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Federal Aviation Administration (FAA), DOT.
Final special conditions; request for comments.
These special conditions are issued for the Dassault Aviation (Dassault) Model Falcon 6X airplane. This airplane will have a novel or unusual design feature when compared to the state of technology envisioned in the airworthiness standards for transport category airplanes. This design feature is an overspeed protection system in the normal mode, designed to prevent the pilot from inadvertently or intentionally exceeding certain airplane speeds. The applicable airworthiness regulations do not contain adequate or appropriate safety standards for this design feature. This special conditions document contains the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards.
This action is effective on Dassault on March 24, 2022. Send comments on or before May 9, 2022.
Send comments identified by Docket No. FAA-2020-1040 using any of the following methods:
•
•
•
•
Troy Brown, Performance and Environment Section, AIR-625, Technical Innovation Policy Branch, Policy and Innovation Division, Aircraft Certification Service, Federal Aviation Administration, 1801 S Airport Rd., Wichita, KS 67209-2190; telephone and fax 405-666-1050; email
The substance of these special conditions has been published in the
The FAA invites interested people to take part in this rulemaking by sending written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data.
The FAA will consider all comments received by the closing date for comments. The FAA may change these special conditions based on the comments received.
On July 1, 2012, Dassault applied for a type certificate for its new Model Falcon 5X airplane. However, Dassault has decided not to release an airplane under the model designation Falcon 5X, instead choosing to change that model designation to Falcon 6X.
In February of 2018, due to engine supplier issues, Dassault extended the type certificate application date for its Model Falcon 5X airplane under new Model Falcon 6X. This airplane is a twin-engine business jet with seating for 19 passengers, and has a maximum takeoff weight of 77,460 pounds.
Under the provisions of 14 CFR 21.17, Dassault must show that the Model Falcon 6X airplane meets the applicable provisions of part 25, as amended by amendments 25-1 through 25-146.
If the Administrator finds that the applicable airworthiness regulations (
Special conditions are initially applicable to the model for which they are issued. Should the type certificate for that model be amended later to include any other model that incorporates the same novel or unusual design feature, these special conditions would also apply to the other model under § 21.101.
In addition to the applicable airworthiness regulations and special conditions, the Dassault Model Falcon 6X airplane must comply with the fuel-vent and exhaust-emission requirements of 14 CFR part 34, and the noise-certification requirements of 14 CFR part 36.
The FAA issues special conditions, as defined in 14 CFR 11.19, in accordance with § 11.38, and they become part of the type certification basis under § 21.17(a)(2).
The Dassault Model Falcon 6X airplane will incorporate the following novel or unusual design feature:
An overspeed protection system in the normal mode, designed to prevent the pilot from inadvertently or intentionally exceeding certain airplane speeds.
Current part 25 sections do not relate to a high-speed limiter that might preclude or modify flying qualities assessments in the overspeed region. This high-speed limiter incorporates an overspeed protection system in the normal mode that prevents the pilot from inadvertently or intentionally exceeding a speed approximately equivalent to V
These special conditions establish requirements to ensure operation of the high-speed limiter that might preclude or modify flying qualities assessments in the overspeed region.
This special conditions document contains the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards.
As discussed above, these special conditions are applicable to the Dassault Model Falcon 6X airplane. Should Dassault apply at a later date for a change to the type certificate to include another model incorporating the same novel or unusual design feature, these special conditions would apply to that model as well.
This action affects only a certain novel or unusual design feature on one model of airplane. It is not a rule of general applicability.
Aircraft, Aviation safety, Reporting and recordkeeping requirements.
The authority citation for these special conditions is as follows:
49 U.S.C. 106(f), 106(g), 40113, 44701, 44702, 44704.
Accordingly, pursuant to the authority delegated to me by the Administrator, the following special conditions are issued as part of the type certification basis for the Dassault Aviation Model Falcon 6X airplane.
In addition to the requirements of title 14, Code of Federal Regulations 25.143, the following requirements apply:
Operation of the high-speed limiter during all routine and descent-procedure flight must not impede normal attainment of speeds up to overspeed warning.
Federal Aviation Administration (FAA), DOT.
Final special conditions; request for comments.
These special conditions are issued for the Dassault Aviation (Dassault) Model Falcon 6X airplane. This airplane will have a novel or unusual design feature when compared to the state of technology envisioned in the airworthiness standards for transport category airplanes. This design feature is installed systems that, directly or as a result of failure or malfunction, affect airplane structural performance. The applicable airworthiness regulations do not contain adequate or appropriate safety standards for this design feature. These special conditions contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards.
This action is effective on Dassault on March 24, 2022. Send comments on or before May 9, 2022.
Send comments identified by Docket No. FAA-2021-0630 using any of the following methods:
•
•
•
•
Todd Martin, Materials and Structural Properties Section, AIR-621, Technical Innovation Policy Branch, Policy and Innovation Division, Aircraft Certification Service, Federal Aviation Administration, 2200 South 216th Street, Des Moines, Washington 98198; telephone and fax 206-231-3210; email
The substance of these special conditions has been published in the
The FAA invites interested people to take part in this rulemaking by sending written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data.
The FAA will consider all comments received by the closing date for comments. The FAA may change these special conditions based on the comments received.
On February 1, 2018, Dassault applied for a type certificate for their new Model Falcon 6X airplane. This airplane is a twin-engine business jet with seating for 19 passengers and a maximum takeoff weight of 77,460 pounds.
Under the provisions of title 14, Code of Federal Regulations (14 CFR) 21.17, Dassault must show that the Model Falcon 6X airplane meets the applicable provisions of part 25, as amended by amendments 25-1 through 25-146.
If the Administrator finds that the applicable airworthiness regulations (
Special conditions are initially applicable to the model for which they are issued. Should the type certificate for that model be amended later to include any other model that incorporates the same novel or unusual design feature, these special conditions would also apply to the other model under § 21.101.
In addition to the applicable airworthiness regulations and special conditions, the Dassault Model Falcon 6X airplane must comply with the fuel-vent and exhaust-emission requirements of 14 CFR part 34, and the noise-certification requirements of 14 CFR part 36.
The FAA issues special conditions, as defined in 14 CFR 11.19, in accordance with § 11.38, and they become part of the type certification basis under § 21.17(a)(2).
The Dassault Model Falcon 6X airplane will incorporate the following novel or unusual design feature:
Installed systems that, directly or as a result of failure or malfunction, affect airplane structural performance.
The Dassault Model Falcon 6X airplane is equipped with systems that directly, or as a result of failure or malfunction, affect its structural performance. These systems include the digital flight-control system, which includes maneuver-load and gust-load alleviation, and the fuel-management system. Current FAA regulations do not take into account the effects of systems on structural performance, including normal operation and failure conditions. Special conditions are needed to account for these features. These special conditions define criteria to be used in the assessment of the effects of these systems on structures. The general approach of accounting for the effect of system failures on structural performance is extended to include any system in which partial or complete failure, alone or in combination with other system partial or complete failures, would affect structural performance.
These special conditions contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards.
These special conditions are similar to those previously applied to other airplane models.
As discussed above, these special conditions are applicable to the Dassault Model Falcon 6X airplane. Should Dassault apply at a later date for a change to the type certificate to include another model incorporating the same novel or unusual design feature, these special conditions would apply to that model as well.
This action affects only a certain novel or unusual design feature on one model of airplane. It is not a rule of general applicability.
Aircraft, Aviation safety, Reporting and recordkeeping requirements.
The authority citation for these special conditions is as follows:
49 U.S.C. 106(f), 106(g), 40113, 44701, 44702, 44704.
Accordingly, pursuant to the authority delegated to me by the Administrator, the following special conditions are issued as part of the type certification basis for the Dassault Model Falcon 6X airplane.
For airplanes equipped with systems that affect structural performance, either directly or as a result of a failure or malfunction, the influence of these systems and their failure conditions must be taken into account when showing compliance with the requirements of 14 CFR part 25 subparts C and D.
The following criteria must be used for showing compliance with these special conditions for airplanes equipped with flight-control systems, autopilots, stability-augmentation systems, load-alleviation systems, flutter-control systems, fuel-management systems, and other systems that either directly, or as a result of failure or malfunction, affect structural performance. If these special conditions are used for other systems, it may be necessary to adapt the criteria to the specific system.
1. The criteria defined herein only address the direct structural
2. Depending upon the specific characteristics of the airplane, additional studies that go beyond the criteria provided in these special conditions may be required to demonstrate the airplane's capability to meet other realistic conditions, such as alternative gust or maneuver descriptions for an airplane equipped with a load-alleviation system.
3. The following definitions are applicable to these special conditions.
a.
b.
c.
d.
e.
The following criteria will be used in determining the influence of a system and its failure conditions on the airplane structure.
1.
a. Limit loads must be derived in all normal operating configurations of the system from all the limit conditions specified in 14 CFR part 25, subpart C (or defined by special conditions or equivalent level of safety in lieu of those specified in subpart C), taking into account any special behavior of such a system or associated functions, or any effect on the structural performance of the airplane that may occur up to the limit loads. In particular, any significant nonlinearity (rate of displacement of control surface, thresholds, or any other system nonlinearities) must be accounted for in a realistic or conservative way when deriving limit loads from limit conditions.
b. The airplane must meet the strength requirements of 14 CFR part 25 (static strength, residual strength), using the specified factors to derive ultimate loads from the limit loads defined above. The effect of nonlinearities must be investigated beyond limit conditions to ensure that the behavior of the system presents no anomaly compared to the behavior below limit conditions. However, conditions beyond limit conditions need not be considered when it can be shown that the airplane has design features that will not allow it to exceed those limit conditions.
c. The airplane must meet the aeroelastic stability requirements of § 25.629.
2.
a. At the time of occurrence. Starting from 1g level flight conditions, a realistic scenario, including pilot corrective actions, must be established to determine the loads occurring at the time of failure and immediately after the failure.
i. For static-strength substantiation, these loads, multiplied by an appropriate factor of safety that is related to the probability of occurrence of the failure, are ultimate loads to be considered for design. The factor of safety is defined in Figure 1, below.
ii. For residual-strength substantiation, the airplane must be able to withstand two-thirds of the ultimate loads defined in special condition 2.a.i above. For pressurized cabins, these loads must be combined with the normal operating differential pressure.
iii. Freedom from aeroelastic instability must be shown up to the speeds defined in § 25.629(b)(2). For failure conditions that result in speeds beyond V
iv. Failures of the system that result in forced structural vibrations (oscillatory failures) must not produce loads that could result in detrimental deformation of primary structure.
b. For the continuation of the flight. For the airplane in the system-failed state, and considering any appropriate reconfiguration and flight limitations, the following apply:
i. The loads derived from the following conditions (or used in lieu of the following conditions) at speeds up to V
1. The limit symmetrical maneuvering conditions specified in §§ 25.331 and 25.345.
2. The limit gust and turbulence conditions specified in §§ 25.341 and 25.345.
3. The limit rolling conditions specified in § 25.349, and the limit unsymmetrical conditions specified in §§ 25.367, and 25.427(b) and (c).
4. The limit yaw-maneuvering conditions specified in § 25.351.
5. The limit ground-loading conditions specified in §§ 25.473 and 25.491.
ii. For static-strength substantiation, each part of the structure must be able to withstand the loads in special condition 2.b.i., multiplied by a factor of safety depending on the probability of being in this failure state. The factor of safety is defined in Figure 2, below.
If P
iii. For residual-strength substantiation, the airplane must be able to withstand two-thirds of the ultimate loads defined in special condition 2.b.ii. For pressurized cabins, these loads must be combined with the normal operating differential pressure.
iv. If the loads induced by the failure condition have a significant effect on fatigue or damage tolerance, then their effects must be taken into account.
v. Freedom from aeroelastic instability must be shown up to a speed determined from Figure 3, below. Flutter clearance speeds V′ and V″ may be based on the speed limitation specified for the remainder of the flight using the margins defined by § 25.629(b).
If P
vi. Freedom from aeroelastic instability must also be shown up to V′ in Figure 3, above, for any probable system-failure condition, combined with any damage required or selected for investigation by § 25.571(b).
c. Consideration of certain failure conditions may be required by other sections of 14 CFR part 25 regardless of calculated system reliability. Where analysis shows the probability of these failure conditions to be less than 10
3.
a. The system must be checked for failure conditions, not extremely
b. The existence of any failure condition, not extremely improbable, during flight, that could significantly affect the structural capability of the airplane, and for which the associated reduction in airworthiness can be minimized by suitable flight limitations, must be signaled to the flightcrew. For example, failure conditions that result in a factor of safety between the airplane strength and the loads of part 25, subpart C, below 1.25, or flutter margins below V”, must be signaled to the crew during flight.
4.
Federal Aviation Administration (FAA), DOT.
Final special conditions; request for comments.
These special conditions are issued for the Dassault Aviation (Dassault) Model Falcon 6X airplane. This airplane will have a novel or unusual design feature when compared to the state of technology envisioned in the airworthiness standards for transport category airplanes. This design feature is a digital systems architecture for the installation of a system with wireless and hardwired network and hosted application functionality that allows access, from sources internal to the airplane, to the airplane's internal electronic components. The applicable airworthiness regulations do not contain adequate or appropriate safety standards for this design feature. These special conditions contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards.
This action is effective on Dassault on March 24, 2022. Send comments on or before May 9, 2022.
Send comments identified by Docket No. FAA-2021-0896 using any of the following methods:
•
•
•
•
Thuan T. Nguyen, Aircraft Information Systems, AIR-622, Technical Innovation Policy Branch, Policy and Innovation Division, Aircraft Certification Service, Federal Aviation Administration, 2200 South 216th Street, Des Moines, Washington 98198; telephone and fax 206-231-3365; email
The substance of these special conditions has been published in the
The FAA invites interested people to take part in this rulemaking by sending written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data.
The FAA will consider all comments received by the closing date for comments. The FAA may change these special conditions based on the comments received.
On July 1, 2012, Dassault Aviation applied for a type certificate for its new Model Falcon 5X airplane. However, Dassault has decided not to release an airplane under the model designation Falcon 5X, instead choosing to change that model designation to Falcon 6X.
In February of 2018, due to engine supplier issues, Dassault extended the type certificate application date for its Model Falcon 5X airplane under new Model Falcon 6X. This airplane is a twin-engine business jet with seating for 19 passengers, and has a maximum takeoff weight of 77,460 pounds.
Under the provisions of 14 CFR 21.17, Dassault must show that the Model Falcon 6X airplane meets the applicable provisions of part 25, as amended by amendments 25-1 through 25-146.
If the Administrator finds that the applicable airworthiness regulations (
Special conditions are initially applicable to the model for which they are issued. Should the type certificate for that model be amended later to include any other model that incorporates the same novel or unusual design feature, these special conditions would also apply to the other model under § 21.101.
In addition to the applicable airworthiness regulations and special conditions, the Dassault Model Falcon 6X airplane must comply with the fuel-vent and exhaust-emission requirements of 14 CFR part 34, and the noise-certification requirements of 14 CFR part 36.
The FAA issues special conditions, as defined in 14 CFR 11.19, in accordance with § 11.38, and they become part of the type certification basis under § 21.17(a)(2).
The Dassault Model Falcon 6X airplane will incorporate the following novel or unusual design feature:
A digital systems architecture for the installation of a system with wireless and hardwired network and hosted application functionality that allows access, from sources internal to the airplane, to the airplane's internal electronic components.
The digital systems architecture for the Aircraft Control Domain and the Airline Information Services Domain by unauthorized persons in the Passenger Services Domain system with wireless network and hosted application functionality on these Dassault Falcon 6X airplanes is a novel or unusual design feature for transport category airplanes because it is composed of several connected wireless and hardwired networks. This proposed network architecture is used for a diverse set of airplane functions, including:
• Flight-safety related control and navigation systems,
• airline business and administrative support, and
• passenger entertainment.
The airplane control domain and airline information-services domain of these networks perform functions required for the safe operation and maintenance of the airplane. Previously, these domains had very limited connectivity with other network sources. This network architecture creates a potential for unauthorized persons to access the aircraft control domain and airline information-services domain from sources internal to the airplane, and presents security vulnerabilities related to the introduction of computer viruses and worms, user errors, and intentional sabotage of airplane electronic assets (networks, systems, and databases) critical to the safety and maintenance of the airplane.
The existing FAA regulations did not anticipate these networked airplane-system architectures. Furthermore, these regulations and the current guidance material do not address potential security vulnerabilities, which could be exploited by unauthorized access to airplane networks, data buses, and servers. Therefore, these special conditions ensure that the security (
These special conditions contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards.
As discussed above, these special conditions are applicable to the Dassault Model Falcon 6X airplane. Should Dassault apply at a later date for a change to the type certificate to include another model incorporating the same novel or unusual design feature, these special conditions would apply to that model as well.
This action affects only a certain novel or unusual design feature on one model of airplane. It is not a rule of general applicability.
Aircraft, Aviation safety, Reporting and recordkeeping requirements.
The authority citation for these special conditions is as follows:
49 U.S.C. 106(f), 106(g), 40113, 44701, 44702, 44704.
Accordingly, pursuant to the authority delegated to me by the Administrator, the following special conditions are issued as part of the type certification basis for the Dassault Aviation Model Falcon 6X airplane for airplane electronic-system security protection from unauthorized internal access.
1. The applicant must ensure that the design provides isolation from, or airplane electronic-system security protection against, access by unauthorized sources internal to the airplane. The design must prevent
2. The applicant must establish appropriate procedures to allow the operator to ensure that continued airworthiness of the airplane is maintained, including all post-type-certification modifications that may have an impact on the approved electronic-system security safeguards.
Federal Aviation Administration (FAA), Department of Transportation (DOT).
Final rule; removal; request for comments.
The FAA is removing Airworthiness Directive (AD) 2021-03-16, which applied to all Airbus Helicopters Model AS350B, AS350B1, AS350B2, AS350B3, AS350BA, AS350D, AS355E, AS355F, AS355F1, AS355F2, AS355N, and AS355NP helicopters. AD 2021-03-16 required inspecting each sliding door and replacing the upper rail or front roller or removing the front roller from service if necessary. Since the FAA issued AD 2021-03-16, inspection results and further investigation have confirmed that the in-flight loss of a sliding door, which prompted AD 2021-03-16, was an isolated case resulting from incorrect operation and maintenance error. Therefore, the FAA has determined that no unsafe condition is likely to exist or develop on the sliding doors on other helicopters in the fleet. Accordingly, AD 2021-03-16 is removed.
This AD becomes effective March 24, 2022.
The FAA must receive comments on this AD by May 9, 2022.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
You may examine the AD docket at
Matt Fuller, AD Program Manager, General Aviation & Rotorcraft Unit, Airworthiness Products Section, Operational Safety Branch, FAA, 10101 Hillwood Pkwy., Fort Worth, TX 76177; telephone 817-222-5110; email
The FAA invites you to send any written data, views, or arguments about this final rule. Send your comments to an address listed under
Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to
CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this AD contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this AD, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this AD. Submissions containing CBI should be sent to Matt Fuller, AD Program Manager, General Aviation & Rotorcraft Unit, Airworthiness Products Section, Operational Safety Branch, FAA, 10101 Hillwood Pkwy., Fort Worth, TX 76177; telephone 817-222-5110; email
EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2020-0175-CN, dated September 13, 2021 (EASA AD 2020-0175-CN) to cancel EASA AD 2020-0175, dated August 5, 2020 (EASA AD 2020-0175) which was issued to correct an unsafe condition for all serial-numbered Airbus Helicopters Model AS 350 and AS 355 helicopters if equipped with a left-hand (LH) and/or right-hand (RH) sliding door. EASA AD 2020-0175 prompted FAA
AD 2021-03-16, Amendment 39-21419 (86 FR 9433, February 16, 2021) (AD 2021-03-16). AD 2021-03-16 applied to Airbus Helicopters Model AS350B, AS350B1, AS350B2, AS350B3, AS350BA, AS350D, AS355E, AS355F, AS355F1, AS355F2, AS355N, and AS355NP helicopters with any sliding door installed. AD 2021-03-16 required, within 30 hours time-in-service, inspecting the upper rail of each RH and LH door for parallelism, deformation, corrosion, and cracking and repairing or replacing the upper rail before further flight if necessary; and
Since the FAA issued AD 2021-03-16, reported inspection results and further investigation have confirmed that the in-flight loss of the sliding door, which prompted EASA AD 2020-0175 and AD 2021-03-16, was an isolated case resulting from incorrect operation and maintenance error, and therefore no unsafe condition is likely to exist or develop on the affected helicopters. The FAA is issuing this AD to remove AD 2021-03-16.
Section 553(b)(3)(B) of the Administrative Procedure Act (APA) (5 U.S.C. 551
There are currently 965 helicopters of U.S. registry affected by AD 2021-03-16. However, the FAA notes that AD 2021-03-16 required unnecessary inspections because the identified unsafe condition does not exist on these helicopters. Therefore, it is unlikely that the FAA would receive any adverse comments or useful information about this AD from U.S. operators that would cause a need for public comment prior to adoption. Accordingly, notice and opportunity for prior public comment are unnecessary, pursuant to 5 U.S.C. 553(b)(3)(B). In addition, for the foregoing reasons, the FAA finds that good cause exists pursuant to 5 U.S.C. 553(d) for making this amendment effective in less than 30 days.
Upon further consideration, the FAA has determined that AD 2021-03-16 is not necessary. Accordingly, this AD removes AD 2021-03-16. Removal of AD 2021-03-16 does not preclude the FAA from issuing another related action or commit the FAA to any course of action in the future.
The requirements of the Regulatory Flexibility Act (RFA) do not apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt a rule without prior notice and comment. Because FAA has determined that it has good cause to adopt this rule without prior notice and comment, RFA analysis is not required.
This AD adds no cost. This AD removes AD 2021-03-16 from 14 CFR part 39; therefore, operators are no longer required to show compliance with that AD.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority.
The FAA determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have 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.
For the reasons discussed above, I certify that this AD:
1. Is not a “significant regulatory action” under Executive Order 12866; and
2. Will not affect intrastate aviation in Alaska.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This airworthiness directive (AD) becomes effective March 24, 2022.
This AD replaces AD 2021-03-16, Amendment 39-21419 (86 FR 9433, February 16, 2021).
This airworthiness directive (AD) applies to Airbus Helicopters Model AS350B, AS350B1, AS350B2, AS350B3, AS350BA, AS350D, AS355E, AS355F, AS355F1, AS355F2, AS355N, and AS355NP helicopters, certificated in any category, with any sliding door installed.
Joint Aircraft System Component (JASC) Code 5210, Passenger/Crew Doors.
(1) For more information about this AD, contact Matt Fuller, AD Program Manager, General Aviation & Rotorcraft Unit, Airworthiness Products Section, Operational Safety Branch, FAA, 10101 Hillwood Pkwy., Fort Worth, TX 76177; telephone 817-222-5110; email
(2) The subject of this AD is addressed in European Union Aviation Safety Agency (EASA) AD No. 2020-0175-CN, dated September 13, 2021. You may view the EASA AD on the internet at
None.
U.S. Integrated Ocean Observing System (IOOS), National Ocean Service (NOS), National Oceanic and Atmospheric Administration (NOAA), Department of Commerce (DOC).
Final rule, technical amendment.
The U.S. Integrated Ocean Observing System Office, led by the National Oceanic and Atmospheric Administration (NOAA), issues this final rule to change the name for “Regional Information Coordination Entities (RICEs)” to “Regional Coastal Observing Systems.” This rule has no substantive effect.
These regulations are effective on March 24, 2022.
Oriana Villar at 240-533-9466 or
The Integrated Coastal and Ocean Observation System (ICOOS) Act of 2009 (Pub. L. 111-11) (ICOOS Act or Act, codified at 33 U.S.C. 3601-3610) and the Coordinated Ocean Observation and Research Act of 2020 (Pub. L. 116-271, Title I) (COORA, amending 33 U.S.C. 3601-3610), directs the President to establish a National Integrated Coastal and Ocean Observation System (System). The System must “include in situ, remote, and other coastal and ocean observation and modeling capabilities, technologies, data management, communication systems, and product development systems and [be] designed to address regional and national needs for ocean and coastal information, to gather specific data on key coastal, ocean, and Great Lakes variables, and to ensure timely and sustained dissemination and availability of these data.” 33 U.S.C. 3601(1).
The ICOOS Act and COORA direct the Interagency Ocean Observation Committee (IOOC) to develop contract certification standards and compliance procedures for integrating regional coastal observing systems into the System. 33 U.S.C. 3603(c)(2)(B)(v). The COORA Act, in amending the ICOOS Act, replaces the term Regional Information Coordination Entity (RICE) with the term Regional Coastal Observing System (RCOS). The term “`regional coastal observing system' means an organizational body that is certified or established by contract or memorandum by the lead Federal agency designated in section 12304(c)(3) and coordinates Federal, State, local, tribal, and private interests at a regional level with the responsibility of engaging the private and public sectors in designing, operating, and improving regional coastal observing systems in order to ensure the provision of data and information that meet the needs of user groups from the respective regions.”
NOAA promulgated regulations in 2014 to develop certification criteria and procedures for integrating RICEs into the system. (June 5, 2014; 79 FR 32449). These regulations are found at 15 CFR part 997.
By this final rule, NOAA is officially changing the name of the Regional Information Coordination Entity (RICE) to reflect the new name, Regional Coastal Observing System (RCOS), as defined in the COORA. This change is necessary to implement the new name established by the COORA in the implementing regulations. This name change has no substantive impact.
By this final rule, NOAA is also updating its mailing address in 997.11(b) and changing the name of the “U.S. IOOS Program Office” to the “U.S. IOOS Office” in 997.20(b), 997.23(f)(5), 997.23(f)(5), and 997.24(a). These changes also do not have substantive impacts.
This rule pertains solely to the renaming of “Regional Information Coordination Entities (RICEs)” to “Regional Coastal Observing Systems (RCOSs)” in an existing rule necessitated by the Coordinated Ocean Observation and Research Act of 2020 (Pub. L. 116-271, Title I). NOAA also is updating its mailing address and updating the name of the IOOS Office. It makes no changes to the substantive legal rights, obligations, or interests of affected parties. This rule therefore is a “rule of agency organization, procedure or practice” and is therefore exempt from the notice-and-comment requirements of 5 U.S.C. 553 under 5 U.S.C. 553(b)(A). Nor is a 30-day delay in effective date required under 5 U.S.C. 553(d) due to the non-substantive nature of this technical amendment.
This rule has been determined to be not significant within the meaning of Executive Order 12866.
This rule does not contain any new or revisions to the existing information collection requirement that was approved by OMB (OMB Control Number 0648-0672, Application to be Certified as a Regional Information Coordination Entity) under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501
This regulation is exempt from the notice and comment provisions of the Administrative Procedures Act (APA), 5 U.S.C. 553. Therefore, the requirements of the Regulatory Flexibility Act do not apply, 5 U.S.C. 603(a). No other rule requires a regulatory flexibility analysis and none has been prepared.
Science and technology.
Accordingly, for the reasons set forth above, 15 CFR part 997 is amended as follows:
33 U.S.C. 3602-3603.
(b) Submission shall be made to NOAA at the following address, or to such other address as may be indicated in the future: Director U.S. IOOS Office, NOAA, 1315 East West Hwy., Suite 3000, Silver Spring, MD 20910. Submissions may also be made online at
Consumer Product Safety Commission.
Request for comments.
The Consumer Product Safety Commission (Commission or CPSC) is publishing this document following a Federal court opinion remanding the Commission's final phthalates rule to allow the Commission to address two procedural deficiencies found by the court. This document seeks public comment regarding the justification for the phthalates final rule and the staff's cost-benefit analysis for continuing the interim prohibition on DINP.
Written comments should be submitted by May 9, 2022.
You may submit comments, identified by Docket No. CPSC-2014-0033, by any of the following methods:
Susan Proper, Directorate for Economic Analysis, Consumer Product Safety Commission, 4330 East West Highway, Bethesda, MD 20814; telephone: (301) 504-7628; email:
Section 108(b)(3) of the Consumer Product Safety Improvement Act of 2008 (CPSIA) required the Commission to promulgate a final rule addressing children's toys and child care articles containing certain phthalates not later than 180 days after the Commission received a final Chronic Hazard Advisory Panel (CHAP) report.
On December 30, 2014, the Commission published a notice of proposed rulemaking (NPRM) in the
In December 2017, the Texas Association of Manufacturers and others petitioned the U.S. Court of Appeals for the Fifth Circuit for a review of the CPSC's final phthalates rule. In March 2021, the court remanded without vacating the phthalates final rule to the CPSC to address two procedural deficiencies found by the court.
The Fifth Circuit held that the phthalates final rule did not provide adequate notice and comment regarding a change in the primary justification between the proposed rule and the final rule. The court remanded the rule to allow CPSC to seek public comment on the justification for the final rule. The Commission's justification for the proposed rule was based on data demonstrating that 10 percent of pregnant women had a Hazard Index (HI) greater than one, which exceeded the acceptable risk, and that the average
After publication of the proposed rule, the Commission examined new data using the CHAP's original methodology. Based on the new data, the Commission determined that phthalate exposures had changed over time and that there were too few samples in the study with an HI above one to make a statistically reliable estimate for the population of the number or percentage of women of reproductive age with an HI greater than one. No new data on infants were available, so risk estimates for this population did not change in the updated analysis. Based on the new data for women of reproductive age, the Commission found that the risk of antiandrogenic effects had decreased, and that the HI at the 95th percentile had decreased from five to less than one. 82 FR 49958. Based on the new data, the Commission could not determine exactly what percentage of the women studied had an HI greater than one but did state that “between two and nine real women from the sample of 538 [women of reproductive age] had an HI greater than one.”
The court of appeals held that the Commission did not provide adequate notice and comment when it changed the justification for the prohibitions in the proposed rule to the final rule. Accordingly, the Commission is publishing this notice to request public comment regarding the justification for the final rule.
The Fifth Circuit held that the final phthalates rule was deficient because it did not consider the costs and benefits of continuing the interim prohibition on DINP. Specifically, the court found that the Commission was required at least to consider the cost, as well as the effect on utility and availability of products containing DINP, to determine whether to continue the interim prohibition.
The staff of the Directorate for Economic Analysis has conducted a cost-benefit analysis regarding continuing the interim prohibition on DINP in the final rule. The staff memorandum “Cost-Benefit Analysis of Continuing the Interim DINP Prohibition in the Final Rule: 16 CFR part 1307 `Prohibition of Children's Toys and Child Care Articles Containing Specified Phthalates' ” can be found here.
We request comments on two issues: The rationale for the final rule in section II.A; and the cost-benefit analysis of continuing the DINP interim prohibition discussed in section II.B of this document. Only comments submitted regarding the rationale for the final rule and/or the cost-benefit analysis of continuing the DINP interim prohibition will be considered. Comments submitted on any other issues are out of scope and will not be considered. Finally, untimely submitted comments will not be considered.
Information regarding the court decision is available on the CPSC website or
Department of State.
Final rule.
The Department of State (the Department) is adjusting the Schedule of Fees for Consular Services (Schedule) by removing Item Number 74, a $25 return check processing fee. Domestically, the Bureau of Consular Affairs, Office of Passport Services (CA/PPT), has charged customers this fee when the instruments they have used to submit payment for a passport application could not be processed due to insufficient funds, closed accounts, stop payments, and altered/fictious checks or money orders. A recent review of the Department's Cost of Service Model (CoSM) established that the costs associated with attempts to recover on non-viable instruments are now captured within the passport application fee. The Department therefore stopped charging this fee on December 13, 2021, and will remove this fee from the Schedule.
This rule is effective March 24, 2022.
Johanna Cruz, Management Analyst, Office of the Comptroller, Bureau of Consular Affairs, Department of State; phone: 202-485-8915, email:
This rule makes changes to the Schedule of Fees in 22 CFR 22.1 by removing Item Number 74, the $25 return check processing fee, from the Schedule of Fees. This fee was added to the Schedule in 1991 to recoup the cost of time spent by passport office personnel attempting to recover on bad checks applicants had submitted to the Department. According to the Passport Directorate's research, in FY 1989 there were approximately 8,800 bad checks and money orders, which required an estimated 5,400 staff hours to process. This fee has only been charged domestically; overseas posts do not accept personal checks and have not charged the fee. A recent review of the Department's CoSM established that the costs associated with the return check processing fee are now captured within
The Department of State's general authority to set and charge fees for consular services it provides derives from the user charges statute, 31 U.S.C. 9701.
To set fees in accordance with the general user charges principles set forth in 31 U.S.C. 9701, the Department must calculate the true cost to the U.S. government of providing each consular service. Following guidance provided in “Managerial Cost Accounting Concepts and Standards for the Federal Government,” OMB's Statement #4 of Federal Accounting Standards (SFFAS #4),
The Government Accountability Office (GAO) defines ABC as a “set of accounting methods used to identify and describe costs and required resources for activities within processes.” Organizations can use the same staff and resources (computer equipment, production facilities, etc.) to produce multiple products or services; therefore, ABC models seek to identify and assign costs to processes and activities and then to individual products and services through the identification of key cost drivers referred to as “resource drivers” and “activity drivers.” The goal is to proportionally and accurately distribute costs. ABC models require financial and accounting analysis and modeling skills combined with a detailed understanding of an organization's business processes. SFFAS Statement #4 provides a detailed discussion of the use of cost accounting by the U.S. Government.
The ABC approach focuses on the activities required to produce a particular service or product and uses resource drivers to assign costs through activities and activity drivers to assign costs from activities to services. In the context of the work of the Department's Bureau of Consular Affairs (CA), resource drivers assign costs (resources including materials, supplies, and labor utilized in the production or delivery of services and products) to activities using business rules that reflect the operational reality of CA and the data available from consular systems, surveys, and internal records. Most resource drivers are based on time spent on each activity. Activity drivers assign the cost of consular activities to the services CA provides. Most activity drivers are based on volumes.
Based on feedback from CA/PPT's field offices, the Department evaluated whether there was a need to charge the $25 return check processing fee. Upon review, it was determined that the costs associated with this service are now captured in the CoSM's cashiering activity, which is accounted for in the passport application fee the Department already charges. The Department therefore no longer needs to charge the return check processing fee in order to recover the costs of providing this service.
As removal of this fee constitutes a benefit, this rule is published as a final rule under the authority of 5 U.S.C. 553(a)(2). Since the rule is exempt from § 553, this rule is effective upon publication.
The Department has reviewed this rule and, by approving it, certifies that it will not have a significant economic impact on a substantial number of small entities as defined in 5 U.S.C. 601(6).
This rule will not result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any year, and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1501-1504.
This rule is a not major rule as defined by 5 U.S.C. 804(2).
The Department has reviewed this rule to ensure its consistency with the regulatory philosophy and principles set forth in the Executive Order and affirms that this regulation is consistent with the guidance therein. The Office of Management and Budget has designated this rule not significant for purposes of E.O. 12866.
Details of the changes to the Schedule of Fee are as follows:
This regulation 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, in accordance with section 6 of Executive Order 13132, it is determined that this rule does not have sufficient federalism implications to require consultations or warrant the preparation of a federalism summary impact statement. The regulations implementing Executive Order 12372 regarding intergovernmental consultation on federal programs and activities do not apply to this regulation.
The Department has determined that this rulemaking will not have tribal implications, will not impose substantial direct compliance costs on Indian tribal governments, and will not preempt tribal law. Accordingly, the requirements of Executive Order 13175 do not apply to this rulemaking.
This rule does not impose any new reporting or record-keeping requirements subject to the Paperwork Reduction Act.
Consular services, Fees.
Accordingly, for the reasons stated in the preamble, 22 CFR part 22 is amended as follows:
8 U.S.C. 1101 note, 1153 note, 1157 note, 1183a note, 1184(c)(12), 1201(c), 1351, 1351 note, 1713, 1714, 1714 note; 10 U.S.C. 2602(c); 22 U.S.C. 214, 214 note, 1475e, 2504(h), 2651a, 4206, 4215, 4219, 6551; 31 U.S.C. 9701; Exec. Order 10718, 22 FR 4632 (1957); Exec. Order 11295, 31 FR 10603 (1966).
The revision reads as follows:
The following table sets forth the fees for the following categories listed on the U.S. Department of State's Schedule of Fees for Consular Services:
Coast Guard, DHS.
Temporary final rule.
The Coast Guard is extending the duration of a temporary safety zone on certain navigable waters of the Chesapeake Bay. This action is necessary to provide for the safety of persons and the marine environment from the potential safety hazards associated with the damage assessment and salvage of the grounded freight ship EVER FORWARD, through 9 p.m. on April 13, 2022. This rule prohibits persons and vessels from being in the safety zone unless authorized by the Captain of the Port, Maryland-National Capital Region or a designated representative.
This rule is effective without actual notice from March 24, 2022 until 9 p.m. on April 13, 2022. For the purposes of enforcement, actual notice will be used from 9 p.m. on March 20, 2022, until March 24, 2022.
To view documents mentioned in this preamble as being available in the docket, go to
If you have questions on this rule, call or email Mr. Ron Houck, Sector Maryland-NCR, Waterways Management Division, U.S. Coast Guard: telephone 410-576-2674, email
On March 14, 2022, the Coast Guard issued a final rule establishing a temporary safety zone on certain navigable waters of the Chesapeake Bay to protect persons and vessels during damage assessment and salvage operations at the grounded 1,102-foot Hong Kong-flagged motor vessel EVER FORWARD. The orignal rule runs through 9 p.m. on March 20, 2022. However, additional time is needed to conduct the damage assessment and salvage operations and, as a result, the Coast Guard needs to extend the safety zone through 9 p.m. on April 13, 2022. The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this extension because it
We are issuing this rule under 5 U.S.C. 553(d)(3), and in accordance with 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the
The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034 (previously 33 U.S.C. 1231). The COTP has determined there are potential hazards associated with damage assessment and salvage operations. The work is a safety concern for anyone transiting the Chesapeake Bay within a 500-yard radius of the motor vessel EVER FORWARD. This rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the safety zone while the damage assessment and salvage operations are being conducted.
This rule extends the effective dates of an established safety zone, originally established on March 14, 2022 and effective through 9 p.m. on March 20, 2022, through 9 p.m. on April 13, 2022. The safety zone includes all navigable waters within 500 yards of the motor vessel EVER FORWARD. The extended duration of the zone is intended to protect personnel, vessels, and the marine environment in these navigable waters while damage assessment and salvage operations are conducted. No vessel or person will be permitted to enter the safety zone without obtaining permission from the COTP or a designated representative.
We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.
Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB).
This regulatory action determination is based on the size of the safety zone, which will impact only vessel traffic required to transit certain navigation channels of the Chesapeake Bay for a total of no more than 30 days. Although this waterway supports both commercial and recreational vessel traffic, portions of the federal navigation channel in the Chesapeake Bay will be opened as damage assessment and salvage operations allow. Moreover, the Coast Guard will issue a Broadcast Notice to Mariners via VHF-FM marine channel 16 about the zone.
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.
While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator.
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the
Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.
This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.
Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or
We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a temporary safety zone that prohibits entry within 500 yards of the motor vessel EVER FORWARD. It is categorically excluded from further review under paragraph L60(d) of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to call or email the person listed in the
Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways.
For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:
46 U.S.C. 70034, 70051; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 00170.1, Revision No. 01.2.
(a)
(b)
(c)
(2) To seek permission to enter, contact the COTP or the COTP's representative by telephone number 410-576-2693 or on Marine Band Radio VHF-FM channel 16 (156.8 MHz). Those in the safety zone must comply with all lawful orders or directions given to them by the COTP or the COTP's designated representative.
(d)
(e)
Environmental Protection Agency (EPA).
Final rule; correction.
The Environmental Protection Agency (EPA) issued a final rule on September 23, 2021, entitled “Air Plan Approval; West Virginia; 2020 Amendments to West Virginia's Ambient Air Quality Standards.” This current action corrects an inadvertent error in the
This correction is effective March 24, 2022, and is applicable beginning October 25, 2021.
EPA has established a docket for this action under Docket ID No. EPA-R03-OAR-2020-0487. All documents in the docket are listed on the
Serena Nichols, Planning & Implementation Branch (3AD30), Air & Radiation Division, U.S. Environmental Protection Agency, Region III, 1650 Arch Street, Philadelphia, PA 19103. The telephone number is (215) 814-2053. Ms. Nichols can also be reached via electronic mail at
On September 23, 2021 (86 FR 52837), EPA published a final rule action announcing our approval of West Virginia's revision updating the incorporation by reference of EPA's NAAQS and the associated monitoring reference and equivalent methods. In the document, we inadvertently opened another comment period instead of setting an effective date for the rule. EPA had previously opened a 30-day public comment period for this action in the notice of proposed rulemaking (NPRM) published on February 9, 2021
As published, the September 23, 2021 final rule opens another comment period instead of setting an effective date.
Section 553 of the Administrative Procedure Act, 5 U.S.C. 553(b)(B), provides that, when an agency for good cause finds that notice and public procedure are impracticable, unnecessary, or contrary to the public interest, the agency may issue a rule without providing notice and an opportunity for public comment. EPA has determined that there is good cause for making this rule final without another prior proposal and opportunity for comment because, as explained here and in the explanation above, the change to the rule is a minor correction, it is noncontroversial in nature, and does not substantively change the requirements of West Virginia's incorporation by reference of the NAAQS. Rather, the change sets the necessary effective date of this previously approved SIP revision. Thus, notice and opportunity for public comment are unnecessary. EPA finds that this constitutes good cause under 5 U.S.C. 553(b)(B).
Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by May 23, 2022. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action.
This action, approving a correction to the West Virginia SIP revision incorporating by reference the NAAQS that previously appeared in the
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.
In the
Coast Guard, DHS.
Final policy; notification.
The Coast Guard announces the availability of the final policy letter that describes type-approval testing methods, and the acceptance process for such methods, for ballast water management systems (BWMS) that render organisms nonviable in ballast water. At this time, the Coast Guard does not accept any type-approval testing methods for ballast water management systems that render organisms in ballast water nonviable (meaning “permanently incapable of reproduction”). In consideration of public comments on the draft policy letter, this final policy letter establishes the mechanism for reviewing and integrating viability testing methods into the existing Coast Guard type-approval testing program. The Coast Guard invites submissions of viability testing methods in accordance with the policy letter at any time following publication. The Coast Guard will review any provided information responsive to the policy letter and enclosure. This final policy letter is subject to revision, in coordination with the Environmental Protection Agency, contingent on any Coast Guard determination that a viability testing method is acceptable.
The final policy letter announced in this notification is issued as of February 28, 2022.
To view the final policy letter, as well as comments mentioned in this notice as being available in the docket, go to
Mr. Matthew Reudelhuber, Environmental Standards Division, 202-372-1432.
The Vessel Incidental Discharge Act of 2018 (VIDA) found at Title IX of the Frank LoBiondo Coast Guard Authorization Act of 2018, Public Law 115-282, amended Section 312(p) of the Federal Water Pollution Control Act (33 U.S.C. 1322). Pursuant to 33 U.S.C. 1322(p)(6)(D)(ii), the Coast Guard published a draft policy letter in the
The final policy letter is issued pursuant to 33 U.S.C. 1322(p)(6)(D)(iv))which requires the
In accordance with 33 U.S.C. 1322(p)(6)(D)(iv), and 46 CFR subpart 162.060, accepted viability testing methods outlined in this policy letter or in future revisions are an alternative to testing procedures in 46 CFR subpart 162.060, including the EPA/600/R-10/146, Environmental Technology Verification (ETV) Program Generic Protocol for the Verification of Ballast Water Treatment Technologies (ETV Protocol).
The final policy letter contains a number of changes from the draft policy letter. This section lists all of the changes made to the draft policy letter. Most of the changes discussed below are being made as a direct response to submitted comments. A full discussion of the comments and Coast Guard responses is available at Section IV below.
As discussed in greater detail below, several comments focused on the Coast Guard's administrative process in issuing the draft policy letter. In Section 8 of the final policy letter, titled “Process for acceptance and use of new protocols,” the Coast Guard added additional details regarding the specific steps the Coast Guard will undertake in fulfilling the administrative procedural requirements associated with accepting a type-approval testing method.
As discussed in greater detail below, many comments were directed at the Coast Guard's statement in the draft policy letter that, “[a]t the time of [publication of the draft policy letter], the Coast Guard does not know of any type-approval testing protocols for BWMS that render organisms nonviable in ballast water that are based on best available science.” In light of those comments, in the final policy letter the Coast Guard clarifies that it is not that we are unaware of viability testing methods; rather we are unaware of viability testing methods that are
In the draft policy letter, the Coast Guard did not address the potential to accept facility or site-specific viability testing methods. This topic has been added to the final policy letter, along with an explanation below of the circumstances in which information on facility or site-specific viability testing methods would be assessed.
In the draft policy letter, the Coast Guard described the applicability of an accepted viability testing method within the existing type-approval testing protocol. In this final policy letter, the Coast Guard describes in detail a limitation on the applicability of the term “permanently” to those viability testing methods addressed by the final policy letter, not to any testing methods in the existing requirements in 46 CFR subpart 162.060.
The Coast Guard's draft policy letter explained the process for our evaluation of any data and information that we may receive for assessing a type-approval method. However, the draft policy letter focused on establishing the type of information and material that the public and stakeholders should provide to the Coast Guard in the form of proposals for specific viability testing methods. We have revised the final policy letter to clarify that the Coast Guard assumes the burden for assessing information regarding available viability testing methods. In this policy letter, the Coast Guard provides an explanation of the best available science decision-making process. Further details can be found below in the relevant responses to comments, as well as in the final policy letter, and the Enclosure to the final policy letter.
The legislative requirement in 33 U.S.C. 1322(p)(6)(D)(v) to consider MPN was not explicitly addressed in the draft policy letter. In the final policy letter, we make clear that the Coast Guard will take MPN-based methods into consideration.
The Coast Guard's initial position in the draft policy letter stated that viability testing methods would need to include statistical data demonstrating a stated minimum for precision and accuracy data. In response to comments, Coast Guard deleted references to such standards in the final policy letter and clarified the requirement to state that information on method risk and uncertainty, including precision and
The Coast Guard's initial position in the draft policy letter was that viability testing methods would need to include validation data from a specific number of tests from specific locations. In response to comments, we have deleted references to minimum testing requirements in the final policy letter and clarified the basis for requesting information regarding the degree to which methods have been validated over a range of geographic locations and conditions.
The definition of best available science was not addressed in the draft policy letter. In response to public comments, the Coast Guard added new text to the final policy letter to define the term.
In the draft policy letter, the Coast Guard did not address the best available science evaluation of available information in assessing viability testing methods. In the final policy letter, the Coast Guard describes the general approach to evaluating information.
In response to comments, the Coast Guard significantly modified what was written in the draft policy letter regarding equivalency with several testing method parameters in the ETV Protocol. In the draft policy letter, the Coast Guard stated that the existing regulation including the ETV Protocol “set the standard for rigor, documentation and transparency required of any BWMS type-approval testing protocol submitted to the Coast Guard for acceptance. BWMS type-approval testing for systems that render organisms nonviable will incorporate protocols based on viability and will be subject to the same level of rigor currently used for type-approval.” The Coast Guard changed the final policy letter to focus on evaluating best available science, not adherence to a standard established by the ETV Protocol. The requirement for equivalency was removed from the final policy letter and the basis for the requested information is further explained in the relevant sections below.
In the draft policy, the Coast Guard did not describe the use of the existing testing method to test organism viability. However, in response to comments expressing confusion on this issue, in the final policy letter the Coast Guard elaborates on the VIDA provision prohibiting the use of stains to test viability and how that relates to accepting a viability testing method for use within the existing type-approval program.
We appreciate the public's comments to the draft policy letter. The draft policy letter remains available on the Coast Guard website at:
The Coast Guard received 39 submissions to the docket, one in duplicate. In the following section, we respond to 38 separate submissions. Each of the 38 submissions contains multiple comments on the draft policy letter. In the discussion below, we distinguish between submissions to the docket and the individual comments contained in those submissions. The comments raised the following issues, addressed below.
The Coast Guard received four comments relating to general alignment between U.S. and International Maritime Organization (IMO) test requirements. One comment asserted that nonconformity between U.S. and IMO test requirements increases both ballast water management system (BWMS) operational complexity and opportunities for noncompliance. One commenter stated that the Coast Guard should accept testing protocols that align with IMO accepted testing protocols because doing so will avoid confusion that could result in wrongful discharges; increase the efficiency of ships by removing a need to operate with increased power; and decrease discharges of Greenhouse gases due to less power being used on ships. Another comment requested that the Coast Guard align testing protocols and type-approval certificate limitations with international standards. One comment stated that the Coast Guard is blocking the intent of VIDA, which the commenter asserts is to adopt international BWMS MPN testing data, as a basis for Coast Guard BWMS type-approval.
The Coast Guard notes that nothing in VIDA nor its legislative history indicates Congressional intent to align domestic BWMS regulations with the IMO Ballast Water Management Convention. When adopting testing protocols, the Coast Guard is required to follow the evaluation criteria and factors for consideration that are articulated in VIDA. Under VIDA, the Coast Guard does not have the authority to accept viability testing methods on any basis other than an evaluation of best available science. Adopting a particular viability testing method on the basis that it would provide greater alignment with IMO or other international standards is not authorized under VIDA. Our interpretation on this issue is more fully addressed in the section immediately below.
The Coast Guard received eight comments relating to Coast Guard alignment with the IMO's approach to the use of MPN statistical analysis-based methods. Two comments questioned why the Coast Guard does not follow IMO by recognizing both the vital stain method and the MPN method for 10-50 um size range. Two comments suggested that the Coast Guard has tacitly accepted the use of MPN by not objecting to or abstaining from the IMO approval process. Three comments stated that the Coast Guard should align domestic BWMS type-approval with IMO type-approval under the Ballast Water Management Convention. One comment noted the objectives of the IMO BWM Convention.
The U.S. is not a signatory to the 2004 IMO Ballast Water Management Convention, and thus the U.S. Coast Guard is not bound by acts taken pursuant to that convention. The Coast Guard cannot elect to adopt a viability testing method simply because it is on the list of methods recognized under the IMO Convention. According to 33 U.S.C. 1322(p)(6)(D)(ii), the Coast Guard must base its decision on the best
Six comments asserted that the Coast Guard did not follow proper administrative processes by failing to conduct an impact study and by violating the Administrative Procedure Act's (APA) requirement to provide a reasoned basis for its policy letter.
Two commenters stated that the Coast Guard violated the APA by not providing a reasoned basis for its best available science determination. One comment noted that the Coast Guard has not done any impact studies for the VIDA draft policy letter. Two comments stated that the Coast Guard disregarded statutory requirements by not accepting MPN to type-approve UV BWMS. One comment requested that the Coast Guard take environmental impacts and opportunity for noncompliance into account when accepting a testing protocol.
In developing the draft policy letter, the Coast Guard attempted to provide concise guidance, responsive to the statutory directive in VIDA. This guidance sought to anticipate questions and areas of concern. However, some public comments provided the Coast Guard with specific concerns requiring more attention and clarification. The Coast Guard made changes in the final policy letter in consideration and as a direct result of public commentary on the draft policy letter. Our responses to comments provide the underlying reasoning for making specific policy decisions. In specific response, please note the discussion below in section D.1 providing the reasoned basis for the Coast Guard's determination that, at the time of publication, evaluation of best available science was impossible.
The Coast Guard did not engage in a rulemaking, due to a specific mandate from Congress to issue a policy letter, not a rule. The APA requirements for notice and comment do not apply to general statements of policy pursuant to 5 U.S.C. 553(b)(A). Moreover, neither the draft policy letter nor this final policy letter imposes legally binding obligations or prohibitions on regulated parties. This is consistent with statements of policy.
Taking into account that 33. U.S.C. 1322(p)(6)(D) requires the publication of a policy letter, the Coast Guard determined that the action falls under a categorical exclusion (CATEX) pursuant to Department of Homeland Security Management Directive 023-01, Rev. 1, associated implementing instructions, and U.S. Coast Guard Environmental Planning Policy COMDTINST 5090.1, which guide the Coast Guard in complying with NEPA (42 U.S.C. 4321
Two categories of actions that are not discussed in this letter are: (1) Acceptance of viability testing method(s), and (2) type-approval for proposed BWMS. The Coast Guard will issue subsequent policy letters for the acceptance of viability testing methods pursuant to 33 U.S.C. 1322(p)(6)(D)(iv)(III). The Coast Guard has provided additional information about the basis for its best available science decisionmaking in Section H. The Coast Guard further notes that these administrative actions will require comprehensive environmental review under NEPA, the preparation of a NEPA document such as an Environmental Assessment or an Environmental Impact Statement, and compliance with other environmental laws. For the purposes of NEPA, the USCG may choose to use a programmatic approach, resulting in one initial NEPA document that could assess potential environmental impacts of multiple testing methods and type-approvals. A programmatic NEPA document could alleviate the need for NEPA analyses on individual testing methods and type-approvals, or at a minimum, would narrow the scope of such NEPA reviews. Environmental reviews of actions following development of a programmatic NEPA document would be undertaken to comply with NEPA (42 U.S.C. 4321
From the 38 submissions to the docket, the Coast Guard received 45 comments concerning its statement that it was unaware of available testing methods. Twenty-two comments interpreted the draft policy letter to mean that the Coast Guard has previously evaluated viability testing methods and determined that there were no acceptable viability testing methods based on best available science. Eight comments noted the availability of specific documentation regarding viability assessment and stated that the Coast Guard is aware (or should be aware) of the information. Eight other comments expressed skepticism about the Coast Guard's evaluation of the available information regarding methods for assessing the viability of organisms in ballast water and associated determination that none are acceptable. One comment stated that the Coast Guard must have assessed and excluded MPN as a testing method and concluded that doing so effectively excludes UV-based BWMS treatment. Three comments asserted that the Coast Guard assessed and rejected MPN. One comment stated that the Coast Guard needs to explain “why [the Coast Guard] effectively dismissed an otherwise unchallenged body of best available science.” One comment stated that the Coast Guard disregarded scientific support for MPN and specific MPN protocols that may meet Coast Guard requirements. One comment stated that a U.S. delegation was present at the IMO's Working Group on Ballast Water Management, so the Coast Guard is aware of type-approval testing methods
The forty-five comments described above all concluded, for various reasons, that the Coast Guard had already evaluated information and methods, including MPN, and determined that none were acceptable. The draft policy letter apparently gave many readers the misimpression that it is the Coast Guard's position that we have no awareness of viability testing methods, generally. We wish to clear up that misimpression by clarifying that it is not that we are unaware of viability testing methods but that we are unaware of a viability testing method that is
In completing the final policy letter, we considered all of the public comments on the best available science evaluation that we proposed in the draft policy letter as well as the specific information that was described in the draft policy letter's Enclosure that would be used in assessing available viability testing methods. A key purpose of the final policy letter, therefore, is to finalize the Coast Guard's best available science evaluative approach.
The Coast Guard received three comments regarding the acceptance of facility-specific methods versus generally applied testing methods. One comment urged the Coast Guard to consider the pros and cons of standard methods compared to facility-specific procedures. One comment stated that the Coast Guard should adopt an approach to viability testing methods that would allow each test facility to develop its own specific MPN-based method(s). One comment asserted that specific media and culture conditions used in grow-out during viability testing should be left to the discretion of individual test facilities.
The Coast Guard will consider a viability testing method that is intended for facility or site-specific use. In order to consider such methods, the Coast Guard requires information on a viability testing method's risks or uncertainties when used in a facility or site-specific manner, within the global context of type-approval testing. Such risks and uncertainties may possibly be mitigated through facility or site-specific validations during use and adjustment of method details based on facility or site-specific conditions.
The Coast Guard received six comments about the scope and applicability of the term “permanently.” One comment touched on the technical aspect of the FDA/CMFDA + motility method in the ETV Protocol and its ability to characterize treated organisms as permanently dead. One comment requested that the Coast Guard explain whether viability assessment methods can be practicably applied to all organisms regulated by BWM regulations. One comment stated that the Coast Guard cannot conduct type-approval testing using the existing stain method because it cannot meet the new statutory definition of “permanently incapable of reproduction.” One comment requested that the Coast Guard ensure that the accepted viability-based BWMS testing protocol demonstrate permanent incapability to reproduce. One comment asserted that the Coast Guard should exempt testing methods from VIDA's requirement to demonstrate that organisms have been rendered permanently incapable of reproduction because this VIDA requirement was not applied to methods in the ETV protocol. One commenter explained that a BWMS that merely renders organisms temporarily nonviable is insufficient to ensure the protection of the Great Lakes and, therefore, it is vitally important that a BWMS that is not based on a live/dead standard, must be able to render organisms permanently nonviable.
The Coast Guard notes that “permanently” applies to organism reproduction under the 33 U.S.C. 1322(p)(6)(D)(i) definition of “live” and “living.” As such, the term has not been previously considered in the context of the ballast water discharge standard regulations contained in 46 CFR subpart 162.060. Additionally, the statute defines the term “render nonviable” in 33 U.S.C. 1322(p)(1)(U) to mean “the action of a ballast water management system that renders the organism permanently incapable of reproduction following treatment.” The Coast Guard recognizes that the new definitions in VIDA could be interpreted to impact the existing type-approval program, but, this is not the case based on the plain meaning of 33 U.S.C. 1322(p)(6)(D)(ii)(II) which states that an approved type-approval testing method that renders organisms nonviable may be used
The Coast Guard received one comment suggesting a definition for the term “viable” to mean an organism that is “capable of growth and replication and hence survival.” The Coast Guard notes that VIDA does not define the individual terms “viable” or “nonviable.” However, VIDA does define the term “render nonviable” (in 33 U.S.C. 1322(p)(1)(U)) thus: “The term `render nonviable', with respect to an organism in ballast water, means the action of a ballast water management system that renders the organism permanently incapable of reproduction following treatment.” Accordingly, the Coast Guard determines that the definition of “viable” is capable of reproduction.
The Coast Guard received four comments speaking to the agency's latitude in considering viability testing methods. One comment stated a preference for the VIDA standard to be based on live/dead status of organisms, not viability. One comment requested that the Coast Guard evaluate risks posed by the introduction of living but nonviable organisms. One comment
These comments seem to assert that either the Coast Guard should consider a viability standard or not consider it; or at least not consider it until the Coast Guard first evaluates the risks posed by introduction of living but nonviable organisms. The Coast Guard has no discretion in this area. The legislation in 33 U.S.C. 1322(p)(6)(D) requires that we consider viability testing protocols.
The Coast Guard received two Comments regarding the request for the public and stakeholders to submit viability testing methods. One comment stated that, contrary to Congressional intent, the Coast Guard shifted the burden of validating BWMS testing protocols onto manufacturers instead of the agency. One comment interpreted the draft policy letter's proposed procedure to mean that BWMS manufacturers would submit methods as part of type-approval testing.
These comments suggest that the Coast Guard is not fulfilling its Congressional mandate to assess viability testing methods. This is not the case. The statute requires a viability testing method to be
The Coast Guard received one comment asserting that the term “if any” in 33 U.S.C. 1322 (p)(6)(D)(ii) refers to BWMS, not type-approval testing methods and protocols.
The Coast Guard notes that the statute's location of the qualifier “if any” differs between the draft policy letter and the final policy letter. However, based on the plain reading of the statute pertaining to the final policy letter (33 U.S.C. 1322(p)(6)(D)(iv)(I), we believe the “if any” language applies to type-approval testing methods. Therefore, the Coast Guard determines that the statute's different location of the qualifying “if any” language does not affect the need to evaluate the science supporting a viability testing method within a best available science evaluative framework.
The Coast Guard received one comment questioning whether the Coast Guard had coordinated with EPA in concluding that no methods were available. We appreciate the question and would again like to emphasize that we did not mean to suggest or imply in the draft policy letter that there are no available viability testing methods, but rather that we have not evaluated the science supporting any viability testing methods within a best available science evaluative framework. We discuss this point in Section D.1.under the paragraph header “Coast Guard awareness of available testing methods.” Second, the Coast Guard received EPA's input on the draft policy letter and integrated that input into the draft policy letter prior to its publication in the
The Coast Guard received eight comments on the determination of no acceptable viability testing methods. One comment disagreed with the Coast Guard's determination not to accept any testing method that uses grow-out for organisms greater than or equal to 10 micrometers and less than or equal to 50 micrometers because the existing type-approval testing method for bacteria relies on organism grow-out. Six comments requested that the final policy letter identify one or more accepted methods, and further assert that the Coast Guard does not have discretion to determine that none are acceptable. One comment asserted that Congress's clear intent was for the final policy letter to be a final action incorporating the best MPN or similar method(s), not the starting point for a new method evaluation using a pre-existing regulatory process.
The Coast Guard disagrees with the equivalency between the existing testing method for bacteria and acceptance of a testing method that uses grow-out for organisms greater than or equal to 10 micrometers and less than or equal to 50 micrometers. The Coast Guard notes that utilizing selective media to enumerate specific organisms is fundamentally different from enumerating mixed assemblages of organisms. Further, at the time of the ETV Protocol development, those specific methods for bacteria existed as fully validated standard methods.
In response to comments asserting that the Coast Guard was required to describe in the draft policy letter, one or more viability testing methods, Congress provided the Coast Guard with the discretion to determine “if any” type-approval testing methods are acceptable. The Coast Guard disagrees with the assertion that we were required to accept a testing method from those currently available. The statute does not require us to accept currently available viability testing methods but to accept viability testing methods that are based on best available science. As explained above, the Coast Guard's acceptance of viability testing methods must result from assessing information regarding viability testing methods within a best available science evaluative framework.
The Coast Guard disagrees that the final policy letter is required to be a final action with no ongoing assessment of viability testing methods. Nor do we agree that we have made the policy letter “the starting point for a new method evaluation using a pre-existing regulatory process.” Under 33 U.S.C. 1322(p)(6)(D)(iv)(III), Congress expressly contemplates an ongoing assessment of viability testing methods by directing the Coast Guard to incorporate accepted viability testing methods into future revisions of the final policy letter. We have determined that a revision of the policy letter will require several steps prior to completing the action of accepting a viability testing method. We must collect relevant information about viability testing methods, assess that information, and comply with any implicated legal authorities such as NEPA. Consequently, any prospective acceptance of a viability testing method will require comprehensive environmental review under NEPA, the preparation of a NEPA document such as an Environmental Assessment or an Environmental Impact Statement, and
The Coast Guard published a draft policy letter that sought public comment on the process for acceptance and use of new protocols. This process, incorporated in the final policy letter, will help the Coast Guard assess viability testing methods based on best available science. At the time that the Coast Guard accepts a viability testing method using the criteria established in the policy letter, we will revise the policy letter to reflect the Coast Guard's acceptance in accordance with 33 U.S.C. 1322(p)(6)(D)(iv)(III).
The Coast Guard received three comments asserting that the Coast Guard did not base its draft policy letter on best available science.
Of these three comments that generally assert that the draft policy letter was not based on the best available science, one commenter specifically asserted that the Coast Guard misinterpreted the statutory directive because the Coast Guard “issue[d] a draft policy letter that is not based on best available science [nor did it] discuss what best available science is or what it shows.” The commenter goes on to say that, “instead USCG appears to have interpreted the statutory directive to ask USCG to determine whether there are any type-approval methods that are themselves based on best available science.”
With respect to the draft policy letter, 33 U.S.C. 1322(p)(6)(D)(ii), requires the Coast Guard to, “publish a draft policy letter,
The Coast Guard received eight comments regarding the requirement to consider MPN. Four comments asserted that VIDA requires the Coast Guard to adopt the MPN method. Two comments asserted that VIDA requires the Coast Guard to consider MPN in the draft policy letter. One comment stated that Coast Guard must accept a culture-based viability testing protocol because that is the only way to determine if an organism is permanently incapable of reproduction. One comment stated that the “MPN method” is intended to be added to the Coast Guard BWMS type-approval testing requirements.
VIDA requires that, in developing the final policy letter, the Coast Guard “take into consideration a testing method that uses organism grow-out and most probable number statistical analysis.” The Coast Guard's final policy letter reflects the requirement to consider such testing methods. We note that the requirement to consider organism grow-out and most probable number statistical analysis were not included in the VIDA mandate for the draft policy letter; consequently, we did not address it.
The Coast Guard does not consider the term “MPN” to refer to any specific method intended to determine the concentration of viable organisms in ballast water. MPN is a general procedure that uses serial dilutions and statistical calculations to estimate concentrations of organisms in original samples and the organism grow-out is used to identify viable organisms. There can be many different specific methods that incorporate MPN or grow-out to identify numbers of viable organisms. Different methods may target specific organisms or broad assemblages of organisms depending on the selection of growth media and conditions. The Coast Guard is required to assess the permanency of an organism's inability to reproduce and will do so under a best available science evaluative framework.
The Coast Guard received two comments directed at the requirement in the draft policy letter enclosure for the precision and accuracy of viability testing methods to be at least equivalent to the precision and accuracy of methods accepted in existing regulations. The first comment points out that because VIDA does not require an equivalent level of precision and accuracy, the Coast Guard should remove this requirement. We agree that the ETV Protocol's precision and accuracy are not benchmarks for a viability testing method. However, we must assess the precision and accuracy for two reasons. First, we must evaluate the scientific information supporting a testing method in a manner that maximizes the quality, objectivity, and integrity of information, including statistical information. Second, we must evaluate the scientific information that supports a testing method in a manner that clearly documents and communicates risks and uncertainties in the scientific basis. Therefore, we are considering those categories of information.
The other comment noted that lesser precision and accuracy of best available methods for evaluating nonviable organisms, compared to existing methods for dead organisms, should not disqualify a proposed method.
We acknowledge that the existing testing method under 46 CFR subpart 162.060 was never evaluated on the basis of best available science. However, VIDA included a best available science criteria relating to viability testing methods. As stated above, we have determined that a best available science evaluation requires the Coast Guard to collect information, including that regarding precision, accuracy and associated statistical calculations for any potential viability testing method.
The Coast Guard received one comment disagreeing with requirements in the draft policy letter's enclosure regarding the validation of viability testing methods be conducted at a specific number of locations in the U.S.
The Coast Guard agrees that there should not be a requirement for a specific number or geographic range of validation locations. Accordingly, in the final policy letter, the Coast Guard changed the requirement such that the focus is on demonstrating the viability testing method's capability to effectively quantify organisms over the geographic range of its intended use, not on meeting a specific number of test locations.
The Coast Guard received eight comments relating to the requirement for consistency with the ETV Protocol when it comes to viability testing methods. Three comments disagreed with requirements specified in the draft policy letter's enclosure as being inconsistent with or exceeding the ETV Protocol's requirements. Another comment stated that the ETV Protocol cannot be used as the standard for scientific rigor in assessing viability testing methods. One comment requested the Coast Guard describe the level of scientific rigor applied in accepting the existing testing method. One comment asserted that the Coast Guard's acceptance of the existing testing method created the comparative level of scientific rigor that must be considered when assessing viability testing methods. One comment stated that a significant flaw in the existing type-approval testing method is that it does not incorporate an incubation period and therefore does not test the ability of organisms to repair after a measurement of dead status. One comment stated that the use of a vital stain is not an accurate assessment of living organisms.
The Coast Guard agrees with the commenters' statements that the ETV Protocol should not establish the standard for acceptance of type-approval testing protocols. The Coast Guard acknowledges that the ETV Protocol is not “perfect science” and that the acceptance of testing methods under that protocol does not set a requirement for acceptance under VIDA. In establishing a best available science evaluative framework, we have determined that the categories and types of information described in the Enclosure to the policy letter are appropriate and necessary in assessing viability testing methods.
The Coast Guard received three comments on the requirement that BWMS type-approval certificates be annotated to differentiate between BWMSs approved on the basis of viability and those that are approved based on rendering organisms dead.
In response to these comments, the Coast Guard refers to 33 U.S.C. 1322(p)(6)(D)(ii)(II)(bb) which includes the explanation that a testing method is used “to certify the performance of each ballast water management system [that renders organisms nonviable in ballast water].” To carry out this requirement, the Coast Guard determined that BWMS tested to a viability standard must be certified as such. Consequently, the final policy letter retains the requirement to annotate a BWMS type-approval certificate to reflect the basis for approval. The Coast Guard notes that in addition to Congressional direction regarding certification of viability-based BWMS, annotation is necessary to help avoid confusion regarding the intended effect of a specific BWMS model. Under 46 CFR 162.060-10(g), the approval certificate will list conditions of approval applicable to the BWMS. We believe that an annotation to the type-approval certificate is the easiest method of avoiding confusion.
The Coast Guard received twenty-one comments about the definition of best available science. Ten of these comments assert that the Coast Guard should adopt an MPN method as representing the best available science because it is accepted for use under the IMO Ballast Water Management Convention. Three comments assert that the Coast Guard's interpretation of best available science improperly requires “perfect science.” Five comments requested that the Coast Guard provide its reason for not following guidance from the legal and scientific community on interpreting the term “best available science.” Three comments asserted that submissions to the docket in response to the draft policy letter provide a best available science basis for accepting the MPN method. In response to these comments, we point out that VIDA does not define “best available science.” Therefore, the Coast Guard must use its discretion in determining what constitutes “best available science.” The Coast Guard notes a cogent definition for the term is found in the immediately preceding section of the Federal Water Pollution Control Act (FWPCA), 33 U.S.C. 1321(a)(27) which states: “the term `best available science' means science that—maximizes the quality, objectivity, and integrity of information, including statistical information; uses peer-reviewed and publicly available data; and clearly documents and communicates risks and uncertainties in the scientific basis for such projects.” Although not intended to apply to other sections of the FWPCA, the Coast Guard notes that the definition in section 1321 aligns with our general understanding of other working definitions for the term “best available science” when used in federal legislation. The definition in section 1321 is concise and informative, providing three elements that can be generically applied to the evaluation of scientific information. This definition is a congressionally defined term within the same Act as the legislative requirements we are required to implement in 33 U.S.C. 1322. The Coast Guard notes that while applying this definition to the evaluation of type-approval testing methods is different from the way that the definition is applied in Section 1321, the definition speaks to the general concept of assessing scientific information, independent of the topic of that science.
The Coast Guard received eight comments about the best available science evaluation for assessing viability testing methods. One comment stated that the draft policy letter does not establish any specific process by which a viability-based methodology could be approved. One comment stated that it is critical that a best available science determination be based on an up-to-date understanding of the relevant science. Three comments asserted that the Coast Guard must describe a detailed process for evaluating viability testing methods, taking into consideration the best available science—including one comment seeking details on the determination of whether organisms are “permanently non-viable.” Two comments asserted that the Coast Guard should research best available science before developing a process. One comment requested that the Coast Guard work with various stakeholders in developing and accepting viability-based BWMS type-approval protocols.
The Coast Guard will assess the most current data and information available that supports viability testing methods on the basis of best available science pursuant to the approach outlined in the final policy letter. The Coast Guard has not yet conducted an assessment of supporting information and data for
The Coast Guard received five comments about the existing type-approval program remaining in effect. One comment agreed with the Coast Guard's conclusion that accepted viability methods would be used as part of the ETV protocol process. One comment noted that the existing type-approval testing method will remain in place until Coast Guard accepts a viability-based type-approval testing method. One comment supported a type-approval testing protocol that combined live/dead and viability assays. One comment agreed with the Coast Guard decision to add viability testing methods to the existing type-approval testing methods. One comment asserted that the final viability policy letter should not address how viability testing methods would be incorporated into the type-approval testing procedures specified in regulation.
Any accepted method will be used in addition to existing type-approval testing methods per 33 U.S.C. 1322 (p)(6)(D)(iv)(II). At the time that one or more viability testing methods are accepted, viability testing methods will only be added to the discrete sections of the type-approval test requirements for which the specific viability testing method applies. Sections 5.4.6.4 and .5 of the ETV Protocol address enumeration of organisms in ballast water. Accepted viability testing methods for organisms greater than 50 um in size would be accepted for use under Section 5.4.6.4, and viability testing methods for organisms in the 10-50 um size group would be accepted for use under 5.4.6.5. An accepted viability testing method may describe alternative procedures relating to aspects of the ETV Protocol beyond those described above. The specifications for such alternatives will then be described in a revision to the final policy letter and must directly relate to measuring the concentration of organisms in ballast water that are capable of reproduction. Under VIDA, the Coast Guard will not assess any method that enumerates living organisms (
The Coast Guard received five comments about the existing testing method as applied to viability testing. One comment states that the ETV Protocol utilizes vital stain to determine organism viability. Three comments noted that vital stain does not assess viability. Another comment claimed that testing organisms with MPN gives a better viability result than vital stains.
The existing testing method specified in the ETV Protocol does not assess organism viability, meaning the ability to reproduce, and will not be used for that purpose. Additionally, 33 U.S.C. 1322(p)(6)(D)(v)(II) prohibits the Coast Guard from considering a testing method that relies on a staining method to measure the concentration of organisms greater than or equal to 10 micrometers and less than or equal to 50 micrometers. The term “stain” is undefined in VIDA and is not consistently used in science to describe a specific scientific procedure. A “stain” is defined by Merriam Webster's dictionary
Seventy-five comments offered support for viability testing methods. Fifty comments expressed support, either generally or for one or more specific viability testing methods. Eighteen comments cited to specific supporting information for one or more specific viability testing methods. Seven comments noted scientific information supporting MPN usage in water treatment.
The Coast Guard did not solicit information regarding potential viability testing methods in the
The Coast Guard received five comments offering general support for VIDA. One comment agreed with VIDA's definition of “live” and “living.” Two comments generally supported the use of viability-based BWMS type-approval testing. One comment stated support for the discharge of nonviable organisms in ballast water as effective in preventing the spread of invasive species. One comment supported the use of best available science in assessing ballast water treatment options. One comment noted the importance of determining permanent nonviability.
While the Coast Guard appreciates these commenters' concern regarding ballast water treatment, we consider these six comments to be outside the scope of the draft policy letter. As discussed above, the draft policy letter sought public comment on the process for accepting type-approval testing methods and protocols for BWMS, if any, that render organisms nonviable in ballast water and may be used in addition to the existing testing methods.
The Coast Guard received ten comments relating to the 2012 BWDS rule. One comment noted that in the 2012 BWDS rulemaking, the Coast Guard noted differences in the Coast Guard's 2012 BWDS and the IMO BWM convention. One comment claimed that existing regulations are designed to ensure ballast water sterilization. One comment claimed that Coast Guard regulations do not address the technical aspects of quantifying organisms in ballast water and that Coast Guard
While the Coast Guard appreciates these commenters' concern regarding ballast water treatment, we consider these ten comments outside the scope of the draft policy letter. As discussed above, the draft policy letter sought public comment on the process for accepting type-approval testing methods and protocols for BWMS, if any, that render organisms in ballast water nonviable and that may be used addition to the existing testing methods.
The Coast Guard received one comment requesting that the Coast Guard require the use of BWMS on all ships traversing the Great Lakes, whether land based or onboard.
This comment is out of scope as it relates to use of BWMS for vessels on the Great Lakes, instead of the testing method that could be used to test BWMS. The Coast Guard acknowledges the comment and notes that VIDA addresses applicability of ballast water regulation in the Great Lakes under other provisions.
The Coast Guard received five comments discussing Coast Guard decisions made prior to the enactment of VIDA. One comment asserted that the Coast Guard made multiple scientific errors in 2016 when the Coast Guard denied an appeal to an earlier Coast Guard decision that rejected the use of MPN. One comment stated that the Coast Guard switched rationales for not accepting MPN, asserting that the USCG rejected MPN in 2015 because it did not meet the BWDS established in the 2012 rule. Now, the commenter asserts we are rejecting MPN on the basis that MPN is not based on the best available science. One comment questioned why the Coast Guard allows culture-based methods for bacteria but not for 10-50 um organisms. Two comments objected to the Coast Guard's rejection of the MPN method for enumeration of viable microorganisms that was published in the 2015 Maritime Commons.
Prior to the enactment of VIDA, the Coast Guard made decisions under other legal authorities. Under VIDA, the Coast Guard is required to evaluate the acceptability of viability testing methods, on the basis of best available science, giving consideration to any MPN-based methods. Consequently, comments pertaining to assessment of VIDA requirements through the lens of other authorities are not relevant to the evaluation of type-approval testing method on the basis of best available science required under VIDA.
The Coast Guard received fourteen comments relating to factors that Coast Guard would consider in assessing viability testing methods based on the impacts of BWMS technology type. One comment provided an opinion on the associated environmental benefits or drawbacks of particular BWM technologies. One comment requested that the Coast Guard evaluate environmental risks of technologies designed to render organisms living but nonviable. One comment mentioned that a filter and UV based BWMS requires more than three times the power consumption if designed according to results from CMFDA testing. The comment further noted that such design will not be optimal, and sometimes impossible to retrofit on-board ships in our main target market segments. The comment requested the Coast Guard consider energy usage in assessing acceptable viability-based type-approval testing methods. One comment provided an opinion on water quality impacts of UVC radiation versus other BWM treatment technologies. One comment stated that the Coast Guard's BWMS testing requirements result in UV based system having to be significantly overpowered, causing the systems to have larger footprints and consume more energy than necessary to be effective. Two comments claimed that the Coast Guard, in not accepting viability assays, is not allowing the use of UV technology. One comment stated that the Coast Guard is biased against UV-based BWMS technologies and that the Coast Guard's rejection of low-energy UV BWMS that render certain microorganisms is contrary to the National Invasive Species Act (NISA) and international norms. One comment asserted that the Coast Guard should recognize low-dose UV as a preferred BWMS technology because it is an effective and economical treatment option for the maritime industry. One comment supported type-approval testing methods that are tailored to specific treatment technologies. One commenter recommends grow-out methods for measuring the response of all treatments because both inactivated and killed cells will not grow out. One comment supported the use of appropriate viability testing methods for type-approving UV BWMS. One comment noted there are limitations of UV-based treatment that, in some situations, will make UV-based processes not the process of choice. One comment asserts that the Coast Guard is concerned that UV-based methods may not render organisms permanently nonviable.
Our response to these comments is that we interpret VIDA to be “technology neutral” when it comes to the acceptance of type-approval protocols. The Coast Guard determines that Congress did not express an intent to either disadvantage or create preference for any specific BWMS technologies. In other words, VIDA does not address BWMS treatment technology types beyond the general qualification that they render organisms nonviable, and the acceptance of viability testing methods is based on best available science.
The Coast Guard will revise the final policy letter once any viability testing methods are accepted. The Coast Guard invites voluntary submission of viability testing methods and associated scientific information and data responsive to the specific categories of information identified in the final policy letter or its enclosure. Upon receipt of a submission, the Coast Guard will evaluate the submitted viability testing method, and associated scientific information and data, on the basis of best available science. Afterwards, the Coast Guard will conduct NEPA-compliant environmental analysis on any potentially acceptable viability testing methods, to include any required public involvement. If, pursuant to these analyses, the Coast Guard determines that a viability testing method is acceptable, we will publish a revision of the final viability policy letter to include any accepted viability testing methods.
Revisions to the final policy letter, if any, may also occur during the 5 year review of standards of performance, pursuant to 33 U.S.C. 1322(p)(D)(iv)(III). Reviewing testing methods, immediately following any changes to standards of performance and associated type-approval requirements, will allow the Coast Guard to expedite the inclusion of changes to the type-approval regulations, including methods
We are mindful of the potential pitfalls associated with reviewing proposed methods submitted at any time. We note that significant resources are required to conduct the best available science evaluation of viability testing methods. Once the Coast Guard initiates review of a viability testing method, subsequent submissions will be reviewed in the order received.
In addition to participating in the revision process described above, states may petition for changes to the policy establishing the review and acceptance process, pursuant to 33 U.S.C. 1322(p)(7). Such changes would pertain to the substance of the policy letter, which establishes the process for accepting and implementing viability testing methods, and would not be for the purpose of revising the policy letter to accept a specific viability testing method. This is due to the phrasing of 33 U.S.C. 1322(p)(7), which allows for petitions to review a policy if there exists new information that could reasonably result in a change to the standard of performance, regulation, or policy or to a determination on which the policy was based.
a. The development of the final policy letter and the general policies contained within it have been thoroughly reviewed by the Coast Guard. Pursuant to NEPA (42 U.S.C. 4321
CATEX A3 pertains to the promulgation of rules, issuance of rulings or interpretations, and the development and publication of policies, orders, directives, notices, procedures, manuals, advisory circulars, and other guidance documents, such as “those of a strictly administrative or procedural nature,” or “those [implementing], without substantive change, statutory or regulatory requirements.”
b. The final policy letter will not have any of the following: Significant cumulative impacts on the human environment; substantial controversy or substantial change to existing environmental conditions; or inconsistencies with any Federal, State, or local laws or administrative determinations relating to the environment. All future specific actions resulting from the general policy in the final policy letter must be individually evaluated for compliance with NEPA (42 U.S.C. 4321
The Coast Guard determines the final policy does not require a new collection of information under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501.
The Coast Guard developed the final policy letter in coordination with the EPA pursuant to 33 U.S.C. 1322(p)(6)(D)(iv). The final policy letter is available in the docket and on the following USCG website:
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
The FAA proposes to adopt a new airworthiness directive (AD) for Bell Textron Canada Limited (type certificate previously held by Bell Helicopter Textron Canada Limited) Model 206L, 206L-1, 206L-3, and 206L-4 helicopters with a certain part-numbered main rotor (M/R) blade installed under Supplemental Type Certificate (STC) SR02684LA. This proposed AD was prompted by delamination of M/R blades. This proposed AD would require a repetitive inspection for delamination, and depending on the results, removing the M/R blade from service and reporting certain information. The FAA is proposing this AD to address the unsafe condition on these products.
The FAA must receive comments on this proposed AD by May 9, 2022.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
For service information identified in this NPRM, contact Van Horn Aviation, L.L.C., ATTN: Dean Rosenlof, 1510 West Drake Drive, Tempe, AZ 85283; telephone (480) 483-4202; email
You may examine the AD docket at
Peter Jarzomb, Aerospace Engineer, Airframe Section, Los Angeles ACO Branch, Compliance & Airworthiness Division, FAA, 3960 Paramount Blvd., Lakewood, CA 90712; telephone (562) 627-5234; email
The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under
Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to
CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Peter Jarzomb, Aerospace Engineer, Airframe Section, Los Angeles ACO Branch, Compliance & Airworthiness Division, FAA, 3960 Paramount Blvd., Lakewood, CA 90712; telephone (562) 627-5234; email
The FAA proposes to adopt a new AD for Bell Textron Canada Limited (type certificate previously held by Bell Helicopter Textron Canada Limited) Model 206L, 206L-1, 206L-3, and 206L-4 helicopters with a certain serial-numbered M/R blade part number (P/N) 20633000-101 installed under STC SR02684LA. Testing by Van Horn Aviation, L.L.C., revealed the potential for delamination in M/R blade P/N 20633000-101. Delaminations were then confirmed by inspection of in-service M/R blades. Testing by Van Horn Aviation, L.L.C., has confirmed that the 90° plies fail in spanwise tension (normal to the fiber direction) at the inboard end of the weight receptacle near M/R blade station 186.0. Delamination then propagates outboard from M/R blade station 186.0 at the interface between the 0° and 90° plies. According to Van Horn Aviation, L.L.C., fatigue testing has shown that the
Accordingly, this proposed AD would require a repetitive inspection for delamination, and depending on the results, removing the M/R blade from service and reporting certain information. This condition, if not addressed, could result in reduced structural integrity of the M/R blade, excessive vibration, and subsequent loss of control of the helicopter.
The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design.
The FAA reviewed Van Horn Aviation, L.L.C., Service Bulletin Notice No. 33000-4R3, dated November 8, 2021 (SB 33000-4R3). This service information specifies procedures to identify “Zone 1” and “Zone 2” inspection areas, accomplish repetitive visual and tap inspections of the zones to detect and monitor the growth of any delamination, and depending on the results, removing the M/R blade from service and contacting Van Horn Aviation, L.L.C.
This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in
This proposed AD would require, at specified intervals, removing the affected M/R blade, drawing rectangular inspection areas “Zone 1” and “Zone 2” with a permanent marker, tap inspecting the inspection areas for delamination, marking and measuring the length of any delamination, and depending on the results, removing the M/R blade from service. This proposed AD would also require reporting certain information to Van Horn Aviation, L.L.C.
This proposed AD would apply to additional M/R blades, serial numbers A007, A008, and A009, that are not identified in SB 33000-4R3 as the FAA has determined that those serial-numbered blades are subject to the same unsafe condition. The proposed AD would require using certain part-numbered composite tap hammers, whereas SB 33000-4R3 does not. SB 33000-4R3 specifies procedures to visually inspect the M/R blade, whereas this proposed AD would not. If there is any delamination in the upper surface inspection zone (“Zone 1”), this proposed AD would require removing the M/R blade from service, whereas SB 33000-4R3 does not specify procedures for this condition.
The FAA considers that this proposed AD could be an interim action. The inspection reports that would be required by this AD will enable the FAA to obtain better insight into the unsafe condition. If final action is later identified, the FAA might consider further rulemaking.
The FAA estimates that this AD, if adopted as proposed, would affect 23 helicopters of U.S. registry. Labor rates are estimated at $85 per work-hour. Based on these numbers, the FAA estimates the following costs to comply with this proposed AD.
Removing, tap inspecting, and re-installing an M/R blade would take about 4.5 work-hours for an estimated cost of $383 per M/R blade, per inspection cycle and up to $8,809 for the U.S. fleet per M/R blade, per inspection cycle. Replacing an M/R blade would take about 4 work-hours and parts would cost about $71,500 per M/R blade for a total of $71,840 per M/R blade. Reporting information to Van Horn Aviation, L.L.C., would take about 1 work-hour for an estimated cost of $85 per report.
A federal agency may not conduct or sponsor, and a person is not required to respond to, nor shall a person be subject to a penalty for failure to comply with a collection of information subject to the requirements of the Paperwork Reduction Act unless that collection of information displays a current valid OMB Control Number. The OMB Control Number for this information collection is 2120-0056. Public reporting for this collection of information is estimated to take approximately 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. All responses to this collection of information are mandatory. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to: Information Collection Clearance Officer, Federal Aviation Administration, 10101 Hillwood Parkway, Fort Worth, TX 76177-1524.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have 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.
For the reasons discussed above, I certify this proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Would not affect intrastate aviation in Alaska, and
(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
The FAA must receive comments on this airworthiness directive (AD) by May 9, 2022.
None.
This AD applies to Bell Textron Canada Limited (type certificate previously held by Bell Helicopter Textron Canada Limited) Model 206L, 206L-1, 206L-3, and 206L-4 helicopters, certificated in any category, with main rotor (M/R) blade part number (P/N) 20633000-101 with serial number A007, A008, A009, or A012 through A104 inclusive installed under Supplemental Type Certificate SR02684LA.
Joint Aircraft System Component (JASC) Code: 6210, Main Rotor Blades.
This AD was prompted by reports of delamination of M/R blades. The FAA is issuing this AD to address delamination of an M/R blade initiating in the 90° plies at the lower inboard end of the weight pocket receptacle. The unsafe condition, if not addressed, could result in reduced structural integrity of the M/R blade, excessive vibration, and subsequent loss of control of the helicopter.
Comply with this AD within the compliance times specified, unless already done.
(1) Accomplish the actions required by paragraph (g)(2) of this AD at the following compliance time, whichever occurs later:
(i) Before the M/R blade accumulates 400 total hours time-in-service (TIS) or 2,400 engine starts since initial installation on any helicopter, whichever occurs first; or
(ii) Within 100 hours TIS after the effective date of this AD.
(2) Remove each M/R blade from the helicopter, place it on a flat, stable surface, and accomplish the following:
(i) Use a permanent marker to draw rectangular inspection “Zone 1” on the upper surface of the M/R blade at M/R blade stations 186.0 and 191.0, beginning 1.1 inches from the leading edge of the M/R blade to 4.9 inches from the leading edge of the M/R blade. Draw lines from the inboard end to the outboard end to connect each end at 1.1 inches and 4.9 inches. Draw parallel lines from the inboard end of the inspection zone to the outboard end of the inspection zone, with the lines spaced 0.50 inch apart.
(ii) Use a permanent marker to draw rectangular inspection “Zone 2” on the lower surface of the M/R blade at M/R blade stations 186.0 and 191.0, beginning from the forward edge of the weight receptacle pocket and extending 1 inch in the direction towards the leading edge of the M/R blade. Draw lines from the inboard end to the outboard end to connect each end at the weight receptacle pocket and 1 inch forward of the weight receptacle pocket. Draw parallel lines from the inboard end of the inspection zone to the outboard end of the inspection zone, with the lines spaced 0.50 inch apart.
(iii) Using composite tap hammer Abaris Training Tap Hammer P/N ABATH, HeatCon Tap Hammer P/N HCS1104-01, Brown Tool Composite Tap Hammer P/N BAT-CTH8, or MATCO Tools Composite Tap Hammer P/N T4BAT-CTH8, tap inspect the areas within “Zone 1” and “Zone 2” for any delamination by following Tap Inspect Balance Receptacle, paragraph A.(4) of SB 33000-4R3. Where SB 33000-4R3 specifies to mark the location where the delamination starts, use a permanent marker.
(iv) If there are any marks where the delamination starts, connect the marks indicating the delamination location and measure the length at the farthest point from the inboard end of the inspection area.
(v) If there is any delamination in the lower surface inspection zone (“Zone 2”) that is 6.0 or more inches in length or if there is any delamination in the upper surface inspection zone (“Zone 1”), before further flight, remove the M/R blade from service.
(3) Thereafter repeat the actions required by paragraph (g)(2) of this AD at intervals not to exceed 400 hours TIS or 2,400 engine starts, whichever occurs first.
(4) If there is any delamination, within 30 days after accomplishing the actions required by paragraphs (g)(1) or (3) of this AD, report each delamination size and location, and the total hours TIS and total engine starts since initial installation of the M/R blade, to Mr. Dean Rosenlof, Van Horn Aviation, L.L.C., 1510 West Drake Drive, Tempe, AZ 85283, or by email to
(1) The Manager, Los Angeles ACO Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the certification office, send it to the attention of the person identified in paragraph (i)(1) of this AD. Information may be emailed to:
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.
(1) For more information about this AD, contact Peter Jarzomb, Aerospace Engineer, Airframe Section, Los Angeles ACO Branch, Compliance & Airworthiness Division, FAA, 3960 Paramount Blvd., Lakewood, CA 90712; telephone (562) 627-5234; email
(2) For service information identified in this AD, contact Van Horn Aviation, L.L.C., ATTN: Dean Rosenlof, 1510 West Drake Drive, Tempe, AZ 85283; telephone (480) 483-4202; email
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
The FAA proposes to supersede Airworthiness Directive (AD) 2015-12-03, which applies to certain The Boeing Company Model 777-200, -200LR, -300, and -300ER series airplanes. AD 2015-12-03 requires repetitive freeplay inspections and lubrication of the right and left
The FAA must receive comments on this proposed AD by May 9, 2022.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
For service information identified in this NPRM, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740-5600; telephone 562-797-1717; internet
You may examine the AD docket at
Luis Cortez-Muniz, Aerospace Engineer, Airframe Section, FAA, Seattle ACO Branch, 2200 South 216th St., Des Moines, WA 98198; phone and fax: (206) 231-3958; email:
The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under
Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to
CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Luis Cortez-Muniz, Aerospace Engineer, Airframe Section, FAA, Seattle ACO Branch, 2200 South 216th St., Des Moines, WA 98198; phone and fax: (206) 231-3958; email:
The FAA issued AD 2015-12-03, Amendment 39-18176 (80 FR 34252, June 16, 2015) (AD 2015-12-03), for certain The Boeing Company Model 777-200, -200LR, -300, and -300ER series airplanes. AD 2015-12-03 was prompted by the manufacturer's determination that the procedure for the rudder freeplay inspection available at the time did not properly detect excessive freeplay in the rudder control load loop. AD 2015-12-03 requires repetitive freeplay inspections and lubrication of the right and left elevators, rudder, and rudder tab, and related investigative and corrective actions if necessary. The agency issued AD 2015-12-03 to detect and correct excessive wear in the load loop components of the control surfaces, which could lead to excessive freeplay of the control surfaces, flutter, and consequent loss of control of the airplane.
AD 2015-12-03 superseded AD 2007-13-05, Amendment 39-15109 (72 FR 33856, June 20, 2007).
Since the FAA issued AD 2015-12-03, engineering testing revealed that the force being applied to the elevator to detect excessive freeplay was insufficient. The original bypass test setup for the power control unit (PCU), which used a hydraulic depressurization method, was found to be unreliable for putting the adjacent PCU into bypass mode, and a new elevator freeplay maintenance procedure is necessary. Model 777F airplanes were not added to the applicability in AD 2015-12-03 because there was a certification maintenance requirement (CMR) task to accomplish the freeplay inspections for those airplanes; therefore, the FAA has determined that it is necessary for operators to revise the maintenance or inspection program to update the elevator freeplay procedures for Model 777F airplanes.
The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design.
The FAA reviewed Boeing Special Attention Service Bulletin 777-27-0062, Revision 4, dated July 15, 2021. This service information specifies procedures for changing the elevator
This proposed AD would also require Boeing Special Attention Service Bulletin 777-27-0062, Revision 2, dated January 27, 2014, which the Director of the Federal Register approved for incorporation by reference as of July 21, 2015 (80 FR 34253, June 16, 2015).
This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
This proposed AD would retain certain requirements of AD 2015-12-03 and require accomplishing the actions specified in accordance with updated service information, including corrective actions, such as repairs, already described for Model 777-200, -200LR, -300, and -300ER airplanes. This proposed AD would also add Model 777F series airplanes to the applicability. For Model 777F series airplanes, this proposed AD would require revising the existing maintenance or inspection program, as applicable, to incorporate a new elevator freeplay maintenance procedure. For information on the procedures and compliance times, see this service information at
The FAA estimates that this AD, if adopted as proposed, would affect 281 airplanes of U.S. registry. The FAA estimates the following costs to comply with this proposed AD:
The FAA has received no definitive data that would enable the agency to provide cost estimates for the on-condition corrective actions specified in this proposed AD.
The FAA has determined that revising the existing maintenance or inspection program takes an average of 90 work-hours per operator, although the agency recognizes that this number may vary from operator to operator. Since operators incorporate maintenance or inspection program changes for their affected fleet(s), the FAA has determined that a per-operator estimate is more accurate than a per-airplane estimate. Therefore, the FAA estimates the average total cost per Model 777F operator to be $7,650 (90 work-hours × $85 per work-hour).
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
The FAA has determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have 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.
For the reasons discussed above, I certify that the proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Would not affect intrastate aviation in Alaska, and
(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
The FAA must receive comments on this airworthiness directive (AD) action by May 9, 2022.
This AD replaces AD 2015-12-03, Amendment 39-18176 (80 FR 34252, June 16, 2015) (AD 2015-12-03).
This AD applies to The Boeing Company airplanes, certificated in any category, identified in paragraphs (c)(1) and (2) of this AD.
(1) All Model 777-200, -200LR, -300, -300ER series airplanes.
(2) Model 777F airplanes with an original airworthiness certificate or original export certificate of airworthiness issued on or before the effective date of this AD.
Air Transport Association (ATA) of America Code 27, Flight Controls.
This AD was prompted by the manufacturer's determination that the procedure for the rudder freeplay inspection available at the time did not properly detect excessive freeplay in the rudder control load loop. This AD was also prompted by engineering testing that revealed that the force being applied to the elevator to detect excessive freeplay was insufficient. The FAA is issuing this AD to address excessive wear in the load loop components of the control surfaces, which could lead to excessive freeplay of the control surfaces, flutter, and consequent loss of control of the airplane.
Comply with this AD within the compliance times specified, unless already done.
This paragraph restates the requirements of paragraph (g) of AD 2015-12-03, with revised service information. For Model 777-200, -200LR, -300, and -300ER series airplanes: At the applicable times specified in tables 1, 2, and 3 of paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 777-27-0062, Revision 2, dated January 27, 2014, or Revision 4, dated July 15, 2021, except as provided by paragraph (i)(1) of this AD: Inspect the freeplay of the right and left elevators, rudder, and rudder tab by accomplishing all of the actions specified in Parts 1, 3, and 5 of the Accomplishment Instructions of Boeing Special Attention Service Bulletin 777-27-0062, Revision 2, dated January 27, 2014, or Revision 4, dated July 15, 2021, except as provided by paragraphs (i)(2) through (4) of this AD. Repeat the inspections thereafter at the intervals specified in tables 1, 2, and 3 of paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 777-27-0062, Revision 2, dated January 27, 2014, or Revision 4, dated July 15, 2021. If, during any inspection required by this paragraph, the freeplay exceeds any applicable measurement specified in Part 1, 3, and 5, as applicable, of the Accomplishment Instructions of Boeing Special Attention Service Bulletin 777-27-0062, Revision 2, dated January 27, 2014, or Revision 4, dated July 15, 2021, before further flight, do the applicable corrective actions in accordance with Part 1, 3, and 5 of the Accomplishment Instructions of Boeing Special Attention Service Bulletin 777-27-0062, Revision 2, dated January 27, 2014, or Revision 4, dated July 15, 2021. After the effective date of this AD use only Boeing Special Attention Service Bulletin 777-27-0062, Revision 4, dated July 15, 2021.
This paragraph restates the requirements of paragraph (h) of AD 2015-12-03, with revised service information. For Model 777-200, -200LR, -300, -300ER series airplanes: At the applicable times specified in tables 1, 2, and 3 of paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 777-27-0062, Revision 2, dated January 27, 2014, or Revision 4, dated July 15, 2021, except as provided by paragraph (i)(1) of this AD: Lubricate the elevator components, rudder components, and rudder tab components, by accomplishing all of the actions specified in Parts 2, 4, and 6 of the Accomplishment Instructions of Boeing Special Attention Service Bulletin 777-27-0062, Revision 2, dated January 27, 2014, or Revision 4, dated July 15, 2021. Repeat the lubrication thereafter at the interval specified in tables 1, 2, and 3 of paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 777-27-0062, Revision 2, dated January 27, 2014, or Revision 4, dated July 15, 2021. After the effective date of this AD use only Boeing Special Attention Service Bulletin 777-27-0062, Revision 4, dated July 15, 2021.
This paragraph restates the requirements of paragraph (i) of AD 2015-12-03, with revised service information, for Model 777-200, -200LR, -300, -300ER series airplanes.
(1) Where Boeing Special Attention Service Bulletin 777-27-0062, Revision 2, dated January 27, 2014, and Revision 4, dated July 15, 2021, specify a compliance time “after the original issue date on this service bulletin,” this AD requires compliance within the specified compliance time after July 25, 2007 (the effective date of AD 2007-13-05, Amendment 39-15109 (72 FR 33856, June 20, 2007)). After the effective date of this AD, only Boeing Special Attention Service Bulletin 777-27-0062, Revision 4, dated July 15, 2021, may be used.
(2) Where Appendix B, paragraph 1.f., “Freeplay Inspection,” step (8), of Boeing Special Attention Service Bulletin 777-27-0062, Revision 2, dated January 27, 2014, specifies that the center of the pad must be within 1.0 inch (13 millimeters) of the center line of the rib rivets in the rudder tab, this AD requires that the center of the tab must be within 1.0 inch (25 millimeters) of the center line of the rib rivets in the rudder tab.
(3) Where Appendix C, paragraph 1.e., “Rudder Tab Surface Freeplay—Inspection,” step (2) and step (6), of Boeing Special Attention Service Bulletin 777-27-0062, Revision 2, dated January 27, 2014, specify that the placement of the force gage and pad should be within one inch of the centerline line of the middle rudder PCU rib and at 12 +/−1 inch (305 +/−72 millimeters) forward of the rudder tab trailing edge, this AD requires placement of the force gage and pad within one inch of the centerline line of the middle rudder PCU rib and at 12 +/−1 inch (305 +/−25 millimeters) forward of the rudder tab trailing edge.
(4) Where Appendix C, paragraph 1.e., “Rudder Tab Surface Freeplay—Inspection,” step (3), of Boeing Special Attention Service Bulletin 777-27-0062, Revision 2, dated January 27, 2014, specifies to apply a 30 +/−pound (133 +/−14 newton) force, this AD requires applying a 30 +/−3 pound force (133 +/−14 newton) force.
For Model 777F airplanes: Within 30 days after the effective date of this AD, revise the 777F elevator freeplay maintenance procedure in the existing maintenance or inspection program, as applicable, by doing the actions specified in paragraphs (j)(1) through (3) of this AD.
(1) Remove the existing hydraulic depressurization PCU test setup procedure step and replace it by incorporating the information specified in figure 1 to paragraph (j) of this AD.
(2) Revise the jack test force used to push the elevator up to 225 +/−10 lb (102.1 +/−4.5 kg).
(3) Revise the elevator freeplay dial indicator limit to 0.34 in. (152 mm) or less.
After the existing maintenance or inspection program has been revised as required by paragraph (j) of this AD, no alternative actions (
This paragraph provides credit for the actions specified in paragraphs (g) and (h) of this AD, if those actions were performed before the effective date of this AD using Boeing Special Attention Service Bulletin 777-27-0062, Revision 3, dated October 9, 2015.
(1) The Manager, Seattle ACO Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or responsible Flight Standards Office, as appropriate. If sending information directly to the manager of the certification office, send it to the attention of the person identified in paragraph (n)(1) of this AD. Information may be emailed to:
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the responsible Flight Standards Office
(3) An AMOC that provides an acceptable level of safety may be used for any repair, modification, or alteration required by this AD if it is approved by The Boeing Company Organization Designation Authorization (ODA) that has been authorized by the Manager, Seattle ACO Branch, FAA, to make those findings. To be approved, the repair method, modification deviation, or alteration deviation must meet the certification basis of the airplane, and the approval must specifically refer to this AD.
(4) AMOCs approved previously for the freeplay measurements of the right and left rudder tab required by AD 2015-12-03, are approved as AMOCs for the corresponding provisions of this AD.
(5) AMOCs approved previously for the freeplay measurements of the rudder required by AD 2015-12-03, are approved as AMOCs for the corresponding provisions of this AD.
(6) AMOCs approved previously for the repetitive lubrications required by AD 2015-12-03, are approved as AMOCs for the corresponding provisions of this AD.
(1) For more information about this AD, contact Luis Cortez-Muniz, Aerospace Engineer, Airframe Section, FAA, Seattle ACO Branch, 2200 South 216th St., Des Moines, WA 98198; phone and fax: (206) 231-3958; email:
(2) For service information identified in this AD, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740-5600; telephone 562-797-1717; internet
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
The FAA proposes to adopt a new airworthiness directive (AD) for certain International Aero Engines, LLC (IAE LLC) PW1122G-JM, PW1124G1-JM, PW1124G-JM, PW1127G1-JM, PW1127GA-JM, PW1127G-JM, PW1129G-JM, PW1130G-JM, PW1133GA-JM, and PW1133G-JM model turbofan engines. This proposed AD was prompted by an analysis of an event involving an International Aero Engines AG (IAE AG) V2533-A5 model turbofan engine, which experienced an uncontained failure of a high-pressure turbine (HPT) 1st-stage disk that resulted in high-energy debris penetrating the engine cowling. This proposed AD would require performance of an ultrasonic inspection (USI) of the HPT 1st-stage disk and HPT 2nd-stage disk and, depending on the results of the inspections, replacement of the HPT 1st-stage disk or HPT 2nd-stage disk. The FAA is proposing this AD to address the unsafe condition on these products.
