transfers could be subject to HHS-RADV adjustments if other issuers in that state market risk pool were outliers and received HHS-RADV risk score error rates for that benefit year.
We solicited comments on these proposals.
We only received comments in support of codifying the HHS-RADV exemption for issuers who are the sole issuer in a state market risk pool during the benefit year being audited and are finalizing the amendment to § 153.630(g)(5) to codify that exemption as proposed. We received several public comments on the codification of the HHS-RADV exemption for issuers providing only small group carryover coverage in the benefit year being audited at § 153.630(g)(4), some of these comments restated the proposal without providing an opinion while others expressed opposition to the proposal. After consideration of the comments received, we are also finalizing the amendment to § 153.630(g)(4) to codify this exemption as proposed.
The following is a summary of the comments we received on the codification of the exemption for issuers providing only small group carryover coverage and our responses.
With respect to the exemption for sole issuers, we believe it is appropriate because we do not calculate risk adjustment transfers for a benefit year in a state market risk pool in which there is only one issuer and thus, there is no payment or financial accountability to other issuers for that risk pool. With respect to the small group carryover coverage exemption, we believe that this exemption ensures that such small group carryover only issuers (who are considered exiting issuers) are treated the same as other exiting issuers with regards to HHS-RADV requirements.
With respect to concerns that issuers seeking to use the small group carryover coverage exemption might make up a large portion of the market, based on our past experience operating HHS-RADV for the 2017 and 2018 benefit years, we found that issuers that would qualify for this exemption criteria are typically very small issuers, with the majority having fewer than 500 billable member months statewide or below $15 million in total premium. As a result, we do not believe issuers that would qualify for this exemption would make up a large portion of a state's market risk pool and these issuers have generally had a reasonable chance of being exempted under other exemption categories.
With respect to the comment on issuers being subject to HHS-RADV requirements if they have not participated in HHS-RADV in the previous 2 years, we note that generally all issuers of risk adjustment covered plans in a state market risk pool must participate in HHS-RADV unless they qualify for an exemption specified in 153.630(g). As established at 153.630(g)(2), it is only issuers at or below the materiality threshold that are subject to random and targeted sampling for HHS-RADV participation approximately every 3 years (barring any risk-based triggers based on experience that will warrant more frequent audits). This exemption for issuers at or below materiality threshold was created in response to stakeholder requests to ease the burden of annual audit requirements for smaller issuers of risk adjustment covered plans. We maintain that this exemption for issuers at or below materiality threshold is important given the fixed costs associated with hiring an initial validation auditor and submitting results to HHS on an annual basis; therefore, we do not intend to make changes to it at this time.
After consideration of the comments received on these proposals, we are finalizing the codification of the sole issuer and small group carryover coverage issuer exemptions from HHS-RADV and the amendments to § 153.630(g) as proposed.
In accordance with § 153.630(b)(3), an issuer must ensure that its IVA Entity is reasonably free of conflicts of interest, such that it is able to conduct the IVA in an impartial manner and its impartiality is not reasonably open to question. In prior rulemaking, we explained that to meet this standard, the IVA Entity, among other things, may not have had a role in establishing any relevant internal controls of the issuer related to the risk adjustment data validation process when HHS is operating risk adjustment on behalf of a state, or serve in any capacity as an advisor to the issuer regarding the IVA.
The only comments we received on the proposed updates to IVA requirements (§ 153.630(b)(3)) supported the proposal noting that there is a potential conflict of interest if an IVA Entity for a company also served as the company's TPA for purposes of EDGE data submission or risk adjustment. These commenters were in support of the regulatory change. After consideration of comments on these proposals, we are finalizing this policy and the accompanying amendment to § 153.630(b)(3) as proposed.
In the 2015 Payment Notice, we established a three-level administrative appeals process for issuers to seek reconsideration of amounts under certain ACA programs, including the calculation of risk adjustment charges, payments and user fees.
The only comment we received on the proposal to codify the previously established limits on the ability to appeal SVA findings as part of the HHS-RADV administrative appeals process was in support of the proposed clarifications. After consideration of the comments on this proposal, we are finalizing the conforming amendments to § 153.630(d)(3) as proposed.
In the 2020 Payment Notice,
HHS publishes the final summary report of risk adjustment transfers (without HHS-RADV adjustments) and information on risk adjustment default charges for the applicable benefit year in the summer of the year after the applicable benefit year (typically June 30th of the year after the applicable benefit year), and issuers report those risk adjustment amounts in their MLR reports by July 31st of the year after the applicable benefit year.
Under the HHS-RADV timeline effective prior to the publication of this rule, HHS begins collection and disbursement of HHS-RADV adjustments and default data validation charges and allocations 2 years after announcing the HHS-RADV adjustments (for example, collection and disbursement of 2017 benefit year HHS-RADV adjustments will begin in 2021
The 2020 Payment Notice timeline was intended to address stakeholder concerns regarding the predictability of HHS-RADV adjustments, especially for the initial payment year. However, since the publication of the 2020 Payment Notice, we have received feedback stating that the extended timeline has not provided the increased flexibility intended by the policy and instead has introduced undue complexity. Specifically, stakeholders have expressed concern that this policy conflicts with state requirements for financial accounting, and can negatively impact their MLR rebate position, particularly if the issuer experiences substantial changes in enrollment over the 3-year MLR calculation period.
Although the operational timelines of the risk adjustment program and the nature of HHS-RADV causes HHS-RADV results to always be at least a year behind the associated risk adjustment transfers report, we have continued to consider these issues. The above referenced changes to the benefit year to which HHS-RADV adjustments are applied also lead us to revisit these issues. We adopted the 2020 Payment Notice timeline to provide issuers (and states) with more options on how and when to account for the financial impacts from HHS-RADV. However, as noted above, stakeholder feedback has indicated that the approach did not achieve its policy goal and instead introduced unnecessary complexity. Therefore, we proposed to revert to the previous schedule for collection and disbursement of HHS-RADV adjustments and default data validation charges and begin such activities in the summer or fall of the calendar year in which HHS-RADV results are released. For example, collection of 2021 benefit year HHS-RADV adjustments and default data validation charges and disbursement of such amounts would begin in summer or fall of 2023. In support of the new proposed timeline for collection and disbursement of HHS-RADV adjustments and default data validation charges, we explained that HHS would need to release the applicable benefit year's report on HHS-RADV adjustments and default data validation charges earlier in the year so the amounts are available for issuers to use for MLR reporting purposes. We therefore also proposed to release the applicable benefit year's HHS-RADV summary report no later than early summer, and require issuers to report those amounts in the MLR reports submitted by July 31st of the same calendar year in which the results are released. For example, as proposed, the summary report on 2021 benefit year HHS-RADV adjustments and default data validation charges and allocations would be released no later than early summer 2023, and issuers would be instructed to report these amounts in the 2022 MLR reporting year (MLR reports that include 2022 benefit year data that are submitted by July 31, 2023; See Table 9). We would then collect and disburse HHS-RADV adjustments and default data validation charges and allocations in summer or fall of the calendar year in which HHS-RADV results are released (for example, collection and disbursement of 2021 benefit year HHS-RADV adjustments and default data validation charges would begin in summer or fall of 2023). We noted that the Unified Rate Review Template (URRT) instructions currently permit issuers and states to consider HHS-RADV impacts in rates for the year when these amounts will be collected and disbursed and specified, as an example, that as 2017 RADV adjustments will be collected in the 2021 calendar year, a state may allow issuers to consider these adjustments in their 2021 rate setting. Therefore, in the proposed rule, we proposed to remove this flexibility from the URRT instructions.
We further explained that the proposed timeline would help mitigate concerns regarding the incongruity with state financial accounting requirements, as well as potential undue impacts of HHS-RADV adjustments on MLR rebate liability, which could result from the
We proposed to begin this policy with the collection and disbursement of HHS-RADV adjustments and default data validation charges for the 2019 benefit year and noted that due to the delay in the 2019 benefit year HHS-RADV,
We are finalizing the updates to the timeline for collection of HHS-RADV payments and charges, as proposed. As such, HHS will publish the 2019 and 2020 benefit year HHS-RADV Summary Report for non-exiting issuers in early summer of 2022.
We received public comments on the proposed updates to the timeline for collection of HHS-RADV payments and charges. The following is a summary of the comments we received on the proposed updated timeline and our responses.
Finally, we received a few comments requesting that we retain the allowance in the URRT for states to determine whether an adjustment for HHS-RADV in the URRT would be reasonable and justifiable in any particular benefit year.
This included consideration of the options from the commenter suggesting that 2017 HHS-RADV be reported in 2020 MLR filings and 2018 HHS-RADV adjustments be reported in 2021 filings. However, we did not propose and are not making any changes with respect to the timeline for collection and disbursement of HHS-RADV results for the 2017 or 2018 benefit year of HHS-RADV. We also do not believe these alternative options would appropriately address 2017 and 2018 HHS-RADV for MLR reporting purposes. First, the current timeline for 2017 and 2018 HHS-RADV were established in notice-and-comment rulemaking,
As outlined elsewhere in this rule and in the proposed rule, after further consideration of stakeholder concerns regarding the timeline established in the 2020 Payment Notice, we proposed and are finalizing the proposed update to revert to the prior schedule for collection and disbursement of HHS-RADV results beginning with the 2019 benefit year. This update responds to stakeholder concerns about the potential conflicts with certain state accounting requirements and the potential negative impact on certain issuers' MLR rebate position. It also aligns with other recently finalized changes to HHS-RADV program requirements. We intend to monitor implementation of the collection and disbursement of HHS-RADV payments and charges, including feedback on lessons learned from stakeholders, and will consider whether further guidance or consideration of these issues is warranted.
To assist stakeholders in understanding the MLR reporting period associated with each benefit year of risk adjustment and HHS-RADV, incorporating the updated timeline that is finalized in this rule, we have created the following table that explains which benefit years of risk adjustment and HHS-RADV adjustments should be reported in which MLR reporting years for the 2020-2025 MLR Reporting Years:
Finally, we disagree with commenters who suggest retaining portions of the URRT instructions pertaining to reporting HHS-RADV adjustments that allowed states the option to allow issuers to take into consideration the impact of HHS-RADV from another benefit year in rating for the upcoming benefit year. Without the 2-year delay between the release of HHS-RADV results and the collections of HHS-RADV adjustments, we are concerned that the continued inclusion of these instructions would be confusing. Further, there is no longer a connection between the collection and disbursement of HHS-RADV adjustments and the applicable upcoming benefit year to support continuing to provide the flexibility in the URRT instructions. We intend to monitor implementation of the collection and disbursement of HHS-RADV payments and charges and will consider whether further guidance is needed.
Under § 153.630(d)(2), issuers have 30 calendar days to confirm the findings of the SVA (if applicable) or the calculation of the risk score error rate, or file a discrepancy report, in the manner set forth by HHS, to dispute the foregoing. As explained in the 2020 Payment Notice, only those issuers who have insufficient pairwise agreement between the IVA and SVA receive SVA findings.
We are not finalizing the proposal to shorten the discrepancy reporting windows under § 153.630(d)(2) for issuers to confirm the findings of the
We received public comments on the proposed updates to the SVA and error rate discrepancy reporting windows. The following is a summary of the comments we received and our responses.
As a result of these comments, we are not finalizing the proposal to shorten the SVA and risk score error rate attestation and discrepancy reporting timeframes from 30 calendar days to 15 calendar days.
As detailed earlier in this preamble, on September 2, 2020, we issued an interim final rule (IFR) on COVID-19 wherein we set forth risk adjustment reporting requirements for issuers offering temporary premium credits in the 2020 benefit year to align with the relaxed enforcement policy announced in guidance.
As noted in the September 2020 IFR on COVID-19, we believe that these requirements are necessary and appropriate because if HHS permitted issuers that provided premium credits to submit unadjusted premiums for the purposes of calculating risk adjustment, distortions could occur that financially impact individual issuers. For example, absent the requirement that issuers offering premium credits report the adjusted, lower premium amount for risk adjustment purposes, an issuer with a large market share with higher-than-average risk enrollees that provides temporary premium credits would inflate the statewide average premium by submitting the higher, unadjusted premium amount, thereby increasing its risk adjustment payment. In such a scenario, a smaller issuer in the same state market risk pool that owes a risk adjustment charge, and also provides premium credits to enrollees, would pay a risk adjustment charge that is relatively higher than it would have been if it were calculated based on a statewide average that reflected the actual, reduced premium charged to enrollees by issuers in the state market risk pool.
Therefore, we believe that requiring issuers that offer temporary premium credits during a declared PHE, when permitted by HHS, to accurately report to the EDGE server the adjusted, lower premium amounts actually billed to enrollees is most consistent with existing risk adjustment program requirements and mitigates the distortions that would occur if issuers that offer these temporary premium credits did not report the actual amounts billed to enrollees, while not imposing additional financial burdens on issuers, as compared to an approach that would permit issuers to report unadjusted premium amounts. We requested comment on this proposal. We are finalizing this policy as proposed. Issuers of risk adjustment covered plans that provide temporary premium credits when permitted by HHS in the 2021 benefit year and beyond during a declared PHE must report to their EDGE servers adjusted plan premiums that reflect actual premiums billed to enrollees, taking the premium credits into account as a reduction in premiums for the applicable months of coverage.
We received public comments on the proposals related to risk adjustment data reporting requirements for future premium credits (§ 153.710) and the accompanying proposed policies related to the calculation of plan average premium and state average premium requirements for extending future premium credits (§ 153.320). The following is a summary of the comments we received and our responses.
We also note that this proposal does not seek to extend or expand issuer ability to offer temporary premium credits. Rather, we proposed to permanently adopt policies to guide risk adjustment calculations and reporting if issuers of risk adjustment covered plans elect to offer premium credits during a declared PHE when permitted by HHS in future benefit years. By limiting this policy to future declared PHEs, the potential creation of incentives for issuers to adjust premiums with knowledge of their competitors' premiums in an attempt to achieve a more favorable risk adjustment transfer (that is, a higher payment or lower charge) is limited. Further, we believe the benefits associated with encouraging issuers to provide temporary premium credits to help consumers maintain continuous health coverage during a declared PHE outweigh these potential risks and is an appropriate approach to balancing the different equities involved during declared PHEs.
After consideration of comments on these proposals, we are finalizing as proposed the policy to permanently adopt these risk adjustment reporting requirements for the 2021 benefit year and beyond, for all issuers of risk adjustment covered plans who elect to offer premium credits during a PHE declared by the Secretary of HHS (declared PHE) if the premium credits are permitted by HHS in future benefit years. We are also finalizing, as proposed, the permanent adoption of the accompanying policy for HHS to calculate the plan average premium and statewide average premium under the state payment transfer formula using issuers' adjusted premium amounts, reflective of temporary premium credits provided by issuers during a declared PHE when such credits are permitted by HHS. That is, the lower actual premiums for which plan enrollees would be responsible would be the amounts used in the calculations under the state payment transfer formula to reflect these temporary premium credits. This approach will also extend to calculations under the state payment transfer formula in states that receive approval for a request to reduce transfers under § 153.320(d).
We proposed to amend § 155.20 to add a definition of QHP issuer direct enrollment technology provider, which we proposed to mean a business entity that provides technology services or provides access to an information technology platform to QHP issuers to facilitate participation in direct enrollment under §§ 155.221 and 156.1230. We also proposed that this definition of QHP issuer direct enrollment technology provider explicitly acknowledge that a web-broker may also provide services to QHP issuers as a QHP issuer direct enrollment technology provider to clarify that being a web-broker does not preclude that entity from providing technology services or an information technology platform to QHP issuers to facilitate QHP issuers' participation in direct enrollment. In addition, we proposed to modify the current definition of direct enrollment technology provider in § 155.20 to
In the 2020 Payment Notice final rule, we amended § 155.20 to define “direct enrollment technology provider” to mean “a type of web-broker business entity that is not a licensed agent, broker, or producer under [s]tate law and has been engaged or created by, or is owned by an agent or broker, to provide technology services to facilitate participation in direct enrollment under §§ 155.220(c)(3) and 155.221.”
As the FFE direct enrollment program has evolved, particularly with the introduction and increased utilization of the enhanced direct enrollment (EDE) pathway, the technical requirements and expertise needed to participate in direct enrollment have become substantially more complex. As a result, technology companies are increasingly relied upon to develop, host, manage, and customize the technical platforms that underpin direct enrollment entity non-Exchange websites. Technology companies have emerged to support the participation of QHP issuers in direct enrollment, as well as agents, brokers, and web-brokers. In the context of EDE, some of these technology companies build technical platforms prior to finalizing contractual relationships with agents, brokers, web-brokers, or QHP issuers and some of these technology companies provide platforms that are used to host direct enrollment websites for both QHP issuers and agents, brokers, or web-brokers. Under the current framework, the technology company is itself a web-broker and often provides direct enrollment services under its own branding while also wanting to offer its technology platform and accompanying services to other agents, brokers, web-brokers, or QHP issuers to facilitate their respective participation in direct enrollment. As part of the services it provides as a technology company, it may offer customized direct enrollment websites that leverage its technical platform to other entities that allows for additional systems or functionality or the use of the other entity's branding. Because the current regulatory definition does not include a reference to QHP issuers, questions have arisen regarding the ability and accompanying requirements for QHP issuers to engage such entities to assist with the development and hosting of a non-Exchange website to facilitate the QHP issuer's participation in direct enrollment. For these reasons we proposed to create a new definition of QHP issuer direct enrollment technology provider and update the definitions of direct enrollment technology provider and web-broker as described above, to clarify that QHP issuers can also engage the services of these technology companies and better align with the evolving business models of entities involved in the FFE direct enrollment program. We also proposed to include language in the new definition of QHP issuer direct enrollment technology provider to clarify that when such entities partner with QHP issuers, they are downstream or delegated entities of the QHP issuer. This is similar to the approach adopted in § 155.221(e) for third-party auditors hired by QHP issuers or web-brokers to perform operational readiness audits. By including this language, we intended to clarify and ensure that these QHP issuer direct enrollment technology providers would be subject to HHS oversight as the delegated or downstream entity of the QHP issuer, and the QHP issuer would be responsible for compliance with all applicable requirements. This approach was also intended to clarify that when providing its technology services and support, or providing access to an information technology platform, to a QHP issuer, QHP issuer direct enrollment technology providers would be subject to the rules applicable to the QHP issuer with whom they are partnering to the extent they are performing activities on behalf of the QHP issuer implicating those rules. For example, if a QHP issuer direct enrollment technology provider is assisting with the development of a non-Exchange website for a QHP issuer, the QHP issuer display requirements captured at § 156.1230(a)(1)(ii) would apply.
We sought comment on this proposal.
We did not receive public comments on the proposal to update the definition of web-broker, and are finalizing that proposal as proposed. We received public comments on the proposed addition of a definition of QHP issuer direct enrollment technology provider and updates to the definition of direct enrollment technology provider. The following is a summary of the comments we received and our responses.
To continue our efforts to standardize regulatory references to web-brokers, we proposed to replace all references in § 155.205(c) to “an agent or broker subject to § 155.220(c)(3)(i)” with the term “web-broker.” In the 2020 Payment Notice final rule, we amended § 155.20 to define the term “web-broker”
In addition, we proposed to revise a requirement related to website content translations for QHP issuers and web-brokers participating in the FFE EDE program that are subject to §§ 155.205(c)(2)(iv)(B) and 155.205(c)(2)(iv)(C) respectively. Currently under §§ 155.205(c)(2)(iv)(B) and (C), QHP issuers and web-brokers are required to translate website content into any non-English language that is spoken by a limited English proficient (LEP) population that makes up 10 percent or more of the total population of the relevant state. Web-brokers are currently required to translate website content within 1 year of registering with the Exchange, while QHP issuers are currently required to translate website content beginning no later than the first day of the individual market open enrollment period for the 2017 benefit year.
In the proposed rule, we proposed to allow QHP issuers and web-brokers participating in the FFE EDE program additional time to come into compliance with the website content translation requirements. Specifically, we proposed that a QHP issuer or web-broker participating in the FFE EDE program would have 12 months from the date the QHP issuer or web-broker begins operating its FFE-approved EDE website in the relevant state to comply with website content translation requirements under §§ 155.205(c)(2)(iv)(B) and (C) for website content added to their websites as a condition of participation in the FFE EDE program. We noted this proposed flexibility would not absolve QHP issuers and web-brokers from complying with website content translation requirements under paragraphs (c)(2)(iv)(B) and (C) that are unrelated to their participation in the FFE EDE program within the applicable timeframes.
We sought comment on whether this proposed flexibility for QHP issuers and web-brokers participating in the FFE EDE program in relevant states would have impacted accessibility to Exchange coverage for LEP communities, or otherwise would have negatively impacted the operation of and consumer access to Exchanges. In addition, we sought comment from QHP issuers and web-brokers as to whether this proposed change would have fostered investment in states where there is a significant LEP community and provide additional incentives for such entities to expand into relevant states. Lastly, we sought comment from assisters about any impacts this proposed change would have had on their proposed ability to work with web-brokers and use EDE websites as described in the proposed rule (and below) when assisting members of the LEP community with Exchange enrollment.
We did not receive public comments on the proposal to replace all references in § 155.205(c) to “an agent or broker subject to § 155.220(c)(3)(i)” with the term “web-broker.” We are finalizing that proposal as proposed. We did receive public comments on the proposal to provide additional time to entities participating in EDE to translate website content added to their websites as a condition of participation in the FFE EDE program. The following is a summary of the comments we received and our responses.
Sections 1311(d)(4)(K) and 1311(i) of the ACA require the Secretary to establish a Navigator program under which HHS awards grants to entities to conduct public education activities to raise awareness of the availability of QHPs, distribute fair and impartial information concerning enrollment in QHPs and the availability of APTC and CSRs, and facilitate enrollment in QHPs; provide referrals to any applicable office of health insurance consumer assistance or health insurance ombudsman established under section 2793 of the PHS Act, or any other appropriate state agency or agencies for any enrollee with a grievance, complaint, or question regarding their health plan, coverage, or a determination under such plan or coverage; and provide information in a manner that is culturally and linguistically appropriate to the needs of the population being served by the Exchange. The statute also requires the Secretary, in collaboration with states, to develop standards to ensure that information made available by Navigators is fair, accurate, and impartial. We have implemented the statutorily required Navigator duties through regulations at §§ 155.210 (for all Exchanges) and 155.215 (for Navigators in FFEs). Certified Application Counselors (CACs) duties have been implemented through regulations at § 155.225.
We proposed allowing, but not requiring, Navigators and CACs in FFEs and SBE-FPs to use web-broker non-Exchange websites to assist consumers with applying for insurance affordability programs and QHP enrollment under certain circumstances and to the extent permitted by state law. For a discussion of the proposal to allow Navigators and CACs to use web-broker non-Exchange websites to assist consumers with applying for insurance affordability programs and QHP enrollment, along with a summary of comments received and our responses to these comments, please see the preamble to § 155.220.
In the 2020 Payment Notice, we proposed, but did not finalize, a modification of our policy that prohibits Navigators and CACs (together referred to here as “assisters”) from using web-broker websites to assist with QHP selection and enrollment.
In the proposed rule, we proposed permitting but not requiring, assisters in FFEs and SBE-FPs to use web-broker non-Exchange websites to assist consumers with QHP selection and enrollment, provided the non-Exchange website met certain conditions. We proposed to provide states with a State Exchange that does not rely on HealthCare.gov the discretion to permit their assisters to use web-broker non-Exchange websites.
We proposed several amendments to § 155.220 to capture this flexibility for assisters in FFE and SBE-FP states to use web-broker non-Exchange websites to assist consumers and sought comment on all of these proposals.
We received public comments on the proposal to allow, but not require, Navigators and CACs in FFEs and SBE-FPs to use web-broker non-Exchange websites to assist consumers with applying for insurance affordability programs and QHP enrollment under certain circumstances and to the extent permitted by state law. The following is a summary of the comments we received and our responses.
We proposed to provide flexibility to web-brokers regarding the information they are required to display on their non-Exchange websites for QHPs in certain circumstances. Currently, § 155.220(c)(3)(i)(A) requires that a web-broker non-Exchange website must disclose and display all QHP information provided by the Exchange or directly by QHP issuers consistent with the requirements of § 155.205(b)(1) and (c). To the extent that not all information required under § 155.205(b)(1) is displayed on the web-broker's website for a QHP, the web-broker's website must prominently display a standardized disclaimer provided by HHS stating that information required under § 155.205(b)(1) for the QHP is available on the Exchange website, and provide a link to the Exchange website. The preamble in the proposed and final
In new proposed § 155.220(n), we proposed to establish an exception to the web-broker display requirements captured at paragraphs (c)(3)(i)(A) and (D). We proposed to revise paragraph (c)(3)(i)(A) to require a web-broker non-Exchange website to disclose and display all QHP information provided by the Exchange or directly by QHP issuers consistent with the requirements of § 155.205(b)(1) and (c), except as permitted under § 155.220(n). We proposed a similar revision to § 155.220(c)(3)(i)(D). At new proposed paragraph (n), we proposed certain flexibilities regarding display of QHP information if a web-broker's non-Exchange website does not support enrollment in a QHP, except in cases where the web-broker's website is intended to be available for use by assisters consistent with proposed paragraph (c)(3)(iii)(A). In that case, the flexibility at new proposed paragraph (n) would not be available. A web-broker's non-Exchange website may not support enrollment in a QHP if the web-broker does not have an appointment with a QHP issuer and therefore is not permitted under state law to enroll consumers in the coverage offered by that QHP issuer. In such circumstances, we proposed that the web-broker's non-Exchange website would not be required to provide all the information identified under § 155.205(b)(1). Instead, web-brokers would be required to display the following limited, minimum information for such QHPs: Issuer marketing name, plan marketing name, plan type, metal level, and premium and cost-sharing information. To take advantage of this new proposed flexibility, we also proposed that the web-broker's non-Exchange website would be required to identify to consumers the QHPs, if any, for which the web-broker's website does not facilitate enrollment by prominently displaying the plan detail disclaimer provided by the Exchange. The plan detail disclaimer explains that the consumer can get more information about such QHPs on the Exchange website, and includes a link to the Exchange website. We noted that we believed this proposal struck an appropriate balance by recognizing that web-brokers may not be permitted to assist with enrollments in QHPs for which they do not have an appointment while still providing key information about all QHPs on web-broker non-Exchange websites to allow consumers to window shop and identify whether they may want to explore other QHP options. It also would minimize burdens for web-brokers by not requiring them to build functionality and processes to display all of the required comparative information listed in § 155.205(b)(1) for those QHPs for which they do not have an appointment to sell.
To more closely align the plan detail disclaimer text
We invited comments on the proposed required limited, minimum QHP details that must be displayed for those QHPs that the web-broker does not facilitate enrollment in through its non-Exchange website and the proposed edits to the plan detail disclaimer text. We also sought comment on whether to require display of any additional elements identified under § 155.205(b)(1) among the limited, minimum information, such as summaries of benefits and coverage.
We received public comments on the proposed updates to requirements regarding QHP information display on web-broker non-Exchange websites. The following is a summary of the comments we received and our responses.
Thus, we intend to further consider these issues and clarify the display requirements for web-broker non-Exchange websites in future rulemaking. In the interim, we also intend to limit our current use of enforcement discretion that permits web-brokers to only display issuer marketing name, plan marketing name, plan type, and metal level for all available QHPs,
We proposed amendments to further clarify the operational readiness requirements applicable to web-brokers by adding a new proposed § 155.220(c)(6). In the 2018 Payment Notice final rule, we adopted rules to require web-brokers to demonstrate operational readiness, including compliance with applicable privacy and security requirements, prior to participating in the FFE direct enrollment program.
We sought comment on this proposal.
We received one public comment on the proposed updates to web-broker operational readiness review requirements. The following is a summary of the comment we received and our response.
We proposed to revise § 155.221(b)(1) to clarify the requirements that apply when direct enrollment entities want to display and market QHPs
In the 2020 Payment Notice final rule, we amended § 155.221(b)(1) to require direct enrollment entities to display and market QHPs and non-QHPs on separate website pages on their respective non-Exchange websites.
In the proposed rule, we proposed to amend paragraph (b)(1) to refine the previously adopted policy, consistent with the original intent of minimizing consumer confusion about distinct products with substantially different characteristics, while providing direct enrollment entities with more marketing flexibility and opportunities for innovation. QHPs are required to be offered on- and off-Exchange under the guaranteed availability requirements at § 147.104. The current framework allows for direct enrollment entities to display on- and off-Exchange QHPs on the same website pages, as long as the direct enrollment entity's website makes clear that APTC and CSRs are only available for QHPs offered through the Exchange.
We proposed to revise § 155.221(b)(1) to require that direct enrollment entities display and market QHPs offered through the Exchange, individual health insurance coverage as defined in § 144.103 offered outside the Exchange (including QHPs and non-QHPs other than excepted benefits), and all other products, such as excepted benefits, on at least three separate website pages, with certain exceptions. Requiring that these three categories of products be displayed and marketed on separate website pages provides a more precise delineation between the three categories of products with substantially different characteristics, either in the way they can be purchased or the types of benefits they offer, while still allowing substantial flexibility in website design to facilitate the consumer's shopping experience. We proposed the first product category, QHPs offered through the Exchange, must be isolated from the other categories of products to distinguish for consumers the products for which APTC and CSRs are available (if eligible). We proposed the second product category, individual health insurance coverage offered outside the Exchange (including QHPs and non-QHPs other than excepted benefits), must be similarly distinguished from other products, because those plans represent major medical coverage that is subject to the same ACA market-wide requirements as QHPs offered through the Exchange, but that is not available with APTC and CSRs. Therefore, distinguishing between these two categories of products by requiring that they be displayed and marketed on separate website pages would allow consumers to more easily shop for comparable major medical insurance subject to ACA market-wide rules while maintaining the clear distinction between plans for which APTC and CSRs are and are not available. We proposed that the third product category, which encompasses types of products not in the first two categories, including excepted benefits, must be displayed and marketed on one or more website pages separate from the website pages used for displaying and marketing the first two categories of products to assist consumers in distinguishing them from major medical plans. The range of products in the third category are not subject to ACA market-wide rules and APTC and CSRs are not available for such products, and therefore they are substantially different from the plans that fall into the first two categories.
We also proposed to amend § 155.221(b)(3) to include clarifying edits and to include the same exceptions detailed in this final rule as we proposed for paragraph (b)(1). We proposed to revise paragraph (b)(3) to limit marketing of non-QHPs during the Exchange eligibility application and QHP selection process in a manner that minimizes the likelihood that consumers would be confused as to which products and plans are available through the Exchange and which products and plans are not, except as permitted under new proposed paragraph (c)(1). The proposal also removed a redundant reference to “plan” that was included after “QHP,” and added references to “plans” after the references to “products” to use consistent language throughout paragraphs (b)(1) and (3). We proposed the same exceptions for paragraph (b)(3) to align with the proposed changes to paragraph (b)(1) to clarify that displaying QHPs and non-QHPs on the same website page, as would be permitted under the proposed exceptions in certain circumstances, would not constitute a violation of paragraphs (b)(1) or (3).
We proposed certain exceptions in new § 155.221(c) to the proposed updates to paragraphs (b)(1) and (3), because we recognized that, in some limited scenarios, consumers may be best served by being able to directly and easily compare plans offered on- and off-Exchange. As of January 1, 2020, employers may offer employees an individual coverage HRA instead of offering traditional group health coverage.
