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Animal and Plant Health Inspection Service, USDA.
Final rule.
We are amending the regulations for the importation of equines. These changes include increasing the number of days horses exported from regions free from contagious equine metritis (CEM) are allowed to spend in a CEM-affected region and enter the United States without testing from 60 days to 90 days; requiring an import permit for horses transiting through CEM-affected regions; adding requirements for health certifications to ensure health certifications properly attest to the health of the imported horse; requiring that horses transiting Central America or the West Indies comply with the same regulations that apply to horses directly imported from these regions; and adding requirements for shipping containers used in transporting horses. We are also adding a number of miscellaneous changes to the regulations such as clarifications of existing policy or intent, and corrections of inconsistencies or outdated information. Many of these changes will better align our regulations with international standards and allow us and the equine industry more flexibility. The changes will also add further safeguards that protect against introducing or disseminating pests or diseases of livestock into the United States.
Effective October 16, 2023.
Dr. Iwona Tumelty, VS Strategy and Policy, Live Animal Imports, VS, APHIS, 4700 River Road Unit 39, Riverdale, MD 20737-1231; 301-851-3300;
Under the Animal Health Protection Act (AHPA, 7 U.S.C. 8301
The regulations in 9 CFR part 93 (referred to below as the regulations) prohibit or restrict the importation of certain animals, including horses, as well as their means of conveyance, pursuant to the AHPA.
On November 29, 2021, we published in the
We solicited comments concerning our proposal for 60 days ending January 28, 2022. We received 28 comments by that date. They were from a veterinary association, a business, governing bodies for equestrian sports, breed associations, State departments of agriculture, a university, equine associations, trade organizations, and members of the public.
Of the 28 submissions, 11 supported the rule, 1 did not support the rule, and 16 posed questions or additional suggestions without expressly supporting or disagreeing with the rule. In response to the comments, we made a number of changes to the proposed rule that we are implementing in this final rule. These changes include the following:
• Not proceeding with our proposal to remove, and instead maintaining, the requirement in § 93.317 that horses presented for permanent importation to the United States from Canada receive an inspection prior to entry;
• Not proceeding with our proposal to require a certificate of castration including date of castration and removal of both testicles from all gelded horses in § 93.314;
• Not proceeding with our proposed amendments to § 93.301(d), which would have required additional details in documentation for imported Spanish pure breed horses from Spain and racing thoroughbred horses from France, Germany, Great Britain, the Republic of Ireland, and Northern Ireland;
• Removing Los Angeles, California, and Miami, Florida from the list of air and ocean ports that APHIS has designated for the importation of horses in § 93.303(a);
• Removing the lists of border ports and limited ports in § 93.303(b) through (d) and adding instead a link to the APHIS website which contains the most up-to-date information regarding ports;
• Amending § 93.301(g)(1)(iii) to clarify that breeding of the horse must never have been attempted, either live or artificial;
• Amending § 93.301(f)(5)(v) to state that seals may also be broken by a State animal health official;
• Adding new § 93.301(e)(2)(ii) to state that stallions and mares must be transported to the approved State in a sealed vehicle, and that the seal may be broken only by an APHIS representative, State animal health official, or accredited veterinarian under certain circumstances, at the horse's destination;
• Amending § 93.302(a)(4) to add the World Organization for Animal Health's (WOAH's)
• Correcting the section heading of § 93.304;
• Amending § 93.306 to clarify that APHIS will refuse entry to horses arriving in the same shipment as horses dead upon arrival;
• Amending § 93.308 to clarify that horses imported from regions where African horse sickness exists must obtain an import permit; and
• Amending § 93.314 to clarify that all horses described in § 93.301 that are allowed to enter the United States from a CEM-affected region under special provisions are not required to state on their health certificate that they have not been in a CEM-affected region prior to export.
The comments that we received, as well as details of the changes we made in response to the comments, are discussed below by topic.
We proposed to amend § 93.301(g) by increasing the number of days horses from the United States or other regions not known to be CEM-affected are allowed to spend in a CEM-affected region and re-enter the United States without testing from 60 days to 90 days.
One commenter believed APHIS was decreasing the amount of time a horse from a CEM-affected region was held in quarantine from 90 days to 60 days, and stated that horses should be made to stay the full 90 days to decrease risk of exposure. Another commenter disagreed with this interpretation and stated that the proposed rule referred to the amount of time a horse from the United States or a region not affected with CEM can spend in CEM-affected regions without needing to undergo CEM testing prior to entry into the United States, rather than time in quarantine upon reentry.
The latter commenter's interpretation is correct. APHIS is not decreasing the amount of time an animal is required to spend in quarantine after returning from the CEM-affected region. Rather, APHIS is making changes to special provisions applicable to horses from CEM-free countries temporarily exported to CEM-affected countries that do not have to undergo CEM testing or CEM quarantine upon arrival, provided they meet certain conditions. These conditions include extensive documentation ensuring that the horse was not exposed to CEM during its temporary exportation. APHIS proposed to extend the days of temporary exportation to a CEM-affected region from the current 60 days to 90 days with regard to these special provisions. As the extensive documentation of the horse's health status and movement during its exportation provides assurance that the horse was not exposed to CEM, this change will not increase the risk of introducing animal disease into the United States.
One commenter disagreed with extending the period of temporary export from 60 to 90 days, calling it careless.
APHIS had proposed this change to better align our regulations with the typical competition cycle—the competition cycle is often more than 60, but no more than 90, days. As stated in the proposed rule, APHIS found that the risk of horses introducing CEM to the United States would continue to be minimal if the temporary export period was increased to 90 days. The most significant safeguards against these horses introducing CEM into the United States are the attestations required by the health certificate in the current regulations, rather than the amount of time the horses may spend in a CEM-affected region. As these attestations ensure that horses have not had the opportunity to breed nor have any genital contact, and CEM is spread through these means, we consider these attestations to be effective mitigations against the introduction of CEM. Limiting the period of temporary export is an additional risk mitigation that supplements the mitigation of the health certificate.
We proposed a number of miscellaneous changes to the regulations regarding test breeding required for horses entering the United States from CEM-affected countries. These included correcting an inconsistency between the requirements in § 93.301(e)(3) and (5) for mares and stallions by specifying that samples from stallions must also be collected by an accredited veterinarian.
One commenter supported adding to the regulations that samples collected from a stallion must be from a qualified trained individual such as an accredited veterinarian, but suggested adding flexibility to the regulations to allow States to approve qualified individuals to take samples as required in § 93.301(e)(3)(i).
We appreciate the suggestion. However, the purpose of this change was only to align the requirements for mares and stallions. We may look into addressing the issue of increased flexibility for States with regards to collecting samples in a future action.
One commenter requested clarification as to who is an accredited veterinarian.
The proposed addition of the term “accredited veterinarian” to § 93.301(e)(3) refers to the individual collecting samples from stallions during test breeding in a State following the horse's export to the United States. As stated in the definition of the term in § 93.300, an accredited veterinarian is a veterinarian approved by the Administrator in accordance with the provisions of 9 CFR part 161 to perform specific outlined functions.
One commenter suggested adding polymerase chain reaction (PCR) testing for CEM to the approved disease screening protocols.
APHIS is constantly monitoring test methods for possible approval. At this time, PCR tests for CEM are not validated by the National Veterinary Services Laboratories (NVSL), the reviewing party within APHIS for tests of diseases of concern for livestock.
One commenter suggested that retired racing stallions repatriated to the United States to accredited sanctuaries should not have to undergo test breeding for CEM.
We understand that racing stallions may come to the United States to retire and find test breeding onerous. However, our CEM testing requirements are critical to ensuring that the United States is protected against the introduction of foreign animal disease. We also note that, under certain circumstances, retiring racehorses may not have to undergo test breeding. For example, if the retiring racehorse is a racing thoroughbred that meets the requirements of § 93.301(d), which pertains to Spanish Pure Breed horses from Spain and thoroughbred horses from France, Germany, Great Britain, the Republic of Ireland, and Northern Ireland imported for permanent entry from CEM-affected regions, the horse does not have to undergo CEM test breeding upon arrival to the United States.
One commenter stated that test breeding for CEM in general should be reconsidered, calling the practice “inhumane” and stating that advancements in science have resulted in more humane methods to test for CEM.
We are constantly monitoring the development of new testing methods and look to adopt new methods when they are validated. At this time, test breeding has been determined to be the most reliable method to ascertain whether horses are affected with CEM and therefore to protect the United States against the introduction of foreign animal disease.
We proposed a number of miscellaneous changes to the regulations regarding horses entering the United States from CEM-affected countries.
These included changes to paragraph (d) of § 93.301, which governs the importation of Spanish pure breed horses from Spain and racing thoroughbred horses from France, Germany, Great Britain (England, Scotland, and Wales), the Republic of Ireland, and Northern Ireland,
One commenter asked about the significance of adding the word “racing” before “thoroughbreds.” Another commenter stated that the requirements that racing thoroughbreds from a CEM-affected country must meet to compete temporarily in the United States are excessive and a financial burden.
We have decided not to proceed with our proposed changes to § 93.301(d). Since the close of the comment period, APHIS has discovered a high degree of noncompliance with the current verification and documentation requirements in § 93.301(d). While we have strengthened our guidance to importers and remediated the non-compliance on a case-by-case basis thus far, and while we are still evaluating the full basis for this non-compliance, the fact that the horses to which these regulations apply move so rapidly between countries is a contributing factor, since this alacrity and frequency of movement makes it challenging for importers to provide the required verification and documentation. We believe that the proposed amendments could exacerbate that problem by adding to the current verification and documentation requirements. We do not want to proceed with the proposed amendments without first evaluating how to increase compliance.
To address this issue, we intend to undertake a holistic evaluation of the requirements in this section. We will propose any revisions to § 93.301(d) resulting from this evaluation at a future date.
Until such rulemaking is promulgated, the provisions of current § 93.301(d) will remain in effect.
Two commenters stated that the approved breed association for France should be updated to France Galop.
A final rule published in the
A commenter stated that some States want to seal doors and barns shut as part of their protocol for keeping a competition horse separated from other horses, and that this is a liability in the case of situations such as fires.
Event organizers routinely discuss emergency protocols in the case of unforeseen circumstances such as fires prior to competition events to ensure the wellbeing of competition horses. Because this contingency planning is a routine business practice, we do not believe that our requirements to keep competition horses separate from other horses place horses at an increased risk of harm in the case of emergencies.
Two commenters asked for the United States and other CEM-free countries to be added to the temporary import exemption provisions for racing thoroughbreds residing in France, Germany, Ireland, and/or the United Kingdom.
As the provisions that the commenter refers to in § 93.301(d) pertain to the importation of a horse from outside the United States into the United States, adding provisions governing reentry of domestic horses to the paragraph would not be warranted or appropriate. Additionally, at this time, we cannot consider adding other countries because a comprehensive evaluation of adequate and reliable recordkeeping on the health history of horses in the country would need to be completed. If a country requests to be added to this list, and APHIS confirms their maintenance of accurate and reliable recordkeeping, APHIS will consider additional changes to the regulations. Currently, APHIS evaluates requests for exemptions for horses from other countries on a case-by-case basis.
We also note that meeting the requirements of § 93.301(d) for racing thoroughbred horses from France, Germany, Great Britain (England, Scotland, and Wales), the Republic of Ireland, and Northern Ireland is not the only way horses can receive an exemption from CEM provisions. U.S.-origin horses may travel to a CEM-affected country for a specified period of time for competition and return without having to complete CEM testing or quarantine if the horse meets the requirements outlined in § 93.301(g).
One commenter asked whether a competition horse that spends 90 days in the European Union and qualifies for the CEM testing exemption in § 93.301(g) can return multiple times within 12 months to the European Union and continue to qualify for the CEM testing exemption.
Section 93.301(g) allows U.S.-origin horses to travel to CEM-affected regions for a maximum of 90 days at a time. The number of 90-day trips that a U.S.-origin
One commenter requested that, in addition to breeding and sexual contact, we add semen collection as a prohibited practice for horses temporarily exported to CEM-affected countries who can re-enter the United States without testing. The commenter noted that CEM can be transmitted through artificial insemination (which involves semen collection).
Because CEM can be spread through semen regardless of the method of insemination, we agree with the commenter and consider artificial breeding a form of breeding. We have revised the prohibition on breeding in § 93.301(g)(1)(iii) to specify that breeding of the horse must never have been attempted, whether live or artificial.
One commenter asked that we modify § 93.301(f)(5)(v), which governs transit within the United States for horses temporarily imported for competition or entertainment purposes, to allow State animal health officials to break seals on sealed vehicles due to the varying availability of APHIS representatives in different States.
We agree with the commenter and will add to the regulations that seals may also be broken by a State animal health official. As these individuals are also trained in preventing the introduction or dissemination of animal disease, this will not increase the risk of introducing CEM into the United States.
The commenter also asked that we add a requirement that trailers transporting horses from Federal to State CEM quarantine be sealed, as this is a routine practice and the explicit addition to the regulations would help with enforceability.
As we stated in the proposed rule, one of the aims of the rule was to clarify existing policy or intent with regard to our regulations governing the importation of equines. We agree with the commenter that the requirement requested does reflect current operational practice for transport of horses from Federal CEM quarantine to State CEM quarantine, and thus fits within this articulated rubric. Accordingly, we will add a new § 93.301(e)(2)(ii) to state that stallions and mares must be transported to the approved State in a sealed vehicle, and that the seal may be broken only by an APHIS representative or a State animal health official at the horse's destination. If an APHIS representative or State animal health official is unavailable to break the seal due to extenuating circumstances, the State animal health official may designate the authority to unseal to an accredited veterinarian and the State animal health official will assume the responsibility for oversight and recordkeeping.
Two commenters asked us to require that a horse's final destination in the United States following CEM quarantine release be listed on the horse's import permit.
This requirement is already captured in the eFile application system. We are currently in the process of phasing out the ePermits system and replacing it with eFile.
We proposed to add additional requirements for shipping containers to § 93.302 by adding disinfection requirements and measures to ensure that horses are transported safely. We proposed to present these requirements as performance standards, and referred individuals to the Live Animals Regulations (LAR), as amended, published by the International Air Transport Association (IATA) for optional guidance on how to meet these requirements. We also proposed that, if an importer wished to use alternative means of meeting the requirements other than those in the LAR, they would be able to contact APHIS Live Animal Imports to ask for approval. Five commenters suggested that APHIS develop its own standards for shipping containers or add more details to regulations, rather than using a performance standard and referring individuals to the LAR published by the IATA for guidance. These commenters cited ambiguity inherent to performance standards, and the high cost of purchasing the LAR as concerns.
Performance standards allow for the possibility of a variety of means in order to meet them. As one of the commenters noted, the various breeds, sizes, and ages of horses shipped make one-size-fits-all requirements for shipping containers difficult. If importers are unsure whether they have met the performance standard, they can contact APHIS Live Animal Imports to ask for approval by phone at (301) 851-3300, option 2, or by email at
Regarding costs, importers are not required to use the LAR published by the IATA to meet the performance standard. Individuals may contact APHIS Live Animal Imports to ask for approval of a particular shipping container by the methods outlined above, without recourse to the examples of guidance that we provide in the regulatory text.
That being said, we acknowledge commenters' concerns about the accessibility of the LAR and recognize that the regulations as written in our proposal may have incorrectly given importers the impression that using the LAR is preferred over other means of meeting the performance standard. In response to these concerns, we are amending the regulatory text to add that the WOAH's Terrestrial Animal Health Code may also be used to meet the performance standard. The Terrestrial Animal Health Code can currently be accessed online
One commenter asked us to add a provision giving APHIS the authority to test shipping containers for disease.
The existing regulation, redesignated as § 93.302(b) in this rule, allows inspectors to inspect whether a means of conveyance, including shipping containers, are contaminated with material that could introduce or disseminate any communicable animal disease. This gives APHIS the authority to test shipping containers for disease, if necessary. Our addition of specific cleaning and disinfection requirements in § 93.302(a) further ensures that biosecurity is upheld.
We proposed to remove the requirement in § 93.317 that horses presented for permanent importation to the United States from Canada receive an inspection prior to entry.
Four commenters expressed concern about our proposed removal of the inspection requirement for horses permanently imported from Canada. These commenters raised the possibility that horses that enter Canada from a different country would then be able to circumvent the health requirements for horses permanently entering the United States from that country. One additional commenter disagreed with our proposal without citing a reason.
We acknowledge the possibility of the commenters' concerns, as our proposed change would have allowed the importation of horses from Canada without inspection, which could present a risk of disease introduction in the event the horse originates from a higher risk region of the world. In light of the commenters' response, we will not proceed with this proposed change.
We proposed to amend § 93.304(a)(1)(i) by adding horses transiting CEM-affected regions to the list of horses requiring an import permit. We also proposed to amend § 93.319 by adding horses transiting Central America and the West Indies as horses requiring an import permit.
One commenter stated that they agreed that horses imported from Central America and the West Indies should comply with the regulations.
We would like to clarify that we proposed a change to horses transiting these regions. The requirements already apply to horses directly imported from these regions.
Five commenters asked us to define the term “transiting,” as its meaning in the regulations may vary depending on the type of horse.
The regulations pertaining to different types of transiting horses are contained in the specific sections for each type of transiting horse, and the meaning of the term “transiting” is contextually clear within each section. If individuals have specific questions regarding these requirements, they can contact APHIS Live Animal at
We proposed to add to § 93.314 that health certificates must confirm that the horse has not been castrated during the 14 days preceding exportation. We also proposed to require that all castrated horses be accompanied by a certificate of castration that includes the date of castration and confirmation that both testicles have been removed.
Five commenters expressed concern that a certificate of castration including a date of castration could be difficult or impossible to obtain, especially for horses castrated years in the past or that have had multiple owners.
We agree with the commenters' concerns regarding the collection of this information. Written confirmation that the horse has not been castrated
One commenter asked for additional clarification on the certificate of castration requirement, asking about the required level of detail and whether an updated passport indicating the horse was castrated would suffice.
As noted above, we will only require confirmation that the horse has not been castrated within the 14 days preceding export. An updated passport would not fulfill this requirement. The attestation must be completed by a salaried veterinary officer of the national government of the region of origin, or as otherwise specified in § 93.314, and may come in the form of an attestation on the health certificate, or as an addendum to the health certificate that accompanies the horse upon arrival.
We proposed to require documentation stating that the pre-export examination required by § 93.314 occurred within 48 hours of the horse's export.
Three commenters expressed concern about the proposed requirement to complete the pre-export examination within 48 hours of the horse's export if the horse's travel time from point of origin to port of embarkation exceeds 48 hours, particularly in the case of long layovers or flight delays. One of these commenters also asked for clarification on whether the 48-hour window referred to the expected or actual departure time.
APHIS is requiring that horses complete a pre-export exam within 48 hours of export because an increasing number of horses are being imported into the United States that are sick or injured and noncompliant with the regulations. Not only does this pose a risk of introducing into or disseminating within the United States pests or diseases of livestock, but it also increases quarantine time and user fees for stakeholders. We believe that requiring horses to receive a pre-export exam within this timeframe will help mitigate these problems.
Because horses are required by § 93.314(b) to obtain a health certificate from each region in which they have been present during the 60 days prior to their shipment to the United States, horses that have an extended layover are currently required to obtain a health certificate from the country in which they had a layover. Therefore, the addition of a requirement of a pre-export exam completed within 48 hours does not impose an additional requirement in this situation.
Horses must be inspected within 48 hours of their actual departure time. To clarify what we meant by “within 48 hours of export” in the proposed rule, we will update § 93.314(a)(5) to replace the phrase “of export” with the phrase “of departure from the port of embarkation.” Extenuating circumstances, such as flight delays, are handled by APHIS on a case-by-case basis, as provided for by the current regulations in § 93.301(a).
We proposed to add the phrase “or other permanent identification approved by APHIS” to the requirement in § 93.301(e)(4) that mares used to test stallions for CEM be marked with the letter “T”.
Five commenters asked that we add International Standards Organization-compliant microchips to the list of approved permanent means of identification for test mares in § 93.301(e)(4)(i).
As stated in the proposed rule, individuals will be able to contact APHIS Live Animal Imports by email at
Three of these commenters also asked that we clarify how individuals can request U.S. Department of Agriculture (USDA) approval of alternative forms of permanent identification for test mares.
As stated in the proposed rule, individuals may request approval of alternative permanent means of identification by contacting APHIS Live Animal Imports by email at
Two commenters suggested that APHIS create a process through which States could seek permanent approval for an alternative type of permanent identification device to be used in that State.
At this time, limited agency resources do not make the creation of such a process practicable. However, we will continue to work with our State partners to ensure that the process for considering the approval of an alternative means of identification is as efficient and expeditious as possible.
One commenter sought clarification on why importers would be interested in using other means of permanent
Currently, the regulations only allow test mares to be identified by being marked with the letter “T”. Microchips are not listed as an acceptable form of permanent identification. Our change allows for the possibility of using permanent identification methods other than branding, such as microchips.
One commenter stated that photos of detailed markings of test mares should be collected to correlate with microchip identification information.
Approval of microchipping as a form of identification, including the specifics of recordkeeping involved in microchipping, will be considered on a case-by-case basis.
One commenter requested that we remove all references to eartags as a means of identification in part 93, as a horse is unlikely to have one, and they are insufficient for traceability.
The only reference to eartags in part 93 occurs in § 93.304, where they are listed as an example of identifying information about a horse to include on an import permit. We acknowledge that eartags are not a frequently used method of identification. However, in order to account for rare circumstances, to ensure that import permits include all possible relevant identifying information, and to retain consistency with the domestic animal traceability regulations in 9 CFR part 86, we will continue to list eartags as an accepted method of identification.
We proposed miscellaneous minor changes to regulations related to horses entering quarantine, including clarifying that horses originating from regions in which Venezuelan equine encephalomyelitis or screwworm is declared to exist may not complete quarantine in temporary, privately-owned quarantine facilities.
Two commenters asked that we remove the requirement for importers to use a trust fund agreement or escrow account agreement for quarantined horses and instead require these individuals to incur and pay user fees.
This is outside of the scope of this rulemaking.
One commenter asked us to consider specific measures to better ensure that horses completing quarantine following importation into the United States meet a destination State's import criteria prior to being moved into the State, as required by § 86.5.
This is also outside of the scope of this rulemaking.
Five commenters asked us to allow horses that receive non-negative tests for quarantine diseases to move to other facilities that better serve their health and wellness needs while waiting for a re-test.
Horses must remain in quarantine facilities for the full length of time prescribed by APHIS to ensure that no communicable animal diseases enter the United States. APHIS determines these quarantine requirements using the best available science regarding the diseases of concern. At the same time, APHIS works to address the health and wellbeing needs of horses in the quarantine facilities it operates. Privately owned quarantine facilities must meet the standards outlined in § 93.308(c) to also address these needs before being approved by APHIS.
Additionally, APHIS representatives work with importers to make sure the needs of horses are met while they are in quarantine.
One commenter stated that provisions need to be made for horses that arrive ill or injured, or become sick or are injured while in import quarantine, and require veterinary care beyond what can be provided at the quarantine facility.
This is standard practice in quarantine facilities. When horses exhibit signs of illness or injury upon arrival or during import quarantine, importers are responsible for bringing in an accredited veterinarian to examine and treat the animal. If the accredited veterinarian determines that the horse needs advanced care at a veterinary hospital, the horse is transported to a veterinary hospital approved by APHIS to treat horses under import quarantine.
Two commenters stated that horses that test negative for regulated diseases during quarantine but that exhibit signs of other illness and require treatment at an approved veterinary hospital should have less stringent quarantine requirements than untested horses.
Our quarantine requirements are based on the best available scientific understanding of communicable diseases of horses. Testing is just one part of the quarantine process. Observation under isolation for the requisite period of time is also essential, as horses that test negative for regulated diseases may still be sick with other infectious or emerging diseases and pose a risk to domestic livestock. Therefore, this suggestion is not practicable at this time. However, we may look further into this suggestion in the future.
Three commenters stated that USDA should dedicate resources to pursue advancing diagnostic testing capabilities for equine import testing, particularly for dourine and glanders diagnostic tests.
We are continuously working with NVSL to build capacity and develop diagnostic testing capabilities for equine import testing.
Two commenters requested that USDA maintain a system of recording and reporting abnormal health events that would be used to notify animal health officials in the state of the horse's destination, as recommended by the U.S. Animal Health Association's (USAHA) Committee on Equine.
We appreciate the suggestion and are working closely with stakeholders and other relevant parties to discuss USAHA's requests. We also note that APHIS currently has a protocol in place for recording and notifying State animal health officials of adverse health events in imported equines.
Three commenters asked that we define the terms “Federal quarantine,” “private quarantine,” and “temporary private quarantine.”
The terms “permanent, privately owned quarantine facility” and “temporary, privately owned quarantine facility” are defined in § 93.300. These definitions distinguish these facilities from Federal quarantine facilities, which are facilities directly operated by APHIS.
Three commenters requested the removal of a reference to allowing exercise equipment in horses' stalls in permanent, privately owned quarantine facilities, as this may compromise the safety of the horse. One of these commenters also asked APHIS to allow horses other opportunities for exercise in both privately owned and Federal quarantine facilities.
Section 93.308(c)(3)(ii)(G) allows exercise equipment to be kept in the stall with the horse in permanent, privately owned quarantine facilities only if there will still be sufficient space within the stalls for the horse to move freely once the equipment is installed. Port officials work with owners to ensure the safety of the horse in these situations. When there are reasonable requests to allow a horse other forms of exercise during quarantine, such as exercise within the lot-holding area, APHIS evaluates the request for feasibility and compliance with the regulations, and works collaboratively with the horse's owner, importer, or other responsible party to address the request.
One commenter asked us to consider allowing horses from VEE-affected and screwworm-affected countries to quarantine in temporary, privately owned quarantine facilities.
As stated in the preamble to the proposed rule, horses from VEE- or screwworm-affected countries cannot complete quarantine in temporary, privately owned quarantine facilities because the performance requirements for these facilities are not sufficient to safeguard against vector-borne foreign animal diseases (which include screwworm, VEE, and African horse sickness).
We proposed to move the screwworm regulations from § 93.301 to § 93.308 and make a minor correction and clarification.
One commenter stated they supported the creation of a screwworm section.
We would like to clarify for the commenter that, as stated in the preamble to the proposed rule, we are not creating a new section regarding screwworm, but rather moving the existing regulations regarding screwworm to a different section and adding minor corrections and clarifications.
One commenter stated that, if USDA allows for exemptions from the 7-day screwworm import quarantine requirements, then a screwworm examination by the accredited veterinarian must be required prior to quarantine release.
We did not propose to add an exemption to the 7-day screwworm quarantine requirement in the regulations. The regulations continue to require that horses from screwworm-affected countries complete a minimum of 7 days in quarantine.
The commenter also requested that we allow a 3-day quarantine instead of 7-day quarantine for horses that stop in a screwworm-affected country for a plane to refuel. Another commenter asked why horses from Australia or New Zealand are required to complete a 7-day quarantine if they transit a screwworm-affected country, while horses from certain screwworm-affected regions are allowed a shorter quarantine period.
As stated above, we did not propose substantive changes to the screwworm regulations. Therefore, the length of time a horse from a screwworm-affected country spends in quarantine is outside the scope of this rulemaking.
Two commenters noted that the lists of ports of entry for horses in § 93.303 were not accurate or did not match those listed on the APHIS website.
The commenters are correct that this information is not up to date in the regulations. Because ports have historically opened or closed more frequently than could be updated via rulemaking, resulting in inaccurate information in the regulations, and because the proposed rule in several instances discussed activities that must take place at an approved port of entry in order for a horse to be validly imported, it is important for clear and unambiguous implementation of this final rule that the lists of such ports of entry be up to date. Accordingly, we will remove the lists of Canadian border ports in paragraph (b), Mexican border ports in paragraph (c), and limited ports in paragraph (d) in § 93.303 and add instead a link to the APHIS website (
Additionally, we will add this link to paragraph (e), which contains information about ports for horses to be quarantined at privately owned quarantine facilities, but does not currently include a list of these ports or information about where such a list may be found. We will also update the list of air and ocean ports in paragraph (a) to remove Los Angeles, California and Miami, Florida, as these ports no longer have APHIS-operated inspection and quarantine facilities for horses.
One commenter stated they had concerns about the validity of the list of VEE-affected countries when some countries fail to report disease outbreaks to the WOAH. Four other commenters expressed concern about the reliability of all the lists of countries affected by regulated equine diseases that APHIS maintains.
The WOAH is not the only source APHIS relies on to determine a country's disease status. As stated in § 93.308(a)(1)(ii), APHIS will add a region to the list of VEE-affected regions based on reports we receive of outbreaks of the disease from veterinary officials of the exporting country, from WOAH, or from other sources the Administrator determines to be reliable. The same is true for lists of regions where screwworm, African horse sickness, and CEM are considered to exist.
One commenter asked for further clarification on how APHIS deals with horses dead upon arrival, and asked us to add to the regulations that APHIS has the authority to require diagnostic testing for horses arriving in the same shipment as a dead horse to ensure that these horses were not exposed to an infectious, contagious condition.
As clarified in the proposed rule, APHIS will refuse entry to horses that are found to be dead upon presentation at the port of entry. The commenter's concern about horses arriving in the same shipment as a dead horse is warranted, as these horses pose an increased risk of introducing animal disease into the United States. Diagnostic testing for these horses would not be feasible, as determining what additional testing and quarantine would be necessary to mitigate disease risk would require a necropsy of the dead horse, and dead horses are refused entry. To address the disease risk that the commenter raises, we will add the phrase “and horses arriving in the same shipment as such horses” after the phrase “horses dead upon presentation” in § 93.306 to clarify that APHIS will refuse entry to such horses as well.
Three commenters recommended that APHIS adopt the USAHA Committee on Equine's request to amend the quarantine requirements for horses from VEE-affected countries by requiring that all horses be isolated 3 weeks prior to shipment, that horses vaccinated against VEE be vaccinated no less than 60 days prior to arrival at the import center, and that unvaccinated horses have negative results for VEE no less than 14 days after the commencement of quarantine.
We appreciate the suggestion and are working closely with stakeholders to discuss USAHA's requests.
Four commenters asked that the written plan outlined in § 93.304(a)(1)(iii)(I) to handle sick and injured horses required of horses temporarily imported into the United States solely for noncompetitive public exhibition and entertainment purposes include biosecurity measures.
The written plan referred to by the commenters is a part of the import permit application required of this class of horses. As such, APHIS evaluates the written plan before granting a permit, keeping biosecurity measures in mind while assessing the information provided regarding the accredited veterinarian and medical facility that will treat the horses should they become sick or injured while in the United States.
In paragraph (a)(1) of § 93.308, we proposed to clarify the regulations by adding that horses imported from regions where VEE exists must obtain an import permit in accordance with § 93.304. In reviewing the proposed rule, we noticed that we had neglected to clarify regulations regarding horses
In reviewing the proposed rule, we also noticed an outdated address. We are updating the address listed in § 93.301(h)(7) to reflect that the name of the relevant Veterinary Services division has changed from “Regionalization Evaluation Services” to “Live Animal Imports.”
We are also making a minor nonsubstantive change by adding a correction to the section heading of § 93.304. The section heading currently reads “Import permits for horses from regions affected with CEM and for horse specimens for diagnostic purposes; reservation fees for space at quarantine facilities maintained by APHIS.” As this section refers to import permits for all horses that require them, rather than only for horses from regions affected with CEM, we are removing the phrase “from regions affected with CEM” so that the heading more accurately reflects the information contained within the section.
Finally, in our proposal, we proposed to amend § 93.314(a)(7)(i) to clarify that the requirement contained within it, that health certificates must state that horses have not been in any region affected with CEM during the 12 months immediately prior to export, does not apply to horses described in § 93.301(f), which are horses from regions affected with CEM that are temporarily imported to the United States for competition or entertainment purposes. In reviewing the proposed rule, we noticed that we had neglected to clarify that this provision also does not apply to horses described in paragraph (d) of § 93.301, which are Spanish Pure Breed horses from Spain and racing thoroughbred horses from France, Germany, the Republic of Ireland, Great Britain, and Northern Ireland and paragraph (e), which are stallions and mares over 731 days of age from CEM-affected regions. Like horses described in § 93.301(f), these horses have special provisions outlined in the aforementioned paragraphs. To avoid confusion and align § 93.314 with these provisions, we are amending the regulatory text to clarify that horses described in § 93.301(d) and (e) are also excluded from the requirement in § 93.314(a)(7)(i).
Therefore, for the reasons given in the proposed rule and in this document, we are adopting the proposed rule as a final rule, with the changes discussed in this document.
This final rule has been determined to be not significant for the purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget.
In accordance with the Regulatory Flexibility Act, we have analyzed the potential economic effects of this action on small entities. The analysis is summarized below. Copies of the full analysis are available on the
APHIS is amending elements of its equine import regulations.
First, APHIS will amend its regulations for temporary export of horses to CEM-affected regions. The changes will allow horses to spend up to 90 days in a CEM-affected region.
The amendments will also allow APHIS to correct and clarify information in 9 CFR 93.308, 93.314, and 93.319. This includes updating the regulations to reflect current policies and affected regions. It also includes amending the description of health certification and permit requirements.
This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule: (1) Preempts all State and local laws and regulations that are inconsistent with this rule; (2) has no retroactive effect; and (3) does not require administrative proceedings before parties may file suit in court challenging this rule.
Pursuant to the Congressional Review Act (5 U.S.C. 801
In accordance with section 3507(d) of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
The Animal and Plant Health Inspection Service is committed to compliance with the EGovernment Act to promote the use of the internet and other information technologies, to provide increased opportunities for citizen access to Government information and services, and for other purposes. For information pertinent to E-Government Act compliance related to this rule, please contact Mr. Joseph Moxey, APHIS' Paperwork Reduction Act Coordinator, at (301) 851-2483.
Animal diseases, Imports, Livestock, Poultry and poultry products, Reporting and recordkeeping requirements.
Accordingly, we are amending 9 CFR part 93 as follows:
7 U.S.C. 1622 and 8301-8317; 21 U.S.C. 136 and 136a; 31 U.S.C. 9701; 7 CFR 2.22, 2.80, and 371.4.
The revisions and additions read as follows:
(a)
(b)
(e) * * *
(2) * * *
(ii) Stallions and mares must be transported to the approved State in a sealed vehicle. The seal may be broken only by an APHIS representative or a State animal health official at the horse's destination. If an APHIS representative or State animal health official is unavailable to break the seal due to extenuating circumstances, the State animal health official may designate the authority to unseal to an accredited veterinarian and will assume the responsibility for oversight and recordkeeping.
(4) * * *
(i) Mares to be used to test stallions for CEM shall be permanently identified before the mares are used for such testing with the letter “T” or other permanent identification approved by APHIS on a case-by-case basis. The marking shall be permanently applied by an inspector, a State inspector, or an accredited veterinarian who shall use a hot iron, freezemarking, a lip tattoo, or other APHIS-approved method. If a hot iron or freezemarking is used, the marking shall not be less than 2 inches (5.08 cm) high and shall be applied to the left shoulder or left side of the neck of the mare. If a lip tattoo is used, the marking shall not be less than 1 inch (2.54 cm) high and 0.75 inch (1.9 cm) wide and shall be applied to the inside surface of the upper lip of the test mare.
(f) * * *
(5) * * *
(v) While in transit, the horse must be moved in either an aircraft or a sealed van or trailer. If the horse is moved in a sealed van or trailer, the seal may be broken only by an APHIS representative or State animal health official at the horse's destination, except in situations where the horse's life is in danger.
(g)
(1) * * *
(iii) That breeding of the horse, either live or artificial, has never been attempted, nor has the horse had any other sexual contact or genital examination while in such region; and
(h) * * *
(4) The State must agree to provide oversight during the test breeding of quarantined stallions.
(7) A list of States approved by APHIS to receive stallions over 731 days of age imported under paragraph (e) of this section is maintained on the APHIS website at
(8) A list of States approved by APHIS to receive mares over 731 days of age imported under paragraph (e) of this section is maintained on the APHIS website at
(Approved by the Office of Management and Budget under control numbers 0579-0040, 0579-0165, 0579-0324, and 0579-0485)
The additions read as follows:
(a)
(1) Containers must be new or cleaned and disinfected in a manner that sufficiently reduces the risk of introduction or dissemination of any pests or diseases of livestock into the United States.
(2) Containers must be of sufficient size and construction to reasonably assure that live equine(s) are transported safely.
(3) Stocking density of live equine(s) must not be to an extent that impinges on the animals' safety during transportation.
(4) Guidance on how to meet these requirements may be found in the Live Animals Regulations (LAR), as amended, published by the International Air Transport Association (IATA) or the Terrestrial Animal Health Code published by the World Organization for Animal Health (WOAH). The Administrator may also approve alternative guidance than that described in the LAR or the Terrestrial Animal Health Code.
(e)
The revisions and addition read as follows:
(b)
(c)
(d)
(e) * * * These ports may be found on the APHIS website at
The revisions read as follows:
(Approved by the Office of Management and Budget under control numbers 0579-0040, 0579-0324, and 0579-0485)
No litter or manure, fodder or other aliment, nor any equipment such as boxes, buckets, ropes, chains, blankets, or other things used for or about horses governed under any law or regulation administered by the Secretary of Agriculture for prevention of the introduction or dissemination of any pests or diseases of livestock, shall be landed from any conveyance except under such restrictions as the inspector in charge at the port of entry shall direct.
The revisions and addition read as follows:
(a) * * *
(1) Except as provided in §§ 93.317 (horses from Canada) and 93.324 (horses from Mexico), horses intended for importation from regions that APHIS considers to be affected with Venezuelan equine encephalomyelitis shall be quarantined at a port designated in § 93.303 to be evaluated for signs of Venezuelan equine encephalomyelitis. Each horse must be accompanied at the time of importation by an import permit in accordance with § 93.304.
(i) A list of regions that APHIS considers affected with Venezuelan equine encephalomyelitis is maintained on the APHIS website at
(ii) APHIS will add a region to the list upon determining that the disease exists in the region based on reports APHIS receives of outbreaks of the disease from veterinary officials of the exporting country, from the World Organization for Animal Health (WOAH), or from other sources the Administrator determines to be reliable. APHIS will remove a region from the list after conducting an evaluation of the region in accordance with § 92.2 of this subchapter and finding that the disease is not present in the region. In the case of a region formerly not on this list that is added due to an outbreak, the region may be removed from the list in accordance with the procedures for reestablishment of a region's disease-free status in § 92.4 of this subchapter.
(2) Horses intended for importation from regions APHIS considers to be affected with African horse sickness may enter the United States only at the port of New York, and must be quarantined at the New York Animal Import Center in Newburgh, New York, for at least 60 days. This restriction also applies to horses that have stopped in or transited a region considered affected with African horse sickness. Each horse must be accompanied at the time of importation by an import permit in accordance with § 93.304.
(3) Horses from regions where APHIS considers screwworm to exist may be imported into the United States only if they meet the requirements in paragraphs (a)(3)(i) through (vii) of this section, obtain an import permit in accordance with § 93.304, and meet all
(i) A veterinarian must treat horses with ivermectin 3 to 5 days prior to the date of export to the United States according to the recommended dose prescribed on the product's label.
(ii) Horses must be examined for screwworm by a full-time salaried veterinary official of the exporting country within 24 hours prior to shipment to the United States. The official must fully examine the horses, including their external genitalia. If horses are found to be infested with screwworm, they must be treated until free from infestation.
(iii) At the time horses are loaded onto a means of conveyance for export, a veterinarian must treat any visible wounds on the animals with a solution of coumaphos dust at a concentration of 5 percent active ingredient.
(iv) Horses must be accompanied to the United States by a certificate signed by a full-time salaried veterinary official of the exporting country. The certificate must state that the horses, including their external genitalia, have been thoroughly examined and found free of screwworm and that the horses have been treated in accordance with paragraphs (a)(3)(i) and (iii) of this section.
(v) Horses must be quarantined upon arrival in the United States at a port designated in § 93.303 for at least 7 days.
(vi) Horses must be examined for screwworm by a veterinarian within 24 hours after arrival at a port designated in § 93.303. The examining veterinarian must examine horses, including their external genitalia, to determine whether the horse is infested with screwworm.
(vii) Horses must be held at the animal import center for a minimum of 7 days. On day 7, prior to the horses' release, the horses must be examined by a veterinarian at the expense of the owner or broker. For this examination, male horses must be tranquilized or sedated so that the external genitalia of the horses can be thoroughly examined. If screwworm is found during this examination, the horses must be held in quarantine and treated until free of infestation.
(Approved by the Office of Management and Budget under control numbers 0579-0313 and 0579-0485)
The revisions and additions read as follows:
(a) Horses offered for importation from any part of the world shall be accompanied by an original certificate endorsed by a salaried veterinary officer of the national government of the region of origin, or if exported from Mexico, shall be accompanied either by such a certificate or by a certificate issued by a veterinarian accredited by the National Government of Mexico and endorsed by a full-time salaried veterinary officer of the National Government of Mexico, thereby representing that the veterinarian issuing the certificate was authorized to do so. The certificate shall specify the name and address of the importer; the species, breed, number or quantity of horses or horse test specimens to be imported; the purpose of the importation; individual horse identification which requires a description of the horse, name, age, markings and, when present, registration number, tattoo, microchip, eartag, brand, if any; the region and premises of origin; the name and address of the exporter; and the destination address for release into the United States; and shows that:
(1) The horses described in the certificate have been in said region during the 60 days preceding exportation, or, for horses described in § 93.301(g), for the duration of their temporary exportation to each CEM-affected region;
(4) The horse, if applicable, has not been gelded during the 14 days preceding exportation;
(5) The horse will be accompanied by documentation of pre-export examination occurring within 48 hours of departure from the port of embarkation endorsed by a salaried veterinary medical officer;
(7) * * *
(i) The horses, except horses described in § 93.301(d), (e), and (f), have not been in any region listed in accordance with § 93.301(c)(1) on the APHIS website as affected with CEM during the 12 months immediately prior to their importation into the United States;
(d) For purposes of this section, the term “original” means documentation is prepared and issued directly from the national government of the region of origin or annotated by the national government of the region of origin to indicate how the documentation may be verified. Any declaration, permit, or other required document for horses may be issued and presented using a United States Government electronic information exchange system or other method authorized by APHIS.
(Approved by the Office of Management and Budget under control number 0579-0485)
The revision and addition read as follows:
(a) Except as provided in paragraph (d) of this section, horses from Canada shall be inspected as provided in § 93.306 and accompanied by a certificate as required by § 93.314, which shall include evidence of a negative test for equine infectious anemia for which blood samples were drawn during the 180 days preceding exportation to the United States and which test was conducted in a laboratory approved by the Canada Department of Agriculture or the United States Department of Agriculture. Horses accompanying their dams, which were foaled after their dam was so tested negative, need not be so tested and shall otherwise be handled as provided in § 93.314. Certificates required for horses from Canada must be issued and endorsed by a salaried veterinarian of the Canadian Government. USDA veterinary port inspection is not required for horses imported from Canada under temporary Customs authorization for a period of 30 days from the date of issue of the certificate and the certificate issued is valid for an unlimited number of importations into the United States during the 30-day period.
(c) Any horse imported into the United States from Canada through air or ocean ports of entry must obtain an import permit under § 93.304 and shall otherwise be handled as provided in §§ 93.305 and 93.314.
For all horses offered for importation from or transiting through regions of Central America or of the West Indies, the importer or his or her agent shall have obtained an import permit under § 93.304 and shall present two copies of a declaration as provided in § 93.305.
(Approved by the Office of Management and Budget under control number 0579-0485)
* * * Horses quarantined at a U.S. facility designated in § 93.303 must obtain an import permit under § 93.304.
(Approved by the Office of Management and Budget under control number 0579-0485)
Federal Aviation Administration (FAA), DOT.
Final rule.
The FAA is adopting a new airworthiness directive (AD) for certain Bombardier, Inc., Model CL-600-1A11 (600), CL-600-2A12 (601), and CL-600-2B16 (601-3A, 601-3R, and 604 Variants) airplanes. This AD was prompted by an uncommanded flap extension accompanied by a flaps fail caution message during climb. This AD requires initial and repetitive operational tests of the flap control system. The FAA is issuing this AD to address the unsafe condition on these products.
This AD is effective October 19, 2023.
The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of October 19, 2023.
• For service information identified in this final rule, contact Bombardier Business Aircraft Customer Response Center, 400 Côte-Vertu Road West, Dorval, Québec H4S 1Y9, Canada; telephone 514-855-2999; email
• You may view this service information at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. It is also available at
Chirayu Gupta, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7300; email
The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would
The MCAI states a Model CL-600-2B16 airplane experienced an uncommanded flap extension from 0 to 45 degrees accompanied by a flaps fail caution message during climb. The airplane returned to the departure airport without further incident. The investigations of this event by Transport Canada and the airplane manufacturer found that the flap control system failed to arrest the uncommanded movement of the flap, due to a failed retract relay. The failed retract relay also caused the flap control system to operate at half speed, which had occurred, but was undetected, during previous flights. The root cause of the uncommanded flap extension remains under investigation. Transport Canada considers the MCAI to be an interim action, and further AD action may follow.
In the NPRM, the FAA proposed to require initial and repetitive operational tests of the of the inboard and outboard flaps of the flap control system to verify the functionality of the retract relays. The FAA is issuing this AD to address the failure of the flap control system to arrest the uncommanded flap extension. The unsafe condition, if not addressed, could lead to the loss of control of the airplane.
You may examine the MCAI in the AD docket at
The FAA received no comments on the NPRM or on the determination of the cost to the public.
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 this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA reviewed the relevant data and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on this product. Except for minor editorial changes, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator.
The FAA reviewed the following service information, which specifies procedures for performing initial and repetitive operational tests of the inboard and outboard flaps to verify the functionality of the retract relays. The service information also specifies contacting the manufacturer for corrective action (repair) for any anomaly found during an operational test. These documents are distinct since they apply to different airplane models.
• Bombardier Service Bulletin 600-0780, dated December 29, 2022.
• Bombardier Service Bulletin 601-1112, Revision 01, dated February 23, 2023.
• Bombardier Service Bulletin 604-27-040, dated December 29, 2022.
• Bombardier Service Bulletin 605-27-011, dated December 29, 2022.
• Bombardier Service Bulletin 650-27-004, dated December 29, 2022.
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
The FAA considers this AD an interim action. If final action is later identified, the FAA might consider further rulemaking then.
The FAA estimates that this AD affects 1,124 airplanes of U.S. registry. The FAA estimates the following costs to comply with this 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.
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,
(2) Will not affect intrastate aviation in Alaska, and
(3) Will 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 amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This airworthiness directive (AD) is effective October 19, 2023.
None.
This AD applies to Bombardier, Inc., airplanes, certificated in any category, identified in paragraphs (c)(1) through (3) of this AD.
(1) Model CL-600-1A11 (600) airplanes, serial numbers 1004 through 1085 inclusive.
(2) Model CL-600-2A12 (601) airplanes, serial numbers 3001 through 3066 inclusive.
(3) Model CL-600-2B16 (601-3A, 601-3R, and 604 Variants) airplanes, serial numbers 5001 through 5194 inclusive, 5301 through 5665 inclusive, 5701 through 5988 inclusive, and 6050 through 6999 inclusive.
Air Transport Association (ATA) of America Code 27, Flight Controls.
This AD was prompted by a Model CL-600-2B16 airplane that experienced an uncommanded flap extension from 0 to 45 degrees accompanied by a flaps fail caution message during climb. The FAA is issuing this AD to address the failure of the flap control system to arrest the uncommanded flap extension. The unsafe condition, if not addressed, could lead to the loss of control of the airplane.
Comply with this AD within the compliance times specified, unless already done.
Within 100 flight hours or 15 months, whichever occurs first after the effective date of this AD, perform an initial operational test of the inboard and outboard flaps, and all applicable corrective actions, in accordance with Section 2.B. of the Accomplishment Instructions of the applicable service information identified in paragraphs (g)(1) through (5) of this AD. Corrective actions must be done before further flight after the test.
(1) For Model CL-600-1A11 (Challenger 600) airplanes, serial numbers 1004 through 1085 inclusive: Use Bombardier Service Bulletin 600-0780, dated December 29, 2022.
(2) For Model CL-600-2A12 (Challenger 601) airplanes, serial numbers 3001 through 3066 inclusive, and Model CL-600-2B16 (Challenger 601) airplanes, serial numbers 5001 through 5194 inclusive: Use Bombardier Service Bulletin 601-1112, Revision 01, dated February 23, 2023.
(3) For Model CL-600-2B16 (Challenger 604) airplanes, serial numbers 5301 through 5665 inclusive: Use Bombardier Service Bulletin 604-27-040, dated December 29, 2022.
(4) For Model CL-600-2B16 (Challenger 605) airplanes, serial numbers 5701 through 5988 inclusive: Use Bombardier Service Bulletin 605-27-011, dated December 29, 2022.