The FAA must receive comments on this proposed AD by May 9, 2022.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
For service information identified in this NPRM, contact International Aero Engines, LLC, 400 Main Street, East Hartford, CT 06118; phone: (860) 690-9667; email:
You may examine the AD docket at
Mark Taylor, Aviation Safety Engineer, ECO Branch, FAA, 1200 District Avenue, Burlington, MA 01803; phone: (781) 238-7229; email:
The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under
Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to
CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Mark Taylor, Aviation Safety Engineer, ECO Branch, FAA, 1200 District Avenue, Burlington, MA 01803. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.
On March 18, 2020, an Airbus Model A321-231 airplane, powered by IAE AG V2533-A5 model turbofan engines, experienced an uncontained HPT 1st-stage disk failure that resulted in high-energy debris penetrating the engine cowling. Based on a preliminary analysis of this event, on March 21, 2020, the FAA issued Emergency AD 2020-07-51 (followed by publication in the
Based on the root cause analysis performed since that March 2020 event, Pratt & Whitney (PW) identified a different population of HPT 1st-stage disks and HPT 2nd-stage disks that are subject to the same unsafe condition identified in AD 2020-07-51. In response, the FAA issued AD 2021-19-10 on September 10, 2021 (86 FR 50610), which requires the removal from service of certain HPT 1st-stage disks and HPT 2nd-stage disks installed on IAE LLC PW1122G-JM, PW1124G1-JM, PW1124G-JM, PW1127G1-JM, PW1127GA-JM, PW1127G-JM, PW1129G-JM, PW1130G-JM, PW1133GA-JM, and PW1133G-JM model turbofan engines.
Since the FAA issued AD 2021-19-10, PW identified another subpopulation of HPT 1st-stage disks and HPT 2nd-stage disks that require inspection and possible removal from service. Included in this additional subpopulation of HPT 1st-stage disks
The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design.
The FAA reviewed PW Service Bulletin (SB) PW1000G-C-72-00-0188-00A-930A-D, Issue No: 001, dated September 13, 2021 (PW SB PW1000G-C-72-00-0188-00A-930A-D). This SB specifies procedures for performing a USI of the HPT 1st-stage disk and the HPT 2nd-stage disk, identified by part number and serial number, installed on IAE LLC PW1124G1-JM, PW1127G-JM, PW1127GA-JM, PW1129G-JM, PW1130G-JM, PW1133G-JM, and PW1133GA-JM model turbofan engines. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in
The FAA reviewed PW SB PW1000G-C-72-00-0112-00A-930A-D, Issue No: 005, dated July 22, 2021. This SB describes procedures for replacing the HPT 1st-stage disk, HPT 2nd-stage disk, and rotating hardware. This SB also increases the life limit of the HPT hardware by introducing a new configuration of rotating hardware.
This proposed AD would require the performance of a USI of the HPT 1st-stage disk and HPT 2nd-stage disk and, depending on the results of the inspections, replacement of the HPT 1st-stage disk or HPT 2nd-stage disk.
PW SB PW1000G-C-72-00-0188-00A-930A-D, Applicability, identifies IAE LLC PW1127G-JM, PW1127GA-JM, PW1130G-JM, PW1124G1-JM, PW1129G-JM, PW1133G-JM, and PW1133GA-JM model turbofan engines. The FAA determined that IAE LLC PW1122G-JM, PW1124G-JM, and PW1127G1-JM model turbofan engines are of the same type design and are subject to the same unsafe condition. Therefore, the FAA included IAE LLC PW1122G-JM, PW1124G-JM, and PW1127G1-JM model turbofan engines in the applicability of this proposed AD.
PW SB PW1000G-C-72-00-0188-00A-930A-D uses the term “hub” to describe the HPT 1st-stage disk and HPT 2nd-stage disk, while this proposed AD uses the term “disk.”
The FAA estimates that this AD, if adopted as proposed, would affect 189 engines installed on airplanes of U.S. registry.
The FAA estimates the following costs to comply with this proposed AD:
The FAA estimates the following costs to do any necessary replacement that would be required based on the results of the proposed inspection. The agency has no way of determining the number of aircraft that might need this replacement:
The FAA has included all known costs in its cost estimate. According to the manufacturer, however, some of the costs of this proposed AD may be covered under warranty, thereby reducing the cost impact on affected operators.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have 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.
For the reasons discussed above, I certify this proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Would not affect intrastate aviation in Alaska, and
(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
The FAA must receive comments on this airworthiness directive (AD) by May 9, 2022.
None.
This AD applies to International Aero Engines, LLC PW1122G-JM, PW1124G1-JM, PW1124G-JM, PW1127G1-JM, PW1127GA-JM, PW1127G-JM, PW1129G-JM, PW1130G-JM, PW1133GA-JM, and PW1133G-JM model turbofan engines with engine serial numbers P770101 through P772647.
Joint Aircraft System Component (JASC) Code 7250, Turbine Section.
This AD was prompted by an analysis of an event involving an International Aero Engines AG V2533-A5 model turbofan engine, which experienced an uncontained failure of a high-pressure turbine (HPT) 1st-stage disk that resulted in high-energy debris penetrating the engine cowling. The FAA is issuing this AD to prevent failure of the HPT 1st-stage disk and HPT 2nd-stage disk. The unsafe condition, if not addressed, could result in uncontained HPT disk failure, release of high-energy debris, damage to the engine, damage to the airplane, and loss of the airplane.
Comply with this AD within the compliance times specified, unless already done.
(1) For affected engines that have not incorporated Pratt & Whitney (PW) Service Bulletin (SB) PW1000G-C-72-00-0112-00A-930A-D, Issue No: 005, dated July 22, 2021 (PW SB PW1000G-C-72-00-0112-00A-930A-D), at the next engine shop visit after the effective date of this AD, perform the following:
(i) Ultrasonic inspection (USI) of the HPT 1st-stage disk using the Accomplishment Instructions, paragraph 9.A. or B., as applicable, of PW SB PW1000G-C-72-00-0188-00A-930A-D, Issue No: 001, dated September 13, 2021 (PW SB PW1000G-C-72-00-0188-00A-930A-D); and
(ii) USI of the HPT 2nd-stage disk using the Accomplishment Instructions, paragraph 9.C. or D., as applicable, of PW SB PW1000G-C-72-00-0188-00A-930A-D.
(2) For affected engines that have incorporated PW SB PW1000G-C-72-00-0112-00A-930A-D, with an installed HPT 1st-stage disk having a serial number (S/N) identified in the Accomplishment Instructions, Table 2., of PW SB PW1000G-C-72-00-0188-00A-930A-D, at the next engine shop visit after the effective date of this AD, perform a USI of the HPT 1st-stage disk using the Accomplishment Instructions, paragraph 9.A. or B., as applicable, of PW SB PW1000G-C-72-00-0188-00A-930A-D.
(3) For affected engines that have incorporated PW SB PW1000G-C-72-00-0112-00A-930A-D, with an installed HPT 2nd-stage disk having an S/N identified in the Accomplishment Instructions, Table 3., of PW SB PW1000G-C-72-00-0188-00A-930A-D, at the next engine shop visit after the effective date of this AD, perform a USI of the HPT 2nd-stage disk using the Accomplishment Instructions, paragraph 9.C. or D., of PW SB PW1000G-C-72-00-0188-00A-930A-D.
(4) Based on the results of the USIs required by paragraphs (g)(1) through (3) of this AD, if any HPT 1st-stage disk or HPT 2nd-stage disk does not pass the USI, as specified in the Accomplishment Instructions, paragraphs 9.A. through D., of PW SB PW1000G-C-72-00-0188-00A-930A-D, as applicable, before further flight, remove the HPT 1st-stage disk or HPT 2nd-stage disk from service and replace with a part eligible for installation.
(1) For the purpose of this AD, a “part eligible for installation” is:
(i) Any HPT 1st-stage disk that passed the USI required by paragraphs (g)(1)(i) and (g)(2) of this AD.
(ii) Any HPT 2nd-stage disk that passed the USI required by paragraphs (g)(1)(ii) and (g)(3) of this AD.
(2) For the purpose for this AD, an “engine shop visit” is the induction of an engine into the shop for maintenance involving the separation of the “M” flange. Separation of the “M” flange solely for the purposes of transportation without subsequent engine maintenance does not constitute an engine shop visit.
(1) The Manager, ECO Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the certification office, send it to the attention of the person identified in paragraph (j)(1) of this AD and email to:
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.
(1) For more information about this AD, contact Mark Taylor, Aviation Safety Engineer, ECO Branch, FAA, 1200 District Avenue, Burlington, MA 01803; phone: (781) 238-7229; email:
(2) For service information identified in this AD, contact International Aero Engines, LLC, 400 Main Street, East Hartford, CT 06118; phone: (860) 690-9667; email:
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
The FAA proposes to adopt a new airworthiness directive (AD) for certain De Havilland Aircraft of Canada Limited Model DHC-8-400 series airplanes. This proposed AD was prompted by reports of broken P-clamps on the pressure relief line and the motive flow line in the fuel tanks, and a subsequent determination that certain service information lacked instructions for maintaining appropriate clearance between certain fuel tubes and their support brackets, and may also have led to incorrect installation of certain Teflon
The FAA must receive comments on this proposed AD by May 9, 2022.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
For service information identified in this NPRM, contact De Havilland Aircraft of Canada Limited, Q-Series Technical Help Desk, 123 Garratt Boulevard, Toronto, Ontario M3K 1Y5, Canada; telephone 416-375-4000; fax 416-375-4539; email
You may examine the AD docket at
Joseph Catanzaro, Aerospace Engineer, Airframe and Propulsion Section, FAA, New York ACO Branch, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7366; email
The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under
Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to
CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Joseph Catanzaro, Aerospace Engineer, Airframe and Propulsion Section, FAA, New York ACO Branch, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7366; email
Transport Canada Civil Aviation (TCCA), which is the aviation authority for Canada, has issued TCCA AD CF-2017-05R2, dated September 20, 2019 (CF-2017-05R2) (also referred to after this as the Mandatory Continuing Airworthiness Information, or the MCAI), to correct an unsafe condition for certain De Havilland Aircraft of Canada Limited Model DHC-8-400, -401, and -402 airplanes. You may examine the MCAI in the AD docket at
This proposed AD was prompted by reports of broken P-clamps on the pressure relief line and the motive fuel line in the fuel tanks, as well as fouling conditions between the motive flow line and the collector tank partition wall in both fuel tanks. Later, certain service information designed to mitigate these issues was found to not contain instructions to support the motive flow line and vent line at wing stations -371.019 and 371.019 in the fuel tanks or to maintain appropriate clearance between the fuel tubes and their support brackets at wing stations -371.019 and -209.109 in the left-hand fuel tank and wing stations 371.019 and 209.019 in the right-hand fuel tank. Bombardier issued Modification Summaries (ModSums) to provide instructions for addressing the initial reports of inadequate clearance. Bombardier later issued revised service information to address this inadequate support and clearance on all affected airplanes. Subsequently, the manufacturer determined that certain service information was missing instructions to relocate certain Teflon
See the MCAI for additional background information.
De Havilland Aircraft of Canada Limited has issued the following Bombardier service information.
• Bombardier Service Bulletin 84-28-18, Revision B, dated April 20, 2017, which describes procedures for increasing the hole size in the collector tank partition wall, inspecting the motive flow line for damage, and replacing the associated grommet and motive flow line.
• Bombardier Service Bulletin 84-28-19, Revision D, dated February 16, 2018, which describes procedures for replacing the affected single nut plate brackets and standoffs at the affected left-hand (LH) and right-hand (RH) wing stations on the motive flow line and pressure relief line; inspecting the motive flow line and vent line at certain wing stations in the fuel tanks to ensure that these fuel tubes are adequately supported; and inspecting the fuel tubes to verify that an appropriate clearance has been maintained between the fuel tubes and their support brackets.
• Bombardier Service Bulletin 84-28-24, dated November 27, 2017, which describes procedures for installing Teflon
• Bombardier Service Bulletin 84-28-25, dated November 27, 2017, which describes procedures for inspecting the Teflon
De Havilland Aircraft of Canada Limited has also issued the following Bombardier service information, which describes procedures for replacing the affected single nut plate brackets and standoffs on the motive flow line and vent line at LH and RH wing stations. These documents are distinct since they apply to different airplane configurations.
• Bombardier Repair Drawing 8/4-28-018, Issue 1, dated October 30, 2017.
• Bombardier Repair Drawing 8/4-28-018, Issue 2, dated June 12, 2018.
• Bombardier Repair Drawing 8/4-28-018, Issue 3, dated June 21, 2018.
• Bombardier Repair Drawing 8/4-28-018, Issue 4, dated July 27, 2018.
De Havilland Aircraft of Canada Limited has also issued the following Bombardier service information, which describes fuel systems limitations. These documents are distinct because they apply to different airplane configurations.
• (Bombardier) Q400 Dash 8 Temporary Revision (TR) ALI-0192, dated April 24, 2018, to Section 4—28 Fuel System Limitation, of Part 2, of the Bombardier Q400 Dash 8 Maintenance Requirements Manual (MRM), PSM 1-84-7.
• (Bombardier) Q400 Dash 8 TR ALI-0193, dated April 24, 2018, to Section 5—00 Critical Design Configuration Control Limitations, of the Bombardier Q400 Dash 8 MRM, PSM 1-84-7.
De Havilland Aircraft of Canada Limited has also issued the following Bombardier service information, which describes new or more restrictive airworthiness limitations for fuel tank systems. These documents are distinct because they apply to different airplane configurations.
• (Bombardier) Q400 Dash 8 Airplane Maintenance Manual (AMM) TR 28-145, dated November 21, 2017.
• (Bombardier) Q400 Dash 8 AMM TR 28-146, dated November 21, 2017.
• (Bombardier) Q400 Dash 8 AMM TR 28-147, dated November 21, 2017.
• (Bombardier) Q400 Dash 8 AMM TR 28-148, dated November 24, 2017.
• (Bombardier) Q400 Dash 8 AMM TR 28-149, dated November 27, 2017.
• (Bombardier) Q400 Dash 8 Maintenance Task Card Manual (MTCM) Maintenance Task Card 000-28-520-704 (Config A01), Detailed Inspection of the Teflon
• (Bombardier) Q400 Dash 8 MTCM Maintenance Task Card 000-28-620-704 (Config A01), Detailed Inspection of the Teflon
This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to the FAA's bilateral agreement with the State of Design Authority, the FAA has been notified of the unsafe condition described in the MCAI and service information referenced above. The FAA is proposing this AD because the FAA evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop on other products of the same type design.
This proposed AD would require accomplishing the actions specified in the service information already described. This proposed AD would allow using Bombardier Repair Drawing 8/4-28-018 as a method of compliance for the actions required by paragraph (h)(2) of this proposed AD, provided the replacement of the affected single nut plate brackets and standoffs on the motive flow line, vent line, pressure relief line, and scavenge line at LH and RH wing stations Yw ± 209.019, Yw ± 317.019, and Yw ± 371.019, is also done.
This proposed AD would also require revising the existing maintenance or inspection program, as applicable, to incorporate new or more restrictive airworthiness limitations for fuel tank systems.
This proposed AD would require revisions to certain operator maintenance documents to include new actions (
The FAA estimates that this AD, if adopted as proposed, would affect 52 airplanes of U.S. registry. The FAA estimates the following costs to comply with this proposed AD:
The FAA has determined that revising the maintenance or inspection program takes an average of 90 work-hours per operator, although the FAA recognizes that this number may vary from operator to operator. In the past, the FAA has estimated that this action takes 1 work-hour per airplane. Since operators incorporate maintenance or inspection program changes for their affected fleet(s), the FAA has determined that a per-operator estimate is more accurate than a per-airplane estimate. Therefore, the FAA estimates the total cost per operator to be $7,650 (90 work-hours × $85 per work-hour).
The FAA has received no definitive data on which to base the cost estimates for the on-condition actions specified in this proposed AD.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have 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.
For the reasons discussed above, I certify this proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Would not affect intrastate aviation in Alaska, and
(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
The FAA must receive comments on this airworthiness directive (AD) by May 9, 2022.
None.
This AD applies to De Havilland Aircraft of Canada Limited (type certificate previously held by Bombardier, Inc.) Model DHC-8-400, -401, and -402 airplanes, certificated in any category, serial numbers (S/Ns) 4001, 4003, and subsequent.
Air Transport Association (ATA) of America Code 28, Fuel System; and 05, Time Limits/Maintenance Checks.
This AD was prompted by reports of broken P-clamps on the pressure relief line and the motive flow line in the fuel tanks, and a subsequent determination that certain service information lacked instructions for maintaining appropriate clearance between certain fuel tubes and their support brackets, and may also have led to incorrect installation of certain Teflon
Comply with this AD within the compliance times specified, unless already done.
For the purposes of this AD, “prohibited tasks” are defined as any task identified in paragraph (l) of this AD and any procedure or task that specifies fuel tank access using non-manufacturer-approved procedures.
(1) For airplanes having S/N 4001 and 4003 through 4525 inclusive: Within 6,000 flight hours or 36 months after the effective date of this AD, whichever occurs first, increase the hole size in the collector tank partition wall, inspect the motive flow line for damage, and replace the associated grommet and motive flow line, in accordance with paragraph 3.B. of the Accomplishment Instructions of Bombardier Service Bulletin 84-28-18, Revision B, dated April 20, 2017.
(2) For airplanes having S/N 4001 and 4003 through 4533 inclusive, on which Bombardier Service Bulletin 84-28-19, dated August 16, 2016; or Revision A, dated November 4, 2016, has not been done: Within 6,000 flight hours or 36 months after the effective date of this AD, whichever occurs first, replace the affected single nut plate brackets and standoffs at the affected left-hand (LH) and right-hand (RH) wing stations on the motive flow line and pressure relief line, in accordance with paragraphs 3.B. and 3.C. of Bombardier Service Bulletin 84-28-19, Revision D, dated February 16, 2018.
(3) Accomplishing Bombardier Repair Drawing 8/4-28-018, Issue 1, dated October 30, 2017; Issue 2, dated June 12, 2018; Issue 3, dated June 21, 2018; or Issue 04, dated July 27, 2018, is an alternative method of compliance (AMOC) only for the replacement of the affected single nut plate brackets and standoffs on the motive flow line and vent line at LH and RH wing stations Yw ± 209.019 and Yw ± 317.019 required by paragraph (h)(2) of this AD.
(4) Accomplishing Bombardier Repair Drawing 8/4-28-018, Issue 1, dated October 30, 2017; Issue 2, dated June 12, 2018; Issue 3, dated June 21, 2018; or Issue 04, dated July 27, 2018, prior to the effective date of this AD, along with the replacement of the
(5) For airplanes having S/N 4001 and 4003 through 4533 inclusive, on which Bombardier Service Bulletin 84-28-19, dated August 16, 2016; or Revision A, dated November 4, 2016, has been done: Within 6,000 flight hours or 36 months after the effective date of this AD, whichever occurs first, inspect the motive flow line and vent line at wing stations -371.019 and 371.019 in the LH and RH fuel tanks, respectively, to ensure that these fuel tubes are adequately supported, and inspect the fuel tubes to verify that an appropriate clearance has been maintained between the fuel tubes and their support brackets, in accordance with paragraph 3.B., step (13), and paragraph 3.C., of Bombardier Service Bulletin 84-28-19, Revision D, dated February 16, 2018.
(6) For airplanes having S/N 4001 and 4003 through 4572 inclusive: Within 8,000 flight hours or 48 months after the effective date of this AD, whichever occurs first, install Teflon
(7) Prior to accomplishment of the actions required by paragraph (h)(6) of this AD, the applicable actions specified in paragraph (h)(2) or (5) of this AD must be done. Accomplishment of Bombardier Modification Summary (ModSum) 4Q113904 on an airplane prior to the effective date of this AD is acceptable for compliance with this paragraph.
(8) For airplanes having S/N 4001 and 4003 through 4575 inclusive: Within 8,000 flight hours or 48 months after the effective date of this AD, whichever occurs first, inspect the Teflon
(9) Prior to accomplishment of the actions required by paragraph (h)(8) of this AD, the applicable actions specified in paragraph (h)(2) or (5) of this AD must be done. Accomplishment of Bombardier ModSum 4Q113904 on an airplane prior to the effective date of this AD is acceptable for compliance with this paragraph.
(1) For airplanes having S/N 4001 and 4003 through 4575 inclusive, on which the actions required by paragraph (h)(6) or (8) of this AD have been done before the effective date of this AD, or that have complied with paragraph (m)(4) of this AD: Within 60 days after the effective date of this AD, review the airplane maintenance records to confirm if any of the prohibited tasks (defined in paragraph (g) of this AD) were accomplished during or after compliance with paragraph (h)(6) or (8) of this AD or paragraph (m)(4) of this AD.
(i) If any of the prohibited tasks were accomplished during or after compliance with paragraph (h)(6) or (m)(4) of this AD, or if it cannot be conclusively confirmed that they were not accomplished during or after compliance with paragraph (h)(6) or paragraph (m)(4) of this AD: Within 8,000 flight hours or 48 months after the effective date of this AD, whichever occurs first, do the actions required by paragraph (h)(6) of this AD and, as applicable, comply with the requirements of paragraph (h)(7) of this AD.
(ii) If any of the prohibited tasks were accomplished during or after compliance with paragraph (h)(8) of this AD, or if it cannot be conclusively confirmed that they were not accomplished during or after compliance with paragraph (h)(8) of this AD: Within 8,000 flight hours or 48 months after the effective date of this AD, whichever occurs first, do the actions required by paragraph (h)(8) of this AD and, as applicable, comply with the requirements of paragraph (h)(9) of this AD.
(2) For airplanes having S/N 4573 and subsequent, with an airplane date of manufacture, as identified on the identification plate of the airplane, dated before the effective date of this AD: Within 60 days after the effective date of this AD, review the airplane maintenance records to confirm if any of the prohibited tasks (defined in paragraph (g) of this AD) were accomplished on or after the airplane date of manufacture. If any of the prohibited tasks were accomplished on or after the airplane date of manufacture, or if it cannot be conclusively confirmed that they were not accomplished on or after the airplane date of manufacture, within 8,000 flight hours or 48 months after the effective date of this AD, whichever occurs first, obtain and follow instructions for rework using a method approved by the Manager, New York ACO Branch, FAA; or Transport Canada Civil Aviation (TCCA); or De Havilland Aircraft of Canada Limited's TCCA Design Approval Organization (DAO). If approved by the DAO, the approval must include the DAO-authorized signature.
For all airplanes: Within 30 days after the effective date of this AD, revise the existing maintenance or inspection program, as applicable, to incorporate the information specified in (Bombardier) Q400 Dash 8 Temporary Revision (TR) ALI-0192 and TR ALI-0193, both dated April 24, 2018, into Section 4—28 Fuel System Limitation, or Section 5—00 Critical Design Configuration Control Limitations, as applicable, of Part 2, of the Bombardier Q400 Dash 8 Maintenance Requirements Manual, PSM 1-84-7. The initial compliance time for doing the tasks in (Bombardier) Q400 Dash 8 TR ALI-0192, dated April 24, 2018, is at the applicable time specified in paragraph (j)(1) or (2) of this AD, whichever occurs later:
(1) Prior to the accumulation of 18,000 total flight cycles or within 108 months since issuance of the original airworthiness certificate or original export certificate of airworthiness, whichever occurs first.
(2) Within 90 days after the effective date of this AD.
After the existing maintenance or inspection program has been revised as required by paragraph (j) of this AD, no alternative actions (
For all airplanes: As of the effective date of this AD, comply with the prohibitions specified in paragraphs (l)(1) and (2) of this AD.
(1) It is prohibited to use the Bombardier airplane maintenance manual (AMM) tasks identified in paragraphs (l)(1)(i) through (v) of this AD, which are specified in the Bombardier Q400 Dash 8 AMM, PSM 1-84-2, Revision 59 dated October 5, 2017, or earlier revisions of these tasks. TRs including these AMM tasks, dated November 27, 2017, or earlier, are also prohibited for use except as specified in paragraph (l)(1)(i) through (v) of this AD.
(i) Task 28-10-00-280-806 Detailed Inspection of the Teflon
(ii) Task 28-12-06-000-801 Removal of the Outboard Vent Line, with the exception of (Bombardier) Q400 Dash 8 AMM TR 28-146, dated November 21, 2017.
(iii) Task 28-12-06-400-801 Installation of the Outboard Vent Line, with the exception of (Bombardier) Q400 Dash 8 AMM TR 28-147, dated November 21, 2017.
(iv) Task 28-12-01-000-801 Removal of the Inboard Vent Line, with the exception of (Bombardier) Q400 Dash 8 AMM TR 28-148, dated November 24, 2017.
(v) Task 28-12-01-400-801 Installation of the Inboard Vent Line, with the exception of (Bombardier) Q400 Dash 8 AMM TR 28-149, dated November 27, 2017.
(2) It is prohibited to use the Bombardier Q400 Dash 8 Maintenance Task Card Manual (MTCM) task cards identified in paragraphs (l)(2)(i) and (ii) of this AD that are specified in the Bombardier Q400 Dash 8 MTCM, PSM 1-84-7TC, Revision 42 dated November 5, 2017, or earlier revisions or amendments of these task cards. MTCM task card revisions or amendments dated November 21, 2017, or earlier, are also prohibited for use, except as specified in paragraphs (l)(2)(i) and (ii) of this AD.
(i) Bombardier Q400 Dash 8 MTCM Maintenance Task Card 000-28-520-704 (Config A01), Detailed Inspection of the Teflon
(ii) Bombardier Q400 Dash 8 MTCM Maintenance Task Card 000-28-620-704 (Config A01), Detailed Inspection of the Teflon
(1) This paragraph provides credit for actions required by paragraph (h)(1) of this AD, if those actions were performed before the effective date of this AD using Bombardier Service Bulletin 84-28-18, dated April 20, 2016; or Revision A, dated November 14, 2016.
(2) This paragraph provides credit for actions required by paragraph (h)(2) of this AD, if those actions were performed before the effective date of this AD using Bombardier Service Bulletin 84-28-19, Revision B, dated July 28, 2017, or Revision C, dated September 1, 2017.
(3) This paragraph provides credit for actions required by paragraph (h) (5) of this AD, if those actions were performed before the effective date of this AD using paragraphs 3.A. and 3.C and paragraph 3.B., step (13) of Bombardier Service Bulletin 84-28-19, Revision B, dated July 28, 2017, or Revision C, dated September 1, 2017
(4) This paragraph provides credit for actions required by paragraph (h)(6) of this AD, if, before the effective date of this AD, the ModSums identified in paragraph (m)(4)(i), (ii), or (iii) of this AD were incorporated, and provided the conditions identified in figure 1 to paragraph (m)(4) of this AD have been met.
(i) Incorporation of both a modsum identified in paragraph (m)(4)(i)(A) of this AD and a modsum identified in paragraph (m)(4)(i) (B) of this AD.
(A) One of the modsums identified in paragraphs (m)(4)(i)(A)(
(
(
(
(
(
(
(
(
(
(B) One of the modsums identified in paragraphs (m)(4)(i)(B)(
(
(
(
(
(
(ii) Incorporation of both a modsum identified in paragraph (m)(4)(ii)(A) of this AD and a modsum identified in paragraph (m)(4)(ii)(B) of this AD.
(A) Bombardier ModSum IS4Q2800030, Revision A, dated November 3, 2017; or Bombardier ModSum IS4Q2800030, Revision B, dated November 21, 2017.
(B) One of the modsums identified in paragraphs (m)(4)(ii)(B)(
(
(
(
(
(
(iii) Incorporation of a modsum identified in paragraphs (m)(4)(iii)(A) through (C) of this AD.
(A) Bombardier ModSum IS4Q2800027, Revision A, dated October 27, 2017.
(B) Bombardier ModSum IS4Q2800027, Revision B, dated November 9, 2017.
(C) Bombardier ModSum IS4Q2800027, Revision C, dated November 15, 2017.
The following provisions also apply to this AD:
(1)
(2)
(1) Refer to Mandatory Continuing Airworthiness Information (MCAI) TCCA AD CF-2017-05R2, dated September 20, 2019, for related information. This MCAI may be found in the AD docket on the internet at
(2) For more information about this AD, contact Joseph Catanzaro, Aerospace Engineer, Airframe and Propulsion Section, FAA, New York ACO Branch, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7366; email
(3) For service information identified in this AD, contact De Havilland Aircraft of Canada Limited, Q-Series Technical Help Desk, 123 Garratt Boulevard, Toronto, Ontario M3K 1Y5, Canada; telephone 416-375-4000; fax 416-375-4539; email
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to amend United States Area Navigation (RNAV) route T-230 in the vicinity of St. Paul Island, AK in support of a large and comprehensive T-route modernization project for the state of Alaska.
Comments must be received on or before May 9, 2022.
Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE, West Building Ground Floor, Room W12-140, Washington, DC 20590; telephone: (800) 647-5527, or (202) 366-9826. You must identify FAA Docket No. FAA-2022-0216; Airspace Docket No. 19-AAL-63 at the beginning of your comments. You may also submit comments through the internet at
FAA Order JO 7400.11F, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Christopher McMullin, Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-8783.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would expand the availability of RNAV in Alaska and improve the efficient flow of air traffic within the National Airspace System (NAS) by lessoning the dependency on ground based navigation.
Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.
Communications should identify both docket numbers (FAA Docket No. FAA-2022-0216; Airspace Docket No. 19-AAL-63) and be submitted in triplicate to the Docket Management Facility (see
Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2022-0216; Airspace Docket No. 19-AAL-63.” The postcard will be date/time stamped and returned to the commenter.
All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the comment closing date. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.
An electronic copy of this document may be downloaded through the internet at
You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see
This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the
In 2003, Congress enacted the Vision 100—Century of Aviation Reauthorization Act (Pub. L. 108-176), which established a joint planning and development office in the FAA to manage the work related to the Next Generation Air Transportation System (NextGen). Today, NextGen is an ongoing FAA-led modernization of the nation's air transportation system to make flying safer, more efficient, and more predictable.
In support of NextGen, this proposal is part of a larger and comprehensive T-route modernization project in the state of Alaska. The project mission statement states: “To modernize Alaska's Air Traffic Service route structure using satellite based navigation Development of new T-routes and optimization of existing T-routes will enhance safety, increase efficiency and access, and will provide enroute continuity that is not subject to the restrictions associated with ground based airway navigation.” As part of this project, the FAA evaluated the existing Colored airway structure for: (a) Direct replacement (
The aviation industry/users have indicated a desire for the FAA to transition the Alaskan en route navigation structure away from dependency on Non-Directional Beacons (NDB), and move to develop and improve the RNAV route structure. Chinook, AK, (AUB) NDB is one of the many NDBs that has been scheduled for decommissioning. RNAV route T-230 currently utilizes AUB as an end point in the route. In order to ensure continuous use of T-230, the FAA proposes to replace AUB in the legal description with King Salmon, AK, (AKN) VHF Omnidirectional Radar and Tactical Air Navigational System (VORTAC). Additionally, there is currently a Fix along the route, GARRS, AK, Fix that will be affected by the pending decommissioning of Cape Newenham, AK (EHM) NDB. This proposal would identify GARRS as a waypoint (WP) and include it in the legal description, since it is a turn point along the route. Finally, the latitude and longitude contained in the FAA Order JO 7400.11F legal description for St. Paul Island, AK (SPY) NDB is inaccurate and this proposal would correct the error.
The FAA is proposing an amendment to 14 CFR part 71 to amend RNAV route T-230 in the vicinity of St. Paul Island, AK in support of a large and comprehensive T-route modernization project in the state of Alaska. The proposed amendment is described below.
United States Area Navigation Routes are published in paragraph 6011 of FAA Order JO 7400.11F dated August 10, 2021 and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The RNAV route listed in this document would be published subsequently in FAA Order JO 7400.11.
FAA Order JO 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.
The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to establish United States Area Navigation (RNAV) route T-377 in the vicinity of Sitka, AK in support of a large and comprehensive T-route modernization project for the state of Alaska.
Comments must be received on or before May 9, 2022.
Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE, West Building Ground Floor, Room W12-140, Washington, DC 20590; telephone: (800) 647-5527, or (202) 366-9826. You must identify FAA Docket No. FAA-2022-0231; Airspace Docket No. 19-AAL-46 at the beginning of your comments. You may also submit comments through the internet at
FAA Order JO 7400.11F, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Christopher McMullin, Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-8783.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would expand the availability of RNAV in Alaska and improve the efficient flow of air traffic within the National Airspace System (NAS) by lessoning the dependency on ground based navigation.
Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.
Communications should identify both docket numbers (FAA Docket No. FAA-2022-0231; Airspace Docket No. 19-AAL-46) and be submitted in triplicate to the Docket Management Facility (see
Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2022-0231; Airspace Docket No. 19-AAL-46.” The postcard will be date/time stamped and returned to the commenter.
All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the comment closing date. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.
An electronic copy of this document may be downloaded through the internet at
You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see
This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the
In 2003, Congress enacted the Vision 100—Century of Aviation Reauthorization Act (Pub. L. 108-176), which established a joint planning and development office in the FAA to manage the work related to the Next Generation Air Transportation System (NextGen). Today, NextGen is an ongoing FAA-led modernization of the nation's air transportation system to make flying safer, more efficient, and more predictable.
In support of NextGen, this proposal is part of a larger and comprehensive T-route modernization project in the state of Alaska. The project mission statement states: “To modernize Alaska's Air Traffic Service route structure using satellite based navigation Development of new T-routes and optimization of existing T-routes will enhance safety, increase efficiency and access, and will provide enroute continuity that is not subject to the restrictions associated with ground based airway navigation.” As part of this project, the FAA evaluated the existing Colored airway structure for: (a) Direct replacement (
The aviation industry/users have indicated a desire for the FAA to transition the Alaskan en route navigation structure away from dependency on Non-Directional Beacons (NDB), and move to develop and improve the RNAV route structure. The Sitka, AK, (SIT) and the Nichols, AK, (ICK) NDBs are on the schedule to be decommissioned. Colored Federal airways Amber 1 (A-1) and Blue 28 (B-28) are dependent upon these two NDBs and will be rendered unusable once they are decommissioned. In order to mitigate the loss of these airways, the FAA proposes to establish a new T-route, T-377, in the area that would provide a generally lower GNSS MEA as well as continuous two-way VHF voice communications. The proposed route would also provide connectivity to RNAV route T-241 at the FOROP, AK, waypoint (WP) that would allow pilots to navigate to the northeast of that area toward Level Island, AK and points beyond.
The FAA is proposing an amendment to 14 CFR part 71 to establish RNAV route T-377 in the vicinity of Sitka, AK in support of a large and comprehensive T-route modernization project in the state of Alaska. The proposed route is described below.
United States Area Navigation Routes are published in paragraph 6011 of FAA Order JO 7400.11F dated August 10, 2021 and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The RNAV route listed in this document would be published subsequently in FAA Order JO 7400.11.
FAA Order JO 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.
The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to establish United States Area Navigation (RNAV) route T-379 in the vicinity of Discovery, AK in support of a large and comprehensive T-route modernization project for the state of Alaska.
Comments must be received on or before May 9, 2022.
Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE, West Building
FAA Order JO 7400.11F, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Christopher McMullin, Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-8783.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would expand the availability of RNAV in Alaska and improve the efficient flow of air traffic within the National Airspace System (NAS) by lessoning the dependency on ground based navigation.
Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.
Communications should identify both docket numbers (FAA Docket No. FAA-2022-0244; Airspace Docket No. 19-AAL-48) and be submitted in triplicate to the Docket Management Facility (see
Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2022-0244; Airspace Docket No. 19-AAL-48.” The postcard will be date/time stamped and returned to the commenter.
All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the comment closing date. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.
An electronic copy of this document may be downloaded through the internet at
You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see
This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the
In 2003, Congress enacted the Vision 100—Century of Aviation Reauthorization Act (Pub. L. 108-176), which established a joint planning and development office in the FAA to manage the work related to the Next Generation Air Transportation System (NextGen). Today, NextGen is an ongoing FAA-led modernization of the nation's air transportation system to make flying safer, more efficient, and more predictable.
In support of NextGen, this proposal is part of a larger and comprehensive T-route modernization project in the state of Alaska. The project mission statement states: “To modernize Alaska's Air Traffic Service route structure using satellite based navigation Development of new T-routes and optimization of existing T-routes will enhance safety, increase efficiency and access, and will provide enroute continuity that is not subject to the restrictions associated with ground based airway navigation.” As part of this project, the FAA evaluated the existing Colored airway structure for: (a) Direct replacement (
The aviation industry/users have indicated a desire for the FAA to transition the Alaskan en route navigation structure away from dependency on Non-Directional Beacons (NDB), and move to develop and improve the RNAV route structure. The primary purpose of this proposal is to establish a route that provides adequate separation from special use airspace (SUA) in the area that would also provide connectivity to other RNAV routes in the area. The current route structure provides navigation for pilots with adequate separation from Stoney Military Operations Area (MOA) and Naknek MOA, but forces pilots to navigate between VHF Omnidirectional Radar/Distance Measuring Equipment (VOR/DME) navigational aid (NAVAIDs) and prolongs the flight time to their destination. The proposed route provide a shorter route around the SUA and ensure connectivity to RNAV routes T-269 and T-222, as well as a future route, T-373, that is in the planning phase.
The FAA is proposing an amendment to 14 CFR part 71 to establish RNAV route T-379 in the vicinity of Discovery, AK in support of a large and comprehensive T-route modernization project in the state of Alaska. The proposed route is described below.
United States Area Navigation Routes are published in paragraph 6011 of FAA Order JO 7400.11F dated August 10, 2021 and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The RNAV route listed in this document would be published subsequently in FAA Order JO 7400.11.
FAA Order JO 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.
The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to establish United States Area Navigation (RNAV) route T-386 in the vicinity of Fairbanks, AK in support of a large and comprehensive T-route modernization project for the state of Alaska.
Comments must be received on or before May 9, 2022.
Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE, West Building Ground Floor, Room W12-140, Washington, DC 20590; telephone: (800) 647-5527, or (202) 366-9826. You must identify FAA Docket No. FAA-2022-0265; Airspace Docket No. 19-AAL-55 at the beginning of your comments. You may also submit comments through the internet at
FAA Order JO 7400.11F, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Christopher McMullin, Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-8783.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that
Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.
Communications should identify both docket numbers (FAA Docket No. FAA-2022-0265; Airspace Docket No. 19-AAL-55) and be submitted in triplicate to the Docket Management Facility (see
Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2022-0265; Airspace Docket No. 19-AAL-55.” The postcard will be date/time stamped and returned to the commenter.
All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the comment closing date. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.
An electronic copy of this document may be downloaded through the internet at
You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see
This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the
In 2003, Congress enacted the Vision 100—Century of Aviation Reauthorization Act (Pub. L. 108-176), which established a joint planning and development office in the FAA to manage the work related to the Next Generation Air Transportation System (NextGen). Today, NextGen is an ongoing FAA-led modernization of the nation's air transportation system to make flying safer, more efficient, and more predictable.
In support of NextGen, this proposal is part of a larger and comprehensive T-route modernization project in the state of Alaska. The project mission statement states: “To modernize Alaska's Air Traffic Service route structure using satellite based navigation Development of new T-routes and optimization of existing T-routes will enhance safety, increase efficiency and access, and will provide enroute continuity that is not subject to the restrictions associated with ground based airway navigation.” As part of this project, the FAA evaluated the existing Colored airway structure for: (a) Direct replacement (
The aviation industry/users have indicated a desire for the FAA to transition the Alaskan en route navigation structure away from dependency on Non-Directional Beacons (NDB), and move to develop and improve the RNAV route structure. This proposal would establish a new RNAV route in an area with no current routing available. The proposed route would allow for navigation over mountainous terrain with the lowest possible GNSS MEA's and continuous two-way VHF communications while also providing access for the Central Airport (PACE), Alaska. The proposed route would also provide connectivity to RNAV route T-226 for navigation to other areas in Alaska.
The FAA is proposing an amendment to 14 CFR part 71 to establish RNAV route T-386 in the vicinity of Fairbanks, AK in support of a large and comprehensive T-route modernization project for the state of Alaska. The proposed route is described below.
United States Area Navigation Routes are published in paragraph 6011 of FAA Order JO 7400.11F dated August 10, 2021 and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The RNAV route listed in this document would be published subsequently in FAA Order JO 7400.11.
FAA Order JO 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.
The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to establish United States Area Navigation (RNAV) route T-388 in the vicinity of Port Heiden, AK in support of a large and comprehensive T-route modernization project for the state of Alaska.
Comments must be received on or before May 9, 2022.
Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE, West Building Ground Floor, Room W12-140, Washington, DC 20590; telephone: (800) 647-5527, or (202) 366-9826. You must identify FAA Docket No. FAA-2022-0266; Airspace Docket No. 19-AAL-56 at the beginning of your comments. You may also submit comments through the internet at
FAA Order JO 7400.11F, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Christopher McMullin, Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-8783.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would expand the availability of RNAV in Alaska and improve the efficient flow of air traffic within the National Airspace System (NAS) by lessoning the dependency on ground based navigation.
Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.
Communications should identify both docket numbers (FAA Docket No. FAA-2022-0266; Airspace Docket No. 19-AAL-56) and be submitted in triplicate to the Docket Management Facility (see
Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2022-0266; Airspace Docket No. 19-AAL-56.” The postcard will be date/time stamped and returned to the commenter.
All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The
An electronic copy of this document may be downloaded through the internet at
You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see
This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the
In 2003, Congress enacted the Vision 100—Century of Aviation Reauthorization Act (Pub. L. 108-176), which established a joint planning and development office in the FAA to manage the work related to the Next Generation Air Transportation System (NextGen). Today, NextGen is an ongoing FAA-led modernization of the nation's air transportation system to make flying safer, more efficient, and more predictable.
In support of NextGen, this proposal is part of a larger and comprehensive T-route modernization project in the state of Alaska. The project mission statement states: “To modernize Alaska's Air Traffic Service route structure using satellite based navigation Development of new T-routes and optimization of existing T-routes will enhance safety, increase efficiency and access, and will provide enroute continuity that is not subject to the restrictions associated with ground based airway navigation.” As part of this project, the FAA evaluated the existing Colored airway structure for: (a) Direct replacement (
The aviation industry/users have indicated a desire for the FAA to transition the Alaskan en route navigation structure away from dependency on Non-Directional Beacons (NDB), and move to develop and improve the RNAV route structure. Port Heiden, AK, (PDN) and Woody Island, AK, (RWO) NDBs are on the list of to be decommissioned in the near future. Colored Federal airway Green 10 (G-10) is dependent upon both of these NAVAIDs and would be rendered unusable upon decommissioning. In order to mitigate the loss of G-10, this proposal would create a new RNAV route, T-388, to replace the portion between these two NDBs. The segment of G-10 that navigates from PDN to Cold Bay, AK is not included in this proposal since there are already mitigating factors in place.
The FAA is proposing an amendment to 14 CFR part 71 to establish RNAV route T-388 in the vicinity of Port Heiden, AK in support of a large and comprehensive T-route modernization project for the state of Alaska. The proposed route is described below.
United States Area Navigation Routes are published in paragraph 6011 of FAA Order JO 7400.11F dated August 10, 2021 and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The RNAV route listed in this document would be published subsequently in FAA Order JO 7400.11.
FAA Order JO 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.
The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to establish United States Area Navigation (RNAV) route T-371 in the vicinity of Kodiak, AK in support of a large and comprehensive T-route modernization project for the state of Alaska.
Comments must be received on or before May 9, 2022.
Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE, West Building Ground Floor, Room W12-140, Washington, DC 20590; telephone: (800) 647-5527, or (202) 366-9826. You must identify FAA Docket No. FAA-2022-0230; Airspace Docket No. 19-AAL-40 at the beginning of your comments. You may also submit comments through the internet at
FAA Order JO 7400.11F, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Christopher McMullin, Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-8783.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would expand the availability of RNAV in Alaska and improve the efficient flow of air traffic within the National Airspace System (NAS) by lessoning the dependency on ground based navigation.
Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.
Communications should identify both docket numbers (FAA Docket No. FAA-2022-0230; Airspace Docket No. 19-AAL-40) and be submitted in triplicate to the Docket Management Facility (see
Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2022-0230; Airspace Docket No. 19-AAL-40.” The postcard will be date/time stamped and returned to the commenter.
All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the comment closing date. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.
An electronic copy of this document may be downloaded through the internet at
You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see
This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the
In 2003, Congress enacted the Vision 100—Century of Aviation Reauthorization Act (Pub. L. 108-176), which established a joint planning and development office in the FAA to
In support of NextGen, this proposal is part of a larger and comprehensive T-route modernization project in the state of Alaska. The project mission statement states: “To modernize Alaska's Air Traffic Service route structure using satellite based navigation Development of new T-routes and optimization of existing T-routes will enhance safety, increase efficiency and access, and will provide enroute continuity that is not subject to the restrictions associated with ground based airway navigation.” As part of this project, the FAA evaluated the existing Colored airway structure for: (a) Direct replacement (
The aviation industry/users have indicated a desire for the FAA to transition the Alaskan en route navigation structure away from dependency on Non-Directional Beacons (NDB), and move to develop and improve the RNAV route structure. The Kachemak, AK, (ACE) and the Woody Island, AK, (RWO) NDBs are on the schedule to be decommissioned in the near future. Colored Federal airway Green 10 (G-10) is dependent upon these NAVAIDs and will be rendered unusable when this occurs. In order to mitigate the loss of G-10, the FAA is proposing to develop RNAV route T-371 in its place. The proposed route would also provide instrument approach procedure connectivity to the Homer Airport (PAHO), Alaska, while providing a lower GNSS MEA with continuous two-way VHF voice communications along the route.
The FAA is proposing an amendment to 14 CFR part 71 to establish RNAV route T-371 in the vicinity of Kodiak, AK in support of a large and comprehensive T-route modernization project in the state of Alaska. The proposed route is described below.
United States Area Navigation Routes are published in paragraph 6011 of FAA Order JO 7400.11F dated August 10, 2021 and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The RNAV route listed in this document would be published subsequently in FAA Order JO 7400.11.
FAA Order JO 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.
The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to establish United States Area Navigation (RNAV) route T-378 in the vicinity of Fort Yukon, AK in support of a large and comprehensive T-route modernization project for the state of Alaska.
Comments must be received on or before May 9, 2022.
Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE, West Building Ground Floor, Room W12-140, Washington, DC 20590; telephone: (800) 647-5527, or (202) 366-9826. You must identify FAA Docket No. FAA-2022-0232; Airspace Docket No. 19-AAL-47 at the beginning of your comments. You may also submit comments through the internet at
FAA Order JO 7400.11F, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Christopher McMullin, Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-8783.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would expand the availability of RNAV in Alaska and improve the efficient flow of air traffic within the National Airspace System (NAS) by lessoning the dependency on ground based navigation.
Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.
Communications should identify both docket numbers (FAA Docket No. FAA-2022-0232; Airspace Docket No. 19-AAL-47) and be submitted in triplicate to the Docket Management Facility (see
Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2022-0232; Airspace Docket No. 19-AAL-47.” The postcard will be date/time stamped and returned to the commenter.
All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the comment closing date. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.
An electronic copy of this document may be downloaded through the internet at
You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see
This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the
In 2003, Congress enacted the Vision 100—Century of Aviation Reauthorization Act (Pub. L. 108-176), which established a joint planning and development office in the FAA to manage the work related to the Next Generation Air Transportation System (NextGen). Today, NextGen is an ongoing FAA-led modernization of the nation's air transportation system to make flying safer, more efficient, and more predictable.
In support of NextGen, this proposal is part of a larger and comprehensive T-route modernization project in the state of Alaska. The project mission statement states: “To modernize Alaska's Air Traffic Service route structure using satellite based navigation Development of new T-routes and optimization of existing T-routes will enhance safety, increase efficiency and access, and will provide enroute continuity that is not subject to the restrictions associated
The aviation industry/users have indicated a desire for the FAA to transition the Alaskan en route navigation structure away from dependency on Non-Directional Beacons (NDB), and move to develop and improve the RNAV route structure. The Fort Yukon, AK, (FTO) NDB is on the schedule to be decommissioned in the near future. Colored Federal airway Blue 4 (B-4) currently navigates from the Utopia Creek, AK, (UTO) to FTO. The decommissioning of FTO would render B-4 unusable from the Evansville, AK (EAV) NDB to FTO. This proposal would provide a newly established RNAV route T-378 as an alternative that would avoid mountainous terrain while also providing continuous two-way voice communications. Additionally, the proposal would establish connectivity with RNAV route T-227 at the JIFFS waypoint (WP).
The FAA is proposing an amendment to 14 CFR part 71 to establish RNAV route T-377 in the vicinity of Fort Yukon, AK in support of a large and comprehensive T-route modernization project in the state of Alaska. The proposed route is described below.
T-378: The FAA proposes to establish RNAV route T-378 from the BRION, AK, WP, southeast of the Bettles Airport to the Fort Yukon, AK (FYU) VHF Omnidirectional Range and Tactical Air Navigation System (VORTAC).
United States Area Navigation Routes are published in paragraph 6011 of FAA Order JO 7400.11F dated August 10, 2021 and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The RNAV route listed in this document would be published subsequently in FAA Order JO 7400.11.
FAA Order JO 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.
The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to establish United States Area Navigation (RNAV) route T-380 in the vicinity of Emmonak, AK in support of a large and comprehensive T-route modernization project for the state of Alaska.
Comments must be received on or before May 9, 2022.
Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE, West Building Ground Floor, Room W12-140, Washington, DC 20590; telephone: (800) 647-5527, or (202) 366-9826. You must identify FAA Docket No. FAA-2022-0245; Airspace Docket No. 19-AAL-49
FAA Order JO 7400.11F, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Christopher McMullin, Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-8783.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would expand the availability of RNAV in Alaska and improve the efficient flow of air traffic within the National Airspace System (NAS) by lessoning the dependency on ground based navigation.
Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.
Communications should identify both docket numbers (FAA Docket No. FAA-2022-0245; Airspace Docket No. 19-AAL-49) and be submitted in triplicate to the Docket Management Facility (see
Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2022-0245; Airspace Docket No. 19-AAL-49.” The postcard will be date/time stamped and returned to the commenter.
All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the comment closing date. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.
An electronic copy of this document may be downloaded through the internet at
You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see
This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the
In 2003, Congress enacted the Vision 100—Century of Aviation Reauthorization Act (Pub. L. 108-176), which established a joint planning and development office in the FAA to manage the work related to the Next Generation Air Transportation System (NextGen). Today, NextGen is an ongoing FAA-led modernization of the nation's air transportation system to make flying safer, more efficient, and more predictable.
In support of NextGen, this proposal is part of a larger and comprehensive T-route modernization project in the state of Alaska. The project mission statement states: “To modernize Alaska's Air Traffic Service route structure using satellite based navigation Development of new T-routes and optimization of existing T-routes will enhance safety, increase efficiency and access, and will provide enroute continuity that is not subject to the restrictions associated with ground based airway navigation.” As part of this project, the FAA evaluated the existing Colored airway structure for: (a) Direct replacement (
The aviation industry/users have indicated a desire for the FAA to transition the Alaskan en route navigation structure away from dependency on Non-Directional Beacons (NDB), and move to develop and improve the RNAV route structure. St. Marys, AK (SMA), Aniak, AK (ANI), and Cairn Mountain, AK (CRN) NDBs are all included on the schedule to be decommissioned. Colored Federal airway Green 6 (G-6) is dependent upon SMA and ANI for navigation and the decommissioning would render it unusable. To mitigate the loss of G-6, this proposal would establish RNAV route T-380 that would overlay the current G-6. Additionally, in order to provide an alternative to VHF Omnidirectional Radar (VOR) Federal airway V-508, this proposal would allow for a lower GNSS MEA and still provide the appropriate separation along the southwest portion of Stony MOA from Aniak, AK to Sparrevohn, AK. Finally, the proposal would provide RNAV route connectivity with T-225 to the southeast of Emmonak, AK at a newly established waypoint (WP) HUMLA.
The FAA is proposing an amendment to 14 CFR part 71 to establish RNAV route T-380 in the vicinity of Emmonak, AK in support of a large and comprehensive T-route modernization project in the state of Alaska. The proposed route is described below.
United States Area Navigation Routes are published in paragraph 6011 of FAA Order JO 7400.11F dated August 10, 2021 and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The RNAV route listed in this document would be published subsequently in FAA Order JO 7400.11.
FAA Order JO 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.
The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to establish United States Area Navigation (RNAV) route T-383 in the vicinity of Sitka, AK in support of a large and comprehensive T-route modernization project for the state of Alaska.
Comments must be received on or before May 9, 2022.
Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE, West Building Ground Floor, Room W12-140, Washington, DC 20590; telephone: (800) 647-5527, or (202) 366-9826. You must identify FAA Docket No. FAA-2022-0249; Airspace Docket No. 19-AAL-52 at the beginning of your comments. You may also submit comments through the internet at
FAA Order JO 7400.11F, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Christopher McMullin, Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-8783.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A,
Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.
Communications should identify both docket numbers (FAA Docket No. FAA-2022-0249; Airspace Docket No. 19-AAL-52) and be submitted in triplicate to the Docket Management Facility (see
Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2022-0249; Airspace Docket No.19-AAL-52.” The postcard will be date/time stamped and returned to the commenter.
All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the comment closing date. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.
An electronic copy of this document may be downloaded through the internet at
You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see
This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the
In 2003, Congress enacted the Vision 100—Century of Aviation Reauthorization Act (Pub. L. 108-176), which established a joint planning and development office in the FAA to manage the work related to the Next Generation Air Transportation System (NextGen). Today, NextGen is an ongoing FAA-led modernization of the nation's air transportation system to make flying safer, more efficient, and more predictable.
In support of NextGen, this proposal is part of a larger and comprehensive T-route modernization project in the state of Alaska. The project mission statement states: “To modernize Alaska's Air Traffic Service route structure using satellite based navigation Development of new T-routes and optimization of existing T-routes will enhance safety, increase efficiency and access, and will provide enroute continuity that is not subject to the restrictions associated with ground based airway navigation.” As part of this project, the FAA evaluated the existing Colored airway structure for: (a) Direct replacement (
The aviation industry/users have indicated a desire for the FAA to transition the Alaskan en route navigation structure away from dependency on Non-Directional Beacons (NDB), and move to develop and improve the RNAV route structure. Haines, AK, (HNS); Elephant, AK, (EEF); and Sitka, AK, (SIT) NDBs are on the schedule to be decommissioned. Colored Federal airways Amber 15 (A-15) and Blue 38 (B-38) are dependent upon one, or more of these NDBs and would be rendered unusable upon their decommissioning. Additionally, this proposal would provide alternate navigation for VHF Omnidirectional Radar (VOR) Federal airways V-428 and V-593, while also establishing connectivity to instrument approach procedures at surrounding airports and other RNAV routes.
The FAA is proposing an amendment to 14 CFR part 71 to establish RNAV route T-383 in the vicinity of Sitka, AK in support of a large and comprehensive T-route modernization project in the state of Alaska. The proposed route is described below.
United States Area Navigation Routes are published in paragraph 6011 of FAA Order JO 7400.11F dated August 10, 2021 and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The RNAV route listed in this document would be published subsequently in FAA Order JO 7400.11.
FAA Order JO 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.
The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to amend United States Area Navigation (RNAV) route T-242 in the vicinity of Utqiagvik, AK in support of a large and comprehensive T-route modernization project for the state of Alaska.
Comments must be received on or before May 9, 2022.
Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE, West Building Ground Floor, Room W12-140, Washington, DC 20590; telephone: (800) 647-5527, or (202) 366-9826. You must identify FAA Docket No. FAA-2022-0220; Airspace Docket No. 19-AAL-67 at the beginning of your comments. You may also submit comments through the internet at
FAA Order JO 7400.11F, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Christopher McMullin, Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-8783.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would expand the availability of RNAV in Alaska and improve the efficient flow of air traffic within the National Airspace System (NAS) by lessoning the dependency on ground based navigation.
Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.
Communications should identify both docket numbers (FAA Docket No. FAA-2022-0220; Airspace Docket No. 19-AAL-67) and be submitted in triplicate to the Docket Management Facility (see
Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2022-0220; Airspace Docket No. 19-AAL-67.” The postcard will be date/time stamped and returned to the commenter.
All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The proposal contained in this action may
An electronic copy of this document may be downloaded through the internet at
You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see
This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the
In 2003, Congress enacted the Vision 100—Century of Aviation Reauthorization Act (Pub. L. 108-176), which established a joint planning and development office in the FAA to manage the work related to the Next Generation Air Transportation System (NextGen). Today, NextGen is an ongoing FAA-led modernization of the nation's air transportation system to make flying safer, more efficient, and more predictable.
In support of NextGen, this proposal is part of a larger and comprehensive T-route modernization project in the state of Alaska. The project mission statement states: “To modernize Alaska's Air Traffic Service route structure using satellite based navigation Development of new T-routes and optimization of existing T-routes will enhance safety, increase efficiency and access, and will provide enroute continuity that is not subject to the restrictions associated with ground based airway navigation.” As part of this project, the FAA evaluated the existing Colored airway structure for: (a) Direct replacement (
The aviation industry/users have indicated a desire for the FAA to transition the Alaskan en route navigation structure away from dependency on Non-Directional Beacons (NDB), and move to develop and improve the RNAV route structure. Due to a review of RNAV route T-242, the FAA is proposing to create connectivity with a future proposed route T-381 at waypoints (WPs) HUMUB and WEGNO. The addition of these WPs will also provide a lower GNSS MEA along the route in this area, deviating the route slightly west of the original. The WEGNO, AK, WP is not a turn point, so it will not be included in the proposed legal description, but would be depicted on the sectional chart. Additionally, the FAA found that WPs KUTDE and LACIL, which are in the current legal description, are not turn points, and this proposal would remove them from the legal description. Finally, the FAA determined that the current legal description is improperly formatted in accordance with FAA Order JO 7400.2N. This proposal would correct the format indicating a west to east legal description in FAA Order JO 7400.11.
The FAA is proposing an amendment to 14 CFR part 71 to amend RNAV route T-242 in the vicinity of Utqiagvik, AK in support of a large and comprehensive T-rout modernization project in the state of Alaska. The proposed amendment is described below.
United States Area Navigation Routes are published in paragraph 6011 of FAA Order JO 7400.11F dated August 10, 2021 and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The RNAV route listed in this document would be published subsequently in FAA Order JO 7400.11.
FAA Order JO 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.
The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to amend United States Area Navigation (RNAV) route T-282 in the vicinity of Ruby, AK in support of a large and comprehensive T-route modernization project for the state of Alaska.
Comments must be received on or before May 9, 2022.
Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE, West Building Ground Floor, Room W12-140, Washington, DC 20590; telephone: (800) 647-5527, or (202) 366-9826. You must identify FAA Docket No. FAA-2022-0221; Airspace Docket No. 19-AAL-77 at the beginning of your comments. You may also submit comments through the internet at
Christopher McMullin, Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-8783.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would expand the availability of RNAV in Alaska and improve the efficient flow of air traffic within the National Airspace System (NAS) by lessoning the dependency on ground based navigation.
Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.
Communications should identify both docket numbers (FAA Docket No. FAA-2022-0221; Airspace Docket No. 19-AAL-77) and be submitted in triplicate to the Docket Management Facility (see
Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2022-0221; Airspace Docket No. 19-AAL-77.” The postcard will be date/time stamped and returned to the commenter.
All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the comment closing date. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.
An electronic copy of this document may be downloaded through the internet at
You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see
This document proposes to amend FAA Order JO 7400.11F, Airspace
In 2003, Congress enacted the Vision 100—Century of Aviation Reauthorization Act (Pub. L. 108-176), which established a joint planning and development office in the FAA to manage the work related to the Next Generation Air Transportation System (NextGen). Today, NextGen is an ongoing FAA-led modernization of the nation's air transportation system to make flying safer, more efficient, and more predictable.
In support of NextGen, this proposal is part of a larger and comprehensive T-route modernization project in the state of Alaska. The project mission statement states: “To modernize Alaska's Air Traffic Service route structure using satellite based navigation Development of new T-routes and optimization of existing T-routes will enhance safety, increase efficiency and access, and will provide enroute continuity that is not subject to the restrictions associated with ground based airway navigation.” As part of this project, the FAA evaluated the existing Colored airway structure for: (a) Direct replacement (
The aviation industry/users have indicated a desire for the FAA to transition the Alaskan en route navigation structure away from dependency on Non-Directional Beacons (NDB), and move to develop and improve the RNAV route structure. During an evaluation of RNAV route T-282, the FAA determined that a slight deviation north would allow for a lower GNSS MEA between the Fix AKTIE and waypoint (WP) ROSII. This proposal would include two newly established WPs the FUZES, AK, WP and the ENVOI, AK, WP to the legal description. Additionally, the proposal would remove the HORSI, AK, Fix from the legal description, since it would no longer be a point along the route.
The FAA is proposing an amendment to 14 CFR part 71 to amend RNAV route T-282 in the vicinity of Ruby, AK in support of a large and comprehensive T-route modernization project in the state of Alaska. The proposed amendment is described below.
United States Area Navigation Routes are published in paragraph 6011 of FAA Order JO 7400.11F dated August 10, 2021 and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The RNAV route listed in this document would be published subsequently in FAA Order JO 7400.11.
FAA Order JO 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.
The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
Office of General Counsel (OGC), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Proposed rule; request for comments.
NOAA proposes to amend procedures governing its civil administrative enforcement proceedings. The principal changes would include updates to statutory references, clarifications regarding the Administrator's discretionary review, revised directions for appealing a written warning, revised requirements for denying a request for admission, and revised directions for electronic service related to certain appeals and petitions. Other changes would remove the requirement for NOAA to challenge late hearing requests, simplify the use of electronic signatures, rename discovery filings, allow depositions by videoconference, require discovery filings to state when a witness is expected to speak in a language other than the English language in order to arrange interpretation, clarify when failing to pay can be a basis for permit sanctions, incorporate Civil Asset Forfeiture Reform Act deadlines into administrative forfeiture proceedings, and allow NOAA to publish a Notice of Proposed Forfeiture on an official government website. In addition, minor changes would update titles and addresses and correct clerical errors.
Comments and information must be received no later than 5 p.m. Eastern Time on April 25, 2022.
You may submit comments on this document, identified by NOAA-HQ-2022-0016, by any of the following methods:
•
•
Comments received electronically will generally be posted to
Patrick Carroll or Meggan Engelke-Ros, GCES, (301) 427-2202.
NOAA is proposing to amend the civil procedure regulations that apply to its administrative proceedings (15 CFR part 904), as described below. This includes proposed changes to update the statutory references subject to the application of this chapter of the Code of Federal Regulations, the titles and addresses for various offices of NOAA, the procedures for collection of civil monetary payments, the process for appealing written warnings issued by an authorized officer, and references to the office of Administrative Law Judges. This action would also provide clarifications to NOAA's filing requirements, requirements for an answering party to deny a request for admissions, deadlines in an administrative forfeiture proceeding, the availability of a NOAA email address to electronically submit appeals of written warnings, petitions to the Administrator, petitions for relief from forfeiture, the process to identify witnesses that are expected to testify in a foreign language, and the criteria the Administrator may rely on to determine whether or not to grant discretionary review. Furthermore, this action would add provisions to the forfeiture section to authorize the posting of notices online, and would correct erroneous cross-references, grammatical issues, internal inconsistencies, typos, and other clerical errors that have resulted from the passage of time or were inadvertently left unaddressed in the last major revision to the regulations and have since been identified.
This proposed rule has been determined to be not significant for purposes of Executive Order 12866.
Pursuant to the Executive Order on federalism, Executive Order 13132, this proposed rule does not have federalism effects and that a federalism assessment is not required.
There are no reporting, recordkeeping or other compliance requirements in the proposed rule. Nor does this proposed rule contain an information-collection request that would implicate the Paperwork Reduction Act, 44 U.S.C. 3501,
The Chief Counsel for Regulation of the Department of Commerce has certified to the Chief Counsel for Advocacy of the Small Business Administration that this proposed rule, if adopted, would not have a significant economic impact on a substantial number of small entities.
The small businesses, as defined in the Regulatory Flexibility Act, 5 U.S.C. 601,
Because this proposed rule would only modify existing procedural rules, the overall economic impact on small entities, if any, is expected to be nominal. Accordingly, this proposed rule will not have a substantial impact on a significant number of small entities. As a result, an initial regulatory flexibility analysis is not required and none has been prepared.
Administrative practice and procedure, Fisheries, Fishing, Fishing vessels, Penalties, Seizures and forfeitures.
For reasons set forth in the preamble, NOAA proposes to amend 15 CFR part 904 to read as follows:
16 U.S.C. 1801
(c) * * *
(1) Anadromous Fish Products Act, 16 U.S.C. 1822 note;
(2) Antarctic Conservation Act of 1978, 16 U.S.C. 2401
(3) Antarctic Marine Living Resources Convention Act of 1984, 16 U.S.C. 2431
(4) Antarctic Mineral Resources Protection Act of 1990, 16 U.S.C. 2461
(5) Atlantic Coastal Fisheries Cooperative Management Act, 16 U.S.C. 5101
(6) Atlantic Salmon Convention Act of 1982, 16 U.S.C. 3601
(7) Atlantic Striped Bass Conservation Act, 16 U.S.C. 1851 note;
(8) Atlantic Tunas Convention Act of 1975, 16 U.S.C. 971
(9) Billfish Conservation Act of 2012, 16 U.S.C. 1827a;
(10) DESCEND Act of 2020, Public Law 116-340, 134 Stat. 5128;
(11) Deep Seabed Hard Mineral Resources Act, 30 U.S.C. 1401
(12) Dolphin Protection Consumer Information Act, 16 U.S.C. 1371
(13) Driftnet Impact Monitoring, Assessment, and Control Act, 16 U.S.C. 1822 note;
(14) Eastern Pacific Tuna Licensing Act of 1984, 16 U.S.C. 972
(15) Endangered Species Act of 1973, 16 U.S.C. 1531
(16) Ensuring Access to Pacific Fisheries Act, 16 U.S.C. 7701
(17) Fish and Seafood Promotion Act of 1986, 16 U.S.C. 4001
(18) Fisherman's Protective Act of 1967, 22 U.S.C. 1980;
(19) Fur Seal Act Amendments of 1983, 16 U.S.C. 1151
(20) High Seas Driftnet Fishing Moratorium Protection Act, 16 U.S.C. 1826g;
(21) High Seas Fishing Compliance Act, 16 U.S.C. 5501
(22) Lacey Act Amendments of 1981, 16 U.S.C. 3371
(23) Land Remote Sensing Policy Act of 1992, as amended, 51 U.S.C. 60101
(24) Magnuson-Stevens Fishery Conservation and Management Act, 16 U.S.C. 1801
(25) Marine Mammal Protection Act of 1972, 16 U.S.C. 1361
(26) National Marine Sanctuaries Act, 16 U.S.C. 1431
(27) North Pacific Anadromous Stocks Convention Act of 1992, 16 U.S.C. 5001
(28) Northern Pacific Halibut Act of 1982, 16 U.S.C. 773
(29) Northwest Atlantic Fisheries Convention Act of 1995, 16 U.S.C. 5601
(30) Ocean Thermal Energy Conversion Act of 1980, 42 U.S.C. 9101
(31) Pacific Salmon Treaty Act of 1985, 16 U.S.C. 3631
(32) Pacific Whiting Act of 2006, 16 U.S.C. 7001
(33) Port State Measures Agreement Act of 2015, 16 U.S.C. 7401
(34) Shark Conservation Act of 2010, 16 U.S.C. 1826k note, 1857 note;
(35) South Pacific Tuna Act of 1988, 16 U.S.C. 973
(36) Sponge Act, 16 U.S.C. 781
(37) Tuna Conventions Act of 1950, 16 U.S.C. 951
(38) Weather Modification Reporting Act, 15 U.S.C. 330
(39) Western and Central Pacific Fisheries Convention Implementation Act, 16 U.S.C. 6901
(40) Whaling Convention Act of 1949, 16 U.S.C. 916
The revisions read as follows:
(1) Any commissioned, warrant, or petty officer of the U.S. Coast Guard (USCG);
(2) Any special agent or fishery enforcement officer of NMFS;
(3) Any officer designated by the head of any Federal or state agency that has entered into an agreement with the Secretary of Commerce to enforce the provisions of any statute administered by NOAA; or
(4) Any USCG personnel accompanying and/or acting under the direction of any person described in paragraphs (1), (2), or (3) of this definition.
(a) Service of a NOVA (§ 904.101), NOPS (§ 904.302), NIDP (§ 904.303), Notice of Proposed Forfeiture (§ 904.504), Notice of Seizure (§ 904.501), Notice of Summary Sale (§ 904.505), Written Warning (§ 904.402), or Initial Decision (§ 904.271) may be made by certified mail (return receipt requested), electronic transmission, or third party commercial carrier to an addressee's last known address or by personal delivery. Service of a notice under this subpart will be considered effective upon receipt.
(b) Service of documents and papers, other than those described in paragraph (a) of this section, may be made by first class mail (postage prepaid), electronic transmission, or third party commercial carrier, to an addressee's last known address or by personal delivery. Service of documents and papers will be considered effective upon the date of postmark (or as otherwise shown for government-franked mail), delivery to third party commercial carrier, electronic transmission, or upon personal delivery.
(c) Whenever this part requires service of a document or other paper referred to in paragraph (a) or (b) of this section, such service may effectively be made on the agent for service of process, on the attorney for the person to be served, or other representative. Refusal by the person to be served (including an agent, attorney, or representative) of service of a document or other paper will be considered effective service of the document or other paper as of the date of such refusal. In cases where a document or paper described in paragraph (a) of this section is returned unclaimed, service will be considered effective if the U.S. Postal Service provides an affidavit stating that the party was receiving mail at the same address during the period when certified service was attempted.
(d) Any documents and other papers filed or served must be signed:
(1) By the person or persons filing the same;
(2) By an officer thereof if a corporation;
(3) By an officer or authorized employee if a government instrumentality; or
(4) By an attorney or other person having authority to sign.
For a NOVA, NOPS or NIDP, the 30-day response period begins to run on the date the notice is received. * * *
(a) A NOVA will be issued by NOAA and served on the respondent(s). The NOVA will contain:
(c) The respondent may, within the 30-day period specified in paragraph (a) of this section, request an extension of time to respond. Agency counsel may grant an extension of up to 30 days unless he or she determines that the requester could, exercising reasonable diligence, respond within the 30-day period. If Agency counsel does not respond to the request within 48 hours of its receipt, the request is granted automatically for the extension requested, up to a maximum of 30 days. A telephonic response to the request within the 48-hour period is considered an effective response, and will be followed by written confirmation.
(d) Agency counsel may, for good cause, grant an additional extension beyond the 30-day period specified in paragraph (c) of this section.
(a) Respondent must make full payment of the civil penalty within 30 days of the date upon which the NOVA becomes effective as the final administrative decision and order of NOAA under § 904.104 or the date of the final administrative decision as provided in subpart C of this part, as directed by NOAA. Payment must be made in accordance with the bill and instructions provided by NOAA.
(b) A hearing request by one joint and several respondent is considered a request by the other joint and several respondent(s). Agency counsel, having received a hearing request from one joint and several respondent, will send a copy of it to the other joint and several respondent(s) in the case. However, if the requesting joint and several respondent settles with the Agency prior to the hearing, upon notification by the Agency, any remaining joint and several respondent(s) must affirmatively request a hearing within the time period specified or the case will be removed from the hearing docket as provided in § 904.213.
(e) Financial information regarding respondent's ability to pay should be submitted to Agency counsel as soon as possible after the receipt of the NOVA. If a respondent has requested a hearing on the violation alleged in the NOVA and wants the Initial Decision of the Judge to consider his or her inability to pay, verifiable, complete, and accurate financial information must be submitted to Agency counsel at least 30 days in advance of the hearing, except where the applicable statute expressly provides for a different time period. No information regarding the respondent's ability to pay submitted by the respondent less than 30 days in advance of the hearing will be admitted at the hearing or considered in the Initial Decision of the Judge, unless the Judge rules otherwise. If the Judge decides to admit any information related to the respondent's ability to pay submitted less than 30 days in advance of the hearing, Agency counsel will have 30 days to respond to the submission from the date of admission. In deciding whether to submit such information, the respondent should keep in mind that the Judge may assess a civil penalty either greater or smaller than that assessed in the NOVA.
(f) Issues regarding ability to pay will not be considered in an administrative review of an Initial Decision if the financial information was not previously presented by the respondent to the Judge prior to or at the hearing.
(h) Whenever a statute requires NOAA to take into consideration a respondent's ability to pay when assessing a civil penalty and the respondent has requested a hearing on the violation alleged in the NOVA, the Agency must submit information on the respondent's financial condition so that the Judge may consider that information, along with any other factors required to be considered, in the Judge's assessment of a civil penalty. Agency counsel may obtain such financial information through discovery procedures under § 904.240, or otherwise. A respondent's refusal or failure to respond to such discovery requests may serve as the basis for inferring that such information would have been adverse to any claim by respondent of inability to pay the assessed civil penalty, or result in respondent being barred from asserting financial hardship.
(a) This subpart sets forth the procedures governing the conduct of hearings and the issuance of initial and final administrative decisions of NOAA involving alleged violations of the laws cited in § 904.1(c) and any other laws or authorities administered by NOAA and regulations implementing these laws, including civil penalty assessments and permit sanctions and denials. By separate regulation, these rules may be applied to other proceedings.
(a) If the respondent wishes a hearing on a NOVA, NOPS or NIDP, the request must be dated and in writing, and must be served in conformance with § 904.3 on the Agency counsel specified in the notice. The respondent must either attach a copy of the NOVA, NOPS or NIDP or refer to the relevant NOAA case number. Agency counsel will promptly forward the request for hearing to the Office of Administrative Law Judges.
(b) Any party requesting a hearing under § 904.102(a)(3) must provide current contact information, including a working telephone number and email address (if one is available). The Agency and the Office of Administrative Law Judges must be promptly notified of any changes to this information.
(c) If a written application is made to NOAA after the expiration of the time period established in this part for the required filing of hearing requests, Agency counsel will promptly forward the request for hearing along with documentation of service and any other relevant materials to the Office of Administrative Law Judges for a determination on whether such request shall be considered timely filed. Determinations by the Judge regarding
(d) Upon its receipt for filing in the Office of Administrative Law Judges, each request for hearing will be promptly assigned a docket number and thereafter the proceeding will be referred to by such number. Written notice of the assignment of hearing to a Judge will promptly be given to the parties.
(a) Pleadings, papers, and other documents in the proceeding must be filed directly with the Office of Administrative Law Judges, be served on all other parties, and conform with all applicable requirements of § 904.3.
(a) Rule on timeliness of hearing requests pursuant to § 904.201(c);
(m) Assess a civil penalty or impose a permit sanction, condition, revocation, or denial of permit application, taking into account all of the factors required by applicable law;
(a) The original of all pleadings and documents must be filed with the Judge and a copy served on the Office of Administrative Law Judges and each party. All pleadings or documents when submitted for filing must show that service has been made upon all parties. Such service must be made in accordance with § 904.3(b).
(b) Pleadings and documents to be filed may be reproduced by printing or any other process, provided the copies are clear and legible; must be dated, signed; and must show the docket description and title of the proceeding, and the title, if any, address, and telephone number of the signatory. If typewritten, the impression may be on only one side of the paper and must be double spaced, if possible, except that quotations may be single spaced and indented.
(d) Unless otherwise provided, the answer to any written motion, pleading, or petition must be served within 20 days after service of the motion. If a motion states that opposing counsel has no objection, it may be acted upon as soon as practicable, without awaiting the expiration of the 20-day period. Answers must be in writing, unless made in response to an oral motion made at a hearing; must fully and completely advise the parties and the Judge concerning the nature of the opposition; must admit or deny specifically and in detail each material allegation of the pleading answered; and must state clearly and concisely the facts and matters of law relied upon. Any new matter raised in an answer will be deemed controverted.
In the interests of justice and administrative efficiency, the Judge, on his or her own initiative or upon the application of any party, may expedite the administrative proceeding. A motion by a party to expedite the administrative proceeding may, at the discretion of the Judge, be made orally or in writing with concurrent actual notice to all parties. Upon granting a motion to expedite the scheduling of an administrative proceeding, the Judge may expedite pleading schedules, prehearing conferences and the hearing, as appropriate. If a motion for an expedited administrative proceeding is granted, a hearing on the merits may not be scheduled with less than 5 business days' notice, unless all parties consent to an earlier hearing.
The parties may, by stipulation, agree upon any matters involved in the administrative proceeding and include such stipulations in the record with the consent of the Judge. Written stipulations must be signed and served on all parties.
(a) Prior to any hearing or at any other time deemed appropriate, the Judge may, upon his or her own initiative, or upon the application of any party, direct the parties to appear for a conference or arrange a telephone conference. The Judge shall provide at least 24 hours' notice of the conference to the parties, and shall record such conference by audio recording or court reporter, to consider:
(a)
(1) The Initial Disclosures shall include the following information: A factual summary of the case; a summary of all factual and legal issues in dispute; a list of all defenses that will be asserted, together with a summary of all factual and legal bases supporting each defense; a list of all potential witnesses, together with a summary of their anticipated testimony; and a list of all potential exhibits.
(2) The Initial Disclosures must be signed by the parties or their attorneys and must be served on all parties in conformance with § 904.3, along with a copy of each potential exhibit listed therein.
(3) A party has the affirmative obligation to supplement their Initial Disclosures as available information or documentation relevant to the stated charges or defenses becomes known to the party.
(b)
(f)
(a)
(c)
(d) * * *
(1) At hearing, part or all of any deposition, so far as admissible under this Part as though the witness were then testifying, may be used against any party who was present or represented at the taking of the deposition or had reasonable notice.
(a)
(b)
(d)
(a)
(b)
(a) The Judge shall be responsible for scheduling the hearing. With due regard for the convenience of the parties, their representatives, or witnesses, the Judge shall fix the time, place and date for the hearing and shall notify all parties of the same. The Judge will promptly serve on the parties notice of the time and place of hearing. The hearing will not be held less than 20 days after service of the notice of hearing unless the hearing is expedited as provided under paragraph (d) of this section.
(a) * * *
(3) In any case involving a charged violation of law in which the respondent has admitted an allegation, evidence may still be presented to establish matters of aggravation or mitigation.
(i)
(j)
(a)
(f)
(b) The official transcript of testimony taken, together with any exhibits, briefs, or memoranda of law filed therewith, will be filed with the Office of Administrative Law Judges. Transcripts of testimony will be available in any hearing and will be supplied to the parties at the cost of the Agency.
(b) The Judge will arrange for appropriate storage of the records of any administrative proceeding, which place of storage need not necessarily be located physically within the Office of Administrative Law Judges.
(a) After expiration of the period provided in § 904.261 for the filing of reply briefs (unless the parties have waived briefs or presented proposed findings orally at the hearing), the Judge will render an Initial Decision upon the record in the case, setting forth:
(b) If the parties have presented oral proposed findings at the hearing or have waived presentation of proposed findings, the Judge may at the termination of the hearing announce the decision, subject to later issuance of a written Initial Decision under paragraph (a) of this section. In such cases, the Judge may direct the prevailing party to prepare proposed findings, conclusions, and an order.
(c) The Judge will serve the Initial Decision on each of the parties, the Chief of the Enforcement Section of the NOAA Office of General Counsel, and the Administrator. Upon request, the Judge will promptly certify to the Administrator the record, including the original copy of the Initial Decision, as complete and accurate.
(d) An Initial Decision becomes effective as the final administrative decision of NOAA 60 days after service, unless:
Unless an order or Initial Decision of the Judge specifically provides otherwise, any party may file a petition for reconsideration of an order or Initial Decision issued by the Judge. Such petitions must state the matter claimed to have been erroneously decided, and the alleged errors and relief sought must be specified with particularity. Petitions must be filed within 20 days after the service of such order or Initial Decision. The filing of a petition for reconsideration shall operate as a stay of an order or Initial Decision or its effectiveness date unless specifically so ordered by the Judge. Within 15 days after the petition is filed, any party to the administrative proceeding may file an answer in support or in opposition.
(a) Subject to the requirements of this section, any party who wishes to seek review of an Initial Decision of a Judge must Petition for Review of the Initial Decision within 30 days after the date the decision is served. The petition must be served on the Administrator in conformance with § 904.3(b) at the following address: Administrator, National Oceanic and Atmospheric Administration, Department of Commerce, Room 5128, 14th Street and Constitution Avenue NW, Washington, DC 20230. Copies of the Petition for Review, and all other documents and materials required in paragraph (d) of this section, must be served in conformance with § 904.3(b) on all parties and to either
(b) The Administrator may elect to issue an order to review the Initial Decision without petition and may affirm, reverse, modify or remand, in whole or in part, the Judge's Initial Decision. Any such order must be issued within 60 days after the date the Initial Decision is served.
(c) Review by the Administrator of an Initial Decision is discretionary and is not a matter of right. If a party files a timely petition for discretionary review, or review is timely initiated by the Administrator, the effectiveness of the Initial Decision is stayed until further order of the Administrator or until the Initial Decision becomes final pursuant to paragraph (h) of this section. In determining whether or not to grant discretionary review, the Administrator will consider:
(1) Whether the Initial Decision contains significant factual or legal errors that warrant further review by the Administrator; and
(2) Whether fairness or other policy considerations warrant further consideration by the Administrator. Types of cases that fall within these criteria include, but are not limited to, those in which;
(i) The Initial Decision conflicts with one or more other NOAA administrative decisions or federal court decisions on an important issue of federal law;
(ii) The Judge decided an important federal question in a way that conflicts with prior rulings of the Administrator;
(iii) The Judge decided a question of federal law that is so important that the Administrator should pass upon it even absent a conflict; or
(iv) The Judge so far departed from the accepted and usual course of administrative proceedings as to call for an exercise of the Administrator's supervisory power.
(d) A Petition for Review must comply with the following requirements regarding format and content:
(1) The petition must include a concise statement of the case, that contains a statement of facts relevant to the issues submitted for review, and a summary of the argument that contains a succinct, clear and accurate statement of the arguments made in the body of the petition;
(2) The petition must set forth, in detail, specific objections to the Initial Decision, the bases for review, and the relief requested;
(3) Each issue raised in the petition must be separately numbered, concisely stated, and supported by detailed citations to specific pages in the record, and to statutes, regulations, and principal authorities. Petitions may not refer to or incorporate by reference entire documents or transcripts;
(4) A copy of the Judge's Initial Decision must be attached to the petition;
(5) Copies of all cited portions of the record must be attached to the petition;
(6) A petition, exclusive of attachments and authorities, must not exceed 20 pages in length and must be in the form articulated in § 904.206(b); and
(7) Issues of fact or law not argued before the Judge may not be raised in the petition unless such issues were raised for the first time in the Judge's Initial Decision, or could not reasonably have been foreseen and raised by the parties during the hearing. The Administrator will not consider new or additional evidence that is not a part of the record before the Judge.
(e) The Administrator may deny a Petition for Review that is untimely or fails to comply with the format and content requirements in paragraph (d) of this section without further review.
(f) No oral argument on Petitions for Review will be allowed.
(g) Within 30 days after service of a petition for discretionary review, any party may file and serve an answer in support or in opposition. An answer must comport with the format and content requirements in paragraphs (d)(5) through (d)(7) of this section and set forth detailed responses to the specific objections, bases for review and relief requested in the petition. No further replies are allowed, unless requested by the Administrator.
(h) If the Administrator has taken no action in response to the petition within 120 days after the petition is served, said petition shall be deemed denied and the Judge's Initial Decision shall become the final agency decision with an effective date 150 days after the petition is served.
(i) If the Administrator issues an order denying discretionary review, the order
(j) If the Administrator grants discretionary review or elects to review the Initial Decision without petition, the Administrator will issue an order to that effect. Such order may identify issues to be briefed and a briefing schedule. Such issues may include one or more of the issues raised in the Petition for Review and any other matters the Administrator wishes to review. Only those issues identified in the order may be argued in any briefs permitted under the order. The Administrator may choose to not order any additional briefing, and may instead make a final determination based on any Petitions for Review, any responses and the existing record.
(k) If the Administrator grants or elects to take discretionary review, and after expiration of the period for filing any additional briefs under paragraph (j) of this section, the Administrator will render a written decision on the issues under review. The Administrator will serve the decision on each of the parties in conformance with § 904.3. The Administrator's decision becomes the final administrative decision on the date it is served, unless otherwise provided in the decision, and is a final agency action for purposes of judicial review; except that an Administrator's decision to remand the Initial Decision to the Judge is not final agency action.
(l) An Initial Decision shall not be subject to judicial review unless:
(1) The party seeking judicial review has exhausted its opportunity for administrative review by filing a Petition for Review with the Administrator in compliance with this section, and
(2) The Administrator has issued a final ruling on the petition that constitutes final agency action under paragraph (k) of this section or the Judge's Initial Decision has become the final agency decision under paragraph (h) or (i) of this section.
(m) For purposes of any subsequent judicial review of the agency decision, any issues that are not identified in any Petition for Review, in any answer in support or opposition, by the Administrator, or in any modifications to the Initial Decision are waived.
(n) If an action is filed for judicial review of a final agency decision, and the decision is vacated or remanded by a court, the Administrator shall issue an order addressing further administrative proceedings in the matter. Such order may include a remand to the Chief Administrative Law Judge for further proceedings consistent with the judicial decision, or further briefing before the Administrator on any issues the Administrator deems appropriate.
(a) This subpart sets forth procedures governing the suspension, revocation, modification, and denial of permits. The bases for sanctioning a permit are set forth in § 904.301.
(1)
(2)
(3)
(4)
(b) This subpart does not apply to the Land Remote Sensing Policy Act of 1992, as amended (51 U.S.C. 60101
(a) Unless otherwise specified in a settlement agreement, or otherwise provided by statutes or in this subpart, NOAA may sanction any permit issued under the statutes cited in § 904.1(c). The bases for an action to sanction or deny a permit include the following:
(1) Violation of any statute administered by NOAA, including violation of any regulation promulgated or permit condition or restriction prescribed thereunder, by the permit holder/applicant or with the use of a permitted vessel;
(2) The failure to pay a civil penalty imposed under any marine resource law administered by NOAA;
(3) The failure to pay a criminal fine imposed or to satisfy any other liability incurred in a judicial proceeding under any of the statutes administered by NOAA; or
(4) The failure to pay any amount in settlement of a civil forfeiture imposed on a vessel or other property.
(b) A sanction may be applied to a permit involved in the underlying violation, as well as to any permit held or sought by the permit holder/applicant, including permits for other vessels. (See,
(c) A permit sanction may not be extinguished by sale or transfer. A vessel's permit sanction is not extinguished by sale or transfer of the vessel, nor by dissolution or reincorporation of a vessel owner corporation, and shall remain with the vessel until lifted by NOAA.
(a) Service of a NOPS against a permit issued to a foreign fishing vessel will be made on the agent authorized to receive and respond to any legal process for vessels of that country.
The revisions read as follows:
(b) The NIDP will set forth the basis for its issuance and any opportunity for a hearing.
(d) A NIDP may be issued in conjunction with or independent of a NOPS.
(b) There will be no opportunity for a hearing to contest a NOPS or NIDP if the permit holder/applicant had a previous opportunity to participate as a party in an administrative or judicial proceeding with respect to the violation that forms the basis for the NOPS or
Where a permit has been sanctioned on one of the bases set forth in § 904.301(a)(2) through (4) and the permit holder/applicant pays the criminal fine, civil penalty, or amount in settlement of a civil forfeiture in full or agrees to terms satisfactory to NOAA for payment:
(b) Any permit suspended under § 904.301(a)(2) through (4) will be reinstated by order of NOAA; or
(a) Any person authorized to enforce the laws listed in § 904.1(c) or Agency counsel may serve a written warning on a respondent.
b. Revise paragraph (b).
The revision reads as follows:
(b) The recipient of a written warning may appeal to the NOAA Deputy General Counsel. The appeal must be served in conformance with § 904.3 and submitted to
(1) An appeal from a written warning must be in writing and must present the facts and circumstances that explain or deny the violation described in the written warning.
(2) [Reserved]
(a) This subpart sets forth procedures governing the release, abandonment, forfeiture, remission of forfeiture, or return of property seized under any of the laws cited in § 904.1(c).
(b) Except as provided in this subpart, these regulations apply to all seized property subject to forfeiture under any of the laws cited in § 904.1(c). This subpart is in addition to, and not in contradiction of, any special rules regarding seizure, holding or disposition of property seized under these statutes.
Within 60 days from the date of the seizure, NOAA will serve a Notice of Seizure on the owner or consignee, if known or easily ascertainable, or other party that the facts of record indicate has an interest in the seized property. In cases where the property is seized by a state or local law enforcement agency; a Notice of Seizure will be served in the above manner within 90 days from the date of the seizure. The Notice will describe the seized property and state the time, place and reason for the seizure, including the provisions of law alleged to have been violated. The Notice will inform each interested party of his or her right to file a claim to the seized property, and state a date by which a claim must be filed, which may not be less than 35 days after service of the Notice. The Notice may be combined with a Notice of the sale of perishable fish issued under § 904.505. If a claim is filed, the case will be referred promptly to the U.S. Department of Justice for institution of judicial proceedings.
(c) If NOAA grants the request, the amount paid by the requester will be deposited in a NOAA suspense account. The amount so deposited will for all purposes be considered to represent the property seized and subject to forfeiture, and payment of the amount by requester constitutes a waiver by requester of any claim rising from the seizure and custody of the property. NOAA will maintain the money so deposited pending further order of NOAA, order of a court, or disposition by applicable administrative proceedings.
NOAA may appraise seized property to determine its domestic value. Domestic value means the price at which such or similar property is offered for sale at the time and place of appraisement in the ordinary course of trade. If there is no market for the seized property at the place of appraisement, the value in the principal market nearest the place of appraisement may be used. If the seized property may not lawfully be sold in the United States, its domestic value may be determined by other reasonable means.
(a)
(b) * * *
(1) Within 60 days from the date of the seizure, or within 90 days of the date of the seizure where the property is seized by a state or local law enforcement agency, NOAA will publish a Notice of Proposed Forfeiture once a week for at least three successive weeks in a newspaper of general circulation in the Federal judicial district in which the property was seized or post a notice on an official government forfeiture website for at least 30 consecutive days. However, if the value of the seized property does not exceed $1,000, the Notice may be published by posting for at least three successive weeks in a conspicuous place accessible to the public at the National Marine Fisheries Service Enforcement Office, U.S. District Court, or the U.S. Customs House nearest the place of seizure, with the date of posting indicated on the Notice. In addition, a reasonable effort will be made to serve the Notice on each person whose identity, address and interest in the property are known or easily ascertainable.
(3)(i) Any person claiming the seized property may file a claim with NOAA, at the address indicated in the Notice, within 30 days of the date the final Notice was published or posted. The claim must state the claimant's interest in the property.
(c) NOAA will serve the Notice of the Summary Sale on the owner or consignee, if known or easily
(a) * * *
(1) This section establishes procedures for filing with NOAA a petition for the return of any property which has been or may be administratively forfeited under the provisions of any statute administered by NOAA that authorizes the remission or mitigation of forfeitures.
(b) * * *
(1) Any person claiming an interest in any property which has been or may be administratively forfeited under the provisions of § 904.504 may, at any time after seizure of the property, but no later than 90 days after the date of forfeiture, petition for a remission or mitigation of the forfeiture and restoration of the proceeds of such sale, or such part thereof as may be claimed by the petitioner by serving the petition in conformance with § 904.3 on
(g) * * *
(2) Destruction will be accomplished in accordance with the requirements of 41 CFR parts 101-1 through 101-49.
Coast Guard, DHS.
Notice of proposed rulemaking.
The Coast Guard is proposing to establish a special local regulation (SLR) on certain navigable waters of the Atlantic Ocean, offshore of Miami Beach, FL, in connection with the Luminsea Offshore Powerboat Race. The race will include approximately 55 offshore powerboats, ranging from 30 to 50 feet in length. The SLR is needed to protect personnel, vessels, and the marine environment from potential hazards associated with the high-speed powerboat race. The special local regulation establishes a race area where all persons and vessels, except those persons and vessels who are participating in the race, will be prohibited from entering, transiting through, anchoring in, or remaining within unless authorized by the Captain of the Port (COTP) Miami or a designated representative. We invite your comments on this proposed rulemaking.
Comments and related material must be received by the Coast Guard on or before April 8, 2022.
You may submit comments identified by docket number USCG-2022-0135 using the Federal Decision Making Portal at
If you have questions on this proposed rule, call or email Omar Beceiro, Sector Miami Waterways Management Division, U.S. Coast Guard at 305-535-4317 or
On February 15, 2022, Cigarette Racing Team, LLC. notified the Coast Guard they would be sponsoring an offshore powerboat race on May 6, 2022 from 8 a.m. to 6 p.m. and May 7, 2022 from 8 a.m. to 6 p.m. The race would take place in the Atlantic Ocean, offshore of Miami Beach, FL and involve approximately 55 powerboats ranging from 30 to 50 feet in length. Approximately 500 spectator crafts are anticpated to attend the event.
The COTP Miami has determined potential hazards associated with the high-speed boat race would be a safety concern for participants, participant vessels, and general public.
The purpose of this rulemaking is to protect event participants, spectators, and vessels on certain navigable waters of the Atlantic Ocean, offshore of Miami Beach, FL before, during, and after the scheduled event. The Coast Guard is proposing this rulemaking under authority in 46 U.S.C. 70034.
The Coast Guard is issuing this notice of proposed rulemaking (NPRM) with a 15-day prior notice and opportunity to comment pursuant to section (b)(3) of the Administrative Procedure Act (APA) (5 U.S.C. 553). This provision authorizes an agency to publish a rule in less than 30 days before its effective date for “good cause found and published with the rule.” Under 5 U.S.C. 553(b)(3)(B), the Coast Guard finds that good cause exists for publishing this NPRM with a 15-day comment period because the Coast Guard was given short notice from the event sponsor, and this not a recurring event that would be listed in the existing annual marine event table as outlined in 33 CFR 100.702, Table 1. Therefore, it is impracticable to provide a 30-day comment period because we must establish this safety zone by May 6, 2022. A 15-day comment period would allow the Coast Guard to provide for public notice and comment, but also update the proposed regulation soon enough that the length of the notice and comment period does not compromise safety.
The COTP proposes to establish an SLR from 8 a.m. until 6 p.m., on May 6, 2022 and May 7, 2022. The safety zone would cover certain navigable waters of the Atlantic Ocean beginning approximately 0.5 miles north of Government Cut and continuing north approximately 3.5 miles. The SLR extends approximately 2.5 miles offshore.
The duration of the zone is intended to protect personnel, vessels, and the
We developed this proposed rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.
Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. 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).
This regulatory action determination is based on the following reasons: (1) The proposed special local regulation will be enforced for only 10 hours per day; a total of 20 hours; (2) although persons and vessels will not be able to enter, transit through, anchor in, or remain within the regulated area, without authorization from the COTP Miami or a designated representative, they may operate in the surrounding area during the enforcement period; (3) persons and vessels may still enter, transit through, anchor in, or remain within the regulated area during the enforcement period if authorized by the COTP Miami or a designated representative; and (4) the Coast Guard will provide advance notification of the special local regulation to the local maritime community through the Local Notice to Mariners and Broadcast Notice to Mariners via VHF-FM.
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this 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 through the safety zone 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 proposed 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 proposed rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the
This proposed rule would not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
A rule has implications for federalism under Executive Order 13132 (Federalism), if it has a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this 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 call or email 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 would not result in such an expenditure, we do discuss the potential effects of this proposed rule elsewhere in this preamble.
We have analyzed this proposed rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have made a preliminary determination that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This proposed rule involves an SLR lasting approximately 10 hours on two separate days that will prohibit entry of persons or vessels during the Luminsea Offshore Powerboat Race. This action is categorically excluded from further review under paragraph L61 of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions
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 call or email 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.
Marine safety, Navigation (water), Reporting and recordkeeping requirements, Waterways.
For the reasons discussed in the preamble, the Coast Guard proposes to amend33 CFR part 100 as follows:
46 U.S.C. 70041; 33 CFR 1.05-1
(a)
(1)
(2) [Reserved]
(b)
(2) The term “Patrol Commander” means a commissioned, warrant, or petty officer of the Coast Guard who has been designated by the respective Coast Guard Sector Commander to enforce these regulations.
(3) The term “spectators” means all persons and vessels not registered with the event sponsor as participants or official patrol vessels.
(c)
(2) Persons and vessels desiring to enter, transit through, anchor in, or remain within the regulated area may contact the COTP Miami by telephone at (305) 535-4472 or a designated representative via VHF-FM radio on channel 16, to request authorization. If authorization is granted, all persons and vessels receiving such authorization must comply with the instructions of the COTP Miami or a designated representative.
(3) The Coast Guard will provide notice of the regulated area through Broadcast Notice to Mariners via VHF-FM channel 16, on-scene designated representatives, and Local Notice to Mariners.
(d)
Postal Service
Proposed rule.
The United States Postal Service (Postal Service) is proposing to amend
Submit comments on or before April 25, 2022.
Mail or deliver written comments to the Director, Product Classification, U.S. Postal Service, 475 L'Enfant Plaza SW, Room 4446, Washington, DC 20260-5015. If sending comments by email, include the name and address of the commenter and send to
All submitted comments and attachments are part of the public record and subject to disclosure. Do not enclose any material in your comments that you consider to be confidential or inappropriate for public disclosure.
You may inspect and photocopy all written comments, by appointment only, at USPS® Headquarters Library, 475 L'Enfant Plaza SW, 11th Floor North, Washington, DC 20260. These records are available for review on Monday through Friday, 9 a.m.-4 p.m., by calling 202-268-2906.
Karen F. Key at (202) 268-7492 or Garry Rodriguez at (202) 268-7281.
The Postal Service continues to experience operational impacts with parcels not properly prepared in soft packaging (poly, plastic, cloth, padded envelopes, or similar soft packaging). Parcels prepared in soft packaging containing contents that are not right-sized leads to an excess of selvage that can cause damage to the parcel or make the parcel nonmachinable, resulting in the parcel ending up in manual processing which is costly to both the customer and the Postal Service. Parcels that become nonmachinable are not processed through parcel sorting equipment and lose visibility for the customer and the Postal Service.
The Postal Service is proposing to implement a two-inch maximum of selvage on the length and the width of a parcel prepared in soft packaging. The two-inch maximum for the length would be determined by holding the parcel horizontally/landscape and with the contents totally positioned at the bottom of the soft packaging, the selvage must not exceed two inches at the top of the mailpiece. The two-inch maximum for the width would be determined by holding the parcel horizontally/landscape and with the contents totally positioned to the left or to the right side of the soft packaging, the selvage must not exceed two inches on the opposite side of the mailpiece.
In addition, the Postal Service is also proposing to provide a clarification defining how to measure parcels prepared in soft packaging to generally determine the length, width, and height of the mailpiece.
These revisions will not affect the standards for parcels claiming the Priority Mail® Commercial Plus cubic prices.
As a result of the proposed two-inch maximum selvage requirement for parcels prepared in soft packaging, the Postal Service would delete Customer Support Ruling (CSR) PS-340,
The Postal Service is proposing to implement this change effective July 10, 2022.
We believe the proposed revisions will provide customers with a more efficient, consistent, and easier process.
Administrative practice and procedure, Postal Service.
Although exempt from the notice and comment requirements of the Administrative Procedure Act (5 U.S.C. 553(b), (c)) regarding proposed rulemaking by 39 U.S.C. 410(a), the Postal Service invites public comment on the following proposed revisions to
We will publish an appropriate amendment to 39 CFR part 111 to reflect these changes.
Accordingly, 39 CFR part 111 is proposed to be amended as follows:
5 U.S.C. 552(a); 13 U.S.C. 301-307; 18 U.S.C. 1692-1737; 39 U.S.C. 101, 401-404, 414, 416, 3001-3018, 3201-3220, 3401-3406, 3621, 3622, 3626, 3629, 3631-3633, 3641, 3681-3685, and 5001.
Parcels prepared in soft packaging (poly, plastic, cloth, padded envelopes, or similar soft packaging) are measured to determine the dimensions (length, width, height) as follows:
Selvage is the overhang of the soft packaging material beyond the contents of the mailpiece.
Parcels mailed under 3.0 in soft packaging material must not exceed 2 inches of selvage on either the length or the width of the mailpiece.
Measure selvage on parcels in soft packaging as follows:
Except for Priority Mail Commercial Plus Cubic Soft Pack under 223.1.4, parcels prepared in soft packaging (poly, plastic, cloth, padded envelopes, or similar soft packaging) are measured to determine the dimensions (length, width, height) as follows.
Selvage is the overhang of the soft packaging material beyond the contents of the mailpiece.
Parcels mailed under 7.0 in soft packaging material must not exceed 2 inches of selvage on either the length or the width of the mailpiece.
Measure selvage on soft packaging parcels as follows:
Postal Service
Proposed rule.
The Postal Service proposes to amend
Comments must be received on or before April 25, 2022.
Comments may be mailed or delivered to Dale Kennedy (Director, Product Classification), United States Postal Service, 475 L'Enfant Plaza SW, Washington, DC 20260-1101; or submitted to
All written comments may be inspected and photocopied, by appointment only, at Postal Service Headquarters Library, 475 L'Enfant Plaza SW, 11th Floor North, Washington, DC. These records will be available for review Monday through Friday, 9 a.m.-4 p.m., by calling 202-268-2906. All submitted comments and attachments are part of the public record and subject to disclosure. Do not enclose any material in your comments that you consider to be confidential or inappropriate for public disclosure.
Dale Kennedy at (202) 268-6592.
The Postal Service is publishing this notice of proposed rulemaking to enact new procedures for auditing compliance with circulation standards for Periodicals requester publications and standardize existing procedures across Postal Service publications. The Postal Service is also using this opportunity to update its listing of authorized audit bureaus for Periodicals verification and requests each authorized audit bureau notify the Postal Service to confirm its status.
If, after public comment, the Postal Service decides to extend the interpretation in such manner, it will update CSR PS-054 to add procedures for the evaluation of text message requests. In addition, the Postal Service will make conforming changes in a new section E-0.4 to Appendix E of DM-204 to notify audit bureaus of its verification requirements for text messages and throughout DM-203 to standardize records retention requirements and to add Text Message requests. Finally, the Postal Service plans to remove a reference to Form 3845 in CSR PS-054, which is no longer in use.
The Postal Service also authorizes audit bureaus to conduct verifications of circulation for applications for Periodicals mailing privileges. DMM 207.8.2.2. The list of audit bureaus authorized to verify circulation of Periodicals publication are listed in CSR PS-054. However, the Postal Service currently has limited visibility into each audit bureau's procedures for verification of publisher records. Because disparate practices between different authorized audit bureaus could lead to inconsistent enforcement of the Postal Service's verification requirements, the Postal Service proposes an update to the DMM explicitly reserving to the Postal Service the right to review each authorized audit bureau's policies and procedures and periodically inspect each bureau for compliance.