Consumers shopping and enrolling in coverage through direct enrollment entity websites may therefore wish to see and consider additional non-QHP individual health insurance coverage (other than excepted benefits) options that are only available off-Exchange. We also noted that we believed consumers may find it difficult to determine their best option, especially when they are part of a tax household with members that may have varying eligibility for APTC, CSRs, Medicaid, CHIP, individual coverage HRAs, and cafeteria plans. For this reason, we proposed to provide an exception to the new proposed display standards in § 155.221(b)(1) and (b)(3) to support the development of innovative and consumer-friendly plan comparison tools by direct enrollment entities to assist consumers in making the best choices among individual health insurance coverage options subject to ACA market-wide rules for themselves and their families in these complex situations.
In proposed new paragraph (c)(1), we proposed to allow direct enrollment entities to display and market QHPs offered through the Exchange and individual health insurance coverage offered outside the Exchange (including QHPs and non-QHPs other than excepted benefits) on the same website pages when assisting individuals who have communicated, within the website user interface or by communicating to an agent or broker assisting them, they have received an offer of an individual coverage HRA, as a standalone benefit or in addition to an offer of an arrangement under which the individual may pay the portion of the premium for individual health insurance coverage that is not covered by an individual coverage HRA using a salary reduction arrangement under a cafeteria plan, so long as certain conditions are met. As reflected in the new proposed § 155.221(c)(1), the conditions we proposed to adopt included clearly distinguishing between the QHPs offered through the Exchange and the individual health insurance coverage offered outside the Exchange (including QHPs and non-QHPs other than excepted benefits), and prominently communicating that APTC and CSRs are available only for QHPs purchased through the Exchange, that APTC is not available to an individual who accepts an offer of an individual coverage HRA or who opts out of an affordable individual coverage HRA, and that a salary reduction arrangement under a cafeteria plan may only be used toward the cost of premiums for plans purchased outside the Exchange.
We noted that we wished to reduce incentives that may lead to routing consumer households to off-Exchange plan shopping experiences based on overly simplistic factors such as a single member of a multi-member household having an individual coverage HRA and a cafeteria plan offer. Instead we sought to encourage direct enrollment entities to develop blended plan selection user interfaces that incorporate on- and off-Exchange plan options when assisting consumers who have communicated receipt of an offer of an individual coverage HRA while incorporating the proposed conditions that are designed to minimize the chance for consumer confusion about the differences between the different coverage options. For example, a direct enrollment entity exercising the flexibility under the proposed exception in § 155.221(c)(1) could clearly distinguish between on- and off-Exchange plan options by using frames, columns, different color schemes, prominent headings, icons, help text, and other visual aids to increase the chance that consumers are aware of the distinctions between the plan options. We emphasized the proposal's intent was to distinguish and clarify user interface elements to be clear, prominent, and difficult to ignore, and therefore the use of an obscure disclaimer in small text at the bottom of the page or behind a link would not be sufficient, for example. We noted that in addition to the safeguards proposed in the proposed rule, direct enrollment entities in the FFEs are subject to standards of conduct that require they provide consumers with correct information, without omission of material fact, regarding QHPs and insurance affordability programs, and refrain from marketing or conduct that is misleading.
We proposed an additional exception to § 155.221(b)(1) at proposed paragraph (c)(2) to allow direct enrollment entities to display and market stand-alone dental plans certified by an Exchange but offered outside the Exchange and non-certified stand-alone dental plans on the same off-Exchange dental plan shopping website pages. Stand-alone dental plans certified by an Exchange and non-certified stand-alone dental plans should be largely comparable products among which consumers looking for dental coverage off-Exchange may wish to comparison shop. Since the proposed change at paragraph (b)(1) to allow display of all individual health insurance coverage offered outside the Exchange on the same website pages (including QHPs and non-QHPs other than excepted benefits) excludes stand-alone dental plans (since stand-alone dental plans are excepted benefits), we proposed this additional exception to allow direct enrollment entities to provide a consumer-friendly off-Exchange stand-alone dental plan shopping experience where consumers can compare the full range of stand-alone dental plans on a single website page.
We proposed conforming amendments to redesignate paragraphs (c) through (h) in § 155.221 as paragraphs (d) through (i) and related updates to internal cross references. As detailed in the proposed rule and this final rule, we also proposed certain amendments to the direct enrollment entity operational readiness review requirements in § 155.221(b)(4).
We requested comment on these proposals.
We received numerous public comments on the proposed amendments to the direct enrollment entity plan display requirements. The following is a summary of the comments we received and our responses.
We do not agree with the one commenter that suggested this exception be made broadly available to EDE entities, without respect to whether a specific consumer the entity is assisting has been offered an individual coverage HRA. This exception is intended to be a targeted measure focused on supporting consumers offered individual coverage HRAs who use direct enrollment entity websites to shop for coverage.
We proposed to revise § 155.221(b)(4) to add additional detail on the operational readiness requirements for direct enrollment entities. Similar to the proposed web-broker operational readiness requirement at new proposed § 155.220(c)(6), we proposed these amendments to codify in § 155.221(b)(4) more details about the existing program requirements that apply to direct enrollment entities and are captured in the agreements executed with participating web-broker and QHP issuer direct enrollment entities. We noted that these proposed requirements are in addition to the operational readiness requirements for web-brokers at new proposed § 155.220(c)(6), although web-brokers may not be required to submit the documentation required under this proposal to revise § 155.221(b)(4) or they may be permitted to use the same documentation to satisfy the requirements of both operational readiness reviews depending on the specific circumstances of their participation in the direct enrollment program and the source and type of documentation. For example, a web-broker seeking to participate only in the Classic DE program would only be required to meet the operational readiness requirements at new proposed § 155.220(c)(6), whereas a web-broker seeking to participate in the EDE program may be permitted to use its third-party security and privacy audit documentation for EDE to satisfy the security and privacy audit documentation requirements of §§ 155.220(c)(6) and 155.221(b)(4) assuming the Classic DE and EDE systems and functionality were hosted in the same environments subject to the third-party audit.
In paragraph (b)(4), we proposed to continue to require a direct enrollment entity to demonstrate operational readiness and compliance with applicable requirements prior to the direct enrollment entity's website being used to complete an Exchange eligibility application or a QHP selection. We added new proposed paragraphs (b)(4)(i) through (v) to reflect that direct enrollment entities may need to submit or complete, in the form and manner specified by HHS, a number of artifacts, documentation, or various testing or training processes. The documentation may include business audit documentation, including: Notices of intent to participate including auditor information; documentation packages including privacy questionnaires, privacy policy statements, and terms of service; and business audit reports including testing results. The required documentation may also include security and privacy audit documentation including: Interconnection security agreements; security and privacy controls assessment test plans; security and privacy assessment reports; plans of action and milestones; privacy impact assessments; system security and privacy plans; incident response plans; and vulnerability scan results. Submission of agreements between the direct enrollment entity and HHS documenting the requirements for participating in the applicable direct enrollment program may also be required. Required testing may include eligibility application audits performed by HHS. The direct enrollment entity may also be required to complete online training modules developed by HHS related to the requirements to participate in the direct enrollment program.
We requested comment on this proposal.
We received one public comment on the proposed updates to direct enrollment entity operational readiness review requirements. The following is a summary of the comment we received and our response.
In the proposed rule, we proposed to allow, but not require, CACs to assist consumers with applying for insurance affordability programs and QHP enrollment through web-broker non-Exchange websites under certain circumstances and to the extent permitted by state law. For a discussion of this proposal, along with a summary of comments received and our responses to these comments, please see the preamble for § 155.220.
Exchanges must verify whether an applicant is eligible for or enrolled in an eligible employer sponsored plan for the benefit year for which coverage and premium assistance (APTC or CSR) are requested using available data sources, if applicable, as described in § 155.320(d)(2). For any coverage year that an Exchange does not reasonably expect to obtain sufficient verification data as described in paragraph (d)(2)(i) through (iii), an alternate procedure applies. Specifically, Exchanges must select a statistically significant random sample of applicants and meet the requirements under paragraph (d)(4)(i). For benefit years 2016 through 2019, Exchanges also could use an alternative process approved by HHS. We are
HHS's experience conducting random sampling revealed that employer response rates to HHS's request for information were low. The manual verification process described in § 155.320(d)(4)(i) requires significant resources and government funds, and the value of the results ultimately does not appear to outweigh the costs of conducting the work because only a small percentage of sample enrollees have been determined by HHS to have received APTC or CSRs inappropriately. We believe an approach to verifying an applicant's attestation regarding access to eligible employer sponsored coverage should be rigorous, while posing the least amount of burden on states, employers, consumers, and taxpayers. Based on our experiences with random sampling methodology under paragraph (d)(4)(i), HHS is of the view that this methodology may not be the best approach for all Exchanges to assess the associated risk for inappropriate payment of APTC and CSRs. As such, in 2019, HHS conducted a study to (1) determine the unique characteristics of the population with offers of employer-sponsored coverage that meets minimum value and affordability standards, (2) compare premium and out-of-pocket costs for consumers enrolled in affordable employer-sponsored coverage to Exchange coverage, and (3) identify the incentives, if any, that drive consumers to enroll in Exchange coverage rather than coverage offered through their current employer. We are still evaluating the results of this study to ensure the best verification process to ensure that consumers with offers of affordable coverage that meets affordability and minimum value standards through their employer are identified and do not receive APTC or CSRs inappropriately. HHS will consider changes to the verification process outlined under paragraph (d)(4) as part of future rulemaking.
As HHS continues to explore the best options for verification of employer sponsored coverage, we proposed that HHS will continue to refrain from taking enforcement action against Exchanges that do not perform random sampling as required by paragraph (d)(4), as an alternative to performing this verification against the data sources required under § 155.320(d)(2)(i) through (iii), and will extend this non-enforcement posture from plan year 2021 through plan year 2022. We also proposed that HHS will continue to exercise such discretion as HHS continues to evaluate the results of the employer verification study described in the proposed rule and of the futures changes also discussed.
Finally, another commenter suggested that, as HHS reviews the results of the study discussed in the preamble to the proposed rule, we should consider releasing the results of the 2019 study in an effort to provide transparency regarding the demographic patterns that HHS discovered as a result of this research.
We disagree with the comment that the proposal to extend enforcement discretion to plan year 2022 provides State Exchanges with less flexibility to implement any future process changes for employer-sponsored coverage verification. State Exchanges have existing flexibility under §§ 155.320(a)(2) and 155.315(h) to propose an alternative approach to using the verification procedures under § 155.320(d)(2), or an alternative to using the random sampling process described under § 155.320(d)(4), in order to verify whether applicants have received an offer of affordable coverage. We continue to encourage states to use this flexibility to explore evidence or risk-based approaches to conducting this verification. Finally, these changes do not impact State Exchanges that currently verify offers of employer-sponsored coverage using approved data sources under § 155.320(d)(2)(i) through (iii) or use the random sampling procedures under § 155.320(d)(4), and have determined these methods are the appropriate approaches for their Exchanges to meet requirements under § 155.320(d).
As noted in section IV of the preamble, on March 4, 2021, the United States District Court for the District of Maryland decided
As explained below in the Implementation of the Decision in
We proposed to add new flexibility to allow current Exchange enrollees and their dependents to enroll in a new QHP of a lower metal level
In 2017, the Market Stabilization Rule addressed concerns that Exchange enrollees were utilizing special enrollment periods to change plan metal levels based on ongoing health needs during the coverage year, negatively affecting the individual market risk pool. The Market Stabilization Rule set forth requirements at § 155.420(a)(4) to limit Exchange enrollees' ability to change to a QHP of a different metal level when they qualify for, or when a dependent(s) newly enrolls in Exchange coverage through, most types of special enrollment periods.
Generally, § 155.420(a)(4) provides that enrollees who newly add a household member through most types of special enrollment periods may add the household member to their current QHP or enroll them in a separate QHP,
Similarly, we proposed to add a new flexibility at § 155.420(a)(4)(ii)(C) to allow enrollees and their dependents who become newly ineligible for APTC in accordance with paragraph (d)(6)(i) or (ii) of this section to enroll in a QHP of
We proposed this new flexibility in part because of concerns from agents and brokers that some consumers who qualify for the special enrollment period in accordance with § 155.420(d)(6)(i) or (ii) because they lose eligibility for APTC based on an income increase may lose a significant amount of financial assistance without having gained enough income to continue to afford the coverage they selected when APTC was available to them. In the proposed rule, we provided an example of a qualified individual whose estimated annual household income increases to more than 400 percent FPL due to an income increase of less than $2,000.
As discussed in the proposed rule, in many cases individuals enrolling in Exchange coverage during open enrollment will not anticipate experiencing a situation in the middle of the plan year like those described in this final rule. Even if they are aware that they could have a small increase in household income or lose a projected tax dependent, they may not realize that these changes could make them newly ineligible for APTC. Furthermore, sometimes these changes are not foreseeable. Additionally, it is reasonable for individuals who complete an application and then shop for coverage on
While this proposal was designed to provide Exchange enrollees who lose APTC with the chance to select lower-cost coverage, we recognized that changing to a new QHP mid-plan year may cause enrollees to incur additional out of pocket costs as a new QHP selection typically resets the deductible and other accumulators. We believe that Exchange enrollees who lose APTC eligibility are best able to weigh the trade-off between reset accumulators or maintaining an affordable monthly premium. As discussed in the proposed rule, a change may benefit some consumers because price differences between QHPs of different metal levels can be significant. For example, in states using the federal enrollment platform, on average, silver plan premiums are 34 percent more expensive than bronze plan premiums, and gold plan premiums are 14 percent more expensive than silver plan premiums.
Finally, in the proposed rule we acknowledged that enrollees may lose APTC eligibility and qualify for a special enrollment period due to their APTC loss for a reason other than a change in household income or tax family size. For example, a currently-enrolled individual or household could lose APTC and qualify for the related special enrollment period due to an expired inconsistency regarding projected annual household income, or because the Exchange has information that they are eligible for or enrolled in other qualifying coverage that is considered MEC such as most Medicaid coverage, CHIP, or the Basic Health
HHS believed that this proposal is unlikely to result in adverse selection, and may improve the risk pool by supporting continued health insurance enrollment by healthy individuals who would be forced to end coverage in response to an increase in premium. However, we requested comment on whether there are concerns with permitting newly unsubsidized enrollees to change to any plan of a lower metal level to help them maintain coverage (for example, permitting an individual to change from a gold plan to a bronze plan), or whether we should instead only permit an enrollee to change to a plan one metal level lower than their current QHP. We also requested comment from issuers on whether there are concerns about impacts such as experiencing a decrease in premium receipt from enrollees who opt to change to a lower-cost plan, or whether they view adverse selection as a possibility. We requested comment from Exchanges, in particular, on implementation burden associated with this change to current plan category limitations rules, including on whether we should instead, to reduce this burden, permit current enrollees and currently enrolled dependents who qualify for this SEP to change to a plan of any metal level—that is, simply exempt the special enrollment periods at § 155.420(d)(6)(i) and (ii) due to becoming newly ineligible for APTC from plan category limitations altogether. We also requested comment from all stakeholders, including those who have or represent individuals with preexisting conditions, on whether such a change would significantly increase risk for adverse selection.
Finally, we also considered whether to propose additional flexibility to allow enrollees and their dependents who become newly eligible for APTC in accordance with paragraph (d)(6)(i) or (ii) to change to a QHP of a higher metal level, but we did not propose additional plan flexibility for enrollees who become newly eligible for APTC. We invited comment on whether we should consider additional flexibilities for this population in the future and the anticipated impact of such a policy.
We received public comments on the proposed updates to Exchange enrollees newly ineligible for APTC. The following is a summary of the comments we received and our responses.
No commenters raised the concern that this proposal specifically would increase the risk of adverse selection. Several commenters supported also allowing enrollees who newly become APTC eligible to change to a plan of a higher metal level. Many commenters supported allowing individuals who qualify for a special enrollment period based on a loss of APTC eligibility to change to a plan of any metal level, either to provide enrollees with flexibility to change to the best plan for themselves and their families, to make implementation easier for State Exchanges, or both. One of these commenters requested that instead of applying plan category limitations, HHS require Exchange enrollees to provide documents to confirm their SEP eligibility. Some commenters supported allowing individuals who lose APTC eligibility to change to a plan of a higher or lower metal level rather than just to a plan of a lower metal level. Finally, many commenters disagreed with the need to require plan category limitations in general, and requested that HHS provide Exchanges with flexibility in terms of when or whether to implement plan category limitations at all based on considerations related to their specific State Exchange's market.
Additionally, we do not believe that it is necessary to require eligible consumers to submit documentation of the change that resulted in their loss of APTC eligibility, in part because this special enrollment period is triggered
We did not propose removing plan category limitations; however, we continue to study potential policies to promote continuous coverage and provide consumers with flexibility. Finally, we acknowledge the potential benefit of requiring Exchanges to implement this change quickly, but we believe that providing Exchanges with flexibility to implement it no later than January 1, 2024 strikes an appropriate balance between allowing early implementation if possible and providing Exchanges with necessary flexibility to plan related system updates based on Exchange-specific competing priorities and resources. While some Exchanges may be able to implement this new flexibility sooner than January 1, 2024, in light of competing priorities such as the need to implement changes to calculating financial assistance established in the American Rescue Plan Act of 2021, we believe that substantial flexibility for Exchanges is appropriate.
We proposed to allow a qualified individual, enrollee, or dependent who did not receive timely notice of a triggering event and was otherwise reasonably unaware that a triggering event occurred to select a new plan within 60 days of the date that he or she knew, or reasonably should have known, of the occurrence of the triggering event. We also proposed to allow such persons to choose the earliest effective date that would have been available if he or she had received timely notice of the triggering event. Finally, we proposed conforming amendments to § 147.104(b)(2)(ii) so that these proposals would also apply to off-Exchange individual health insurance coverage. We are finalizing this policy as proposed.
In accordance with § 155.410(a)(2), an Exchange may allow qualified individuals and enrollees to enroll in or change coverage only during the annual open enrollment period as specified in § 155.410(e), and during special enrollment periods as specified in § 155.420. An Exchange must allow a qualified individual or enrollee to enroll in or change from one qualified health plan to another if one of the triggering events described in § 155.420(d) occurs. Furthermore, under § 155.420(c)(1), a qualified individual or enrollee generally has until 60 days after the date of the triggering event to select a qualified health plan. Section 155.420(c)(2) and (3), provide exceptions to this general rule under which a qualified individual or enrollee may enroll prior to the date of a triggering event. Section 155.420(c)(4) provides a final exception under which a qualified individual or enrollee may have less than 60 days to enroll. Coverage effective dates are outlined in § 155.420(b) and vary depending on the special enrollment period triggering event, but in all cases are either on or after the date of the triggering event.
Because the time period during which a qualified individual may enroll through a special enrollment period is determined by the triggering event, a qualified individual who does not know the triggering event has occurred may not have sufficient time to enroll in coverage. Generally, the triggering events described in § 155.420(d) and related plan selection timelines under § 155.420(c) are premised on the assumption that an individual will become aware of a triggering event in time to make a plan selection within the time allotted under § 155.420(c). For example, the rules anticipate that qualified individuals or enrollees will receive timely notice of the day they will lose employer-sponsored coverage or the day they will gain a dependent such that 60 days is ample time for the individual to apply for enrollment through an applicable special enrollment period and select a plan. However, our experience operating the Federally-facilitated Exchange has shown that there are circumstances in which an individual reasonably may not be aware of an event that triggers special enrollment period eligibility until after the triggering event has occurred. This change will allow a qualified individual, enrollee, or dependent who did not receive timely notice of a triggering event or was otherwise reasonably unaware that a triggering event occurred, to qualify for an applicable special enrollment period and select a new plan within 60 days of the date that he or she knew, or reasonably should have known, of the occurrence of the triggering event. This proposal will also allow the qualified individual, enrollee, or dependent to choose the earliest effective date that would have been available if he or she had received timely notice of the triggering event.
For example, an employer fails to pay its share of premium for an insured employer-sponsored health plan and enters a grace period beginning April 1st, which will expire on May 31st. Because the employer intends to satisfy its premium liability before the end of the grace period, the employer does not notify participants and beneficiaries in the plan of the non-payment or the risk of termination of its employer-sponsored coverage retroactive to April 1st. The employer is does not timely satisfy the premium debt, and the issuer of the employer-sponsored health coverage terminates coverage for the participants and beneficiaries retroactively to April 1st. Neither the employer nor the issuer of the employer-sponsored health plan notify the participants and beneficiaries of the beginning of the grace period or that coverage would be terminated as of April 1st. On July 10th, the participants and beneficiaries first receive notice from the issuer that their coverage terminated as of April 1st. In accordance with the circumstances described in 26 CFR 54.9801-6(a)(3)(i), due to the employer's failure to timely pay premiums, the participants and beneficiaries of the employer-sponsored health plan lost eligibility for the coverage and are eligible for the special enrollment period provided in § 155.420(d)(1)(i). Per paragraph (d)(1)(i), the triggering event for special enrollment periods due to loss of minimum essential coverage is the last day the consumer would have coverage under his or her previous plan or coverage. But in this scenario, affected participants and beneficiaries, through no fault of their own, were not aware of their loss of minimum essential coverage until more than 60 days following the last day they had coverage. Thus, without the measure we proposed here, the participants and beneficiaries in this example would not be able to use the special enrollment period at paragraph (d)(1)(i), because more than 60 days had passed since the relevant triggering event without their having selected a new plan. Some participants and beneficiaries of employer-sponsored health plans are experiencing similar circumstances during the COVID-19 public health emergency and sought or seek individual health insurance coverage through the FFEs, exposing a perceived gap in current special enrollment period rules.
Another circumstance in which an individual may not be aware that a triggering event occurred involves technical errors that block an individual from enrolling in coverage through an Exchange. Section 155.420(d)(4) specifies that an individual is eligible for a special enrollment period if, among other things, their erroneous non-enrollment in a qualified health plan was due to an error on the part of the Exchange or one of its agents. In this case, the error itself is the triggering event, and the date it occurs serves as the beginning of the special enrollment period. However, as in the case of the loss of employer-sponsored coverage discussed above, an individual may not be aware that an error has occurred. In some cases, the Exchange may not be aware that a technical error has
Therefore we proposed to amend § 155.420 by adding paragraph (c)(5) to specifically provide that if a qualified individual, enrollee, or dependent does not receive timely notice of an event that triggers eligibility for a special enrollment period under this section, and otherwise was reasonably unaware that a triggering event occurred, the Exchange must allow them to select a new plan within 60 days of the date that they knew, or reasonably should have known, of the occurrence of the triggering event. Additionally, we proposed to add paragraph (b)(5) to clarify that when a qualified individual, enrollee, or dependent did not receive timely notice of an event that triggers eligibility for a special enrollment period, the Exchange must allow the such persons the option to choose the earliest coverage effective date for the triggering event under paragraph (b) that would have been available if they had received timely notice of the triggering event. In addition, we proposed that the Exchange must also provide the qualified individual, enrollee or dependent the option to choose the effective date that would otherwise be available under the other provisions in paragraph (b).
Lastly, we proposed a conforming edit to § 147.104(b)(2) that would incorporate these amendments by reference in the regulations governing limited open enrollment periods for off-Exchange coverage, so that these proposed special enrollment rules would apply to issuers of non-grandfathered individual health insurance, both on and off-Exchange. We also separately proposed a change to § 147.104(b)(2)(ii) to clarify how the special enrollment period in § 155.420(d)(4) applies off-Exchange. This change is discussed in further detail in the preamble to part 147.
We sought comment on these proposals.
We received public comments on the proposed updates to Special Enrollment Periods—Untimely Notice of Triggering Event. The following is a summary of the comments we received and our responses.
Following review of the comments, we are finalizing this policy as proposed.
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
In accordance with the policy currently in place on the Exchanges on the Federal platform, we proposed to amend § 155.420(d)(1) to state that the complete cessation of employer contributions for COBRA continuation coverage serves as a triggering event for special enrollment period eligibility. We are instead finalizing this policy under new paragraph (d)(15), rather than in paragraph (d)(1)(v) as we proposed. We are also finalizing text providing that the special enrollment period will be available when subsidies from a government entity completely cease.
Exchange regulations at § 155.420(d)(1)(i) provide that when a qualified individual or his or her dependent loses minimum essential coverage as defined by § 155.20, they gain eligibility for a special enrollment period, during which they can enroll in a qualified health plan. Paragraph (e) of § 155.420 states that loss of minimum essential coverage as described in paragraph (d)(1) includes the circumstances listed at 26 CFR 54.9801-6(a)(3)(i) through (iii). These provisions describe conditions under which someone may qualify for a special enrollment period for group health plan coverage, including paragraphs (a)(3)(i), “Loss of eligibility for coverage,” and (a)(3)(iii), “exhaustion of COBRA continuation coverage.” Exhaustion of COBRA coverage is defined in 26 CFR 54.9801-2(4) as cessation of COBRA coverage for reasons other than failure of the individual to timely pay premiums, and includes coverage ceasing due to “failure of the employer or other responsible entity to remit premiums on a timely basis.”
In implementing special enrollment periods for Exchanges on the Federal platform, HHS has provided a loss of minimum essential coverage special enrollment period under § 155.420(d)(1)(i) for individuals whose COBRA costs change because their former employer completely ceases contributions and as a result they must pay the full cost of premiums. However, loss of coverage based on complete cessation of employer contributions for COBRA coverage might not have been treated as a triggering event by issuers of individual health insurance coverage off-Exchange or by State Exchanges.
We proposed to amend § 155.420 by adding paragraph (d)(1)(v) stating that a special enrollment period is triggered when a qualified individual or his or her dependent is enrolled in COBRA continuation coverage for which an employer is paying all or part of the premiums, and the employer completely ceases its contributions, with the triggering event being the last day of the period for which COBRA continuation coverage is paid for, in whole or in part, by the employer. We are instead finalizing proposed paragraph (d)(1)(v) as (d)(15), and in addition we are also finalizing a change to (e)(1) to explicitly exclude (d)(15). In the preamble to the proposed rule, we clarified that the triggering event for this special enrollment period would be based on loss of employer contributions to COBRA continuation coverage, rather than the loss of coverage itself. Thus, eligibility for this special enrollment period does not depend on loss of COBRA coverage, as illustrated by the examples we included. However, proposed paragraph (d)(1)(v), like the rest of paragraph (d)(1), would have been subject to paragraph (e), which states that loss of coverage excludes voluntary termination of coverage, and (e)(1), which states that loss of coverage does not include failure to pay premiums on a timely basis, including COBRA premiums. Although new paragraph (d)(15) will not be subject to the provisions in (e), we are concerned that stakeholders may still be uncertain about whether individuals who voluntarily end COBRA continuation coverage or have such coverage terminated following a loss of employer contributions or government subsidies would still be eligible for this special enrollment period, given the limitations imposed by paragraph (e)(1). Therefore, we are finalizing proposed paragraph (d)(1)(v) as (d)(15), which is not subject to paragraph (e). In addition, we are also finalizing a change to paragraph (e)(1) to explicitly exclude the special enrollment period trigger in paragraph (d)(15), making clear that individuals who voluntarily end COBRA continuation coverage or have such coverage terminated following a loss of employer contributions or government subsidies are still eligible for this special enrollment period, and to use the term “COBRA continuation coverage” consistently.
Similar to the special enrollment period for termination of employer contributions to employer-sponsored coverage at 26 CFR 54.9801-6(a)(3)(ii), we proposed that the triggering event is the last day of the period for which COBRA continuation coverage is paid for, in part or in full, by an employer. Furthermore, we proposed to clarify that complete cessation of employer contributions toward employer-sponsored continuation coverage under state mini-COBRA laws
Similar to other special enrollment periods based on loss of minimum essential coverage, in the Exchanges, this special enrollment period would be subject to the provisions in paragraph (a)(4)(iii)(B) and (C), which allow dependents and non-dependent qualified individuals who qualify for a special enrollment period to be added to the QHP of a household member who is already enrolled in Exchange coverage, or to enroll separately in a plan of any metal level. We also proposed that the Exchange must provide the qualified individual, enrollee, or dependent the effective date that would otherwise be available pursuant to the other provisions at paragraph (b)(2)(iv). To ensure that this provision applies to new paragraph (d)(15), we are also finalizing changes to paragraph (b)(2)(iv) to include paragraph (d)(15) in the list of special enrollment periods that are subject to the paragraph. In addition, we proposed that an individual eligible for this special enrollment period would have 60 days before or after the triggering event (in this case, the last day for which the qualified individual or dependent has COBRA continuation coverage to which an employer or governmental entity is contributing) to select a qualified health plan. Therefore we are also finalizing changes to paragraph (c)(2) to include new paragraph (d)(15). We also proposed that this special enrollment period, which would be incorporated by reference in the guaranteed availability regulations at § 147.104(b)(2), apply with respect to individual health insurance coverage offered through and outside of an Exchange.
To help clarify the circumstances that would trigger the proposed special enrollment period, we included the following example:
In addition to this proposal, HHS also considered addressing situations in which an employer reduces, but does not completely cease, its contributions for COBRA continuation coverage. In particular, we considered adding to proposed paragraph § 155.420(d)(1)(v) a provision that a reduction of employer contributions to COBRA continuation coverage would also serve as a special enrollment period trigger. We also sought comment on whether HHS
Lastly, we note that in addition to employer contributions to COBRA continuation coverage, COBRA coverage is sometimes subsidized by government entities as well, either directly or through a third party such as an employer.
We also provide the following example to illustrate how the special enrollment period would work with regard to government subsidies of COBRA continuation coverage premiums.
We received public comments on the proposed updates to cessation of employer contributions to COBRA as special enrollment period trigger. The following is a summary of the comments we received and our responses.
As a result of the comments, we are finalizing this policy as proposed, except that we are finalizing proposed paragraph (d)(1)(v) as paragraph (d)(15), with the additional provision that cessation of government subsidies to COBRA continuation coverage will also result in a special enrollment period trigger, and with other conforming changes discussed in this section of the
In 2017, the HHS Market Stabilization Rule preamble explained that HHS would implement pre-enrollment verification of eligibility for certain special enrollment periods in all FFEs and SBE-FPs and encouraged states to do the same in State Exchanges.
Since 2017, Exchanges on the Federal platform have implemented pre-enrollment special enrollment period verification for special enrollment period types commonly used by consumers to enroll in coverage. Consumers who are not already enrolled through the Exchange and who apply for coverage through a special enrollment period type that requires pre-enrollment verification by the Exchange must have their eligibility electronically verified using available data sources, or they must submit supporting documentation to verify their eligibility for the special enrollment period before their enrollment can become effective. As stated in the HHS Marketplace Stabilization Rule, special enrollment period verification is only conducted for new enrollees due to the potential for additional burden on issuers and confusion for consumers if required for existing enrollees.
In implementing pre-enrollment verifications for special enrollment periods in the Market Stabilization Rule, HHS did not establish a regulatory requirement that all Exchanges conduct special enrollment period verifications, in order to allow State Exchanges with flexibility to adopt policies that fit the needs of their state.
We proposed to amend § 155.420 to add paragraph (f) to require all Exchanges to conduct eligibility verification for special enrollment periods. Specifically, we proposed to require that Exchanges conduct special enrollment period verification for at least 75 percent of new enrollments through special enrollment periods for consumers not already enrolled in coverage through the applicable Exchange.
We also proposed that under § 155.315(h), State Exchanges would have the flexibility to propose alternative methods for conducting required verifications to determine eligibility for enrollment in a QHP under subpart D, and to allow State Exchanges to request HHS approval for use of alternative processes for verifying eligibility for special enrollment periods as part of determining eligibility for special enrollment periods under § 155.305(b).