(5) For Model CL-600-2B16 (Challenger 650) airplanes, serial numbers 6050 through 6999 inclusive: Use Bombardier Service Bulletin 650-27-004, dated December 29, 2022.
Repeat the operational test required by paragraph (g) of this AD at the applicable time specified in paragraph (h)(1) through (3) of this AD.
(1) For Model CL-600-1A11 airplanes: Repeat at intervals not to exceed 100 flight hours.
(2) For the airplanes identified in paragraphs (h)(2)(i) and (ii) of this AD: Repeat within the repetitive intervals specified in Section 1.D. of Bombardier Service Bulletin 601-1112, Revision 01, dated February 23, 2023.
(i) Model CL-600-2A12 airplanes.
(ii) Model CL-600-2B16 airplanes, serial numbers 5001 through 5194 inclusive.
(3) For the airplanes identified in paragraphs (h)(3)(i) through (iii) of this AD: Repeat the test at intervals not to exceed 400 flight hours.
(i) Model CL-600-2B16 airplanes, serial numbers 5301 through 5665 inclusive.
(ii) Model CL-600-2B16 airplanes, serial numbers 5701 through 5988 inclusive.
(iii) Model CL-600-2B16 airplanes, serial numbers 6050 through 6999 inclusive.
For the airplanes identified in paragraph (h)(2) of this AD: This paragraph provides credit for actions required by paragraphs (g) and (h) of this AD, if those actions were performed before the effective date of this AD using Bombardier Service Bulletin 601-1112, dated December 29, 2022.
The following provisions also apply to this AD:
(1)
(2)
(1) Refer to Transport Canada AD CF-2023-07, dated February 10, 2023, for related information. This Transport Canada AD may be found in the AD docket at
(2) For more information about this AD, contact Chirayu Gupta, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7300; email
(3) Service information identified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (l)(3) and (4) of this AD.
(1) The Director of the Federal Register approved the incorporation by reference of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.
(i) Bombardier Service Bulletin 600-0780, dated December 29, 2022.
(ii) Bombardier Service Bulletin 601-1112, Revision 01, dated February 23, 2023.
(iii) Bombardier Service Bulletin 604-27-040, dated December 29, 2022.
(iv) Bombardier Service Bulletin 605-27-011, dated December 29, 2022.
(v) Bombardier Service Bulletin 650-27-004, dated December 29, 2022.
(3) For service information identified in this AD, contact Bombardier Business Aircraft Customer Response Center, 400 Côte-Vertu Road West, Dorval, Québec H4S 1Y9, Canada; telephone 514-855-2999; email
(4) You may view this service information at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195.
(5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, email
Federal Aviation Administration (FAA), DOT.
Final rule.
The FAA is adopting a new airworthiness directive (AD) for all ATR—GIE Avions de Transport Régional Model ATR42 and ATR72 airplanes. This AD was prompted by a determination that some batches of nose landing gear (NLG) drag brace panels (DBP) having certain part numbers were affected by a quality deficiency that was not detected in production. This AD requires a measurement of the affected part and, depending on findings, accomplishment of applicable corrective actions, as specified in a European Union Aviation Safety Agency (EASA) AD, which is incorporated by reference. This AD also prohibits the installation of affected parts. The FAA is issuing this AD to address the unsafe condition on these products.
This AD is effective October 19, 2023.
The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of October 19, 2023.
• For EASA material incorporated by reference in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email
• For Safran Landing Systems SAS service information incorporated by reference in this AD, contact Safran Landing Systems SAS, Inovel Parc Sud—7, rue Général Valérie André, 78140 VELIZY-VILLACOUBLAY—FRANCE; telephone +33 (0) 1 46 29 81 00, website
• You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. It is also available in the AD docket at
Shahram Daneshmandi, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: 206-231-3220; email:
The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to all ATR—GIE Avions de Transport Régional Model ATR 42-200, ATR 42-300, ATR 42-320, ATR 42-400, ATR 42-500, ATR 72-101, ATR 72-102, ATR 72-201, ATR 72-202, ATR 72-211, ATR 72-212, and ATR 72-212A airplanes. Model ATR 42-400 airplanes are not certificated by the FAA and are not included on the U.S. type certificate data sheet; this AD therefore does not include those airplanes in the applicability. The NPRM published in the
In the NPRM, the FAA proposed to require a measurement of the affected part and, depending on findings, accomplishment of applicable corrective actions, as specified in EASA AD 2023-0010. The NPRM also proposed to prohibit the installation of affected parts. The FAA is issuing this AD to address the unsafe condition on these products.
You may examine the MCAI in the AD docket at
The FAA received a comment from Air Line Pilots Association, International, who supported the NPRM without change.
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 this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA reviewed the relevant data, considered the comment received, and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on this product. Except for minor editorial changes, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator.
EASA AD 2023-0010 specifies procedures for measuring the affected part and, depending on findings, accomplishing applicable corrective actions. Corrective actions could include obtaining and carrying out repair instructions, or replacing the affected part with a serviceable part. EASA AD 2033-0010 also specifies procedures for reporting measurement findings to ATR—GIE and prohibits the installation of affected parts.
Safran Landing Systems SAS Service Bulletin 631-32-286, dated October 28, 2022, provides the list of affected parts and specifies measurement procedures.
This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
The FAA estimates that this AD affects 73 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:
The FAA has received no definitive data on which to base the cost estimates for the on-condition actions specified in this AD.
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 currently 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.
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,
(2) Will not affect intrastate aviation in Alaska, and
(3) Will 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 amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This airworthiness directive (AD) is effective October 19, 2023.
None.
This AD applies to all ATR—GIE Avions de Transport Régional Model ATR42-200, -300, -320, and -500 airplanes; and Model ATR72-101, -102, -201, -202, -211, -212, and -212A airplanes, certificated in any category.
Air Transport Association (ATA) of America Code 32, Landing gear.
This AD was prompted by a determination that some batches of nose landing gear (NLG) drag brace panels (DBP) having part number (P/N) D63757 and P/N D69085 were affected by a quality deficiency that was not detected in production. The FAA is issuing this AD to address the possibility of a resulting NLG DBP dissymmetry at the lower area, which might affect the structural strength of the NLG DBP. This condition, if not addressed, could lead to NLG DBP structural fatigue failure and subsequent collapse of the NLG, possibly resulting in damage to the airplane and injury to occupants.
Comply with this AD within the compliance times specified, unless already done.
Except as specified in paragraph (h) of this AD: Comply with all required actions and compliance times specified in, and in accordance with, European Union Aviation Safety Agency (EASA) AD 2023-0010, dated January 17, 2023 (EASA AD 2023-0010).
(1) Where EASA AD 2023-0010 refers to its effective date, this AD requires using the effective date of this AD.
(2) This AD does not adopt the “Remarks” section of EASA AD 2023-0010.
(3) Where EASA AD 2023-0010 defines “the SB,” for this AD, operators must use Safran Landing Systems SAS Service Bulletin 631-32-286, dated October 28, 2022.
(4) Paragraph (2) of EASA AD 2023-0010 specifies to report measurement results to Safran Landing Systems SAS within a certain compliance time. For this AD, report inspection results at the applicable time specified in paragraph (h)(4)(i) or (ii) of this AD, but do not exceed the compliance time specified in Table 1 of EASA AD 2023-0010.
(i) If the inspection was done on or after the effective date of this AD: Submit the report within 30 days after the inspection.
(ii) If the inspection was done before the effective date of this AD: Submit the report within 30 days after the effective date of this AD.
The following provisions also apply to this AD:
(1)
(2)
For more information about this AD, contact Shahram Daneshmandi, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: 206-231-3220; email:
(1) The Director of the Federal Register approved the incorporation by reference of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.
(i) European Union Aviation Safety Agency (EASA) AD 2023-0010, dated January 17, 2023.
(ii) Safran Landing Systems SAS Service Bulletin 631-32-286, dated October 28, 2022.
(3) For EASA AD 2023-0010, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email
(4) For Safran Landing Systems SAS service information, contact Safran Landing Systems SAS, Inovel Parc Sud—7, rue Général Valérie André, 78140 VELIZY-VILLACOUBLAY—FRANCE; telephone +33 (0) 1 46 29 81 00, website
(5) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195.
(6) You may view this material that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, email
Federal Aviation Administration (FAA), DOT.
Final rule.
The FAA is adopting a new airworthiness directive (AD) for certain Saab AB, Support and Services Model 340A (SAAB/SF340A) and SAAB 340B airplanes. This AD was prompted by reports of a high number of events related to stall warnings upon landing, following introduction of the ice speed function within the stall warning system. This AD requires modification of the stall warning/identification system, as specified in a European Union Aviation Safety Agency (EASA) AD, which is incorporated by reference. The FAA is issuing this AD to address the unsafe condition on these products.
This AD is effective October 19, 2023.
The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of October 19, 2023.
• For EASA material incorporated by reference in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email
• You may view this service information at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. It is also available in the AD docket at
Shahram Daneshmandi, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 206-231-3220; email
The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain SAAB/SF340A and SAAB 340B airplanes. The NPRM published in the
In the NPRM, the FAA proposed to require accomplishing the actions specified in EASA AD 2022-0216R1, except for any differences identified as exceptions in the regulatory text of this AD. The FAA is issuing this AD to address the unsafe condition on these products.
You may examine the MCAI in the AD docket at
The FAA received no comments on the NPRM or on the determination of the cost to the public.
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 this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA reviewed the relevant data and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on this product. Except for minor editorial changes, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator.
EASA AD 2022-0216R1 specifies procedures for modifying the stall warning/identification system to introduce an ice speed cancel logic. This material 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 estimates that this AD affects 79 airplanes of U.S. registry. The FAA estimates the following costs to comply with this 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.
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,
(2) Will not affect intrastate aviation in Alaska, and
(3) Will 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 amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This airworthiness directive (AD) is effective October 19, 2023.
None.
This AD applies to Saab AB, Support and Services (formerly known as Saab AB, Saab Aeronautics) Model 340A (SAAB/SF340A) and SAAB 340B airplanes, certificated in any category, as identified in European Union Aviation Safety Agency (EASA) AD 2022-0216R1, dated February 1, 2023; corrected February 2, 2023 (EASA AD 2022-0216R1).
Air Transport Association (ATA) of America Code 27, Flight controls.
This AD was prompted by reports of a high number of events related to stall warnings upon landing, following introduction of the ice speed function within the stall warning system. The FAA is issuing this AD to address a margin to stall warning that is lower when ice speed is ON than with ice speed OFF. The unsafe condition, if not addressed, could lead to inappropriate stall warnings during the landing phase and result in increased pilot workload during a critical phase of flight.
Comply with this AD within the compliance times specified, unless already done.
Except as specified in paragraph (h) of this AD: Comply with all required actions and compliance times specified in, and in accordance with, EASA AD 2022-0216R1.
(1) Where EASA AD 2022-0216R1 refers to November 16, 2022 (the effective date of EASA AD 2022-0216), this AD requires using the effective date of this AD.
(2) The “Remarks” section of EASA AD 2022-0216R1 does not apply to this AD.
The following provisions also apply to this AD:
(1)
(2)
For more information about this AD, contact Shahram Daneshmandi, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 206-231-3220; email
(1) The Director of the Federal Register approved the incorporation by reference of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.
(i) European Union Aviation Safety Agency (EASA) AD 2022-0216R1, dated February 1, 2023; corrected February 2, 2023.
(ii) [Reserved]
(3) For EASA AD 2022-0216R1, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email
(4) You may view this service information at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195.
(5) You may view this material that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, email
Federal Aviation Administration (FAA), DOT.
Final rule.
The FAA is adopting a new airworthiness directive (AD) for all Airbus SAS Model A330-200 series airplanes, Model A330-200 Freighter series airplanes, Model A330-300 series airplanes, Model A340-200 series airplanes, and Model A340-300 series airplanes. This AD was prompted by a report that certain overheat detection system (OHDS) sensing elements, produced before January 31, 2021, may not properly detect thermal bleed leak events due to a quality escape during the manufacturing process. This AD requires a one-time special detailed inspection (SDI) for discrepancies of each affected part installed at an affected position, and replacement of discrepant parts, as specified in a European Union Aviation Safety Agency (EASA) AD, which is incorporated by reference. This AD would also prohibit the installation of affected parts. The FAA is issuing this AD to address the unsafe condition on these products.
This AD is effective October 19, 2023.
The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of October 19, 2023.
• For EASA material incorporated by reference in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email
• For Kidde Aerospace & Defense service information incorporated by reference in this AD, contact Kidde Aerospace & Defense, 4200 Airport Drive NW, Building B, Wilson, NC 27896; telephone 319-295-5000; website
• You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195. It is also available in the AD docket at
Timothy Dowling, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 206-231-3667; email
The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to all Airbus SAS Model A330-200
In the NPRM, the FAA proposed to require a one-time SDI for discrepancies of each affected part installed at an affected position, and replacement of discrepant parts, as specified in EASA AD 2022-0243. The NPRM also proposed to prohibit the installation of
You may examine the MCAI in the AD docket at
The FAA received comments from Air Line Pilots Association, International (ALPA), who supported the NPRM without change.
The FAA received additional comments from Airbus SAS. The following presents the comment received on the NPRM and the FAA's response.
Airbus SAS requested to correct the EASA AD number referenced in paragraph (h)(5) of the proposed AD. The reference to EASA AD 2022-0234 is a mistake as it should refer to EASA AD 2022-0243.
The FAA agrees that EASA AD 2022-0243 is correct for paragraph (h)(5) of this AD. The FAA has changed this AD accordingly.
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 this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA reviewed the relevant data, considered the comments received, and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on this product. Except for minor editorial changes, and any other changes described previously, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator.
EASA 2022-0243 specifies procedures for a one-time SDI for discrepancies of each affected part installed at an affected position, and replacement of discrepant parts where the displayed electronic centralized aircraft monitoring (ECAM) warning is not related to results of a heat gun test at certain locations. EASA AD 2022-0243 also prohibits the installation of affected parts.
The FAA reviewed Kidde Aerospace & Defense Service Bulletin CFD-26-3, dated January 13, 2022; and Revision 1, dated March 29, 2022, which identify affected OHDS sensing elements (those having certain part numbers and corresponding date codes). These documents are distinct because Revision 1 corrects typographical errors and clarifies wording.
This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
The FAA estimates that this AD affects 119 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:
The FAA estimates the following costs to do any necessary on-condition actions that would be required based on the results of any required actions. The FAA has no way of determining the number of aircraft that might need these on-condition actions:
The FAA has included all known costs in its cost estimate. According to the manufacturer, however, some or all of the costs of this 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.
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,
(2) Will not affect intrastate aviation in Alaska, and
(3) Will 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 amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This airworthiness directive (AD) is effective October 19, 2023.
None.
This AD applies to all Airbus SAS airplanes specified in paragraphs (c)(1) through (5) of this AD, certificated in any category.
(1) Model A330-201, -202, -203, -223, and -243 airplanes.
(2) Model A330-223F and -243F airplanes.
(3) Model A330-301, -302, -303, -321, -322, -323, -341, -342, and -343 airplanes.
(4) Model A340-211, -212, and -213 airplanes.
(5) Model A340-311, -312, and -313 airplanes.
Air Transport Association (ATA) of America Code 36, Pneumatic.
This AD was prompted by a report that certain overheat detection system (OHDS) sensing elements, produced before January 31, 2021, may not properly detect the thermal bleed leak events due to a quality escape during the manufacturing process. The FAA is issuing this AD to address an air leak remaining undetected by the OHDS sensing element and not being isolated during flight. The unsafe condition, if not addressed, could possibly result in localized areas of the airplane being exposed to high temperatures, with consequent reduced structural integrity of the airplane.
Comply with this AD within the compliance times specified, unless already done.
Except as specified in paragraph (h) of this AD: Comply with all required actions and compliance times specified in, and in accordance with, European Union Aviation Safety Agency (EASA) AD 2022-0243, dated December 8, 2022 (EASA AD 2022-0243).
(1) Where EASA AD 2022-0243 refers to its effective date, this AD requires using the effective date of this AD.
(2) This AD does not adopt the “Remarks” section of EASA AD 2022-0243.
(3) Where EASA AD 2022-0243 defines “affected part” and refers to “the VSB” for the part numbers and date codes, for this AD, use Kidde Aerospace & Defense Service Bulletin CFD-26-3, dated January 13, 2022; or Revision 1, dated March 29, 2022, as “the VSB” for the part numbers and date codes.
(4) Where EASA AD 2022-0243 defines Groups, replace the text “the SB” with “Airbus Service Bulletin A330-36-3052, dated June 27, 2022; or Airbus SB A340-36-4036, dated June 27, 2022; as applicable.”
(5) Where paragraph (2) of EASA AD 2022-0243 specifies action if “any discrepancy as defined in the SB is detected,” for this AD a discrepancy is when the displayed electronic centralized aircraft monitoring (ECAM) warning is not related to results of a heat gun test at certain location.
(1) Although the service information referenced in EASA AD 2022-0243 specifies to submit certain information to the manufacturer, this AD does not include that requirement.
(2) Although the service information referenced in EASA AD 2022-0243 specifies to return certain parts to the manufacturer, this AD does not include that requirement.
The following provisions also apply to this AD:
(1)
(2)
(3)
For more information about this AD, contact Timothy Dowling, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 206-231-3667; email
(1) The Director of the Federal Register approved the incorporation by reference of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.
(i) European Union Aviation Safety Agency (EASA) AD 2022-0243, dated December 8, 2022.
(ii) Kidde Aerospace & Defense Service Bulletin CFD-26-3, dated January 13, 2022.
(iii) Kidde Aerospace & Defense Service Bulletin CFD-26-3, Revision 1, dated March 29, 2022.
(3) For EASA AD 2022-0243, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email
(4) For Kidde Aerospace & Defense service information, contact Kidde Aerospace & Defense, 4200 Airport Drive NW, Building B, Wilson, NC 27896; telephone 319-295-5000; website
(5) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195.
(6) You may view this material that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability
Federal Aviation Administration (FAA), DOT.
Final rule.
The FAA is adopting a new airworthiness directive (AD) for certain General Electric Company (GE) Model CF6-80E1A2, CF6-80E1A3, CF6-80E1A4, and CF6-80E1A4/B engines. This AD was prompted by a manufacturer investigation that revealed that a certain forward outer seal and certain high-pressure turbine rotor (HPTR) stage 1 disks and rotating seals were manufactured from material suspected to contain iron inclusion, which may cause reduced material properties and a lower fatigue life capability. This AD requires the replacement of the affected forward outer seal, HPTR stage 1 disks, and rotating seals. The FAA is issuing this AD to address the unsafe condition on these products.
This AD is effective October 19, 2023.
Alexei Marqueen, Aviation Safety Engineer, FAA, 2200 South 216th Street, Des Moines, WA 98198; phone: (781) 238-7178; email:
The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain GE Model CF6-80E1A2, CF6-80E1A3, CF6-80E1A4, and CF6-80E1A4/B engines. The NPRM published in the
The FAA received comments from two commenters. The commenters were Delta Air Lines, Inc. (DAL) and EVA Air. The following presents the comments received on the NPRM and the FAA's response to each comment.
EVA Air commented that its fleet does not have any affected parts. The FAA acknowledges this comment.
DAL commented that according to the engine illustrated parts catalog, the R88DT rotor on the CF6-80E1 fleet of engines could be installed on the CF6-80C2 fleet of engines, specifically on the -B2F, -B4F, -B6F, -B7F, and -B8F variants. The commenter reasoned that without a part installation prohibition in the proposed AD, the affected parts would be eligible for installation on the non-CF6-80E1 engines after the required removal action in the AD. DAL requested that the FAA revise the proposed AD to add certain engine variants to paragraph (c), Applicability, and to add a parts installation prohibition to paragraph (g), Required Actions, to prevent installation of the removed parts on non-CF6-80E1 engines.
The FAA disagrees. This AD applies to engine models known to have affected parts installed. Paragraph (g) of this AD requires the removal of the affected parts from service. Since the FAA and the manufacturer know where these parts are, and parts removed from service by AD action are not serviceable and not eligible for re-installation on any engine, it is not necessary to revise paragraph (c) of this AD to add engine variants and revise paragraph (g) of this AD to prohibit installation of the removed parts. Additionally, adding new engine variants to this AD would delay final issuance of this AD, as such a change would increase the scope of this AD, requiring new notice and comment. We may consider separate rulemaking, however. The FAA did not change this AD as a result of these comments.
The FAA reviewed the relevant data, considered any comments received, and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on these products. Except for minor editorial changes, and any other changes described previously, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator.
The FAA considers this AD to be an interim action. This unsafe condition is still under investigation by the manufacturer and, depending on the results of that investigation, the FAA may consider further rulemaking action.
The FAA estimates that this AD affects 1 engine installed on airplanes of U.S. registry. This engine requires replacement of the rotating seal. The FAA estimates that there are no engines installed on airplanes of U.S. registry that requires replacement of the forward outer seal or HPTR stage 1 disk.
The FAA estimates the following costs to comply with this 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.
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,
(2) Will not affect intrastate aviation in Alaska, and
(3) Will 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 amends 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This airworthiness directive (AD) is effective October 19, 2023.
None.
This AD applies to General Electric Company Model CF6-80E1A2, CF6-80E1A3, CF6-80E1A4, and CF6-80E1A4/B engines with an installed forward outer seal, high-pressure turbine rotor (HPTR) stage 1 disk, or rotating seal having a part number (P/N) and serial number (S/N) identified in Table 1 to paragraph (c) of this AD.
Joint Aircraft System Component (JASC) Code 7250, Turbine Section.
This AD was prompted by a manufacturer investigation that revealed that a certain forward outer seal and certain HPTR stage 1 disks and rotating seals were manufactured from material suspected to contain iron inclusion, which may cause reduced material properties and a lower fatigue life capability. The FAA is issuing this AD to prevent fracture and subsequent uncontained failure of a certain forward outer seal and certain HPTR stage 1 disks and rotating seals. The unsafe condition, if not addressed, could result in uncontained debris release, damage to the engine, and damage to the aircraft.
Comply with this AD within the compliance times specified, unless already done.
(1) At the next piece-part exposure of the affected forward outer seal or before the affected forward outer seal exceeds 5,400 cycles since new (CSN), whichever occurs first after the effective date of this AD, remove the affected forward outer seal from service and replace with a part eligible for installation.
(2) At the next piece-part exposure of the affected rotating seal or before the affected rotating seal exceeds 5,200 CSN, whichever occurs first after the effective date of this AD, remove the affected rotating seal from service and replace with a part eligible for installation.
(3) Before further flight after the effective date of this AD, remove the affected HPTR stage 1 disk from service and replace with a part eligible for installation.
(1) For the purpose of this AD, a “part eligible for installation” is any forward outer seal, HPTR stage 1 disk, or rotating seal that does not have a P/N and S/N identified in Table 1 to paragraph (c) of this AD.
(2) For the purpose of this AD, “piece-part exposure” is when the affected part is removed from the engine and completely disassembled.
(1) The Manager, AIR-520, Continued Operational Safety 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 branch, send it to the attention of the person identified in paragraph (j) 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.
For more information about this AD, contact Alexei Marqueen, Aviation Safety Engineer, FAA, 2200 South 216th Street, Des Moines, WA 98198; phone: (781) 238-7178; email:
None.
Department of State.
Final rule.
The Department of State is amending the International Traffic in Arms Regulations to reflect current defense trade policy toward Cyprus.
This rule is effective on October 1, 2023.
Ms. Maria Tatarska, Foreign Affairs Officer, Office of Defense Trade Controls Policy, U.S. Department of State, telephone (771) 205-7671; email
Section 1250A(d) of the National Defense Authorization Act for Fiscal Year 2020 (Pub. L. 116-92) (2020 NDAA) and section 205(d) of the Eastern Mediterranean Security and Energy Partnership Act of 2019 (Pub. L. 116-94, Div. J.) (EMSEPA) provide that the policy of denial for exports, reexports, and transfers of defense articles on the United States Munitions List to the Republic of Cyprus shall remain in place unless the President determines and certifies to the appropriate congressional committees, not less than annually, that: (A) the Government of the Republic of Cyprus is continuing to cooperate with the United States Government in efforts to implement reforms on anti-money laundering regulations and financial regulatory oversight; and (B) the Government of the Republic of Cyprus has made and is continuing to take the steps necessary to deny Russian military vessels access to ports for refueling and servicing.
On April 14, 2020, the President delegated to the Secretary of State the functions and authorities vested by the 2020 NDAA and the EMSEPA (85 FR 35797, June 12, 2020). On August 14, 2023, utilizing these authorities, the Secretary of State certified to the appropriate congressional committees that the Republic of Cyprus meets the statutory requirements to remove the policy of denial for exports, reexports, and transfers of defense articles to the Republic of Cyprus for fiscal year 2024. The Secretary of State further approved the suspension of the policy of denial for exports, reexports, and transfers of defense articles and defense services to the Republic of Cyprus for fiscal year 2024. In conjunction with this action, the Secretary of State also suspended the policy of denial for retransfers and temporary imports destined for or originating in the Republic of Cyprus and brokering activities involving the Republic of Cyprus for fiscal year 2024. Accordingly, the Department now amends section 126.1 of the International Traffic in Arms Regulations (ITAR) (22 CFR parts 120 through 130) to specify that the Republic of Cyprus' status as a proscribed destination is suspended from October 1, 2023, through September 30, 2024. This action continues the Department's current policy, which suspended the status of the Republic of Cyprus as a proscribed destination under § 126.1 of the ITAR on October 1, 2022.
As a result of this change, certain exemptions to licensing requirements continue to be available for exports, reexports, retransfers, and temporary imports destined for or originating in the Republic of Cyprus and brokering activities involving the Republic of Cyprus, provided the conditions for use of those exemptions are met. Applications for licenses and other authorizations submitted to the Directorate of Defense Trade Controls involving the Republic of Cyprus and nationals of the Republic of Cyprus are subject to case-by-case review.
This rulemaking is exempt from section 553 of the Administrative Procedure Act (APA) pursuant to section 553(a)(1) as a military or foreign affairs function of the United States. As the provisions of section 553 do not apply to this rulemaking, the Department is publishing this rule without a delay in its effective date or a request for public comment.
Since this rule is exempt from the notice-and-comment rulemaking provisions of 5 U.S.C. 553, it does not require analysis under the Regulatory Flexibility Act.
This rulemaking does not involve a mandate that will 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.
It is the view of the Office of Information and Regulatory Affairs that this rulemaking is not a major rule under the criteria of 5 U.S.C. 804. This rule will not increase costs or prices and should have no adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises in domestic and export markets. The Department does not expect this rule to have an annual effect on the economy of $100 million or more.
This rulemaking 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 rulemaking.
Executive Orders 12866 (as amended by Executive Order 14094) and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributed impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. Because the scope of this rule implements a governmental policy expanding defense trade with a country, and does not impose additional regulatory requirements or obligations, the Department believes costs associated with this rule will be minimal. This rule has been designated as a significant regulatory action by the Office of Information and Regulatory Affairs under Executive Order 12866, as amended.
The Department of State has reviewed this rulemaking in light of Executive Order 12988 to eliminate ambiguity, minimize litigation, establish clear legal standards, and reduce burden.
The Department of State 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 rulemaking does not impose or revise any information collections subject to 44 U.S.C. Chapter 35.
Arms and munitions, Exports.
Accordingly, for the reasons set forth above, title 22, chapter I, subchapter M, part 126 is amended as follows:
22 U.S.C. 287c, 2651a, 2752, 2753, 2776, 2778, 2779, 2779a, 2780, 2791, 2797; Sec. 1225, Pub. L. 108-375, 118 Stat. 2091; Sec. 7045, Pub. L. 112-74, 125 Stat. 1232; Sec. 1250A, Pub. L 116-92, 133 Stat. 1665; Sec. 205, Pub. L. 116-94, 133 Stat. 3052; E.O. 13637, 78 FR 16129, 3 CFR, 2013 Comp., p. 223.
(r)
(1) A license or other approval may be issued, on a case-by-case basis, for the United Nations Forces in Cyprus (UNFICYP) or for civilian end-users; and
(2) From October 1, 2023, through September 30, 2024, the policy of denial and the status of Cyprus as a proscribed destination is suspended.
Office of Foreign Assets Control, Treasury.
Publication of web general licenses.
The Department of the Treasury's Office of Foreign Assets Control (OFAC) is publishing two general licenses (GLs) issued pursuant to the Belarus Sanctions Regulations: GLs 8 and 9, each of which was previously made available on OFAC's website.
GLs 8 and 9 were issued on August 9, 2023. See
OFAC: Assistant Director for Licensing, 202-622-2480; Assistant Director for Regulatory Affairs, 202-622-4855; or Assistant Director for Compliance, 202-622-2490.
This document and additional information concerning OFAC are available on OFAC's website:
On August 9, 2023, OFAC issued GLs 8 and 9 to authorize certain transactions otherwise prohibited by the Belarus Sanctions Regulations, 31 CFR part 548. GL 8 has an expiration date of October 9, 2023. GL 9 has an expiration date of September 8, 2023. Each GL was made available on OFAC's website (
(a) Except as provided in paragraph (b) of this general license, all transactions prohibited by the Belarus Sanctions Regulations, 31 CFR part 548 (BSR), that are ordinarily incident and necessary to the wind down of any transaction involving Joint Stock Company Byelorussian Steel Works Management Company of Holding Byelorussian Metallurgical Company (BSW) or any entity in which BSW owns, directly or indirectly, a 50 percent or greater interest, including Bel-Kap-Steel LLC (collectively, “BSW Entities”), are authorized through 12:01 a.m. eastern daylight time, October 9, 2023, provided that any payment to a BSW Entity must be made into a blocked account in accordance with the BSR.
The authorization in paragraph (a) of this general license includes authorization for U.S. persons to process and pay salaries, severance, and expenses, and to pay vendors and landlords, to the extent such transactions are ordinarily incident and necessary to the wind down of Bel-Kap-Steel LLC and do not involve a debit to a blocked account.
(b) This general license does not authorize any transactions otherwise prohibited by the BSR, including transactions involving any person blocked pursuant to the BSR other than the BSW Entities, unless separately authorized.
(a) Except as provided in paragraph (c), all transactions prohibited by the Belarus Sanctions Regulations, 31 CFR part 548 (BSR), that are ordinarily incident and necessary to the provision, exportation, or reexportation of goods, technology, or services to ensure the safety of civil aviation involving Open Joint Stock Company Belavia Belarusian Airlines, or any entity in which Open Joint Stock Company Belavia Belarusian Airlines owns, directly or indirectly, a 50 percent or greater interest (collectively, the “Belavia Entities”), are authorized through 12:01 a.m. eastern daylight time, September 8, 2023, provided that the goods, technology, or services that are provided, exported, or reexported are for use on aircraft operated solely for civil aviation purposes.
(b) Except as provided in paragraph (c), all transactions prohibited by the BSR that are ordinarily incident and necessary to the wind down of any transaction involving the Belavia Entities, are authorized through 12:01 a.m. eastern daylight time, September 8, 2023, provided that any payment to a Belavia Entity must be made into a blocked account in accordance with the BSR.
(c) This general license does not authorize any transactions otherwise prohibited by the BSR, including transactions involving any person blocked pursuant to the BSR other than the Belavia Entities, unless separately authorized.
Nothing in this general license relieves any person from compliance with any other Federal laws or requirements of other Federal agencies, including export, reexport, and transfer (in-country) licensing requirements maintained by the Department of Commerce's Bureau of Industry and Security under the Export Administration Regulations, 15 CFR parts 730-774.
Coast Guard, DHS.
Notification of enforcement of regulation.
The Coast Guard will enforce the special local regulation on the waters of San Diego Bay, CA, during the Swim for Special Operations Forces on September 16, 2023. This special local regulation is necessary to provide for the safety of the participants, crew, sponsor vessels of the event, and general users of the waterway. During the enforcement period, persons and vessels are prohibited from entering into, transiting through, or anchoring within this regulated area unless authorized by the Captain of the Port, or his designated representative.
The regulations in 33 CFR 100.1101 for the location described in Item 16 in table 1 to § 100.1101, will be enforced from 7:30 a.m. until Noon on September 16, 2023.
If you have questions about this notification of enforcement, call or email Lieutenant Junior Grade Shelley Turner, Waterways Management, U.S. Coast Guard Sector San Diego, CA; telephone (619) 278-7656, email
The Coast Guard will enforce the special local regulations in 33 CFR 100.1101 for the location identified in Item No. 16 in table 1 to § 100.1101, from 7:30 a.m. until Noon on September 16, 2023, for the Swim for Special Operations Forces in San Diego Bay, CA. This action is being taken to provide for the safety of life on the navigable waterways during the event. Our regulation for recurring marine events in the San Diego Captain of the Port Zone, § 100.1101, Item No. 16 in table 1 to § 100.1101, specifies the location of the regulated area for the Swim for Special Operations Forces, which encompasses portions of San Diego Bay. Under the provisions of § 100.1101, persons and vessels are prohibited from entering into, transiting through, or anchoring within this regulated area unless authorized by the Captain of the Port, or his designated representative. The Coast Guard may be assisted by other Federal, State, or local law enforcement agencies in enforcing this regulation.
In addition to this document in the
Coast Guard, DHS.
Temporary final rule.
The Coast Guard is proposing to establish a temporary safety zone for certain waters of the San Diego Bay. The safety zone is needed to protect personnel, vessels, and the marine environment from potential hazards during a U.S. Army parachute demonstration. Entry of vessels or persons into this zone is prohibited unless specifically authorized by the Captain of the Port Sector San Diego.
This rule is effective from 10 a.m. to noon on September 18th, 2023.
To view documents mentioned in this preamble as being available in the docket, go to
If you have questions about this proposed
The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because it would be impracticable as the Coast Guard did not receive final details until August 3rd, 2023, and must establish this safety zone by September 18th, 2023.
Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the
The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034. The Captain of the Port Sector San Diego (COTP) has determined that potential hazards associated with the U.S. Army's parachute demonstration on September 18th, 2023, will be a safety concern for anyone within a 100-yard radius of USS MIDWAY. This rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the safety zone during the demonstration.
This rule establishes a safety zone from 10 a.m. until noon on September 18, 2023. The safety zone will cover all navigable waters within 100 yards of the USS MIDWAY. The duration of the zone is intended to protect personnel, vessels, and the marine environment in these navigable waters while the parachute demonstration is being 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 section 3(f) of Executive Order 12866, as amended by Executive Order 14094 (Modernizing Regulatory Review). Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB).
This regulatory action determination is based on the size, location, duration, and time-of-day of the regulated area. The affected portion of the San Diego Bay will be of very limited duration and is necessary for safety of life to participants in the event. Moreover, the Coast Guard would make a post in the Local Notice to Mariners with details on the regulated area, as well as issue a Safety Marine Information Broadcast over Channel 22A.
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
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 100 yard radius safety zone around the USS MIDWAY lasting 2 hours during the U.S. ARMY's parachute demonstration. It is categorically excluded from further review under paragraph L60(a) of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to call or email the person listed in the
Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways.
For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:
46 U.S.C. 70034, 70051, 70124; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 00170.1, Revision No. 01.3.
(a)
(b)
(c)
(2) To seek permission to enter, contact the COTP or the COTP's representative by VHF-FM Channel 21A or by telephone at 619-278-7033. 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)
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA or Agency) finalizes revisions to the Agency's regulations under the Freedom of Information Act (FOIA or Act). This action supports the Agency's mission by updating the process by which the public may access information about EPA actions and activities.
This rule is effective on November 13, 2023.
The EPA has established a docket for this action under Docket ID No. OGC-2022-0885. All documents in the docket are listed on the
Christopher T. Creech, Office of General Counsel, U.S. Environmental Protection Agency, 1200 Pennsylvania Avenue NW, (2310A), Washington, DC 20460; telephone, 202-564-4286; email,
This discussion is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this action. This discussion includes the types of entities that EPA is now aware could potentially be regulated by this action. Other types of entities not included could also be regulated. To determine whether your entity is regulated by this action, you should carefully examine the applicability criteria found in 40 CFR part 2. If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the
This action finalizes changes to EPA's FOIA regulations at 40 CFR part 2. The changes alter the process by which individuals and entities request records from EPA under the Act. EPA makes changes to clarify certain provisions and align with the FOIA and with EPA and government-wide policy.
In the 2019 “Freedom of Information Act Regulations Update,” 84 FR 30028, July 26, 2019 (Phase I Rule), EPA stated its intention to conduct a second rulemaking phase to make discretionary and modernizing changes. Consistent with that statement, EPA is finalizing the proposal published on November 17. 2022 with certain changes.
This action is the second phase in a two-phase process to update the Agency's FOIA regulations. On June 26, 2019, effective July 26, 2019, EPA issued the Phase I Rule to “bring EPA's regulations into compliance with nondiscretionary provisions of the amended statute and reflect changes in the Agency's organization, procedure, or practice.” 84 FR 30028.
Below is a summary of the provisions that EPA finalizes in the same form that they were proposed.
EPA adds a statement that requires a requester to modify a request within 20 calendar days after an EPA notice that the request is not reasonably described. 40 CFR 2.102(c) requires that requesters reasonably describe the records that they are seeking. EPA did, and continues to, provide requesters with an opportunity to discuss and modify a request that does not reasonably describe the records sought. Previously, however, there was no clear timeline for requesters to modify a request. If a requester sufficiently modifies the request to meet the requirements of 40 CFR 2.102(c) within 20 calendar days, EPA will not close the request.
EPA reorganizes, but makes no substantive changes to, 40 CFR 2.100(a) by moving to separate paragraphs the sentences describing other regulations relevant to the release of information.
EPA creates a new paragraph (f) in section 2.100 to direct the public to the Agency's website (
EPA consolidates the provisions in EPA's FOIA regulations that discuss the timing of EPA's response to FOIA requests to simplify and accurately represent EPA's obligations under the FOIA. This change combines into section 2.104(a) previous sections 2.101(a)(4) and 2.102(a), and directly incorporates into section 2.104(a) the FOIA's language on timing of response from 5 U.S.C. 552(a)(6)(A)(i). EPA also explains at section 2.104(f) that EPA will work with requesters to come to an agreement regarding alternative timeframes for processing the request when EPA provides notice pursuant to 5 U.S.C. 552(a)(6)(B)(i) and (ii).
EPA adds to section 2.104(a)(2) providing that a request submitted after 5:00 p.m. Eastern Time is considered received on the next business day. This change states the corollary of the already existing and unchanged language stating that requests submitted before 5:00 p.m. are considered received on that business day. EPA modifies section 2.108(b) to state that appeals submitted after 5:00 p.m. Eastern Time are considered received on the next business day.
EPA makes three changes, found at sections 2.106, 2.108(d)(3), and 2.108(e)(1), which discuss the preservation of records, handling of appeals after FOIA litigation, and the contents of adverse administrative appeals decisions.
EPA updates 40 CFR 2.107(b) to state that payments by check or money order should be made out to the Treasury of the United States.
EPA revises all references to EPA's electronic submission website, FOIAonline (
EPA removes the clause in 40 CFR 2.103(b) that described the phrase “determinations required by 5 U.S.C. 552(a)(6)(A).” 40 CFR 2.103(b) previously stated “[Listed positions within EPA] are authorized to make determinations required by 5 U.S.C. 522(a)(6)(A), including to issue final determinations whether to release or withhold a record or a portion of a record on the basis of responsiveness or under one or more of the exemptions under the FOIA, and to issue `no records' responses.” 40 CFR 2.103(b) now states that “[Listed positions within EPA] are authorized to make determinations required by 5 U.S.C. 522(a)(6)(A).”
EPA does not reinstate any methods of submission that EPA removed through the issuance of the 2019 FOIA Regulations Update.
EPA changes the “ordinary” search cut-off date identified in section 2.103(a) from the date the request was received to the date the Agency begins its search for responsive records.
EPA adds a provision at 40 CFR 2.107(l) that states EPA may aggregate FOIA requests when EPA reasonably believes that multiple requests—submitted either by a requester or by a group of requesters acting in concert—constitute a single request that would otherwise give rise to unusual circumstances and the requests involve related matters.
EPA adds a provision at 40 CFR 2.104(f) that states EPA may assign multiple tracking numbers to a request with distinct parts that will be processed by separate regions or program offices. EPA will notify the requester of the separate tracking numbers for the distinct parts of the request, which thereafter would be processed and responded to separately and will be provided with separate appeal rights on completion.
EPA modifies the methods of submission of FOIA appeals, located at section 2.108(a), to match the methods of submission of FOIA requests.
EPA establishes new fee rates, located at 40 CFR 2.107(f)(2)(ii) tied to the U.S. Office of Personnel and Management's General Schedule (GS) scale. EPA now has two fee rates for Agency personnel time spent processing FOIA requests, one rate for grades GS-12 and below and a second rate for those with grades GS-13 and above. Both rates are adjusted for the value of benefits, expressed in quarter-hour rates, and rounded to the nearest $1 increment. As of the date of signature, the proposed rates would be calculated as explained below.
EPA increases the minimum fee threshold, located at 40 CFR 2.107(g)(1), to an amount calculated by formula,
EPA removes the provision specifying that a requester automatically agrees to pay up to $25 in fees when they submit a FOIA request. Because EPA raises the minimum fee threshold, EPA believes that an automatic agreement to fees at any amount at or above $250 may dissuade some requesters from submitting FOIA requests.
EPA raises the assurance of payment threshold, located at 40 CFR 2.107(h)(1), to an amount calculated by formula, which, as of the publication of this rule is $250. When EPA estimates fees or accumulates actual fees equaling or exceeding the assurance of payment threshold, EPA seeks from a requester an assurance that the requester will pay the fees associated with the FOIA request. The formula would tie the assurance of payment threshold to the minimum fee threshold (40 CFR 2.107(g)(1)).
EPA increases the advanced payment threshold, located at 40 CFR 2.107(h)(2), to an amount that would currently calculate to $450 and proposes a formula for calculating the advance payment threshold that will be self-escalating as EPA's costs increase in future years. When EPA estimates fees or accumulates actual fees equaling or exceeding the advanced payment threshold, EPA may seek advanced payment from a requester of the estimated or actual fees associated with the FOIA request.
EPA adds language at 2.107(h)(5) explaining that EPA's reassessment of actual or estimated fees may result in EPA re-seeking assurance of payment or advanced payment. This provision provides clarity and informs the public regarding EPA's practices by describing a scenario where EPA has previously informed the requester of the amount of actual or estimated fees and, after further processing, EPA has updated its actual or estimated fee assessment.
EPA revises the provisions applicable to delinquent requesters. Previous EPA regulations discussed the failure to pay fees in several separate locations (previous sections 2.107(h) and (j). EPA consolidates these provisions into 40 CFR 2.107(k). EPA also adds a sentence stating that the Agency may share information regarding delinquent requesters with other Federal agencies.
Below is a summary of the changes from what EPA proposed and what EPA finalizes today.
EPA proposed, and here finalizes, a provision to allow requesters to seek expedited processing of their request if the records sought pertain to an environmental justice-related need and will be used to inform an affected community. 5 U.S.C. 552(a)(6)(E)(i) provides that EPA may issue regulations “providing for expedited processing of requests for records (I) in cases in which the person requesting the records demonstrates a compelling need;
EPA finalizes the proposed provision with two minor changes. EPA makes the first change to reflect a change in relevant descriptive language used in Executive Order 14096. EPA modifies the phrase “disproportionately high and adverse human health or environmental effects” to read “disproportionate and adverse human health or environment effects.” This change will ensure consistency with EPA policy but is not intended to have substantive impact on EPA's implementation on the environmental justice-need expedited processing provision.
EPA makes the second change to improve the readability of the environmental justice expedited processing criteria. EPA reorganizes but does not substantively change 40 CFR 2.107(g)(ii). As proposed, the provision specified considerations in both 2.107(g)(ii) and in the subsequent subparagraphs. The reorganization identifies in a list format the specific elements EPA will consider. EPA believes that this change is clearer than the proposal and will benefit requesters by providing a set of elements that flow in a logical and express manner.
The provision providing expedited processing for an environmental justice-related need is in addition to and does not modify the provision granting expedited processing for requests demonstrating a “compelling need,” which the FOIA provides at 5 U.S.C. 552(a)(6)(E)(i)(I). This new expedited processing category targets a recognized need for communities with environmental justice concerns to have timely access to information.
Executive Order 14096 defines environmental justice as “the just treatment and meaningful involvement of all people, regardless of income, race, color, national origin, Tribal affiliation, or disability, in agency decision-making and other Federal activities that affect human health and the environment[.]” EPA recognizes that timely access to information contained in EPA records improves the opportunity for meaningful involvement by communities with environmental justice concerns.
To determine whether an application for expedited processing qualifies under this provision, the Agency will consider: (1) whether the requested records relate to actual or alleged Federal government activity, including Agency records containing environmental information or data; (2) the extent to which there is a pressing need to inform the community about the Federal government activity; (3) the extent to which the community is potentially experiencing disproportionate and adverse human health or environmental effects; and (4) the requester's ability and intention to effectively convey the information to members of the community.
EPA will use EJScreen as a source of facts to determine whether the community cited by the requester is potentially experiencing environmental justice concerns. As EPA previously explained in the preamble to the proposed rule, EJScreen is an environmental justice mapping and screening tool that provides EPA with a nationally consistent dataset and approach for combining environmental and demographic indicators into Environmental Justice indexes. EJScreen's “Supplemental Indexes” are thirteen indexes calculated by combing a single environmental indicator and the supplemental demographic index. The Supplemental Indexes do not factor in racial status. EJScreen may also be a valuable tool for requesters to assess whether the community about which they are seeking records may be affected
One commenter suggested that EPA “make[ ] clear that any criteria be applied flexibly and generously to accomplish the goals of this provision.” EPA acknowledges the commenter's concern and will implement the provision consistent with the regulatory text. As such, EPA provides the following examples of types of requests that EPA would consider as evidencing a pressing need to inform a community potentially experiencing environmental justice-related concerns.
On the other hand, EPA would
One commenter suggested that EPA remove the evaluation criteria regarding the requester's intent and ability to effectively convey the information to members of the community that is potentially experiencing disproportionate and adverse human health or environmental effects. EPA declines to make this change. The purpose of considering the requesters intent and ability to effectively convey the information to members of the community is to ensure that those seeking the information can and are likely to meet the information needs of members of the community. EPA believes that this consideration is essential to both the purpose and effective implementation of the provision.
For clarity on how EPA intends to implement the “ability and intention” element, EPA provides the following examples that EPA would consider as evidencing an ability and intent to inform the community potentially experiencing environmental justice-related concerns:
EPA would consider the following types of requests to
EPA proposed modifying previous section 2.102(c) to state that “Requesters should reasonably describe the records sought in sufficient detail to enable agency personnel to locate them with a reasonable amount of effort.” One commenter suggested to use alternative language from
EPA proposed to incorporate a requirement that a requester must submit a statement, certified to be true and correct to the best of the requester's knowledge and belief, explaining in detail the basis for the fee waiver request. EPA does not finalize that proposed provision at this time.
EPA received one comment about the use of the term “appeal letter” in the section of the regulations discussing administrative appeals, 40 CFR 2.108. The comment stated that the use of the word “letter” was misleading and implied that physical mail is suggested or preferred for purposes of appeal. Dropping the term “letter” would provide clarity to requesters. EPA reviewed the use of the word “letter” and related terms and updated 40 CFR 2.108(c). These changes have no substantive impact on EPA or the public and are meant solely for clarity.
EPA received one comment noting that the hyphen is not needed in the phrase “90-calendar days” and should be removed. EPA agrees with the commentor will make the suggested change at 40 CFR 2.108(a).
Additional information about these statutes and Executive Orders can be found at
This action is not a significant regulatory action and was therefore not submitted to the Office of Management and Budget (OMB) for review.
This action does not impose an information collection burden under the PRA.
I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. In making this determination, EPA concludes that the impact of concern for this rule is any significant adverse economic impact on small entities and that the agency is certifying that this rule will not have a significant economic impact on a substantial number of small entities because the rule has no net burden on the small entities subject to the rule. This final rule does not impose any new requirements on small entities, and the EPA FOIA regulation's requirements apply equally to all FOIA requesters. This rule raises the FOIA fee rates, which EPA applies when EPA charges for the direct costs of EPA staff's time. This change does not represent a significant economic impact and any impact will be offset by increasing the minimum fee threshold. If EPA does not accumulate chargeable fees in an amount above the minimum fee threshold, then EPA does not charge fees. We have therefore concluded that this action will have no net regulatory burden for all directly regulated small entities.
This action does not contain any unfunded mandates as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. The action imposes no enforceable duty on any state, local or tribal governments or the private sector.
This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government.
This action does not have tribal implications as specified in Executive Order 13175. It will not have substantial direct effects on Indian Tribal governments or on the relationship between the national government and the Indian Tribal governments. Thus, Executive Order 13175 does not apply to this action.
The EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that EPA has reason to believe may disproportionately affect children, per the definition of “covered regulatory action” in section 2-202 of the Executive order. This action is not subject to Executive Order 13045 because it does not concern an environmental health risk or safety risk.