The Postal Service also proposes an update to DMM 207.8.1.3 to add record retention requirements for authorized audit bureaus. Publishers are required to keep circulation records for 3 years following the issue date of the publication. DMM 207.8.1.3. The Postal Service's proposed update to DMM 207.8.1.3 would impose a similar requirement on authorized audit bureaus and require publishers to retain records for paid subscribers for 12 months.
If the Postal Service adopts the proposed DMM changes, it will make conforming updates in CSR PS-054 and Handbook DM-204 (Applying for Periodicals Mailing Privilege) to add minimum requirements for acceptance of text (SMS and MMS) messages for the purpose of auditing Periodicals requests. The Postal Service will also publish an appropriate amendment to 39 CFR part 111 to reflect these changes if this proposal is adopted.
Finally, the Postal Service believes that its agreements with authorized independent audit bureaus are out of date and is therefore reviewing those agreements. Once this rulemaking is concluded, the Postal Service will decide whether to renegotiate the agreements to bring them up to date and would then publish a new list of authorized audit bureaus in CSR PS-054.
The Postal Service proposes the following changes to
Administrative practice and procedure, Postal Service.
Accordingly, 39 CFR part 111 is amended as follows:
5 U.S.C. 552(a); 13 U.S.C. 301-307; 18 U.S.C. 1692-1737; 39 U.S.C. 101, 401-404, 414, 416, 3001-3018, 3201-3220, 3401-3406, 3621, 3622, 3626, 3629, 3631-3633, 3641, 3681-3685, and 5001.
The publisher must keep records for each issue of a publication for 3 years from its issue date, except for circulation records for general or requester publications for which USPS verification of circulation is done by a USPS-authorized audit bureau. In addition, the publisher must retain records for paid subscribers for 12 months following the issue date. A publisher whose records are verified by an authorized audit bureau is not required to keep source records of requests and subscriptions longer than required by the audit bureau, provided, however, the authorized audit bureau shall be required to retain records related to such requests and subscriptions for 3 years following each issue date.
USPS employees or an authorized audit bureau may conduct verifications of circulation for an application for Periodicals mailing privileges, reentry application, or other required circulation verification of general or requester publications, provided, however, that the Postal Service will have the authority to review audit procedures upon request. In addition, the Postal Service reserves the right to verify each audit bureau's compliance with such audit procedures. The Postal Service shall have the authority to revoke any audit bureau's authorization to conduct verifications if it finds such audit bureau has failed to follow approved audit procedures.
U.S. Codex Office, USDA.
Notice of public meeting and request for comments.
The U.S. Codex Office is sponsoring a public meeting on April 19, 2022. The objective of the public meeting is to provide information and receive public comments on agenda items and draft United States (U.S.) positions to be discussed at the 15th Session of the Codex Committee on Contaminants in Foods (CCCF) of the Codex Alimentarius Commission (CAC), which will convene virtually, May 9-13, 2022, with report adoption on May 24, 2022. The U.S. Manager for Codex Alimentarius and the Acting Deputy Under Secretary for Trade and Foreign Agricultural Affairs recognize the importance of providing interested parties the opportunity to obtain background information on the 15th Session of the CCCF and to address items on the agenda.
The public meeting is scheduled for April 19, 2022, from 1:00-3:00 p.m. EDT.
The public meeting will take place via Video Teleconference only. Documents related to the 15th Session of the CCCF will be accessible via the internet at the following address:
Dr. Lauren Posnick Robin, U.S. Delegate to the 15th Session of the CCCF, invites U.S. interested parties to submit their comments electronically to the following email address:
For Information about the 15th Session of the CCCF, contact U.S. Delegate, Dr. Lauren Posnick Robin,
Codex was established in 1963 by two United Nations organizations, the Food and Agriculture Organization (FAO) and the World Health Organization (WHO). Through adoption of food standards, codes of practice, and other guidelines developed by its committees, and by promoting their adoption and implementation by governments, Codex seeks to protect the health of consumers and ensure fair practices in the food trade.
The Terms of Reference of the Codex Committee on Contaminants in Foods (CCCF) are:
(a) To establish or endorse permitted maximum levels or guidelines levels for contaminants and naturally occurring toxicants in food and feed;
(b) to prepare priority lists of contaminants and naturally occurring toxicants for risk assessment by the Joint FAO/WHO Expert Committee on Food Additives;
(c) to consider methods of analysis and sampling for the determination of contaminants and naturally occurring toxicants in food and feed;
(d) to consider and elaborate standards or codes of practice for related subjects; and
(e) to consider other matters assigned to it by the Commission in relation to contaminants and naturally occurring toxicants in food and feed.
The CCCF is hosted by the Netherlands. The United States attends the CCCF as a member country of Codex.
The following items from the forthcoming Agenda for the 15th Session of the CCCF will be discussed during the public meeting:
At the April 19, 2022, public meeting, draft U.S. positions on the agenda items will be described and discussed, and attendees will have the opportunity to pose questions and offer comments. Written comments may be offered at the meeting or sent to Dr. Lauren Posnick Robin, U.S. Delegate for the 15th Session of the CCCF (see
Public awareness of all segments of rulemaking and policy development is important. Consequently, the U.S. Codex Office will announce this
No agency, officer, or employee of the USDA shall, on the grounds of race, color, national origin, religion, sex, gender identity, sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program, or political beliefs, exclude from participation in, deny the benefits of, or subject to discrimination any person in the United States under any program or activity conducted by the USDA.
To file a complaint of discrimination, complete the USDA Program Discrimination Complaint Form, which may be accessed online at
Persons with disabilities who require alternative means for communication (Braille, large print, audiotape, American Sign Language, etc.) should contact USDA's TARGET Center at (202) 720-2600 (voice and TDD).
U.S. Commission on Civil Rights.
Notice 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 South Carolina Advisory Committee (Committee) to the U.S. Commission on Civil Rights will hold a business meeting via WebEx at 11:00 a.m. ET on Thursday, April 7, 2022, for the purpose of discussing the Committee's project on Civil Asset Forfeiture in South Carolina.
The meeting will take place on Thursday, April 7, 2022, at 11:00 a.m. ET.
Barbara Delaviez, DFO, at
Committee meetings are available to the public through the meeting link above. Any interested member of the public may listen to the meeting. An open comment period will be provided to allow members of the public to make a statement as time allows. If joining via phone, 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. Individuals who are deaf, deafblind, and hard of hearing may also follow the proceedings by first calling the Federal Relay Service at 1 (800) 877-8339 and providing the Service with the conference details found through registering at the web link above. To request additional accommodations, please email
Members of the public are also entitled to submit written comments; the comments must be received in the regional office within 30 days following the meeting. Written comments may be emailed to Sarah Villanueva at
Records generated from this meeting may be inspected and reproduced at the Regional Programs Coordination Unit Office, as they become available, both before and after the meeting. Records of the meeting will be available via
U.S. Commission on Civil Rights.
Notice 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 New York Advisory Committee (Committee) will hold a web meeting via WebEx at 1:00 p.m. ET on Friday, April 15, 2022, for the purpose of discussing civil rights topics for their next project.
The meeting will be held on Friday, April 15, 2022, at 1:00 p.m. ET.
Mallory Trachtenberg, DFO, at
Members of the public can listen to the discussion. This meeting is available to the public through the following toll-free call-in number. An open comment period will be provided to allow members of the public to make a statement as time allows. The conference operator will ask callers to identify themselves, the organizations they are affiliated with (if any), and an email address prior to placing callers into the conference call. Callers can expect to incur charges for calls they initiate over wireless lines, and 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. To request additional accommodations, please email
Members of the public are also entitled to submit written comments; the comments must be received in the regional office within 30 days following the meeting. Written comments may be emailed to Mallory Trachtenberg 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
Census Bureau, Department of Commerce.
Notice of final program criteria.
This notice provides the Census Bureau's final criteria for defining urban areas based on the results of the 2020 Decennial Census. This notice also provides a summary of comments received in response to the proposed criteria published in the
The Census Bureau will begin implementing the criteria as of March 24, 2022.
Requests for additional information should be directed to Vincent Osier, Geography Division, U.S. Census Bureau, via email at
The Census Bureau's urban-rural classification is fundamentally a delineation of geographical areas, identifying individual urban areas as well as the rural portion of the nation. The Census Bureau's urban areas represent densely developed territory, and encompass residential, commercial, and other non-residential urban land uses. The boundaries of this urban footprint have been defined using measures based primarily on population counts and residential population density, and also on criteria that account for non-residential urban land uses, such as commercial, industrial, transportation, and open space that are part of the urban landscape. Since the 1950 Census, when the Census Bureau first defined densely settled urbanized areas of 50,000 or more people, the urban area delineation process has addressed non-residential urban land uses through criteria designed to account for commercial enclaves, special land uses such as airports, and densely developed noncontiguous territory.
In developing criteria for delineating urban areas, the Census Bureau uses an objective approach that is designed to meet the needs of a broad range of analysts and users interested in the definition of and data for urban and rural communities for statistical purposes. The Census Bureau recognizes that some federal and state agencies use the Census Bureau's urban-rural classification for allocating program funds, setting program standards, and implementing aspects of their programs. The agencies that use the classification and data for such nonstatistical uses should be aware that the changes to the urban area criteria also might affect the implementation of their programs.
While the Census Bureau is not responsible for the use of its urban-rural classification in nonstatistical programs, we will work with tribal, federal, state, or local agencies as well as stakeholders, as appropriate, to ensure understanding of our classification. Agencies using the classification for their programs must ensure that the classification is appropriate for their use.
The following table compares the final 2020 Census urban area criteria with those that were proposed in the
Over the course of a century defining urban areas, the Census Bureau has introduced conceptual and methodological changes to ensure that the urban-rural classification keeps pace with changes in settlement patterns and with changes in theoretical and practical approaches to interpreting and
Increasing suburbanization, particularly outside the boundaries of large incorporated places led the Census Bureau to adopt the urbanized area concept for the 1950 Census. At that time, the Census Bureau formally recognized that densely settled communities outside the boundaries of incorporated municipalities were just as “urban” as the densely settled population inside those boundaries. Outside urbanized areas of 50,000 or more people, the Census Bureau continued to recognize urban places with at least 2,500 and less than 50,000 persons. This basic conceptual approach to identifying urban areas remained in effect through the 1990 Census, although with some changes to criteria and delineation methods.
The Census Bureau adopted six substantial changes to its urban area criteria for the 2000 Census:
• Defining urban clusters using the same criteria as urbanized areas.
• Disregarding incorporated place and census designated place (CDP) boundaries when defining urbanized areas and urban clusters.
• Adopting 500 persons per square mile (PPSM) as the minimum density criterion for recognizing some types of urban territory.
• Increasing the maximum jump distance for linking densely developed territory separated from the main body of the urban area by intervening low density territory from 1.5 to 2.5 miles. This recognized the prospect that larger clusters of non-residential urban uses might offset contiguity of densely settled territory.
• Introducing the hop concept to provide an objective basis for recognizing that nonresidential urban uses, such as small commercial areas or parks, create small gaps between densely settled residential territory, but are part of the pattern of urbanization.
• Adopting a zero-based approach to defining urban areas.
For the 2010 Census, the Census Bureau adopted moderate changes and enhancements to the criteria to improve upon the classification of urban and rural areas while continuing to meet the objective of a uniform application of criteria nationwide. These changes were:
• Use of census tracts as analysis units in the initial phase of delineation.
• Use of land use/land cover data from the National Land Cover Database (NLCD) to identify qualifying areas of non-residential urban land uses.
• Qualification of airports for inclusion in urban areas.
• Elimination of the designation of central places within urban areas.
• Requirement for minimum population residing outside institutional group quarters.
• Splitting large urban agglomerations.
The conceptual and criteria changes adopted for both the 2000 and 2010 Censuses, as well as the history of the Census Bureau's urban and rural classification, are discussed in more detail in the document “A Century of Delineating a Changing Landscape: The Census Bureau's Urban and Rural Classification, 1910 to 2010,” available at
The notice published in the
The Census Bureau received ten comments that expressed general support or general opposition to the proposed criteria without specifying any particular aspect of the criteria. Five commenters expressed general opposition; five commenters offered general support.
The Census Bureau received twenty-nine comments regarding the proposal to increase the minimum threshold to qualify as urban to 10,000 persons or 4,000 housing units. Twenty-seven commenters expressed concern about the increase, citing loss of statistical continuity for small communities. Two commenters supported increasing the minimum threshold.
The Census Bureau received nineteen comments regarding the proposal to exclude hop/jump corridors from an urban area. Seventeen commenters expressed concern, citing issues related to the complex, multipiece urban areas that would result. Two commenters supported excluding the hop/jump corridors.
The Census Bureau received sixteen comments regarding the proposal to cease distinguishing types of urban areas. Thirteen commenters expressed concern about the loss of distinction between Urban Clusters and Urbanized Areas (though this is only a change in terminology—it still will be possible to distinguish between different sizes of urban areas based on population). Three commenters supported the proposal to cease distinguishing types of urban areas.
The Census Bureau received fifty-five comments regarding the proposed criteria to utilize housing unit density.
Twenty-six commenters expressed concern about using housing unit density instead of population density. Eight commenters supported using housing unit density.
Twenty commenters expressed concern that the minimum housing unit density threshold of 385 housing units per square mile (HPSM) was too high. One commenter supported the
The Census Bureau received five comments regarding the proposed criteria for splitting large urban area agglomerations or the use of the Longitudinal Employer-Household Dynamics (LEHD) data. Three commenters supported the proposed criteria; two commenters expressed concern.
The Census Bureau received forty-seven comments regarding the proposed jump criteria designed to include noncontiguous, but qualifying territory within an urban area. Of these, six commenters supported lowering the maximum jump distance threshold from 2.5 to 1.5 miles. Forty-one commenters favored no change to the 2.5-mile maximum jump distance threshold. Reasons for retention of the 2.5-mile maximum jump distance provided by these commenters included retaining consistency with the 2010 Census urban area delineation, the ability to account for future urbanization and extended suburbanization, and mitigation of the presence of undevelopable land not identified by the Census Bureau.
The Census Bureau received seven comments regarding the proposed use of the census block as the analysis unit (or geographic building block) during the delineation of the initial urban area core. These commenters expressed concern that the use of census blocks instead of census tracts would lead to the shrinking of the population and geographic area of urban areas.
The Census Bureau received ten comments regarding proposed criteria to no longer include low-density territory located within indentations formed during the Urban Area Delineation Process. These commenters opposed the proposed criteria, citing the jagged nature of the urban area boundaries without the smoothing that occurs by including indentations.
The Census Bureau received nine comments regarding the proposed use of the National Land Cover Database (NLCD) to assist in identifying and qualifying as urban, sparsely populated urban-related territory associated with a high degree of impervious surface. These commenters expressed concern about the vintage of the data.
Additional comments expressed concern that the Census Bureau does not acknowledge or consider any nonstatistical uses of urban areas when developing delineation criteria. These commenters also suggested delaying the delineation of urban areas until provisions are adopted that would prevent adverse impacts on programs and funding formulas relating to urban areas as currently defined.
In response to the comments received regarding the nonstatistical uses of Census urban areas, the Census Bureau recognizes that some federal and state agencies use the Census Bureau's urban-rural classification for allocating program funds, setting program standards, and implementing aspects of their programs. The Census Bureau remains committed to an objective, equitable, and consistent nationwide urban area delineation, and thus identifies these areas for the purpose of tabulating and presenting statistical data. This provides data users, analysts, and agencies with a baseline set of areas from which to work, as appropriate. Given the many programmatic and often conflicting or competing uses for Census Bureau-defined urban areas, the Census Bureau cannot attempt to take each such use into account or assess the relative value of any particular use. The Census Bureau is committed to working with stakeholders, as appropriate, to promote understanding of our classification.
Three commenters specifically requested that territory defined as urban in the 2010 Census continue to be defined as urban for the 2020 Census. Six commenters requested that the 2010 criteria be used to define urban areas for the 2020 Census.
Eight commenters expressed concern that there are no provisions in the delineation criteria for local input and requested the opportunity to review and comment on the definition of individual urban areas before boundaries become final.
The Census Bureau received ten comments regarding the block boundaries on the edges of urban development. Commenters expressed concern that these blocks are often a mix of urban and rural characteristics and are often large in scale, potentially leading to their exclusion from an urban area.
Commenters also expressed concern about the automated and inflexible nature of the delineation process and suggested that the extent of each urban area should be evaluated individually. The Census Bureau also received comments expressing concern that the proposed delineation criteria do not consider local zoning laws, topography, and municipal boundaries.
The Census Bureau's urban area criteria for the 2020 Census consists of a single set of rules that allow for application of automated processes based on the input of standardized nationwide datasets that yield consistent results. Rather than defining areas through a process of accretion over time, the criteria also provide a better reflection of the distribution of population, housing, and other uses and how they reflect the current state of urbanization.
The Census Bureau received twenty-six requests for the extension of the public comment period on the proposed urban area delineation criteria to further assess its potential impacts. Additional comments expressed difficulty in predicting results of changes to criteria as published in the
The delineation and production of urban areas and their associated data are scheduled to begin after the release of the Decennial Census block-level population and housing counts to ensure sufficient time to delineate and review the urban area definitions and prepare geographic information files in time for tabulation and inclusion in statistical data products from both the 2020 Census and the American Community Survey (ACS). Adherence to this schedule prevented any attempts toward a test delineation using all the proposed 2020 urban area criteria for the entire United States, Puerto Rico, and the Island Areas, thus prohibiting
This section of the notice provides information about the Census Bureau's decisions on changes that were incorporated into the Urban Area Criteria for the 2020 Census in response to the many comments received. These decisions benefited greatly from public participation as the Census Bureau took into account the comments received in response to the proposed criteria published in the
The changes made to the proposed criteria in Section III of the published in the
1. In Section III, subsection A, the Census Bureau modifies the minimum criteria for an area to qualify as an urban area. The territory must encompass at least 2,000 housing units or at least 5,000 persons, decreased from 4,000 housing units or 10,000 persons as proposed.
2. In Section III, subsection B, the Census Bureau modifies the criteria to utilize multiple housing unit densities: 1,275 housing units per square mile (HPSM), 425 HPSM, and 200 HPSM. In response to comments stating that 385 HPSM was too high for a minimum threshold, and further testing of the impacts of complex multipiece urban areas, the Census Bureau adjusts the delineation criteria to include multiple housing unit density thresholds at different stages of the process. The addition of a high-density threshold of 1,275 HPSM ensures each urban area contains a core. Including a low density fill of 200 HPSM will reduce the number of individual pieces of an urban area while accommodating for the irregular nature of census block size that affects the density calculations.
3. In Section III, subsection B.1, the Census Bureau modifies the criteria to utilize a housing unit density of 425 instead of 385 HPSM.
4. In Section III, subsection B.1, the Census Bureau clarifies the criteria regarding which areas are considered “Initial Urban Core.” An Initial Urban Core must contain at least 500 housing units.
5. In Section III, subsection B.2, the Census Bureau removes the section related to the “Inclusion of Group Quarters.” Blocks containing group quarters can qualify in multiple steps of the criteria.
6. In Section III, subsection B.3, the Census Bureau removes all references to “385 housing units or more.”
7. In Section III, subsection B.3, the Census Bureau removes the reference to “all urban area cores that have a housing unit count of 577 or more.”
8. In Section III, subsection B.4, the Census Bureau clarifies references to the land cover data used in determining exempted territory. The Census Bureau will use the most current land cover data from the National Land Cover Database (NLCD) or Coastal Change Analysis Program (C-CAP) High Resolution Land Cover for any given area to better represent land use/land cover conditions at the time of the delineation.
9. In Section III, subsection B.5, the Census Bureau clarifies when the enclave criteria are applied. Enclaves will be added after development of the Initial Urban Cores and again after the addition of nonresidential territory. This process recognizes that some census blocks that are internal and integral to an urban area may have few or no housing units and little impervious surface, such as census blocks containing urban parkland.
10. In Section III, subsection B.6, the Census Bureau removes the criteria for the “Inclusion of Airports” and includes it within subsection B.7, “Additional Nonresidential Urban Territory.”
11. In Section III, subsection B.7, the Census Bureau adds criteria to include additional nonresidential census blocks that contain at least 1,000 commuter destinations (in a three-year average) and are within 0.5 miles of already qualifying territory.
12. In Section III, subsection B.8, the Census Bureau clarifies and simplified the criteria for splitting large agglomerations.
13. In Section III, subsection B.9, the Census Bureau modifies the criteria to include the most populous place name of the high-density nucleus.
14. In Section III, subsection B.9, the Census Bureau modifies the criteria for secondary names to utilize housing unit counts rather than population counts.
The sections of the proposed criteria referenced above do not appear in the same order in Section V of this final notice due to the reorganization of existing criteria sections and the addition of new criteria sections. The following table provides a crosswalk of the criteria sections that were proposed in the
The criteria outlined herein apply to the United States,
For the 2020 Census, an urban area will comprise a densely developed core of census blocks
1. As a result of the urban area delineation process, an incorporated place or census designated place (CDP) may be partly inside and partly outside an urban area. Further, any census geographic areas, with the exception of census blocks, may be partly within and partly outside an urban area.
2. All criteria based on land area, housing unit density, and population, reflect the information contained in the Census Bureau's Master Address File/Topologically Integrated Geographic Encoding and Referencing (MAF/TIGER) Database (MTDB) at the time of the delineation. All density calculations include only land; the areas of water contained within census blocks are not used in density calculations. Housing unit, population, and worker flow data used in the urban area delineation process will be those published by the Census Bureau for all public and official uses.
3. The Census Bureau will utilize multiple data sources in the 2020 Urban Area delineation. Worker-flows are calculated from the Longitudinal Employer-Household Dynamics Origin-Destination Employment Statistics (LODES) data. Level of imperviousness is calculated from either the National Land Cover Database (NLCD) or Coastal Change Analysis Program (C-CAP) High Resolution Land Cover. The Census Bureau will utilize the most recent data available from either data source for any given area.
The Census Bureau defines urban areas primarily based on housing unit density measured at the census block-level of geography. Three housing unit densities are used in the delineation—425 housing units per square mile (HPSM) to identify the initial core of urban block agglomerations and the cores of noncontiguous peripheral urban territory; 200 HPSM to expand the urban block agglomerations into less dense, but structurally connected portions of urban areas; and 1,275 HPSM to identify the presence of higher-density territory representing the urban nucleus.
The Census Bureau will begin the delineation process by identifying and aggregating contiguous census blocks to form Eligible Block Aggregations (EBAs) based on the following criteria:
(a) The census block has a density of at least 425 HPSM; or
(b) At least one-third of the census block consists of territory with an impervious level of at least 20 percent,
(c) At least one-third of the census block consists of territory with an impervious level of at least 20 percent and at least 40 percent of its boundary is contiguous with qualifying territory; or
(d) The census block contains a group quarter and has a block-level density of at least 500 persons per square mile (PPSM).
The Census Bureau will apply criteria Steps B.1.a, B.1.b, B.1.c, and B.1.d above until there are no additional blocks to add to the EBA. If an EBA contains at least 500 housing units, it will be considered an Initial Urban Core, to which other qualifying areas may be added in subsequent steps of the criteria. Any “holes” (remaining nonqualifying territory surrounded by an Initial Urban Core) that are less than five square miles in area will qualify as urban via the criteria for inclusion of enclaves, as set forth below in Step B.6.a.
Any EBA created in Step B.1 that contains at least ten housing units or a group quarter in a block with at least 500 PPSM may be added to an Initial Urban Core via a hop or a jump.
Hops connect EBAs separated by no more than 0.5 miles of road connections. Multiple hops can occur along road connections between EBAs leading to an Initial Urban Core. After all hop connections are made, EBAs that contain one or more Initial Cores will be considered Core EBAs.
The Census Bureau will then add additional EBAs via jump connections. Jumps are used to connect densely settled noncontiguous territory separated from the Core EBA by territory with low housing unit density. A jump can occur along a road connection that is greater than 0.5 miles but no more than 1.5 miles. Because it is possible that any given densely developed area could qualify for inclusion in multiple Core EBAs via a jump connection, the identification of jumps in an automated process starts with the Core EBA that has the highest number of housing units and continues in descending order based on the total housing units of each Core EBA. Once a Core EBA is added to another Core EBA via a jump, it becomes ineligible for any other jumps.
The non-qualifying blocks along the road connection are not included in the delineation; therefore, Core EBAs that contain hop or jump connections will be noncontiguous aggregations.
Those remaining EBAs that did not have an Initial Urban Core but contain the following will remain as candidates for inclusion in subsequent steps:
• At least ten housing units, or
• A group quarter and a block-level density of at least 500 PPSM.
The Census Bureau will identify and exempt territory in which residential development is substantially constrained or not possible due to either
(a) Bodies of water (as defined by the Census Bureau, or classified as water in the land cover data); and
(b) Wetlands (belonging to any wetlands classifications in the land cover data).
When the hop and jump criteria in Step B.2 are applied, the qualifying hop or jump connections may be extended when the intervening non-qualifying blocks contain exempted territory, provided that:
(c) The road connection across the exempted territory (located on both sides of the road) is no greater than five miles in length; and
(d) The total length of the road connection between the Core EBA and the noncontiguous territory, including the exempt distance and non-exempt hop or jump distances, is also no greater than five miles.
The intervening low housing unit density block or blocks and the block or blocks of water or wetlands are not included in the Core EBA.
The Census Bureau will add contiguous territory to the Core EBAs where blocks have a density of at least 200 HPSM. After the low-density fill is added, any EBA with fewer than 50 total housing units will be removed from the Core EBA with which it is associated.
The Census Bureau will identify additional nonresidential urban territory that is noncontiguous, yet near the Core EBA. The Census Bureau will consider for inclusion all census blocks that:
(a) Qualify as urban via the impervious surface criteria set forth in Steps B.1.b or B.1.c; and
(b) Have a total area of at least 0.15 square miles;
(c) Are within 0.5 miles of a Core EBA.
The Census Bureau will also include all census blocks that:
(d) Contain a three-year average of at least 1,000 commuter destinations;
(e) Are within 0.5 miles of a Core EBA.
A final review of these census blocks and surrounding territory
The Census Bureau will then add census blocks that approximate the territory of airports, provided at least one of the blocks that represent the airport is within 0.5 miles of the edge of a Core EBA. An airport qualifies for inclusion if it is currently functional and one of the following (per the Federal Aviation Administration (FAA) Air Carrier Activity Information System.
(a) Is a qualified cargo airport; or
(b) Has an annual passenger enplanement of at least 2,500 in any year between 2011 and 2019.
The Census Bureau will add enclaves (nonqualifying area completely surrounded by area already qualified for inclusion) within an EBA or Core EBA, provided:
(a) The area of the enclave is less than five square miles, or
(b) All area of the enclave is more than a straight-line distance of 1.5 miles from a land block that is not part of the already qualified area.
Additional enclaves will be identified and included within the EBA or Core EBA if:
(c) The area of the enclave is less than 5 square miles; and
(d) The enclave is surrounded by both water and land that qualified for inclusion in the EBA or Core EBA; and
(e) The length of the line of adjacency with the water is less than the length of the line of adjacency with the land.
The Census Bureau will evaluate and include territory that forms an indentation within an urban area.
To determine whether an indentation should be included in the urban area, the Census Bureau will identify a closure line, defined as a straight line no more than one mile in length, that extends from one point along the edge of the urban area across the mouth of the indentation to another point along the edge of the urban area.
A census block located wholly or partially within an indentation will be considered for inclusion in the urban area, if the Census Bureau-defined internal point of the block is inside the closure line. The total aggregated area of these qualifying indentation blocks is compared to the area of a circle, the diameter of which is the length of the closure qualification line. The qualifying indentation block will be included in the urban area if it is at least four times the area of the circle and less than 3.5 square miles.
If the aggregated area of the qualifying indentation blocks does not meet the criteria listed above, the Census Bureau will define successive closure lines within the indentation, starting at its mouth and working inward toward the base of the indentation, until the criteria for inclusion are met or it is determined that no portion of the indentation will qualify for inclusion.
After all criteria have been exhausted and the Core EBAs have been extended to their maximum size, Core EBAs will be merged where the following criteria are met:
(a) The boundaries of two Core EBAs are within 0.25 miles of each other; and
(b) Both Core EBAs have at least 1,000 housing units or 2,500 persons; and
(c) The three-year mean worker-flow
After all qualifying EBA merges are completed, Core EBAs will be evaluated for high-density nuclei. A high-density nucleus is defined as a collection of blocks, with at least 500 housing units, where each census block has:
(a) A density of at least 1,275 HPSM; or
(b) At least one-third of the census block consists of territory with an impervious level of at least 20 percent,
(c) At least one-third of the census block consists of territory an impervious level of at least 20 percent and at least 40 percent of its boundary is contiguous with qualifying territory.
Core EBAs will be considered Urban Area Agglomerations if they contain:
(a) At least one high-density nucleus with at least 500 housing units in blocks with a density of at least 1,275 HPSM; and
(b) At least 2,000 housing units or 5,000 persons.
All other remaining EBAs are removed from qualification.
Population growth and development, coupled with the automated urban area delineation methodology used for the 2020 Census, results in large Urban Area Agglomerations (UAAs) that encompass territory defined as separate urban areas for the 2010 Census. If such results occur, or if multiple Core EBAs were connected in Step B.6 (Low-Density Fill), the Census Bureau will apply split criteria. Due to differences in the availability of data, Steps B.10.a and B.10.b will apply only to the United States. Step B.10.c will apply to Puerto Rico and the Island Areas (American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, and the U.S. Virgin Islands).
(a) Eligible UAAs.
UAAs will be evaluated for splitting where the UAA:
1. Encompasses territory defined as separate urban areas for the 2010 Census and those intersecting areas contain:
a. At least 50 percent of the population of each of two or more urban areas for the 2010 Census.
2. Encompasses territory where two or more Core EBAs were connected in Step B.6 (Low-Density Fill):
a. Each of the Core EBAs, prior to Step B.6, meets the high-density nucleus qualification criteria outlined in Step 9; and
b. Each of the Core EBAs, prior to Step B.6, has a mean internal worker-flow of at least 25 percent.
UAAs that meet the criteria above (Steps B.10.a.1 or B.10.a.2) will progress to the Split Boundary Assignment (Step B.10.b). The remaining UAAs will continue as a single urban area.
(b) Split Boundary Assignment.
Community detection is performed on the three most-recently available years of Longitudinal Employer-Household Dynamics Origin-Destination Employment Statistics (LODES) worker-flow data, using unsupervised clustering, specifically the Leiden Algorithm,
Commuter-based partitions associated with only one intersecting area or one Core EBA meeting the criteria in Step B.10.a.1 or Step B.10.a.2, are grouped together to form component UAAs. Additionally, partitions are grouped or assigned to existing component UAAs if:
1. The partition comprises at least 90 percent of the population of an intersecting area or Core EBA; or
2. At least 90 percent of the population of a partition is located within an intersecting area or Core EBA.
The remaining partitions are:
• Completely outside of 2010 urban territory; or
• Completely within 2020 low-density fill; or
• Within multiple intersecting areas or Core EBAs.
These partitions will be assigned to the component UAA with which they have the greatest worker-flow relationship.
Component UAAs are evaluated to ensure they have at least 25 percent mean internal worker-flow. Those that do not meet this threshold will merge with the component UAA with which they have the greatest worker-flow relationship. This process continues until all component UAAs have at least 25 percent mean internal worker-flow and at least 5,000 persons.
The boundary between two urban areas may be modified to avoid splitting an incorporated place, CDP, or minor civil division (MCD) between two urban areas at the time of delineation or to follow a legal geographic boundary near the commuter-based partition boundary used to split the two urban areas.
(c) Splitting Criteria for Puerto Rico and the Island Areas.
As the LODES data are not available for Puerto Rico and the Island Areas, the Census Bureau will maintain the 2010 split boundaries between qualified urban areas. These boundaries will be adjusted to the appropriate 2020 block boundaries.
A clear, unambiguous title based on commonly recognized place names helps provide context for data users and ensures that the general location and setting of the urban area can be clearly identified and understood. The title of an urban area identifies the place that is the most populated within the high-density nucleus of the urban area. All population and housing unit requirements for places (incorporated places or CDPs) and MCDs apply to the portion of the entity's population that is within the specific urban area being named.
The Census Bureau will use the following criteria to determine the title of an urban area:
Primary Name:
1. The most populous place within the high-density nuclei of an urban area that has a population of 2,500 or more will be listed first in the urban area title.
Secondary Names:
Up to two additional places, in descending order of housing unit count, may be included in the title of an urban area provided that:
2. The place has 90,000 or more housing units; or
3. The place has at least 1,000 housing units and that housing unit count is at least two-thirds of that of the urban portion of the place providing the primary name.
If the high-density nuclei of an urban area do not contain a place of at least 2,500 people, the Census Bureau will consider the name of the incorporated place, CDP, or MCD with the largest total population in the urban area, or a local name recognized for the area by the United States Geological Survey's (USGS) Geographic Names Information System (GNIS), with preference given to names also recognized by the United States Postal Service (USPS). The urban area title will include the USPS abbreviation of the name of each state or statistically equivalent entity in which the urban area is located or extends. The order of the state abbreviations is the same as the order of the related place names in the urban area title.
If a single place or MCD qualifies as the title of more than one urban area, the urban area with the largest population will use the name of the place or MCD. The smaller urban area will have a title consisting of the place or MCD name and the direction (such as
If any title of an urban area duplicates the title of another urban area within the same state, or uses the name of an incorporated place, CDP, or MCD that is duplicated within a state, the name of the county that has most of the population of the largest place or MCD is appended, in parentheses, after the duplicate place or MCD name for each urban area. If there is no incorporated place, CDP, or MCD name in the urban area title, the name of the county having the largest total population residing in the urban area will be appended to the title.
Robert L. Santos, Director, Census Bureau, approved the publication of this Notice in the
United States Section, NAFTA Secretariat, International Trade Administration, Department of Commerce.
Notice of completion of panel review.
In accordance with Rules 78 and 80 of the NAFTA
Vidya Desai, Acting United States Secretary, NAFTA Secretariat, Room 2061, 1401 Constitution Avenue NW, Washington, DC 20230, 202-482-5438.
Chapter 19 of Article 1904 of NAFTA provides a dispute settlement mechanism involving trade remedy determinations issued by the Government of the United States, the Government of Canada, and the Government of Mexico. Following a Request for Panel Review, a Binational Panel is composed to review the trade remedy determination being challenged and issue a binding Panel Decision. For the complete NAFTA
Enforcement and Compliance, International Trade Administration, Department of Commerce.
As a result of this sunset review, the Department of Commerce (Commerce) finds that revocation of the countervailing duty (CVD) order on certain coated paper suitable for high-quality print graphics using sheet-fed presses (certain coated paper) from Indonesia would be likely to lead to continuation or recurrence of countervailable subsidies at the levels indicated in the “Final Results of Review” section of this notice.
Applicable March 24, 2022.
Daniel Alexander, AD/CVD Operations, Office VII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-4313.
On November 17, 2010, Commerce published its CVD order on certain coated paper from Indonesia in the
Commerce received a substantive response from the domestic interested parties
On January 20, 2021, Commerce notified the U.S. International Trade Commission (ITC) that it did not receive an adequate substantive response from
The merchandise subject to the
Imports of the subject merchandise are provided for under the following categories of the Harmonized Tariff Schedule of the United States (HTSUS): 4810.29.1035, 4810.29.7035, 4810.92.1235, 4810.92.1435, 4810.92.6535, 4810.14.11, 4810.14.1900, 4810.14.2010, 4810.14.2090, 4810.14.5000, 4810.14.6000, 4810.14.70, 4810.19.1100, 4810.19.1900, 4810.19.2010, 4810.19.2090, 4810.22.1000, 4810.22.50, 4810.22.6000, 4810.22.70, 4810.29.1000, 4810.29.5000, 4810.29.6000, 4810.29.70, 4810.32.10, 4810.32.30, 4810.32.65, 4810.92.30, 4810.92.65, 4810.39.12, 4810.39.14, 4810.39.30, 4810.39.65, 4810.92.12, and 4810.92.14. While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope of this order is dispositive. A full description of the scope of the
All issues raised in this sunset review are addressed in the Issues and Decision Memorandum. A list of topics discussed in the Issues and Decision Memorandum is included as an appendix to this notice. The Issues and Decision Memorandum is a public document and is on file electronically via the Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (ACCESS). ACCESS is available to registered users at
Pursuant to sections 751(c)(1) and 752(b) of the Act, we determine that revocation of the CVD order on certain coated paper from Indonesia would be likely to lead to continuation or recurrence of countervailable subsidies at the following rates:
This notice also serves as the only reminder to parties subject to an APO of their responsibility concerning the return or destruction of proprietary information disclosed under APO in accordance with 19 CFR 351.305. Timely notification of the return or destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and terms of an APO is a violation which is subject to sanction.
We are issuing and publishing the final results and this notice in accordance with sections 751(c), 752(b), and 777(i)(1) of the Act, and 19 CFR 351.218.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of a public meeting.
The South Atlantic Fishery Management Council (Council) will host a Seminar Series presentation on the Deepwater Marine Protected Areas in the South Atlantic Region via webinar.
The webinar presentation will be held on Tuesday, April 12, 2022, from 1 p.m. until 2:30 p.m.
Kim Iverson, Public Information Officer, SAFMC; phone: (843) 302-8439 or toll free: (866) SAFMC-10; fax: (843) 769-4520; email:
The Council will host a presentation from NOAA Fisheries on research conducted in the Deepwater Marine Protected Areas in the South Atlantic Region. The presentation will describe the impact of the protected areas based on data collected from remotely operated vehicles over the past 17 years by NOAA Fisheries Southeast Fisheries Science Center. During their research scientists were able to document fish abundances before and after implementation of fishing restrictions, comparing protected and unprotected areas. They were also able to examine the effect of lionfish on reef fish community structure along the south Atlantic shelf break and compare natural and artificial habitats to illuminate deep-water grouper hotspots. A question-and-answer session will follow the presentation. Members of the public will have the opportunity to participate in the discussion. The presentation is for informational purposes only and no management actions will be taken.
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.
National Oceanic and Atmospheric Administration, Commerce.
Notice of renewal.
In accordance with the provisions of the Federal Advisory Committee Act, and the General Services Administration (GSA) rule on Federal Advisory Committee Management, and after consultation with GSA, the Secretary of Commerce has determined that the renewal of the Advisory Committee on Commercial Remote Sensing (ACCRES) is in the public interest in connection with the performance of duties imposed on the Department by law. ACCRES was last renewed on March 6, 2020.
Alan Robinson, Commercial Remote Sensing Regulatory Affairs Office, NOAA Satellite and Information Services, 1335 East West Highway, Room G101, Silver Spring, Maryland 20910; telephone (240) 997-2475, email
The Committee was first established in May 2002, to advise the Under Secretary of Commerce for Oceans and Atmosphere on matters relating to the U.S. commercial remote-sensing industry and NOAA's activities to carry out the responsibilities of the Department of Commerce set forth in the National and Commercial Space Programs Act of 2010 (the Act), Title 51 U.S.C. 60101
ACCRES will have a fairly balanced membership consisting of approximately 10 to 20 members serving in a representative capacity. All members should represent the views of a stakeholder organization in the remote sensing area, and should have expertise in remote sensing, space commerce or a related field. Each candidate member shall be recommended by the Assistant Administrator and shall be appointed by the Under Secretary for a term of two years at the discretion of the Under Secretary.
The Committee will function solely as an advisory body, and in compliance with provisions of the Federal Advisory Committee Act. Copies of the Committee's revised Charter have been filed with the appropriate committees of the Congress and with the Library of Congress.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of public meeting.
The New England Fishery Management Council (Council, NEFMC) will hold a three-day hybrid meeting with both in-person and remote participation to consider actions affecting New England fisheries in the exclusive economic zone (EEZ). The Council continues to follow all public safety measures related to COVID-19 and intends to do so for this meeting.
The meeting will be held on Tuesday, April 12, Wednesday, April 13 and Thursday, April 14, 2022, beginning at 1 p.m. on Tuesday and 9 a.m. on Wednesday and Thursday.
Thomas A. Nies, Executive Director, New England Fishery Management Council; telephone: (978) 465-0492, ext. 113.
After brief announcements, Council members and staff will each introduce themselves. Next, the Council will
The Council will begin the second day of its meeting with the Scallop Committee report, which will cover three issues: (1) An update on work being conducted by the Scallop Survey Working Group; (2) next steps for the Evaluation of the Atlantic Sea Scallop Rotational Management Program final report, which the Council received during the February 2022 meeting; and (3) potential approval of a scoping document for limited access leasing. Next, GARFO staff will provide an overview of the agency's efforts to develop bycatch reduction measures to reduce takes of sea turtles in trawl fisheries. The Council will provide comments on this action. The Council then will receive a report on outcomes from the March 2022 meeting of the Northeast Trawl Advisory Panel (NTAP). Following this report, the Northeast Fisheries Science Center will present the peer review results for recent research track assessments for Gulf of Maine haddock,
After the lunch break, the Council will receive a presentation from the Gulf of Maine Research Institute on its Maximized Retention Electronic Monitoring Program for Groundfish Monitoring Amendment 23. This presentation will be followed by the Groundfish Committee report. First, the Council will initiate Framework Adjustment 65 to the Groundfish FMP, which will include: (1) 2023 total allowable catches (TACs) for U.S./Canada shared resources on Georges Bank; (2) 2023-24 specifications for Georges Bank cod and Georges Bank yellowtail flounder; (3) 2023-25 specifications for 14 additional groundfish stocks; (4) revised rebuilding plans for Gulf of Maine cod and Southern New England/Mid-Atlantic winter flounder; (6) additional measures to promote stock rebuilding; and (7) acceptable biological catch (ABC) control rule revisions. Next, the Council will discuss potential modifications to its 2022 groundfish priorities to address possible changes to Atlantic cod management units. The Council then will adjourn for the day.
The Council will lead off the third day of its meeting with an update on the Mid-Atlantic Fishery Management Council's work to rebuild Atlantic mackerel. The Council will have the opportunity to provide comments and feedback on the mackerel rebuilding program. Next, members of the public will have the opportunity to speak during an open comment period on issues that relate to Council business but are not included on the published agenda for this meeting. The Council asks the public to limit remarks to 3-5 minutes. These comments will be received both in person and through the webinar. A guide for how to publicly comment through the webinar is available on the Council website at
Following the lunch break, the Council will receive an update from GARFO on the status of the Industry-Funded Monitoring (IFM) Program for the Atlantic herring fishery, which will be followed by Council discussion. Then, the Council will close out the meeting with other business.
Although non-emergency issues not contained on this agenda may come before the Council for discussion, those issues may not be the subject of formal action during this meeting. Council action will be restricted to those issues specifically listed in this notice and any issues arising after publication of this notice that require emergency action under section 305(c) of the Magnuson-Stevens 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 public also should be aware that the meeting will be recorded. Consistent with 16 U.S.C. 1852, a copy of the recording is available upon request.
This meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Thomas A. Nies (see
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of a public meeting.
The Caribbean Fishery Management Council's (Council) Scientific and Statistical Committee (SSC) will hold a two-day public hybrid meeting to address the items contained in the tentative agenda included in the
The public hybrid meeting will be held on April 12, 2022, from 10 a.m.
You may join the SSC public hybrid meeting via Zoom by entering the following address:
In case there are problems and we cannot reconnect via Zoom, the meeting will continue via GoToMeeting. You may join from a computer, tablet or smartphone by entering the following address:
You can also dial in using your phone.
Join from a video-conferencing room or system.
Get the app now and be ready when the first meeting starts:
Miguel Rolón, Executive Director, Caribbean Fishery Management Council, 270 Muñoz Rivera Avenue, Suite 401, San Juan, Puerto Rico 00918-1903, telephone: (787) 398-3717.
The following items included in the tentative agenda will be discussed:
The order of business may be adjusted as necessary to accommodate the completion of agenda items. The meeting will begin on April 12, 2022, at 10 a.m. EST, and will end on April 13, 2022, at 5 p.m. EST. Other than the start time, interested parties should be aware that discussions may start earlier or later than indicated, at the discretion of the Chair. In addition, the meeting may be completed prior to the date established in this notice.
For any additional information on this public virtual meeting, please contact Dr. Graciela García-Moliner, Caribbean Fishery Management Council, 270 Muñoz Rivera Avenue, Suite 401, San Juan, Puerto Rico 00918-1903, telephone: (787) 403-8337.
United States Patent and Trademark Office, Department of Commerce.
Notice of information collection; request for comment.
The United States Patent and Trademark Office (USPTO), as required by the Paperwork Reduction Act of 1995, invites comments on the extension and revision of an existing information collection: 0651-0087 (COVID-19 Vaccine Supplemental Medical Provider Statement). The purpose of this notice is to allow 60 days for public comment preceding submission of the information collection to OMB.
To ensure consideration, comments regarding this information collection must be received on or before May 23, 2022.
Interested persons are invited to submit written comments by any of the following methods. Do not submit Confidential Business Information or otherwise sensitive or protected information.
•
•
•
Request for additional information should be directed to Naveen Paul, Office of Equal Employment Opportunity and Diversity, United States Patent and Trademark Office, P.O. Box 1450, Alexandria, VA 22313-1450; by telephone at 571-270-5395; or by email at
Consistent with guidance from the Centers for Disease Control and Prevention (CDC), guidance from the Safer Federal Workforce Task Force established pursuant to E.O. 13991 of January 20, 2021,
The vaccination requirement issued pursuant to E.O. 14043, is currently the subject of a nationwide injunction. While that injunction remains in place, USPTO will not process requests for a medical exception from the COVID-19 vaccination requirement pursuant to E.O. 14043. USPTO will also not request the submission of any medical information related to a request for an exception from the vaccination requirement pursuant to E.O. 14043 while the injunction remains in place. But USPTO may nevertheless receive information regarding a medical exception. That is because, if USPTO were to receive a request for an exception from the COVID-19 vaccination requirement pursuant to E.O. 14043 during the pendency of the injunction, USPTO will accept the request, hold it in abeyance, and notify the employee who submitted the request that implementation and enforcement of the COVID-19 vaccination requirement pursuant to E.O. 14043 is currently enjoined and that an exception therefore is not necessary so long as the injunction is in place. In other words, during the pendency of the injunction, any information collection related to requests for medical exception from the COVID-19 vaccination requirement pursuant to E.O. 14043 is not undertaken to implement or enforce the COVID-19 vaccination requirement.
USPTO utilizes its
• USPTO-OEEOD Form 303 (COVID-19 Vaccine Supplemental Medical Provider Statement)
The USPTO is soliciting public comments to:
(a) Evaluate whether the collection of information is necessary for the proper performance of the functions of the Agency, including whether the information will have practical utility;
(b) Evaluate the accuracy of the Agency's estimate of the burden of the collection of information, including the validity of the methodology and assumptions used;
(c) Enhance the quality, utility, and clarity of the information to be collected; and
(d) 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,
All comments submitted in response to this notice are a matter of public record. USPTO will include or summarize each comment in the request to OMB to approve this information collection. Before including an address, phone number, email address, or other personally identifiable information (PII) in a comment, be aware that the entire comment— including PII—may be made publicly available at any time. While you may ask in your comment to withhold PII from public view, USPTO cannot guarantee that it will be able to do so.
Department of Energy, National Nuclear Security Administration, Office of Defense Programs.
Notice of closed meeting.
This notice announces a closed meeting of the Defense Programs Advisory Committee (DPAC). The Federal Advisory Committee Act requires that public notice of meetings be announced in the
April 6, 2022; 1:00 p.m. to 4:00 p.m.
Microsoft Teams Video Conferencing.
Ms. Watti Hill, Office of Strategic Partnership Programs (NA-10.1) National Nuclear Security Administration, U.S. Department of Energy, 1000 Independence Ave. SW, Washington, DC 20585, (202) 586-8266;
This is a supplemental notice in the above-referenced proceeding of Sunlight Storage, 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
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 April 7, 2022.
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
Take notice that the Commission received the following electric rate 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:
Take notice that during the month of February 2022, the status of the above-captioned entities as Exempt Wholesale Generators became effective by operation of the Commission's regulations. 18 CFR 366.7(a) (2021).
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
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.
The filings are accessible in the Commission's eLibrary system (
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
The staff of the Federal Energy Regulatory Commission (FERC or Commission) has prepared a final environmental impact statement (EIS) for the Wisconsin Access Project, proposed by ANR Pipeline Company (ANR) in the above-referenced docket. ANR requests authorization to modify seven existing meter stations in Oneida, Marathon, Oconto, and Manitowoc Counties, Wisconsin and increase firm transportation capacity on its pipeline by 50,707 dekatherms per day.
The final EIS assesses the potential environmental effects of the construction and operation of the Wisconsin Access Project in accordance with the requirements of the National Environmental Policy Act. FERC staff concludes that approval of the Project would not result in significant environmental impacts, with the exception of climate change impacts, where staff find the annual operation and downstream greenhouse gas emissions from the project would exceed the Commission's presumptive significance threshold based on 100 percent utilization.
The final EIS addresses the potential environmental effects of the construction and operation of minor modifications to ANR's existing Coleman, Lena, Meeme, Mosinee, Rhinelander, Suring, and Two Rivers Meter Stations. The modifications include the replacement of some metering and filtering equipment, installation of additional metering equipment, and replacement of two meter station buildings at the Lena and Rhinelander Meter Stations.
The Commission mailed a copy of the
Additional information about the project is available from the Commission's Office of External Affairs, at (866) 208-FERC, or on the FERC website (
In addition, the Commission offers a free service called eSubscription that allows you to keep track of all formal issuances and submittals in specific dockets. This can reduce the amount of time you spend researching proceedings by automatically providing you with notification of these filings, document summaries, and direct links to the documents. Go to
Take notice that on March 14, 2022, pursuant to section 211 of the Federal Power Act,
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant. On or before the comment date, it is not necessary to serve motions to intervene or protests on persons other than the Applicant.
In addition to publishing the full text of this document in the
The Commission strongly encourages electronic filings of comments, protests and interventions in lieu of paper using the “eFiling” link at
In response to emergency conditions caused by Novel Coronavirus Disease (COVID-19), on May 8, 2020, the Secretary first waived the Commission's regulations that require that filings with the Commission be notarized or supported by sworn declarations.
Many companies and individuals have continued to return to their workplaces since issuance of the December 2021 Notice, and we expect more will do so in the coming months. Further, the Secretary noted in the December 2021 Notice that the Commission did not “anticipate issuing any further blanket extensions discussed herein after March 31, 2022.”
The Commission recognizes that there could be certain circumstances that may warrant entity-specific waivers of these obligations after March 31, 2022. This notice reminds entities that if they believe that specific circumstances warrant continued relief from the requirements addressed herein after March 31, 2022, they may request a case-specific waiver. Such requests will be addressed at that time.
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency (EPA) has submitted an information collection request (ICR), “State Program Adequacy Determination: Municipal Solid Waste Landfills (MSWLFs) and Non-Municipal, Non-Hazardous Waste Disposal Units that Receive Conditionally Exempt Small Quantity Generator (CESQG) Hazardous Waste.” (EPA ICR Number 1608.09, OMB
Additional comments may be submitted on or before April 25, 2022.
Submit your comments, referencing Docket ID Number EPA-HQ-OLEM-2018-0012, online using
Submit written comments and recommendations to OMB for the proposed information collection within 30 days of publication of this notice to
Craig Dufficy, Materials Recovery and Waste Management Division, Office of Resource Conservation and Recovery, Mail Code 5304T, Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460; telephone number: (202) 566-0537; fax number: (202) 250-8572; email address:
Supporting documents, which explain in detail the information that the EPA will be collecting, are available in the public docket for this ICR. The docket can be viewed online at
Environmental Protection Agency (EPA).
Notification for a public meeting.
Pursuant to the Federal Advisory Committee Act (FACA), the U.S. Environmental Protection Agency (EPA) hereby provides notice that the National Environmental Justice Advisory Council (NEJAC) will meet on the date and time described below. The meeting is open to the public. Members of the public are encouraged to provide comments relevant to EPA investments for addressing Environmental Justice and related topics being considered by the NEJAC. For additional information about registering to attend the meeting or to provide public comment, please see “REGISTRATION” under
The NEJAC will hold a two-day virtual public meeting on Wednesday, April 20, 2022, and Thursday, April 21, 2022, from approximately 1:00 p.m. to 5:00 p.m., Eastern Time. A public comment period relevant to EPA investments and related topics will be considered by the NEJAC during the meeting on April 20, 2022 (see
Fred Jenkins, NEJAC Designated Federal Officer, U.S. EPA; email:
The meeting discussion will focus on the business of environmental justice as it relates to the Justice 40 Initiative, the new infrastructure bill, and EPA's endeavors on investments and related topics.
The Charter of the NEJAC states that the advisory committee will provide independent advice and recommendations to the EPA Administrator about broad, crosscutting issues related to environmental justice.
The NEJAC is interested in receiving public comments specific to EPA investments and the public's recommendation as to where investments are made. Every effort will be made to hear from as many registered public commenters during the time specified on the agenda. Individuals or groups making remarks during the oral public comment period will be limited to three (3) minutes. Please be prepared to briefly describe your comments and recommendations on what you want the NEJAC to advise the EPA to do as it relates to EPA's endeavors on investments and related topics. Submitting written comments for the record are strongly encouraged. You can submit your written comments in three different ways, (1) by using the webform at
For information about access or services for individuals requiring assistance, please contact Fred Jenkins, via email at:
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency (EPA) has submitted an information collection request (ICR), RCRA Expanded Public Participation (EPA ICR Number 1688.10, OMB Control Number 2050-0149) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act. This is a proposed extension of the ICR, which is currently approved through May 31, 2022. Public comments were previously requested via the
Additional comments may be submitted on or before April 25, 2022.
Submit your comments, referencing Docket ID No. EPA-HQ-OLEM-2018-0102, online using
Submit written comments and recommendations to OMB for the proposed information collection within 30 days of publication of this notice to
Peggy Vyas, Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460; telephone number: 202-566-0453; fax number: email address:
Supporting documents, which explain in detail the information that the EPA will be collecting, are available in the public docket for this ICR. The docket can be viewed online at
This slight increase is due to a slight increase in the respondent universe.
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency (EPA) has submitted an information collection request (ICR), NESHAP for Metal Furniture Surface Coating (EPA ICR No. 1952.10, OMB Control No. 2060-0518), to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act. This is a proposed extension of the ICR, which is currently approved through April 30, 2022. Public comments were previously requested, via the
Additional comments may be submitted on or before April 25, 2022.
Submit your comments, referencing Docket ID Number EPA-HQ-OAR-2021-0107, online using
Submit written comments and recommendations to OMB for the proposed information collection within 30 days of publication of this notice to
Muntasir Ali, Sector Policies and Program Division (D243-05), Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency, Research Triangle Park, North Carolina, 27711; telephone number: (919) 541-0833; email address:
Supporting documents, which explain in detail the information that the EPA will be collecting, are available in the public docket for this ICR. The docket can be viewed online at
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency (EPA) is planning to submit the information collection request (ICR), Hazardous Waste Specific Unit Requirements, and Special Waste Processes and Types (EPA ICR No. 1572.13, OMB Control No. 2050-0050) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act (PRA). Before doing so, the EPA is soliciting public comments on specific aspects of the proposed information collection as described in
Comments must be submitted on or before May 23, 2022.
Submit your comments, referencing by Docket ID No. EPA-HQ-OLEM-2018-0757, at
Due to public health concerns related to COVID-19, the EPA Docket Center and Reading Room are open to the public by appointment only. Our Docket Center staff also continues to provide remote customer service via email, phone, and webform. Hand deliveries or couriers will be received by scheduled appointment only. For further information and updates on EPA Docket Center services, please visit us online at
The EPA continues to carefully and continuously monitor information from the Centers for Disease Control and Prevention (CDC), local area health departments, and our Federal partners so that we can respond rapidly as conditions change regarding COVID-19.
Peggy Vyas, Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460; telephone number: 202-566-0453; email address:
Supporting documents which explain in detail the information that the EPA will be collecting are available in the public docket for this ICR. The docket can be viewed online at
Pursuant to section 3506(c)(2)(A) of the PRA, the EPA is soliciting comments and information to enable it to: (i) 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; (ii) 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; (iii) enhance the quality, utility, and clarity of the information to be collected; and (iv) 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,
With each information collection covered in this ICR, the EPA is aiding the goal of complying with its statutory mandate under RCRA to develop standards for hazardous waste treatment, storage, and disposal facilities, to protect human health and the environment. Without the information collection, the agency cannot assure that the facilities are designed and operated properly.
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency (EPA) has submitted an information collection request (ICR), NESHAP for Steel Pickling, HCl Process Facilities and Hydrochloric Acid Regeneration Plants (EPA ICR Number 1821.11, OMB Control Number 2060-0419) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act. This is a proposed extension of the ICR, which is currently approved through April 30, 2022. Public comments were previously requested via the
Additional comments may be submitted on or before April 25, 2022.
Submit your comments, referencing Docket ID Number EPA-HQ-OAR-2021-0092, to (1) EPA online using
EPA's policy is that all comments received will be included in the public docket without change including any personal information provided, unless the comment includes profanity, threats, information claimed to be confidential business information or other information whose disclosure is restricted by statute.
Submit written comments and recommendations to OMB for the proposed information collection within 30 days of publication of this notice to
Muntasir Ali, Sector Policies and Program Division (D243-05), Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency, Research Triangle Park, North Carolina, 27711; telephone number: (919) 541-0833; email address:
Supporting documents, which explain in detail the information that the EPA will be collecting, are available in the public docket for this ICR. The docket can be viewed online at
Federal Communications Commission.
Notice and request for comments.
As part of its continuing effort to reduce paperwork burdens, as required by the Paperwork Reduction Act (PRA) of 1995, the Federal Communications Commission (FCC or the Commission) invites the general public and other Federal Agencies to take this opportunity to comment on the following information collection. Pursuant to the Small Business Paperwork Relief Act of 2002, the FCC seeks specific comment on how it might “further reduce the information collection burden for small business concerns with fewer than 25 employees.”
The Commission 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 comments and recommendations for the proposed information collection should be submitted on or before April 25, 2022.
Comments should be sent to
For additional information or copies of the information collection, contact Nicole Ongele at (202) 418-2991. To view a copy of this information collection request (ICR) submitted to OMB: (1) Go to the web page
As part of its continuing effort to reduce paperwork burdens, as required by the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3520), the FCC invited the general public and other Federal Agencies to take this opportunity to comment on the following information collection. Comments are requested concerning: (a) 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; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) 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. Pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the FCC seeks specific comment on how it might “further reduce the information collection burden for small business concerns with fewer than 25 employees.”
47 CFR 76.73 provides that equal opportunity in employment shall be afforded by all multichannel video program distributors (“MVPD”) to all qualified persons and no person shall be discriminated against in employment by such entities because of race, color, religion, national origin, age or sex.
Section 76.75 requires that each MVPD employment unit employing six or more full-time employees shall establish, maintain and carry out a program to assure equal opportunity in every aspect of a cable entity's policy and practice.
Section 76.79 requires that every MVPD employment unit employing six or more full-time employees maintain, for public inspection, a file containing copies of all annual employment reports and related documents.
Section 76.1702 requires that every MVPD employment unit employing six or more full-time employees place certain information concerning its EEO program in its public inspection file.
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 (PRA) of 1995, the Federal Communications Commission (FCC or the Commission) invites the general public and other Federal agencies to take this opportunity to comment on the following information collection. 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
Written PRA comments should be submitted on or before May 23, 2022. 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 Nicole Ongele, FCC, via email
For additional information about the information collection, contact Nicole Ongele, (202) 418-2991.
OMB Control Number: 3060-0986.
In 2019, the Commission adopted an order establishing a separate, parallel high-cost program for the U.S. territories suffering extensive infrastructure damage due to Hurricanes Irma and Maria.
Through several orders, the Commission has changed, modified, and eliminated certain reporting obligations for high-cost support. These changes are outlined in the following:
On January 30, 2020, the Commission adopted an order establishing the framework for the Rural Digital Opportunity Fund (RDOF), building on the successful Connect America Fund (CAF) Phase II auction.
In the
In the
The Commission therefore proposes to revise this information collection, as well as the Form 481 and its accompanying instructions, to reflect these modified and eliminated requirements. Finally, the Commission proposes to increase the respondents associated with existing reporting requirements to account for additional carriers that will be subject to those requirements.
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 (PRA) of 1995, the Federal Communications Commission (FCC or the Commission) invites the general public and other Federal agencies to take this opportunity to comment on the following information collection. 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 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 Office of Management and Budget (OMB) control number.
Written PRA comments should be submitted on or before May 23, 2022. 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 Nicole Ongele, FCC, via email
For additional information about the information collection, contact Nicole Ongele, (202) 418-2991.
As part of the
This information collection addresses the requirement that carriers electing model-based support must notify the Commission of that election and their commitment to satisfy the specific service obligations associated with the amount of model support.
In the
Federal Communications Commission.
Notice and request for comments.
As part of its continuing effort to reduce paperwork burdens, as required by the Paperwork Reduction Act (PRA) of 1995, the Federal Communications Commission (FCC or the Commission) invites the general public and other Federal Agencies to take this opportunity to comment on the following information collection. Pursuant to the Small Business Paperwork Relief Act of 2002, the FCC seeks specific comment on how it can further reduce the information collection burden for small business concerns with fewer than 25 employees.
Written comments and recommendations for the proposed information collection should be submitted on or before April 25, 2022.
Comments should be sent to
For additional information or copies of the information collection, contact Cathy Williams at (202) 418-2918. To view a copy of this information collection request (ICR) submitted to OMB: (1) Go to the web page
The Commission 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.
As part of its continuing effort to reduce paperwork burdens, as required by the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3520), the FCC invited the general public and other Federal Agencies to take this opportunity to comment on the following information collection. Comments are requested concerning: (a) 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; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) 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. Pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the FCC seeks specific comment on how it might “further reduce the information collection burden for small business concerns with fewer than 25 employees.”
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 (PRA) of 1995, the Federal Communications Commission (Commission) invites the general public and other Federal agencies to take this opportunity to comment on the following information collection. Comments are requested concerning: Whether the 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 Commission may not conduct or sponsor a collection of information unless it displays a currently valid 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 Office of Management and Budget (OMB) control number.
Written PRA comments should be submitted on or before May 23, 2022.
Direct all PRA comments to Cathy Williams, FCC, via email to
For additional information or copies of the information collection, contact Cathy Williams at (202) 418-2918.
Section 73.3700(e)(3) requires all broadcast television station licensees and MVPDs that received an initial allocation from the TV Broadcaster Relocation Fund, upon completing construction or other reimbursable changes, or by a specific deadline prior to the end of the Reimbursement Period to be established by the Media Bureau, whichever is earlier, to provide the Commission with information and documentation, including invoices and receipts, regarding their actual expenses incurred as of a date to be determined by the Media Bureau. If a broadcast television station licensee or MVPD has not yet completed construction or other reimbursable changes by the Final Allocation Deadline, it must provide the Commission with information and documentation regarding any remaining eligible expenses that it expects to reasonably incur.
Section 73.3700(e)(4) requires broadcast television station licensees and MVPDs that have received money from the TV Broadcaster Relocation Fund, after completing all construction or reimbursable changes, to submit final expense documentation containing a list of estimated expenses and actual expenses as of a date to be determined by the Media Bureau. Entities that have finished construction and have submitted all actual expense documentation by the Final Allocation Deadline will not be required to file at the final accounting stage.
Section 73.3700(e)(6) requires broadcast television station licensees and MVPDs that receive payment from the TV Broadcaster Relocation Fund to retain all relevant documents pertaining to construction or other reimbursable changes for a period ending not less
Federal Deposit Insurance Corporation (FDIC).
Agency Information Collection Activities: Submission for OMB Review; comment request.
The Federal Deposit Insurance Corporation (FDIC) will submit the information collection described below to OMB for review and clearance under the Paperwork Reduction Act of 1995, on or after the date of publication of this notice. Notice of the proposed new information collection was previously published in the
Comments must be submitted on or before April 25, 2022.
Interested parties are invited to submit written comments to the FDIC by any of the following methods:
•
•
•
•
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Manny Cabeza, Regulatory Counsel, 202-898-3767,
The FDIC will submit the following information collection to OMB for review and clearance under the Paperwork Reduction Act of 1995, Public Law 104-13 on or after the date of publication of this notice:
Notice is given that a complaint has been filed with the Federal Maritime Commission (Commission) by Foreign Tires Sales, Inc., hereinafter “Complainant”, against Evergreen Shipping Agency (America) Corp.; as agent for Evergreen Line, Evergreen Group d/b/a Evergreen Line (Evergreen), “Respondents”. Complainant alleges that Respondent Evergreen Shipping Agency (America) Corp. is a corporation existing under the laws of the State of New Jersey and agent for Evergreen, a vessel-operating common carrier.
Complainant alleges that Respondents violated 46 U.S.C. 41102(c), 41104(a)(2), 41104(a)(5), 41104(a)(9), and 41104(a)(10) with regard to refusal to provide space on their vessels. The full text of the complaint can be found in the Commission's Electronic Reading Room at
This proceeding has been assigned to Office of Administrative Law Judges. The initial decision of the presiding office in this proceeding shall be issued by March 20, 2023, and the final decision of the Commission shall be issued by October 4, 2023.
Notice is given that a complaint has been filed with the Federal Maritime Commission (Commission) by ACME Freight Services Corp., hereinafter “Complainant”, against Total Terminals International, “Respondent”. Complainant alleges that Respondent is a Delaware corporation and marine terminal operator (“MTO”).
Complainant alleges that Respondents violated 46 U.S.C. 41102(c) and 46 CFR 545.4 and 545.5 with regard to assessing demurrage charges against containers, including containers that are subject to a governmental hold and therefore unavailable for pickup. The full text of the complaint can be found in the Commission's Electronic Reading Room at
This proceeding has been assigned to Office of Administrative Law Judges. The initial decision of the presiding office in this proceeding shall be issued by March 21, 2023, and the final decision of the Commission shall be issued by October 25, 2023.
Notice is given that a complaint has been filed with the Federal Maritime Commission (Commission) by Royal White Cement, Inc., hereinafter “Complainant”, against CMA CGM S.A. and CMA CGM (America) LLC, “Respondents”. Complainant alleges that Respondent CMA CGM S.A. is a French corporation or similar form of entity, and that Respondent CMA CGM (America) LLC is a New Jersey limited liability company. Complainant alleges that Respondents are common carriers.
Complainant alleges that Respondents violated 46 U.S.C. 41102(c) with regard to refusal to accept bookings and provide equipment to accomplish such bookings pursuant to an agreed service contract. The full text of the complaint can be found in the Commission's Electronic Reading Room at
This proceeding has been assigned to Office of Administrative Law Judges. The initial decision of the presiding office in this proceeding shall be issued by March 21, 2023, and the final decision of the Commission shall be issued by October 5, 2023.
Federal Mediation & Conciliation Service.
Notice of a new system of records.
The Federal Mediation and Conciliation Service (FMCS) uses this system to process requests for arbitration panels, including payment for requests, to process annual fees for each arbitrator, to maintain a roster of qualified, private labor arbitrators to hear disputes arising under collective bargaining agreements, and provide fact finding and interest arbitration.
This system of records will be effective without further notice on April 25, 2022 unless otherwise revised pursuant to comments received. New routine uses will be effective on April 25, 2022. Comments must be received on or before April 25, 2022.
You may send comments, identified by FMCS-0008, by any of the following methods:
•
•
•
Arthur Pearlstein, Director of Arbitration Services, at
The enabling legislation for FMCS provides that “the settlement of issues between employers and employees through collective bargaining may advance by making available full and adequate governmental facilities for conciliation, mediation, and voluntary arbitration . . .” 29 U.S.C. 171(b). Pursuant to the statute and 29 CFR part 1404, FMCS has long maintained a roster of qualified, private labor arbitrators to hear disputes arising under collective bargaining agreements and provide fact finding and interest arbitration. The existing regulation establishes the policy and administrative responsibility for the FMCS roster, criteria, procedures for listing and removing arbitrators, and procedures for using arbitration services.
FMCS-0008 Arbitration Records.
Federal Mediation and Conciliation Service, Office of General Counsel (OGC), 250 E Street SW, Washington, DC 20427.
Arthur Pearlstein, Director of Arbitration, email
29 U.S.C. 172,
The records in this system are used to collect, process, and maintain arbitrator panel reports, payment requests, annual fees, and arbitrator rosters. The system maintains a roster of qualified, private labor arbitrators to hear disputes arising under collective bargaining agreements and provide fact findings and interest arbitration.
The categories of individuals covered in the system are the public, FMCS clients, parties requesting an arbitration roster or services, arbitrators, applicants to be on the arbitration roster, and FMCS employees.
The categories of records maintained in the system include the:
(1) Records concerning requests for arbitrators including, but not limited to, the Request for Arbitration Panel (FMCS Form R-43). This form can be found at
(2) Records pertaining to arbitrator registration, including but not limited to, Arbitrators' Personal Data Questionnaire (FMCS Form R-22), and records used to collect information from applicants submitted for consideration to the FMCS Arbitrator Review Board. This form can be found at
(3) Records concerning case processing updates including, but not limited to, The Arbitrator's Report and Fee Statement (FMCS Form R-19). This form can be found at
Information in this system of records is provided by:
(1) Parties seeking to request an arbitration panel which may include the public, Federal, state, and local employees, Unions, and employers; and
(2) Arbitrators provide information for registration and case processing updates.
In addition to those disclosures generally permitted under 5 U.S.C. 552a(b) of the Privacy Act, all or a portion of these records or information contained in this system may be disclosed to authorized entities, as is determined to be relevant and necessary, outside the FMCS as a routine use pursuant to 5 U.S.C. 552a(b)(3) as follows:
(a) To disclose pertinent information to the appropriate Federal, State, or local agency responsible for investigating, prosecuting, enforcing, or implementing a statute, rule regulation or order where the record, either alone or in conjunction with other information creates an indication of a violation or potential violation of civil or criminal laws or regulations.
(b) To disclose information to the National Archives and Records Administration (NARA) for use in its records management inspections; to the Government Accountability Office (GAO) for oversight purposes; to the Department of Justice (DOJ) to obtain that department's advice regarding disclosure obligations under the Freedom of Information Act (FOIA); or to the Office of Management and Budget (OMB) to obtain that office's advice regarding obligations under the Privacy Act.
(c) To disclose information to the National Archives and Records Administration (NARA) in records management inspections.
(d) To disclose information to contractors, grantees, experts, consultants, detailers, and other non-Government employees performing or working on a contract, service, or other assignment for the Federal Government when necessary to accompany an agency function related to this system of records.
(e) To officials of labor organizations recognized under 5 U.S.C. chapter 71 upon receipt of a formal request and in accordance with the conditions of 5 U.S.C. 7114 when relevant and necessary to their duties of exclusive representation concerning personnel policies, practices, and matters affecting working conditions.
(f) To disclose information to a Member of Congress or a congressional office in response to an inquiry made on behalf of, and at the request of, an individual who is the subject of the record.
(g) To disclose information when FMCS determines that the records are relevant to a proceeding before a court, grand jury, or administrative or adjudicative body when the adjudicator determines the records to be relevant to the proceeding.
(h) To disclose information to another Federal agency, to a court, or to a party in litigation before a court or in an administrative proceeding being conducted by a federal agency when the Government is a party to the judicial or administrative proceeding. Such disclosure is permitted only when it is relevant and necessary to the litigation or proceeding.
(i) To any agency, organization, or person for the purposes of performing audit or oversight operations related to the operation of this system of records as authorized by law, but only information necessary and relevant to such audit or oversight function.
(j) To disclose information to appropriate agencies, entities, and persons when: (1) FMCS suspects or has confirmed that there has been a breach of the system of records; (2) FMCS has determined that as a result of the suspected or confirmed breach there is a risk of harm to individuals, FMCS (including its information systems, programs, and operations), the Federal Government, or national security; and (3) the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with FMCS's efforts to respond to the suspected or confirmed breach or to prevent, minimize, or remedy such harm.
(k) To another Federal agency or Federal entity, when FMCS determines that information from this system of records is reasonably necessary to assist the recipient agency or entity in: (1) Responding to a suspected or confirmed breach or (2) preventing, minimizing, or remedying the risk of harm to individuals, the recipient agency or entity (including its information systems, programs, and operations), the Federal Government, or national security, resulting from a suspected or confirmed breach.
(l) To disclose information to arbitrators or parties to an arbitration concerning case processing, or to investigate allegations of arbitrator misconduct.
(m) To disclose to professional organizations, including but not limited to the American Arbitration Association, JAMS, or the National Academy of Arbitrators concerning
These records are maintained in hard copy and electronic form in locations only accessible to authorized personnel. Electronic records are stored on the agency's internal servers with restricted access to authorized Human Resources staff and designated deciding officials as determined by agency policy. Hard copy records are stored in a locked cabinet accessible to authorized Human Resources staff and designated deciding officials as determined by agency policy.
These records are retrieved by the name or other programmatic identifier assigned to an individual in the electronic database and paper filing system.
All records are retained and disposed of in accordance with General Records Schedule 4.1, issued by the National Archives and Records Administration.
Records are located in a locked file storage area or stored electronically in locations only accessible to authorize personnel requiring agency security credentials. Access is restricted and accessible to limited Human Resources officials, and/or individuals in a need-to-know capacity. FMCS buildings are guarded and monitored by security personnel, cameras, ID checks, and other physical security measures.
Individuals wishing to request access to their records should contact the Office of General Counsel (OGC). Individuals must provide the following information for their records to be located and identified: (1) Full name, (2) Address, and (3) A specific description of the record content requested. See 29 CFR 1410.3, Individual access requests.
See 29 CFR 1410.6, Requests for correction or amendment of records, on how to contest the content of any records. Privacy Act requests to amend or correct records may be submitted to the Chief Privacy Officer at
See 29 CFR 1410.3(a), Individual access requests.
None.
None.
Centers for Medicare & Medicaid Services, Health and Human Services (HHS).
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (the PRA), federal agencies are required to publish notice in the
Comments must be received by May 23, 2022.
When commenting, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be submitted in any one of the following ways:
1.
2.
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
1. Access CMS' website address at website address at
William N. Parham at (410) 786-4669.
This notice sets out a summary of the use and burden associated with the following information collections. More detailed information can be found in each collection's supporting statement and associated materials (see
Under the PRA (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA requires federal agencies to publish a 60-day notice in the
1.
2.
CMS uses the MDS 3.0 PPS Item Set to collect the data used to reimburse skilled nursing facilities for SNF-level care furnished to Medicare beneficiaries and to collect information for quality measures and standardized patient assessment data under the SNF QRP.
Centers for Medicare & Medicaid Services, Health and Human Services (HHS).
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (PRA), federal agencies are required to publish notice in the
Comments on the collection(s) of information must be received by the OMB desk officer by April 25, 2022.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
1. Access CMS' website address at website address at:
William Parham at (410) 786-4669.
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires federal agencies to publish a 30-day notice in the
1.
Children's Bureau, Administration for Children and Families, HHS.
Request for public comment.
The Administration for Children and Families (ACF) is requesting a 3-year extension of the National Youth in Transition Database (NYTD) Youth Services Report and Youth Outcomes Survey Data Collection (OMB #0970-0340, expiration date 03/31/2022). 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
Division of Tribal TANF Management, Office of Family
Request for public comment.
The Administration for Children and Families (ACF) is requesting a 3-year extension of the form OFA-0086: NEW Plan Guidance and NEW Program Report (OMB #0970-0174, expiration 8/31/2022). There are minor changes requested to both documents.
You can obtain copies of the proposed collection of information and submit comments by emailing
Consideration will be given to comments and suggestions submitted within 60 days of this publication.
Food and Drug Administration, Health and Human Services (HHS).
Notice.
The Food and Drug Administration (FDA or Agency) is withdrawing approval of the new drug application (NDA) for FARYDAK (panobinostat) Capsules, 10 milligrams (mg), 15 mg, and 20 mg, held by Secura Bio, Inc., 1995 Village Center Circle, Suite 128, Las Vegas, NV 89134. Secura Bio, Inc. has voluntarily requested that FDA withdraw approval of this application and has waived its opportunity for a hearing.
Approval is withdrawn as of March 24, 2022.
Kimberly Lehrfeld, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 51, Rm. 6226, Silver Spring, MD 20993-0002, 301-796-3137,
On February 23, 2015, FDA approved NDA 205353 for FARYDAK (panobinostat) Capsules, 10 mg, 15 mg, and 20 mg, in combination with bortezomib and dexamethasone for the treatment of patients with multiple myeloma who have received at least two prior regimens, including bortezomib and an immunomodulatory agent, under the Agency's accelerated approval regulations, 21 CFR part 314, subpart H. The accelerated approval of FARYDAK (panobinostat) Capsules, 10 mg, 15 mg, and 20 mg, for multiple myeloma included a required postmarketing trial intended to verify the clinical benefit of FARYDAK.
On September 24, 2021, FDA published the
On November 22, 2021, Secura Bio, Inc. submitted a letter asking FDA to withdraw approval of NDA 205353 for FARYDAK (panobinostat) Capsules, 10 mg, 15 mg, and 20 mg, pursuant to § 314.150(d) (21 CFR 314.150(d)) and waiving its opportunity for a hearing. In the letter, Secura Bio, Inc. stated they are requesting withdrawal of approval of the NDA for FARYDAK because it was not feasible for them to complete the required postmarketing clinical trials. On November 26, 2021, FDA acknowledged Secura Bio, Inc.'s request for withdrawal of approval of the NDA and waiver of its opportunity for hearing. FDA also cancelled the ODAC meeting scheduled for December 2, 2021, since the applicant's withdrawal request made discussion at an advisory committee meeting moot.
For the reasons discussed above, and in accordance with the applicant's request, approval of NDA 205353 for FARYDAK (panobinostat) Capsules, 10 mg, 15 mg, and 20 mg, and all amendments and supplements thereto, is withdrawn under § 314.150(d). Distribution of FARYDAK (panobinostat) Capsules, 10 mg, 15 mg, and 20 mg, into interstate commerce without an approved application is illegal and subject to regulatory action (see sections 505(a) and 301(d) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(a) and 331(d)).
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA or we) is announcing that a proposed collection of information has been submitted to the Office of Management and Budget (OMB) for review and clearance under the Paperwork Reduction Act of 1995.
Submit written comments (including recommendations) on the collection of information by April 25, 2022.
To ensure that comments on the information collection are received, OMB recommends that written comments be submitted to
Ila S. Mizrachi, Office of Operations, Food and Drug Administration, Three White Flint North, 10A-12M, 11601 Landsdown St., North Bethesda, MD 20852, 301-796-7726,
In compliance with 44 U.S.C. 3507, FDA has submitted the following proposed collection of information to OMB for review and clearance.
Section 1701(a)(4) of the Public Health Service Act (PHS Act) (42 U.S.C. 300u(a)(4)) authorizes FDA to conduct research relating to health information. Section 1003(d)(2)(C) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) (21 U.S.C. 393(d)(2)(C)) authorizes FDA to conduct research relating to drugs and other FDA regulated products in carrying out the provisions of the FD&C Act.
The Office of Prescription Drug Promotion's (OPDP) mission is to protect the public health by helping to ensure that prescription drug promotion is truthful, balanced, and accurately communicated. OPDP's research program provides scientific evidence to help ensure that our policies related to prescription drug promotion will have the greatest benefit to public health.
Toward that end, we have consistently conducted research to evaluate the aspects of prescription drug promotion that are most central to our mission, focusing in particular on three main topic areas: Advertising features, including content and format; target populations; and research quality. Through the evaluation of advertising features, we assess how elements such as graphics, format, and disease and product characteristics impact the communication and understanding of prescription drug risks and benefits. Focusing on target populations allows us to evaluate how understanding of prescription drug risks and benefits may vary as a function of audience, and our focus on research quality aims at maximizing the quality of our research data through analytical methodology development and investigation of sampling and response issues. This study will inform the first topic area, advertising features, including content and format; and the second topic area, target populations.
Because we recognize the strength of data and the confidence in the robust nature of the findings is improved through the results of multiple converging studies, we continue to develop evidence to inform our thinking. We evaluate the results from our studies within the broader context of research and findings from other sources, and this larger body of knowledge collectively informs our policies as well as our research program. Our research is documented on our homepage, which can be found at:
Pursuant to section 506(c) of the FD&C Act (21 U.S.C. 356(c)) and 21 CFR part 314, subpart H (or 21 CFR part 601, subpart E for biological products), FDA may grant accelerated approval to a drug product under section 505(c) of the FD&C Act (21 U.S.C. 355(c)) or a biological product under section 351(a) of the PHS Act (42 U.S.C. 262(a)). This pathway enables faster approval of prescription drugs intended to treat serious or life-threatening illnesses. Accelerated approval may be based on a determination that a drug product has an effect on a surrogate endpoint (for example, a blood test result) that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit (
The accelerated approval pathway is limited to certain products intended to treat serious or life-threatening illnesses as there can be “[u]ncertainty about whether clinical benefit will be verified and the possibility of undiscovered risks” (FDA's 2014 guidance for industry entitled “Expedited Programs for Serious Conditions—Drugs and Biologics,” available at
Under FDA regulations governing physician labeling for prescription drugs, the INDICATIONS AND USAGE section of FDA-approved prescribing information for a drug approved under accelerated approval must include not only the indication (§ 201.57(c) (21 CFR 201.57(c))) but also a “succinct description of the limitations of usefulness of the drug and any uncertainty about anticipated clinical benefits . . .” (§ 201.57(c)(2)(i)(B)). In a guidance, FDA recommended that in addition to these required elements, the INDICATIONS AND USAGE section for drugs approved under accelerated approval should generally acknowledge that continued approval for the drug or indication may be contingent on verification and description of clinical benefit in confirmatory trials (FDA 2019 guidance for industry entitled “Labeling for Human Prescription Drug and Biological Products Approved Under the Accelerated Approval Regulatory Pathway,” available at
Some DTC websites have included disclosures about accelerated approval, and of those, many included similar content to that seen in the INDICATIONS AND USAGE section of approved labeling. A content analysis of DTC websites for accelerated approval products found that 21 percent of the disclosures used language directly from the approved physician labeling, 79 percent of the disclosures used at least some medical language, but 27 percent of the websites did not include any disclosure that the products attained approval through this pathway (Ref. 2). The same analysis found that 84 percent of accelerated approval disclosures on DTC websites mentioned the approval basis, 68 percent mentioned unknown outcomes, and 47 percent mentioned confirmatory trials (Ref. 2).
OPDP recently conducted a general-population study testing the disclosure of FDA accelerated approval information on a DTC prescription drug website (OMB control number 0910-0872—Experimental Study of an Accelerated Approval Disclosure; the 0910-0872 Study). The study tested a control condition with no disclosure; a disclosure based on wording used in physician labeling, including more complex or technical terminology (physician-labeling disclosure); and a consumer-friendly disclosure drafted using simpler language intended to be suited for that audience (consumer-friendly disclosure). The disclosures had three elements: (1) Approval basis, (2) unknown outcomes, and (3) confirmatory trials. The physician labeling disclosure was “This indication is based on response rate. An improvement in survival or disease-related symptoms has not been established. Continued approval for this indication may be contingent upon verification of clinical benefit in subsequent trials.” The consumer-friendly disclosure was “In a clinical trial, [Drug X] returned blood counts to normal. However, we currently do not know if [Drug X] helps people live longer or feel better. We continue to study [Drug X] in clinical trials to learn more about [Drug X]'s benefits.” We also varied whether the physician-labeling and consumer-friendly disclosures were presented with low or high prominence (varying the size, color, and location of the disclosure). Preliminary results related to the comprehension of the disclosures tested in that study suggest that the consumer-friendly disclosure helped participants understand information related to the drug's accelerated approval, but that participants' understanding was low overall.
The purpose of the current project is to replicate and extend our prior research through two studies by: (1) Testing the same experimental conditions with a different study population (cancer survivors and cancer caregivers in study 1) and, (2) testing additional consumer-friendly disclosures in study 2. Replication is an important part of science and, if confirmation of prior results is seen, can increase confidence in the results from our first study.
With regard to proposed study 1, public comments for FDA's previous accelerated approval disclosure study and other similar FDA studies have suggested conducting studies with people who have been diagnosed with the medical condition or who are caregivers to patients diagnosed with the medical condition that the fictitious drug in the study is intended to treat. Specifically, public comments on the previous study suggested enrolling participants who have been diagnosed with cancer (
With regard to study 2, public comments on the original study (Docket No. FDA-2018-N-3138) expressed concern that over-disclosure could dissuade consumers from considering accelerated approval products. One public comment specifically suggested removing the “unknown outcomes” element in the consumer-friendly and physician-labeling disclosures. Based on these comments, in study 2, we propose testing four versions of the consumer-friendly disclosure (table 2): The “three element” version of the consumer-friendly disclosure as well as three other consumer-friendly disclosures that vary with respect to which of these three elements they address. This will allow us to evaluate the impact on participants' comprehension of the disclosure and perception of the fictitious drug when they view a disclosure with only the approval basis, the approval basis plus information about the unknown outcomes, the approval basis plus information about confirmatory trials, and finally the approval basis plus information about both the unknown outcomes and confirmatory trials. In study 2, the prominence of all the test conditions will be the same and will be the same as the “high prominence” version tested in study 1.
We plan to conduct two pretests not longer than 20 minutes, administered via internet panel, to pilot the main study procedures. We then plan to conduct two main studies not longer than 20 minutes, administered via internet panel. For the pretests and main studies, we will randomly assign the participants to one of the test conditions (see table 1 for the study 1 design and table 2 for the study 2 design). In both studies, participants will view a website for a fictitious oncology prescription drug. After viewing the website, participants will complete a questionnaire that assesses whether participants noticed the disclosure and their understanding of it, as well as perceptions of the drug's risks and benefits. We will also measure covariates such as demographics and literacy. The questionnaire is available upon request from
For study 1, we hypothesize that participants will be more likely to notice the disclosure when it is presented more, rather than less, prominently. In turn, we expect that participants' perceptions of the drug are more likely to be affected by the disclosure in the high prominence condition. We also hypothesize that participants will be more likely to notice and understand the disclosure and use it to form their perceptions of the drug if they view the consumer-friendly language. For study 2, we hypothesize that participants will be more likely to understand each accelerated approval concept (
For the pretests and main studies, we plan to recruit individuals who report a diagnosis with any cancer (except for certain non-melanoma skin cancers) for half the sample and individuals who report being a caregiver for someone with a diagnosis with any cancer (except for certain non-melanoma skin cancers) for the other half of the sample. We will exclude individuals who work for the U.S. Department of Health and Human Services or work in the healthcare, marketing, advertising, or pharmaceutical industries. With the sample sizes described below, we will have sufficient power to detect small-sized effects in the main study (table 3).
In the
(Comment 1) Comment 1 expressed concern that this research will duplicate a prior FDA study and lack practical utility. The comment asserts that while the 60-day PRA notice provided a statement of “preliminary results” of the prior study, full study materials, results, and conclusions of that prior study have not been published. It requested that the results of the prior study be published before this study is conducted, suggesting that, without publishing the results of the prior study, FDA has not addressed how the new proposed research would address open research issues or limitations of the prior study.
(Response 1) Contrary to the comment's suggestion, we do not plan to duplicate the prior research, although there often is value in that undertaking. Rather, the present research seeks to replicate the previous study in a new patient population and extend the previous study by testing additional versions of the disclosure. The new research is directly informed by open research issues and limitations raised in the public comments from the previous study. The proposed studies will be conducted in a new cancer survivor and caregiver sample, which differs from the sample in the prior study, which was conducted with a general population sample. As noted above, cancer survivors and cancer caregivers are more likely to seek out or be exposed to promotion for accelerated approval products than the general population. They may also be more familiar with cancer-related terms and concepts than the general population. Replications in different study samples are often proposed. Indeed, at the time of the previously proposed study (0910-0872 Study), public comments suggested conducting the study with cancer survivors who had used oncology products. Also, in response to public comments on the prior study design, we will extend the prior research by testing additional versions of the disclosure. This study therefore has practical utility to expand our information regarding website disclosures regarding accelerated approval drugs, both by extending to additional versions of the
(Comment 2) Comment 2 stated that establishing mandates to unduly emphasize a product's accelerated approval status could deter appropriate usage and lead to misconception and confusion among patients. The comment specifically referred to one statement in the disclosure, “we currently do not know if [Drug X] helps people live longer or feel better” to suggest that the disclosure may oversimplify the benefits of the product and thus discourage patients from getting needed treatments. The comment later stated that the availability of FDA prior review of promotional pieces for accelerated approval means there is less need to prescribe specific overarching new rules for disclosures because FDA can consider disclosures on a case-by-case basis.
(Response 2) This notice proposes a data collection for research purposes and does not establish a mandate or propose a new rule. Instead, it proposes research that may inform FDA and stakeholder thinking on accelerated approval product disclosures in DTC promotional materials. The research will specifically investigate patient understanding of and reaction to the disclosure language about a product's accelerated approval status. Study 2 was designed in direct response to public comment on the previously proposed study (0910-0872 Study) raising concerns about over-disclosure. Study 2 will test several conditions based on disclosures found in the marketplace, two of which will not include the statement “we currently do not know if [Drug X] helps people live longer or feel better” (see table 2).
(Comment 3) Comment 3 suggested that DTC promotional materials are not the best venue for providing information about prescription drugs, given the role of healthcare professionals (HCPs) in discussing and prescribing treatments. Based on this, the comment suggested modifying the study to focus on prescriber-patient interactions rather than DTC promotion by including a component to evaluate patient understanding of accelerated approval after consultation with a prescriber.
(Response 3) We agree that the prescriber-patient interaction is important. Consumers often wish to participate in shared decision-making with HCPs when selecting prescription drugs and may request specific prescription drugs from their HCPs based on promotions they have seen in the marketplace. Because information consumers receive through DTC prescription drug promotion can impact these requests, it is important to investigate how the information in prescription drug promotional pieces impacts consumer attention, understanding, and perceptions.
(Comment 4) Comment 4 suggested conducting qualitative interviews or a blended approach of qualitative and quantitative research rather than a quantitative study. In addition, the comment recommended that the interviews include showing the stimuli to participants, asking them questions about the stimuli, and then showing them the stimuli again so they can read the disclosure and have it in front of them while answering questions.
(Response 4) We plan to conduct nine 1-hour interviews to cognitively test the stimuli and questionnaire. These interviews will allow for indepth discussions with participants, and the findings from the interviews will help improve the study materials. In addition, the questionnaire follows the approach the commenter suggested: Participants view the stimuli and answer questions, then see the disclosure again for questions 16 and 17. This will allow us to test what participants remember and understand after visiting a website for an accelerated approval product, as well as their understanding of the disclosure language while it is in front of them. We will use the cognitive interviews and pretesting to determine whether participants will be able to view the stimuli when answering more of the questions in study 2.
(Comment 5) Comment 5 suggested screening for patients who have a personal experience with Acute Lymphoblastic Leukemia (ALL) (the cancer referred to in the study stimuli) and who have received accelerated approval products from their prescribers.
(Response 5) We will ask participants about the type of cancer and type of treatment(s) they or their loved one had. In this study, we will not ask if they used an accelerated approval product, because participants are unlikely to know this information. In the pretest, we will examine the feasibility of quotas aiming for a broad range of cancer diagnoses in the sample, including blood cancers like ALL. We will also use the pretest to examine the feasibility of restricting recruitment to cancer survivors, and caregivers for cancer survivors, who have received a systemic therapy (
(Comment 6) Comment 6 questioned why caregivers are included in the sample and noted that it is unclear what direct role caregivers have in drug prescribing decisions.
(Response 6) We included caregivers in part because previous public comments have encouraged FDA to include caregivers in DTC research (for example, Docket No. FDA-2019-N-2313). Prior research also supports the inclusion of caregivers in a study on consumer understanding of health information on a DTC prescription drug website. Surveys have found that many people searching for health information online are doing so on behalf of someone else (
(Comment 7) Comment 7 stated that information on the proposed number of study participants was not observed in the 60-day notice, and suggested a minimum of 200-300 participants, with 400-500 being optimal. The comment also suggested considering quotas for demographic variables such as age and education to allow for subgroup analyses.
(Response 7) The proposed number of participants can be found in table 3 of this notice. Specifically, we propose 630 participants in study 1 and 400 participants in study 2. We have not proposed any planned subgroup analyses; however, we will have quotas for age, sex, race, and education to ensure a diverse sample.
(Comment 8) Comment 8 suggested that, for study participants to understand the disclosures being tested, they must first be told that the drug received an accelerated approval; accelerated approval is based on an FDA determination that the drug is likely to provide meaningful therapeutic benefits to patients over existing treatments and likely addresses a significant unmet medical need; and the drug is approved based on adequate and well-controlled clinical trial(s) on surrogate or intermediate clinical endpoints that are reasonably likely to predict clinical benefit, but that the drug's effects need to be verified with additional data.
(Response 8) Consumers encountering DTC websites for accelerated approval
(Comment 9) Comment 9 suggested testing an alternative disclosure that would include background information about accelerated approval, described in the last comment, along with the disclosures currently proposed to be tested.
(Response 9) We acknowledge that we cannot test all possible disclosure language. We based the disclosures we plan to test on FDA-approved labeling for accelerated approval products and on disclosures found in the marketplace (Ref. 2). We encourage research on alternate disclosures.
(Comment 10) Comment 10 stated that question 9, which asks participants about their understanding of the confirmatory trials concept from the disclosure, is unclear and suggested deleting the question or refining the answer options.
(Response 10) We will delete this question in study 1. As noted in the questionnaire, we plan to test two versions of question 9 in the study 2 pretests. We will refine or delete this question in study 2 based on findings from the cognitive interviews and pretesting.
(Comment 11) Comment 11 suggested clarifying “quality of life” in consumer-friendly terms and defining specific quality of life measures in question 10.
(Response 11) Question 10 does not refer to a specific quality of life measure. In a recent survey of metastatic breast cancer patients, most participants (89 percent) reported understanding the term “quality of life” (Ref. 6). We expect participants in this study will also understand the term “quality of life” without further clarification, but we will cognitively test and pretest the question to determine if any clarification is needed.
(Comment 12) Comment 12 stated that questions 11 and 12, which ask about risk-benefit tradeoffs, are redundant and too general, not sufficient to study over-disclosure, and that these questions typically require consumers and HCPs to arrive at the answer together. The comment suggested that instead, the study ask whether, based on information on the website, participants intend to ask to take the drug, not ask to take the drug, speak with a doctor about whether the drug is right for them, or none of these.
(Response 12) We disagree that consumers do not form their own perceptions about risk-benefits tradeoffs after seeing DTC promotional materials and prior to any discussion with a HCP. Thus, we plan to ask participants about their perceptions of the risk-benefit tradeoff through question 11, which is a common and validated item in DTC research. We will delete question 12 to reduce redundancy (Ref. 7). We will also ask about behavioral intentions. Participants do not necessarily have the type of cancer the fictitious drug is indicated to treat; therefore, it would not make sense to ask them about their intentions to ask about the drug for themselves. Instead, similar to what the comment requests, question 14 asks whether participants would recommend that a loved one diagnosed with the cancer that the fictitious drug is indicated to treat ask a doctor about taking the drug.
(Comment 13) Comment 13 recommended deleting question 13, which asks about the drug side effects, because it is too general and does not test the disclosure.
(Response 13) Question 13 is intended to measure the effect of the disclosure on participants' risk perceptions. We will assess this question in cognitive interviews and pretesting and will refine it if needed.
(Comment 14) Comment 14 suggested deleting or refining question 14, which asks participants to select all actions they would suggest a loved one take (
(Response 14) We revised question 14 from “select all that apply” to separate “yes/no” items for each action. We will assess the utility of asking about each of these actions in cognitive interviews and pretesting. At a minimum, we will retain the “taking [Drug X]” item to assess intentions as discussed in a previous comment.
(Comment 15) Comment 15 suggested that participants are unlikely to have the information to provide yes or no answers to question 19, which asks participants whether they used any accelerated approval products for their own cancer, and questioned why it is important for a patient to understand the regulatory approval pathway for a drug, as opposed to information about the drug's safety and effectiveness for use in discussion with an HCP.
(Response 15) We agree that participants are unlikely to know whether the product they used was an accelerated approval product and will delete this question in this study.
(Comment 16) Comment 16 suggested deleting question 21, which asks how similar the study website was to other DTC websites the participant has seen, because it seems vague and not directly related to the research question.
(Response 16) Question 21 is for pretesting purposes only and is intended to assess the quality of the stimuli. We will keep question 21 for pretesting but will not ask it in the main studies.
FDA estimates the burden of this collection of information as follows:
The following references marked with an asterisk (*) are on display at the Dockets Management Staff (HFA-305), Food and Drug Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852, 240-402-7500, and are available for viewing by interested persons between 9 a.m. and 4 p.m., Monday through Friday; they also are available electronically at
Health Resources and Services Administration (HRSA), Department of Health and Human Services (HHS).
Notice.
HRSA is publishing this notice of petitions received under the National Vaccine Injury Compensation Program (the Program), as required by Section 2112(b)(2) of the Public Health Service (PHS) Act, as amended. While the Secretary of HHS is named as the respondent in all proceedings brought by the filing of petitions for compensation under the Program, the United States Court of Federal Claims is charged by statute with responsibility for considering and acting upon the petitions.
For information about requirements for filing petitions, and the Program in general, contact Lisa L. Reyes, Clerk of Court, United States Court of Federal Claims, 717 Madison Place NW, Washington, DC 20005, (202) 357-6400. For information on HRSA's role in the Program, contact the Director, National Vaccine Injury Compensation Program, 5600 Fishers Lane, Room 08N146B, Rockville, Maryland 20857; (301) 443-6593, or visit our website at:
The Program provides a system of no-fault compensation for certain individuals who have been injured by specified childhood vaccines. Subtitle 2 of Title XXI of the PHS Act, 42 U.S.C. 300aa-10
A petition may be filed with respect to injuries, disabilities, illnesses, conditions, and deaths resulting from vaccines described in the Vaccine Injury Table (the Table) set forth at 42 CFR 100.3. This Table lists for each covered childhood vaccine the conditions that may lead to compensation and, for each condition, the time period for occurrence of the first symptom or manifestation of onset or of significant aggravation after vaccine administration. Compensation may also be awarded for conditions not listed in the Table and for conditions that are manifested outside the time periods specified in the Table, but only if the petitioner shows that the condition was caused by one of the listed vaccines.
Section 2112(b)(2) of the PHS Act, 42 U.S.C. 300aa-12(b)(2), requires that “[w]ithin 30 days after the Secretary receives service of any petition filed under section 2111 the Secretary shall publish notice of such petition in the
Section 2112(b)(2) also provides that the special master “shall afford all interested persons an opportunity to submit relevant, written information” relating to the following:
1. The existence of evidence “that there is not a preponderance of the evidence that the illness, disability, injury, condition, or death described in the petition is due to factors unrelated to the administration of the vaccine described in the petition,” and
2. Any allegation in a petition that the petitioner either:
a. “[S]ustained, or had significantly aggravated, any illness, disability, injury, or condition not set forth in the Vaccine Injury Table but which was caused by” one of the vaccines referred to in the Table, or
b. “[S]ustained, or had significantly aggravated, any illness, disability, injury, or condition set forth in the Vaccine Injury Table the first symptom or manifestation of the onset or significant aggravation of which did not occur within the time period set forth in the Table but which was caused by a vaccine” referred to in the Table.
In accordance with Section 2112(b)(2), all interested persons may submit written information relevant to the issues described above in the case of the petitions listed below. Any person choosing to do so should file an original and three (3) copies of the information with the Clerk of the United States Court of Federal Claims at the address listed above (under the heading
Office of the Assistant Secretary for Health, Office of the Secretary, Department of Health and Human Services.
Notice.
As required by the Federal Advisory Committee Act, the Department of Health and Human Services (HHS) is hereby giving notice that the Tick-Borne Disease Working Group (TBDWG) will hold a virtual meeting. The meeting will be open to the public. For this meeting, the TBDWG will be discussing and voting on recommendations for the 2022 TBDWG Report to the HHS Secretary and Congress. Most of the recommendations the TBDWG will consider are from the reports of five TBDWG subcommittees, which were created to examine critical topic areas related to tick-borne diseases. The 2022 report will address a wide range of topics related to tick-borne diseases, such as, surveillance, prevention, diagnosis, diagnostics, and treatment; identify advances made in research, as well as overlap and gaps in tick-borne disease research; and provide recommendations regarding any appropriate changes or improvements to such activities and research.
The meeting will be held online via webcast on April 27, 2022-April 28, 2022 from approximately 9:00 a.m. to 5:00 p.m. ET (times are tentative and subject to change) each day. The confirmed times and agenda items for the meeting will be posted on the TBDWG web page
James Berger, Designated Federal Officer for the TBDWG; Office of Infectious Disease and HIV/AIDS Policy, Office of the Assistant Secretary for Health, Department of Health and Human Services, Mary E. Switzer Building, 330 C Street SW, Suite L600, Washington, DC 20024. Email:
Registration information can be found on the meeting website at
Office of the Secretary, HHS.
Notice.
Findings of research misconduct have been made against Hui (Herb) Bin Sun, Ph.D. (Respondent), formerly Professor of Orthopedic Surgery and Radiation Oncology, Albert Einstein College of Medicine (AECM). Respondent engaged in research misconduct in research supported by U.S. Public Health Service (PHS) funds, specifically National Institute of Arthritis and Musculoskeletal and Skin Diseases (NIAMS), National Institutes of Health (NIH), grant R01 AR050968 and National Heart, Lung, and Blood Institute (NHLBI), NIH, grant P01 HL110900. The administrative actions, including supervision for a period of twelve (12) years, were implemented beginning on March 1, 2022, and are detailed below.
Wanda K. Jones, Dr.P.H., Acting Director, Office of Research Integrity, 1101 Wootton Parkway, Suite 240, Rockville, MD 20852, (240) 453-8200.
Notice is hereby given that the Office of Research Integrity (ORI) has taken final action in the following case:
ORI found that Respondent engaged in research misconduct by intentionally, knowingly, or recklessly falsifying and/or fabricating data included in sixteen (16) grant applications submitted for PHS funds:
• R01 AR065563-01, “CITED2 and Chondroprotection,” submitted to NIAMS, NIH, on 02/05/2013.
• R01 AR066009-01, “Remote Loading for Osteoarthritis,” submitted to NIAMS, NIH, on 06/04/2013.
• R01 AR065563-01A1, “CITED2 and Chondroprotection,” submitted to NIAMS, NIH, on 11/05/2014.
• R41 AR070695-01, “A novel product for tendinopathy treatment,” submitted to NIAMS, NIH, on 01/05/2015.
• R01 AG069693-01, “Chondrocyte fate regulation and cartilage protection,” submitted to National Institute on Aging (NIA), NIH, on 06/05/2015.
• R01 AG039561-06, “Human tendon stem progenitor cell aging and regeneration,” submitted to NIA, NIH, on 03/15/2016 (original grant funding from 08/15/2012-04/30/2018).
• R43 AT009414-01, “A novel nutraceutical drug for tendinopathy treatment,” submitted to National Center for Complementary and Alternative Medicine (NCCAM), NIH, on 04/05/2016.
• R01 AR070431-01A1, “The role of Panx1 in the pathogenesis and pain of osteoarthritis,” submitted to NIAMS, NIH, on 07/19/2016.