We sought comment on these proposals. With respect to Special Enrollment Period Verification, we sought comment from States about the 75 percent verification threshold and whether it should be based on past year or current year special enrollment period enrollments, understanding that unforeseen events may occur that may drive up or down enrollments from year-to-year.
We received public comments on the proposed updates to require Exchanges to conduct Special Enrollment Period verification. The following is a summary of the comments we received and our responses.
Following review of the comments, we are not finalizing this proposal.
HHS calculates the required contribution percentage for each benefit year using the most recent projections and estimates of premium growth and income growth over the period from 2013 to the preceding calendar year. Accordingly, we proposed the required contribution percentage for the 2022 benefit year, calculated using income and premium growth data for the 2013 and 2021 calendar years.
Under section 5000A of the Code, an individual must have MEC for each month, qualify for an exemption, or make an individual shared responsibility payment. Under § 155.605(d)(2), an individual is exempt from the requirement to have MEC if the amount that he or she would be required to pay for MEC (the required contribution) exceeds a particular percentage (the required contribution percentage) of his or her projected household income for a year. Although the Tax Cuts and Jobs Act reduced the individual shared responsibility payment to $0 for months beginning after December 31, 2018, the required contribution percentage is still used to determine whether individuals above the age of 30 qualify for an affordability exemption that would enable them to enroll in catastrophic coverage under § 155.305(h).
The initial 2014 required contribution percentage under section 5000A of the Code was 8 percent. For plan years after 2014, section 5000A(e)(1)(D) of the Code and Treasury regulations at 26 CFR 1.5000A-3(e)(2)(ii) provide that the required contribution percentage is the percentage determined by the Secretary of HHS that reflects the excess of the rate of premium growth between the preceding calendar year and 2013, over the rate of income growth for that
As discussed elsewhere in this preamble, we are finalizing as the measure for premium growth the 2022 premium adjustment percentage of 1.3760126457 (or an increase of about 37.6 percent over the period from 2013 to 2021). This reflects an increase of about 1.6 percent over the 2021 premium adjustment percentage (1.3760126457/1.3542376277).
As the measure of income growth for a calendar year, we established in the 2017 Payment Notice that we would use per capita personal income (PI). Under the approach finalized in the 2017 Payment Notice and proposed for use in the 2022 Payment Notice, the rate of income growth for 2022 is the percentage (if any) by which the NHEA Projections 2019-2028 value for per capita PI for the preceding calendar year ($61,156 for 2021) exceeds the NHEA Projections 2019-2028 value for per capita PI for 2013 ($44,948), carried out to ten significant digits. The ratio of per capita PI for 2021 over the per capita PI for 2013 is estimated to be 1.3605944647 (that is, per capita income growth of about 36.1. percent).
Using the 2022 premium adjustment percentage finalized in this rule, the excess of the rate of premium growth over the rate of income growth for 2013 to 2021 is 1.3760126457 ÷ 1.3605944647, or 1.0113319445. This results in the 2022 required contribution percentage under section 5000A of the Code of 8.00 × 1.0113319445 or 8.09 percent, when rounded to the nearest one-hundredth of one percent, a decrease of 0.18 percentage points from 2021 (8.09066−8.27392).
Finally, beginning with the 2023 benefit year, we proposed to publish the required contribution percentage, along with the premium adjustment percentage and the annual cost-sharing limitation parameters, in guidance separate from the annual notice of benefit and payment parameters, unless HHS were to propose a change to the methodology for calculating the parameters, in which case, we would do so through notice-and-comment rulemaking. For a discussion of that proposal, please see the preamble for Publication of the Premium Adjustment Percentage, Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual Limitation on Cost Sharing, and Required Contribution Percentage (§ 156.130).
We received public comments on the proposed updates to the required contribution percentage (§ 155.605(d)(2)) for plan year 2022. Please see our summary of comments on the premium adjustment percentage (§ 156.130(e)) for a summary of comments on the required contribution percentage.
Special enrollment periods due to cessation of employer contributions to COBRA continuation coverage are generally not available in the group insurance market. Therefore, to maintain consistency between SHOP and the rest of the group insurance market, we proposed to amend § 155.726(c)(2)(i) to exclude the special enrollment period trigger in proposed paragraph § 155.420(d)(1)(v) from applying to SHOP plans. However, because proposed paragraph (d)(1)(v) is instead being finalized as paragraph (d)(15), which is not included in § 155.726(c)(2)(i), SHOP plans would no longer be subject to the requirement to offer this special enrollment period. Therefore, there is no need to finalize this provision.
We sought comment on this proposal.
We did not receive public comments on this provision, but are not finalizing this policy as changes to the final regulation at § 155.420 make this unnecessary.
The user fee rates for the 2022 benefit year for issuers on the FFE and SBE-FPs were initially finalized in the final rule published on January 19, 2021 (86 FR 6138 at 6152). However, as a result of a change in administration priorities, enrollment increases due to legislation and emergency action, and technical improvements we expect increases in the costs of activities related to consumer outreach and Navigators for 2022. Therefore, upon review, we now estimate that the user fees rates established in the January 19, 2021 final rule (86 FR 6138 at 6152) will need to be slightly increased to sustain essential Exchange-related activities and ensure robust outreach to support long-term operational health. HHS intends to propose to increase FFE and SBE-FP user fee rates for the 2022 benefit year through future notice-and-comment rulemaking. HHS intends to propose a 2022 benefit year user fee rate for all participating FFE issuers at 2.75 percent of total monthly premiums, and a 2022 benefit year user fee rate for all participating SBE-FP issuers at 2.25 percent of total monthly premiums. These user fee rates continue to be lower than the 2021 user fee rates of 3.0 percent of total monthly premiums for all participating FFE issuers and 2.5 percent of total monthly premiums for all participating SBE-FP issuers, but higher than the recently finalized rates of 2.25 percent of total monthly premiums for FFE issuers and 1.75 percent of total monthly premiums for SBE-FP issuers.
We proposed to eliminate the state user fee collection flexibility that HHS had previously offered to states in the 2017 Payment Notice. We proposed that HHS would not collect an additional user fee, if a state so requests, from issuers at a rate specified by the state to cover costs incurred by the state for the functions the state retains. HHS previously provided this flexibility to states to help reduce the administrative burden on states of collecting additional user fees. However, our subsequent
We did not receive public comments on this provision, and therefore, we are finalizing it as proposed.
We proposed to amend § 156.50(d) to clarify that issuers participating through SBE-FPs are eligible to receive adjustments to their federal user fee amounts that reflect the value of contraceptive claims they have reimbursed to third-party administrators (TPAs) that have provided contraceptive coverage on behalf of an eligible employer. In the final rules “Coverage of Certain Preventative Services Under the Affordable Care Act,”
We sought comment on these proposals.
We received public comments on the proposed updates to eligibility for user fee adjustments for issuers participating through SBE-FPs (§ 156.50(d)). The following is a summary of the comments we received and our responses.
In the proposed 2022 Payment Notice, we solicited comment on the appropriateness of an alternative revenue source to Exchange user fees to ensure Exchanges can cover the costs of the Exchange in an effective, appropriate, and fair manner. We appreciate the comments received on this issue, but are not taking any action at this time in relation to Exchange revenue sources. Should we propose future administrative action on this topic, we will review and consider responsive comments at that time.
We proposed July 1, 2022 as the deadline for states to submit to HHS their annual reports on state-required benefits pursuant to § 156.111(d) and (f). We are finalizing this deadline as proposed for 2022.
We also intend to exercise enforcement discretion with regard to the first annual reporting submission deadline of July 1, 2021 under current regulation. Pursuant to this enforcement posture, we will not take enforcement action against states that do not submit an annual report in 2021. Rather, we will begin enforcing the annual reporting requirement on July 1, 2022, when states must notify HHS in the manner specified by HHS, of any benefits in addition to EHB and any benefits the state has identified as not in addition to EHB and not subject to defrayal, describing the basis for the state's determination, that QHPs in the individual or small group market are required to cover in plan year 2022 or after plan year 2022 by state action taken by May 2, 2022 (60 days prior to the annual submission deadline).
In the 2021 Payment Notice, we amended § 156.111(d) and added paragraph (f) to require states to annually notify HHS in a form and manner specified by HHS, and by a date determined by HHS, of any state-required benefits applicable to QHPs in the individual or small group market that are considered to be “in addition to EHB” in accordance with § 155.170(a)(3) and any benefits the state has identified as not in addition to EHB and not subject to defrayal, describing the basis for the state's determination. Under this requirement, a state's submission must describe all benefits requirements under state mandates applicable to QHPs in the individual or small group market that were imposed on or before December 31, 2011, and that were not withdrawn or otherwise no longer effective before December 31, 2011, as well as all benefits requirements under state mandates that were imposed any time after December 31, 2011, applicable to the individual or small group market. The state's report is also required to describe whether any of the state benefit requirements in the report were amended or repealed after December 31, 2011. Information in the state's report is required to be accurate as of the day that is at least 60 days prior to the annual reporting submission deadline set by HHS.
We also finalized § 156.111(d)(2) to specify that if the state does not notify HHS of its required benefits considered to be in addition to EHB by the annual reporting submission deadline, or does not do so in the form and manner specified by HHS, HHS will identify which benefits are in addition to EHB for the state for the applicable plan year. HHS's identification of which benefits are in addition to EHB will become part of the definition of EHB for the applicable state for the applicable plan year. In the 2021 Payment Notice, we finalized that we would begin implementation of the annual reporting policy in 2021. Specifically, we finalized that states would be required to notify HHS by July 1, 2021, of any benefits in addition to EHB and any benefits the state has identified as not in addition to EHB and not subject to defrayal, describing the basis for the state's determination, that QHPs in the individual or small-group market are
We are finalizing as proposed a July 1, 2022 deadline for states to submit to HHS a complete reporting package for the second year of annual reporting. As finalized, states are required to notify HHS in the manner specified by HHS by July 1, 2022, of any benefits in addition to EHB and any benefits the state has identified as not in addition to EHB and not subject to defrayal, describing the basis for the state's determination, that QHPs are required to cover in plan year 2022 or after plan year 2022 by state action taken by May 2, 2022 (60 days prior to the annual submission deadline). However, as noted earlier in this section, we also intend to exercise enforcement discretion with regard to the first annual reporting submission deadline of July 1, 2021. Pursuant to this enforcement posture, we will not be actively collecting or requiring submission of annual reports in 2021.
Other commenters also urged HHS to delay the reporting requirement, arguing that HHS should not implement the annual reporting requirement until HHS releases additional guidance clarifying its defrayal policies as HHS promised it would in the 2021 Payment Notice. These commenters requested that any implementation of the annual reporting policy only occur after states have an opportunity to review the annual reporting process and associated templates in more depth that HHS will be requiring states to use for annually reporting state mandates to HHS. These commenters noted that states have not yet seen or had an opportunity to review or comment on the proposed annual reporting templates, reiterating the request for HHS to specify with more clarity the reporting and determination mechanisms required of states. Commenters urged HHS to immediately make available the proposed templates that states are expected to use when submitting annual reports.
Commenters also expressed concern about the lack of transparency around the annual reporting and review process, requesting that HHS delay the reporting requirement until HHS provides further clarification. These commenters specifically requested that HHS clarify whether HHS will accept a state's determination as to whether a state mandate is in addition to EHB, who will be the final arbiter of such determinations, and whether there will be any avenue for states to appeal HHS's decisions in situations where there is disagreement between HHS and a state surrounding the scope of a benefit mandate or its status as being in an addition to EHB.
Although we continue to support implementation of the annual reporting policy, we also acknowledge the validity of commenters' concerns regarding the timing and implementation of annual reporting of state-required benefits as planned in 2021. Therefore, although we are finalizing the second annual reporting deadline of July 1, 2022 as proposed, we also intend to exercise enforcement discretion in relation to the upcoming first annual reporting submission deadline of July 1, 2021. Specifically, HHS will not take enforcement action against states that do not submit an annual report on state-required benefits by the July 1, 2021 submission deadline; and HHS will not identify state-required benefits in addition to EHB for states that do not submit a report to HHS by the July 1, 2021 submission deadline. Accordingly, because HHS is not enforcing the collection of state-required benefits reports in 2021, HHS will not publish on the CMS website in 2021 any annual reports on state-required benefits. We note that the obligation for a state to defray the cost of QHP coverage of state-required benefits in addition to EHB is an independent statutory requirement from the annual reporting policy finalized at § 156.111(d) and (f). Therefore, although this enforcement posture effectively relieves states of state-required benefit reporting requirements until July 1, 2022, it does not pend or otherwise impact the defrayal requirements under section 1311(d)(3)(B) of the ACA, as implemented at § 155.170. Under this enforcement posture, states remain responsible for making payments to defray the cost of additional required benefits and issuers are still responsible for quantifying the cost of these benefits and reporting the cost to the state.
Under this enforcement posture, HHS will begin enforcing the annual reporting requirement on states in 2022. States are required to notify HHS in the manner specified by HHS by July 1, 2022, of any benefits in addition to EHB that QHPs are required to cover in plan year 2022 or after plan year 2022 by state action taken by May 2, 2022 (60 days prior to the annual submission deadline). As part of this reporting, states must also identify which state-required benefits are not in addition to EHB and do not require defrayal in accordance with § 155.170, and provide the basis for the state's determination, by the July 1, 2022 reporting submission deadline. States are permitted to submit their annual report at any time during the May 2-July 1, 2022, submission window.
In the 2021 Payment Notice, we indicated that we would continue engaging in technical assistance with states to help ensure state understanding of when a state-benefit requirement is in addition to EHB and requires defrayal. We continue to work on additional technical assistance that we believe will further assist states with their defrayal analyses and believe such technical assistance will bolster state compliance with defrayal requirements, as well as result in a smoother annual reporting process for states and review process for HHS. However, we also believe these additional technical assistance documents will best serve state needs if made available to states far enough in advance of the first annual reporting deadline. It is important that states have an opportunity to ask HHS any clarifying questions after reviewing these technical assistance documents and make any necessary adjustments to state policy. We believe that exercising enforcement discretion for the first year of annual reporting in the manner we described will ensure that states have these opportunities before the July 1, 2022 submission deadline. We also believe our enforcement posture will promote a smoother annual reporting process overall in 2022 and beyond as states will be able to utilize the additional technical assistance documents as a tool to identify which state mandates are in addition to EHB in a manner that reflects federal policy.
We also believe the additional technical assistance efforts will help address commenter concerns around potential disagreements between HHS and states as to which state-required benefits are in addition to EHB and require defrayal. The purpose of this additional technical assistance and outreach is to clarify the defrayal policy more generally and to provide states with a more precise understanding of how HHS analyzes and expects states to analyze whether a state-required benefit is in addition to EHB pursuant to § 155.170. We encourage states to review state-required benefits in the context of this additional technical assistance and take the appropriate steps to update policy decisions regarding which state-required benefits are in addition to EHB and require defrayal ahead of the July 1, 2022 annual reporting deadline.
We also acknowledge that states continue to express concern regarding how HHS plans to enforce § 155.170 after reviewing state reports or identifying mandates in a non-reporting state that are in addition to EHB for which the non-reporting state is not defraying. We stated in the 2021 Payment Notice that we would not be adopting any policy with regard to whether enforcement of the defrayal requirement will be retrospective or prospective in relation to the submission of § 156.111 reports. However, we are concerned that declining to adopt an enforcement policy has caused unnecessary confusion and concern for states. We are therefore clarifying that HHS does not intend to retroactively enforce the defrayal requirement against states for plan years prior to 2022 in relation to the submission of § 156.111 reports. With regards to resolving any disagreements that may arise between a state and HHS as to whether a mandated benefit is in addition to EHB, we intend to work closely with the state to address the disagreement without engaging in a formal appeals process. We also intend to provide non-reporting states with an opportunity to review our identifications of state-required benefits that are in addition to EHB prior to releasing the annual reports on the CMS website an effort to mitigate the potential for disagreement between the state and HHS.
As stated in the 2021 Payment Notice, HHS will provide the templates that states are required to use for annually reporting the information required pursuant to § 156.111(f)(1) through (6). We continue to believe that the descriptions of the required data elements at § 156.111(f)(1) through (6) provide sufficient detail to states regarding the types of information states will be required to include in the annual reports. States and other stakeholders reviewing those requirements should be able to review § 156.111(f)(1) through (6) to better understand the scope of the information states are required to include in their annual reports without reviewing the actual reporting templates. However, we also believe it is important to provide states with ample time to review the precise format, instructions, and content of the annual reporting templates for state-required benefits ahead of submission. As stated in the 2021 Payment Notice, the precise templates that HHS will require states to use are available for review as part of the information collection amended under OMB control number: 0938-1174 (Essential Health Benefits Benchmark Plans (CMS-10448)). Although OMB approved that information collection on February 25, 2021, this approval took longer than anticipated and we agree with commenters that this delay resulted in increasingly limited time for states to review the templates ahead of the July 1, 2021 deadline for the first year of annual reporting of state-required benefits. By exercising enforcement discretion in the manner described, we would provide states that are concerned about having ample time to review the templates ahead of submitting an annual report the option to choose to delay submitting their first annual report until July 1, 2022 without HHS identifying which state-required benefits are in addition to EHB for the applicable plan year in the state.
We also understand that states have an immediate need to devote limited resources to responding to the COVID-19 PHE and that commenters feel that preparing an annual report on state-required benefits in 2021 is competing with that urgent priority. We continue to believe that the information we are requiring that states report to HHS as part of this annual reporting requirement should already be readily accessible to states, as every state should already be defraying the costs of state-required benefits in addition to EHB. Thus, states should already have ready access to the information the annual reports require and the reporting itself should therefore be complementary to the process the state already has in place for tracking and analyzing state-required benefits. Moreover, states need not report to HHS if they choose not to. Specifically, § 156.111(d)(2) provides that, HHS will identify the state-required benefits it believes are in addition to EHB for the applicable plan year for any state that does not submit an annual report by the annual submission deadline, or does not do so in the form and manner specified by HHS. However, when coupled with the delays in finalizing the reporting templates and issuing additional technical assistance, we believe the added burden of the COVID-19 PHE on states is yet an additional factor that supports exercising enforcement discretion. We believe our enforcement posture for 2021 will allow states that have concerns about the upcoming July 1, 2021 deadline in the context of the COVID-19 PHE sufficient time to prepare their annual reports on state-required benefits before the July 1, 2022 submission deadline.
With regards to the timing of the annual reporting submission deadline, we acknowledge that a July 1 deadline of any given reporting year may not perfectly align with other state and issuer deadlines, such as issuer rate-setting deadlines. However, we remind commenters that states must defray benefits in addition to EHB in accordance with § 155.170 independent of any reporting requirement or reporting timeline and regardless of whether the state benefit requirement is included in that plan year's annual reporting submission. We therefore also conclude that states newly identifying state-required benefits as being in addition to EHB after rate-setting has concluded is likely not a new issue. In the event that a state newly identifies a state-required benefit as being in addition to EHB and this determination affects issuer rates for the plan year during which the reporting is taking place or for a future plan year, we will work with the state on how to address that situation on a state-by-state basis. We believe that our additional technical assistance and outreach to states will assist in preventing such situations from arising by ensuring that states can analyze pending legislation and state-required benefits in a manner consistent with federal defrayal policy and in advance of rate filing deadlines. However, states that have still concerns about such a situation arising are encouraged to ask HHS in advance of annual reporting submission deadlines for input on whether a state-required benefit is in addition to EHB.
The 2019 Payment Notice stated that we would propose EHB-benchmark plan submission deadlines in the HHS annual Notice of Benefit and Payment Parameters. In the proposed 2022 Payment Notice, we proposed May 6, 2022, as the deadline for states to submit the required documents for the state's EHB-benchmark plan selection for the 2023 plan year and as the deadline for states to notify HHS that they wish to permit between-category substitution for the 2023 plan year. A typographical error appeared in the proposed rule related to these deadlines. Both proposed deadlines should have read May 6, 2022, for the 2024 plan year, not for the 2023 plan year. The correct meaning of the proposed rule as applying to the 2024 plan year should have been clear from the context of the rulemaking, and the prior rulemaking in the 2021 Payment Notice establishing deadlines for this purpose.
We are finalizing these deadlines with minor revisions to correct the typographical error such that May 6, 2022, is the deadline for states submitting EHB-benchmark plan selections for the 2024 plan year and May 6, 2022, is the deadline for states to permit between-category substitution for the 2024 plan year.
As discussed in more detail in the 2019 Payment Notice, the purpose of this policy is to allow for state flexibility in selecting an EHB-benchmark plan, which is why we allow states to make such changes on an annual basis. Furthermore, because of the level of effort needed by the state and its issuers to make changes to a state's EHB-benchmark plan, we believe that in only very limited cases will a state choose to make EHB-benchmark plan changes on an annual basis, a scenario that has not yet occurred since finalizing the EHB-benchmark plan selection flexibility. If a state does decide to make changes annually, there may be a specific reason for needing an annual change such as for a medical innovation where such benefits would outweigh any potential for consumer confusion.
We continue to emphasize that the deadlines for EHB-benchmark plan selection and permitting between-category substitution are firm, and that states should optimally have one of their points of contact who has been predesignated to use the EHB Plan Management Community reach out to us using the EHB Plan Management Community well in advance of the deadlines with any questions. Although not a requirement, we recommend states submit applications for EHB-benchmark plan selections at least 30 days prior to the submission deadline to ensure completion of their documents by the proposed deadline. We also remind states that they must complete the required public comment period for EHB-benchmark plan selection and submit a complete application by the finalized deadline.
We proposed the 2022 benefit year annual premium adjustment percentage using the most recent estimates and projections of per enrollee premiums for private health insurance (excluding Medigap and property and casualty insurance) from the NHEA, which are calculated by CMS' Office of the Actuary. For the 2022 benefit year, the premium adjustment percentage will represent the percentage by which this measure for 2021 exceeds that for 2013. However, in light of the overwhelming comments received, we are readopting as the measure of premium growth for the 2022 benefit year and beyond the NHEA projections of average per enrollee employer-sponsored insurance (ESI) premium, which was the measure used for benefit years 2015 through 2019.
Section 1302(c)(4) of the ACA directs the Secretary to determine an annual premium adjustment percentage, a measure of premium growth that is used to set three other parameters detailed in the ACA: (1) The maximum annual limitation on cost sharing (defined at § 156.130(a)); (2) the required contribution percentage used to determine eligibility for certain exemptions under section 5000A of the Code (defined at § 155.605(d)(2)); and (3) the employer shared responsibility payment amounts under section 4980H(a) and (b) of the Code (see section 4980H(c)(5) of the Code). Section 1302(c)(4) of the ACA and § 156.130(e) provide that the premium adjustment percentage is the percentage (if any) by which the average per capita premium for health insurance coverage for the preceding calendar year exceeds such average per capita premium for health insurance for 2013, and the regulations provide that this percentage will be published in the annual HHS notice of benefit and payment parameters.
The 2015 Payment Notice final rule and 2015 Market Standards Rule established a methodology for estimating the average per capita premium for purposes of calculating the premium adjustment percentage for the 2015 benefit year and beyond. In those rules, HHS used the NHEA ESI premium measure to estimate premium growth. As noted in the 2022 Payment Notice proposed rule, the 2020 Payment Notice final rule changed this methodology and, for benefit years 2020 and 2021, we instead calculated the average per capita premium as private health insurance premiums minus premiums paid for Medicare supplement (Medigap) insurance and property and casualty insurance, divided by the unrounded number of unique private health insurance enrollees, excluding all Medigap enrollees. Additionally, as finalized in the 2021 Payment Notice final rule, we finalized that we would calculate the payment parameters that depend on NHEA data based on the NHEA data available at the time of the applicable proposed rule.
As such, we proposed that the premium adjustment percentage for 2022 would be the percentage (if any) by which the most recent NHEA projection available at the time of the applicable proposed rule of per enrollee premiums for private health insurance (excluding Medigap and property and casualty insurance) for 2021 ($7,036) exceeds the most recent NHEA estimate available at the time of the applicable proposed rule of per enrollee premiums for private health insurance (excluding Medigap and property and casualty insurance) for 2013 ($4,883).
We received numerous public comments on the proposed updates to premium adjustment percentage (§ 156.130(e)). Many comments on the premium adjustment percentage were presented alongside comments on related parameters such as the required contribution percentage, maximum annual limitation on cost sharing, and reduced annual limitation on cost sharing. As such, we address comments on all of these parameters in this section. The following is a summary of the comments we received and our responses.
Commenters also expressed concerns that more rapid increases in the premium adjustment percentage would lead to higher costs to consumers and lower enrollment. A significant majority of these commenters requested that HHS reverse the policy finalized in the 2020 Payment Notice. A few commenters suggested alternatives, including a cap on increases to the maximum annual limitation on cost sharing of 3 percent year-to-year, or a hybrid approach between the pre-2020 and current methodologies. Under the suggested hybrid policy, ESI premiums would be used to calculate the growth in premiums between 2013 and 2019, while all private health insurance premiums minus Medigap and the medical portion of property and casualty insurance would be used to calculate the growth in premiums between 2019 and the current benefit year. These two growth estimates would be multiplied to arrive at the premium adjustment percentage.
Some of these commenters suggested that consumer burden connected to the increases in these parameters has been exacerbated by the COVID-19 PHE and its economic implications. These commenters maintained that these parameters should not be raised during the COVID-19 PHE. However, one commenter specified that they support the flexibility provided by the increase in the maximum annual limitation on cost sharing, which is a result of the increase in the premium adjustment percentage.
With these considerations, we believe this change is consistent with the will and interest of stakeholders and will mitigate the uncertainty regarding premium growth during the COVID-19 PHE. Reverting to the NHEA ESI premium measure also aligns with the policy objectives in the January 28, 2021 Executive Order on Strengthening the Affordable Care Act and Medicaid
In addition to aligning with the policy priorities expressed in the recent executive order and statute, reverting to NHEA ESI data as a measure of premium was an explicit interest expressed by commenters to the proposed rule. As noted earlier in this section, the overwhelming majority of commenters specifically opposed the changes made to the premium adjustment percentage calculation in the 2020 Payment Notice and asked HHS to revert to the NHEA ESI premium. We agree with these commenters' concerns.
Furthermore, reverting to NHEA ESI premium data is consistent with changing circumstances related to the potential uncertainty of the private health insurance premium measure that includes the individual market. Private health insurance premiums are more likely to be influenced by risk premium pricing, or premium pricing based on changes in benefit design and market composition in the individual market. Particularly during times of economic uncertainty, such as that experienced as a result of the COVID-19 PHE, private health insurance premium growth could reflect issuer uncertainty in market developments and could be reflected in the NHEA private insurance premium measure (excluding Medigap and property and casualty insurance). NHEA ESI premium data provides a more stable premium measure because it will exclude premiums from the individual market, which are likely to be most affected by the significant changes in benefit design, or risk premium pricing. By using the NHEA ESI premium measure for the 2022 benefit year and beyond, we will provide a more appropriate and fair measure of average per capita premiums for health insurance coverage when considering the goal of consumer protection.
As such, using the NHEA Projections 2019-2028 ESI data available at the time of the proposed rule, the premium adjustment percentage for 2022 is the percentage (if any) by which the NHEA Projections 2019-2028 value for per enrollee ESI premiums for 2021 ($6,964) exceeds the NHEA Projections 2019-2028 value for per enrollee ESI
Based on the comments received, we are finalizing the premium adjustment percentage for the 2022 benefit year as 1.3760126457 ($6,964/$5,061) which represents an increase in ESI premiums of approximately 37.6 percent over the period from 2013 to 2021.
We proposed to increase the maximum annual limitation on cost sharing for the 2022 benefit year based on the proposed value calculated for the premium adjustment percentage for the 2022 benefit year. As finalized in the EHB final rule
Using the proposed premium adjustment percentage, and the 2014 maximum annual limitation on cost sharing of $6,350 for self-only coverage, which was published by the IRS on May 2, 2013,
We received public comments on the proposed updates to the maximum annual limitation on cost sharing for plan year 2022. Please see our summary of comments on the premium adjustment percentage (§ 156.130(e)) for a summary of comments on the maximum annual limitation on cost sharing.
We are not finalizing the 2022 maximum annual limitation on cost sharing as proposed. Based on the comments received and as explained above, we are finalizing a 2022 maximum annual limitation on cost sharing of $8,700 for self-only coverage and $17,400 for other than self-only coverage. Using the premium adjustment percentage of 1.3760126457 for 2022 finalized in this rule, and the 2014 maximum annual limitation on cost sharing of $6,350 for self-only coverage, which was published by the IRS on May 2, 2013,
We proposed for the 2022 benefit year and beyond, unless changed through notice-and-comment rulemaking, to use the reductions in the maximum annual limitation on cost sharing for cost-sharing plan variations determined by the methodology we established beginning with the 2014 benefit year, as further described later in this section of the preamble.
Sections 1402(a) through (c) of the ACA direct issuers to reduce cost sharing for EHBs for eligible individuals enrolled in a silver-level QHP. In the 2014 Payment Notice, we established standards related to the provision of these CSRs. Specifically, in part 156 subpart E, we specified that QHP issuers must provide CSRs by developing plan variations, which are separate cost-sharing structures for each eligibility category that change how the cost sharing required under the QHP is to be shared between the enrollee and the federal government. At § 156.420(a), we detailed the structure of these plan variations and specified that QHP issuers must ensure that each silver-plan variation has an annual limitation on cost sharing no greater than the applicable reduced maximum annual limitation on cost sharing specified in the annual HHS notice of benefit and payment parameters. Although the amount of the reduction in the maximum annual limitation on cost sharing is specified in section
As we stated earlier in this final rule, the proposed 2022 maximum annual limitation on cost sharing was $9,100 for self-only coverage and $18,200 for other than self-only coverage. We analyzed the effect on AV of the reductions in the maximum annual limitation on cost sharing described in the statute to determine whether to adjust the reductions so that the AV of a silver plan variation will not exceed the AV specified in the statute. Below, we describe our analysis for the 2022 plan year and our proposed results.
Consistent with our analysis for the 2014 through 2021 benefit years' reduced maximum annual limitation on cost sharing, we developed three test silver level QHPs, and analyzed the impact on AV of the reductions described in the ACA to the proposed estimated 2022 maximum annual limitation on cost sharing for self-only coverage ($9,100). The test plan designs are based on data collected for 2021 plan year QHP certification to ensure that they represent a range of plan designs that we expect issuers to offer at the silver level of coverage through the Exchanges. For 2022, the test silver level QHPs included a PPO with typical cost-sharing structure ($9,100 annual limitation on cost sharing, $2,775 deductible, and 20 percent in-network coinsurance rate); a PPO with a lower annual limitation on cost sharing ($7,400 annual limitation on cost sharing, $3,050 deductible, and 20 percent in-network coinsurance rate); and an HMO ($9,100 annual limitation on cost sharing, $4,800 deductible, 20 percent in-network coinsurance rate, and the following services with copayments that are not subject to the deductible or coinsurance: $500 inpatient stay per day, $500 emergency department visit, $30 primary care office visit, and $55 specialist office visit). Based on the parameters in the proposed rule, all three test QHPs meet the AV requirements for silver level health plans.