This action is not subject to Executive Order 13211 because it is not a significant regulatory action under Executive Order 12866.
This rule does not involve technical standards.
Executive Order 12898 (59 FR 7629, February 16, 1994) directs Federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations (people of color) and low-income populations.
The EPA believes that this type of action does not concern human health or environmental conditions and therefore cannot be evaluated with respect to potentially disproportionate and adverse effects on people of color, low-income populations and/or indigenous peoples. Although this action does not concern human health or environmental conditions, the EPA identifies and addresses environmental justice concerns by finalizing a provision to allow requesters to seek expedited processing of their request if the records sought pertain to an environmental justice-related need and will be used to inform an affected community. See section IV.A. of this preamble.
This action is subject to the CRA, and the EPA will submit a rule report to each House of the Congress and to the Comptroller General of the United States. This action is not a “major rule” as defined by 5 U.S.C. 804(2).
Environmental protection, Administrative practice and procedure, Confidential business information, Freedom of information, Government employees.
For the reasons set forth in the preamble, the EPA amends title 40 of the Code of Federal Regulations, part 2 as follows:
5 U.S.C. 552, 552a, 553; 28 U.S.C. 509, 510, 534; 31 U.S.C. 3717.
(a)
(b)
(2) 40 CFR part 16 contains requirements pertaining to Privacy Act requests.
(c)
(d)
(e)
(f)
(a) Requesters must submit all requests for records from EPA under the FOIA in writing and by one of the following methods:
(1) EPA's FOIA submission website, linked to at
(2) An electronic government submission website established pursuant to 5 U.S.C. 552(m), such as
(3) U.S. Mail sent to the following address: National FOIA Office, U.S. Environmental Protection Agency, 1200 Pennsylvania Avenue NW (2310A), Washington, DC 20460; or
(4) Overnight delivery service to National FOIA Office, U.S. Environmental Protection Agency, 1200 Pennsylvania NW, Room 7309C, Washington, DC 20460.
(b) EPA will not treat a request submitted by any method other than those listed in § 2.101(a) as a FOIA request, and the Agency will not re-route such a request.
(c) The requester or requester organization must include the full name of their point of contact and their mailing address for EPA to process the request. For all requests, requesters should provide an email address and daytime telephone number whenever possible. For requests submitted through EPA's FOIA submission website or as provided by an electronic government submission website established pursuant to 5 U.S.C. 552(m), requesters must include an email address. For requests submitted through U.S. Mail, the requester must mark both the request letter and envelope “Freedom of Information Act Request.”
(d) EPA provides access to all records that the FOIA requires an agency to make regularly available for public inspection and copying. Each office is responsible for determining which of the records it generates are required to be made publicly available and for providing access by the public to them. The Agency will also maintain and make available for public inspection and copying a current subject matter index of such records and provide a copy or a link to the respective website for Headquarters or the Regions. Each index will be updated regularly, at least quarterly, with respect to newly-included records.
(e) All records created by EPA on or after November 1, 1996, which the FOIA requires an agency to make regularly available for public inspection and copying, will be made available electronically through EPA's website, located at
(a) EPA employees may attempt in good faith to comply with oral requests for inspection or disclosure of EPA records that are publicly available under § 2.201(a) and (b), but such requests are not subject to the FOIA or this Part.
(b)(1) Requesters must reasonably describe the records sought in sufficient detail to enable a professional employee of the Agency who is familiar with the subject area of the request to locate the records with a reasonable amount of effort.
(2) If EPA determines that a request does not reasonably describe the requested records as provided in § 2.102(b)(1), EPA will tell the requester either what additional information the requester needs to provide or why the request is otherwise insufficient. EPA will also give the requester an opportunity to discuss and modify the request to meet the requirements of § 2.102(b)(1). If the requester fails to modify the request to meet the requirements of § 2.102(b)(1) within 20 calendar days, EPA will not process the submission and close the request. If the requester does modify the request to meet the requirements of § 2.102(b)(1), EPA will consider the request received as of the date the modification is received by EPA.
(3) Whenever possible, a request should include specific information about each record sought, such as the date, title or name, author, recipient, and subject matter. If known, the requester should include any file designations or descriptions for the records that the requester wants. The more specific the requester is about the records or type of records that the requester wants, the more likely EPA will be able to identify and locate records responsive to the request.
(a)
(b)
(c)
(d)
(1) In coordination with the National FOIA Office, consult with the Federal agency where the record or portion thereof originated and then respond to the request, or
(2) With the concurrence of the National FOIA Office, refer any record to the Federal agency where the record or portion thereof originated. The National FOIA Office will notify the requester whenever all or any part of the responsibility for responding to a request has been referred to another agency.
(e)
(f)
(a)
(2) A requester submitting a request electronically must do so before 5:00 p.m. Eastern Time for the Agency to consider the request as received on that date, and a request submitted electronically at or after 5 p.m. Eastern Time will be considered received by the National FOIA Office on the next business day.
(3) The timeframe for response may be extended if unusual circumstances exist per paragraph (f) of this section, including when EPA asserts unusual circumstances and arranges an alternative timeframe with the requester, or exceptional circumstances exist per paragraph (g) of this section. The timeframe for response may be tolled per paragraph (e) of this section.
(b)
(c)
(d)
(e)
(1) The Agency may toll the processing time-period one time while seeking clarification from the requester; or
(2) The Agency may toll the processing time-period as many times as necessary to resolve fee issues.
(f)
(2) If the 20 working-day period is extended, EPA will give the requester an opportunity to limit the scope of the request, modify the request, or agree to an alternative time-period for processing, as described by the FOIA.
(3) EPA will provide contact information for its FOIA Public Liaison to assist in the resolution of any disputes between the requester and the Agency, and the Agency will notify the requester of their right to seek dispute resolution services from the Office of Government Information Services within the National Archives and Records Administration.
(g)
(i) A compelling need is defined as either:
(A) Circumstances in which the lack of expedited treatment could reasonably be expected to pose an imminent threat to the life or physical safety of an individual; or
(B) An urgency to inform the public about an actual or alleged Federal government activity, if the information is requested by a person primarily engaged in disseminating information to the public.
(ii) For purposes of this provision, an environmental justice-related need means a pressing need to inform a community that is potentially experiencing disproportionate and adverse human health or environmental effects. The Agency will consider:
(A) Whether the requested records relate to actual or alleged Federal government activity, including Agency records containing environmental information or data.
(B) The extent to which there is a pressing need to inform the community about the Federal government activity. A pressing need to inform does not include requests where the disclosure is primarily in the commercial interest of the requester.
(C) The extent to which the community is potentially experiencing disproportionate and adverse human health or environmental effects.
(D) The requester's ability and intention to effectively convey the information to members of the community.
(iii) If the Agency grants a request for expedited processing under paragraph (g)(1)(ii) of this section, the Agency will also waive fees established under § 2.107(f) for the request.
(2) Requesters must make a written request for expedited processing at the time of the initial request for records or at the time of appeal.
(3) If the requester seeks expedited processing, the requester must submit a statement, certified to be true and correct to the best of the requester's knowledge and belief, explaining in detail the basis for the request.
(i) For example, if the requester fits within the category described in paragraph (g)(1)(i)(B) of this section and is not a full-time member of the news media, the requester must establish that they are a person whose primary professional activity or occupation is information dissemination, although it
(ii) If the requester fits within the category described in paragraph (g)(1)(i)(B) of this section, the requester must also establish a particular urgency to inform the public about the government activity involved in the request, beyond the public's right to know about government activity generally.
(4) Within 10 calendar days from the date of the request for expedited processing, the Chief FOIA Officer, or the Chief FOIA Officer's delegates, will decide whether to grant the request and will notify the requester of the decision. If the Agency grants the request for expedited processing, the Agency will give the request priority and will process the request as soon as practicable. If the Agency denies the request for expedited processing, the Agency will act on any appeal of that decision expeditiously.
(h)
(i)
(1) A decision that the requested record is exempt from disclosure, in whole or in part;
(2) A decision that the information requested is not a record subject to the FOIA;
(3) A decision that the requested record does not exist or cannot be located;
(4) A decision that the requested record is not readily reproducible in the form or format sought by the requester;
(5) A determination on any disputed fee matter, including a denial of a request for a fee waiver; or
(6) A denial of a request for expedited processing.
(j)
(1) The name and title or position of the person responsible for the determination;
(2) A brief statement of the reason or reasons for the denial, including an identification of records being withheld (either individually or, if a large number of similar records are being denied, described by category) and any FOIA exemption applied by the office in denying the request;
(3) An estimate of the volume of records or information withheld, in number of pages or in some other reasonable form of estimation. This estimate does not need to be provided if the volume is otherwise indicated through annotated deletions on records disclosed in part, or if providing an estimate would harm an interest protected by an applicable exemption;
(4) A statement that an adverse determination may be appealed under § 2.108 and description of the requirements for submitting an administrative appeal; and
(5) A statement that the requester has the right to seek dispute resolution services from an EPA FOIA Public Liaison or the Office of Government Information Service.
The Agency will preserve all correspondence pertaining to the FOIA requests that it receives, as well as copies of all requested records, until disposition or destruction is authorized pursuant to title 44 of the United States Code or the National Archives and Records Administration's General Records Schedule 4.2. Records shall not be disposed of while they are the subject of a pending request, appeal, or lawsuit under the FOIA.
(a)
(b)
(c)
(d)
(e)
(1)
(ii) For a commercial-use request, the Agency will charge the requester for search, review, and duplication.
(2)
(ii) For an educational institution request, the Agency will charge the requester for duplication, except that the Agency will furnish the first 100 pages of duplication at no charge.
(3)
(ii) For a noncommercial scientific institution request, the Agency will charge the requester for duplication, except that the Agency will furnish the first 100 pages of duplication at no charge.
(4)
(ii) For representative of the news media requests, the Agency will charge a requester for duplication, except that the Agency will furnish the first 100 pages of duplication at no charge.
(5)
(ii) The Agency will charge other requesters for search and duplication, except that the Agency will furnish without charge the first two hours of search time and the first 100 pages of duplication.
(f)
(1)
(2)
(ii) Search fees will equal the direct costs of search. Personnel will bill their time at the following rates using the current Office of Personnel Management General Schedule (GS) pay table for Washington-Baltimore-Arlington, DC-MD-VA-WV-PA. The current calculations of these rates may be found at
(A) GS-12 level or below (or equivalent pay scale): The average of GS-9 to GS-12 (Step 5), plus 16 percent, rounded to the nearest $1 increment per quarter hour.
(B) GS-13 level or above (or equivalent pay scale): The average of GS-13 to GS-15 (Step 5), plus 16 percent, rounded to the nearest $1 increment per quarter hour.
(iii) For requests that require the retrieval of records stored by an agency at a Federal Records Center operated by NARA, additional costs will be charged in accordance with the Transactional Billing Rate Schedule established by NARA.
(3)
(ii) The Agency will charge review fees only for the initial record review (that is, the review done when an office is deciding whether an exemption applies to a particular record or portion of a record at the initial request level). The Agency will not charge for review at the administrative appeal level for an exemption already applied. However, the Agency may again review records or portions of records withheld under an exemption that the Agency subsequently determines not to apply to determine whether any other exemption not previously considered applies; the Agency will charge costs of that review when a change of circumstances makes it necessary. The Agency will charge review fees at the same rates as those charged for a search under paragraph (f)(2)(ii) of this section.
(4)
(ii) For either a photocopy or a computer-generated printout of a record (no more than one copy of which need be supplied), the fee will be fifteen (15) cents per page. For electronic forms of duplication, other than a computer-generated printout, offices will charge the direct costs of that duplication. Such direct costs will include the costs of the requested electronic medium on which the copy is to be made and the actual operator time and computer resource usage required to produce the copy, to the extent they can be determined. The Agency will charge operator time at the same rates as those charged for search under paragraph (f)(2)(ii) of this section.
(g)
(2) The restrictions in paragraphs (e)(1)(ii), (2)(ii), (3)(ii), (4)(ii), and (5)(ii) and minimum fee threshold in (g)(1) of this section work together. This means that for requesters other than those seeking records for a commercial use, the Agency will charge no fee unless the cost of search more than two hours plus the cost of duplication in excess of 100 pages totals more than fourteen times the rate in paragraph 2.107(f)(2)(ii)(B) of this section rounded to the nearest $5.00 increment. The current calculation of this threshold may be found at
(3) If EPA fails to comply with the FOIA's time limits for responding to a request, EPA will not charge search fees, or, in the instance of requesters described in paragraphs (e)(2) through (4) of this section, duplication fees, except as follows:
(i) If EPA determined that unusual circumstances as defined by the FOIA apply and the Agency provided timely written notice to the requester in accordance with the FOIA, a failure to comply with the time limit shall be excused for an additional 10 working days;
(ii) If EPA determined that unusual circumstances as defined by the FOIA apply and more than 5,000 pages are necessary to respond to the request, EPA may charge search fees, or, in the case of requesters described in paragraphs (e)(2) through (4) of this section, may charge duplication fees, if the following steps are taken: EPA must have
(iii) If a court determines that exceptional circumstances exist, as defined by the FOIA, a failure to comply with the time limits shall be excused for the length of time provided by the court order.
(h)
(2) If EPA determines that the actual or estimated fees exceed twenty-five times the amount in paragraph (f)(2)(ii)(B) of this section, the Agency will notify the requester of the actual or estimated amount, and may toll the processing clock and do no further work on the request until the requester pays the estimated or actual fee. The current calculation of this amount may be found at
(3) After providing the requester with estimated fee amounts, EPA will provide the requester with an opportunity to discuss with the Agency how to modify the request to meet the requester's needs at a lower cost.
(4) EPA calculates the estimated or actual fee cumulatively for multi-component requests. If only a part of the fee can be estimated readily, the Agency will advise the requester that the estimated fee may be only a portion of the total fee.
(5) If, after the requester provided an assurance of payment or paid an initially estimated or actual amount of fees, the Agency increases the estimated or actual amount of fees, the Agency will notify the requester, stop further processing of the request, and toll any deadline for responding to the request. Once the requester provides assurance of payment or pays the fees, the time to respond to the request will resume from where it was at the date of the tolling notification.
(i)
(j)
(k)
(2) Before EPA continues processing a pending FOIA request or begins processing any new FOIA requests from a delinquent requester, the delinquent requester must pay the full amount due, plus any applicable interest, on that prior request and make an advance payment of the full amount of any anticipated fee.
(3) When the Agency requires payment under paragraph (h)(2) of this section, the request will not be considered received until the required payment is made. If the requester does not pay the outstanding balance and the advance payment within 30 calendar days after the date of EPA's fee determination, the request will be closed.
(l)
(1) The Agency reasonably believes that if the requests constituted a single request, such a request would result in unusual circumstances pursuant to § 2.104(f); or
(2) The Agency reasonably believes that the requester or requesters acting together are attempting to divide a request into a series of requests for the purpose of avoiding fees. The Agency may presume that such requests have been submitted to avoid fees if submitted within a 30-day period. When requests are submitted by a period greater than 30 days, the Agency will aggregate them only if there exists a solid basis for determining that aggregation is warranted under all the circumstances involved.
(m)
(n)
(2) Requests for the waiver or reduction of fees must address the factors listed in paragraphs (n)(4) through (6) of this section, as far as they apply to each request. EPA components will exercise their discretion to consider the cost-effectiveness of their investment of administrative resources in deciding whether to grant waivers or reductions of fees and will consult the appropriate EPA components as needed. Requesters must submit requests for the waiver or reduction of fees along with the request.
(3) When only some of the requested records satisfy the requirements for a waiver of fees, the Agency will grant a waiver for only those records.
(4) Records responsive to a request will be furnished without charge or at a charge reduced below that established under paragraph (c) of this section when the Agency determines, based on all available information, that disclosure of the requested information is in the public interest because it is:
(i) Likely to contribute significantly to public understanding of the operations or activities of the government, and
(ii) Is not primarily in the commercial interest of the requester.
(5) To determine whether the request meets the first fee waiver requirement, the Agency will consider the following factors:
(i) The subject of the request. Whether the subject of the requested records concerns “the operations or activities of the government.” The subject of the requested records must concern identifiable operations or activities of the Federal government, with a connection that is direct and clear, not remote.
(ii) The informative value of the information to be disclosed. Whether the disclosure is “likely to contribute” to an understanding of government operations or activities. The disclosable portions of the requested records must be meaningfully informative about government operations or activities in order to be “likely to contribute” to an increased public understanding of those operations or activities. The disclosure of information that already is in the public domain, in either a duplicative or a substantially identical form, would not be as likely to contribute to such understanding when nothing new would be added to the public's understanding.
(iii) The contribution to an understanding of the subject by the public is likely to result from the disclosure. Whether disclosure of the requested information will contribute to “public understanding.” The disclosure must contribute to the understanding of a reasonably broad audience of persons interested in the subject, as opposed to the individual understanding of the requester. The Agency will consider a requester's expertise in the subject area and ability and intention to effectively convey information to the public. The Agency presumes that a representative of the news media will satisfy this consideration.
(iv) The significance of the contribution to public understanding. Whether the disclosure is likely to contribute “significantly” to public understanding of government operations or activities. The public's understanding of the subject in question, as compared to the level of public understanding existing prior to the disclosure, must be enhanced by the disclosure to a significant extent. The Agency will not make value judgments about whether information that would contribute significantly to public understanding of the operations or activities of the government is “important” enough to be made public.
(6) To determine whether the request meets the second fee waiver requirement, the Agency will consider the following factors:
(i) The existence and magnitude of a commercial interest. Whether the requester has a commercial interest that would be furthered by the requested disclosure. The Agency will consider any commercial interest of the requester (with reference to the definition of “commercial use request” in paragraph (e)(1) of this section), or of any person on whose behalf the requester may be acting, that would be furthered by the requested disclosure. The Agency will give the requester an opportunity in the administrative process to provide explanatory information regarding this consideration.
(ii) The primary interest in disclosure. Whether any identified commercial interest of the requester is sufficiently large, in comparison with the public interest in disclosure, that disclosure is “primarily in the commercial interest of the requester.” A fee waiver or reduction is justified where the public interest standard is satisfied and that public interest is greater in magnitude than that of any identified commercial interest in disclosure. The Agency ordinarily will presume that when a news media requester has satisfied the public interest standard, the public interest will be the interest primarily served by disclosure to that requester. The Agency will not presume that disclosure to data brokers or others who merely compile and market government information for direct economic return is to primarily serve the public interest.
(a)
(1) EPA's FOIA submission website, linked to at
(2) U.S. Mail sent to the following address: National FOIA Office, U.S. Environmental Protection Agency, 1200 Pennsylvania Avenue NW (2310A), Washington, DC 20460; or
(3) Overnight delivery service to National FOIA Office, U.S. Environmental Protection Agency, 1200 Pennsylvania NW, Room 7309C, Washington, DC 20460.
(b)
(c)
(d)
(1) The Counsel to the Inspector General will act on any appeal where the Inspector General or the Inspector General's delegate has made the final adverse determination; however, if the Counsel to the Inspector General has signed the final adverse determination, the General Counsel or the General Counsel's delegate will act on the appeal;
(2) An adverse determination by the Administrator on an initial request will serve as the final action of the Agency; and
(3) An appeal ordinarily will not be adjudicated if the request becomes a matter of FOIA litigation.
(e)
(1) A decision affirming an adverse determination in whole or in part will contain a statement of the reason or reasons for the decision, including any FOIA exemption or exemptions applied, inform the requester of dispute resolution services offered by the Office of Government Information Service of the National Archives and Records Administration, and inform the
(2) If the Agency reverses or modifies the adverse determination on appeal, the Agency will attach the requested information that the Agency determined on appeal to be releasable, or the Agency will return the request to the appropriate office so that the office may reprocess the request in accordance with the appeal decision.
(f)
Nothing in this subpart shall be construed to entitle any person, as a right, to any service or to the disclosure of any record to which such person is not entitled under the FOIA.
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) is finalizing a revision to the El Dorado County Air Quality Management District's (EDCAQMD or “District”) portion of the California State Implementation Plan (SIP). This revision governs the District's issuance of permits for stationary sources, and focuses on the preconstruction review and permitting of major sources and major modifications under part D of title I of the Clean Air Act (CAA or “the Act”).
This rule is effective October 16, 2023.
The EPA has established a docket for this action under Docket No. EPA-R09-OAR 2022-0910. All documents in the docket are listed on the
Camille Cassar, EPA Region IX, 75 Hawthorne St., San Francisco, CA 94105; by phone: (415) 947-4164; or by email to
Throughout this document, the terms “we,” “us,” and “our” refer to the EPA.
On March 31, 2023,
For areas designated nonattainment for one or more National Ambient Air Quality Standards (NAAQS), the applicable SIP must include preconstruction review and permitting requirements for new or modified major stationary sources of such nonattainment pollutant(s) under part D of title I of the Act, commonly referred to as Nonattainment New Source Review (NNSR). The rule listed in Table 1 contains the District's NNSR permit program applicable to new and modified major sources located in the designated nonattainment areas in El Dorado County. Our proposed action contains more information on the rule and our evaluation.
The EPA's proposed action provided a 30-day public comment period. During this period, no comments were submitted on our proposal.
No comments were submitted on our proposal. We continue to find that Rule 523-1 satisfies the relevant requirements for a CAA NNSR program for ozone and PM
Additionally, all sanctions and sanctions clocks triggered by our February 2, 2000 final limited approval and limited disapproval action (65 FR 4887) will be permanently terminated on the effective date of this final approval action. In our interim final determination to defer sanctions (88 FR 19225), issued concurrently with our proposed approval action, we explained
This action incorporates the submitted rule into the California SIP. In conjunction with the EPA's SIP approval of the District's visibility program for sources subject to the NNSR program, this action also revises the scope of the visibility Federal Implementation Plan (FIP) at 40 CFR 52.28 in California so that this FIP no longer applies to sources located in El Dorado County that are subject to the District's visibility program.
In this rule, the EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is incorporating by reference El Dorado County Air Quality Management District Rule 523-1, Federal Non-Attainment New Source Review, revised on December 7, 2021, which regulates the issuance of permits for stationary sources. The EPA has made, and will continue to make, these materials available through
Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves state law as meeting federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 14094 (88 FR 21879, April 11, 2023);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997) because it approves a state program;
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001); and
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act.
In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
Executive Order 12898 (Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations, 59 FR 7629, Feb. 16, 1994) directs Federal agencies to identify and address “disproportionately high and adverse human health or environmental effects” of their actions on minority populations and low-income populations to the greatest extent practicable and permitted by law. The EPA defines environmental justice (EJ) as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” The EPA further defines the term fair treatment to mean that “no group of people should bear a disproportionate burden of environmental harms and risks, including those resulting from the negative environmental consequences of industrial, governmental, and commercial operations or programs and policies.”
The State did not evaluate environmental justice considerations as part of its SIP submittal; the CAA and applicable implementing regulations neither prohibit nor require such an evaluation. The EPA did not perform an EJ analysis and did not consider EJ in this action. Due to the nature of the action being taken here, this action is expected to have a neutral to positive impact on the air quality of the affected area. Consideration of EJ is not required as part of this action, and there is no information in the record inconsistent with the stated goal of E.O. 12898 of achieving environmental justice for people of color, low-income populations, and Indigenous peoples.
This action is subject to the Congressional Review Act, and the EPA will submit a rule report to each House of the Congress and to the Comptroller General of the United States. This action is not a “major rule” as defined by 5 U.S.C. 804(2). Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by November 13, 2023. 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 may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Nitrogen oxides, Ozone, Particulate matter, Reporting and recordkeeping requirements, Volatile organic compounds.
42 U.S.C. 7401
For the reasons stated in the preamble, the Environmental Protection Agency amends part 52, chapter I, title 40 of the Code of Federal Regulations as follows:
42 U.S.C. 7401
(c) * * *
(604) * * *
(i) * * *
(B) El Dorado County Air Quality Management District.
(
(
(d) * * *
(11) El Dorado County Air Quality Management District.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
The FAA proposes to adopt a new airworthiness directive (AD) for certain Airbus Canada Limited Partnership Model BD-500-1A10 and BD-500-1A11 airplanes. This proposed AD was prompted by damage found on two power-feeder harnesses due to chafing with wheel bins. An investigation found that the power-feeder harnesses were not adequately supported to protect from chafing due to vibration. This proposed AD would require modifying the variable frequency generator (VFG) power-feeder harness routing, as specified in a Transport Canada AD, which is proposed for incorporation by reference (IBR). The FAA is proposing this AD to address the unsafe condition on these products.
The FAA must receive comments on this proposed AD by October 30, 2023.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
• For Transport Canada material that is proposed for IBR in this AD, contact Transport Canada, Transport Canada National Aircraft Certification, 159 Cleopatra Drive, Nepean, Ontario K1A 0N5, Canada; telephone 888-663-3639; email
• For service information identified in this NPRM, contact Airbus Canada Limited Partnership, 13100 Henri-Fabre Boulevard, Mirabel, Québec, J7N 3C6, Canada; telephone 450-476-7676; email
• You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195.
William Reisenauer, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: 516-228-7300; 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 William Reisenauer, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: 516-228-7300; email:
Transport Canada, which is the aviation authority for Canada, has issued Transport Canada AD CF-2023-24, dated April 6, 2023 (Transport Canada AD CF-2023-24) (also referred to as the MCAI), to correct an unsafe condition for certain Airbus Canada Limited Partnership Model BD-500-1A10 and BD-500-1A11 airplanes. The MCAI states that two VFG power-feeder harnesses were found damaged due to chafing with wheel bins during
The FAA is proposing this AD to prevent damage to VFG power-feeder harnesses from chafing due to vibration, which could lead to a loss of generated power from both VFGs, or to a fire in the case of flammable fluid contact with arcing wires.
You may examine the MCAI in the AD docket at
Transport Canada AD CF-2023-24 specifies procedures for modifying the VFG power-feeder harness routing, including a general visual inspection for damage at the intersection of the VFG power-feeder harnesses and the surface of the wheel bins, and corrective actions including obtaining and following repair instructions. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in
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 this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop in other products of the same type design.
This proposed AD would require accomplishing the actions specified in Transport Canada AD CF-2023-24 described previously, except for any differences identified as exceptions in the regulatory text of this proposed AD.
In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA developed a process to use some civil aviation authority (CAA) ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has been coordinating this process with manufacturers and CAAs. As a result, the FAA proposes to incorporate Transport Canada AD CF-2023-24 by reference in the FAA final rule. This proposed AD would, therefore, require compliance with Transport Canada AD CF-2023-24 in its entirety through that incorporation, except for any differences identified as exceptions in the regulatory text of this proposed AD. Service information required by Transport Canada AD CF-2023-24 for compliance will be available at
The FAA estimates that this AD, if adopted as proposed, would affect 16 airplanes of U.S. registry. The FAA estimates the following costs to comply with 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 October 30, 2023.
None.
This AD applies to Airbus Canada Limited Partnership Model BD-500-1A10 and BD-500-1A11 airplanes, certificated in any category, as identified in Transport Canada
Air Transport Association (ATA) of America Code 24, Electrical Power.
This AD was prompted by damage found on two variable frequency generator (VFG) power-feeder harnesses due to chafing with wheel bins. An investigation found that the power-feeder harnesses were not adequately supported to protect from chafing due to vibration. The FAA is issuing this AD to prevent damage to VFG power-feeder harnesses from chafing due to vibration. The unsafe condition, if not addressed, could lead to a loss of generated power from both VFGs, or to a fire in the case of flammable fluid contact with arcing wires.
Comply with this AD within the compliance times specified, unless already done.
Except as specified in paragraph (h) of this AD: Comply with all required actions and compliance times specified in, and in accordance with, Transport Canada AD CF-2023-24.
(1) Where Transport Canada AD CF-2023-24 refers to its effective date, this AD requires using the effective date of this AD.
(2) Where Transport Canada AD CF-2023-24 refers to “hours air time,” this AD requires using “flight hours.”
The following provisions also apply to this AD:
(1)
(2)
For more information about this AD, contact William Reisenauer, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: 516-228 7300; email:
(1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.
(i) Transport Canada AD CF-2023-24, dated April 6, 2023.
(ii) [Reserved]
(3) For Transport Canada AD CF-2023-24, contact Transport Canada National Aircraft Certification, 159 Cleopatra Drive, Nepean, Ontario K1A 0N5, Canada; telephone 888-663-3639; email
(4) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195.
(5) You may view this material that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, email
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
The FAA proposes to adopt a new airworthiness directive (AD) for all Deutsche Aircraft GmbH Model 328-100 and 328-300 airplanes. This proposed AD was prompted by a manufacturer's design review, which identified a potential risk of the rudder control rod buckling during operation with one engine inoperative during take-off and landing phases. This proposed AD would require visually inspecting the rudder control rod, performing a one-time functional check of the rudder control rod, performing corrective actions if necessary, and reporting the inspection results, as specified in a European Union Aviation Safety Agency (EASA) AD, which is proposed for incorporation by reference (IBR). This proposed AD would also limit the installation of affected parts under certain conditions. The FAA is proposing this AD to address the unsafe condition on these products.
The FAA must receive comments on this proposed AD by October 30, 2023.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
• For material that is proposed for IBR in this NPRM, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email:
• You may view this service information at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th Street, Des Moines, WA. For information on the
Todd Thompson, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 206-231-3228; 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 Todd Thompson, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 206-231-3228; email
EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2023-0065, dated March 20, 2023 (EASA AD 2023-0065) (also referred to as the MCAI), to correct an unsafe condition for all Deutsche Aircraft GmbH (Type Certificate Previously Held by 328 Support Services GmbH; AvCraft Aerospace GmbH; Fairchild Dornier GmbH; Dornier Luftfahrt GmbH) Model 328-100 and 328-300 airplanes. The MCAI states that during a design review of the rudder control architecture, it was discovered that the rudder control rod could buckle during operation with one engine inoperative during take-off and landing phases. This condition, if not detected and corrected, could result in reduced control of the airplane.
The FAA is proposing this AD to address the unsafe condition on these products. You may examine the MCAI in the AD docket at
EASA AD 2023-0065 specifies procedures for a functional check and general visual inspection (GVI) of the rudder control rod (measuring the length of the rudder control rod, inspecting for signs of bending, ensuring both rudder control rod ends are symmetrically adjusted, and ensuring the threads of the rod end fully cover both inspection holes). Depending on the inspection results, EASA AD 2023-0065 also specifies corrective action, including obtaining and following instructions if any discrepancy is identified. EASA AD 2023-0065 also requires reporting the inspection results to Deutsche Aircraft GmbH and limits the installation of affected parts under certain conditions.
This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in
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 this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop in other products of the same type design.
This proposed AD would require accomplishing the actions specified in EASA AD 2023-0065 described previously, except for any differences identified as exceptions in the regulatory text of this proposed AD.
In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA developed a process to use some civil aviation authority (CAA) ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has been coordinating this process with manufacturers and CAAs. As a result, the FAA proposes to incorporate EASA AD 2023-0065 by reference in the FAA final rule. This proposed AD would, therefore, require compliance with EASA AD 2023-0065 in its entirety through that incorporation, except for any differences identified as exceptions in the regulatory text of this proposed AD. Using common terms that are the same as the heading of a particular section in EASA AD 2023-0065 does not mean that operators need comply only with that section. For example, where the AD requirement refers to “all required actions and compliance times,” compliance with this AD requirement is not limited to the section titled “Required Action(s) and Compliance Time(s)” in EASA AD 2023-0065. Service information required by EASA AD 2023-0065 for compliance will be available at
The FAA considers that this proposed AD would be an interim action. If final action is later identified, the FAA might consider further rulemaking then.
The FAA estimates that this AD, if adopted as proposed, would affect 54 airplanes of U.S. registry. The FAA estimates the following costs to comply with this proposed AD:
The FAA has received no definitive data on which to base the cost estimates for the on-condition actions specified in this proposed AD.
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 October 30, 2023.
None.
This AD applies to all Deutsche Aircraft GmbH (Type Certificate previously held by 328 Support Services GmbH; AvCraft Aerospace GmbH; Fairchild Dornier GmbH; Dornier Luftfahrt GmbH) Model 328-100 and 328-300 airplanes, certificated in any category.
Air Transport Association (ATA) of America Code: 27, Flight Controls.
This AD was prompted by a manufacturer's design review, which identified a potential risk of the rudder control rod buckling during operation with one engine inoperative during take-off and landing phases. The FAA is issuing this AD to address the potential failure of a rudder control rod. The unsafe condition, if not addressed, could result in reduced control of the airplane.
Comply with this AD within the compliance times specified, unless already done.
Except as specified in paragraph (h) of this AD: Comply with all required actions and compliance times specified in, and in accordance with, European Union Aviation Safety Agency (EASA) AD 2023-0065, dated March 20, 2023 (EASA AD 2023-0065).
(1) Where EASA AD 2023-0065 refers to its effective date, this AD requires using the effective date of this AD.
(2) Replace the entire text of paragraph (2) of EASA AD 2023-0065 with the following text, “If, during the functional check or GVI as required by paragraph (1) of this AD, as applicable, the length of the rudder control rod exceeds the maximum allowable length specified in the ASB, the rudder control rod is bent, both rudder control rod ends are not symmetrically adjusted, or both inspection holes are not fully covered with the threads of the rod end, repair before further flight using a method approved by the Manager, International Validation Branch, FAA; or EASA; or Deutsche Aircraft GmbH's EASA Design Organization Approval (DOA). If approved by the DOA, the approval must include the DOA-authorized signature.”
(3) This AD does not adopt the “Remarks” section of EASA AD 2023-0065.
The following provisions also apply to this AD:
(1)
(2)
For more information about this AD, contact Todd Thompson, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 206-231-3228; email
(1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.
(i) European Union Aviation Safety Agency (EASA) AD 2023-0065, dated March 20, 2023.
(ii) [Reserved]
(3) For EASA AD 2023-0065, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; telephone +49 221 8999 000; email:
(4) You may view this service information at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th Street, Des Moines, WA. For information on the availability of this material at the FAA, call 206-231-3195.
(5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, email
Financial Crimes Enforcement Network (FinCEN), Treasury.
Notice of proposed rulemaking (NPRM).
In accordance with the requirements of the Privacy Act of 1974, as amended, FinCEN gives notice of a proposed amendment to exempt a new system of records, entitled “FinCEN .004—Beneficial Ownership Information System,” from certain provisions of the Privacy Act. The Beneficial Ownership Information (BOI) System is being established to implement the beneficial ownership information reporting and access requirements set out in the Corporate Transparency Act (CTA), which was enacted on January 1, 2021, as part of the Anti-Money Laundering Act of 2020. The exemptions are intended to increase the value of the system for law enforcement purposes and to comply with the CTA's prohibitions against unauthorized disclosure of certain information. Public comments are invited.
Comments on this document must be received by October 16, 2023.
Written comments on this document may be submitted electronically through the Federal Government eRulemaking portal at
In general, Treasury will post all comments to
For questions about this document and privacy issues, contact: Deputy Assistant Secretary for Privacy, Transparency, and Records at U.S. Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC 20220; telephone: (202) 622-5710.
In a separate notice published on September 14, 2023, FinCEN is proposing to establish a system of records for information that the bureau will collect pursuant to the CTA, which was enacted into law as part of the Anti-Money Laundering Act of 2020.
On September 30, 2022, FinCEN issued the final rule establishing BOI reporting requirements (the Reporting Rule).
An individual or a reporting company may obtain a FinCEN identifier (FinCEN ID) by providing certain information to FinCEN. A FinCEN ID is unique to each such individual or reporting company. The FinCEN ID associated with an individual can be used in lieu of the information required to be reported about that individual. An individual may request and obtain a FinCEN ID by submitting an application containing the information described above in connection with a reporting company's beneficial owner or company applicant. Information provided to FinCEN to obtain a FinCEN ID will be disclosed to authorized recipients for authorized purposes—in the same way and to the same extent as BOI. The effective date of the Reporting Rule is January 1, 2024.
In addition to imposing reporting requirements, the CTA also authorizes FinCEN to disclose BOI to five categories of authorized recipients, subject to strict security, confidentiality, and use protocols. Those categories include foreign and domestic law enforcement agencies, but do
To collect, maintain, and provide access to BOI, FinCEN is developing the Beneficial Ownership Information System (the BOI System). The CTA dictates that the BOI System should be “highly useful” to its authorized users, including law enforcement agencies.
The Privacy Act contains certain requirements regarding the maintenance and disclosure of a system of records. Those requirements may differ from, or conflict with, the comprehensive requirements for maintaining and disclosing BOI specified in the CTA. For example, while the Privacy Act provides for access to records by certain individuals upon request, the CTA prohibits disclosure of BOI except as authorized in five enumerated categories, none of which include disclosure to such individuals under the Privacy Act.
Under 5 U.S.C. 552a(j)(2), the head of a Federal agency may promulgate rules to exempt a system of records from certain provisions of 5 U.S.C. 552a if the system of records is “maintained by an agency or component thereof which performs as its principal function any activity pertaining to the enforcement of criminal laws, including police efforts to prevent, control, or reduce crime or to apprehend criminals, and the activities of prosecutors, courts, correctional, probation, pardon or parole authorities, and which consists of (A) information compiled for the purpose of identifying individual criminal offenders and alleged offenders and consisting only of identifying data and notations of arrests, the nature and disposition of criminal charges, sentencing, confinement, release, and parole and probation status; (B) information compiled for the purpose of a criminal investigation, including reports of informants and investigators, and associated with an identifiable individual; or (C) reports identifiable to an individual compiled at any stage of the process of enforcement of the criminal laws from arrest or indictment through release from supervision.”
Under 5 U.S.C. 552a(k)(2), the head of a Federal agency may promulgate rules to exempt a system of records from certain provisions of 5 U.S.C. 552a if the system of records is “investigatory material compiled for law enforcement purposes, other than material within the scope of subsection (j)(2) of this section.”
FinCEN is hereby giving notice of a proposed rule to exempt the BOI System from certain provisions of the Privacy Act pursuant to 5 U.S.C. 552a(j)(2) and (k)(2) and the authority vested in the Secretary of the Treasury by 31 CFR 1.23(c). The reasons for exempting the system of records from sections (c)(3), (c)(4), (d)(1), (d)(2), (d)(3), (d)(4), (e)(1), (e)(2), (e)(4)(G), (e)(4)(H), (e)(5), (e)(8), (f) and (g) of the Privacy Act are as follows:
(1) 5 U.S.C. 552a(d)(1), (e)(4)(H) and (f)(2), (f)(3) and (f)(5) grant individuals access to records containing information about them. An exemption from these provisions is appropriate because the CTA prohibits FinCEN from disclosing BOI except to five categories of authorized recipients;
(2) 5 U.S.C. 552a(e)(4)(G) and (f)(1) enable individuals to inquire whether a system of records contains records about them. An exemption from these provisions is appropriate because allowing individuals involved in illegal activity to learn that FinCEN has information concerning those individuals that could lead to them being identified for investigation could undercut the CTA mandate that the BOI System be “highly useful” to law enforcement agencies. For instance, such notice could prompt individuals engaged in illegal activity to: (a) take steps to avoid detection; (b) begin, continue, or resume illegal conduct upon learning that they are not identified in the system of records; or (c) destroy evidence needed to prove the violation.
(3) 5 U.S.C. 552a(d)(2), (d)(3) and (d)(4), (e)(4)(H) and (f)(4) permit individuals to request amendment of a record pertaining to them and require the agency either to amend the record or note the disputed portion of the record and, if the agency refuses to amend the record, to provide a copy of the individual's statement of disagreement with the agency's refusal, to persons or other agencies to whom the record is thereafter disclosed. Because these provisions depend on individuals
(4) 5 U.S.C. 552a(c)(4) requires an agency to inform any person or other agency about any correction or notation of dispute that the agency made in accordance with 5 U.S.C. 552a(d) to any record that the agency disclosed to the person or agency, if an accounting of the disclosure was made. Because this provision depends on individuals having access to and an opportunity to request amendment of records pertaining to them, and because this rule proposes to exempt the BOI System from the provisions of 5 U.S.C. 552a relating to access to and amendment of records for the reasons set forth above, this provision would not apply to the BOI System.
(5) 5 U.S.C. 552a(c)(3) requires an agency to make any accounting of disclosures of records required by 5 U.S.C. 552a(c)(1) available to the individual named in the record upon his or her request. Any such accounting must state the date, nature, and purpose of each disclosure of the record and the name and address of the recipient. Applying this provision would impair the effective use of information collected in the BOI System. Making an accounting of disclosures available to the subject of an investigation would alert them that another agency is investigating their criminal activities and could reveal the geographic location of the other agency's investigation, the nature and purpose of that investigation, and the dates on which that investigation was active. Violators possessing such knowledge would be able to take measures to avoid detection or apprehension by: (a) altering their operations; (b) transferring their criminal activities to other geographical areas, legal entities, or ostensible beneficial owners; or (c) destroying or concealing evidence that would form the basis for arrest. Moreover, providing an accounting to the subjects of investigations would alert them to the fact that FinCEN has information relevant to their suspected criminal activities. Access to such information, together with other available information, could reveal the operation of the information-gathering and analysis systems of FinCEN and other BOI System users, and permit violators to take steps to avoid detection or apprehension.
(6) 5 U.S.C. 552a(e)(1) requires an agency to maintain in its records only such information about an individual as is relevant and necessary to accomplish a purpose of the agency required to be accomplished by statute or executive order. Maintenance of information, as defined in 5 U.S.C. 552a(a)(3), includes the collection and dissemination of information. An exemption from this provision is therefore appropriate because its application would require FinCEN to make determinations at the time of collection about the relevance and necessity of collected information. Speculative determinations about the relevance and necessity of collected information could negatively impact the quality of information available to law enforcement in future investigations, which would undermine the mandate in the CTA that the BOI System be “highly useful” to law enforcement.
(7) 5 U.S.C. 552a(e)(2) requires an agency to collect information to the greatest extent practicable directly from the subject individual when the information may result in adverse determinations about an individual's rights, benefits, and privileges under Federal programs. To the extent information in the BOI System might result in such an adverse determination, applying this provision would contravene the requirement in the CTA that FinCEN collect BOI from reporting companies.
(8) 5 U.S.C. 552a(e)(5) requires an agency to maintain all records it uses in making any determination about any individual with such accuracy, relevance, timeliness, and completeness as is reasonably necessary to assure fairness to the individual in the determination. Because 5 U.S.C. 552a(a)(3) defines “maintain” as including “collect” and “disseminate,” applying this provision to the BOI System would hinder timely dissemination of BOI, and by extension hinder law enforcement efforts dependent upon such information. Information in the BOI System is filed by reporting companies and individual FinCEN ID applicants, and it is not possible at the time of collection to determine whether the information in such records is accurate, relevant, timely, and complete.
(9) 5 U.S.C. 552a(e)(8) requires an agency to make reasonable efforts to serve notice on an individual when the agency makes any record on the individual available to any person under compulsory legal process when such process becomes a matter of public record. Exemption from this requirement is appropriate because applying the requirement to the BOI System could reveal to the subject of a law enforcement investigation or action that a law enforcement agency used BOI in the investigation or action, thereby revealing the agency's investigative techniques and procedures.
(10) 5 U.S.C. 552a(g) provides an individual with civil remedies when: (a) an agency wrongfully refuses to amend a record or to review a request for amendment; (b) an agency wrongfully refuses to grant access to a record; (c) any determination relating to an individual is based on records that are not accurate, relevant, timely and complete; and (d) an agency fails to comply with any other provision of 5 U.S.C. 552a so as to adversely affect the individual. The BOI System should be exempted from this provision to the extent that the civil remedies relate to the provisions of 5 U.S.C. 552a from which the prior paragraphs of this section exempt the BOI System. There should be no civil remedies for failure to comply with provisions from which this system of records is exempted. Exemption from this provision will also protect FinCEN from baseless civil court actions that might hamper its ability to collate, analyze and disseminate data.
Any information from a system of records for which an exemption is claimed under 5 U.S.C. 552a(j)(2) or (k)(2) which is also included in another system of records retains the same exempt status such information has in the system of records for which such exemption is claimed.
This proposed rule is not a “significant regulatory action” under Executive Order 12866.
Pursuant to the requirements of the Regulatory Flexibility Act (RFA), 5 U.S.C. 601
In accordance with the provisions of the Paperwork Reduction Act of 1995, 44 U.S.C. 3501
Privacy.
For the reasons stated in the preamble, part 1 of title 31 of the Code of Federal Regulations is proposed to be amended as follows:
5 U.S.C. 301, 552, 552a, 553; 31 U.S.C. 301, 321; 31 U.S.C. 3717.
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Coast Guard, DHS.
Notice of proposed rulemaking.
The Coast Guard is proposing to establish a safety zone for the navigable waters of the Sector Virginia Captain of the Port (COTP) Zone, to be enforced in the event of hurricanes, tropical storms, and other storms with high winds. This action is necessary to ensure the safety of the waters of the Sector Virginia COTP Zone. This proposed rulemaking would establish actions to be completed by industry and vessels within the COTP Zone before hurricanes, tropical storms, and other storms with high winds threatening the State of Virginia make landfall, and afterwards as well. We invite your comments on this proposed rulemaking.
Comments and related material must be received by the Coast Guard on or before October 16, 2023.
You may submit comments identified by docket number USCG-2023-0366 using the Federal Decision-Making Portal at
If you have questions about this proposed rulemaking, call or email LCDR Ashley Holm, Chief Waterways Management Division U.S. Coast Guard; 757-617-7986,
Virginia has the potential to be affected by hurricanes and tropical storms on a yearly basis, especially between the months of June and November. Additionally, severe storms generating high winds and rough seas are also common in the winter months. The Sector Virginia COTP proposes establishing a safety zone to protect mariners, port infrastructure, and the environment during and after these severe weather events. The Coast Guard is proposing this rulemaking under authority in 46 U.S.C. 70034.
The Coast Guard proposes to establish a safety zone on the navigable waters of the Sector Virginia COTP Zone during hurricanes, tropical storms, and other storms with high winds. This safety zone would establish actions to be completed by local industry and vessels in the COTP zone prior to landfall of hurricanes, tropical storms, and other storms with high winds threatening Virginia and in the aftermath of landfall. Port Conditions (WHISKEY, X-RAY, YANKEE, ZULU, and RECOVERY) are standardized terms for states of operation instituted by the COTP which are clearly communicated to port
Actions to be taken by vessels is provided in the language of the proposed rule. In addition, ports and waterfront facilities are encouraged to take action when specific Port Conditions are declared. Under Port Condition WHISKEY, ports and waterfront facilities should remove all debris and secure potential flying hazards. Upon a declaration that Port Condition X-RAY is in effect, port facilities should ensure that potential flying debris and hazardous materials are removed, and that loose cargo and cargo equipment is secured. Upon a declaration of Port Condition YANKEE, terminal operators should terminate all cargo operations not associated with storm preparations. All facilities should continue to operate in accordance with approved Facility Security Plans (as defined at 33 CFR 101.105, and as further described in 33 CFR 105.400 to 105.415), and to comply with all applicable requirements of the Maritime Transportation Security Act of 2002 (46 U.S.C. chapter 701).
Under the proposed rule, the COTP would retain flexibility in controlling and reconstituting vessel traffic during periods of heavy weather, and it would allow for the expedited resumption of the MTS following such events. The proposed safety zone would consist of all waters of the territorial seas within the Sector Virginia COTP Zone, as defined in 33 CFR 3.25-10. Portions of the safety zone might be activated at different times, as conditions dictated. Notice of Port Conditions and their requirements would be given via Marine Safety Information Bulletins and Broadcast Notice to Mariners. The regulatory text we are proposing appears at the end of this document.
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, as amended by Executive Order 14094 (Modernizing Regulatory Review). Accordingly, the NPRM has not been reviewed by the Office of Management and Budget (OMB).
This regulatory action determination is based on the necessity to protect life, port infrastructure, and the environment during hurricanes, tropical storms, and other storms with high winds. The scope of the regulation is narrow and will only apply when a hurricane, tropical storm, or other storm with high winds impacts the navigable waters of the Virginia COTP Zone. These events are infrequent and of short duration. Regulatory restrictions will be lifted as soon as practicable.
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 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 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.
We review all comments received, but we will only post comments that address the topic of the proposed rule. We may choose not to post off-topic, inappropriate, or duplicate comments that we receive.
Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways.
For the reasons discussed in the preamble, the Coast Guard is proposing to amend 33 CFR part 165 as follows:
46 U.S.C. 70034, 70051, 70124; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 00170.1, Revision No. 01.3.
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Postal Regulatory Commission.
Notice of proposed rulemaking.
The Commission is acknowledging a recent filing requesting the Commission initiate a rulemaking proceeding to consider changes to analytical principles relating to periodic reports (Proposal Five). This document informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
On September 5, 2023, the Postal Service filed a petition pursuant to 39 CFR 3050.11 requesting that the Commission initiate a rulemaking proceeding to consider changes to analytical principles relating to periodic reports.