• R41 AG056246-01A1, “A novel product for tendinopathy treatment,” submitted to NIA, NIH, on 09/06/2016, funded from 09/15/2017-08/31/2019.
• R01 AG056623-01, “Chondrocyte fate regulation and osteoarthritis,” submitted to NIA, NIH, on 10/05/2016.
• R01 AR072038-01, “MSC-derived exosomes and tendon disorders,” submitted to NIAMS, NIH, on 10/05/2016.
• R43 AT009414-01A1, “A novel nutraceutical drug for tendinopathy treatment,” submitted to NCCAM, NIH, on 04/05/2017, funded from 08/01/2018-07/31/2020.
• R01 AR073194-01, “Chondrocyte fate regulation and cartilage protection,” submitted to NIAMS, NIH, on 06/05/2017.
• R01 AR074802-01, “The role of Panx1 in the pathogenesis and pain of osteoarthritis,” submitted to NIAMS, NIH, on 04/02/2018.
• R01 AR074802-01A1, “The role of Panx1 in the pathogenesis and pain of osteoarthritis,” submitted to NIAMS, NIH, on 08/01/2018.
• R44 AG065089-01, “Botanical drug for spontaneous osteoarthritis,” submitted to NIA, NIH, on 01/07/2019.
ORI found that Respondent intentionally, knowingly, or recklessly reported falsified and/or fabricated Western blot and histological image data for chronic deep tissue conditions including osteoarthritis (OA) and tendinopathy in murine models. Respondent included image data that were falsely reused and relabeled as data representing different experiments in fifty (50) figures included in sixteen (16) PHS grant applications. In the absence of reliable image data, the figures, quantitative data in associated graphs purportedly derived from those images, statistical analyses, and related text also are false.
Specifically, ORI found that:
1. Respondent reported falsified Western blot images from the same source that were reused and relabeled to represent different proteins and/or experimental results in:
• Figure 4B in R01 AR065563-01 and R01 AR065563-01A1 and Figure 11 in R01 AR069693-01, specifically:
• Figure 2A in R01 AG056623-01 and R44 AG065089-01 and Figure 1A in R01 AR073194-01, specifically:
2. Respondent reported falsified Western blot data by copying blot panels representing rAAV-vector and rAAV-GFP in human cartilage explants from Figure 11C in R01 AR065563-01 and Figure 16 in R01 AR066009-01 and manipulating and relabeling the same panels to represent “Sham” and “KO” samples in conditional knock out of Cited2 gene in cartilage of adult mice in:
3. Respondent reported falsified photomicrographs of supraspinatus tendon tissue from tendinopathy rats exposed to different experimental conditions that were reused and relabeled in:
4. Respondent reported falsified photomicrographs that were reused and relabeled in:
5. Respondent reported falsified photomicrographs that were reused and relabeled from Figure 2C in R01 AR072038-01 representing cleaved collagen-1 stained supraspinatus tendon of overuse tendinopathy rats injected with placebo + ex-ADSC-2D (control exosomes) to falsely represent:
6. Respondent falsified photomicrographs of human cartilage explants presented in R01 AG069693-01 that were reused and relabeled, specifically:
7. Respondent reported falsified photomicrographs of non-OA or OA human cartilage explants presented in Figure 3 in R01 AR070431-01A1 that were reused and relabeled representing:
8. Respondent reported falsified photomicrographs from the following published papers that were reused and relabeled to falsely represent unrelated experimental results in NIH grant applications:
• Green tea polyphenol treatment is chondroprotective, anti-inflammatory and palliative in a mouse post-traumatic osteoarthritis model.
• Curcumin slows osteoarthritis progression and relieves osteoarthritis-associated pain symptoms in a post-traumatic osteoarthritis mouse model.
• Procyanidins Mitigate Osteoarthritis Pathogenesis by, at Least in Part, Suppressing Vascular Endothelial Growth Factor Signaling.
Specifically, in:
Respondent neither admits nor denies ORI's findings of research misconduct.
Respondent voluntarily agreed to the following:
(1) Respondent will have his research supervised for a period of twelve (12) years beginning on March 1, 2022 (the “Supervision Period”). Prior to the submission of an application for PHS support for a research project on which Respondent's participation is proposed and prior to Respondent's participation in any capacity in PHS-supported research, Respondent will submit a plan for supervision of Respondent's duties to ORI for approval. The supervision plan must be designed to ensure the integrity of Respondent's research. Respondent will not participate in any PHS-supported research until such a supervision plan is approved by ORI. Respondent will comply with the agreed-upon supervision plan.
(2) The requirements for Respondent's supervision plan are as follows:
i. A committee of 2-3 senior faculty members at the institution who are familiar with Respondent's field of research, but not including Respondent's supervisor or collaborators, will provide oversight and guidance. The committee will review primary data from Respondent's laboratory on a quarterly basis and submit a report to ORI at six (6) month intervals setting forth the committee meeting dates and Respondent's compliance with appropriate research standards and confirming the integrity of Respondent's research.
ii. The committee will conduct an advance review of each application for PHS funds, or report, manuscript, or abstract involving PHS-supported research in which Respondent is involved. The review will include a discussion with Respondent of the primary data represented in those documents and will include a certification to ORI that the data presented in the proposed application, report, manuscript, or abstract is supported by the research record.
(3) During the Supervision Period, Respondent will ensure that any institution employing him submits, in conjunction with each application for PHS funds, or report, manuscript, or abstract involving PHS-supported research in which Respondent is involved, a certification to ORI that the data provided by Respondent are based on actual experiments or are otherwise legitimately derived and that the data, procedures, and methodology are accurately reported in the application, report, manuscript, or abstract.
(4) If no supervision plan is provided to ORI, Respondent will provide certification to ORI at the conclusion of the Supervision Period that his participation was not proposed on a research project for which an application for PHS support was submitted and that he has not participated in any capacity in PHS-supported research.
(5) During the Supervision Period, Respondent will exclude himself voluntarily from serving in any advisory or consultant capacity to PHS including, but not limited to, service on any PHS advisory committee, board, and/or peer review committee.
Office of the Secretary, HHS.
Notice.
In compliance with the requirement of the Paperwork Reduction Act of 1995, the Office of the Secretary (OS), Department of Health and Human Services, is publishing the following summary of a proposed collection for public comment.
Comments on the ICR must be received on or before May 23, 2022.
Submit your comments to
When submitting comments or requesting information, please include the document identifier 0990-New-60D and project title for reference, to Sherrette A. Funn, email:
Interested persons are invited to send comments regarding this burden estimate or any other aspect of this collection of information, including any of the following subjects: (1) The necessity and utility of the proposed information collection for the proper performance of the agency's functions; (2) the accuracy of the estimated burden; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) the use of automated collection techniques or other forms of information technology to minimize the information collection burden.
Through the Health Care Readiness Portfolio, ASPR provides awards to 62 health departments in all 50 states, territories, freely associated states, and four metropolitan areas to support the health care delivery system through over 320 health care coalitions (HCCs) with nearly 45,000 members. An HCC is a network of public and private organizations that partner to conduct planning, training, and preparedness activities within a state or locality, building that area's overall readiness.
ASPR's Health Care Readiness Portfolio aligns preparedness activities across health care and also includes the Regional Disaster Health Response System (RDHRS) demonstration sites that establish regional partnerships to develop promising practices in coordinating disaster readiness and regional medical response; the National Special Pathogen System, a nationwide systems-based network approach for special pathogen care; workforce capacity activities; and other initiatives.
ASPR collects data annually to understand how federal funding has been spent, measure performance, and monitor adherence with program requirements. These data additionally support ASPR to develop funding opportunities, improve programmatic operations, and inform decision-making. ASPR is also responsible for allocating and monitoring emergency and supplemental funding, understanding recipient and sub-recipient real-time needs, and maintaining situational awareness of the current state of preparedness, response, and recovery activities. When circumstances require rapid information gathering, it is necessary for ASPR to also collect data
Office of the Secretary, HHS.
Notice.
Findings of research misconduct have been made against Daniel Leong, Ph.D. (Respondent), formerly a Research Technician, Albert Einstein College of Medicine (AECM). Respondent engaged in research misconduct in research supported by U.S. Public Health Service (PHS) funds, specifically National Institute of Arthritis and Musculoskeletal and Skin Diseases (NIAMS), National Institutes of Health (NIH), grant R01 AR050968 and National Heart, Lung, and Blood Institute (NHLBI), NIH, grant P01 HL110900. The administrative actions, including debarment for a period of four (4) years followed by supervision for a period of four (4) years, were implemented beginning on February 28, 2022, and are detailed below.
Wanda K. Jones, Dr.P.H., Acting Director, Office of Research Integrity, 1101 Wootton Parkway, Suite 240, Rockville, MD 20852, (240) 453-8200.
Notice is hereby given that the Office of Research Integrity (ORI) has taken final action in the following case:
ORI found that Respondent engaged in research misconduct by intentionally, knowingly, or recklessly falsifying and/or fabricating data included in sixteen (16) grant applications submitted for PHS funds:
• R01 AR065563-01, “CITED2 and Chondroprotection,” submitted to NIAMS, NIH, on 02/05/2013.
• R01 AR066009-01, “Remote Loading for Osteoarthritis,” submitted to NIAMS, NIH, on 06/04/2013.
• R01 AR065563-01A1, “CITED2 and Chondroprotection,” submitted to NIAMS, NIH, on 11/05/2014.
• R41 AR070695-01, “A novel product for tendinopathy treatment,” submitted to NIAMS, NIH, on 01/05/2015.
• R01 AG069693-01, “Chondrocyte fate regulation and cartilage protection,” submitted to National Institute on Aging (NIA), NIH, on 06/05/2015.
• R01 AG039561-06, “Human tendon stem progenitor cell aging and regeneration,” submitted to NIA, NIH, on 03/15/2016 (original grant funding from 08/15/2012-04/30/2018).
• R43 AT009414-01, “A novel nutraceutical drug for tendinopathy treatment,” submitted to National Center for Complementary and Alternative Medicine (NCCAM), NIH, on 04/05/2016.
• R01 AR070431-01A1, “The role of Panx1 in the pathogenesis and pain of osteoarthritis,” submitted to NIAMS, NIH, on 07/19/2016.
• R41 AG056246-01A1, “A novel product for tendinopathy treatment,” submitted to NIA, NIH, on 09/06/2016, funded from 09/15/2017-08/31/2019.
• R01 AG056623-01, “Chondrocyte fate regulation and osteoarthritis,” submitted to NIA, NIH, on 10/05/2016.
• R01 AR072038-01, “MSC-derived exosomes and tendon disorders,” submitted to NIAMS, NIH, on 10/05/2016.
• R43 AT009414-01A1, “A novel nutraceutical drug for tendinopathy treatment,” submitted to NCCAM, NIH, on 04/05/2017, funded from 08/01/2018-07/31/2020.
• R01 AR073194-01, “Chondrocyte fate regulation and cartilage protection,” submitted to NIAMS, NIH, on 06/05/2017.
• R01 AR074802-01, “The role of Panx1 in the pathogenesis and pain of osteoarthritis,” submitted to NIAMS, NIH, on 04/02/2018.
• R01 AR074802-01A1, “The role of Panx1 in the pathogenesis and pain of osteoarthritis,” submitted to NIAMS, NIH, on 08/01/2018.
• R44 AG065089-01, “Botanical drug for spontaneous osteoarthritis,” submitted to NIA, NIH, on 01/07/2019.
ORI found that Respondent intentionally, knowingly, or recklessly falsified and/or fabricated Western blot and histological image data for chronic deep tissue conditions including osteoarthritis (OA) and tendinopathy in murine models by reusing image data, with or without manipulating them to conceal their similarities, and falsely relabeling them as data representing different experiments in fifty (50) figures included in sixteen (16) PHS grant applications. In the absence of reliable image data, the figures, quantitative data in associated graphs purportedly derived from those images, statistical analyses, and related text also are false.
Specifically, ORI found that:
1. Respondent reused and relabeled Western blot images from the same source to falsely represent different proteins and/or experimental results in:
• Figure 4B in R01 AR065563-01 and R01 AR065563-01A1 and Figure 11 in R01 AR069693-01, specifically:
• Figure 2A in R01 AG056623-01 and R44 AG065089-01 and Figure 1A in R01 AR073194-01, specifically:
2. From Figure 11C in R01 AR065563-01 and Figure 16 in R01 AR066009-01, Respondent copied blot panels representing rAAV-vector and rAAV-GFP in human cartilage explants, flipped, resized, added a lane to the left, and reused and relabeled the bands to falsely represent “Sham” and “KO” samples in conditional knock out of Cited2 gene in cartilage of adult mice in:
3. Respondent reused and relabeled the same photomicrographs of supraspinatus tendon tissue from tendinopathy rats exposed to different experimental conditions in:
4. Respondent reused and relabeled the same photomicrographs in:
5. Respondent reused and relabeled photomicrographs from Figure 2C in R01 AR072038-01 representing cleaved collagen-1 stained supraspinatus tendon of overuse tendinopathy rats injected with placebo + ex-ADSC-2D to falsely represent:
6. Respondent reused and relabeled photomicrographs of human cartilage explants presented in R01 AG069693-01. Specifically, Respondent reused image panels from R01 AG069693-01:
7. Respondent reused and relabeled photomicrographs of non-OA or OA human cartilage explants presented in Figure 3 in R01 AR070431-01A1 representing:
8. Respondent reused and relabeled photomicrographs from the following published papers to falsely represent unrelated experimental results in NIH grant applications:
• Green tea polyphenol treatment is chondroprotective, anti-inflammatory and palliative in a mouse post-traumatic osteoarthritis model.
• Curcumin slows osteoarthritis progression and relieves osteoarthritis-associated pain symptoms in a post-traumatic osteoarthritis mouse model.
• Procyanidins Mitigate Osteoarthritis Pathogenesis by, at Least in Part, Suppressing Vascular Endothelial Growth Factor Signaling.
Specifically, in:
Respondent neither admits nor denies ORI's findings of research misconduct. The parties entered into a Voluntary Settlement Agreement (Agreement) to conclude this matter without further expenditure of time, finances, or other resources. The settlement is not an admission of liability on the part of the Respondent.
Respondent voluntarily agreed to the following:
(1) Respondent will exclude himself voluntarily for a period of four (4) years beginning on February 28, 2022 (the “Exclusion Period”) from any contracting or subcontracting with any agency of the United States Government and from eligibility for or involvement in nonprocurement or procurement transactions referred to as “covered transactions” in 2 CFR parts 180 and 376 (collectively the “Debarment Regulations”). At the conclusion of the Exclusion Period, Respondent agreed to have his research supervised for a period of four (4) years (the “Supervision Period”). During the Supervision Period, prior to the submission of an application for PHS support for a research project on which Respondent's participation is proposed and prior to Respondent's participation in any capacity in PHS-supported research, Respondent will submit a plan for supervision of Respondent's duties to ORI for approval. The supervision plan must be designed to ensure the integrity of Respondent's research. Respondent will not participate in any PHS-supported research until such a supervision plan is approved by ORI. Respondent will comply with the agreed-upon supervision plan.
(2) During the Supervision Period, the requirements for Respondent's supervision plan are as follows:
i. A committee of 2-3 senior faculty members at the institution who are familiar with Respondent's field of research, but not including Respondent's supervisor or collaborators, will provide oversight and guidance. The committee will review primary data from Respondent's laboratory on a quarterly basis and submit a report to ORI at six (6) month intervals setting forth the committee meeting dates and Respondent's compliance with appropriate research standards and confirming the integrity of Respondent's research.
ii. The committee will conduct an advance review of each application for PHS funds, or report, manuscript, or abstract involving PHS-supported research in which Respondent is involved. The review will include a discussion with Respondent of the primary data represented in those documents and will include a certification to ORI that the data presented in the proposed application, report, manuscript, or abstract is supported by the research record.
(3) During the Supervision Period, Respondent will ensure that any institution employing him submits, in conjunction with each application for PHS funds, or report, manuscript, or abstract involving PHS-supported research in which Respondent is involved, a certification to ORI that the data provided by Respondent are based on actual experiments or are otherwise legitimately derived and that the data, procedures, and methodology are accurately reported in the application, report, manuscript, or abstract.
(4) If no supervision plan is provided to ORI, Respondent will provide
(5) During the Exclusion and Supervision Periods, Respondent will exclude himself voluntarily from serving in any advisory or consultant capacity to PHS including, but not limited to, service on any PHS advisory committee, board, and/or peer review committee.
National Institutes of Health, HHS.
Notice.
The invention listed below is owned by an agency of the U.S. Government and is available for licensing to achieve expeditious commercialization of results of federally-funded research and development. Foreign patent applications are filed on selected inventions to extend market coverage for companies and may also be available for licensing.
Peter Tung at 240-669-5483 or
Technology description follows:
Using a computational design methodology, SARS-CoV-2 spike proteins containing engineered amino acid changes to the receptor binding domain (RBD) were designed. These engineered spike proteins improved the immune response upon immunization of animals. An engineered RBD was also expressed at greater yield, had increased temperature stability, and improved the immune response upon immunization of animals. Specifically, the disclosed RBD designs can be produced approximately 7 times more efficiently than the native sequence, facilitating vaccine manufacturing on a global scale. The disclosed designs also have up to 10 °C higher thermal stability than the native sequence, suggesting enhanced stability during storage and when in the body. Finally, immunization of animals with the disclosed antigens produces up to 10-fold higher levels of blocking antibodies than the native sequence and 30-fold higher levels of pseudoviral neutralizing antibodies. An additional RBD protein has been engineered to eliminate the need for glycosylation, facilitating production and single-component nanoparticle display of the antigen. The engineered receptor binding domain (RBD) and spike protein antigens produce significant improvements in pre-clinical animal models and may be used to develop improved coronavirus vaccines.
This technology is available for licensing for commercial development in accordance with 35 U.S.C. 209 and 37 CFR part 404, as well as for further development and evaluation under a research collaboration.
• Novel SARS-CoV-2 vaccine.
• Improved SARS-CoV-2 diagnostics using stabilized antigens.
• Method of designing vaccine candidates or stabilized antigens by computational. optimization of amino acid identity, followed by additional sequence comparison and selection (Stabilizer for Protein Expression and Epitope Design (SPEEDesign)).
• Novel SARS-CoV-2 spike vaccine with improved breadth and duration of protection.
• Novel RBD monomer and nanoparticle designs that are more immunogenic and stable than the naturally occurring RBD sequence.
• Computational method of designing vaccine antigens.
• Pre-clinical testing of the novel immunogens in non-human primates.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Coast Guard, DHS.
Notice of availability of draft report; request for comments.
On March 18, 2020, the Coast Guard published a notice of study and request for comments announcing a Port Access Route Study (PARS) for the Seacoast of North Carolina Including Offshore Approaches to the Cape Fear River and Beaufort Inlet, North Carolina. This notice announces the availability of a draft report for public review and comment. We seek your comments on the content, proposed routing measures, and development of the report. The recommendations of the study may lead to future rulemakings or appropriate international agreements.
Your comments and related material must reach the Coast Guard on or before April 25, 2022.
You may submit comments identified by docket number USCG-2020-0093 using the Federal portal at
If you have questions about this notice or study, call or email Mr. Matthew Creelman, Fifth Coast Guard District (dpw), U.S. Coast Guard; telephone (757) 398-6225, email
The Ports and Waterways Safety Act (46 U.S.C. 70003(c)) requires the Coast Guard to conduct a PARS,
In 2019, the Coast Guard announced a supplemental study of routes used by all vessels to access ports on the Atlantic Coast of the United States (84 FR 9541, March 15, 2019). This posting announced PARS for specific port approaches and international transit areas along the Atlantic Coast. The purpose of the supplemental studies is to align the Atlantic Coast Port Access Route Study (ACPARS) (81 FR 13307, March 14, 2016) with port approaches. The ACPARS analyzed the Atlantic Coast waters seaward of existing port approaches within the U.S. Exclusive Economic Zone and was finalized in 2017 (82 FR 16510, April 5, 2017).
The purpose of this notice is to announce the availability of the draft PARS examining the seacoast of North Carolina and the offshore approaches to the Cape Fear River and Beaufort Inlet, North Carolina. We encourage you to participate in the study process by submitting comments in response to this notice. This PARS used Automated Information System (AIS) data and information from stakeholders to identify and verify customary navigation routes as well as potential conflicts involving alternative activities, such as wind energy generation and offshore mineral exploitation and exploration, off the seacoast of North Carolina and in the offshore approaches to the Cape Fear River and Beaufort Inlet, North Carolina.
The study area extends approximately 200 nautical miles seaward of Cape Fear including the offshore area of North and South Carolina used by commercial and public vessels transiting to and from these ports. An illustration showing the study area is available in the docket where indicated under
On March 18, 2020, the Coast Guard published a Notice of Study; request for comments entitled “Port Access Route Study: Seacoast of North Carolina Including Offshore Approaches to the Cape Fear River and Beaufort Inlet, North Carolina” in the
PARS are the means by which the Coast Guard determines the need to establish traffic routing measures or shipping safety fairways to reduce the risk of collision, allision, and grounding, and their impact on the environment; increase the efficiency and predictability of vessel traffic; and preserve the paramount right of navigation while continuing to allow for other reasonable waterway uses. The study analyzes current routing measures around the approaches to the Cape Fear River and Beaufort Inlet, North Carolina, and proposes an adequate way to manage forecasted maritime traffic growth and to promote navigation safety. The study also reviewed coastal port access from the seacoasts of North and South Carolina within the study area and the co-dependent use of the waters in support of future development.
The Coast Guard received two discrete comments in response to our
As a result of the data analysis within this study, and considering the
We encourage you to submit comments to this notice of availability through the Federal portal at
To view documents mentioned in this notice of inquiry as being available in the docket, find the docket as described in the previous paragraph, and then select “Supporting & Related Material” in the Document Type column. Public comments will also be placed in our online docket and can be viewed by following instructions on the
We accept anonymous comments. Comments we post to
This document is issued under authority of 5 U.S.C. 552(a).
Coast Guard, DHS.
Notice of availability.
The Coast Guard announces the completion of the Port Access Route Study for the Seacoast of New Jersey Including Offshore Approaches to the Delaware Bay, Delaware. The study examined existing shipping routes and waterway uses, to include the potential for offshore energy development, in the study area to evaluate the need for establishing or changing existing vessel routing measures. This notice summarizes the study's recommendation.
If you have questions about this notice or study, call or email Mr. Matthew Creelman, Marine Planner at Fifth Coast Guard District, telephone (757) 398-6225, email
We conducted this Port Access Route Study (PARS) following a Notice of Study, published in the
We conducted two (2) public meetings, as published in the
On September 24, 2021, we published a Notice of Availability of the draft study in the
During the 30-day public comment period, the USCG received 15 comments in response to our draft study. All comments and supporting documents are available in the public docket and can be viewed at
The goal of the study is to enhance navigational safety in the study area by examining existing shipping routes and waterway uses. We have undertaken measures to (1) determine what, if any, navigational safety concerns exist with vessel transits in the study area; (2) determine whether to recommend changes to enhance navigational safety by examining existing shipping routes and all other waterway uses; and (3) reconcile any other proposed changes with other reasonable waterway uses.
The recommendations of this PARS are based on the data analysis for historical vessel traffic patterns, comments received to the docket, public outreach, and consultation with other government agencies and stakeholders. Recommendations in the study include:
1. Submit proposals to the IMO to create precautionary areas offshore from the entrance to the Delaware River where shipping safety fairways and traffic separation schemes intersect.
2. Submit proposals to the IMO to extend the Traffic Separation Schemes in the approach to the Delaware River beyond any OREI lease areas adjacent to the approaches.
3. Submit a proposal to the IMO to extend the two-way route along the New Jersey coast across the entrance of the Delaware Bay and along the Delaware coast.
4. Amend the proposed Shipping Safety Fairways along the Atlantic Coast to separate the Cape Charles to Montauk Point Fairway into a Cape Charles to Delaware Bay Fairway and a Barnegat to Narragansett Fairway.
5. Create a New Jersey to New York Fairway and include this in the Shipping Safety Fairways along the Atlantic Coast.
6. Establish a Fairway Anchorage adjacent to the Southeastern Traffic Separation Scheme to accommodate future needs for safe anchorage around OREI.
Recommendations in Section F were expanded to include a general notice to mariners on navigation safety around OREI.
The table of coordinates was removed in an effort to avoid confusion. Detailed coordinates for proposed routing measures, fairways, and anchorage grounds will be announced in future rulemakings.
A statement acknowledging the impact of OREI on SAR was included in Section F to address future actions necessary to ensure operational units revise plans to incorporate in the future.
A section summarizing comments to the draft report from the public was added as a new Section G and subsequent sections were re-labeled to incorporate this addition.
The USCG will continue to serve as a NEPA cooperating agency to the Bureau of Ocean Energy Management's (BOEM) environmental review of each proposed OREI project. In that role, the USCG will evaluate the navigational safety risks of each proposal on a case-by-case basis.
The final study will be submitted to the Coast Guard's Office of Navigation Systems (CG-NAV-2) for consideration and to inform the Coast Guard's ongoing efforts to establish shipping safety fairways along the Atlantic Coast, which can be found at 85 FR 37034.
The final study is available for viewing and download from the
Federal Emergency Management Agency, Department of Homeland Security.
Announcement of meetings.
The Federal Emergency Management Agency (FEMA) is holding meetings under the Plan of Action to Establish a National Strategy for the Manufacture, Allocation, and Distribution of Medical Devices to Respond to COVID-19 and the Plan of Action to Establish a National Strategy for the Manufacture, Allocation, and Distribution of Drug Products, Drug Substances, and Associated Medical Devices to Respond to COVID-19, in order to implement the Voluntary Agreement for the Manufacture and Distribution of Critical Healthcare Resources Necessary to Respond to a Pandemic.
• Thursday, March 24, 2022, from 1 p.m. to 3 p.m. Eastern Time (ET).
• Thursday, April 7, 2022, from 1 p.m. to 3 p.m. ET.
Robert Glenn, FEMA Office of Response and Recovery's Office of Business, Industry, and Infrastructure Integration, via email at
Notice of these meetings is provided as required by section 708(h)(8) of the Defense Production Act (DPA), 50 U.S.C. 4558(h)(8), and consistent with 44 CFR part 332.
The DPA authorizes the making of “voluntary agreements and plans of action” with representatives of industry, business, and other interests to help provide for the national defense.
On August 17, 2020, after the appropriate consultations with the Attorney General and the Chairman of the Federal Trade Commission, FEMA completed and published in the
On May 24, 2021, four additional plans of action under the Voluntary Agreement—the Plan of Action to Establish a National Strategy for the Manufacture, Allocation, and Distribution of Diagnostic Test Kits and other Testing Components to respond to COVID-19, the Plan of Action to Establish a National Strategy for the Manufacture, Allocation, and Distribution of Drug Products, Drug Substances, and Associated Medical Devices to respond to COVID-19, the Plan of Action to Establish a National Strategy for the Manufacture, Allocation, and Distribution of Medical Devices to respond to COVID-19, and the Plan of Action to Establish a National Strategy for the Manufacture, Allocation, and Distribution of Medical Gases to respond to COVID-19—were finalized.
On October 15, 2021, the sixth plan of action under the Voluntary Agreement—the Plan of Action to Establish a National Strategy for the Coordination of National Multimodal Healthcare Supply Chains to Respond to COVID-19—was finalized.
The meetings are chaired by the FEMA Administrator's delegates from the Office of Response and Recovery (ORR) and Office of Policy and Program Analysis (OPPA), attended by the Attorney General's delegates from the U.S. Department of Justice, and attended by the Chairman of the Federal Trade Commission's delegates. In implementing the Voluntary Agreement, FEMA adheres to all procedural requirements of 50 U.S.C. 4558 and 44 CFR part 332.
1. Convene the Requirements Sub-Committees under the Medical Devices and Drug Products/Drug Substances Plans of Action to establish priorities related to the COVID-19 response under the Voluntary Agreement.
2. Gather Requirements Sub-Committee Participants and Attendees to ask targeted questions for situational awareness.
3. Identify pandemic-related information gaps and areas that merit sharing by holding quarterly meetings of the Requirements Sub-Committees with key stakeholders.
4. Identify potential Objectives and Actions that should be completed under the Requirements Sub-Committees.
The Sponsor of the Voluntary Agreement, the FEMA Administrator, found that these meetings to implement the Voluntary Agreement involve matters which fall within the purview of matters described in 5 U.S.C. 552b(c) and the meetings are therefore closed to the public.
Specifically, these meetings may require participants to disclose trade secrets or commercial or financial information that is privileged or confidential. Disclosure of such information allows for meetings to be closed to the public pursuant to 5 U.S.C. 552b(c)(4).
The success of the Voluntary Agreement depends wholly on the willing participation of the private sector participants. Failure to close these meetings to the public could reduce active participation by the signatories due to a perceived risk that sensitive company information could be released to the public. A public disclosure of a private sector participant's information executed prematurely could reduce trust and support for the Voluntary Agreement.
A resulting loss of support by the participants for the Voluntary Agreement would significantly hinder the implementation of the Agency's objectives. Thus, these meeting closures are permitted pursuant to 5 U.S.C. 552b(c)(9)(B).
Transportation Security Administration, DHS.
30-Day notice.
This notice announces that the Transportation Security Administration (TSA) has forwarded the Information Collection Request (ICR), Office of Management and Budget (OMB) control number 1652-0058, abstracted below, to OMB for review and approval of an extension of the currently approved collection under the Paperwork Reduction Act (PRA). The ICR describes the nature of the information collection and its expected burden. The information collection activity provides a means to gather qualitative customer and stakeholder feedback in an efficient, timely manner, in accordance with TSA's commitment to improving service delivery.
Send your comments by April 25, 2022. A comment to OMB is most effective if OMB receives it within 30 days of publication.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Christina A. Walsh, TSA PRA Officer, Information Technology (IT), TSA-11, Transportation Security Administration, 6595 Springfield Center Drive, Springfield, VA 20598-6011; telephone (571) 227-2062; email
TSA published a
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
(1) Evaluate whether the proposed information requirement 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;
(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 using appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
From TSA's perspective, qualitative feedback from customers and stakeholders is information that provides useful insights on their perceptions, experiences, opinions, and expectations regarding TSA products or services, provides TSA with an early warning of issues with service, and focuses attention on areas where changes regarding communication, training, or operations might improve delivery of products or services. These collections will allow for ongoing, collaborative, and actionable communications between TSA and its customers and stakeholders. They will also allow feedback to contribute
As a general matter, information collections will not result in any new system of records containing privacy information and will not ask questions of a sensitive nature. Information gathered is intended to be used solely within TSA general service improvement and program management purposes and is not intended for release outside of TSA (if released, TSA will indicate the qualitative nature of the information). Feedback collected under this generic clearance provides useful qualitative information, but it does not yield data that can be generalized to the overall population. Qualitative information is not designed or expected to yield statistically reliable or actionable results; it will not be used for quantitative information collections. Depending on the degree of influence the results are likely to have, there may be future information collection submissions for other generic mechanisms that are designed to yield quantitative results.
Below we provide TSA's projected average estimates for the next three years:
Transportation Security Administration, DHS.
30-Day notice.
This notice announces that the Transportation Security Administration (TSA) has forwarded the Information Collection Request (ICR), Office of Management and Budget (OMB) control number 1652-0071, abstracted below to OMB for review and approval of an extension of the currently approved collection under the Paperwork Reduction Act (PRA). The ICR describes the nature of the information collection and its expected burden. The collection involves the submission of information from former employees who are interested in a Law Enforcement Officers Safety Act (LEOSA) Identification (ID) Card, a retired badge, and/or a retired credential.
Send your comments by April 25, 2022. A comment to OMB is most effective if OMB receives it within 30 days of publication.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Christina A. Walsh, TSA PRA Officer, Information Technology (IT), TSA-11, Transportation Security Administration, 6595 Springfield Center Drive, Springfield, VA 20598-6011; telephone (571) 227-2062; email
TSA published a
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
(1) Evaluate whether the proposed information requirement 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;
(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 using appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
TSA Management Directive (MD) 3500.1,
In addition, under TSA MD 2800.11,
Under TSA's current application process for these two programs, qualified applicants may apply for a LEOSA ID Card, a Retired Badge, and/or a Retired Credential, as applicable, either while still employed by TSA (shortly before separating or retiring) or after they have separated or retired (after they become private citizens,
The
Bureau of Reclamation, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995, we, the Bureau of Reclamation (Reclamation) are proposing to renew an information collection.
Interested persons are invited to submit comments on or before April 25, 2022.
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 information collection request (ICR), contact Jeremy Dodds by email at
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.
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 authority for this action is the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
U.S. International Trade Commission.
Notice.
Notice is hereby given that the U.S. International Trade Commission has determined not to review an initial determination (“ID”) (Order No. 32) of the presiding administrative law judge (“ALJ”) terminating the investigation in its entirety based on settlement. The investigation is terminated.
Houda Morad, Office of the General Counsel, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436, telephone (202) 708-4716. Copies of non-confidential documents filed in connection with this investigation may be viewed on the Commission's electronic docket (EDIS) at
On February 2, 2021, the Commission instituted this investigation under section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337 (“section 337”), based on a complaint filed by Solas OLED Ltd. of Dublin, Ireland (“Solas” or “Complainant”).
On October 28, 2021, the Commission partially terminated the investigation as to the BOE respondents.
On October 29, 2021, the Commission terminated the investigation as to claims 14-16 of the '068 patent and claims 12, 13, 15-19, 22-24, 34, 35, and 38-40 of the '880 patent based on the withdrawal of the allegations in the complaint as to those claims.
On December 14, 2021, the Commission terminated the investigation as to claims 3-5, 7-9, 11, 20, 21, 25-29, 31-33, 36, and 37 of the '880 patent based on the withdrawal of the allegations in the complaint as to those claims.
On March 1, 2022, Complainant and the remaining respondents, Samsung, filed a joint motion to terminate the investigation in its entirety based on settlement. On March 3, 2022, OUII filed a response in support of the joint motion.
On March 4, 2022, the ALJ issued the subject ID (Order No. 32) granting the joint motion. The ID finds that “[t]he pending motion for termination complies with the Commission Rules.”
No petition for review of the subject ID was filed. The Commission has determined not to review the subject ID. The investigation is terminated.
The Commission's vote for this determination took place on March 18, 2022.
The authority for the Commission's determination is contained in section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337), and in part 210 of the Commission's Rules of Practice and Procedure (19 CFR part 210).
By order of the Commission.
U.S. International Trade Commission.
Notice.
Notice is hereby given that the U.S. International Trade Commission has determined not to review an initial determination (“ID”) (Order No. 20) of the presiding administrative law judge (“ALJ”), granting in part complainant's motion to amend the complaint and notice of investigation and to terminate the investigation as to respondent BBTank USA, LLC (“BBTank”) based upon withdrawal of allegations in the complaint.
Cathy Chen, Office of the General Counsel, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436, telephone 202-205-2392. Copies of non-confidential documents filed in connection with this investigation may be viewed on the Commission's electronic docket (EDIS) at
The Commission instituted this investigation on November 10, 2021, based on a complaint filed on behalf of Shenzhen Smoore Technology Limited (“Smoore”) of China. 86 FR 62567-69 (Nov. 10, 2021). The complaint, as supplemented, alleged violations of section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337, in the importation into the United States, the sale for importation, or the sale within the United States after importation of certain oil-vaping cartridges, components thereof, and products containing the same by reason of infringement of certain claims of U.S. Patent Nos. 10,357,623; 10,791,763; 10,791,762; and U.S. Registered Trademark No. 5,633,060.
On February 1, 2022, Smoore filed a motion for leave to amend the complaint and notice of investigation pursuant to Commission Rule 210.14(b)(1), 19 CFR 210.14(b)(1). Specifically, Smoore's motion requests to: (1) Change the corporate entity name of Respondents BoldCarts.com and Bold Crafts, Inc., to Bold Crafts, LLC d/b/a Bold Carts and BoldCarts.com; (2) change the corporate entity name of Respondent Green Tank Technologies Corp. to Greentank Technologies Corp.; (3) change the corporate entity name of Blinc Group Holdings, LLC, to The Blinc Group Inc.; (4) change the corporate entity name of Respondent BulkCarts.com to Zachary R. Esquivel d/b/a ZRE Enterprises Inc. and ceramiccellcartridges.com; (5) substitute Respondent BBTank with proposed respondents DES Products Ltd. d/b/a O2VAPE and TCM Enterprises, LLC d/b/a O2VAPE; (6) terminate the investigation as to Respondent BBTank based on withdrawal of allegations in the complaint; (7) delete paragraph 148 of the complaint alleging trademark infringement by Respondent BBTank; (8) name additional proposed respondent AEG Holdings (HK) Ltd. n/k/a AVD Holdings Ltd.; and (9) replace Exhibit 36 to the complaint.
On February 23, 2022, the ALJ issued the subject ID granting in part the motion.
The Commission has determined not to review the subject ID. The complaint and notice of investigation are amended as indicated above, and Respondent BBTank is hereby terminated from the investigation.
The Commission vote for this determination took place on March 18, 2022.
The authority for the Commission's determination is contained in section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337, and in Part 210 of the Commission's Rules of Practice and Procedure, 19 CFR part 210.
By order of the Commission.
U.S. International Trade Commission.
Notice.
Notice is hereby given that the U.S. International Trade Commission has determined not to review an initial determination (“ID”) (Order No. 9) issued by the presiding administrative law judge (“ALJ”) on February 25, 2022, granting a motion to intervene of Amazon.com, Inc. (“Amazon”).
Michael Liberman, Esq., Office of the General Counsel, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436, telephone (202) 205-2392. Copies of non-confidential documents filed in connection with this investigation may be viewed on the Commission's electronic docket (EDIS) at
On February 3, 2022, the Commission instituted this investigation under section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337, based on a complaint filed by DivX, LLC of San Diego, California (“DivX”). 87 FR 6200-01 (Feb. 3, 2022). The complaint alleged a violation of section 337 in the importation into the United States, the sale for importation, or the sale within the United States after importation of certain video processing devices, components thereof, and digital smart televisions containing the same by reason of infringement of certain claims of U.S. Patent Nos. 8,832,297 and 8,472,792. The complaint also alleged the existence of a domestic industry. The notice of investigation named as respondents: TCL Technology Group Corporation of Huizhou, Guangdong, China; TCL Electronics Holdings Limited of Shenzhen, Guangdong, China; TTE Technology, Inc. of Shenzhen, Guangdong, China; TCL King Electrical Appliances (Huizhou) Co. Ltd. of Huizhou, Guangdong, China; TCL MOKA International Limited of Sha Tin, New Territories, Hong Kong; and TCL Smart Device (Vietnam) Co., Ltd. of Tan Binh Commune, Bae Tan Uyen District, Binh Duong Province, Vietnam (collectively, “TCL”).
On February 11, 2022, Amazon moved pursuant to 19 CFR 210.19 to intervene in this investigation. Respondents TCL did not oppose. Order No. 9, at 1 (Feb. 25, 2022). While complainant DivX did not oppose Amazon's requested relief, and “does not otherwise plan to file a response to the motion, it (i) takes no position as to whether it is more appropriate for Amazon to intervene in this Investigation as an intervenor or as a respondent, and reserves all rights, and (ii) makes no representations regarding TCL's knowledge of Amazon technology.”
Amazon requests that it be permitted to intervene in this investigation as an intervenor “with full participation rights and obligations with respect to the issues of infringement/non- infringement, validity/invalidity, any related subsidiary issues (
Amazon explains that DivX accuses certain TCL products of infringing the asserted patents “at least in part because they use and incorporate Amazon technology—primarily, Amazon's Prime Video.”
On February 25, 2022, the ALJ issued the subject ID, granting Amazon's motion. The ID found that there is no dispute that Amazon has an interest in infringement and invalidity issues regarding the asserted patents, that Amazon's interests are not adequately protected by TCL, and that intervention has been granted in similar circumstances in previous investigations.
On March 3, 2022, DivX, TCL, and Amazon filed a letter with the Commission requesting an expedited determination on whether to review the subject ID and indicating that none of the parties would petition for review of the ID.
The Commission has determined not to review the ID. Amazon's intervention as intervenor in this investigation is granted.
The Commission vote for this determination took place on March 18, 2022.
The authority for the Commission's determination is contained in section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337, and in Part 210 of the Commission's Rules of Practice and Procedure, 19 CFR part 210.
By order of the Commission.
Office of Assistant Secretary for Administration and Management, DOL.
Notice of a new system of records.
As required by the Privacy Act of 1974, and Office of Management and Budget (OMB) Circular No. A-108, this notice is a new Privacy Act System of Records titled Contractor and Visitor Public Health Emergency Records DOL/OASAM-38, which include information on contractor employees, special government employees and student volunteers who work in, as well as visitors to, Department of Labor (DOL) facilities during declared public health emergencies. The system contains information provided by the contractor's employees including such information as their applicable vaccination or medical countermeasure status and whether they are experiencing symptoms associated with the public health emergency. Each contractor with employees who will work in DOL facilities (regardless of whether the contract is with DOL or another Federal agency such as GSA) will be asked to confirm if its employees have been vaccinated or have received appropriate medical countermeasures, in addition, the contractor will be required to ensure that its employees follow the guidelines specified for working in DOL facilities, for example, to mitigate the spread of COVID-19, not fully vaccinated employees are required to wear masks and maintain physical distancing. Visitors to DOL facilities will also be asked to provide information about their vaccination or medical countermeasure status and information about whether they are experiencing any symptoms associated with the public health emergency. Contractors, special government employees and student volunteers may also be asked to provide proof of their vaccination status.
We invite you to submit comments on this notice. You may submit comments by any of the following methods:
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All comments will be made public by DOL and will be posted without change to
To submit general questions about the system, contact Rick Kryger, at telephone 202-693-4158, or email
DOL is establishing a system of records, DOL/OASAM-38, subject to the Privacy Act of 1974, 5 U.S.C. 552a. The purpose of this new system of records is to house information provided by contractors, subcontractors, their employees, special government employees, student volunteers, and visitors needed for DOL to take appropriate actions during a public health emergency. This system supports DOL's COVID-19 safety protocols as required by Executive Order 13991; Office of Management and Budget (OMB) Memorandums M-21-15 and M-21-25; COVID-19 Workplace Safety: Agency Model Safety Principles issued by the Federal Safer Federal Workforce Task Force; and other applicable law and policy. Federal labor, employment and workforce health and safety laws that govern the collection, dissemination, and retention of DOL employees' medical information include the Americans with Disability Act (ADA), the Rehabilitation Act of 1973 (Rehab Act), and the Occupational Safety and Health Act of 1970. The Department of Health and Human Services (HHS) Secretary may, under section 319 of the Public Health Service (PHS) Act codified at 42 U.S.C. 247d, declare that: (a) A disease or disorder presents a public health emergency; or (b) that a public health emergency, including significant outbreaks of infectious disease or bioterrorist attacks, otherwise exists.
The Occupational Safety and Health Act (OSHA) of 1970, Public Law 91-596, 29 U.S.C. 668, Section 19(a) requires the head of each Federal agency to establish and maintain an effective and comprehensive occupational safety and health program and safe and healthful places and conditions of employment, and to keep adequate records of all occupational accidents and illnesses for proper evaluation and necessary corrective action. OSHA also requires that Federal agencies maintain an injury and illness prevention program, which is a proactive process designed to reduce injuries, illnesses, and fatalities.
This OASAM-38 notice covers DOL employees and individuals that do not fall under Title 5 and OPM's personnel recordkeeping authority and thus are not covered by the OPM/GOVT-10 SORN. Federal civilian employee medical records are covered by a government-wide Privacy Act SORN published by the Office of Personnel Management (OPM), OPM/GOVT-10, Employee Medical File System Records (75 FR 35099, June 21, 2010; modification published at 80 FR 74815, November 30, 2015). These Federal employee confidential medical records are managed in accordance with OPM regulations at 5 CFR part 293, the OPM/GOVT-10 SORN, and its published routine uses. The OPM/GOVT-10 SORN covers Federal civilians that are identified under Title 5 U.S.C. chapter 21. The majority of DOL Federal employees fall under Title 5 and their medical records are covered by the OPM/GOVT-10 SORN and must be managed in accordance with that SORN and applicable OPM regulations.
Any collection of records in DOL/OASAM-38 is only permitted during a time of a public health emergency or similar health and safety incident. During such an emergency or incident, DOL will only collect the minimum information necessary to respond to the emergency or incident, and comply with Federal workforce safety requirements, when DOL determines that a significant risk of substantial harm exists to individuals working at or visiting a DOL controlled facility, or attending a DOL sponsored event in a non-DOL controlled facility. DOL's responsibilities for ensuring a safe workforce and secure buildings and workspaces depend on the nature and circumstances of the public health emergency.
In order to meet requirements for workforce safety during a public health emergency or similar incident, DOL may collect records that could include medical countermeasures, such as vaccinations, diagnostic test results, whether the individual is experiencing relevant symptoms, and any other information necessary to assist DOL with determining appropriate mitigation measures to take with respect to contractor employees, special government employees, student volunteers and visitors in DOL facilities or in the performance of duties associated with the Department.
In general, the information will be used to confirm that contractors, their employees, special government employees, student volunteers and visitors to DOL facilities are aware of and complying with requirements necessitated by the public health emergency, such as those to wear masks and maintain physical distancing while working onsite or visiting a DOL
DOL may also collect location and dates of potential exposure, information related to employee requests for reasonable accommodation, and other information that may be relevant or required for DOL to comply with Federal guidelines and prevent or slow the spread of the COVID-19 disease and mitigate health impacts to DOL personnel, visitors, and other individuals at DOL controlled facilities and sponsored events.
This notice also adds required breach routine uses to ensure that the Department can disclose information necessary to respond to a DOL breach and to assist another agency in responding to a confirmed or suspected breach, as appropriate, pursuant to OMB M-17-12.
Contractor and Visitor Public Health Emergency Records DOL/OASAM-38.
Unclassified.
The U.S. Department of Labor (DOL) Office of Assistant Secretary and Administration and Management owns the Contractor and Visitor Public Health Emergency Records System, which is housed in secure datacenters in the continental United States. Each DOL agency that has contractors working in a DOL facility has custody of the records pertaining to its own contracts. Contact the system manager for additional information.
Rick Kryger, Deputy Chief Information Officer, Office of the Assistant Secretary for Administration and Management, U.S. Department of Labor, 200 Constitution Avenue NW, N-1301, Washington, DC 20210.
National Emergencies Act (50 U.S.C. 1601-1651); the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121, 5192(1)); Section 319 of the Public Health Service (PHS) Act (42 U.S.C. 247d); 5 U.S.C. 301, 7901, 7902, and 7903; the Occupational Safety and Health Act (29 U.S.C. 668), Executive Order 12196 “Occupational safety and health programs for Federal employees”; Workforce Innovation and Opportunity Act (WIOA) WIOA 159(g) ((29 U.S.C. 3209(g)) and WIOA 147(a)(3)(J) ((29 U.S.C. 3197(a)(3)(J)).
To capture and report health and safety-related information during public health emergencies. Such reporting will be provided to DOL contracting officers and other authorized officials in DOL to enable the agency to use the data from the system to review submissions for compliance with applicable mitigation requirements, and, in the case of contractor employees, with contractual terms and conditions for contracts for which they are responsible.
The Contractor and Visitor Public Health Emergency Records System contains records related to employees of prime and subcontractors who are performing work on federal contract awards at any DOL facility, or in shared operations. An owner, agent, or employee of a prime or subcontractor may enter or certify information, as applicable.
The Contractor and Visitor Public Health Emergency Records System will also contain records related to contractors, subcontractors, their employees, special government employees, student volunteers, visitors, individuals from outside the DOL workforce on detail to DOL, experts/consultants, and grantees.
The information in the system of records consists of electronic or hard copy records, including records of vaccination status or other medical countermeasures (such as diagnostic test results), status of employees or visitors, and other health and safety information related to the public health emergency. The information in the system of records includes the name of the person entering, and as applicable, certifying, information on behalf of the prime or subcontractor, their position within the company, phone number, and email address. Categories of records include, but are not limited to: Name, unique identifier assigned by the prime or subcontractor, medical countermeasure (vaccination or diagnostic test) status, symptom questionnaires and other information relevant and necessary for mitigation purposes. Optional records that may be required for certain contracts or in certain geographic areas include: Name, position, work phone number, email address, DOL facility, lands, or shared operations at which the employee will be working on-site, and other similar records related to their official responsibilities.
Contract employee records are created, reviewed and, as appropriate, certified by the prime or subcontractor. Records pertaining to the individual entering and certifying data in the system may be created by the individual, by a contracting officer, or in the case of a subcontractor by the prime contractor or another subcontractor. Visitor records are created, reviewed and, as appropriate, certified by the appropriate Agency Official receiving the visitor to the DOL facility.
In addition to those disclosures generally permitted under 5 U.S.C. 552a(b) of the Privacy Act of 1974, and all universal routine uses listed at 81 FR 25765, 25775 (April 29, 2016) and
1. The information in this system may be disclosed to state and local public health officials for purposed related to the public health emergency, such as contract tracing.
2. To appropriate agencies, entities, and persons when (1) the DOL suspects or confirms a breach of the System of Records; (2) the DOL determines as a result of the suspected or confirmed breach there is a risk of harm to individuals, the DOL (including its information systems, programs, and operations), the Federal Government, or national security; and (3) the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the DOL's efforts to respond to the suspected or confirmed breach or to prevent, minimize, or remedy such harm.
3. To another Federal agency or Federal entity, when the DOL determines that information from this System of Records is reasonably necessary to assist the recipient agency or entity in (1) responding to a suspected or confirmed breach or (2) preventing, minimizing, or remedying the risk of harm to individuals, the recipient agency or entity (including its information systems, programs and operations), the Federal Government, or national security, resulting from a suspected or confirmed breach.
Electronic records in this system of records are stored on security measure protected (for example, e-authentication, password, restricted access protocol, etc.) databases, electronically on e-media devices (computer hard drive, magnetic disc, tape, digital media, CD, DVD, etc.). Paper copies of records are stored within secured or locked facilities.
Records may be retrieved by the individual's name, unique identifier assigned by the prime or subcontractor, vaccination status, position, or facility at which the employee will be working on-site.
Records are maintained in file folders and DOL computer systems at applicable locations as set out above under the heading “System Location.” System records will be retained and disposed of according to DOL's records maintenance and disposition schedules as well as any applicable General Records Schedules.
Records in this system of records are safeguarded in accordance with applicable rules and policies, including all applicable DOL automated systems security and access policies. Strict controls have been imposed to minimize the risk of compromising the information that is being stored. Access to the computer systems containing the records in this system of records is limited to those individuals who have a need to know the information for the performance of their official duties and who have appropriate clearances or permissions.
Records in the system are protected from unauthorized access and misuse through a combination of administrative, technical, and physical security measures. Administrative measures include but are not limited to policies that limit system access to individuals within an agency with a legitimate business need, and regular review of security procedures and best practices to enhance security. Technical measures include but are not limited to system design that allows prime contractor and subcontractor employees access only to data for which they are responsible; role-based access controls that allow government employees access only to data regarding contracts awarded by their agency or reporting unit; required use of strong passwords that are frequently changed; and use of encryption for certain data transfers. Physical security measures include but are not limited to the use of data centers which meet government requirements for storage of sensitive data.
Prime and subcontractors enter and review their own data in the system and are responsible for ensuring that those data are correct. If an individual wishes to access their own data in the system after it has been submitted, that individual should consult the System Manager.
Individuals desiring to contest or amend information maintained in the system should direct their request to the above listed System Manager and should include the reason for contesting it and the proposed amendment to the information with supporting information to show how the record is inaccurate. A request for contesting records pertaining to an individual should contain:
• Name, and
• Any other pertinent information to help identify the file.
An individual may request information regarding this system of records or information as to whether the system contains records pertaining to the individual from the System Manager above.
None.
None.
National Aeronautics and Space Administration.
Notice of meeting.
In accordance with the Federal Advisory Committee Act, as amended, the National Aeronautics and Space Administration (NASA) announces a meeting of the Heliophysics Advisory Committee (HPAC). This Committee functions in an advisory capacity to the Director, Heliophysics Division, in the NASA Science Mission Directorate. The meeting will be held for the purpose of soliciting, from the science community and other persons, scientific and technical information relevant to program planning.
Thursday, May 5, 2022, 2:30 p.m.-6:00 p.m.; and Friday, May 6, 2022, 11:00 a.m.-5:00 p.m., Eastern Time.
Mrs. KarShelia Kinard, Science Mission Directorate, NASA Headquarters, Washington, DC 20546, (202) 358-2355, or
Dr. Janet Kozyra, Designated Federal Officer, Science Mission Directorate, NASA Headquarters, Washington, DC 20546, at
This meeting will be virtual and will take place telephonically and via WebEx. Any interested person must use a touch-tone phone to participate in this meeting. Any interested person may call the USA toll free number 1-877-939-1570, or toll number 1-210-234-0110, passcode 9775739, followed by the # sign to participate in this meeting by telephone on both days. The WebEx link is
The agenda for the meeting includes the following topic:
It is imperative that the meeting be held on these dates to accommodate the scheduling priorities of the key participants.
National Science Foundation.
Notice and request for comments.
The National Science Foundation (NSF) is announcing plans to renew clearance of this collection. In accordance with the requirements of the Paperwork Reduction Act of 1995, we are providing opportunity for public comment on this action. After obtaining and considering public comment, NSF will prepare the submission requesting OMB clearance of this collection for no longer than 3 years.
Written comments should be received by May 23, 2022 to be assured of consideration. Comments received after that date will be considered to the extent practicable.
Written comments regarding the information collection and requests for copies of the proposed information collection request should be addressed to Suzanne Plimpton, Reports Clearance Officer, National Science Foundation, 2415 Eisenhower Avenue, Suite 18000W, Alexandria, VA 22314, or by email to
Suzanne Plimpton on (703) 292-7556 or send email to
The second is facilitation of the proposal review process. Since peer review is a key component of NSF's grant-making process, it is imperative that proposals are reviewed by scientists with appropriate expertise. The information collected helps ensure that the proposals are evaluated by specialists who are well versed in appropriate subject matter. This helps maintain a fair and equitable review process.
The third use of the information is program evaluation. The Directorate is committed to investing in a range of substantive areas. With data from this collection, the Directorate can calculate submission rates and funding rates in specific areas of research. Similarly, the information can be used to identify emerging areas of research, evaluate changing infrastructure needs in the research community, and track the amount of international research. As the National Science Foundation is committed to funding cutting-edge science, these factors all have implications for program management.
The Directorate of Biological Sciences has a continuing commitment to monitor its information collection in order to preserve its applicability and necessity. Through periodic updates and revisions, the Directorate ensures that only useful, non-redundant information is collected. These efforts will reduce excessive reporting burdens.
Nuclear Regulatory Commission.
Regulatory guide for trial use; request for comment.
The U.S. Nuclear Regulatory Commission (NRC) is issuing for public comment and for trial use, a new regulatory guide (RG) 1.247, “Acceptability of Probabilistic Risk Assessment Results for Non-Light Water Reactor Risk-Informed Activities.” This new guidance describes one acceptable approach for determining whether the acceptability of the probabilistic risk assessment (PRA) used to support a PRA application is sufficient to provide confidence in the results for non-light water reactors (NLWRs) and risk-informed activities. As a trial RG, this issuance does not provide final staff positions and the guidance within may be revised based on experience obtained by the NRC with its use after its publication.
Submit comments by May 23, 2022. Comments received during this public comment period will be considered and responded to. The public comment period will be followed by a 2-year trial use period. At any time during the trial use period, a member of the public may submit suggestions to
You may submit comments by any of the following methods; however, the NRC encourages electronic comment submission through the Federal rulemaking website:
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For additional direction on accessing information and submitting comments, see “Obtaining Information and Submitting Comments” in the
Anders Gilbertson, telephone: 301-415-1541, email:
Please refer to Docket ID NRC-2022-0052 when contacting the NRC about the availability of information regarding this action. You may obtain publicly available information related to this action, by any of the following methods:
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The NRC encourages electronic comment submission through the Federal rulemaking website (
The NRC cautions you not to include identifying or contact information that you do not want to be publicly disclosed in your comment submission. The NRC posts all comment submissions at
If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that the NRC does not routinely edit comment submissions to remove such information before making the comment submissions available to the public or entering the comment submissions into ADAMS.
The NRC is issuing this new trial RG in the NRC's “Regulatory Guide” series and requesting public comment. This series was developed to describe methods that are acceptable to the NRC staff for implementing specific parts of the agency's regulations, to explain techniques that the staff uses in evaluating specific issues or postulated events, and to describe information that the staff needs in its review of applications for permits and licenses.
This RG titled, “Acceptability of Probabilistic Risk Assessment Results for Non-Light Water Reactor Risk-Informed Activities,” is designated as a trial use RG 1.247 and is available in ADAMS under Accession No. ML21235A008. It describes one acceptable approach for determining whether the acceptability of the PRA used to support an application is sufficient to provide confidence in the results, such that the PRA can be used in regulatory decision-making for NLWRs for implementing the requirements in Part 50 and 52 of title 10 of the
It is issued as a trial RG since the staff has determined that additional implementation experience would better inform draft and final staff positions. Such revisions would involve the development of a draft RG that would include lessons learned and public comments from use of this trial RG. The draft RG would also be available for public comment prior to issuance of a final RG. Therefore, the staff positions included in this trial RG could be different that the ones that would be included in the draft and final RG.
The staff is also issuing a regulatory analysis (ADAMS Accession No. ML21235A010). The staff develops a regulatory analysis to assess the value of issuing this new regulatory guide as well as alternative courses of action.
This trial RG does not establish a staff position for purposes of 10 CFR 50.109, “Backfitting” or constitute forward fitting as that term is defined and described in NRC Management Directive
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
License amendment and exemptions; issuance.
The U.S. Nuclear Regulatory Commission (NRC) is issuing exemptions from NRC regulations and associated license amendment related to requests from Westinghouse Electric Company, LLC (WEC) and US Ecology, Inc. (USEI). WEC requested NRC approval for an alternate disposal and related exemptions for specified low-activity radioactive waste from the Columbia Fuel Fabrication Facility (CFFF) in Hopkins, South Carolina containing byproduct material and special nuclear material (SNM) under License Number SNM-1107. Additionally, the NRC is approving exemptions requested by USEI from the applicable licensing requirements to allow USEI to receive and dispose of the material from CFFF without an NRC license. The USEI disposal facility, located near Grand View, Idaho, is a Subtitle C Resource Conservation and Recovery Act (RCRA) hazardous waste disposal facility permitted by the State of Idaho to receive low-level radioactive waste. Approval of the alternate disposal request from WEC and the exemptions and license amendment requested by WEC, and associated exemptions requested by USEI would allow WEC to transfer the specific waste from CFFF to USEI for disposal.
The exemptions are effective on March 24, 2022.
Please refer to Docket ID NRC-2022-0047 when contacting the NRC about the availability of information regarding this document. You may obtain publicly available information related to this document using any of the following methods:
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Jenny Tobin, Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-2328, email:
Westinghouse Electric Company, LLC (WEC) holds a special nuclear materials (SNM) License Number SNM-1107 under part 70 of title 10 of the
The proposed action would approve the alternate disposal request and provide exemptions from 10 CFR 70.3 and 10 CFR 30.3 and an associated WEC license amendment, allowing WEC to transfer and USEI to receive and dispose of waste containing byproduct material and SNM. The volumetrically contaminated waste includes calcium fluoride (CaF
As proposed, this waste would be transported from CFFF in South Carolina to the USEI facility near Grand View, Idaho using a combination of trucks and railcars. The USEI facility is a RCRA Subtitle C hazardous waste disposal facility permitted by the State of Idaho.
Pursuant to 10 CFR 70.17 and 10 CFR 30.11, the Commission may, upon application of any interested person or upon its own initiative, grant such exemptions from the requirements of 10 CFR part 70 and part 30 respectively, as
The proposal provides that the material described in this notice would be transported and disposed of in compliance with Federal, State, and local regulations. Further, as previously noted, the NRC is authorized to grant exemptions from 10 CFR parts 30 and 70. Granting these exemptions are also not contrary to the Atomic Energy Act of 1954, as amended, or other regulatory requirements or law. Therefore, such disposal is not otherwise contrary to NRC requirements, and is otherwise authorized by law.
NRC staff reviewed the information provided by WEC to support its 10 CFR 20.2002 alternate disposal request and the specific exemptions from 10 CFR 30.3 and 10 CFR 70.3 and the associated license amendment in order to dispose of the specified material associated with cleanup activities at CFFF. The NRC staff concluded that the requested disposal of waste containing byproduct material and SNM is acceptable under 10 CFR 20.2002. Details provided in this request, in combination with appropriate references to past approvals of similar procedures and material from the same site, provide an adequate description of the waste and demonstrate that the proposed manner and conditions of waste disposal would be protective of public health and safety and security and would not endanger property. In particular, under the alternate disposal request, public doses would be a fraction of the natural background radiation dose and a fraction of the annual public dose limit. NRC staff also notes that the request is also subject to regulation under RCRA. Lastly, because of the presence of SNM, the NRC evaluated potential criticality in its safety evaluation report and found no concerns. Therefore, the NRC concludes that issuance of the exemption will not endanger life, property, or the common defense and security.
Issuance of the exemptions to WEC and USEI is in the public interest because it provides for the efficient and safe disposal for the subject waste material, facilitates the decommissioning of the CFFF site consistent with the consent agreement between CFFF and the South Carolina Department of Health and Environmental Control, and conserves low-level radioactive waste disposal capacity at licensed low-level radioactive disposal sites while ensuring that the material being considered is disposed of safely in a regulated facility. Therefore, based upon the evaluation previously noted, exemptions are appropriate pursuant to 10 CFR 30.11 and 10 CFR 70.17.
As required by 10 CFR 51.21, the NRC performed an environmental assessment (EA) that analyzes the environmental impacts of the proposed exemptions in accordance with the National Environmental Policy Act of 1969 and NRC implementing regulations in 10 CFR part 51. Based on the conclusions of the EA, the NRC staff has determined that there is no need to prepare an environmental impact statement for the proposed exemptions and has issued a finding of no significant impact (FONSI). The EA and FONSI were published in the
Accordingly, the Commission has determined that, pursuant to 10 CFR 70.17 and 10 CFR 30.11, exemptions for WEC and USEI are authorized by law, will not present an undue risk to the public health and safety, are consistent with the common defense and security, and are in the public interest. Therefore, the Commission hereby grants WEC and USEI exemptions from 10 CFR 70.3 and 10 CFR 30.3 to allow WEC to transfer certain low-activity radioactive materials, including byproduct and SNM, from the WEC CFFF for disposal at the USEI disposal facility located near Grand View, Idaho, and issues WEC a conforming license amendment.
For the Nuclear Regulatory Commission.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange proposes certain amendments to the preamble to Rule 9217. 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 III 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 certain amendments to the preamble to Rule 9217.
The preamble to current Rule 9217 consists of two paragraphs. The first provides that any member organization of covered person
The Exchange proposes to add two additional paragraphs to the preamble based on the preamble to the version of Rule 9217 adopted by the Exchange's affiliate NYSE Arca, Inc. (“NYSE Arca”) and to reorder the paragraphs as subsections (a) through (d), as follows.
The current first paragraph of the preamble to Rule 9217 would become new subsection (a). The text would be unchanged except that the Exchange would add “, not to exceed $5,000,” after fine to clarify that a minor rule fine on the Exchange cannot exceed $5,000.
The Exchange would add a new subsection (b) that would provide that Regulatory Staff designated by the Exchange shall have the authority to impose a fine pursuant to this Rule. Proposed Rule 9217(b) is identical to NYSE Arca Rule 10.9217(b).
The Exchange would also add the following text as new subsection (c) to Rule 9217:
Any person or organization found in violation of a minor rule is not required to report such violation on SEC Form BD or Form U-4 if the sanction imposed consists of a fine not exceeding $2,500 and the sanctioned person or organization has not sought an adjudication, including a hearing, or otherwise exhausted the administrative remedies available with respect to the matter. Any fine imposed in excess of $2,500 is subject to current rather than quarterly reporting to the Commission pursuant to Rule 19d-1 under the Act.
Proposed subsection (c) is identical to NYSE Arca Rule 10.9217(c).
Finally, the current second paragraph of the preamble to Rule 9217 would become new subsection (d). The text of proposed Rule 9217(d) would be unchanged.
The proposed rule change is consistent with Section 6(b) of the Act,
Minor rule fines provide a meaningful sanction for minor or technical violations of rules when the conduct at issue does not warrant stronger, immediately reportable disciplinary sanctions. The inclusion of a rule in Rule 9217 does not minimize the importance of compliance with the rule, nor does it preclude the Exchange from choosing to pursue violations of eligible rules through formal disciplinary action if the nature of the violations or prior disciplinary history warrants more significant sanctions. The option to impose a minor rule sanction gives the Exchange additional flexibility to administer its enforcement program in the most effective and efficient manner while still fully meeting the Exchange's remedial objectives in addressing violative conduct.
The Exchange believes that harmonizing the preamble to Rule 9217 with that of its affiliates would remove impediments to and perfect the mechanism of a free and open market and a national market system by a providing greater harmonization between Exchange rules and those of its affiliates in connection with minor rule fines, thereby fostering cooperation and coordination with persons engaged in facilitating transactions in securities and will remove impediments to and perfect the mechanism of a free and open market and a national market system. Moreover, by adopting the same applicable minor rule standards for violations of those standards as its affiliates, the Exchange would promote regulatory consistency.
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 change is not designed to address any competitive issue but rather to align the Exchange's rule setting forth violations eligible for a minor rule fine more closely with that of its affiliates.
No written comments were solicited or received with respect to the proposed rule change.
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.
The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
As stated above, the Exchange proposes certain amendments to the preamble of Rule 9217. Specifically, the Exchange proposes to add two additional paragraphs to the preamble based on the preamble of NYSE Arca, its affiliate exchange, add clarifying language regarding the maximum fine amount for violations appropriate for disposition under Rule 9216(b), and reorder the paragraphs to the preamble of Rule 9217. The Commission believes that Rule 9217 is an effective way to discipline a member for a minor violation of a rule. The Commission finds that the Exchange's proposal to amend the preamble is consistent with the Act because it may help the Exchange's ability to better carry out its oversight and enforcement responsibilities. The Commission also believes that the Exchange's proposal to add clarifying language regarding the maximum fine amount for violations appropriate for disposition under Rule 9216(b) and to reorder the paragraphs in the preamble is consistent with the Act because such changes will add clarity and accuracy to the Exchange's rules.
In approving the propose rule change, the Commission in no way minimizes the importance of compliance with the Exchange's rules and all other rules subject to fines under Rule 9217. The Commission believes that a violation of any self-regulatory organization's rules, as well as Commission rules, is a serious matter. However, Rules 9216(b) and 9217 provide a reasonable means of addressing rule violations that may not rise to the level of requiring formal disciplinary proceedings, while providing greater flexibility in handling certain violations. The Commission expects that the Exchange will continue to conduct surveillance with due diligence and make a determination based on its findings, on a case-by-case basis, whether a fine of more or less than the recommended amount is appropriate for a violation under Rule 9217 or whether a violation requires formal disciplinary action.
For the same reasons discussed above, the Commission finds good cause, 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 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
Cboe EDGA Exchange, Inc. (“EDGA” or the “Exchange”) is filing with the Securities and Exchange Commission (the “Commission”) a proposal to extend the pilot related to the market-wide circuit breaker in Rule 11.16 to April 18, 2022. 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.
EDGA Rules 11.16(a) through (d), (f) and (g) describe the methodology for determining when to halt trading in all stocks due to extraordinary market volatility,
The market-wide circuit breaker under Rule 11.16 provides an important, automatic mechanism that is invoked to promote stability and investor confidence during a period of significant stress when securities markets experience extreme broad-based declines. All U.S. equity exchanges and FINRA adopted uniform rules on a pilot basis relating to market-wide circuit breakers in 2012 (“MWCB Rules”), which are designed to slow the effects of extreme price movement through coordinated trading halts across securities markets when severe price declines reach levels that may exhaust market liquidity.
Pursuant to Rule 11.16, a market-wide trading halt will be triggered if the S&P 500 Index declines in price by specified percentages from the prior day's closing price of that index. Currently, the triggers are set at three circuit breaker thresholds: 7% (Level 1), 13% (Level 2), and 20% (Level 3). A market decline that triggers a Level 1 or Level 2 halt after 9:30 a.m. ET and before 3:25 p.m. ET would halt market-wide trading for 15 minutes, while a similar market decline at or after 3:25 p.m. ET would not halt market-wide trading. A market decline that triggers a Level 3 halt, at any time during the trading day, would halt market-wide trading for the remainder of the trading day.
In the Spring of 2020, at the outset of the worldwide COVID-19 pandemic, U.S. equities markets experienced four MWCB Level 1 halts, on March 9, 12, 16, and 18, 2020. In each instance, the markets halted as intended upon a 7% drop in the S&P 500 Index, and resumed as intended 15 minutes later.
In response to these events, the previously-convened MWCB Taskforce (“Taskforce”) reviewed the March 2020 halts and considered whether any immediate changes to the MWCB mechanism should be made. The Taskforce, consisting of representatives from equities exchanges, futures exchanges, FINRA, broker-dealers, and other market participants, had been assembled in early 2020 to consider more generally potential changes to the MWCB mechanism. The Taskforce held ten meetings in the Spring and Summer of 2020 that were attended by Commission staff to consider, among other things: (1) Whether to retain the S&P 500 Index as the standard for measuring market declines; (2) whether halts that occur shortly after the 9:30 a.m. market open cause more harm than good; and (3) what additional testing of the MWCB mechanism should be done.
After considering data and anecdotal reports of market participants' experiences during the March 2020 MWCB events, the Taskforce did not recommend immediate changes be made to the use of the S&P 500 Index as the reference price against which market declines are measured, or to the current MWCB mechanism which permits halts even shortly after the 9:30 a.m. market open. The Taskforce recommended creating a process for a backup reference price in the event that the S&P 500 Index becomes unavailable, and enhancing functional MWCB testing. The Taskforce also asked CME to consider modifying its rules to enter into a limit-down state in the futures pre-market after a 7% decline instead of 5%.
On September 17, 2020, the Director of the Division of Trading and Markets requested that the equities exchanges and FINRA prepare a more complete study of the design and operation of the MWCB mechanism and the LULD Plan during the period of volatility in the Spring of 2020. In response to the request, the SROs created a MWCB “Working Group” composed of SRO representatives and industry advisers that included members of the advisory committees to both the LULD Plan and the NMS Plans governing the collection, consolidation, and dissemination of last-sale transaction reports and quotations in NMS Stocks. The Working Group met regularly from September 2020 through March 2021 to consider the Commission's request, review data, and compile its study. The Working Group's efforts in this respect incorporated and built on the work of an MWCB Task Force. The Working Group submitted its study to the Commission on March 31, 2021 (the “Study”).
The SROs have since worked on a proposed a rule change to make the Pilot Rules permanent, consistent with the Working Group's recommendations. New York Stock Exchange (“NYSE”) filed such proposed rule change on July 16, 2021.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Exchange also believes that the proposed rule change promotes just and equitable principles of trade in that it promotes transparency and uniformity across markets concerning when and how to halt trading in all stocks as a result of extraordinary market volatility. Based on the foregoing, the Exchange believes the benefits to market participants from the MWCB under Rule 11.16 should continue on a pilot basis because the MWCB will promote fair and orderly markets, and protect investors and the public interest.
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 because the proposal would ensure the continued, uninterrupted operation of a consistent mechanism to halt trading across the U.S. markets while the Exchange and the other SROs finalize their proposals to make the Pilot Rules permanent. Further, the Exchange understands that FINRA and other national securities exchanges will file proposals to extend their rules regarding the market-wide circuit breaker pilot following Commission approval of the NYSE proposal. Thus, the proposed rule change will help to ensure consistency across market centers without implicating any competitive issues.
No written comments were either solicited or received on the proposed rule change.
Because the foregoing proposed rule change does not:
A. Significantly affect the protection of investors or the public interest;
B. impose any significant burden on competition; and
C. become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed under Rule 19b-4(f)(6)
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the
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.
You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CboeEDGA-2022-006 and should be submitted on or before
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On February 4, 2022, The Nasdaq Stock Market LLC (“Exchange”) 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 is extending the 45-day time period for Commission action on the proposed rule change. 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.
Accordingly, pursuant to Section 19(b)(2) of the Act,
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On December 6, 2021, Cboe EDGX Exchange, Inc. (“Exchange” or “EDGX”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1)
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 MRVP in Rule 25.3 in connection with certain minor rule violations and applicable fines. Rule 25.3 provides for disposition of specific violations through assessment of fines in lieu of conducting a formal disciplinary proceeding.
Specifically, the proposed rule change amends Rule 25.3 by: (1) Eliminating violations of Rule 22.6(a) (regarding Market Maker firm quotes) in Rule 25.3(c), which currently imposes fines for violations of Rules 22.6(a) through (c) (Market Maker Quotations); (2) relocating violations of Rule 22.6(b) (regarding Market Maker initial quote volume requirements) and Rule 22.6(c) (regarding Market Maker two-sided quote requirements) to Rule 25.3(d),
First, the proposed rule change eliminates the violation of 22.6(a) currently in Rule 25.3(c) of the MRVP. Specifically, Rule 22.6(a) requires a Market Maker to submit bids and offers that are firm for all orders. The Exchange no longer believes violations of Rule 22.6(a) to be minor in nature and therefore proposes to remove it from the list of rules in Rule 25.3 eligible for a minor rule fine disposition. Particularly, the Exchange believes that violations of Rule 22.6(a), to the extent they would occur,
The proposed rule change next relocates violations of Rules 22.6(b)
The Exchange notes that, under current Rule 25.3(c), violations of the Market Maker initial quote volume requirement (Rule 22.6(b)) and violations of the Market Maker two-sided quote requirement (Rule 22.6(c)) are to be treated separately for purposes of determining the number of cumulative violations under the applicable fine schedule. For example, if during the same period, a Market Maker violates the initial quote volume requirement five times and also violates the two-sided quote requirement four times, the current provision would provide for two separate Letters of Caution (one for the initial quote size violations and one for the two-sided quote violations).
Further, the Exchange notes that Rule 25.3(d) currently provides that violations occurring during a calendar month are aggregated and sanctioned as a single offense. In line with the proposed change to allow the Exchange the flexibility to choose to aggregate violations across different sections governing market maker quoting obligations (upon the proposed relocation of the Market Maker two-sided quote and initial quote volume requirements to Rule 25.3(d)), the proposed rule change removes this language. Without the explicit requirement that the Exchange must aggregate and sanction violations as a single offense, the Exchange is free to determine whether or not violations of a Market Maker's quoting obligations across different sections, and across different review periods (
The proposed rule change also updates the fine schedule heading in Rule 25.3(d) to reflect that fines may be imposed per the number of offenses, rather than violations, within one period (
Ultimately, the Exchange believes that the proposed flexibility to choose whether to aggregate violations of a Market Maker's quoting obligations across sections will allow it to administer discipline in a manner it deems most appropriate. For example, if a Market Maker violates its continuous quoting obligation pursuant to Rule 22.6(d) on multiple trading days, January 27, 28 and 31, 2022, due to a systemic error, and also violates the initial quote volume requirement pursuant to Rule 22.6(b) multiple times during the next trading day, February 1,
The proposed rule change next amends the fine schedule in Rule 25.3(d) (Rule 25.3(c), as amended)
For the first violation during any rolling 24-month period (
The proposed rule change updates the fine schedule to provide that, during any rolling 24-month period, the Exchange may continue to give a Letter of Caution for a first offense,
The Exchange believes it is appropriate to increase the fine amounts for a second and third offense and to remove the fine imposed for a fourth offense and proceed with formal disciplinary proceedings for subsequent offenses following a third offense. Particularly, the Exchange believes that applying a higher fine per second and third offenses in connection with a Market Maker's quoting obligations
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
The Exchange believes that the proposed rule change to remove the firm quote requirement, which it no longer considers violations of which to be minor in nature, as eligible for a minor rule fine disposition under its MRVP, will assist the Exchange in preventing fraudulent and manipulative acts and practices and promoting just and equitable principles of trade, and will serve to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest. Particularly, the Exchange believes that violations of the firm quote requirement may directly impact trading on the Exchange, maintenance of a fair and orderly market, and customer protection. As such, the Exchange does not believe violations of this rule to be minor in nature and, instead, should be handled under its formal disciplinary rules, rather than imposing fines pursuant to its MRVP. Also, and as stated above, the proposed rule change is consistent with the MRVP of its affiliated options exchange, Cboe Options, which, for the same reasons provided herein, no longer includes violations of the firm quote requirement as eligible for a minor rule disposition on Cboe Options.
The Exchange believes that the proposed rule change to apply the same MRVP fine schedule for violations of a Market Makers quoting obligations pursuant to Rule 22.6 (
Additionally, the Exchange believes the proposed rule change will serve to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest because it is intended to harmonize the Exchange's MRVP in connection with Market Maker quoting obligations with that of Cboe Options, as well as BZX Options and C2 Options (to the extent possible),
The Exchange also believes that the proposed rule change, in connection with the fine schedule for violations of a Market Maker's quoting obligations in Rule 25.3(d), as proposed, to increase the fine amounts for a second and third offense
The Exchange further believes that the proposed rule changes to Rule 25.3 are consistent with Section 6(b)(6) of the Act,
The Exchange also believes that the proposed change is designed to provide a fair procedure for the disciplining of members and persons associated with members, consistent with Sections 6(b)(7) and 6(d) of the Act.
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 not intended to address competitive issues but rather is concerned solely with amending its MRVP in connection with rules eligible for a minor rule fine disposition and with the fine schedule for Market Maker failures to meet their quoting obligations. The Exchange believes the proposed rule changes, overall, will strengthen the Exchange's ability to carry out its oversight and enforcement functions and deter potential violative conduct.
The Exchange neither solicited nor received comments on the proposed rule change.
The Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
As stated above, the Exchange proposes to amend Rule 25.3 by eliminating violations of Rule 22.6(a) from Rule 25.3(c) and the Exchange's MRVP; relocating violations of Rule 22.6(b) and Rule 22.6(c) to proposed Rule 25.3(c) so that a single MRVP provision governs violations of a Market Maker's quoting obligations; amending the current manner of calculating violations of Market Marker rules, including deleting a provision that requires violations of Market Maker obligations occurring during a calendar month be aggregated and sanctioned as a single offense; and updating the fine schedule applicable to minor rule violations related to Market Maker quoting obligations.
The Commission believes that Rule 25.3 is an effective way to discipline a member for a minor violation of a rule. More specifically, the Commission finds that the Exchange's proposal, as modified by Amendment No. 1, to eliminate Rule 22.6(a), a Market Maker quoting obligation rule, from the MRVP is consistent with the Act because it should help the Exchange enforce compliance with, and provide appropriate discipline for, violation of a rule that the Exchange no longer believes is minor in nature. Combining all the Market Maker quoting obligation rules together in one provision of Rule 25.3 will also bring clarity to the Rule. The Commission also finds that amending the current manner of calculating violations of Market Maker rules is appropriate because the Exchange can already aggregate violations under Rule 8.15 under certain circumstances. Finally, the Commission finds that amending the associated fee schedule is consistent with the Act because it may help the Exchange's ability to better carry out its oversight and enforcement responsibilities by levying appropriate fines on Market Makers for violations of the Market Marker rules.
In approving the propose rule change, as modified by Amendment No. 1, the Commission in no way minimizes the importance of compliance with the Exchange's rules and all other rules subject to fines under Rule 25.3. The Commission believes that a violation of any self-regulatory organization's rules, as well as Commission rules, is a serious matter. However, Rule 25.3 provides a reasonable means of addressing rule violations that may not rise to the level of requiring formal disciplinary proceedings, while providing greater flexibility in handling certain violations. The Commission expects that the Exchange will continue to conduct surveillance with due diligence and make a determination based on its findings, on a case-by-case basis, whether a fine of more or less than the recommended amount is appropriate for a violation under Rule 25.3 or whether a violation requires formal disciplinary action.
Interested persons are invited to submit written views, data, and arguments concerning whether Amendment No. 1 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.
The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 1, prior to the thirtieth day after the date of publication of notice of the filing of Amendment No. 1 in the
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Securities and Exchange Commission (“Commission” or “SEC”).
Notice.
Notice of application for an order under sections 17(d) and 57(i) of the Investment Company Act of 1940 (the “Act”) and rule 17d-1 under the Act to permit certain joint transactions otherwise prohibited by sections 17(d) and 57(a)(4) of the Act and rule 17d-1 under the Act.
Applicants request an order (“Order”) to permit certain business development companies (“BDCs”) and closed-end management investment companies to co-invest in portfolio companies with each other and with affiliated investment entities.
BlackRock Capital Investment Corporation (“BCIC”), BlackRock Credit Strategies Fund (“BCSF”), BlackRock Direct Lending Corp. (“BDLC”), BlackRock Private Credit Fund (“BPCF”), BlackRock Private Investments Fund (“BPIF”), BPIF Subsidiary, LLC, BlackRock Capital Investment Advisors, LLC (“BlackRock Capital Advisor”), BlackRock Advisors, LLC (“BAL”), Middle Market Senior Fund, L.P., 1824 Private Equity Feeder, L.P., 1824 Private Equity Fund, L.P., 1885 Private Opportunities Fund, L.P., ABR PEP I, Ltd., ABR PEP II, Ltd., APO Global Healthcare Cayman, Ltd., APO Global Healthcare HOLDCO SCSP, BEL45 Private Opportunities Fund, L.P., BlackRock 2019 Evergreen Private Opportunities Feeder SCSP, BlackRock 2019 Evergreen Private Opportunities Master SCSP, BlackRock APO Global Healthcare Private Equity Fund, S.C.A. SICAV-RAIF, BlackRock ASF Private Opportunities Fund, L.P., BlackRock Diversified Private Debt USPC Holdings LP, BlackRock Diversified Private Opportunities Fund, L.P., BlackRock Diversified Private Opportunities Fund II, L.P., BlackRock ERI Private Opportunities Feeder SCSP, BlackRock ERI Private Opportunities Master SCSP, BlackRock Gemini II Private Opportunities Fund, LP, BlackRock Gemini Private Opportunities Fund, L.P., BlackRock Growth Equity Fund Aggregator LP, BlackRock Growth Equity Fund LP, BlackRock Growth Equity Fund (LUX) SCSP, BlackRock Growth Equity Fund Holdings (LUX) SCSP, BlackRock GSA Private Opportunities Feeder Fund, L.P., BlackRock GSA Private Opportunities Fund, L.P., BlackRock HAJAR Feeder Fund, L.P., BlackRock HAJAR Fund, L.P., BlackRock Healthcare Opportunities Fund (Delaware), L.P., BlackRock Healthcare Opportunities Fund, L.P., BlackRock Heartland Private Opportunities Fund, L.P., BlackRock Inverwood Private Opportunities Fund, L.P, BlackRock JI Private Equity Solutions, L.P., BlackRock McKinney Opportunities Fund Cayman, Ltd., BlackRock MD POF Cayman, Ltd., BlackRock MD Private Opportunities Feeder Fund, L.P., BlackRock MD Private Opportunities Fund, L.P., BlackRock MSV Private Opportunities Fund, L.P., BlackRock Private Equity Co-Investments 2021 Aggregator LP, BlackRock Private Equity Co-Investments 2021 LP, BlackRock Private Equity Co-Investments 2021 (LUX) SCSP, BlackRock Private Equity Co-Investments 2021 Holdings (LUX) SCSP, BlackRock Private Equity Impact Capital 60-40 LP, BlackRock Private Equity Impact Capital 60-40 (LUX) SCSP, BlackRock Private Equity Impact Capital 100 LP, BlackRock Private Equity Impact Capital 100 (LUX) SCSP, BlackRock Private Equity Impact Capital Aggregator LP, BlackRock Private Equity Impact Capital Holdings (LUX) SCSP, BlackRock Private Equity Primaries 2021 Aggregator LP, BlackRock Private Equity Primaries 2021 Holdings (Cayman) LP, BlackRock Private Equity Primaries 2021 LP, BlackRock Private Equity Primaries 2021 (LUX) SCSP, BlackRock Private Opportunities Fund IV (Cayman), L.P., BlackRock Private Opportunities Fund IV (Employees),
The application was filed on August 25, 2021, and amended on March 17, 2022.
An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by emailing the Commission's Secretary at
The Commission:
Jean E. Minarick, Senior Counsel, or Terri Jordan, Branch Chief, at (202) 551-6825 (Division of Investment Management, Chief Counsel's Office).
For Applicants' representations, legal analysis, and conditions, please refer to Applicants' first amended and restated application, dated March 17, 2022, which may be obtained via the Commission's website by searching for the file number at the top of this document, or for an Applicant using the Company name search field, on the SEC's EDGAR system. The SEC's EDGAR system may be searched at
1. The Applicants request an Order of the Commission under sections 17(d) and 57(i) of the Act and rule 17d-1 thereunder to permit, subject to the terms and conditions set forth in the application (the “Conditions”), a Regulated Fund
“Adviser” means BlackRock Capital Advisor, TCP and SVOF/MM and any Future Adviser. The term Adviser does not include BAL or any other investment adviser to an Affiliated Fund or a Regulated Fund whose sub-adviser is an Adviser (a “Sub-Advised Fund”), except that such investment adviser is deemed to be an Adviser for purposes of Conditions 2(c)(iv), 13 and 14 only. BAL and any investment adviser to a Sub-Advised Fund will not be the source of any Potential Co-Investment Transactions under the Order.
“Future Adviser” means any future investment adviser that (i) is controlled by BlackRock Capital Advisor, (ii) (a) is registered as an investment adviser under the Advisers Act (as defined below) or (b) is a relying adviser of an investment adviser that is registered under the Advisers Act and that is controlled by BlackRock Capital Advisor, and (iii) is not a Regulated Fund or a subsidiary of a Regulated Fund.
“BDC Downstream Fund” means, with respect to any Regulated Fund that is a BDC, an entity (i) that the BDC directly or indirectly controls, (ii) that is not controlled by any person other than the BDC (except a person that indirectly controls the entity solely because it controls the BDC), (iii) that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act, (iv) whose investment adviser or sub-adviser is an Adviser, (v) that is not a Wholly-Owned Investment Sub and (vi) that intends to participate in the Co-Investment Program.
2. The Order sought by the application would supersede the Prior Order (as defined below) issued by the Commission to BlackRock Capital Investment Corporation,
3. BCIC is a Delaware corporation organized as a closed-end management investment company that has elected to be regulated as a BDC under the Act.
“Independent Party” means, with respect to a BDC Downstream Fund, (i) if the BDC Downstream Fund has a board of directors (or the equivalent), the board or (ii) if the BDC Downstream Fund does not have a board of directors (or the equivalent), a transaction committee or advisory committee of the BDC Downstream Fund.
4. BCSF, a Delaware statutory trust, is registered as a non-diversified, closed-end management investment company under the Act. BCSF is managed by a Board, a majority of which are Independent Directors.
5. BDLC is a closed-end management investment company incorporated in Delaware that has elected to be regulated as a BDC under the Act. BDLC is managed by a five member board of directors, three of whom are Independent Directors.
6. BPCF is a Delaware statutory trust organized as a closed-end management investment company that intends to elect to be regulated as a BDC under the Act. BPCF currently is managed by its sole originating trustee.
7. BPIF, a Delaware statutory trust, is registered as a non-diversified, closed-end management investment company under the Act. BPIF is managed by a Board of trustees, a majority of which are Independent Directors.
8. TCPC is a BDC incorporated in Delaware and its common stock is traded on The NASDAQ Global Select Market. TCPC's business and affairs are managed under the direction of its Board. TCPC has an eight-member Board, six of whom are Independent Directors.
9. SVCP is a limited liability company under the laws of the State of Delaware. SVCP is a wholly-owned subsidiary of TCPC.
10. TCPC Funding and TCP Funding II are limited liability companies under the laws of the State of Delaware and are wholly-owned subsidiaries of TCPC.
10. TCPC SBIC is a limited partnership under the laws of the state of Delaware. SVCP directly owns a 100% limited partnership interest in TCPC SBIC. TCPC SBIC will not be registered under the Act based on the exclusion from the definition of investment company contained in section 3(c)(7). TCPC SBIC is a wholly-owned subsidiary that is licensed by the Small Business Administration (the “SBA”) to operate under the Small Business Investment Act of 1958 (the “SBA Act”) as a small business investment company (such a subsidiary, an “SBIC Subsidiary”).
12. TCPC SBIC GP is a limited liability company under the laws of the state of Delaware, and is a wholly-owned subsidiary of SVCP, which is the sole member of the TCPC SBIC GP. TCPC SBIC GP is the sole general partner of TCPC SBIC.
13. TCPC effectively controls TCPC SBIC because TCPC SBIC GP is a wholly-owned subsidiary of SVCP.
14. BlackRock Capital Advisor is an indirect wholly-owned subsidiary of BlackRock, Inc., which is a New York based global investment management firm. BlackRock Capital Advisor is a Delaware limited liability company and an investment adviser that is registered with the Commission under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). BlackRock Capital Advisor serves as the investment adviser to BCIC and BDLC and sub-adviser to BCSF and BPIF.
15. BAL is a Delaware limited liability company that is registered with the Commission as an investment adviser under the Advisers Act. BAL serves as the investment adviser to BCSF and BPIF and may serve as the investment adviser to Future Regulated Funds and future Affiliated Funds that are sub-advised by an Adviser. BAL is an indirect wholly-owned subsidiary of BlackRock, Inc.
16. TCP is a wholly-owned subsidiary of BlackRock Capital Advisor. TCP, a Delaware limited liability company registered under the Advisers Act, serves as the investment adviser to TCPC, TCPC SBIC and certain Existing Affiliated Funds.
17. SVOF/MM is a controlled subsidiary of TCP. SVOF/MM is an investment adviser registered under the Advisers Act. Certain classes and series of SVOF/MM also serve as managing member, sub-adviser and/or investment adviser to certain Existing Affiliated Funds.
18. The Existing Affiliated Funds are the investment funds identified in Appendix A to the application. Applicants represent that each Existing Affiliated Fund is a separate and distinct legal entity and would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act. TCP is the investment adviser to 54 of the Existing Affiliated Funds. Series I of SVOF/MM is the investment adviser to 3 of the Existing Affiliated Funds and BlackRock Capital Advisor is the investment adviser or sub-adviser to 197 of the Existing Affiliated Funds. Series I of SVOF/MM also serves as sub-adviser to one Existing Affiliated Fund of which TCP is the investment adviser.
19. Applicants state that a Regulated Fund may, from time to time, form one or more Wholly-Owned Investment Subs.
20. Applicants represent that the Advisers have established processes for ensuring compliance with the Prior Order and for allocating initial investment opportunities, opportunities for subsequent investments in an issuer and dispositions of securities holdings reasonably designed to treat all clients fairly and equitably. Further, Applicants represent that these processes will be extended and modified in a manner reasonably designed to ensure that the additional transactions permitted under the Order will both (i) be fair and equitable to the Regulated Funds and the Affiliated Funds and (ii) comply with the Conditions.
21. Specifically, Applicants state that the Advisers are organized and managed such that the individual portfolio managers, as well as the teams and committees of portfolio managers, analysts and senior management (“Investment Teams” and “Investment Committees”), responsible for evaluating investment opportunities and making investment decisions on behalf of clients are promptly notified of the opportunities. If the Order is granted, the Advisers will establish, maintain and implement policies and procedures reasonably designed to ensure that, when such opportunities arise, the Advisers to the relevant Regulated
22. The Adviser to each applicable Regulated Fund will then make an independent determination of the appropriateness of the investment for the Regulated Fund in light of the Regulated Fund's then-current circumstances. If the Adviser to a Regulated Fund deems the Regulated Fund's participation in such Potential Co-Investment Transaction to be appropriate, then it will formulate a recommendation regarding the proposed order amount for the Regulated Fund.
23. Applicants state that, for each Regulated Fund and Affiliated Fund whose Adviser recommends participating in a Potential Co-Investment Transaction, the Adviser will formulate a proposed order amount. Prior to the External Submission (as defined below), each proposed order amount may be reviewed and adjusted, in accordance with the Advisers' written allocation policies and procedures, by an allocation committee for the area in question (
24. If the aggregate Internal Orders for a Potential Co-Investment Transaction do not exceed the size of the investment opportunity immediately prior to the submission of the orders to the underwriter, broker, dealer or issuer, as applicable (the “External Submission”), then each Internal Order will be fulfilled as placed. If, on the other hand, the aggregate Internal Orders for a Potential Co-Investment Transaction exceed the size of the investment opportunity immediately prior to the External Submission, then the allocation of the opportunity will be made pro rata on the basis of the size of the Internal Orders.
“Eligible Directors” means, with respect to a Regulated Fund and a Potential Co-Investment Transaction, the members of the Regulated Fund's Board eligible to vote on that Potential Co-Investment Transaction under section 57(o) of the Act (treating any registered investment company or series thereof as a BDC for this purpose).
25. Applicants state that from time to time the Regulated Funds and Affiliated Funds may have opportunities to make Follow-On Investments
26. Applicants propose that Follow-On Investments would be divided into two categories depending on whether the prior investment was a Co-Investment Transaction or a Pre-Boarding Investment.
27. A Regulated Fund would be permitted to invest in Standard Review Follow-Ons either with the approval of the Required Majority under Condition 8(c) or without Board approval under Condition 8(b) if it is (i) a Pro Rata Follow-On Investment
“JT No-Action Letters” means SMC Capital, Inc., SEC No-Action Letter (pub. avail. Sept. 5, 1995) and Massachusetts Mutual Life Insurance Company, SEC No-Action Letter (pub. avail. June 7, 2000).
28. Applicants propose that Dispositions
29. A Regulated Fund may participate in a Standard Review Disposition either with the approval of the Required Majority under Condition 6(d) or without Board approval under Condition 6(c) if (i) the Disposition is a Pro Rata Disposition
30. Applicants represent that under the terms and Conditions of the application, all Regulated Funds and Affiliated Funds participating in a Co-Investment Transaction will invest at the same time, for the same price and with the same terms, conditions, class, registration rights and any other rights, so that none of them receives terms more favorable than any other. However, the settlement date for an Affiliated Fund in a Co-Investment Transaction may occur up to ten business days after the settlement date for the Regulated Fund, and vice versa. Nevertheless, in all cases, (i) the date on which the commitment of the Affiliated Funds and Regulated Funds is made will be the same even where the settlement date is not and (ii) the earliest settlement date and the latest settlement date of any Affiliated Fund or Regulated Fund participating in the transaction will occur within ten business days of each other.
31. Under Condition 15, if an Adviser, its principals, or any person controlling, controlled by, or under common control with the Adviser or its principals, and the Affiliated Funds (collectively, the “Holders”) own in the aggregate more than 25 percent of the outstanding voting shares of a Regulated Fund (the “Shares”), then the Holders will vote such Shares in the same percentage as the Regulated Fund's other shareholders (not including the Holders) when voting on matters specified in the Condition.
1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit participation by a registered investment company and an affiliated person in any “joint enterprise or other joint arrangement or profit-sharing plan,” as defined in the rule, without prior
2. Similarly, with regard to BDCs, section 57(a)(4) of the Act generally prohibits certain persons specified in section 57(b) from participating in joint transactions with the BDC or a company controlled by the BDC in contravention of rules as prescribed by the Commission. Section 57(i) of the Act provides that, until the Commission prescribes rules under section 57(a)(4), the Commission's rules under section 17(d) of the Act applicable to registered closed-end investment companies will be deemed to apply to transactions subject to section 57(a)(4). Because the Commission has not adopted any rules under section 57(a)(4), rule 17d-1 also applies to joint transactions with Regulated Funds that are BDCs.
3. Co-Investment Transactions are prohibited by either or both of rule 17d-1 and section 57(a)(4) without a prior exemptive order of the Commission to the extent that the Affiliated Funds and the Regulated Funds participating in such transactions fall within the category of persons described by rule 17d-1 and/or section 57(b), as modified by rule 57b-1 thereunder, as applicable, vis-à-vis each participating Regulated Fund. Each of the participating Regulated Funds and Affiliated Funds may be deemed to be affiliated persons vis-à-vis a Regulated Fund within the meaning of section 2(a)(3) by reason of common control to the extent that (i) an Existing Adviser or an entity that controls, is controlled by, or under common control with an Existing Adviser, is the investment adviser (and sub-adviser, if any) to each of the Regulated Funds and the Affiliated Funds, and may be deemed to control, each of the Existing Affiliated Funds; (ii) an Adviser to Future Affiliated Funds will be the investment adviser (and sub-adviser, if any) to, and may be deemed to control, any other Affiliated Fund; (iii) an Existing Adviser is the investment adviser (and sub-adviser, if any) to, and may be deemed to control, the existing Regulated Fund and (iv) an Adviser will be the investment adviser (and sub-adviser, if any) to, and may be deemed to control any other Future Regulated Funds; and (v) each BDC Downstream Fund
4. In passing upon applications under rule 17d-1, the Commission considers whether the company's participation in the joint transaction is consistent with the provisions, policies, and purposes of the Act and the extent to which such participation is on a basis different from or less advantageous than that of other participants.
5. Applicants state that in the absence of the requested relief, in many circumstances the Regulated Funds would be limited in their ability to participate in attractive and appropriate investment opportunities. Applicants state that, as required by rule 17d-1(b), the Conditions ensure that the terms on which Co-Investment Transactions may be made will be consistent with the participation of the Regulated Funds being on a basis that it is neither different from nor less advantageous than other participants, thus protecting the equity holders of any participant from being disadvantaged. Applicants further state that the Conditions ensure that all Co-Investment Transactions are reasonable and fair to the Regulated Funds and their shareholders and do not involve overreaching by any person concerned, including the Advisers. Applicants state that the Regulated Funds' participation in the Co-Investment Transactions in accordance with the Conditions will be consistent with the provisions, policies, and purposes of the Act and would be done in a manner that is not different from, or less advantageous than, that of other participants.
Applicants agree that the Order will be subject to the following Conditions:
1.
(a) The Advisers will establish, maintain and implement policies and procedures reasonably designed to ensure that each Adviser is promptly notified of all Potential Co-Investment Transactions that fall within the then-current Objectives and Strategies and Board-Established Criteria of any Regulated Fund the Adviser manages.
(b) When an Adviser to a Regulated Fund is notified of a Potential Co-Investment Transaction under Condition 1(a), the Adviser will make an independent determination of the appropriateness of the investment for the Regulated Fund in light of the Regulated Fund's then-current circumstances.
2.
(a) If the Adviser deems a Regulated Fund's participation in any Potential Co-Investment Transaction to be appropriate for the Regulated Fund, it will then determine an appropriate level of investment for the Regulated Fund.
(b) If the aggregate amount recommended by the Advisers to be invested in the Potential Co-Investment Transaction by the participating Regulated Funds and any participating Affiliated Funds, collectively, exceeds the amount of the investment opportunity, the investment opportunity will be allocated among them pro rata based on the size of the Internal Orders, as described in section III.A.1.b. of the application. Each Adviser to a participating Regulated Fund will promptly notify and provide the Eligible Directors with information concerning the Affiliated Funds' and Regulated Funds' order sizes to assist the Eligible Directors with their review of the applicable Regulated Fund's investments for compliance with these Conditions.
(c) After making the determinations required in Condition 1(b) above, each Adviser to a participating Regulated Fund will distribute written information concerning the Potential Co-Investment Transaction (including the amount proposed to be invested by each participating Regulated Fund and each participating Affiliated Fund) to the Eligible Directors of its participating Regulated Fund(s) for their consideration. A Regulated Fund will
(i) The terms of the transaction, including the consideration to be paid, are reasonable and fair to the Regulated Fund and its equity holders and do not involve overreaching in respect of the Regulated Fund or its equity holders on the part of any person concerned;
(ii) the transaction is consistent with:
(A) The interests of the Regulated Fund's equity holders; and
(B) the Regulated Fund's then-current Objectives and Strategies;
(iii) the investment by any other Regulated Fund(s) or Affiliated Fund(s) would not disadvantage the Regulated Fund, and participation by the Regulated Fund would not be on a basis different from, or less advantageous than, that of any other Regulated Fund(s) or Affiliated Fund(s) participating in the transaction; provided that the Required Majority shall not be prohibited from reaching the conclusions required by this Condition 2(c)(iii) if:
(A) The settlement date for another Regulated Fund or an Affiliated Fund in a Co-Investment Transaction is later than the settlement date for the Regulated Fund by no more than ten business days or earlier than the settlement date for the Regulated Fund by no more than ten business days, in either case, so long as: (x) The date on which the commitment of the Affiliated Funds and Regulated Funds is made is the same; and (y) the earliest settlement date and the latest settlement date of any Affiliated Fund or Regulated Fund participating in the transaction will occur within ten business days of each other; or
(B) any other Regulated Fund or Affiliated Fund, but not the Regulated Fund itself, gains the right to nominate a director for election to a portfolio company's board of directors, the right to have a board observer or any similar right to participate in the governance or management of the portfolio company so long as: (x) The Eligible Directors will have the right to ratify the selection of such director or board observer, if any; (y) the Adviser agrees to, and does, provide periodic reports to the Regulated Fund's Board with respect to the actions of such director or the information received by such board observer or obtained through the exercise of any similar right to participate in the governance or management of the portfolio company; and (z) any fees or other compensation that any other Regulated Fund or Affiliated Fund or any affiliated person of any other Regulated Fund or Affiliated Fund receives in connection with the right of one or more Regulated Funds or Affiliated Funds to nominate a director or appoint a board observer or otherwise to participate in the governance or management of the portfolio company will be shared proportionately among any participating Affiliated Funds (who may, in turn, share their portion with their affiliated persons) and any participating Regulated Fund(s) in accordance with the amount of each such party's investment; and
(iv) the proposed investment by the Regulated Fund will not involve compensation, remuneration or a direct or indirect
3.
4.
“Close Affiliate” means the Advisers, the other Regulated Funds, the Affiliated Funds and any other person described in section 57(b) (after giving effect to rule 57b-1) in respect of any Regulated Fund (treating any registered investment company or series thereof as a BDC for this purpose) except for limited partners included solely by reason of the reference in section 57(b) to section 2(a)(3)(D).
“Remote Affiliate” means any person described in section 57(e) in respect of any Regulated Fund (treating any registered investment company or series thereof as a BDC for this purpose) and any limited partner holding 5% or more of the relevant limited partner interests that would be a Close Affiliate but for the exclusion in that definition.
5.
6.
(a)
(i) The Adviser to such Regulated Fund or Affiliated Fund will notify each Regulated Fund that holds an investment in the issuer of the proposed Disposition at the earliest practical time; and
(ii) the Adviser to each Regulated Fund that holds an investment in the issuer will formulate a recommendation as to participation by such Regulated Fund in the Disposition.
(b)
(c)
(i)(A) The participation of each Regulated Fund and Affiliated Fund in such Disposition is proportionate to its then-current holding of the security (or securities) of the issuer that is (or are) the subject of the Disposition;
(ii) each security is a Tradable Security and (A) the Disposition is not to the issuer or any affiliated person of the issuer; and (B) the security is sold for cash in a transaction in which the only term negotiated by or on behalf of the participating Regulated Funds and Affiliated Funds is price.