We then entered these test plans into a draft version of the 2022 benefit year AV Calculator
However, as with prior years, we continue to find that the reduction in the maximum annual limitation on cost sharing specified in the ACA for enrollees with a household income between 200 and 250 percent of FPL (
The calculation of the reduced maximum annual limitation on cost sharing has remained consistent since the 2014 Payment Notice due to year-over-year consistency of the results of our analysis regarding the effects of the reduced maximum annual limitation on cost sharing on the AV of silver plan variations. Therefore, as a result of the apparent stability of those results, and consistent with prior Payment Notices, we proposed to continue to use the maximum annual limitation on cost sharing reductions of
Specifically, we proposed to continue to use the methodology described above for analyzing the effects of the reduced maximum annual limitations on cost sharing on the AV of silver plan variations to verify that the reductions do not result in unacceptably high AVs before we publish these values in guidance for a given benefit year. Subsequently, if a future analysis using this methodology supports a modification to the reduced maximum annual limitation for any of the household income bands for a future benefit year, we would propose those modifications to the reduced maximum annual limitations through notice-and-comment rulemaking, as appropriate.
We noted that selecting a reduction for the maximum annual limitation on cost sharing that is less than the reduction specified in the statute would not reduce the benefit afforded to enrollees in the aggregate. This is because QHP issuers are required to meet specified AV levels that require the plan's cost-sharing to be within a limited range.
We sought comment on this analysis and the proposed reductions in the maximum annual limitation on cost sharing calculation methodology for the 2022 benefit year and beyond. We also sought comment on the proposed reduced annual limitations on cost sharing for the 2022 benefit year.
We noted that for 2022, as described in § 156.135(d), states are permitted to request HHS's approval for state-specific datasets for use as the standard population to calculate AV. No state submitted a dataset by the September 1, 2020 deadline.
We received no comments on the reductions in the maximum limitations on cost sharing apart from those already discussed in the preamble to the premium adjustment percentage (§ 156.130(e)). In this regard, please see our summary of comments on the premium adjustment percentage (§ 156.130(e)) for a summary of comments pertaining to the reduced maximum annual limitation on cost sharing.
In light of our decision to finalize the 2022 premium adjustment percentage using the NHEA ESI premium measure to estimate premium growth, we are not finalizing the 2022 reduced maximum annual limitation on cost sharing parameters as proposed (in Table 9 of the proposed rule
To confirm consistency with the analysis for the reduced maximum annual limitation on cost sharing, we tested the reductions to the maximum annual limitation for cost sharing which we are finalizing in this rule, and we analyzed the impact on AV of the reductions described in the ACA to the 2022 maximum annual limitation on cost sharing that we are finalizing ($8,700). For 2022, the test silver level
We then entered these test plans into a draft version of the 2022 benefit year AV Calculator
Therefore, we are finalizing as proposed the reductions of
Since the 2014 benefit year, HHS has published the premium adjustment percentage, maximum annual limitation on cost sharing, reduced maximum annual limitation on cost sharing, and required contribution percentage parameters through notice-and-comment rulemaking. Beginning with the 2023 benefit year, we proposed to publish these parameters in guidance by January of the year preceding the applicable benefit year, unless HHS is changing the methodology for calculating the parameters, in which case, we would do so through notice-and-comment rulemaking. We additionally proposed to publish in guidance the premium adjustment percentage and related parameters using the most recent NHEA income and premium data that is available at the time these values are published in guidance or, if HHS is changing the methodology for calculating these parameters, at the time these values are proposed in notice-and-comment rulemaking. Publication of these parameters prior to the release of updates to the NHEA data, which typically (but not always) occurs in February or March, is consistent with the 2021 Payment Notice policy to finalize the premium adjustment percentage, maximum limitation on cost sharing, reduced maximum limitation on cost sharing, and required contribution percentage using NHEA data that would be available at the time that the proposed rule would have been published.
In the EHB final rule,
In addition, once the methodologies used to calculate the premium adjustment percentage, required contribution percentage, and maximum annual limitation on cost sharing have been established through rulemaking, the calculation of these amounts is a function of entering the applicable figures into the established equations, and therefore, does not require rulemaking to establish in subsequent benefit years. Furthermore, the methodology used to calculate the reduced maximum annual limitation on
With these methodologies in place we proposed to amend §§ 156.130(e) and 156.420(a) to reflect that, beginning with the 2023 benefit year, we would publish the premium adjustment percentage, along with the maximum annual limitation on cost sharing, the reduced maximum annual limitation on cost sharing, and the required contribution percentage, in guidance by January of the year preceding the applicable benefit year (for example, the 2023 premium adjustment percentage would be published in guidance no later than January 2022), unless HHS is amending the methodology to calculate these parameters, in which case HHS would amend the methodology and publish the parameters through notice-and-comment rulemaking.
We believed that publishing the final premium adjustment percentage and associated final parameters in guidance annually instead of through notice-and-comment rulemaking is consistent with our efforts to provide information to stakeholders in a timely manner.
We received public comments on the proposal to publish the premium adjustment percentage, maximum annual limitation on cost sharing, reduced maximum annual limitation on cost sharing (§ 156.130), and required contribution percentage (§ 155.605(d)(2)) in guidance. The following is a summary of the comments we received and our responses.
However, a few commenters expressed concern that publication in guidance would reduce their opportunities to review and comment on these parameters. Some of these commenters pointed out that their concerns regarding the 2020 Payment Notice change in the premium adjustment percentage calculation
As mentioned in previous sections of this final rule, we have addressed comments concerned about the methodology change for calculating the premium adjustment percentage that was finalized in the 2020 Payment Notice, and are reverting back to the methodology used prior to 2020 Payment Notice. Therefore, we are relying on NHEA ESI premium data, not premium data from other private health insurance markets, in our calculation of premium growth and the premium adjustment percentage, maximum annual limitation on cost sharing, reduced maximum annual limitation on cost sharing, and required contribution percentage for the 2022 benefit year and beyond.
In the 2021 Payment Notice, we finalized a requirement that under § 156.270(b)(1), QHP issuers must send termination notices with effective dates and reason for the termination to enrollees for all termination events. We finalized this policy as proposed, noting that all commenters who weighed in on this topic supported our proposal. This policy became effective July 13, 2020. In the 2022 Payment Notice proposed rule, we did not propose, and we are not finalizing, any changes to paragraph (b)(1) beyond what we finalized in the 2021 Payment Notice for the reasons discussed below.
In finalizing the change to § 156.270(b)(1) in the 2021 Payment Notice, we inadvertently omitted discussion of two comments opposing the proposal. These comments raised concerns about unnecessary additional administrative costs and IT builds, and noted that a termination notice could be confusing in certain scenarios—for example, if the enrollee switches between QHPs offered by the same issuer, a termination notice from their issuer could cause confusion. These commenters proposed instead that Exchanges should be required to clearly convey the eligibility termination reason and effective date in the Exchange's own eligibility notices, consistent with the data conveyed to issuers on 834 termination transactions.
We are sensitive to commenters' concerns that issuers need sufficient time to build IT systems to implement this policy. In response, we issued guidance allowing issuers using the Federal platform enforcement discretion until February 1, 2021 to implement the new termination notice requirement.
However, the comments in opposition to the proposal do not change our policy goals underlying our decision to finalize the rule as proposed. FFEs do not send termination notices for any termination scenario other than citizenship data-matching issue expirations and terminations associated with Medicare PDM when the enrollee has elected at plan selection to terminate Exchange coverage when found dually enrolled. FFEs also do not send termination notices in enrollee-initiated
Complaints about terminations are one of the largest sources of casework. More consistent communication is part of the solution. We believed consumers should be notified of these changes, even if they initiated them, so that enrollees have a record that the issuer completed the request. Issuers are the proper messenger of termination noticing for many reasons. For example, Exchange issuers historically are the senders of termination notices, and some issuers acknowledged in their comments on the 2021 Payment Notice that they already do send termination notices in all scenarios. Furthermore, the issuer has record of the termination date needed for the termination notice before the Exchange in some cases, such as some retroactive termination requests handled through casework, and State Exchange issuer terminations described in § 155.430(d)(iv). One reason we regulated in this area is that we were receiving detailed questions from issuers about which termination scenarios required issuer notices; we believe requiring issuer termination notices for all scenarios in the long run makes the requirement simpler.
Therefore, we did not propose, and are not finalizing, any changes to § 156.270(b)(1) beyond what we finalized in the 2021 Payment Notice.
Section 6005 of the ACA added section 1150A(a)(2) of the Act to require a PBM under a contract with a Medicare Part D plan sponsor or Medicare Advantage plan that offers a Medicare Part D plan, or with a QHP offered through an Exchange established by a state under section 1311 of the ACA
In the 2012 Exchange Final Rule, we codified the requirements contained in section 1150A of the Act with regard to QHPs at § 156.295. In that rule, we interpreted section 1150A of the Act to require QHP issuers to report the information described in section 1150A(b) of the Act and did not specify the responsibilities of PBMs that contract with QHP issuers to report this information. On January 28, 2020
In the proposed rule, we proposed to add new part 184 to address the responsibilities of PBMs under the ACA and to add § 184.50 to codify in regulation the statutory requirement that PBMs that are under contract with an issuer of one or more QHPs report the data required by section 1150A of the Act. Accordingly, we proposed to revise § 156.295(a) to state that where a QHP issuer does not contract with a PBM to administer the prescription drug benefit for QHPs, the QHP issuer will report the data required by section 1150A of the Act to HHS. We proposed corresponding revisions throughout § 156.295 to remove the applicability of the reporting requirement for PBMs under this section and propose revising the title to “Prescription drug distribution and cost reporting by QHP issuers”.
As explained in the proposed rule and in the preamble for § 184.50 in this final rule, we acknowledge that section 1150A places responsibility on both the QHP issuer and their PBMs to report this prescription drug data. Generally, where a QHP issuer contracts with a PBM, the PBM is more likely to be the source of the data that must be reported. Therefore, to reduce overall burden, rather than requiring the QHP issuer to serve as a conduit between its PBM and HHS, or unnecessarily requiring both the PBM and the QHP issuer to submit duplicated data, we proposed to implement section 1150A to make QHP issuers responsible for reporting this data directly to the Secretary only when the QHP issuer does not contract with a PBM to administer the prescription drug benefit for their QHPs. Where a QHP contracts with a PBM, the PBM is responsible for reporting data to the Secretary as required by § 184.50.
We stated that although we were unaware of any QHP issuer that does not currently utilize a PBM, we believed that, together, the proposals to revise § 156.295 and to add § 184.50 would ensure the collection of data required by section 1150A of the Act in all circumstances, including when a QHP issuer does not use a PBM to administer its prescription drug benefit. Retaining the requirement for QHP issuers to report data at § 156.295 when they do not contract with a PBM would ensure that the data is consistently collected every plan year.
We also proposed to remove § 156.295(a)(3) to remove the requirement for QHP issuers to report spread pricing amounts when the QHP issuer does not contract with a PBM to administer the prescription drug benefit for their QHPs. Spread pricing amounts are only present where a PBM acts as an intermediary between the QHP issuer and a drug manufacturer. If a QHP issuer does not contract with a PBM, no such intermediary exists and it is not possible for QHP issuers to report this data.
We sought comment on these proposals.
We received public comments on these proposals. The following is a summary of the comments we received and our responses.
We also note that, after the proposed rule displayed, Congress passed the Consolidated Appropriations Act, 2021,
As a result of the comments, we are finalizing this policy as proposed.
Section 1150A(b)(1) of the Act requires the Secretary to collect certain QHP prescription drug data
We received public comments on the proposed updates to reporting of data by pharmacy type. The following is a summary of the comments we received and our responses.
Following review of the comments, we are finalizing this policy as proposed.
In the second Program Integrity Rule, we finalized general provisions related to the oversight of QHP issuers in relation to APTC and CSRs.
In the proposed rule, we proposed amendments to consolidate HHS audit authority regarding APTC, CSR, and user fee audits by expanding the audit authority under § 156.480(c) to also capture user fees audits by HHS, or its designee, of QHP issuers participating in an FFE. Additionally, as part of determining whether APTC and CSR amounts were properly paid to issuers, and whether user fee amounts were properly collected, we explained that HHS regularly identifies discrepancies in issuer records caused by issuer non-compliance with other applicable Exchange operational standards. Examples include failure to correctly effectuate or terminate coverage, or to correctly calculate premiums. In addition, we proposed to apply the same framework to QHP issuers participating in SBE-FP states. As such, QHP issuers in SBE-FP states would be required to comply with HHS audits under § 156.480(c) to confirm compliance with the applicable standards established in part 156, subpart E for APTC and CSRs and § 156.50 for user fees.
We further proposed that in situations where the state fails to substantially enforce such standards, HHS would enforce compliance, including imposing CMPs using the same standards set forth in part 156, subpart I. Based on our experience conducting audits of APTC, CSRs, and user fees, we also proposed several amendments to § 156.480(c) to ensure we can effectively oversee the payment of these amounts by QHP issuers, regardless of Exchange type (for example, FFE, State Exchange, or SBE-FP).
As detailed below, to further support our program integrity efforts in these areas, we proposed to amend § 156.480(c) to codify additional details regarding HHS audits and to capture authority for HHS to conduct compliance reviews of QHP issuer compliance with the applicable federal APTC, CSR, and user fee standards,
We sought comment on these proposals, including with respect to how HHS could coordinate with State Exchanges and SBE-FPs to address non-compliance by QHP issuers with applicable federal APTC, CSRs, and user fee standards. We sought comment on ways to balance enforcement by State Exchanges and SBE-FPs and the protection and oversight of federal funds by HHS. We are finalizing the proposal to apply the same audit requirements to QHP issuers participating in SBE-FP states as for QHP issuers participating in FFE states. As such, QHP issuers in SBE-FP states will be required to comply with HHS audits under § 156.480(c) to confirm compliance with the applicable standards established in part 156, subpart E for APTC and CSRs and § 156.50 for user fees. We are also finalizing the APTC, CSR, and user fee audit requirements at § 156.480(c) with slight modifications to certain audit timeframes, as well as HHS's authority to impose CMPs on issuers in State Exchanges and SBE-FPs when the State Exchange or SBE-FP fails to substantially enforce the applicable federal APTC, CSR, and user fee standards at §§ 156.800 and 156.805. We are also finalizing the accompanying amendments to establish authority for HHS to conduct compliance reviews to confirm QHP issuer compliance with the federal APTC, CSR, and user fee standards.
We received public comments on the proposed updates and policies regarding
We appreciate commenters' suggestions and agree that HHS may provide technical assistance to the state and coordinate with the state on corrective action required of any issuers in the state, if necessary, to help guide collaboration efforts with State Exchanges and SBE-FPs with respect to ensuring issuer compliance with federal APTC, CSR, and user fee standards and audits. We intend to consider the various recommendations for potential enhancements to the process for HHS audits and compliance reviews of federal APTC, CSR, and user fee standards, including potential ways to further enhance the collaboration with state regulators, State Exchanges, and SBE-FPs. However, as explained in the proposed rule, the proposed updates were intended to build on the existing framework established in the second Program Integrity Rule and clarify HHS's authority with respect to oversight and enforcement of compliance with federal APTC, CSR, and user fee standards in State Exchange and SBE-FP states.
HHS will consider recommendations to enhance the QHP issuer audit and compliance review processes to take into consideration existing audit activities that HHS requires State Exchanges to conduct annually under § 155.1200, the variation between FFE, SBE-FP, and State Exchange issuers, as well as the variation among issuers participating in the different State Exchanges. In all cases, HHS will continue to collaborate with the State Exchange or SBE-FP to enforce the applicable federal APTC, CSR, and user fee standards. Further, one of the goals of these amendments is to ensure the timely and accurate completion of audits of federal funds under the APTC, CSR, and user fee programs. Therefore, based on our experience to date conducting 2014 benefit year CSR audits, to ensure the protection of federal funds and compliance with applicable federal requirements, HHS will generally lead the efforts to audit compliance with federal APTC, CSR, and user fee standards (where applicable) under § 156.480(c).
After consideration of the comments received on these proposals, we are finalizing the provision to apply the same audit requirements to QHP issuers participating in SBE-FP states as for QHP issuers participating in FFE and State Exchange states as proposed. As such, QHP issuers in SBE-FP states will be required to comply with HHS audits and compliance reviews under § 156.480(c) to confirm compliance with the applicable standards established in part 156, subpart E for APTC and CSRs and § 156.50 for user fees. We are also finalizing the APTC, CSR, and user fee audit requirements at § 156.480(c), as well as HHS's authority to impose CMPs on issuers in State Exchanges and SBE-FPs when the State Exchange or SBE-FP fails to substantially enforce the applicable federal APTC, CSR, and user fee standards at §§ 156.800 and 156.805.
In prior rulemaking, we codified authority for HHS to audit an issuer that offers a QHP in the individual market through an Exchange to assess compliance with the requirements of part 156, subpart E.
We also proposed several amendments to § 156.480(c) to expand the oversight tools available to HHS beyond traditional audits to also provide authority for HHS to conduct compliance reviews of QHP issuers to assess compliance with the applicable federal APTC, CSR, and user fee standards. We explained that these proposed HHS compliance reviews would follow the standards set forth for compliance review of QHP issuers participating in FFEs established in 45 CFR 156.715. However, compliance reviews under this section would be conducted to confirm QHP issuer compliance with the federal APTC, CSR, and user fee standards in subpart E of part 156 and 45 CFR 156.50 for user fees, as applicable, and they would generally extend to QHP issuers participating in all Exchanges.
First, we proposed to rename § 156.480(c) to “Audits and Compliance Reviews” to clarify that the authority described in this section would apply to audits and the proposed HHS compliance reviews to evaluate QHP issuer compliance with the applicable federal APTC, CSR, and user fee standards. We similarly proposed to update the introductory language in § 156.480(c) to incorporate a reference to HHS compliance reviews. As amended, § 156.480(c) would provide that HHS or its designee may audit and perform compliance reviews to assess whether an issuer that offers a QHP in the individual market through an Exchange is in compliance with the applicable requirements of subpart E, part 156, and 45 CFR 156.50. We proposed to capture in a new sentence in the amended § 156.480(c) that HHS would conduct these compliance reviews consistent with the standards set forth in 45 CFR 156.715. As detailed earlier in this preamble, these oversight tools would be available to HHS to evaluate compliance by QHP issuers participating in all Exchanges with the applicable federal APTC, CSR, and user fee standards.
Second, we proposed to add new § 156.480(c)(1) to establish notice and conference requirements for these audits. Proposed new paragraph (c)(1) states that HHS would provide at least 15 calendar days advance notice of its intent to conduct an audit of an QHP issuer under § 156.480(c). Under proposed paragraph (c)(1)(i), HHS proposed to codify that all audits would include an entrance conference at which the scope of the audit would be presented and an exit conference at which the initial audit findings would be discussed.
Third, HHS proposed to add new paragraph (c)(2) to capture the requirements issuers must meet to comply with an audit under this section. Under the proposed paragraph (c)(2)(i), we proposed to require the issuer to ensure that its relevant employees, agents, contractors, subcontractors, downstream entities, and delegated entities cooperate with any audit or compliance review under this section. In new proposed paragraph (c)(2)(ii), we proposed to require issuers to submit complete and accurate data to HHS or its designees that is necessary to complete the audit, in the format and manner specified by HHS, no later than 30 calendar days after the initial deadline communicated and established by HHS at the entrance conference described in proposed paragraph (c)(1)(i). For example, for CSR audits, HHS may request that QHP issuers provide a re-adjudicated claims data extract for the selected sample of policies to verify accuracy of the re-adjudication process and reported amounts (this would include verification of all elements necessary to perform accurate re-adjudication) and a data extract containing incurred claims for the selected sample of policies to verify accuracy of actual amount the enrollee(s) paid for EHBs via an Electronic File Transfer. As another example, for APTC audits, issuers may be asked to provide data to validate and support APTC payments received for the applicable benefit year.
Fourth, under proposed § 156.480(c)(2)(iii), HHS proposed to require that issuers respond to any audit notices, letters, and inquires, including requests for supplemental or supporting information, no later than 15 calendar days after the date of the notice, letter, request, or inquiry. We explained that we believe that the proposed requirements in paragraph (c)(2) are necessary and appropriate to ensure the timely completion of audits and to protect the integrity of the APTC, CSR, and user fee programs and the payments made thereunder.
Fifth, recognizing that there may be situations that warrant an extension of the timeframes under paragraph (c)(2)(ii) or (iii), as applicable, we proposed to also add a new paragraph (c)(2)(iv) to establish a process for an issuer to request an extension. To request an extension, we proposed to
Sixth, under § 156.480(c)(3), HHS proposed that it would share its preliminary audit findings with the issuer, and further proposed that the issuer would then have 30 calendar days to respond to such findings in the format and manner as specified by HHS. HHS would describe the process, format, and manner by which an issuer can dispute the preliminary audit findings in the preliminary audit report sent to the issuer. For example, if the issuer disagrees with the findings set forth in the preliminary audit report, HHS would require the issuer to respond to such findings by submitting written explanations that detail its dispute(s) or additional rebuttal information via Electronic File Transfer. HHS proposed under paragraph (c)(3)(i) that if the issuer does not dispute or otherwise respond to the preliminary findings within 30 calendar days, the audit findings would become final. In new proposed paragraph (c)(3)(ii), if the issuer timely responds and disputes the preliminary audit findings within 30 calendar days, HHS would review and consider such response and finalize the audit findings after such review. HHS would provide contact and other information necessary for an issuer to respond to the preliminary audit findings in the preliminary audit report sent to the issuer.
Seventh, HHS proposed to add a new section at § 156.480(c)(4) to capture the process and requirements related to final audit findings and reports. If an audit results in the inclusion of a finding in the final audit report, the issuer would be required to comply with the actions set forth in the final audit report in the manner and timeframe established by HHS. We noted that the actions set forth in the final audit report could require an issuer to return APTC or CSRs or make additional user fee payments. HHS further proposed that (1) the issuer must provide a written corrective action plan to HHS for approval within 30 calendar days of the issuance of the final audit report; (2) the issuer must implement the corrective action plan; and (3) the issuer must provide HHS with written documentation demonstrating the adoption and completion of the required corrective actions.
If an issuer fails to comply with the audit requirements set forth in new proposed § 156.480(c), HHS proposed in paragraph (c)(5)(i) that HHS would notify the issuer of payments received that the issuer has not adequately substantiated, and in new proposed paragraph (c)(5)(ii), HHS would notify the issuer that HHS may recoup any payments identified as not adequately substantiated. Therefore, the continued failure to respond to or cooperate with an audit under paragraph (c) and provide the necessary information to substantiate the payments made could result in HHS recouping up to 100 percent of the APTC or CSR payments made to an issuer for the benefit year(s) that are the subject of the audit.
We clarified in the proposed rule that APTC and CSR amounts recovered by HHS as a result of an audit under § 156.480(c) would be paid to the U.S. Treasury. We further noted that user fee amounts recovered by HHS as a result of an audit under § 156.480(c) would be paid to the ACA Marketplace user fee program collection account.
Lastly, HHS proposed to add a new paragraph (c)(6) to § 156.480 to codify HHS's ability to enforce the applicable federal APTC, CSR, and user fee standards if a State Exchange or SBE-FP is not enforcing or fails to substantially enforce one or more of these requirements. In instances where HHS enforces compliance with the applicable APTC, CSR, and user fee standards with respect to QHP issuers participating in State Exchanges or SBE-FPs, HHS proposed to use the same standards and processes as outlined in §§ 156.805 and 156.806 for QHP issuers participating in an FFE with respect to the imposition of CMPs. This would include the proposed extension of the process outlined in § 156.901,
We sought comment on these proposals, including HHS's clarification of its compliance review authority, the proposed timeframes and processes for issuers to respond to audit notices and requests for information and for issuers to request extensions of those timeframes, and the proposals related to HHS's authority to enforce compliance with the federal APTC, CSR, and user fee requirements if a State Exchange or SBE-FP is not enforcing or fails to substantially enforce one or more of these requirements. We are finalizing these provisions as proposed, with slight modifications to certain audit timelines in response to comments stating that issuers need more time during audits to provide complete and accurate data. HHS will provide at least 30 calendar days advance notice of its intent to conduct an audit, rather than the proposed 15 calendar days. If HHS determines the need for a corrective action plan as the result of an audit, the issuer must provide a written corrective action plan to HHS for approval within 45 calendar days of the issuance of the final audit report, rather than the proposed 30 calendar days. As noted in the above sections on audits of issuers of reinsurance-eligible plans and risk adjustment covered plans (§§ 153.410(d) and 153.620(c)), these modified timeframes apply across the parallel HHS audit provisions for reinsurance, risk adjustment, ATPC, CSR, and user fee audits.
We also clarify that we will recoup monies owed due to a finding as the result of a reinsurance, risk adjustment, APTC, CSR, or user fee audit using the same method with which we collect all debts. That is, we will first net using the process set forth in 45 CFR 156.1215, and we will then invoice issuers for the remaining debt.
We received public comments on the proposed updates to audits and compliance reviews of federal APTC, CSR, and user fee standards (§ 156.480(c)). The majority of the comments we received to the proposed updates outlined in this section were also made to the sections regarding audits and compliance reviews of issuers of reinsurance-eligible plans (§ 153.410(d)) and audits and compliance reviews of issuers of risk adjustment covered plans (§ 153.620(c)). We respond to all of these parallel comments in this section. As noted above, the comments we received to the proposed § 156.480(c)(6) were also made to the sections regarding the application of requirements to issuers in State Exchanges and SBE-FPs (§ 156.480), enforcement remedies in the Exchanges (§ 156.800), and bases and process for imposing CMPs in the Exchanges (§ 156.805). We summarize and respond to those parallel comments in the § 156.805 preamble section below.
The following is a summary of the parallel general comments we received to all of the audits and compliance review proposals in this rule and the specific comments on the proposed
We also note that, to provide clear and enforceable standards, we proposed and are finalizing the codification of these procedures in regulation.
Additionally, in response to comments suggesting a 45 calendar day deadline for issuers to provide written corrective action plans rather than the proposed 30 calendar day deadline, we will finalize a 45 calendar day timeframe to submit a corrective action plan if an audit results in the inclusion of a finding in the final audit report, rather than a 30 calendar day timeframe, at § 153.410(d)(4)(i) for reinsurance program audits, § 153.620(c)(4)(i) for risk adjustment program audits, and § 156.480(c)(4)(i) for APTC, CSR, and user fee audits. We are persuaded by these comments and agree that issuers would benefit from the extension of this timeframe because the development of a
HHS makes every effort to conduct audits in an efficient and timely manner and will continue to do so. The audit proposals addressed in the proposed rule and this final rule are aimed at making the audit process more efficient so that audits may be completed in a shorter length of time. However, HHS is flexible and willing to work with issuers who keep us informed of their progress but may need more time. Therefore, as we proposed, we are also finalizing at § 153.410(d)(2)(iv) for reinsurance program audits, § 153.620(c)(2)(iv) for risk adjustment program audits and § 156.480(c)(2)(iv) for APTC, CSR, and user fee audits that issuers may request an extension to certain audit deadlines by submitting a written request to HHS within the applicable timeframe(s)
We further note that HHS currently provides information on audit requirements, file layouts, submission requirements, and source documentation as part of the applicable audit entrance conference. Issuers selected for audit receive this information at the entrance conference, which they are required to attend, and also receive further details on these requirements from HHS via the audit contractor. Guidance documents related to APTC audit requirements are also available on REGTAP.
After consideration of the comments on the audit proposals in §§ 153.410(d), 153.630(c), and 156.480(c), we are finalizing these provisions as proposed, with slight modifications to certain audit timelines in response to comments stating that issuers need more time during audits to provide complete and accurate data and to provide written corrective action plans. HHS will provide at least 30 calendar days advance notice of its intent to conduct a reinsurance, risk adjustment, APTC, CSR, or user fee audit, rather than the proposed 15 calendar days. If an audit results in the inclusion of a finding in the final audit report, the issuer must provide a written corrective action plan to HHS for approval within 45 calendar days of the issuance of the final audit report, rather than the proposed 30 calendar days.
We also clarify that we will recoup monies owed due to a finding as the result of a reinsurance, risk adjustment, APTC, CSR, or user fee audit using the same method with which we collect all ACA financial program debts. That is, we will first net using the process set forth in 45 CFR 156.1215, and we will then invoice issuers for the remaining debt.
We proposed to rename Subpart I to “Enforcement Remedies in the Exchanges,” and to make other amendments to clarify that HHS has the ability to impose CMPs when it is enforcing the applicable federal requirements in part 156, subpart E and 45 CFR 156.50 for user fees, regardless of whether the Exchange is established and operated by a state (including a regional Exchange or subsidiary exchange) or by HHS.
Through its cross-reference to section 2723(b) of the PHS Act,
We also explained that we expected that states that established a State Exchange or SBE-FP will enforce all applicable federal requirements applicable to QHPs and QHP issuers participating in Exchanges, including the applicable APTC, CSR, and user fee standards captured in part 156, subpart E and 45 CFR 156.50. However, to address situations where a State Exchange or SBE-FP fails to enforce these federal Exchange requirements, consistent with the framework established in section 2723(b) of the PHS Act, we proposed that if HHS determines that a State Exchange or SBE-FP lacks authority or has otherwise failed to substantially enforce the requirements captured in part 156, subpart E or 45 CFR 156.50, HHS would step in to enforce these requirements with respect to QHP issuers participating in the State Exchange or SBE-FP. Once this determination is made, HHS would become responsible for enforcement of these provisions and would take appropriate action to ensure QHP issuer compliance with the applicable requirement(s),
We also noted that we intend to continue our collaborative enforcement approach and would coordinate our actions with state efforts to avoid duplication and to streamline oversight of the administration of APTC, CSRs, and user fees. We solicited comments for how HHS can collaborate with State Exchanges and SBE-FPs to proactively address non-compliance with applicable federal requirements and share compliance tools regarding APTC, CSRs, and user fees. We are finalizing the proposals to (1) amend the introductory sentence to § 156.800(a) to replace the current references to the “Federally-facilitated Exchange” with references to “an Exchange,” and (2) amend § 156.800(b) to remove the word “only” from the sentence describing the scope of HHS sanctions with respect to QHP issuers participating in FFEs and to add a new sentence that affirms HHS authority to impose CMPs for non-compliance with the applicable requirements in part 156, subpart E and 45 CFR 156.50 by QHP issuers participating in State Exchanges and SBE-FPs.
We received public comments on the proposed updates to Subpart I—Enforcement Remedies in Federally-Facilitated Exchanges; Available remedies; Scope (§ 156.800). The comments we received to this section were also made to the sections regarding the application of requirements to issuers in State Exchanges and SBE-FPs (§ 156.480), HHS enforcement of the applicable federal APTC, CSR, and user fee standards if a State Exchange or SBE-FP is not enforcing or fails to substantially enforce one or more of these requirements (§ 156.480(c)(6)), and the bases and process for imposing CMPs in the Exchanges (§ 156.805), and we responded to all of these parallel comments in the bases and process for imposing CMPs in the Exchanges (§ 156.805) preamble section below.
After consideration of the relevant comments, we are finalizing the amendments to § 156.800 as proposed. As detailed further in the below section on the bases and process for imposing CMPs in the FFEs, we also clarify that we intend to leverage this authority to pursue enforcement and the imposition of CMPs in State Exchange and SBE-FP states where HHS is responsible for enforcement in a targeted manner with a focus on egregious or repeated occurrences of QHP issuer noncompliance with the applicable APTC, CSR, and user fee standards that are discovered as the result of audits and the State Exchange or SBE-FP fails to substantially enforce the applicable standard(s). We further note that we did not propose and are not finalizing any substantive changes related to the enforcement framework applicable to QHP issuers participating in FFEs. The below section on bases and process for imposing CMPs in the Exchanges discusses this point in further detail.