Previously, USPS Retail Ground (RG), First-Class Package Service (FCPS), and Parcel Select were listed as separate Competitive products within the Mail Classification Schedule (MCS) with Parcel Select Ground (PSG) as a price category within the PS product.
In addition, classification changes were made to the products on the MCS by removing RG from the Competitive product list, removing PSG as a price category from PS, and expanding the FCPS price structure to include mailpieces weighing up to 70 pounds thus subsuming the RG and PSG price categories under FCPS.
In Docket Nos. CP2023-113 and CP2023-114, the Commission approved additional proposed classification changes to rename FCPS to USPS Ground Advantage and several changes to the PS price structure including: (1) eliminating the distinction of machinable and nonmachinable prices for Parcel Select Heavy Weight (PSHW), (2) establishing a Destination Hub (DHUB) price category for PSHW, (3) establishing a DHUB price category for Parcel Select Lightweight (PSLW), and
The Postal Service states that the Docket No. ACR2022 Cost and Revenue Analysis (CRA) proportional adjustment factor is incorporated in the model as a value so that the factor does not recalculate based on proposed FY 2023 modifications and the CRA proportional adjustment factor will be calculated as usual when the Docket No. ACR2023 cost model input data become available.
The Postal Service has incorporated DHUB cost estimates for machinable, nonmachinable, oversize PSHW, and PSLW mailpieces into the summary worksheet of the modified mail processing cost model.
The Postal Service states that the transportation cost model has been expanded to include both DHUB and DDU transportation cost estimates.
Finally, the Postal Service has provided the mail processing unit cost estimates and the transportation cost estimate impacts under seal in an Excel file in Library Reference USPS-RM2023-10-NP1.
The Commission establishes Docket No. RM2023-10 for consideration of matters raised by the Petition. More information on the Petition may be accessed via the Commission's website at
1. The Commission establishes Docket No. RM2023-10 for consideration of the matters raised by the Petition of the United States Postal Service for the Initiation of a Proceeding to Consider Proposed Changes in Analytical Principles (Proposal Five), filed September 5, 2023.
2. Comments by interested persons in this proceeding are due no later than October 10, 2023.
3. Pursuant to 39 U.S.C. 505, the Commission appoints Philip T. Abraham to serve as an officer of the Commission (Public Representative) to represent the interests of the general public in this docket.
4. The Secretary shall arrange for publication of this order in the
By the Commission.
Environmental Protection Agency (EPA).
Reopening of information collection request (ICR 2170.09) comment period.
The Environmental Protection Agency (EPA) is reopening the comment period for the Information Collection Request (ICR) number 2170.09, for the proposed Air Emissions Reporting Requirements (AERR), published in the
The comment period for the ICR published on August 9, 2023 at 88 FR 54118 is reopened. Comments must be received on or before October 18, 2023.
Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2004-0489, by one of the following methods:
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Mr. Marc Houyoux, Office of Air Quality Planning and Standards, Air Quality Assessment Division, Emission Inventory and Analysis Group (C339-02), U.S. Environmental Protection Agency, Research Triangle Park, NC 27711; telephone number: (919) 541-3649; email:
On Wednesday August 9, 2023, the EPA published proposed revisions to the Air Emissions Reporting Requirements along with the associated ICR in the
Environmental Protection Agency (EPA).
Proposed rule; extension of comment period.
On July 31, 2023, the Environmental Protection Agency (EPA) issued a proposal titled, “National Emission Standards for Hazardous Air Pollutants: Integrated Iron and Steel Manufacturing Facilities Technology Review.” The EPA is extending the comment period on the proposed rule from September 14, 2023, to September 29, 2023.
The public comment period for the proposed rule published in the
You may send comments, identified by Docket ID No. EPA-HQ-OAR-2002-0083, by any of the following methods:
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For questions about this action, contact Phil Mulrine, Sector Policies and Programs Division (D243-02), Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency, P.O. Box 12055, Research Triangle Park, North Carolina 27711; telephone number (919) 541-5289; and email address
The EPA may publish any comment received to its public docket. Multimedia submissions (audio, video, etc.) must be accompanied by a written comment. The written comment is considered the official comment and should include discussion of all points you wish to make. The EPA will generally not consider comments or comment contents located outside of the primary submission (
The
Our preferred method to receive CBI is for it to be transmitted electronically using email attachments, File Transfer Protocol (FTP), or other online file sharing services (
Federal Communications Commission.
Proposed rule.
This document requests comments on a petition for rule making filed by L.D.F. Business Development Corp., the non-gaming wholly-owned business entity of the Lac du Flambeau Band of Lake Superior Chippewa Indians (LDF Tribe), proposing to amend the FM Table of Allotments, by allotting Channel 225A at Lac du Flambeau, Wisconsin, as a Tribal allotment and the community's first local service. A staff engineering analysis indicates that Channel 225A can be allotted to Lac du Flambeau, Wisconsin, consistent with the minimum distance separation requirements of the Commission's rules, with a site restriction of 12.1 km (7.5 miles) northwest of the community. The reference coordinates are 46-01-14 NL and 89-44-54 WL. Lac du Flambeau, Wisconsin is located within 320 kilometers (199 miles) of the U.S.-Canada border. Commission staff has requested Canadian concurrence.
Comments must be filed on or before October 30, 2023, and reply comments on or before November 15, 2023.
Secretary, Federal Communications Commission, 45 L Street NE, Washington, DC 20554. In addition to filing comments with the FCC, interested parties should serve the petitioner and its counsel as follows: Melodie A. Virtue, Esq., Brad C. Deutsch, Esq., c/o L.D.F. Business Development Corp., Foster Garvey PC, 1000 Potomac Street NW, Suite 200, Washington, DC 20007,
Rolanda F. Smith, Media Bureau, (202) 418-2054,
This is a synopsis of the Federal Communications Commission's (Commission) Notice of Proposed Rule Making, MB Docket No. 23-302, adopted September 6, 2023, and released September 6, 2023. The full text of this Commission decision is available online at
Provisions of the Regulatory Flexibility Act of 1980 do not apply to this proceeding.
Members of the public should note that from the time a Notice of Proposed Rule Making is issued until the matter is no longer subject to Commission consideration or court review, all
For information regarding proper filing procedures for comments,
Radio, Radio broadcasting.
Federal Communications Commission.
For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CFR part 73 as follows:
47 U.S.C. 154, 155, 301, 303, 307, 309, 310, 334, 336, 339.
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Rural Business-Cooperative Service, USDA.
Notice.
The Rural Business-Cooperative Service (RBCS or Agency), an agency of the United States Department of Agriculture (USDA), invites applications under the Intermediary Relending Program (IRP) for fiscal year (FY) 2024, subject to availability of funding. This Notice is being issued prior to passage of a FY 2024 Consolidated Appropriations Act in order to allow applicants enough time to leverage financing, prepare and submit their applications, and give the Agency time to process program applications within FY 2024. Based on FY 2023 appropriated funding, the Agency estimates that approximately $18,889,000 will be available for FY 2024. Successful applications will be selected by the Agency for funding and subsequently awarded to the extent that funding may ultimately be made available through appropriations. The Agency advises that all interested parties bear the financial burden of preparing and submitting an application in response to this Notice whether or not funding is appropriated for this program in FY 2024.
The deadlines for completed applications to be received in the USDA Rural Development (RD) State Office for quarterly funding competitions is no later than 4:30 p.m. (local time) on: First Quarter—September 30, 2023, Second Quarter—December 31, 2023, Third Quarter—March 31, 2024, and Fourth Quarter—June 30, 2024.
Applications must be submitted to the USDA RD State Office for the state where the applicant is located. Applications may be submitted in paper or electronic format to the appropriate RD State Office and must be received by 4:30 p.m. local time on the deadline date(s) to compete for available funds in the fiscal quarter. Applicants are encouraged to contact their respective RD State Office for an email contact to submit an electronic application prior to the submission deadline date(s). A list of the USDA RD State Office contacts can be found at:
Lori Pittman, Program Management Division, Business Programs, Rural Business-Cooperative Service, U.S. Department of Agriculture, 1400 Independence Avenue SW, MS 3226, Room 5160-S, Washington, DC 20250-3226,
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The Consolidated Appropriations Act, 2023, authorized set-aside funding to projects and intermediaries serving Federally Recognized Native American Tribes, and for Mississippi Delta Region Counties (as determined in accordance with Pub. L. 100-460). Eligible applicants for the set-aside funds, assuming that similar set-aside funds are appropriated for fiscal year 2024, must demonstrate that at least 75 percent of the benefits of an approved loan in this program will assist ultimate recipients in the designated areas. Applications for any set-aside funds must be submitted to the RD State Office where the project is located by 4:30 p.m. (local time) on the following deadline dates. The deadline to submit completed applications for Federally Recognized Tribes and Mississippi Delta Region Counties' projects is May 31, 2024. It is possible that funds may also be appropriated by Congress for projects
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There are no “responsiveness” or “threshold” eligibility criteria for these loans. However, not more than one loan will be approved by the Agency for an intermediary in any single fiscal year unless the additional request is from this program's set-aside funding.
Applications will not be considered for funding if they do not provide enough information to determine eligibility, are not suitable for evaluation, or are missing required elements as stated in 7 CFR 4274.340.
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The applicant documentation and forms needed for a complete application are located in 7 CFR 4274.340. There are no specific formats or limitations on the number of pages required for an application narrative, and applicants may request any Agency forms and addresses from the
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(a) At the time of application, each applicant must have an active registration in the System for Award Management (SAM) before submitting its application in accordance with 2 CFR part 25. In order to register in SAM, entities will be required to obtain a Unique Entity Identifier (UEI). Instructions for obtaining the UEI are available at
(b) Applicants must maintain an active SAM registration, with current, accurate and complete information, at all times during which it has an active Federal award or an application under consideration by a Federal awarding agency.
(c) Each applicant must ensure that it completes the Financial Assistance General Certifications and Representations in SAM.
(d) Each applicant must provide a valid UEI in its application, unless determined exempt under 2 CFR 25.110.
(e) The Agency will not make an award until the applicant has complied with all SAM requirements including providing the UEI. If an applicant has not fully complied with the requirements by the time the Agency is ready to make an award, the Agency may determine that the applicant is not qualified to receive a Federal award and use that determination as a basis for making a Federal award to another applicant.
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(1) Assisting rural communities recover economically through more and better market opportunities and through improved infrastructure. Applicant would receive priority points if the project is located in or serving a rural community whose economic well-being ranks in the most distressed tier (distress score of 80 or higher) of the Distressed Communities Index using the Distressed Communities Look-Up Map available at
(2) Ensuring all rural residents have equitable access to RD programs and benefits from RD funded projects. Using the Social Vulnerability Index (SVI) Look-Up Map (available at
• Located in or serving a community with score 0.75 or above on the SVI;
• Is a Federally recognized tribe, including Tribal instrumentalities and entities that are wholly owned by Tribes; or
• Is a project where at least 50 percent of the project beneficiaries are members of Federally Recognized Tribes and non-Tribal applicants include a Tribal Resolution of Consent from the Tribe or Tribes that the applicant is proposing to serve.
(3) Reducing climate pollution and increasing resilience to the impacts of climate change through economic support to rural communities. Using the Disadvantaged Community and Energy Community Look-Up Map (available at
• If the project is located in or serves a Disadvantaged Community as defined by the Climate and Economic Justice Screening Tool (CEJST), from the White House Council on Environmental Quality (CEQ), or
• If the project is located in or serves an Energy Community as defined by the Inflation Reduction Act (IRA).
See the website,
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In order to distribute funds among the greatest number of projects possible during the respective funding periods, applications will be reviewed, organized and ranked in order from highest to lowest and funded up to the maximum funding available during each quarterly funding cycle in FY 24.
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Intermediaries must collect and maintain data provided by Ultimate
The applicant and the Ultimate Recipients must comply with title VI of the Civil Rights Act of 1964, title IX of the Education Amendments of 1972, the Americans with Disabilities Act (ADA), section 504 of the Rehabilitation Act of 1973, the Age Discrimination Act of 1975, Executive Order 12250, Executive Order 13166 Limited English Proficiency (LEP), and 7 CFR part 1901, subpart E.
For general questions about this notice see the point of contact provided in the
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Program information may be made available in languages other than English. Persons with disabilities who require alternative means of communication to obtain program information (
To file a program discrimination complaint, a complainant should complete a Form AD-3027, USDA Program Discrimination Complaint Form, which can be obtained online at
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USDA is an equal opportunity provider, employer, and lender.
Rural Business-Cooperative Service, USDA.
Notice.
The Rural Business-Cooperative Service (the Agency) is issuing a notice of the Agency's intention to remove the self-imposed restriction that all Fiscal Year (FY) 2023 applications that were submitted under the Rural Energy for America Program (REAP) prior to June 30, 2023, and were not funded in the national unrestricted pooling competitions, must be withdrawn.
This notice is effective September 14, 2023.
Jonathan Burns, Program Management Division, Rural Business-Cooperative Service, United States Department of Agriculture, 774-678-7238 or email
The Agency published two funding opportunity notices and a correction notice in the
Rural Business-Cooperative Service, USDA.
Notice.
The Rural Business-Cooperative Service (RBCS or Agency), an agency of the United States Department of Agriculture (USDA), Rural Development (RD), is making an initial announcement to invite applications for loans and grants under the Rural Microentrepreneur Assistance Program (RMAP) for fiscal year (FY) 2024, subject to the availability of funding. This notice is being issued prior to the passage of a FY 2024 Appropriations Act, which may or may not provide funding for this program, in order to allow applicants sufficient time to leverage financing, prepare and submit their applications, and give the Agency time to process applications within FY 2024. Based on FY 2023 appropriated funding, the Agency estimates that approximately $29,000,000 will be available for FY 2024. Successful applications will be selected by the Agency for funding and subsequently awarded to the extent that funding may ultimately be made available through appropriations. All applicants are responsible for any expenses incurred in developing their applications or any costs incurred prior to the obligation date.
The deadlines for completed applications to be received in the RD State Office for quarterly funding competitions are no later than 11:59 p.m. Eastern time on: First Quarter, September 30, 2023; Second Quarter, December 31, 2023; Third Quarter, March 31, 2024; and Fourth Quarter, June 30, 2024. If the due date falls on a Saturday, Sunday, or Federal holiday, the application is due the next business day.
The subsequent microlender technical assistance grant (existing Microenterprise Development Organizations (MDOs) with a microentrepreneur revolving loan fund) will be made, non-competitively, based on the microlender's microlending activity and availability of funds. To determine the microlender technical assistance grant awards for FY2024, if available, the Agency will use the microlender's outstanding balance of microloans as of June 30, 2024, to calculate the eligible grant amount. MDOs that are in compliance with the terms of their loan agreement may apply for this annual grant.
Applications must be submitted electronically to the RD State Office for the State where the project is located. Applicants are encouraged to contact their respective RD State Office for an email contact to submit an electronic application prior to the submission deadline date(s). A list of the RD State Office contacts can be found at:
Shamika Johnson at
• Assisting rural communities recover economically through more and better market opportunities and through improved infrastructure;
• Ensuring all rural residents have equitable access to RD programs and benefits from RD funded projects; and
• Reducing climate pollution and increasing resilience to the impacts of climate change through economic support to rural communities.
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The MDO is required to provide a match of not less than 15 percent of the total amount of the grant in the form of matching funds, indirect costs, or in-kind goods or services.
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An MDO may submit an initial application for a loan with a microlender technical assistance grant, or an initial or subsequent loan-only (without a microlender technical assistance grant). Loan applications must be submitted electronically to the RD State Office where the project is located and must be organized in the same order set forth in 7 CFR 4280.315. Applicants are strongly encouraged to contact their respective RD State Office for an email contact to submit an electronic application prior to the submission deadline date(s).
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For entities applying for program loan funds to become an RMAP microlender only, the following items are also required: (1) Form RD 1910-11, “Applicant Certification Federal Collection Policies for Consumer or Commercial Debts;” available at
Current MDO entities may be eligible for subsequent annual microlender technical assistance grants that are awarded subject to funding availability and determined non-competitively based on Agency appropriations for the fiscal year. The MDO must submit a prescribed worksheet, listing the outstanding balance of their microloans and unexpended grant funds as of June 30, 2024, and a letter certifying that their organization still meets all the requirements set forth in 7 CFR part 4280, subpart D, and that no significant changes have occurred within the last year that would affect its ability to carry out the MDO functions. In addition, all MDOs who request Subsequent Annual Microlender Technical Assistance Grants must complete their reporting into the Lenders Interactive Network Connection (LINC) for the Federal fiscal quarter ending June 30, 2024 which will verify the outstanding balance of their microloans as stated in their request for grant funds. The deadline for reporting into LINC and requesting a technical assistance grant is no later than 4:30 p.m. (Eastern time) on August 1, 2024.
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(a) At the time of application, each applicant must have an active registration in the System for Award Management (SAM) before submitting its application in accordance with 2 CFR part 25. In order to register in SAM, entities will be required to obtain a Unique Entity Identifier (UEI). Instructions for obtaining the UEI are available at
(b) Applicants must maintain an active SAM registration, with current, accurate and complete information, at all times during which it has an active Federal award or an application under consideration by a Federal awarding agency.
(c) Applicant must ensure they complete the Financial Assistance General Certifications and Representations in SAM.
(d) Applicants must provide a valid UEI in its application, unless determined exempt under 2 CFR 25.110.
(e) The Agency will not make an award until the applicant has complied with all SAM requirements including providing the UEI. If an applicant has not fully complied with the requirements by the time the Agency is ready to make an award, the Agency may determine that the applicant is not qualified to receive a Federal award and use that determination as a basis for making a Federal award to another applicant.
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Applications must be received by the RD State Office by the dates and times as indicated above to compete for available funds in that fiscal quarter. If the due date falls on a Saturday, Sunday, or Federal holiday, the application is due the next business day.
The Agency will not solicit or consider new scoring or eligibility information that is submitted after the application deadline. RBCS also reserves the right to ask applicants for clarifying information and additional verification of assertions in the application.
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Intermediaries must collect and maintain data provided by Ultimate Recipients defined by 7 CFR 4280.3 on race, sex, and national origin and must also ensure that Ultimate Recipients collect and maintain this data. Race and ethnicity data will be collected in accordance with OMB
The applicant and the Ultimate Recipients must comply with Title VI of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, the Americans with Disabilities Act (ADA), Section 504 of the Rehabilitation Act of 1973, the Age Discrimination Act of 1975, Executive Order 12250, Executive Order 13166 Limited English Proficiency (LEP), and 7 CFR part 1901, subpart E.
For general questions about this notice, please contact the RD State Office as provided in the
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Program information may be made available in languages other than English. Persons with disabilities who require alternative means of communication to obtain program information (
To file a program discrimination complaint, a complainant should complete a Form AD-3027, USDA Program Discrimination Complaint Form, which can be obtained online at
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USDA is an equal opportunity provider, employer, and lender.
Rural Business-Cooperative Service, USDA.
Notice.
The Rural Business-Cooperative Service (RBCS or Agency), a Rural Development (RD) agency of the United States Department of Agriculture (USDA), invites applications for loans and grants under the Rural Economic Development Loan and Grant Programs (REDLG or Programs) for fiscal year (FY) 2024, subject to the availability of funding. This notice is being issued prior to the passage of a FY 24 Consolidated Appropriations Act, which may or may not provide funding for this program, to allow applicants sufficient time to leverage financing, prepare and submit their applications, and give the Agency time to process applications within FY 2024. Based on FY 2023 appropriated funding, the Agency estimates that approximately $90,000,000 will be available for FY 2024. Successful applications will be selected by the Agency for funding and subsequently awarded to the extent that funding may ultimately be made available through appropriations. All applicants are responsible for any expenses incurred in developing their applications.
The deadlines for completed applications to be received in the RD State Office for quarterly funding competitions are no later than 4:30 p.m. (local time) on: First Quarter, September 30, 2023; Second Quarter, December 31, 2023; Third Quarter, March 31, 2024 and Fourth Quarter, June 30, 2024. The Agency will not consider any application received after the deadline for funding competition in that fiscal quarter.
Applications must be submitted in paper or electronically to the RD State Office for the state where the project is located. A list of the RD State Office contacts can be found at:
Cindy Mason at
• Assisting rural communities recover economically through more and better market opportunities and through improved infrastructure;
• Ensuring all rural residents have equitable access to Rural Development (RD) programs and benefits from RD funded projects; and
• Reducing climate pollution and increasing resilience to the impacts of climate change through economic support to rural communities.
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The Consolidated Appropriations Act, 2023, (Pub. L. 117-328, division A, title VII), section 736 designates funding for projects in persistent poverty counties. Persistent poverty counties as defined in section 736 is “any county that has had 20 percent or more of its population living in poverty over the past 30 years, as measured by the 1990 and 2000 decennial censuses, and 2007-2011 American Community Survey 5-year average, or any territory or possession of the United States”. Another provision in SEC. 736 expands the eligible population in persistent poverty counties to include any county seat of such a persistent poverty county that has a population that does not exceed the authorized population limit by more than 10 percent. This provision expands the current 50,000 population limit to 55,000 for only county seats located in persistent poverty counties. Therefore, assuming the Appropriations Act for 2024 has similar language, applicants and/or beneficiaries located in persistent poverty county seats with populations up to 55,000 (per the 2010 Census) are eligible.
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(a) There are no “responsiveness” or “threshold” eligibility criteria for these loans and grants. There is no limit on the number of applications an applicant may submit under this announcement.
(b) None of the funds made available by this or any other Act may be used to enter into a contract, memorandum of understanding, or cooperative agreement with, make a grant to, or provide a loan or loan guarantee to any corporation that:
(i) Has any unpaid Federal tax liability, that has been assessed, for which all judicial and administrative remedies have been exhausted or have lapsed, and that is not being paid in a timely manner pursuant to an agreement with the authority responsible for collecting the tax liability where the awarding agency is aware of the unpaid tax liability, unless a Federal agency has considered suspension or debarment of the corporation and has made a determination that this further action is not necessary to protect the interests of the Government.
(ii) Was convicted of a felony criminal violation under any Federal law within the preceding 24 months, where the awarding agency is aware of the conviction, unless a Federal agency has considered suspension or debarment of the corporation and has made a determination that this further action is not necessary to protect the interests of the Government.
(c) Applications will not be considered for funding if they do not provide sufficient information to determine eligibility or are missing required elements.
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(a) At the time of application, each applicant must have an active registration in the System for Award Management (SAM) before submitting
(b) Applicants must maintain an active SAM registration, with current, accurate and complete information, at all times during which it has an active Federal award or an application under consideration by a Federal awarding agency.
(c) Applicant must ensure they complete the Financial Assistance General Certifications and Representations in SAM.
(d) Applicants must provide a valid UEI in its application, unless determined exempt under 2 CFR 25.110.
(e) The Agency will not make an award until the applicant has complied with all SAM requirements including providing the UEI. If an applicant has not fully complied with the requirements by the time the Agency is ready to make an award, the Agency may determine that the applicant is not qualified to receive a Federal award and use that determination as a basis for making a Federal award to another applicant.
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The Agency will not solicit or consider new scoring or eligibility information that is submitted after the application deadline. The Agency also reserves the right to ask applicants for clarifying information and additional verification of assertations in the application.
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(a) There are no specific limitations on the number of pages, font size and type face, margins, paper size, number of copies, and the sequence or assembly requirements.
(b) The component pieces of this application should contain original signatures on the original application. Any form that requires an original signature but is signed electronically in the application submission, must be signed in ink by the authorized person prior to the disbursement of funds.
(c) An original copy of the application package must be filed with the RD State Office for the State where the intermediary is located.
(d) Applicants may submit applications in hard copy or electronic format as previously indicated in the Application and Submission Information section of this notice. If the applicant wishes to hand deliver its application, the addresses for these deliveries can be located in the
Applicants intending to mail applications must allow sufficient time to permit delivery on or before the closing deadline date and time. Acceptance by the United States Postal Service or private mailer does not constitute delivery. Facsimile (FAX) or postage due applications will not be accepted.
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(a) Assisting rural communities recover economically through more and better market opportunities and through improved infrastructure. Applicant would receive priority points if the project is located in or serving a rural community whose economic well-being ranks in the most distressed tier (distress score of 80 or higher) of the Distressed Communities Index using the Distressed Communities Look-Up Map available at
(b) Ensuring all rural residents have equitable access to RD programs and benefits from RD funded projects. Using the Social Vulnerability Index (SVI) Look-Up Map (available at
• Located in or serving a community with score 0.75 or above on the SVI;
• Is a Federally recognized tribe, including Tribal instrumentalities and entities that are wholly owned by Tribes; or
• Is a project where at least 50 percent of the project beneficiaries are members of Federally Recognized Tribes and non-Tribal applicants include a Tribal Resolution of Consent from the Tribe or Tribes that the applicant is proposing to serve.
(c) Reduce climate pollution and increasing resilience to the impacts of climate change through economic support to rural communities. Using the Disadvantaged Community and Energy Community Look-Up Map (available at
• If the project is located in or serves a
• If the project is located in or serves an
See the website,
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Awards are subject to USDA grant regulations at 2 CFR part 400 which adopts the Office of Management and Budget (OMB) regulations 2 CFR part 200.
All successful applicants will be notified by letter which will include a Letter of Conditions, and a Letter of Intent to Meet Conditions. This letter is not an authorization to begin performance. If the applicant wishes to consider beginning performance prior to the loan or grant being officially closed, all pre-award costs must be approved in writing and in advance by the Agency. The loan or grant will be considered officially awarded when all conditions in the Letter of Conditions have been met and the Agency obligates the funding for the project.
The following additional requirements apply to intermediaries or grantees selected for these Programs:
(a) Form RD 4280-2 “Rural Business-Cooperative Service Financial Assistance Agreement.”
(b) Letter of Conditions.
(c) Form RD 1940-1, “Request for Obligation of Funds.”
(d) Form RD 1942-46, “Letter of Intent to Meet Conditions.”
(e) LLL, “Disclosure of Lobbying Activities,” if applicable.
(f) Form SF 270, “Request for Advance or Reimbursement.”
(g) Form RD 400-4, “Assurance Agreement” must be completed by the applicant and each prospective ultimate recipient.
(h) Intermediaries or grantees must collect and maintain data provided by ultimate recipients on race, sex, and national origin and ensure ultimate recipients collect and maintain this data. Race and ethnicity data will be collected in accordance with OMB
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(a) A financial status report and a project performance activity report will be required of all grantees on a quarterly basis until initial funds are expended and yearly thereafter, if applicable, based on the Federal fiscal year. The grantee will complete the project within the total time available to it in accordance with the scope of work and any necessary modifications thereof prepared by the grantee and approved by the Agency. A final project performance report will be required with the final financial status report. The final report may serve as the last quarterly report. The final report must provide complete information regarding the jobs created and supported as a result of the grant if applicable. Grantees must continuously monitor performance to ensure that time schedules are being met, projected work by time periods is being accomplished, and other performance objectives are being achieved. Grantees must submit an original of each report to the Agency no later than 30 days after the end of the quarter. The project performance reports must include, but not be limited to, the following:
(i) A comparison of actual accomplishments to the objectives established for that period;
(ii) Problems, delays, or adverse conditions, if any, which have affected or will affect attainment of overall project objectives, prevent meeting time schedules or objectives, or preclude the attainment of particular project work elements during established time periods. This disclosure shall be accompanied by a statement of the action taken or planned to resolve the situation;
(iii) Objectives and timetable established for the next reporting period;
(iv) Any special reporting requirements, such as jobs supported and created, businesses assisted, or economic development which results in improvements in median household incomes, and any other specific requirements, should be placed in the reporting section of the Letter of Conditions; and
(v) Within 90 days after the conclusion of the project, the intermediary will provide a final project evaluation report. The last quarterly payment will be withheld until the final report is received and approved by the Agency. Even though the intermediary may request reimbursement on a monthly basis, the last 3 months of reimbursements will be withheld until a final report, project performance, and financial status report are received and approved by the Agency.
(b) In addition to any reports required by 2 CFR part 200 and 2 CFR 400.1 to 400.2 and 2 CFR part 415 to 422, the intermediary or grantee must provide reports as required by 7 CFR part 4280, subpart A.
For general questions about this announcement, please contact your RD State Office provided in the
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Program information may be made available in languages other than English. Persons with disabilities who require alternative means of communication to obtain program information (
To file a program discrimination complaint, a complainant should complete a Form AD-3027, USDA Program Discrimination Complaint Form, which can be obtained online at
(1)
(2)
(3)
USDA is an equal opportunity provider, employer, and lender.
U.S. Commission on Civil Rights.
Notice of public briefing.
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 Minnesota Advisory Committee (Committee) to the U.S. Commission on Civil Rights will hold a public briefing via Zoom at 1:00 p.m. CT on Friday, December 8, 2023. The purpose of this briefing is to hear testimony on housing affordability in the state.
Friday, December 8, 2023, from 1:00 p.m.-3:00 p.m. Central Time.
The meeting will be held via Zoom.
Ana Victoria Fortes, Designated Federal Officer, at
This committee meeting is available to the public through the registration 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. Per the Federal Advisory Committee Act, public minutes of the meeting will include a list of persons who are present at the meeting. 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. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Closed captioning will be available for individuals who are deaf, hard of hearing, or who have certain cognitive or learning impairments. To request additional accommodations, please email Liliana Schiller, Support Services Specialist, at
Members of the public are entitled to submit written comments; the comments must be received in the regional office within 30 days following
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 meetings will be available via
U.S. Commission on Civil Rights.
Notice of public 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 Minnesota Advisory Committee (Committee) to the U.S. Commission on Civil Rights will hold a public meeting via Zoom at 12:30 p.m. CT on Thursday, September 28, 2023. The purpose of this meeting is to plan for a series of briefings regarding the Committee's project on housing affordability in the state.
Thursday, September 28, 2023, from 12:30 p.m.-1:45 p.m. Central Time.
The meeting will be held via Zoom.
Ana Victoria Fortes, Designated Federal Officer, at
This committee meeting is available to the public through the registration 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. Per the Federal Advisory Committee Act, public minutes of the meeting will include a list of persons who are present at the meeting. 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. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Closed captioning will be available for individuals who are deaf, hard of hearing, or who have certain cognitive or learning impairments. To request additional accommodations, please email Liliana Schiller, Support Services Specialist, at
Members of the public are 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 Ana Victoria Fortes 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 meetings will be available via
U.S. Commission on Civil Rights.
Notice of public 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 Minnesota Advisory Committee (Committee) to the U.S. Commission on Civil Rights will hold a public meeting via Zoom at 12:30 p.m. CT on Thursday, October 19, 2023. The purpose of this meeting is to continue planning for a series of briefings on the Committee's project regarding housing affordability in the state.
Thursday, October 19, 2023, from 12:30 p.m.-1:45 p.m. Central Time.
The meeting will be held via Zoom.
Ana Victoria Fortes, Designated Federal Officer, at
This committee meeting is available to the public through the registration 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. Per the Federal Advisory Committee Act, public minutes of the meeting will include a list of persons who are present at the meeting. 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. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Closed captioning will be available for individuals who are deaf, hard of hearing, or who have certain cognitive or learning
Members of the public are 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 Ana Victoria Fortes 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 meetings will be available via
U.S. Commission on Civil Rights.
Notice of public briefing.
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 Minnesota Advisory Committee (Committee) to the U.S. Commission on Civil Rights will hold a public briefing via Zoom at 1:00 p.m. CT on Friday, November 10, 2023. The purpose of this briefing is to hear testimony on housing affordability in the state.
Friday, November 10, 2023, from 1:00 p.m.-3:00 p.m. Central Time.
The meeting will be held via Zoom.
Ana Victoria Fortes, Designated Federal Officer, at
This committee meeting is available to the public through the registration 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. Per the Federal Advisory Committee Act, public minutes of the meeting will include a list of persons who are present at the meeting. 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. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number. Closed captioning will be available for individuals who are deaf, hard of hearing, or who have certain cognitive or learning impairments. To request additional accommodations, please email Liliana Schiller, Support Services Specialist, at
Members of the public are 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 Ana Victoria Fortes 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 meetings will be available via
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Applicable September 14, 2023.
Andrew Huston (India), Samuel Frost (Malaysia), Joy Zhang (Taiwan), Fred Baker (Thailand), or Eliza DeLong (the Socialist Republic of Vietnam (Vietnam)); AD/CVD Operations, Offices VII, V, III, and VI, respectively, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-4261, (202) 482-8180, (202) 482-1168, (202) 482-2924, or (202) 482-3878, respectively.
On May 15, 2023, the U.S. Department of Commerce (Commerce) initiated the less-than-fair-value (LTFV) investigations of imports of boltless steel shelving units prepackaged for sale (boltless steel shelving) from India, Malaysia, Taiwan, Thailand, and Vietnam.
Section 733(b)(1)(A) of the Tariff Act of 1930, as amended (the Act), requires
On August 31, 2023, Edsal Manufacturing Co., Inc. (the petitioner) submitted a timely request that Commerce postpone the preliminary determinations in the LTFV investigations for India, Malaysia, Taiwan, Thailand, and Vietnam.
For the reasons stated above, and because there are no compelling reasons to deny the request, Commerce, in accordance with section 733(c)(1)(A) of the Act and 19 CFR 351.205(e), is postponing the deadline for the preliminary determinations by 50 days (
This notice is issued and published pursuant to section 733(c)(2) of the Act and 19 CFR 351.205(f)(1).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) is issuing the final results of changed circumstances reviews (CCRs) of the antidumping duty (AD) and countervailing duty (CVD) orders on certain metal lockers and parts thereof (metal lockers) from the People's Republic of China (China), to revoke the orders, in part, with respect to certain gun safes.
Applicable September 14, 2023.
Matthew Palmer, AD/CVD Operations, Office III, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-1678.
On July 24, 2023, Commerce published its initiation and preliminary results in the CCRs on metal lockers from China,
On August 7, 2023, Academy, Ltd., (Academy), submitted a case brief,
The scope of the
All issues raised by the parties in the case brief, letter in lieu of a case brief, and rebuttal briefs are addressed in the Issues and Decision Memorandum
Upon review of the comments received,
As a result of this determination, Commerce finds that entries of certain gun safe models imported by TSC, specifically, TS12-30 and TS20-30,
TSC requested that Commerce apply the final results of these reviews retroactively to the date of the
Because we determine that there are changed circumstances that warrant the revocation of the
Commerce intends to issue instructions to CBP no earlier than 35 days after the date of publication of these final results of CCRs in the
This notice serves as a final reminder to parties subject to an administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely written notification of the return or destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and terms of an APO is a sanctionable violation.
This notice is published in accordance with sections 751(b)(1) and 777(i)(1) of the Act and 19 CFR 351.216(b), 351.221(b), and 351.221(c)(3).
The scope of the
The subject metal lockers typically are made of flat-rolled metal, metal mesh and/or expanded metal, which includes but is not limited to alloy or non-alloy steel (whether or not galvanized or otherwise metallically coated for corrosion resistance), stainless steel, or aluminum, but the doors may also include transparent polycarbonate, Plexiglas or similar transparent material or any combination thereof. Metal mesh refers to both wire mesh and expanded metal mesh. Wire mesh is a wire product in which the horizontal and transverse wires are welded at the cross-section in a grid pattern. Expanded metal mesh is made by slitting and stretching metal sheets to make a screen of diamond or other shaped openings.
Where the product has doors, the doors are typically configured with or for a handle or other device or other means that permit the use of a mechanical or electronic lock or locking mechanism, including, but not limited to: A combination lock, a padlock, a key lock (including cylinder locks) lever or knob lock, electronic key pad, or other electronic or wireless lock. The handle and locking mechanism, if included, need not be integrated into one another. The subject locker may or may not also enter with the lock or locking device included or installed. The doors or body panels may also include vents (including wire mesh or expanded metal mesh vents) or perforations. The bodies, body components and doors are typically powder coated, otherwise painted or epoxy coated or may be unpainted. The subject merchandise includes metal lockers imported either as welded or otherwise assembled units (ready for installation or use) or as knocked down units or kits (requiring assembly prior to installation or use).
The subject lockers may be shipped as individual or multiple locker units preassembled, welded, or combined into banks or tiers for ease of installation or as sets of component parts, bulk packed (
The scope also includes all parts and components of lockers made from flat-rolled
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The scope also includes all hardware for assembly and installation of the lockers and locker banks that are imported with or shipped, invoiced, or sold with the imported locker or locker system except the lock.
Excluded from the scope are wire mesh lockers. Wire mesh lockers are those with each of the following characteristics:
(1) At least three sides, including the door, made from wire mesh;
(2) the width and depth each exceed 25 inches; and
(3) the height exceeds 90 inches.
Also excluded are lockers with bodies made entirely of plastic, wood, or any nonmetallic material.
Also excluded are exchange lockers with multiple individual locking doors mounted on one master locking door to access multiple units. Excluded exchange lockers have multiple individual storage spaces, typically arranged in tiers, with access doors for each of the multiple individual storage space mounted on a single frame that can be swung open to allow access to all of the individual storage spaces at once. For example, uniform or garment exchange lockers are designed for the distinct function of securely and hygienically exchanging clean and soiled uniforms. Thus, excluded exchange lockers are a multi-access point locker whereas covered lockers are a single access point locker for personal storage. The excluded exchange lockers include assembled exchange lockers and those that enter in `knock down' form in which all of the parts and components to assemble a completed exchange locker unit are packaged together. Parts for exchange lockers that are imported separately from the exchange lockers in `knock down' form are not excluded.
Also excluded are metal lockers that are imported with an installed electronic, internet-enabled locking device that permits communication or connection between the locker's locking device and other internet connected devices.
Also excluded are locks and hardware and accessories for assembly and installation of the lockers, locker banks and storage systems that are separately imported in bulk and are not incorporated into a locker, locker system or knocked down kit at the time of importation. Such excluded hardware and accessories include but are not limited to locks and bulk imported rivets, nuts, bolts, hinges, door handles, door/frame latching components, and coat hooks. Accessories of sheet metal, including but not limited to end panels, bases, dividers and sloping tops, are not excluded accessories.
Mobile tool chest attachments that meet the physical description above are covered by the scope of the
The scope also excludes metal safes with each of the following characteristics: (1) Pry resistant, concealed hinges; (2) body walls and doors of steel that are at least 17 gauge (0.05625 inch or 1.42874 mm thick); and (3) an integrated locking mechanism that includes at least two round steel bolts 0.75 inch (19 mm) or larger in diameter; or three bolts 0.70 inch (17.78 mm) or more in diameter; or four or more bolts at least 0.60 inch (15.24 mm) or more in diameter, that project from the door into the body or frame of the safe when in the locked position.
The scope also excludes gun safes meeting each of the following requirements:
(1) Shall be able to fully contain firearms and provide for their secure storage.
(2) Shall have a locking system consisting of at minimum a mechanical or electronic combination lock. The mechanical or electronic combination lock utilized by the safe shall have at least 10,000 possible combinations consisting of a minimum three numbers, letters, or symbols. The lock shall be protected by a casehardened (Rc 60+) drill-resistant steel plate, or drill-resistant material of equivalent strength.
(3) Boltwork shall consist of a minimum of three steel locking bolts of at least
(4) The exterior walls shall be constructed of a minimum 12-gauge thick steel for a single-walled safe, or the sum of the steel walls shall add up to at least 0.100 inches for safes with walls made from two pieces of flat-rolled steel.
(5) Doors shall be constructed of a minimum one layer of 7-gauge steel plate reinforced construction or at least two layers of a minimum 12-gauge steel compound construction.
(6) Door hinges shall be protected to prevent the removal of the door. Protective features include, but are not limited to: Hinges not exposed to the outside, interlocking door designs, dead bars, jeweler's lugs and active or inactive locking bolts.
The scope also excludes gun safes meeting each of the following requirements:
(1) Shall be able to fully contain firearms and provide for their secure storage.
(2) Shall have a locking system consisting of at minimum a mechanical or electronic combination lock with a lock body that is integrated into the door of the safe. The mechanical or electronic combination lock utilized by the safe shall have at least 10,000 possible combinations consisting of a minimum three numbers, letters, or symbols.
(3) Bolt work shall consist of a minimum of three steel locking bolts of at least 1/2-inch diameter that intrude from the door of the safe into the body of the safe or from the body of the safe into the door of the safe, which are operated by a separate handle and secured by the lock.
(4) The exterior walls (inclusive of the floor and top) shall be constructed of a minimum 14-gauge thick steel and shall be lined with one or more layers of fire-retardant gypsum board bonded, affixed with brackets or otherwise securely attached to the exterior walls. The fire retardant gypsum board shall be at least 15 mm in thickness for a single layer or shall sum to at least 19 mm in thickness where multiple layers are combined together.
(5) Doors shall be constructed of a minimum of one layer of 14-gauge steel lined with a minimum of one layer of 15 mm thick, fire-retardant gypsum board bonded, affixed with brackets or otherwise securely attached to the door. The doors shall fit into jambs equipped with a fire seal fitted completely around the door frame consisting of a hydrated sodium silicate encapsulated in a plastic film or sleeve that, when heat-activated by temperatures of over 210 degrees, expands to cover the space between the jambs and door, providing a barrier to prevent the intrusion of flames, gas, or smoke into the safe.
(6) Door hinges shall be protected to prevent the removal of the door. Protective features include but are not limited to: hinges not exposed to the outside, interlocking door designs, dead bars, jeweler's lugs and active or inactive locking bolts.
(7) The excluded safe must be imported in the fully assembled condition.
The scope also excludes metal storage devices that (1) have two or more exterior exposed drawers regardless of the height of the unit, or (2) are no more than 30 inches tall and have at least one exterior exposed drawer.
Also excluded from the scope are free standing metal cabinets less than 30 inches tall with a single opening, single door and an installed tabletop.
The scope also excludes metal storage devices less than 27 inches wide and deep that: (1) Have two doors hinged on the right and left side of the door frame respectively covering a single opening and that open from the middle toward the outer frame; or (2) are free standing or wall-mounted, single-opening units 20 inches or less high with a single door.
The subject certain metal lockers are classified under Harmonized Tariff Schedule of the United States (HTSUS) subheading 9403.20.0078. Parts of subject certain metal lockers are classified under HTS subheading 9403.90.8041. In addition, subject certain metal lockers may also enter under HTS subheading 9403.20.0050. While HTSUS subheadings are provided for convenience and Customs purposes, the written description of the scope of the
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; Issuance of an incidental harassment authorization.
In accordance with the regulations implementing the Marine Mammal Protection Act (MMPA) as amended, notification is hereby given that NMFS has issued an incidental harassment authorization (IHA) to the Alaska Department of Transportation and Public Facilities (ADOT&PF) to incidentally harass marine mammals during construction activities associated with ferry berth construction in Tongass Narrows in Ketchikan, Alaska.
This authorization is effective from September 11, 2023 to September 10, 2024.
Electronic copies of the application and supporting documents, as well as a list of the references cited in this document, may be obtained online at:
Kate Fleming, Office of Protected Resources, NMFS, (301) 427-8401.
The MMPA prohibits the “take” of marine mammals, with certain exceptions. Sections 101(a)(5)(A) and (D) of the MMPA (16 U.S.C. 1361
Authorization for incidental takings shall be granted if NMFS finds that the taking will have a negligible impact on the species or stock(s) and will not have an unmitigable adverse impact on the availability of the species or stock(s) for taking for subsistence uses (where relevant). Further, NMFS must prescribe the permissible methods of taking and other “means of effecting the least practicable adverse impact” on the affected species or stocks and their habitat, paying particular attention to rookeries, mating grounds, and areas of similar significance, and on the availability of the species or stocks for taking for certain subsistence uses (referred to in shorthand as “mitigation”); and requirements pertaining to the mitigation, monitoring and reporting of the takings are set forth. The definitions of all applicable MMPA statutory terms cited above are included in the relevant sections below.
On January 24, 2023, NMFS received a request from ADOT&PF for an IHA to take marine mammals incidental to the construction of and improvements to four (initially five—see explanation below) ferry berths in Tongass Narrows in Ketchikan, Alaska. On February 23, 2023, ADOT&PF submitted a memo proposing additional construction activities at this project site, which was later retracted on March 21, 2023. Following NMFS' review of the application and discussions between NMFS and ADOT&PF, on May 2, 2023, ADOT&PF asked NMFS to halt processing of the IHA until it submitted an acoustic monitoring report associated with previous work at the project site. ADOT&PF submitted the report on May 24, 2023. NMFS reviewed and accepted the results in the report, and the application was deemed adequate and complete on June 27, 2023. ADOT&PF's request is for take of 11 species of marine mammals, by Level B harassment and, for Steller sea lion (
NMFS previously issued two consecutive IHAs to ADOT&PF for this work (85 FR 673, January 7, 2020), which covered construction at the following six sites: Revilla New Ferry Berth and Upland Improvements (Revilla New Berth), New Gravina Island Shuttle Ferry Berth/Related Terminal Improvements (Gravina New Berth), Gravina Airport Ferry Layup Facility, Gravina Freight Facility, Revilla Refurbish Existing Ferry Berth Facility, and Gravina Refurbish Existing Ferry Berth Facility (Figure 1). Due to various project delays (and two minor changes to the phase 1 IHA activities), the phase 1 IHA was renewed (86 FR 23938, May 05, 2021) and the phase 2 IHA was reissued (87 FR 12117, March 3, 2022). Upon the expiration of the phase 1 renewal, because a subset of work had still not been completed, ADOT&PF requested, and NMFS issued, a new IHA (87 FR 15387, March 18, 2022) which was renewed upon its expiration (88 FR 13802, March 6, 2023). The reissued phase 2 IHA expired on February 28, 2023. While the current renewal IHA (88 FR 13802, March 6, 2023) does not expire until March 5, 2024, ADOT&PF proposed new project components that warrant a new IHA, and a subset of activities covered under the reissued phase 2 IHA remain incomplete. As such, ADOT&PF requested a new IHA to authorize take of marine mammals associated with all remaining work at the Tongass Narrows sites. Work at the Gravina Airport Ferry Layup Facility was completed prior to the application for this new IHA. Since the submission of ADOT&PF's 2023 IHA
Monitoring results from the previous IHAs are discussed in the Potential Effects of Specified Activities on Marine Mammals and their Habitat and the Estimated Take of Marine Mammals section.
ADOT&PF is making improvements to two existing ferry berths and constructing two new ferry berths on Gravina Island and Revillagigedo (Revilla) Island in Tongass Narrows, near Ketchikan, in southeast Alaska (see Figure 1 of the notice of proposed IHA (88 FR 46746; July 20, 2023). The existing ferry facilities improve access to developable land on Gravina Island, improve access to the Ketchikan International Airport, and facilitate economic development in the Ketchikan Gateway Borough. The new ferry berths provide redundancy to the existing ferry berths. The project's planned activities that have the potential to take marine mammals, by Level A harassment and Level B harassment, include down-the-hole (DTH) drilling of rock sockets and tension anchors, vibratory installation and removal of temporary steel pipe piles and/or H-piles, vibratory and impact installation of permanent steel pipe piles, and vibratory removal of permanent piles (in cases where work is being redone). The marine construction associated with the planned activities is expected to occur over 131 non-consecutive days over 1 year.
A detailed description of the planned construction project is provided in the
A notice of NMFS' proposal to issue an IHA to ADOT&PF was published in the
Since the
Additionally, as requested by ADOT&PF, NMFS made two changes to the PSO requirements since publication of the proposed IHA. First, NMFS revised the requirement for PSOs to be independent of the activity contractor (for example, employed by a subcontractor), to reflect that PSOs must be independent (not be part of the construction crew) but not necessarily employed by a subcontractor. This change is intended to align this requirement with that in the active IHA to allow PSOs who are currently working on the project to continue to do so. Second, NMFS proposed to require ADOT&PF to employ three PSOs for DTH activities. After publication of the proposed IHA, ADOT&PF requested for NMFS to revise this measure to require two PSOs for DTH activities, given that the zone sizes for DTH activities, like those of impact pile driving, are small enough to be adequately monitored by two PSOs. NMFS concurred, and therefore, the final IHA requires ADOT&PF to employ at least two PSOs for DTH activities, rather than three.
Finally, NMFS corrected a typographical error in Table 8 of the notice of the proposed IHA (88 FR 46746, July 20, 2023). The table omitted the Level B harassment isopleth for DTH of tension anchors, which should have been listed as 1,274 m. The corresponding table in the proposed IHA at the time of publishing was correct.
Sections 3 and 4 of the application summarize available information regarding status and trends, distribution and habitat preferences, and behavior and life history of the potentially affected species. NMFS fully considered all of this information, and we refer the reader to these descriptions, incorporated here by reference, instead of reprinting the information. Additional information regarding population trends and threats may be found in NMFS' SARs (
Table 1 lists all species or stocks for which take is expected and authorized for this activity, and summarizes information related to the population or stock, including regulatory status under the MMPA and Endangered Species Act (ESA) and potential biological removal (PBR), where known. PBR is defined by the MMPA as the maximum number of animals, not including natural mortalities, that may be removed from a marine mammal stock while allowing that stock to reach or maintain its optimum sustainable population (as described in NMFS' SARs). While no serious injury or mortality is anticipated or authorized here, PBR and annual serious injury and mortality from anthropogenic sources are included here as gross indicators of the status of the species or stocks and other threats.