(d)
7.
(a)
(i) The Adviser to such Regulated Fund or Affiliated Fund will notify each Regulated Fund that holds an investment in the issuer of the proposed Disposition at the earliest practical time;
(ii) the Adviser to each Regulated Fund that holds an investment in the issuer will formulate a recommendation as to participation by such Regulated Fund in the Disposition; and
(iii) the Advisers will provide to the Board of each Regulated Fund that holds an investment in the issuer all information relating to the existing investments in the issuer of the Regulated Funds and Affiliated Funds, including the terms of such investments and how they were made, that is necessary for the Required Majority to make the findings required by this Condition.
(b)
(i) The Disposition complies with Condition 2(c)(i), (ii), (iii)(A), and (iv).
(ii) the making and holding of the Pre-Boarding Investments were not prohibited by section 57 or rule 17d-1, as applicable, and records the basis for the finding in the Board minutes.
(c)
(i)
(ii)
(iii)
(iv)
(v)
8.
(a)
(i) The Adviser to each such Regulated Fund or Affiliated Fund will notify each Regulated Fund that holds securities of the portfolio company of the proposed transaction at the earliest practical time; and
(ii) the Adviser to each Regulated Fund that holds an investment in the issuer will formulate a recommendation as to the proposed participation, including the amount of the proposed investment, by such Regulated Fund.
(b)
(i)(A) The proposed participation of each Regulated Fund and each Affiliated Fund in such investment is proportionate to its outstanding investments in the issuer or the security at issue, as appropriate,
(ii) it is a Non-Negotiated Follow-On Investment.
(c)
(d)
(i) The amount of the opportunity proposed to be made available to any Regulated Fund is not based on the Regulated Funds' and the Affiliated Funds' outstanding investments in the issuer or the security at issue, as appropriate, immediately preceding the Follow-On Investment; and
(ii) the aggregate amount recommended by the Advisers to be invested in the Follow-On Investment by the participating Regulated Funds and any participating Affiliated Funds, collectively, exceeds the amount of the investment opportunity,
(e)
9.
(a)
(i) The Adviser to each such Regulated Fund or Affiliated Fund will notify each Regulated Fund that holds securities of the portfolio company of the proposed transaction at the earliest practical time;
(ii) the Adviser to each Regulated Fund that holds an investment in the issuer will formulate a recommendation as to the proposed participation, including the amount of the proposed investment, by such Regulated Fund; and
(iii) the Advisers will provide to the Board of each Regulated Fund that holds an investment in the issuer all information relating to the existing investments in the issuer of the Regulated Funds and Affiliated Funds, including the terms of such investments and how they were made, that is necessary for the Required Majority to make the findings required by this Condition.
(b)
(c)
(i)
(ii)
(iii)
(iv)
(d)
(i) The amount of the opportunity proposed to be made available to any Regulated Fund is not based on the Regulated Funds' and the Affiliated Funds' outstanding investments in the issuer or the security at issue, as appropriate, immediately preceding the Follow-On Investment; and
(ii) the aggregate amount recommended by the Advisers to be invested in the Follow-On Investment by the participating Regulated Funds and any participating Affiliated Funds, collectively, exceeds the amount of the investment opportunity, then the Follow-On Investment opportunity will be allocated among them pro rata based on the size of the Internal Orders, as described in section III.A.1.b. of the application.
(e)
10.
(a) Each Adviser to a Regulated Fund will present to the Board of each Regulated Fund, on a quarterly basis, and at such other times as the Board may request, (i) a record of all investments in Potential Co-Investment Transactions made by any of the other Regulated Funds or any of the Affiliated Funds during the preceding quarter that fell within the Regulated Fund's then-current Objectives and Strategies and Board-Established Criteria that were not made available to the Regulated Fund, and an explanation of why such investment opportunities were not made available to the Regulated Fund; (ii) a record of all Follow-On Investments in and Dispositions of investments in any issuer in which the Regulated Fund holds any investments by any Affiliated Fund or other Regulated Fund during the prior quarter; and (iii) all information concerning Potential Co-Investment Transactions and Co-Investment Transactions, including investments made by other Regulated Funds or Affiliated Funds that the Regulated Fund considered but declined to participate in, so that the
(b) All information presented to the Regulated Fund's Board pursuant to this Condition will be kept for the life of the Regulated Fund and at least two years thereafter, and will be subject to examination by the Commission and its staff.
(c) Each Regulated Fund's chief compliance officer, as defined in rule 38a-1(a)(4), will prepare an annual report for its Board each year that evaluates (and documents the basis of that evaluation) the Regulated Fund's compliance with the terms and Conditions of the application and the procedures established to achieve such compliance. In the case of a BDC Downstream Fund that does not have a chief compliance officer, the chief compliance officer of the BDC that controls the BDC Downstream Fund will prepare the report for the relevant Independent Party.
(d) The Eligible Directors will consider at least annually: (i) The continued appropriateness for the Regulated Fund of participating in new and existing Co-Investment Transactions; and (ii) the continued appropriateness of any Board-Established Criteria.
11.
12.
13.
14.
15.
For the Commission, by the Division of Investment Management, under delegated authority.
On December 6, 2021, Cboe BZX Exchange, Inc. (“Exchange” or “BZX”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1)
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 MRVP in Rule 25.3 in connection with certain minor rule violations and applicable fines. Rule 25.3 provides for disposition of specific violations through assessment of fines in lieu of conducting a formal disciplinary proceeding.
Specifically, the proposed rule change amends Rule 25.3 by: (1) Eliminating violations of Rule 22.6(a) (regarding Market Maker firm quotes) in Rule 25.3(c), which currently imposes fines for violations of Rules 22.6(a) through (c) (Market Maker Quotations); (2) relocating violations of Rule 22.6(b) (regarding Market Maker initial quote volume requirements) and Rule 22.6(c) (regarding Market Maker two-sided quote requirements) to Rule 25.3(d),
First, the proposed rule change eliminates the violation of 22.6(a) currently in Rule 25.3(c) of the MRVP. Specifically, Rule 22.6(a) requires a Market Maker to submit bids and offers that are firm for all orders. The Exchange no longer believes violations of Rule 22.6(a) to be minor in nature and therefore proposes to remove it from the list of rules in Rule 25.3 eligible for a minor rule fine disposition. Particularly, the Exchange believes that violations of Rule 22.6(a), to the extent they would occur,
The proposed rule change next relocates violations of Rules 22.6(b) and (c), currently in Rule 25.3(c) of the MRVP, to Rule 25.3(d) (Rule 25.3(c), as amended)
The Exchange notes that, under current Rule 25.3(c), violations of the Market Maker initial quote volume requirement (Rule 22.6(b)) and violations of the Market Maker two-sided quote requirement (Rule 22.6(c)) are to be treated separately for purposes of determining the number of cumulative violations under the applicable fine schedule. For example,
Further, the Exchange notes that Rule 25.3(d) currently provides that violations occurring during a calendar month are aggregated and sanctioned as a single offense. In line with the proposed change to allow the Exchange the flexibility to choose to aggregate violations across different sections governing market maker quoting obligations (upon the proposed relocation of the Market Maker two-sided quote and initial quote volume requirements to Rule 25.3(d)), the proposed rule change removes this language.
The proposed rule change also updates the fine schedule heading in Rule 25.3(d) to reflect that fines may be imposed per the number of offenses, rather than violations, within one period (
Ultimately, the Exchange believes that the proposed flexibility to choose whether to aggregate violations of a Market Maker's quoting obligations across sections will allow it to administer discipline in a manner it deems most appropriate. For example, if a Market Maker violates its continuous quoting obligation pursuant to Rule 22.6(d) on multiple trading days, January 27, 28 and 31, 2022, due to a systemic error, and also violates the initial quote volume requirement pursuant to Rule 22.6(b) multiple times during the next trading day, February 1, 2022,
The proposed rule change next amends the fine schedule in Rule 25.3(d) (Rule 25.3(c), as amended)
For the first violation during any rolling 24-month period (
The proposed rule change updates the fine schedule to provide that, during any rolling 24-month period, the Exchange may continue to give a Letter of Caution for a first offense,
The Exchange believes it is appropriate to increase the fine amounts for a second and third offense and to remove the fine imposed for a fourth offense and proceed with formal disciplinary proceedings for subsequent offenses following a third offense. Particularly, the Exchange believes that applying a higher fine per second and third offenses in connection with a Market Maker's quoting obligations
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
The Exchange believes that the proposed rule change to remove the firm quote requirement, which it no longer considers violations of which to be minor in nature, as eligible for a minor rule fine disposition under its MRVP, will assist the Exchange in preventing fraudulent and manipulative acts and practices and promoting just and equitable principles of trade, and will serve to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest. Particularly, the Exchange believes that violations of the firm quote requirement may directly impact trading on the Exchange, maintenance of a fair and orderly market, and customer protection. As such, the Exchange does not believe violations of this rule to be minor in nature and, instead, should be handled under its formal disciplinary rules, rather than imposing fines pursuant to its MRVP. Also, and as stated above, the proposed rule change is consistent with the MRVP of its affiliated options exchange, Cboe Options, which, for the same reasons provided herein, no longer includes violations of the firm quote requirement as eligible for a minor rule disposition on Cboe Options.
The Exchange believes that the proposed rule change to apply the same MRVP fine schedule for violations of a Market Makers quoting obligations pursuant to Rule 22.6 (
Additionally, the Exchange believes the proposed rule change will serve to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest because it is intended to harmonize the Exchange's MRVP in connection with Market Maker quoting obligations with that of Cboe Options, as well as EDGX Options and C2 Options (to the extent possible),
The Exchange also believes that the proposed rule change, in connection with the fine schedule for violations of a Market Maker's quoting obligations in Rule 25.3(d), as proposed, to increase the fine amounts for a second and third offense
The Exchange further believes that the proposed rule changes to Rule 25.3 are consistent with Section 6(b)(6) of the Act,
The Exchange also believes that the proposed change is designed to provide a fair procedure for the disciplining of members and persons associated with members, consistent with Sections 6(b)(7) and 6(d) of the Act.
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 not intended to address competitive issues but rather is concerned solely with amending its MRVP in connection with rules eligible for a minor rule fine disposition and with the fine schedule for Market Maker failures to meet their quoting obligations. The Exchange believes the proposed rule changes, overall, will strengthen the Exchange's ability to carry out its oversight and enforcement functions and deter potential violative conduct.
The Exchange neither solicited nor received comments on the proposed rule change.
The Commission finds that the proposed rule change, as modified by Amendment No. 2, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
As stated above, the Exchange proposes to amend Rule 25.3 by eliminating violations of Rule 22.6(a) from Rule 25.3(c) and the Exchange's MRVP; relocating violations of Rule 22.6(b) and Rule 22.6(c) to proposed Rule 25.3(c) so that a single MRVP provision governs violations of a Market Maker's quoting obligations; amending the current manner of calculating violations of Market Marker rules, including deleting a provision that requires violations of Market Maker obligations occurring during a calendar month be aggregated and sanctioned as a single offense; and updating the fine schedule applicable to minor rule violations related to Market Maker quoting obligations.
The Commission believes that Rule 25.3 is an effective way to discipline a member for a minor violation of a rule. More specifically, the Commission finds that the Exchange's proposal, as modified by Amendment No. 2, to eliminate Rule 22.6(a), a Market Maker quoting obligation rule, from the MRVP is consistent with the Act because it should help the Exchange enforce compliance with, and provide appropriate discipline for, violation of a rule that the Exchange no longer believes is minor in nature. Combining all the Market Maker quoting obligation rules together in one provision of Rule 25.3 will also bring clarity to the Rule. The Commission also finds that amending the current manner of calculating violations of Market Maker rules is appropriate because the Exchange can already aggregate violations under Rule 8.15 under certain circumstances. Finally, the Commission finds that amending the associated fee schedule is consistent with the Act because it may help the Exchange's ability to better carry out its oversight and enforcement responsibilities by levying appropriate fines on Market Makers for violations of the Market Marker rules.
In approving the propose rule change, as modified by Amendment No. 2, the Commission in no way minimizes the importance of compliance with the Exchange's rules and all other rules subject to fines under Rule 25.3. The Commission believes that a violation of any self-regulatory organization's rules, as well as Commission rules, is a serious matter. However, Rule 25.3 provides a reasonable means of addressing rule violations that may not rise to the level of requiring formal disciplinary proceedings, while providing greater flexibility in handling certain violations. The Commission expects that the Exchange will continue to conduct surveillance with due diligence and make a determination based on its findings, on a case-by-case basis, whether a fine of more or less than the recommended amount is appropriate for a violation under Rule 25.3 or whether a violation requires formal disciplinary action.
Interested persons are invited to submit written views, data, and arguments concerning whether Amendment No. 2 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.
The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 2, prior to the thirtieth day after the date of publication of notice of the filing of Amendment No. 2 in the
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On January 25, 2022, 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 any 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.
On December 2, 2021, Long-Term Stock Exchange, Inc. (“LTSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange proposes to modify and expand the package of products and services provided to Companies and clarify existing practice under Exchange Rule 14.602 with respect to providing Company-specific web pages on the Exchange's website in connection with listing on the Exchange.
Currently, in connection with a Company's approval for listing, the Exchange offers complimentary promotional services (including press releases, articles, videos, and podcasts) and invites the Company to participate in listing ceremonies.
Next, the Exchange proposes to provide each listed Company with complimentary “Capital Market Reports” on an ongoing basis.
Lastly, the Exchange proposes to provide each listed Company with up to one year of complimentary Capital Market Solutions (“CM Solutions”).
The Exchange states that the Investor Alignment Solution would provide recipient Companies with detailed institutional investor analytics and insights into investor behavior to enable them to evaluate the behaviors of select investors and provide them with a deeper understanding of the ESG landscape and their positioning, with LTSE Services analyzing the ESG profile of institutional investors in order to understand and identify relevant sources of capital to aid the Company in honing and achieving strategic priorities, deploying a highly-experienced, multi-disciplinary team to support this long-term governance and capital markets strategy.
The Exchange states that the LTIP is a platform that would provide listed Companies with a means to upload and effectively manage and use their registered shareholder data received from their transfer agent.
According to the Exchange, the LTIP would allow Companies to more easily track, analyze, and utilize registered shareholder data in support of their investor relations, strategic initiatives, board review, and governance functions.
The Exchange proposes that newly and currently listed Companies would have the option of receiving CM Solutions on a complimentary basis for a continuous one-year term.
The Exchange states that Companies are not required to use the products and services proposed above as a condition of listing, and may choose not to avail themselves of any of these products and services or only a subset of them.
The Commission has carefully reviewed the proposed rule change, as modified by Amendment No. 1, and finds that it is consistent with the requirements of Section 6 of the Act.
The Exchange proposes to modify and expand the package of products and services provided to Companies and clarify existing practice under Exchange Rule 14.602 with respect to providing Company-specific web pages on the Exchange's website in connection with listing on the Exchange. The Commission believes that by describing and clarifying in its Rules the complimentary products and services available to listed Companies, the Exchange is adding greater transparency to its rules and the fees applicable to such Companies.
Moreover, the Commission notes the Exchange's representations that the proposed complimentary products and services will be offered to all listed Companies on the same terms and conditions without differentiation.
The Commission also acknowledges that the Exchange is responding to competitive pressures in the market for listings in making this proposal. Specifically, according to LTSE, the Exchange expects to face competition as a new entrant in the market for exchange listings, and it believes the complimentary products and services that it proposes to offer to listed companies will facilitate LTSE's ability to attract and retain listings.
Interested persons are invited to submit written data, views, and arguments concerning whether Amendment No. 1 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.
The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 1, prior to the thirtieth day after the date of publication of notice of the amended proposal in the
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 General 3, Rule 1002, Qualifications of Exchange Members and Associated Persons; Registration of Branch Offices and Designation of Office of Supervisory Jurisdiction.
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 General 3, Rule 1002, Qualifications of Exchange Members and Associated Persons; Registration of Branch Offices and Designation of Office of Supervisory Jurisdiction. Specifically, General 3, Rule 1002(b) provides for ineligibility of certain persons for Membership or Association. General 3, Rule 1002(b)(2) provides,
Subject to such exceptions as may be explicitly provided elsewhere in the Rules, no person shall become associated with a Member, continue to be associated with a Member, or transfer association to another Member, if such person fails or ceases to satisfy the qualification requirements established by the Rules, or if such person is or becomes subject to a statutory disqualification; and no broker or dealer shall be admitted to membership, and no Member shall be continued in membership, if any person associated with it is ineligible to be an Associated Person under this subsection.
For purposes of statutory disqualification, as such term is defined in Section 3(a)(39) of the Act,
At this time, Nasdaq proposes to adopt FINRA's definitions of “person associated with a member” and “associated person” as provided within FINRA By-Law Article I(ee), for purposes of statutory disqualification, within new Nasdaq General 3, Rule 1002(b)(2)(A). As proposed, General 3, Rule 1002(b)(2)(A) would provide,
For purposes of “statutory disqualification” as such term is defined in Section 3(a)(39) of the Exchange Act the terms “person associated with a member” and “associated person” shall mean (1) a natural person who is registered or has applied for registration under the Rules of the Exchange; (2) a sole proprietor, partner, officer, director, or branch manager of a member, or other natural person occupying a similar status or performing similar functions, or a natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by a member, whether or not any such person is registered or exempt from registration with the Exchange under its Rules; and (3) for purposes of Nasdaq General 5, Rule 8210, any other person listed in Schedule A of Form BD of a member.
By defining the terms “person associated with a member” and “associated person” substantively identical
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Exchange believes its proposal will promote just and equitable principles of trade and protect investors and the public interest by ensuring market participants that are members of both FINRA and Nasdaq are held to the same standard with respect to statutory disqualification.
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 Exchange's proposal to adopt FINRA's definitions of “person associated with a member” and “associated person” as provided within FINRA By-Law Article I(ee) within General 3, Rule 1002(b)(2)(A), for purposes of statutory disqualification pursuant to Section 3(a)(39) of Act,
No written comments were either solicited or 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)(iii) of the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is 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.
Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission's Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly.
All submissions should refer to File Number SR-NASDAQ-2022-022 and should be submitted on or before April 14, 2022.
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 (the “Act”),
Cboe EDGX Exchange, Inc. (“EDGX” or the “Exchange”) is filing with the Securities and Exchange Commission (the “Commission”) a proposal to extend the pilot related to the market-wide circuit breaker in Rule 11.16 to April 18, 2022. 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.
EDGX Rules 11.16(a) through (d), (f) and (g) describe the methodology for determining when to halt trading in all stocks due to extraordinary market volatility,
The market-wide circuit breaker under Rule 11.16 provides an important, automatic mechanism that is invoked to promote stability and investor confidence during a period of significant stress when securities markets experience extreme broad-based declines. All U.S. equity exchanges and FINRA adopted uniform rules on a pilot basis relating to market-wide circuit breakers in 2012 (“MWCB Rules”), which are designed to slow the effects of extreme price movement through coordinated trading halts across securities markets when severe price declines reach levels that may exhaust market liquidity.
Pursuant to Rule 11.16, a market-wide trading halt will be triggered if the S&P 500 Index declines in price by specified percentages from the prior day's closing price of that index. Currently, the triggers are set at three circuit breaker thresholds: 7% (Level 1), 13% (Level 2), and 20% (Level 3). A market decline that triggers a Level 1 or Level 2 halt after 9:30 a.m. ET and before 3:25 p.m. ET would halt market-wide trading for 15 minutes, while a similar market decline at or after 3:25 p.m. ET would not halt market-wide trading. A market decline that triggers a Level 3 halt, at any time during the trading day, would halt market-wide trading for the remainder of the trading day.
In the Spring of 2020, at the outset of the worldwide COVID-19 pandemic, U.S. equities markets experienced four MWCB Level 1 halts, on March 9, 12, 16, and 18, 2020. In each instance, the markets halted as intended upon a 7% drop in the S&P 500 Index, and resumed as intended 15 minutes later.
In response to these events, the previously-convened MWCB Taskforce (“Taskforce”) reviewed the March 2020 halts and considered whether any immediate changes to the MWCB mechanism should be made. The Taskforce, consisting of representatives from equities exchanges, futures exchanges, FINRA, broker-dealers, and other market participants, had been assembled in early 2020 to consider more generally potential changes to the MWCB mechanism. The Taskforce held ten meetings in the Spring and Summer of 2020 that were attended by Commission staff to consider, among other things: (1) Whether to retain the S&P 500 Index as the standard for measuring market declines; (2) whether halts that occur shortly after the 9:30 a.m. market open cause more harm than good; and (3) what additional testing of the MWCB mechanism should be done.
After considering data and anecdotal reports of market participants' experiences during the March 2020 MWCB events, the Taskforce did not recommend immediate changes be made to the use of the S&P 500 Index as the reference price against which market declines are measured, or to the current MWCB mechanism which permits halts even shortly after the 9:30 a.m. market open. The Taskforce recommended creating a process for a backup reference price in the event that the S&P 500 Index becomes unavailable, and enhancing functional MWCB testing. The Taskforce also asked CME to consider modifying its rules to enter into a limit-down state in the futures pre-market after a 7% decline instead of 5%.
On September 17, 2020, the Director of the Division of Trading and Markets requested that the equities exchanges and FINRA prepare a more complete
The SROs have since worked on a proposed a rule change to make the Pilot Rules permanent, consistent with the Working Group's recommendations. New York Stock Exchange (“NYSE”) filed such proposed rule change on July 16, 2021.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Exchange also believes that the proposed rule change promotes just and equitable principles of trade in that it promotes transparency and uniformity across markets concerning when and how to halt trading in all stocks as a result of extraordinary market volatility. Based on the foregoing, the Exchange believes the benefits to market participants from the MWCB under Rule 11.16 should continue on a pilot basis because the MWCB will promote fair and orderly markets, and protect investors and the public interest.
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 because the proposal would ensure the continued, uninterrupted operation of a consistent mechanism to halt trading across the U.S. markets while the Exchange and the other SROs finalize their proposals to make the Pilot Rules permanent. Further, the Exchange understands that FINRA and other national securities exchanges will file proposals to extend their rules regarding the market-wide circuit breaker pilot following Commission approval of the NYSE proposal. Thus, the proposed rule change will help to ensure consistency across market centers without implicating any competitive issues.
No written comments were either solicited or received on the proposed rule change.
Because the foregoing proposed rule change does not:
A. Significantly affect the protection of investors or the public interest;
B. impose any significant burden on competition; and
C. become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed under Rule 19b-4(f)(6)
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will 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.
You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CboeEDGX-2022-019 and should be submitted on or before
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On September 20, 2021, NYSE Arca, Inc. (“NYSE Arca”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
On November 10, 2021, pursuant to Section 19(b)(2) of the Act,
Section 19(b)(2) of the Act
The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised in the comments that have been submitted in connection therewith. Accordingly, the Commission, 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 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
Cboe BZX Exchange, Inc. (“BZX” or the “Exchange”) is filing with the Securities and Exchange Commission (the “Commission”) a proposal to extend the pilot related to the market-wide circuit breaker in Rule 11.18 to April 18, 2022. 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.
BZX Rules 11.18(a) through (d), (f) and (g) describe the methodology for determining when to halt trading in all stocks due to extraordinary market volatility,
The market-wide circuit breaker under Rule 11.18 provides an important, automatic mechanism that is invoked to promote stability and investor confidence during a period of significant stress when securities markets experience extreme broad-based declines. All U.S. equity exchanges and FINRA adopted uniform rules on a pilot basis relating to market-wide circuit breakers in 2012 (“MWCB Rules”), which are designed to slow the effects of extreme price movement through coordinated trading halts across securities markets when severe price declines reach levels that may exhaust market liquidity.
Pursuant to Rule 11.18, a market-wide trading halt will be triggered if the S&P 500 Index declines in price by specified percentages from the prior day's closing price of that index. Currently, the triggers are set at three circuit breaker thresholds: 7% (Level 1), 13% (Level 2), and 20% (Level 3). A market decline that triggers a Level 1 or Level 2 halt after 9:30 a.m. ET and before 3:25 p.m. ET would halt market-wide trading for 15 minutes, while a similar market decline at or after 3:25 p.m. ET would not halt market-wide trading. A market decline that triggers a Level 3 halt, at any time during the trading day, would halt market-wide trading for the remainder of the trading day.
In the Spring of 2020, at the outset of the worldwide COVID-19 pandemic, U.S. equities markets experienced four MWCB Level 1 halts, on March 9, 12, 16, and 18, 2020. In each instance, the markets halted as intended upon a 7% drop in the S&P 500 Index, and resumed as intended 15 minutes later.
In response to these events, the previously-convened MWCB Taskforce (“Taskforce”) reviewed the March 2020 halts and considered whether any immediate changes to the MWCB mechanism should be made. The Taskforce, consisting of representatives from equities exchanges, futures
After considering data and anecdotal reports of market participants' experiences during the March 2020 MWCB events, the Taskforce did not recommend immediate changes be made to the use of the S&P 500 Index as the reference price against which market declines are measured, or to the current MWCB mechanism which permits halts even shortly after the 9:30 a.m. market open. The Taskforce recommended creating a process for a backup reference price in the event that the S&P 500 Index becomes unavailable, and enhancing functional MWCB testing. The Taskforce also asked CME to consider modifying its rules to enter into a limit-down state in the futures pre-market after a 7% decline instead of 5%.
On September 17, 2020, the Director of the Division of Trading and Markets requested that the equities exchanges and FINRA prepare a more complete study of the design and operation of the MWCB mechanism and the LULD Plan during the period of volatility in the Spring of 2020. In response to the request, the SROs created a MWCB “Working Group” composed of SRO representatives and industry advisers that included members of the advisory committees to both the LULD Plan and the NMS Plans governing the collection, consolidation, and dissemination of last-sale transaction reports and quotations in NMS Stocks. The Working Group met regularly from September 2020 through March 2021 to consider the Commission's request, review data, and compile its study. The Working Group's efforts in this respect incorporated and built on the work of an MWCB Task Force. The Working Group submitted its study to the Commission on March 31, 2021 (the “Study”).
The SROs have since worked on a proposed a rule change to make the Pilot Rules permanent, consistent with the Working Group's recommendations. New York Stock Exchange (“NYSE”) filed such proposed rule change on July 16, 2021.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Exchange also believes that the proposed rule change promotes just and equitable principles of trade in that it promotes transparency and uniformity across markets concerning when and how to halt trading in all stocks as a result of extraordinary market volatility. Based on the foregoing, the Exchange believes the benefits to market participants from the MWCB under Rule 11.18 should continue on a pilot basis because the MWCB will promote fair and orderly markets, and protect investors and the public interest.
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 because the proposal would ensure the continued, uninterrupted operation of a consistent mechanism to halt trading across the U.S. markets while the Exchange and the other SROs finalize their proposals to make the Pilot Rules permanent. Further, the Exchange understands that FINRA and other national securities exchanges will file proposals to extend their rules regarding the market-wide circuit breaker pilot following Commission approval of the NYSE proposal. Thus, the proposed rule change will help to ensure consistency across market centers without implicating any competitive issues.
No written comments were either solicited or received on the proposed rule change.
Because the foregoing proposed rule change does not:
A. Significantly affect the protection of investors or the public interest;
B. impose any significant burden on competition; and
C. become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed under Rule 19b-4(f)(6)
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will 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.
You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CboeBZX-2022-023 and should be submitted on or before
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 fees to create a monthly Media Enterprise License for the distribution of Nasdaq Basic to the general investing public for Display Usage.
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
The purpose of the Proposal is to create a monthly Media Enterprise License for the distribution of Nasdaq Basic to the general investing public for Display Usage.
Nasdaq Basic is a real-time market data product that offers best bid and offer and last sale information for all U.S. exchange-listed securities based on liquidity within the Nasdaq market center and trades reported to the FINRA/Nasdaq Trade Reporting Facilities at Chicago and Carteret (“TRFs”). It is a subset of the core quotation and last sale data provided by securities information processors (“SIPs”), which distribute consolidated data pursuant to the CTA/CQ Plan and the UTP Plan.
Nasdaq Basic is separated into three components, which may be purchased individually or in combination: (i) Nasdaq Basic for Nasdaq, which contains the best bid and offer on the Nasdaq Market Center and last sale transaction reports for Nasdaq and the FINRA/Nasdaq TRFs for Nasdaq-listed stocks; (ii) Nasdaq Basic for NYSE, which covers NYSE-listed stocks, and (iii) Nasdaq Basic for NYSE American, which provides data on stocks listed on NYSE American and other listing venues that disseminate quotes and trade reports on Tape B. The specific data elements available through Nasdaq Basic are: (i) Nasdaq Basic Quotes (“QBBO”), the best bid and offer and associated size available in the Nasdaq Market Center, as well as last sale transaction reports;
Nasdaq proposes to introduce a Media Enterprise License that will allow any External Distributor
Distribution of Nasdaq Basic through the Media Enterprise License will be subject to two primary restrictions. First, distribution of Derived Data
Second, data may only be used for informational and non-trading purposes. Nasdaq Basic information may only be distributed on platforms pre-approved by the Exchange as providing a reasonable basis to conclude that all Users of such Information are either Non-Professionals
The proposed Media Enterprise License does not cover the Distributor Fee for Nasdaq Basic set forth in subparagraph (c)(1).
Nasdaq also proposes to provide the Media Enterprise License at no additional cost to broker-dealers that purchase either of the following two enterprise licenses: (i) The license to distribute Nasdaq Basic to natural persons in a brokerage relationship with
The enterprise license at Equity 7, Section 147(b)(5), allows a broker-dealer to distribute Nasdaq Basic, or Derived Data therefrom, through any electronic system approved by Nasdaq, to an unlimited number of Professional and Non-Professional Subscribers who are natural persons and with whom the broker-dealer has a brokerage relationship for a monthly fee of $100,000.
Nasdaq proposes to add a reference to the Media Enterprise License to Equity 7, Section 147(b)(5). If a customer chooses to continue to distribute NLS it may do so without change.
The Market Data Enterprise License for Display Usage at Equity 7, Section 132, allows a Distributor that is also a broker-dealer or an investment adviser to distribute, for Display Usage only, Depth-of-Book data and Nasdaq Basic to an unlimited number of internal and external recipients, to be used only in the context of a brokerage relationship with a broker-dealer or an engagement with an Investment Adviser. The license currently allows unlimited external distribution of NLS and NLS Plus through one of the mechanisms for the general investing public identified at Equity 7, Section 139(b), provided that platforms distributing such information are pre-approved by the Exchange as reasonably designed to meet the requirements with respect to each of the products identified. This license may be purchased for a monthly fee of $600,000, or the Distributor may purchase a full twelve months of the license in advance for a monthly fee of $500,000.
The Exchange proposes to add a reference to Nasdaq Basic for the Market Data Enterprise License. If the purchaser wishes to continue to distribute NLS after the Proposal, it may do so without change.
Nasdaq distributes a Short Interest Report under a fee schedule set forth at Equity 7, Section 122(c). Distributors that currently purchase enterprise licenses at Equity 7, Section 123(c)(3) or Equity 7, Section 147(b)(5), or that expend $5,000 or more on any product offered at Equity 7, Section 139 in a particular month, excluding distributor fees at Equity 7, Section 139(c), may distribute the Short Interest Report to an unlimited number of external Subscribers, or on an open website, for $1,500 per month. The Exchange proposes to add the Media Enterprise License at Equity 7, Section 147(b)(6) to the list of licenses which will allow distribution of the Short Interest Report to an unlimited number of external Subscribers or on an open website for $1,500 per month.
This Proposal is a response to customer requests. A number of firms, including financial media firms, mobile application vendors, and data vendors, have informed Nasdaq that they have observed an increase in demand for bid and offer information from the general investing public, and requested that Nasdaq create the proposed enterprise license. These potential customers compared Nasdaq's market data fee schedule to that of one of its competitors, which already allows general news websites to distribute real-time quote and trade information on open public websites and applications,
Upon consideration of these requests, Nasdaq has determined that distribution of best bid and offer information is in the best interest of our customers and the market as a whole. When NLS was introduced in 2007, it was a significant leap forward for Retail Investors. NLS allowed, for the first time, a cost-effective method for the retail audience to gain insights into the real time price movements of US securities on open websites. The release of pre-trade information on a similar basis is the next step in expanding the availability and accessibility of accurate and reliable trading information, increasing overall transparency.
Nasdaq believes that there is little risk that the proposed license will change the way that Professionals use pre-trade data. Although the new license may occasionally result in incidental professional use, data that is generally available to online customers via television, open websites, mobile devices, or any other unrestricted means of transmission is unlikely to have the breadth or depth of information, or desktop applications, used by professionals. Information for professional use is typically distributed through firewall-protected websites, intranet sites, secured terminals, or is otherwise protected from widespread dissemination.
The Exchange expects the new license to be attractive to financial media outlets, search engines and firms engaged in the development and sale of new financial applications. Based on Nasdaq's familiarity with the market, it
Any firm that is interested in distributing Nasdaq Basic to the general investing public under the conditions set forth in the proposed rule would be able to do so. The Exchange expects financial media firms, firms engaged in the development and sale of new financial applications, broker-dealers, and data vendors in particular to benefit from the proposed license. The Proposal will promote competition as it is similar to a media license already offered by another exchange.
The Exchange believes that its Proposal is consistent with Section 6(b) of the Act,
As the Commission and courts
Nasdaq Basic provides choices to broker-dealers and other data consumers by offering less than the quantum of data provided through the consolidated tape feeds, but at a lower price. All of the top-of-book proprietary products offered by the exchanges are readily substitutable for each other.
Top-of-book data can be used for many purposes—from a retail investor casually surveying the market to sophisticated market participants using it for a variety of applications, such as investment analysis, risk management, or portfolio valuation.
All major exchange groups compete to sell top-of-book data. Nasdaq Basic provides data derived from liquidity within the Nasdaq market center and trades reported to the FINRA/Nasdaq TRFs. The NYSE BQT feed disseminates top-of-book information from the NYSE, NYSE American, NYSE Arca, NYSE National and NYSE Chicago exchanges.
Nasdaq, NYSE and Cboe compete on price and quality. Like Nasdaq, both NYSE
Competition among exchanges for order flow has long been recognized by the courts. As the D.C. Circuit stated in
The proposed Media Enterprise License is an element of the competition among exchanges for the sale of top-of-book feeds. As explained above, it was drafted in response to requests from potential customers, including financial media firms, mobile application vendors, and data vendors, and also as a response to the license offered by one of Nasdaq's competitors allowing general news websites to distribute real-time quote and trade information.
In addition to the new Media Enterprise License, Nasdaq proposes to expand the broker-dealer enterprise license at Equity 7, Section 147(b)(5), and the Market Data Enterprise License for Display Usage at Equity 7, Section 132, to include the Media Enterprise License at no additional cost. The Exchange also proposes to add the Media Enterprise License at Equity 7,
The fact that the new Media Enterprise License is subject to competition provides a substantial basis for a finding that the terms of the proposal are equitable, fair, and reasonable.
The Proposal is not unfairly discriminatory. The proposed license will be available to any External Distributor to disseminate Nasdaq Basic to the general investing public for Display Usage. Broker-dealers that purchase the enterprise licenses at Equity 7, Sections 147(b)(5) and 132 will be able to distribute the same data to the general investing public at no additional charge, beyond the fees for the underlying licenses, and, as discussed above, these broker-dealers may continue to distribute NLS as they did before this change. Any firm that is interested in distributing Nasdaq Basic to the general investing public under the conditions set forth in the proposed rule would be able to do so on a non-discriminatory basis.
With respect to the Short Interest Report at Equity 7, Section 122(c), there is no unfair discrimination in allowing customers another means to qualify for purchase of the Short Interest Report for a reduced fee.
For all of the reasons set forth herein, the proposed Media Enterprise License will be subject to significant competition, and that competition will ensure that there is no unfair discrimination. The Proposal will also benefit the general investing public by lowering the cost of distributing Nasdaq Basic, thereby enhancing overall market transparency.
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. With respect to inter-market competition—the competition among SROs—the Exchange's ability to price market data products is constrained by competition among exchanges for top-of-book data. The proposed Media Enterprise License is itself a response to a similar product offered by another exchange, and other exchanges are free to follow Nasdaq in offering their own version of the product. With respect to intra-market competition—the competition among consumers of exchange data—the Exchange expects the Proposal to promote competition by making Nasdaq Basic freely available to any External Distributor willing to distribute it to the general investing public under the terms set forth in this license.
As discussed in detail under Statutory Basis, Nasdaq competes with other exchanges in the sale of top-of-book products.
Nasdaq is offering the proposed Media Enterprise License to gain new customers and to compete with a similar product offered by another exchange. The Proposal will not cause any unnecessary or inappropriate burden on intermarket competition, as other exchanges are free to respond with a similar license of their own.
The Proposal will not cause any unnecessary or inappropriate burden on intramarket competition. Indeed, it will foster competition by providing External Distributors—including financial media firms, search engines, vendors, and broker-dealers—with more options to deliver top-of-book information to the general investing public. The Proposal will also promote competition by increasing market transparency through greater dissemination of QBBO information to the general investing public. The license is available to all market participants that meet the terms set forth in the license, and nothing in the Proposal will place any unnecessary or inappropriate burden on intramarket competition.
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”),
The Exchange proposes to amend the qualifications for the Exchange's Market Maker Plus program in its Pricing Schedule at Options 7, Section 3.
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 purpose of the proposed rule change is to amend the qualifications for the Exchange's Market Maker Plus program in its Pricing Schedule at Options 7, Section 3. The Exchange initially filed the proposed pricing changes on February 23, 2022 (SR-ISE-2022-05). On March 4, 2022, the Exchange withdrew that filing and submitted this filing.
Today, the Exchange operates a Market Maker Plus program for regular orders in Select Symbols
Market Makers are evaluated each trading day for the percentage of time spent on the NBBO for qualifying series that expire in two successive thirty calendar day periods beginning on that trading day. A Market Maker Plus is a Market Maker who is on the NBBO a specified percentage of the time on average for the month based on daily performance in the qualifying series for each of the two successive periods described above.
The Exchange now proposes to amend existing language around the reduced Tier 2 incentive to provide that a Market Maker who qualifies for Market Maker Plus Tier 2 or higher in at least four of the previous six months will be eligible to receive a reduced Tier 2 incentive in a given month where the Market Maker does not qualify for Market Maker Plus Tier 2 or higher. The Exchange also proposes to add that for the avoidance of doubt, if a Market Maker has achieved Tier 2 or higher in at least four of the previous six months, but does not achieve Tier 2 or higher in the current month, that Market Maker will receive the better of the reduced Tier 2 incentive or any applicable Tier 1 incentive the Market Maker qualified for in the current month. The Exchange is proposing this language to avoid inadvertently penalizing Market Makers that qualify for a Market Maker Plus Tier 1 incentive in a given month, yet receive a lower incentive than if that Market Maker achieved no Market Maker Plus tier in the same time frame. Specifically, a Market Maker that qualifies for the SPY, QQQ, and IWM Market Maker Plus Tier 1b incentive in a given month would receive a rebate of $0.05 per contract today. If that Market Maker did not qualify for any tier in the same month, but had qualified for SPY, QQQ, and IWM Market Maker Plus Tiers 2 or higher in four of the prior six months, the Market Maker would receive a reduced Tier 2 incentive of $0.10 (
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Exchange's proposed changes to its Pricing Schedule are reasonable in several respects. As a threshold matter, the Exchange is subject to significant competitive forces in the market for options securities transaction services that constrain its pricing determinations in that market. The fact that this market is competitive has long been recognized by the courts. In
The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system “has been remarkably successful in promoting market competition in its
Numerous indicia demonstrate the competitive nature of this market. For example, clear substitutes to the Exchange exist in the market for options security transaction services. The Exchange is only one of sixteen options exchanges to which market participants may direct their order flow. Within this environment, market participants can freely and often do shift their order flow among the Exchange and competing venues in response to changes in their respective pricing schedules. As such, the proposal represents a reasonable attempt by the Exchange to increase its liquidity and market share relative to its competitors.
As discussed above, the Exchange's proposal is intended to avoid inadvertently penalizing Market Makers that qualify for the SPY, QQQ, and IWM Market Maker Plus Tier 1b incentive in a given month, yet receive a lower incentive than if that Market Maker achieved no Market Maker Plus tier in the same time frame (
The Exchange believes that the proposed language is equitable and not unfairly discriminatory as all Market Makers are subject to the same qualification criteria for Market Maker Plus. The Exchange also believes that it is not unfairly discriminatory to offer this program's incentives to Market Makers only. Market Makers, and in particular, those Market Makers that participate in and qualify for the Market Maker Plus program, add value through continuous quoting, and are subject to additional requirements and obligations (such as quoting obligations) that other market participants are not. Lastly, the proposed language will continue to encourage Market Makers to post tight markets in symbols traded on the Exchange, thereby increasing liquidity and attracting additional order flow to the Exchange, which benefits all market participants in the quality of order interaction.
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 intra-market competition, while the proposed language would apply directly to Market Makers that participate in the Market Maker Plus program, the Exchange believes that the proposed changes will continue to fortify participation in the program, ultimately to the benefit of all market participants. As discussed above, continuing to encourage participation in the Market Maker Plus program will improve market quality by incentivizing Market Makers to provide significant quoting at the NBBO. This, in turn, improves trading conditions for all market participants through narrower bid-ask spreads and increased depth of liquidity available at the inside market, thereby attracting additional order flow to the Exchange.
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. In such an environment, the Exchange must continually adjust its fees and rebates to remain competitive with other exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited.
In sum, if the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets.
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
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice is hereby given that Main Street Capital III, L.P., 1300 Post Oak Blvd., Suite 800, Houston, TX 77056, a Federal Licensee under the Small Business Investment Act of 1958, as amended (the “Act”), in connection with a financing involving small concern Charps, LLC located at 453 Tower St. NW, Clearbrook, MN 56634, provided notice of this transaction to the Small Business Administration (“SBA”) pursuant to the Regulations found at 13 CFR 107.730-13 CFR 107.730—Financings which constitute conflicts of interests. Charps, LLC is an Associate of Main Street Capital III, L.P. because Associate Main Street Equity Investment, Inc. owns a greater than ten percent interest in the Charps, LLC.
This financing is pursuant to § 107.730(f) of the Regulations because Main Street Capital III, L.P.'s parent corporation, Main Street Capital Corporation, is registered under the Investment Company Act of 1940 and received an exemption from the Securities and Exchange Commission for the transaction and fulfilled its requirement to notify SBA.
Notice is hereby given that any interested person may submit written comments on the transaction within fifteen days of the date of this publication, to the Associate Administrator, Office of Investment and Innovation, U.S. Small Business Administration, 409 Third Street SW, Washington, DC 20416.
Pursuant to the authority granted to the United States Small Business Administration under the Small Business Investment Act of 1958, as amended, under Section 309 of the Act and Section 107.1900 of the Small Business Administration Rules and Regulations (13 CFR 107.1900) to function as a small business investment company under the Small Business Investment Company License No. 04/04-0308 issued to Plexus Fund II, L.P. said license is hereby declared null and void.
Notice is hereby given that Main Street Capital III, L.P., 1300 Post Oak Blvd., Suite 800, Houston, TX 77056, a Federal Licensee under the Small Business Investment Act of 1958, as amended (the “Act”), in connection with a financing involving small concern NuStep, LLC located at 511 Venture Drive, Ann Arbor, MI 48108, provided notice of this transaction to the Small Business Administration (“SBA”) pursuant to the Regulations found at 13 CFR 107.730—13 CFR 107.730—Financings which constitute conflicts of interests. NuStep, LLC is an Associate of Main Street Capital III, L.P. because Associate Main Street Equity Investment, Inc. owns a greater than ten percent interest in the NuStep, LLC.
This financing is pursuant to § 107.730(f) of the Regulations because Main Street Capital III, L.P.'s parent corporation, Main Street Capital Corporation, is registered under the Investment Company Act of 1940 and received an exemption from the Securities and Exchange Commission for the transaction and fulfilled its requirement to notify SBA.
Notice is hereby given that any interested person may submit written comments on the transaction within fifteen days of the date of this publication, to the Associate Administrator, Office of Investment and Innovation, U.S. Small Business Administration, 409 Third Street SW, Washington, DC 20416.
Bureau of International Security and Nonproliferation, State Department.
Notice.
A determination has been made that a number of foreign persons have engaged in activities that warrant the imposition of measures pursuant to Section 3 of the Iran, North Korea, and Syria Nonproliferation Act. The Act provides for sanctions on foreign entities and individuals for the transfer to or acquisition from Iran since January 1, 1999; the transfer to or acquisition from Syria since January 1, 2005; or the transfer to or acquisition from the DPRK since January 1, 2006, of goods, services, or technology controlled under multilateral control lists (Missile Technology Control Regime, Australia Group, Chemical Weapons Convention, Nuclear Suppliers Group, Wassenaar
Effective March 14, 2022.
On general issues: Pam Durham, Office of Missile, Biological, and Chemical Nonproliferation, Bureau of International Security and Nonproliferation, Department of State, Telephone (202) 647-4930. For U.S. Government procurement ban issues: Eric Moore, Office of the Procurement Executive, Department of State, Telephone: (703) 875-4079.
On March 14, 2022, the U.S. Government applied the measures authorized in Section 3 of the Iran, North Korea, and Syria Nonproliferation Act (Pub. L. 109-353) against the following foreign persons identified in the report submitted pursuant to Section 2(a) of the Act:
Zhengzhou Nanbei Instrument Equipment Co. Ltd (People's Republic of China) and any successor, sub-unit, or subsidiary thereof;
Second Academy of Natural Science Foreign Affairs Bureau (SANS FAB) (DPRK) and any successor, sub-unit, or subsidiary thereof;
Ri Sung Chol (aka Ri Su'ng-ch'o'l) (DPRK individual);
Ardis Group of Companies LLC (Russia) and any successor, sub-unit, or subsidiary thereof;
PFK Profpodshipnik, LLC (Russia) and any successor, sub-unit, or subsidiary thereof;
Igor Aleksandrovich Michurin (Russian individual).
Accordingly, pursuant to Section 3 of the Act, the following measures are imposed on these persons:
1. No department or agency of the U.S. government may procure or enter into any contract for the procurement of any goods, technology, or services from these foreign persons, except to the extent that the Secretary of State otherwise may determine;
2. No department or agency of the U.S. government may provide any assistance to these foreign persons, and these persons shall not be eligible to participate in any assistance program of the U.S. government, except to the extent that the Secretary of State otherwise may determine;
3. No U.S. government sales to these foreign persons of any item on the United States Munitions List are permitted, and all sales to these persons of any defense articles, defense services, or design and construction services under the Arms Export Control Act are terminated; and
4. No new individual licenses shall be granted for the transfer to these foreign persons of items the export of which is controlled under the Export Control Reform Act of 2018 or the Export Administration Regulations, and any existing such licenses are suspended.
These measures shall be implemented by the responsible departments and agencies of the U.S. government and will remain in place for two years from the effective date, except to the extent that the Secretary of State may subsequently determine otherwise. These measures are independent of and in addition to any other sanctions imposed on such entities and/or individuals by other federal agencies under separate legal authorities.
Susquehanna River Basin Commission.
Notice.
As part of its regular business meeting held on March 17, 2022, Harrisburg, Pennsylvania, the Commission approved the applications of certain water resources projects, and took additional actions, as set forth in the
March 17, 2022.
Susquehanna River Basin Commission, 4423 N Front Street, Harrisburg, PA 17110-1788.
Jason E. Oyler, General Counsel and Secretary, telephone: (717) 238-0423, ext. 1312, fax: (717) 238-2436; email:
In addition to the actions taken on projects identified in the summary above and the listings below, the following items were also acted upon at the business meeting: (1) Approved one grant agreement, a land acquisition agreement and a lease agreement; and (2) accepted staff recommendations for waiver of regulatory requirements related to renewal application deadlines for two projects.
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Tennessee Valley Authority.
60-Day notice of submission of information collection renewal approval and request for comments; correction.
The Tennessee Valley Authority published a document in the
Public Information Collection Clearance Officer: Jennifer A. Wilds, Specialist, Records Compliance, Tennessee Valley Authority, 400 W Summit Hill Dr., CLK-320, Knoxville, TN 37902-1401; telephone (865) 632-6580 or by email
National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT).
Notice and request for comments on a request for approval of a new information collection.
In compliance with the Paperwork Reduction Act of 1995 (PRA), this notice announces that the Information Collection Request (ICR) abstracted below will be submitted to the Office of Management and Budget (OMB) for review and approval. The ICR describes the nature of the information collection and its expected burden. This document describes a new collection of information for which NHTSA intends to seek OMB approval on Fatal Crash Seat Belt Use Reporting and Awareness, a one-time voluntary experiment to understand whether the inclusion of seat belt status in a fatal crash news report could affect seat belt use. A
Comments must be submitted on or before April 25, 2022.
Written comments and recommendations for the proposed information collection, including suggestions for reducing burden, should be submitted to the Office of Management and Budget at
For additional information or access to
Under the PRA (44 U.S.C. 3501
A
In 2019, 22,215 occupants of passenger vehicles (passenger cars, pickup trucks, vans, and SUVs) died in motor vehicle crashes in the United States. Of those killed where restraint status was known, 47% were unrestrained at the time of the fatal crash. NHTSA estimates that seat belts saved the lives of 14,955 passenger vehicle occupants age 5 and older in 2017 (latest data available), and, if all passenger vehicle occupants age 5 and older had worn seat belts, an additional 2,549 lives could have been saved.
This project supports NHTSA's efforts to increase occupant protection by examining factors related to seat belt use. Previous research in this area indicated that news organizations may not report seat belt use in many of the driving fatalities they cover.
Rosales, M., & Stallones, L. (2008). Coverage of motor vehicle crashes with injuries in U.S. newspapers, 1999-2002.
The information from this collection will assist NHTSA in (a) planning seat belt program activities; (b) supporting groups involved in improving public safety; and (c) identifying countermeasure strategies that are most acceptable and effective in increasing seat belt use.
The experiment will invite up to 20,850 people to participate. The
The total estimated burden associated with this collection is 1,057 hours. The sample of potential participants will receive an email invitation from Schlesinger Group, a marketing research firm that specializes in providing sampling pools of panelists, with screening questions to determine eligibility. The 20,850 potential participants are expected to spend 1 minute each in reading the invitation email for an estimated 348 hours. Those who are interested (estimated to be 20%, or 4,170 individuals) are expected to spend 1 minute each in completing the screener form for an estimated 70 hours. Schlesinger will provide electronic links to the consent form to the first 834 full-time seat belt users and to the first 834 part-time/non-users who qualify based on the screening questions. The 1,668 eligible participants are expected to spend 5 minutes each reading and completing the consent form for an estimated 139 hours. The estimated 1,500 consenting participants will each spend 20 minutes completing the experiment for an estimated 500 hours. The total burden is the sum of the burden across the invitation/screening, consenting, and completing the experiment for a total estimate of 1,057 hours. The details are presented in Table 1 below.
Issued in Washington, DC.
National Highway Traffic Safety Administration (NHTSA), Department of Transportation.
Denial of petition for a defect investigation.
This notice sets forth the reasons for the denial of a petition submitted on August 7, 2018, by Mr. Gary Weinreich (the petitioner) to NHTSA's Office of Defects Investigation (ODI). The petition requests that the Agency investigate alleged “premature and excessive frame corrosion” in model year (MY) 2002 through 2006 Toyota 4Runner vehicles. The petitioner bases his request upon his own experience with a MY 2005 Toyota 4Runner, a class action lawsuit settlement involving other Toyota products, and other complaints of underbody corrosion in Toyota 4Runner vehicles that he found in NHTSA's online complaint database. After reviewing the information provided by the petitioner regarding his vehicle, facts related to the class action lawsuit cited by the petitioner, and field data regarding underbody corrosion in
Mr. Gregory Magno, Vehicle Defects Division—D, Office of Defects Investigation, NHTSA, 1200 New Jersey Ave. SE, Washington, DC 20590 (telephone 202-366-5226).
By letter dated August 7, 2018, Mr. Gary Weinreich (the petitioner) submitted a petition requesting that the Agency “perform a high-priority investigation” of “premature and excessive frame corrosion” in model year (MY) 2002 through 2006 Toyota 4Runner vehicles. The petitioner bases his request upon a corrosion-related front suspension failure he experienced in his MY 2005 Toyota 4Runner, a class action lawsuit settlement involving other Toyota products, and other complaints of underbody corrosion in Toyota 4Runner vehicles that he found in NHTSA's online complaint database.
On August 17, 2018, the Office of Defects Investigation (ODI) opened Defect Petition DP18-002 to evaluate the petitioner's request for an investigation. ODI has reviewed the following information as part of its evaluation: (1) Information provided by the petitioner regarding his vehicle; (2) facts related to the class action lawsuit cited by the petitioner; (3) consumer complaint data regarding underbody corrosion in third- and fourth-generation Toyota 4Runner vehicles.
Yesterday, my wife and I and two friends riding with us narrowly escaped a fatal accident when the front suspension separated from the frame due to the corrosion problem. At highway speed, the vehicle began shaking violently and the steering was unable to properly control the vehicle. The vehicle went off the road after coming close to hitting an oncoming vehicle.
The petitioner alleged that this failure resulted from premature and excessive frame corrosion and provided service history information and photographs as supporting evidence.
ODI found that the petitioner's vehicle had a history of general corrosion concerns throughout the undercarriage that were not isolated to the frame. The photographs showed that the vehicle undercarriage was seriously corroded at the time the incident occurred. The information indicates severe general corrosion of the vehicle undercarriage consistent with many years of severe use and exposure, but ODI has not found evidence showing a design or manufacturing defect in the vehicle.
The vehicle service history information that the petitioner provided supports these observations. Concerns with underbody corrosion on his vehicle were first noted by a Toyota dealer in a multi-point vehicle inspection performed on April 28, 2011. The invoice for that inspection noted “severe and excessive amount of rust on the undercarriage and on the drive shaft transmission.” Two years later, on October 21, 2013, another multi-point inspection by a Toyota dealer observed further progression of underbody corrosion damage, noting: “rust on shocks/struts and other components,” “rust on exhaust system,” “both splash shields severely rusted,” and “undercarriage very rusty.”
The service history further indicates that corrosion concerns in the petitioner's vehicle were first observed in other underbody components (
The petitioner lives less than a mile from the ocean, where exposure to marine salts may lead to increased vehicle corrosion rates if vehicles are not regularly cleaned. While no information was provided regarding the use, care, and maintenance of the petitioner's vehicle, ODI has not received evidence that the vehicle received any repairs to address the noted corrosion concerns prior to the May 2018 front suspension failure.
Starting in 2008, Toyota conducted multiple service campaigns and warranty extension programs to address concerns with premature frame corrosion in certain vehicles equipped with frames supplied by Dana Holding Company (Dana).
These issues were presented in other litigation as well. A class-action lawsuit filed in Arkansas on October 3, 2014, alleged that MY 2005 through 2009 Toyota Tacoma vehicles lacked adequate rust protection on the vehicles' frames, leading to premature corrosion failures.
The class action was settled in May 2017. The terms of the settlement included extending warranty coverage to 12 years from first use for a Frame Inspection and Replacement Program. The settlement was widely reported by news media.
Both third and fourth-generation 4Runner vehicles were built in Japan and are not equipped with frames manufactured by Dana. Although private litigation can be a relevant source of information to consider in the course of examining a potential vehicle defect in many cases, the petitioner has not demonstrated that the litigation he cites here supports the grant of his petition.
ODI's analysis of consumer complaint data related to frame corrosion in fourth-generation Toyota 4Runner vehicles has not found evidence of a failure trend indicating a potential design or manufacturing defect leading to premature failures. Rather, the data tends to show complaint trends occurring late in vehicle life in high corrosion regions. Relatively few complaints involved suspension detachments, and those that did were spread among multiple suspension links, each occurring in older vehicles operated in high corrosion regions. Finally, ODI finds no meaningful difference between frame corrosion complaint trends and related suspension detachment allegations in third- and fourth-generation 4Runner vehicles.
4Runner complaint trends lag trends for the Dana frame vehicles by several years. Through the end of 2008, the year of Toyota's first field action for Dana frame vehicles, NHTSA had received 150 complaints for Dana frame vehicles and just 3 for 4Runner vehicles (none involving the subject fourth-generation 4Runner vehicles). By the end of 2010, NHTSA had received 716 complaints for the Dana frame vehicles and just 36 for 4Runner vehicles (only 5 involving the subject fourth-generation vehicles).
Figure 1 shows the vehicle age distributions of frame corrosion complaints to NHTSA for Toyota 4Runner vehicles, Toyota Dana frame vehicles, and peer body-on-frame vehicles. The chart on the left shows the distributions for MY 1996 through 2002 vehicles (
In both age groups, the complaint age distributions for the Toyota 4Runner vehicles lag the distributions of the Toyota Dana frame and peer body-on-frame vehicles by several years. The complaints peak at 15 years-in-service for the third-generation Toyota 4Runner vehicles, 6 years after the peak for the Dana frame vehicles and 4 years after the peak for the peer body-on-frame vehicles. The complaints also peak at 15 years-in-service for the fourth-generation Toyota 4Runner vehicles, 6 years after the peak for the Toyota Dana frame vehicles and 5 years after the peak for the peer body-on-frame vehicles.
Figure 2 shows the cumulative age distributions of frame corrosion complaints to NHTSA for the same vehicle sets. The 4Runner complaints occur later in the vehicle age than the Toyota Dana frame and peer body-on-frame complaints. Only about 3 percent of the complaints for the third-generation 4Runner vehicles occurred within 10 years-in-service, compared with 43 percent of the Toyota Dana frame vehicle complaints and 21 percent of the peer body-on-frame vehicle complaints for the same model year range. For the MY 2003 through 2009 vehicles, approximately 6 percent of complaints for the Toyota 4Runners occurred within 10 years, compared with 45 percent for the Toyota Dana frame vehicles and 47 percent for the peer body-on-frame vehicles.
ODI's analysis of consumer complaints received by NHTSA through March 7, 2022, identified a total of 1,024 records that appear to be related to frame corrosion in fourth-generation Toyota 4Runner vehicles, including 70 involving alleged detachments of front or rear suspension links. Both the overall complaints and those reporting suspension link detachments primarily involve older vehicles in high-corrosion states. No patterns or trends were identified for any specific suspension link. The radiator support bracket was the most common location for frame perforation damage in reports that included sufficient information to assess damage location. This part can be serviced separately and does not present any crash avoidance or crashworthiness safety concerns. The complaints describe general underbody corrosion damage indicative of normal, end-of-life wear-out failures from long duration exposures to severe, corrosive environments.
Table 1 provides a breakdown of the complaints reporting suspension detachments by the suspension component. The detachment failures include two minor crashes and no verified injury allegations.
ODI's analysis of NHTSA complaint data finds similar age-adjusted trends in the field experience of the third and fourth-generation 4Runner vehicles. The third-generation 4Runner vehicles have more than double the allegations of suspension link detachments than the fourth-generation 4Runners. The difference appears to be attributable to the greater exposure time of the third-generation vehicles. Analysis of suspension link failures by vehicle age showed similar rates for the third- and fourth-generation products through 15 years of service. In both generations, the failures are concentrated in states with the greatest use of deicing salts to treat road surfaces in winter months. 96 percent of the failures involved vehicles owned or previously registered in states with the greatest use of deicing salts to treat road surfaces in winter months (“Salt states”).
Complaints for both generations of 4Runners appear to have been influenced by news about Toyota's field actions for the Sequoia, Tacoma and
Analysis of the age distributions of corrosion-related suspension link failures in the subject 4Runner vehicles shows late-life patterns after well over 10 years of exposure to severe corrosion environments. Incidents of corrosion damage that have resulted in failure of underbody components while driving appear to have developed progressively over many years with ample opportunity for detection and repair. This appears to be indicative of normal wear and tear failures, and we have not found evidence of a defect related to premature or excessive corrosion failures.
ODI has not identified any serious crashes or injuries associated with corrosion-related failure of frame structural components while driving in a population of vehicles that currently ranges from 15 to 19 years old. Accordingly, the Agency is denying the petition.
Internal Revenue Service (IRS), Treasury.
Notice.
This document provides notice of the availability of the application package for the 2023 Community Volunteer Income Tax Assistance (VITA) Matching Grant Program.
Application instructions are available electronically from the IRS on May 1, 2022, by visiting:
Internal Revenue Service, Grant Program Office, 401 West Peachtree St. NW, Stop 420-D, Atlanta, GA 30308.
Sharon Alley, at 470-639-2933, or at the Grant Program Office via their email address at
Authority for the Community Volunteer Income Tax Assistance (VITA) Matching Grant Program is contained in the Taxpayer First Act 2019, Public Law 116-25.
Internal Revenue Service (IRS), Treasury.
Notice.
This document provides notice of the availability of application packages for the 2023 Tax Counseling for the Elderly (TCE) Program.
Application instructions are available electronically from the IRS on May 1, 2022, by visiting:
Internal Revenue Service, Grant Program Office, 5000 Ellin Road, NCFB C4-110, SE:W:CAR:SPEC:FO:GPO, Lanham, Maryland 20706.
Lorraine Thompson, at (240)613-6085, or at the Grant Program Office via their email address at
Authority for the Tax Counseling for the Elderly (TCE) Program is contained in Section 163 of the Revenue Act of 1978, Public Law 95-600, (92 Stat.12810), November 6, 1978. Regulations were published in the
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
Veterans Benefits Administration, Department of Veterans
Written comments and recommendations on the proposed collection of information should be received on or before May 23, 2022.
Submit written comments on the collection of information through Federal Docket Management System (FDMS) at
Maribel Aponte, Office of Enterprise and Integration, Data Governance Analytics (008), 1717 H Street NW, Washington, DC 20006, (202) 266-4688 or email
Under the PRA of 1995, Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. This request for comment is being made pursuant to Section 3506(c)(2)(A) of the PRA.
With respect to the following collection of information, VBA invites comments on: (1) Whether the proposed collection of information is necessary for the proper performance of VBA's functions, including whether the information will have practical utility; (2) the accuracy of VBA's estimate of the burden of the proposed collection of information; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or the use of other forms of information technology.
By direction of the Secretary.
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
Veterans Benefits Administration, Department of Veterans Affairs (VA), is announcing an opportunity for public comment on the proposed collection of certain information by the agency. Under the Paperwork Reduction Act (PRA) of 1995, Federal agencies are required to publish notice in the
Written comments and recommendations on the proposed collection of information should be received on or before May 23, 2022.
Submit written comments on the collection of information through Federal Docket Management System (FDMS) at
Maribel Aponte, Office of Enterprise and Integration, Data Governance Analytics (008), 1717 H Street NW, Washington, DC 20006, (202) 266-4688 or email
Under the PRA of 1995, Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. This request for comment is being made pursuant to Section 3506(c)(2)(A) of the PRA.
With respect to the following collection of information, VBA invites comments on: (1) Whether the proposed collection of information is necessary for the proper performance of VBA's functions, including whether the information will have practical utility; (2) the accuracy of VBA's estimate of the burden of the proposed collection of information; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or the use of other forms of information technology.
By direction of the Secretary.
Office of Energy Efficiency and Renewable Energy, Department of Energy.
Notice of proposed rulemaking and request for comment.
The U.S. Department of Energy (“DOE”) proposes to amend the test procedures for central air conditioners and heat pumps that will be required for certification of compliance with applicable energy conservation standards starting January 1, 2023 to address a limited number of specific issues. DOE is seeking comment from interested parties on the proposal.
DOE will accept comments, data, and information regarding this proposal no later than May 23, 2022. See section V, “Public Participation,” for details. DOE will hold a webinar on Monday, April 18, 2022, from 1 p.m. to 4 p.m.
Interested persons are encouraged to submit comments using the Federal eRulemaking Portal at
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No telefacsimiles (“faxes”) will be accepted. For detailed instructions on submitting comments and additional information on this process, see section V of this document.
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
Ms. Catherine Rivest, 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) 586-7335. Email
Mr. Pete Cochran, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: (202) 586-9496. Email:
For further information on how to submit a comment, review other public comments and the docket, or participate in a public meeting, contact the Appliance and Equipment Standards Program staff at (202) 287-1445 or by email:
DOE proposes to maintain the following previously approved incorporations by references in 10 CFR part 430:
ANSI/AHRI 210/240-2008 with Addenda 1 and 2, 2008 Standard for Performance Rating of Unitary Air-Conditioning & Air-Source Heat Pump Equipment, ANSI approved October 27, 2011;
ANSI/AHRI 1230-2010 with Addendum 2, 2010 Standard for Performance Rating of Variable Refrigerant Flow (VRF) Multi-Split Air-Conditioning and Heat Pump Equipment, ANSI approved August 2, 2010.
Copies of AHRI 210/240-2008 and AHRI 1230-2010 can be obtained from the Air-Conditioning, Heating, and Refrigeration Institute, 2111 Wilson Boulevard, Suite 500, Arlington, VA 22201, (703) 524-8800, or by going to
ANSI/ASHRAE 23.1-2010, Methods of Testing for Rating the Performance of Positive Displacement Refrigerant Compressors and Condensing Units that Operate at Subcritical Temperatures of the Refrigerant, ANSI approved January 28, 2010;
ANSI/ASHRAE Standard 37-2009, Methods of Testing for Rating Electrically Driven Unitary Air-Conditioning and Heat Pump Equipment, ANSI approved June 25, 2009;
ANSI/ASHRAE 41.1-2013, Standard Method for Temperature Measurement, ANSI approved January 30, 2013;
ANSI/ASHRAE 41.2-1987 (Reaffirmed 1992), “Standard Methods for Laboratory Airflow Measurement,” ANSI approved April 20, 1992;
ANSI/ASHRAE 41.6-2014, Standard Method for Humidity Measurement, ANSI approved July 3, 2014;
ANSI/ASHRAE 41.9-2011, Standard Methods for Volatile-Refrigerant Mass Flow Measurements Using Calorimeters, ANSI approved February 3, 2011;
ANSI/ASHRAE 116-2010, Methods of Testing for Rating Seasonal Efficiency of Unitary Air Conditioners and Heat Pumps, ANSI approved February 24, 2010.
Copies of ASHRAE 23.1-2010, ANSI/ASHRAE 37-2009, ANSI/ASHRAE 41.1-2013, ASHRAE 41.2-1987 (RA 1992), ASHRAE 41.6-2014, ASHRAE 41.9-2011, and ASHRAE 116-2010 can be purchased from
ANSI/AMCA 210-2007, ANSI/ASHRAE 51-2007, Laboratory Methods of Testing Fans for Certified Aerodynamic Performance Rating, Figure 2A and Figure 12, ANSI approved August 17, 2007.
Copies of AMCA 210-2007 can be purchased from
For a further discussion of these standards, see section IV.M of this document.
Central air conditioners (“CACs”) and central air conditioning heat pumps (“HPs”) (collectively, “CAC/HPs”) are included in the list of “covered products” for which DOE is authorized to establish and amend energy conservation standards and test procedures (42 U.S.C. 6292(a)(3)). DOE's energy conservation standards and test procedures for CAC/HPs are currently prescribed at title 10 of the Code of Federal Regulations (“CFR”), part 430 section 32(c), and 10 CFR part 430 subpart B appendices M (“Appendix M”) and M1 (“Appendix M1”). The following sections discuss DOE's authority to establish test procedures for CAC/HPs and relevant background information regarding DOE's consideration of test procedures for this product.
The Energy Policy and Conservation Act, as amended (“EPCA”),
The energy conservation program under EPCA consists essentially of four parts: (1) Testing, (2) labeling, (3) Federal energy conservation standards, and (4) certification and enforcement procedures. Relevant provisions of EPCA specifically include definitions (42 U.S.C. 6291), test procedures (42 U.S.C. 6293), labeling provisions (42 U.S.C. 6294), energy conservation standards (42 U.S.C. 6295), and the authority to require information and reports from manufacturers (42 U.S.C. 6296).
The Federal testing requirements consist of test procedures that manufacturers of covered products must use as the basis for: (1) Certifying to DOE that their products comply with the applicable energy conservation standards adopted pursuant to EPCA (42 U.S.C. 6295(s)), and (2) making representations about the efficiency of those consumer products (42 U.S.C. 6293(c)). Similarly, DOE must use these test procedures to determine whether the products comply with relevant standards promulgated under EPCA. (42 U.S.C. 6295(s))
Federal energy efficiency requirements for covered products established under EPCA generally supersede State laws and regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 6297) DOE may, however, grant waivers of Federal preemption for particular State laws or regulations, in accordance with the procedures and other provisions of EPCA. (42 U.S.C. 6297(d))
Under 42 U.S.C. 6293, EPCA sets forth the criteria and procedures DOE must follow when prescribing or amending test procedures for covered products. EPCA requires that any test procedures prescribed or amended under this section be reasonably designed to produce test results which measure energy efficiency, energy use or estimated annual operating cost of a covered product during a representative average use cycle or period of use and not be unduly burdensome to conduct. (42 U.S.C. 6293(b)(3))
If the Secretary determines, on her own behalf or in response to a petition by any interested person, that a test procedure should be prescribed or amended, the Secretary shall promptly publish in the
DOE's regulations at 10 CFR 430.27 provide that any interested person may seek a waiver from the test procedure requirements if certain conditions are met. A waiver allows manufacturers to use an alternate test procedure in situations in which the DOE test procedure cannot be used to test the product or equipment, or use of the DOE test procedure would generate unrepresentative results. 10 CFR 430.27(a)(1). DOE's regulations at 10 CFR 430.27(l) require that as soon as practicable after the granting of any waiver, DOE will publish in the
As discussed, DOE's existing test procedures for CAC/HPs appear at appendix M and appendix M1 (both titled “Uniform Test Method for Measuring the Energy Consumption of Central Air Conditioners and Heat Pumps”).
On January 5, 2017, DOE published a final rule regarding the Federal test procedure for CAC/HPs. 82 FR 1426 (“January 2017 Final Rule”). The January 2017 Final Rule amended appendix M and established appendix M1, use of which is required beginning January 1, 2023 for any representations, including compliance certifications, made with respect to the energy use or efficiency of CAC/HPs. appendix M provides for the measurement of the cooling and heating performance of CAC/HPs using the seasonal energy efficiency ratio (“SEER”) metric and heating seasonal performance factor (“HSPF”) metric, respectively. appendix M1 specifies a revised SEER metric (
Since the publication of the January 2017 Final Rule, DOE has granted various petitions for waiver and interim waiver from certain provisions of appendix M and/or M1.
In addition, on May 8, 2019, AHRI submitted a comment responding to the notice of proposal to revise and adopt procedures, interpretations, and policies for consideration of new or revised energy conservation standards (2020 Process Rule NOPR, 84 FR 3910, Feb. 13, 2019). The comment included as Exhibit 2 a “List of Errors Found in both appendix M and appendix M1” (“AHRI Exhibit 2”, EERE-2017-BT-STD-0062-0117 at pp. 23-24). Many of the errors pointed out by AHRI regard typographical errors in appendix M and appendix M1. DOE is addressing these issues in this rulemaking.
In accordance with section 3(a) of 10 CFR part 430, subpart C, appendix A (“Appendix A”), DOE notes that it is deviating from the provision in appendix A regarding the early assessment process prior to the NOPR stage to notify stakeholders that DOE is considering a rulemaking to amend a test procedure and solicit comment on whether an amended test procedure would more accurately measure energy efficiency, energy use, water use (as specified in EPCA), or estimated annual operating cost of a covered product during a representative average use cycle or period of use without being unduly burdensome to conduct or reduce testing burden. DOE is opting to deviate from this provision by proposing changes to the test procedure in this proposed rule without first having gone through the early assessment process because DOE has already been made aware by stakeholders that the test procedure for CACs/HPs could be enhanced to improve repeatability, representativeness, and accuracy, and reduce testing burden, and the proposals in this document are aimed at addressing those issues. Additionally, resolution of these issues has some urgency because the test procedure the proposals address is required to be used for testing starting on January 1, 2023. Hence, because DOE is aware that the test procedure could be improved to be more repeatable and representative, and less burdensome, a general early assessment process of request of comments, data, and information prior to the NOPR stage is not considered necessary.
In this notice of proposed rulemaking (“NOPR”), DOE proposes to update appendix M1 to subpart B of part 430, “Uniform Test Method for Measuring the Energy Consumption of Central Air Conditioners and Heat Pumps.” DOE has identified certain provisions of appendix M1 that may benefit from additional detail and/or instruction. The proposed updates are as follows:
(1) Adjusting the default fan power for two-stage coil-only systems when testing at low stage with reduced air volume rate to be more representative of fan input power trends as air volume rate reduces;
(2) Defining “Variable-speed Communicating Coil-only Central Air Conditioner or Heat Pump” and “Variable-speed Non-communicating Coil-only Central Air Conditioner or Heat Pump” and establishing procedures specific for testing such systems;
(3) Allowing the adjustment of the air volume rate as a function of outdoor air temperature during testing for blower coil systems with either multiple-speed or variable-speed indoor fans and with a control system capable of adjusting air volume rate as function of outdoor air temperature;
(4) Adjusting the maximum wet bulb temperature from 3 °F to 4 °F for the H4 test condition;
(5) Specifying in section 2(B) of appendix M1, that the instructions presented in the labels attached to the unit take precedence over the installation manuals printed and shipped with a product;
(6) Specifying in sections 3.1.4.1.1, 3.1.4.1.2, and 3.1.4.4.3 of appendix M1 that the airflow measurement apparatus fan must be adjusted if necessary to maintain the same air volume rate for different test conditions for systems not including multiple-speed or variable-speed indoor fans with control system capability to adjust air volume rate as function of operating conditions such as outdoor air temperature; and
(7) Revising the equations representing full-capacity operation of variable-speed heat pumps at and above 45 °F ambient temperature to be consistent with the intent for nominal capacity operation.
Additionally, in this notice of proposed rulemaking (“NOPR”), DOE proposes to update 10 CFR part 429, “Certification, Compliance, and Enforcement for Consumer Products and Commercial and Industrial Equipment”. DOE has identified certain provisions of part 429 that may benefit from additional detail and/or instruction. The proposed updates are as follows:
(1) Clarifying the language for required represented values for single-stage and two-stage coil-only CACs; and
(2) Providing additional direction regarding the regional standard requirements in part 429.
DOE's proposed substantive actions are summarized in Table II.1 compared to the current test procedure as well as the reason for the proposed change (“attribution”). Additional proposed
As mentioned previously, DOE is also fixing typographical errors in appendix M and appendix M1 that were commented upon by AHRI. DOE is addressing these issues in this rulemaking.
Under 42 U.S.C. 6293(e)(1), DOE is required to determine whether an amended test procedure will alter the measured energy use of any covered product. If an amended test procedure does alter measured energy use, DOE is required to make a corresponding adjustment to the applicable energy conservation standard to ensure that minimally compliant covered products remain compliant. (42 U.S.C. 6293(e)(2)) DOE has tentatively determined that the proposed amendments described in section III of this NOPR would not alter the measured efficiency of CAC/HPs that are rated using the test procedure that is currently required for testing,
DOE is proposing to amend the test procedures at appendix M1 for CAC/HP and to implement a few minor clerical revisions to the test procedures at appendix M. A
Appendix M1 applies to the following CACs/HPs:
(a) Split-system air conditioners, including single-split, multi-head mini-split, multi-split (including VRF), and multi-circuit systems;
(b) Split-system heat pumps, including single-split, multi-head mini-split, multi-split (including VRF), and multi-circuit systems;
(c) Single-package air conditioners;
(d) Single-package heat pumps;
(e) Small-duct, high-velocity systems (including VRF);
(f) Space-constrained products—air conditioners; and
(g) Space-constrained products—heat pumps.
DOE is not proposing to change the scope of CACs/HPs covered by appendix M1.
Coil-only systems are indoor units that are distributed in commerce without an indoor blower or separate designated air mover. Such systems installed in the field rely on a separately installed furnace or a modular blower for indoor air movement. Because coil-only CAC/HPs do not include their own indoor fan to circulate air, the DOE test procedures prescribe equations that are used to calculate the assumed (
In appendix M, the default fan power coefficient is defined as 365 W/1000 scfm, and the default fan heat coefficient is defined as 1,250 Btu/h/1000 scfm.
The January 2017 Final Rule adopted certain values in appendix M1 to be more representative of field conditions, as compared to appendix M (
In updating the default fan power coefficients and default fan heat coefficients for coil-only systems in appendix M1, DOE relied on indoor fan electrical power consumption data collected from product literature, testing, and exchanges with manufacturers during a previous furnace fan rulemaking (see 79 FR 500, 506; Jan. 3, 2014) to determine appropriate values for these coefficients for coil-only products. 80 FR 69277, 69318.
By letter dated September 7, 2021, Nortek filed a petition for waiver and interim waiver from the test procedure for CAC/HPs set forth in appendix M1.
On November 16, 2021, DOE published a notification that announced its receipt of the petition for waiver and denial of Nortek's petition for an interim waiver. 86 FR 63357 (“Notification of Petition for Waiver”). In the Notification of Petition for Waiver, DOE noted that applying the modified default fan power coefficients and default fan heat coefficients in appendix M1 to products such as those that are the subject of Nortek's petition was determined to be representative of the systems' performance and reflected the adoption of the recommendations of a working group formed to negotiate a notice of proposed rulemaking for energy conservation standards for CAC/HPs; and that the modified coefficients were subject to public comment during the 2016 test procedure rulemaking for CAC/HPs. 82 FR 1426, 1452 (January 5, 2017). DOE also noted that Nortek commented in support of the modified coefficients during the 2016 rulemaking.
In response to the issue raised by Nortek, DOE re-examined the furnace fan electrical power consumption data collected for the furnace fans rulemaking (see 79 FR 506, Jan. 3, 2014) that was used to develop the default fan power coefficients and default fan heat coefficients for coil-only products in appendix M1. In establishing the current coefficients, for each furnace fan in DOE's furnace fan dataset, DOE developed correlations of airflow and power consumption as functions of external static pressure (“ESP”), and then applied those correlations to a reference ductwork system curve to predict the actual operating airflow and power consumption at each fan speed setting for the furnace fan.
DOE has extended the prior analysis to examine both full-load and part-load air volume rates.
The analysis conducted by DOE resulted in higher default fan power coefficients and default fan heat coefficients at the reduced 75 percent air volume rate than the values presented in the Nortek waiver petition. DOE tentatively concludes that its analysis is a more appropriate representation of average furnace fan power consumption than the results presented by Nortek for the following reasons: (1) DOE's analysis relied on test and specification data from a collection of actual furnaces operating at reduced air volume rates, whereas the Nortek analysis derived default fan power values using a theoretical relationship between full-load and part-load conditions; (2) DOE's analysis applied the same weighting factors that were used to develop the full-load default values during the 2016 CAC TP Rulemaking, whereas Nortek's analysis introduced new weighting factors and motor efficiency data without indicating the source of the data; and (3) DOE's analysis considered performance data from an additional type of fan motor not considered by Nortek (specifically, constant-torque brushless-permanent-magnet “X13” motors). Therefore, in this NOPR DOE proposes to amend the default fan power coefficients and default fan heat coefficients for coil-only fan power when operating at reduced air volume rates to reflect the results of its analysis. Specifically, when operating at 75 percent air volume rate (or higher manufacturer-specified air volume rate that is between the 75 percent air volume rate and the full-load air volume rate as described in appendix M1, section 3.1.4.2.c), DOE proposes to specify for ducted two-capacity coil-only systems a default fan power coefficient of 360 W/1000 scfm and a default fan heat coefficient of 1,228 Btu/h/1000 scfm for units installed in conventional systems; and a default fan power coefficient of 331 W/1000 scfm and a default fan heat coefficient of 1,130 Btu/h/1000 scfm for mobile home and space-constrained systems.
The reduced air volume rate used for low-stage operation of two-stage coil-only systems may be higher than 75 percent of the full-load air volume rate, if the manufacturer's instructions specify a higher part-load air volume rate. DOE is proposing that in such cases, the default fan power values associated with full-load air volume rate be used. However, the appropriate default fan power coefficient and default fan heat coefficient may be values between the reduced values discussed above and the values used for full-load air volume rate. For such cases, DOE could consider alternative options, other than requiring use of the full-load air volume default fan power and fan heat coefficients. Two alternative options include (1) allowing the reduced value up to a threshold value,
DOE requests comment on its proposal to specify a reduced default fan power coefficient and default fan heat coefficient at part-load airflows in the calculations of SEER2 and HSPF2
As discussed, appendix M1 contains provisions for testing split-system CAC/HPs equipped with “coil only” indoor units that, in a field installation, are paired with an existing furnace or other air handler in order to circulate conditioned air through ductwork. These provisions apply to single-stage and two-stage systems.
Since the publication of the January 2017 Final Rule, DOE has granted test procedure waivers to GD Midea Heating & Ventilating Equipment Co., Ltd. (“GD Midea”) (83 FR 56065 (Nov. 9, 2018)) and TCL air conditioner (zhongshan) Co. Ltd. (“TCL AC”) (84 FR 11941 (Mar. 29, 2019)), and an interim waiver for LG Electronics U.S.A., Inc. (“LGE”) (85 FR 40272 (July 6, 2020)), for specified basic models of variable-speed, coil-only CAC/HPs. In each of these cases, the petitioners identified their variable-speed coil only systems as “non-communicative” systems for which compressor speed varies based only on controls located on the outdoor unit, and for which the indoor unit maintains a constant indoor blower fan speed (see,
DOE notes also that the waivers for “non-communicative” variable-speed coil-only systems did not address comprehensively how the outdoor units are controlled to turn on or off in cooling mode or in heating mode, nor how the compressor speeds are set to match the internal building load. Regarding the latter, the waivers indicated only that “compressor speed varies based only on controls located on the outdoor unit” (GD Midea, EERE-2017-BT-WAV-0060, No. 1, p. 6; TCL, EERE-2018-BT-WAV-0013, No. 1, p. 4; LG, EERE-2019-BT-WAV-0023, No. 1, pp 2). DOE did not receive information in the waiver petitions regarding, nor has it evaluated, the compressor speed selections used for different test conditions specified in appendix M or appendix M1. Further, DOE has not compared these speed selections with those used by blower-coil variable speed systems for the same test conditions. Based on the information received and evaluated, DOE has yet to receive sufficient evidence that can be relied on to conclude that the alternate test procedures specified in the waivers are representative of average use cycles of CAC/HPs other than those subject to the granted waivers, as required by EPCA for DOE test procedures.
DOE has also granted an interim test procedure waiver to Goodman Manufacturing Company, L.P. (“Goodman”) (86 FR 40534 (July 28, 2021)) for their basic models of variable-speed, coil-only CAC/HPs. Unlike the aforementioned test procedure waivers, Goodman represented, and supported in their petition, that their systems have communicative controls, where both the outdoor unit and indoor coil communicate with each other to control both the variable-speed compressor and multi-speed indoor fan. 86 FR 40534, 40539. As a result, the alternate test procedure prescribed under the interim waiver requires use of two different indoor air volume rates during testing to simulate the impacts of communicative control that would be realized in a typical field installation. 86 FR 40534, 40538. Specifically, the Goodman waiver requires use of the cooling full-load air volume rate for the full-load cooling and full-load heating tests; and the cooling minimum air volume rate for the cooling minimum, heating minimum, cooling intermediate, and heating intermediate tests.
In response to the notice of petition for waiver, Rheem questioned the approach of the alternate test procedure in specifying two different indoor air volume rates during testing of these basic models. (Rheem, EERE-2021-BT-WAV-0001, No. 7 at p. 1). Rheem expressed concern that the alternate test procedure would allow Goodman an unfair competitive advantage, (
As stated in a final rule published in 2005, use of a lower air volume rate for low-stage operation is based on the assumption that the two-capacity coil-only unit would most often be used with an existing multi-tap furnace blower (
As mentioned in the notification of the interim waiver issued in response to the Goodman petition, DOE reviewed numerous materials relevant to the control of the Goodman variable-speed coil-only system, including additional materials Goodman provided in support of the petition. 86 FR 40534, 40537 (July
DOE notes that Goodman's interim waiver was granted for both appendix M and appendix M1. The waiver for appendix M will expire on the date representations are required to be based on testing according to appendix M1 (Jan 1, 2023), and the waiver for appendix M1 will expire on the date on which use of an amended test procedure that addresses the issues presented in the Goodman waiver is required to demonstrate compliance. 10 CFR 430.27(h)(3).
In this NOPR, DOE proposes to add testing provisions addressing variable-speed coil-only systems in appendix M1. DOE also proposes to define “communicating control” in the context of variable-speed, coil-only CAC/HPs in order to differentiate between the test procedure provisions that would be applicable to communicating systems from those applicable to non-communicating systems.
DOE is proposing provisions as generally prescribed in the relevant waivers, except that DOE is proposing to require that all variable-speed coil-only systems, regardless of communicative capability, would be tested using the cooling minimum air volume rate for the cooling minimum, heating minimum, cooling intermediate, and heating intermediate tests. This proposal is consistent with the conditions specified in the interim waiver granted to Goodman. DOE further proposes to require that non-communicative variable-speed coil-only systems be tested using the newly proposed provisions for variable-speed compressor with non-communicating coil-only systems (
Regarding indoor air volume rate, the proposed test procedure would utilize the same procedure as for ducted two-capacity coil-only units. As discussed previously, the two-stage coil-only test procedure is premised on the capability of controlling an existing multi-tap furnace fan at two air volume rates for cooling operation. DOE is not proposing to amend this approach. DOE is proposing to apply a similar approach to the testing of variable-speed coil-only systems. As such, DOE proposes to align the requirements for minimum air volume rate between two-capacity and variable-speed coil-only indoor units, regardless of communicating capabilities. This includes adopting the reduced default fan power and default fan heat coefficients at reduced air volume rates discussed in section I.B.1. However, if the system does not include the capability to control an existing furnace fan at two air volume rates, the manufacturer has the option of specifying minimum/intermediate air volume rates equal to the full-load air volume rate. Regarding compressor speed, the proposed test procedure would limit use of the variable-speed testing provisions to those systems meeting the newly proposed criteria for communicating control.
As previously stated, the test procedure for two-stage coil-only systems is premised on the system using a two-stage thermostat and associated wiring that responds to indoor temperature measurements and sends voltage signals that enable two-stage control of both the compressor speed and the indoor fan speed. A more sophisticated control approach is required to enable a variable speed system to modulate compressor speed control (
DOE also proposes to define variable-speed systems that do not have this communicating feature as the following:
Variable-speed coil-only systems that meet the “communicating” definition would be tested like any other variable-speed system, except that the heating full-load air volume rate would be equal to the cooling full-load air volume rate, and the intermediate and minimum cooling and heating air volume rates would all be the higher of (1) the rate specified by the installation instructions included with the unit by the manufacturer, and (2) 75 percent of the full-load cooling air volume rate.
DOE proposes that those variable-speed coil-only systems that are not “communicating” as defined above would be tested with additional limitations as if they have some variable-speed system characteristics and some two-stage coil-only system characteristics. Specifically, (a) the outdoor unit and/or the indoor unit would be provided with a control signal indicating operation at high or low stage, rather than testing with compressor speed fixed at specified speeds, and (b) air volume rates would be determined consistent with the requirement for two-stage coil-only systems. A key implication of (a) is that there would be no intermediate compressor speed operation. Many of the requirements associated with variable-speed operation would, however, be retained. For example, such systems would be allowed to have “minimum speed-limiting” control for heat pump mode (see the alternative calculations representing minimum-speed operation in appendix M1, section 4.2.4.b). The test method for non-communicating variable-speed coil-only systems would include requiring tests for minimum-speed operation for both the 35 °F and 17 °F heating test conditions so that the HSPF2 calculations utilize test results for appropriate compressor speeds. Also, the full compressor speed during heating mode operation would be allowed to vary with outdoor temperature, there would be an H1
To ensure consistency of testing, it may be necessary for manufacturers to certify whether a variable-speed coil-only rating is based on non-communicating or communicating control. However, this change is not being proposed in this NOPR and may be considered in a separate rulemaking.
DOE requests comment on its proposals related to test procedures for variable-speed coil-only CAC/HPs and on its proposed definitions for variable-speed communicating and non-communicating coil-only CAC/HPs.
DOE recognizes that there may be variable-speed control technology that cannot be tested according to the proposed test approach described previously for non-communicating variable-speed coil-only systems. Specifically, the test approach may not result in tests that meet the stability requirements for testing (
DOE is aware that installations using non-communicating controls may not be limited only to variable-speed coil-only systems, but could also occur with variable-speed blower-coil systems. DOE's proposal makes a distinction between the testing approach used for coil-only configurations and the testing approach used for blower-coil configurations. As coil-only installations are much more likely than blower-coil installations to involve use of both the existing furnace fan and existing controls, the test procedure should be reflective of coil-only installations because they are more representative than blower coil installations.
DOE has considered whether the current test procedures for variable-speed systems generally give manufacturers too much flexibility in specifying fixed settings of the compressor and indoor fan for testing without requiring the selected settings to be demonstrated using native control testing. DOE is well aware that there is ongoing work addressing questions about whether the current DOE test procedure for variable-speed systems is fully representative of native control operation. However, DOE has initiated this rulemaking not as a comprehensive revision that will satisfy the 7-year lookback requirements (see 42 U.S.C. 6293(b)(1)(A)), but instead as an action that will address a focused group of known issues, including those that have been raised through the test procedure waiver process. Thus, DOE is limiting its proposals addressing potential concerns about variable-speed systems to coil-only systems, for which there are clear differences in system controls architecture, particularly when using non-communicating controls, which impact the performance of these systems in the field. However, DOE may more comprehensively address these issues for all variable-speed systems in a future rulemaking.
Coil-only testing approaches for variable-speed systems address the installation of variable-speed technology in which the newly-installed system uses existing components, for example an existing furnace fan. For single-capacity and two-capacity air-conditioners, certification requirements anticipate this potential gap by requiring that such models include performance representations with a coil-only combination representative of the least-efficient combination in which the outdoor unit is sold (see 10 CFR 429.16(a)(1)). DOE considered whether such a requirement may be appropriate for variable-speed systems.
A review of manufacturing materials, such as product datasheets and installation instructions, indicates that there is a wide range of instruction provided regarding the need to pair a variable-speed outdoor unit with specific models of indoor units and/or air movers (
Currently, every single-split system AC with other than single-stage and two-stage compressors must represent every individual combination distributed in commerce, including all coil-only and blower coil combinations. 10 CFR 429.16(a)(1). These regulations, when combined with the test procedure proposals in this NOPR, would require manufacturers to represent variable-speed ACs based on how they distribute them in commerce, which includes whether they are coil-only communicating, coil-only noncommunicating, or blower coil, as applicable to a given model of outdoor unit. DOE would evaluate how manufacturers distribute models of outdoor units based on review of product datasheets, installation and operation manuals, product marketing, relevant databases (including the AHRI database), manufacturer websites, and other related materials that help inform the consumer how the outdoor unit should be installed.
As noted previously, representations of efficiency for single-split air conditioners with a single-stage or two-stage compressor must include at least one coil-only combination representative of the least-efficient combination distributed in commerce with that outdoor unit. 10 CFR 429.16(a)(1). As part of this rulemaking, DOE considered adopting such an approach for all single-split outdoor units, including variable speed models, to ensure that representations include all installations that may occur in the field. However, based on the
In order improve representativeness of the representations of variable-speed systems used in coil-only combinations, DOE proposes to require a coil-only tested combination for any variable-speed outdoor unit distributed in commerce in a coil-only combination. In addition, DOE proposes to require that, if a manufacturer distributes in commerce an outdoor unit basic model with other than a single-stage or two-stage compressor in non-communicating coil-only combinations, the combination selected for testing be a non-communicating coil-only combination. If a manufacturer distributes in commerce an outdoor unit basic model with other than a single-stage or two-stage compressor only in communicating coil-only combinations, then the combination selected for testing that outdoor model would be a communicating coil-only combination. Finally, if the manufacturer does not distribute in commerce any coil-only combinations, then the individual combination selected for testing for split-system AC and HP with other than a single-stage or two-stage compressor would be a blower-coil combination.
DOE notes that the variable-speed coil-only waiver petitions addressed both air-conditioners and heat pumps. Thus, DOE's considered whether the coil-only tested combination requirement should apply to variable speed heat pumps and/or to single-stage and/or two-stage heat pumps. DOE notes that coil-only heat pumps allow the heating system to provide heat either using the furnace or the heat pump. There has been greater interest in such systems in recent years, since they provide heating with a furnace in extreme cold conditions for which a heat pump may have limited capacity and/or reduced efficiency.
Regarding variable-speed coil-only systems using indoor units manufactured by independent coil manufacturers (“ICMs”), the regulations require certification of the performance of any variable-speed coil-only combinations distribution in commerce, and whether any given combination is coil-only (see 10 CFR 429.16(a)(1)). However, DOE notes that a tested combination for an ICM indoor unit must include the least-efficient outdoor unit with which the indoor unit is distributed in commerce (see 10 CFR 429.6(b)(2)(i)). DOE does not believe any changes are needed to this proposal with respect to ICM certifications as the current regulations already encompass representing all combinations distributed in commerce, including noncommunicating and communicating variable-speed coil only systems.
DOE requests comment on its approach for variable speed coil-only systems. More specifically, DOE seeks comment on its proposal to require coil-only tested combinations for variable-speed systems, both air-conditioners and heat pumps, that are distributed in commerce with coil-only combinations. DOE also requests comment on the proposal to require that the tested combination be a non-communicating coil-only combination, if the outdoor unit is distributed in commerce in a non-communicating coil-only combination.
DOE's regulations at 10 CFR 429.16 prescribe certification requirements for CAC/HPs. Paragraph (a)(1) of that section includes a table specifying the required represented values for each “tested combination” of CAC/HPs. Table III-1 is an excerpt from the table in 10 CFR 429.16(a)(1) showing represented value requirements for different varieties of split-system CAC/HPs.
As presented in Table III-1, single-split CACs with single-stage or two-stage compressors are required to provide represented values for every individual combination distributed in commerce, each rated as a coil-only combination. For each model of outdoor unit, this must include at least one coil-only value that is representative of the least efficient combination distributed in commerce with that model of outdoor unit. Additional blower-coil ratings are allowed (
DOE requests comment on its proposal to clarify the language for required represented values of coil-only CACs found in the table at 10 CFR 429.16(a)(1)
The requirement to provide coil-only ratings for each basic model also applies to single split CACs designed for space-constrained applications (“SC-CAC”). DOE has received three petitions for test procedure waivers related to the represented value requirements for SC-CACs. The first was a petition from National Comfort Products, Inc. (“NCP”) dated March 20, 2017 (Docket No. EERE-2017-BT-WAV-0030-0001); the second was a petition from AeroSys, Inc. (“AeroSys”) dated May 29, 2017 (Docket No. EERE-2017-BT-WAV-0042-0001); and the third was a petition from First Company (“First Co.”) dated May 25, 2018 (Docket No. EERE-2018-BT-WAV-0012-0002). Each petitioner claimed that specified basic models of SC-CAC outdoor units listed in their respective petitions are designed and intended to be sold only with proprietary blower-coil indoor units equipped with high-efficiency electronically commutated (“ECM”) fan motors, and not as a coil-only combination (NCP, EERE-2017-BT-WAV-0030, No. 1 at p. 1; AeroSys, EERE-2017-BT-WAV-0042; No. 1 at p. 1, First Co., EERE-2018-BT-WAV-0012, No. 2 at p. 1) Each petitioner also claimed that the identified blower-coil indoor units operate at a much lower wattage than the default fan power required by appendix M for coil-only combinations and asserted that appendix M would not result in a representative rating for the specified basic models (NCP,
In a notice published May 30, 2021, DOE granted AeroSys's petition for interim waiver. Since that time, AeroSys filed for bankruptcy and thus DOE stopped further evaluation of the AeroSys test procedure waiver request.
With respect to First Co.'s petition, DOE has concluded that statements provided in product specification sheets and installation instructions for the subject basic models appear inconsistent with First Co.'s assertion that the subject basic models are distributed in commerce exclusively for use with blower-coil indoor units. For example, installation instructions for affected models include language describing these units as replacements for R-22 systems, and the existing indoor units are unlikely to have the high-efficiency motors used in the described blower-coil indoor units. Additionally, some spec sheets include additional language indicating that installation is intended with existing indoor units that are unlikely to have high efficiency motors.
As NCP's waiver petition and the prescribed alternate test procedure are specific to appendix M, the interim waiver will terminate on the date on which testing is required under appendix M1 (
DOE is required per EPCA to prescribe test procedures that are reasonably designed to produce test results which measure energy efficiency during a representative average use cycle or period of use, as determined by the Secretary. (42 U.S.C. 6293(b)(3)) For split-system central air conditioner and heat pump outdoor units, determination of what constitutes a representative average use cycle or period of use must include consideration of combinations in which a unit is paired in field installations. DOE published an energy conservation standard final rule to set new standards for central air conditioners and heat pumps on January 6, 2017. 82 FR 1786. In the rulemaking that culminated in this final rule, DOE examined the typical installations for split-system CACs and HPs as part of its assessment of life-cycle costs. DOE determined that 39 percent of split-system CAC installations in 2021
DOE's analysis indicates that installations involving blower-coil indoor units are in the minority for split-system CACs. While DOE does not have data showing the installation breakdown specifically for space-constrained systems, DOE assumes in the absence of such data that the general installation trends would apply to equally to space-constrained systems. Additionally, DOE has observed instances for which outdoor units designed for space-constrained applications are being distributed in commerce without a corresponding blower-coil indoor unit,
Consequently, DOE tentatively concludes that measuring the performance of space-constrained systems exclusively with high-efficiency blower-coil combinations, as requested in the NCP, AeroSys, and First Co. waiver petitions, is not generally representative of field operation. Based on this tentative conclusion, amendment to the existing requirements for represented values in 10 CFR 429.16 to allow manufacturers to avoid the coil-only test requirement for single-speed and two-stage space-constrained CACs would provide test results that are not representative of an average use cycle or period of use. DOE is not proposing amendments to appendix M1 regarding the test procedure waiver granted to NCP.
DOE requests comment on its planned approach not to propose waiving the coil-only rating requirement for space-constrained air conditioners and heat pumps. To support any comments suggesting that DOE reverse this decision, DOE requests shipment and/or installation data for space-constrained systems to clarify the characteristics of representative installations.
When testing CAC/HP systems under appendix M1, section 3.1.4 requires determining airflow setting(s) before testing begins; unless otherwise specified, no changes are to be made to the airflow setting(s) after initiation of testing. The subsections of section 3.1.4 provide instructions for establishing air volume rates for the following test conditions: Cooling full-load (section 3.1.4.1), cooling minimum (section 3.1.4.2), cooling intermediate (section 3.1.4.3), heating full-load (section 3.1.4.4), heating minimum (section 3.1.4.5), heating intermediate (section 3.1.4.6), and heating nominal (section 3.1.4.7).
For example, section 3.1.4.1.1.a of appendix M1 provides instructions for determining the cooling full-load air volume rate for ducted blower coil systems other than those having a constant-air-volume-rate indoor blower. Within that section, a seven-step process is followed to determine the final fan speed or control settings to be used for testing. Step (7) of the process specifies using the measured air volume rate as the cooling full-load air volume rate, and to use the final fan speed or control settings for all tests that use the cooling full-load air volume rate. Sections 3.1.4.2.a and 3.1.4.4.3.a specify a similar process for determining cooling minimum air volume rate and heating full-load air volume rate, respectively. These sections similarly specify using use the measured air volume rate and final fan speed or control settings for all tests that use the cooling minimum air volume rate or heating full-load air volume rate, respectively.
As noted, sections 3.1.4.1.1.a, 3.1.4.2.a, and 3.1.4.3.a of appendix M1 specify using the air volume rates determined in those respective sections for all tests. By contrast, sections 3.2.2.2, 3.2.3.b, and 3.2.4.b specify using air volume rates that represent a “normal installation” when testing units having a single-speed compressor where the indoor section uses a single variable-speed variable-air-volume rate indoor blower or multiple indoor blowers (3.2.2.2), when testing units having a two-capacity compressor (3.2.3.b), and when testing units having a variable-speed compressor (3.2.4.b). In some cases, reference to “air volume rates that represent a normal installation” could conflict with the air volume rates determined in sections 3.1.4.1.1.a, 3.1.4.2.a, and 3.1.4.3.a.
For example, many modern blower-coil systems have multiple-speed or variable-speed indoor fans and control systems (
For units with multiple-speed or variable-speed indoor fans and control systems that have the capability to vary fan speed in response to operating conditions, requiring air volume rate to remain constant as outdoor air temperature changes during testing may not provide test results that are representative of field operation.
To address this issue, DOE proposes to explicitly state in Step 7 of sections 3.1.4.1.1.a, 3.1.4.2.a, and 3.1.4.3.a that,
DOE requests comments on its proposal to add language clarifying how to implement variation of blower speed for different ambient temperature test conditions.
Appendix M1 specifies required and optional heating mode test conditions for heat pumps, designated as “H” conditions. See Tables 11 through 15 of appendix M1. appendix M1 provides for conducting optional “H4” heating tests at a 5 °F outdoor ambient dry-bulb temperature and, at a maximum, a 3 °F outdoor wet-bulb temperature.
In the January 2017 TP Final Rule, DOE agreed that the amount of moisture in 5 °F air would be sufficiently low that imposing a maximum wet bulb temperature of 3 °F would be adequate to ensure test repeatability; hence DOE adopted the suggestion to require a 3 °F maximum wet bulb temperature in the January 2017 TP Final Rule (82 FR 1426). Since the publication of the 2017 Final Rule, DOE and other stakeholders have gained additional experience testing to the new appendix M1, including testing at the 5 °F H4 heating condition. DOE has received informal comments and has independently observed that holding the wet-bulb tolerance of maximum 3 °F is difficult for some test labs, especially for extended periods of time, and that even if this low humidity level can be attained, the additional 0.5 to 1.0 °F wet bulb reduction adds significant time to testing (as compared to maximum wet bulb requirements of 3.5 °F and 4 °F, respectively).
The 3 °F wet bulb condition represents an extremely dry air condition, which is difficult to attain and maintain due to issues with infiltration and ground moisture passing through the floor in some laboratory setups. Accordingly, DOE is proposing to amend the wet bulb test condition for all H4 tests to be 4 °F maximum instead of the current condition of 3 °F maximum. Because, as previously identified in comments, there is very little moisture content in the air at 5 °F dry-bulb temperature, DOE does not expect that the change in wet bulb temperature condition will have a significant impact on test results.
DOE seeks comment on its proposal to amend the wet bulb temperature condition for the H4 heating tests from the existing 3 °F maximum temperature to a maximum temperature of 4 °F.
Instructions for installation of CAC/HP products can take multiple forms, including documents shipped with the product, labels affixed to the outdoor unit and/or indoor unit, and online documents.
Section 2(A) of appendix M1 provides requirements regarding the installation instructions to be used and their order of precedence (
Throughout appendix M1, references to manufacturer's installation instructions are made regarding refrigerant charging requirements (section 2.2.5), installation of an air supply plenum adapter accessory for testing small-duct, high-velocity systems (section 2.4.1.c), and control circuit connections between the furnace and the outdoor unit for coil-only systems (section 3.13.1.a).