We also proposed to amend § 156.805 to more clearly reflect HHS's authority to impose CMPs due to non-compliance with respect to the applicable federal APTC, CSR, and user fee standards against a QHP issuer participating in a State Exchange or SBE-FP. Under this proposal, we would use the same bases and process currently captured in § 156.805 for imposing CMPs on QHP issuers participating in an FFE. More specifically, in § 156.805, we proposed
Finally, we proposed to add a new paragraph (f) to § 156.805 to capture in this regulation details on the circumstances requiring HHS enforcement of the applicable requirements in part 156, subpart E and § 156.50. Consistent with the framework established in section 2723(b) of the PHS Act and section 1321(c) of the ACA, we propose in new § 156.805(f)(1) that HHS's authority to enforce in these situations would be limited to situations where the State Exchange or SBE-FP notifies HHS that it is not enforcing these requirements or if HHS makes a determination using the process set forth at 45 CFR 150.201,
We proposed that HHS would apply the same process HHS uses to determine when a state is failing to substantially enforce PHS Act requirements in determining whether a State Exchange or SBE-FP is substantially enforcing the applicable federal APTC, CSR, and user fee standards. More specifically, we proposed that if an audit of a QHP issuer in a State Exchange or SBE-FP demonstrates the State Exchange or SBE-FP's failure to enforce the applicable federal APTC, CSR, and user fee standards, HHS would investigate the State Exchange or SBE-FP's enforcement and follow the process set forth in 45 CFR 150.207 if necessary. We proposed that if HHS receives or obtains information (including information discovered through an audit) that a State Exchange or SBE-FP may not be enforcing the applicable requirements in part 156, subpart E, or 45 CFR 156.50, HHS may initiate the process described in 45 CFR 150.207 to determine whether the State Exchange or SBE-FP is failing to substantially enforce these requirements. Mirroring the process set forth in 45 CFR 150.207 for making determinations regarding substantial enforcement of PHS Act requirements, HHS would follow the procedures in §§ 150.209 through 150.219 to determine if a State Exchange or SBE-FP is failing to enforce one or more of the applicable requirements in part 156, subpart E or 45 CFR 156.50. If HHS believes there is a reasonable question whether there has been a failure to enforce one or more of the applicable requirements in part 156, subpart E or 45 CFR 156.50, HHS would send a notice, as described in 45 CFR 150.213, identifying the applicable requirement(s) that allegedly have not been substantially enforced to the proper State Exchange or SBE-FP officials using the process outlined in 45 CFR 150.211. We proposed that, following the process described in 45 CFR 150.215, HHS may extend, for good cause, the time the State Exchange or SBE-FP has for responding to the notice, such as if there is an agreement between HHS and the State Exchange or SBE-FP that there should be a public hearing on the State Exchange or SBE-FP's enforcement, or evidence that the State Exchange or SBE-FP is undertaking expedited enforcement activities. Using the process described in 45 CFR 150.217, if at the end of the extension period HHS determines that the State Exchange or SBE-FP has not established to HHS's satisfaction that it is substantially enforcing the applicable requirements, we proposed that HHS would consult with the appropriate State Exchange or SBE-FP officials, notify the State Exchange or SBE-FP of its preliminary determination that the State Exchange or SBE-FP has failed to substantially enforce the requirements and that the failure is continuing, and permit the State Exchange or SBE-FP a reasonable opportunity to show evidence of substantial enforcement. If, after providing notice and a reasonable opportunity for the State Exchange or SBE-FP to show that it has corrected any failure to substantially enforce, HHS finds that the failure to substantially enforce has not been corrected, HHS would notify the State Exchange or SBE-FP of its final determination using the process described in 45 CFR 150.219. Therefore, we proposed that after a determination that a State Exchange or SBE-FP is not or cannot substantially enforce the applicable requirements in part 156, subpart E or § 156.50, HHS could impose CMPs on issuers in the State Exchange or SBE-FP if there is cause for such imposition. HHS would also provide a notice of non-compliance, consistent with § 156.806, to QHP issuers in State Exchanges or SBE-FPs prior to imposing CMPs.
We explained that we sought to work collaboratively with State Exchanges and SBE-FPs for any topics of mutual concern and oversight activities where possible. We also sought comment to this proposal, the proposed updates to § 156.805, and ways in which HHS and state authorities can efficiently and effectively enforce federal standards related to APTC, CSRs, and user fees.
We also proposed that if the changes to §§ 156.800 and 156.805 were finalized as proposed, we would also amend § 156.903 such that an administrative law judge's authority also extends to CMPs imposed against QHP issuers in State Exchanges and SBE-FPs under § 156.805. Specifically, we proposed to amend § 156.903(a) to extend the provision to also include State Exchanges and SBE-FPs so that the ALJ has the authority, including all the authority conferred by the Administrative Procedure Act, to adopt whatever procedures may be necessary or proper to carry out in an efficient and effective manner the ALJ's duty to provide a fair and impartial hearing on
We received public comments on the proposed updates to bases and process for imposing civil money penalties in Federally-facilitated Exchanges (§ 156.805). The majority of the comments we received to this section were also made to the proposals regarding HHS enforcement of the applicable federal APTC, CSR, and user fee standards if a State Exchange or SBE-FP is not enforcing or fails to substantially enforce one or more of these requirements (§ 156.480(c)(6)), the application of requirements to issuers in State Exchanges and SBE-FPs (§ 156.480), and the enforcement remedies in the Exchanges, available remedies, and scope (§ 156.800). The following is a summary of these comments and our responses.
In response to comments, we offer the following example of a situation in which HHS could begin the process of making a determination that a State Exchange or SBE-FP is failing to substantially enforce the applicable APTC, CSR, and user fee requirements. If HHS discovers, as the result of an audit, that an issuer in a State Exchange or SBE-FP failed to comply with a federal APTC requirement, it would inform the State Exchange or SBE-FP and the issuer of this finding and set forth required corrective actions for the issuer to take. If HHS then discovers in the following year's audit of this same issuer that the issuer has not taken the corrective actions and is continuing to fail to comply with the requirement, HHS would again inform the State Exchange or SBE-FP and the issuer of this repeated finding, and ask the State Exchange or SBE-FP to take the appropriate enforcement action against the issuer for noncompliance. If the State Exchange or SBE-FP repeatedly fails to enforce the applicable requirement across multiple benefit years and the issuer continues to have an audit finding related to this non-compliance across multiple benefit years, HHS would begin the process of making a determination that the State Exchange or SBE-FP is failing to substantially enforce that requirement. We reiterate our commitment to working with State Exchanges and SBE-FPs, and we confirm that this policy is narrowly targeted at egregious or repeated occurrences of QHP issuer non-compliance with the applicable APTC, CSR, and user fee standards evaluated through audits of these programs. We also reiterate that the above is an illustrative example. Consistent with the statutory framework outlined in section 1321(c) of the ACA, and as reflected in the amendments we are finalizing to §§ 156.800 and 156.805, HHS may step in to enforce applicable federal APTC, CSR, and user fee standards in other situations where there is evidence or information suggesting that the State Exchange or SBE-FP is failing to do so.
The process by which HHS proposed and is finalizing to determine whether a State Exchange or SBE-FP is failing to substantially enforce the applicable APTC, CSR, and user fee requirements mirrors the process set forth in 45 CFR 150.207 for making determinations regarding a state's substantial enforcement of PHS Act requirements. As detailed above, the process involves HHS sending notice to the proper State Exchange or SBE-FP officials; permits extending the time the State Exchange or SBE-FP has for responding to the notice; requires consulting with the appropriate State Exchange or SBE-FP officials; and mandates that HHS notify the State Exchange or SBE-FP of HHS's preliminary determination that the State Exchange or SBE-FP has failed to substantially enforce the requirement(s) and that the failure is continuing. Only after HHS goes through the process and makes a determination that the State Exchange or SBE-FP is substantially non-enforcing applicable APTC, CSR, and user fee requirements, and the State Exchange or SBE-FP fails to address the identified concerns, would HHS have authority to begin the process to impose a CMP on a QHP issuer in a State Exchange or SBE-FP state pursuant to 45 CFR 156.805 for their non-compliance.
After consideration of the comments received on these proposals, we are finalizing the proposed amendments to § 156.805 to describe the bases and process by which HHS may determine that a State Exchange or SBE-FP is failing to substantially enforce the applicable federal APTC, CSR, and user fee standards and subsequently impose CMPs on these State Exchange or SBE-FP issuers as proposed.
We proposed to change the title to subpart J, removing the reference to “in Federally-Facilitated Exchanges” to make clear it applies to QHP issuers participating in any Exchange type to align with accompanying proposed changes outlined above to §§ 156.800 and 156.805. We also proposed several procedural changes to provisions in subpart J of part 156 related to administrative hearings consistent with the amendments discussed in the preamble to part 150. These proposed procedural changes are intended to align with the Departmental Appeals Board's current practices for administrative hearings to appeal CMPs. Specifically, we proposed changes that would remove requirements to file submissions in triplicate and instead require electronic filing. This change is reflected in the proposed amendments to the definition of “Filing date” in § 156.901, to the introductory text in § 156.927(a), and to the service of submission requirements captured in paragraph (b). We also proposed to allow for the option of video conferencing as a form of administrative hearing by amending the definition of “Hearing” in § 156.901 and to the requirements outlined in § 156.919(a) related to the forms for the hearing, § 156.941(e) related to prehearing conferences, and § 156.947(a) related to the record of the hearing. Finally, we proposed to update § 156.947 to allow the ALJ to communicate the next steps for a hearing in either the acknowledgement of a request for hearing or on a later date. We sought comment on these proposals.
We received the same public comments on the proposed updates to Subpart J—Administrative Review of QHP Issuer Sanctions (§§ 156.901, 156.927, 156.931, 156.947) and the parallel proposed updates to Part 150, Administrative Hearings, for the parallel amendments made to reflect the Departmental Appeals Board's current practices for administrative hearings to appeal CMPs. We summarized and responded to these comments in the above preamble section on Part 150 Administrative Hearings. We did not receive comments on the proposed change to the title to subpart J, removing the reference to “in Federally-Facilitated Exchanges”. After consideration of the comments on the proposed amendments to §§ 156.901, 156.927, 156.931 and 156.947 and the title to subpart J, we are finalizing these amendments as proposed.
Section 1311(c)(3) of the ACA directs the Secretary of HHS to develop a quality rating for each QHP offered through an Exchange, based on quality and price. Section 1311(c)(4) of the ACA directs the Secretary to establish an enrollee satisfaction survey that will assess enrollee satisfaction with each QHP offered through the Exchanges with more than 500 enrollees in the prior year.
Based on this authority, HHS finalized rules in May 2014 to establish standards and requirements related to QHP issuer data collection and public reporting of quality rating information in every Exchange.
Through valuable feedback from the QRS and QHP Enrollee Survey Call Letter process and continued engagement with health plan issuer organizations, health care quality measurement experts, state representatives, consumer advocates and other stakeholders, we continued to learn about populations buying insurance coverage across the Exchanges and about areas of improvement for these programs. We also continued to assess potential refinements to the QRS rating methodology and the QHP Enrollee Survey to prioritize strategies to improve value for consumers and to reduce the burden of quality reporting.
As part of the 2020 QRS and QHP Enrollee Survey Call Letter process, we received many comments requesting that we remove levels of the QRS hierarchy to help streamline and improve consumer understanding of the quality rating information. While we did not propose amendments to the QRS or to the QHP Enrollee Survey as part of the proposed rule, we sought comment on the removal of one or more levels of the QRS hierarchy, which is a key element of the QRS framework that establishes how quality measures are organized for scoring, rating and reporting purposes. We previously described the general overall framework for the QRS, including details on the hierarchical structure of the measure set and the elements of the QRS rating methodology.
In addition, to further support transparency of QHP quality data and to empower stakeholders including consumers, states, issuers and researchers with valuable information related to enrollee experience with QHPs, we proposed to make the full QHP Enrollee Survey results publicly available in an annual PUF. Currently, we post on
We solicited comment on this proposal to post a QHP Enrollee Survey PUF annually and on potential changes to the QRS hierarchy.
The following is a summary of the comments we received and our responses.
After consideration of all public comments received, we are finalizing the proposal to make the full QHP Enrollee Survey results publicly available in an annual PUF, and the removal of the composite level and domain level from the QRS hierarchy. We intend to clarify the timeframe for the removal of the composite and domain levels of the QRS hierarchy in the QRS and QHP Enrollee Survey Technical Guidance for 2022, which would affect the 2022 ratings year for Plan Year 2023.
In the 2014 Payment Notice, we established provisions related to the confirmation and dispute of payment and collection reports. These policies were finalized under the assumption that all issuers that receive APTC would generally be able to provide these confirmations or disputes automatically to HHS. However, HHS has found that many issuers prefer to research payment errors and use enrollment reconciliation and disputes to update their enrollment and payment data, and may be unable to complete this research and provide confirmation or dispute of their payment and collection reports within 15 days, the timeline established by the 2014 Payment Notice.
In the 2021 Payment Notice, we amended § 156.1210(a) to lengthen the time to report payment inaccuracies from 15 days to 90 days to allow all issuers who receive APTC more time to research, report, and correct inaccuracies through other channels. The longer timeframe also allows for the processing of reconciliation updates, which may resolve potential disputes. Additionally, at § 156.1210, we removed the requirement at paragraph (a) that issuers actively confirm payment accuracy to HHS each month, as well as the language in paragraph (b) regarding late filed inaccuracies. Instead, we amended paragraph (b) to require an annual confirmation from issuers that the amounts identified in the most recent payment and collections report for the coverage year accurately reflect applicable payments owed by the issuer to the federal government and the payments owed to the issuer by the federal government, or that the issuer has disputed any identified inaccuracies, after the end of each payment year, in a form and manner specified by HHS.
Since finalizing these changes, HHS's experience has shown that some data inaccuracies reasonably will be identified after the 90-day reporting window. For example, issuers might receive notification of an eligibility appeal adjudication after the 90-day submission window. Additionally, some issuers are directed to update their enrollment and payment data after an HHS data review or audit which may occur after this 90-day window. In such instances it is in the interest of HHS, states, issuers, and enrollees to accept the late reporting of data inaccuracies. As such, we proposed to amend § 156.1210 by redesignating current § 156.1210(b) to § 156.1210(d) and adding new § 156.1210(b) to establish a process for issuers to report enrollment or payment data changes in these situations.
We clarified that this proposed flexibility would not reduce an issuer's obligation to make a good faith effort to identify and promptly report discrepancies within the 90-day reporting window established under § 156.1210(a). We further explained that issuers could demonstrate good faith by sending regular and accurate enrollment reconciliation files and timely enrollment disputes throughout the applicable enrollment calendar year, making timely and regular changes to enrollment reconciliation and dispute files to correct past errors, and by reaching out to HHS and responding timely to HHS outreach to address any issues identified. With respect to inaccuracies identified after the end of the applicable 90-day period, we proposed to work with the issuer to resolve the inaccuracy if the issuer promptly notifies HHS, in a form and
Additionally, we proposed to add paragraph (c) to allow the reporting of data inaccuracies after the 90-day period up to 3 years following the end of the plan year to which the inaccuracy relates or the date of the completion of the HHS audit process for such plan year, whichever is later. We believe this deadline will provide issuers with enough time to report any data inaccuracies discovered after the 90-day submission window, while providing a reasonable end date by which HHS, the State Exchange, issuer and other stakeholders can consider the records for a particular benefit year closed.
We noted that, under section 1313(a)(6) of the ACA, “payments made by, through, or in connection with an Exchange are subject to the False Claims Act (31 U.S.C. 3729,
We further clarified that the requirements of § 156.1210 apply to all issuers who receive APTC, including issuers in State Exchanges. We sought comment on all aspects of this proposal, including its impact on the State Exchanges' ability to resolve disputes and report payment adjustments to HHS in this timeframe. We are finalizing the amendments to §§ 156.1210(b) and (c), as proposed, to establish a framework to permit issuers to report data inaccuracies after the 90-day window up to 3 years following the end of the plan year to which the inaccuracy relates or the date of the completion of the HHS audit process for such plan year, whichever is later. As detailed further below, we are also codifying the clarification we announced in the proposed rule by finalizing conforming amendments to section § 156.1210 to more clearly reflect that these requirements also apply to issuers in state Exchanges. We received public comments on the proposed updates to dispute of HHS payment and collections reports (§ 156.1210). The following is a summary of the comments we received and our responses.
After consideration of the comments on these proposals, we are finalizing amendments to § 156.1210 which will allow issuers the flexibility to identify data inaccuracies after the 90-day period and report inaccuracies up to 3 years following the end of the plan year to which the inaccuracy relates or the date of the completion of the HHS audit process for such plan year. We are finalizing these amendments as proposed and are codifying the clarification we announced in the proposed rule by finalizing conforming amendments to more clearly reflect that the requirements of § 156.1210 apply to all issuers who receive APTCs, including issuers in State Exchanges by adding a reference to “or the State Exchange (as applicable)” to paragraph (a), the introductory sentence to paragraph (b), paragraphs (b)(1) and (b)(2), as well as paragraph (c)(3).
In the 2015 Payment Notice, HHS established a monthly payment and collections cycle for insurance affordability programs, user fees, and premium stabilization programs. As discussed elsewhere in this rule, we proposed to eliminate state user fee collection flexibility that HHS had previously offered to states as part of the 2017 Payment Notice,
We received public comments on the proposed updates to dispute of HHS payment and collections processes (§ 156.1215). The following is a summary of the comments we received and our responses.
After consideration of comments received on this proposal, we are finalizing the amendment to § 156.1215(b) as proposed.
As detailed earlier in this preamble, we previously established a three-level administrative appeals process for issuers to seek reconsideration of amounts under certain ACA programs, including the calculation of risk adjustment charges, payments and user fees. This process also applies to issuer disputes of the findings of a second validation audit (if applicable) as a result of HHS-RADV for the 2016 benefit year and beyond.
We also proposed amendments to § 156.1220(a)(3) to clarify that the 30-calendar day timeframe to file a request for reconsideration of second validation audit findings (if applicable) or the risk score error rate calculation would be 30 calendar days from the applicable benefit year's Summary Report of Benefit Year Risk Adjustment Data Validation Adjustments to Risk Adjustment Transfers. To capture this clarification, we proposed to create a new proposed § 156.1220(a)(3)(ii) to specify the timeframe for filing a request for reconsideration for a risk adjustment payment or charge, including an assessment of risk adjustment user fees. This new proposed regulatory provision maintains the language that establishes a 30 calendar day window for these appeals that begin on the date of notification under § 153.310(e). We also proposed to create a new proposed § 156.1220(a)(3)(iii) to separately address the timeframe for filing a request for reconsideration of second validation audit findings or the risk score error rate calculation and to add the phrase “if applicable” to more clearly capture the limitation on the ability to appeal second validation audit findings. To accommodate these two new proposed paragraphs, we also proposed to amend § 156.1220 to redesignate paragraphs (a)(3)(iii) through (vi) as (a)(3)(iv) through (vii), respectively. We sought comment on these proposals.
The only comment received on the proposed updates to the administrative appeals regulations (§ 156.1220) noted general support of the proposed amendments and accompanying clarifications.
After consideration of comments received on these proposals, we are finalizing the amendments to § 156.1220 as proposed.
We proposed to amend § 158.103 to establish the definition of prescription drug rebates and other price concessions that are deducted from incurred claims for MLR reporting and rebate calculation purposes.
In the preamble to the proposed rule, we discussed that HHS received numerous comments during the regulatory process of finalizing amendments to § 158.140(b)(1)(i) in the 2021 Payment Notice final rule with respect to reporting prescription drug
In light of the comments that we previously received during the process of amending § 158.140(b)(1)(i), we proposed to further amend the MLR rules to add the definition for prescription drug rebates and other price concessions to § 158.103 and to clarify that this term excludes bona fide service fees, consistent with how such fees are described in § 156.295. We proposed that this provision become applicable beginning with the 2022 MLR reporting year (MLR reports filed in 2023), which aligns with the applicability date of the amendment to § 158.140(b)(1)(i) and should provide issuers with adequate time to adjust contracts with entities providing pharmacy benefit management services to provide transparency regarding prescription drug rebates and other price concessions they receive from drug manufacturers. We solicited comment on this proposal.
We received public comments on the proposed amendment of § 158.103 to establish the definition of prescription drug rebates and other price concessions that are deducted from incurred claims for MLR reporting and rebate calculation purposes. The following is a summary of the comments we received and our responses.
After consideration of all the comments received and for the reasons stated in our responses, we are finalizing the definition of prescription drug rebates and price concessions at § 158.103 as proposed, with a modification to clarify that the definition excludes any remuneration, coupons, or price concessions for which the full value is passed on to the enrollee, and technical edits to replace the phrase “direct and indirect remuneration” with “remuneration,” and remove the term “receivable.”
We proposed to clarify the MLR premium reporting requirements under § 158.130 for issuers that choose to offer temporary premium credits during a public health emergency (PHE) declared by the Secretary of HHS (declared PHE) in the 2021 benefit year and beyond, when such credits are permitted by HHS. In the August 4, 2020 guidance, Temporary Policy on 2020 Premium Credits Associated with the COVID-19 PHE, CMS adopted a temporary policy of relaxed enforcement to allow issuers in the individual and small group markets the flexibility, when consistent with state law, to temporarily offer premium credits for 2020 coverage to support continuity of coverage for individuals, families and small employers who may struggle to pay premiums because of illness or loss of incomes or revenue resulting from the COVID-19 PHE.
We proposed that for purposes of § 158.130, issuers must account for temporary premium credits provided to enrollees during a declared PHE as reductions in earned premium for the applicable MLR reporting years, consistent with any technical guidance set forth in the applicable year's MLR Annual Reporting Form Instructions,
We solicited comment on this proposal.
We received public comments on the proposal to require issuers for purposes of § 158.130 to account for temporary premium credits provided to enrollees during a declared PHE as reductions in earned premium for the applicable MLR reporting years, consistent with any technical guidance set forth in the applicable year's MLR Annual Reporting Form Instructions, when such credits are permitted by HHS. The following is a summary of the comments we received and our responses.
After consideration of all of the comments received and for the reasons stated in our responses, we are finalizing as proposed the clarification that issuers must account for temporary premium credits provided to enrollees during a declared PHE as reductions in earned premium for the applicable MLR reporting years, when such credits are permitted by HHS.
As noted in section IV of the preamble, on March 4, 2021, the United States District Court for the District of Maryland decided
With the deletion of § 158.221(b)(8), our regulations will no longer provide issuers the option of reporting an amount equal to 0.8 percent of earned premium in the relevant State and market in lieu of reporting the issuers' actual expenditures for activities that improve health care quality. As discussed in section IV of the preamble and consistent with the court's decision, we are reverting to requiring issuers to itemize QIA expenditures, on a prospective basis, beginning with the 2020 MLR reporting year (MLR reports due by July 31, 2021). However, we are not requiring issuers to incur the burden or expense of revising MLR Annual Reporting Forms from prior years or otherwise updating QIA expenditure amounts reported for prior years. In addition, because MLR calculations are based on a three-year average,
In order to allow enrollees to benefit from the ability to receive estimated rebates earlier and to provide MLR reporting flexibilities to issuers that may owe rebates, we proposed to amend § 158.240 by adding paragraph (g) to explicitly allow issuers to prepay a portion or all of their estimated rebates to enrollees for any MLR reporting year. We also proposed to require that issuers that choose to prepay a portion or all of their estimated rebates do so for all eligible enrollees in a given state and market in a non-discriminatory manner.
In the preamble to the proposed rule, we noted that an issuer that prepays a portion or all of its estimated rebate and subsequently determines that such prepayment is less than the total rebate owed to an enrollee would have to incur the costs of disbursing rebates twice: First to disburse the prepaid rebate amount, and again to disburse the remaining rebate amount by the deadlines set forth in §§ 158.240(e) and 158.241(a)(2). Therefore, in order to reduce the regulatory burden on issuers and incentivize issuers to deliver rebates to enrollees sooner, we proposed to add to the new § 158.240(g) a safe harbor under which an issuer that prepays at least 95 percent of the total rebate owed to enrollees in a given state and market for a given MLR reporting year by the MLR rebate payment deadlines set forth in §§ 158.240(e) and 158.241(a)(2) may, without penalty or late payment interest under § 158.240(f), defer the payment of any remaining rebate owed to enrollees in that state and market until the MLR rebate payment deadlines set forth in §§ 158.240(e) and 158.241(a)(2) for the following MLR reporting year. This would enable such an issuer to maintain a single rebate disbursement cycle per year, while ensuring that enrollees continue to receive most of the rebate within the regular timeframe. To further ensure that enrollees do not regularly receive reduced rebates as a result of
We noted that § 158.250 requires issuers to provide a notice of rebates at the time any rebate is provided, which includes both rebate prepayments and payments of rebates remaining after prepayment. We also noted that we intend to modify the ICRs approved under OMB Control Number 0938-1164 to add modified standard notices that can be used by issuers that elect to prepay rebates under the proposed new § 158.240(g). In addition, we noted that we intend to revise the MLR Annual Reporting Form Instructions to clarify that an issuer that prepays a portion or all of its estimated rebate and subsequently determines that the amount of such prepayment is more than the total rebate owed to an enrollee for that MLR reporting year and that does not recoup the overpayment from the enrollee, may include the overpayment in its rebate payments reported for purposes of calculating the optional limit on the payable rebates under § 158.240(d). We also noted that we intend to revise the MLR Annual Reporting Form Instructions to clarify how issuers that prepay estimated rebates must report such prepayments.
We proposed that the amendment to create new § 158.240(g) would be applicable beginning with the 2020 MLR reporting year (MLR reports filed in 2021). We solicited comment on this proposal, including the proposed applicability date.
We received public comments on the proposed amendments to § 158.240. The following is a summary of the comments we received and our responses.
After consideration of all the comments received and for the reasons stated in our responses, we are finalizing the amendments to § 158.240 as proposed, with an additional clarification that issuers that choose to prepay a portion or all of their estimated rebates must do so to the extent consistent with state law or other applicable state authority.
We proposed to amend § 158.241(a)(2) to allow issuers to provide rebates in the form of a premium credit prior to the date that the rules previously provided.
As discussed in the proposed rule, under § 158.240(e), issuers that choose to provide a rebate via a lump-sum check or lump-sum reimbursement to the account used to pay the premium must issue the rebate no later than September 30 following the end of the MLR reporting year. In contrast, § 158.241(a)(2) previously provided that issuers that elect to provide rebates in the form of a premium credit must apply the rebate to the first month's premium that is due on or after September 30 following the MLR reporting year, and that when the rebate is provided in the form of a premium credit and the total amount of the rebate owed exceeds the premium due in October, any excess rebate amount must be applied to succeeding premium payments until the full amount of the rebate has been credited.
Given the proposed addition of § 158.240(g) discussed in the prior section, the fact that an issuer may wish to provide rebates in the form of a premium credit earlier than October, and the desire to reduce the regulatory burden and enable enrollees to receive the benefit of rebates sooner, we proposed to amend § 158.241(a)(2) to allow issuers to provide rebates in the form of a premium credit prior to September 30. Specifically, we proposed to amend § 158.241(a)(2) to specify that when provided in the form of premium credits, rebates must be applied to premium that is due no later than October 30 following the MLR reporting year. We proposed that this amendment would be applicable beginning with the 2020 MLR reporting year (rebates due in 2021). We solicited comment on this proposal, including on the proposed applicability date.
We received public comments on the proposal to amend § 158.241(a)(2) to allow issuers to provide rebates in the form of a premium credit prior to the date that the rules previously provided. The following is a summary of the comments we received and our responses.
After consideration of all the comments received and for the reasons stated in our responses, we are finalizing the amendment to § 158.241 as proposed, with a clarification that the amendment will be applicable beginning with rebates due for the 2020 MLR reporting year.
PBMs are third-party administrators that manage the prescription drug benefit for a contracted entity.
Available at
The role of PBMs in the prescription drug landscape, including any impact on the rising cost of prescription drugs, is not well understood.
We proposed to add part 184 to 45 CFR subchapter E to codify in regulation the statutory requirement that PBMs under contract with QHP issuers report the data described at section 1150A(b) of the Act to the Secretary and to each QHP for which the PBM administers the prescription drug benefit.
At proposed § 184.10(a)(1), we explained that new part 184 is based on section 1150A of the Act. At proposed § 184.10(b), we proposed that the scope of new part 184 establishes standards for PBMs that administer prescription drug benefits for health insurance issuers which offer QHPs with respect to the offering of such plans. We also proposed definitions for part 184 at new § 184.20. Except for the definition of pharmacy benefit manager, these proposed definitions would codify terms already in use in parts 144 and 155 of subchapter B of subtitle A of title 45 of the Code of Federal Regulations.
As part of the ACA, Congress passed section 6005, which added section 1150A to the Act, requiring a PBM under a contract with a QHP offered through an Exchange established by a state under section 1311 of the ACA
In the 2012 Exchange Final Rule, we codified the requirements of section 1150A of the Act, as it applies to QHPs, at § 156.295.
We proposed to add § 184.50(a) to state that where a PBM contracts with an issuer of QHPs to administer the prescription drug benefit for their QHPs, the PBM is required to report the data required by section 1150A(b) of the Act to the QHP and to the Secretary, at such times, and in such form and manner, as the Secretary shall specify. While we acknowledge that this section applies to both the QHP issuer and their PBMs to report this data, we proposed to implement section 1150A to require PBMs to report this data directly to the Secretary, and only to require the QHP issuer to report the data only when the QHP issuer does not contract with a PBM to administer the prescription drug benefit for their QHPs, as further discussed in the preamble to § 156.295 in this final rule.
We proposed to add § 184.50(a)(1) through (3) to require these PBMs to report the data described at section 1150A(b) of the Act to the Secretary. The data proposed to be collected, as required by section 1150A, are: The percentage of all prescriptions that were provided through retail pharmacies compared to mail order pharmacies, and the percentage of prescriptions for which a generic drug was available and dispensed (generic dispensing rate), that is paid by the health benefits plan or PBM under the contract;
At new § 184.50(b) and (c), we also proposed to codify the confidentiality and penalty provisions that appear at § 1150A(c) and (d) to PBMs which administer the prescription drug benefits for QHP issuers.
We sought comment on these proposals.
We received public comments on the proposed updates to prescription drug distribution and cost reporting by pharmacy benefit managers (§§ 184.10 and 184.50). We have consolidated the description of the public comments received in response to this proposal at Part 184 as part of the discussion in the preamble above for § 156.295. Please refer to that section for our responses to those comments received.
After consideration of all the comments received and for the reasons stated in our responses, we are finalizing this policy as proposed.
On March 4, 2021, the United States District Court for the District of Maryland decided
1. The 2019 Payment Notice's extension of the elimination of federal reviews of network adequacy of qualified health plans offered through the FFEs in certain circumstances by incorporating the results of the states' reviews, first finalized in rulemaking in the Market Stabilization final rule
2. The 2019 Payment Notice's cessation of the practice of designating some plans in the FFEs as “standardized options” in an effort to encourage innovation in the individual market (83 FR 16974 through 16975).