Marine mammal abundance estimates presented in this document represent the total number of individuals that make up a given stock or the total number estimated within a particular study or survey area. NMFS' stock abundance estimates for most species represent the total estimate of individuals within the geographic area, if known, that comprises that stock. For some species, this geographic area may extend beyond U.S. waters. All managed stocks in this region are assessed in NMFS' U.S. Alaska and Pacific Ocean SARs All values presented in Table 1 are the most recent available at the time of publication (Caretta
As indicated above, all 11 species (with 13 managed stocks) in Table 1 temporally and spatially co-occur with the activity to the degree that take is reasonably likely to occur.
A detailed description of the species likely to be affected by ADOT&PF's project, including brief introductions to the species and relevant stocks as well as available information regarding populations trends and threats, and
In the proposed IHA, NMFS stated that the Central North Pacific stock of humpback whale was likely to be impacted by ADOT&PF's activities. Given the revised stock structure, NMFS has reanalyzed the potential for take of each stock of humpback whale and determined that the Hawaii stock and the Mexico- North Pacific stock are likely to be impacted by ADOT&PF's activities.
The 2022 Alaska SARs described a revised stock structure for southeast Alaska harbor porpoise, which were split from one stock into three: the Northern Southeast Alaska Inland Waters, Southern Southeast Alaska Inland Waters, and Yakutat/Southeast Alaska Offshore Waters harbor porpoise stocks (Young
Hearing is the most important sensory modality for marine mammals underwater, and exposure to anthropogenic sound can have deleterious effects. To appropriately assess the potential effects of exposure to sound, it is necessary to understand the frequency ranges marine mammals are able to hear. Not all marine mammal species have equal hearing capabilities (
The pinniped functional hearing group was modified from Southall
For more detail concerning these groups and associated frequency ranges, please see NMFS (2018) for a review of available information.
The effects of underwater noise from ADOT&PF's construction activities have the potential to result in behavioral harassment of marine mammals in the vicinity of the project area. The notice of the proposed IHA (88 FR 46746, July 20, 2023) included a discussion of the effects of anthropogenic noise on marine mammals and the potential effects of underwater noise from ADOT&PF's construction activities on marine mammals and their habitat. That information and analysis is incorporated by reference into these final IHA determinations and is not repeated here; please refer to the
This section provides an estimate of the number of incidental takes authorized through this IHA, which
Harassment is the only type of take expected to result from these activities. Except with respect to certain activities not pertinent here, section 3(18) of the MMPA defines “harassment” as any act of pursuit, torment, or annoyance, which (i) has the potential to injure a marine mammal or marine mammal stock in the wild (Level A harassment); or (ii) has the potential to disturb a marine mammal or marine mammal stock in the wild by causing disruption of behavioral patterns, including, but not limited to, migration, breathing, nursing, breeding, feeding, or sheltering (Level B harassment).
Authorized takes will primarily be by Level B harassment, as use of the acoustic sources (
As described previously, no serious injury or mortality is anticipated or authorized for this activity. Below we describe how the take numbers are estimated.
For acoustic impacts, generally speaking, we estimate take by considering: (1) acoustic thresholds above which NMFS believes the best available science indicates marine mammals will be behaviorally harassed or incur some degree of permanent hearing impairment; (2) the area or volume of water that will be ensonified above these levels in a day; (3) the density or occurrence of marine mammals within these ensonified areas; and, (4) the number of days of activities. We note that while these factors can contribute to a basic calculation to provide an initial prediction of potential takes, additional information that can qualitatively inform take estimates is also sometimes available (
NMFS recommends the use of acoustic thresholds that identify the received level of underwater sound above which exposed marine mammals would be reasonably expected to be behaviorally harassed (equated to Level B harassment) or to incur PTS of some degree (equated to Level A harassment).
Level B Harassment—Though significantly driven by received level, the onset of behavioral disturbance from anthropogenic noise exposure is also informed to varying degrees by other factors related to the source or exposure context (
Level A harassment—NMFS' Technical Guidance for Assessing the Effects of Anthropogenic Sound on Marine Mammal Hearing (Version 2.0) (Technical Guidance, 2018) identifies dual criteria to assess auditory injury (Level A harassment) to five different marine mammal groups (based on hearing sensitivity) as a result of exposure to noise from two different types of sources (impulsive or non-impulsive). ADOT&PF's planned activity includes the use of impulsive (impact pile driving and DTH) and non-impulsive (vibratory pile driving/removal and DTH) sources.
These thresholds are provided in Table 3 below. The references, analysis, and methodology used in the development of the thresholds are described in NMFS' 2018 Technical Guidance, which may be accessed at:
Here, we describe operational and environmental parameters of the activity that are used in estimating the area ensonified above the acoustic thresholds, including source levels and transmission loss coefficient.
The sound field in the project area is the existing background noise plus additional construction noise from the planned project. Marine mammals are expected to be affected via sound generated by the primary components of the project (
The intensity of pile driving sounds is greatly influenced by factors such as the type of piles (material and diameter), hammer type, and the physical environment (
To determine appropriate proxy SPLs for impact and vibratory pile driving of all pile types, NMFS completed a comprehensive review of source levels relevant to Southeast Alaska to generate regionally-specific source levels. NMFS compiled all available data from Puget Sound and Southeast Alaska and adjusted the data to standardize distance from the measured pile to 10 meters (m). NMFS then calculated average source levels for each project and for each pile type. NMFS weighted impact pile driving project averages by the number of strikes per pile following the methodology in Navy (2015). The source levels for these various pile types, sizes and methods are listed in Table 4. Additionally, ADOT&PF requested, and NMFS agreed, to use the 24-inch sound source values for impact or vibratory pile driving of 14-inch H-piles, because the source value of smaller piles of the same general type (steel) are not expected to exceed a larger pile.
NMFS recommends treating DTH systems as both impulsive and continuous, non-impulsive sound source types simultaneously. Thus, impulsive thresholds are used to evaluate Level A harassment, and continuous thresholds are used to evaluate Level B harassment. NMFS (2022) recommended guidance on DTH systems (
TL is the decrease in acoustic intensity as an acoustic pressure wave propagates out from a source. TL parameters vary with frequency, temperature, sea conditions, current, source and receiver depth, water depth, water chemistry, and bottom composition and topography. The general formula for underwater TL is:
Absent site-specific acoustical monitoring with differing measured transmission loss, a practical spreading value of 15 is used as the transmission loss coefficient in the above formula. Site-specific transmission loss data for the Tongass Narrows are not available for vibratory pile installation and removal and impact pile driving; therefore, the default coefficient of 15 is used to determine the distances to the Level A harassment and Level B harassment thresholds for these activities and associated pile types. In the case of DTH activities, ADOT&PF conducted SSV at the project site for DTH of 24-inch rock sockets and 8-inch tension anchors. NMFS reviewed the TL data from this monitoring and has incorporated the most conservative transmission loss values measured for each pile type at the project site in its analysis herein (Table 4).
All Level B harassment isopleths are reported in Table 5 below. Of note, based on the geography of Tongass Narrows and the surrounding islands, sound will not reach the full distance of the Level B harassment isopleth in most directions. Generally, due to interaction with land, only a thin slice of the possible area will be ensonified to the full distance of the Level B harassment isopleth.
The ensonified area associated with Level A harassment is more technically challenging to predict due to the need to account for a duration component. Therefore, NMFS developed an optional User Spreadsheet tool to accompany the Technical Guidance that can be used to relatively simply predict an isopleth distance for use in conjunction with marine mammal density or occurrence to help predict potential takes. We note that because of some of the assumptions included in the methods underlying this optional tool, we anticipate that the resulting isopleth estimates are typically going to be overestimates of some degree, which may result in an overestimate of potential take by Level A harassment. However, this optional tool offers the best way to estimate isopleth distances when more sophisticated modeling methods are not available or practical. For stationary sources such as pile driving or removal or DTH using any of the methods discussed above, the optional User Spreadsheet tool predicts the distance at which, if a marine mammal remained at that distance for the duration of the activity, it is expected to incur PTS. Inputs used in the optional User Spreadsheet tool, and the resulting estimated isopleths, are reported in Table 6 and Table 7.
Level A harassment thresholds for impulsive sound sources (impact pile driving and DTH) are defined for both cumulative sound exposure level (SELcum) and Peak SPL with the threshold that results in the largest modeled isopleth for each marine mammal hearing group used to establish the Level A harassment isopleth. In this project, Level A harassment isopleths based on SELcum were always larger than those based on Peak SPL. It should be noted that there is a duration component when calculating the Level A harassment isopleth based on SELcum, and this duration depends on the number of piles that will be driven in a day and strikes per pile. For some activities, ADOT&PF plans to drive variable numbers of piles per day throughout the project (See “Average Piles per Day (Range)” in Table 1 of the
In this section we provide information about the occurrence of marine mammals, including density, or group dynamics of marine mammals, that will inform the take calculations. Additionally, we describe how the occurrence information is synthesized to produce a quantitative estimate of the take that is reasonably likely to occur and authorized. Note that take estimates included in ADOT&PF's application reflect 152 construction days rather than 131 (see Summary of Request section, in which it is described that one site has been completed since submission of the application). A summary of take, including a percentage of population for each of the species, is shown in Table 8.
There are no known occurrences of minke whales within the project area. No minke whales where reported during ADOT&PF's previous construction activities at the project site (ADOT&PF 2021, 2023), nor during other recent projects in the Tongass Narrows (
ADOT&PF conservatively requested take by Level B harassment of three minke whales every 4 months across the 12 months that the IHA is active. NMFS concurs with ADOT&PF's estimated group size and frequency, but finds it more appropriate to estimate take according to the number of actual months in which construction is planned. As such, NMFS conservatively authorizes four takes by Level B harassment (3 minke whales × 1.25 months = 4 takes by Level B harassment).
ADOT&PF is planning to implement shutdown zones for low-frequency cetaceans that exceed the Level A harassment isopleth for all activities. Therefore, especially in combination with the infrequent occurrence of minke whales entering the project area, implementation of the established shutdown zones is expected to eliminate the potential for take by Level A harassment of minke whale. Therefore, ADOT&PF did not request take by Level A harassment of minke whale, nor is NMFS authorizing any.
Fin whales typically inhabit deep, offshore waters and often travel in open seas away from coasts, and are often observed in social groups of two to seven. However, a single fin whale was recently observed in Clarence Strait (Scheurer, personal communication). Since the ensonified area extends to the mouth of Tongass Narrows, where it meets Clarence Strait, there is a chance that fin whale could occur in the project area during construction. As such, NMFS conservatively authorizes two takes by Level B harassment of fin whale.
ADOT&PF is planning to implement shutdown zones for low-frequency cetaceans that exceed the Level A harassment isopleth for all activities. Therefore, especially given the rare occurrence of fin whale in the surrounding area, implementation of the established shutdown zones is expected to eliminate the potential for take by Level A harassment of fin whale. Therefore, ADOT&PF did not request take by Level A harassment of fin whale, nor is NMFS authorizing any.
While no systematic studies have documented humpback whale abundance near Ketchikan, anecdotal information suggests that this species is present in low numbers year-round in Tongass Narrows. Additionally, during ADOT&PF's 215 days of monitoring associated with previous construction, 80 humpback whales were observed, or 0.37 humpback whales per day (ADOT&PF 2021, 2023). According to ADOT&PF, the average group size was 1.25 humpback whales, and the maximum group size was 4.
ADOT&PF conservatively estimates, and NMFS concurs, that one humpback whale may occur in the Level B harassment zone each day of planned in-water work (1 humpback whale × 131 days = 131 takes by Level B harassment).
ADOT&PF is planning to implement shutdown zones for low-frequency cetaceans that exceed the Level A harassment isopleth for all activities. Therefore, implementation of the established shutdown zones is expected to eliminate the potential for take by Level A harassment of humpback whale. Therefore, ADOT&PF did not request take by Level A harassment of humpback whale, nor is NMFS authorizing any.
In the proposed IHA, NMFS anticipated that all takes of humpback whale would be of the Central North Pacific stock. Given the revised stock structure described in the Description of Marine Mammals in the Area of Specified Activities section, NMFS has reanalyzed the potential for take of each stock of humpback whale and anticipates that the authorized takes would be of the new Hawaii stock and
Gray whales are rare in the project area and unlikely to occur in Tongass Narrows. They were not observed during the Dahlheim
ADOT&PF requested 24 takes by Level B harassment of gray whales (1 group × 2 gray whales × 12 months that the IHA is active). NMFS concurs with ADOT&PF's estimated group size and frequency, but finds it more appropriate to base take estimates on planned duration of in-water work. As such, NMFS authorizes 10 takes by Level B harassment (1 group × 2 gray whales × 5 months = 10 takes by Level B harassment).
ADOT&PF is planning to implement shutdown zones for low-frequency cetaceans that exceed the Level A harassment isopleth for all activities. Therefore, especially in combination with the low occurrence of gray whales in the project area, implementation of the planned shutdown zones is expected to eliminate the potential for take by Level A harassment of gray whale. Therefore, ADOT&PF did not request take by Level A harassment of gray whale, nor is NMFS authorizing any.
Pacific white-sided dolphins were not observed during the 215 days of marine mammal monitoring associated with ADOT&PF's previous construction activities at this site (ADOT&PF 2021, 2023). There were also no sightings of Pacific white-sided dolphins during previous monitoring conducted during other recent construction projects in the Tongass Narrows (Sitkiewicz 2020, Power Systems and Supplies of Alaska, 2020).
While rare in the inside passageways of Southeast Alaska, a group of 164 Pacific white-sided dolphins were observed in the Dixon entrance to the south of Tongass Narrows during aerial surveys in 1997 (Muto
ADOT&PF requested Level B harassment take of one group of 50 Pacific white-sided dolphins. However, to remain consistent with mean groups sizes detected near Tongass Narrows (Dalheim
ADOT&PF is planning to implement shutdown zones for mid-frequency cetaceans that exceed the Level A harassment isopleth for all activities. Additionally, the Level A harassment isopleths for mid-frequency cetaceans are quite small, and therefore, shutdown zones should be easily implemented. Therefore, especially in combination with the low occurrence of Pacific white-sided dolphins in the project area, implementation of the established shutdown zones is expected to eliminate the potential for take by Level A harassment of Pacific white-sided dolphin. Therefore, ADOT&PF did not request take by Level A harassment of Pacific white-sided dolphin, nor is NMFS is authorizing any.
While no systematic studies of killer whales have been conducted in or around Tongass Narrows, killer whales are observed in Tongass Narrows year-round, and anecdotal reports suggest they are most common during the summer Chinook salmon run (May-July) (84 FR 36891, July 30, 2019). Across the 215 days of monitoring during ADOT&PF's previous Tongass Narrows construction activities, a total of 78 killer whales were observed, for an observation rate of 0.36 per day (ADOT&PF 2021, 2023). According to ADOT&PF, the average group size observed was 4.6 killer whales and the maximum group size was 8.
While ADOT&PF requested 180 takes by Level B harassment ((1 group × 12 killer whales × 9 months) + (2 groups × 12 killer whales × 3 months) = 180 takes by Level B harassment)), NMFS finds it more appropriate to base take estimates off the maximum group size (8 killer whales) observed during monitoring of previous construction activities and the planned duration of in-water work (5 months). As such, NMFS authorizes 64 takes by Level B harassment ((2 pods × 8 killer whales × 3 months) + (1 pod × 8 killer whales × 2 months) = 64 takes by Level B harassment).
ADOT&PF is planning to implement shutdown zones for mid-frequency cetaceans that exceed the Level A harassment isopleth for all activities. Additionally, the Level A harassment isopleths for mid-frequency cetaceans are quite small and therefore shutdown zones should be easily implemented. Therefore, implementation of the established shutdown zones is expected to eliminate the potential for take by Level A harassment of killer whale. Therefore, ADOT&PF did not request take by Level A harassment of killer whale, nor is NMFS authorizing any.
Abundance data for harbor porpoise in Southeast Alaska were collected during 18 seasonal surveys spanning 22 years, from 1991 to 2012 (Dahlheim
ADOT&PF estimates that two groups of five harbor porpoise may occur in the Level B harassment zone across the 12 months that the IHA is active. NMFS concurs with ADOT&PF's estimated group size but finds it appropriate to increase the frequency of occurrence estimate in the Level B harassment zone from two groups per month to three groups per month of work. Additionally,
In the proposed IHA, NMFS anticipated that all takes of harbor porpoise would be of the Southern Southeast Alaska Inland Water stock. Given the revised stock structure described in the Description of Marine Mammals in the Area of Specified Activities section, NMFS has reanalyzed the potential for take of each stock of harbor porpoise and anticipates that the authorized takes would be of the new Southern Southeast Alaska Inland Waters stock, as that is the only stock that overlaps the project area.
Dall's porpoise have occasionally been observed during previous construction projects completed in Tongass Narrows (Power Systems and Supplies of Alaska, 2020), including during ADOT&PF's 215 days of monitoring (ADOT&PF 2021, 2023). ADOT&PF reported that the average group size observed was 5.6 and the maximum group size was 10. To estimate take, ADOT&PF has assumed that Dall's porpoise may occur in pods of 15 and across the 12 months that the IHA is active. NMFS finds it more appropriate to base take estimates off the maximum group size (10 Dall's porpoise) observed during monitoring of previous construction activities and according to estimated duration of planned pile driving and DTH activities.
As such, while ADOT&PF estimates that one pod of 15 Dall's porpoise may occur within the Level B harassment zone across each of the 12 months that the IHA is active, NMFS finds it more appropriate to conservatively estimate that 2 pods of 10 Dall's porpoise may occur in the Level B harassment zone each month in which in-water work is planned (2 pod × 10 Dall's porpoise × 5 months = 100).
Additionally, ADOT&PF has estimated that one pod of 15 Dall's porpoise may occur within the Level A harassment zone across the 12 months that the IHA is active. However, NMFS finds it more appropriate to estimate 10 takes by Level A harassment of Dall's porpoise across the 2.9 months in which the Level A harassment zone may extend beyond the shutdown zone for this species, which could occur when DTH systems are employed to install 24-inch piles or an impact pile driver (200 strikes) is used to install 24-inch and 30-inch piles (1 group × 10 Dall's porpoise = 10 takes by Level A harassment). Therefore, NMFS is authorizing 10 takes by Level A harassment of Dall's porpoise. Finally, the authorized take by Level B harassment has been calculated as the total calculated Dall's porpoise takes by Level B harassment minus the authorized takes by Level A harassment (100 takes by Level B harassment−10 takes by Level A harassment = 90 takes by Level B harassment). Therefore, NMFS is authorizing 90 takes by Level B harassment of Dall's porpoise.
Steller sea lions may be found in Tongass Narrows year-round, with anecdotal reports suggesting an increase in abundance from March to early May during the herring spawning season, and another increase in late summer associated with salmon runs. During the 215 days of marine mammal monitoring that took place during construction of previous components of the Tongass Narrows Project, a total of 322 Steller sea lions were observed (ADOT&PF 2021, 2023). According to ADOT&PF, the average group size was 1.25 individuals and maximum group size observed was five individuals. At least one Steller sea lion was observed during each month that monitoring took place. Monitoring during construction of the nearby Ward Cove Dock recorded 4.1 individuals per day (Power Systems & Supplies of Alaska, 2020).
ADOT&PF estimates that one group of 10 Steller sea lions may be taken by Level B harassment each day that in-water work is planned. Based on ADOT&PF's 215 days of project-related monitoring, NMFS finds it more appropriate to estimate that 1 group of 5 Steller sea lions may be present in the Level B harassment zone each day (1 group × 5 Steller sea lion × 131 construction days = 655 takes by Level B harassment).
ADOT&PF is required to implement a shutdown zone that exceeds the Level A harassment zone for Steller sea lions during all project activities. However, ADOT&PF expects that Steller sea lions could enter the Level A harassment zone undetected on rare occasions. As such, ADOT&PF requests take by Level A harassment of 5 percent of Steller sea lions authorized for take by Level B harassment. NMFS concurs that, given the various structures along the shoreline in the project area, Steller sea lions could enter the Level A harassment zone and remain in the zone undetected for a long enough duration to incur PTS before a shutdown occurs. However, NMFS anticipates that 5 percent of the take by Level B harassment would result in an overestimate of Level A harassment. NMFS anticipates that 10 Steller sea lions could enter the Level A harassment zone and remain in the zone undetected for a long enough duration to incur PTS before a shutdown occurs across the 131 days of planned in-water work. As such, NMFS is authorizing 10 takes by Level A harassment and 645 takes by Level B harassment ((1 group × 5 individuals × 131 construction days)−10 takes by Level A harassment = 645 takes by Level B harassment).
Although northern elephant seals are known to visit the Gulf of Alaska to feed on benthic prey, they rarely occur on the beaches of Alaska. Despite the low probability of northern elephant seals entering the project area, there have been recent reports of elephant seals occurring in and near the Tongass Narrows, and two northern elephant seals were observed during ADOT&PF's Tongass Narrows construction in 2022. As such, ADOT&PF requested take by Level B harassment of one elephant seal per 6-day work week. NMFS concurs that one take by Level B harassment per work week is appropriate. However, because ADOT&PF plans 7-day work weeks, NMFS calculates the total number of work weeks to occur within 131 construction days as 19 weeks rather than ADOT&PF's planned 22 weeks (1 Northern elephant seal × 19 work weeks = 19 takes by Level B harassment).
For most project activities, the established shutdown zone will exceed the Level A harassment zone for Northern elephant seal. However, the Level A harassment zone may extend beyond the established shutdown zone for this species on 37 days (when DTH systems may be employed to install 24-
During marine mammal monitoring associated with ADOT&PF's previous Tongass Narrows construction activities, 550 harbor seals were observed with an average of 1.2 harbor seals per day and a maximum group size of 5. The COK pinnacle rock blasting project recorded a total of 21 harbor seal sightings of 24 individuals over 76.2 hours of pre- and post-blast monitoring (Sitkiewicz 2020). Additionally, information from PSOs associated with on-going construction indicates that a small number of harbor seals are regularly sighted at about 820 ft (250 m) from the project location (Wyatt, personal communication). Additionally, there are two key harbor seal haulouts about 7.1 miles (11.5 kilometers) from the project area on a mid-channel island to the southeast of the project site. Each haulout was monitored in 2022 with 10 harbor seals observed at one haulout and 50 harbor seals observed at the other (Richland, personal communication).
ADOT&PF estimates, and NMFS concurs, that up to 2 groups of 3 harbor seals could enter the Level B harassment zone per day (2 groups × 3 harbor seals × 131 days = 786). Further, NMFS also estimates that half the harbor seals occurring at the haulout sites within the project area could enter the Level B harassment zone on days when the ensonified area (during 30″ vibratory pile driving) reaches these haulout sites (30 harbor seals × 13 days = 390).
ADOT&PF also estimates that 1 harbor seal could be taken by Level A harassment on each day of in-water work (1 harbor seal × 131 days = 131 takes by Level A harassment). For most project activities, the shutdown zone exceeds the Level A harassment zone. However, when an impact pile driver (200 strikes) is used to install 30-inch piles, the Level A harassment zone exceeds the associated shutdown zone. This could occur on 13 days. NMFS anticipates that three harbor seals could be taken by Level A harassment on each day that the Level A harassment isopleth for this species extends beyond the shutdown zone. Therefore, NMFS is authorizing 39 takes by Level A harassment (3 harbor seal × 13 days = 39 takes by Level A harassment) and 1,137 takes by Level B harassment (786 takes by Level B harassment + 390 takes by Level B harassment − 39 takes by Level A harassment = 1,137 takes by Level B harassment).
In order to issue an IHA under section 101(a)(5)(D) of the MMPA, NMFS must set forth the permissible methods of taking pursuant to the activity, and other means of effecting the least practicable impact on the species or stock and its habitat, paying particular attention to rookeries, mating grounds, and areas of similar significance, and on the availability of the species or stock for taking for certain subsistence uses. NMFS regulations require applicants for incidental take authorizations to include information about the availability and feasibility (economic and technological) of equipment, methods, and manner of conducting the activity or other means of effecting the least practicable adverse impact upon the affected species or stocks, and their habitat (50 CFR 216.104(a)(11)).
In evaluating how mitigation may or may not be appropriate to ensure the least practicable adverse impact on species or stocks and their habitat, as well as subsistence uses where applicable, NMFS considers two primary factors:
(1) The manner in which, and the degree to which, the successful implementation of the measure(s) is expected to reduce impacts to marine mammals, marine mammal species or stocks, and their habitat. This considers the nature of the potential adverse impact being mitigated (likelihood, scope, range). It further considers the likelihood that the measure will be effective if implemented (probability of accomplishing the mitigating result if
(2) The practicability of the measures for applicant implementation, which may consider such things as cost, and impact on operations.
ADOT&PF must ensure that construction supervisors and crews, the monitoring team and relevant ADOT&PF staff are trained prior to the start of all pile driving and DTH activity, so that responsibilities, communication procedures, monitoring protocols, and operational procedures are clearly understood. New personnel joining during the project must be trained prior to commencing work.
ADOT&PF must employ PSOs and establish monitoring locations as described in the NMFS-approved Marine Mammal Monitoring Plan and Section 5 of the IHA. ADOT&PF must monitor the project area to the maximum extent possible based on the required number of PSOs, required monitoring locations, and environmental conditions. For all vibratory pile driving and removal, ADOT&PF must employ at least three PSOs. For all impact pile driving and DTH, ADOT&PF must employ at least two PSOs. As noted in the Changes from the Proposed IHA to Final IHA section, in the proposed IHA, NMFS proposed to require ADOT&PF to employ three PSOs for DTH activities. After publication of the proposed IHA, ADOT&PF requested for NMFS to revise this measure to require two PSOs for DTH activities, given that the zone sizes for DTH activities were more commensurate with that of impact pile driving. NMFS concurred, and therefore, the final IHA requires ADOT&PF to employ at least two PSOs for DTH activities, rather than three. The placement of the PSOs during all pile driving and removal and DTH activities will ensure that the entire shutdown zone is visible.
Monitoring must take place from 30 minutes prior to initiation of pile driving or DTH activity (
Soft-start procedures provide additional protection to marine mammals by providing warning and/or giving marine mammals a chance to leave the area prior to the hammer operating at full capacity. ADOT&PF must use soft start techniques when impact pile driving. Soft start requires contractors to provide an initial set of three strikes at reduced energy, followed by a 30-second waiting period, then two subsequent reduced-energy strike sets. A soft start must be implemented at the start of each day's impact pile driving and at any time following cessation of impact pile driving for a period of 30 minutes or longer.
For all pile driving/removal and DTH activities, ADOT&PF will establish shutdown zones (Table 9). The purpose of a shutdown zone is generally to define an area within which shutdown of activity will occur upon sighting of a marine mammal (or in anticipation of an animal entering the defined area). Shutdown zones vary based on the activity type and duration and marine mammal hearing group (Table 9). In most cases, shutdown zones are based on the estimated Level A harassment isopleth distances for each hearing group. However, in cases where ADOT&PF asserted that it would be impracticable to shut down at the Level A harassment isopleth due to excessive work stoppages, a smaller shutdown zone has been established (
ADOT&PF anticipates that the maximum amount of activity within a given day may vary significantly (Table 6), with large differences in maximum zones sizes possible (Table 7). Given this uncertainty and concerns related to ESA-listed humpback whales and fin whales, and practicability concerns with shutting down, ADOT&PF plans a tiered system to identify and monitor the appropriate Level A harassment zones and shutdown zones for large frequency cetaceans and phocids. This tiered system is based on the maximum expected number of piles to be installed (impact or vibratory pile driving) or the maximum expected DTH duration in a given day. At the start of each work day, ADOT&PF will determine the maximum scenario possible for that day (according to the defined duration intervals in Tables 7 and 9), which will determine the appropriate Level A harassment isopleth and associated shutdown zone for that day. This Level A harassment zone (Table 7) and associated shutdown zone (Table 9) must be implemented for the entire work day.
The placement of PSOs during all pile installation and removal, and DTH activities (described in detail in the Monitoring and Reporting section) will ensure that the entire shutdown zones are visible during pile driving. If a marine mammal is observed entering or within the shutdown zones indicated in Table 9, pile driving must be delayed or halted. If pile driving is delayed or halted due to the presence of a marine mammal, the activity may not commence or resume until either the animal has voluntarily exited and been visually confirmed beyond the shutdown zone (Table 9) or 15 minutes (non-ESA-listed species) or 30 minutes (humpback whales and fin whales) have passed without re-detection of the animal. Further, pile driving activity must be halted upon observation of either a species for which incidental take is not authorized or a species for which incidental take has been authorized but the authorized number of takes has been met, entering or within the harassment zone.
ADOT&PF must also avoid direct physical interaction with marine
Based on our evaluation of the applicant's planned measures, as well as other measures considered by NMFS, NMFS has determined that the required mitigation measures provide the means effecting the least practicable impact on the affected species or stocks and their habitat, paying particular attention to rookeries, mating grounds, and areas of similar significance.
In order to issue an IHA for an activity, section 101(a)(5)(D) of the MMPA states that NMFS must set forth requirements pertaining to the monitoring and reporting of such taking. The MMPA implementing regulations at 50 CFR 216.104(a)(13) indicate that requests for authorizations must include the suggested means of accomplishing the necessary monitoring and reporting that will result in increased knowledge of the species and of the level of taking or impacts on populations of marine mammals that are expected to be present while conducting the activities. Effective reporting is critical both to compliance as well as ensuring that the most value is obtained from the required monitoring.
Monitoring and reporting requirements prescribed by NMFS should contribute to improved understanding of one or more of the following:
• Occurrence of marine mammal species or stocks in the area in which take is anticipated (
• Nature, scope, or context of likely marine mammal exposure to potential stressors/impacts (individual or cumulative, acute or chronic), through better understanding of: (1) action or environment (
• Individual marine mammal responses (behavioral or physiological) to acoustic stressors (acute, chronic, or cumulative), other stressors, or cumulative impacts from multiple stressors;
• How anticipated responses to stressors impact either: (1) long-term fitness and survival of individual marine mammals; or (2) populations, species, or stocks;
• Effects on marine mammal habitat (
• Mitigation and monitoring effectiveness.
Monitoring must be conducted by qualified, NMFS-approved PSOs, who will be present during all pile installation and removal activities, including vibratory, impact, and DTH methods, in accordance with the following:
• PSOs must be independent (
• At least one PSO must have prior experience performing the duties of a PSO during construction activity pursuant to a NMFS-issued IHA;
• Other PSOs may substitute other relevant experience, education (degree in biological science or related field), or training for prior experience performing the duties of a PSO during construction activity pursuant to a NMFS-issued IHA;
• Where a team of three or more PSOs is required, a lead observer or monitoring coordinator must be designated. The lead observer must have prior experience performing the duties of a PSO during construction activity pursuant to a NMFS-issued incidental take authorization; and
• PSOs must be approved by NMFS prior to beginning any activity subject to this IHA.
PSOs should have the following additional qualifications:
• Ability to conduct field observations and collect data according to assigned protocols;
• Experience or training in the field identification of marine mammals, including the identification of behaviors;
• Sufficient training, orientation, or experience with the construction operation to provide for personal safety during observations;
• Writing skills sufficient to prepare a report of observations including but not limited to the number of species of marine mammals observed; dates and times when in-water construction activities were conducted; dates, times, and reason for implementation of mitigation (or why mitigation was not implemented when required); and marine mammal behavior; and
• Ability to communicate orally, by radio or in person, with project personnel to provide real-time information on marine mammals observed in the area as necessary.
A minimum of one PSO (the lead PSO) must be assigned to the active pile driving or DTH location to monitor the shutdown zones and as much of the harassment zones as possible. The observation points of the additional
PSOs must record all observations of marine mammals, regardless of distance from the pile being driven. PSOs shall document any behavioral reactions in concert with distance from piles being driven or removed.
A draft marine mammal monitoring report will be submitted to NMFS within 90 days after the completion of pile driving and removal activities, or 60 days prior to a requested date of issuance of any future IHAs for projects at the same location, whichever comes first. The report will include an overall description of work completed, a narrative regarding marine mammal sightings, and associated PSO data sheets. Specifically, the report must include:
• Dates and times (begin and end) of all marine mammal monitoring;
• Construction activities occurring during each daily observation period, including the number and type of piles driven or removed and by what method (
• PSO locations during marine mammal monitoring;
• Environmental conditions during monitoring periods (at beginning and end of PSO shift and whenever conditions change significantly), including Beaufort sea state and any other relevant weather conditions including cloud cover, fog, sun glare, and overall visibility to the horizon, and estimated observable distance;
• Upon observation of a marine mammal, the following information: Name of PSO who sighted the animal(s) and PSO location and activity at time of sighting; Time of sighting; Identification of the animal(s) (
• Number of marine mammals detected within the harassment zones, by species;
• Detailed information about any implementation of any mitigation triggered (
ADOT&PF must also submit all PSO datasheets and/or raw sighting data with the draft report, as specified in condition 6(b) of this IHA.
If no comments are received from NMFS within 30 days, the draft report will constitute the final report. If comments are received, a final report addressing NMFS comments must be submitted within 30 days after receipt of comments.
In the event that personnel involved in the construction activities discover an injured or dead marine mammal, the IHA-holder must immediately cease the specified activities and report the incident to the Office of Protected Resources (OPR), NMFS and to the NMFS 24-hour Stranding Hotline as soon as feasible. If the death or injury was clearly caused by the specified activity, ADOT&PF must immediately cease the specified activities until NMFS is able to review the circumstances of the incident and determine what, if any, additional measures are appropriate to ensure compliance with the terms of the IHA. The IHA-holder must not resume their activities until notified by NMFS. The report must include the following information:
• Time, date, and location (latitude/longitude) of the first discovery (and updated location information if known and applicable);
• Species identification (if known) or description of the animal(s) involved;
• Condition of the animal(s) (including carcass condition if the animal is dead);
• Observed behaviors of the animal(s), if alive;
• If available, photographs or video footage of the animal(s); and
• General circumstances under which the animal was discovered.
NMFS has defined negligible impact as an impact resulting from the specified activity that cannot be reasonably expected to, and is not reasonably likely to, adversely affect the species or stock through effects on annual rates of recruitment or survival (50 CFR 216.103). A negligible impact finding is based on the lack of likely adverse effects on annual rates of recruitment or survival (
To avoid repetition, the majority of our analysis applies to all the species listed in Table 1, given that many of the
Pile driving and DTH activities associated with the project, as outlined previously, have the potential to disturb or displace marine mammals. Specifically, the specified activities may result in take, in the form of Level B harassment and, for some species Level A harassment, from underwater sounds generated by pile driving and DTH. Potential takes could occur if marine mammals are present in zones ensonified above the thresholds for Level B harassment or Level A harassment, identified above, while activities are underway.
NMFS does not anticipate that serious injury or mortality will occur as a result of ADOT&PF's planned activity given the nature of the activity, even in the absence of required mitigation. Further, no take by Level A harassment is anticipated for Pacific white-sided dolphin, killer whale, humpback whale, gray whale, fin whale, or minke whale, due to the likelihood of occurrence and/or required mitigation measures. As stated in the mitigation section, ADOT&PF will implement shutdown zones that equal or exceed many of the Level A harassment isopleths shown in Table 9. Take by Level A harassment is authorized for some species (Steller sea lion, harbor seal, northern elephant seal, harbor porpoise, and Dall's porpoise) to account for the potential that an animal could enter and remain within the area between a Level A harassment zone and the shutdown zone for a duration long enough to be taken by Level A harassment, and in some cases, to account for the possibility that an animal could enter a shutdown zone without detection given the various obstructions along the shoreline, and remain in the Level A harassment zone for a duration long enough to be taken by Level A harassment before being observed and a shutdown occurring. Any take by Level A harassment is expected to arise from, at most, a small degree of PTS because animals would need to be exposed to higher levels and/or longer duration than are expected to occur here in order to incur any more than a small degree of PTS. Additionally, and as noted previously, some subset of the individuals that are behaviorally harassed could also simultaneously incur some small degree of TTS for a short duration of time. Because of the small degree anticipated, though, any PTS or TTS potentially incurred here is not expected to adversely impact individual fitness, let alone annual rates of recruitment or survival.
For all species and stocks, take is expected to occur within a limited, confined area (adjacent to the project site) of the stock's range. The intensity and duration of take by Level A harassment and Level B harassment will be minimized through use of mitigation measures described herein. Further the amount of take authorized is small when compared to stock abundance.
Behavioral responses of marine mammals to pile driving, pile removal, and DTH at the sites in Tongass Narrows are expected to be mild, short term, and temporary. Marine mammals within the Level B harassment zones may not show any visual cues they are disturbed by activities or they could become alert, avoid the area, leave the area, or display other mild responses that are not visually observable such as changes in vocalization patterns. Given that pile driving, pile removal, and DTH will occur for only a portion of the project's duration and often on nonconsecutive days, any harassment would be temporary. Additionally, many of the species present in Tongass Narrows would only be present temporarily based on seasonal patterns or during transit between other habitats. These species would be exposed to even shorter periods of noise-generating activity, further decreasing the impacts.
As previously described, a UME has been declared for gray whales. However, we do not expect the takes authorized herein to exacerbate the ongoing UME. No serious injury or mortality of gray whales is expected or authorized, and take by Level B harassment is limited (10 takes over the duration of the authorization). As such, the authorized take by Level B harassment of gray whale is not expected to exacerbate or compound upon the ongoing UME.
For all species except humpback whales, there are no known BIAs near the project zone that will be impacted by ADOT&PF's planned activities. For humpback whales, the inland waters of Southeast Alaska is a seasonal feeding BIA from May through September (Wild
More generally, there are no known calving or rookery grounds within the project area, but anecdotal evidence from local experts shows that marine mammals are more prevalent in Tongass Narrows and Clarence Strait during spring and summer associated with feeding on aggregations of fish, meaning the area may play a role in foraging. Because ADOT&PF's activities could occur during any season, takes may occur during important feeding times. However, the project area represents a small portion of available foraging habitat and impacts on marine mammal feeding for all species, including humpback whales, should be minimal.
Any impacts on marine mammal prey that occur during ADOT&PF's planned activity are expected to have, at most, short-term effects on foraging of individual marine mammals, and likely no effect on the populations of marine mammals as a whole. Indirect effects on marine mammal prey during the construction are expected to be minor, and these effects are unlikely to cause substantial effects on marine mammals at the individual level, with no expected effect on annual rates of recruitment or survival.
In addition, it is unlikely that minor noise effects in a small, localized area of habitat will have any effect on the reproduction or survival of any individuals, much less the stocks' annual rates of recruitment or survival. In combination, we believe that these factors, as well as the available body of evidence from other similar activities, demonstrate that the potential effects of the specified activities will have only minor, short-term effects on individuals. The specified activities are not expected to impact rates of recruitment or survival and will, therefore, not result in population-level impacts.
In summary and as described above, the following factors primarily support our determination that the impacts resulting from this activity are not expected to adversely affect any of the species or stocks through effects on annual rates of recruitment or survival:
• No serious injury or mortality is anticipated or authorized;
• Take by Level A harassment of Pacific white-sided dolphin, killer whale, humpback whale, fin whale, gray whale, or minke whale is not anticipated or authorized;
• ADOT&PF will implement mitigation measures including soft-starts for impact pile driving and shutdown zones to minimize the numbers of marine mammals exposed to
• The intensity of anticipated takes by Level B harassment is relatively low for all stocks and will not be of a duration or intensity expected to result in impacts on reproduction or survival;
• There are 10 known areas of specific biological importance, covering a broad area of southeast Alaska, for humpback whales. The project area overlaps a very small portion of one of these BIAs. No other known areas of particular biological importance to any of the affected species or stocks are impacted by the activity, including ESA-designated critical habitat;
• The project area represents a very small portion of the available foraging area for all potentially impacted marine mammal species and stocks and anticipated habitat impacts are minor; and
• Monitoring reports from similar work in Tongass Narrows have documented little to no effect on individuals of the same species impacted by the specified activities.
Based on the analysis contained herein of the likely effects of the specified activity on marine mammals and their habitat, and taking into consideration the implementation of the monitoring and mitigation measures, NMFS finds that the total marine mammal take from the planned activity will have a negligible impact on all affected marine mammal species or stocks.
As noted previously, only take of small numbers of marine mammals may be authorized under sections 101(a)(5)(A) and (D) of the MMPA for specified activities other than military readiness activities. The MMPA does not define small numbers and so, in practice, where estimated numbers are available, NMFS compares the number of individuals taken to the most appropriate estimation of abundance of the relevant species or stock in our determination of whether an authorization is limited to small numbers of marine mammals. When the predicted number of individuals to be taken is fewer than one-third of the species or stock abundance, the take is considered to be of small numbers. Additionally, other qualitative factors may be considered in the analysis, such as the temporal or spatial scale of the activities.
The authorized number of instances of take is below one-third of the estimated stock abundance for all stocks (see Table 8). The number of animals authorized to be taken from these stocks would be considered small relative to the relevant stocks' abundances even if each estimated taking occurred to a new individual, which is an unlikely scenario. Some individuals may return multiple times in a day, but PSOs will count them as separate takes if they cannot be individually identified.
The Alaska stock of Dall's porpoise has no official NMFS abundance estimate, as the most recent estimate is greater than 8 years old. The most recent estimate was 13,110 animals for just a portion of the stock's range. Therefore, the 100 authorized takes of this stock clearly represent small numbers of this stock.
The Mexico—North Pacific stock of Humpback Whale has no official NMFS abundance estimate, as the most recent estimate is greater than 8 years old. The most recent estimate was 571 animals for just a portion of the stock's range (Revillagigedo Archipelago). Therefore, the three takes of this stock authorized clearly represent small numbers of this stock.
There is no current or historical estimate of the Alaska minke whale stock, but there are known to be over 1,000 minke whales in the Gulf of Alaska (Muto
The best available abundance estimate for fin whale is not considered representative of the entire stock as surveys were limited to a small portion of the stock's range, but there are known to be over 2,500 fin whales in the northeast Pacific stock (Muto
Based on the analysis contained herein of the planned activity (including the mitigation and monitoring measures) and the anticipated take of marine mammals, NMFS finds that small numbers of marine mammals are expected to be taken relative to the population size of the affected species or stocks.
In order to issue an IHA, NMFS must find that the specified activity will not have an “unmitigable adverse impact” on the subsistence uses of the affected marine mammal species or stocks by Alaskan Natives. NMFS has defined “unmitigable adverse impact” in 50 CFR 216.103 as an impact resulting from the specified activity: (1) That is likely to reduce the availability of the species to a level insufficient for a harvest to meet subsistence needs by: (i) Causing the marine mammals to abandon or avoid hunting areas; (ii) Directly displacing subsistence users; or (iii) Placing physical barriers between the marine mammals and the subsistence hunters; and (2) That cannot be sufficiently mitigated by other measures to increase the availability of marine mammals to allow subsistence needs to be met.
Harbor seals are the marine mammal species most regularly harvested for subsistence by households in Ketchikan and Saxman (a community a few miles south of Ketchikan, on the Tongass Narrows). Eighty harbor seals were harvested by Ketchikan residents in 2007, which ranked fourth among all communities in Alaska that year for harvest of harbor seals. Thirteen harbor seals were harvested by Saxman residents in 2007. In 2008, two Steller sea lions were harvested by Ketchikan-based subsistence hunters, but this is the only record of sea lion harvest by residents of either Ketchikan or Saxman. In 2012, the community of Ketchikan had an estimated subsistence take of 22 harbor seals and 0 Steller sea lion (Wolf
All project activities are planned to take place within the industrial area of Tongass Narrows immediately adjacent to Ketchikan where subsistence activities do not generally occur. Both harbor seals and Steller sea lions may be temporarily displaced from the project area. The project will also not have an adverse impact on the availability of marine mammals for subsistence use at locations farther away where these construction activities are not expected to take place. Some minor, short-term harassment of the harbor seals could occur, but given the information above, we do not expect such harassment to have effects on subsistence hunting activities.
Based on the description of the specified activity, the measures described to minimize adverse effects on the availability of marine mammals for subsistence purposes, and the mitigation and monitoring measures,
Section 7(a)(2) of the Endangered Species Act of 1973 (ESA: 16 U.S.C. 1531
NMFS is authorizing take of the Mexico—North Pacific stock of humpback whale, and fin whale, which are listed as threatened or endangered under the ESA. The NMFS AKRO issued a Biological Opinion under section 7 of the ESA on the issuance of an IHA to ADOT&PF under section 101(a)(5)(D) of the MMPA by NMFS OPR. The biological opinion concluded that the action is not likely to jeopardize the continued existence of the listed species.
To comply with the National Environmental Policy Act of 1969 (NEPA; 42 U.S.C. 4321
NMFS has issued an IHA to ADOT&PF for the potential harassment of small numbers of 11 marine mammal species incidental to ferry berth construction in Tongass Narrows in Ketchikan, Alaska, that includes the previously explained mitigation, monitoring, and reporting requirements.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of a public meeting.
The Gulf of Mexico Fishery Management Council (Council) will hold a one-day meeting of its Reef Fish Advisory Panel (AP).
The meeting will be held Monday, October 2, 2023, from 8:30 a.m. to 5 p.m., EDT.
The in-person meeting will take place at the Gulf Council office.
Mr. Ryan Rindone, Lead Fishery Biologist, Gulf of Mexico Fishery Management Council;
The meeting will begin with Introductions of Members and Adoption of Agenda, Approval of Minutes from the October 11, 2022, meeting, election of the Chair and Vice Chair, review the Scope of Work, and Reef Fish and Individual Fishing Quota (IFQ) Program Landings.
The AP will then receive an update on the Marine Recreational Information Program—Fishing Effort Survey (MRIP-FES) Pilot Study and Proposed Next Steps, followed by a summary of the Gag Research Review from September 2023 Gulf Scientific and Statistical Committee (SSC) Meeting. The AP will then review the Gag Interim Analysis Health Check, followed by discussions on the Reef Fish Framework Action: Modifications to
Next, the AP will review Draft Snapper Grouper Amendment 44/Reef Fish Amendment 55: Catch Level Adjustments and Allocations for Southeastern U.S.
Lastly, the AP will discuss any Other Business items.
The meeting will also be broadcast via webinar. You may register for the webinar by visiting
Although other non-emergency issues not on the agenda may come before the Advisory Panel for discussion, in accordance with the Magnuson-Stevens Fishery Conservation and Management Act, those issues may not be the subject of formal action during this meeting. Actions of the Advisory Panel will be restricted to those issues specifically identified in the agenda 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 action to address the emergency.
The meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aid should be directed to Kathy Pereira, (813) 348-1630, at least 5 days prior to the meeting date.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of a public meeting.
The Gulf of Mexico Fishery Management Council (Council) will hold a half-day webinar meeting of its Standing, Reef Fish, Socioeconomic, and Ecosystem Scientific and Statistical Committees (SSC). See
The meeting will be held Wednesday, October 4, 2023, from 9 a.m. to 12 p.m., EDT.
The meeting will take place via webinar. Registration information will be available on the Council's website by visiting
Mr. Ryan Rindone, Lead Fishery Biologist, Gulf of Mexico Fishery Management Council;
The meeting will begin with Introductions and Adoption of Agenda, and a review of the Scope of Work. The Committees will then review the Marine Recreational Information Program Fishing Effort Survey Pilot Study and Next Steps. Following, the Committees will receive an update on SEDAR 81 Sensitivity Runs with Respect to the MRIP-FES Pilot Study. SSC discussion will follow.
The Committees will receive public comment, if any, before addressing any items under Other Business.
The meeting will be broadcast via webinar. You may register for the webinar by visiting
The Agenda is subject to change, and the latest version along with other meeting materials will be posted on
Although other non-emergency issues not on the agenda may come before the Scientific and Statistical Committees for discussion, in accordance with the Magnuson-Stevens Fishery Conservation and Management Act, those issues may not be the subject of formal action during this meeting. Actions of the Scientific and Statistical Committee will be restricted to those issues specifically identified in the agenda 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 action to address the emergency.
The meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aid should be directed to Kathy Pereira, (813) 348-1630, at least 5 days prior to the meeting date.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; issuance of permits, and permit modifications.
Notice is hereby given that permits and permit modifications have been issued to the following entities under the Marine Mammal Protection Act (MMPA) and the Endangered Species Act (ESA), as applicable.
The permits and related documents are available for review upon written request via email to
Shasta McClenahan, Ph.D., (Permit Nos. 26939, 27038, and 27052), Malcolm Mohead (Permit Nos. 27294 and 24016-01), and Courtney Smith, Ph.D. (Permit No. 26623); at (301) 427-8401.
Notices were published in the
In compliance with the National Environmental Policy Act of 1969 (42 U.S.C. 4321
As required by the ESA, as applicable, issuance of these permit was based on a finding that such permits: (1) were applied for in good faith; (2) will not operate to the disadvantage of such endangered species; and (3) are consistent with the purposes and policies set forth in Section 2 of the ESA.