DOE notes that it initially proposed in a supplemental NOPR published November 9, 2015 (“November 2015 SNOPR”) that the hierarchy of installation instructions be located in proposed section 2.2.5.1 of appendix M1, which pertains to refrigerant charging requirements. See 80 FR 69278, 69350.
The requirements regarding installation instruction would be equally applicable to classes of CAC/HP other than VRF multi-split systems. As noted, manufacturer's installation instructions are referenced in a number of provisions in appendix M1. Therefore, DOE is proposing to add in section 2(B) of appendix M1, “Testing Overview and Conditions for Systems Other than VRF,” the same requirements associated with installation instructions that are in section 2(A),
DOE requests comment on the proposed alignment of the VRF and non-VRF test procedures when it comes to instruction precedence.
DOE is aware that the specifications for cooling full-load air volume rates for both ducted and non-ducted units may require additional detail to provide improved repeatability. Sections 3.1.4.1.1, 3.1.4.2, and 3.1.4.4.3 of appendix M1 each specify seven steps for achieving the correct air volume rate to be used for testing (cooling full-load air volume rate, cooling minimum air volume rate, and heating full-load air volume rate, respectively). In each section, Step 7 mentions “fan speed” and “control settings” without indicating whether they are the speed and settings of the unit under test, of the airflow measurement apparatus, or both. DOE notes that cooling full-load air volume rate, cooling minimum air volume rate, and heating full-load air volume rate may each be used for multiple test conditions. However, when using this same air-volume rate at different test conditions, it may be necessary to adjust one of the fans to achieve the same air-volume rate, due to differences in air density and/or loading of condensate on the indoor coil.
These sections may be misinterpreted to indicate that both the fan speed of the unit under test and the airflow measurement apparatus fan speed should not be adjusted during testing. As previously described, if both the test unit fan speed and the measurement apparatus fan speed are fixed, differences in air density and/or loading of condensate could cause differences in measured air volume rate at different test conditions, with no recourse for correction. This interpretation could then cause tests to be conducted at different air volume rates across test conditions, whereas the test procedure at sections 3.1.4.1.1, 3.1.4.2, and 3.1.4.4.3 of appendix M1 requires the tests to be conducted at the same air volume rate across different conditions. To minimize the potential for misinterpretation, DOE is proposing to explicitly require that the airflow measurement apparatus fan be adjusted if needed to maintain constant air volume rate for all tests using the same air volume rate. Similarly, the section would explicitly state that the speed and settings of the fan of the unit under test are not to be adjusted.
DOE requests comment on its proposal to add more specific direction to step 7 of sections 3.1.4.1.1, 3.1.4.2, and 3.1.4.4.3.
A compressor's speed at full speed may change as the outdoor temperature changes. While the compressor speed at full speed may differ at different outdoor temperatures, accuracy of predictions using the test results from two temperature conditions to calculate the performance for a third temperature condition is maximized when the same compressor speed is used for the tests at the two different ambient temperature conditions (see,
For calculation of full-compressor performance in the temperature ranges less than 17 °F and greater than or equal to 45 °F, the test procedure determines performance based on the H3
The H1
While DOE believes that the proposed amendments would provide more representative results, DOE does not expect that such changes would significantly affect heat pump HSPF2 measurements. This is because the full-capacity performance would affect HSPF2 only when the calculated building load exceeds the calculated intermediate capacity of a variable-speed heat pump, which DOE believes to be a rare occurrence in the ambient temperature range above 45 °F. In the cases that would affect HSPF2, the change would increase the measured efficiency, since H1
DOE requests comment on the proposed change to the full-capacity performance equations for variable-speed heat pumps in the ambient temperature range above 45 °F, adjusting the equations for capacity and power by the ratio of capacity and power, respectively, associated with H1
Section 4.2.6 of appendix M1 includes additional steps for calculating HSPF2 of a heat pump having a triple-capacity compressor. Heat pumps with triple-capacity compressors respond to building heating load by operating at low (k=1), high (k=2), or booster (k=3) capacity or by cycling on and off at one or more of those stages. Section 4.2.6.5 covers the scenario where the heat pump alternates between high (k=2) and booster (k=3) compressor capacity to satisfy the building load. In this scenario, the total electrical power consumption is determined by calculating the fraction of time the system spends operating in the high and booster stage, respectively, and then weighting the steady-state power consumption at each operating state accordingly. Section 4.2.6.5 gives equations for calculating the fraction of load addressed by the high compressor stage, denoted as “X
DOE seeks comment on its proposal to revise the calculation for booster capacity load factor equation for triple-capacity northern heat pumps.
Appendix M1 includes procedures for calculating the heating capacity and power input for variable-speed heat pumps at various test conditions. The H1
DOE requests comment on its proposal to specify heating nominal air volume rate as the air volume rate to be used for the H1
Section 4.2 of appendix M1 contains methodologies for calculating HSPF2 for all heat pumps. DOE has identified an instance where additional instruction may be warranted to make clear the calculation procedure across different types of heat pump systems. DOE proposes to clarify the appropriate slope adjustment factor to be used in the calculation for building heating load (Equation 4.2-2).
As written, Equation 4.2-2 refers to the heating load line slope adjustment factor “C”, which varies by climate region according to Table 20. However, Table 20 includes both the “C” factor as well as a factor denoted “C
DOE seeks comment on its proposal to clarify the calculation process for heating load line slope factor as it pertains to variable-speed heat pumps.
EPCA defines “industrial equipment” as equipment of a type which, among other requirements, is not a covered product under section 6291(a)(2),
EPCA defines “central air conditioner” as a product, other than a packaged terminal air conditioner, which is powered by single phase electric current, is air-cooled, is rated below 65,000 Btu per hour, is not contained within the same cabinet as a furnace the rated capacity of which is above 225,000 Btu per hour, and is a heat pump or a cooling only unit. DOE understands that there are basic models that exists on the market that meet the central air conditioner definition but are exclusively distributed in commerce for commercial and industrial applications. In DOE's view, there are certain types of equipment that meet the definition of CAC but that EPCA was not intended to regulate as consumer products. To clarify that any such model is not a central air conditioner, DOE proposes to revise the central air conditioner definition so that it explicitly excludes these equipment categories, similar to the way the definition excludes packaged terminal air conditioners and packaged terminal heat pumps. The exclusion for single-package vertical air-conditioners and heat pumps would refer specifically to those models that could be confused with central air conditioners,
DOE emphasizes that the exclusion from the central air conditioner definition for a given model depends on whether it meets the definition for one of the excluded categories. For example, a model must meet the packaged terminal air conditioner definition to be considered to be a packaged terminal air conditioner. Suppose a model meets the characteristics listed in the central air conditioner definition, but otherwise has similarities to packaged terminal air conditioners. If such a model is not “intended for mounting through the wall,” it would be missing a key characteristic of the packaged terminal air conditioner definition (see 10 CFR 431.92), and, unless it met the definition for one of the other categories proposed to be excluded, it is considered a central air conditioner irrespective of whether it gets installed in a consumer or commercial building.
On May 8, 2019, AHRI submitted a comment responding to the notice of proposal to revise and adopt procedures, interpretations, and policies for consideration of new or revised energy conservation standards (2020 Process Rule NOPR, 84 FR 3910, Feb. 13, 2019). The comment included as Exhibit 2 a “List of Errors Found in appendix M and appendix M1” (“AHRI Exhibit 2”, EERE-2017-BT-STD-0062-0117 at pp. 23-24). Many of the errors pointed out by AHRI regard typographical errors in appendix M and appendix M1. DOE published a notice of corrections to appendices M and M1 on December 2, 2021 (“December 2021 Corrections Notice”). 86 FR 68389. The December 2021 Corrections Notice
AHRI's comment identified three areas of appendix M where they requested changes. These are detailed in Table III-2. Additionally, DOE has identified one transcription error in the December 2021 Corrections Notice related to changes made in section 3.6.4 of appendix M. DOE is making corresponding revisions in this NOPR to correct that transcription error.
The following sections discuss proposed changes to the language of appendix M that DOE believes will improve clarity regarding how tests and calculations are to be conducted to determine capacity levels and efficiency metrics.
AHRI commented that the definition of Nominal Cooling Capacity in Section 1.2 of appendix M incorrectly references the H1
In section 4.1.4.2 of appendix M, there are a series of equations used to calculate EER
AHRI commented that the formula for the “A” coefficient has an error. Specifically, EER
In the December 2021 Corrections Notice, DOE discussed corrections to the compressor speed limitations for the H1
AHRI's comment identified one area of appendix M1 where they requested changes. This requested change is detailed in Table III-2.
The following sections discuss proposed changes to the language of appendix M1 that DOE believes will improve clarity regarding how tests and calculations are to be conducted to determine capacity levels and efficiency metrics.
AHRI commented that in Section 4.2 of appendix M1, which describes the calculation for HSPF2 for different subcategories of heat pumps, there is a lack of clarity in the term for heating capacity measured at 47 °F, “Q
However, AHRI commented regarding a “H
AHRI's comment claimed that there are two sections in both appendix M and appendix M1 that contain similar errors. These errors are detailed below in Table III-4.
The following sections discuss proposed changes to the language of both appendix M and appendix M1 that DOE believes will improve clarity regarding how tests and calculations are to be conducted to determine capacity levels and efficiency metrics.
AHRI's comment claims that the part load factor (PLF) equation in section 4.2.3.3 of both appendix M and appendix M1 contain two errors. The first error is that the equation is missing a closing square bracket, and the second is that the heating mode low-capacity load factor, “X
AHRI has identified an error in the equation for electrical energy consumed by the heat pump for electric resistance auxiliary heating for bin temperature, T
DOE requests comments on the proposals to implement the correcting revisions described in this section.
Manufacturers, including importers, must use product-specific certification templates to certify compliance to DOE. For CAC/HPs, the certification template reflects the general certification requirements specified at 10 CFR 429.12 and the product-specific requirements specified at 10 CFR 429.16. As discussed in the previous paragraphs, DOE is not making any proposals related to certification requirements in this rulemaking and any such changes may be addressed in a future rulemaking.
DOE's standards for CAC at 10 CFR 430.32(c) include both amended national standards with which compliance is required for models manufactured on or after January 1, 2023, and amended regional standards with which compliance is required for units installed on or after January 1, 2023. See 10 CFR 430.32(c)(5)-(6). In addition, as discussed in section III.B.3, DOE's regulations at 10 CFR 429.16 describe certification requirements for central air conditioners and central air conditioning heat pumps, and paragraph (a)(1) of this section requires single-split CACs with single-stage or two-stage compressors, at a minimum, to rate each outdoor model as part of a coil-only combination representative of the least efficient combination distributed in commerce with that particular outdoor unit.
On December 16, 2021, DOE issued final guidance regarding whether a model of outdoor unit for a single-split-system AC with single-stage or two-stage compressor whose coil-only rating under M1 does not meet regional standards, but where certain blower-coil combinations that include the outdoor model do meet regional standards, can be installed in the SE or SW region. DOE's guidance states that “In order to be installed in the SE or SW region, the outdoor unit must have at least one coil-only combination that is compliant with the regional standard applicable at the time of installation.”
As background, DOE notes that it finalized provisions related to this issue in a June 2016 Test Procedure Final Rule (81 FR 36992, June 8, 2016) with minor revisions in a January 2017 Test Procedure Final Rule (82 FR 1426, January 5, 2017); a July 2016 Enforcement Final Rule (81 FR 45387, July 14, 2016); and a January 2017 Energy Conservation Standards Direct Final Rule (82 FR 1786, January 6, 2017). These provisions were based on consensus recommendations by two ASRAC Working Groups—a Regional Standards Enforcement Working Group (“Enforcement WG”) that concluded on October 24, 2014 (See final report: Docket No. EERE-2011-BT-CE-0077, No. 70), and a Central Air Conditioner and Heat Pump Energy Conservation Standards Working Group (“ECS WG”) that concluded on January 19, 2016 (See term sheet: Docket No. EERE-2014-BT-STD-0048, No. 76).
The July 2016 Enforcement Final Rule adopted several provisions of relevance here, with a focus on enforcement of the existing energy conservation standards:
• 10 CFR 429.102(c)(4) contains provisions regarding what a “product installed in violation” includes, specifying, among other things: “(i) A complete central air conditioning system that is not certified as a complete system that meets the applicable standard. Combinations that were previously validly certified may be installed after the manufacturer has discontinued the combination, provided the combination meets the currently applicable standard. . . . [and] (iii) An outdoor unit that is part of a certified combination rated less than the standard applicable in the region in which it is installed.” 81 FR 45387, 45393-45394.
• 10 CFR 429.158(a) specifies that if DOE determines a model of outdoor unit fails to meet the applicable regional standard(s) when tested in a combination certified by the same manufacturer, then the outdoor unit basic model will be deemed noncompliant with the regional standard(s). 81 FR 45387, 45397.
• 10 CFR 430.32(c)(3)-(4) provides that any outdoor unit model that has a certified combination with a rating below 14 SEER cannot be installed in either the southern or southwest region. 81 FR 45387, 45391.
The June 2016 TP Final Rule adopted several certification provisions of relevance here, with a focus on the amended energy conservation standards recommended by the ECS WG. In particular, the June 2016 TP Final Rule noted that the ECS WG recommended energy conservation standards for central air conditioners based on coil-only ratings. 81 FR 36992, 37002. (June 8, 2016). The recommended standard levels for split system air conditioners may very well have been higher if they had been based on blower-coil ratings. For example, the recommended standard levels for split system heat pumps, which are based on blower-coil ratings, are approximately one point higher than those for split system air conditioners.
In addition, the ECS WG recommended that DOE implement the requirement that every single-split air conditioner combination distributed in commerce must be rated, and that every single-stage and two-stage condensing (outdoor) unit distributed in commerce (other than a condensing unit for a 1-to-1 mini split) must have at least 1 coil-only rating that is representative of the least efficient coil distributed in commerce with a particular condensing unit. Every condensing unit distributed in commerce must have at least 1 tested combination, and for single-stage and two-stage condensing units (other than condensing units for a 1-to-1 mini split) this must be a coil-only combination. (Docket No. EERE-2014-BT-STD-0048, No. 76, Recommendation #7) In the June 2016 Final Rule, DOE adopted these recommendations along with regional limitations for represented values of individual combinations:
• 10 CFR 429.16(a)(1) contains provisions for required represented values, stating that for single-split system AC with single-stage or two-stage compressor, every individual combination distributed in commerce must be rated as a coil-only combination. For each model of outdoor unit, this must include at least one coil-only value that is representative of the least efficient combination distributed in commerce with that particular model of outdoor unit. Additional blower-coil representations are allowed for any applicable individual combinations, if distributed in commerce. 81 FR 36992, 37002.
• 10 CFR 429.16(b)(2)(i) specifies that for each basic model of single-split system AC with single-stage or two-stage compressor, the model of outdoor unit must be tested with a model of coil-only indoor unit. 81 FR 36992, 37002.
• 10 CFR 429.16(a)(4)(i) [as modified in the January 2017 TP Final Rule] states that a basic model may only be certified as compliant with a regional standard if all individual combinations within that basic model meet the
DOE notes that the July 2016 Enforcement Final Rule stated that the adopted provisions in 10 CFR 430.32(c)(3)-(4) were meant to be complementary to the regional limitations adopted in the June 2016 TP Final Rule at 10 CFR 429.16(a)(3)(i) [now 10 CFR 429.16(a)(4)(i)]. 81 FR 45387, 45391. In the January 2017 CAC DFR, DOE adopted additional language in 10 CFR 430.32 relevant to the amended standards:
• 10 CFR 430.32(c)(6)(ii) provides that any outdoor unit model that has a certified combination with a rating below the applicable standard level(s) for a region cannot be installed in that region. The least-efficient combination of each basic model must comply with this standard. 82 FR 1786, 1857.
Finally, DOE notes that the general enforcement provisions in Subpart C to part 429 also apply to CAC standards (both national and regional), including:
• 10 CFR 429.102(a)(1), specifying that the failure of a manufacturer to properly certify covered products in accordance with 10 CFR 429.12 and 429.14 through 429.62 is a prohibited act subject to enforcement action.
Taken together, the regional standards, certification, and enforcement provisions require that, in order to comply with a regional standard, the least efficient combination of each basic model must comply. 10 CFR 430.32(c)(6)(ii). Further, each basic model of single-split system AC with single-stage or two-stage compressor must include a represented value for a coil-only combination representative of the least efficient combination distributed in commerce with the model of outdoor unit, and each model of outdoor unit must be tested with a model of coil-only indoor unit. (10 CFR 429.16(a)(1) and 429.16(b)(2)(i)). While manufacturers can create a regional-specific basic model under 10 CFR 429.16(a)(4)(i), such a basic model must still be certified properly according to the other provisions in that section. As such, in order to comply with a regional standard, a regional-specific basic model of single-split system AC with single-stage or two-stage compressor must include at least one coil-only combination that complies with the regional standard. Failure to certify a regional-specific basic model according to the provisions in 10 CFR 429.16(a)(1) and 429.16(b)(2)(i) is a prohibited act under 10 CFR 429.102(a)(1).
Similarly, while 10 CFR 429.102(c)(4)(i) states that combinations that were previously validly certified may be installed after the manufacturer has discontinued the combination, provided the combination meets the currently applicable standard. The provision at 10 CFR 429.102(c)(4)(i) was designed to allow sell-through of inventory that manufacturers had discontinued for reasons other than non-compliance with a regional standard. 81 FR 45387, 45393. It was not intended, nor in the light of all other provisions can it be read, as allowing installation of models of outdoor unit that do not comply with the applicable regional standard at the time of installation (
Based on this background, the CAC regional guidance states in part:
In general, a basic model may be certified as compliant with a regional standard (and, as of January 1, 2023, meets the applicable amended regional standard) only if all individual combinations within that basic model meet the regional standard for which it is certified. All individual model combinations within a basic model must include, for single-split-system AC with single-stage or two-stage compressor (including space-constrained and SDHV systems), a coil-only combination representative of the least-efficient combination in which the specific outdoor unit is distributed in commerce.
A manufacturer may sell an outdoor unit of identical design in the SE and SW regions, if the manufacturer separates the basic model (
DOE notes that the install-through provisions in 10 CFR 429.102(c)(4)(i) allows existing stock of discontinued basic model combinations to be installed in the SE or SW regions as long as they were previously validly certified as compliant to the regional standards applicable at the time of installation. DOE further notes that the term “previously validly certified” means that all combinations within the basic model must show compliance with the regional standard applicable at the time of installation, including, for single-split-system AC with single-stage or two-stage compressor (including space-constrained and SDHV systems), a coil-only combination representative of the least-efficient combination in which the specific outdoor unit is distributed in commerce, in order for the install-through provisions to apply.
DOE proposes to add additional direction to the regulatory text in 10 CFR 429.16(a)(1) and (a)(4)(i), 10 CFR 429.102(c)(4)(i) and (iii), and 10 CFR 430.32(c)(6)(ii) to more explicitly cross-reference the existing regulatory text to clarify the interplay of the existing requirements and reinforce the guidance.
In addition, DOE notes that the table in 10 CFR 429.16(a)(1) states that the required coil-only value must be “representative of the least efficient combination
Finally, 10 CFR 429.158 discusses products determined noncompliant with regional standards. Paragraphs (a) and (b) cross-reference 10 CFR 429.102(c), stating that the certifying manufacturer is liable for distribution of noncompliant units in commerce. DOE notes that 10 CFR 429.102(c) refers to distributors, contractors, and dealers, while 10 CFR 429.102(a)(10) states that it is prohibited “for any manufacturer or private labeler to knowingly sell a product to a distributor, contractor, or dealer with knowledge that the entity routinely violates any regional standard applicable to the product.” Therefore, DOE proposes that 10 CFR 429.158(a)-(b) cross-reference 10 CFR 429.102(a)(10) rather than 10 CFR 429.102(c).
DOE requests comment on its proposals to the regulatory text in 10 CFR part 429, and in particular, whether they clarify the requirements and align with DOE's issued guidance or whether additional clarification is needed.
As discussed, DOE's existing test procedures for CAC/HPs appear at appendix M and appendix M1 (both titled “Uniform Test Method for Measuring the Energy Consumption of Central Air Conditioners and Heat Pumps”). In this NOPR, DOE proposes to amend the existing test procedure for CACs and HPs to provide additional detail and instruction to ensure the representativeness of the test procedure and to reduce potential burden. As discussed, DOE is proposing limited amendments to appendix M1, which is the required test procedure beginning January 1, 2023.
DOE has tentatively determined that the proposed amendments in this NOPR would improve the representativeness, accuracy, and reproducibility of the test results, and they would not be unduly burdensome for manufacturers to conduct or result in increased testing cost as compared to the current test procedure.
The proposed amendment to the wet bulb temperature maximum for the 5 °F ambient temperature condition, discussed in section III.C.2, would amend the condition from 3 °F to 4 °F. This change is proposed based, in part, on feedback from manufacturers that the proposed change to 4 °F would be easier to achieve than 3 °F. As such, DOE does not anticipate that this provision would increase the burden of conducting testing under appendix M1.
With regards to the additional test procedure proposals introduced in sections III.B and III.C of this NOPR, DOE does not believe that these will cause manufacturers to incur any additional test procedure costs. The proposals to (a) define revised fan wattages for low-stage testing of two-stage coil-only units, and (b) revise the equations for full-capacity operation of variable-speed heat pumps at and above 45 °F affect calculations rather than testing. The proposals for variable-speed coil-only air conditioners and heat pumps provide instructions for testing such models that are currently the subject of test procedure waivers. The proposals to (a) revise text regarding variation of fan speed with ambient temperature, (b) explicitly indicate that the airflow measurement apparatus fan should be adjusted to maintain constant airflow for certain models, and (c) clarify that the instructions on a label affixed to the unit take precedence over the instructions shipped with the unit provide additional instruction to improve consistency of testing but would not increase either the number of tests or the duration of tests. Finally, the proposed changes in 10 CFR part 429 neither modify the test procedure nor increase the number of units that would be required to be tested. Thus, DOE does not anticipate these additional procedures would cause any increased test procedure costs.
EPCA prescribes that, if DOE amends a test procedure, all representations of energy efficiency and energy use, including those made on marketing materials and product labels, must be made in accordance with that amended test procedure, beginning 180 days after publication of such a test procedure final rule in the
If DOE were to publish an amended test procedure EPCA provides an allowance for individual manufacturers to petition DOE for an extension of the 180-day period if the manufacturer may experience undue hardship in meeting the deadline. (42 U.S.C. 6293(c)(3)) To receive such an extension, petitions must be filed with DOE no later than 60 days before the end of the 180-day period and must detail how the manufacturer will experience undue hardship. (
Upon the compliance date of test procedure provisions of an amended test procedure, should DOE issue a such an amendment, any waivers that had been previously issued and are in effect that pertain to issues addressed by such provisions are terminated. 10 CFR 430.27(h)(3). Recipients of any such waivers would be required to test the products subject to the waiver according to the amended test procedure as of the compliance date of the amended test procedure. The amendments proposed in this document pertain to issues addressed by waivers granted to GD Midea Heating and Ventilating Equipment Co., (83 FR 56065, Case No. 2017-013), and TCL AC (84 FR 11941, Case No. 2018-009); and interim waivers granted to Aerosys (83 FR 24762, Case No. 2017-008), LG Electronics (85 FR 40272, Case No. 2019-008), and Goodman (86 FR 40534, Case No. 2021-001). To the extent such waivers and interim waivers permit the petitioner to test according to an alternate test procedure to appendix M, such waivers and interim waivers will terminate on the date testing is required according to appendix M1 (
DOE notes that the waiver issued to Johnson Controls (83 FR 12735, Case No. CAC-051; 84 FR 52489, Case No. CAC-050) and interim waiver granted to National Comfort Products (83 FR 24754, Case No. 2017-008) will terminate on January 1, 2023, the date beginning which testing according to appendix M1 is required, independent of this NOPR.
The Office of Management and Budget (“OMB”) has determined that this test procedure rulemaking does not constitute a “significant regulatory action” under section 3(f) of Executive Order (“E.O.”) 12866, Regulatory Planning and Review, 58 FR 51735 (Oct. 4, 1993). Accordingly, this action was not subject to review under the Executive order by the Office of Information and Regulatory Affairs (“OIRA”) in OMB.
The Regulatory Flexibility Act (5 U.S.C. 601
DOE reviewed this proposed rule under the provisions of the Regulatory Flexibility Act and the procedures and policies published on February 19, 2003. DOE certifies that the proposed rule, if adopted, would not have significant economic impact on a substantial number of small entities.
Under 42 U.S.C. 6293, the statute sets forth the criteria and procedures DOE must follow when prescribing or amending test procedures for covered products. EPCA requires that any test procedures prescribed or amended under this section must be reasonably designed to produce test results which measure energy efficiency, energy use or estimated annual operating cost of a covered product during a representative average use cycle or period of use and not be unduly burdensome to conduct. (42 U.S.C. 6293(b)(3))
DOE is proposing a limited number of amendments to the test procedure for central air conditioners and heat pumps (“CAC/HPs”) to address specific issues that have been raised in test procedure waivers regarding appendix M1 to subpart B of 10 CFR part 430.
In this NOPR, DOE proposes the following updates to the test procedure for CACs/HPs:
1. Update default fan power for coil-only CACs and HPs that can utilize different fan speeds and the 75% intermediate airflow.
2. Define “Communicating Variable-speed Coil-only Central Air Conditioner or Heat Pump” and prescribing an appropriate test procedure.
3. Add the control system capability to adjust air volume rate as a function of outdoor air temperature for blower coil systems with multiple-speed or variable-speed indoor fans.
4. Amend the wet bulb test condition for the 5 °F dry, outdoor ambient test to have a 4 °F maximum.
5. Add direction to prioritize the instructions presented in the label attached to the unit over the instructions included in the installation instructions shipped with the unit.
6. Add specific instruction to adjust the exhaust fan speed to achieve a constant cooling full-load air volume rate through the airflow measurement apparatus.
7. Revise the equations representing full-capacity performance of variable-speed heat pumps for the temperature range above 45 °F to be more consistent with field operation.
8. Providing additional direction regarding the regional standard requirements in 10 CFR part 429.
For manufacturers of CACs/HPs, the Small Business Administration (“SBA”) has set a size threshold, which defines those entities classified as “small businesses” for the purposes of the statute. DOE used the SBA's small business size standards to determine whether any small entities would be subject to the requirements of the rule. See 13 CFR part 121. The equipment covered by this rule is classified under North American Industry Classification System (“NAICS”) code 333415,
This NOPR proposes amendments to the test procedure for CAC/HP for which compliance is not required until January 1, 2023. As discussed in more detail in section III.E of this document, DOE has initially determined that the proposed amendments to the test procedure would not require retesting or re-rating, with the potential exception of variable-speed coil-only units. While DOE believes the variable-speed coil-only units will be isolated to a very small fraction of models distributed in commerce (
Manufacturers of CAC/HP must certify to DOE that their products comply with any applicable energy conservation standards. To certify compliance, manufacturers must first obtain test data for their products according to the DOE test procedures, including any amendments adopted for those test procedures. DOE has established regulations for the certification and recordkeeping requirements for all covered consumer products and commercial equipment, including CACs/HPs. (See generally 10 CFR part 429.) The collection-of-information requirement for the certification and recordkeeping is subject to review and approval by OMB under the Paperwork Reduction Act (“PRA”). This requirement has been approved by OMB under OMB control number 1910-1400. Public reporting burden for the certification is estimated to average 35 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.
Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number.
In this NOPR, DOE proposes test procedure amendments that it expects will be used to develop and implement future energy conservation standards for CAC/HP. DOE has determined that this proposed rule falls into a class of actions that are categorically excluded from review under the National
Executive Order 13132, “Federalism,” 64 FR 43255 (Aug. 4, 1999) imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have federalism implications. The Executive order requires agencies to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and to carefully assess the necessity for such actions. The Executive order also requires agencies to have an accountable process to ensure meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications. On March 14, 2000, DOE published a statement of policy describing the intergovernmental consultation process it will follow in the development of such regulations. 65 FR 13735. DOE has examined this proposed rule and has determined that it would not have 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. EPCA governs and prescribes Federal preemption of State regulations as to energy conservation for the products that are the subject of this proposed rule. States can petition DOE for exemption from such preemption to the extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297(d)) No further action is required by Executive Order 13132.
Regarding the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” 61 FR 4729 (Feb. 7, 1996), imposes on Federal agencies the general duty to adhere to the following requirements: (1) Eliminate drafting errors and ambiguity, (2) write regulations to minimize litigation, (3) provide a clear legal standard for affected conduct rather than a general standard, and (4) promote simplification and burden reduction. Section 3(b) of Executive Order 12988 specifically requires that executive agencies make every reasonable effort to ensure that the regulation (1) clearly specifies the preemptive effect, if any, (2) clearly specifies any effect on existing Federal law or regulation, (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction, (4) specifies the retroactive effect, if any, (5) adequately defines key terms, and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in sections 3(a) and 3(b) to determine whether they are met, or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, the proposed rule meets the relevant standards of Executive Order 12988.
Title II of the Unfunded Mandates Reform Act of 1995 (“UMRA”) requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and Tribal governments and the private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531). For a proposed regulatory action likely to result in a rule that may cause the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector of $100 million or more in any one year (adjusted annually for inflation), section 202 of UMRA requires a Federal agency to publish a written statement that estimates the resulting costs, benefits, and other effects on the national economy. (2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to develop an effective process to permit timely input by elected officers of State, local, and Tribal governments on a proposed “significant intergovernmental mandate,” and requires an agency plan for giving notice and opportunity for timely input to potentially affected small governments before establishing any requirements that might significantly or uniquely affect small governments. On March 18, 1997, DOE published a statement of policy on its process for intergovernmental consultation under UMRA. 62 FR 12820; also available at
Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well-being. This proposed rule would not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.
DOE has determined, under Executive Order 12630, “Governmental Actions and Interference with Constitutionally Protected Property Rights” 53 FR 8859 (March 18, 1988), that this proposed regulation would not result in any takings that might require compensation under the Fifth Amendment to the U.S. Constitution.
Section 515 of the Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 (Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446 (Oct. 7, 2002). Pursuant to OMB Memorandum M-19-15, Improving Implementation of the Information Quality Act (April 24, 2019), DOE published updated guidelines which are available at
Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to OMB, a Statement of Energy Effects for any proposed significant energy action. A
The proposed regulatory action to amend the test procedure for measuring the energy efficiency of CAC/HPs is not a significant regulatory action under Executive Order 12866. Moreover, it would not have a significant adverse effect on the supply, distribution, or use of energy, nor has it been designated as a significant energy action by the Administrator of OIRA. Therefore, it is not a significant energy action, and, accordingly, DOE has not prepared a Statement of Energy Effects.
Under section 301 of the Department of Energy Organization Act (Pub. L. 95-91; 42 U.S.C. 7101), DOE must comply with section 32 of the Federal Energy Administration Act of 1974, as amended by the Federal Energy Administration Authorization Act of 1977. (15 U.S.C. 788; “FEAA”) Section 32 essentially provides in relevant part that, where a proposed rule authorizes or requires use of commercial standards, the notice of proposed rulemaking must inform the public of the use and background of such standards. In addition, section 32(c) requires DOE to consult with the Attorney General and the Chairman of the Federal Trade Commission (“FTC”) concerning the impact of the commercial or industry standards on competition.
The proposed modifications to the test procedure for CACs/HPs would maintain the incorporation of testing methods contained in certain sections of the following commercial standards: ANSI/AHRI 210/240-2008 with Addenda 1 and 2, (“AHRI 210/240-2008”): 2008 Standard for Performance Rating of Unitary Air-Conditioning & Air-Source Heat Pump Equipment, ANSI approved October 27, 2011; ANSI/AHRI 1230-2010 with Addendum 2, (“AHRI 1230-2010”): 2010 Standard for Performance Rating of Variable Refrigerant Flow (VRF) Multi-Split Air-Conditioning and Heat Pump Equipment, ANSI approved August 2, 2010; ANSI/ASHRAE 23.1-2010, (“ASHRAE 23.1-2010”): Methods of Testing for Rating the Performance of Positive Displacement Refrigerant Compressors and Condensing Units that Operate at Subcritical Temperatures of the Refrigerant, ANSI approved January 28, 2010; ANSI/ASHRAE Standard 37-2009, (“ANSI/ASHRAE 37-2009”), Methods of Testing for Rating Electrically Driven Unitary Air-Conditioning and Heat Pump Equipment, ANSI approved June 25, 2009; ANSI/ASHRAE 41.1-2013, (“ANSI/ASHRAE 41.1-2013”): Standard Method for Temperature Measurement, ANSI approved January 30, 2013; ANSI/ASHRAE 41.6-2014, (“ASHRAE 41.6-2014”): Standard Method for Humidity Measurement, ANSI approved July 3, 2014; ANSI/ASHRAE 41.9-2011, (“ASHRAE 41.9-2011”): Standard Methods for Volatile-Refrigerant Mass Flow Measurements Using Calorimeters, ANSI approved February 3, 2011; ANSI/ASHRAE 116-2010, (“ASHRAE 116-2010”): Methods of Testing for Rating Seasonal Efficiency of Unitary Air Conditioners and Heat Pumps, ANSI approved February 24, 2010; ANSI/ASHRAE 41.2-1987 (Reaffirmed 1992), (“ASHRAE 41.2-1987 (RA 1992)”): “Standard Methods for Laboratory Airflow Measurement”, ANSI approved April 20, 1992; and ANSI/AMCA 210-2007, ANSI/ASHRAE 51-2007, (“AMCA 210-2007”) Laboratory Methods of Testing Fans for Certified Aerodynamic Performance Rating, ANSI approved August 17, 2007.
DOE has evaluated these standards and is unable to conclude whether they fully comply with the requirements of section 32(b) of the FEAA (
The following standard was previously approved for incorporation by reference in appendix M1 where it appears and no change is proposed:
ANSI/ASHRAE Standard 37-2009, Methods of Testing for Rating Electrically Driven Unitary Air-Conditioning and Heat Pump Equipment, ANSI approved June 25, 2009;
DOE will accept comments, data, and information regarding this proposed rule no later than the date provided in the
However, your contact information will be publicly viewable if you include it in the comment or in any documents attached to your comment. Any information that you do not want to be publicly viewable should not be included in your comment, nor in any document attached to your comment. Persons viewing comments will see only first and last names, organization names, correspondence containing comments, and any documents submitted with the comments.
Do not submit to
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Include contact information each time you submit comments, data, documents, and other information to DOE. No faxes will be accepted.
Comments, data, and other information submitted to DOE electronically should be provided in PDF (preferred), Microsoft Word or Excel, WordPerfect, or text (ASCII) file format. Provide documents that are not secured, written in English and free of any defects or viruses. Documents should not contain special characters or any form of encryption and, if possible, they should carry the electronic signature of the author.
It is DOE's policy that all comments may be included in the public docket, without change and as received, including any personal information provided in the comments (except information deemed to be exempt from public disclosure).
Although DOE welcomes comments on any aspect of this proposal, DOE is particularly interested in receiving comments and views of interested parties concerning the following issues:
(1) DOE requests comment on its proposal to specify a reduced default fan power coefficient and default fan heat coefficient at part-load airflows in the calculations of SEER2 and HSPF2 for ducted two-stage coil-only systems. DOE requests comment on the specific default fan power coefficients and default fan heat coefficients proposed. If the proposed values are not appropriate, DOE seeks data to support selection of alternative values. Additionally, DOE requests comment on whether a single default fan power coefficient (and default fan heat coefficient) should be used for each product class group regardless of the actual air volume rate used for low-stage tests, or whether one of the alternative approaches discussed in the NOPR should be considered, or any other alternative. If an alternative approach should be used, DOE requests details indicating how such an alternative should be implemented, and justification for its use rather than the proposed approach. See section III.B.1.
(2) DOE requests comment on its proposals related to test procedures for variable-speed coil-only CAC/HPs and on its proposed definitions for variable-speed communicating and non-communicating coil-only CAC/HPs. See section III.B.2.
(3) DOE requests comment on its proposal to clarify the language for required represented values of coil-only CACs found in the table at 10 CFR 429.16(a)(1). See section III.B.3.
(4) DOE requests comment on its planned approach to require the coil-only rating requirement for space-constrained air conditioners and heat pumps. DOE requests shipment and/or installation data for space-constrained systems to clarify the characteristics of representative installations. See section III.B.3.
(5) DOE requests comments on its proposal to add language clarifying how to implement variation of blower speed for different ambient temperature test conditions. See section III.C.1.
(6) DOE seeks comment on its proposal to amend the wet bulb temperature condition for the H4 heating tests from the existing 3 °F maximum temperature to a maximum temperature of 4 °F. See section III.C.2.
(7) DOE requests comment on the proposed alignment of the VRF and non-VRF test procedures when it comes to instruction precedence. See section III.C.3.
(8) DOE requests comment on its proposal to add more specific direction to step 7 of sections 3.1.4.1.1, 3.1.4.2, and 3.1.4.4.3. See section III.C.4.
(9) DOE requests comment on the proposed change to the full-capacity performance equations for variable-speed heat pumps in the ambient temperature range above 45 °F, adjusting the equations for capacity and power by the ratio of capacity and power, respectively, associated with H1N and H12 operation. See section III.C.5.
(10) DOE requests comment on its proposals to the regulatory text in 10 CFR part 429. See section III.D.1.
The time and date of the webinar are listed in the
Webinar registration information, participant instructions, and information about the capabilities available to webinar participants will be published on DOE's website:
Persons requesting to speak should briefly describe the nature of their interest in this rulemaking and provide a telephone number for contact. DOE requests persons selected to make an oral presentation to submit an advance copy of their statements at least two weeks before the webinar. At its discretion, DOE may permit persons who cannot supply an advance copy of their statement to participate, if those persons have made advance alternative arrangements with the Building Technologies Office. As necessary, requests to give an oral presentation should ask for such alternative arrangements.
DOE will designate a DOE official to preside at the webinar/public meeting and may also use a professional facilitator to aid discussion. The meeting will not be a judicial or evidentiary-type public hearing, but DOE will conduct it in accordance with section 336 of EPCA (42 U.S.C. 6306). A court reporter will be present to record the proceedings and prepare a transcript. DOE reserves the right to schedule the order of presentations and to establish the procedures governing the conduct of the webinar/public meeting. There shall not be discussion of proprietary information, costs or prices, market share, or other commercial matters regulated by U.S. anti-trust laws. After the webinar/public meeting and until the end of the comment period, interested parties may submit further comments on the proceedings and any aspect of the rulemaking.
The webinar/public meeting will be conducted in an informal, conference style. DOE will present a summary of the proposals, allow time for prepared general statements by participants, and encourage all interested parties to share their views on issues affecting this rulemaking. Each participant will be allowed to make a general statement (within time limits determined by DOE), before the discussion of specific topics. DOE will permit, as time permits, other participants to comment briefly on any general statements.
At the end of all prepared statements on a topic, DOE will permit participants to clarify their statements briefly. Participants should be prepared to answer questions by DOE and by other participants concerning these issues. DOE representatives may also ask questions of participants concerning other matters relevant to this rulemaking. The official conducting the webinar/public meeting will accept additional comments or questions from those attending, as time permits. The presiding official will announce any further procedural rules or modification of the above procedures that may be needed for the proper conduct of the webinar/public meeting.
A transcript of the webinar/public meeting will be included in the docket, which can be viewed as described in the Docket section at the beginning of this document. In addition, any person may buy a copy of the transcript from the transcribing reporter.
The Secretary of Energy has approved publication of this proposed rule.
Administrative practice and procedure, Confidential business information, Energy conservation, Household appliances, Imports, Intergovernmental relations, Reporting and recordkeeping requirements, Small businesses.
Administrative practice and procedure, Confidential business information, Energy conservation, Household appliances, Imports, Incorporation by reference, Intergovernmental relations, Small businesses.
This document of the Department of Energy was signed on February 22, 2022, by Kelly J. Speakes-Backman, Principal Deputy 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 Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of the Department of Energy. This administrative process in no way alters the legal effect of this document upon publication in the
For the reasons stated in the preamble, DOE is proposing to amend parts 429 and 430 of chapter II of title 10, Code of Federal Regulations as set forth below:
42 U.S.C. 6291-6317; 28 U.S.C. 2461 note.
The revisions read as follows:
(a) * * *
(1) * * *
(4) * * *
(i)
(b) * * *
(2) * * *
(i) * * *
(c) * * *
(4) * * *
(i) A complete central air conditioning system that is not certified as a complete system that meets the applicable standard. Combinations that were previously validly certified may be installed after the manufacturer has discontinued the combination, provided all combinations within the basic model, including for single-split-system AC with single-stage or two-stage compressor at least one coil-only combination as specified in paragraph (a)(1) of this section, comply with the regional standard applicable at the time of installation.
(iii) An outdoor unit that is part of a certified combination rated less than the standard applicable in the region in which it is installed or, where applicable, an outdoor unit with no certified coil-only combination as specified in paragraph (a)(1) of this section that meets the standard applicable in the region in which it is installed.
42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.
(c) * * *
(6) * * *
(ii) Any model of outdoor unit that has a certified combination with a rating below the applicable standard level(s) for a region cannot be installed in that region. The least-efficient combination of each basic model, which for single-split-system AC with single-stage or
The revisions read as follows:
a. Conduct one maximum temperature test (H0
Where a tolerance on speed of plus 5 percent or the next higher inverter frequency step from the calculated value is allowed.
Obtain the fractional bin hours for the cooling season, n
For each unit, determine the coefficients A, B, and C by conducting the following calculations once:
The calculation of the Equation 4.2-1 quantities differ depending upon whether the heat pump would operate at low capacity (section 4.2.3.1 of this appendix), cycle between low and high capacity (section 4.2.3.2 of this appendix), or operate at high capacity (sections 4.2.3.3 and 4.2.3.4 of this appendix) in responding to the building load. For heat pumps that lock out low capacity operation at low outdoor temperatures, the outdoor temperature at which the unit locks out must be that specified by the manufacturer in the certification report so that the appropriate equations can be selected.
The revisions and additions read as follows:
(a) Communicates the difference in space temperature and space setpoint temperature (not a setpoint value inferred from on/off thermostat signals) to the control that sets compressor speed;
(b) Provides a signal to the indoor fan to set fan speed appropriate for compressor staging; and
(c) Has installation instructions indicating that the control system having these capabilities must be installed.
(B) For systems other than VRF, only a subset of the sections listed in this test procedure apply when testing and determining represented values for a particular unit. Table 1 shows the sections of the test procedure that apply to each system. This table is meant to assist manufacturers in finding the appropriate sections of the test procedure. Manufacturers are responsible for determining which sections apply to each unit tested based on the model characteristics. The appendix sections provide the specific requirements for testing. To use Table 1, first refer to the sections listed under “all units”. Then refer to additional requirements based on:
(1) System configuration(s),
(2) The compressor staging or modulation capability, and
(3) Any special features.
Testing requirements for space-constrained products do not differ from similar products that are not space-constrained, and thus space-constrained products are not listed separately in this table. Air conditioners and heat pumps are not listed separately in this table, but heating procedures and calculations apply only to heat pumps.
The “manufacturer's published instructions,” as stated in section 8.2 of ASHRAE Standard 37-2009 (incorporated by reference, see § 430.3) and “manufacturer's installation instructions” discussed in this appendix mean the manufacturer's installation instructions that come packaged with the unit or appear in the labels applied to the unit. Manufacturer's installation instructions do not include online manuals. Installation instructions that appear in the labels applied to the unit shall take precedence over installation instructions that come packaged with the unit.
Where needed, the manufacturer must provide a means for overriding the controls of the test unit so that the compressor(s) operates at the specified speed or capacity and the indoor blower operates at the specified speed or delivers the specified air volume rate. For variable-speed non-communicating coil-only air conditioners and heat pumps, the control system shall be provided with a control signal indicating operation at high or low stage, rather than testing with the compressor speed fixed at specific speeds, with the exception that compressor speed override may be used for heating mode test H1
a. For all ducted blower coil systems, except those having a constant-air-volume-rate indoor blower:
Step (1) Operate the unit under conditions specified for the A test (for single-stage units) or A
Step (2) Measure the external static pressure;
Step (3) If this external static pressure is equal to or greater than the applicable minimum external static pressure cited in Table 4, the pressure requirement is satisfied; proceed to step 7 of this section. If this external static pressure is not equal to or greater than the applicable minimum external static pressure cited in Table 4, proceed to step 4 of this section;
Step (4) Increase the external static pressure by adjusting the exhaust fan of the airflow measuring apparatus until the first to occur of:
(i) The applicable Table 4 minimum is equaled or
(ii) The measured air volume rate equals 90 percent or less of the Cooling full-load air volume rate;
Step (5) If the conditions of step 4 (i) of this section occur first, the pressure requirement is satisfied; proceed to step 7 of this section. If the conditions of step 4 (ii) of this section occur first, proceed to step 6 of this section;
Step (6) Make an incremental change to the setup of the indoor blower (
Step (7) The airflow constraints have been satisfied. Use the measured air volume rate as the Cooling full-load air volume rate. Use the final indoor fan speed or control settings of the unit under test for all tests that use the Cooling full-load air volume rate. Adjust the fan of the airflow measurement apparatus if needed to obtain the same full-load air volume rate (in scfm) for all such tests, unless the system modulates indoor blower speed with outdoor dry bulb temperature or to adjust the sensible to total cooling capacity ratio—in this case, use an air volume rate that represents a normal installation and calculate the target external static pressure as described in section 3.1.4.2 of this appendix.
b. For ducted blower coil systems with a constant-air-volume-rate indoor blower. For all tests that specify the Cooling full-load air volume rate, obtain an external static pressure as close to (but not less than) the applicable Table 4 value that does not cause either automatic shutdown of the indoor blower or a value of air volume rate variation Q
Additional test steps as described in section 3.3.f of this appendix are required if the measured external static pressure exceeds the target value by more than 0.03 inches of water.
a. For a ducted blower coil system without a constant-air-volume indoor blower, adjust for external static pressure as follows:
Step (1) Operate the unit under conditions specified for the B
Step (2) Measure the external static pressure;
Step (3) If this pressure is equal to or greater than the minimum external static pressure computed above, the pressure requirement is satisfied; proceed to step 7 of this section. If this pressure is not equal to or greater than the minimum external static pressure computed above, proceed to step 4 of this section;
Step (4) Increase the external static pressure by adjusting the exhaust fan of the airflow measuring apparatus until either:
(i) The pressure is equal to the minimum external static pressure, ΔP
(ii) The measured air volume rate equals 90 percent or less of the cooling minimum air volume rate, whichever occurs first;
Step (5) If the conditions of step 4 (i) of this section occur first, the pressure requirement is satisfied; proceed to step 7 of this section. If the conditions of step 4 (ii) of this section occur first, proceed to step 6 of this section;
Step (6) Make an incremental change to the setup of the indoor blower (
Step (7) The airflow constraints have been satisfied. Use the measured air volume rate as the cooling minimum air volume rate. Use the final indoor fan speed or control settings of the unit under test for all tests that use the cooling minimum air volume rate. Adjust the fan of the airflow measurement apparatus if needed to obtain the same cooling minimum air volume rate (in scfm) for all such tests, unless the system modulates the indoor blower speed with outdoor dry bulb temperature or to adjust the sensible to total cooling capacity ratio—in this case, use an air volume rate that represents a normal installation and calculate the target minimum external static pressure as described in this section 3.1.4.2.
b. For ducted units with constant-air-volume indoor blowers, conduct all tests that specify the cooling minimum air volume rate—(
f. For ducted variable-speed compressor systems tested with a coil-only indoor unit, the cooling minimum air volume rate is the higher of:
(1) The rate specified by the installation instructions included with the unit by the manufacturer; or
(2) 75 percent of the cooling full-load air volume rate. During the laboratory tests on a coil-only (fanless) system, obtain this cooling minimum air volume rate regardless of the pressure drop across the indoor coil assembly.
b. For a ducted blower coil system with a constant-air-volume indoor blower, conduct the E
d. For ducted variable-speed compressor systems tested with a coil-only indoor unit, use the cooling minimum air volume rate as determined in section 3.1.4.2(f) of this appendix, without regard to the pressure drop across the indoor coil assembly.
a. For all ducted heating-only blower coil system heat pumps, except those having a constant-air-volume-rate indoor blower: Conduct the following steps only during the first test, the H1 or H1
Step (1) Adjust the exhaust fan of the airflow measuring apparatus to achieve the certified heating full-load air volume rate.
Step (2) Measure the external static pressure.
Step (3) If this pressure is equal to or greater than the Table 4 minimum external static pressure that applies given the heating-only heat pump's rated heating capacity, the pressure requirement is satisfied; proceed to step 7 of this section. If this pressure is not equal to or greater than the applicable Table 4 minimum external static pressure, proceed to step 4 of this section;
Step (4) Increase the external static pressure by adjusting the exhaust fan of the airflow measuring apparatus until either:
(i) The pressure is equal to the applicable Table 4 minimum external static pressure; or
(ii) The measured air volume rate equals 90 percent or less of the heating full-load air volume rate, whichever occurs first;
Step (5) If the conditions of step 4 (i) of this section occur first, the pressure requirement is satisfied; proceed to step 7 of this section. If the conditions of step 4 (ii) of this section occur first, proceed to step 6 of this section;
Step (6) Make an incremental change to the setup of the indoor blower (
Step (7) The airflow constraints have been satisfied. Use the measured air volume rate as the heating full-load air volume rate. Use the final indoor fan speed or control settings of the unit under test for all tests that use the heating full-load air volume rate. Adjust the fan of the airflow measurement apparatus if needed to obtain the same heating full-load air volume rate (in scfm) for all such tests, unless the system modulates indoor blower speed with outdoor dry bulb temperature—in this case, use an air volume rate that represents a normal installation and calculate the target minimum external static pressure as described in section 3.1.4.2 of this appendix.
d. For ducted variable-speed compressor systems tested with a coil-only indoor unit, use the heating minimum air volume rate, which (as specified in section 3.1.4.5.1.a.(3) of this appendix) is equal to the cooling minimum air volume rate, without regard to the pressure drop across the indoor coil assembly.
The manufacturer must specify the heating nominal air volume rate and the instructions for setting fan speed or controls. Calculate target minimum external static pressure as described in section 3.1.4.2 of this appendix. Make adjustments as described in section 3.1.4.6 of this appendix for heating intermediate air volume rate so that the target minimum external static pressure is met or exceeded. For ducted variable-speed compressor systems tested with a coil-only indoor unit, use the heating full-load air volume rate as the heating nominal air volume rate.
a. Conduct five steady-state wet coil tests: The A
d. For variable-speed non-communicating coil-only air conditioners and heat pumps, the manufacturer-provided equipment overrides for full and minimum compressor speed described in section 3.1.2 of appendix M1 shall be limited to two stages of digital on/off control.
d. For mobile home and space-constrained ducted coil-only system tests,
(1) For two-stage or variable-speed systems, for all steady-state wet coil tests that specify the cooling minimum air volume rate or cooling intermediate air volume rate (
(2) For two-stage or variable-speed systems, for all steady-state wet coil tests that specify the cooling full-load air volume rate (
e. For non-mobile, non-space-constrained home ducted coil-only system tests,
(1) For two-stage or variable-speed systems, for all steady-state wet coil tests that specify the cooling minimum air volume rate or cooling intermediate air volume rate (
(2) For two-stage or variable-speed systems, for all steady-state wet coil tests that specify the cooling full-load air volume rate (
The automatic controls that are installed in the test unit must govern the OFF/ON cycling of the air moving equipment on the indoor side (
a. For mobile home and space-constrained ducted coil-only systems,
(1) For two-stage or variable-speed systems, for all cyclic dry-coil tests that specify the cooling minimum air volume rate (
(2) For two-stage or variable-speed systems, for all cyclic dry-coil tests that specify the cooling full-load air volume rate (
(3) For single-stage systems, for all cyclic dry-coil tests (
b. For ducted, non-mobile, non-space-constrained home coil-only units,
(1) For two-stage or variable-speed systems, for all cyclic dry-coil tests that specify the cooling minimum air volume rate (
(2) For two-stage or variable-speed systems, for all cyclic dry-coil tests that specify the cooling full-load air volume rate (
(3) For single-stage systems, for all cyclic dry-coil tests (
c. For units having a variable-speed indoor blower that is disabled during the cyclic test, increase e
a. Conduct one maximum temperature test (H0
b. If one of the high temperature tests (H1
Evaluate the quantities Q
Otherwise (if no high temperature test is conducted using the same speed (RPM or power input frequency) as the H3
c. If the H2
d. Determine the quantities Q
e. For multiple-split heat pumps (only), the following procedures supersede the above requirements. For all Table 14A tests specified for a minimum compressor speed, turn off at least one indoor unit. The manufacturer shall designate the particular indoor unit(s) to be turned off. The manufacturer must also specify the compressor speed used for the Table 14A H2
a. Conduct one maximum temperature test (H0
b. If one of the high temperature tests (H1
Evaluate the quantities Q
Otherwise (if no high temperature test is conducted using the same speed (RPM or power input frequency) as the H3
c. Determine the quantities Q
c. For mobile home and space-constrained ducted coil-only system tests,
(1) For two-stage or variable-speed systems, for all steady-state maximum temperature and high temperature tests that specify the heating minimum air volume rate or the heating intermediate air volume rate (
(2) For two-stage or variable-speed systems, for all steady-state maximum temperature and high temperature tests that specify the heating full-load air volume rate or the heating nominal air volume rate (
(3) For single-stage systems, for all steady-state maximum temperature and high temperature tests (
d. For non-mobile, non-space-constrained home ducted coil-only system tests,
(1) For two-stage or variable-speed systems, for all steady-state maximum temperature and high temperature tests that specify the heating minimum air volume rate or the heating intermediate air volume rate (
(2) For two-stage or variable-speed systems, for all steady-state maximum temperature and high temperature tests that specify the heating full-load air volume rate or the heating nominal air volume rate (
b. For ducted coil-only system heat pumps (excluding the special case where a variable-speed fan is temporarily removed),
(1) For mobile home and space-constrained ducted coil-only systems
(i) For two-stage or variable-speed systems, for all cyclic heating tests that specify the heating minimum air volume rate (
(ii) For two-stage or variable-speed systems, for all cyclic heating tests that specify the heating full-load air volume rate (
(iii) For single-stage systems, for all cyclic heating tests (
(2) For non-mobile home and non-space-constrained ducted coil-only systems
(i) For two-stage or variable-speed systems, for all cyclic heating tests that specify the heating minimum air volume rate (
(ii) For two-stage or variable-speed systems, for all cyclic heating tests that specify the heating full-load air volume rate (
(iii) For single-stage systems, for all cyclic heating tests (
In making these calculations, use the average indoor air volume rate (
(1) For mobile home and space-constrained ducted coil-only system tests,
(i) For two-stage or variable-speed systems, for all frost accumulation tests that specify the heating minimum air volume rate or the heating intermediate air volume rate (
(ii) For two-stage and variable-speed systems, for all frost accumulation tests that specify the heating full-load air volume rate or the heating nominal air volume rate (
(2) For non-mobile home and non-space-constrained ducted coil-only systems,
(i) For two-stage or variable-speed systems, for all frost accumulation tests that specify the heating minimum air volume rate or the heating intermediate air volume rate (
(ii) For two-stage and variable-speed systems, for all frost accumulation tests that specify the heating full-load air volume rate or the heating nominal air volume rate (
Calculate SEER2 using Equation 4.1-1. Evaluate the space cooling capacity, Q
Use Equations 4.1.4-1 and 4.1.4-2, respectively, to calculate Q
If the unit operates at an intermediate compressor speed (k=i) in order to match the building cooling load at temperature T
Where:
Q
If the unit alternates between high (k=2) and low (k=1) compressor capacity to satisfy the building cooling load at temperature T
The calculation of the Equation 4.2-1 quantities differ depending upon whether the heat pump would operate at low capacity (section 4.2.3.1 of this appendix), cycle between low and high capacity (section 4.2.3.2 of this appendix), or operate at high capacity (sections 4.2.3.3 and 4.2.3.4 of this appendix) in responding to the building load. For heat pumps that lock out low capacity operation at low outdoor temperatures, the outdoor temperature at which the unit locks out must be that specified by the manufacturer in the certification report so that the appropriate equations can be selected.
a. Minimum Compressor Speed.
For units other than variable-speed non-communicating coil-only heat pumps, evaluate the space heating capacity, Q
For variable-speed non-communicating coil-only heat pumps, when T
b. Minimum Compressor Speed for Minimum-speed-limiting Variable-speed Heat Pumps: For units other than variable-speed non-communicating coil-only heat pumps, evaluate the space heating capacity, Q
For variable-speed non-communicating coil-only heat pumps, evaluate the space heating capacity, Q
c. Full Compressor Speed for Heat Pumps for which the H4
Evaluate the space heating capacity, Q
Determine Q
e. Intermediate Compressor Speed. For units other than variable-speed non-communicating coil-only heat pumps, calculate the space heating capacity, Q
Use Equations 4.2.4-1 and 4.2.4-2, respectively, to calculate Q
For variable-speed non-communicating coil-only heat pumps, there is no intermediate speed.
For units that are not variable-speed non-communicating coil-only heat pumps, calculate
Q
COP
For each temperature bin where the heat pump operates at an intermediate compressor speed, determine COP
For each temperature bin where Q
For each temperature bin where Q
Securities and Exchange Commission.
Proposed rule.
The Securities and Exchange Commission (the “Commission” or the “SEC”) is proposing new rules under the Investment Advisers Act of 1940 (the “Advisers Act” or the “Act”). We propose to require registered investment advisers to private funds to provide transparency to their investors regarding the full cost of investing in private funds and the performance of such private funds. We also are proposing rules that would require a registered private fund adviser to obtain an annual financial statement audit of each private fund it advises and, in connection with an adviser-led secondary transaction, a fairness opinion from an independent opinion provider. In addition, we are proposing rules that would prohibit all private fund advisers, including those that are not registered with the Commission, from engaging in certain sales practices, conflicts of interest, and compensation schemes that are contrary to the public interest and the protection of investors. All private fund advisers would also be prohibited from providing preferential treatment to certain investors in a private fund, unless the adviser discloses such treatment to other current and prospective investors. We are proposing corresponding amendments to the Advisers Act books and records rule to facilitate compliance with these proposed new rules and assist our examination staff. Finally, we are proposing amendments to the Advisers Act compliance rule, which would affect all registered investment advisers, to better enable our staff to conduct examinations.
Comments should be received on or before April 25, 2022.
Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments to Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
Studies, memoranda, or other substantive items may be added by the Commission or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any such materials will be made available on the Commission's website. To ensure direct electronic receipt of such notifications, sign up through the “Stay Connected” option at
Christine Schleppegrell, Senior Counsel; Thomas Strumpf, Senior Counsel; Melissa Roverts Harke, Senior Special Counsel; Michael C. Neus, Private Funds Attorney Fellow; or Melissa S. Gainor, Assistant Director, Investment Adviser Rulemaking Office, or Marc Mehrespand, Branch Chief, Chief Counsel's Office, at (202) 551-6787 or
The Securities and Exchange Commission (the “Commission”) is proposing for public comment 17 CFR 275.206(4)-10 (new rule 206(4)-10), 17 CFR 275.211(h)(1)-1 (new rule 211(h)(1)-1), 17 CFR 275.211(h)(1)-2 (new rule 211(h)(1)-2), 17 CFR 275.211(h)(2)-1 (new rule 211(h)(2)-1), 17 CFR 275.211(h)(2)-2 (new rule 211(h)(2)-2), and 17 CFR 275.211(h)(2)-3 (new rule 211(h)(2)-3) under the Investment Advisers Act of 1940 [15 U.S.C. 80b-1
In the wake of the 2007-2008 financial crisis, Congress passed and the President signed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), which increased the Commission's oversight responsibility for private fund advisers.
Registration and reporting on both Form ADV and Form PF have been critical to increasing transparency and protecting investors in private funds and assessing systemic risk.
During our decade overseeing most private fund advisers, our staff has examined private fund advisers to assess both the issues and risks presented by their business models and the firms' compliance with their existing legal obligations.
First, we continue to observe that private fund investments are often opaque; advisers frequently do not provide investors with sufficiently detailed information about private fund investments. Without sufficiently clear, comparable information, even sophisticated investors would be unable to protect their interests or make sound investment decisions. For example, some investors do not have sufficient information regarding private fund or portfolio company fees and expenses to make informed investment decisions, given those fees and expenses can be subject to complicated calculation methodologies (that often include the application of offsets, waivers, and other limits); may have varied labels across private funds; and can affect individual investors' returns differently because of alternative fee arrangements set forth in side letter agreements. In addition, advisers often provide private fund investors with laundry lists of potential fees and expenses, without giving details on the magnitude and scope of fees and expenses charged. Beyond management fees, performance-based compensation, and the expenses charged directly to the funds, some private fund advisers and their related persons charge a number of fees and expenses to the fund's portfolio companies. These can include consulting fees, monitoring fees, servicing fees, transaction fees, director's fees, and others. At the time of the initial investment and as fund operations continue, many investors do not have sufficient information regarding these fee streams that flow to the adviser or its related persons and reduce the return on their investment.
Investors also often lack sufficient transparency into how private fund performance is calculated. Advisers frequently present fund performance reflecting different assumptions, making it difficult to measure and compare data across funds and advisers or compare the fund's performance to the investor's chosen benchmarks, even where the assumptions are disclosed. For example, one adviser may show fund performance that reflects the use of a subscription line of credit initially to fund investments and pay expenses rather than investor capital. Another adviser may present only unlevered performance results that do not reflect the effect of a subscription line. More standardized requirements for performance metrics would allow private fund investors to make apples to apples comparisons when assessing the returns of similar fund strategies over different market environments and over time. More standardized requirements for performance information also would improve investors' ability to interpret complex performance reporting, and assess the relationship between the fees paid in connection with an investment and the return on that investment as they monitor their investment and consider potential future investments.
Similarly, investors may not have information regarding the preferred terms granted to certain investors (
This lack of transparency regarding costs, performance, and preferential terms causes an information imbalance between advisers and private fund investors, which, in many cases, prevents private bilateral negotiations from effectively remedying shortcomings in the private funds market. We believe that this imbalance serves only the adviser's interest and leaves many investors without the tools they need to effectively protect their interests, whether through negotiations or otherwise. Moreover, certain advisers may only provide sufficiently detailed information following an investor's admission to the fund when the primary bargaining window has closed, particularly for closed-end funds where investors have no, or very limited, options to withdraw.
Enhanced information about costs, performance, and preferential treatment, would help an investor better decide whether to invest or to remain invested in a particular private fund, how to invest other assets in the investor's portfolio, and whether to invest in private funds managed by the adviser or its related persons in the future. More standardized information would improve comparability among private funds with similar characteristics. This information also would help a private fund investor better monitor and assess the true cost of its investments, the value of the services for which the fund is paying, and potential conflicts of interest. For example, enhanced cost information could allow an investor to identify when the private fund has incorrectly, or improperly, assessed a fee or expense by the adviser contrary to the adviser's fiduciary duty, contractual obligations to the fund, or
We also have continued to observe instances of advisers acting on conflicts of interest that are not transparent to investors, provide substantial financial benefits to the adviser, and potentially have significant negative impacts on the private fund's returns.
As an example of advisers acting on conflicts of interest, certain venture capital fund advisers use private funds to obtain a controlling or influential interest in a non-publicly traded early stage company and then instruct that company to hire the adviser or its related persons to provide certain services. In these circumstances, the adviser often sets the terms of the engagement, including the price paid for the services. In cases where the adviser causes the fund to overpay for services because the services were not negotiated in an arm's-length process, the adviser's practice of hiring its related persons harms investors by diminishing the private fund's returns. For example, the adviser sometimes instructs the company to pay certain of the adviser's bills, to reimburse the adviser for expenses incurred in managing its investment in the company, or to add to its payroll adviser employees who manage the investment. In contrast, outside of the private fund context, an adviser often uses private fund clients to buy shares in a company and may vote proxies or engage with management and the board, but absent taking some extraordinary steps, the adviser's ability to influence or control the company is generally constrained. In addition, if the company is publicly traded, the adviser's attempts to seize control or make a variety of other changes are generally visible to its clients and the public at large.
Although many conflicts of interest can involve problematic sales practices or compensation schemes, some can be managed. For example, advisers have a conflict of interest with private funds and investors in those funds when they value the fund's assets and use that valuation as the basis for the calculation of the adviser's fees and fund performance.
Other conflicts of interest are contrary to the public interest and the protection of investors, and cannot be managed given the lack of governance mechanisms frequent in private funds as discussed above. For example, we have observed situations where the adviser causes one fund to bear more than its pro rata share of expenses related to a portfolio investment.
Accordingly, based on our experience overseeing private fund advisers, as well as private funds' impact on our financial
In addition, given the lack of strong governance mechanisms at private funds, their compliance programs take on added importance in protecting investors.
We are proposing a series of rules under the Advisers Act that would specifically address these practices by advisers to private funds. The goal of this package of proposed reforms is to protect those who directly or indirectly invest in private funds by increasing visibility into certain practices, establishing requirements to address certain practices that have the potential to lead to investor harm, and prohibiting adviser activity that we believe is contrary to the public interest and the protection of investors. While some of the investor protection concerns identified herein may relate to an adviser's activities with regard to other client types (
We request comment on the following aspects of the package of proposed reforms:
• Are there certain activities that this package of proposed reforms would address in the private fund context that we should also address in other contexts (
• Are there certain activities in the private fund context that this package of proposed reforms is not addressing but that we should address?
The proposed rule would require an investment adviser that is registered or required to be registered with the Commission to prepare a quarterly statement that includes certain information regarding fees, expenses, and performance for any private fund that it advises and distribute the quarterly statement to the private fund's investors within 45 days after each calendar quarter end, unless a quarterly statement that complies with the proposed rule is prepared and distributed by another person.
We believe advisers should provide statements to help an investor better understand the relationship between the fees and expenses the investor bears and the performance the investor receives from the investment because of the opaque nature of the fees and expenses typically associated with private fund investments. For example, a private fund's governing documents (
We believe that periodic statements containing certain required information would allow investors to understand and monitor their private fund investments better. For example, investors could check fees and expenses paid directly or indirectly by the private fund against the private fund's governing documents. This information may allow an investor to identify when the private fund is incorrectly, or improperly, assessed a fee or expense by the adviser contrary to the adviser's fiduciary duty or the fund's governing agreements or disclosures. As discussed in more detail below, the proposed quarterly statement also would improve transparency for investors into both the myriad ways an adviser and its related persons benefit from their relationship with the private fund and the scope of potential conflicts of interests.
In addition, the proposed quarterly statement would allow a private fund investor to compare cost and performance information across its private fund investments. This information would help inform investment decisions, including whether to remain invested in certain private funds or to invest in other private funds managed by the adviser or its related persons. More broadly, this disclosure would help inform investors about the cost and performance dynamics of this marketplace and potentially improve efficiency for future investments. For example, if an investor owns interests in funds with similar investment strategies, the investor may be in a better position to negotiate lower fee rates for future investments because the investor would be aware of the rates charged by certain advisers in that segment of the market.
We recognize that many private fund advisers contractually agree to provide
Reporting practices also vary across the private funds industry due to, among other things, different forms and templates. Because the proposed requirement of quarterly statements would involve a degree of standardization across the industry, we believe that investors would be able to find and compare key information regarding fees, expenses, and performance for funds with similar characteristics more easily than is the case today. This has the potential to, in our view, bring greater efficiencies to the marketplace by improving investor decision making. For example, investors likely would be able to compare adviser compensation across similar funds, which may assist investors in determining whether to negotiate or renegotiate economic terms or whether to invest or continue to invest in private funds managed by the adviser.
The proposed quarterly statement requirement would provide fund-wide reporting. We believe this approach would help private fund investors compare the costs of investing across private funds. We are not proposing to require private fund advisers to provide personalized account statements showing each individual investor's fees, expenses, and performance. The proposed quarterly statements are designed, in part, to allow individual private fund investors to use fund-level information to perform more personal, customized calculations. In addition, these proposed requirements do not prevent an adviser from providing (or causing a third party, such as an administrator, consultant, or other service provider, to provide), or an investor from negotiating, personalized reporting. In the registered fund context, fund-level reporting has, in our view, enabled retail investors to understand their investments better. We believe a comparable approach, but one that is more suitable to the needs of investors in private funds, is appropriate here.
We request comment on the following aspects of the proposed rule:
• Should we, as proposed, require advisers to private funds to prepare a quarterly statement providing standardized disclosures regarding the cost of investing in the private fund and the private fund's performance and distribute the quarterly statement to the fund's investors? Should we instead require advisers to provide investors with personalized information that takes into account the investors' individual ownership stake in the fund in addition to, or in lieu of, a statement covering the private fund? If so, what information should be included in the personalized disclosure? For example, should the statement reflect specific fee arrangements, including any offsets or waivers applicable only to the investors receiving the statement? Do advisers currently provide personalized fee, expense, and performance disclosures? If so, what other types of information do advisers or funds typically include? Do they automate such disclosures? How expensive and complex would it be for advisers to create and deliver personalized disclosures? How useful would it be for investors to receive personalized disclosures?
• Would investors find data regarding the private fund's fees, expenses, and performance useful given that certain investors may have different economic arrangements with the adviser, such as fee breaks or expense caps? Should we require advisers to disclose in the quarterly statement whether investors are subject to different economic arrangements, whether documented in side letters or other written agreements or, to the extent applicable, as a result of different class terms? If so, should we require advisers to list the rates or otherwise show a range?
• Should the quarterly statement rule apply to registered advisers to private funds as proposed or should it apply to all advisers to private funds? Should it apply to exempt reporting advisers? Should the rule include any exceptions for categories of advisers? If so, what conditions should apply to such an exception?
• Should the rule require advisers to prepare and distribute the quarterly statements only to private fund investors, as proposed? Alternatively, should the rule require advisers to provide quarterly statements to investors in other types of pooled investment vehicles, such as a vehicle that relies on an exclusion from the definition of “investment company” in section 3 of the Investment Company Act other than section 3(c)(1) or 3(c)(7) of that Act? For example, should we require advisers to provide quarterly statements to investors in pooled investment vehicles that rely on the exclusion from the definition of “investment company” in section 3(c)(5)(C) of that Act?
• The proposed rule would require an adviser to distribute the quarterly statement to the private fund's investors within 45 days after each calendar quarter end, unless such a quarterly statement is prepared and distributed by another person. Would this provision eliminate burdens where there are multiple advisers to the same fund, while still providing the fund's investors with the benefits of the quarterly statement? Would the fund's primary adviser typically prepare and distribute the quarterly statement in these circumstances? How would advisers that do not prepare and distribute a quarterly statement in reliance on another adviser demonstrate compliance with this requirement?
• The proposed rule would require advisers to prepare and distribute a quarterly statement disclosing certain information regarding a private fund's fees, expenses, and performance. Are there alternative approaches we should require to improve investor protection and bring greater efficiencies to the market? For example, should we establish maximum fees that advisers may charge at the fund level? Should we prohibit certain compensation arrangements, such as the “2 and 20” model? Should we prohibit advisers from receiving compensation from portfolio investments to the extent they also receive management fees from the fund? Should we require advisers to disclose their anticipated management fee revenue and operating budget to private fund investors or an LPAC or other similar body (despite the limitations of private fund governance mechanisms, as discussed above) on an annual or more frequent basis? Should we impose limitations on management fees (which are typically paid regardless of whether the fund generates a profit), but not impose limitations on performance-based compensation (which is typically tied to the success of the fund)? Should we prohibit
• Similarly, should we prohibit certain types of private fund performance information in the quarterly statement? For example, should we prohibit advisers from presenting performance with the impact of fund-level subscription facilities? Should we prohibit advisers from presenting combined performance for multiple funds, such as a main fund and a co-investment fund that pays lower or no fees?
• Do private fund advisers or their related persons receive other economic benefits that the rule should require advisers to disclose in the quarterly statement? For example, should the quarterly statement also require disclosure and quantification of the kinds of economic benefits commonly received by advisers or their related persons from broker-dealers or other service providers to private funds, such as hedge funds? Why or why not?
The proposed rule would require an investment adviser that is registered or required to be registered to prepare and distribute quarterly statements with certain information regarding fees and expenses, including fees and expenses paid by underlying portfolio investments to the adviser or its related persons. While the types of fees and expenses charged to private funds can vary across the industry, private funds are often more expensive than other asset classes because the scope and magnitude of fees and expenses paid directly and indirectly by private fund investors can be extensive. Investors typically compensate the adviser for managing the affairs of the fund, often in the form of management fees.
Investors generally are required to bear all expenses related to the operation of the fund and its portfolio investments. In addition to expenses such as organizational and offering expenses, private fund investors also frequently bear expenses that vary based on the private fund's strategy and contractual agreements. For example, hedge fund investors indirectly bear trading expenses. Investors in private equity and venture capital funds indirectly bear expenses associated with fund investments, such as deal sourcing and due diligence expenses, including for investments that are unconsummated. Investors in private funds with a real estate investment strategy also indirectly bear expenses related to property management, environmental reviews, and site inspections. These expenses generally are uncapped, and, unlike a fund's performance-based compensation, private fund investors are typically required to bear them regardless of whether the fund or the applicable investment generates a positive return for investors.
Investors often lack transparency regarding the total cost of such fees and expenses.
We have seen a significant increase in investors seeking transparency regarding fees and expenses. For example, certain investors and industry groups have encouraged advisers to adopt uniform reporting templates to promote transparency and alignment of interests between advisers and
The proposed quarterly statement rule would require private fund advisers to disclose the following information to investors in a table format:
(1) A detailed accounting of all compensation, fees, and other amounts allocated or paid to the adviser or any of its related persons by the private fund during the reporting period (“adviser compensation”);
(2) A detailed accounting of all fees and expenses paid by the private fund during the reporting period other than those listed in paragraph (1) above (“fund expenses”); and
(3) The amount of any offsets or rebates carried forward during the reporting period to subsequent quarterly periods to reduce future payments or allocations to the adviser or its related persons.
The table would provide investors with comprehensive fee and expense disclosure for the prior quarterly period (or, in the case of a newly formed private fund's initial quarterly statement, its first two full calendar quarters of operating results).
We believe requiring advisers to disclose all forms of adviser compensation as separate line items (without prescribing particular categories of fees) is appropriate because it would encompass the various forms of adviser compensation across the private funds industry. Many private funds compensate advisers with a “2 and 20” arrangement, consisting of a 2% management fee and a 20% share of any profits generated by the fund. Certain advisers, however, receive other forms of compensation from private funds in addition to, or in lieu of, such amounts. For example, certain advisers charge private funds administration fees or servicing fees. The proposal would help ensure disclosure of the various forms of adviser compensation, and the corresponding dollar amounts of each type of compensation, to current investors regardless of how an adviser characterizes the compensation and regardless of the different economic arrangements in place. This would allow investors to understand and assess the magnitude and scope of adviser compensation better and help validate that adviser compensation conforms to contractual agreements.
In addition to compensation paid to the adviser, the proposed rule would require disclosure of compensation, fees, and other amounts allocated or paid to the adviser's “related persons.” We propose to define “related persons” to include: (i) All officers, partners, or directors (or any person performing similar functions) of the adviser; (ii) all persons directly or indirectly controlling or controlled by the adviser; (iii) all current employees (other than employees performing only clerical, administrative, support or similar functions) of the adviser; and (iv) any person under common control with the adviser.
Many advisers conduct a single advisory business through multiple separate legal entities or provide services to a private fund through different affiliated entities. The proposed “related person” definition is designed to capture the various entities and personnel an adviser may use to provide advisory services to, and receive compensation from, private fund clients. We considered, but are not proposing, a broader definition of related persons to include additional entities related to the adviser or its personnel, such as entities the adviser or its personnel own a financial interest in but do not control. We are not proposing a broader definition because it would likely capture entities or persons outside of the ones advisers typically use to conduct a single advisory business. In addition, the proposed definition is consistent with the definition of related person used on Form ADV, which advisers have experience assessing as part of their disclosure obligations on that form. We believe that the proposed definition captures the relevant entities without being overly broad.
We have observed two general trends in the private funds industry that support this approach. First, fund expenses have risen significantly in recent years for certain private funds due to, among other things, complex fund structures, global marketing and investment efforts, and increased service provider costs.
The proposed quarterly statement rule would require a detailed accounting of each category of fund expense. This would require advisers to list each specific category of expense as a separate line item, rather than permit advisers to group fund expenses into broad categories. For example, if a fund paid insurance premiums, administrator expenses, and audit fees during the reporting period, a general reference to “fund expenses” on the quarterly statement would not satisfy the detailed accounting requirement. Instead, an adviser would be required to list each specific category of expense (
To the extent a fund expense also could be characterized as adviser compensation under the proposed rule, the proposed rule would require advisers to disclose such payment or allocation as adviser compensation and not as a fund expense in the quarterly statement. For example, certain private funds may engage the adviser or its related persons to provide services to the fund, such as consulting, legal, or back-office services. An adviser would disclose any compensation, fees, or other amounts allocated or paid by the fund for such services as part of the detailed accounting of adviser compensation. This approach would help ensure that investors understand the entire amount of adviser compensation allocated or paid to the adviser and its related persons during the reporting period.
Advisers may offset, rebate, or waive adviser compensation or fund expenses in a number of circumstances. For example, a private equity adviser may enter into a management services agreement with a fund's portfolio company, requiring the company to pay the adviser a fee for those services. To the extent the fund's governing agreement requires the adviser to share the fee with the fund investors through an offset to the management fee, the management fee would typically be reduced, on a dollar-for-dollar basis, by an amount equal to the fee.
We considered whether to require advisers to disclose adviser compensation and fund expenses only after the application of offsets, rebates, and waivers, rather than before and after. We recognize that investors may find the reduced numbers more meaningful, given that they generally reflect the actual amounts borne by the fund during the reporting period. We believe, however, that presenting both figures would provide investors with greater transparency into advisers' fee and expense practices, particularly with respect to how offsets, rebates, and waivers affect adviser compensation. Transparency into fee and expense practices is important because it would assist investors in monitoring their private fund investments and, for certain investors, would ease their own efforts at complying with their reporting obligations.
In addition, we are proposing to require advisers to disclose the amount of any offsets or rebates carried forward during the reporting period to subsequent periods to reduce future adviser compensation.
We request comment on all aspects of the proposed content of the fund fee and expense table, including the following items:
• Should we require advisers to disclose all compensation and fund expenses as proposed? Do commenters
• Would the proposed content result in fund-level fee and expense disclosure that is meaningful to investors? Are there other items that advisers should be required to disclose in the fund table? Are there any proposed items that we should eliminate? Would more or less information about the fees and expenses charged to the fund be helpful for investors? Are there any revisions to the descriptions of fees that would make the proposed disclosure more useful to investors?
• Instead of the proposed approach, should we prescribe a template for the fund table? Would the increased comparability of a template be useful to investors? Would a template be flexible enough to accommodate changes in the types of fees and expenses as well as the types of offsets, rebates, or waivers used by private fund advisers? Would a template necessitate repeated updating as the industry evolves?
• Should we include any additional definitions of terms or phrases for the fund table? Should we omit any definitions we have proposed for the fund table?
• The proposed rule would require an adviser to include the compensation paid to a related person sub-adviser in its quarterly statement. For private funds that have sub-advisers that are not related persons, should we require a single quarterly statement showing all adviser compensation (at both the adviser and sub-adviser levels)? In cases where a non-related person sub-adviser does not prepare a quarterly account statement in reliance on the adviser's preparation and distribution of the quarterly statement to the fund's investors, how would advisers reflect the compensation paid to the sub-adviser and its related persons? Do commenters agree that such compensation would be captured as a fund expense? Should we require a separate table covering these fees and expenses, as well as a separate table showing portfolio investment compensation paid to the sub-adviser or its related person? How would advisers operationalize this requirement in these circumstances?
• Should we adopt the proposed definitions of “related persons” and “control” as proposed? Are they too broad? Are the proposed definitions broad enough? Should we add former personnel of the adviser or its related persons to the proposed definition? If so, for how long after a departure from the adviser or its related persons should such personnel fall into the definition? Should the definition of related person include family members of adviser personnel or persons who share the same household with adviser personnel? Should the definition capture any person directly or indirectly controlled by the adviser's officers, partners, or directors (including any consulting firms controlled by such persons)? Should it capture operational partners, senior advisors, or other similar consultants of the adviser, the private fund, or its portfolio investments? Should we add any entity more than five percent of the ownership of which is held, directly or indirectly, by the adviser or its personnel? Should the definition include any person that receives, directly or indirectly, management fees or performance based compensation from, or in respect of, the fund; or any person that has an interest in the investment adviser or general partner (or similar control person) of the fund? If we adopt a different definition of “related person” than what is being proposed, should we use a different defined term (such as “related party”) to avoid confusion given that the term “related person” is defined in Form ADV?
• For purposes of the definition of “control,” are the control presumptions appropriate in this context? Should we eliminate or modify any of the presumptions? For example, should we eliminate aspects of the definition that may capture passive investors who do not have the power to direct the management or policies of the relevant entity? Why or why not? Should we add any additional control presumptions? For example, should an entity be presumed to be controlled by an adviser to the extent the adviser has authority over the entity's budget or whether to hire personnel or terminate their employment?
• The proposed rule includes a non-exhaustive list of certain types of adviser compensation and fund expenses.
• Do private fund advisers or their related persons receive other economic benefits that the rule should require advisers to disclose in the quarterly statement? For example, should we require hedge fund advisers to disclose the dollar amount of any soft dollar or similar benefits provided by broker-dealers that execute trades for the funds, or any benefits provided by hedge fund prime brokers?
• Do commenters agree with the scope of the proposed definition of “performance-based compensation”? Should we specify the types of compensation that should be included in the definition? For example, should the definition specify that the term includes carried interest, incentive fees, incentive allocations, performance fees, or profit allocations?
• Should we only require the table to disclose adviser compensation and fund expenses after the application of any offsets, rebates, or waivers, rather than before and after, as proposed? If so, why?
• Should we define offsets, rebates, and waivers? If so, what definitions should we use and why? Are there any types of offsets, rebates, and waivers that we should not require advisers to reflect in the fund table? If so, which ones and why? To the extent that offsets, rebates, or waivers are available to certain, but not all, investors, are there any operational concerns with reflecting and describing those offsets, rebates, or waivers in the fund-wide numbers presented in the quarterly statement? Are there alternatives we should use?
• Should we require advisers to disclose the amount of any offsets or rebates carried forward during the reporting period to subsequent periods to reduce future adviser compensation as proposed? Would this information be helpful for investors? Do advisers already provide this information in the fund's financial statements or otherwise?
• Should we require advisers to provide any additional disclosures regarding fees and expenses in the quarterly statement? In particular, should we require any disclosures from an investment adviser's Form ADV Part 2A narrative brochure (if applicable) to be included in the quarterly statement, such as more details about an investment adviser's fees?
• Should we tailor the disclosure requirements based on fund type? For example, should the requirements or format for hedge funds differ from the requirements and format for private equity funds? Are there unique fees or expenses for types of funds that advisers should be required to disclose or otherwise list as a separate line item? If so, how should we define these types of funds for these purposes? For example, should we use the definitions of such terms used on Form ADV?
• Do any of the proposed requirements impose unnecessary costs or compliance challenges? Please provide specific data. Are there any modifications to the proposal that we could make that would lower those costs or mitigate those challenges? Please provide examples.
• The proposed quarterly statement prescribes minimum fee and expense information that must be included. What are the benefits and drawbacks of prescribing the minimum disclosure to be included in the quarterly statement and otherwise permitting advisers to include additional information? Do commenters agree that we should allow advisers to include additional information? Would the inclusion of additional information affect whether investors review the quarterly statement?
• Certain advisers use management fee waivers where the amount of management fees paid by the fund to the adviser is reduced in exchange for an increased interest in fund profits.
• Should we permit advisers to exclude expenses from the quarterly statement if they are below a certain threshold? Alternatively, should we permit advisers to group expenses into broad categories and disclose them under single line item—such as “Miscellaneous Expenses” or “Other Expenses”—if the aggregate amount is
• The proposed rule would require the initial quarterly statement for newly formed funds to include start-up and organizational fees of the fund if they were paid during the reporting period. Instead, should the proposed rule exclude those fees and expenses?
• Should the table provide fee and expense information for any other periods? For example, should we require advisers to disclose all adviser compensation and fund expenses since inception (in addition to adviser compensation and fund expenses allocated or paid during the applicable reporting period)? If so, should we require since-inception information only for certain types of funds, such as closed-end private funds, and not for other types of funds, such as open-end private funds?
• We recognize that certain private fund advisers may already provide quarterly account or similar statements to investors, such as advisers that rely on an exemption from certain disclosure and recordkeeping requirements provided by U.S. Commodity Futures Trading Commission regulations at 17 CFR 4.7. How often are private fund advisers separately required to provide such quarterly statements, and how often do they do so even when not required? Would there be any overlap between the proposed quarterly statement and the existing quarterly account or similar statements currently prepared by advisers?
The proposed quarterly statement rule would require advisers to disclose the following information with respect to any covered portfolio investment,
(1) A detailed accounting of all portfolio investment compensation allocated or paid by each covered portfolio investment during the reporting period;
(2) The private fund's ownership percentage of each such covered portfolio investment as of the end of the reporting period or, if the fund does not have an ownership interest in the covered portfolio investment, the adviser would be required to list zero percent as the fund's ownership percentage along with a brief description of the fund's investment in such covered portfolio investment.
The proposed rule defines “portfolio investment” as any entity or issuer in which the private fund has invested directly or indirectly.
We considered, but are not proposing, using the term “portfolio company,” rather than “portfolio investment.” We believe that the term “portfolio company” would be too narrow given that some private funds do not invest in traditional operating companies. For example, certain private funds originate loans and invest in credit-related instruments, while others invest in more bespoke assets such as music royalties, aircraft, and tanker vessels. The proposed rule would define “portfolio investment” to apply to all types of private fund investments and structures. The proposed definition also is designed to remain evergreen, capturing new investment structures as they continue to evolve.
We recognize, however, that portfolio investments of certain private funds may not pay or allocate portfolio-investment compensation to an adviser or its related persons. For example, advisers to hedge funds focusing on passive investments in public companies may be less likely to receive portfolio-investment compensation than advisers to private equity funds focusing on control-oriented investments in private companies. Under the proposed rule, advisers would only be required to disclose information regarding
Similar to the approach taken with respect to adviser compensation and fund expenses discussed above, the proposed rule would require a detailed accounting of
We believe that this disclosure would inform investors about the scope of portfolio investment compensation paid to the adviser and related persons, and could help provide insight into some of the conflicts of interest some advisers face. For example, in cases where the adviser controls the portfolio investment, the adviser also generally has discretion over whether to charge portfolio investment compensation and, if so, the rate, timing, method, amount, and recipient of such compensation. Additionally, where the private fund's governing documents require the adviser to offset portfolio investment compensation against other revenue streams or otherwise provide a rebate to investors, this information would also help investors monitor the application of such offsets or rebates.
The proposed rule would require the adviser to disclose the amount of portfolio investment compensation attributable to the private fund's interest in the covered portfolio investment.
Similar to the approach discussed above with respect to adviser compensation and fund expenses, an adviser would be required to list the amount of portfolio investment compensation allocated or paid with respect to each covered portfolio investment both
We recognize that calculating the fund's ownership percentage may be difficult in certain circumstances, especially for funds that do not make equity investments in operating companies. For example, a private equity secondaries fund may own a preferred security or a hybrid instrument that entitles the fund to
We request comment on all aspects of the proposed content of the portfolio investment table, including the following items:
• Would the proposed rule provide portfolio investment compensation disclosure that is meaningful to investors? Should the rule require advisers to disclose additional or different information in the portfolio-investment table? Would more information about the fees and expenses charged to portfolio investments be helpful for investors?
• Should we include any additional definitions of terms or phrases for the portfolio-investment table? Should we omit any definitions we have proposed for the portfolio-investment table?
• Is the proposed definition of “portfolio investment” clear? Should we modify or revise the proposed definition? For example, should we define “portfolio investment” as any person whose securities are beneficially owned by the private fund or any person in which the private fund owns an equity or debt interest? Alternatively, should we define “portfolio investment” as any underlying company, business, platform, issuer, or other person in which the private fund has made, directly or indirectly, an investment? Should we permit advisers to determine, in good faith, which entity or entities constitute the portfolio investment for purposes of the quarterly statement rule? For example, a fund of funds may indirectly invest in hundreds of issuers or entities. Depending on the underlying structure, control relationship, and reporting, the fund of funds' adviser may have limited knowledge regarding such underlying entities or issuers. Should we exclude such entities or issuers from the definition of portfolio investment for such advisers? Is there a different standard or test we should use? Should we require such adviser to conduct a reasonable amount of diligence consistent with past practice and/or industry standards? Why or why not?
• As discussed above, to the extent a private fund enters into a negotiated instrument, such as a derivative, with a counterparty, we would not consider the private fund to have made an investment in the counterparty. Do commenters agree with this approach? Why or why not? Should we adopt a different approach for derivatives or other similar instruments generally? For purposes of determining whether the fund has made an investment in an issuer or entity, should we only include equity investments? Should we exclude derivatives? Why or why not? How should exchange-traded (
• The proposed definition of portfolio investment would not distinguish among different types of private funds. Is our approach in this respect appropriate or should we treat certain funds differently depending on their strategy or fund type? If so, how should we reflect that treatment? For example, should we modify the definition with respect to a real estate fund to reflect that such a fund generally invests in real estate assets, rather than operating companies? Because a secondaries fund may indirectly invest in a significant number of underlying operating companies or other assets, should we limit the “indirect” component of the definition for such funds (or any other funds that may have indirect exposure to a significant number of companies or assets)? Why or why not? Would additional definitions be appropriate or useful? Should the proposed rule define the term “entity” and/or “issuer”? If so, how? Should the proposed rule treat hedge funds, liquidity funds, and other open-end private funds differently than private equity funds and other closed-end private funds?
• Should we adopt the approach with respect to portfolio-investment compensation as proposed? Do commenters agree with the scope of the proposal? Why or why not?
• The proposed rule includes non-exhaustive lists of certain types of fees. Would this information assist advisers in complying with the rule? Should we add any additional types? If so, which ones and why?
• Should we require advisers to list each type of portfolio-investment compensation as a separate line item as proposed? Would this level of detail be helpful for investors with respect to portfolio-investment reporting? Given that many funds require a management fee offset of all portfolio-investment compensation, is this level of detail necessary or useful to investors? Should we instead require advisers to provide aggregate information for each covered portfolio investment?
• Should the rule permit advisers to use project or deal names or other codes, and if so, what additional disclosures are necessary for an investor to understand the nature of the conflicts?
• We considered only requiring advisers to disclose the amount of portfolio investment compensation after the application of any offsets, rebates, or waivers, rather than before and after. We believe the proposed approach would be more helpful for investors because investors would have greater insight into the compensation advisers initially charge and the amount they ultimately retain at the expense of the private fund and its investors. Do commenters agree? Why or why not?
• Would information about a firm's services to portfolio investments be helpful for investors? Are there any elements of the proposed requirements that firms should or should not include? If so, which ones and why?
• We considered requiring advisers to disclose the total portfolio-investment compensation for the reporting period as an aggregate number, rather than providing the amount of compensation allocated or paid by each covered portfolio investment as proposed. However, we believe that investment-by-investment information would provide investors with greater transparency into advisers' fee and expense practices and thus be more helpful for investors. Do commenters agree? Should we require advisers to report a consolidated “top-line” number that covers all covered portfolio investments?
• Should we define the term “ownership interest”? If so, how should we define it? For purposes of the rule, should a private fund be deemed to hold an “ownership interest” in a covered portfolio investment only to the extent the fund has made an equity investment in the covered portfolio investment? Why or why not? What types of funds may not hold an “ownership interest” in a covered portfolio investment?
• The proposed rule would require advisers to list the fund's ownership percentage of each covered portfolio investment. Because the definition of “portfolio investment” could capture more than one entity, will advisers be able to calculate the fund's ownership percentage? Are there any changes to the proposed rule text that could mitigate this challenge? If a portfolio investment captures multiple entities,
• Should we require advisers to disclose how they allocate or apportion portfolio-investment compensation among multiple private funds invested in the same covered portfolio investment? If so, how should the portfolio investment table reflect this information?
• Certain advisers have discretion or substantial influence over whether to cause a fund's portfolio investment to compensate the adviser or its related persons. Should the requirement to disclose portfolio-investment compensation apply only to advisers that have such discretion or authority? Should such requirement apply if the adviser is entitled to appoint one or more directors to the portfolio investment's board of directors or similar governing body (if applicable)? Is there another standard we should require?
• We recognize that certain private funds, such as quantitative and algorithmic funds and other similar funds, may have thousands of holdings and/or transactions during a quarter and that those funds typically do not receive portfolio investment compensation. While the proposed rule would not require an adviser to include any portfolio investment that did not pay or allocate portfolio-investment compensation to the adviser or its related persons during the reporting period in its quarterly statement, these advisers would need to consider how to identify such portfolio investment's payments and allocations for purposes of complying with this disclosure requirement. Should the rule provide any full or partial exceptions for such funds? Should we require investment-level disclosure for quantitative, algorithmic, and other similar funds only where they own above a specified threshold percentage of the portfolio investment? For example, should such funds only be required to provide investment-level disclosure where they own 25% or more ownership of any class of voting shares? Alternatively, should we use a lower ownership threshold, such as 20%, 10%, or 5%? Should we adopt a similar approach for all private funds, rather than just quantitative, algorithmic, and other similar funds? If so, what threshold should we apply? For instance, should it be 5%? Or 10%? A higher percentage?
• Should we exclude certain types of private funds from these disclosures? If so, which funds and how should we define them? For example, should we exclude private funds that only hold (or primarily hold) publicly traded securities, such as hedge funds?
• Should we require layered disclosure for the portfolio-investment table (
• Are there particular funds that may require longer quarterly statements than other funds? Please provide data regarding the number of funds that have covered portfolio investments and, with respect to those funds, the number of covered portfolio investments per private fund. Should the Commission take into account the fact that certain funds will have more covered portfolio investments than other funds? For example, should we require funds that have more than a specific number of covered portfolio investments, such as 50 or more covered portfolio investments, to provide only portfolio-investment level reporting for a subset of their covered portfolio investments, such as a specific number of their largest holdings during the reporting period (
• The proposed rule would require advisers to list zero percent as the ownership percentage if the fund has completely sold or completely written off its ownership interest in the covered portfolio investment during the reporting period. Instead, should we require or permit advisers to exclude any such portfolio investments from the table? Why or why not?
• The proposed rule would require the adviser to disclose the amount of portfolio investment compensation attributable to the private fund's interest in the covered portfolio investment that is paid or allocated to the adviser and its related persons. Should we require disclosure of portfolio compensation paid to other persons (such as co-investors, joint venture partners, and other third parties) to the extent such compensation reduces the value of the private fund's interest in the portfolio investment?
The proposed quarterly statement rule would require each statement to include prominent disclosure regarding the manner in which expenses, payments, allocations, rebates, waivers, and offsets are calculated.
To facilitate an investor's ability to seek additional information, the quarterly statement also must include cross references to the relevant sections of the private fund's organizational and offering documents that set forth the calculation methodology.
We request comment on the following aspects of the proposed rule:
• Should we allow flexibility in the words advisers use, as proposed, or should we require advisers to include prescribed wording in disclosing calculation methodology? If the latter, what prescribed wording would be helpful for investors? Does the narrative style work or are there other presentation formats that we should require?
• Should we provide additional guidance or specify additional requirements regarding what type of
• Would providing cross references, as proposed, to the relevant sections of the private fund's organizational and offering documents be helpful for investors? Would it permit investors to “cross check” or evaluate the adviser's calculations? Are there other alternatives that would achieve our objectives?
In addition to providing information regarding fees and expenses, the proposed rule would require an adviser to include standardized fund performance information in each quarterly statement provided to fund investors. The proposed rule would require an adviser to a liquid fund (as defined below) to show performance based on net total return on an annual basis since the fund's inception, over prescribed time periods, and on a quarterly basis for the current year. For illiquid funds (also defined below), the proposed rule would require an adviser to show performance based on the internal rate of return and a multiple of invested capital. The proposed rule would require an adviser to display the different categories of required performance information with equal prominence.
It is essential that quarterly statements include performance in order to enable investors to compare private fund investments and comprehensively understand their existing investments and determine what to do holistically with their overall investment portfolio. A quarterly statement that includes fee, expense, and performance information would allow investors to monitor for abnormalities and better understand the impact of fees and expenses on their investments. For example, a quarterly statement that includes fee and expense, but not performance, information would not allow an investor to perform a cost-benefit analysis to determine whether to retain the current investment or consider other options or, for an investor in an illiquid fund, to determine whether to invest in other private funds managed by the same adviser. In addition, current clients or investors may use fee, expense, and performance information about their current investments to inform their overall investment decisions (
Although there are commonalities between the performance reporting elements of the proposed rule and the performance elements of our recently adopted marketing rule, the two rules satisfy somewhat different policy goals. Our experience has led us to believe that, while all clients and investors should be protected against misleading, deceptive, and confusing information, as is the policy goal of the marketing rule,
Currently, there are various approaches to report private fund performance to fund investors, often depending on the type of private fund (
Without standardized performance metrics (and adequate disclosure of the criteria used and assumptions made in calculating the performance),
The proposed rule recognizes the need for different performance metrics for private funds based on certain fund characteristics, but also imposes a general framework to ensure there is sufficient standardization in order to provide useful, comparable information to investors. An adviser would remain free to include other performance metrics in the quarterly statement as long as the quarterly statement presents the performance metrics prescribed by the proposed rule and complies with the other requirements in the proposed rule. However, advisers that choose to include additional information should consider what other rules and regulations might apply. For example, although we would not consider information in the quarterly statement required by the proposed rule to be an “advertisement” under the marketing rule, an adviser that offers new or additional investment advisory services with regard to securities in the quarterly statement would need to consider whether such information would be subject to the marketing rule.
The proposed performance disclosure requirements of the quarterly statement rule would require an adviser first to determine whether its private fund client is an illiquid or liquid fund, as defined in the proposed rule, no later than the time the adviser sends the initial quarterly statement.
We propose to define an illiquid fund as a private fund that: (i) Has a limited life; (ii) does not continuously raise capital; (iii) is not required to redeem interests upon an investor's request; (iv) has as a predominant operating strategy the return of the proceeds from disposition of investments to investors; (v) has limited opportunities, if any, for investors to withdraw before termination of the fund; and (vi) does not routinely acquire (directly or indirectly) as part of its investment strategy market-traded securities and derivative instruments.
Private funds that fall into the proposed “illiquid fund” definition are generally closed-end funds that do not offer periodic redemption options, other than in exceptional circumstances, such as in response to regulatory events. They also do not invest in publicly traded securities, except for investing a
We propose to define a “liquid fund” as any private fund that is not an illiquid fund.
In any case, the proposed rule would require advisers to provide performance reporting for each private fund as part of the fund's quarterly statement. The determination of whether a fund is liquid or illiquid dictates the type of performance reporting that must be included and, because it would result in funds with similar characteristics presenting the same type of performance metrics, we believe this approach would improve comparability of private fund performance reporting for fund investors. As indicated below, we welcome comment on whether these definitions lead to meaningful performance reporting for different types of private funds in light of the myriad fund strategies and structures.
We request comment on the following aspects of the proposed performance disclosure requirement:
• Should the proposed rule require advisers to include performance
• Should the proposed rule require advisers to determine whether a private fund is a liquid or illiquid fund and provide performance metrics based on that determination? Alternatively, should the rule eliminate the definitions and give advisers discretion to provide the proposed performance metrics that they believe most accurately portray the fund's returns?
• Should we define “illiquid fund” and “liquid fund” as proposed or are there alternative definitions we should use? Are there other terms we should use for these purposes? For example, should we refer to the types of funds that would provide annual net total returns under the rule as “annual return funds” and those that would provide internal rates of return (IRR) and a multiple of invested cash (MOIC) under the rule as “IRR/MOIC funds”?
• Are the six factors used in the definition of “illiquid fund” sufficient to capture most funds for which an annual net total return is not an appropriate measure of performance? Are there any factors we should add? For example, should we add a factor regarding whether the fund produces irregular cash flows or whether the fund takes into account unrealized gains when calculating performance-based compensation? Should we add as a factor whether the private fund pays carried interest? Are there factors we should eliminate?
• Should we define additional terms or phrases used within the definition of “illiquid fund,” such as “has as a predominant operating strategy the return of the proceeds from disposition of investments to investors”? Would this characteristic carve out certain funds, such as real estate funds and credit funds, for which we generally believe internal rates of return and a multiple of invested capital are the appropriate performance measures? If so, why? Should we eliminate or modify this characteristic in the definition of “illiquid fund”?
• Should the proposed rule define a “liquid fund” based on certain characteristics? If so, what characteristics? For example, should we define it as a private fund that requires investors to contribute all, or substantially all, of their capital at the time of investment, and invests no more than a
• Will advisers be able to determine whether a private fund it manages is a liquid or illiquid fund? For example, how would an adviser classify certain types of hybrid funds under the proposed rule? Should the rule include a third category of funds for hybrid or other funds? If so, what definition should we use? Should we amend the proposed definitions if we adopt a third category of funds (
• Are there scenarios in which an adviser might initially classify a fund as illiquid, but the fund later transitions to a liquid fund (or vice versa)? Should we provide additional flexibility in these circumstances? Should the proposed rule require advisers to revisit periodically their determination of a fund's liquidity status? For example, should the proposed rule require advisers to revisit the liquid/illiquid determination annually, semi-annually, or quarterly?
• How would an adviser to a private fund with an illiquid side pocket classify the private fund under the proposed rule's definitions for liquid and illiquid funds? For example, would the adviser treat the entire private fund as illiquid because of the side pocket? Why or why not? Should we permit or require the adviser to classify the side pocket as an illiquid fund, with the remaining portion of the private fund classified as a liquid fund?
• Instead of requiring advisers to show performance with equal prominence, should the proposed rule instead allow advisers to feature certain performance with greater prominence than other performance as long as all of the information is included in the quarterly statement? Why or why not?
The proposed rule would require advisers to liquid funds to disclose performance information in quarterly statements for the following periods. First, an adviser to a liquid fund would be required to disclose the liquid fund's annual net total returns for each calendar year since inception. For example, a liquid fund that commenced operations four calendar years ago would show annual net total returns for each of the first four years since its inception.
Second, the adviser would be required to show the liquid fund's average annual net total returns over the one-, five-, and ten-calendar year periods.
Third, the adviser would be required to show the liquid fund's cumulative net total return for the current calendar year as of the end of the most recent calendar quarter covered by the quarterly statement. For example, a liquid fund that has been in operations for four calendar years (beginning on January 1) and seven months would show the cumulative net total return for the current calendar year through the end of the second quarter. We believe this information would provide fund investors with insight into the fund's most recent performance, which investors could use to assess the fund's performance during current market
We believe these performance metrics would allow investors to assess these funds' performance because they ordinarily invest in market-traded securities, which are primarily liquid. As a result, liquid funds generally are able to determine their net asset value on a regular basis and compute the year-over-year return using the market-based value of the underlying assets. We have taken a similar approach with regard to registered funds, which also invest a substantial amount of their assets in primarily liquid underlying holdings (
We request comment on the following with respect to the proposed liquid fund performance requirement:
• Should we require advisers to provide annual net total returns for liquid funds, as proposed? Would showing annual net total returns for each calendar year since a private fund's inception be overly burdensome for older funds? Would performance information that is more than 10 years old be useful to investors? Why or why not?