3. The 2019 Payment Notice's modification of Exchange income verification requirements for resolving data matching issues related to eligibility for advance payments of premium tax credits to require an individual who attests to a household income within 100 percent to 400 percent of the federal poverty level (FPL), but whose income according to trusted electronic data sources is below 100 percent FPL, to submit additional documentation supporting the attested to household income (83 FR 16985 through 16987).
4. The 2019 Payment Notice's amendment of medical loss ratio requirements to allow issuers to submit either a detailed, itemized report of quality improvement activity (QIA) expenditures or to report a single, fixed QIA amount (83 FR 17032 through 17036).
We intend to implement the court's decision as soon as possible. However, we will not be able to fully implement those aspects of the court's decision regarding network adequacy review and standardized options in time for issuers to design plans and for Exchanges to be prepared to certify such plans as QHPs for the 2022 plan year, and therefore, intend instead to address these issues in time for plan design and certification for plan year 2023. Specifically, in order to implement the court's ruling on the network adequacy provision, HHS will need to set up a new network adequacy review process, and issuers will need
The same is true for the court's decision regarding standardized options. With the rule removing standardized options vacated, we need to design and propose new standardized options that otherwise meet current market reform requirements, and we must also alter the Federal Exchange eligibility and enrollment platform system build (
Although standardized options have been required in the past, we will not be able to simply reinstate the same standardized option plans that previously existed. Specifically, in the last iteration of standardized options we finalized in the 2018 Payment Notice, we created three sets of standardized options based on FFE and SBE-FP enrollment data and state cost-sharing laws. The basis on which we created these three sets of options as well as a number of other factors in the individual market) have changed considerably since the last iteration of standardized options in 2018. Several such changes include modifications in the most popular plans' cost-sharing structures, shifting enrollment trends, the introduction of new state cost sharing laws that affect standardized option plan designs, and states with FFEs or SBE-FPs transitioning to SBEs (which affects the number of sets of options). As a result of these changes, the sets of standardized options and the design of the options themselves must be adjusted accordingly. Further, we do not have sufficient time prior to the 2022 plan year to conduct a full analysis of the changes that have occurred in the last several years in order to design and propose adequate standardized options suitable for the current environment. Additionally, in prior years, we proposed and finalized standardized option plan designs prior to the start of the QHP certification cycle for the following plan year such that issuers had sufficient time to assess these standardized options in order to determine if they wanted to offer them and take the steps necessary to do so. Even if we were able to design standardized option plans prior to the 2022 plan year, issuers would not have a sufficient amount of time to meaningfully assess any standardized options we might propose and decide whether or not to offer them.
For these reasons, we intend to resume the designation of standardized options and propose specific designs in more complete detail in the 2023 Payment Notice. As such, we will seek comment during the corresponding comment period. In the interim, we encourage states with FFEs or SBE-FPs and unique cost-sharing laws that could affect standardized plan design to contact us to discuss their circumstances.
We can take more immediate steps to begin to implement the court's holdings regarding income verification and QIA reporting. First, as discussed more fully later in this section, we are exercising flexibilities under the Administrative Procedure Act (APA) to rescind or replace in this final rule relevant parts of the income verification and MLR regulations the court invalidated. Second, we plan to implement accompanying operational policies to begin implementation of the court's order with respect to the impacted income verification regulation.
Specific to income verification, we are deleting the invalidated provision requiring certain consumers to provide information for income verification purposes. We note that HHS's systems automatically generate requests for income verification information for those with income data matching issues, and it will take some time for us to redesign this function. Until that redesign is complete, however, HHS will be able to identify consumers who receive requests for verification information and we have established a manual process to notify those recipients that they need not provide the requested information.
As to QIA reporting, we are deleting the invalidated provision to remove the option to report the fixed standardized amount of QIA. The regulation will thus revert to requiring issuers to itemize QIA expenditures on a prospective basis beginning with the 2020 MLR reporting year (MLR reports due by July 31, 2021).
Under the Paperwork Reduction Act of 1995 (PRA), we are required to provide 30-day notice in the
• The need for the information collection and its usefulness in carrying out the proper functions of our agency.
• The accuracy of our estimate of the information collection burden.
• The quality, utility, and clarity of the information to be collected.
• Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.
We solicited public comment on each of the required issues under section 3506(c)(2)(A) of the PRA for the following ICRs.
To derive wage estimates, we generally used data from the Bureau of Labor Statistics to derive average labor costs (including a 100 percent increase for fringe benefits and overhead) for estimating the burden associated with the ICRs.
As indicated, employee hourly wage estimates have been adjusted by a factor of 100 percent. This is necessarily a rough adjustment, both because fringe benefits and overhead costs vary significantly across employers, and because methods of estimating these costs vary widely across studies. Nonetheless, there is no practical alternative, and we believe that doubling the hourly wage to estimate total cost is a reasonably accurate estimation method.
45 CFR 153.610 and 153.710 provide that issuers of a risk adjustment covered plan must provide HHS with access to risk adjustment data through a dedicated distributed data environment (EDGE server), in a manner and timeframe specified by HHS. We clarify that, for purposes of risk adjustment data submissions in the 2021 benefit year and beyond when a declared PHE is in effect and HHS permits temporary premium credits, issuers that choose to provide temporary premium credits must submit the adjusted (that is, lower) plan premiums for those months, instead of the unadjusted plan premiums. HHS is finalizing the proposal to require issuers to submit adjusted plan premiums to their EDGE servers for all enrollees whom the issuer has actually provided temporary premium credits as a reduction to the corresponding benefit year premiums. We do not believe that issuers who elect to provide these temporary premium credits during a declared PHE will incur additional operational burden associated with EDGE server data submissions as a result of these requirements because we expect issuers' premium reporting systems will already be configured to enable issuers to upload the billable premiums actually charged to enrollees for the applicable benefit year to the EDGE server. Additionally, the current EDGE server operational guidance for the risk adjustment program allows issuers to submit billable premium changes so there will be no changes to the data submission rules. The burden related to this information collection is currently approved under OMB control number 0938-1155 (Standards Related to Reinsurance, Risk Corridors, Risk Adjustment, and Payment Appeals). The information collection request expires on February 23, 2021.
At § 155.220(c)(6), we are finalizing the proposal that a web-broker must demonstrate operational readiness and compliance with applicable requirements prior to the web-broker's non-Exchange website being used to complete an Exchange eligibility application or a QHP selection, which may include submission of a number of artifacts of documentation or completion of certain testing processes. The required documentation may include operational data including licensure information, points of contact, and third-party relationships; security and privacy assessment documentation, including penetration testing results, security and privacy assessment reports, vulnerability scan results, plans of action and milestones, and system
We are finalizing the proposal to add additional detail to the operational readiness requirement in § 155.221(b)(4) for direct enrollment entities. In § 155.221(b)(4), we require that a direct enrollment entity must demonstrate operational readiness and compliance with applicable requirements prior to the direct enrollment entity's website being used to complete an Exchange eligibility application or a QHP selection, which may include submission of a number of artifacts of documentation or completion of various testing or training processes. The required documentation may include business audit documentation including: Notices of intent to participate including auditor information; documentation packages including privacy questionnaires, privacy policy statements, and terms of service; and business audit reports including testing results. The required documentation may also include security and privacy audit documentation including: Interconnection security agreements; security and privacy controls assessment test plans; security and privacy assessment reports; plans of action and milestones; privacy impact assessments; system security and privacy plans; incident response plans; vulnerability scan results; and an agreement between the direct enrollment entity and HHS documenting the requirements for participating in the applicable direct enrollment program. We estimate that for each direct enrollment entity it will take up to 9 hours for a Business Operations Specialist (at an hourly cost of $77.14) to complete and submit a typical documentation package and related information to HHS each year. Based on current EDE participation and potential market size, we estimate that 77 EDE entities will participate in a manner such that they will be required to submit this type of information, and therefore, this data collection will have an annual burden of 693 hours with an annual cost of approximately $53,458.
In addition, we estimate that it will take up to 72 hours for an Auditor (at an hourly cost of $76.46) to complete and submit a business requirements audit package for a direct enrollment entity, including audit report and testing results, to HHS. Based on current EDE participation and potential market size, we estimate that 4 EDE entities will participate, and therefore this data collection would have an annual burden of 288 hours with a cost of approximately $22,020.
We also estimate that it will take up to 122 hours for an Auditor (at an hourly cost of $76.46) to complete and submit a security and privacy audit package for a direct enrollment entity to HHS each year. Based on current EDE participation and potential market size, we estimate that 14 EDE entities will participate, and therefore this data collection will have an annual burden of 1,708 hours with a cost of approximately $130,594.
We are finalizing these burden estimates as proposed.
We anticipate that removing the income verification requirements for resolving data matching issues will reduce burden on those consumers who are identified and notified as having this income inconsistency, saving them approximately 45 minutes since they will not be required to complete associated questions in the application or submit supporting documentation. Based on historical data from the FFE, HHS estimates that approximately 295,000 inconsistencies are generated at the household level. Therefore, eliminating these inconsistencies will reduce burden by approximately 221,250 hours. Using the average hourly wage for all occupations (at an hourly cost $51.44 per hour), we estimate that the annual reduction in cost for each consumer will be approximately $39, and the annual cost reduction for all consumers who would have generated this income inconsistency will be approximately $11,381,100.
The burden related to this information collection is approved under OMB control number 0938-1191 (Data Collection to Support Eligibility Determinations for Insurance Affordability Programs and Enrollment through Health Insurance Marketplaces, Medicaid and Children's Health Insurance Program Agencies), which will be revised to account for this reduced burden. The approval for this information collection expires on September 30, 2022.
We are finalizing the proposal to revise § 156.295 and add § 184.50 to require QHP issuers or PBMs that contract with QHP issuers to report the data envisioned by section 1150A. We have not previously collected this data; therefore, the burden associated with these proposals will reflect the imposition of the burden for a new collection, and not merely the burden created by changes to existing regulatory text. On January 1, 2020
The burden associated with this collection is attributed to QHP issuers and PBMs, and the burden estimates were developed based on our previous experience with QHP information reporting activities. We stated that we were unaware of any QHP issuer that does not contract with a PBM to administer their prescription drug benefit. While we invited comment on whether any QHP issuer does not use a PBM, we did not estimate any burden for a QHP issuer to submit data directly. The following burden estimate reflects our expectation that all data will be submitted by PBMs.
Across all 50 states and the District of Columbia, we estimate approximately 40 PBMs will be subject to the reporting requirement. We further estimate that these PBMs, taken as a whole, annually contract with approximately 275 QHP issuers to administer the prescription drug benefit for their QHPs. We estimate that the 275 QHP issuers offer 7,000 total QHPs annually or 25.4 QHPs per QHP issuer. Thus, we estimate that each of the 40 PBMs will report data for 175 QHPs on average each year. We understand that some of these PBMs
Each PBM that administers pharmacy benefits for a QHP issuer will be required to complete a web form and a data collection instrument. The web form will collect data aggregated at the QHP issuer level for all plans and products offered by the QHP issuer combined. The web form will also require the reporting of an allocation methodology that is selected by the PBM to allocate data, where necessary. We expect submitters to maintain internal documentation of the allocation methodologies chosen, as we may need to follow-up with the submitter to better understand the methodology.
PBMs will prepare and submit one data collection instrument per QHP issuer by Health Insurance Oversight System (HIOS) ID. Each data collection instrument will contain information regarding each plan the issuer offers. We estimated that an average PBM will report information for 5,200 NDCs for each QHP. The reports must include the data for all of the plans that the QHP issuer offered in their QHPs in the applicable plan year, even if they have no data to report for that plan year.
Each submitter will also be required to complete an attestation which confirms the data submitted is accurate, complete, and truthful.
We estimate that 40 PBMs will submit data for this reporting requirement, each submitting data for 175 QHPs on average. For each PBM, we estimate that it will take compliance officers approximately 570 hours (for an annual cost of approximately $39,934 at a rate of $70.06 per hour), pharmacy technician 350 hours (for an annual cost of $11,865 at a rate of $33.90 per hour), secretaries and administrative assistants 175 hours (for an annual cost of $6,594 at a rate of $37.68 per hour), and billing and posting clerks 175 hours (for an annual cost of approximately $6,836 at a rate of $39.06 per hour) to prepare and submit the information and 8 hours for a chief executive (for an annual cost of approximately $1,491.20 at a rate of $186.40 per hour) to review the information and complete the attestation. In total, we estimate it will take a PBM approximately 1,278 hours to respond to this reporting requirement each year on average, for a total annual cost of approximately $66,719 per PBM to report data. This estimate will vary by PBM, since each PBM will report for a different number of plans, depending on the number of QHPs offered by a particular QHP issuer. Thus, we estimate the total annual burden for all 40 PBMs combined to be approximately 51,120 hours or $2,668,796.
We estimate that PBMs will incur burden to complete a one-time technical build to implement the changes necessary for this collection, which will involve activities such as planning, assessment, budgeting, contracting, and reconfiguring systems to generate data extracts that conform to this collection's requirements. We expect that this one-time burden will be incurred primarily in 2021. We estimate that, for each PBM, on average, it will take project management specialists and business operations specialists 500 hours (at $77.51 per hour), computer system analysts 1,300 hours (at $92.46 per hour), computer programmers 2,080 hours (at $89.06 per hour), computer and information systems managers 40 hours (at $150.38 per hour) and general and operations managers 50 hours (at $118.30 per hour) to complete this task. The total one-time burden for a PBM would be approximately 3,970 hours on average, with an equivalent cost of approximately $356,128. For all 40 PBMs, the total one-time burden will be 158,800 hours for a total cost of approximately $14.2 million. For all 40 PBMs, the average annual burden in 2021-2023 incurred for implementation and reporting will be approximately 87,000 hours with an average annual cost of approximately $6.5 million.
We estimate that 275 QHP issuers will need to identify for the PBMs each year which plans are QHPs. For each QHP issuer, we estimate that it will take secretaries and administrative assistants 7 hours (for an annual burden of $263.76 at a rate of $37.68 per hour) to identify, on average, approximately 25 QHPs offered by a QHP issuer. This estimate will vary by QHP issuer, since each QHP issuer would identify a different number of QHPs, depending on the number of QHPs offered by a particular QHP issuer. Thus, we estimate the total annual burden for all 275 QHP issuers combined to be 1,925 hours or approximately $72,534.
We are finalizing as proposed.
We are finalizing our proposal to amend § 158.103 to establish the definition of prescription drug rebates and other price concessions that issuers must deduct from incurred claims for MLR reporting and rebate calculation purposes under § 158.140(b)(1)(i). We are also finalizing the proposal to add a new § 158.240(g) to explicitly allow issuers to prepay a portion or all of their estimated MLR rebates to enrollees for a given MLR reporting year, and to establish a safe harbor allowing such issuers, under certain conditions, to defer the payment of rebates remaining after prepayment until the following MLR reporting year. In addition, we are finalizing the proposal to amend § 158.241(a)(2) to allow issuers to provide MLR rebates in the form of a premium credit prior to the date that the rules currently provide. Finally, are finalizing the proposal to clarify MLR reporting and rebate requirements for issuers that choose to offer temporary premium credits during a PHE declared by the Secretary of HHS in the 2021 benefit year and beyond when such credits are permitted by HHS. We anticipate that implementing these provisions will require minor changes to the MLR Annual Reporting Form, but will not significantly increase the associated burden. The burden related to this information collection was approved under OMB control number 0938-1164 (Medical Loss Ratio Annual Reports, MLR Notices, and Recordkeeping Requirements (CMS-10418)). The control number expired on October 31, 2020. A revised collection of information seeking OMB approval for an additional 3 years is currently under review by OMB.
We have submitted a copy of this final rule to OMB for its review of the rule's information collection requirements. The requirements are not effective until they have been approved by OMB.
To obtain copies of the supporting statement and any related forms for the collections discussed in this rule (CMS-9914-F2), please visit the CMS website at
We ordinarily publish a notice of proposed rulemaking in the
Section 553(d) of the APA ordinarily requires a 30-day delay in the effective date of a final rule from the date of its publication in the
In
With regard to MLR QIA expenditures, we need to clarify that CMS will implement the court's decision going forward, that is, as CMS explained above, issuers will have to report actual data and cannot report standardized QIA expenditure amounts for 2020 and future MLR reporting years, but issuers will not be required to go back and correct their MLR Annual Reporting Forms for 2017-2019. We find it necessary to immediately clarify issuer reporting obligations to avoid issuer confusion regarding how to report QIA on the 2020 MLR Annual Reporting Forms (due by July 31, 2021) and to mitigate the potential of any delay or inaccuracy in providing consumers rebates that may be owed for the 2020 MLR reporting year. In vacating the QIA provision of the 2019 Payment Notice, the court found that the statute requires the itemization of QIA expenditures and does not permit a reporting of such expenses as a standard percentage of earned premium. In light of the court's decision, additional public comments could not meaningfully impact whether CMS is authorized to allow the standardized reporting of QIA expenses. For this additional reason, we find good
With regard to income verification requirements, in which the court vacated the requirement imposed on consumers to provide verification if certain sources of information indicated a variance from a consumer's reported income, we find it necessary and in the public interest to immediately suspend enforcement of these provisions to ensure that consumers are not improperly denied advance payments of premium tax credits. Any delay in clarifying what is required after the court's decision will create confusion and interfere with consumers' access to health coverage. We have concerns that any delay in implementing clarification of this rule could lead eligible consumers to improperly losing coverage if they are unable to produce documentation compliant with the income verification requirements. Without immediate changes, the public, and particularly consumers who are eligible for advance payments of the premium tax credits, may be deterred in accessing advance payments of the premium tax credits that allow them to afford coverage.
For these reasons, we find it necessary and in the public interest to move quickly and without the delay that would accompany a period for notice and comment to address the court's decision regarding the QIA provisions and income verification requirements. We find good cause for waiving notice-and-comment rulemaking and the delay in effective date given the decision of the district court and the public interest in expeditious implementation of the district court's ruling. Immediately taking the steps described in section IV. of this final rule to implement the court's decision regarding income verification and QIA reporting, including removing the regulation text at §§ 155.320(c) and 158.221(b)(8) directly in this final rule rather than through the normal notice-and-comment rulemaking cycle and waiving delay of the effective date, will ensure an expeditious implementation of those aspects of the court's decision and remove any doubt about what standards apply after that decision. We believe rulemaking without notice and comment for these limited purposes is a reasonable response to the court's order that will minimize confusion over the current status of our rules in those two areas. Therefore, we find good cause to waive notice-and-comment rulemaking for the provisions in section IV. of this final rule, waive delay of the effective date, and to issue these changes as part of this final rule.
This final rule includes standards related to the risk adjustment program and cost sharing parameters for the 2022 benefit year and beyond. It also includes changes related to special enrollment periods; direct enrollment entities; the administrative appeals process with respect to health insurance issuers and non-federal governmental group health plans; and the medical loss ratio program. In addition, it includes changes to the regulation to require the reporting of certain prescription drug information for QHPs or their PBM.
We have examined the impacts of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all 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. A regulatory impact analysis (RIA) must be prepared for rules with economically significant effects ($100 million or more in any one year).
Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as an action that is likely to result in a rule: (1) Having an annual effect on the economy of $100 million or more in any one year, or adversely and materially affecting a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local or tribal governments or communities (also referred to as “economically significant”); (2) creating a serious inconsistency or otherwise interfering with an action taken or planned by another agency; (3) materially altering the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raising novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. An RIA must be prepared for major rules with economically significant effects ($100 million or more in any one year), and a “significant” regulatory action is subject to review by OMB. HHS has concluded that this rule is likely to have economic impacts of $100 million or more in at least one year, and therefore, meets the definition of “significant rule” under Executive Order 12866. Therefore, HHS has provided an assessment of the potential costs, benefits, and transfers associated with this rule. In accordance with the provisions of Executive Order 12866, this regulation was reviewed by OMB.
The provisions in this final rule aim to ensure that consumers continue to have access to affordable coverage and health care, and that states have flexibility and control over their insurance markets. They will reduce regulatory burden, reduce administrative costs for states, ensure greater market stability, increase transparency and availability of QHP survey data, and increase transparency on the impact of PBMs on the cost of prescription drugs for QHPs. Through the reduction in financial uncertainty for issuers and increased affordability for consumers, these provisions are expected to increase access to affordable health coverage.
Affected entities, such as Exchanges, issuers and FFE Classic DE and EDE partners, will incur costs to implement new special enrollment period requirements. Issuers will incur costs to comply with audits and compliance reviews of risk adjustment covered plans, reinsurance-eligible plans, and APTC, CSRs, and user fees requirements. Web-brokers and direct enrollment entities will incur costs to comply with operational readiness demonstration requirements. QHP issuers and PBMs will incur costs to implement and operationalize drug data reporting. In accordance with Executive Order 12866, HHS believes that the benefits of this regulatory action justify the costs.
In accordance with OMB Circular A-4, Table 13 depicts an accounting statement summarizing HHS's assessment of the benefits, costs, and transfers associated with this regulatory action.
This final rule implements standards for programs that will have numerous effects, including allowing consumers to have continued access to coverage and health care, and stabilizing premiums in the individual and small group health insurance markets and in an Exchange. We are unable to quantify all benefits and costs of this final rule. The effects in Table 13 reflect non-quantified impacts and estimated direct monetary costs and transfers resulting from the provisions of this final rule for health insurance issuers and consumers.
We are finalizing the risk adjustment user fee of $0.25 PMPM for the 2022 benefit year to operate the risk adjustment program on behalf of states,
This RIA expands upon the impact analyses of previous rules and utilizes the Congressional Budget Office's (CBO) analysis of the ACA's impact on federal spending, revenue collection, and insurance enrollment. The ACA ends the transitional reinsurance program and temporary risk corridors program after the benefit year 2016. Therefore, the costs associated with those programs are not included in Table 13 or 14. Table 14 summarizes the effects of the risk adjustment program on the federal budget from fiscal years 2022 through 2026, with the additional, societal effects of this final rule discussed in this RIA. We do not expect the provisions of this final rule to significantly alter CBO's estimates of the budget impact of the premium stabilization programs that are described in Table 14.
In addition to utilizing CBO projections, HHS conducted an internal analysis of the effects of its regulations
The revision to § 147.104(b)(4)(ii) will allow an individual or dependent who did not receive timely notice of a triggering event and otherwise was reasonably unaware that a triggering event occurred to use the date the individual knew, or reasonably should have known, of the occurrence of the triggering event as the date of the triggering event for a special enrollment period to enroll in individual market coverage through or outside of an Exchange. This will enable consumers to maintain continued access to coverage and health care.
We are removing the requirement to file submissions to the Departmental Appeals Board in triplicate and instead require electronic filing. Based on our experience, such filings are infrequent, and this proposed change will not have a significant impact. An entity filing a submission will experience a small reduction in costs related to printing and mailing the submission.
The risk adjustment program is a permanent program created by section 1343 of the ACA that collects charges from issuers with lower-than-average risk populations and uses those funds to make payments to issuers with higher-than-average risk populations in the individual, small group, and merged markets (as applicable), inside and outside the Exchanges. We established standards for the administration of the risk adjustment program in subparts A, B, D, G, and H of part 153. If a state is not approved to operate, or chooses to forgo operating its own risk adjustment program, HHS will operate risk adjustment on its behalf. For the 2022 benefit year, HHS will operate a risk adjustment program in every state and the District of Columbia. As described in the 2014 Payment Notice, HHS's operation of risk adjustment on behalf of states is funded through a risk adjustment user fee. For the 2022 benefit year, we used the same methodology that we finalized in the 2020 Payment Notice to estimate our administrative expenses to operate the program. Risk adjustment user fee costs for the 2022 benefit year are expected to remain steady from the prior 2021 benefit year estimates of approximately $60 million. We estimate that the total cost for HHS to operate the risk adjustment program on behalf of all 50 states and the District of Columbia for 2022 will be approximately $60 million, and the risk adjustment user fee will be $0.25 PMPM. Because of the constant costs estimated for the 2022 benefit year, we expect the final risk adjustment user fee for the 2022 benefit year to have no additional financial impact on issuers of risk adjustment covered plans or the federal government.
Additionally, for the risk adjustment factors, we are finalizing an approach to recalibrate the HHS risk adjustment models for the 2022 benefit year by using the 2016, 2017 and 2018 enrollee-level EDGE data, the same data years used for the 2021 benefit year.
We are finalizing the requirement that issuers that choose to offer premium credits to consumers during a declared PHE, when HHS permits such credits, must report the adjusted plan premium amount, taking into account the credits provided to consumers as a reduction to premiums for the applicable months for risk adjustment data submissions for the 2021 benefit year and beyond. We do not believe that the clarifications regarding risk adjustment reporting in this provision will impose additional administrative burden on health insurance issuers beyond the effort already required to submit data to HHS for the purposes of operating risk adjustment, as previously estimated in
In the 2021 Payment Notice, HHS finalized the risk adjustment state payment transfer formula under the HHS risk adjustment methodology for the 2021 benefit year, and reaffirmed that HHS will continue to operate the risk adjustment program in a budget neutral manner. As finalized in this rule, we will maintain the same methodology for the 2022 benefit year and beyond, unless changed through notice-and-comment rulemaking.
We do not believe that the impact of this provision will vary from what was previously estimated in the interim final rule on COVID-19 (85 FR 54820). Similar to our analysis of regulatory impacts in the interim final rule on COVID-19, we recognize the potential for financial impacts for individual issuers as a result of these clarifications. We believe that if HHS permitted issuers that provided premium credits when permitted by HHS during a declared PHE to submit unadjusted premiums for the purposes of calculating risk adjustment, distortions could occur which could also financially impact individual issuers. For example, absent the requirement that issuers that offer premium credits report the adjusted, lower premium amount for risk adjustment purposes, an issuer with a large market share with higher-than-average risk enrollees that provides temporary premium credits would inflate the statewide average premium by submitting the higher, unadjusted premium amount, thereby increasing its risk adjustment payment. In such a scenario, a smaller issuer in the same state market risk pool that owes a risk adjustment charge, and also provides premium credits to enrollees, would pay a risk adjustment charge that is relatively higher than it would have been if it were calculated based on a statewide average that reflected the actual, reduced premium charged to enrollees by issuers in the state market risk pool.
For all of these reasons, we believe that requiring issuers that offer temporary premium credits when permitted by HHS for 2021 and future benefit years' coverage to accurately report to the EDGE server the adjusted, lower premium amounts actually charged to enrollees is most consistent with existing risk adjustment program requirements. We also believe this requirement will mitigate the distortions that would occur if issuers that offer these temporary premium credits did not report the actual amounts charged to enrollees, while avoiding additional financial burden on issuers, as compared to an approach that would permit issuers to report unadjusted premium amounts.
We also are providing more clarity regarding audits and establishing authority to conduct compliance reviews of issuers of risk adjustment covered plans by finalizing amendments to § 153.620(c), with slight modifications to certain audit timeframes in response to comments requesting issuers be provided more time to provide the initial audit data submissions and written corrective action plans. Issuers being audited under the risk adjustment program will be required to comply with audit requirements including participating in entrance and exit conferences, submitting complete and accurate data to HHS in a timely manner, and providing responses to additional requests for information from HHS and to preliminary audit reports in a timely manner. If an audit results in a finding, issuers must also provide written corrective plans in the time and manner set forth by HHS. We are also codifying our authority to recoup risk adjustment (including high-cost risk pool) payments if they are not adequately substantiated by the data and information submitted by issuers during the course of the audit.
We anticipate that compliance with risk adjustment program (including high-cost risk pool) audits will take 120 hours by a business operations specialist (at a rate of $77.14 per hour), 40 hours by a computer systems analyst (at a rate of $92.46 per hour), and 20 hours by a compliance officer (at a rate of $70.06 per hour) per issuer per benefit year. The cost per issuer will be approximately $14,356. While the number of issuers participating in the risk adjustment program varies per benefit year, (for example, there were 751 issuers participating in the risk adjustment program for the 2016 benefit year), HHS only intends to audit a small percentage of these issuers, roughly 30-60 issuers per benefit year, and intends to focus these audits on payments under the high-cost risk pool.
We anticipate that compliance with risk adjustment program (including high-cost risk pool) compliance reviews will take 30 hours by a business operations specialist (at a rate of $77.14 per hour), 10 hours by a computer systems analyst (at a rate of $92.46 per hour), and 5 hours by a compliance officer (at a rate of $70.06 per hour) per issuer per benefit year. The cost per issuer will be approximately $3,589. While the number of issuers participating in the risk adjustment program varies per benefit year, (for example, there were 751 issuers participating in the risk adjustment program for the 2016 benefit year), HHS only intends to conduct compliance reviews for no more than 15 issuers per benefit year and intends to focus these reviews on payments under the high-cost risk pool.
We are increasing the materiality threshold for EDGE discrepancies, beginning in the 2020 benefit year of HHS-operated risk adjustment, so that HHS may only take action if the amount in dispute is equal to or exceeds $100,000 or one percent of the total estimated transfer amount in the applicable state market risk pool, whichever is less. As a result of this change, some discrepant issuers will no
We are finalizing the amendments to § 153.410(d) providing more clarity regarding audits and establishing authority to conduct compliance reviews of reinsurance-eligible plans, with slight modifications to certain audit timeframes in response to comments requesting issuers be provided more time to provide the initial audit data submissions and written corrective action plans. Issuers of reinsurance-eligible plans being audited will be required to comply with audit requirements including participating in entrance and exit conferences, submitting complete and accurate data to HHS in a timely manner, and providing responses to additional requests for information from HHS and to preliminary audit reports in a timely manner. If an audit results in a finding, issuers must also provide written corrective plans in the time and manner set forth by HHS. We are also codifying our authority to recoup reinsurance payments if they are not adequately substantiated by the data and information submitted by issuers during the course of the audit.
We anticipate that compliance with reinsurance program audits will take 120 hours by a business operations specialist (at a rate of $77.14 per hour), 40 hours by a computer systems analyst (at a rate of $92.46 per hour), and 20 hours by a compliance officer (at a rate of $70.06 per hour) per issuer per benefit year. The cost per issuer will be approximately $14,356. There were 557 issuers participating in the reinsurance program for the 2015 benefit year and 496 issuers participating in the reinsurance program for the 2016 benefit year; however, HHS will only audit a small percentage of these issuers, roughly 30-60 issuers per benefit year. As noted above, we also intend to combine the 2015 and 2016 benefit year reinsurance audits to reduce the burden on issuers subject to such audits. Depending on the number of issuers audited for each benefit year, the total cost to issuers being audited will be between $430,692 and $861,384, with an average annual cost of approximately $646,038.
We anticipate that compliance with reinsurance program compliance reviews will take 30 hours by a business operations specialist (at a rate of $77.14 per hour), 10 hours by a computer systems analyst (at a rate of $92.46 per hour), and 5 hours by a compliance officer (at a rate of $70.06 per hour) per issuer per benefit year. The cost per issuer will be approximately $3,589. There were 557 issuers participating in the reinsurance program for the 2015 benefit year and 496 issuers participating in the reinsurance program for the 2016 benefit year; however, HHS only intends to conduct compliance reviews for no more than 15 issuers per benefit year and intends to focus these reviews on payments received by reinsurance-eligible plans under the program. The total annual cost to issuers undergoing compliance reviews will be approximately $53,836.