U.S. Army Corps of Engineers (USACE), Department of the Army, Department of Defense (DoD).
60-Day information collection notice.
In compliance with the
Consideration will be given to all comments received by November 13, 2023.
You may submit comments, identified by docket number and title, by any of the following methods:
To request more information on this proposed information collection or to obtain a copy of the proposal and associated collection instruments, please write to U.S. Army Corps of Engineers, 441 G Street NW, Washington, DC 20314-1000, ATTN: Ms. Kathryn Nevins, or call 703-428-6440.
Office of the Under Secretary of Defense for Personnel and Readiness (OUSD(P&R)), Department of Defense (DoD).
60-Day information collection notice.
In compliance with the
Consideration will be given to all comments received by November 13, 2023.
You may submit comments, identified by docket number and title, by any of the following methods:
To request more information on these proposed information collections or to obtain a copy of the proposal and associated collection instruments, please write to CNA Corporation, 3003 Washington Blvd., Arlington, VA, Ria Reynolds, MPH,
DSPO has contracted with CNA to assist the Services and Components in meeting the requirements set forth in DOD Instruction 6490.16 that all suicide prevention activities are developed from a relevant evidence-base and have an evaluation capability prior to implementation. CNA, in conjunction with the participating Services and Components (
The Services and Components will use the results of their respective voluntary KI interviews and/or survey to tailor their LMS activities, materials, messaging, training, and outreach efforts to maximize their effectiveness with their Service members and communities.
Responses per Respondent: 1.
Under Secretary of Defense for Research and Engineering, Defense Science Board, Department of Defense (DoD).
Notice of Federal advisory committee meeting.
The DoD is publishing this notice to announce that the following Federal Advisory Committee meeting of the Defense Science Board (DSB) will take place.
Closed to the public Thursday, September 28, 2023 from 10:00 a.m. to 3:45 p.m.
The address of the closed meeting is 4075 Wilson Blvd., Arlington, VA.
Mr. Kevin Doxey, Designated Federal Officer (DFO), (703) 571-0081 (Voice), (703) 697-1860 (Facsimile),
This meeting is being held under the provisions of chapter 10 of title 5, United States Code (U.S.C.) (commonly known as the “Federal Advisory Committee Act” or “FACA”), 5 U.S.C. 552b (commonly known as the “Government in the Sunshine Act”), and sections 102-3.140 and 102-3.150 of title 41, Code of Federal Regulations (CFR).
The Office of the Assistant Secretary of Defense for Health Affairs (OASD(HA)), Department of Defense (DoD).
60-Day information collection notice.
In compliance with the
Consideration will be given to all comments received by November 13, 2023.
You may submit comments, identified by docket number and title, by any of the following methods:
To request more information on this proposed information collection or to obtain a copy of the proposal and associated collection instruments, please write to the Defense Health Agency, 7700 Arlington Blvd., Falls Church, VA 22042, Terry McDavid, 703-681-3645.
• Concurrent collection of demographics, research health information (RHI), and self-reported alcohol consumption
• Avoid potential statistical confounding by implementing systematic data collection across all participants to address research questions and perform statistical modeling,
• Ability to link survey data to genotyping and sequencing data,
• Ability to re-contact participants for future research.
This research will deliver a knowledge product that will inform policy and practice in the Military Health System (MHS). We further expect to identify alcohol as a potential modifiable risk factor related to PTSD and other mental health conditions, which could go beyond the MHS into embedded mental health services for prevention and intervention for at-risk individuals. In the context of Precision Medicine, this survey establishes a cohort who may be contacted for participation in additional research, tailors medical care to optimize efficiency, effectiveness, safety, and patient-centeredness of therapeutic approaches using genetic profiling. The long-term impact of this study has the potential to lower inappropriate utilization, thus reducing costs while improving health-related quality of life and optimizing Readiness.
Information collected in this survey will be used for research purposes to fulfill the objectives of this grant-funded study which aligns to a requirement to “better understand the impact of alcohol use on resiliency and recovery.” The findings will be interpreted by a multidisciplinary team of physicians, scientists, behavioral psychologists, and healthcare services researchers to (a) inform policy and (b) make recommendations for practice in the contest of Precision Medicine.
Under Secretary of Defense for Personnel and Readiness, Department of Defense (DoD).
Notice of closed Federal advisory committee meetings.
The DoD is publishing this notice to announce that the following Federal Advisory Committee meetings of the DoDWC will take place.
Tuesday, September 5, 2023, from 10:00 a.m. to 10:30 a.m. and will be closed to the public.
Tuesday, September 19, 2023, from 10:00 a.m. to 11:30 a.m. and will be closed to the public.
Tuesday, October 3, 2023, from 10:00 a.m. to 11:30 a.m. and will be closed to the public.
Tuesday, October 17, 2023, from 10:00 a.m. to 12:30 p.m. and will be closed to the public.
Tuesday, October 31, 2023, from 10:00 a.m. to 11:00 a.m. and will be closed to the public.
Tuesday, November 14, 2023, from 10:00 a.m. to 12:30 p.m. and will be closed to the public.
Tuesday, November 28, 2023 from 10:00 a.m. to 11:00 a.m. and will be closed to the public.
The closed meetings will be held by teleconference.
Mr. Karl Fendt, (571) 372-1618 (voice),
These meetings are being held under the provisions of chapter 10 of title 5, United States Code (U.S.C.) (commonly known as the “Federal Advisory Committee Act” or “FACA”), 5 U.S.C. 552b (commonly known as the “Government in the Sunshine Act”), and 41 CFR 102-3.140 and 102-3.150.
Due to circumstances beyond the control of the Department of Defense and the Designated Federal Officer, the Department of Defense Wage Committee was unable to provide public notification required by 41 CFR 102-3.150(a) concerning its September 5, 2023 meeting. Accordingly, the Advisory Committee Management Officer for the Department of Defense, pursuant to 41 CFR 102-3.150(b), waives the 15-calendar day notification requirement.
Due to circumstances beyond the control of the Department of Defense and the Designated Federal Officer, the Department of Defense Wage Committee was unable to provide public notification required by 41 CFR 102-3.150(a) concerning its September 19, 2023 meeting. Accordingly, the Advisory Committee Management Officer for the Department of Defense, pursuant to 41 CFR 102-3.150(b), waives the 15-calendar day notification requirement.
Opening Remarks by Chair and Designated Federal Officer (DFO).
Reviewing survey results and/or survey specifications for the following Appropriated Fund areas:
1. Any items needing further clarification or action from the previous agenda.
2. Wage Schedule (Full Scale) for the Boise, Idaho wage area (AC-045).
3. Any items needing further clarification from this agenda may be discussed during future scheduled meetings.
Closing Remarks by Chair.
Opening Remarks by Chair and DFO.
Reviewing survey results and/or survey specifications for the following Nonappropriated Fund areas:
1. Any items needing further clarification or action from the previous agenda.
2. Wage Schedule (Full Scale) for the Burlington, New Jersey wage area (AC-071).
3. Wage Schedule (Full Scale) for the Kent, Delaware wage area (AC-076).
4. Wage Schedule (Full Scale) for the Richmond-Chesterfield, Virginia wage area (AC-082).
5. Wage Schedule (Full Scale) for the Morris, New Jersey wage area (AC-090).
6. Wage Schedule (Wage Change) for the Frederick, Maryland wage area (AC-088).
7. Wage Schedule (Wage Change) for the Washington, District of Columbia wage area (AC-124).
8. Wage Schedule (Wage Change) for the Alexandria-Arlington-Fairfax, Virginia wage area (AC-125).
9. Wage Schedule (Wage Change) for the Prince William, Virginia wage area (AC-126).
10. Wage Schedule (Wage Change) for the Prince George's-Montgomery, Maryland wage area (AC-127).
11. Wage Schedule (Wage Change) for the Charles-St. Mary's, Maryland wage area (AC-128).
12. Wage Schedule (Wage Change) for the Anne Arundel, Maryland wage area (AC-147).
Reviewing survey results and/or survey specifications for the following Appropriated Fund areas:
13. Wage Schedule (Full Scale) for the Utah wage area (AC-139).
14. Wage Schedule (Full Scale) for the Spokane, Washington wage area (AC-145).
15. Wage Schedule (Full Scale) for the Puerto Rico wage area (AC-151).
16. Wage Schedule (Wage Change) for the Alaska wage area (AC-007).
17. Wage Schedule (Wage Change) for the Montana wage area (AC-083).
18. Wage Schedule (Wage Change) for the Charleston, South Carolina wage area (AC-119).
19. Special Pay—Puerto Rico Special Rates.
20. Any items needing further clarification from this agenda may be discussed during future scheduled meetings.
Closing Remarks by Chair.
Opening Remarks by Chair and DFO.
Reviewing survey results and/or survey specifications for the following Nonappropriated Fund areas:
1. Any items needing further clarification or action from the previous agenda.
2. Survey Specifications for the Onslow, North Carolina wage area (AC-097).
3. Survey Specifications for the Shelby, Tennessee wage area (AC-098).
4. Survey Specifications for the Christian, Kentucky/Montgomery Tennessee wage area (AC-099).
5. Survey Specifications for the Charleston, South Carolina wage area (AC-120).
6. Survey Specifications for the San Juan-Guaynabo, Puerto Rico wage area (AC-155).
Reviewing survey results and/or survey specifications for the following Appropriated Fund areas:
7. Wage Schedule (Full Scale) for the Dothan, Alabama wage area (AC-003).
8. Wage Schedule (Full Scale) for the Washington, District of Columbia wage area (AC-027).
9. Wage Schedule (Full Scale) for the Columbus, Georgia wage area (AC-040).
10. Wage Schedule (Full Scale) for the Charlotte, North Carolina wage area (AC-100).
11. Wage Schedule (Full Scale) for the Oklahoma City, Oklahoma wage area (AC-109).
12. Wage Schedule (Full Scale) for the Pittsburgh, Pennsylvania wage area (AC-116).
13. Wage Schedule (Wage Change) for the Cedar Rapids-Iowa City, Iowa wage area (AC-052).
14. Wage Schedule (Wage Change) for the Portland, Oregon wage area (AC-112).
15. Wage Schedule (Wage Change) for the Wichita Falls, Texas-Southwestern Oklahoma wage area (AC-138).
16. Wage Schedule (Wage Change) for the Madison, Wisconsin wage area (AC-147).
17. Special Pay—Portland, Oregon Special Rates.
18. Special Pay—Missouri River Power Rate (D800).
19. Any items needing further clarification from this agenda may be discussed during future scheduled meetings.
Closing Remarks by Chair.
Opening Remarks by Chair and DFO.
Reviewing survey results and/or survey specifications for the following Nonappropriated Fund areas:
1. Any items needing further clarification or action from the previous agenda.
2. Wage Schedule (Full Scale) for the Monterey, California wage area (AC-003).
3. Wage Schedule (Full Scale) for the Kern, California wage area (AC-010).
4. Wage Schedule (Full Scale) for the San Diego, California wage area (AC-054).
5. Wage Schedule (Full Scale) for the Solano, California wage area (AC-059).
6. Wage Schedule (Wage Change) for the Los Angeles, California wage area (AC-130).
7. Wage Schedule (Wage Change) for the Orange, California wage area (AC-131).
8. Wage Schedule (Wage Change) for the Ventura, California wage area (AC-132).
9. Wage Schedule (Wage Change) for the Riverside, California wage area (AC-133).
10. Wage Schedule (Wage Change) for the San Bernardino, California wage area (AC-134).
11. Wage Schedule (Wage Change) for the Santa Barbara, California wage area (AC-135).
12. Wage Schedule (Wage Change) for the Guam wage area (AC-150).
Reviewing survey results and/or survey specifications for the following Appropriated Fund areas:
13. Wage Schedule (Full Scale) for the Albany, Georgia wage area (AC-036).
14. Wage Schedule (Full Scale) for the Northwestern Michigan wage area (AC-071).
15. Wage Schedule (Full Scale) for the Tulsa, Oklahoma wage area (AC-111).
16. Wage Schedule (Full Scale) for the Scranton-Wilkes Barre, Pennsylvania wage area (AC-117).
17. Wage Schedule (Wage Change) for the Little Rock, Arkansas wage area (AC-011).
18. Wage Schedule (Wage Change) for the Boston, Massachusetts wage area (AC-068).
19. Survey Specifications for the Birmingham, Alabama wage area (AC-002).
20. Survey Specifications for the Southern Colorado wage area (AC-023).
21. Survey Specifications for the Hagerstown-Martinsburg-Chambersburg, Maryland wage area (AC-067).
22. Survey Specifications for the Dayton, Ohio wage area (AC-107).
23. Survey Specifications for the Harrisburg, Pennsylvania wage area (AC-114).
24. Survey Specifications for the Wyoming wage area (AC-150).
25. Special Pay—Boston, Massachusetts Special Rates.
26. Special Pay—Little Rock, Arkansas Special Rates.
27. Any items needing further clarification from this agenda may be discussed during future scheduled meetings.
Closing Remarks by Chair.
Opening Remarks by Chair and DFO.
Reviewing survey results and/or survey specifications for the following Nonappropriated Fund areas:
1. Any items needing further clarification or action from the previous agenda.
2. Survey Specifications for the Oklahoma, Oklahoma wage area (AC-052).
3. Survey Specifications for the Harrison, Mississippi wage area (AC-070).
4. Survey Specifications for the Hardin-Jefferson, Kentucky wage area (AC-096).
5. Survey Specifications for the Wayne, North Carolina wage area (AC-107).
6. Survey Specifications for the Cumberland, North Carolina wage area (AC-108).
7. Survey Specifications for the Richland, South Carolina wage area (AC-110).
8. Survey Specifications for the Wichita, Texas wage area (AC-122).
9. Survey Specifications for the Comanche, Oklahoma wage area (AC-123).
10. Survey Specifications for the Craven, North Carolina wage area (AC-164).
Reviewing survey results and/or survey specifications for the following Appropriated Fund areas:
11. Survey Specifications for the New York, New York wage area (AC-094).
12. Any items needing further clarification from this agenda may be discussed during future scheduled meetings.
Closing Remarks by Chair.
Opening Remarks by Chair and DFO.
Reviewing survey results and/or survey specifications for the following Appropriated Fund areas:
1. Any items needing further clarification or action from the previous agenda.
2. Wage Schedule (Full Scale) for the San Diego, California wage area (AC-017).
3. Wage Schedule (Full Scale) for the San Francisco, California wage area (AC-018).
4. Wage Schedule (Full Scale) for the Pensacola, Florida wage area (AC-034).
5. Wage Schedule (Full Scale) for the Central Illinois wage area (AC-046).
6. Wage Schedule (Full Scale) for the Des Moines, Iowa wage area (AC-054).
7. Wage Schedule (Full Scale) for the Baltimore, Maryland wage area (AC-066).
8. Wage Schedule (Full Scale) for the Buffalo, New York wage area (AC-092).
9. Wage Schedule (Wage Change) for the Los Angeles, California wage area (AC-013).
10. Wage Schedule (Wage Change) for the San Bernardino-Riverside-Ontario, California wage area (AC-016).
11. Wage Schedule (Wage Change) for the Santa Barbara, California wage area (AC-019).
12. Wage Schedule (Wage Change) for the New London, Connecticut wage area (AC-025).
13. Wage Schedule (Wage Change) for the Panama City, Florida wage area (AC-033).
14. Wage Schedule (Wage Change) for the Chicago, Illinois wage area (AC-047).
15. Wage Schedule (Wage Change) for the Las Vegas, Nevada wage area (AC-085).
16. Wage Schedule (Wage Change) for the Portsmouth, New Hampshire wage area (AC-087).
17. Wage Schedule (Wage Change) for the Seattle-Everett-Tacoma, Washington wage area (AC-143).
18. Survey Specifications for the Salinas-Monterey, California wage area (AC-015).
19. Survey Specifications for the Rochester, New York wage area (AC-096).
20. Special Pay—San Diego, California Special Rates.
21. Special Pay—Los Angeles, California Special Rates.
22. Special Pay—New London, Connecticut Special Rates.
23. Special Pay—Southwest Power Rate.
24. Special Pay—North Central Power Rate.
25. Any items needing further clarification from this agenda may be discussed during future scheduled meetings.
Closing Remarks by Chair.
Opening Remarks by Chair and DFO.
Reviewing survey results and/or survey specifications for the following Nonappropriated Fund areas:
1. Any items needing further clarification or action from the previous agenda.
2. Wage Schedule (Full Scale) for the Hampden, Massachusetts wage area (AC-039).
3. Wage Schedule (Full Scale) for the Middlesex, Massachusetts wage area (AC-138).
4. Wage Schedule (Full Scale) for the York, Maine wage area (AC-139).
5. Wage Schedule (Wage Change) for the Maricopa, Arizona wage area (AC-012).
6. Wage Schedule (Wage Change) for the Pima, Arizona wage area (AC-013).
7. Wage Schedule (Wage Change) for the Yuma, Arizona wage area (AC-055).
8. Wage Schedule (Wage Change) for the Kings-Queens, New York wage area (AC-091).
Reviewing survey results and/or survey specifications for the following Appropriated Fund areas:
9. Survey Specifications for the Lexington, Kentucky wage area (AC-058).
10. Survey Specifications for the Northern Mississippi wage area (AC-077).
11. Survey Specifications for the Memphis, Tennessee wage area (AC-124).
12. Survey Specifications for the Nashville, Tennessee wage area (AC-125).
13. Any items needing further clarification from this agenda may be discussed during future scheduled meetings.
Closing Remarks by Chair.
Department of the Navy, Department of Defense (DoD).
60-Day information collection notice.
In compliance with the
Consideration will be given to all comments received by November 13, 2023.
You may submit comments, identified by docket number and title, by any of the following methods:
To request more information on this proposed information collection or to obtain a copy of the proposal and associated collection instruments, please write to the Naval Air Warfare Center Aircraft Division, 22347 Cedar Point Road, Building 2185, Patuxent River, MD 20670; ATTN: Ms. Crystal Krater, or call 301-757-6690.
Federal Student Aid (FSA), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act (PRA) of 1995, the Department is proposing a revision of a currently approved information collection request (ICR).
Interested persons are invited to submit comments on or before November 13, 2023.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Beth Grebeldinger, 202-377-4018.
The Department, in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. The Department is soliciting comments on the proposed information collection request (ICR) that is described below. The Department is especially interested in public comment addressing the following issues: (1) is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
Institute of Education Sciences (IES), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act (PRA) of 1995, the Department is proposing a new information collection request (ICR).
Interested persons are invited to submit comments on or before November 13, 2023.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Amy Johnson, 202-453-5974.
The Department, in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. The Department is soliciting comments on the proposed information collection request (ICR) that is described below. The Department is especially interested in public comment addressing the following issues: (1) is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
IES requests clearance for activities to support the recruitment of schools and districts to participate in an efficacy study of the toolkit as part of the REL Appalachia contract. A second OMB package, which will be submitted later this year, will request clearance for data collection instruments and the collection of district administrative data.
The study will assess the efficacy of the professional development resources included in the toolkit. The evaluation will also assess how teachers implement the toolkit to provide context for the efficacy findings and guidance to improve the toolkit and its future use.
The evaluation will take place in 50 schools across approximately 10 school divisions in Virginia and focus on mathematics teaching practices and student mathematics knowledge and skills in preschool classrooms. The purpose of this study will be to measure the efficacy and implementation of the REL AP-developed toolkit designed to improve teacher practice and preschool students' math learning outcomes. The toolkit evaluation will produce a report for district and school leaders who are considering strategies to improve math learning in preschool. The report will be designed to help them decide whether and how to use the toolkit to help them implement the practice guide recommendations.
Office of Postsecondary Education (OPE), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act (PRA) of 1995, the Department is proposing a revision of a currently approved information collection request (ICR).
Interested persons are invited to submit comments on or before November 13, 2023.
To access and review all the documents related to the information collection listed in this notice, please use
Written requests for information or comments submitted by postal mail or delivery should be addressed to the Manager of the Strategic Collections and Clearance Governance and Strategy Division, U.S. Department of Education, 400 Maryland Ave. SW, LBJ, Room 6W203, Washington, DC 20202-8240.
For specific questions related to collection activities, please contact Jason Cottrell, 202-453-7530.
The Department, in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. The Department is soliciting comments on the proposed information collection request (ICR) that is described below. The Department is especially interested in public comment addressing the following issues: (1) is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
Office of Energy Efficiency and Renewable Energy, Department of Energy.
Notice of open meeting and webinar.
This notice announces a public meeting of the Appliance Standards and Rulemaking Federal Advisory Committee (ASRAC). The Federal Advisory Committee Act (FACA), requires that agencies publish notice of an advisory committee meeting in the
October 17, 2023 from 11 a.m. to 4 p.m., in Washington, DC.
The public meeting will be held at the National Renewable Energy Laboratory, 901 D Street SW, Suite 930, Washington, DC 20024. The meeting will also be broadcast as a webinar. See the Public Participation section of this notice for webinar registration information, participant instructions, and information about the capabilities available to webinar participants.
Mr. Lucas Adin, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE-5B, 1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: (202) 287-5904. Email
Please note that foreign nationals participating in the public meeting are subject to advance security screening procedures which require advance notice prior to attendance at the public meeting. If a foreign national wishes to participate in the public meeting, please inform DOE as soon as possible by contacting Ms. Regina Washington at (202) 586-1214 or by email:
In addition, you can attend the public meeting via webinar. Webinar registration information, participant instructions, and information about the capabilities available to webinar participants will be published on DOE's website:
The webinar will held using the Webex software platform and participants are responsible for ensuring their systems are compatible with the webinar software. If you plan to attend the webinar, please notify the ASRAC staff at
This document of the Department of Energy was signed on September 8, 2023, by Francisco Alejandro Moreno, Acting Assistant Secretary for Energy Efficiency and Renewable Energy, pursuant to delegated authority from the Secretary of Energy. That document with the original signature and date is maintained by DOE. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DOE 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
Office of Environment, Health, Safety and Security, U.S. Department of Energy.
Notice of revision of listing of covered facilities.
The U.S. Department of Energy (DOE or Department) has periodically published in the
September 14, 2023.
Mr. Kevin Dressman, Director, Office of Health and Safety (EHSS-10), 1000 Independence Avenue SW, Washington, DC 20585; (301) 903-2473; or by email at
This Notice is being published to reflect the fact that the Beryllium Mill in Delta is a covered beryllium vendor facility under EEOICPA. Previous lists or revisions were published by DOE on August 3, 2022 (87 FR 47399); February 17, 2016 (81 FR 8060); July 16, 2015 (80 FR 42094); February 11, 2013 (78 FR 9678); February 6, 2012 (77 FR 5781); May 26, 2011 (76 FR 30695); August 3, 2010 (75 FR 45608); April 9, 2009 (74 FR 16191); June 28, 2007 (72 FR 35448); November 30, 2005 (70 FR 71815); August 23, 2004 (69 FR 51825); July 21, 2003 (68 FR 43095); December 27, 2002
EEOICPA established a program to provide compensation to individuals who developed illnesses because of their employment in nuclear weapons production-related activities of DOE or its predecessor agencies. Covered employees include current or former employees of a “beryllium vendor” as defined by the Act. On December 7, 2000, the President issued Executive Order 13179, “Providing Compensation to America's Nuclear Weapons Workers,” which directed the Secretary of Energy to, among other things, publish in the
Section 3621(6) of the Act (42 U.S.C. 7384l(6)) defines “beryllium vendor” as any of the following: “(A) Atomics International; (B) Brush Wellman, Incorporated, and its predecessor, Brush Beryllium Company; (C) General Atomics; (D) General Electric Company; (E) NGK Metals Corporation and its predecessors, Kawecki-Berylco, Cabot Corporation, BerylCo, and Beryllium Corporation of America; (F) Nuclear Materials and Equipment Corporation; (G) StarMet Corporation and its predecessor, Nuclear Metals, Incorporated; (H) Wyman Gordan, Incorporated; (I) Any other vendor, processor, or producer of beryllium or related products designated as a beryllium vendor for purposes of the compensation program under section 3622 [42 U.S.C. 7384m].” The beryllium vendors listed in Section 3621(6) of the Act (42 U.S.C. 7384l(6)), are sometimes referred to as “statutory beryllium vendors” because they are specifically identified by name in the statute.
In 1969, the Brush Beryllium Company opened the Beryllium Mill in Delta and since then, the facility has processed two types of ore to extract beryllium—locally mined bertrandite ore and beryl ore imported from various suppliers. From the Beryllium Mill in Delta, beryllium products are shipped to another Materion Brush, Inc. beryllium vendor facility in Elmore, Ohio to produce metallic beryllium, beryllium alloys, and beryllia ceramic feedstock. The Beryllium Mill in Delta was operated by Brush Beryllium Company from 1969-1971, Brush Wellman, Inc. from 1971-January 23, 2001, Brush Resources, Inc. from January 23, 2001-March 8, 2011, and Materion Natural Resources, Inc. from March 8, 2011-Present. For purposes of coverage under EEOICPA, all references to “Brush Wellman Incorporated” or “Brush Wellman, Inc.” include its predecessor and successor entities, including the aforementioned entities.
Due to Brush Wellman, Inc.'s status as a statutory beryllium vendor, all employees of Brush Wellman, Inc. in the U.S., regardless of location, are covered for the entire period for which Brush Wellman, Inc., its predecessors, and successor entities have supplied beryllium to DOE or its predecessor agencies. That period is defined as August 13, 1943, and continuing. While DOE is publishing this Notice to update its list of covered facilities to reflect the fact that the Beryllium Mill in Delta is owned by a successor to Brush Wellman, Inc., and therefore, is a covered beryllium vendor facility under EEOICPA, DOE notes that the beryllium facilities operated by Brush Wellman, Inc., its predecessors, and successor entities are covered beryllium facilities under EEOICPA because they are facilities of a statutory beryllium vendor, regardless of whether the facility is listed by DOE in a
This document of the Department of Energy was signed on September 11, 2023, by Todd N. Lapointe, Director, Office of Environment, Health, Safety and Security, 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
Office of Science, Department of Energy.
Notice of closed meeting.
This notice announces a closed meeting of the President's Council of Advisors on Science and Technology (PCAST). The Federal Advisory Committee Act (FACA) requires that public notice of these meetings be announced in the
Thursday, September 14, 2023; 3:00 p.m. ET.
The White House, 1600 Pennsylvania Avenue NW, Washington, DC 20500.
Dr. Reba Bandyopadhyay, Designated Federal Officer, PCAST, email:
PCAST is an advisory group of the nation's leading scientists and engineers, appointed by the President to augment the science and technology advice available to him from the White House, cabinet departments, and other Federal agencies. See the Executive Order at
This notice is being published less than 15 days prior to the meeting due to scheduling difficulties.
PCAST operates under the provisions of FACA, all public comments and/or presentations will be treated as public documents and will be made available for public inspection, including being posted on the PCAST website at:
Office of Fossil Energy and Carbon Management, Department of Energy.
Reopening of public comment period.
The U.S. Department of Energy (DOE) is reopening the public comment period for its Notice of Intent (NOI) and Request for Information (RFI) regarding launching a Responsible Carbon Management Initiative which was published in the
The comment period for the NOI and RFI published on August 11, 2023 (88 FR 54608), and closed on September 11, 2023, is reopened until September 30, 2023. DOE will accept comments regarding this NOI and RFI received on and before September 30, 2023.
Interested parties may submit comments electronically to
Kelli Roemer, email:
On August 11, 2023, DOE published a NOI and RFI in the
This document of the Department of Energy was signed on September 8, 2023, by Brad Crabtree, Assistant Secretary, Office of Fossil Energy and Carbon Management, 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
Office of Environmental Management, Department of Energy.
Notice of open meeting.
This notice announces an in-person meeting of the Environmental Management Site-Specific Advisory Board (EM SSAB) Chairs. The Federal Advisory Committee Act requires that public notice of this meeting be announced in the
DoubleTree Hotel, 215 S Illinois Avenue, Oak Ridge, TN 37830.
Kelly Snyder, EM SSAB Designated Federal Officer. Phone: (702) 918-6715; Email:
Thursday, October 5, 2023
U.S. Energy Information Administration (EIA), Department of Energy (DOE).
Notice and request for comments.
EIA invites public comment on the proposed three-year extension, with changes, to the Natural Gas Data Collection Program, OMB Control Number 1905-0175, as required under the Paperwork Reduction Act of 1995. The surveys covered by this request include; Form EIA-176,
EIA must receive all comments on this proposed information collection no later than November 13, 2023. If you anticipate any difficulties in submitting your comments by the deadline, contact the email address listed in the
Written comments may be sent to:
If you need additional information, contact Michael Kopalek, U.S. Energy Information Administration, telephone (202) 586-4001, or by email at
This information collection request contains:
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Form EIA-176 collects data on natural, synthetic, and other supplemental gas supplies, their disposition, and certain revenues by state. During the previous collection package, EIA modified the survey instructions to include Renewable Natural Gas (RNG) producers who inject high-Btu RNG into an interstate pipeline, intra-state pipeline, or natural gas distribution company system. As such, EIA requests an increase in respondent count and burden to accommodate additions of new respondents to the survey frame.
Form EIA-757 collects information on the capacity, status, and operations of natural gas processing plants, and monitors their constraints to natural gas supplies during catastrophic events, such as hurricanes. Schedule A of Form EIA-757 collects baseline operating and capacity information from all respondents on a triennial basis or less frequently. Schedule B is used on an emergency standby basis and is activated during natural disasters or other energy disruptive events. Schedule B collects data from a sample of respondents in the affected areas.
EIA proposes to discontinue collection of Form EIA-757 Schedule A, and burden hours have been adjusted downward accordingly. As part of the Terms of Clearance of the package prior to this, EIA has investigated potential consolidation of the EIA-757 Schedule A survey with another, more frequent natural gas processing plant survey, the EIA-64A Survey (OMB number 1905-0057). As a result of this research, EIA proposes that the EIA-64A Survey will absorb several key data items from the EIA-757 Schedule A Survey in order to reduce overall respondent burden and eliminate duplicative data collection efforts. This resolves the prior Terms of Clearance.
EIA-757 Schedule B, which is a standby survey, is active in instances of a natural disaster or incident resulting in widespread closures of natural gas processing plants. However, since the agency has not elected to activate the survey at any point in the last six years (two clearance cycles), EIA is reducing the requested burden hours by 50% to allow an activation once every three years, rather than twice every three years.
Form EIA-857 collects data on the quantity and cost of natural gas delivered to distribution systems and the quantity and revenue of natural gas delivered to consumers by end-use sector, on a monthly basis by state. EIA is increasing the requested burden to accommodate increased sample coverage, parallel to the increased scope of the EIA-176, the universe from which this survey's sample is drawn.
Form EIA-912 collects information on weekly inventories of natural gas in underground storage facilities. EIA is slightly decreasing the requested burden to more accurately reflect demonstrated sample sizes over the past six years.
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EIA estimates that respondents will have no additional costs associated with the surveys other than the burden hours and the maintenance of the information during the normal course of business.
Comments are invited on whether or not: (a) The proposed collection of information is necessary for the proper performance of agency functions, including whether the information will have a practical utility; (b) EIA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used, is accurate; (c) EIA can improve the quality, utility, and clarity of the information it will collect; and (d) EIA can minimize the burden of the collection of information on respondents, such as automated collection techniques or other forms of information technology.
National Nuclear Security Administration, Department of Energy.
Amended record of decision.
The National Nuclear Security Administration (NNSA), a semi-autonomous agency within the Department of Energy (DOE), is announcing this amendment to the June 22, 2016, Record of Decision (ROD) for the Final Supplemental Environmental Impact Statement for the Production of Tritium in a Commercial Light Water Reactor (CLWR SEIS) (DOE/EIS-0288-S1). NNSA is amending the 2016 decision in partnership with the Tennessee Valley Authority (TVA). TVA is considering increasing the number of TPBARs irradiated in their reactors at Watts Bar Nuclear Plant (WBN) using tritium-producing burnable absorber rods (TPBARs). NNSA initially decided to implement the CLWR SEIS Preferred Alternative, Alternative 6, which allows for the irradiation of up to a total of 5,000 TPBARs every 18 months using TVA reactors at both the Watts Bar and Sequoyah sites. Subsequent to the CLWR SEIS, WBN Unit 1 increased tritium production under Unit 1 License Amendment #107 (July 2016) and Unit 2 tritium production was authorized under Unit 2 License Amendment #27 (May 2019). Hence, TVA and NNSA are now opting to choose the previously analyzed CLWR SEIS Alternative 4, which allows for the irradiation of up to a total of 5,000 TPBARs every 18 months at the Watts Bar site using Watts Bar Units 1 and 2.
For information on NNSA's NEPA process, please contact Mr. James Sanderson, NEPA Compliance Officer, National Nuclear Security Administration, Office of General Counsel, Telephone (202) 586-1402; or by email to
NNSA is the lead Federal agency responsible for maintaining and enhancing the safety, security, reliability, and performance of the United States (U.S.) nuclear weapons stockpile. Tritium, a radioactive isotope of hydrogen, is an essential component of every weapon in the U.S. nuclear weapons stockpile and must be replenished periodically due to its short half-life. In March 1999, DOE published the 1999 EIS, which addressed the production of tritium in the TVA's Watts Bar and Sequoyah nuclear reactors using TPBARs. The 1999 EIS assessed the potential environmental impacts of irradiating up to 3,400 TPBARs per reactor per fuel cycle (a fuel cycle lasts about 18 months). On May 14, 1999, DOE published the ROD for the 1999 EIS (64 FR 26369) in which it announced its decision to enter into an agreement with TVA to irradiate TPBARs in the Watts Bar Unit 1 reactor (Watts Bar 1) in Rhea County, Tennessee, near Spring City; and Sequoyah Units 1 and 2 reactors (Sequoyah 1 and 2) in Hamilton County, Tennessee, near Soddy-Daisy. In 2002, TVA received license amendments from the U.S. Nuclear Regulatory Commission (NRC) to irradiate TPBARs in those reactors. (However, TVA's license for the Sequoyah reactors no longer allows for the irradiation of TPBARs.) Since 2003, TVA has been irradiating TPBARs for NNSA by irradiating TPBARs only in Watts Bar 1. (In 2020, TVA began irradiating TPBARs in Watts Bar 2.) After irradiation, NNSA transports the TPBARs to the Tritium Extraction Facility at the DOE Savannah River Site in South Carolina. NNSA's Interagency Agreement with TVA to irradiate TPBARs is in effect until the earlier of either (a) November 30, 2035, or (b) the date TVA no longer has a pressurized water reactor in operation.
NNSA prepared the 2016 CLWR SEIS to update the environmental analyses in the 1999 Final Environmental Impact Statement for the Production of Tritium in a Commercial Light Water Reactor (DOE/EIS-0288; the 1999 EIS). The 2016 CLWR SEIS provides analysis of the potential environmental impacts from TPBAR irradiation based on a conservative estimate of the tritium permeation rate through the TPBAR cladding, NNSA's revised estimate of the maximum number of TPBARs necessary to support the current and projected future tritium supply requirements, and a maximum production scenario of irradiating no more than a total of 5,000 TPBARs every 18 months. NNSA initially decided to implement the Preferred Alternative, Alternative 6, which allows for the irradiation of up to a total of 5,000 TPBARs every 18 months using TVA reactors at both the Watts Bar and Sequoyah sites. Although near-term tritium requirements could likely be met with the irradiation of 2,500 TPBARs every 18 months, at the time, this decision provided the greatest flexibility to meet potential future needs that could arise from various plausible but unexpected events. Subsequent to the 2016 SEIS, WBN Unit 1 increased the irradiation of TPBARs under Unit 1 License Amendment #107 (July 2016) and Unit 2 TPBAR irradiation was authorized under Unit 2 License Amendment #27 (May 2019). Hence, TVA and NNSA are now opting to choose the previously analyzed CLWR SEIS Alternative 4, which allows for the irradiation of up to a total of 5,000 TPBARs every 18 months at the Watts Bar site using Watts Bar 1 and 2. TVA noted new information or circumstances relevant to environmental concerns that could potentially have a bearing on the current proposal or its impacts. This new information was analyzed in a February 6, 2023 TVA memorandum, “Determination of NEPA Adequacy, Production of Tritium in a Commercial Light Water Nuclear Reactor (Watts Bar Nuclear Plant), Tennessee Valley Authority.” In this memo, TVA addressed their recent review of the
NNSA is amending its previous decision (81 FR 40685), which was to choose the 2016 CLWR SEIS's Alternative 6 that assumes TVA would irradiate up to a total of 5,000 TPBARs every 18 months using both the Watts Bar and Sequoyah sites. Because TVA would irradiate a maximum of 2,500 TPBARs in any one reactor, this could involve the use of one or both reactors at each of the sites. Instead, NNSA's new decision is to choose the 2016 CLWR SEIS's Alternative 4 that assumes TVA would irradiate up to a total of 5,000 TPBARs every 18 months at the Watts Bar site using Watts Bar 1 and 2 reactors. Since TVA would irradiate a maximum of 2,500 TPBARs in any one reactor, this would involve use of both Watts Bar reactors. Under this decision, TVA will not irradiate TPBARs for tritium production at the Sequoyah site.
The environmental impacts of this proposed action have been addressed in previous environmental impact statements,
This document of the Department of Energy was signed on June 29, 2023, by Jill Hruby, Under Secretary for Nuclear Security and Administrator, NNSA, 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
The staff of the Federal Energy Regulatory Commission (FERC or Commission) has prepared an environmental assessment (EA) for the Lucas and Pavonia Wells Abandonment Project, proposed by Columbia Gas Transmission, LLC (Columbia) in the above-referenced docket. Columbia requests authorization to abandon 37 injection/withdrawal wells and associated pipelines and appurtenances at its existing certificated Lucas and Pavonia Storage Fields in Ashland and Richland Counties, Ohio.
The EA assesses the potential environmental effects of the construction and operation of the Lucas and Pavonia Wells Abandonment Project in accordance with the
The proposed Lucas and Pavonia Wells Abandonment Project includes the following facilities and activities:
• abandonment of 37 injection/withdrawal wells at the Lucas and Pavonia Storage Fields by permanently plugging and abandoning the wells in place;
• abandonment of approximately 41,423 feet of associated 3- to 6-inch-diameter pipeline, of which 39,402 feet would be capped and abandoned in place and 2,021 feet would be abandoned by removal; and
• abandonment by removal of all associated aboveground appurtenances, including, but not limited to, tie-in valves, pipeline markers, cathodic protection test stations, rectifiers, casing vents, and above-ground pipeline blowdown vents.
The Commission mailed a copy of the
The EA is not a decision document. It presents Commission staff's independent analysis of the environmental issues for the Commission to consider when addressing the merits of all issues in this proceeding. Any person wishing to comment on the EA may do so. Your comments should focus on the EA's disclosure and discussion of potential environmental effects, reasonable alternatives, and measures to avoid or lessen environmental impacts. The more specific your comments, the more useful they will be. To ensure that the Commission has the opportunity to consider your comments prior to making its decision on this project, it is important that we receive your comments in Washington, DC on or before 5:00 p.m. Eastern Time on October 10, 2023.
For your convenience, there are three methods you can use to file your comments to the Commission. The Commission encourages electronic filing of comments and has staff available to assist you at (866) 208-3676 or
(1) You can file your comments electronically using the
(2) You can also file your comments electronically using the
(3) You can file a paper copy of your comments by mailing them to the Commission. Be sure to reference the project docket number (CP23-82-000) on your letter. Submissions sent via the U.S. Postal Service must be addressed to: Kimberly D. Bose, Secretary, Federal Energy Regulatory Commission, 888 First Street NE, Room 1A, Washington, DC 20426. Submissions sent via any other carrier must be addressed to: Kimberly D. Bose, Secretary, Federal Energy Regulatory Commission, 12225 Wilkins Avenue, Rockville, Maryland 20852.
Filing environmental comments will not give you intervenor status, but you do not need intervenor status to have your comments considered. Only intervenors have the right to seek rehearing or judicial review of the Commission's decision. At this point in this proceeding, the timeframe for filing timely intervention requests has expired. Any person seeking to become a party to the proceeding must file a motion to intervene out-of-time pursuant to Rule 214(b)(3) and (d) of the Commission's Rules of Practice and Procedures (18 CFR 385.214(b)(3) and (d)) and show good cause why the time limitation should be waived. Motions to intervene are more fully described at
Additional information about the project is available from the Commission's Office of External Affairs, at (866) 208-FERC, or on the FERC website (
The Commission's Office of Public Participation (OPP) supports meaningful public engagement and participation in Commission proceedings. OPP can help members of the public, including landowners, environmental justice communities, Tribal members and others, access publicly available information and navigate Commission processes. For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, the public is encouraged to contact OPP at (202)502-6595 or
In addition, the Commission offers a free service called eSubscription which 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
On October 8, 2023, the Commission will discontinue utilization and access of the Commission's email address, for Freedom of Information Act (FOIA) requests and Critical Energy Infrastructure Information (CEII) requests,
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The Commission's FOIA and CEII web pages will be updated to reflect these changes.
In addition, the Department of Justice's Office of Information Policy, which is responsible for overseeing FOIA compliance, will be timely notified of these programmatic changes.
Please direct questions to Carolyn Templeton, Director—Strategic Operations and Special Projects; Office of External Affairs, at
Take notice that the Commission has received the following Natural Gas and Oil Pipeline Rate and Refund Report filings:
Any person desiring to protest in any the above proceedings must file in accordance with Rule 211 of the Commission's Regulations (18 CFR 385.211) on or before 5:00 p.m. Eastern time on the specified comment date. The filings are accessible in the Commission's eLibrary system (
The Commission's Office of Public Participation (OPP) supports meaningful public engagement and participation in Commission proceedings. OPP can help members of the public, including landowners, environmental justice communities, Tribal members and others, access publicly available information and navigate Commission processes. For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, the public is encouraged to contact OPP at (202) 502-6595 or
Take notice that the Commission received the following exempt wholesale generator filings:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system (
Any person desiring to intervene, to protest, or to answer a complaint in any of the above proceedings must file in accordance with Rules 211, 214, or 206 of the Commission's Regulations (18 CFR 385.211, 385.214, or 385.206) 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:
The Commission's Office of Public Participation (OPP) supports meaningful public engagement and participation in Commission proceedings. OPP can help members of the public, including landowners, environmental justice communities, Tribal members and others, access publicly available information and navigate Commission processes. For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, the public is encouraged to contact OPP at (202) 502-6595 or
Environmental Protection Agency (EPA).
Notice.
The Toxic Substances Control Act (TSCA) requires EPA to publish in the
The docket for this action, identified by docket identification (ID) number EPA-HQ-OPPT-2023-0098, is available online at
This action provides information that is directed to the public in general.
This document lists the statements of findings made by EPA after review of submissions under TSCA section 5(a) that certain new chemical substances or significant new uses are not likely to present an unreasonable risk of injury to health or the environment. This document presents statements of findings made by EPA during the reporting period.
TSCA section 5(a)(3) requires EPA to review a submission under TSCA section 5(a) and make one of several specific findings pertaining to whether the substance may present unreasonable risk of injury to health or the environment. Among those potential findings is that the chemical substance or significant new use is not likely to present an unreasonable risk of injury to health or the environment per TSCA section 5(a)(3)(C).
TSCA section 5(g) requires EPA to publish in the
Anyone who plans to manufacture (which includes import) a new chemical substance for a non-exempt commercial purpose and any manufacturer or processor wishing to engage in a use of a chemical substance designated by EPA as a significant new use must submit a notice to EPA at least 90 days before commencing manufacture of the new chemical substance or before engaging in the significant new use.
The submitter of a notice to EPA for which EPA has made a finding of “not likely to present an unreasonable risk of injury to health or the environment” may commence manufacture of the chemical substance or manufacture or processing for the significant new use notwithstanding any remaining portion of the applicable review period.
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In this unit, EPA provides the following information (to the extent that such information is not claimed as Confidential Business Information (CBI)) on the PMNs, MCANs and SNUNs for which, during this period, EPA has made findings under TSCA section 5(a)(3)(C) that the new chemical substances or significant new uses are not likely to present an unreasonable risk of injury to health or the environment:
The following list provides the EPA case number assigned to the TSCA section 5(a) submission and the chemical identity (generic name if the specific name is claimed as CBI).
• P-19-0095, Poly hydroxy alkanoate (Generic Name).
To access EPA's decision document describing the basis of the “not likely to present an unreasonable risk” finding made by EPA under TSCA section 5(a)(3)(C), look up the specific case number at
Federal Communications Commission.
Notice of a new matching program.
In accordance with the Privacy Act of 1974, as amended (“Privacy Act”), this document announces a new computer matching program the Federal Communications Commission (“FCC” or “Commission” or “Agency”) and the Universal Service Administrative Company (USAC) will conduct with the Puerto Rico Department of the Family. The purpose of this matching program is to verify the eligibility of applicants to and subscribers of Lifeline, and the Affordable Connectivity Program (ACP), both of which are administered by USAC under the direction of the FCC. More information about these programs is provided in the
Written comments are due on or before October 16, 2023. This computer matching program will commence on October 16, 2023, and will conclude 18 months after the effective date.
Send comments to Elliot S. Tarloff, FCC, 45 L Street NE, Washington, DC 20554, or to
Elliot S. Tarloff at 202-418-0886 or
The Lifeline program provides support for discounted broadband and voice services to low-income consumers. Lifeline is administered by the Universal Service Administrative Company (USAC) under FCC direction. Consumers qualify for Lifeline through proof of income or participation in a qualifying program, such as Medicaid, the Supplemental Nutritional Assistance Program (SNAP), Federal Public Housing Assistance, Supplemental Security Income (SSI), Veterans and Survivors Pension Benefit, or various Tribal-specific federal assistance programs.
In the Consolidated Appropriations Act, 2021, Public Law 116-260, 134 Stat. 1182, 2129-36 (2020), Congress created the Emergency Broadband Benefit Program, and directed use of the National Verifier to determine eligibility based on various criteria, including the qualifications for Lifeline (Medicaid, SNAP, etc.). EBBP provided $3.2 billion in monthly consumer discounts for broadband service and one-time provider reimbursement for a connected device (laptop, desktop computer or tablet). In the Infrastructure Investment and Jobs Act, Public Law 117-58, 135 Stat. 429, 1238-44 (2021) (codified at 47 U.S.C. 1751-52), Congress modified and extended EBBP, provided an additional $14.2 billion, and renamed it the Affordable Connectivity Program (ACP). A household may qualify for the ACP benefit under various criteria, including an individual qualifying for the FCC's Lifeline program.
In a Report and Order adopted on March 31, 2016, (81 FR 33026, May 24, 2016) (
The Consolidated Appropriations Act of 2021 directs the FCC to leverage the National Verifier to verify applicants' eligibility for ACP. The purpose of this matching program is to verify the eligibility of Lifeline and ACP applicants and subscribers by determining whether they receive PAN benefits administered by the Puerto Rico Department of the Family.
Puerto Rico Department of the Family; Federal Communications Commission.
The authority for the FCC's ACP is Infrastructure Investment and Jobs Act, Public Law 117-58, 135 Stat. 429, 1238-44 (2021) (codified at 47 U.S.C. 1751-52); 47 CFR part 54. The authority for the FCC's Lifeline program is 47 U.S.C. 254; 47 CFR 54.400 through 54.423; Lifeline and Link Up Reform and Modernization,
The purpose of this modified matching agreement is to verify the eligibility of applicants and subscribers to Lifeline, as well as to ACP and other Federal programs that use qualification for Lifeline as an eligibility criterion. This new agreement will permit eligibility verification for the Lifeline program and ACP by checking an applicant's/subscriber's participation in PAN in Puerto Rico. Under FCC rules, consumers receiving these benefits qualify for Lifeline discounts and also for ACP benefits.
The categories of individuals whose information is involved in the matching program include, but are not limited to, those individuals who have applied for Lifeline and/or ACP benefits; are currently receiving Lifeline and/or ACP benefits; are individuals who enable another individual in their household to qualify for Lifeline and/or ACP benefits; are minors whose status qualifies a parent or guardian for Lifeline and/or ACP benefits; or are individuals who have received Lifeline and/or ACP benefits.
The categories of records involved in the matching program include, but are not limited to, the last four digits of the applicant's Social Security Number, date of birth, and first name. The National Verifier will transfer these data elements to the Puerto Rico Department of the Family, which will respond either “yes” or “no” that the individual is enrolled in a qualifying assistance program: PAN administered by the Puerto Rico Department of the Family.
The records shared as part of this matching program reside in the Lifeline system of records, FCC/WCB-1, Lifeline, which was published in the
The records shared as part of this matching program reside in the ACP system of records, FCC/WCB-3, Affordable Connectivity Program, which was published in the
Federal Communications Commission.
Notice of a new matching program.