• Should the proposed rule define “annual net total return” or specify the format in which advisers must present the annual net total returns? Should the proposed rule specify how advisers should calculate the annual net total return, similar to Form N-1A?
• The proposed rule would require advisers to provide performance information for each calendar year since inception and over prescribed time periods (one-, five-, and ten-year periods). Should the proposed rule instead only require an adviser to satisfy one of these requirements (
• The proposed rule would require advisers to provide average annual net total returns for the private fund over the one-, five-, and ten-calendar year periods. However, the proposal would not prohibit advisers from providing additional information. Should we allow advisers to provide performance information for annual periods other than calendar years?
• Should the proposed rule define “average annual net total return” or specify the format in which advisers must present the average annual net total returns?
• The proposed rule would require an adviser to provide “the cumulative net total return for the current calendar year.” Instead of using the word “cumulative” net total return, should the rule use the phrase “year to date” net total return?
• To the extent certain liquid funds quote yields rather than returns, should such funds be required or permitted to quote yields in addition to or instead of returns?
The proposed rule would require advisers to illiquid funds to disclose the following performance measures in the quarterly statement, shown since inception of the illiquid fund and computed without the impact of any fund-level subscription facilities:
(i) Gross internal rate of return and gross multiple of invested capital for the illiquid fund;
(ii) Net internal rate of return and net multiple of invested capital for the illiquid fund; and
(iii) Gross internal rate of return and gross multiple of invested capital for the realized and unrealized portions of the illiquid fund's portfolio, with the realized and unrealized performance shown separately.
The proposed rule also would require advisers to provide investors with a statement of contributions and distributions for the illiquid fund.
The proposed rule would require an adviser to include performance measures for the illiquid fund through the end of the quarter covered by the quarterly statement. We recognize, however, that certain funds may need information from portfolio investments and other third parties to generate performance data and thus may not have the necessary information prior to the distribution of the quarterly statement. Accordingly, to the extent quarter-end numbers are not available at the time of distribution of the quarterly statement, an adviser would be required to include performance measures through the most recent practicable date, which we generally believe would be through the end of the quarter immediately preceding the quarter covered by the quarterly statement. The proposed rule would require the quarterly statement to reference the date the performance information is current through (
Many advisers currently provide performance figures that reflect the impact of fund-level subscription facilities. These “levered” performance figures often do not reflect the fund's actual performance and have the potential to mislead investors.
We propose to define “fund-level subscription facilities” as any subscription facilities, subscription line financing, capital call facilities, capital commitment facilities, bridge lines, or other indebtedness incurred by the private fund that is secured by the unfunded capital commitments of the private fund's investors.
We would generally interpret the phrase computed without the impact of fund-level subscription facilities to require advisers to exclude fees and expenses associated with the subscription facility, such as the interest expense, when calculating net performance figures and preparing the statement of contributions and distributions. This approach would cause the net returns for many funds to be higher than would be the case if such amounts were included. We believe that this approach is appropriate, however, because it is consistent with the policy goal of this aspect of the proposed rule (
We recognize that illiquid funds have unique characteristics, such as irregular cash flows, that make measuring performance difficult for both advisers and investors. We also recognize that internal rate of return and multiple of invested capital, each as discussed below, have their drawbacks as performance metrics.
We propose to define “internal rate of return” as the discount rate that causes the net present value of all cash flows throughout the life of the private fund to be equal to zero.
We propose to define “multiple of invested capital” as (i) the sum of: (A) The unrealized value of the illiquid fund; and (B) the value of all distributions made by the illiquid fund; (ii) divided by the total capital contributed to the illiquid fund by its investors.
We believe that the proposed definitions of internal rate of return and multiple of invested capital are generally consistent with how the industry currently calculates such performance metrics. For example, most advisers use electronic spreadsheet programs to calculate a fund's internal rate of return. Such programs typically calculate the internal rate of return as the interest rate for an investment consisting of payments (cash outflows) and income (cash inflows) received over a period.
An adviser would be required to present each performance metric on a gross and net basis.
The proposed rule also would require an adviser to provide a statement of contributions and distributions for the illiquid fund. We believe this would provide private fund investors with important information regarding the fund's performance because it would reflect the underlying data used by the adviser to generate the fund's returns, which, in many cases, is not currently provided to private fund investors. Such data would allow investors to diligence the various performance measures presented in the quarterly statement. In addition, this data would allow the investors to calculate additional performance measures based on their own preferences.
We propose to define statement of contributions and distributions as a document that presents:
(i) All capital inflows the private fund has received from investors and all capital outflows the private fund has distributed to investors since the private fund's inception, with the value and date of each inflow and outflow; and
(ii) The net asset value of the private fund as of the end of the reporting period covered by the quarterly statement.
For similar reasons to those discussed above, the proposed rule would require an adviser to prepare the statement of contributions and distributions without the impact of any fund-level subscription facilities. This would require an adviser to assume the private fund called investor capital, rather than drawing down on fund-level subscription facilities. To avoid double counting capital inflows, the amount borrowed under the subscription facility generally should be reflected as a capital inflow from investors and an equal dollar amount of actual capital inflows from investors generally should not be reflected on the statement.
The value of the unrealized portion of an illiquid fund's portfolio typically is determined by the adviser and, given the lack of readily available market values, can be challenging. For example, an adviser's valuation policies and procedures for illiquid investments may rely on models and unobservable inputs. This creates a conflict of interest because the adviser is typically evaluated and, in certain cases, compensated based on the fund's unrealized performance. Further, investors often decide whether to invest in a successor fund based on the predecessor fund's performance. These factors create an incentive for the adviser to inflate the value of the unrealized portion of the illiquid fund's portfolio. We believe highlighting the performance of the fund's unrealized investments would assist investors in determining whether the aggregate, fund-level performance measures present an overly optimistic view of the fund's overall performance. For example, if the performance of the unrealized portion of the fund's portfolio is significantly higher than the performance of the realized portion, it may imply that the adviser's valuations are overly optimistic or otherwise do not reflect the values that can be realized in a transaction or sale with an independent third party.
The proposed rule would only require an adviser to disclose gross performance measures for the realized and unrealized portions of the illiquid fund's portfolio. We believe that calculating net figures could involve complex and potentially subjective assumptions regarding the allocation of fund-level fees, expenses, and adviser compensation between the realized and unrealized portions of the portfolio.
We request comment on the following with respect to the proposed illiquid fund performance requirement:
• Are the proposed performance metrics appropriate? Why or why not? We recognize that advisers often utilize different performance metrics for different funds. Should we add any other metrics to the proposed rule? For example, should we require a public market equivalent or variations of internal rate of return, such as a modified internal rate of return that assumes cash flows are reinvested at modest rates of return or otherwise incorporates a cost of capital concept for funds that do not draw down all, or substantially all, of investor capital at the time of investment? If so, should we prescribe a benchmark for the cost of capital and reinvestment rates?
• The proposed rule would not distinguish among different types of illiquid funds. Is our approach in this respect appropriate or should we treat certain illiquid funds differently? If so, how should we reflect that treatment?
• Are there additional guardrails we should add to the proposed rule to achieve the policy goal of providing investors with comparable performance information? If so, please explain. Are there practices that advisers use or assumptions that advisers make, when calculating performance that we should require, curtail, or otherwise require advisers to disclose?
• Although some investors receive certain annual performance information about a private fund if that fund is audited and distributes financial statements prepared in accordance with U.S. GAAP, we believe that the proposed rule's performance information would be helpful for private fund investors because it would require performance information to be reported at more frequent intervals in a standardized manner. Do commenters agree? To the extent there are differences (
• Would investor confusion or other concerns arise from requiring performance information in the quarterly statement as proposed?
• What, if any, burdens would be associated with this aspect of the proposed rule? How can we minimize any associated burdens while still achieving our goals?
• Are the proposed definitions appropriate and clear? If not, how should we clarify the definitions?
• Are the definitions of gross IRR, gross MOIC, net IRR, and net MOIC appropriate? Should we provide further guidance or specify requirements in the proposed rule on how to calculate gross performance or net performance? If so, what guidance or requirements? Should we require advisers to adopt policies and procedures prescribing specific methodologies for calculating gross performance and net performance? Why or why not? When calculating net performance, are there additional fees and expenses that advisers should include? Alternatively, should we expressly permit advisers to exclude certain fees and expenses when calculating net performance figures, such as taxes incurred to accommodate certain, but not all, investor preferences? Why or why not?
• Similarly, are the definitions of gross IRR and gross MOIC appropriate for purposes of calculating the performance metrics of the realized and unrealized portions of the illiquid fund's portfolio? Should we modify such definitions to reference specifically the realized and unrealized portions of the portfolio, rather than only referencing the illiquid fund? For example, should the definition of MOIC be revised to mean, as of the end of the applicable calendar quarter: (i) The sum of (A) the unrealized value of applicable portion of the illiquid fund's portfolio, and (b) the value of all distributions made by the illiquid fund attributable to the applicable portion of the illiquid fund's portfolio; (ii) divided by the total capital contributed to the illiquid fund by its investors attributable to the applicable portion of the illiquid fund's portfolio? Are there other variations we should impose? Why or why not?
• The Global Investment Performance Standards (“GIPS”) are a set of voluntary standards for calculating and presenting investment performance. For purposes of calculating an illiquid fund's performance under the proposed rule, are there any elements found in the GIPS standards that we should require? For example, should we require advisers to disclose composite cumulative committed capital,
• We recognize that advisers and their related persons typically invest in private funds on a “fee-free, carry-free” basis (
• The proposed rule would require advisers to calculate the various performance measures without the impact of any fund-level subscription facilities. Do commenters agree with this approach? Should the proposed rule require advisers to provide the same performance measures
• Should we define the term “computed without the impact of any fund-level subscription facilities”? Should we provide additional guidance or requirements regarding how advisers generally should or must calculate such performance measures? If so, what guidance or requirements should we provide?
• We recognize that a fund-level subscription facility has the potential to have a greater impact on a fund's internal rate of return as compared to its multiple of invested capital. Should advisers only be required to provide “unlevered” internal rates of return and not “unlevered” multiples of invested capital? If the fund realizes an investment prior to calling any capital from investors in respect of such investment, how would an adviser calculate a multiple for such investment?
• The proposed rule would require advisers to prepare the statement of contributions and distributions without the impact of any fund-level subscription facilities. Would this information be helpful for investors? Would advisers be able to prepare such a statement without making arbitrary assumptions? Why or why not? For example, would advisers need to make assumptions in calculating the preferred return (if applicable)?
• The proposed rule would require only gross performance measures for the realized and unrealized portion of the illiquid fund's portfolio. Should the proposed rule require net performance information as well? Would net performance measures be beneficial for investors despite the drawbacks discussed above? What assumptions should we require in calculating net information? What limitations, if any, would advisers face in providing net performance measures?
• Should we define the phrases “unrealized portion of the illiquid fund's portfolio” and “realized portion of the illiquid fund's portfolio”? For example, should we define the realized portion to include not only completely realized investments but also substantially realized investments to the extent the fund's remaining interest is
• Should we require advisers to disclose the dollar amounts of the realized and unrealized portions of the portfolio? Should we also require advisers to disclose such amounts as percentages? For example, if the value of the realized portion of the portfolio is $250 million and the value of the unrealized portion is $750 million, should we require advisers to disclose those amounts, both as dollar values and percentages (
• The proposed rule would require advisers to provide cumulative performance reporting since inception of the illiquid fund each quarter. Is this the right approach? Should the proposed rule require performance since inception for each quarter or on an
• Should we prescribe specific periods for illiquid fund performance reporting? For example, should we prescribe one-, five-, and/or ten-year time periods? Instead, should we require that advisers always present performance since inception as proposed? Are there other periods for which we should require the presentation of performance results? Are there any specific compliance issues that an adviser would face in generating and presenting performance results for the required period? For example, would advisers have the requisite information to generate or support performance figures for older funds from the proposed recordkeeping requirements and/or performance presentation requirements? If not, should we provide an exemption for advisers that lack such information?
• Liquid funds often have longer terms than illiquid funds. To the extent an illiquid fund has been in existence for an extended period of time, such as more than ten years, should the rule prescribe specific periods for performance reporting for such funds (
• Should we require that advisers provide performance results current through the end of the quarter covered by the quarterly statement as proposed? In circumstances where quarter-end numbers are not available at the time of distribution of the quarterly statement, should we require an adviser to include performance measures through the most recent practicable date as proposed? Should we define, or provide additional guidance about, the term “most recent practicable date”? If so, what definition or additional guidance should we provide?
• Should the proposed rule require advisers to make certain, standard disclosures tailored to each of the performance metrics mandated in the proposed rule? For example, should we require advisers to illiquid funds that are required to display internal rate of return to disclose prominently that the returns do not represent returns on the investor's capital commitment and instead only reflect returns on the investor's contributed capital? Should we require advisers to disclose that an investor's actual return on its capital commitment will depend on how the investor invests its uncalled commitments?
• As noted above, we would generally interpret the phrase computed without the impact of fund-level subscription facilities to require advisers to exclude fees and expenses associated with the subscription facility, such as the interest expense, when calculating net performance figures and preparing the statement of contributions and distributions. Do commenters agree with this approach? Should we require advisers to include such amounts instead? Are there other assumptions advisers would need to make in calculating performance information that the rule should address?
• The proposed rule would require the statement of contributions and distributions to reflect the private fund's net asset value as of the end of the applicable quarter. Should we require advisers to provide additional detail regarding the unrealized value of the private fund? For example, should we require advisers to reflect the portion of such net asset value that would be required to be paid to the adviser as performance-based compensation assuming a hypothetical liquidation of the fund?
• The statement of contributions and distributions generally reflects aggregate, fund-level numbers. Should we also require a statement of contributions and distributions for each underlying investment? Would a statement of each investment's cash flows be useful to investors? Why or why not? Would such a requirement be too burdensome for certain advisers, especially advisers to private funds that have a significant number of investments? Should this requirement only apply to certain types of funds, such as private equity, venture capital, or other similar funds that may invest in operating companies?
• Should we provide further guidance or specify requirements on how advisers generally should or must present performance? For example, should we require advisers to present the various performance metrics with equal prominence as proposed? Should we require advisers to present performance information in a format designed to facilitate comparison? Should we provide additional guidance or requirements regarding how an adviser should or must calculate the proposed performance metrics? Is there additional information that we should require advisers to disclose when presenting performance?
• Should we provide further guidance or specify requirements in the rule on how advisers generally should or must treat taxes for purposes of calculating performance? For example, should the rule state that advisers may exclude taxes paid or withheld with respect to a particular investor or by a blocker corporation (but not the illiquid fund as a whole)?
The proposed rule would require advisers to include prominent disclosure of the criteria used and assumptions made in calculating the performance. Information about the criteria used and assumptions made would enable the private fund investor to understand how the performance was calculated and help provide useful context for the presented performance metrics. Additionally, while the proposed rule includes detailed information about the type of performance an adviser must present for liquid and illiquid funds, it is still possible that advisers would make certain assumptions or rely on specific criteria that the proposed rule's requirements do not address specifically.
For example, the proposed rule would require an adviser to display, for a liquid fund, the annual returns for each calendar year since the fund's inception. If the adviser made any assumptions in performing that calculation, such as whether dividends were reinvested, the adviser should disclose those assumptions in the quarterly statement. As another example, for an illiquid fund, the proposed rule would require an adviser to display the net internal rate of return and net multiple of invested capital. In this case, the adviser should disclose the assumed fee rates, including whether the adviser is using fee rates set forth in the fund documents, whether it is using a blended rate or weighted average that would factor in any discounts, or whether it is using a different method for calculating net performance. The proposed rule requires the disclosure to be within the quarterly statement.
We request comment on this aspect of the proposal:
• Should we require advisers to disclose the criteria used and assumptions made in calculating the performance as part of the quarterly statement as proposed? Is this approach too flexible? Should we instead prescribe required disclosures?
• Should we require advisers to provide these disclosures prominently as proposed? Is there another disclosure standard we should use for these purposes?
• Because we propose to require an adviser to provide these disclosures as part of each quarterly statement, investors would receive these disclosures quarterly. Would providing these disclosures every quarter reduce their salience? Should we require these disclosures only as part of the first quarterly statement that an adviser sends to an investor with amendments if the criteria used or assumptions made in calculating performance change? Should we permit hyperlinking to these disclosures after the initial quarterly statement?
The proposed rule would require quarterly statements to be prepared and distributed to fund investors within 45 days after each calendar quarter end. We believe quarterly statements would provide fund investors with timely and regular statements that contain meaningful and comprehensive information. We understand that most private fund advisers currently provide investors with quarterly reporting.
For a newly formed private fund, the proposed rule would require a quarterly statement to be prepared and distributed beginning after the fund's second full calendar quarter of generating operating results. Many private funds may not have performance information that is readily available within the first several months of operations. For example, a private equity fund might not begin investing until several months after the fund's formation because the adviser is still identifying investments that align with the fund's strategy. As another example, a hedge fund may hold initial investor capital in cash or cash equivalents, prior to commencing the fund's investment strategy. Accordingly, we believe that the proposed requirements for newly formed funds would help ensure that investors receive comprehensive information about the adviser during the early stage of the fund's life. The reporting period for the final quarterly statement would cover the calendar quarter in which the fund is wound up and dissolved.
We propose to require quarterly statements to be distributed within 45 days after the calendar quarter end. Based on our experience, we believe advisers generally would be in a position to prepare and deliver quarterly statements within this period.
An adviser generally would satisfy the proposed requirement to “distribute” the quarterly statements when the statements are sent to all investors in the private fund.
We request comment on the quarterly statement preparation and distribution requirement of the proposed rule:
• Should we require advisers to prepare and distribute statements to clients at least quarterly, or should we prescribe a different frequency? For example, should we require monthly, semi-annual, or annual statements? Should we mandate the same delivery frequency for all proposed statements under the rule? How would each of these approaches affect comparability and effectiveness of the information in those statements? Would a quarterly reporting obligation require advisers to value the fund's investments more frequently than advisers currently do?
• We understand that advisers may use a fund administrator or another person to distribute the quarterly statement. Is the proposed definition of “distribute” broad enough to capture a fund administrator or another person acting under the direction and control of the adviser sending the quarterly statement on the adviser's behalf? If not, should we broaden the definition? Instead of changing the definition of “distribute,” should we require the adviser to distribute the quarterly statement, unless it has reason to believe that another person has distributed a required statement (and has a copy of each such statement distributed by such other person)?
• The proposed rule would require advisers to distribute the quarterly statement within 45 days of a calendar quarter end. Is this period too long or too short for an adviser to prepare the quarterly statement while also ensuring timely delivery to investors? Should we instead adopt a flexible delivery standard, such as a requirement that the adviser distribute the quarterly statement “promptly”? Why or why not? If we were to adopt a prompt delivery standard, should we define “promptly”? If so, how? If we should not define “promptly,” should we instead interpret that term to mean as soon as reasonably practicable?
• We understand that preparing quarterly statements may require coordination with, and reliance on, third parties. This may be the case, for example, when a private fund itself invests in other private funds or
• Should the proposed rule bifurcate the timing of when certain information in the quarterly statement is required? For example, should the proposed rule require fee and expense information starting at the fund's inception and then require performance information beginning later? If so, when should we require an adviser to start showing performance?
• Should the proposed rule treat liquid and illiquid funds differently with regard to fee and expense versus performance reporting? For example, should the proposed rule require liquid funds to start distributing quarterly statements with performance reporting sooner than illiquid funds? If so, why and how much sooner?
• As proposed, the rule would use “operating results” as the trigger for quarterly statement distribution. Should we instead rely on another trigger to indicate when an adviser must start distributing quarterly statements to investors? For example, should the proposed rule instead require an adviser to start distributing quarterly statements when the private fund has financial statements that report operating results? If so, why? Should we define “operating results” or clarify what it means?
• Should the proposed rule require an adviser to prepare and distribute an initial quarterly statement sooner than after the first two full calendar quarters of operating results? For example, should we require an adviser to prepare and distribute a quarterly statement after the first calendar quarter of the fund's operations? Why or why not? If we required an adviser to prepare and distribute a quarterly statement earlier in the fund's life, would this information be useful to investors?
• The proposed rule would require advisers to prepare and distribute a quarterly statement after the private fund has two full calendar quarters of operating results and continuously each calendar quarter thereafter. An adviser would be required to provide information for any stub periods that precede its first two full calendar quarters of operating results (
• The proposed rule would require fee and expense reporting based on a fund's calendar quarter and performance reporting based on a liquid fund's calendar year. Should we instead use “fiscal quarter” and “fiscal year”? Why or why not?
• Are there certain types of advisers or funds that should be exempt from distributing the quarterly statement to investors? If so, which ones and why? Are there certain types of advisers or funds that should be required to distribute quarterly statements to investors? If so, which ones and why?
• Instead of requiring advisers to distribute the quarterly statement to investors, should we require advisers to only distribute or make the quarterly statement available to investors upon request? Despite the limitations of private fund governance mechanisms, as discussed above, should we require advisers to distribute the quarterly statement to independent members of the fund's LPAC, board, or other similar governance body?
• Rule 206(4)-2 under the Advisers Act (the “custody rule”) allows a client to designate an independent representative to receive on its behalf account statements and notices that are required by that rule.
• Should we revise the definition of “distribute” expressly to include distribution by granting investors access to a virtual data room containing the quarterly statement? Why or why not?
• We considered requiring the proposed quarterly statement disclosures to be submitted using a structured, machine-readable data language. Such format may facilitate comparisons of quarterly statement disclosures across advisers and periods. Should we require advisers to provide quarterly statements in a machine-readable data language, such as Inline eXtensible Business Reporting Language (“Inline XBRL”)? Why or why not? Would such a requirement make the quarterly statements, and the information included therein, easier for investors to analyze? For example, would it be useful for investors to download quarterly statement information directly into spreadsheets, particularly for institutional investors that may have a significant number of private fund investments? Would a machine-readable data language impose undue additional costs and burdens on advisers? Please provide support for your response, including, where available, cost data.
• If we adopt rules requiring a machine-readable data language, is the Inline XBRL standard the one that we should use? Are any other standards becoming more widely used or otherwise superior to Inline XBRL? What would the advantages of any such other standards be over Inline XBRL?
An adviser may form multiple funds to implement a single strategy. For example, an adviser may form a parallel fund for certain tax-sensitive investors, such as non-U.S. investors that prefer to invest through an entity taxed as a corporation—rather than a partnership—for U.S. Federal income tax purposes, that invests alongside the main fund in all, or substantially all, of its investments. An adviser may also form a feeder fund for tax-sensitive investors that invests all, or substantially all, of its capital into the main fund. Advisers often seek to structure the funds in a way that accommodates investor preferences.
In some of these circumstances, we believe that consolidated reporting of the cost and performance information by all private funds in the structure would provide a more complete and accurate picture of the fees and expenses borne and performance achieved than reporting by each private fund separately. Due to the complexity of private fund structures, however, we believe a principles-based approach to the funds that must provide consolidated reporting is necessary. Accordingly, the proposed rule would require advisers to consolidate reporting for substantially similar pools of assets to the extent doing so would provide more meaningful information to the
For example, certain private funds utilize master-feeder structures. Typically, investors invest in onshore and offshore feeder funds, which, in turn, invest all, or substantially all, of their investable capital in a single master fund. The same adviser typically advises and controls all three funds, and the master fund typically makes and holds the investments. Because the feeder funds are conduits for investors to gain exposure to the master fund and its investments, the proposed rule would require the adviser to provide feeder fund investors with a single quarterly statement covering the applicable feeder fund and the feeder fund's proportionate interest in the master fund on a consolidated basis, so long as the consolidated statement would provide more meaningful information to investors and would not be misleading.
We request comment on the proposed consolidated reporting provision of the proposed rule:
• Do commenters agree that the proposed rule should require advisers to consolidate reporting to cover related funds to the extent doing so would provide more meaningful information to investors and would not be misleading? Alternatively, should we prohibit advisers from consolidating information for multiple funds? Why or why not? Should the rule permit, rather than require, consolidated reporting?
• Should we require advisers to provide a consolidated quarterly statement for funds that are part of the same strategy, such as parallel funds, feeder funds, and master funds? Alternatively, should these types of funds have separate reporting? For example, should feeder fund investors receive a quarterly statement covering the feeder fund and a separate quarterly statement covering the main fund or master fund? How should the rule address the fact that certain funds may have different expenses (
• As noted above, the proposal would require advisers to provide feeder fund investors with a consolidated quarterly statement covering the applicable feeder fund and the feeder fund's proportionate interest in the master fund, to the extent doing so would provide more meaningful information to investors and would not be misleading. Do commenters agree with this approach? Alternatively, should we require advisers to provide consolidated reporting covering all feeder funds (and not just the applicable feeder fund) and the master fund? Why or why not?
• We also recognize that certain private funds have multiple classes (or other groupings such as series or tranches) of interests or shares. The proposed rule would require the quarterly statement to present fund-wide information. Would advisers face challenges in calculating fee, expense, and performance information if there are differences in fees, allocations, and/or expenses between or among classes, series, or tranches? Should we require disclosure of class-specific fees and expenses, or of the differences among classes? Why or why not? Should we instead permit or require quarterly statements for multi-class private funds to present the proposed fee and expense and performance information on a class-by-class basis, particularly if each class (or series or tranche) is considered a distinct private fund or separate legal entity (with segregated assets and liabilities) under applicable law? Would such an approach provide more meaningful information for investors in each of those classes, given the potential for different fee, allocation, and expense structures? Should we require quarterly statements for multi-class (or multi-series or multi-tranche) private funds to present class-by-class (or series-by-series or tranche-by-tranche) information to the extent each class (or series or tranche) holds different investments?
• Should advisers only be required to distribute a class' quarterly statement to interest holders of such class, or should all fund investors be entitled to receive such statement regardless of whether they are interest holders of the relevant class if the rule permits or requires class-specific quarterly statements for multi-class private funds?
• Certain advisers provide combined financial statements covering multiple funds. Should we require or permit advisers to provide consolidated quarterly statements for funds that have combined financial statements? Why or why not?
The proposed rule would require the adviser to use clear, concise, plain English in the quarterly statement.
In addition, the proposed rule would require an adviser to present information in the quarterly statement in a format that facilitates review from one quarterly statement to the next. As noted above, the quarterly statement is designed to allow an investor to monitor and assess the costs and performance of the fund over time. We anticipate that, quarter-over-quarter, an adviser would use a consistent format for a fund's quarterly statements, thus allowing an investor to easily compare fees, expenses, and performance over each quarterly period. We also encourage advisers to use a structured, machine-readable format if advisers believe this format would be useful to the investors in their fund.
The proposed format and content requirements would apply to all aspects of a quarterly statement, including the proposed requirements to disclose the manner in which expenses, payments, allocations, rebates, waivers, and offsets are calculated and to cross-reference sections of the private fund's organizational and offering documents.
We believe the proposal strikes an appropriate balance in prescribing the
We request comment on this aspect of the proposed rule:
• Should the proposed quarterly statement rule include a provision on formatting and content? Why or why not?
• Do commenters agree with the flexibility of the proposed format and content requirements, or should we prescribe wording? For example, should we require a cover page with prescribed wording? If so, what prescribed wording should we require?
• To meet the rule's formatting requirements, any information that an adviser chooses to include in a quarterly statement, but that is not required by the rule, would be required to be presented in a manner that is no more prominent than the required information. Should the rule, instead, require that advisers
We propose amending rule 204-2 (the “books and records rule”) under the Advisers Act to require advisers to retain books and records related to the proposed quarterly statement rule.
We request comment on the proposed recordkeeping rule amendments:
• Should we require advisers to maintain the proposed records or would these requirements be overly burdensome for advisers? Are there alternative or additional recordkeeping requirements we should impose?
• Should we require advisers to retain a record of each addressee, the date(s) the statement was sent, address(es), and delivery method(s) for each quarterly statement, as proposed? Should we instead eliminate this requirement because of the potential burdens?
• Should we provide more specific requirements regarding the records an adviser must maintain to substantiate its determination that a private fund is a liquid fund or an illiquid fund? Alternatively, should we leave the proposed rule as is and allow advisers flexibility in how they document this determination?
In addition to disclosure, we propose to require private fund advisers to obtain an annual audit of the financial statements of the private funds they manage.
The proposed audit rule would require a registered investment adviser providing investment advice, directly or indirectly, to a private fund, to cause that fund to undergo a financial statement audit that meets the terms of the rule at least annually and upon liquidation, unless the fund otherwise undergoes such an audit. Under the proposed rule:
(1) The audit must be performed by an independent public accountant that meets the standards of independence in 17 CFR 210.2-01(b) and (c) (rule 2-01(b) and (c) of Regulation S-X) that is registered with, and subject to regular inspection as of the commencement of the professional engagement period, and as of each calendar year-end, by, the Public Company Accounting Oversight Board (“PCAOB”) in accordance with its rules;
(2) The audit must meet the definition of audit in 17 CFR 210.1-02(d) (rule 1-02(d) of Regulation S-X), the professional engagement period of which shall begin and end as indicated in Regulation S-X rule 2-01(f)(5);
(3) Audited financial statements must be prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) or, in the case of financial statements of private funds organized under non-U.S. law or that have a general partner or other manager with a principal place of business outside the United States (“foreign private funds”), must contain information substantially similar to statements prepared in accordance with U.S. GAAP and material differences with U.S. GAAP must be reconciled;
(4) Promptly after completion of the audit, the private fund's audited financial statements, which include any reconciliation to U.S. GAAP prepared for a foreign private fund, are distributed; and
(5) The auditor notifies the Commission upon certain events.
Additionally, for a fund that the adviser does not control and that is neither controlled by nor under
We have historically relied on financial statement audits to verify the existence of pooled investment vehicle investments.
The proposed audit rule is based on the custody rule and contains many similar or identical requirements, although compliance with either rule would not automatically satisfy the requirements of the other.
Another main difference between the requirements of the two rules is the requirement of the proposed rule for there to be a written agreement between the adviser or the private fund and the auditor pursuant to which the auditor would be required to notify our Division of Examinations upon the auditor's termination or issuance of a modified opinion.
The other main difference between the two rules, aside from timing requirements for the distribution of audited financial statements under the two rules discussed below, relates to their scope. While both rules pertain to advisers that are registered or required to be registered with us, the custody rule also contains exceptions from the surprise examination requirement, which in turn make it unnecessary for an adviser to rely on that rule's audit provision.
The proposed audit rule would include certain requirements regarding the accountant performing a private fund audit. First, we propose to require an accountant performing a private fund audit to meet the standards of
We understand that this requirement may limit the pool of accountants that are eligible to perform these services because only those accountants that currently conduct public company issuer audits are subject to regular inspection by the PCAOB. Most private funds, however, are already undergoing a financial statement audit; therefore, the increase in demand for these services may be limited.
We understand that, as part of a temporary inspection program, the PCAOB inspects accountants auditing brokers and dealers, and identifies and addresses with these firms any significant issues in those audits.
An independent public accounting firm would not be considered to be “subject to regular inspection” if it is included on the list of firms that is headquartered or has an office in a foreign jurisdiction that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by one or more authorities in that jurisdiction in accordance with PCAOB Rule 6100.
Under the proposed audit rule, an audit must meet the definition in rule 1-02(d) of Regulation S-X. Pursuant to that definition, financial statement audits performed for purposes of the proposed audit rule would generally be performed in accordance with the generally accepted auditing standards of the United States (“U.S. GAAS”).
The proposed rule also generally would require the audited financial statements to be prepared in accordance with U.S. GAAP. Financial statements of private funds organized under non-U.S. law or that have a general partner or other manager with a principal place of business outside the United States would be required to contain information substantially similar to statements prepared in accordance with U.S. GAAP and any material differences would be required to be reconciled to U.S. GAAP. Requiring that financial statements comply with U.S. GAAP is designed to help investors receive consistent and quality financial reporting on their investments from the fund's adviser.
Financial statements that are prepared in accordance with accounting standards other than U.S. GAAP, would meet the requirements of the proposed audit rule so long as they contain information substantially similar to financial statements prepared in accordance with U.S. GAAP, material differences with U.S. GAAP are reconciled, and the reconciliation,
The proposed audit rule would require a fund's audited financial statements to be distributed to current investors “promptly” after the completion of the audit.
Under the proposed audit rule, the audited financial statements (including any reconciliation to U.S. GAAP prepared for a foreign private fund, as applicable) must be sent to all of the private fund's investors. In circumstances where an investor is itself a pooled vehicle that is in a control relationship with the adviser or its related persons, it would be necessary to look through that pool (and any pools in a control relationship with the adviser or its related persons, such as in a master-feeder fund structure), in order to send to investors in those pools.
Key to the effectiveness of the audit in protecting investors is timely and regular administration and distribution. Under the proposed audit provision, an audit must be obtained at least annually and upon an entity's liquidation. The liquidation audit would serve as the annual audit for the fiscal year in which it occurs. Requiring the audit on an annual basis and at liquidation would help alert investors within months, rather than years, to any material misstatements identified in the audit and would raise the likelihood of mitigating losses or reducing exposure to other investor harms. Similarly, a liquidation audit would help ensure the appropriate and prompt accounting of the proceeds of a liquidation so that investors can take timely steps to protect their rights at a time when they may be vulnerable to misappropriation by the investment adviser. We believe that it becomes increasingly difficult to correct a material misstatement the longer it goes undetected. The proposed annual and liquidation audit requirements would address these concerns while also balancing the cost, burden, and utility of requiring frequent audits.
The proposed annual audit requirement is consistent with current practices of private fund advisers that obtain an audit in order to comply with the custody rule under the Advisers Act, or to satisfy investor demand for an audit, and would provide investors with uniformity in the information they are receiving.
With respect to liquidation, we understand that the amount of time it takes to complete the liquidation of a private fund may vary. A number of years might elapse between the decision to liquidate an entity and the completion of the liquidation process. During this time, the fund may execute few transactions and the total amount of investments may represent a fraction of the investments that existed prior to the start of the liquidation process. We further understand that a lengthy liquidation period can lead to circumstances where the cost of an annual audit represents a sizeable portion of the fund's remaining assets.
The proposed rule would require an adviser to enter into, or cause the private fund to enter into, a written agreement with the independent public accountant performing the audit to notify the Commission (i) promptly upon issuing an audit report to the private fund that contains a modified opinion and (ii) within four business days of resignation or dismissal from, or other termination of, the engagement, or upon removing itself or being removed from consideration for being reappointed.
As we noted above, there is not a similar obligation under the custody rule for an accountant to notify the Commission as there is for a surprise examination, although there is a requirement on Form ADV for a private fund adviser
We recognize that some advisers may not have requisite control over a private fund client to cause its financial statements to undergo an audit in a manner that would satisfy all five elements (paragraphs (a) through (e)) of the proposed rule. This could be the case, for instance, where a sub-adviser is unaffiliated with the fund. Therefore, we are proposing to require that an adviser
Finally, the proposal would amend the Advisers Act books and records rule to require advisers to keep a copy of any audited financial statements, along with a record of each addressee and the corresponding date(s) sent, address(es), and delivery method(s) for each such addressee.
We request comment on all aspects of the proposed audit rule and related proposed amendments to the books and records rule, including the following items:
• Would the proposed audit rule provide appropriate protection for investors? If not, please describe what, if any, modifications would improve investor protection.
• The proposed audit rule bears many similarities to provisions of the custody rule; however, one notable difference is that there would be no option to, instead, undergo a surprise examination and rely on a qualified custodian to deliver quarterly statements. What would be the impact on advisers to private funds that are not relying on the custody rule's audit provision? Are private funds undergoing similar audits of their financial statements for other reasons, or would this represent a new requirement for them? There also are no exceptions from the proposed rule, as there are in the custody rule, such as the exception from the surprise examination requirement for advisers whose sole basis for being subject to the rule is because they have authority to deduct their advisory fees. What would be the impact on advisers to private funds that are relying on this and other exceptions? Do many private fund advisers rely on the exception for fee-deduction?
• Do commenters agree that the similarities of the audit requirements for the custody rule and for the proposed rule would ease the compliance burdens of advisers that would be required to comply with both? Should the rule provide that compliance with one rule would satisfy the requirements of the other, given the similarities of the two rules? Why or why not?
• The application of the proposed rule to registered advisers to private funds seeks to balance our policy goal with the anticipated costs of the proposed measures. Do commenters agree with this approach? If not, what would be a more effective way of achieving our goals?
• Should the rule apply to
• Similarly, should it apply in the context of all pooled investment vehicle clients (
• Should the rule provide any full or partial exceptions, such as when an adviser plays no role in valuing the fund's assets, receives little or no compensation for its services, or receives no compensation based on the value of the fund's assets? Should the rule provide exceptions for private funds below a certain asset threshold (
• Should the rule apply to a sub-adviser to a private fund? In situations where a fund has multiple advisers, is it clear that a single audit of the fund's financial statements may satisfy the proposed audit rule for all of the advisers subject to the rule?
• Should the alternative of “taking all reasonable steps” to cause a private fund client to be audited apply in
• Should the rule require accountants performing the independent public audits to be registered with the PCAOB, as proposed? Should the rule limit the pool of accountants to those who are subject to inspection by the PCAOB, as proposed? If the rule does not include these requirements, should the rule impose any alternative or additional requirements on such accountants? If so, describe these additional requirements and explain why they are necessary or appropriate.
• Do commenters agree that the availability of accountants to perform services for purposes of the proposed audit rule is sufficient and that even advisers in foreign jurisdictions (or with private fund clients in foreign jurisdictions) would not have significant difficulty in finding a local accountant that is eligible to perform an audit under the proposed rule? Do advisers have reasonable access to independent public accountants that are registered with, and subject to inspection by, the PCAOB in the foreign jurisdictions in which they operate? If not, how should the rule address this issue?
• Should the rule require advisers to obtain audits performed under rule 1-02(d) of Regulation S-X, as proposed? If not, what other auditing standards should the rule allow? Are there certain non-U.S. auditing standards that the proposed rule should explicitly include?
• Should the rule require private funds to prepare audited financial statements in accordance with generally accepted accounting principles, as proposed? Should the rule include any additional requirements regarding the preparation of financial statements? If so, what requirements, and why?
• As proposed, should financial statements prepared in accordance with accounting standards other than U.S. GAAP for foreign private funds meet the requirements of the rule provided they contain information substantially similar to statements prepared in accordance with U.S. GAAP, material differences with U.S. GAAP are reconciled, and the reconciliation is distributed to investors along with the financial statements? If so, should we specify what “substantially similar” means?
• Would there be unique challenges to complying with the rule for auditors and advisers to private funds in foreign jurisdictions? For example, might certain advisers or auditors face challenges in complying with the proposed rule's Commission notification requirement, including because of applicable privacy and other local laws? If so, what would alleviate these challenges and still achieve the policy goals of the proposed audit rule?
• Do commenters agree that the proposed rule's requirement to distribute the audited financial statements promptly would provide appropriate flexibility regarding the timing of the distribution of audited financial statements? Should there nevertheless be an outer limit on the number of days an investment adviser has from its fiscal year end for the distribution of audited financial statements? If so, what should that limit be? Would it be more appropriate for distribution to be required within 120 days of the end of the fund's fiscal year, as under the custody rule? Alternatively, would a longer or shorter period be appropriate in most circumstances? Should the timeline for distributing audited financial statements align with the timeline for distributing quarterly statements under the proposed quarterly statement rule? Why or why not? We understand that funds of funds or certain funds in master-feeder structures (including those advised by related persons) have difficulty satisfying the 120-day requirement and that our staff has indicated they would not recommend enforcement if certain of these funds satisfy the distribution requirement within 180 or 260 days of the fund's fiscal year end, depending on a variety of circumstances.
• Instead of requiring prompt distribution of the audited financial statement to investors, should we require the statement to be distributed or made available to investors upon request?
• Should the rule provide additional flexibility, such as for situations in which the adviser can demonstrate that it reasonably believed that it would be able to comply with the rule but failed due to certain unforeseeable circumstances?
• Should the rule require annual audits, as proposed? Should the rule require an audit upon a private fund's liquidation, as proposed? Should we modify either or both of these requirements? If so, how should we modify these requirements, and why?
• Advisers would be required to comply with the proposed audit rule beginning with their first fiscal year after the compliance date and any liquidation that occurs after the compliance date. Advisers would also be required to obtain an audit annually. We understand that newly formed and liquidating funds may face unique challenges. For instance, the value provided by an audit of a very short period of time, such as a period of less than three-months (a “stub period”), may be diminished because there is a lack of comparability in the information provided. In addition, we understand that the cost of obtaining an audit covering a few months can be similar to the cost of an audit covering an entire fiscal year. We further understand that when newly formed entities have few financial transactions and/or investments, obtaining an audit, relative to the investor protections ultimately offered by obtaining the audit, may be burdensome. Should the rule allow newly formed or liquidating entities to obtain an audit less frequently than annually to avoid stub period audits? Should the rule permit advisers to satisfy the audit requirement by relying on an audit on an interval other than annually when a fund is liquidating? For example, should we allow advisers
• If the rule were to permit audits less frequently than on an annual basis, should it also include additional restrictions or requirements? If so, what restrictions or requirements, and why? For instance, should it require investment advisers to create and distribute alternative financial reporting for the fund to investors (
• Should the rule define “liquidation” for purposes of the liquidation audit requirement? If so, how? For example, should we base such a definition on a certain percentage of assets under management of the entity from or over previous fiscal period(s) or a stated threshold based on an absolute dollar amount of the entity's assets under management? Should we base the definition on a calculation of the ratio of the management fees assessed on assets under management of the entity or some other basis, for example, to detect whether an adviser is charging management fees on a very small amount of assets?
• Are there risks posed to investors when an entity is liquidating that the proposed rule does not address? If so, please describe those risks. How should we modify the rule to address such risks?
• Are there some types of investments that pose a greater risk of misappropriation or loss to investors during a liquidation that the rule should specifically address to provide greater investor protection? If so, please describe the investment type; the particular risk the investment type poses to investors during liquidation; and how to modify the proposed rule to address such investor risk.
• We are not proposing the filing of a copy of the audit report or a copy of the audited financial statements with the Commission; should the rule contain such a requirement? Why or why not?
• Would the requirement for an accountant to comply with the notification requirement change the approach that an accountant would take with respect to audits that normally are performed for purposes of satisfying the custody rule? If so, how?
• Should we, as proposed, require advisers to enter into, or cause a private fund to enter into, a written agreement with the independent public accountant completing the audit to notify the Commission in connection with a modified opinion or termination?
• Do commenters agree that the professional engagement period of an audit performed under the rule should begin and end as indicated in Regulation S-X rule 2-01(f)(5), as proposed? If not, why not?
• As noted above, the proposed Commission notification provision bears some similarities to, and is drawn from our experience with, a similar custody rule requirement in the surprise examination context with which we believe advisers may likely already have some familiarity. The regulations in 17 CFR 240.17a-5 (rule 17a-5) require a broker or dealer's self-report to the Commission within one business day and to provide a copy to the accountant. The accountant must report to the Commission about any aspects of the broker or dealer's report with which the accountant does not agree. If the broker or dealer fails to self-report, the accountant must report to the Commission to describe any material weaknesses or any instances of non-compliance that triggered the notification requirement. Should the audit rule contain similar requirements? Why or why not? Are private fund advisers and the accountants that perform private fund financial statement audits more familiar with Rule 17a-5's notification requirement than the custody rule's notification requirement?
• Do commenters agree that the related proposed amendments to the books and records rule would facilitate compliance with the proposed audit rule? What additional or alternative amendments should the rule include, if any?
We propose to require an adviser to obtain a fairness opinion in connection with certain adviser-led secondary transactions where an adviser offers fund investors the option to sell their interests in the private fund, or to exchange them for new interests in another vehicle advised by the adviser. This would provide an important check against an adviser's conflicts of interest in structuring and leading a transaction from which it may stand to profit at the expense of private fund investors. The proposed adviser-led secondaries rule would prohibit an adviser from completing an adviser-led secondary transaction with respect to any private fund, unless the adviser distributes to investors in the private fund, prior to the closing of the transaction, a fairness opinion from an independent opinion provider and a summary of any material business relationships the adviser or any of its related persons has, or has had within the past two years, with the independent opinion provider.
Investments in closed-end private funds are typically illiquid and require a long-term investor commitment of capital. Such funds generally do not permit investors to withdraw or redeem their fund interests prior to the end of the term. Open-end private funds may also limit or restrict an investor's ability to withdraw or redeem its interest, for example, with side pockets or illiquid sleeves. Without the ability to cash out all or a portion of their interest from the fund, investors have historically sought liquidity by selling their interests on the secondary market to third parties. Advisers typically have a relatively minor role in such “investor-led” transactions, as investors engage in the transaction directly with the prospective purchaser.
In recent years, advisers have become increasingly active in the secondary market. The number of “adviser-led” transactions has increased, with the deal value of such transactions representing a meaningful portion of the secondary market, particularly for closed-end private funds.
Adviser-led secondaries often are highly bespoke transactions that can take many forms. For purposes of the rule, we propose to define them as transactions initiated by the investment adviser or any of its related persons that offer the private fund's investors the choice to: (i) Sell all or a portion of their interests in the private fund; or (ii) convert or exchange all or a portion of their interests in the private fund for interests in another vehicle advised by the adviser or any of its related persons.
This definition generally would include secondary transactions where a fund is selling one or more assets to another vehicle managed by the adviser, if investors have the option either to obtain liquidity or to roll all or a portion of their interests into the other vehicle. Examples of such transactions may include single asset transactions (such as the fund selling a single asset to a new vehicle managed by the adviser), strip sale transactions (such as the fund selling a portion of multiple assets to a new vehicle managed by the adviser), and full fund restructurings (such as the fund selling all of its assets to a new vehicle managed by the adviser). The proposed definition also would capture secondary transactions that may not involve a cross sale between two vehicles managed by the same adviser.
While adviser-led transactions can provide liquidity for investors and secure additional time and capital to maximize the value of fund assets, they also raise certain conflicts of interest. The adviser and its related persons typically are involved on both sides of the transaction and have interests in the transaction that are different than, or in addition to, the interests of the private fund investors. For example, because the adviser may have the opportunity to earn economic and other benefits conditioned upon the closing of the secondary transaction, such as additional management fees or carried interest, the adviser generally has a conflict of interest in setting and negotiating the transaction terms.
Ensuring that the private fund and the investors that participate in the secondary transaction are offered a fair price is a critical component of preventing the type of harm that might result from the adviser's conflict of interest in leading the transaction.
To mitigate the potential influence of the adviser's conflict of interest further, the rule would require these opinions to be issued only by an “independent opinion provider,” which is one that (i) provides fairness opinions in the ordinary course of its business and (ii) is not a related person of the adviser.
We recognize, however, that other business relationships may have the potential to result, or appear to result, in a biased opinion, particularly if such relationships are not disclosed to private fund investors. For example, an opinion provider that receives an income stream from an adviser for performing services unrelated to the issuance of the opinion might not want to jeopardize its business relationship with the adviser by alerting the private fund investors that the price being offered is unfair (or by otherwise refusing to issue the fairness opinion). By requiring disclosure of such material relationships, the proposed rule would put private fund investors in a position to evaluate whether any conflicts associated with such relationships may cause the opinion provider to deliver a biased opinion. Thus, the proposed rule would require the adviser to prepare and distribute to private fund investors a summary of any material business relationships the adviser or any of its related persons has, or has had within the past two years, with the independent opinion provider. Whether a business relationship would be material under the proposed rule would require a facts and circumstances analysis; however, for purposes of the proposed rule, we believe that audit, consulting, capital raising, investment banking, and other similar services would typically meet this standard.
The proposed rule would require an adviser to distribute the opinion and the material business relationship summary to investors.
We request comment on all aspects of the proposed rule, including the following items:
• Do commenters agree that adviser-led secondary transactions can be of some benefit to a private fund and its investors?
• Do commenters agree with the scope of the proposed rule? Should the rule apply to all investment advisers? Why or why not? What are the factors that weigh in favor of expanding the scope of the proposed rule to apply to a broader scope of advisers than proposed? Are there particular types of advisers that should or should not be subject to the rule? Should the rule only apply when the adviser or its related person is general partner (or equivalent) of a fund that is party to the transaction?
• Should certain adviser-led transactions be exempt from the proposed rule? For example, if the adviser conducts a competitive sale process for the assets being sold, which ultimately leads to the price, should advisers still be required to obtain a fairness opinion? Do competitive bids typically represent net asset value? Do prospective purchasers typically bid at a discount to net asset value? Does net asset value always correspond to the current value of the assets being sold? Why or why not? Are there other price discovery processes that we should require to protect investors?
• Should certain adviser-led transactions be exempt from the rule, such as adviser-led transactions involving liquid funds? For example, if the underlying assets being sold in the transaction are predominantly publicly traded securities, should advisers still be required to obtain a fairness opinion? Do such transactions present the same concerns as adviser-led secondary transactions involving illiquid funds where the underlying assets are typically illiquid and not listed or quoted on a securities exchange? Are there other hedge fund transactions that we should exempt from the rule, such as hedge fund restructurings where an adviser may be merging the portfolios of two different hedge funds and gives all affected investors the option to redeem or convert/exchange their interests into the new fund? Should the exemption depend on whether the price of the transaction is based on net asset value? Why or why not?
• Are there other transactions for which we should require private fund advisers to obtain a fairness opinion? For example, should we require advisers to obtain a fairness opinion before certain cross transactions between private funds it manages? If so, which transactions? Should we provide certain cross transaction exemptions, such as exemptions for bridge financings or syndications where the selling fund transfers the investments within a short period at a price equal to cost plus interest?
• Should the scope of the fairness opinion be limited to the price, as proposed? Alternatively, should we require the fairness opinion to cover all, or certain other, terms of the transaction? For example, should we revise the definition of “fairness opinion” to a written opinion stating that the terms of the adviser-led secondary transaction are fair to the private fund? Why or why not?
• Should the rule give investment advisers the option to obtain either a fairness opinion or a third-party valuation? Why or why not? What are the advantages and disadvantages of a third-party valuation as compared to a fairness opinion, and
• We request comment on the proposed use of “related person.” Do commenters agree that the fairness opinion should be issued by a person that is not a related person of the adviser? Should we adopt a different definition of “related person” than the one proposed?
• The proposed rule would require an “independent opinion provider” to provide fairness opinions “in the ordinary course of its business.” Do commenters agree with this approach?
• Instead of requiring disclosure of any material business relationships between the adviser (or its related persons) and the independent opinion provider, should the rule prohibit firms with certain business relationships with the adviser, its related persons, or the private fund from providing the fairness opinion? For example, if a firm has provided consulting, prime broker, audit, capital raising, or investment banking services to the private fund or the adviser or its related persons within a certain time period—such as two or three years—should the rule prohibit the firm from providing the opinion? If so, should the rule include a threshold of materiality, regularity, or frequency for some or all of such services to trigger such a prohibition?
• Should we require the independent opinion provider to have any specific qualifications, licenses, or registrations?
• Should we define the term “transaction” in the definition of “adviser-led secondary transaction”? If so, how should the rule define “transaction”? Should we reference the various types of adviser-led secondary transactions in the definition? For example, should “transaction” include only single asset transactions, strip sale transactions, and other similar secondary transactions? Should we include in the definition of “adviser-led secondary transaction” transactions initiated by the adviser's related persons?
• Should we define, or provide additional guidance regarding, the phrase “initiated by the investment adviser or any of its related persons”? Should we define, or provide additional guidance regarding, the role the adviser would have to play in a secondary transaction for it to be considered an adviser-led transaction subject to the proposed rule?
• Should the rule require the fairness opinion to state that the private fund and/or its investors may rely on the opinion? Why or why not?
• Should we require the fairness opinion to be obtained on behalf of the private fund as proposed? Alternatively, should we require the fairness opinion to be obtained on behalf of the private fund investors? Are there characteristics of certain types of adviser-led transactions, such as tender offers, that would require the fairness opinion to be obtained on behalf of the private fund investors rather than the private fund?
• Should the adviser be required to distribute a summary of any material business relationships the adviser or its related persons has, or has had within the past two years, with the independent opinion provider as proposed? Should we provide guidance or impose requirements regarding the level of detail advisers should include in the summary? For example, should we require advisers to disclose the total amount paid to the independent opinion provider by the adviser or its related persons, if applicable? Why or why not? Is two years the appropriate look-back period? Are there any other conflict disclosures we should require in the fairness opinion or otherwise require to be made available to investors?
• Should we define “material business relationship” for purposes of the proposed rule? Should the rule include a threshold of regularity or frequency (in addition to or in lieu of the materiality threshold) for some or all of such relationships or services to trigger a disclosure requirement?
• Should we require advisers to distribute the fairness opinion to investors as proposed? Alternatively, should we require advisers to only distribute or make the fairness opinion available to investors upon request?
• We recognize that certain adviser-led transactions may not involve investors rolling their interests into a new vehicle managed by the adviser. For example, an adviser may arrange for a new investor to offer to purchase fund interests directly from existing
• Should the rule apply to adviser-led transactions initiated by the adviser or its related persons as proposed? Is the definition of “related person” too broad in this context such that it would capture secondary transactions initiated by third parties unrelated to the adviser? Should we revise the definition of “related person” to include an investment discretion requirement? Similarly, is the definition of “control” too broad in this context?
• We recognize that, for certain adviser-led transactions, the closing of the underlying deal may not occur simultaneously with the closing of the new vehicle managed by the adviser. How should the rule take this into account, if at all? For example, should we clarify that, for purposes of the rule, an adviser would not be deemed to have completed an adviser-led secondary transaction until the underlying deal has closed (if applicable)? Alternatively, should we prohibit an adviser from calling investor capital prior to obtaining and distributing the fairness opinion?
We propose amending rule 204-2 under the Advisers Act to require advisers to retain books and records to support their compliance with the proposed adviser-led secondaries rule, which would help facilitate the Commission's inspection and enforcement capabilities. We propose to require advisers to retain a copy of the fairness opinion and material business relationship summary distributed to investors, as well as a record of each addressee, the date(s) the opinion was sent, address(es), and delivery method(s).
We request comment on this aspect of the proposed rule:
• Should we require advisers to maintain the proposed records or would these requirements be overly burdensome for advisers? Are there alternative or additional recordkeeping requirements we should impose?
• Should we require advisers to retain a record of each addressee, the date(s) the statement was sent, address(es), and delivery method(s) as proposed? Why or why not?
We are also proposing to prohibit a private fund adviser from engaging in certain sales practices, conflicts of interest, and compensation schemes that are contrary to the public interest and the protection of investors. We have observed certain industry practices over the past decade that have persisted despite our enforcement actions and that disclosure alone will not adequately address.
Proposed rule 211(h)(2)-1 would prohibit an investment adviser to a private fund, directly or indirectly, from engaging in certain activities with respect to the private fund or any investor in that private fund, including:
(i) Charging certain fees and expenses to a private fund or portfolio investment, including accelerated monitoring fees; fees or expenses associated with an examination or investigation of the adviser or its related persons by governmental or regulatory authorities; regulatory or compliance expenses or fees of the adviser or its related persons; or fees and expenses related to a portfolio investment on a non-pro rata basis when multiple private funds and other clients advised by the adviser or its related persons have invested (or propose to invest) in the same portfolio investment;
(ii) Reducing the amount of any adviser clawback by the amount of certain taxes;
(iii) Seeking reimbursement, indemnification, exculpation, or limitation of its liability by the private fund or its investors for a breach of fiduciary duty, willful misfeasance, bad faith, negligence, or recklessness in providing services to the private fund; and
(iv) Borrowing money, securities, or other fund assets, or receiving an extension of credit, from a private fund client.
This proposed rule would apply to all advisers to private funds, regardless of whether they are registered with the Commission or one or more states, exempt reporting advisers, or prohibited from registration. We believe that this scope is appropriate since we believe these activities are contrary to the public interest and the protection of investors and have the potential to lead to fraud. We are proposing this rule under sections 206 and 211 of the Advisers Act, which sections apply to all investment advisers, regardless of SEC-registration status.
We request comment on the scope of the proposed rule, including the following items:
• Should the rule apply to all advisers as proposed? Alternatively, should the rule apply only to SEC-registered advisers? If so, why?
• Should the rule only prohibit these activities with respect to an adviser's private fund clients and the investors in those private funds? Should the rule apply more broadly or more narrowly? For example, should the rule apply to such activities with respect to
• We have historically taken the position that most of the substantive provisions of the Advisers Act do not apply with respect to the non-U.S. clients (including funds) of a registered offshore adviser.
• Instead of prohibiting these activities, should the rule prohibit these activities unless the adviser satisfies certain governance and other conditions (
• Should we amend the books and records rule to require advisers to retain specific documentation evidencing compliance with the prohibited activities rule? For example, records showing how fees and expenses associated with an examination or investigation of the adviser or its related persons by governmental or regulatory authorities were paid or showing the allocations of fees and expenses related to a portfolio investment on an investment by investment basis? Would advisers be able to obtain or generate sufficient records to demonstrate compliance with all aspects of the proposed rule? Should we amend the books and records rule to require advisers to prepare a memorandum on an annual basis attesting to their compliance with each aspect of the proposed rule?
First, the prohibited activities rule would prohibit an investment adviser from charging a portfolio investment for monitoring, servicing, consulting, or other fees in respect of any services the investment adviser does not, or does not reasonably expect to, provide to the portfolio investment.
An adviser typically receives management fees and performance-based compensation for providing advisory services to a fund. A fund's portfolio investments may also make payments to the adviser and its related persons. For example, some private fund advisers enter into arrangements with a fund's portfolio investments to provide management, consulting, financial, servicing, advisory, or other services. The adviser and the applicable portfolio investment would enter into a monitoring agreement or a management services agreement documenting the payment terms and the services the adviser will provide.
Because the private fund (and, by extension, its investors) typically bears the costs of such payments indirectly and the adviser typically receives the benefit, the receipt of such fees gives rise to conflicts of interest between the fund (and, by extension, its investors), on the one hand, and the adviser, on the other hand. For example, the adviser receives the benefit of the accelerated fees without incurring any costs associated with having to provide any services. The private fund, however, may have a lower return on its investment because the accelerated monitoring fees may reduce the portfolio investment's available cash, in turn reducing the investment's value in advance of a public offering or sale transaction. An adviser also may have an incentive to cause the fund to exit a portfolio investment earlier than anticipated, which may result in the fund receiving a lesser return on its investment.
In addition to these conflicts, we believe that charging a portfolio investment for unperformed services creates a compensation scheme that is contrary to the public interest and the protection of investors because such practice unjustly enriches the adviser at the expense of the private fund and its underlying investors who are not receiving the benefit of any services. Accordingly, the proposed rule would prohibit an adviser from charging these types of accelerated payments.
The prohibited activities rule would not prohibit an adviser from receiving payment for services actually provided. The proposed rule also would not prohibit an adviser from receiving payments in advance for services that it reasonably expects to provide to the portfolio investment in the future. For example, if an adviser expects to provide monitoring services to a portfolio investment, the proposed rule would not prohibit the adviser from charging for those services.
We also do not intend to prohibit an arrangement where the adviser shifts 100% of the economic benefit of any portfolio investment fee to the private fund investors, whether through an offset, rebate, or otherwise. We recognize that certain advisers offset management fees or other amounts payable to the adviser at the fund level by the amount of portfolio investment fees paid to the adviser. However, private funds with a 100% management fee offset would not comply with the proposed rule if there are excess fees retained by the adviser where no further management fee offset can be applied and the private fund investors are not offered a rebate or another economic benefit equal to their pro rata share of any such excess fees.
We request comment on this aspect of the prohibited activities rule, including the following items:
• Are there any scenarios in which we should permit an adviser to charge a fund's portfolio investment for unperformed services? If so, please explain.
• Should we prohibit an adviser from being paid in advance for services it reasonably expects to provide in the future? Why or why not?
• As noted above, if an adviser is paid in advance, and reasonably expects to perform services, but ultimately does not provide the contracted for services, the proposed rule would require the adviser to refund the prepaid amount attributable to the unperformed services. Do commenters agree with this approach? Why or why not?
• The proposed rule specifically references “monitoring, servicing, consulting, or other fees.” Do commenters agree with this list? Should we eliminate any? Are there additional or alternative types of remuneration that the rule should reference?
• Do commenters agree that if an adviser shifts 100% of the economic benefit of any portfolio investment fee to the private fund investors, whether through an offset, rebate, or otherwise, the adviser would not violate the proposed rule? Why or why not? We recognize that certain tax-sensitive investors often waive the right to receive their share of any rebates of portfolio investment fees. How should the rule take into account such waivers, if it all? For example, to the extent one investor does not accept its share, should the rule require the adviser to distribute such amount to the other investors in the fund? Why or why not?
• Should the rule instead permit an adviser to engage in this activity if the adviser satisfies certain disclosure, governance, and/or other conditions (
• The proposed rule would prohibit compensation schemes where an adviser charges for services that it does not
The second and third elements of the prohibited activities rule would prevent an adviser from charging a private fund for fees or expenses associated with an examination or investigation of the adviser or its related persons by any governmental or regulatory authority, as well as regulatory and compliance fees and expenses of the adviser or its related persons.
Advisers incur various fees and expenses in connection with the establishment and ongoing operations of their advisory business. Establishment fees and expenses often relate to the structuring and organization of the adviser's business, including the adviser's registration with financial regulators, such as the Commission. Ongoing fees and expenses often relate to the adviser's overhead and administrative expenses, such as salary, rent, and office supplies. Ongoing expenses also may include those associated with an examination or investigation of the adviser or its related persons.
The proposed rule would prohibit an adviser from charging a private fund for (i) fees and expenses associated with an examination or investigation of the adviser or its related persons by any governmental or regulatory authority, and (ii) regulatory or compliance fees and expenses of the adviser or its related persons, even where such fees and expenses are otherwise disclosed. We have seen an increase in private fund advisers charging these expenses to private fund clients. These types of expenses, which are a cost of being an investment adviser, should not be passed on to private fund investors, whether as a separate expense (in addition to a management fee) or as part of a pass-through expense model.
We believe allocating these types of expenses to a private fund client is contrary to the public interest and is harmful to investors because they create an incentive for an adviser to place its own interests ahead of the private fund's interests and unfairly allocate expenses to the fund, even where fully disclosed. For example, in some circumstances, an adviser may charge a fund significant fees and expenses in connection with an investigation that may not be in the fund's best interest. Further, as discussed above, we believe the prohibited fees and expenses are related to forming and operating an advisory business and thus should be borne by the adviser and its owners rather than the private fund and its investors.
We do not anticipate this aspect of the proposed prohibited activities rule would cause a dramatic change in practice for most private fund advisers, other than for certain advisers that utilize a pass-through expense model as noted above. We recognize, however, that advisers often charge private funds for regulatory, compliance, and other similar fees and expenses directly related to the activities of the private fund. The proposed rule would not change this practice. For example, the proposed rule would not prohibit an adviser from charging a private fund for all the costs associated with a regulatory filing of the fund, such as Form D.
We request comment on this aspect of the prohibited activities rule, including the following items:
• Are there circumstances in which it would be appropriate in the public interest or for the protection of investors for a private fund to bear (i) regulatory or compliance expenses of the adviser or its related persons or (ii) expenses related to an examination or investigation of the adviser or its related persons? If so, please explain. Should we permit private funds to bear these fees and expenses if fully disclosed and consented to by the private fund investors and/or an LPAC (despite the limitations of private fund governance mechanisms, as discussed above)? Should we place any conditions on charging these fees and expenses, such as caps, management fee offsets, or detailed reporting requirements in the proposed quarterly statement?
• The proposed rule would likely increase operating costs for advisers that have historically charged private funds for the types of fees and expenses covered by the proposed rules.
Do commenters believe that advisers would increase management fees to offset such increase in operating costs?
• Are there any additional types of fees or expenses that we should prohibit an adviser from charging to a private fund? Alternatively, are there fees and expenses that the rule should not prohibit?
• Should we provide exceptions to the proposed rules for certain types of private funds and/or certain types of advisers? For example, should we permit a first-time fund adviser to charge regulatory and compliance expenses to the fund? If so, why?
• Do commenters agree that many advisers do not currently charge private funds for the types of fees and expenses covered by the proposed rules and, as a result, the proposed rules would not cause a dramatic change in industry practice? Why or why not? To the extent commenters disagree, please provide supporting data.
• Will advisers have difficulty in determining whether fees and expenses relate to the adviser's activities versus the fund's activities? Should we provide guidance to assist advisers in making such a determination? If so, what guidance should we provide? Should the rule list certain types of fees and expenses that relate to the adviser's activities versus the fund's activities?
• As discussed above, we recognize that certain private fund advisers utilize a pass-through expense model. Should the rule provide any full or partial exceptions for advisers utilizing such models, particularly where the adviser does not charge any management, advisory, or similar fees to the private fund?
The fourth element of the prohibited activities rule would prohibit an adviser from reducing the amount of any adviser clawback by actual, potential, or hypothetical taxes applicable to the adviser, its related persons, or their respective owners or interest holders. We propose to define “adviser clawback” as any obligation of the adviser, its related persons, or their respective owners or interest holders to restore or otherwise return performance-based compensation to the private fund pursuant to the private fund's governing agreements.
Investors typically seek to align their interests with the adviser's interest by tying the adviser's compensation to the success of the private fund. To accomplish this, many private funds provide the adviser with a disproportionate share of profits generated by the fund, often referred to as performance-based compensation.
Because the profitability of a private fund will fluctuate over time, the amount of performance-based compensation to which the adviser is entitled will also fluctuate. For example, a fund may initially generate significant profits due to early realizations of successful investments, resulting in distributions to the adviser. However, the fund may subsequently dispose of unsuccessful investments, resulting in losses to the fund. Certain private funds include “clawback” mechanisms in their governing agreements, which require the adviser (or a related person of the adviser)
Advisers and investors often negotiate whether the clawback amount should be reduced by taxes paid, or deemed paid, by the adviser or its owners.
We believe that reducing the amount of any adviser clawback by taxes applicable to the adviser puts the adviser's interests ahead of the investors' interests and creates a compensation scheme that is contrary to the public interest and the protection of investors, even where such practice is disclosed. The interests of investors to receive their share of fund profits—without any adviser tax reductions—justifies the burdens on advisers, including the obligation to amend tax returns. Advisers typically have control over the methodology used to determine the timing of performance-based compensation distributions or allocations, such as any waterfall arrangement.
We request comment on this aspect of the proposed rule, including the following items:
• Would this aspect of the proposed prohibited activities rule have our intended effect of ensuring that investors receive their full share of profits generated by the fund? Is there an alternative approach that would better produce this intended effect? For example, should we require advisers to return the entire amount of any adviser clawback, rather than only prohibiting advisers from reducing the clawback amount by actual, potential, or hypothetical taxes? Would this approach ensure that investors receive their full share of fund profits?
• Would the proposed clawback provision result in more whole-fund waterfalls (commonly referred to as European waterfalls in the private funds industry), which generally delay payments of performance-based compensation until investors receive a return of all capital contributions? What other effects would this aspect of the proposed rule have on the industry, including with respect to adviser's ability to attract, retain, and develop investment professionals?
• Instead of the proposed clawback provision, should we prohibit deal-by-deal waterfall arrangements (commonly referred to as American waterfalls)?
• We recognize that clawback mechanisms are more common for closed-end funds and less common for open-end funds. Should the rule separately address performance-based compensation for open-end private funds? If so, how should we address those funds?
• Is the proposed definition of “adviser clawback” clear? Are there ways in which the proposed definition is over- or under-inclusive? For example, should the definition include “all-partner” givebacks or clawbacks (
• Is the proposed definition of “performance-based compensation” clear? Is it too narrow or too broad?
• What issues may advisers face in complying with this aspect of the proposed prohibited activities rule? In particular, what issues may result with respect to amending tax returns from prior years?
• We recognize that this aspect of the proposed rule might result in delayed payments of performance-based compensation. For example, during the early stages of the fund, the adviser may be less inclined to distribute performance-based compensation to investment professionals that source or manage successful investments. How would this aspect of the proposed prohibited activities rule affect the intended incentive effects of performance-based compensation?
• We recognize that many fund agreements clawback performance-based compensation on a post-tax basis. We considered, but are not proposing, a rule that would generally allow this practice to continue, but would prohibit advisers from using a hypothetical marginal tax rate to determine the tax reduction amount.
The fifth element of the proposed prohibited activities rule would prohibit an adviser to a private fund, directly or indirectly, from seeking reimbursement, indemnification, exculpation, or limitation of its liability by the private fund or its investors for a breach of fiduciary duty, willful misfeasance, bad faith, negligence, or recklessness in providing services to the private fund.
Currently, many private funds and/or their investors enter into documents containing such contractual terms. Our staff has observed private fund agreements with waiver and indemnification provisions that have become more aggressive over time. For example, our staff recently encountered many limited partnership agreements that state that the adviser to the private fund or its related person, which is the general partner to the fund, to the maximum extent permitted by applicable law, will not be subject to any duties or standards (including fiduciary or similar duties or standards) existing under the Advisers Act, Delaware law, or Cayman Islands law or will not be liable to the fund or investors for breaching its duties (including fiduciary duties) or liabilities (that exist at law or in equity).
While these contractual terms may be permissible under certain state laws, a waiver of an adviser's compliance with its Federal antifraud liability for breach of fiduciary duty to the private fund or with any other provision of the Advisers Act or rules thereunder is invalid under the Act.
We request comment on this aspect of the proposed rule, including the following items:
• We have observed these types of contractual provisions among private fund advisers and their related persons; do advisers to clients other than private funds typically include these types of contractual provisions?
• Are there other types of contractual provisions we should prohibit as contrary to the public interest and the protection of investors?
• Should this aspect of the final prohibited activities rule prohibit limiting liability for “gross negligence,” or would prohibiting limitations of liability for ordinary negligence, as proposed, be more appropriate? Why?
• Should the proposed rule prohibit contractual provisions that limit or purport to waive fiduciary duties and other liabilities in situations where state law permits such waivers?
• Do commenters believe that the proposed rule would increase operating expenses for advisers? For example, would the proposed prohibition on receiving indemnification/exculpation for negligence cause an adviser's insurance premium to increase?
The sixth element of the prohibited activities rule would prohibit an adviser from directly or indirectly charging or allocating fees and expenses related to a portfolio investment (or potential portfolio investment) on a non-pro rata basis when multiple private funds and other clients advised by the adviser or its related persons have invested (or propose to invest) in the same portfolio investment.
An adviser may cause a private fund and one or more other vehicles to invest in an issuer or entity in which other related funds or vehicles have, or are concurrently making, an investment. For example, an adviser may form a parallel fund in a non-U.S. jurisdiction, such as Luxembourg, to accommodate certain European or other non-U.S. investors that invests alongside the adviser's main fund in all, or substantially all, of its investments. An adviser also may form more bespoke structures for large or strategic investors, such as separate accounts, funds of one, and co-investment vehicles, that invest alongside other funds managed by the adviser that have similar or overlapping investment strategies.
An adviser can face conflicts of interest where multiple clients (and/or other persons advised by the adviser) invest, or propose to invest, in the same portfolio investment, especially with respect to allocating fees and expenses among those clients (or such other
Moreover, we do not believe that fees and expenses attributable to unconsummated—or potential—portfolio investments should be treated differently than consummated investments, given that non-pro rata allocations in respect of unconsummated investments generally present the same concerns as discussed above with respect to consummated investments. If more than one fund would have participated in an investment that generated “broken deal” or other fees and expenses, our view is that all such funds should bear their pro rata share of such amount.
We recognize that many advisers do not charge all their clients or potential co-investors for fees and expenses relating to unconsummated investments. For example, certain advisers offer existing investors, related persons, or third parties the opportunity to co-invest alongside the fund through one or more co-investment vehicles advised by the adviser.
We request comment on this aspect of the proposed prohibited activities rule, including the following items:
• Should we prohibit non-pro rata fee and expense allocations as proposed? If not, under what circumstances would non-pro rata allocations be appropriate? For example, we recognize that advisers often have policies and procedures in place that permit the adviser to allocate fees and expenses in a fair and equitable manner (or similar standard), rather than on a pro rata basis; would this better achieve our policy goals? Why or why not? What specific protections are included in such policies and procedures? Should such protections be included in the rule? Why or why not? Should there be an exception to the prohibition where an adviser determines that it is in a private fund's best interest to bear more expenses than another managed vehicle and the private fund's investors agree?
• Should the proposed rule apply to unconsummated—or potential—portfolio investments, as proposed? Do commenters agree that non-pro rata allocations of fees and expenses attributable to such investments present the same concerns as the ones discussed above with respect to consummated investments? Why or why not?
• We recognize that many co-investors do not agree to bear their pro rata share of broken or dead deal expenses. Would the proposed rule make it difficult for funds to consummate larger investments where co-investment capital is needed? Would the proposed rule cause funds to syndicate more deals post-closing once the adviser is confident that the deal will not fall through?
• Should we include an exception for co-investment vehicles (or certain other vehicles) that invest alongside another fund managed by the adviser? If so, how should we define “co-investment vehicle”? Should the rule treat single-deal co-investment vehicles differently than multi-deal co-investment vehicles? Why or why not?
• Should we define “pro rata”? Should “pro rata” be determined based on each client's ownership (or anticipated ownership) of the portfolio investment? Will advisers interpret “pro rata” differently?
• Where multiple funds invest in the same portfolio investment at different times, the first fund to invest may initially bear a higher level of fees and expenses than later funds. Should the proposed rule address fees and expense allocations among funds that invest at different times, and if so, how? If a significant amount of time has passed between the first fund's investment and the later fund's investment, should the later fund pay interest on its portion of fees and expenses? Should interest payments always apply when portfolio investments are made at different times?
• The proposed rule would prohibit advisers from charging or allocating fees and expenses related to a portfolio investment (or potential portfolio investment) on a non-pro rata basis when multiple private funds
• We recognize that a transaction counterparty may request to only contract with one fund entity, which can result in one fund being liable for its own share as well as another fund's share of any transaction obligations, including fees and expenses. If one fund would be responsible for the liability of another fund, those funds, in certain cases, contractually agree to bear their pro rata share, often times through a contribution or reimbursement agreement. Should we prohibit this practice and thus require each fund entity to contract directly with the counterparty? Alternatively, should we require certain governance and other protections, such as contribution or reimbursement agreements, if only one fund contracts directly with the counterparty? Why or why not?
• As noted above, the proposed rule would not prohibit an adviser from charging different fund-level compensation, such as advisory fees, to vehicles that invest alongside each other in the same underlying portfolio investment. For example, a co-investment vehicle may pay lower management fees than the main fund. Is it sufficiently clear that such arrangements would not be prohibited under the proposed rule?
The final element of the proposed prohibited activities rule would prohibit an adviser directly or indirectly from borrowing money, securities, or other fund assets, or receiving a loan or an extension of credit, from a private fund client (collectively, a “borrowing”).
When an adviser borrows from a private fund client, that adviser has a conflict of interest because it is on both sides of the transaction (
Moreover, this practice may prevent the fund client from using those assets to further the fund's investment strategy. Even where disclosed (and potentially consented to by an advisory board, such as an LPAC), this practice presents a conflict of interest that is harmful to investors because, as a result of the unique structure of private funds, only certain investors with specific information or governance rights (such as representation on the LPAC) would potentially be in a position to negotiate or discuss the terms of the borrowing with the adviser, rather than all of the private fund's investors.
The proposed rule would not prevent the adviser from borrowing from a third party on the fund's behalf or from lending to the fund. Private funds sometimes use subscription lines of credit, also known as credit facilities, to address financing needs. For example, some private funds use these facilities to address short-term financing needs when the fund makes investments or participates in a co-investment. Other private funds use such facilities for long-term financing purposes, for example, when an infrastructure fund decides to use a long-term facility during the development stage of a project before a capital call. In these circumstances, the adviser is not borrowing from the fund. Similarly, advisers sometimes lend money to a fund in order to address start-up costs or to manage other expenses (for example, an adviser may pay legal or operating expenses of several fund clients and then seek reimbursement once the expenses have been allocated among the advised private funds). Allowing advisers to continue this practice would provide private funds access to capital, especially when they are in the early stages of attracting investors. Advisers lending to private funds they manage on terms that do not include excessive interest rates or other abusive practices do not raise the same concerns that advisers borrowing from private funds they manage raises because there are fewer opportunities for abusive practices when the adviser is providing money to, rather than taking money from, the private fund.
We request comment on this aspect of the proposed prohibitions rule, including the following:
• Should we broaden the scope of the prohibition on borrowings to prevent a private fund adviser from borrowing from co-investment vehicles or other accounts that are not private funds?
• Should we broaden the proposed prohibition to apply when an adviser lends to the fund?
• Should the proposed rule exclude certain activity from the prohibition (
• Are there situations in which a fund would agree to lend a start-up adviser money for initial costs and employee salaries? Are there situations in which a private fund client should be able to make a loan to a private fund adviser because the economic terms would be favorable to the private fund? How would we determine that the terms are favorable to the private fund?
• Should the proposed rule be expanded to prohibit an adviser from borrowing against a private fund client's bank account or other assets, where the lender may be a third party (rather than the private fund)? Why or why not?
• Should we amend Form ADV and/or Form PF to require advisers to report information about an adviser or its related person lending to, or borrowing from, private funds or other clients? Why or why not? For example, should we require advisers to report whether they engage in this practice and to provide an aggregate amount or range of such loans or borrowings?
• Recognizing the limitations of private fund governance mechanisms, as discussed above, should we permit borrowing if it is subject to specific governance and other protections (
• Should the rule include any full or partial exclusions for certain transactions that may not involve conflicts of interest or that may involve certain third parties that ameliorate the conflicts of interest? For example, should we provide an exclusion if the terms of the borrowing are set by an independent third party and such third party has the authority to act on behalf of the fund in the event of a default by the adviser? Why or why not?
• Do commenters envision unintended consequences of this proposed prohibition, such as in circumstances where an adviser's related person has its own commercial relationship with the fund?
• Should the rule prohibit (or otherwise restrict) advisers from lending to private funds they manage on terms that include excessive interest rates or other abusive practices? To what extent and under what circumstances does this practice occur? Does it raise similar concerns to borrowing?
In order to address specific types of preferential treatment that have a material negative effect on other investors in the private fund or in a substantially similar pool of assets, we also propose to prohibit all private fund advisers, regardless of whether they are registered with the Commission, from providing preferential terms to certain investors regarding redemption or information about portfolio holdings or exposures.
Side letters or side arrangements are generally agreements among the investor, general partner, adviser, and/or the private fund that provide the investor with different or preferential terms than those set forth in the fund's governing documents.
We recognize that advisers provide a range of preferential treatment, some of which does not necessarily disadvantage other fund investors. In this case, we believe that disclosure is appropriate because it would allow investors to make their own assessment. Other types of preferential treatment, however, have a material, negative effect on other fund investors or investors in a substantially similar pool of assets. We propose to prohibit these types of preferential treatment because they are sales practices that present a conflict of interest between the adviser and the private fund client that are contrary to the public interest and protection of investors. We have tailored the proposed rule to address these different ends of the spectrum.
We propose to prohibit a private fund adviser, including indirectly through its related persons, from granting an investor in the private fund or in a substantially similar pool of assets the ability to redeem its interest on terms that the adviser reasonably expects to have a material, negative effect on other investors in that private fund or in a substantially similar pool of assets.
Different types of private funds and other pooled vehicles offer different redemption opportunities, and an investor's ability to exit or withdraw differs significantly depending on the fund's or pool's liquidity profile. While open-end private funds typically allow
We believe that granting preferential liquidity terms on terms that the adviser reasonably expects to have a material, negative effect on other investors in the private fund or in a substantially similar pool of assets is a sales practice that is harmful to the fund and its investors. In granting preferential liquidity rights to a large investor, the adviser stands to benefit because its fees increase as fund assets under management increase. As noted above, the adviser attracts preferred investors to invest in the fund by offering preferential terms, such as more favorable liquidity rights. While the fund also may experience some benefits, including the ability to attract additional investors and to spread expenses over a broader investor and asset base, there are scenarios where the preferential liquidity terms harm the fund and other investors. For example, if an adviser allows a preferred investor to exit the fund early and sells liquid assets to accommodate the preferred investor's redemption, the fund may be left with a less liquid pool of assets, which can inhibit the fund's ability to carry out its investment strategy or promptly satisfy other investors' redemption requests. This can dilute remaining investors' interests in the fund and make it difficult for those investors to mitigate their investment losses in a down market cycle. These concerns can also apply when an adviser provides favorable redemption rights to an investor in a substantially similar pool of assets, such as another feeder fund investing in the same master fund. The Commission believes that the potential harms to other investors justify this restriction.
We propose to prohibit an adviser and its related persons from providing information regarding the portfolio holdings or exposures of the private fund or of a substantially similar pool of assets to any investor if the adviser reasonably expects that providing the information would have a material, negative effect on other investors in that private fund or in a substantially similar pool of assets.
Private fund advisers, in some cases, disclose information about portfolio holdings or exposures to certain, but not all, investors in the private fund or in a substantially similar pool of assets. For example, an investor may request certain information about characteristics of the fund's holdings to satisfy the investor's internal reporting obligations. An investor can negotiate to receive certain types of information that is not widely available to all investors; however, an investor's success in obtaining such terms may depend on factors including the size of its capital commitment.
Selective disclosure of portfolio holdings or exposures can result in profits or avoidance of losses among those who were privy to the information beforehand at the expense of investors who did not benefit from such transparency. In addition, such information could enable an investor to trade in portfolio holdings in a way that “front-runs” or otherwise disadvantages the fund or other clients of the adviser. Granting preferential transparency, for example through side letters, presents a sales practice that is contrary to the public interest and protection of investors because it preferences one investor at the expense of another. An adviser may agree to provide preferential information rights to a certain investor in exchange for something of benefit to the adviser. The proposed rule is designed to neutralize the potential for private fund advisers to treat portfolio holdings information as a commodity to be used to gain or maintain favor with particular investors.
The proposed rule would define the term “substantially similar pool of assets” as a pooled investment vehicle (other than an investment company registered under the Investment Company Act of 1940 or a company that elects to be regulated as such) with substantially similar investment policies, objectives, or strategies to those of the private fund managed by the adviser or its related persons.
The types of asset pools that would be included in this term would include a variety of pools, regardless of whether they are private funds. For example, this term would include limited liability companies, partnerships, and other organizational structures, regardless of the number of investors; feeders to the same master fund; and parallel fund structures and alternative investment vehicles. It would also include pooled vehicles with different base currencies and pooled vehicles with embedded leverage to the extent such pooled vehicles have substantially similar investment policies, objectives, or strategies as those of the subject private fund. In addition, an adviser would be required to consider whether its proprietary accounts meet the definition of “substantially similar pool of assets.”
This proposed definition is designed to capture most commonly used fund structures and prevent advisers from structuring around the prohibitions on preferential treatment. For example, in a master-feeder structure, some advisers create custom feeder funds for favored investors. Without a comprehensive definition of substantially similar pool of assets, the proposed rule would not preclude such advisers from providing preferential treatment to investors in these custom feeder funds to the detriment of investors in standard commingled feeder funds within the master-feeder structure. While similar concerns may exist for separately managed accounts, this proposed rule is designed to address the specific concerns that arise out of the lack of
The proposed rule also would prohibit other preferential terms unless the adviser provides certain written disclosures to prospective and current investors.
Increased transparency would better inform investors regarding the breadth of preferential treatment, the potential for those terms to affect their investment in the private fund, and the potential costs (including compliance costs) associated with these preferential terms.
Under the proposed rule, an adviser would need to describe specifically the preferential treatment to convey its relevance. For example, if an adviser provides an investor with lower fee terms in exchange for a significantly higher capital contribution than paid by others, we do not believe that mere disclosure that some investors pay a lower fee is specific enough. Instead, we believe an adviser must describe the lower fee terms, including the applicable rate (or range of rates if multiple investors pay such lower fees), in order to provide specific information as required by the proposed rule. An adviser could comply with the proposed disclosure requirements by providing copies of side letters (with identifying information regarding the other investors redacted).
The timing of the proposed rule's delivery requirements would differ depending on whether the recipient is a prospective or existing investor in the private fund. For a prospective investor the notice needs to be provided, in writing, prior to the investor's investment. For an existing investor, the adviser would have to “distribute” the notice annually if any preferential treatment is provided to an investor since the last notice.
We request comment on this aspect of the proposed rule, including the following:
• Should the proposed rule apply only to SEC-registered advisers and advisers that are required to be registered with the SEC instead of all advisers, as proposed?
• Should we prohibit
• Should the proposed prohibitions apply only to terms that the adviser reasonably expects
• Should we prohibit
• Are there certain investors who require different liquidity terms (
• Are there practices related to liquidity and redemption rights that the proposed rule should explicitly address (
• Should we prohibit
• Should we define, or provide guidance on, when preferential redemption terms or preferential information rights would have a material, negative effect on other investors? If so, what should be some determining factors? Would it be relevant that the redemption terms would cause another investor to reconsider its investment decision? Please explain your answer. Should we clarify whether an adviser could disclose information about holdings or exposures of the fund or a substantially similar pool of assets on a delayed basis without violating the proposed prohibition? Should the proposed rule expressly require disclosure to investors after a specified period? If so, what period?
• Are transparency concerns, especially with regard to information that could have an impact on an investor's decision to redeem, more prominent with certain fund types (
• Should we exempt certain types of private funds from the written notice requirements of the proposed preferential treatment rule?
• Should we restrict the use of side letters and side arrangements so that they can only be used to address certain matters such as, for example, legal, regulatory, or tax issues that are specific to an investor?
• Should the rule's prohibitions on preferential terms extend to a substantially similar pool of assets or apply only to each private fund separately?
• The proposed definition of “substantially similar pool of assets” would not include co-investments by a separately managed account managed by the adviser or its related persons. Is this definition too narrow? Why or why not? Would the proposed definition appropriately capture similar funds? Should it, for example, include circumstances where a private fund invests alongside a separately managed account? Why or why not? Should the definition include a co-investment vehicle that is structured as a pool of assets that invests in a single entity and where the private fund invests in the same entity?
• Should we limit “substantially similar pool of assets” to pools the adviser or its related persons manage, as proposed? Is the proposed definition too broad or too narrow? The proposed definition would require the pool of assets to have substantially similar (i) investment policies, (ii) objectives, or (iii) strategies to those of the private fund. Should we change “or” to “and” and instead require that the pool satisfy all three requirements (
• Should we narrow the scope of the term “substantially similar pool of assets” to only include pooled vehicles that invest or generally invest
• Do commenters agree that we should prohibit other preferential terms unless the adviser provides specific information regarding those terms to prospective and current private fund investors? Would these disclosures benefit these investors? Should we require advisers to provide additional information in the written notices? If so, what information? Should the rule specify what information is required to be included in the notice?
• Instead of requiring advisers to provide or distribute the written notice, should we require advisers to only provide or distribute the written notice upon request?
• With regard to current investors, the proposed rule would require advisers to disclose preferential treatment
• Should we require advisers to provide advance written notice to prospective investors, as proposed? Should we define “prospective investor” in the proposed rule? If so, how should we define this term and why? For example, should we define “prospective investor” as any person or entity that has expressed an interest in a private fund advised by the adviser?
• The proposed rule would require the adviser to provide the written notice “prior to the investor's investment in the private fund.” Should we prescribe how far in advance of the investment an adviser must provide such notice? For example, should we require an adviser to provide the written notice at least two business days prior to the date of investment? Should such period be longer or shorter? If so, why? Should the proposed rule require advisers to provide notice to prospective investors within a certain number of days before the investor submits its complete subscription agreement (or equivalent)? Alternatively, should the proposed rule require the adviser to provide the notice at the time an investor receives the private fund's offering and organizational documents (
• What impact would the advance written notice requirement have on “most favored nation” clauses (“MFN clauses”) granted to other fund investors?
• Should the rule require disclosure of all preferential treatment, as proposed, or should the rule have a narrower or broader scope?
• Should the proposed rule require the adviser to disclose how it memorialized the preferential treatment (
• The proposed rule would require the adviser to provide
• The proposed rule would require the adviser to provide notice on an annual basis to current investors, if the adviser or its related persons provided any preferential treatment to other investors in the same private fund since the last written notice. The proposed rule does not specify whether the adviser must provide this on a calendar year basis, the adviser's fiscal year, or on a rolling annual basis. Should the rule specify precisely when the annual period begins and ends? Why or why not? If so, what should the beginning and ending dates be? Instead of an annual notice, should we require an adviser to provide the notice within 30 days of providing any new preferential treatment to an investor in the fund?
• Should we require an adviser to document the years during which it has not provided any preferential treatment and therefore need not distribute or provide a written notice to current investors or prospects, respectively? Why or why not? If an adviser has not provided preferential treatment to any investors, or has not done so during the applicable time period, should we require an adviser to send current investors and prospects a written notice confirming that it does not have any preferential treatment to disclose? Why or why not?
• The proposed rule would require advisers to provide or distribute a written notice that provides “specific” information about preferential treatment. Should the proposed rule define “specific” or use another term to describe the required level of detail?
We propose amending rule 204-2 under the Advisers Act to require advisers registered with the Commission to retain books and records to support their compliance with the proposed preferential treatment rule.
We request comment on this aspect of the proposed rule:
• Would the proposed recordkeeping requirement be overly burdensome for advisers? Why or why not?
• Would advisers face more difficulty retaining records regarding prospective investors as compared to retaining records for current investors? Would it be more difficult for advisers to keep track of prospective investors? For example, prospective investors may express interest in a private fund, but may not actually invest. Should we only require advisers to retain records regarding prospective investors that invest in the private fund?
• The books and records rule under the Advisers Act applies to SEC-registered advisers. Should we adopt a recordkeeping obligation that would require other advisers (such as exempt reporting advisers) to retain the written notices that proposed rule 211(h)(2)-3 would require? Why or why not?
We are proposing to amend the Advisers Act compliance rule to require all SEC-registered advisers to document the annual review of their compliance policies and procedures in writing.
The compliance rule currently requires advisers to review, no less frequently than annually, the adequacy of their compliance policies and procedures and the effectiveness of their implementation. The annual review requirement was intended to require advisers to evaluate periodically whether their compliance policies and procedures continue to work as designed and whether changes are needed to assure their continued effectiveness.
Based on staff experience, some investment advisers do not make and preserve written documentation of the annual review of their compliance policies and procedures. The compliance rule does not expressly require written documentation.
Proposed rule 206(4)-7(b) does not enumerate specific elements that advisers must include in the written documentation of their annual review. The written documentation requirement is intended to be flexible to allow advisers to continue to use the review procedures they have developed and found most effective. For example, some advisers may review the adequacy of their compliance policies and procedures (or a subset of those compliance policies and procedures) and the effectiveness of their implementation on a quarterly basis. In such a case, we believe that the written documentation of the annual review could comprise written quarterly reports.
The regulations in 17 CFR 270.38a-1 (rule 38a-1 under the Investment Company Act), the compliance rule applicable to registered investment companies and business development companies (collectively “registered funds”), do not require written documentation of a registered fund's annual review of its compliance policies and procedures.
We request comment on the proposed amendments to the compliance rule:
• Should we expressly require advisers to document the annual review of their compliance policies and procedures in writing, as proposed? If not, why?
• Should we specify certain elements that must be included in the written documentation of the annual review? For example, should we require the written documentation to address matters similar to those that are required in the chief compliance officer's written report to a registered fund's board of directors pursuant to rule 38a-1 under the Investment Company Act? Despite the limitations of private fund governance mechanisms, as discussed above, should we require the new documentation to be provided to LPACs, directors, or other governing bodies of private funds? Why or why not?
• Are there alternate means to document an adviser's annual review of its compliance program?
• Are there exceptions to the written documentation requirement that we should adopt?
We are proposing a one-year transition period to provide time for advisers to come into compliance with these new and amended rules if they are adopted. Accordingly, we propose that the compliance date of any adoption of this proposal would be one year following the rules' effective dates, which would be sixty days after the date of publication of the rules in the
Staff in the Division of Investment Management is reviewing staff statements, including staff no-action letters and staff interpretative letters, to determine whether any statements, or portions thereof, should be withdrawn or modified in connection with any adoption of this proposal. Upon the adoption of any rule, some letters and other staff statements, or portions thereof, may be moot, superseded, or otherwise inconsistent with the rule and, therefore, would be withdrawn or modified. If interested parties believe that certain letters or other staff statements, or portions thereof, should be withdrawn or modified, they should identify the letter or statement, state why it is relevant to the proposed rule, how it or any specific portion thereof should be treated, and the reason therefor. Interested parties also should explain any concerns with the withdrawal or modification of any staff statements and letters on this topic.
We request comments on the proposed transition period:
• Do commenters agree that a one-year transition period following each
• Should the transition period be the same for all of the proposed new and amended rules if adopted? Should we have different compliances dates for each proposed rule? Why or why not, and for which rules?
• Should the transition period be the same for all advisers subject to the proposed rules, if adopted? Alternatively, should we adopt a tiered transition period for smaller or larger entities? For example, should we provide an additional six months in the transition period for smaller entities (or some other shorter or longer period)? How should we define smaller entities for this purpose?
• Should advisers to certain fund types have a longer (or shorter) transition period? Would compliance with some or all of the proposed rules be more complex for advisers to certain fund types, such as private equity, venture capital, real estate or other similar closed-end private funds, than for advisers to other fund types, such as hedge funds or other similar open-end private funds?
• The proposed quarterly statement rule would require advisers to report performance since the fund's inception. Should we allow funds that existed before the compliance date of the proposed rule to include performance information only for periods beginning on or after the proposed rule's compliance date? Should the proposed rule include a maximum period of time that funds that are in existence as of the compliance date must look back in order to report performance, fees, and expenses? Is it common practice for older funds (
We are mindful of the costs imposed by, and the benefits obtained from, our rules. Whenever we engage in rulemaking and are required to consider or determine whether an action is necessary or appropriate in the public interest, section 202(c) of the Advisers Act requires the Commission to consider, in addition to the protection of investors, whether the action would promote efficiency, competition, and capital formation. The following analysis considers, in detail, the potential economic effects that may result from this rulemaking, including the benefits and costs to market participants as well as the broader implications of the proposed rules for efficiency, competition, and capital formation.
Where possible, the Commission quantifies the likely economic effects of its proposed amendments and rules. However, the Commission is unable to quantify certain economic effects because it lacks the information necessary to provide estimates or ranges of costs. Further, in some cases, quantification would require numerous assumptions to forecast how investment advisers and other affected parties would respond to the proposed amendments and rules, and how those responses would in turn affect the broader markets in which they operate. In addition, many factors determining the economic effects of the proposed amendments and rules would be firm-specific and thus inherently difficult to quantify, such that, even if it were possible to calculate a range of potential quantitative estimates, that range would be so wide as to not be informative about the magnitude of the benefits or costs associated with the proposed rules. Many parts of the discussion below are, therefore, qualitative in nature. As described more fully below, the Commission is providing a qualitative assessment and, where feasible, a quantified estimate of the economic effects.
The economic baseline against which we evaluate and measure the economic effects of the proposed rules, including its potential effects on efficiency, competition, and capital formation, is the state of the world in the absence of the proposed rules. We consider the current business practices and disclosure practices of private fund advisers, as well as the current regulation and the forms of external monitoring and investor protections that are currently in place. In addition, in considering the current business and disclosure practices, we consider the usefulness of the information that investment advisers provide to investors about the private funds in which those investors invest, including information that may be helpful for deciding whether to invest (or remain invested) in the fund, monitoring an investment in the fund (in relation to fund documents and in relation to other funds), and other purposes. We further consider the effectiveness of the disclosures in providing useful information to the investor. For example, fund disclosures can have direct effects on investors by affecting their ability to assess costs and returns and to identify the funds that align with their investment preferences and objectives. Disclosures can also help investors monitor their private fund advisers' conduct, depending in part on the extent to which private funds lack governance mechanisms that would otherwise help check adviser conduct. Disclosures can therefore influence the matches between investor choices of private funds and preferences over private fund terms, investment strategies, and investment outcomes, with more effective disclosures resulting in improved matches.
The proposed quarterly statement, audit, and adviser-led secondary rules would apply to all SEC registered investment advisers (“RIAs”) with private fund clients.
The proposed prohibited activity and preferential treatment rules would apply to all advisers to private funds, regardless of whether the advisers are registered with or reporting as exempt reporting advisers (“ERAs”) to the Commission or one or more state securities commissioners or are otherwise not required to register. Proposed amendments to the books and records rule would also impose corresponding recordkeeping obligations on private fund advisers if they are registered with the Commission.
The proposed amendments to the compliance rule would affect all RIAs, regardless of whether they have private fund clients. According to Form ADV data, there are 15,283 RIAs, across both those who do and do not have private fund clients.
The parties affected by these various proposed rules would include the private fund advisers, advisers to other client types (with respect to the proposed amendments to the compliance rule), private funds, private fund investors, certain other pooled investment vehicles and clients advised by private fund advisers and their related persons, and others to whom those affected parties would turn for assistance in responding to the proposed rules. Private fund investors are generally institutional investors (including, for example, retirement plans, trusts, endowments, sovereign wealth funds, and insurance companies), as well as high net worth individuals. In addition, the parties affected by these various proposed rules could include private fund portfolio investments, such as portfolio companies. For example, certain types of fees, such as accelerated payment fees, would no longer be able to be charged to those portfolio companies.
The relationships between the affected parties are governed in part by current rules under the Advisers Act, as discussed in Section V.B.3. In addition, relationships between funds and investors generally depend on fund governance.
Based on Form ADV filing data between October 1, 2020, and September 30, 2021, 5,139 RIAs and 4,900 ERAs reported that they are advisers to private funds.
Also based on Form ADV data, the market for private fund investing has grown dramatically over the past five years. For example, the assets under management of private equity funds reported by RIAs on Form ADV during this period grew from $2.6 trillion to $5.1 trillion, or by 96 percent. The assets under management of hedge funds reported by RIAs grew from $6.1 trillion to $8.4 trillion, or by 38 percent.
Advisers have a fiduciary duty to clients, including private fund clients, that is comprised of a duty of care and a duty of loyalty enforceable under the antifraud provision of Section 206.
Private fund advisers are also subject to rule 206(4)-8 under the Advisers Act, which prohibits investment advisers to pooled investment vehicles, which include private funds, from (1) making any untrue statement of a material fact or omitting to state a material fact necessary to make the statements made, in the light of the circumstances under which they were made, not misleading, to any investor or prospective investor in the pooled investment vehicle; or (2) otherwise engaging in any act, practice, or course of business that is fraudulent, deceptive, or manipulative with respect to any investor or prospective investor in the pooled investment vehicle. There are no particularized requirements, however, that deal with many of the revised requirements in this proposal. For example, there is no regulation requiring an adviser to disclose multiple different measures of performance to its investors, to refrain from borrowing from a private fund client, to obtain a fairness opinion from an independent opinion provider when leading secondary transactions, or to disclose preferential treatment of certain investors to other investors.
In the absence of more particularized requirements, we have observed business practices of private fund advisers that enrich advisers without providing any benefit of services to the private fund and its underlying investors or create incentives for an adviser to place its own interests ahead of the private fund's interests. For example, as discussed above, some private fund advisers have entered into arrangements with a fund's portfolio investments to provide services which permit the adviser to accelerate the unpaid portion of fees upon the occurrence of certain triggering events, even though the adviser will never provide the contracted-for services.
We have also seen a trend in the industry where certain advisers charge a private fund for fees and expenses incurred by the adviser in connection with the establishment and ongoing operations of its advisory business.
Some investors may not anticipate the performance implications of these disclosed costs, or may avoid investments out of concern that such costs may be present. For those investors, this could lead to a mismatch between investor choices of private funds and their preferences over private fund terms, investment strategies, and investment outcomes, relative to what would occur in the absence of such unexpected or uncertain costs.
In addition, our staff has observed instances in which advisers have entered into agreements that reduce the amount of clawbacks by taxes paid, or deemed to be paid, by the adviser or its owners,
We have also observed some cases where private fund advisers have directly or indirectly (including through a related person) borrowed from private fund clients.
The staff also has observed harm to investors from disparate treatment of investors in a fund. For example, our staff has observed scenarios where an adviser grants certain private fund investors and/or investments in substantially similar pools of assets with better liquidity terms than other investors.
The staff also has observed harm to investors when advisers lead multiple private funds and other clients advised by the adviser or its related persons to invest in a portfolio investment.
We understand that it can be difficult for investors to have full transparency into the scenarios described above relating to conflicts of interest. For example, the Commission has pursued enforcement actions against private fund advisers where the adviser failed to inform investors about benefits that the advisers obtained from accelerated monitoring fees.
While our staff has observed that some advisers have begun to more fully disclose sales practices, conflicts of interests, and compensation schemes to investors and the practices that are associated with them, we believe that it may be hard even for sophisticated investors with full and fair disclosure, to understand the future implications of terms and practices related to these practices at the time of investment and during the investment. Further, some investors may find it relatively difficult to negotiate agreements that would fully protect them from bearing unexpected portions of fees and expenses or from other decreases in the value of investments associated with the above-described practices. For example, some forms of negotiation may occur through repeat-dealing that may not be available to some smaller private fund investors.
Our staff has also observed that investors are generally not provided with detailed information about these preferential terms.
Current rules under the Advisers Act do not require advisers to provide quarterly statements detailing fees and expenses (including fees and expenses paid to the adviser and its related persons by portfolio investments) to private fund clients or to fund investors. The custody rule does, however, generally require advisers whose private fund clients are not undergoing a financial statement audit to have a reasonable basis for believing that the qualified custodians that maintain private fund client assets provide quarterly account statements to the fund's limited partners. Those account statements may contain some of this information, though in our experience adviser fees and expenses typically are not presented with the level of specificity the proposed quarterly statement rule would require. In addition, Form ADV Part 2A (the “brochure”) requires certain information about an adviser's fees and compensation. For example, Part 2A, Item 6 of Form ADV requires an adviser to disclose in its brochure whether the adviser accepts performance-based fees, whether the adviser manages both accounts that are charged a performance-based fee and accounts that are charged another type of fee, and any potential conflicts. Although the brochure is not required to be delivered to investors in a private fund, the information on Form ADV is available to the public, including private fund investors, through the Commission's Investment Adviser Public Disclosure (“IAPD”) website.
Similarly, there currently are no requirements under current Advisers Act rules for advisers to provide investors with a quarterly statement detailing private fund performance. Although our recently adopted marketing rule contains requirements that pertain to displaying performance information and providing information about specific investments in adviser advertisements, these requirements do not
Within this framework, advisers have exercised discretion in responding to the needs of private fund investors for periodic statements regarding fees, expenses, and performance or similar information on their current investments.
While a variety of practices are used, as the market for private fund investing has grown, some patterns have emerged. We understand that most private fund advisers currently provide current investors with quarterly reporting, and many private fund advisers contractually agree to provide fee, expense, and performance reporting to current investors.
However, reports that are provided to investors may report only aggregated expenses, or may not provide detailed information about the calculation and implementation of any negotiated rebates, credits, or offsets.