We are codifying two previously-established exemptions from HHS-RADV under § 153.630(g). These exemptions apply when the issuer only has small group carryover coverage for the applicable benefit year or when an issuer is the sole issuer in the state market risk pool for the applicable benefit year (and did not participate in another risk pool with other issuers for that benefit year). We further note that these new regulatory provisions are not establishing new exemptions; instead, the amendments to § 153.630(g) merely codify existing policies and previously established exemptions from HHS-RADV for these subsets of issuers. The impact of the exemption for sole issuers was addressed in the 2019 Payment Notice and the discussion of exempting small group carryover coverage issuers was set forth in the 2020 Payment Notice.
We are also changing the HHS-RADV collections timeline from the timeline finalized in the 2020 Payment Notice in response to stakeholder feedback. Under the revised timeline, we will implement the collection of HHS-RADV charges and disbursement of payments in the calendar year in which HHS-RADV results are released. We do not believe this will change the administrative burden previously estimated in the 2020 Payment Notice
After consideration of comments received, we are not finalizing the proposal to provide flexibility to web-brokers regarding the information they are required to display on their non-Exchange websites for QHPs in certain circumstances. As explained above, we intend to further consider these issues and clarify the display requirements for web-broker non-Exchange websites in future rulemaking. Until addressed in future rulemaking, beginning at the start of the open enrollment period for plan year 2022, web-broker non-Exchange websites will be required to display all QHP information received from the Exchange or directly from QHP issuers, consistent with the requirements of § 155.205(b)(1) and (c) for all available QHPs with the exception of medical loss ratio information and transparency of coverage measures under § 155.205(b)(1)(vi) and (vii). This interim approach does not establish new requirements and instead represents a change in the exercise of enforcement discretion regarding the standardized comparative information web-brokers are required to display under existing
At § 155.220(c)(6), we are finalizing that a web-broker must demonstrate operational readiness and compliance with applicable requirements prior to the web-broker's non-Exchange website being used to complete an Exchange eligibility application or a QHP selection. As reflected in § 155.220(c)(6)(i) through (iv), HHS may request a web-broker submit a number of artifacts or documents or complete certain testing processes to demonstrate the operational readiness of its non-Exchange website. The required documentation may include operational data including licensure information, points of contact, and third-party relationships; security and privacy assessment documentation, including penetration testing results, security and privacy assessment reports, vulnerability scan results, plans of action and milestones, and system security and privacy plans; and an agreement between the web-broker and HHS documenting the requirements for participating in the applicable direct enrollment program. The required testing processes may include enrollment testing, prior to approval or at the time of renewal, and website reviews performed by HHS to evaluate prospective web-brokers' compliance with applicable website display requirements prior to approval. To facilitate testing, prospective and approved web-brokers will have to maintain and provide access to testing environments that reflect their prospective or actual production environments. These amendments codify in regulation existing program requirements that apply to web-brokers that participate in the FFE direct enrollment program and are captured in the agreements executed with participating web-broker direct enrollment entities and related technical guidance.
We are revising § 155.221(b)(4) to add additional detail on the operational readiness requirements for direct enrollment entities. Similar to the proposed web-broker operational readiness requirement at new § 155.220(c)(6), these amendments codify in § 155.221(b)(4) additional details about the existing program requirements that apply to direct enrollment entities and are captured in the agreements executed with participating web-broker and QHP issuer direct enrollment entities. We note that these requirements are in addition to the operational readiness requirements at new § 155.220(c)(6) for web-brokers, although web-brokers may not be required to submit the documentation required under this proposal to revise § 155.221(b)(4) or they may be permitted to use the same documentation to satisfy the requirements of both operational readiness reviews depending on the specific circumstances of their participation in direct enrollment programs and the source and type of documentation.
In paragraph (b)(4), we require a direct enrollment entity to demonstrate operational readiness and compliance with applicable requirements prior to the direct enrollment entity's website being used to complete an Exchange eligibility application or a QHP selection. We add new paragraphs (b)(4)(i) through (v) to reflect that direct enrollment entities may need to submit or complete, in the form and manner specified by HHS, a number of artifacts of documentation or various testing or training processes. The documentation may include business audit documentation including: Notices of intent to participate including auditor information; documentation packages including privacy questionnaires, privacy policy statements, and terms of service; and business audit reports including testing results. The required documentation may also include security and privacy audit documentation including: Interconnection security agreements; security and privacy controls assessment test plans; security and privacy assessment reports; plans of action and milestones; privacy impact assessments; system security and privacy plans; incident response plans; and vulnerability scan results. Submission of agreements between the direct enrollment entity and HHS documenting the requirements for participating in the applicable direct enrollment program may also be required. Required testing may include eligibility application audits performed by HHS. The direct enrollment entity may also be required to complete online training modules developed by HHS related to the requirements to participate in direct enrollment programs. We expect minimal new burden associated with this policy as these requirements have historically been established through agreements EDE entities have executed with HHS, and therefore entities have completed these tasks in the past to be able to use the EDE pathway. The burden related to these requirements is discussed in the Collection of Information Requirements section in this final rule.
We are revising § 155.221(b)(1) to require that direct enrollment entities display and market QHPs offered through the Exchange, individual health insurance coverage as defined in § 144.103 offered outside the Exchange (including QHPs and non-QHPs other than excepted benefits), and all other products, such as excepted benefits, on at least three separate website pages, with certain exceptions. This change is a revision of a policy adopted in 2019. We anticipate this policy will provide increased flexibility and believe many direct enrollment entity websites are already designed in a manner largely consistent with this proposal, and therefore the burden associated with it is minimal.
In the 2019 Payment Notice we estimated a one-time burden on Exchanges for necessary system changes to meet the requirement related to data matching issues. The 2019 Payment Notice estimate did not take into account the ongoing operational cost for processing data matching issues from this requirement, because ongoing operational costs are dependent on the Exchange's number of applicants with income inconsistencies and the threshold for setting a data matching issue which was unknown at the time.
Now that we are changing this requirement, we expect a cost saving and burden reduction. We estimate the amendments to § 155.320(c) will create a one-time cost for an Exchange of approximately $450,000 to complete the necessary system changes to remove functionality for this policy. We estimate that approximately half of the State Exchanges implemented verification functionality in 2019 or 2020. Therefore, for 7 State Exchanges, the estimated total cost will be $3.15 million.
Based on plan year 2019 and 2020 data of the volume of income inconsistencies generated in the FFEs, we estimate that approximately 295,000 fewer inconsistencies will be generated annually by FFEs by removing this requirement and will result in annual savings of approximately $3,560,650 for FFEs. We anticipate additional ongoing annual savings for FFEs estimated at $242,550 due to the reduction of approximately 385,000 mailed consumer notices (approximately $0.63 per notice). We estimate that approximately 57,361 fewer inconsistencies will be generated annually by State Exchanges by removing this requirement and will result in annual savings of approximately $692,349 annually for State Exchanges. Likewise, we anticipate additional ongoing annual savings for State Exchanges estimated at $74,861 due to the reduction of approximately 10,694 mailed consumer notices. Total annual savings for FFEs and State Exchanges is estimated to be approximately $4,570,410. We note that there could also be additional savings in appeals costs.
As discussed previously in the preamble, as for benefit years 2020 and 2021, we will not take enforcement action against Exchanges that do not perform random sampling as required by § 155.320(d)(4) for benefit year 2022. HHS's experience conducting random sampling revealed that employer response rates to HHS's request for information were low. The manual verification process described in paragraph (d)(4)(i) requires significant resources and government funds, and the value of the results ultimately does not appear to outweigh the costs of conducting the work because only a small percentage of sample enrollees have been determined by HHS to have received APTC/CSRs inappropriately. We estimate the annual costs to conduct sampling on a statistically significant sample size of approximately 1 million cases to be approximately $6 million to $8 million for the Exchanges on the Federal platform and State Exchanges that operate their own eligibility and enrollment platforms. This estimate includes operational activities such as noticing, inbound and outbound calls to the Marketplace call center, and adjudicating consumer appeals. We estimate that the total annual cost for the Exchanges on the Federal platform and the 15 State Exchanges operating their own eligibility and enrollment platform in 2022 would have been approximately $113 million. Relieving Exchanges of the requirement to conduct sampling for benefit year 2022 will therefore result in total savings of approximately $113 million. We sought comment on this estimate.
We are adding a new paragraph at § 155.420(a)(4)(ii)(C) to require Exchanges, no later than January 1, 2024, to allow enrollees and their dependents who qualify for a special enrollment period because they become newly ineligible for APTC in accordance with paragraph (d)(6)(i) or (ii) of this section to enroll in a QHP of any metal level. We anticipate that this change will help reduce Exchanges' implementation burden by simplifying the policy and providing additional time to operationalize it, which some Exchanges may need in light of competing priorities such as the need to implement changes to calculate financial assistance established in the American Rescue Plan Act of 2021. We also expect that this policy will help impacted enrollees' ability to maintain continuous coverage for themselves and for their dependents in spite of losing a potentially significant amount of financial assistance to help them purchase coverage. For example, an enrollee impacted by an increase to his or her monthly premium payment may change to a bronze-level plan, or to catastrophic coverage if they are otherwise eligible. Relatedly, this proposal may benefit the individual market risk pool by encouraging healthy individuals to maintain continuous coverage. Previously, an enrollee who lost APTC eligibility had only two choices: Paying the full premium or terminating his or her coverage. Healthy individuals who lose APTC may be more likely to terminate coverage due to increased premium liability, while enrollees who have one or more medical conditions will be incentivized to maintain coverage in spite of the additional expense. This provision will serve to facilitate continuous coverage of healthy individuals by giving them the ability to enroll in a new plan with a lower premium, thereby supporting a healthier risk pool. Finally, the American Rescue Plan Act of 2021 will prevent some individuals from losing a significant amount of APTC based on a relatively small change in household income, because it allows individuals whose household income exceeds 400 percent FPL to qualify for a premium tax credit if they are otherwise eligible. However, we believe that some consumers will still benefit from this flexibility to plan category limitations, in part because, as described in preamble, there are scenarios other than a household income increase that may
As discussed in the proposed rule, we did not believe that this change would have a negative impact on the individual market risk pool, because most applicable enrollees would be seeking to change coverage based on financial rather than health needs. However, we sought comment on concerns about adverse selection risk with permitting newly unsubsidized enrollees to change to any plan of a lower metal level to help them maintain coverage (for example, permitting an individual to change from a gold plan to a bronze plan), or whether this risk would be significantly lower if we only permitted an enrollee to change to a plan one metal level lower than their current QHP. We also requested comment from issuers on whether there were concerns about impacts such as experiencing a decrease in premium receipts from enrollees who opted to change to a lower-cost plan, or whether they view adverse selection as a possibility.
Additionally, we solicited comments on the extent to which Exchanges would experience burden due to the proposed change, and on whether we should exempt the special enrollment periods at § 155.420(d)(6)(i) and (ii) due to becoming newly ineligible for APTC from plan category limitations altogether to help to mitigate this burden, or whether such a change would significantly increase risk for adverse selection.
Finally, we solicited comment on whether this change to current system logic would impose burden on FFE Direct Enrollment and Enhanced Direct Enrollment partners, as well as more generally, on the impact of this proposal.
We received public comments on the potential risk related to the proposed updates to add new flexibility to allow current Exchange enrollees and their dependents to enroll in a new QHP of a lower metal level if they qualify for a special enrollment period due to becoming newly ineligible for APTC. The following is a summary of the comments we received and our responses.
We also clarify that this policy does not create a new special enrollment period qualifying event, but rather is a change to limitations on plan selection that apply to an already-existing special enrollment period for Exchange enrollees who become newly ineligible for APTC per 45 CFR 155.420(d)(6)(i) and (ii).
We did not propose removing plan category limitations. We will continue to study potential policies to promote continuous coverage and provide consumers with flexibility. Finally, we acknowledge the potential benefit of requiring Exchanges to implement this change quickly, but we believe that providing Exchanges with flexibility to implement it no later than January 1, 2024 strikes an appropriate balance between allowing early implementation if possible and providing Exchanges with necessary flexibility to plan related system updates based on Exchange-specific competing priorities and resources, such as implementation of changes to eligibility for advance payments of the premium tax credit established by the American Rescue Plan Act of 2021.
We anticipate that the amendments related to qualified individuals who do not receive timely notice of a triggering event and otherwise are reasonably unaware that a triggering event occurred will provide certain consumers a pathway to maintain continuous coverage, which will have an overall positive impact on the risk pool and will benefit consumers. Consumers will benefit from being able to maintain continued access to coverage and health care. We recognize the possibility of some minor adverse selection risk given that consumers with known health issues may be more likely to request a retroactive effective date than healthy consumers. However, we expect this risk to be very limited as the proposal only permits individuals to request a retroactive effective date if they did not
We expect that Exchanges and direct enrollment partners might incur minor costs to update consumer messaging and processes to administer this proposal. State Exchanges that currently do not have this policy and issuers offering off-Exchange plans would incur minor costs to implement this proposal.
We received public comments on the proposed updates to Special Enrollment Periods—Untimely Notice of Triggering Event. See the preamble to this provision for a summary of the comments we received and our responses.
We anticipate that the amendments regarding special enrollment period eligibility for qualified individuals whose employers completely cease payment of their portion of COBRA continuation coverage premiums will provide clarity regarding a policy that has been operationalized on
Although this special enrollment period has already been available to individuals enrolling in a qualified health plan on Exchanges on the Federal Platform, because cessation of government subsidies to COBRA has not previously been considered a triggering event, we do anticipate that the Exchanges on the Federal platform, direct enrollment partners, State Exchanges that do not have this policy, and issuers who operate off-Exchange plans will incur some costs to implement this policy, especially in light of the projected increase in COBRA enrollments as a result of the subsidies provided for in the American Rescue Plan Act of 2021.
We received public comments on the proposed updates to cessation of employer contributions to COBRA as special enrollment period trigger. The following is a summary of the comment we received and our response.
The aforementioned CBO analysis notes however that many of the enrollees who are projected to enroll in COBRA as a result of the federal subsidies would have otherwise enrolled in individual market coverage,
As described earlier in the preamble, we are finalizing a premium adjustment percentage of 1.3760126457 for the 2022 benefit year. The annual premium
In accordance with § 155.605(d)(2), we are finalizing a required contribution of 8.09 percent for the 2022 benefit year, which reflects the premium adjustment percentage calculation for the 2022 benefit year detailed in preamble. In accordance with § 156.130(a)(2), we are finalizing a maximum annual limitation on cost sharing of $8,700 for self-only coverage and $17,400 for other than self-only for the 2022 benefit year. The CMS Office of the Actuary estimates that the change in measure of premium growth from using private health insurance (excluding Medigap, and property and casualty insurance) to ESI to calculate the premium adjustment percentage may have the following impacts between 2022 and 2026.
As noted in Table 15, we expect that the change in measure of premium growth used to calculate the premium adjustment percentage index for the 2022 benefit year and beyond will likely result in:
• Net premium decreases of approximately $181 million per year, which is approximately one percent of 2018 benefit year net premiums, for the 2024 benefit year through the 2026 benefit year.
• An increase in federal premium tax credit spending of $460 million to $510 million between 2023 and 2026, due to the decrease in the applicable percentage table, based on an assumption that the Department of the Treasury and the IRS will adopt the use of the NHEA ESI premium measure finalized for the calculation of the premium adjustment percentage in this rule for the purposes of calculating the indexing of the premium tax credit applicable percentage and required contribution percentage under section 36B of the Code.
We are also finalizing the proposed rates of reductions to the maximum annual limitation on cost sharing of
We are also finalizing that beginning with the 2023 benefit year, we will publish the premium adjustment percentage, maximum annual limitation on cost sharing, reduced maximum annual limitations on cost sharing, and required contribution percentage in guidance in January of the calendar year preceding the benefit year to which the parameters are applicable, unless HHS is changing the methodology, in which case we will do so through the applicable HHS notice of benefit and payment parameters. This policy change affects only the timing and method by which these parameters are released and will provide issuers with additional time for plan design and rate setting.
As part of the ACA, Congress passed section 6005, which added section 1150A to the Act, requiring a PBM under a contract with a QHP offered through an Exchange established by a state under section 1311 of the ACA
On January 1, 2020
For example, to reduce overall burden, we will collect data directly from PBMs that contract with QHPs directly, rather than require QHP issuers to serve as a go-between their PBM and CMS.
These information collections also explained how we utilize the reporting paradigm currently used by CMS' DIR reporting requirement which collects, in part, the data required by section 1150A(a)(1) of the Act from Prescription Drug Plan sponsors of a prescription drug plan and Medicare Advantage organizations offering a Medicare Advantage Prescription Drug Plan under part D of title XVII. We noted our intention to utilize the DIR reporting mechanisms only to the extent authorized solely by section 1150A(a)(2), explaining our understanding that DIR reporting is not authorized by section 1150A alone.
We are providing more clarity around the APTC, CSR, and user fee program audits and establishing authority for HHS to conduct compliance reviews to assess compliance with federal APTC, CSR, and user fee standards by finalizing amendments to § 156.480(c), with slight modifications to certain audit timeframes in response to comments requesting issuers be provided more time to provide the initial audit data submissions and written corrective action plans. QHP issuers being audited for compliance with federal APTC, CSR, and user fee standards will be required to comply with audit requirements including participating in entrance and exit conferences, submitting complete and accurate data to HHS in a timely manner, and providing responses to additional requests for information from HHS and to preliminary audit reports in a timely manner. If an audit results in a finding, issuers must also provide written corrective plans in the time and manner set forth by HHS. We are also codifying our authority to recoup APTC and CSR payments if they are not adequately substantiated by the data and information submitted by issuers during the course of the audit.
We anticipate that compliance with APTC, CSR, and user fee program audits will take 120 hours by a business operations specialist (at a rate of $77.14 per hour), 40 hours by a computer systems analyst (at a rate of $92.46 per hour), and 20 hours by a compliance officer (at a rate of $70.06 per hour) per issuer per benefit year. The cost per issuer will be approximately $14,356. While the number of QHP issuers participating in the APTC, CSR, and user fee programs varies per benefit year (for example, there were 561 QHP issuers participating in the programs for the 2019 benefit year), HHS only intends to audit a small percentage of these issuers, roughly 30-60 issuers per benefit year. Depending on the number of issuers audited each year, the total cost to issuers being audited will be between $430,692 and $861,384, with an average annual cost of approximately $646,038.
We anticipate that APTC, CSR, and user fee program compliance reviews will take 30 hours by a business operations specialist (at a rate of $77.14 per hour), 10 hours by a computer systems analyst (at a rate of $92.46 per hour), and 5 hours by a compliance officer (at a rate of $70.06 per hour) per issuer per benefit year. The cost per issuer will be approximately $3,589. While the number of QHP issuers participating in the APTC, CSR, and user fee programs varies per benefit year, (for example, there were 561 QHP issuers participating in the programs for the 2019 benefit year), HHS only intends to conduct compliance reviews for no more than 15 issuers per benefit year. The total annual cost to issuers undergoing compliance reviews will be approximately $53,836.
We are finalizing removal of the composite level and domain level of the QRS hierarchy, which is a key element of the QRS framework that establishes how quality measures are organized for scoring, rating and reporting purposes. We will also make the full QHP Enrollee Survey results publicly available in an annual PUF. We anticipate that these changes will benefit consumers and QHP issuers by increasing transparency and availability of QHP survey data through publication of a nationwide PUF, and simplifying the QRS scoring hierarchy to improve understanding of QRS quality rating information and alignment with other CMS quality reporting programs. Neither refinement will alter the data collection and reporting requirements for the QRS and QHP Enrollee Survey because QHP issuers are already required to report all data needed to support a QHP Enrollee Survey PUF and simplified QRS hierarchy. Therefore, these refinements will create no additional cost or burden for QHP issuers.
We are finalizing the proposal to amend § 158.103 to establish the definition of prescription drug rebates and other price concessions that issuers must deduct from incurred claims for MLR reporting and rebate calculation purposes pursuant to § 158.140(b)(1)(i). We do not expect this to change the result of the regulatory impact analysis previously conducted for the 2021 Payment Notice with respect to the requirement that issuers deduct from MLR incurred claims not only prescription drug rebates received by
We are also finalizing the proposal that issuers that choose to provide temporary premium credits to consumers during a declared PHE in 2021 and beyond when permitted by HHS must account for these credits as reductions to premium for the applicable months when reporting earned premium for the applicable MLR reporting year. Although we do not know how many states will permit issuers to provide temporary credits to reduce premiums or how many issuers will elect to do so, for purposes of this analysis, we previously estimated in the interim final rule on COVID-19 (85 FR 54820) that approximately 40 percent of issuers offering individual, small group or merged market health insurance coverage will provide these premium credits to reduce the premiums charged to enrollees to support continuity of coverage during the PHE for COVID-19. We do not estimate a change to the cost or burden previously estimated in that final rule, and anticipate that that regulatory impact estimate would extend to 2021 and beyond. Although we do not know the number of issuers that will provide these temporary premium credits or the amount of premium credits that issuers may elect to provide, for purposes of this estimate we assume that such premium credits will on average constitute approximately 8 percent of total annual premium (equivalent to one month of premium), as previously estimated in that final rule. Because the MLR calculation uses three consecutive years of data, there may be additional rebate decreases in subsequent years, although the impact on rebates might be smaller as issuers will likely account for the premium relief provided to enrollees through these temporary premiums credits at the time they develop premium rates for the 2022 benefit year and future benefit years.
As noted in section IV of this final rule, on March 4, 2021, the U.S. District Court for the District of Maryland, in
We are also finalizing the proposal to add a new § 158.240(g) to explicitly allow issuers to prepay a portion or all of their estimated MLR rebates to enrollees for a given MLR reporting year, and to establish a safe harbor allowing such issuers, under certain conditions, to defer the payment of rebates remaining after prepayment until the following MLR reporting year. We are additionally finalizing the proposal to amend § 158.241(a) to allow issuers to provide rebates in form of a premium credit prior to the date that the rules previously provided. We do not expect these provisions to have a significant quantitative impact as they will not change the rebate amounts provided by issuers to enrollees. Since it is easiest and most cost-effective for issuers to conduct rebate disbursement activities all at once, the additional rebates will generally be paid during the following year's disbursement cycle—that is, if 95 percent of rebates for 2020 was prepaid during Jan.-July 2021, the remainder will be paid no later than Sept. 2022 (possibly earlier in 2022 if the issuer decides to prepay again). However, we note that there may be some increased administrative burden on issuers that owe rebates remaining after prepayment associated with good faith efforts to locate enrollees, if any, with whom they no longer have a direct economic relationship.
If regulations impose administrative costs on private entities, such as the time needed to read and interpret this final rule, we should estimate the cost associated with regulatory review. Due to the uncertainty involved with accurately quantifying the number of entities that will review the rule, we assume that this rule will be reviewed by all affected issuers, states, PBMs, and some individuals and other entities that commented on the proposed rule. We acknowledge that this assumption may understate or overstate the costs of reviewing this rule. It is possible that not all commenters reviewed the proposed rule in detail, and it is also possible that some reviewers chose not to comment on the proposed rule. For these reasons we thought that the number of affected entities and commenters to be a fair estimate of the number of reviewers of this rule.
We are required to issue a substantial portion of this rule each year under our regulations and we estimate that approximately half of the remaining provisions would cause additional regulatory review burden that stakeholders do not already anticipate. We also recognize that different types of entities are in many cases affected by mutually exclusive sections of this final rule, and therefore, for the purposes of our estimate we assume that each reviewer reads approximately 50 percent of the rule, excluding the portion of the rule that we are required to issue each year.
Using the wage information from the BLS for medical and health service managers (Code 11-9111), we estimate that the cost of reviewing this rule is $110.74 per hour, including overhead and fringe benefits.
In developing the policies contained in this final rule, we considered numerous alternatives to the presented proposals. Below we discuss the key regulatory alternatives that we considered.
Under part 153 of this final rule, we are finalizing an approach to recalibrate the risk adjustment models for the 2022 benefit year using 2016, 2017, and 2018 enrollee-level EDGE data.
We also considered alternatives to the proposed model specification changes and revised enrollment duration factors that we are not finalizing in this rulemaking. For example, we initially considered adding only a non-linear term or only adopting new HCC counts terms for all enrollees to the adult and child risk adjustment models. As described earlier in this final rule, we had convergence issues with the non-linear model specifications and concerns that the HCC counts terms approach posed significant gaming concerns when pursued separately.
In addition to the non-linear and HCC counts model specifications, we also considered alternatives to the two-stage specification and HCC interacted counts model. Specifically, we tested various alternative caps for the weights based on the distribution of costs, but found the finalized caps resulted in better prediction on average. For the prediction weights, we tested various alternative forms of weights, including reciprocals of square root of prediction, log of prediction, and residuals from first step estimation, but the reciprocal of the capped predictions resulted in better predictive ratios for low-cost enrollees compared to any of the other weights.
For the interacted HCC counts factors, we tested several HCCs and considered adding and removing certain HCCs from the list in Table 3 in the proposed rule. We choose the list of HCCs in Table 3 of the proposed rule because including those HCCs most improved prediction for enrollees with the highest costs, multiple HCCs, and with these specific HCCs. For the HCC interacted counts, we also considered various alternatives to structure the interacted HCC counts, such as applying individual interacted HCC counts factors (between 1-10 based on the number of HCCs an enrollee has) to each of the selected HCCs included in the models (instead of combining all of the selected HCCs into two severity and transplant indicator groups). We choose the proposed model specifications because they would add fewer additional factors to the models without sacrificing any significant predictive accuracy. However, as noted above, after consideration of comments, we are not finalizing the adoption of the either the proposed two-stage model specification or interacted HCC counts factors in the adult and child models or the accompanying removal of the existing severity illness indicators from the adult models.
For the enrollment duration factors in the adult risk adjustment models, we proposed modifying the enrollment duration factors to apply monthly duration factors of up to 6 months for those with HCCs. The purpose of this proposed change was to address the underprediction of plan liability for adults with HCCs. As part of this assessment, we considered whether enrollment duration factors by market type may be warranted. However, as described earlier in this final rule, we did not find a major distinction in market-specific incremental monthly enrollment duration factor risk scores after isolating the enrollment duration factors to enrollees with HCCs. However, as detailed above, after consideration of comments, we are not finalizing the adoption of the new proposed adult model enrollment duration factors or the accompanying removal of the current adult model enrollment duration factors.
In regards to the changes to § 155.320, we considered taking no action to modify the requirement that when an Exchange does not reasonably expect to obtain sufficient verification data related to enrollment in or eligibility for employer sponsored coverage that the Exchange must select a statistically significant random sample of applicants and attempt to verify their attestation with the employer listed on their Exchange application. However, based on HHS's experience conducting sampling, this manual verification process requires significant resources for a low return on investment, as using this method HHS identified only a small population of applicants who received APTC/CSR payments inappropriately. We ultimately determined that a verification process for employer-sponsored coverage should be one that is evidence or risk-based and that not taking enforcement action against Exchanges that do not conduct random sampling was appropriate as we anticipate future rulemaking is necessary to ensure that Exchanges have more flexibility for such verifications.
We considered taking no action regarding our policy to add a new § 155.420(a)(4)(iii)(C) to allow enrollees and their dependents to enroll in a new QHP of a lower metal level
We also considered whether to provide additional flexibility to allow enrollees and their dependents who become newly eligible for APTC in accordance with section 155.420(d)(6)(i) or (ii) to enroll in a QHP of a higher metal level, because we recognize becoming newly eligible for APTC may increase the affordability of higher metal level plans for some individuals. However, as discussed in the proposed rule, we believed including this flexibility would largely exempt the special enrollment periods at paragraph (d)(6)(i) and (ii) from the rules at 155.420(a)(4)(iii), which might make it likely that more individuals would change coverage levels in response to health status changes. More importantly, while we believe the flexibilities for individuals who become newly ineligible for APTC are needed in order to promote continuous coverage for individuals who can no longer afford their original plan choice, no similar affordability and continuous coverage concerns exist for enrolled consumers who gain APTC eligibility during the coverage year. However, as noted in preamble, we received several comments requesting that HHS provide this flexibility for enrollees who newly become eligible for APTC. Therefore,
We considered taking no action regarding our policy to add a new § 155.420(c)(5) to allow a qualified individual, dependent or enrollee that did not receive timely notice of a triggering event or was otherwise reasonably unaware that a triggering event described in § 155.420(d) occurred to select a new plan within 60 days of the date he or she knew, or reasonably should have known, of the occurrence of the triggering event. However, in some circumstances this would result in consumers, through no fault of their own, being unable to access a special enrollment period for which they were eligible. Additionally, we considered not adding new § 155.420(b)(5) to provide a qualified individual, dependent, or enrollee described in new § 155.420(c)(5) with the option for a retroactive effective date. Failing to provide the option for a retroactive effective date would necessarily result in a gap in coverage, and therefore hinder a consumer's ability to maintain continuous coverage.
We also considered limiting the applicability of the policy to add a new § 155.420(c)(5) to a qualified individual, enrollee, or dependent who does not receive notice or become reasonably aware of the occurrence of a triggering event until more than 15 days after the triggering event. However, failing to apply the new § 155.420(c)(5) to qualified individuals, enrollees, or dependents who receive notice or become reasonably aware of the occurrence of a triggering event 15 days or less after the triggering event and eliminating the option for a retroactive effective date for those individuals would result in a gap in coverage for such individuals and hinder their ability to maintain continuous coverage.
We considered taking no action regarding our policy to add new paragraph (d)(15) to § 155.420 to specify that complete cessation of employer contributions or government subsidies to COBRA continuation coverage is a special enrollment period triggering event. However, codifying this policy in regulation provides transparency to a long-standing interpretation of the Exchanges on the Federal platform. Additionally, codifying this policy in regulation ensures alignment across all Exchanges and in the off-Exchange individual market.
For the revisions to § 156.295 and addition of § 184.50 to require certain prescription drug reporting, we considered, but did not yet require, the reporting of data described in section 1150A(b)(1) broken down by pharmacy type (which includes an independent pharmacy, chain pharmacy, supermarket pharmacy, or mass merchandiser pharmacy that is licensed as a pharmacy by the state and that dispenses medication to the general public). As mentioned in this final rule, we are aware that it is not currently possible to report such data by pharmacy type because pharmacy type is not a standard classification currently captured in industry databases or files. While we believe the imposition of this level of reporting would impose unreasonable burden at this time, we intend to begin collecting this information in the future.
The Regulatory Flexibility Act, (5 U.S.C. 601,
In this rule, we finalize standards for the risk adjustment program, which are intended to stabilize premiums and reduce incentives for issuers to avoid higher-risk enrollees. We believe that health insurance issuers and group health plans would be classified under the North American Industry Classification System code 524114 (Direct Health and Medical Insurance Carriers). According to SBA size standards, entities with average annual receipts of $41.5 million or less are considered small entities for these North American Industry Classification System codes. Issuers could possibly be classified in 621491 (HMO Medical Centers) and, if this is the case, the SBA size standard would be $35 million or less.
In this rule, we are requiring certain QHP issuers or their PBMs to report certain prescription drug information to CMS. We are not aware of any QHP issuer or PBM that contracts with a QHP issuer to administer their prescription drug benefit which would be considered a “small entity” under the RFA.
In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule under title XVIII, title XIX, or part B of title 42 of the Act may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a metropolitan statistical area and has fewer than 100 beds. While this rule is not subject to section 1102 of the Act, we have determined that this rule will not affect small rural hospitals. Therefore, the Secretary has determined that this rule will not have a significant impact on the operations of a substantial number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 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 governments, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. In 2021 that threshold is approximately $158
Executive Order 13132 establishes certain requirements that an agency must meet when it issues a final rule that imposes substantial direct costs on state and local governments, preempts state law, or otherwise has federalism implications. In our view, while this final rule will not impose substantial direct requirement costs on state and local governments, this regulation has federalism implications due to potential direct effects on the distribution of power and responsibilities among the state and federal governments relating to determining standards relating to health insurance that is offered in the individual and small group markets.