In accordance with the Privacy Act of 1974, as amended (“Privacy Act”), this document announces a new computer matching program the Federal Communications Commission (“FCC” or “Commission” or “Agency”) and the Universal Service Administrative Company (USAC) will conduct with the Wisconsin Department of Health Services and the Wisconsin Department of Revenue. The purpose of this matching program is to verify the eligibility of applicants to and subscribers of Lifeline, and the Affordable Connectivity Program (ACP), both of which are administered by USAC under the direction of the FCC. More information about these programs is provided in the
Written comments are due on or before October 16, 2023. This computer matching program will commence on October 16, 2023, and will conclude 18 months after the effective date.
Send comments to Elliot S. Tarloff, FCC, 45 L Street NE, Washington, DC 20554, or to
Elliot S. Tarloff at 202-418-0886 or
The Lifeline program provides support for discounted broadband and voice services to low-income consumers. Lifeline is administered by the Universal Service Administrative Company (USAC) under FCC direction. Consumers qualify for Lifeline through proof of income or participation in a qualifying program, such as Medicaid, the Supplemental Nutritional Assistance Program (SNAP), Federal Public Housing Assistance, Supplemental Security Income (SSI), Veterans and Survivors Pension Benefit, or various Tribal-specific federal assistance programs.
In the Consolidated Appropriations Act, 2021, Public Law 116-260, 134 Stat. 1182, 2129-36 (2020), Congress created the Emergency Broadband Benefit Program, and directed use of the National Verifier to determine eligibility based on various criteria, including the qualifications for Lifeline (Medicaid, SNAP, etc.). EBBP provided $3.2 billion in monthly consumer discounts for broadband service and one-time provider reimbursement for a connected device (laptop, desktop computer or tablet). In the Infrastructure Investment and Jobs Act, Public Law 117-58, 135 Stat. 429, 1238-44 (2021) (codified at 47 U.S.C. 1751-52), Congress modified and extended EBBP, provided an additional $14.2 billion, and renamed it the Affordable Connectivity Program (ACP). A household may qualify for the ACP benefit under various criteria, including an individual qualifying for the FCC's Lifeline program.
In a Report and Order adopted on March 31, 2016, (81 FR 33026, May 24, 2016) (
The Consolidated Appropriations Act of 2021 directs the FCC to leverage the National Verifier to verify applicants' eligibility for ACP. The purpose of this matching program is to verify the eligibility of Lifeline and ACP applicants and subscribers by determining whether they receive SNAP, SSI, Medicaid, and Income Verification benefits administered by the Wisconsin Department of Health Services and the Wisconsin Department of Revenue.
Wisconsin Department of Health Services; Wisconsin Department of Revenue; Federal Communications Commission
The authority for the FCC's ACP is Infrastructure Investment and Jobs Act, Public Law 117-58, 135 Stat. 429, 1238-44 (2021) (codified at 47 U.S.C. 1751-52); 47 CFR part 54. The authority for the FCC's Lifeline program is 47 U.S.C. 254; 47 CFR 54.400 through 54.423; Lifeline and Link Up Reform and Modernization,
The purpose of this modified matching agreement is to verify the eligibility of applicants and subscribers to Lifeline, as well as to ACP and other Federal programs that use qualification for Lifeline as an eligibility criterion. This new agreement will permit eligibility verification for the Lifeline program and ACP by checking an applicant's/subscriber's participation in SNAP, SSI, Medicaid, and Income Verification in Wisconsin. Under FCC rules, consumers receiving these benefits qualify for Lifeline discounts and also for ACP benefits.
The categories of individuals whose information is involved in the matching program include, but are not limited to, those individuals who have applied for Lifeline and/or ACP benefits; are currently receiving Lifeline and/or ACP benefits; are individuals who enable another individual in their household to qualify for Lifeline and/or ACP benefits; are minors whose status qualifies a parent or guardian for Lifeline and/or ACP benefits; or are individuals who have received Lifeline and/or ACP benefits.
The categories of records involved in the matching program include, but are not limited to, the last four digits of the applicant's Social Security Number, and first and last name. The National Verifier will transfer these data elements to the Wisconsin Department of Health Services, Wisconsin Department of Revenue, which will respond either “yes” or “no” that the individual is enrolled in a qualifying assistance program: SNAP, SSI, Medicaid, and Income Verification administered by the Wisconsin Department of Health Services and the Wisconsin Department of Revenue.
The records shared as part of this matching program reside in the Lifeline system of records, FCC/WCB-1, Lifeline, which was published in the
The records shared as part of this matching program reside in the ACP system of records, FCC/WCB-3, Affordable Connectivity Program, which was published in the
Appraisal Subcommittee of the Federal Financial Institutions Examination Council.
Notice of special closed meeting.
The ASC convened a Special Closed Meeting to discuss a personnel matter. No action was taken by the ASC.
Board of Governors of the Federal Reserve System.
Notice of a modified system of records.
Pursuant to the provisions of the Privacy Act of 1974, notice is given that the Board of Governors of the Federal Reserve System (Board) proposes to modify an existing system of records, entitled BGFRS-24, “FRB—EEO General Files.” BGFRS-24 presently includes self-identification reports of current and former employees regarding race, national origin, sex, and disability and identification by Board staff regarding the race, national origin, and sex for those current and former employees who decline to voluntarily provide the information.
Comments must be received on or before October 16, 2023. This new system of records will become effective October 16, 2023, without further notice, unless comments dictate otherwise.
The Office of Management and Budget (OMB), which has oversight responsibility under the Privacy Act, requires a 30-day period prior to publication in the
You may submit comments, identified by
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In general, all public comments will be made available on the Board's website at
David B. Husband, Senior Counsel, (202) 530-6270, or
The Board is in the process of replacing its current enterprise resource planning (ERP) system which will result in changes to the information collected and retained for Board employees. Accordingly, the Board is making minor modifications to the EEO General Files system to reflect such changes. Principally, to better reflect the many dimensions within its workforce, beyond the customary demographics of race/ethnicity, disability, and gender, the Board is broadening its demographic data collection to encompass voluntary disclosure of gender identity and preferred personal pronouns. These new fields will help Board employees personalize their self-identification. The Board is therefore amending the category of records to reflect the inclusion of this information. The Board is removing from the category of records the reference to EEO-related training records which are no longer retained as part of the system of records and the reference to identification by Board staff of disability status for employees who decline to voluntarily provide such information, as disability status would not be inferred via visual observation. The Board will also collect information from applicants, such as self-identification reports, and therefore the Board is amending the category of individuals to include applicants and the category of records to refer to applicants in addition to current and former employees.
The Board is also taking the opportunity to update the system manager, the system location, the authority for the system, the record source categories, and the practices for retention and disposal of records. The Board is also taking the opportunity to update the “Routine Uses” section to incorporate a link to the Board's general routine uses and is amending the system-specific routine use to refer to “workforce” instead of the more archaic term “manpower.” The Board otherwise is not amending or establishing any new routine uses.
The Board is also making technical changes to BGFRS-24 consistent with the template laid out in OMB Circular No. A-108. Accordingly, the Board has made technical corrections and non-substantive language revisions to the following categories: “Policies and Practices for Storage of Records,” “Policies and Practices for Retrieval of Records,” “Policies and Practices for Retention and Disposal of Records,” “Administrative, Technical and Physical Safeguards,” “Record Access Procedures,” “Contesting Record Procedures,” and “Notification Procedures.” The Board has also created the following new fields: “Security Classification” and “History.”
BGFRS-24 “FRB—EEO General Files”.
Unclassified.
Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW, Washington, DC 20551. Records are also stored by the Federal Reserve Bank of Minneapolis, located at 90 Hennepin Ave., Minneapolis, MN 55401 and by the Board's contractor, Workday, Inc., located at 6110 Stoneridge Mall Road, Pleasanton, CA 94588.
Sheila Clark, Chief Diversity Officer—Office of Diversity, Equity, and Inclusion (ODE&I), Office of the Chief Operating Officer, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW, Washington, DC 20551, (202) 452-2883, or
Rehabilitation Act of 1973 (29 U.S.C. 791); Title VII of the Civil Rights Act (42 U.S.C. 2000e
These records are collected and maintained to assist the Board in carrying out its responsibilities consistent with the Rehabilitation Act of 1973, Title VII of the Civil Rights Act, and other nondiscrimination statutes.
Applicants for Board employment and current and former Board employees.
Self-identification reports of applicants and current and former employees regarding demographics including race, national origin, sex, personal pronouns, gender identity, and disability; per EEOC guidance identification by Board staff regarding the race, national origin, and sex for those current and former employees who decline to voluntarily provide such information.
The information is provided by the individual to whom the record pertains and employees responsible for administering the Board's EEO program or human resource function.
General routine uses A, B, C, D, F, G, I, and J apply to this system. These general routine uses are located at
Paper records in this system are stored in locked file cabinets with access limited to staff with a need to know. Electronic records are stored on
Records can be retrieved by the individual's name.
All records are retained for three years.
Paper records are secured by lock and key and electronic files are stored on secure servers. The system has the ability to track individual user actions within the system. The audit and accountability controls are based on NIST and Board standards which, in turn, are based on applicable laws and regulations. The controls assist in detecting security violations and performance or other issues in the system. Access to the system is restricted to authorized users within the Board who require access for official business purposes. Users are classified into different roles and common access and usage rights are established for each role. User roles are used to delineate between the different types of access requirements such that users are restricted to data that is required in the performance of their duties. Periodic assessments and reviews are conducted to determine whether users still require access, have the appropriate role, and whether there have been any unauthorized changes.
The Privacy Act allows individuals the right to access records maintained about them in a Board system of records. Your request for access must: (1) contain a statement that the request is made pursuant to the Privacy Act of 1974; (2) provide either the name of the Board system of records expected to contain the record requested or a concise description of the system of records; (3) provide the information necessary to verify your identity; and (4) provide any other information that may assist in the rapid identification of the record you seek.
Current or former Board employees may make a request for access by contacting the Board office that maintains the record. The Board handles all Privacy Act requests as both a Privacy Act request and as a Freedom of Information Act request. The Board does not charge fees to a requestor seeking to access or amend his/her Privacy Act records.
You may submit your Privacy Act request to the—Secretary of the Board, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW, Washington, DC 20551.
You may also submit your Privacy Act request electronically by filling out the required information at:
The Privacy Act allows individuals to seek amendment of information that is erroneous, irrelevant, untimely, or incomplete and is maintained in a system of records that pertains to them. To request an amendment to your record, you should clearly mark the request as a “Privacy Act Amendment Request.” You have the burden of proof for demonstrating the appropriateness of the requested amendment and you must provide relevant and convincing evidence in support of your request.
Your request for amendment must: (1) provide the name of the specific Board system of records containing the record you seek to amend; (2) identify the specific portion of the record you seek to amend; (3) describe the nature of and reasons for each requested amendment; (4) explain why you believe the record is not accurate, relevant, timely, or complete; and (5) unless you have already done so in a related Privacy Act request for access or amendment, provide the necessary information to verify your identity.
Same as “Access procedures” above. You may also follow this procedure in order to request an accounting of previous disclosures of records pertaining to you as provided for by 5 U.S.C. 552a(c).
None.
This SORN was previously published in the
Board of Governors of the Federal Reserve System.
The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The public portions of the applications listed below, as well as other related filings required by the Board, if any, are available for immediate inspection at the Federal Reserve Bank(s) indicated below and at the offices of the Board of Governors. This information may also be obtained on an expedited basis, upon request, by contacting the appropriate Federal Reserve Bank and from the Board's Freedom of Information Office at
Comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors, Ann E. Misback, Secretary of the Board, 20th Street and Constitution Avenue, NW, Washington DC 20551-0001, not later than October 16, 2023.
A. Federal Reserve Bank of Minneapolis (Stephanie Weber, Assistant Vice President) 90 Hennepin Avenue, Minneapolis, Minnesota 55480-0291. Comments can also be sent electronically to
1.
Board of Governors of the Federal Reserve System.
Office of Family Assistance, Administration for Children and Families, United States Department of Health and Human Services.
Request for public comments.
The Administration for Children and Families (ACF) Office of Family Assistance (OFA) is requesting a 3-year extension of the Temporary Assistance for Needy Families (TANF) Expenditure Report, Form ACF-196R (Office of Management and Budget #0970-0446 expires February 29, 2024). ACF is proposing minor updates to the form to update references to lapsed timeframes, demonstrative tables that aid in a recipient's comprehension of reporting requirements and minor edits to the instructions and formatting to improve presentation.
You can obtain copies of the proposed collection of information and submit comments by emailing
Office of Human Services Emergency Preparedness and Response (OHSEPR), Administration for Children & Families (ACF), Department of Health and Human Services (HHS).
Notice of a modified system of records.
The Department of Health and Human Services (HHS) is modifying a system of records maintained by the Administration for Children & Families (ACF), 09-80-0327 ORR Repatriation Program Records, to reflect the change ownership of the repatriation program that was transferred to ACF's Office of Human Services Emergency Preparedness and Response (OHSEPR), and to broaden the scope of the system of records to include functionally similar records that OHSEPR uses to identify, assess, and address immediate unmet human services (
This modified system of records is applicable September 14, 2023, subject to a 30-day period to comment on the new and revised routine uses. Submit any comments by October 16, 2023. The new and revised routine uses will become effective on October 16, 2023 unless the Department receives comments that would persuade us to modify the notice.
The public should address written comments on the proposed system of records to Anita Alford, Senior Official for Privacy, Administration for Children & Families by email, to
General questions about the system of records may be submitted to the OHSEPR Deputy Director, Byron R. Mason, by telephone at (202) 365-8110 or by email to
HHS established system of records 09-80-0327 in 2016 to cover records about temporary assistance provided to repatriated U.S. citizens and their dependents under ACF's repatriation program, to meet the individuals' human service's needs. At that time, the repatriation program was administered by ACF's Office of Refugee Resettlement (ORR). In 2018, ACF transferred responsibility for the repatriation program to ACF's Office of Human Services Emergency Preparedness and Response (OHSEPR) that also administers ACF's disaster assistance program. Because the records used for both programs are functionally similar (
• Changing the name of the system of records to refer to OHSEPR instead of ORR and to reflect the expanded scope of the system of records.
• Updating the System Location and System Manager(s) sections to provide address and contact information for OHSEPR instead of ORR, and to add service provider and contractor locations to the System Location section.
• Revising the Authorities section to add authorities for the disaster assistance program, and to add a Social Security Number (SSN) collection authority that applies to the repatriation program only.
• Adding descriptions of disaster assistance program records throughout the SORN.
• Revising the Purpose(s) section to describe the primary purpose for repatriation program records used as “making eligibility determinations before temporary assistance is provided;” to add, as an additional secondary purpose for the use of repatriation program records, “providing training and technical assistance to State human services departments and local services providers;” to add purposes for disaster program records use; and to add a note at the end of the section stating that records of repatriation assistance to particular individuals are referred from this system of records to a separate system of records for debt management and collection purposes.
• Revising the Categories of Records section to describe the categories of records maintained for the repatriation program as case files containing correspondence, and to summarize the data elements contained in those records instead of listing them; to add categories of records maintained for the disaster assistance program; and to include a note explaining that records OHSEPR maintains as a result of providing disaster assistance services on behalf of another HHS component or another agency are not covered by this SORN.
• Specifying, in the Record Source Categories section the sources that apply to the repatriation program or both programs.
• Adding and revising routine uses, and removing unnecessary routine uses, as follows. A note has been added, stating that a routine use applies to both the repatriation program and the disaster assistance programs unless worded to apply to only one of those programs.
○ Routine use 1,
○ Routine use 2,
○ Routine use 4,
○ Routine use 5 (4 in the existing SORN), is now titled
○ Routine use 6,
○ Routine use 7,
○ Routine use 8 (15 in the existing SORN), is now titled
○ Routine use 12,
○ Routine use 13,
○ Routine use 14,
○ Routine use 15,
○ Routine uses 16 and 17,
○ Routine use 18,
○ Routine uses 9 and 10,
○ Routine use 11,
○ Routine uses formerly numbered as 6, 7, and 14,
• Removing the section titled Disclosure to Consumer Reporting Agencies, because such disclosures are not made by ACF/OHSEPR from this system of records. Such disclosures are made by HHS' Program Support Center from the system of records that covers records used for debt management and collection purposes.
• Revising the Storage section to describe the storage media as hard copy files, electronic storage media, and cloud/network storage, instead of stating that the records are stored on a grantee's computer network and safe/file cabinet.
• Revising the Retrieval section to add that disaster assistance case records are retrieved by the individual's name or case file number.
• Revising the Retention section to cite the disposition schedule and retention periods applicable to records about disaster survivors.
• Revising the Safeguards section to describe the particular administrative, technical, and physical safeguards used to prevent unauthorized access to the records, instead of simply stating that safeguards conform to the HHS Information Security Program; and to mention “grantees” in addition to contractors.
• Updating the procedures for making access, correction, and notification
Because this modification includes significant changes, HHS provided advance notice of the modified system of records to the Office of Management and Budget and Congress as required by 5 U.S.C. 552a(r) and OMB Circular A-108.
OHSEPR Repatriation and Disaster Human Services Case Management Records, 09-80-0389.
Unclassified.
The address of the agency component responsible for this system of records is Administration for Children & Families (ACF), Office of Human Services Emergency Preparedness and Response (OHSEPR), 330 C Street SW—4th Floor, Washington, DC 20201.
On behalf of ACF, a grantee located in Baltimore MD stores ACF's repatriation program records in a cloud-based system. A contractor and subcontractor located in Washington, DC manage ACF's disaster assistance database housed on an ACF server.
The System Manager is: OHSEPR Repatriation Specialist, HHS, ACF, Office of Human Services Emergency Preparedness and Response (OHSEPR), 330 C Street SW—4th Floor, Washington, DC 20201;
The purpose of the system of records is to enable OHSEPR to provide assistance in an efficient and expeditious manner to repatriated U.S. citizens and their dependents and to disaster survivors. Specifically:
• Records for the repatriation program are used by OHSEPR for the primary purposes of making eligibility determinations before temporary assistance is provided to U.S. citizens and their dependents who are without available resources in the U.S. upon their arrival from abroad and for up to 90 days after their arrival, not exceeding 90 days as may be provided in regulations of the Secretary of HHS and supporting repayment of assistance allocable to individual recipients. Temporary assistance may include money payments, medical care, temporary billeting, transportation, and other goods and services necessary for the health or welfare of individuals (including guidance, counseling, and other welfare services). All temporary assistance provided under the repatriation program and allocable to individual recipients is repayable to the Federal Government. OHSEPR may use the records for the secondary purpose of providing training and technical assistance to State human services departments and local services providers, in addition to creating aggregate datasets to use in monitoring and assessing the effectiveness of the repatriation program.
• Records for the disaster assistance program are used by OHSEPR for the primary purpose of identifying, assessing, and addressing immediate, unmet disaster-caused human services needs of survivors of federally declared disasters. Disaster assistance may include conducting intake assessments and referrals, providing outreach and triage, developing a Disaster Survivor Recovery Plan, and connecting the disaster survivor to resources that are locally available. OHSEPR may use the records for the secondary purposes of creating aggregate datasets to use in providing financial assistance to State or local government agencies or qualified private organizations assisting survivors, building local disaster case management capacity through the provision of training and technical assistance to States, Tribes, Territories, and local governments, and monitoring and assessing the effectiveness of the disaster assistance program.
OHSEPR will refer records from this system of records about temporary assistance allocable to individuals receiving repatriation assistance that is repayable to the Federal Government, to the Program Support Center within the Office of the Assistant Secretary for Administration for debt management and collection purposes. Records used for debt management and collection purposes are maintained under SORN 09-40-0012, Debt Management and Collection Records, and may be used and disclosed for the purposes described in that SORN.
The categories of individuals covered by this system are:
• U.S. citizens and their dependents who are receiving temporary assistance and are identified by the Department of State as having returned or been brought from a foreign country to the U.S. because of destitution, illness, war, threat of war, or a similar crisis.
• Survivors of disasters who reside within a jurisdiction included in federally declared disaster or emergency and apply for disaster assistance under an HHS authority (
The categories of records are:
• Case files containing correspondence about repatriated U.S. citizens and their dependents receiving temporary assistance. Information about a repatriate may include full name, current mailing address, social security number, passport number, date and place of birth, dependents, and information about any medical care, temporary billeting, transportation, or other goods and services (
• Case files about disaster survivors who apply for disaster assistance under
Note that this system of records does
• Records of immediate disaster case management services that OHSEPR provides on behalf of another component of HHS or another agency. For example, pursuant to an interagency agreement, OHSEPR provides immediate disaster case management (IDCM) services on behalf of the Department of Homeland Security, FEMA (DHS/FEMA), under mission assignments from DHS/FEMA. Records of those services are covered under a FEMA SORN; currently, DHS/FEMA-008 Disaster Recovery Assistance Files System of Records.
• Disaster response records maintained by another component of HHS, such as the records maintained by the Office of the Assistant Secretary for Preparedness and Response (ASPR) under SORNs 09-90-0039 National Disaster Claims Processing System, and 09-90-0040 National Disaster Medical System (NDMS) Disaster Medical Information Suite (DMIS).
Information in repatriation program records is received directly from the subject individual (
Information in disaster assistance program records is received directly from the subject individual (
In addition to other disclosures permitted under 5 U.S.C. 552a(b)(1) and (2) and (4) through (11), OHSEPR may disclose a record about an individual from this system of records to parties outside HHS as provided in these routine uses, which are published pursuant to 5 U.S.C. 552a(b)(3). A routine use applies to both the repatriation program and the disaster assistance program, unless worded to apply to only one of those programs. Each proposed disclosure of information under these routine uses will be evaluated to ensure that the disclosure is legally permissible, including but not limited to ensuring that the purpose of the disclosure is compatible with the purpose for which the information was collected.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
• HHS, or any component thereof; or
• Any employee of HHS in his or her official capacity; or
• Any employee of HHS in his or her individual capacity where DOJ or HHS has agreed to represent the employee; or
• The United States, if HHS determines that the litigation is likely to affect HHS or any of its components,
is a party to the litigation or has an interest in the litigation and the use of the records by DOJ or HHS is deemed by HHS to be relevant and necessary to the litigation.
15.
16.
17.
18.
Records are stored in hard copy files, electronic storage media, and cloud/network storage.
Disaster assistance case records are retrieved by the individual's name or case file number. Repatriate case records are retrieved by the individual's name, case file number, or social security number.
Records about individuals receiving repatriation assistance are retained and disposed of in accordance with NARA-approved disposition schedule N1-292-93-1, as follows:
• Files are transferred to a Federal records center one year after termination of collection efforts and are destroyed five years after termination of collection efforts.
Records about disaster survivors are disposed of in accordance with NARA-approved disposition schedule DAA-0292-2019-0001, as follows:
• Database intake assessment records: Cut off at the end of the calendar year, following the end of a disaster mission; Destroy 10 years after cutoff.
• Resource referral list: Cut off at the end of the calendar year, following the end of a disaster mission; Destroy 10 years after cutoff.
• Disaster Survivor Recovery Plans: Cut off at the end of the calendar year, following the end of a disaster mission; Destroy 3 years after cutoff.
Safeguards conform to the HHS Information Security and Privacy Program,
Case managers, should they need to use paper records into the field, will take only those records needed to complete field activities, and all paper files will be kept in a locking file box while in transport and kept in a controlled facility when not being directly used for case management functions. Records in electronic format are accessible only to authorized users using two-factor authentication and password protection through a secured system protected by encryption, firewalls, and intrusion detection systems that require additional encryption for records stored on removable media. Records that become eligible for destruction are disposed of in alignment with the destruction methods prescribed by the NIST Special Publication (SP) 800-88. The associated information technology (IT) system(s) receive Authority to Operate (ATO) under the guidance of NIST SP 800-37.
Individuals seeking access to records about them in this system of records must submit a written access request to the System Manager identified in the “System Manager(s)” section of this SORN, in accordance with the Department's Privacy Act implementation regulations in 45 CFR. The request must contain the requester's full name, address, telephone number and/or email address, date and place of birth, and signature, and should identify the repatriation program or the applicable disaster, or otherwise provide enough information to enable OHSEPR to locate the requested records.
So that HHS may verify the requester's identity, the requester's signature must be notarized or the request must include the requester's written certification that the requester is the individual who the requester claims to be and that the requester understands that the knowing and willful request for or acquisition of a record pertaining to an individual under false pretenses is a criminal offense subject to a fine of up to $5,000.
You may request that a copy of the record be sent to you, or you may request an appointment to review the record in person (including with a person of your choosing, if you provide written authorization for agency personnel to discuss the record in that person's presence). You may also request an accounting of disclosures that have been made of the record, if any.
Individuals seeking to amend records about them in this system of records must submit a written amendment request to the System Manager identified in the “System Manager(s)” section of this SORN, in accordance with the Department's Privacy Act implementation regulations in 45 CFR. The request must contain the same information required for an access request. The request must include verification of the requester's identity in the same manner required for an access request; must reasonably identify the record and specify the information contested, the corrective action sought, and the reasons for requesting the correction; and should include supporting information to show how the record is factually inaccurate, incomplete, untimely, or irrelevant.
Individuals who wish to know if this system contains records about them should submit a written notification request to the System Manager identified in the “System Manager(s)” section of this SORN, in accordance with the Department's Privacy Act implementation regulations in 45 CFR. The request must contain the same information required for an access request and must include verification of the requester's identity in the same manner required for an access request.
None.
81 FR 46687 (July 18, 2016), 83 FR 6591 (Feb. 14, 2018).
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 October 16, 2023.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
When submitting comments or requesting information, please include the document identifier 0990-0438-30D 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.
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the National Heart, Lung, and Blood Advisory Council.
The meeting will be a hybrid meeting held in-person and virtually and will be open to the public as indicated below. Individuals who plan to attend in-person or view the virtual meeting and need special assistance, such as sign language interpretation or other reasonable accommodations, should notify the Contact Person listed below in advance of the meeting. The meeting can be accessed from the NIH Videocast at the following links:
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.
Any member of the public interested in presenting oral comments to the committee may notify the Contact Person listed on this notice at least 10 days in advance of the meeting. Interested individuals and representatives of organizations may submit a letter of intent, a brief description of the organization represented, and a short description of the oral presentation. Only one representative of an organization may be allowed to present oral comments and if accepted by the committee, presentations may be limited to five minutes. Both printed and electronic copies are requested for the record. In addition, any interested person may file written comments with the committee by forwarding their statement to the Contact Person listed on this notice. The statement should include the name, address, telephone number and when applicable, the business or professional affiliation of the interested person.
In the interest of security, NIH has procedures at
Information is also available on the Institute's/Center's home page:
Federal Emergency Management Agency, Department of Homeland Security.
Notice.
Comments are requested on proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for the communities listed in the table below. The purpose of this notice is to seek general information and comment regarding the preliminary FIRM, and where applicable, the FIS report that the Federal Emergency Management Agency (FEMA) has provided to the affected communities. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP).
Comments are to be submitted on or before December 13, 2023.
The Preliminary FIRM, and where applicable, the FIS report for each community are available for inspection at both the online location
You may submit comments, identified by Docket No. FEMA-B-2369, to Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and
FEMA proposes to make flood hazard determinations for each community listed below, in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR 67.4(a).
These proposed flood hazard determinations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities. These flood hazard determinations are used to meet the floodplain management requirements of the NFIP.
The communities affected by the flood hazard determinations are provided in the tables below. Any request for reconsideration of the revised flood hazard information shown on the Preliminary FIRM and FIS report that satisfies the data requirements outlined in 44 CFR 67.6(b) is considered an appeal. Comments unrelated to the flood hazard determinations also will be considered before the FIRM and FIS report become effective.
Use of a Scientific Resolution Panel (SRP) is available to communities in support of the appeal resolution process. SRPs are independent panels of experts in hydrology, hydraulics, and other pertinent sciences established to review conflicting scientific and technical data and provide recommendations for resolution. Use of the SRP only may be exercised after FEMA and local communities have been engaged in a collaborative consultation process for at least 60 days without a mutually acceptable resolution of an appeal. Additional information regarding the SRP process can be found online at
The watersheds and/or communities affected are listed in the tables below. The Preliminary FIRM, and where applicable, FIS report for each community are available for inspection at both the online location
Federal Emergency Management Agency, Department of Homeland Security.
Notice.
Comments are requested on proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for the communities listed in the table below. The purpose of this notice is to seek general information and comment regarding the preliminary FIRM, and where applicable, the FIS report that the Federal Emergency Management Agency (FEMA) has provided to the affected communities. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP).
Comments are to be submitted on or before December 13, 2023.
The Preliminary FIRM, and where applicable, the FIS report for each community are available for inspection at both the online location
You may submit comments, identified by Docket No. FEMA-B-2366, to Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
FEMA proposes to make flood hazard determinations for each community listed below, in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR 67.4(a).
These proposed flood hazard determinations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities. These flood hazard determinations are used to meet the floodplain management requirements of the NFIP.
The communities affected by the flood hazard determinations are provided in the tables below. Any request for reconsideration of the revised flood hazard information shown on the Preliminary FIRM and FIS report that satisfies the data requirements outlined in 44 CFR 67.6(b) is considered an appeal. Comments unrelated to the flood hazard determinations also will be considered before the FIRM and FIS report become effective.
Use of a Scientific Resolution Panel (SRP) is available to communities in support of the appeal resolution process. SRPs are independent panels of experts in hydrology, hydraulics, and other pertinent sciences established to review conflicting scientific and technical data and provide recommendations for resolution. Use of the SRP only may be exercised after FEMA and local communities have been engaged in a collaborative consultation process for at least 60 days without a mutually acceptable resolution of an appeal. Additional information regarding the SRP process can be found online at
The watersheds and/or communities affected are listed in the tables below. The Preliminary FIRM, and where applicable, FIS report for each community are available for inspection at both the online location
Federal Emergency Management Agency, Department of Homeland Security.
Notice.
New or modified Base (1-percent annual chance) Flood Elevations (BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries or zone designations, and/or regulatory floodways (hereinafter referred to as flood hazard determinations) as shown on the indicated Letter of Map Revision (LOMR) for each of the communities listed in the table below are finalized. Each LOMR revises the Flood Insurance Rate Maps (FIRMs), and in some cases the Flood Insurance Study (FIS) reports, currently in effect for the listed communities.
Each LOMR was finalized as in the table below.
Each LOMR is available for inspection at both the respective Community Map Repository address listed in the table below and online through the FEMA Map Service Center at
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
The Federal Emergency Management Agency (FEMA) makes the final flood hazard determinations as shown in the LOMRs for each community listed in the table below. Notice of these modified flood hazard determinations has been published in newspapers of local circulation and 90 days have elapsed since that publication. The Deputy Associate Administrator for Insurance and Mitigation has resolved any appeals resulting from this notification.
The modified flood hazard determinations are made pursuant to section 206 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001
The new or modified flood hazard information is the basis for the floodplain management measures that the community is required either to adopt or to show evidence of being already in effect in order to remain qualified for participation in the National Flood Insurance Program (NFIP).
This new or modified flood hazard information, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities.
This new or modified flood hazard determinations are used to meet the floodplain management requirements of the NFIP. The changes in flood hazard determinations are in accordance with 44 CFR 65.4.
Interested lessees and owners of real property are encouraged to review the final flood hazard information available at the address cited below for each community or online through the FEMA Map Service Center at
Federal Emergency Management Agency; Department of Homeland Security.
Notice; correction.
On July 31, 2023, FEMA published in the
Comments are to be submitted on or before December 13, 2023.
The Preliminary Flood Insurance Rate Map (FIRM), and where applicable, the Flood Insurance Study (FIS) report for each community are available for inspection at both the online location and the respective Community Map Repository address listed in the table below. Additionally, the current effective FIRM and FIS report for each community are accessible online through the FEMA Map Service Center at
You may submit comments, identified by Docket No. FEMA-B-2357, to Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
Rick Sacbibit, Chief, Engineering Services Branch, Federal Insurance and Mitigation Administration, FEMA, 400 C Street SW, Washington, DC 20472, (202) 646-7659, or (email)
FEMA proposes to make flood hazard determinations for each community listed in the table below, in accordance with Section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR 67.4(a).
These proposed flood hazard determinations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own, or pursuant to policies established by other Federal, State, or regional entities. These flood hazard determinations are used to meet the floodplain management requirements of the NFIP.
Use of a Scientific Resolution Panel (SRP) is available to communities in support of the appeal resolution process. SRPs are independent panels of experts in hydrology, hydraulics, and other pertinent sciences established to review conflicting scientific and technical data and provide recommendations for resolution. Use of the SRP may only be exercised after FEMA and local communities have been engaged in a collaborative consultation process for at least 60 days without a mutually acceptable resolution of an appeal. Additional information regarding the SRP process can be found online at
The communities affected by the flood hazard determinations are provided in the table below. Any request for reconsideration of the revised flood hazard determinations shown on the Preliminary FIRM and FIS report that satisfies the data requirements outlined in 44 CFR 67.6(b) is considered an appeal. Comments unrelated to the flood hazard determinations will also be considered before the FIRM and FIS report are made final.
In the
United States International Trade Commission.
Notice.
The Commission hereby gives notice of the scheduling of expedited reviews pursuant to the Tariff Act of 1930 (“the Act”) to determine whether revocation of the antidumping and countervailing duty orders on stainless steel flanges from China and India would be likely to lead to continuation or recurrence of material injury within a reasonably foreseeable time.
August 4, 2023.
Nitin Joshi (202) 708-1669, Office of Investigations, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on (202) 205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at (202) 205-2000. General information concerning the Commission may also be obtained by accessing its internet server (
For further information concerning the conduct of these reviews and rules of general application, consult the Commission's Rules of Practice and Procedure, part 201, subparts A and B (19 CFR part 201), and part 207, subparts A, D, E, and F (19 CFR part 207).
In accordance with §§ 201.16(c) and 207.3 of the rules, each document filed by a party to the reviews must be served on all other parties to the reviews (as identified by either the public or BPI service list), and a certificate of service must be timely filed. The Secretary will not accept a document for filing without a certificate of service.
By order of the Commission.
On August 10, 2022, the Drug Enforcement Administration (hereinafter, DEA or Government) issued an Order to Show Cause (hereinafter, OSC) to Green Wave Analytical (hereinafter, Applicant) of San Diego, California. Request for Final Agency Action (hereinafter, RFAA), Exhibit (hereinafter, RFAAX) 10, at 1, 6. The OSC proposed the denial of Applicant's application for a DEA Certificate of Registration (hereinafter, registration), Control No. W21055614H, alleging that Applicant has “committed such acts as would render [its] registration inconsistent with the public interest.”
The Agency makes the following findings of fact based on the uncontroverted evidence submitted by the Government in its RFAA dated March 3, 2023.
According to the DEA Diversion Investigator assigned to investigate Applicant (hereinafter, the DI), on May 18, 2021, Applicant applied, through its owner (hereinafter, J.P.), for a DEA registration as an analytical lab. RFAAX 1, at 2;
The DI attempted to schedule with J.P. an onsite preregistration inspection of Applicant and time to assist J.P. with disposal of the controlled substances that Applicant continued to unlawfully possess.
Thereafter, the DI requested administrative subpoenas for VEV's records “[t]o determine whether [Applicant] received any controlled substance[s] as a DEA registrant, for which it lacked records of receipt, and whether [Applicant] received any controlled substances after its DEA registration expired, for which it lacked legal authorization.” RFAAX 1, at 5-6. On August 9, 2021, DEA issued an administrative subpoena to VEV, pursuant to which VEV produced records of controlled substance distributions to Applicant and “Order Information/Chain of Custody” forms.
On July 6, 2022, DEA issued another administrative subpoena to VEV, pursuant to which VEV produced records of controlled substance distributions from VEV to Applicant between December 3, 2018, and September 30, 2020, “Order Information/Chain of Custody” forms, and DEA Forms 222.
Pursuant to Section 303(g)(1) of the CSA “[t]he Attorney General shall register practitioners . . . to dispense . . . controlled substances . . . if the applicant is authorized to dispense . . . controlled substances under the laws of the State in which he practices.” 21 U.S.C. 823(g)(1). Section 303(g)(1) further provides that an application for a practitioner's registration may be denied upon a determination that “the issuance of such registration . . . would be inconsistent with the public interest.”
(A) The recommendation of the appropriate State licensing board or professional disciplinary authority.
(B) The applicant's experience in dispensing, or conducting research with respect to controlled substances.
(C) The applicant's conviction record under Federal or State laws relating to the manufacture, distribution, or dispensing of controlled substances.
(D) Compliance with applicable State, Federal, or local laws relating to controlled substances.
(E) Such other conduct which may threaten the public health and safety.
21 U.S.C. 823(g)(1).
The DEA considers these public interest factors in the disjunctive.
Here, the Agency finds that the Government's evidence satisfies its
Evidence is considered under Public Interest Factors B and D when it reflects compliance (or non-compliance) with laws related to controlled substances and experience dispensing controlled substances.
Under federal law, those engaged in chemical analysis are required to be registered with the DEA. 21 CFR 1301.13(e)(1)(x). Regarding recordkeeping, the CSA requires that DEA registrants maintain complete and accurate records of the manufacture, receipt, sale, delivery, or disposal of controlled substances. 21 U.S.C. 827(a)(3). Additional relevant recordkeeping requirements can be found at 21 CFR 1304.03(a) (all registrants shall maintain required records), 1304.04(a) (records must be retained and available for DEA inspection for at least two years), 1304.21(a) (records must be complete and accurate), 1304.23(a) (registrants registered for chemical analysis with controlled substances must maintain records for each controlled substance).
Here, the record demonstrates that prior to the expiration of its previous registration on September 30, 2020, Applicant failed to maintain necessary records as required by the CSA despite receiving and possessing controlled substances. Further, the record demonstrates that following the expiration of its previous registration on September 30, 2020, Applicant unlawfully continued to receive and possess large quantities of controlled substances without maintaining necessary records for two years as required by the CSA. As Applicant's conduct displays clear violations of federal law relating to controlled substances, the Agency hereby finds that Applicant violated 21 U.S.C. 827(a)(3) and 21 CFR 1301.13(e)(1)(x), 1304.03(a), 1304.04(a), 1304.21(a), 1304.23(a).
Accordingly, the Agency finds that Factors B and D weigh in favor of denial of Applicant's application and thus finds Applicant's registration to be inconsistent with the public interest in balancing the factors of 21 U.S.C. 823(g)(1). The Agency further finds that Applicant failed to provide sufficient evidence to rebut the Government's
Where, as here, the Government has established grounds to deny Applicant's application, the burden shifts to the registrant to show why it can be entrusted with the responsibility carried by a registration.
Here, Applicant did not request a hearing, submit a corrective action plan, respond to the OSC, or otherwise avail itself of the opportunity to refute the Government's case. As such, Applicant has made no representations as to its future compliance with the CSA nor demonstrated that it can be entrusted with registration. Moreover, the evidence presented by the Government clearly shows that Applicant violated the CSA and the Agency has found that Applicant is ineligible for DEA registration. S
Pursuant to 28 CFR 0.100(b) and the authority vested in me by 21 U.S.C. 823(g)(1) and 21 U.S.C. 824(a), I hereby deny the pending application for a Certificate of Registration, Control No. W21055614H, submitted by Green Wave Analytical, as well as any other pending application of Green Wave Analytical for additional registration in California. This Order is effective October 16, 2023.
This document of the Drug Enforcement Administration was signed on September 5, 2023, by Administrator Anne Milgram. That document with the original signature and date is maintained by DEA. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DEA Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of DEA. This administrative process in no way alters the legal effect of this document upon publication in the
On October 18, 2022, the Drug Enforcement Administration (DEA or Government) issued an Order to Show Cause and Immediate Suspension of Registration (OSC/ISO) to Rachel Pittala, APRN (Respondent) of Orlando, Florida. OSC/ISO, at 1. The OSC/ISO informed Respondent of the immediate suspension of her DEA Certificate of Registration, Control No. MP4600791, pursuant to 21 U.S.C. 824(d), alleging that Respondent's continued registration constitutes “`an imminent danger to the public health or safety.' ” OSC/ISO, at 1 (quoting 21 U.S.C. 824(d)). The OSC/
A hearing was held before DEA Administrative Law Judge Teresa A. Wallbaum (the ALJ) who, on May 15, 2023, issued her Recommended Rulings, Findings of Fact, Conclusions of Law, and Decision (Recommended Decision or RD), which recommended revocation of Respondent's registration. RD, at 27. Respondent did not file exceptions to the RD. Having reviewed the entire record, the Agency adopts and hereby incorporates by reference the entirety of the ALJ's rulings, credibility findings,
Respondent was a mid-level practitioner at Sawgrass Health of Florida (Sawgrass Health), a practice operated by physician S.H. RD, at 5; Tr. 37, 44. On April 4, 2022, an undercover detective (UC) posing as a patient went to Sawgrass Health and recorded his visit with S.H. and his attempt to obtain prescriptions. RD, at 5; Tr. 46-47, 74. Respondent was not present during the visit. RD, at 5; Tr. 66. UC testified that during the visit, S.H. did not perform a physical examination, take vital signs, or obtain a medical history; further, S.H. indicated that he would not be issuing any prescriptions and that Respondent would follow up with UC to issue him prescriptions. RD, at 5-6; Tr. 83, 92, 112. On April 5, 2022, Respondent and UC had a phone call. RD, at 6; Tr. 92, 94-95; GX 6-7.
At the beginning of the call, Respondent stated to UC, “[S.H.] sent me a message and . . . asked me to give you a call so we can . . . see whatcha need,” and then immediately asked UC “what medication [he was] needing.” RD, at 6; GX 8, at 1. UC stated that he wanted Adderall, to which Respondent asked UC if he had attention-deficit/hyperactivity disorder (ADHD) and UC replied, “No I don't I just . . . like taking it[.] I don't . . . have any medical stuff.”
Following Respondent's indication that she would send a prescription for Adderall to UC's pharmacy, UC also asked Respondent for a Xanax
Respondent and UC again discussed the dangers of fentanyl; Respondent told UC that he did the right thing by coming to see S.H. and asked that UC not purchase anything illicitly. RD, at 7; GX 8, at 8-10. At the conclusion of the phone call, Respondent told UC that she would issue him prescriptions for 30 mg tablets of Adderall and 1 mg tablets of Klonopin. RD, at 7; GX 8, at 5-6, 10-11. After his call with Respondent, UC went to the pharmacy where Respondent had sent his prescriptions, filled the prescriptions, and obtained the controlled substances. RD, at 7; Tr. 106-108; GX 9a; GX 9b; GX 11.
Respondent worked at Sawgrass Health and signed a collaborative agreement with S.H. for him to be her supervising physician. RD, at 8; Tr. 221-222, 225-226, 230; RX 2.
Regarding the current matter, Respondent testified that prior to the phone call with UC, S.H. had provided her with a verbal history and indicated that UC had a substance use disorder, but S.H. specifically stated that he did not diagnose UC with ADHD or anxiety. RD, at 9; Tr. 371-373, 393, 395-397.
Regarding the Klonopin prescription, Respondent testified that she prescribed Klonopin to UC because she wanted to keep him safe and further explore a plan of care with follow-up visits. RD, at 10; Tr. 385-386.
In the time since her call with UC and since leaving Sawgrass Health, Respondent has obtained her post-master's certification to treat psychiatric and mental health conditions as well as completed two additional courses, one regarding safely and effectively prescribing controlled substances in Florida and the other regarding the laws and rules governing nursing in Florida. RD, at 11; Tr. 248-249; RX 8-9. Respondent testified that this training “really clarified some things for [her].” RD, at 11; Tr. 247. Respondent also testified that she now understands that S.H.'s opinion on Adderall was wrong and that she violated the CSA. RD, at 11; Tr. 249, 299.
DEA hired Dr. Kennedy to testify as an expert in the standard of care in prescribing controlled substances in Florida, including for the management of pain and addiction and including prescribing by nurse practitioners. RD, at 4; Tr. 136-137.
In reviewing the current matter, Dr. Kennedy determined, and the Agency agrees, that Respondent issued both prescriptions to UC beneath the Florida standard of care because, as detailed above, Respondent failed to make a diagnosis justifying either prescription, failed to take a medical history, failed to perform a physical examination, and failed to accurately document her treatment. RD, at 15; Tr. 170-172. Respondent's diagnostic procedure consisted of asking UC if he had ADHD and anxiety, to which UC repeatedly stated that he did not have either condition and wanted to take Adderall and Klonopin because he liked them and wanted to relax; and, Respondent ultimately failed to diagnose UC with any condition justifying either prescription, as well as ignored the FDA “Black Box” warning for Adderall in particular. RD, at 15-16; 159, 163-164, 166-169, 171-172, 419-420; GX 8, at 4, 8. Moreover, Respondent did not take a medical history for either prescription, did not perform any diagnostic interview for either prescription, failed
Under the CSA, “[a] registration . . . to . . . dispense a controlled substance . . . may be suspended or revoked by the Attorney General upon a finding that the registrant . . . has committed such acts as would render her registration under section 823 of this title inconsistent with the public interest as determined under such section.” 21 U.S.C. 824(a). In making the public interest determination, the CSA requires consideration of the following factors:
(A) The recommendation of the appropriate State licensing board or professional disciplinary authority.
(B) The [registrant's] experience in dispensing, or conducting research with respect to controlled substances.
(C) The [registrant's] conviction record under Federal or State laws relating to the manufacture, distribution, or dispensing of controlled substances.
(D) Compliance with applicable State, Federal, or local laws relating to controlled substances.
(E) Such other conduct which may threaten the public health and safety.
The DEA considers these public interest factors in the disjunctive.
The Government has the burden of proof in this proceeding. 21 CFR 1301.44. While the Agency has considered all of the public interest factors in 21 U.S.C. 823(g)(1), the Government's evidence in support of its
Having reviewed the record and the RD, the Agency agrees with the ALJ, adopts the ALJ's analysis, and finds that the Government's evidence satisfies its
Evidence is considered under Public Interest Factors B and D when it reflects compliance (or non-compliance) with laws related to controlled substances and experience dispensing controlled substances.
In the current matter, the Agency agrees with the ALJ's analysis that Respondent issued prescriptions for Adderall and Klonopin to UC beneath the Florida standard of care and thus violated Federal and State Law because, as detailed above, Respondent failed to make a diagnosis justifying either prescription, failed to take a medical history, failed to perform a physical examination (conduct a diagnostic interview), and failed to accurately document her treatment. RD, at 20. Instead, Respondent “prescribed two controlled substances to a person who repeatedly denied having any medical justification for those medications, repeatedly admitted that he was obtaining controlled substances illegally, and admitted that he wanted the controlled substances for recreational use.”
As Respondent's conduct displays clear violations of the federal and state regulations described above, the Agency agrees with the ALJ and hereby finds that Respondent violated 21 CFR 1306.04(a) and Fla. Stat. 464.018(1)(i), 464.018(1)(n), 464.018(1)(p)(3), 464.018(1)(p)(6), 893.02(3), 893.05(1)(a). RD, at 23. Accordingly, the Agency agrees with the ALJ and finds that Factors B and D weigh in favor of revocation of Respondent's registration and thus finds Respondent's continued registration to be inconsistent with the public interest in balancing the factors of 21 U.S.C. 823(g)(1).
Where, as here, the Government has established sufficient grounds to revoke Respondent's registration, the burden shifts to the registrant to show why she can be entrusted with the responsibility carried by a registration.
Here, the Agency agrees with the ALJ that Respondent failed to accept responsibility because “[w]hile [she] acknowledged that she made mistakes with [UC] and would do things differently if she had the opportunity, she made excuses and shifted blame,”
When a registrant fails to make the threshold showing of acceptance of responsibility, the Agency need not address the registrant's remedial measures.
In addition to acceptance of responsibility, the Agency considers both specific and general deterrence when determining an appropriate sanction.
In sum, Respondent has not offered any credible evidence on the record to rebut the Government's case for revocation of her registration and Respondent has not demonstrated that she can be entrusted with the responsibility of registration. RD, at 27. Accordingly, the Agency will order that Respondent's registration be revoked.
Pursuant to 28 CFR 0.100(b) and the authority vested in me by 21 U.S.C. 824(a), I hereby revoke DEA Certificate of Registration No. MP4600791 issued to Rachel Pittala, APRN. Further, pursuant to 28 CFR 0.100(b) and the authority vested in me by 21 U.S.C. 823(g)(1), I hereby deny any pending applications of Rachel Pittala, APRN, to renew or modify this registration, as well as any other pending application of Rachel Pittala, APRN, for additional registration in Florida. This Order is effective October 16, 2023.
This document of the Drug Enforcement Administration was signed on September 5, 2023, by Administrator Anne Milgram. That document with the original signature and date is maintained by DEA. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DEA Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of DEA. This administrative process in no way alters the legal effect of this document upon publication in the
Office of Justice Programs (OJP), Bureau of Justice Assistance (BJA).
Notice of meeting.
This is an announcement of a meeting (via WebEx/conference call-in) of the Public Safety Officer Medal of Valor Review Board to consider nominations for the 2022-2023 Medal of Valor, and to make a limited number of recommendations for submission to the U.S. Attorney General to be cited. Additional issues of importance to the Board may also be discussed.