In other cases, adviser reliance on exemptions from specific regulatory burdens for other regulators can lead advisers to make certain quarterly disclosures. For example, while we believe that many advisers to hedge funds subject to the jurisdiction of the U.S. Commodity Futures Trading Commission (“CFTC”) rely on an exemption provided in CFTC Regulation § 4.13 from the requirement to register with CFTC as a “commodity pool operator,” some may rely on other CFTC exemptions, exclusions or relief. Specifically, we believe that some advisers registered with the CFTC may operate with respect to a fund in reliance on CFTC Regulation § 4.7, which provides certain disclosure, recordkeeping and reporting relief and to the extent that the adviser does so, the adviser would be required to, no less frequently than quarterly, prepare and distribute to pool participants statements that present, among other things, the net asset value of the exempt pool and the change in net asset value from the end of the previous reporting period.
In addition, information about advisers' fees and about expenses is often included in advisers' marketing documents, or included in the fund documents. Many advisers to private equity funds and other funds that would be determined to be illiquid funds under the proposed rule provide prospective investors with access to a virtual data room for the fund, containing the fund's offering documents (including categories of fees and expenses that may be charged), as well as the adviser's brochure and other ancillary items, such as case studies.
The adviser's and related persons' rights to compensation, which are set forth in fund documents, vary across fund types and advisers and can be difficult to quantify at the time of the initial investment. For example, advisers of private equity funds generally receive a management fee (compensating the adviser for bearing the costs relating to the operation of the fund and its portfolio investment) and performance-based compensation (further incentivizing advisers to maximize investor value).
Management fee compensation figures and performance-based compensation figures are not widely disclosed or reported,
In addition, advisers or their related persons may receive a monitoring fee for consulting services targeted to a specific asset or company in the fund portfolio.
Regarding performance disclosure, advisers typically provide information about fund performance to investors through the account statements, transaction reports, and other reports. Some advisers, primarily private equity fund advisers, also disclose information about past performance of their funds in the private placement memoranda that they provide to prospective investors.
Many standardized industry methods have emerged that private funds rely on to report returns and performance.
For private equity and other funds that would be determined to be illiquid under the proposed rules, standardized industry methods for measuring performance must contend with the complexity of the timing of illiquid investments. One approach that has emerged for computing returns for private equity and other fund that would be determined to be illiquid funds is the internal rate of return (“IRR”).
However, current use of IRR to measure returns has a number of drawbacks, including an upward bias in the IRR that comes from a fund's use of leverage, assumptions about the reinvestment of proceeds, and a large effect on measured IRR from cash flows that occur early in the life of the pool. For example, as discussed above, some private equity funds borrow extensively at the fund level.
As for reinvestment assumptions, the IRR as a performance measure assumes that cash proceeds have been reinvested at the IRR over the entire investment period. For example, if a private equity or other fund determined to be illiquid reports a 50% IRR but has exited an investment and made a distribution to investors early in its life, the IRR assumes that the investors were able to reinvest their distribution again at a 50% annual return for the remainder of the life of the fund.
Although IRR remains one of the leading standardized methods of reporting returns at present, these and other drawbacks make IRR difficult as a singular return measure, especially for investors who likely may not understand the limitations of the IRR metric, and the differences between IRR and total return metrics used for public equity or registered investment funds.
Several other measures have emerged for measuring the performance of
Regardless of the performance measure applied, another fundamental difficulty in reporting the performance of funds determined to be illiquid is accounting for differences in realized and unrealized gains. Funds determined to be illiquid funds generally pursue longer-term investments, and reporting of performance before the fund's exit requires estimating the unrealized value of ongoing investments.
Other approaches tend to be used for evaluating the performance of hedge funds and other liquid funds. In particular, a fund's alpha is its excess return over a benchmark index of comparable risk. A fund's Sharpe ratio is its excess return above the risk-free market rate divided by the investment's standard deviation of returns. Many, but not all, hedge funds disclose these and other performance measures, including net returns of the fund. Many hedge fund-level performance metrics can be calculated by investors directly using data on the fund's historical returns, by either combining with publicly available benchmark index data (in the case of alpha) or by combining with an estimate of the standard deviation of the fund's returns (in the case of the Sharpe ratio). Despite these detailed methods, public data on hedge fund performance reporting may also be biased, because hedge funds choose whether and when to make their performance results publicly available.
While the Commission believes that many advisers currently select from these varying standardized industry methods in order to prepare and present performance information, the difficulty in measuring and reporting returns on a basis comparable with respect to risk, coupled with the potentially high fees and expenses associated with these funds, can present investors with difficulty in monitoring and selecting their investments. Specifically, without disclosure of detailed performance measures and accounting for the impact of risk, debt, the varying impact of realized and unrealized gains, performances across funds can be highly overstated or otherwise manipulated, and so impossible to compare.
Currently under the custody rule, some private fund advisers may obtain financial statement audits as an alternative to the requirement of the rule that an RIA with custody of client assets obtain an annual surprise examination from an independent public accountant.
Also under the custody rule, an adviser's choice for a fund to obtain an external financial statement audit (in lieu of a surprise examination) may depend on the benefit of the audit from the adviser's perspective, including the benefit of any assurances that an audit might provide investors about the reliability of the financial statement. The adviser's choice also may depend on the cost of the audit, including fees and expenses.
Based on Form ADV data and as shown below, more than 90 percent of the total number of hedge funds and private equity funds that are advised by RIAs currently undergo a financial statement audit, though such audits are not necessarily always by a PCAOB-registered independent public accountant that is subject to regular inspection.
These audits, while currently valuable to investors, do not obviate the issues with fee, expense, and performance reporting discussed above.
Regarding fairness opinions, our staff has observed a recent rise in adviser-led secondary transactions where an adviser offers fund investors the option to sell their interests in the private fund or to exchange them for new interests in another vehicle advised by the adviser.
The books and records rule includes requirements for recordkeeping to promote, and facilitate internal and external monitoring of, compliance. For example, the books and records rule requires advisers registered or required to be registered under Section 203 of the Act to make and keep true, accurate and current certain books and records relating to their investment advisory businesses, including advisory business financial and accounting records, and advertising and performance records.
Under the Advisers Act compliance rule, advisers registered or required to be registered under Section 203 of the Act must review no less frequently than annually the adequacy of their compliance policies and procedures and the effectiveness of their implementation. Currently, there is no requirement to document that review in writing.
Private fund investments can be opaque, and we have observed that investors lack sufficiently detailed information about fund fees and expenses and the preferred terms granted to certain investors and often lack sufficient transparency into how private fund performance is calculated. In addition, we have observed that certain sales practices, conflicts of interest, and compensation schemes are either not transparent to investors or can be harmful and have significant negative effects on private fund returns.
The proposed rules would (a) require registered investment advisers to provide certain disclosures in quarterly statements to private fund investors, (b) require all investment advisers, including those that are not registered with the Commission, to make certain disclosures of preferential terms offered to prospective and current investors, (c) prohibit all private fund advisers, including those that are not registered with the Commission, from engaging in certain activities with respect to the private fund or any investor in that private fund, (d) require a registered private fund adviser to obtain an annual financial statement audit of a private fund and, in connection with an adviser-led secondary transaction, a fairness opinion from an independent opinion provider, and (e) impose further
Without Commission action, private funds and private fund advisers would have limited abilities and incentives to implement effective reform. First, it may be difficult for private funds to adopt a common, standardized set of detailed disclosures and practices. This is because investors and advisers compete and negotiate independently of each other, and also because of the substantial complexity of information that fund advisers maintain on their funds and may potentially disclose. For example, and as discussed above, developing an industry standard on fee and expense disclosures would require independent and competing investors and advisers to determine which of management fees, fund expenses, performance-based compensation, monitoring fees, and more should be disclosed and at what frequency.
Second, fund adviser incentives to develop and implement reforms, such as developing more detailed disclosures, are limited by principal-agent problems that are inherent to the relationship between fund advisers and clients.
These issues carry costs and risks of investor harm in financial markets. The relationship between fund adviser and investor can provide valuable opportunities for diversification of investments and an efficient avenue for the raising of capital, enabling economic growth that would not otherwise occur. However, the current opacity of the market can prevent even sophisticated investors from optimally obtaining certain terms of agreement from fund advisers, and this can result in investors paying excess costs, bearing excess risk, receiving limited and less reliable information about investments, and receiving contractual terms that may reduce their returns relative to what they would obtain otherwise. The proposed rules provide a regulatory solution that addresses these problems and enhances the protection of investors. Moreover, the proposed rules do so in a way that does not deprive fund advisers of compensation for their services: Insofar as the proposed rules shift costs and risks back onto fund advisers, the rules strengthen the incentives of advisers to manage risk in the interest of fund investors and, in doing so, does not preclude fund advisers from responding by raising prices of services that are not prohibited and are appropriately, transparently disclosed.
The costs of the proposed rules would include the costs of meeting the minimum regulatory requirements of the rules, including the costs of providing standardized disclosures and, for some funds, refraining from prohibited activities, and obtaining the required external financial statement audit and fairness opinions. Additional costs would arise from the new compliance requirements of the proposed rules. For example, some advisers would update their compliance programs in response to the requirement to make and keep a record of their annual review of the program's implementation and effectiveness. Certain fund advisers may also face costs in the form of declining revenue, declining in compensation to fund personnel and a potential resulting loss of employees, or losses of investor capital. However, some of these costs, such as declining compensation to fund personnel, would be a transfer to investors depending on the fund's economic arrangement with the adviser.
Below we discuss these benefits and costs in more detail and in the context of the specific elements of the proposal.
We are proposing to require a registered investment adviser to prepare a quarterly statement for any private fund that it advises, directly or indirectly, that has at least two full calendar quarters of operating results, and distribute the quarterly statement to the private fund's investors within 45 days after each calendar quarter end, unless such a quarterly statement is prepared and distributed by another person.
We discuss the costs and benefits of this proposal to require a quarterly account statement below. The Commission notes, however, that it is generally difficult to quantify these economic effects with meaningful precision, for a number of reasons. For example, there is a lack of quantitative data on the extent to which advisers currently provide information that would be required to be provided under the proposed rule to investors. Even if these data existed, it would be difficult to quantify how receiving such information from advisers may change investor behavior. In addition, the benefit from the requirement to provide the mandated performance disclosures would depend on the extent to which investors already receive the mandated information in a clear, concise, and comparable manner. As discussed above, however, we believe that the format and scope of these disclosures vary across advisers and private funds, with some disclosures providing limited information while others are more detailed and complex.
The proposed rule would require an investment adviser that is registered or required to be registered and that provides investment advice to a private fund to provide to each of the private fund investors with a quarterly statement containing certain information regarding fees and expenses, including fees and expenses paid by underlying portfolio investments to the adviser or its related persons, is distributed to the fund's investors. The quarterly statement would include a table detailing all adviser compensation to advisers and related persons, fund expenses, and the amount of offsets or rebates carried forward to reduce future payments or allocations to the adviser or its related persons.
The effect of this requirement to provide a standardized minimum amount of information in an easily understandable format would be to lower the cost to investors of monitoring fund fees and expenses, lower the cost to investors of monitoring any conflicting arrangements, improve the ability of investors to negotiate terms related to the governance of the fund, and improve the ability of investors to evaluate the value of services provided by the adviser and other service providers to the fund.
For example, investors could more easily compare actual investment returns to the projections they received prior to investing. As discussed above, any waterfall arrangements governing
Investors may also find it easier to compare alternative funds or other investments. As a result, some investors may reallocate their capital among competing fund investments and, in doing so, achieve a better match between their choice of private fund and their preferences over private fund terms, investment strategies, and investment outcomes. For example, investors may discover differences in the cost of compensating advisers across funds that lead them to move their assets into funds (if able to do so) with less costly advisers or other service providers. Investors may also have an improved ability to negotiate expenses and other arrangements in any subsequent private funds raised by the same adviser. Investors may therefore face lower overall costs of investing in private funds as a benefit of the standardization. In addition, an investor may more easily detect errors by reading the adviser's disclosure of any offsets or rebates carried forward to subsequent periods that would reduce future adviser compensation. This information would make it easier for investors to understand whether they are entitled to additional reductions in future periods.
Because the rule requires disclosures at both the private-fund level and the portfolio level, investors can more easily evaluate the aggregate fees and expenses of the fund, including the impact of individual portfolio investments. The private fund level information would allow investors to more easily evaluate their fund fees and expenses relative to the fund governing documents, evaluate the performance of the fund investment net of fees and expenses, and evaluate whether they want to pursue further investments with the same adviser or explore other potential investments. The portfolio investment level information would allow investors to evaluate the fees and costs of the fund more easily in relation to the adviser's compensation and ownership of the portfolio investments of the fund. For example, investors would be able to evaluate more easily whether any portfolio investments are providing compensation that could entitle investors to a rebate or offset of the fees they owe to the fund adviser. This information would also allow investors to compare the adviser's compensation from the fund's portfolio investments relative to the performance of the fund and relative to the performance of other investments available to the investor. To the extent that this heightened transparency encourages advisers to make more substantial disclosures to prospective investors, investors may also be able to obtain more detailed fee and expense and performance data for other prospective fund investments. As a result of these required disclosures, investor choices over private funds may more closely match investor preferences over private fund terms, investment strategies, and investment outcomes.
The magnitude of the effect depends on the extent to which investors do not currently have access to the information that would be reported in the quarterly statement in an easily understandable format. While many advisers not required to send quarterly statements choose to do so anyway, existing quarterly statements are not standardized across advisers and may vary in their level of detail. For example, we understand that many private equity fund governing agreements are broad in their characterization of the types of expenses that may be charged to portfolio investments and that investors receive reports of fund expenses that are aggregated to a level that makes it difficult for investors to verify that the individual charges to the fund are justified.
The cost of the proposed changes in fee and expense disclosure would include the cost of compliance by the adviser. For advisers that currently maintain the records needed to generate the required information, the cost of complying with this new disclosure requirement would be limited to the costs of compiling, preparing, and distributing the information for use by investors and the cost of distributing the information to investors. We expect these costs would generally be ongoing costs. Advisers would also incur costs associated with determining and verifying that the required disclosures comply with the format requirements under the proposed rule, including demands on personnel time required to verify that disclosures are made in plain English regarding the manner in which calculations are made and to verify that disclosures include cross-references to the sections of the private fund's organizational and offering documents. This also includes demands on personnel time to verify that the information required to be provided in tabular format is distributed with the correct presentation. Advisers may also choose to undertake additional costs of ensuring that all information in the quarterly statements is drafted
Some of these costs of compliance could be reduced by the rule provision providing that advisers must consolidate the quarterly statement reporting to cover substantially similar pools of assets, avoiding duplicative costs across multiple statements. However, in other cases the rule provision requiring consolidation may further increase the costs of compliance with the proposed rules, not decrease the costs of compliance. For example, in the case where a private fund adviser is preparing quarterly statements for investors in a feeder fund, and therefore consolidating statements between a master fund and its feeder funds, the consolidation may require the adviser to calculate the feeder fund's proportionate interest in the master fund on a consolidated basis. The additional costs of these calculations of proportionate interest in the master fund, to the extent the adviser does not already undertake this practice, may offset any reduced costs the adviser receives from not being required to undertake duplicative costs across multiple statements.
There are other aspects of the rule that would impose costs. The proposed rule would require each portfolio investment table to list the fund's ownership percentage of covered portfolio investments as of the end of the reporting period and impose record-keeping and timing requirements. The costs associated with implementing this requirement are likely to vary among advisers depending on the current record keeping and disclosure practices of the adviser. These costs are likely to be initially higher, but could also vary over time. In addition, some advisers may choose to update their systems and internal processes and procedures for tracking fee and expense information in order to better respond to this disclosure requirement. The costs of those improvements would be an indirect cost of the rule, to the extent they would not occur otherwise, and they are likely to be higher initially than they would be on an ongoing basis.
Under the proposed rule, these compliance costs may be borne by advisers and, where permissible, could be imposed on funds and therefore indirectly passed on to investors. For example, under current practice, advisers to private funds generally charge disclosure and reporting costs to the funds, so that those costs are ultimately paid by the fund investors. Also, currently, to the extent advisers use service providers to assist with preparing statements (
Further, to the extent that the additional standardization and comparability of the information in the required disclosures makes it more difficult to charge fees higher than those charged for similar adviser services or otherwise to continue current levels and structures of fees and expenses, the proposal may reduce revenues for some advisers and their related persons. These advisers may respond by reducing their fees or by differentiating their services from those provided by other advisers, including by, for example, increasing the quality of their services in a manner that could attract additional capital to funds they advise. To the extent these reduced revenues result in reduced compensation for some advisers and their related persons, those entities may become less competitive as employers. However, this cost is likely to be mitigated because some advisers may attract new capital under the proposal, and so those advisers and their related persons may become more competitive as employers.
Advisers would also be required to include standardized fund performance information in each quarterly statement provided to fund investors. Specifically, the proposed rule would require an adviser to a fund considered a liquid fund under the proposed rule to disclose the fund's annual total returns for each calendar year since inception and the fund's cumulative total return for the current calendar year as of the end of the most recent calendar quarter covered by the quarterly statement.
As a result of these performance disclosures, some investors would find it easier to obtain and use information about the performance of their private fund investments. They may, for example, find it easier to monitor the performance of their investments and compare the performance of the private funds in their portfolios to each other and to other investments. In addition, they may use the information as a basis for updating their choices between
We understand that some investors receive the required performance information under the baseline, independently of the proposed rule. For example, some investors receive performance disclosures from advisers on a tailored basis. Those investors may not experience easier access to performance information from the proposal. They may, however, benefit from standardization of the information in quarterly statements across investors in a fund and across advisers. For example, the standardization of the data that a fund provides to all of its investors could benefit some investors by facilitating the development and sharing of tools and methods for analyzing the data among the various investors of the fund. In addition, to the extent that investors share the complete, comparable data with consultants or other intermediaries they work with (as is often current practice to the extent permitted under confidentiality provisions), this may allow such intermediaries to provide broader views across the private funds market or segments of the market. This may facilitate better decision making and capital allocation more broadly.
The required presentation of performance information and the resulting economic benefits would vary based on whether the fund is determined to be a liquid fund or an illiquid fund. For example, for private equity and other funds determined to be illiquid funds, investors would benefit from receiving multiple pieces of performance information, because the shortcomings discussed above that are associated with each method of measuring performance make it difficult for investors to evaluate fund performance from any singular piece of performance information alone, such as IRR or MOIC.
The cost of the required performance disclosure by fund advisers would vary according to the existing practices of the adviser and the complexity of the required disclosure. For advisers who already (under their current practice) incur the costs of generating the necessary performance data, presenting and distributing it in a format suitable for disclosure to investors, and checking the disclosure for accuracy and completeness, the cost would likely be small. In particular, for those advisers, the cost of the performance disclosure may be limited to the cost of reformatting the performance information for inclusion in the mandated quarterly report. However, we understand that some advisers may face costs of changing their performance tracking or reporting practices under the current rule. Some of these costs would be direct costs of the rule requirements. Costs of updating an adviser's internal controls or internal compliance system to verify the accuracy and completeness of the reported performance information would be indirect costs of the rule. We expect the bulk of the costs associated with complying with this aspect of the proposed rules would likely be most substantial initially rather than on an ongoing basis.
Some of these costs of compliance could again be affected by the rule provision providing that advisers must consolidate the quarterly statement reporting to cover substantially similar pools of assets. These costs of compliance would be reduced to the extent that advisers are able to avoid duplicative costs across multiple statements, but would be increased to the extent that advisers must undertake costs associated with calculating feeder fund proportionate interests in a master fund, to the extent advisers do not already do so.
The required presentation of performance, and the resulting costs, would vary based on whether the fund is categorized as liquid or illiquid. In particular, for funds determined to be liquid funds, the cost is mitigated by the limited nature of the required disclosure, as the proposal requires only annual total returns and cumulative total returns for the current calendar year as of the end of the most recent calendar quarter covered, while the more detailed required disclosures for funds determined to be illiquid funds may require greater cost (yielding, as just discussed, greater benefit).
Under the proposed rule, these compliance costs may be borne by advisers and, where permissible, could be imposed on funds and therefore indirectly passed on to investors. For example, under current practice, advisers to private funds generally charge disclosure and reporting costs to the funds, so that those costs are ultimately paid by the fund investors. Similarly, to the extent advisers currently use service providers to assist with performance reporting (
Further, to the extent that the additional standardization and comparability of the information in the required disclosures make it easier for investors to compare and evaluate performance, the rule may prompt some investors to search for and seek higher performing investment opportunities. This could reduce the ability for advisers of low-performing funds to attract additional capital. By the same rationale, the rule may prompt some
The proposed rules would prohibit a private fund adviser from engaging in certain activities with respect to the private fund or any investor in that private fund, including (i) charging certain regulatory and compliance fees and expenses or fees or expenses associated with certain examinations or investigations,
We discuss the costs and benefits of each of these prohibitions and requirements below. The Commission notes, however, that several factors make the quantification of many of these economic effects of the proposed amendments and rules difficult. For example, there is a lack of data on the extent to which advisers engage in certain of the activities that would be prohibited under the proposed rules, as well as their significance to the businesses of such advisers. It is, therefore, difficult to quantify how costly it would be to comply with the prohibitions. Similarly, it is difficult to quantify the benefits of these prohibitions, because there is a lack of data regarding how and to what extent the changed business practices of advisers would affect investors, and how advisers may change their behavior in response to these prohibitions. Further, there is a lack of data on the frequency with which advisers grant certain investors the preferential treatment that would be prohibited under the proposed rules, as well as the frequency with which preferential terms are currently disclosed to other investors, as well as how and to what extent these disclosures affect investor behavior. As a result, parts of the discussion below are qualitative in nature.
The proposal would prohibit a private fund adviser from charging the fund for fees or expenses associated with an examination or investigation of the adviser or its related persons by any governmental or regulatory authority or for the regulatory and compliance fees and expenses of the adviser or its related persons.
This prohibition would impose direct costs on advisers from the need to update their charging and contracting practices to bring them into compliance with the new requirements. Advisers would also incur costs related to this prohibition, in connection with not being able to charge private fund clients for the prohibited expenses. In addition, advisers may incur indirect costs related to adapting their business models in order to identify and substitute non-prohibited sources of revenue. For example, advisers may identify and implement methods of replacing the lost charges from the prohibited practice with the other sources of fund revenue. These costs would likely be transitory.
Further, as discussed above, we understand that certain private fund advisers, most notably hedge funds and other funds determined to be liquid funds,
Moreover, to the extent that re-structuring a pass-through expense model of a hedge fund under the proposal diverts the hedge fund's resources away from the hedge fund's investment strategy, this could lead to a lower return to investors in hedge funds. The cost of lower returns would be mitigated to the extent that investors can distinguish and identify those funds that require restructuring as to how they collect revenue from investors and use this information to search for and identify substitute funds that have expense models that do not need to be restructured under the rule and that do not present the investor with reduced returns as a result of the rule. Investors would also need to be able to evaluate whether these substitute funds would be likely to present them with better performance than their current funds. Any such search costs would be a cost of the rule. As a result, the cost to investors may include a combination of the cost of lower returns and the cost of avoiding such reductions in returns.
In addition, the proposal would prohibit a private fund adviser from charging a portfolio investment for monitoring, servicing, consulting or other fees in respect of services that the adviser does not, or does not reasonably expect, to provide to the portfolio investment, such as through an accelerated payment. As discussed above, these fees are likely to reflect conflicts of interest between the fund and the adviser that are difficult for the investor to detect and mitigate.
Investors would also benefit directly via lower costs from the prohibition through the elimination of the fees charged to the fund's portfolio investment.
This prohibition would impose direct costs on advisers from the need to update their charging and contracting practices to bring them into compliance with the new requirements. Advisers would also incur costs related to this prohibition in connection with not being able to receive these charges for unperformed services. For example, advisers would incur costs in connection with not being able to receive the accelerated payments, and as a result, advisers could attempt to replace the accelerated payments with some new fee or charge. Advisers could, therefore, incur transitory costs related to adapting their business models in order to identify and substitute non-prohibited sources of revenue. These costs may be particularly high in the short term to the extent that advisers re-negotiate, re-structure and/or revise certain existing deals or existing economic arrangements in response to this prohibition.
In addition, investors may incur some costs from this prohibition that take the form of lower returns from certain fund investments, depending on the extent to which the fund adviser's loss of revenue from the prohibited activity diverts resources away from the fund's investment strategy. For example, the loss of revenue under this prohibition could cause some advisers to update their portfolio investment strategies, so that they are less reliant on the prohibited fees for revenue. The advisers could limit their portfolio investments that are reliant on accelerated payments for revenue, for example. This could lead to a cost to investors in the form of reduced returns from those investments. Investors could mitigate this cost to the extent that they can distinguish and identify those funds that require restructuring as to how they collect revenue from investors and use this information to search for and identify substitute funds that do not present the investor with reduced returns as a result of the rule. Investors would also need to be able to evaluate whether these substitute funds would be likely to present them with better performance than their current funds. These alternative search costs would be a cost of the rule. As a result, the cost of the prohibition to investors could thus include a combination of the cost of lower returns and the cost of avoiding such reductions in returns.
The proposal would prohibit a private fund adviser from charging certain fees and expenses related to a portfolio investment (or potential portfolio investment) on a non-pro rata basis when multiple private funds and other clients advised by the adviser or its related persons have invested (or propose to invest) in the same portfolio investment.
These non-pro rata fee and expense allocations tend to adversely affect some investors who are placed at a disadvantage to other investors. We associate these practices and disadvantages with a tendency towards opportunistic hold-up of investors by advisers, involving exploitation of an informational or bargaining advantage.
Investors could either benefit or face costs from the resulting revised apportionment of expenses to the fund they are invested in, based on whether their share of expenses is decreased or increased under the rule. Investing clients in these portfolio investments paying greater than pro rata shares of such fees and expenses would benefit as a result of lowered fees. However, to the extent that a client was previously able to obtain fee and expense allocations at rates less than a pro rata apportionment, the client could incur higher fee and expense costs in the future. Investors may not be aware of the extent to which fees are charged on a non pro-rata basis. Even if disclosed, the complexity of fee arrangements may mean that these arrangements are hard to follow. More sophisticated investors may be aware that they risk non pro-rata fees, but nonetheless be harmed by the uncertainty from complex fee arrangements. Fund advisers may face a commitment problem in that they and their clients might be better off if they could commit to pro-rata arrangements; thus a prohibition could serve as a net benefit to clients and advisers.
This prohibition would impose direct costs on advisers to updating their charging and contracting practices to bring them into compliance with the new requirements. These compliance costs may be particularly high in the short term to the extent that advisers re-negotiate, re-structure, and/or revise certain existing deals or existing economic arrangements in response to this prohibition. Advisers may face additional costs in the form of lower expenses and fees, to the extent that less flexible pro-rata fee and expense allocations result in lower average fees and expenses to the adviser or are more costly to administer and monitor.
The proposal prohibits an adviser, directly or indirectly, from borrowing money, securities, or other fund assets, or receiving a loan or an extension of credit, from a private fund client.
Advisers may experience costs as a result of this prohibition related to any marginal increases in the cost of capital incurred from new sources of borrowing, as compared to what was being charged by the fund.
The proposed rule would prohibit certain uses of fund resources by the private fund adviser by prohibiting advisers from reducing the amount of their clawback obligation by actual, potential, or hypothetical taxes applicable to the adviser, its related persons, or their respective owners or interest holders.
This prohibition would impose direct costs on advisers of updating their charging and contracting practices to bring them into compliance with the new requirements. Advisers may also attempt to mitigate the greater costs of clawbacks under the prohibition by introducing some new fee, charge, or other contractual provision that would make up for the lost tax reduction on the clawback, and they would then incur costs of updating their contracting practices to introduce these new provisions.
Advisers may attempt to mitigate their increased costs associated with clawbacks by reducing the risk of a clawback occurring. For example, certain advisers may adopt new waterfall arrangements designed to delay carried interest payments until later in the life of a fund, in order to limit the possibility of a clawback or reduce the possible sizes of clawbacks. In this case, investors would benefit from earlier distributions of proceeds from the fund and reduced costs associated with monitoring their potential need for a clawback. However, some fund advisers are able to attract investors even though their fund terms do not provide for full or partial clawbacks. To the extent such advisers were able to update their business practices, for example by providing for an advance on tax payments with no option for a clawback, this would reduce the benefit of the proposal, as investors would continue to receive the reduced clawback amounts and bear portions of the adviser's tax burden. In either case, advisers would also bear additional costs from the proposal of updating their business practices.
Advisers could, therefore, incur transitory costs related to adapting their business models in order to identify and substitute non-prohibited sources of revenue. These direct costs may be particularly high in the short term to the extent that advisers re-negotiate, re-structure, and/or revise certain existing deals or existing economic arrangements in response to this prohibition.
In addition, the proposal would prohibit an adviser to a private fund, directly or indirectly, from seeking reimbursement, indemnification, exculpation, or limitation of its liability by the private fund or its investors for a breach of fiduciary duty, willful misfeasance, bad faith, negligence, or recklessness in providing services to the private fund.
Further, these contractual clauses may lead investors to believe that they do not have any recourse in the event of such a breach. To the extent that any such investors do not seek damages under this belief, the contractual clauses eliminating liability for breach of fiduciary duty would represent a harm to the investors. By prohibiting these scenarios, this proposal could make such breaches of fiduciary duty incrementally less likely to occur. Investors would therefore benefit from a reduced need to engage in costly research or negotiations with the adviser to prevent such breaches.
The proposal would prohibit a private fund adviser from providing certain preferential terms to some investors that have a material negative effect on other investors in the private fund or in a substantially similar pool of assets. We associate these practices with a tendency towards opportunistic hold-up of investors by advisers, involving the exploitation of an informational or bargaining advantage by the adviser or advantaged investor.
Benefits may accrue from these prohibitions in two situations. First, the prohibitions may benefit the non-preferred investors in situations where advisers lack the ability to commit to avoid the opportunistic behavior after entering into the agreement (or relationship) with the investor. For example, similar to the case regarding non-pro rata fee and expense allocations, an adviser with repeat business from a large investor with early redemption rights and smaller investors with no early redemption rights may have adverse incentives to take on extra risk, as the adviser's preferred investor could exercise its early redemption rights to avoid the bulk of losses in the event an investment begins to fail. The adviser would then continue to receive repeat business with the investors with preferential terms, to the detriment of the investors with no preferential terms.
Investors who do receive preferential terms may also receive information over the course of a fund's life that the investors can use to their own gain but to the detriment of the fund and, by extension, the other investors. For instance, if a fund was heavily invested in a particular sector and an investor with early redemption rights learned the sector was expected to suffer deterioration, that investor could submit a redemption request, securing their funds early but forcing the fund to sell assets in a declining market, harming the other investors. In this situation, the prohibitions would provide a solution to the hold-up problem that is not currently available. The rule would benefit the disadvantaged investors by prohibiting such a situation, and so the disadvantaged investors would be less susceptible to hold-up and experience better performance on their fund investments as a benefit of the proposed rule.
Second, in situations where investors face uncertainty as to whether the adviser engages in the prohibited practice, the benefit from the prohibition would be to eliminate the costs to investors of avoiding entering into agreements with advisers that engage in the practice and the costs to investors from inadvertently entering into such agreements.
Specifically, in this second case, the prohibited preferential terms would harm investors in private funds and cause investors to incur extra costs of researching fund investments to avoid fund investments in which the prospective fund adviser engages in these practices (or costs of otherwise avoiding or mitigating the harm to those disadvantaged investors from the practice). The benefit of the prohibition to investors would be to eliminate such costs. It would prohibit disparities in treatment of different investors in substantially similar pools of assets in the case where the disparity is due to the adviser placing their own interests ahead of the client's interests or due to behavior that may be deceptive. Investors would benefit from the costs savings of no longer needing to evaluate whether the adviser engages in such practices. Investors and advisers also may benefit from reduced cost of negotiating the terms of a fund investment. Investors who would have been harmed by the prohibited practices would benefit from the elimination of such harms through their prohibition.
The cost of the prohibitions would depend on the extent to which investors would otherwise obtain such preferential terms in their agreements with advisers and the conditions under which they make use of the preferential treatment. Investors who would obtain and make use of the preferential terms would incur a cost of losing the prohibited redemption and information rights. This would include any investors who might benefit from the ability to redeem based on negotiated exceptions to the private fund's stated redemption terms, in addition to the investors who might benefit from the hold-up problems discussed above. In addition, advisers would incur direct costs of updating their processes for entering into agreements with investors, to accommodate what terms could be effectively offered to all investors once the option of preferential terms to certain investors has been removed. These direct costs may be particularly high in the short term to the extent that advisers re-negotiate, re-structure and/or revise certain existing deals or existing economic arrangements in response to this prohibition.
To the extent advisers respond to the prohibition by developing new preferential terms and disclosing them to all investors, there may be new costs to investors who do not receive these new preferential terms. As discussed below, such costs would be mitigated by
The proposed rule also would prohibit other preferential terms unless the adviser provides certain written disclosures to prospective and current investors, and these disclosures must contain information regarding all preferential treatment the adviser provides to other investors in the same fund.
Disclosures of such preferential treatment would impose direct costs on advisers to update their contracting and disclosure practices to bring them into compliance with the new requirements, including by incurring costs for legal services. These direct costs may be particularly high in the short term to the extent that advisers re-negotiate, re-structure and/or revise certain existing deals or existing economic arrangements in response to this prohibition. However, these costs may also be reduced by an adviser's choice between not providing the preferential terms and continuing to provide the preferential terms with the required disclosures, as the costs to some advisers from not providing the preferential terms to investors may be lower than the costs from the disclosure.
As discussed below, for purposes of the PRA, we anticipate that the disclosure of preferential treatment would impose an aggregate annual internal cost of $128,902,375 and an aggregate annual external cost of $32,550,000, or a total cost of $161,452,375 annually.
To the extent that these disclosures could discourage advisers from providing certain preferential terms in the interest of avoiding future negotiations with other investors on similar terms, this prohibition could ultimately decrease the likelihood that some investors are granted preferential terms. As a result, some investors may find it harder to secure such terms.
The proposed audit rule would require an investment adviser that is registered or required to be registered to cause each private fund that it advises, directly or indirectly, to undergo a financial statement audit that meets certain elements at least annually and upon liquidation, if the private fund does not otherwise undergo such an audit. These audits would need to be performed by an independent public accountant that meets certain standards of independence and is registered with and subject to regular inspection by the PCAOB, and the statements would need to be prepared in accordance with U.S. GAAP or, for foreign private funds, must contain information substantially similar to statements prepared in accordance with U.S. GAAP, with material differences with U.S. GAAP reconciled.
In addition, the rule would require advisers to obtain fairness opinions from an independent opinion provider in connection with certain adviser-led secondary transactions with respect to a private fund. This requirement would not apply to advisers that are not required to register as investment advisers with the Commission, such as state-registered advisers and exempt reporting advisers. In connection with this fairness opinion, the proposal would also require a summary of any material business relationships the adviser or any of its related persons has, or has had within the past two years, with the independent opinion provider. The proposal would lastly require all advisers, not just those to private funds, to document the annual review of their compliance policies and procedures in writing.
We discuss the costs and benefits of these rule provisions below. The Commission notes, however, several factors make the quantification of many of the economic effects of the proposed amendments and rules difficult. For example, there is a lack of quantitative data on the extent to which adviser-led secondaries without fairness opinions differ in fairness of price from adviser-led secondaries with fairness opinions attached. It would also be difficult to quantify how investors and advisers may change their preferences over secondary transactions once fairness opinions are required to be provided. As a result, parts of the discussion below are qualitative in nature.
We recognize that many advisers already provide audited fund financial statements to fund investors in connection with the adviser's alternative compliance with the custody rule. However, to the extent that an adviser does not currently have its private fund client undergo a financial statement audit, investors would receive more reliable information from private fund advisers as a result of the proposed audit rule. The benefit to investors in securitized asset funds may be relatively greater from the proposal, given the relatively lower frequency with which securitized asset funds currently undergo financial statement audits.
The audit requirement would provide an important check on the adviser's valuation of private fund assets, which often serve as the basis for the calculation of the adviser's fees. These audits would likely detect valuation irregularities or errors, as well as an investment adviser's loss, misappropriation, or misuse of client investments. It may thereby limit some opportunities for advisers to materially over-value investments. Audits provide substantial benefits to private funds and their investors because audits also test other assertions associated with the investment portfolio (
Investors who are not currently provided with audited fund financial statements, and who would be under the proposal, may, as a result, have additional confidence in information regarding their investments and, in turn, the fees being paid to advisers. Further, this additional confidence may facilitate investors' capital allocation decisions. Anticipating a lower risk of harm from a private fund investment, investors may be more likely to invest in private funds and participate in the resulting returns.
As discussed above, currently not all financial statement audits are necessarily conducted by a PCAOB-registered independent public accountant that is subject to regular inspection.
In addition, investors would benefit from enhanced regulatory oversight as a result of the requirement for the adviser to engage the auditor to notify the Commission under some conditions.
The proposal's requirement that an adviser distribute a fairness opinion and summary of material business relationships with the opinion provider in connection with certain adviser-led secondary transactions may provide similar increases in investor confidence in the specific context of adviser-led secondary transactions. This requirement would provide an important check against an adviser's conflicts of interest in structuring and leading these transactions. Investors would have decreased risk of experiencing harm from mis-valuation of secondary-led transactions. Further, anticipating a lower risk of harm from mis-valuation when participating in such transactions, investors may be more likely to participate. The result may be a closer alignment between investor choices and investor preferences over private fund terms, investment strategies, and investment outcomes. These benefits would, however, be reduced to the extent that advisers are already obtaining fairness opinions as a matter of best practice.
Finally, this proposed rule amendment would require all SEC-registered advisers to document the annual review of their compliance policies and procedures in writing. This would allow our staff to better determine whether an adviser has complied with the review requirement of the compliance rule, and would facilitate remediation of non-compliance. Because our staff's determination of whether the adviser has complied with the compliance rule will become more effective, the rule may reduce the risk of non-compliance, as well as any risk to investors associated with non-compliance.
These benefits from mandatory audits and fairness opinions are particularly relevant for illiquid investments. Illiquid assets currently are where we believe it is most feasible for financial information to have material misstatements of investment values, for adviser-led secondary transactions to occur at unfair prices, and where there is broadly a higher risk of investor harm from potential conflicts of interest or fraud. This is because currently, as discussed above, advisers may use a high level of discretion and subjectivity in valuing a private fund's illiquid investments, and the adviser further may have incentives to bias the fair value estimates of the investment upwards in order to generate larger fees.
As discussed above, we recognize that many advisers already provide audited financial statements to fund investors in connection with the adviser's alternative compliance with the custody rule.
As discussed below, based on Form ADV filings, as of November 30, 2021, there were 5,037 registered advisers providing advice to private funds, and we estimate that these advisers would, on average, each provide advice to 9 private funds.
For example, all or a portion of the costs described in this section may be disproportionately borne by advisers or investors (or both) to securitized asset funds,
For advisers that had been complying with the surprise examination requirement of the custody rule and do not have other clients (
We also understand that the PCAOB registration and inspection requirement may limit the pool of auditors that are eligible to perform these services which could, in turn, increase costs, as a result of the potential for these auditors to charge higher prices for their services. The increase in demand for these services, however, may be limited in light of the high percentage of funds already being audited.
The indirect costs of the independent audit requirement would depend on the quality of the financial statements of the funds newly subject to audits. These costs may be relatively higher for the funds with lower quality financial statements (
Costs would also be incurred related to obtaining the required fairness opinion and material business relationship summary in the case of an adviser-led secondary transaction. For purposes of the PRA, we estimate that 10% of advisers providing advice to private funds conduct an adviser-led secondary transaction each year and that the funds would pay external costs of $40,849 for each fairness opinion and material business relationship summary.
The costs associated with obtaining fairness opinions could dissuade some private fund advisers from leading these transactions, which could decrease liquidity opportunities for some private fund advisers. Under current practice, some investors bear the expense associated with obtaining a fairness opinion if there is one. To the extent not prohibited, we expect similar arrangements may be made going forward to comply with the proposed rule. Advisers could alternatively attempt to introduce substitute charges (for example, increased management fees) in order to cover the costs of compliance with the rule, but their ability to do so may depend on the willingness of investors to incur those substitute charges.
In addition, the required documentation of the annual review of the fund compliance program has direct costs that include the cost of legal services associated with the preparation of such documentation. As discussed below, for purposes of the PRA, we anticipate that the requirement for all SEC-registered advisers to document the annual review of their compliance policies and procedures in writing would, for all advisers, impose 44,496 hours of internal annual burden hours at a cost of approximately $18.9 million for internal time, and approximately $4.1 million for external costs.
Finally, the proposed amendment to the recordkeeping rule would require advisers who are registered or required to be registered to retain books and records related to the proposed quarterly statement rule,
These requirements would impose costs on advisers related to maintaining these records. As discussed below, for purposes of the PRA, we anticipate that the additional recordkeeping obligations would impose, for all advisers, 40,800 hours of internal annual burden hours and that the annual cost would be approximately $2.8 million.
The proposed rules would likely enhance economic efficiency by enabling investors more easily to identify funds that align with their preferences over private fund terms, investment strategies, and investment outcomes, and also by causing fund advisers to align their actions more closely with the interests of investors through the elimination of prohibited practices.
First, the proposed rules could increase the usefulness of the information that investors receive from private fund advisers regarding the fees, expenses, and performance of the fund, and regarding the preferential treatment of certain investors of the fund through the more detailed and standardized disclosures discussed above.
Regarding preferential treatment, the proposed rules further align fund adviser actions and investor interests by prohibiting certain preferential treatment practices altogether (instead of only requiring disclosure), specifically prohibiting preferential terms regarding liquidity or transparency that have a material, negative impact on investors in the fund or a substantially similar pool of assets.
In addition, the proposed rules' requirements for advisers to obtain audits of fund financial statements would enhance investor protection and thereby improve the efficiency of the investment adviser search process. While many proposed disclosure requirements involve disclosures only to current investors, and not prospective investors, the proposed rule's disclosure requirements may enhance efficiency through the tendency of some fund advisers to rely on investors in current funds to be prospective investors in their future funds. For example, when fund advisers raise multiple funds sequentially, current investors can base their decisions on whether to invest in subsequent funds based on the disclosures of the prior funds.
Lastly, the proposed rules prohibit various activities that represent possible conflicting arrangements between investors and fund advisers. To the extent that investors currently bear costs of searching for fund advisers who do not engage in these arrangements, or bear costs associated with monitoring fund adviser conduct to avoid harm, then prohibiting these activities may lower investors' overall costs of searching for, monitoring, and choosing among alternative private fund
There may be losses of efficiency from the proposed rules to prohibit various activities, and from any changes in fund practices in response to the proposed rules, to the extent that investors currently benefit from those activities or incur costs from those changes. For example, investors who currently receive preferential terms that would be prohibited under the proposal may have only invested with their current adviser because they were able to secure preferential terms. With those preferential terms removed, those investors may choose to re-evaluate the match between their choice of adviser and their overall preferences over private fund terms, investment strategy, and investment outcomes. Depending on the results of this re-evaluation, those investors may choose to incur costs of searching for new fund advisers or alternative investments.
The proposed rules may also affect competition in the market for private fund investing. As discussed above, private fund adviser fees may currently total in the hundreds of billions of dollars per year.
First, to the extent that the enhanced transparency of certain fees, expenses, and performance of private funds under the proposal may reduce the cost to some investors of comparing private fund investments, then current investors evaluating whether to continue investing in subsequent funds may be more likely to reject future funds raised by their current adviser in favor of the terms of competing funds, including new funds that advisers may offer as alternatives that they would not have offered absent the increased transparency.
To the extent that this heightened transparency encourages advisers to make more substantial disclosures to prospective investors, investors may also be able to obtain more detailed fee and expense and performance data for other prospective fund investments, strengthening the effect of the proposal on competition.
Second, because enhanced transparency of preferential treatment will be provided to both current and prospective investors, there may be reduced search costs to all investors seeking to compare funds on the basis of which investors receive preferential treatment. For example, some funds may lose investors who only participated in the fund because of the preferential terms they received. We anticipate that investors withdrawing from a fund because of a loss of preferential treatment would redeploy their capital elsewhere, and so new advisers would have a new pool of investment capital to pursue.
We believe the proposed rules would facilitate capital formation by causing advisers to more efficiently manage private fund clients, by prohibiting activities that may currently deter investors from private fund investing because they represent possible conflicting arrangements, and by enabling investors to choose more efficiently among funds and fund advisers. This may reduce the cost of intermediation between investors and portfolio investments. To the extent this occurs, this would lead to enhanced capital formation in the real economy, as portfolio companies would have greater access to the supply of financing from private fund investors. This would contribute to greater capital formation through greater investment into those portfolio companies.
The proposed rules may also enhance capital formation through their competitive effects by inducing new fund advisers to enter private fund markets.
Similarly, and in addition to lower costs of intermediation between investors and portfolio investments, the proposed rules may directly lower the costs charged by fund advisers to investors by improving transparency over fees and expenses. The proposed rules may also enhance overall investor returns (for example, as above, larger returns, less correlated returns across different investment strategies, or returns with more favorable risk profiles) by improving transparency over performance information, prohibiting conflicting arrangements, and requiring external financial statement audits and fairness opinions. To the extent these increased investor funds from lower expenses and enhanced returns are redeployed to new investments, there would be further benefits to capital formation.
There may be reduced capital formation associated with the proposed rules to prohibit various activities, to the extent that investors currently benefit from those activities. For example, investors who currently receive preferential terms that would be prohibited under the proposal may withdraw their capital from their existing fund advisers. Those investors may have less total capital to deploy after bearing costs of searching for new investment opportunities, or they may redeploy their capital away from private funds more broadly and into investments with less effective capital formation.
First, the Commission could consider broadening the application of this rule to, for example, apply to all advisers to private funds, rather than to only advisers to private funds that are registered or required to be registered. Extending the application of the proposed audit rule to all advisers and in the context of these pooled investment vehicles would increase the benefits of helping investors receive more reliable information from private fund advisers associated with the rule. Investors would, as a result, have greater assurance in both the valuation of fund assets and, because these valuations often serve as the basis for the calculation of the adviser's fees, the fees charged by advisers. However, the extension of the proposed rule to apply to all advisers would likely impose the costs of obtaining audits on smaller funds advised by unregistered advisers. For these types of funds, the cost of obtaining such an audit may be large compared to the value of fund assets and fees and the related value to investors of the required audit, and so this alternative could inhibit entry of new funds, potentially constraining the growth of the private fund market.
Second, instead of broadening the proposed audit rule, we could consider narrowing the rule by providing full or partial exemptions. For example, we could exempt smaller funds or we could exempt an adviser from compliance with the rule where an adviser plays no role in valuing the fund's assets, receives little or no compensation for its services, or receives no compensation based on the value of the fund's assets. We could also exempt advisers of hedge funds and other funds determined to be liquid funds. Further, we could provide an exemption for private funds below a certain asset threshold, for funds that have only related person investors, or for funds that are below a minimum asset value or have a limited number of investors.
These exemptions could also be applied in tandem, for example by exempting only advisers to hedge funds and other funds determined to be liquid funds below a certain asset threshold. For each of these categories, we could consider partial instead of full exemptions, for example by requiring an audit only every two (or more) years instead of not requiring any annual audits at all. Further, the benefits of the rule may not be substantial for funds below a minimum asset value, where the cost of obtaining such an audit would be relatively large compared to the value of fund assets and fees that the rule is intended to provide a check on.
We believe, however, that this narrower alternative with the above exemptions to the proposed audit rule would likely not provide the same investor protection benefits. Many of the investor protection benefits discussed above are specifically associated with the general applicability of the proposed audit rule.
Finally, instead of requiring an audit as described in the proposed audit rule, we could consider requiring that advisers provide other means of checking the adviser's valuation of private fund assets. For example, we could consider requiring that an adviser subject to the proposed audit rule provide information to substantiate the adviser's evaluation to its LPAC or, if the fund has no LPAC, then to all, or only significant investors in the fund. We believe that such methods for checking an adviser's methods of valuation would be substantially less expensive to obtain, which could reduce the cost burdens associated with an audit.
However, we believe that these alternatives would likely not accomplish the same investor protection benefits as the proposal to require an audit. As an immediate matter, limiting the requirement like so would undermine the broader goal of the proposal to standardize information made available to different investors. We believe, more generally, that these checks would not provide the same level of assurance over valuation and, by extension, fees, to fund investors as an audit. As discussed above, we have historically relied on financial statement audits to verify the existence of pooled investment vehicle investments.
The Commission could also consider requiring that additional and more granular information be provided in the quarterly statements that we are proposing be sent by registered investment advisers to investors in private funds. For example, we could require that these statements include investor-level capital account information, which would provide each investor with means of monitoring capital account levels at regular intervals throughout the year. Because this more specific information would show exactly how fees, expenses, and performance have affected the investor, it could, effectively, further reduce the cost to an investor of monitoring the value of the services the adviser provides to the investor. We believe, however, that requiring capital account information for each investor would substantially increase costs for funds associated with the preparation of these quarterly statements.
We could also, for example, require disclosure of performance information for each portfolio investment. For funds determined to be illiquid funds in particular, we could require advisers to report the IRR for portfolio investments, assuming no leverage, as well as the cash flows for each portfolio investment.
While we believe that advisers would have cash flow data for each portfolio investment available in connection with the preparation of the standardized fund performance information required to be reported pursuant to the proposed rule, calculating performance information for each portfolio investment in accordance with the rule could add significant operational burdens and costs, which would vary depending on factors that include the number of portfolio investments held by a private fund. The operational burden and cost would also depend on whether the alternative proposal required both gross and net performance information for each portfolio investment, which would determine whether the information reflected the impact of fund-level fees and expenses on the performance of each portfolio investment. Requiring both gross and net performance information for each portfolio investment would be of greater use to investors, but would come at a higher operational burden and cost, as providing net performance information would require more complex calculations to allocate fund fees and expenses across portfolio investments. Lastly, to the extent that advisers were required to disclose cash flows for each portfolio investment without the impact of fund-level subscription facilities, this calculation may be more burdensome than the single calculation required to
As a final granular addition to performance disclosures, the Commission could require the reporting of a wider variety of performance metrics for hedge funds and other funds determined to be liquid funds, similar to the detailed disclosure requirements for funds determined to be illiquid funds. These could include requirements for funds determined to be liquid funds to report estimates of fund-level alphas, betas, Sharpe ratios, or other performance metrics. We believe that for investors of funds determined to be liquid funds, absolute returns are of highest priority, and furthermore investors may calculate many of these additional performance metrics themselves by combining fund annual total returns with publicly available data. Therefore, we believe these additional reporting requirements would impose additional costs with comparatively little benefit.
Further, the Commission could also consider requiring less information be provided to investors in these quarterly statements. For example, instead of requiring the disclosure of comprehensive fee and expense information, we could require that advisers disclose only a subset of these, including investments fees and expenses paid by a portfolio company to the adviser. These fees in particular may currently present the biggest burden on investors to track, and requiring the disclosure of only these fees could reduce some costs associated with the effort of compiling, on a quarterly basis, information regarding management fees more generally. We believe, however, that if we did not require comprehensive information, investors would not derive the same utility in monitoring fund performance.
We could also consider requiring that comprehensive information regarding fees and performance be reported on Form ADV, instead of being disclosed to investors individually. Reporting publicly on Form ADV would continue to allow investors to monitor performance, while also allowing public review of important information about an adviser. However, because the information we propose to require under the rule is tailored to what we believe would serve existing investors in a fund, we believe that direct delivery to investors would better reduce monitoring costs for investors. Further, as discussed above, prospective investors have separate protections, including against misleading, deceptive, and confusing information in advertisements as set forth in the recently adopted marketing rule.
Instead of requiring disclosure of comprehensive fee and expense information to investors, we could consider prohibiting certain fee and expense practices. For example, we could prohibit charging fees at the fund level in excess of a certain maximum amount that we could determine to be what investors could reasonably anticipate being charged by an adviser. This could, effectively, protect investors from unanticipated charges, and reduce monitoring costs to investors. Further, we could prohibit certain compensation arrangements, such as the “2 and 20” model or compensation from portfolio investments, to the extent the adviser also receives management fees from the fund. Prohibition of the “2 and 20” model would cause investors to reallocate their capital way from funds that employ this model and toward other types of funds. It may cause advisers to consider and adopt more efficient models for private fund investing in which the adviser gets a smaller fee and the investor gets a larger share of the gross fund returns, and in which investors are generally better off.
Similarly, instead of requiring disclosure of comprehensive performance information to investors, we could consider prohibiting certain performance disclosure practices. For example, instead of requiring disclosure of performance without the effect of fund-level subscription facilities, we could consider prohibiting advisers from presenting performance with the effect of such facilities. Similarly, we could consider prohibiting advisers from presenting combined performance information for multiple funds, such as a main fund and a co-investment fund that pays lower or no fees. We believe that the required disclosures present the correct standardized, detailed information for investors to be able to evaluate performance, but we do not believe there are harms from advisers electing to disclose additional information. As such, we think the benefits of prohibiting any performance disclosure practices would likely be negligible, while there could be substantial costs to investors who value the information that would be prohibited under this alternative.
Finally, the Commission could consider broadening the application of this rule to, for example, apply to all advisers to private funds, rather than to only advisers to private funds that are registered or required to be registered. Extending the application of the proposed rule to all advisers would increase the benefits of helping investors receive more detailed and standardized information regarding fees, expenses, and performance. Investors would, as a result, have better information with which to evaluate the services of these advisers. It is, however, not clear to us that these benefits would also be realized in contexts where fund performance is not as heavily relied upon when obtaining new investors, as is the case for private funds. Further, the extension of the proposed rule to apply to all advisers would likely impose the costs of compiling, preparing, and distributing quarterly statements on smaller funds advised by unregistered advisers. For these types of funds, these quarterly statement costs may be large compared to the value of fund assets and fees and the related value to investors of the required audit.
The proposed rules would require private fund advisers to “distribute” quarterly statements and audited annual financial statements to investors in the private fund, and this requirement could be satisfied through either paper or electronic means.
An Inline XBRL requirement for the disclosures could benefit private fund investors with access to XBRL analysis software by enabling them to more efficiently access, compile, and analyze the disclosures in quarterly statements and audited annual financial statements, facilitating calculations and comparisons of the disclosed information across different time periods or across different portfolio investments within the same time period. For any such private fund investors who receive disclosures from multiple private funds, an Inline XBRL requirement could also facilitate comparisons of the disclosed information across those funds.
An Inline XBRL requirement for the proposed disclosures would diverge from the Commission's other Inline XBRL requirements, which apply to disclosures that are made available to the public and the Commission, thus allowing for the realization of informational benefits (such as increased market efficiency and decreased information asymmetry) through the processing of Inline XBRL disclosures by information intermediaries such as analysts and researchers.
Compared to the proposal, an Inline XBRL requirement would result in additional compliance costs for private funds and advisers, as a result of the requirement to select, apply, and review the appropriate XBRL U.S. GAAP taxonomy element tags for the required disclosures (or pay a third-party service provider to do so on their behalf). In addition, private fund advisers may not have prior experience with preparing Inline XBRL documents, as neither Form PF nor Form ADV is filed using Inline XBRL. Thus, under this alternative, private funds may incur the initial Inline XBRL implementation costs that are often associated with being subject to an Inline XBRL requirement for the first time (including, as applicable, the cost of training in-house staff to prepare filings in Inline XBRL and the cost to license Inline XBRL filing preparation software from vendors). Accordingly, the magnitude of compliance cost resulting from an Inline XBRL requirement under this proposal may be higher than for other rules with Inline XBRL requirements.
The Commission could also consider prohibiting other activities, in addition to those currently prohibited in the proposed rule. For example, we could prohibit advisers from charging private funds for expenses generally understood to be adviser expenses, such as those incurred in connection with the maintenance and operation of the adviser's business. To the extent that the performance of these activities is outsourced to a consultant, for example, and the fund is charged for that service, advisers may be effectively shifting expenses that would be generally recognized as adviser expenses to instead be fund expenses. The prohibition of such charges could reduce investor monitoring costs. We believe, however, that identifying the types of charges associated with activities that should never be charged to the fund would likely be difficult. As a result, any such prohibition could risk effectively limiting an adviser's ability to outsource certain activities that could be better performed by a consultant, because under the prohibition the adviser would not be able to pass those costs on to the fund.
Further, the Commission could consider providing an exemption for funds utilizing a pass-through expense model from the prohibition on charging fees or expenses associated with certain examinations, investigations, and regulatory and compliance fees and expenses. This would allow advisers to avoid the costs associated with re-structuring any arrangements not compliant with the prohibition, given the proposed rules would likely prohibit certain aspects of these expense models.
We could also consider requiring detailed and standardized disclosures of the activities under consideration, instead of prohibiting the activities outright. This alternative may be desirable to the extent that certain investors would be willing to bear the costs of these activities in exchange for certain other beneficial terms, and would be willing to give informed consent to fund advisers engaging in the practices under consideration. However, we do not believe that disclosure requirements would achieve the same benefit of protecting investors from harm, because many of the practices are deceptive and result in obscured payments, and so may be used to defraud investors even if detailed disclosures are made. Moreover, as discussed above, private funds typically lack fully independent governance mechanisms more common to other markets that could help protect investors from harm in the context of the activities considered.
We could, therefore, consider exceptions that allow certain prohibited activities if disclosed and if appropriate governance or other protections are in place. For example, we could consider requiring a fund's LPAC (or other similar body) or directors to give approval to any of the activities under consideration before the adviser may pursue them. Similarly, we could require advisers to obtain approval for any of the activities under consideration by a majority (either by number or by interest) of investors. However, we believe that allowing such activities, even under such governance, would not achieve all of the same benefits of protecting investors, by the same logic that many of the practices are deceptive and result in obscured payments, and so may be used to defraud investors even if disclosed and governed.
The Commission could consider requiring advisers to obtain a third party
We could also consider changing the scope of this rule. For example, we could consider broadening the application of this rule to, for example, apply to all advisers, including advisers that are not required to register as investment advisers with the Commission, such as state-registered advisers and exempt reporting advisers. Investors would, as a result, receive the assurance of the fairness of more adviser-led secondary transactions. The extension of the proposed rule to apply to all advisers would, however, likely impose the costs of obtaining fairness opinions on smaller funds advised by unregistered advisers, and for these types of funds, the cost of obtaining such opinions would likely be relatively large compared to the value of fund assets and fees that the rule is intended to provide a check on, which could discourage them from undertaking these transactions. This could ultimately reduce liquidity opportunities for fund investors. Alternatively, we could provide exemptions from the rule. For example, an exemption could be provided where the adviser undertakes a competitive sale process for the assets being sold or for certain advisers to hedge funds or other funds determined to be liquid funds for whom the concerns regarding pricing of illiquid assets may be less relevant. These exemptions would reduce the costs on advisers associated with obtaining the fairness opinion, which could ultimately reduce costs for investors. However, we believe that any such exemptions could reduce the benefits of the proposed rule associated with providing greater assurance to investors of the fairness of the transaction. We believe that, even under circumstances where the adviser has conducted a competitive sales process, the effective check on this process provided by the fairness opinion would benefit investors. Further, even for advisers to hedge funds or other funds determined to be liquid funds who are advising funds with predominantly highly liquid securities, we believe that a fairness opinion would be beneficial to investors because the conflicts of interest inherent in structuring and leading a transaction may, despite the nature of the assets in the fund, harm investors.
Instead of requiring that private fund advisers provide investors and prospective investors with written disclosures regarding all preferential treatment the adviser or its related persons provided to other investors in the same fund, the Commission could consider prohibiting all such terms. This could provide investors in private funds with increased confidence that the adviser's negotiations with other investors would not affect their investment in the private fund. We preliminarily believe, however, that an outright prohibition of all preferential terms may not provide significant additional benefits beyond prohibitions on providing certain preferential terms regarding redemption or information about portfolio holdings or exposures. As discussed above, we believe that certain types of preferential terms raise relatively few concerns, if disclosed.
Further, we could consider prohibiting
In addition, for preferential terms not regarding redemption or information about portfolio holdings or exposures, we could consider requiring advisers to private funds to provide disclosure only when the term has a material negative effect on other fund investors. This could reduce the compliance burden on advisers associated with the costs of disclosure. We believe, however, that limiting disclosure to only those terms that an adviser determines to have a material negative effect could reduce an investor's ability to recognize the potential for harm from unforeseen favoritism toward other investors, relative to a requirement to disclose all preferential treatment.
The Commission requests comment on all aspects of the economic analysis of the proposed rule. To the extent possible, the Commission requests that commenters provide supporting data and analysis with respect to the benefits, costs, and effects on competition, efficiency, and capital formation of adopting the proposed amendments or any reasonable alternatives. In particular, the Commission asks commenters to consider the following questions:
• What additional qualitative or quantitative information should the Commission consider as part of the baseline for its economic analysis of these amendments?
• Has the Commission accurately characterized the costs and benefits of proposed rule? If not, why not? Should any of the costs or benefits be modified? What, if any, other costs or benefits should the Commission take into account? If possible, please offer ways of estimating these costs and benefits. What additional considerations can the Commission use to estimate the costs and benefits of the proposed amendments?
• Has the Commission accurately characterized the effects on competition, efficiency, and capital formation arising from the proposed rules? If not, why not?
• Has the Commission accurately characterized the economic effects of the above alternatives? If not, why not? Should any of the costs or benefits be modified? What, if any, other costs or benefits should the Commission take into account? Are there other reasonable alternatives to the proposed amendments? What are the economic effects of any other alternatives?
• Are there data sources or data sets that can help the Commission refine its
• How would the proposed delivery of the quarterly statement affect the reporting practices of advisers, including the costs and benefits of these statements? Would advisers add the required report to the report that they currently provide to investors? Would advisers substitute the required report for an existing report? Explain.
• What are the benefits to investors of obtaining the information that would be required under the proposal in a standardized format that would enable them to make comparisons across alternative fund investments? Explain. Would the benefits to investors vary based on the investor's scale of operations, relationship with the adviser, or other factors? Explain. Please provide data, if available, to support your answer along with details regarding data sources and interpretation of statistics, where appropriate.
• Would the proposed rules strengthen the bargaining power of investors in negotiating with private fund advisers? If so, under what circumstances, and for what types of funds and investors would this effect occur? How would it affect other investors who do not gain bargaining power as a result of the proposed rules? Please explain your answer and provide supporting data, if possible.
• What would the aggregate total cost (including but not limited to the audit fee) be of complying with the new audit requirement, separately, for (a) funds that currently receive audits and (b) funds that would newly receive an audit under the proposed rule? For each, what is the current per-fund cost of an audit? Is the per-fund cost different between the funds that currently receive audits and would newly receive audits? If yes, explain Please include an explanation of any differences between the funds that currently receive an audit and the funds that would newly receive an audit that would explain the differences in their per-fund audit costs. Provide quantitative evidence to support your explanation, if available.
• Would the proposed rules introduce new fixed costs of compliance? Would they cause private funds or fund advisers to consolidate their operations to economize on those costs? Please explain. Provide quantitative evidence to support your explanation, if available.
• To what extent do funds currently provide quarterly statements to investors, and what is the cost of providing these statements? How are they delivered? How do investors use them? What are the contents of these statements currently? How do the current contents compare with the contents that would be required under the proposed rule? Explain.
• We believe that the information in the new quarterly statements would supplement the information that investors currently receive about their fund investments and that advisers would not respond to the proposal by discontinuing any reports to investors. Is this correct? Why or why not? Please explain.
• What fee and expense information is currently available to investors for use in comparing investment opportunities among similar funds (sponsored by the same adviser or different advisers)? How does this information differ from the information that advisers would be required to provide under the proposed rule? In what way does the lack of this information affect investor choice or the ability of investors to monitor fund performance net of fees and expenses?
• What performance information is currently available for investors for use in comparing investment opportunities among similar funds (sponsored by the same adviser or different advisers)? How does this information differ from the information that advisers would be required to provide under the proposed rule?
• How frequently do advisers currently engage in each of the activities that would be prohibited under the proposed rule? Does this frequency vary depending on the type of adviser or investor? For each practice, what is the current business purpose of the activity and how else might that purpose be achieved (if the activity were prohibited)? Please provide quantitative evidence on the magnitude of the activity,
• What is the economic effect on investors, currently, of the activities we propose to prohibit under the proposed rule? What empirical evidence is there that those activities make investors worse off?
• What data exists regarding the costs to investors of conflicts of interest in connection with adviser-led secondary transactions where an adviser offers fund investors the option to sell their interests in the private fund, or to exchange them for new interests in another vehicle advised by the adviser? How do costs vary according to the presence or absence of the disclosure that would be required under the proposed rule?
• From what sources do investors receive information about fund performance: (a) When comparing alternative prospective fund investments and (b) for evaluating the performance of an ongoing und investment? For example, do investors obtain this information directly from the advisers or from a third party? If from a third party, from what source does the third party obtain the fund performance information, and what is the cost of this information? How does the source vary with the fund type or third party, if at all?
• How frequently and under what conditions are private fund investors (current and prospective) unable to obtain information from fund advisers or third parties on the fund performance?
• Do investors rely on IRR and MOIC for evaluating the performance of funds determined to be illiquid funds? What additional information do investors use to evaluate illiquid fund performance? How frequently do they rely on this information? From what sources do they currently obtain this information?
• How do investors who do not have access to this information evaluate illiquid fund performance? What alternative sources of information do they rely upon?
• Do investors rely on annual total returns for evaluating the performance of funds determined to be liquid funds? When evaluating performance partway through a current year, do investors rely on cumulative total return for the current calendar year? What additional information do investors use to evaluate liquid fund performance? How frequently do they rely on this information? From what sources do they currently obtain this information?
• How do investors who do not have access to this information evaluate liquid fund performance? What alternative sources of information do they rely upon?
Certain provisions of our proposal would result in new “collection of information” requirements within the meaning of the Paperwork Reduction Act of 1995 (“PRA”).
We discuss below the new collection of information burdens associated with new rules 211(h)(1)-2, 206(4)-10, 211(h)(2)-2, and 211(h)(2)-3 as well as the revised existing collection of information burdens associated with the proposed amendments to rules 206(4)-7 and 204-2. Responses provided to the Commission in the context of amendments to rules 206(4)-7 and 204-2 would be kept confidential subject to the provisions of applicable law. Because the information collected pursuant to new rules 211(h)(1)-2, 211(h)(2)-2, and 211(h)(2)-3 requires disclosures to existing investors and in some cases potential investors, these disclosures would not be kept confidential. Proposed new rule 206(4)-10 requires the collection of two types of information: one type (the audited financial statements) would be distributed only to investors in the private fund, and the other (notifications to the Commission) would be kept confidential subject to the provisions of applicable law.
Proposed rule 211(h)(1)-2 would require an investment adviser registered or required to be registered with the Commission to prepare a quarterly statement that includes certain standardized disclosures regarding the cost of investing in the private fund and the private fund's performance for any private fund that it advises, directly or indirectly, that has at least two full calendar quarters of operating results, and distribute the quarterly statement to the private fund's investors within 45 days after each calendar quarter end, unless such a quarterly statement is prepared and distributed by another person.
The collection of information is necessary to provide private fund investors with information about their private fund investments. The quarterly statement would allow a private fund investor to compare standardized cost and performance information across its private fund investments. We believe this information would help inform investment decisions, including whether to remain invested in certain private funds or to invest in other private funds managed by the adviser or its related persons. More broadly, this disclosure would help inform investors about the cost and performance dynamics of this marketplace and potentially improve efficiency for future investments.
Each requirement to disclose information, offer to provide information, or adopt policies and procedures constitutes a “collection of information” requirement under the PRA. This collection of information is found at 17 CFR 275.211(h)(1)-2 and is mandatory. The respondents to these collections of information requirements would be investment advisers that are registered or required to be registered with the Commission that advise one or more private funds.
Based on Investment Adviser Registration Depository (IARD) data, as of November 30, 2021, there were 14,832 investment advisers registered with the Commission. According to this data, 5,037 registered advisers provide advice to private funds.
We have made certain estimates of this data solely for the purpose of this PRA analysis. The table below summarizes the initial and ongoing annual burden estimates associated with the proposed account statement rule.
Proposed rule 206(4)-10 would require investment advisers that are registered or required to be registered to cause each private fund they advise, directly or indirectly, to undergo a financial statement audit at least annually and upon liquidation that complies with the proposed rule, unless the fund otherwise undergoes such an audit.
Each requirement to disclose information, offer to provide information, or adopt policies and procedures constitutes a “collection of information” requirement under the PRA. This collection of information is found at 17 CFR 275.206(4)-10 and is mandatory to the extent the adviser provides investment advice to a private fund. The respondents to these collections of information requirements would be investment advisers that are registered or required to be registered with the Commission that advise one or more private funds. All responses required by the proposed audit rule would be mandatory. One response type (the audited financial statements) would be distributed only to investors in the private fund and would not be confidential, and the other (notifications to the Commission) would be kept confidential subject to the provisions of applicable law.
Based on IARD data, as of November 30, 2021, there were 14,832 investment advisers registered with the Commission. According to this data, 5,037 registered advisers provide advice to private funds.
We have made certain estimates of this data, as discussed below, solely for the purpose of this PRA analysis. The table below summarizes the initial and ongoing annual burden estimates associated with the proposed rule's reporting requirement.
Proposed rule 211(h)(2)-2 would prohibit an adviser registered or required to be registered from completing an adviser-led secondary transaction with respect to any private fund, unless the adviser, prior to the closing of the transaction, distributes to investors in the private fund a fairness opinion from an independent opinion provider and a summary of any material business relationships the adviser or any of its related persons has, or has had within the past two years, with the independent opinion provider.
Each requirement to disclose information, offer to provide information, or adopt policies and procedures constitutes a “collection of information” requirement under the PRA. This collection of information is found at 17 CFR 275.211(h)(2)-2 and is mandatory. The respondents to these collections of information requirements would be investment advisers that are registered or required to be registered with the Commission that advise one or more private funds. Based on IARD data, as of November 30, 2021, there were 14,832 investment advisers registered with the Commission. According to this data, 5,037 registered advisers provide advice to private
We have made certain estimates of this data solely for the purpose of this PRA analysis. The table below summarizes the annual burden estimates associated with the proposed rule's requirements.
Proposed rule 211(h)(2)-3 would prohibit all private fund advisers from providing preferential terms to certain investors regarding redemption or information about portfolio holdings or exposures.
The proposed new rule is designed to protect investors and serve the public interest by requiring disclosure of preferential treatment afforded to certain investors. The proposed new rule would increase transparency in order to better inform investors regarding the breadth of preferential terms, the potential for those terms to affect their investment in the private fund, and the potential costs (including compliance costs) associated with these preferential terms. Also, this disclosure would help investors shape the terms of their relationship with the adviser of the private fund. The collection of information is necessary to provide private fund investors with information about their private fund investments.
Each requirement to disclose information, offer to provide information, or adopt policies and procedures constitutes a “collection of information” requirement under the PRA. This collection of information is found at 17 CFR 275.211(h)(2)-3 and is mandatory. The respondents to these collections of information requirements would be all investment advisers that advise one or more private funds. Based on IARD data, as of November 30, 2021, there were 12,500 investment advisers that provide advice to private funds.
We have made certain estimates of this data solely for the purpose of this PRA analysis. The table below summarizes the initial and ongoing annual burden estimates associated with
The proposed amendment to rule 206(4)-7 would require investment advisers that are registered or required to be registered to document the annual review of their compliance policies and procedures in writing.
This collection of information is found at 17 CFR 275.206(4)-7 and is mandatory. The Commission staff uses the collection of information in its examination and oversight program. As noted above, responses provided to the Commission in the context of its examination and oversight program concerning the proposed amendments to rule 206(4)-7 would be kept confidential subject to the provisions of applicable law.
Based on IARD data, as of November 30, 2021, there were 14,832 investment advisers registered with the Commission. In our most recent PRA submission for rule 206(4)-7, we estimated a total hour burden of 1,152,663 hours, and the total annual external cost burden is $0.
The table below summarizes the initial and ongoing annual burden estimates associated with the proposed amendments to rule 204-2.
The proposed amendments to rule 204-2 would require advisers to private funds to retain books and records related to the proposed quarterly statement rule, the proposed audit rule, the proposed adviser-led secondaries rule, and the proposed preferential treatment rule.
Specifically, the proposed books and records amendments related to the quarterly statement rule would require advisers to (i) retain a copy of any quarterly statement distributed to fund investors as well as a record of each addressee, the date(s) the statement was sent, address(es), and delivery method(s); (ii) retain all records evidencing the calculation method for all expenses, payments, allocations, rebates, offsets, waivers, and performance listed on any statement delivered pursuant to the proposed quarterly statement rule; and (iii) make and keep books and records substantiating the adviser's determination that the private fund it manages is a liquid fund or an illiquid fund pursuant to the proposed quarterly statement rule.
The proposed books and records amendments related to the proposed audit rule would require advisers to keep a copy of any audited financial statements along with a record of each addressee and the corresponding date(s) sent, address(es), and delivery method(s) for each such addressee.
The proposed books and records amendments related to the proposed adviser-led secondaries rule would require advisers to retain a copy of any fairness opinion and summary of material business relationships distributed pursuant to the proposed rule along with a record of each addressee and the corresponding date(s) sent, address(es), and delivery method(s) for each such addressee.
The proposed books and records amendments related to the proposed preferential treatment rule would require advisers to retain copies of all written notices sent to current and prospective investors in a private fund pursuant to rule 211(h)(2)-3.
The respondents to these collections of information requirements would be investment advisers that are registered or required to be registered with the Commission that advise one or more private funds. Based on IARD data, as of November 30, 2021, there were 14,832 investment advisers registered with the Commission. According to this data, 5,037 registered advisers provide advice to private funds.
In our most recent PRA submission for rule 204-2,
The table below summarizes the initial and ongoing annual burden estimates associated with the proposed amendments to rule 204-2.
We request comment on whether these estimates are reasonable. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits comments in order to: (1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information will have practical utility; (2) evaluate the accuracy of the Commission's estimate of the burden of the proposed collection of information; (3) determine whether there are ways to enhance the quality, utility, and clarity of the information to be collected; and (4) determine whether there are ways to minimize the burden of the collection of information on those who are to respond, including through the use of automated collection techniques or other forms of information technology.
Persons wishing to submit comments on the collection of information requirements of the proposed amendments should direct them to the OMB Desk Officer for the Securities and Exchange Commission,
The Commission has prepared the following Initial Regulatory Flexibility Analysis (“IRFA”) in accordance with section 3(a) of the Regulatory Flexibility Act (“RFA”).
We are proposing new rule 211(h)(1)-1 under the Advises Act (the “definitions rule”), which would contain numerous definitions for purposes of proposed rules 211(h)(1)-2, 206(4)-10, 211(h)(2)-1, 211(h)(2)-2, and 211(h)(2)-3.
We are proposing new rule 211(h)(1)-2 under the Advisers Act, which requires any investment adviser registered or required to be registered with the Commission that provides investment advice to a private fund that has at least two full calendar quarters of operating results to prepare and distribute a quarterly statement to private fund investors that includes certain standardized disclosures regarding the cost of investing in the private fund and the private fund's performance.
We are proposing new rule 206(4)-10 under the Advisers Act, which would generally require all investment advisers that are registered or required to be registered with the Commission to have their private fund clients undergo a financial statement audit at least annually and upon liquidation containing certain prescribed elements, which are described above in section II.B. The proposed rule is designed to provide protection for the fund and its investors against the misappropriation of fund assets and to provide an important check on the adviser's valuation of private fund assets, which often serve as the basis for the calculation of the adviser's fees. The reasons for, and objectives of, the proposed audit rule are discussed in more detail in section II.B, above. The burdens of these requirements on small advisers are discussed below as well as above in sections V and VI, which discuss the burdens on all advisers. The professional skills required to meet these specific burdens also are discussed in section VI.
Proposed rule 211(h)(2)-1 would prohibit all private fund advisers from, directly or indirectly, engaging in certain sales practices, conflicts of interest, and compensation schemes that are contrary to the public interest and the protection of investors. Specifically, the rule would prohibit an adviser from: (1) Charging certain fees and expenses to a private fund or portfolio investment (including accelerated monitoring fees, fees or expenses associated with an examination or investigation of the adviser or its related persons by governmental or regulatory authorities, regulatory or compliance expenses or fees of the adviser or its related persons, or fees and expenses related to a portfolio investment (or potential portfolio investment) on a non-pro rata basis when multiple private funds and other clients advised by the adviser or its related persons have invested (or propose to invest) in the same portfolio investment); (2) reducing the amount of any adviser clawback by the amount of certain taxes; (3) seeking reimbursement, indemnification, exculpation, or limitation of its liability by the private fund or its investors for a breach of fiduciary duty, willful misfeasance, bad faith, negligence, or recklessness in providing services to the private fund; and (4) borrowing money, securities, or other fund assets, or receiving a loan or an extension of credit, from a private fund client.
We are proposing new rule 211(h)(2)-2 under the Advisers Act, which generally would make it unlawful for an adviser that is registered or required to be registered with the Commission to complete an adviser-led secondary transaction with respect to any private fund, where an adviser (or its related persons) offers fund investors the option to sell their interests in the private fund, or to convert or exchange them for new interests in another vehicle advised by the adviser or its related persons, unless the adviser, prior to the closing of the transaction, distributes to investors in the private fund a fairness opinion from an independent opinion provider and a summary of any material business relationships the adviser or any of its related persons has, or has had within the past two years, with the independent opinion provider. The specific requirements of the proposed rule are described above in section II.C. The proposed rule is designed to provide an important check against an adviser's conflicts of interest in structuring and leading a transaction from which it may stand to profit at the expense of private fund investors. The reasons for, and objectives of, the proposed rule are discussed in more detail in section II.C above. The burdens of these requirements on small advisers are discussed below as well as above in sections V and VI, which discuss the burdens on all advisers. The professional skills required to meet these specific burdens also are discussed in section VI.
Proposed rule 211(h)(2)-3 would prohibit a private fund adviser, directly or indirectly, from (1) granting an investor in a private fund or in a substantially similar pool of assets the ability to redeem its interest on terms that the adviser reasonably expects to have a material, negative effect on other investors in that private fund or in a substantially similar pool of assets; or (2) providing information regarding the portfolio holdings or exposures of the private fund, or of a substantially similar pool of assets, to any investor if the adviser reasonably expects that providing the information would have a material, negative effect on other investors in that private fund or in a substantially similar pool of assets.
We are also proposing related amendments to rule 204-2, the books and records rule, which sets forth various recordkeeping requirements for registered investment advisers. We are
We are proposing amendments to rule 206(4)-7 to require all SEC-registered advisers to document the annual review of their compliance policies and procedures in writing, as described above in section III. The proposed amendments are designed to focus renewed attention on the importance of the annual compliance review process and would better enable our staff to determine whether an adviser has complied with the review requirement of the compliance rule. The reasons for, and objectives of, the proposed rule are discussed in more detail in section III, above. The burdens of these requirements on small advisers are discussed below as well as above in sections V and VI, which discuss the burdens on all advisers. The professional skills required to meet these specific burdens also are discussed in section VI.
The Commission is proposing new rules 211(h)(1)-2, 211(h)(2)-1, 211(h)(2)-2, 211(h)(2)-3, and 206(4)-10 under the Advisers Act under the authority set forth in sections 203(d), 206(4), 211(a), and 211(h) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(d), 80b-6(4) and 80b-11(a) and (h)). The Commission is proposing amendments to rule 204-2 under the Advisers Act under the authority set forth in sections 204 and 211 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-4 and 80b-11). The Commission is proposing amendments to rule 206(4)-7 under the Advisers Act under the authority set forth in sections 203(d), 206(4), and 211(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(d), 80b-6(4), and 80b-11(a)).
In developing these proposals, we have considered their potential impact on small entities that would be subject to the proposed rules and amendments. Some of the proposed rules and amendments would affect many, but not all, investment advisers registered with the Commission, including some small entities, the proposed amendments to rule 206(4)-7 would affect all investment advisers that are registered, or required to be registered, with the Commission, including some small entities, and proposed rules 211(h)(2)-1 and 211(h)(2)-3 would apply to all advisers to private funds (even if not registered), including some small entities. Proposed rule 211(h)(1)-1 would affect all advisers, including all that are small entities, regardless of whether they are registered or advise private funds. Under Commission rules, for the purposes of the Advisers Act and the RFA, an investment adviser generally is a small entity if it: (1) Has assets under management having a total value of less than $25 million; (2) did not have total assets of $5 million or more on the last day of the most recent fiscal year; and (3) does not control, is not controlled by, and is not under common control with another investment adviser that has assets under management of $25 million or more, or any person (other than a natural person) that had total assets of $5 million or more on the last day of its most recent fiscal year.
Other than the proposed definitions rule, prohibitions rule and preferential treatment rule, our proposed rules and amendments would not affect most investment advisers that are small entities (“small advisers”) because those rules apply only to registered advisers, and small registered advisers are generally registered with one or more state securities authorities and not with the Commission. Under section 203A of the Advisers Act, most small advisers are prohibited from registering with the Commission and are regulated by state regulators. Based on IARD data, we estimate that as of November 30, 2021, approximately 594 SEC-registered advisers are small entities under the RFA.
The proposed prohibited activities rule and the proposed preferential treatment rule, however, would have an impact on
Additionally, the proposed prohibited activities rule and the proposed preferential treatment rule would apply to other advisers that are not registered with the SEC or with the states and that do not make filings with either the SEC or states. This includes foreign private advisers,
The proposed definitions rule would affect all advisers, but not unless the adviser is also affected by one of the rules discussed above. It has no independent substantive requirements or economic impacts. Therefore, the number of small advisers affected by this rule is accounted for in those
Proposed rule 211(h)(1)-1 would not impose any reporting, recordkeeping, or other compliance requirements on investment advisers because it has no independent substantive requirements or economic impacts. The rule would not affect an adviser unless it was complying with proposed rule 211(h)(1)-2, 206(4)-10, 211(h)(2)-1, 211(h)(2)-2, or 211(h)(2)-3, each of which is discussed below.
Proposed rule 211(h)(1)-2 would impose certain compliance requirements on investment advisers, including those that are small entities. It would require any investment adviser registered or required to be registered with the Commission that provides investment advice to a private fund that has at least two full calendar quarters of operating results to prepare and distribute quarterly statements with certain fee and expense and performance disclosure to private fund investors. The proposed requirements, including compliance and related recordkeeping requirements that would be required under the proposed amendments to rule 204-2 and rule 206(4)-7, are summarized in this IRFA (section VII above). All of these proposed requirements are also discussed in detail, above, in section II, and these requirements and the burdens on respondents, including those that are small entities, are discussed above in sections V and VI (the Economic Analysis and Paperwork Reduction Act Analysis, respectively) and below. The professional skills required to meet these specific burdens are also discussed in section VI.
As discussed above, there are approximately 29 small advisers to private funds currently registered with us, and we estimate that 100 percent of these advisers would be subject to the proposed rule 211(h)(1)-2. As discussed in our Paperwork Reduction Act Analysis in section V above, the proposed rule 211(h)(1)-2 under the Advisers Act, which would require advisers to prepare and distribute quarterly statements, would create a new annual burden of approximately 130.5 hours per adviser, or 3,784.5 hours in aggregate for small advisers. We therefore expect the annual monetized aggregate cost to small advisers associated with our proposed amendments would be $1,802,466.
Proposed rule 206(4)-10 would impose certain compliance requirements on investment advisers, including those that are small entities. All registered investment advisers that provide investment advice, including small entity advisers, would be required to comply with the proposed rule's requirements to have their private fund clients undergo a financial statement audit (at least annually and upon liquidation) and distribute audited financial statements to private fund investors. The proposed requirements, including compliance and related recordkeeping requirements that would be imposed under proposed amendments to rule 204-2 and rule 206(4)-7, are summarized in this IRFA (section VII.A. above). All of these proposed requirements are also discussed in detail, above, in section II, and these requirements and the burdens on respondents, including those that are small entities, are discussed above in sections V and VI (the Economic Analysis and Paperwork Reduction Act Analysis, respectively) and below. The professional skills required to meet these specific burdens are also discussed in section VI.
As discussed above, there are approximately 29 small advisers to private funds currently registered with us, and we estimate that 100 percent of these advisers would be subject to the proposed rule 206(4)-10. As discussed above in our Paperwork Reduction Act Analysis in section V above, proposed rule 206(4)-10 under the Advisers Act would create a new annual burden of approximately 18.36 hours per adviser, or 532.44 hours in aggregate for small advisers. We therefore expect the annual monetized aggregate cost to small advisers associated with our proposed amendments would be $15,819,118.65.
Proposed rule 211(h)(2)-1 would impose certain compliance requirements on investment advisers, including those that are small entities. Proposed rule 211(h)(2)-1 would prohibit all private fund advisers from engaging in certain sales practices, conflicts of interest, and compensation schemes that are contrary to the public interest and the protection of investors. Specifically, the rule would prohibit an adviser from: (1) Charging certain fees and expenses to a private fund or portfolio investment (including accelerated monitoring fees, fees or expenses associated with an examination or investigation of the adviser or its related persons by governmental or regulatory authorities, regulatory or compliance expenses or fees of the adviser or its related persons, or fees and expenses related to a portfolio investment (or potential portfolio investment) on a non-pro rata basis when multiple private funds and other clients advised by the adviser or its related persons have invested (or propose to invest) in the same portfolio investment); (2) reducing the amount of any adviser clawback by the amount of certain taxes; (3) seeking reimbursement, indemnification, exculpation, or limitation of its liability by the private fund or its investors for a breach of fiduciary duty, willful misfeasance, bad faith, negligence, or recklessness in providing services to the private fund; and (4) borrowing money, securities, or other fund assets, or receiving a loan or an extension of credit from a private fund client. All of these proposed requirements are also discussed in detail, above, in section II, and these requirements and the burdens on respondents, including those that are small entities, are discussed above in section V (the Economic Analysis) and below.
As discussed above, there are approximately 29 small advisers to private funds currently registered with us, and we estimate that 100 percent of these advisers would be subject to the proposed rule 211(h)(2)-1. As discussed above, we estimate that there are no ERAs that would meet the definition of “small entity” and we do not have a method for estimating the number of state-registered advisers to private funds that would meet the definition of “small entity.”
Proposed rule 211(h)(2)-2 would impose certain compliance requirements on investment advisers, including those that are small entities. The rule generally would make it unlawful for an adviser that is registered or required to be registered with the Commission to complete an adviser-led secondary transaction with respect to any private fund, where an adviser (or its related persons) offers fund investors
As discussed above, there are approximately 29 small advisers to private funds currently registered with us, and we estimate that 100 percent of these advisers would be subject to proposed rule 211(h)(2)-2. As discussed above in our Paperwork Reduction Act Analysis in section V above, proposed rule 211(h)(2)-2 under the Advisers Act would create a new annual burden of approximately 7 hours per adviser, or 21 hours in aggregate for small advisers.
Proposed rule 211(h)(2)-3 would impose certain compliance requirements on investment advisers, including those that are small entities. Proposed rule 211(h)(2)-3 would prohibit a private fund adviser, including indirectly through its related persons, from (1) granting an investor in the private fund or in a substantially similar pool of assets the ability to redeem its interest on terms that the adviser reasonably expects to have a material, negative effect on other investors in that private fund or in a substantially similar pool of assets; and (2) providing information regarding the private fund's portfolio holdings or exposures of the private fund or of a substantially similar pool of assets to any investor if the adviser reasonably expects that providing the information would have a material, negative effect on other investors in that private fund or in a substantially similar pool of assets. The rule would also prohibit these advisers from providing any other preferential treatment to any investor in the private fund unless the adviser provides written disclosures to prospective and current investors in the private fund regarding all preferential treatment the adviser or its related persons provided to other investors in the same fund. The proposed requirements, including compliance and related recordkeeping requirements that would be imposed under proposed amendments to rule 204-2 and 206(4)-7, are summarized in this IRFA (section VII above). All of these proposed requirements are also discussed in detail, above, in section II, and these requirements and the burdens on respondents, including those that are small entities, are discussed above in sections V and VI (the Economic Analysis and Paperwork Reduction Act Analysis, respectively) and below. The professional skills required to meet these specific burdens also are discussed in section VI.
As discussed above, there are approximately 29 small advisers to private funds currently registered with us, and we estimate that 100 percent of these advisers would be subject to the proposed rule 211(h)(2)-3. As discussed above, we estimate that there are no ERAs that would meet the definition of “small entity” and we do not have a method for estimating the number of state-registered advisers to private funds that would meet the definition of “small entity.”
The proposed amendments to rule 204-2 would impose certain recordkeeping requirements on investment advisers to private funds, including those that are small entities. All registered investment advisers to private funds, including small entity advisers, would be required to comply with recordkeeping amendments. While all SEC-registered investment advisers, and advisers that are required to be registered, are subject to rule 204-2 under the Advisers Act, our proposed amendments to rule 204-2 would only impact private fund advisers that are SEC registered. The proposed amendments are summarized in this IRFA (section VII above). The proposed amendments are also discussed in detail, above, in section II, and the requirements and the burdens on respondents, including those that are small entities, are discussed above in sections V and VI (the Economic Analysis and Paperwork Reduction Act Analysis, respectively) and below. The professional skills required to meet these specific burdens also are discussed in section VI.
As discussed above, there are approximately 29 small advisers to private funds currently registered with us, and we estimate that 100 percent of advisers registered with us would be subject to the proposed amendments to rule 204-2. As discussed above in our Paperwork Reduction Act Analysis in section VI above, the proposed amendments to rule 204-2 under the Advisers Act, which would require advisers to retain certain copies of documents required under proposed rules 206(4)-10, 211(h)(1)-2, 211(h)(2)-2, and 211(h)(2)-3 would create a new annual burden of approximately 9 hours per adviser, or 261 hours in aggregate for small advisers. We therefore expect the annual monetized aggregate cost to small advisers associated with our
Proposed amendments to rule 206(4)-7 would impose certain compliance requirements on investment advisers, including those that are small entities. All registered investment advisers, and advisers that are required to be registered, would be required to document the annual review of their compliance policies and procedures in writing. The proposed requirements are summarized in this IRFA (section VII above). All of these proposed requirements are also discussed in detail, above, in section III, and these requirements and the burdens on respondents, including those that are small entities, are discussed above in sections V and VI (the Economic Analysis and Paperwork Reduction Act Analysis, respectively) and below. The professional skills required to meet these specific burdens also are discussed in section VI.
As discussed above, there are approximately 29 small advisers currently registered with us, and we estimate that 100 percent of these advisers would be subject to the proposed amendments to rule 206(4)-7. As discussed above in our Paperwork Reduction Act Analysis in section VI above, these amendments would create a new annual burden of approximately 3 hour per adviser, or 87 hours in aggregate for small advisers. We therefore expect the annual monetized aggregate cost to small advisers associated with our proposed amendments would be $44,921.
There are no duplicative, overlapping, or conflicting Federal rules with respect to the specific requirements of proposed rule 211(h)(1)-1, 211(h)(1)-2, 211(h)(2)-1, 211(h)(2)-2, 211(h)(2)-3, or the proposed amendments to rule 204-2 or rule 206(4)-7. We recognize that private fund advisers are prohibited from making misstatements or materially misleading statements to investors under rule 206(4)-8. To the extent there is any overlap between the proposed rules and rule 206(4)-8, we believe that any additional costs to advisers to private funds would be minimal, as they can assume that conduct that would raise issues under any of the specific provisions of the proposed rules would also be prohibited under rule 206(4)-8. To the extent there is any overlap between the requirements of proposed rule 211(h)(1)-2 and Form ADV Part 2, it is minimal, and it is complementary, not contradictory. For example, Form ADV Part 2 requires advisers to disclose what fees the adviser charges, such as a 2% management fee based on its clients' assets that it manages. The proposed rule would require advisers to disclose what amount was actually charged to a private fund client (
There is significant duplication and overlap of the requirements of proposed rule 206(4)-10 and rule 206(4)-2 because proposed rule 206(4)-10 is drawn from the option to comply with rule 206(4)-2's account statement and surprise examination requirements by having pooled investment vehicle clients undergo a financial statement audit and distribute the financial statements to the investors in the pools. Similarities between these rules should result in minimal new compliance burdens for private fund advisers that have chosen to comply with the audit provision of rule 206(4)-2, however. For private fund advisers that have not chosen to comply with the audit provision of rule 206(4)-2, proposed rule 206(4)-10 will result in new compliance burdens, but not ones that contradict rule 206(4)-2. These advisers can choose to mitigate, as much as possible, their compliance burdens by electing to comply with rule 206(4)-2's audit provision in lieu of the account statement and surprise examination requirements, though this option may be limited for some advisers if they also have clients for which the adviser is unable to choose to rely on the audit provision of the custody rule. We believe these additional compliance burdens are justified because an audit by an independent public accountant would provide an important check on the adviser's valuation of private fund assets, which often serve as the basis for calculating the adviser's fees.
The RFA directs the Commission to consider significant alternatives that would accomplish the stated objective, while minimizing any significant adverse impact on small entities. In connection with the proposed rules and rule amendments, the Commission considered the following alternatives: (i) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (ii) the clarification, consolidation, or simplification of compliance and reporting requirements under the proposed rules and rule amendments for such small entities; (iii) the use of performance rather than design standards; and (iv) an exemption from coverage of the proposed rules and rule amendments, or any part thereof, for such small entities.
Regarding the first and fourth alternatives, we do not believe that differing compliance or reporting requirements or an exemption from coverage of the proposed rules and rule amendments, or any part thereof, for small entities, would be appropriate or consistent with investor protection. Because the protections of the Advisers Act are intended to apply equally to clients of both large and small advisory firms, it would be inconsistent with the purposes of the Act to specify different requirements for small entities under the proposed rules and rule amendments.
Regarding the second alternative, the proposed prohibited activities rule and the proposed preferential treatment rule are particularly intended to provide clarification to
Regarding the third alternative, we do not consider using performance rather than design standards to be consistent with our statutory mandate of investor protection with respect to preventing fraudulent, deceptive, or manipulative acts, or inappropriate sales practices, conflicts of interest or compensation schemes, by investment advisers.
We encourage written comments on matters discussed in this IRFA. In particular, the Commission seeks comment on:
• The number of small entities that would be affected by the proposed rule; and
• whether the effect of the proposed rule on small entities would be economically significant.
Commenters are asked to describe the nature of any effect and provide empirical data supporting the extent of the effect.
For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996, or “SBREFA,”
We request comment on the potential impact of the proposed rules and amendments on the economy on an annual basis. Commenters are requested to provide empirical data and other factual support for their views to the extent possible.
The Commission is proposing new rules 211(h)(1)-1, 211(h)(1)-2, 211(h)(2)-1, 211(h)(2)-2, 211(h)(2)-3, and 206(4)-10 under the Advisers Act under the authority set forth in sections 203(d), 206(4), 211(a), and 211(h) of the Investment Advisers Act of 1940 [15 U.S.C. 80b-3(d), 80b-6(4) and 80b-11(a) and (h)]. The Commission is proposing amendments to rule 204-2 under the Advisers Act under the authority set forth in sections 204 and 211 of the Investment Advisers Act of 1940 [15 U.S.C. 80b-4 and 80b-11]. The Commission is proposing amendments to rule 206(4)-7 under the Advisers Act under the authority set forth in sections 203(d), 206(4), and 211(a) of the Investment Advisers Act of 1940 [15 U.S.C. 80b-3(d), 80b-6(4), and 80b-11(a)].
Administrative practice and procedure, Reporting and recordkeeping requirements, Securities.
For the reasons set forth in the preamble, the Commission is proposing to amend title 17, chapter II of the Code of Federal Regulations as follows:
15 U.S.C. 80b-2(a)(11)(G), 80b-2(a)(11)(H), 80b-2(a)(17), 80b-3, 80b-4, 80b-4a, 80b-6(4), 80b-6a, and 80b-11, unless otherwise noted.
The additions read as follows:
(a) * * *
(7) * * *
(v) Any notice required pursuant to § 275.211(h)(2)-3 as well as a record of each addressee and the corresponding date(s) sent, address(es), and delivery method(s) for each such addressee.
(20)(i) A copy of any quarterly statement
(ii) All records evidencing the calculation method for all expenses, payments, allocations, rebates, offsets, waivers, and performance listed on any statement delivered pursuant to § 275. 211(h)(1)-2.
(21) For each private fund client:
(i) A copy of any audited financial statements prepared and
(ii) A record documenting steps taken by the adviser to cause a private fund client that the adviser does not control, is not controlled by, and with which it is not under common control to undergo a financial statement audit pursuant to § 275.206(4)-10.
(22) Documentation substantiating the adviser's determination that a private fund client is a
(23) A copy of any
(b)
As a means reasonably designed to prevent such acts, practices, and courses of business as are fraudulent, deceptive, or manipulative, an investment adviser that is registered or required to be registered under section 203 of the Investment Advisers Act of 1940 shall cause each private fund that it advises, directly or indirectly, to undergo a financial statement audit as follows at least annually and upon liquidation, if the private fund does not otherwise undergo such an audit:
(a) The audit is performed by an independent public accountant that meets the standards of independence described in 17 CFR 210.2-01(b) and (c) [Rule 2-01(b) and (c) of Regulation S-X] and that is registered with, and subject to regular inspection as of the commencement of the professional engagement period, and as of each calendar year-end, by, the Public Company Accounting Oversight Board in accordance with its rules;
(b) The audit meets the definition in 17 CFR 210.1-02(d) [Rule 1-02(d) of Regulation S-X], the professional engagement period of which shall begin and end as indicated in Rule 2-01(f)(5) of Regulation S-X;
(c) Audited financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) or, in the case of financial statements of private funds organized under non-U.S. law or that have a general partner or other manager with a principal place of business outside the United States (“foreign private funds”), contain information substantially similar to statements prepared in accordance with U.S. GAAP and material differences with U.S. GAAP are reconciled;
(d) Promptly after the completion of the audit, the private fund's audited financial statements, which includes any reconciliation to U.S. GAAP prepared for a foreign private fund, including supplementary U.S. GAAP disclosures, as applicable, are
(e) Pursuant to a written agreement between the independent public accountant
(1) Promptly upon issuing an audit report to the private fund that contains a modified opinion; and
(2) Within four business days of resignation or dismissal from, or other termination of, the engagement, or upon removing itself or being removed from consideration for being reappointed;
(f) For a private fund that the adviser does not
(g) For purposes of this section, defined terms shall have the meanings set forth in § 275.211(h)(1)-1.
For purposes of §§ 275.206(4)-10, 275.211(h)(1)-2, 275.211(h)(2)-3, 275.211(h)(2)-1, and 275.211(h)(2)-2:
(1) Sell all or a portion of their interests in the private fund; or
(2) Convert or exchange all or a portion of their interests in the private fund for interests in another vehicle advised by the adviser or any of its
(1) Each of an investment adviser's officers, partners, or directors exercising executive responsibility (or persons having similar status or functions) is presumed to control the investment adviser;
(2) A person is presumed to control a corporation if the person:
(i) Directly or indirectly has the right to vote 25% or more of a class of the corporation's voting securities; or
(ii) Has the power to sell or direct the sale of 25% or more of a class of the corporation's voting securities;
(3) A person is presumed to control a partnership if the person has the right to receive upon dissolution, or has contributed, 25% or more of the capital of the partnership;
(4) A person is presumed to control a limited liability company if the person:
(i) Directly or indirectly has the right to vote 25% or more of a class of the interests of the limited liability company;
(ii) Has the right to receive upon dissolution, or has contributed, 25% or more of the capital of the limited liability company; or
(iii) Is an elected manager of the limited liability company; or
(5) A person is presumed to control a trust if the person is a trustee or managing agent of the trust.
(1) Has a limited life;
(2) Does not continuously raise capital;
(3) Is not required to redeem interests upon an investor's request;
(4) Has as a predominant operating strategy the return of the proceeds from disposition of investments to investors;
(5) Has limited opportunities, if any, for investors to withdraw before termination of the fund; and
(6) Does not routinely acquire (directly or indirectly) as part of its investment strategy market-traded securities and derivative instruments.
(1) Provides
(2) Is not a
(1) The sum of:
(i) The unrealized value of the
(ii) The value of all distributions made by the
(2) Divided by the total capital contributed to the
(1) All officers, partners, or directors (or any person performing similar functions) of the adviser;
(2) All persons directly or indirectly controlling or controlled by the adviser;
(3) All current employees (other than employees performing only clerical, administrative, support or similar functions) of the adviser; and
(4) Any person under common
(1) All capital inflows the private fund has received from investors and all capital outflows the private fund has distributed to investors since the private fund's inception, with the value and date of each inflow and outflow; and
(2) The net asset value of the private fund as of the end of the
(a)
(b)
(1) A detailed accounting of all compensation, fees, and other amounts allocated or paid to the investment adviser or any of its
(2) A detailed accounting of all fees and expenses paid by the private fund during the
(3) The amount of any offsets or rebates carried forward during the
(c)
(1) A detailed accounting of all
(2) The fund's ownership percentage of each such
(d)
(e)
(2) The quarterly statement must present the following with equal prominence:
(i)
(A) Annual net total returns for each calendar year since inception;
(B) Average annual net total returns over the one-, five-, and ten- calendar year periods; and
(C) The cumulative net total return for the current calendar year as of the end of the most recent calendar quarter covered by the quarterly statement.
(ii)
(A) The following performance measures, shown since inception of the
(
(
(
(
(B) [Reserved]
(iii) The quarterly statement must include the date as of which the performance information is current through and prominent disclosure of the criteria used and assumptions made in calculating the performance.
(f)
(g)
(h)
(a) An investment adviser to a private fund may not, directly or indirectly, do the following with respect to the private fund, or any investor in that private fund:
(1) Charge a
(2) Charge the private fund for fees or expenses associated with an examination or investigation of the adviser or its
(3) Charge the private fund for any regulatory or compliance fees or expenses of the adviser or its
(4) Reduce the amount of any
(5) Seek reimbursement, indemnification, exculpation, or limitation of its liability by the private fund or its investors for a breach of fiduciary duty, willful misfeasance, bad faith, negligence, or recklessness in providing services to the private fund;
(6) Charge or allocate fees and expenses related to a
(7) Borrow money, securities, or other private fund assets, or receive a loan or an extension of credit, from a private fund client.
(b) For purposes of this section, defined terms shall have the meanings set forth in § 275.211(h)(1)-1.
(a) As a means reasonably designed to prevent fraudulent, deceptive, or manipulative acts, practices, or courses of business within the meaning of section 206(4) of the Act (15 U.S.C. 80b-6(4)), it is unlawful for any investment adviser that is registered or required to be registered under section 203 of the Act to complete an
(1) Obtains, and
(2) Prepares, and
(b) For purposes of this section, defined terms shall have the meanings set forth in § 275.211(h)(1)-1.
(a) An investment adviser to a private fund may not, directly or indirectly, do the following with respect to the private fund, or any investor in that private fund:
(1) Grant an investor in the private fund or in a
(2) Provide information regarding the portfolio holdings or exposures of the private fund, or of a
(b) An investment adviser to a private fund may not, directly or indirectly, provide any other preferential treatment to any investor in the private fund unless the adviser provides written notices as follows:
(1)
(2)
(c) For purposes of this section, defined terms shall have the meanings set forth in § 275.211(h)(1)-1.
By the Commission.