In compliance with the requirement of Executive Order 13132 that agencies examine closely any policies that may have federalism implications or limit the policy making discretion of the states, we have engaged in efforts to consult with and work cooperatively with affected states, including participating in conference calls with and attending conferences of the NAIC, and consulting with state insurance officials on an individual basis.
While developing this rule, we attempted to balance the states' interests in regulating health insurance issuers with the need to ensure market stability. By doing so, we complied with the requirements of Executive Order 13132.
Because states have flexibility in designing their Exchange and Exchange-related programs, state decisions will ultimately influence both administrative expenses and overall premiums. States are not required to establish an Exchange or risk adjustment program. For states that elected previously to operate an Exchange, those states had the opportunity to use funds under Exchange Planning and Establishment Grants to fund the development of data. Accordingly, some of the initial cost of creating programs was funded by Exchange Planning and Establishment Grants. After establishment, Exchanges must be financially self-sustaining, with revenue sources at the discretion of the state. A user fee is assessed on issuers under all existing Exchange models, including State Exchanges where the user fee is assessed by the state, SBE-FPs, and the FFEs.
This final rule is subject to the Congressional Review Act provisions of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801,
Age discrimination, Citizenship and naturalization, Civil rights, Health care, Health insurance, Individuals with disabilities, Intergovernmental relations, Reporting and recordkeeping requirements, Sex discrimination.
Administrative practice and procedure, Health care, Health insurance, Penalties, Reporting and recordkeeping requirements.
Administrative practice and procedure, Health care, Health insurance, Health records, Intergovernmental relations, Organization and functions (Government agencies), Reporting and recordkeeping requirements.
Administrative practice and procedure, Advertising, Age discrimination, Brokers, Civil rights, Citizenship and naturalization, Conflict of interests, Consumer protection, Grant programs—health, Grants administration, Health care, Health insurance, Health maintenance organizations (HMO), Health records, Hospitals, Indians, Individuals with disabilities, Intergovernmental relations, Loan programs—health, Medicaid, Organization and functions (Government agencies), Public assistance programs, Reporting and recordkeeping requirements, Sex discrimination, State and local governments, Technical assistance, Taxes, Women, Youth.
Administrative practice and procedure, Advertising, Advisory committees, Age discrimination, Alaska, Brokers, Citizenship and naturalization, Civil rights, Conflict of interests, Consumer protection, Grant programs—health, Grants administration, Health care, Health insurance, Health maintenance organization (HMO), Health records, Hospitals, Indians, Individuals with disabilities, Intergovernmental relations, Loan programs—health, Medicaid, Organization and functions (Government agencies), Prescription drugs, Public assistance programs, Reporting and recordkeeping requirements, Sex discrimination, State and local governments, Sunshine Act, Technical assistance, Women, Youth.
Administrative practice and procedure, Claims, Health care, Health insurance, Penalties, Reporting and recordkeeping requirements.
Administrative practice and procedure, Consumer protection, Health care, Health insurance, Health maintenance organization (HMO), Organization and functions (Government agencies), Prescription Drugs, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, under the authority at 5 U.S.C. 301, the Department of Health and Human Services proposes to amend 45 CFR subtitle A, subchapter B, as set forth below.
42 U.S.C. 300gg through 300gg-63, 300gg-91, and 300gg-92, as amended, and section 3203, Pub. L. 116-136, 134 Stat. 281.
(b) * * *
(2) * * *
(ii) In applying this paragraph (b)(2), a reference in § 155.420 (other than in §§ 155.420(a)(5) and (d)(4)) of this subchapter to a “QHP” is deemed to refer to a plan, a reference to “the
(4) * * *
(ii) In the individual market, subject to § 155.420(c)(5) of this subchapter, individuals must be provided 60 calendar days after the date of an event described in paragraph (b)(2) and (3) of this section to elect coverage, as well as 60 calendar days before certain triggering events as provided for in § 155.420(c)(2) of this subchapter.
42 U.S.C. 300gg through 300gg-63, 300gg-91, and 300gg-92, as amended.
(a) Every submission filed with the ALJ must be filed electronically and include:
(b) A party filing a submission with the ALJ must, at the time of filing, serve a copy of such submission on the opposing party. An intervenor filing a submission with the ALJ must, at the time of filing, serve a copy of the submission on all parties. If a party is represented by an attorney, service must be made on the attorney. An electronically filed submission is considered served on all parties using the electronic filing system.
After receipt of the request for hearing, the ALJ assigned to the case or someone acting on behalf of the ALJ will send a written notice to the parties that acknowledges receipt of the request for hearing, identifies the docket number assigned to the case, and provides instructions for filing submissions and other general information concerning procedures. The ALJ will set out the next steps in the case either as part of the acknowledgement or on a later date.
(e) Establishing a schedule for an in-person, telephone, or video teleconference hearing, including setting deadlines for the submission of written direct testimony or for the written reports of experts.
42 U.S.C. 18031, 18041, and 18061 through 18063.
(c)
(d)
(1)
(i)
(ii) [Reserved]
(2)
(i) Ensure that its relevant employees, agents, contractors, subcontractors,
(ii) Submit complete and accurate data to HHS or its designees that is necessary to complete the audit, in the format and manner specified by HHS, no later than 30 calendar days after the initial audit response deadline established by HHS at the entrance conference described in paragraph (d)(1)(i) of this section for the applicable benefit year;
(iii) Respond to all audit notices, letters, and inquiries, including requests for supplemental or supporting information, as requested by HHS, no later than 15 calendar days after the date of the notice, letter, request, or inquiry; and
(iv) In circumstances in which an issuer cannot provide the requested data or response to HHS within the timeframes under paragraph (d)(2)(ii) or (iii) of this section, as applicable, the issuer may make a written request for an extension to HHS. The extension request must be submitted within the timeframe established under paragraph (d)(2)(ii) or (iii) of this section, as applicable, and must detail the reason for the extension request and the good cause in support of the request. If the extension is granted, the issuer must respond within the timeframe specified in HHS's notice granting the extension of time.
(3)
(i) If the issuer does not dispute or otherwise respond to the preliminary findings, the audit findings will become final.
(ii) If the issuer responds and disputes the preliminary findings, HHS will review and consider such response and finalize the audit findings after such review.
(4)
(i) Within 45 calendar days of the issuance of the final audit report, provide a written corrective action plan to HHS for approval.
(ii) Implement that plan.
(iii) Provide to HHS written documentation of the corrective actions once taken.
(5)
(i) HHS will notify the issuer of reinsurance payments received that the issuer has not adequately substantiated; and
(ii) HHS will notify the issuer that HHS may recoup any payments identified in paragraph (5)(i) of this section.
(c)
(1)
(i)
(ii) [Reserved]
(2)
(i) Ensure that its relevant employees, agents, contractors, subcontractors, downstream entities, and delegated entities cooperate with any audit or compliance review under this section;
(ii) Submit complete and accurate data to HHS or its designees that is necessary to complete the audit, in the format and manner specified by HHS, no later than 30 calendar days after the initial audit response deadline established by HHS at the audit entrance conference described in paragraph (c)(1)(i) of this section for the applicable benefit year;
(iii) Respond to all audit notices, letters, and inquiries, including requests for supplemental or supporting information, as requested by HHS, no later than 15 calendar days after the date of the notice, letter, request, or inquiry; and
(iv) In circumstances in which an issuer cannot provide the requested data or response to HHS within the timeframes under paragraphs (c)(2)(ii) or (iii) of this section, as applicable, the issuer may make a written request for an extension to HHS. The extension request must be submitted within the timeframe established under paragraphs (c)(2)(ii) or (iii) of this section, as applicable, and must detail the reason for the extension request and the good cause in support of the request. If the extension is granted, the issuer must respond within the timeframe specified in HHS's notice granting the extension of time.
(3)
(i) If the issuer does not dispute or otherwise respond to the preliminary findings, the audit findings will become final.
(ii) If the issuer responds and disputes the preliminary findings, HHS will review and consider such response and finalize the audit findings after such review.
(4)
(i) Within 45 calendar days of the issuance of the final audit report, provide a written corrective action plan to HHS for approval.
(ii) Implement that plan.
(iii) Provide to HHS written documentation of the corrective actions once taken.
(5)
(i) HHS will notify the issuer of the risk adjustment (including high-cost risk pool) payments that the issuer has not adequately substantiated; and
(ii) HHS will notify the issuer that HHS may recoup any risk adjustment (including high-cost risk pool) payments identified in paragraph (c)(5)(i) of this section.
The revisions read as follows:
(d) * * *
(3) An issuer may appeal the findings of a second validation audit (if applicable) or the calculation of a risk
(g) * * *
(4) The issuer only offered small group market carryover coverage during the benefit year that is being audited.
(5) The issuer was the sole issuer in the state market risk pool during the benefit year that is being audited and did not participate in any other market risk pools in the State during the benefit year that is being audited.
The addition reads as follows:
(e)
42 U.S.C. 18021-18024, 18031-18033, 18041-18042, 18051, 18054, 18071, and 18081-18083.
The additions and revision read as follows:
(c) * * *
(2) * * *
(i) * * *
(B) For a web-broker, beginning November 1, 2015, or when such entity has been registered with the Exchange for at least 1 year, whichever is later, this standard also includes telephonic interpreter services in at least 150 languages.
(iii) * * *
(B) For a web-broker, beginning when such entity has been registered with the Exchange for at least 1 year, this standard also includes taglines on website content and any document that is critical for obtaining health insurance coverage or access to health care services through a QHP for qualified individuals, applicants, qualified employers, qualified employees, or enrollees. Website content or documents are deemed to be critical for obtaining health insurance coverage or access to health care services through a QHP if they are required to be provided by law or regulation to a qualified individual, applicant, qualified employer, qualified employee, or enrollee. Such taglines must indicate the availability of language services in at least the top 15 languages spoken by the limited English proficient population of the relevant State or States, as determined in guidance published by the Secretary. A web-broker that is licensed in and serving multiple States may aggregate the limited English populations in the States it serves to determine the top 15 languages required for taglines. A web-broker may satisfy tagline requirements with respect to website content if it posts a Web link prominently on its home page that directs individuals to the full text of the taglines indicating how individuals may obtain language assistance services, and if it also includes taglines on any critical stand-alone document linked to or embedded in the website.
(iv) For Exchanges, QHP issuers, and web-brokers, website translations.
(C) For a web-broker, beginning on the first day of the individual market open enrollment period for the 2017 benefit year, or when such entity has been registered with the Exchange for at least 1 year, whichever is later, content that is intended for qualified individuals, applicants, qualified employers, qualified employees, or enrollees on a website that is maintained by the web-broker must be translated into any non-English language that is spoken by a limited English proficient population that comprises 10 percent or more of the population of the relevant State, as determined in guidance published by the Secretary.
(c) * * *
(6) In addition to applicable requirements under § 155.221(b)(4), a web-broker must demonstrate operational readiness and compliance with applicable requirements prior to the web-broker's internet website being used to complete an Exchange eligibility application or a QHP selection, which
(i) Operational data including licensure information, points of contact, and third-party relationships;
(ii) Enrollment testing, prior to approval or renewal;
(iii) Website reviews performed by HHS;
(iv) Security and privacy assessment documentation, including:
(A) Penetration testing results;
(B) Security and privacy assessment reports;
(C) Vulnerability scan results;
(D) Plans of action and milestones; and
(E) System security and privacy plans.
(v) Agreements between the web-broker and HHS.
The additions and revisions read as follows:
(b) * * *
(1) Display and market QHPs offered through the Exchange, individual health insurance coverage as defined in § 144.103 of this subchapter offered outside the Exchange (including QHPs and non-QHPs other than excepted benefits), and any other products, such as excepted benefits, on at least three separate website pages on its non-Exchange website, except as permitted under paragraph (c) of this section;
(3) Limit marketing of non-QHPs during the Exchange eligibility application and QHP selection process in a manner that minimizes the likelihood that consumers will be confused as to which products and plans are available through the Exchange and which products and plans are not, except as permitted under paragraph (c)(1) of this section;
(4) Demonstrate operational readiness and compliance with applicable requirements prior to the direct enrollment entity's internet website being used to complete an Exchange eligibility application or a QHP selection, which may include submission or completion, in the form and manner specified by HHS, of the following:
(i) Business audit documentation including:
(A) Notices of intent to participate including auditor information;
(B) Documentation packages including privacy questionnaires, privacy policy statements, and terms of service; and
(C) Business audit reports including testing results.
(ii) Security and privacy audit documentation including:
(A) Interconnection security agreements;
(B) Security and privacy controls assessment test plans;
(C) Security and privacy assessment reports;
(D) Plans of action and milestones;
(E) Privacy impact assessments;
(F) System security and privacy plans;
(G) Incident response plans; and
(H) Vulnerability scan results.
(iii) Eligibility application audits performed by HHS;
(iv) Online training modules offered by HHS; and
(v) Agreements between the direct enrollment entity and HHS.
(c)
(1) Display and market QHPs offered through the Exchange and individual health insurance coverage as defined in § 144.103 of this subchapter offered outside the Exchange (including QHPs and non-QHPs other than excepted benefits) on the same website pages when assisting individuals who have communicated receipt of an offer of an individual coverage health reimbursement arrangement as described in § 146.123(c) of this subchapter, as a standalone benefit, or in addition to an offer of an arrangement under which the individual may pay the portion of the premium for individual health insurance coverage that is not covered by an individual coverage health reimbursement arrangement using a salary reduction arrangement pursuant to a cafeteria plan under section 125 of the Internal Revenue Code, but must clearly distinguish between the QHPs offered through the Exchange and individual health insurance coverage offered outside the Exchange (including QHPs and non-QHPs other than excepted benefits), and prominently communicate that advance payments of the premium tax credit and cost-sharing reductions are available only for QHPs purchased through the Exchange, that advance payments of the premium tax credit are not available to individuals who accept an offer of an individual coverage health reimbursement arrangement or who opt out of an individual coverage health reimbursement arrangement that is considered affordable, and that a salary reduction arrangement under a cafeteria plan may only be used toward the cost of premiums for plans purchased outside the Exchange; and
(2) Display and market Exchange-certified stand-alone dental plans offered outside the Exchange and non-certified stand-alone dental plans on the same website pages.
The revision read as follows:
(c) * * *
(3) * * *
(iii) * * *
(A) Except as specified in paragraph (c)(3)(iii)(B) and (C) of this section, if an applicant's attestation, in accordance with paragraph (c)(3)(ii)(B) of this section, indicates that a tax filer's annual household income has increased or is reasonably expected to increase from the data described in paragraph (c)(3)(ii)(A) of this section for the benefit year for which the applicant(s) in the tax filer's family are requesting coverage and the Exchange has not verified the applicant's MAGI-based income through the process specified in paragraph (c)(2)(ii) of this section to be within the applicable Medicaid or CHIP MAGI-based income standard, the Exchange must accept the applicant's attestation regarding a tax filer's annual household income without further verification.
The revisions and additions read as follows:
(a) * * *
(4) * * *
(ii) * * *
(B) Beginning January 2022, if an enrollee and his or her dependents become newly ineligible for cost-sharing reductions in accordance with paragraph (d)(6)(i) or (ii) of this section and are enrolled in a silver-level QHP, the Exchange must allow the enrollee and his or her dependents to change to a QHP one metal level higher or lower, if they elect to change their QHP enrollment; or
(C) No later than January 1, 2024, if an enrollee and his or her dependents become newly ineligible for advance payments of the premium tax credit in accordance with paragraph (d)(6)(i) or (ii) of this section, the Exchange must allow the enrollee and his or her dependents to change to a QHP of any metal level, if they elect to change their QHP enrollment;
(iii) For the other triggering events specified in paragraph (d) of this section, except for paragraphs (d)(2)(i), (4), (6)(i) and (6)(ii) of this section for becoming newly eligible or ineligible for CSRs or, no later than January 1, 2024 newly ineligible for APTC, (d)(8), (9), (10) and (12) of this section:
(b) * * *
(2) * * *
(iv) If a qualified individual, enrollee, or dependent, as applicable, loses coverage as described in paragraph (d)(1) or (d)(6)(iii) of this section, gains access to a new QHP as described in paragraph (d)(7) of this section, becomes newly eligible for enrollment in a QHP through the Exchange in accordance with § 155.305(a)(2) as described in paragraph (d)(3) of this section, becomes newly eligible for advance payments of the premium tax credit in conjunction with a permanent move as described in paragraph (d)(6)(iv) of this section, or is enrolled in COBRA continuation coverage and employer contributions to or government subsidies of this coverage completely cease as described in paragraph (d)(15) of this section, and if the plan selection is made on or before the day of the triggering event, the Exchange must ensure that the coverage effective date is the first day of the month following the date of the triggering event. If the plan selection is made after the date of the triggering event, the Exchange must ensure that coverage is effective in accordance with paragraph (b)(1) of this section or on the first day of the following month, at the option of the Exchange.
(5)
(c) * * *
(2)
(5)
(d) * * *
(15) The qualified individual or his or her dependent is enrolled in COBRA continuation coverage for which an employer is paying all or part of the premiums, or for which a government entity is providing subsidies, and the employer completely ceases its contributions to the qualified individual's or dependent's COBRA continuation coverage or government subsidies completely cease. The triggering event is the last day of the period for which COBRA continuation coverage is paid for or subsidized, in whole or in part, by an employer or government entity. For purposes of this paragraph, “COBRA continuation coverage” has the meaning provided for in § 144.103 of this subchapter and includes coverage under a similar State program.
(e) * * *
(1) Failure to pay premiums on a timely basis, including COBRA continuation coverage premiums prior to expiration of COBRA continuation coverage, except for circumstances in which an employer completely ceases its contributions to COBRA continuation coverage, or government subsidies of COBRA continuation coverage completely cease as described in paragraph (d)(15) of this section, or
42 U.S.C. 18021-18024, 18031-18032, 18041-18042, 18044, 18054, 18061, 18063, 18071, 18082, and 26 U.S.C. 36B.
The revisions and addition read as follows:
(c)
(2) To support the functions of State Exchanges on the Federal platform, unless the State Exchange and HHS agree on an alternative mechanism to collect the funds, a participating issuer offering a plan through a State Exchange on the Federal Exchange platform for certain Exchange functions described in § 155.200 of this subchapter, as specified in a Federal platform agreement, must remit a user fee to
(3) A participating issuer offering a plan through an State-based Exchange on the Federal platform that has adopted the Direct Enrollment option or Federally-facilitated Exchange that has adopted the direct enrollment option as described in § 155.221(j) of this subchapter, as specified in a Federal agreement with HHS, must remit a user fee to HHS each month, in the timeframe and manner established by HHS, equal to the product of the monthly user fee rate for the applicable benefit year specified in an annual HHS notice of benefit and payment parameters published in advance of the applicable benefit year and the monthly premium charged by the issuer for each policy under the plan where enrollment is through the State-based Exchange on the Federal platform that has adopted the Direct Enrollment option or Federally-facilitated Exchange that has adopted the direct enrollment option.
(d)
(2) For a participating issuer described in paragraph (d)(1) of this section to receive an adjustment of a user fee under this section—
(i) * * *
(A) Identifying information for the participating issuer and each third party administrator that received a copy of the self-certification referenced in 26 CFR 54.9815-2713A(a)(4) or 29 CFR 2590.715-2713A(a)(4) with respect to which the participating issuer seeks an adjustment of the user fee specified in paragraph (c)(1), (2), or (3) of this section, as applicable, whether or not the participating issuer was the entity that made the payments for contraceptive services;
(B) Identifying information for each self-insured group health plan with respect to which a copy of the self-certification referenced in 26 CFR 54.9815-2713A(a)(4) or 29 CFR 2590.715-2713A(a)(4) was received by a third party administrator and with respect to which the participating issuer seeks an adjustment of the user fee specified in paragraph (c)(1), (2), or (3) of this section, as applicable; and
(ii) Each third party administrator that intends to seek an adjustment on behalf of a participating issuer of the Federally-facilitated Exchange user fee, the State-based Exchange on the Federal platform user fee, or the user fee applicable to issuers participating in a State-based Exchange on the Federal platform or a Federally-facilitated Exchange that has adopted the direct enrollment option § 155.221(j) of this subchapter based on payments for contraceptive services, must submit to HHS a notification of such intent, in a manner specified by HHS, by the 60th calendar day following the date on which the third party administrator receives the applicable copy of the self-certification referenced in 26 CFR 54.9815-2713A(a)(4) or 29 CFR 2590.715-2713A(a)(4).
(iii) * * *
(B) Identifying information for each self-insured group health plan with respect to which a copy of the self-certification referenced in 26 CFR 54.9815-2713A(a)(4) or 29 CFR 2590.715-2713A(a)(4) was received by the third party administrator and with respect to which the participating issuer seeks an adjustment of the user fee specified in paragraph (c)(1), (2), or (3) of this section, as applicable;
(3) If the requirements set forth in paragraph (d)(2) of this section are met, the participating issuer will be provided a reduction in its obligation to pay the user fee specified in paragraph (c)(1), (2), or (3) of this section, as applicable, equal in value to the sum of the following:
(4) If the amount of the adjustment under paragraph (d)(3) of this section is greater than the amount of the participating issuer's obligation to pay the user fee specified in paragraph (c)(1), (2), or (3) of this section, as applicable, in a particular month, the participating issuer will be provided a credit in succeeding months in the amount of the excess.
(5) Within 60 days of receipt of any adjustment of a user fee under this section, a participating issuer must pay each third party administrator with respect to which it received any portion of such adjustment an amount that is no less than the portion of the adjustment attributable to the total dollar amount of the payments for contraceptive services submitted by the third party administrator, as described in paragraph (d)(2)(iii)(D) of this section. No such payment is required with respect to the allowance for administrative costs and margin described in paragraph (d)(3)(ii) of this section. This paragraph does not apply if the participating issuer made the payments for contraceptive services on behalf of the third party administrator, as described in paragraph (d)(1)(i) of this section, or is in the same issuer group as the third party administrator.
(6) A participating issuer that receives an adjustment in the user fee specified in paragraph (c)(1), (2), or (3) of this section for a particular calendar year must maintain for 10 years following that year, and make available upon request to HHS, the Office of the Inspector General, the Comptroller General, and their designees, documentation demonstrating that it timely paid each third party administrator with respect to which it received any such adjustment any amount required to be paid to the third party administrator under paragraph (d)(5) of this section.
(7) A third party administrator of a plan with respect to which an adjustment of the user fee specified in paragraph (c)(1), (2), or (3) of this section is received under this section for a particular calendar year must maintain for 10 years following that year, and make available upon request to HHS, the Office of the Inspector General, the Comptroller General, and their designees, all of the following documentation:
(e)
The revisions read as follows:
(a)
(1) The percentage of all prescriptions that were provided under the QHP through retail pharmacies compared to mail order pharmacies, and the percentage of prescriptions for which a generic drug was available and dispensed compared to all drugs dispensed;
(2) The aggregate amount, and the type of rebates, discounts or price concessions (excluding bona fide service fees) that the QHP issuer negotiates that are attributable to patient utilization under the QHP, and the aggregate amount of the rebates, discounts, or price concessions that are passed through to the QHP issuer, and the total number of prescriptions that were dispensed.
(b)
(a) * * *
(1) * * *
(i) An annual limitation on cost sharing no greater than the reduced maximum annual limitation on cost sharing specified in the annual HHS guidance or notice of benefit and payment parameters for such individuals, and
(2) * * *
(i) An annual limitation on cost sharing no greater than the reduced maximum annual limitation on cost sharing specified in the annual HHS guidance or notice of benefit and payment parameters for such individuals, and
(3) * * *
(i) An annual limitation on cost sharing no greater than the reduced maximum annual limitation on cost sharing specified in the annual HHS guidance or notice of benefit and payment parameters for such individuals, and
(c)
(1)
(i)
(ii) [Reserved]
(2)
(i) Ensure that its relevant employees, agents, contractors, subcontractors, downstream entities, and delegated entities cooperate with any audit or compliance review under this section;
(ii) Submit complete and accurate data to HHS or its designees that is necessary to complete the audit, in the format and manner specified by HHS, no later than 30 calendar days after the initial audit response deadline established by HHS at the entrance conference described under paragraph (c)(1)(i) of this section for the applicable benefit year;
(iii) Respond to all audit notices, letters, and inquiries, including requests for supplemental or supporting information, as requested by HHS, no later than 15 calendar days after the date of the notice, letter, request, or inquiry; and
(iv) In circumstances in which an issuer cannot provide the requested data or response to HHS within the timeframes under paragraph (c)(2)(ii) or (iii) of this section, as applicable, the issuer may make a written request for an extension to HHS. The extension request must be submitted within the timeframe established under paragraph (c)(2)(ii) or (iii), as applicable, and must detail the reason for the extension request and the good cause in support of the request. If the extension is granted, the issuer must respond within the timeframe specified in HHS's notice granting the extension of time.
(3)
(i) If the issuer does not dispute or otherwise respond to the preliminary findings, the audit findings will become final.
(ii) If the issuer responds and disputes the preliminary findings, HHS will review and consider such response and finalize the audit findings after such review.
(4)
(i) Within 45 calendar days of the issuance of the final audit or compliance review report, provide a written corrective action plan to HHS for approval.
(ii) Implement that plan.
(iii) Provide to HHS written documentation of the corrective actions once taken.
(5)
(i) HHS will notify the issuer of payments received under this subpart that the issuer has not adequately substantiated; and
(ii) HHS will notify the issuer that HHS may recoup any payments
(6)
(a)
(b)
The revisions and addition read as follows:
(a)
(5) * * *
(i) To HHS or an Exchange; or
(f)
(2) If HHS is responsible under paragraph (f)(1) of this section for enforcement of the requirements set forth in subpart E of this part or 45 CFR 156.50, HHS may impose civil money penalties on an issuer in a State Exchange or State-based Exchange on the Federal platform, in accordance with the bases and process for imposing civil money penalties set forth in this section.
(a) The ALJ has the authority, including all of the authority conferred by the Administrative Procedure Act (5 U.S.C. 554a), to adopt whatever procedures may be necessary or proper to carry out in an efficient and effective manner the ALJ's duty to provide a fair and impartial hearing on the record and to issue an initial decision concerning the imposition of a civil money penalty of a QHP offered in a Federally-facilitated Exchange, State Exchange, and State-based Exchange on the Federal platform, or the decertification of a QHP offered in a Federally-facilitated Exchange.
(a) All hearings before an ALJ are on the record. The ALJ may receive argument or testimony in writing, in person, by telephone, or by video teleconference. The ALJ may receive testimony by telephone only if the ALJ determines that doing so is in the interest of justice and economy and that no party will be unduly prejudiced. The ALJ may require submission of a witness' direct testimony in writing only if the witness is available for cross-examination.
(a) Every submission filed with the ALJ must be filed electronically and include:
(b) A party filing a submission with the ALJ must, at the time of filing, serve a copy of such submission on the opposing party. An intervenor filing a submission with the ALJ must, at the time of filing, serve a copy of the submission on all parties. If a party is represented by an attorney, service must be made on the attorney. An electronically filed submission is considered served on all parties using the electronic filing system.
After receipt of the request for hearing, the ALJ assigned to the case or someone acting on behalf of the ALJ will send a written notice to the parties that acknowledges receipt of the request for hearing, identifies the docket number assigned to the case, and provides instructions for filing submissions and other general information concerning procedures. The ALJ will set out the next steps in the case either as part of the acknowledgement or on a later date.
(e) Establishing a schedule for an in-person, telephone, or video teleconference hearing, including setting deadlines for the submission of written direct testimony or for the written reports of experts.
(a) Any testimony that is taken in-person, by telephone, or by video teleconference is recorded and transcribed. The ALJ may order that other proceedings in a case, such as a prehearing conference or oral argument of a motion, be recorded and transcribed.
The additions read as follows:
(a)
(b)
(1) The issuer promptly notifies HHS or the State Exchange (as applicable) upon identifying the inaccuracy, but in no case later than 15 calendar days after identifying the inaccuracy; and
(2) The failure to identify the inaccuracy and submit it to HHS or the State Exchange (as applicable) in a timely manner was not unreasonable or due to the issuer's misconduct or negligence.
(c)
(1) The end of the 3-year period beginning at the end of the plan year to which the inaccuracy relates; or
(2) The date by which HHS notifies issuers that the HHS audit process with respect to the plan year to which such inaccuracy relates has been completed.
(3) If a payment error is discovered after the timeframes set forth in paragraph (c)(1) and (2) of this section, the issuer must notify HHS, the State Exchange, or SBE-FP (as applicable) and repay any overpayments to HHS.
(b)
The revision and addition reads as follows:
(a) * * *
(1) * * *
(vii) The findings of a second validation audit as a result of risk adjustment data validation (if applicable) with respect to risk adjustment data for the 2016 benefit year and beyond; or
(3) * * *
(ii) For a risk adjustment payment or charge, including an assessment of risk adjustment user fees, within 30 calendar days of the date of the notification under § 153.310(e) of this subchapter;
(iii) For the findings of a second validation audit (if applicable), or the calculation of a risk score error rate as a result of risk adjustment data validation, within 30 calendar days of publication of the applicable benefit year's Summary Report of Benefit Year Risk Adjustment Data Validation Adjustments to Risk Adjustment Transfers;
42 U.S.C. 300gg-18.
(g)
(a) * * *
(2) For each of the 2011, 2012, and 2013 MLR reporting years, any rebate provided in the form of a premium credit must be provided by applying the full amount due to the first month's premium that is due on or after August 1 following the MLR reporting year. If the amount of the rebate exceeds the premium due for August, then any overage shall be applied to succeeding premium payments until the full amount of the rebate has been credited. Beginning with the 2014 MLR reporting year, any rebate provided in the form of a premium credit must be provided by applying the full amount due to the first month's premium that is due on or after September 30 following the MLR reporting year. If the amount of the rebate exceeds the premium due for October, then any overage shall be applied to succeeding premium payments until the full amount of the rebate has been credited. Beginning with rebates due for the 2020 MLR reporting year, any rebate provided in the form of a premium credit must be provided by applying the full amount due to the monthly premium that is due no later than October 30 following the MLR reporting year. If the amount of the rebate exceeds the monthly premium, then any overage shall be applied to succeeding premium payments until the full amount of the rebate has been credited.
42 U.S.C. 1302, 1320b-23.
(a)
(2) [Reserved]
(b)
The following definitions apply to this part, unless the context indicates otherwise:
(a)
(1) The percentage of all prescriptions that were provided under the QHP through retail pharmacies compared to mail order pharmacies, and the percentage of prescriptions for which a generic drug was available and dispensed compared to all drugs dispensed;
(2) The aggregate amount, and the type of rebates, discounts or price concessions (excluding
(i)
(ii) [Reserved]
(3) The aggregate amount of the difference between the amount the QHP issuer pays its contracted PBM and the amounts that the PBM pays retail pharmacies, and mail order pharmacies, and the total number of prescriptions that were dispensed.
(b)
(1) As HHS determines to be necessary to carry out section 1150A or part D of title XVIII of the Act;
(2) To permit the Comptroller General to review the information provided;
(3) To permit the Director of the Congressional Budget Office to review the information provided; or
(4) To States to carry out section 1311 of the Affordable Care Act.
(c)