October 12, 2023, 12:30 p.m. to 3:00 p.m. EDT.
This meeting will be held virtually using web conferencing technology. The public may hear the proceedings of this virtual meeting/conference call by registering with Gregory Joy at last seven (7) days in advance with Gregory Joy (contact information below).
Gregory Joy, Policy Advisor, Bureau of Justice Assistance, Office of Justice Programs, by telephone at (202) 514-1369, or by email at
The Public Safety Officer Medal of Valor Review Board carries out those advisory functions specified in 42 U.S.C. 15202. Pursuant to 42 U.S.C. 15201, the President of the United States is authorized to award the Public Safety Officer Medal of Valor, the highest national award for valor by a public safety officer.
This virtual meeting/conference call is open to the public to participate remotely. For security purposes, members of the public who wish to participate must register at least seven (7) days in advance of the meeting/conference call by contacting Mr. Joy.
Access to the virtual meeting/conference call will not be allowed without prior registration. Please submit any comments or written statements for consideration by the Review Board in writing at least seven (7) days in advance of the meeting date.
Office of Justice Programs (OJP), Bureau of Justice Assistance (BJA).
Notice of meeting.
This is an announcement of a meeting (via WebEx/conference call-in) of the Public Safety Officer Medal of Valor Review Board to cover a range of issues of importance to the Board, to include but not limited to: Membership/terms; Board Bylaws; program marketing and outreach.
November 15, 2023, 1:00 p.m. to 2:00 p.m. EST.
This meeting will be held virtually using web conferencing technology. The public may hear the proceedings of this virtual meeting/conference call by registering at last
Gregory Joy, Policy Advisor, Bureau of Justice Assistance, Office of Justice Programs, by telephone at (202) 514-1369, or by email at
The Public Safety Officer Medal of Valor Review Board carries out those advisory functions specified in 42 U.S.C. 15202. Pursuant to 42 U.S.C. 15201, the President of the United States is authorized to award the Public Safety Officer Medal of Valor, the highest national award for valor by a public safety officer.
This virtual meeting/conference call is open to the public to participate remotely. For security purposes, members of the public who wish to participate must register at least seven (7) days in advance of the meeting/conference call by contacting Mr. Joy.
Access to the virtual meeting/conference call will not be allowed without prior registration. Please submit any comments or written statements for consideration by the Review Board in writing at least seven (7) days in advance of the meeting date.
Notice of availability; request for comments.
The Department of Labor (DOL) is submitting this Mine Safety and Health Administration (MSHA)-sponsored information collection request (ICR) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995 (PRA). Public comments on the ICR are invited.
The OMB will consider all written comments that the agency receives on or before October 16, 2023.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Michael Howell by telephone at 202-693-6782, or by email at
Section 103(h) of the Federal Mine Safety and Health Act of 1977 (Mine Act), 30 U.S.C. 813(h), authorizes MSHA to collect information necessary to carry out its duty in protecting the safety and health of miners.
Title 30 CFR 56.13015 and 57.13015 require compressed-air receivers and other unfired pressure vessels to be inspected by inspectors holding a valid National Board Commission and in accordance with the applicable chapters of the National Board Inspection Code, a Manual for Boiler and Pressure Vessels Inspectors, 1979. Safety defects found on compressed-air receivers and other unfired pressure vessels have caused injuries and fatalities in the mining industry.
Records of inspections must be kept in accordance with the requirements of the National Board Inspection Code and the records must be made available to the Secretary or an authorized representative.
Title 30 CFR 56.13030 and 57.13030 require that fired pressure vessels (boilers) must be equipped with water level gauges, pressure gauges, automatic pressure-relief valves, blowdown piping and other safety devices approved by the American Society of Mechanical Engineers (ASME) to protect against hazards from overpressure, flameouts, fuel interruptions and low water level.
These sections also require that records of inspection and repairs be retained by the mine operator in accordance with the requirements of the ASME Boiler and Pressure Vessel Code, 1977, and the National Board Inspection Code (progressive records—no limit on retention time) and shall be made available to the Secretary or an authorized representative.
Title 30 CFR 56.14100 and 57.14100 require operators to inspect equipment, machinery, and tools that are to be used during a shift for safety defects before the equipment is placed in operation. For additional substantive information about this ICR, see the related notice published in the
This information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an information collection, unless the OMB approves it and displays a currently valid OMB Control Number. In addition, notwithstanding any other provisions of law, no person shall generally be subject to penalty for failing to comply with a collection of information that does not display a valid OMB Control Number.
Notice of availability; request for comments.
The Department of Labor (DOL) is submitting this Mine Safety and Health Administration (MSHA)-sponsored information collection request (ICR) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995 (PRA). Public comments on the ICR are invited.
The OMB will consider all written comments that the agency receives on or before October 16, 2023.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Michael Howell by telephone at 202-693-6782, or by email at
Under section 101(a) of the Federal Mine Safety and Health Act of 1977 (Mine Act), the Secretary of Labor shall develop, promulgate, and revise as may be appropriate, improved mandatory health or safety standards for the protection of life and prevention of injuries in coal or other mines. In addition, section 103(h) of the Mine Act mandates that mine operators keep any records and make any reports that are reasonably necessary for the Mine Safety and Health Administration to perform its duties under the Mine Act.
MSHA established standards and regulations for diesel-powered equipment in underground coal mines that provide additional important protection for coal miners who work on and around diesel-powered equipment. The standards were designed to reduce the risks to underground coal miners of serious health hazards that are associated with exposure to high concentrations of diesel particulate matter. The standards contain information collection requirements for underground coal mine operators in §§ 72.510(a) & (b), 72.520(a) & (b).
Section 72.510(a) requires underground coal mine operators to provide annual training to all miners who may be exposed to diesel emissions. The training must include health risks associated with exposure to diesel particulate matter; methods used in the mine to control diesel particulate concentrations; identification of the personnel responsible for maintaining those controls; and actions miners must take to ensure controls operate as intended.
Section 72.510(b) requires underground coal mine operators to keep a record of the training for one year.
Section 72.520(a) and (b) requires underground coal mine operators to maintain an inventory of diesel powered equipment units together with a list of information about any unit's emission control or filtration system. The list must be updated within 7 calendar days of any change. For additional substantive information about this ICR, see the related notice published in the
This information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an information collection, unless the OMB approves it and displays a currently valid OMB Control Number. In addition, notwithstanding any other provisions of law, no person shall generally be subject to penalty for failing to comply with a collection of information that does not display a valid OMB Control Number.
Notice of availability; request for comments.
The Department of Labor (DOL) is submitting this Mine Safety and Health Administration (MSHA)-sponsored information collection request (ICR) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995 (PRA). Public comments on the ICR are invited.
The OMB will consider all written comments that the agency receives on or before October 16, 2023.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Michael Howell by telephone at 202-693-6782, or by email at
Section 72.100(d) requires that each mine operator must develop and submit for approval to NIOSH a plan in accordance with 42 CFR part 37 for providing miners with the required periodic examinations specified in 72.100(a) and a roster specifying the name and current address of each miner covered by the plan.
Section 72.100(e) requires that each mine operator must post on the mine bulletin board at all times the approved plan for providing the examinations specified in 72.100(a). For additional substantive information about this ICR, see the related notice published in the
This information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an
Notice of availability; request for comments.
The Department of Labor (DOL) is submitting this Occupational Safety & Health Administration (OSHA)-sponsored information collection request (ICR) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995 (PRA). Public comments on the ICR are invited.
The OMB will consider all written comments that the agency receives on or before October 16, 2023.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Nicole Bouchet by telephone at 202-693-0213, or by email at
Regulation 29 CFR 1910.217(h) regulates the use of Presence Sensing Devices (PSDs) in mechanical power-press safety systems. A PSD (
This information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an information collection, unless the OMB approves it and displays a currently valid OMB Control Number. In addition, notwithstanding any other provisions of law, no person shall generally be subject to penalty for failing to comply with a collection of information that does not display a valid OMB Control Number.
DOL seeks PRA authorization for this information collection for three (3) years. OMB authorization for an ICR cannot be for more than three (3) years without renewal. The DOL notes that information collection requirements submitted to the OMB for existing ICRs receive a month-to-month extension while they undergo review.
Nuclear Regulatory Commission.
Notice of submission to the Office of Management and Budget; request for comment.
The U.S. Nuclear Regulatory Commission (NRC) has recently submitted a request for renewal of an existing collection of information to the Office of Management and Budget (OMB) for review. The information collection is entitled, “Licenses for Radiography and Radiation Safety Requirements for Radiographic Operations.”
Submit comments by October 16, 2023. Comments received after this date will be considered if it is practical to do so, but the Commission is able to ensure consideration only for comments received on or before this date.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
David Cullison, NRC Clearance Officer,
Please refer to Docket ID NRC-2022-0189 when contacting the NRC about the availability of information for this action. You may obtain publicly available information related to this action by any of the following methods:
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Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
The NRC cautions you not to include identifying or contact information in comment submissions that you do not want to be publicly disclosed in your comment submission. All comment submissions are posted at
If you are requesting or aggregating comments from other persons for submission to the OMB, 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 comment submissions are not routinely edited to remove such information before making the comment submissions available to the public or entering the comment into ADAMS.
Under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), the NRC recently submitted a request for renewal of an existing collection of information to OMB for review entitled, “Part 34 of title 10 of the
The NRC published a
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For the Nuclear Regulatory Commission.
Office of Personnel Management.
Notice of a new system of records.
In accordance with the requirements of the Privacy Act of 1974, the Office of Personnel Management (OPM) proposes to establish a new government-wide system of records titled “OPM/GOVT-11 Federal Fair Chance Act Complaint Records.”
Submit comments on or before October 16, 2023. This new system is effective upon publication in the
You may submit written comments through the:
•
All submissions received must include the agency name and docket number for this
For general questions, please contact: Timothy Curry, Deputy Associate Director, Employee Services, Accountability and Workforce Relations, Office of Personnel Management, at (202) 606-2930 or
In accordance with the Privacy Act of 1974, 5 U.S.C. 552a, OPM proposes to establish a new system of records titled “OPM/GOVT-11 Federal Fair Chance Act Complaint Records.” This system of records will enable Federal agencies to collect and maintain complaint records pertaining to the Fair Chance to Compete for Jobs Act of 2019 or the Fair Chance Act, 5 U.S.C. 9201-9206 (“FCA” or “the Act”).
The FCA limits the circumstances in which agencies may request criminal history information from an applicant prior to extending a conditional offer of employment. In addition, the FCA requires OPM to establish a complaint process by which applicants for appointment to a position in the civil service may submit a complaint, or any other information, relating to compliance with the requirements of the Act. Furthermore, the Act establishes requirements and procedures regarding penalties for violations.
The FCA directs OPM to establish and publish procedures under which an applicant for an appointment to a position in the civil service may submit a complaint, or any other information, relating to compliance by an employee of an agency with 5 U.S.C. 9202. The complaint, or any other information, is submitted to and maintained by the employing agency until such time as the complaint is referred to OPM or OPM requests the records.
The records in this system of records include the applicant's complaint or any other information submitted by the applicant and the agency's investigative report, which includes the agency's factual findings; a complete copy of all information gathered during the investigation, including documentary and testimonial evidence; any other information the agency believes OPM should consider; and any additional information OPM requests the agency provide. In addition, the records include OPM's written notification to the agency and the subject(s) of the complaint regarding OPM's assessment of the complaint, including whether to dismiss the complaint or that a violation may have occurred such that OPM is initiating adverse action proceedings under 5 CFR part 754, subpart B.
This proposed Government-wide system of records will include the complaint records in the custody and control of the agencies as well as those with OPM. OPM has provided a report of this system of records to the Committee on Oversight and Government Reform of the House of Representatives, the Committee on Homeland Security and Governmental Affairs of the Senate, and the Office of Management and Budget (OMB), pursuant to 5 U.S.C. 552a(r) and OMB Circular A-108, “Federal Agency Responsibilities for Review, Reporting, and Publication under the Privacy Act,” dated December 23, 2016. This system of records will be included in the OPM's inventory of records systems.
Office of Personnel Management, OPM/Government-wide-11 Federal Fair Chance Act Complaint Records.
Unclassified.
Employee Services, Accountability and Workforce Relations, Office of Personnel Management, and other Federal agencies are responsible for the records in this system of records. Records in OPM's custody are maintained at 1900 E Street NW, Washington, DC 20415. Other Federal agencies that receive Fair Chance Act complaints, or any other information, maintain records at their headquarters and field offices.
Deputy Associate Director, Employee Services, Accountability and Workforce Relations, Office of Personnel Management, 1900 E Street NW, Washington, DC 20415.
The Fair Chance to Compete for Jobs Act of 2019; 5 U.S.C. 9202; 5 CFR 754.
The purpose of this system of records is to permit OPM and other Federal agencies to collect and maintain records to administer the provisions of the Fair Chance Act (FCA) regarding complaints, or any other information, for alleged violations of the FCA. This includes conducting all activities related to complaints, or any other information, receipt, investigation, adjudication, and, where applicable, appeal of the final decision.
Individuals covered by this system of records are:
• Applicants for Federal civil service positions, other than positions excepted under 5 CFR 920.201(b), in a covered agency defined in 5 U.S.C. 105; and
• Agency employees who violate or have been alleged to have violated the Fair Chance Act.
Records maintained in this system are:
• Full name;
• Phone numbers;
• Email addresses;
• Mailing addresses; and
• The applicant's complaint, or any other information provided;
• Any information provided by the applicant in support of the complaint;
• Documentation of the applicant's authorized representative;
• Information from current and potential parties and participants about the complaint and complaint process;
• Any records OPM creates when another agency refers a complaint to OPM;
• Correspondence or documentation issued by the t employing Federal agency; and
• Any other information related to the complaint and the complaint process, including OPM's processing of the complaint through the adjudication and any appeal.
Information contained in this system may be obtained from:
a. The applicant to whom the records pertain.
b. Supervisors, managers, and other agency officials.
c. Federal employees (non-applicants) and others who provide information regarding the complaint.
d. Investigators.
e. The individual applicant/complainant's authorized representative.
f. The employing Federal agency that received the complaint.
The records in this system of records are records of OPM and should be
In addition to disclosures generally permitted under 5 U.S.C. 552a(b) of the Privacy Act, all or a portion of the records or information contained in this system may be disclosed as a routine use pursuant to 5 U.S.C. 552a(b)(3), as follows:
a. To the Department of Justice, including Offices of the U.S. Attorneys; another Federal agency conducting litigation or in proceedings before any court, adjudicative, or administrative body; another party in litigation before a court, adjudicative, or administrative body; or to a court, adjudicative, or administrative body. Such disclosure is permitted only when it is relevant and necessary to the litigation or proceeding, and one of the following is a party to the litigation or has an interest in such litigation:
(1) OPM, the employing Federal agency, or any component thereof;
(2) Any employee or former employee of OPM or the employing Federal agency in their official capacity;
(3) Any employee or former employee of OPM or the employing Federal agency in their individual capacity where the Department of Justice or another Federal agency has agreed to represent the employee;
(4) The United States, a Federal agency, or another party in litigation before a court, adjudicative, or administrative body, pursuant to 5 CFR part 295 or otherwise.
b. To the appropriate Federal, State, or local agency responsible for investigating, prosecuting, enforcing, or implementing a statute, rule, regulation, or order, when a record, either on its face or in conjunction with other information, indicates or is relevant to a violation or potential violation of civil or criminal law or regulation.
c. To a member of Congress from the record of an individual in response to an inquiry made at the request of the individual to whom the record pertains.
d. To the National Archives and Records Administration (NARA) for records management inspections being conducted under the authority of 44 U.S.C. 2904 and 2906.
e. To appropriate agencies, entities, and persons when (1) OPM or the employing Federal agency suspects or has confirmed that there has been a breach of the system of records; (2) OPM or the employing Federal agency has determined that, as a result of the suspected or confirmed breach, there is a risk of harm to individuals, OPM or the employing Federal agency (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 efforts to respond to the suspected or confirmed breach or to prevent, minimize, or remedy such harm.
f. To another Federal agency or Federal entity, when OPM or the employing Federal agency 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.
g. To contractors, experts, consultants, or volunteers performing or working on a contract or other assignment for OPM or the employing Federal agency when OPM or the employing Federal agency determines that it is necessary to accomplish an agency function related to this system of records. Individuals provided information under this routine use will have proper clearance, act on behalf of the relevant federal agency and understand the need to protect Privacy Act information.
h. To the Merit Systems Protection Board or the Office of the Special Counsel, the Federal Labor Relations Authority and its General Counsel, the Equal Employment Opportunity Commission, arbitrators, and hearing examiners to the extent necessary to carry out their authorized duties.
i. To any source, including but not limited to a former employee or Federal agency, from which information is requested in the course of reviewing, investigating, and responding to a complaint, to the extent necessary to identify the individual, inform the source of the nature of the complaint, and to identify the type of information being requested.
j. To the employing Federal agency and the employee who was the subject of the complaint, by OPM, to provide information to the employing agency concerning OPM's review and OPM's assessment regarding the complaint, including any decision to initiate adverse action proceedings or to dismiss the complaint.
k. To the Office of Government Information Services (OGIS), NARA, to the extent necessary to fulfill its responsibilities in 5 U.S.C. 552(h) to review administrative policies, procedures, and compliance with the FOIA, and to facilitate OGIS' offering of mediation services to resolve disputes between persons making FOIA requests and administrative agencies.
The records in this system of records are stored electronically on OPM or Federal agency or cloud servers or on paper in locked file cabinets or locked offices with access restricted to those who have a need to know.
Records may be retrieved by the name or by any other personal identifier, or combination of identifiers, contained in this system of records.
The records in this system of records are subject to General Record Schedule 2.3, Item 060, which requires that they be destroyed no sooner than 4 years but no later than 7 years after the case is closed or there is a final settlement on appeal, as appropriate. Agencies must select one fixed retention period, between 4 and 7 years, for all administrative grievance, adverse action, and performance-based action case files. Agencies may not use different retention periods for individual cases.
Records in this system are protected from unauthorized access and misuse through various administrative, technical, and physical security measures. OPM and the other Federal agencies who maintain custody and control of records in this system of records are required to maintain security measures in compliance with the Federal Information Security Modernization Act of 2014 (Pub. L. 113-203), associated OMB policies, and applicable standards and guidance from the National Institute of Standards and Technology. Electronic records are protected by restricted access procedures, including passwords and sign-on protocols; paper records are in locked file cabinets or locked offices with restricted access. Only employees whose official duties require access to the electronic or paper records are authorized to view, administer, and control these records.
Individuals seeking notification of and access to their records in this system of records may submit a request in writing to the Office of Personnel Management, Office of Privacy and Information Management—FOIA, 1900 E Street NW, Room 5H25, Washington, DC 20415-7900 or by emailing
1. Full name.
2. Email address or mailing address.
3. Name of the relevant agency named in the complaint.
4. Signature.
Individuals requesting access must also comply with OPM's Privacy Act regulations on verification of identity and access to records (5 CFR part 297).
Individuals may request that records about them be amended by submitting a request in writing to the Office of Personnel Management, Office of Privacy and Information Management—FOIA, 1900 E Street NW, Room 5H25, Washington, DC 20415-7900 or by emailing
1. Full name.
2. Email address or mailing address.
3. Name of the relevant agency named in the complaint.
4. A precise description of the records for which they are requesting amendment and the reason for the amendment.
5. Signature.
Individuals must also comply with OPM's Privacy Act regulations on verification of identity and access to records (5 CFR part 297).
See “Record Access Procedures.”
None.
None.
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing for the Commission's consideration concerning a negotiated service agreement. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the Market Dominant or the Competitive product list, or the modification of an existing product currently appearing on the Market Dominant or the Competitive product list.
Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request's acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request.
The public portions of the Postal Service's request(s) can be accessed via the Commission's website (
The Commission invites comments on whether the Postal Service's request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern Market Dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3030, and 39 CFR part 3040, subpart B. For request(s) that the Postal Service states concern Competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3035, and 39 CFR part 3040, subpart B. Comment deadline(s) for each request appear in section II.
1.
2.
3.
This Notice will be published in the
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing for the Commission's consideration concerning a negotiated service agreement. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the Market Dominant or the Competitive product list, or the modification of an existing product currently appearing on the Market Dominant or the Competitive product list.
Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request's acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request.
The public portions of the Postal Service's request(s) can be accessed via the Commission's website (
The Commission invites comments on whether the Postal Service's request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern Market Dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3030, and 39 CFR part 3040, subpart B. For request(s) that the Postal Service states concern Competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3035, and 39 CFR part 3040, subpart B. Comment deadline(s) for each request appear in section II.
1.
2.
3.
This Notice will be published in the
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Sean Robinson, 202-268-8405.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on September 5, 2023, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Sean C. Robinson, 202-268-8405.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on September 1, 2023, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Sean Robinson, 202-268-8405.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on September 6, 2023, it filed with the Postal Regulatory Commission a
Postal Service
Notice of a modified system of records.
The United States Postal Service
These revisions will become effective without further notice on October 16, 2023, unless comments received on or before that date result in a contrary determination.
Comments may be submitted via email to the Privacy and Records Management Office, United States Postal Service Headquarters (
Janine Castorina, Chief Privacy and Records Management Officer, Privacy and Records Management Office at
This notice is in accordance with the Privacy Act requirement that agencies publish their systems of records in the
The Postal Service is proposing to modify the following SORs to implement a platform to manage APIs:
• USPS SOR 550.200 Commercial Information Technology Resources—Administrative
• USPS SOR 830.000 Customer Service and Correspondence
Versatility and manageability are integral components of an organization's technology infrastructure. Application Programming Interfaces (APIs) allow applications to coordinate, send, and process data between otherwise disparate applications. The Postal Service utilizes a variety of these APIs for numerous reasons; however, the number and deployability of these APIs within the Postal Service's technology ecosystem can prove onerous. To that end, the Postal Service intends to implement an API manager for a limited scope. The scope of this new application will manage APIs connected or associated with an existing customer relationship management application.
To achieve this effort, the systems of records will be revised as follows:
• USPS SOR 550.200 Commercial Information Technology Resources—Administrative will be revised to modify one existing category of records, and will add fifteen new categories of records to reflect the auditing and tracking capabilities of users of the API manager.
• USPS SOR 830.000 Customer Service and Correspondence will be revised with one new purpose to allow the transmission of data to the API manager and to the ultimate destination of that customer data.
Pursuant to 5 U.S.C. 552a (e)(11), interested persons are invited to submit written data, views, or arguments on this proposal. A report of the proposed revisions has been sent to Congress and to the Office of Management and Budget for their evaluations. The Postal Service does not expect these amended systems of records to have any adverse effect on individual privacy rights. The notices for USPS SOR 550.200 Commercial Information Technology Resources—Administrative and USPS SOR 830.000 Customer Service and Correspondence are provided below in their entirety:
550.200 Commercial Information Technology Resources—Administrative
None.
All USPS facilities and contractor sites.
For records of computer access authorizations: Chief Information Officer and Executive Vice President, United States Postal Service, 475 L'Enfant Plaza SW, Washington, DC 20260.
39 U.S.C. 401, 403, and 404.
1. To provide active and passive monitoring and review of information system applications and user activities.
2. To generate logs and reports of information system application and user activities.
3. To provide a means of auditing commercial information system activities across applications and users.
1. Individuals with authorized access to USPS computers, information resources, and facilities, including employees, contractors, business partners, suppliers, and third parties.
2. Individuals participating in web-based meetings, web-based video
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Employees; contractors; customers.
Standard routine uses 1. through 9. apply. In addition:
(a) To appropriate agencies, entities, and persons when (1) the Postal Service suspects or has confirmed that there has been a breach of the system of records; (2) the Postal Service has determined that as a result of the suspected or confirmed breach there is a risk of harm to individuals, the Postal Service (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 Postal Service's efforts to respond to the suspected or confirmed breach or to prevent, minimize, or remedy such harm.
Automated database, computer storage media, and paper.
Records relating to system administration are retrievable by user ID.
Records relating to system administration are retained for twenty-four months.
Paper records, computers, and computer storage media are located in controlled-access areas under supervision of program personnel. Computer access is limited to authorized personnel with a current security clearance, and physical access is limited to authorized personnel who must be identified with a badge.
Access to records is limited to individuals whose official duties require such access. Contractors and licensees are subject to contract controls and unannounced on-site audits and inspections.
Computers are protected by encryption, mechanical locks, card key systems, or other physical access control methods. The use of computer systems is regulated with installed security software, computer logon identifications, and operating system controls including access controls, terminal and transaction logging, and file management software.
Requests for access must be made in accordance with the Notification Procedure above and USPS Privacy Act regulations regarding access to records and verification of identity under 39 CFR 266.5.
See Notification Procedure and Record Access Procedures above.
Customers wanting to know if other information about them is maintained in this system of records must address inquiries in writing to the Chief Information Officer and Executive Vice President and include their name and address.
None.
May 10th, 2021; 86 FR 24902.
830.000 Customer Service and Correspondence.
None.
USPS Customer Experience, Headquarters; Integrated Business Solutions Services Centers; the National Customer Support Center (NCSC); districts, Post Offices contractor sites; and detached mailing units at customer sites.
Chief Customer and Marketing Officer and Executive Vice President, United States Postal Service, 475 L'Enfant Plaza SW, Washington, DC 20260.
39 U.S.C. 401, 403, and 404.
1. To enable review and response services for customer inquiries and concerns regarding USPS and its products and services.
2. To ensure that customer accounts and needs are attended to in a timely manner.
3. To enhance the customer experience by improving the security of Change of Address (COA) and Hold Mail processes.
4. To protect USPS customers from becoming potential victims of mail fraud and identity theft.
5. To identify and mitigate potential fraud in the COA and Hold Mail processes.
6. To verify a customer's identity when applying for COA and Hold Mail services.
7. To support (or facilitate) the administration of Operation Santa, Letters to Santa, or similar programs.
8. To track employee performance and productivity through dashboard metrics and analysis.
9. To set and track employee goals relating to Customer Relationship Management Software metrics.
10. To create competitions to encourage productivity and promote team effectiveness.
11. To provide business customer data to other systems through APIs.
This system contains records relating to customers who contact customer service by online and offline channels. This includes customers making inquiries via email, 1-800-ASKUSPS, other toll-free contact centers, or the Business Service Network (BSN), as
This system also contains records relating to employees who utilize the dashboard analysis and productivity application.
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Standard routine uses 1. through 7., 10., and 11. apply.
Automated databases, computer storage media, and paper.
By customer name, customer ID(s), mail or email address, phone number, customer account number, case number, article number, pickup number, last four digits of SSN, ZIP Code, other customer identifier, employee name, employee email.
1. Customer care records for usps.com products are retained 90 days.
2. Records related to 1-800-ASK-USPS, Delivery Confirmation service, Special Services, and international call centers are retained 1 year.
3. Customer complaint letters are retained 6 months and automated complaint records are retained 3 years.
4. Business Service Network records are retained 5 years.
5. Records related to Operation Santa, Letters to Santa, or similar programs are retained 6 months after the new calendar year.
6. Other records are retained 2 years after resolution of the inquiry.
7. Records relating to Dashboard Metric Analysis are retained for 1 year.
Records existing on paper are destroyed by burning, pulping, or shredding. Records existing on computer storage media are destroyed according to the applicable USPS media sanitization practice.
Paper records, computers, and computer storage media are located in controlled-access areas under supervision of program personnel.
Access to records is limited to individuals whose official duties require such access. Contractors and licensees are subject to contract controls and unannounced on-site audits and inspections.
Computers are protected by mechanical locks, card key systems, or other physical access control methods. The use of computer systems is regulated with installed security software, computer logon identifications, and operating system controls including access controls, terminal and transaction logging, and file management software. Online data transmissions are protected by encryption.
Requests for access must be made in accordance with the Notification Procedure above and USPS Privacy Act regulations regarding access to records and verification of identity under 39 CFR 266.5.
See Notification Procedure and Record Access Procedures above.
Customers wanting to know if information about them is maintained in this system of records must address inquiries to the system manager in writing. Inquiries should include name, address, and other identifying information.
None.
December 12, 2018, 83 FR 63912; June 27, 2012, 77 FR 38342; April 29, 2005, 70 FR 22516.
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Sean Robinson, 202-268-8405.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on September 5, 2023, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Sean Robinson, 202-268-8405.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on September 6, 2023, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Sean Robinson, 202-268-8405.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on September 7, 2023, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Sean Robinson, 202-268-8405.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on September 1, 2023, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Sean C. Robinson, 202-268-8405.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on September 7, 2023, it filed with the Postal Regulatory Commission a
On July 10, 2023, ICE Clear Europe Limited (“ICE Clear Europe”) filed with the Securities and Exchange Commission (“Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
ICE Clear Europe is registered with the Commission as a clearing agency for the purpose of clearing security-based swaps. In its role as a clearing agency for security-based swaps, ICE Clear Europe maintains the Plan.
The proposed rule change would make various updates and amendments to the Plan. ICE Clear Europe is making these changes to implement the results of internal and external reviews of the Plan. These changes are described below according to the section of the Plan in which they appear.
Section 1 summarizes the Plan. Among other things, Section 1 gives an overview of (i) ICE Clear Europe's options for recovery as well as (ii) how it governs, tests, and reviews the Plan.
ICE Clear Europe's options for recovery include tools that it could use to recover losses, such as powers of assessment,
Section 1 of the Plan also describes the coverage of ICE Clear Europe's recovery options. Section 1 explains why ICE Clear Europe would be able to fully cover default losses, liquidity shortfalls, and investment losses, should it need to do so. With respect to default losses in particular, the Plan currently explains that with the use of partial tear-ups, ICE Clear Europe can eliminate variation margin obligations by, in effect, cancelling any remaining positions, and therefore default losses can be fully covered. The proposed rule change would keep this explanation, but it would delete the statement, “Therefore default losses can be fully covered.” ICE Clear Europe is deleting this statement because it believes the statement is redundant considering the overall explanation that ICE Clear Europe would be able to fully cover default losses.
Similar to the description of partial tear-ups, Section 1 of the Plan also describes the coverage of ICE Clear Europe's powers of assessment. The Plan currently explains that under powers of assessment for its Futures and Options clearing service, ICE Clear Europe would have sufficient capital to cover all Clearing Members defaulting simultaneously under extreme but plausible market scenarios, meaning the maximum exposures from all Clearing Members with same directional positions defaulting simultaneously. Moreover, for its Credit Default Swap clearing service, the Plan currently describes the scenario in which ICE Clear Europe would exhaust its
The proposed rule change would delete this description of ICE Clear Europe's powers of assessment and replace it with a more concise explanation. The revised description would state that, under ICE Clear Europe's powers of assessment, it can immediately recover losses that exceed the pre-funded resources to cover the default of the largest Clearing Members under extreme but plausible stress scenarios because ICE Clear Europe has the authority to collect resources from non-defaulting Clearing Members intraday and in cash. The revised description also would explain that ICE Clear Europe can confirm the capacity of its powers of assessment using reverse stress testing. Although the proposed rule change would not amend ICE Clear Europe's powers of assessment, ICE Clear Europe does not believe it is necessary to specify the expected coverage of assessment powers in the Plan.
As mentioned above, Section 1 also provides an overview of how ICE Clear Europe governs, tests, and reviews the Plan. With respect to governance under the existing Plan, ICE Clear Europe's President must attempt to convene the ICE Clear Europe Board for approval in advance of making each material decision under the Plan. If the Board cannot be convened in advance of making the decision, however, it must be convened afterwards. The proposed rule change would clarify that the Board must be convened afterwards “as soon as reasonably possible” and updated on steps taken.
Section 1 currently explains that in exercising its options under the Plan, ICE Clear Europe does not need the approval of Clearing Members or any other external stakeholders. The proposed rule change would maintain this statement but would add a further caveat to explain that ICE Clear Europe would seek to communicate its plans and/or intentions to relevant external stakeholders where possible, and as soon as reasonably practicable, to ensure appropriate transparency.
Section 1 also explains how ICE Clear Europe conducts testing of the Plan. Currently, Section 1 states that the Plan is tested annually through a tabletop exercise. The proposed rule change would amend this description to provide that the Plan is tested
Moreover, Section 1 currently provides that where appropriate, elements of the Plan are included in ICE Clear Europe's annual default fire drills. The proposed rule change would retain this statement but would add further description of the elements that ICE Clear Europe could test in the fire drills. Specifically, ICE Clear Europe could test default-related recovery scenarios, including coordination with other covered clearing agencies.
Section 1 currently provides that a key focus of the annual test of the Plan is to work through specific scenarios as they might develop and to consider, among other things, how ICE Clear Europe would implement recovery options and which communication pathways it would use. The proposed rule change would retain this description but would revise it slightly. Under the proposed rule change, ICE Clear Europe would consider which communication and governance pathways to use, instead of just communication pathways. Moreover, the proposed rule change would add another consideration: whether all services can continue to be provided, including those provided to affiliates.
Finally, Section 1 currently includes a statement that ICE Clear Europe will review the Plan after each test. The proposed rule change would retain this statement but would further add that any proposed changes would follow the relevant governance schedule for the Plan.
Section 2 of the Plan describes (i) ICE Clear Europe's Critical Services; (ii) entities that rely on ICE Clear Europe's Critical Services; (iii) providers of services to ICE Clear Europe; (iv) how ICE Clear Europe mitigates its dependencies on these service providers; (v) ICE Clear Europe's technology infrastructure that supports its Critical Services; (vi) and interdependencies between ICE Clear Europe and other entities in the financial markets.
The Plan currently identifies three services as ICE Clear Europe's Critical Services: (i) futures and options clearing; (ii) credit-default swap clearing; and (iii) treasury and banking services. The proposed rule change would not alter this description, but it would add further explanation of the meaning of the term “Critical Services.” Specifically, the proposed rule change would add a footnote to explain that “Critical Services” are defined at the highest level for the purposes of the Plan and should not be confused with “Important Business Services,” which form part of the Operational Resilience framework and are defined within the Operational Risk and Resilience Policy.
Moreover, the proposed rule change would revise a description of the products that ICE Clear Europe clears. Currently, Section 2 provides that ICE Clear Europe clears certain financial instruments including CDS instruments, futures contracts, and options on futures contracts. The proposed rule change would revise the description of the last category, from options on futures contracts to just options contracts.
Finally, Section 2 currently contains a table that identifies the markets and exchanges for each of ICE Clear Europe's Critical Services. For example, futures and options clearing applies to contracts on soft commodities and covers exchanges such as ICE Futures Europe and ICE Futures US. The proposed rule change would update the names of the exchanges in this table, changing ICE Futures US to ICE Futures US (Energy Division). The proposed rule change also would add ICE Futures Abu Dhabi to the list of exchanges.
Section 2 describes in further detail how market participants and exchanges depend on ICE Clear Europe's Critical Services. For example, if ICE Clear Europe were unable to provide its Critical Services, market participants would be unable to manage their positions with ICE Clear Europe. Moreover, the Plan notes that in stressed market conditions, when Clearing Members themselves may already be under additional financial stress, actions that ICE Clear Europe takes to recover from losses may increase the stresses on Clearing Members' capital and liquidity resources. Given that, the Plan currently states that capital and liquidity impacts on market participants (including Clearing Members and their clients) would be taken into account when assessing which recovery options to use. The proposed rule change would
Section 2 further describes the entities upon which ICE Clear Europe relies when providing its Critical Services. ICE Clear Europe relies on both affiliates and third parties when providing its Critical Services. For example, ICE Clear Europe relies on third-party banks in providing its treasury and banking services, and it relies on affiliates, such as other ICE Clearing Houses and Exchanges, for settlement prices and intraday margin collection. With respect to services provided by ICE affiliates, the Plan currently states that these services are contractually governed by master outsourcing agreements. The proposed rule change would revise the name of these agreements to inter-company service agreements.
Section 2 currently contains a table that lists categories of service providers, identifies the Critical Services they support, and describes the services that they provide. This table currently identifies investment agents as supporting treasury and banking services. The proposed rule change would expand this category to include both investment agents and repo counterparties. The proposed rule change also would add another category to the table to cover default brokers. Default brokers support all three of ICE Clear Europe's Critical Services. Default brokers do so by hedging the positions of a defaulting Clearing Member and liquidating the defaulter's non-cash collateral.
Section 2 next describes how ICE Clear Europe mitigates its dependencies on these service providers. ICE Clear Europe mitigates its dependencies with three mechanisms: (i) using multiple service providers, so it is not overly dependent on one provider alone; (ii) engaging with service providers who place high levels of importance on continuity of operations through multiple levels of resilience; and (iii) ensuring its contracts with providers do not have provisions that allow the providers to alter or terminate the contracts when ICE Clear Europe is under financial stress. With respect to the first point, the proposed rule change would maintain the current provision found in the Plan but would add further explanation as to how ICE Clear Europe confirms it is using multiple service providers. ICE Clear Europe would regularly test its assumptions regarding multiple providers as part of its operational resilience framework.
On the second point, resilience within providers, the proposed rule change would add a similar explanation. ICE Clear Europe would conduct regular testing of its assumptions regarding resilience within services providers as part of its operational resilience framework.
With respect to the third point, contractual provisions, the proposed rule change would amend the description of this mechanism. Currently, the Plan provides that ICE Clear Europe ensures that its contracts with services providers have appropriate termination periods and do not include covenants, material adverse change clauses, or other provisions that would permit service providers to alter or terminate the contracts if it were under financial stress. The proposed rule change would revise this slightly to state that ICE Clear Europe ensures that its contracts do not include covenants, material adverse change clauses, or other provisions that would permit service providers to unduly alter or terminate the contracts. Moreover, the Plan currently provides that ICE Clear Europe has analyzed its contracts in the context of the Plan and has not found any issues that would impact the Critical Services in recovery. The proposed rule change would revise this slightly to state that ICE Clear Europe periodically analyzes the relevant contracts in the context of the Plan (and any other relevant factors).
Section 2 also describes ICE Clear Europe's dependencies on particular service providers. Specifically, the Plan describes ICE Clear Europe's particular dependencies with respect to custodians, physical delivery agents, ICE's exchanges, ICE's other clearing houses, and ICE's technology and operations groups.
In the description of dependencies on custodians, the proposed rule change would revise a reference to the Business Continuity and Disaster Recovery plans to be a general reference to ICE Clear Europe's operational resilience plans.
In the description of ICE Clear Europe's dependencies on physical delivery agents, the Plan currently provides that if there were a significant issue with a Physical Delivery Agent that could not be resolved then ICE Clear Europe could fall back to financial settlement, and therefore it does not ultimately have a dependency on physical delivery agents. The proposed rule change would retain the statement that ICE Clear Europe could fallback to financial settlement but would delete the statement that ICE Clear Europe does not ultimately have a dependency on physical delivery agents. Instead, the proposed rule change would add a statement that ICE Clear Europe for certain markets at this time, regularly tests its ability to perform the functions usually performed by those delivery agents itself under certain disruption scenarios. ICE Clear Europe is making this change to recognize that despite the mitigation of financial settlement, its relationship with physical delivery agents could still be considered a dependency.
With respect to dependencies on ICE's Exchanges, the Plan currently provides that ICE Clear Europe's dependency on ICE's Exchanges for the provision of settlement prices is mitigated through its ability under to generate its own settlement prices if needed, and therefore ICE Clear Europe does not ultimately have a dependency on ICE's Exchanges. The proposed rule change would delete the statement that ICE Clear Europe does not ultimately have a dependency on ICE's Exchanges. Instead, the proposed rule change would add that ICE Clear Europe's dependencies are mitigated via the ICE Exchanges' own resilience testing. Like the dependency on physical delivery agents, ICE Clear Europe is making this change to recognize that despite the mitigation of generating its own settlement prices, its relationship with ICE's Exchanges could still be considered a dependency.
With respect to dependencies on ICE's Clearing Houses, the Plan currently provides that ICE Clear Europe's dependency on ICE's Clearing Houses for operational or risk processes is mitigated through ICE Clear Europe's ability to run the processes itself, if needed, and therefore ICE Clear Europe does not ultimately have a dependency on ICE's Clearing Houses. The proposed rule change would delete the statement that ICE Clear Europe does not ultimately have a dependency on ICE's Clearing Houses. Instead, the proposed rule change would explain that the processes in question are generally the processes that ICE Clear Europe does already perform during business as usual London hours (such as intraday margin calls), which therefore validates the assumption that ICE Clear Europe can run the processes itself, if needed.
With respect to dependencies on ICE's technology and operations groups, the Plan notes that ICE Clear Europe relies on these groups for certain operational processes and for technology infrastructure. Moreover, the Plan provides that ICE Clear Europe's
Finally, the Plan identifies certain service providers that ICE Clear Europe does not depend on. Section currently provides the following types of service providers are not considered as dependencies for ICE Clear Europe: Investment Agents, APS Banks, Central Banks, Data Providers. Section 2 provides that these service providers are not dependencies because ICE Clear Europe would be able to substitute the providers as needed. The proposed rule change would delete this provision. ICE Clear Europe is making this particular change to recognize that despite being able to substitute these providers, its relationship with these providers could still be considered a dependency.
Section 2 also contains a table that describes ICE Clear Europe's technology systems that support its Critical Services. The table identifies and describes each system, identifies which Critical Service it supports, and the entity that provides the system. The proposed rule change would maintain this table largely as it is currently written in the Plan. In certain entries, the proposed rule change would clarify that a specific system relates to either credit-default swap trades or futures and options trades.
After the table, Section 2 describes how ICE Clear Europe mitigates the risks associated with its dependency on these technology systems. For example, the Plan states that ICE Clear Europe ensures that systems are run with multiple live redundancies and there are in place effective business continuity and disaster recovery arrangements. The proposed rule change would revise the description of these mitigation techniques. For example, in addition to ensuring that systems are run with multiple live redundancies, ICE Clear Europe would test these redundancies periodically. Further, the proposed rule change would, going forward, refer to business continuity and disaster recovery arrangements as operational resilience arrangements. Finally, the proposed rule change would note that, given these technology systems are provided by ICE Inc. or ICE Clear Credit, ICE Clear Europe is a direct participant in defining and ensuring operational and regulatory requirements are met when new capabilities are developed.
Finally, Section 2 describes the interdependencies between ICE Clear Europe and other financial market infrastructures. For example, the Plan states that some of ICE Clear Europe's Clearing Members are participants in other central counterparties. While ICE Clear Europe does not provide interoperability with other central counterparties, default of a Clearing Member at ICE Clear Europe may cause the Clearing Member to default at another central counterparty, and vice versa. The proposed rule change would maintain this description but would add explanation regarding ICE Clear Europe's interdependencies with other ICE, Inc. affiliates. Specifically, ICE Clear Europe provides certain intercompany services to certain affiliates within the ICE group and operates on the assumption that those services will continue to be provided during execution of the Plan. Because the services in question are typically operational or almost fully automated, ICE Clear Europe anticipates having relevant resources available outside of those required for recovery activities to continue the intercompany services. For those services that are not automated, and therefore do require ICE Clear Europe resources even under business-as-usual circumstances, ICE Clear Europe has, and periodically tests, backup arrangements.
Section 3 of the Plan describes the scenarios where ICE Clear Europe is likely to invoke the Plan and triggers for when ICE Clear Europe would invoke the Plan in those scenarios, as well as early warning indicators of when those scenarios might occur.
Currently the Plan describes two scenarios that could lead to recovery (each a “Recovery Scenario”): (i) losses caused by a defaulting Clearing Member and (ii) all other non-default losses caused by investments, operational incidents, or other business activities. The trigger for the default loss scenario is when ICE Clear Europe's Guaranty Fund is or is likely to be exhausted and there are still losses to cover. The trigger for the non-default loss scenario is when ICE Clear Europe's Base Capital is or is likely to be breached.
The proposed rule change would retain this description but would add explanation with respect to the trigger for the second scenario. The Plan would be triggered in the non-default loss scenario when ICE Clear Europe's Base Capital is or is likely to be breached by holding insufficient EMIR eligible capital.
Section 3 also explains the distinction between business-as-usual risk management and recovery under the Plan. Business-as-usual risk management options, such as the default waterfall, are designed to incentivize effective risk management and participation from Clearing Members and ICE Clear Europe, to maximize the likelihood that losses are managed through business-as-usual processes.
ICE Clear Europe invokes the Plan when it has been unable to cover its losses using business-as-usual risk management. In an appendix to the Plan, ICE Clear Europe describes certain scenarios that would stress its financial and operational resources and analyzes how these stress scenarios could become Recovery Scenarios (in other words, when such stress scenarios could lead ICE Clear Europe to invoke the Plan). The proposed rule change would add a statement to explain that with respect to these scenarios analyzed in Appendix A, each scenario is mapped to key risks contained within ICE Clear Europe's risk appetite statements, ensuring that each key risk type is covered within those scenarios. Also in this section, the proposed rule change would add a footnote to clarify that ICE Clear Europe's Guaranty Fund contribution is otherwise known as “Skin in the Game.”
Finally, Section 3 explains the distinction between ICE Clear Europe's management of operational risks and recovery under the Plan. ICE Clear Europe has established Business Continuity and Disaster Recovery Plans, which it uses to manage service issues caused by operational or technology problems. Such an operational or technological scenario could still trigger the Plan if it causes ICE Clear Europe to hit the non-default loss trigger. As discussed above, the Plan is triggered in the non-default loss scenario when ICE Clear Europe's Base Capital is or is likely to be breached by holding insufficient EMIR eligible capital.
The proposed rule change would update this description. For example, it would add references to ICE Clear Europe's operational resilience framework. The proposed rule change also would add references to ICE Clear Europe's incident management processes, which are part of its operational resilience framework.
Section 3 also describes certain early warning indicators. These are qualitative and quantitative metrics that ICE Clear Europe monitors to determine if it might hit the recovery triggers. These indicators are categorized according to whether they relate to the default loss or non-default loss scenarios discussed above.
For the default loss trigger, the early warning indicators are the default management information which is produced if a counterparty is potentially going be called into default. For example, ICE Clear Europe would consider the size of a Clearing Member's positions, its collateral, and market volatility. The proposed rule change would revise this description slightly to state that the early warning is default management information that is produced if a counterparty is potentially going to fail to meet an obligation and may therefore be called into default.
For the non-default loss trigger, ICE Clear Europe monitors its eligible capital against certain target thresholds each day, as an early warning indicator. The proposed rule change would revise this description slightly. The revised language would explain that, in that in order to identify warning indicators for non-default loss scenarios as early as possible, ICE Clear Europe monitors its eligible capital against target thresholds and the continued suitability of the target thresholds each day.
Section 4 of the Plan describes and analyzes the tools that ICE Clear Europe could use to recover from losses. The Plan refers to these tools as ICE Clear Europe's Recovery Options. ICE Clear Europe's Recovery Options include, among others, powers of assessment, reduced gains distribution, and allocation of investment losses.
Section 4 of the Plan currently describes these tools in detail, and the proposed rule change would make minor updates to this description. For example, the Plan currently states that ICE Clear Europe can call any amount of assessments up to the maximums and can call assessments multiple times. The proposed rule change would maintain this description but would add a phrase to clarify that if ICE Clear Europe were to call assessments multiple times, it would do so in accordance with the Rules. The proposed rule change also would correct a reference to the Capital Replenishment Framework, changing the name of that document to the Capital Replenishment Plan. In Section 4, the proposed rule change also would delete language that references Appendix A to the Plan. Appendix A to the Plan is a chart showing ICE Clear Europe's committee structure. As discussed further below, the proposed rule change would delete this Appendix A. Accordingly, the proposed rule change would remove a reference to Appendix A that is currently found in Section 4. Finally, the proposed rule change would delete a reference stating that ICE Clear Europe is responsible for the first $90 million of investment losses. This figure is no longer correct, and the amount is subject to change, so ICE Clear Europe believes it should not be set out in the Plan.
Section 4 of the Plan also describes how ICE Clear Europe's Recovery Options are comprehensive and effective. For example, Section 4 currently states that using partial tear-ups, ICE Clear Europe can eliminate any remaining Variation Margin and mark-to-market payment obligations by cancelling any remaining positions. The proposed rule change would delete this description from Section 4 because this language is identical to, and therefore duplicative of, language found in Section 1.
Finally, Section 4 contains a table that lays out all of ICE Clear Europe's Recovery Options, the scope of those Recovery Options, and some decision-making considerations associated with them. In the portion of the table describing the scope of powers of assessment, the proposed rule change would delete a statement that powers of assessment are potentially able to cover all Clearing Members defaulting simultaneously. As discussed above, ICE Clear Europe is making this change because it does not think the Plan should specify the expected coverage of assessment.
Section 5 describes the decision-making, governance, and communications process related to the Plan. Generally, when taking actions related to the Plan, ICE Clear Europe's President will attempt to convene the Board for approval in advance of making each material decision provided the Board can be convened in a timely manner. If the Board cannot be convened in advance, then it will be convened afterwards. The proposed rule change would maintain this provision but would explain that if the Board cannot be convened in advance, then it will be convened afterwards as soon as reasonably possible and updated on steps taken.
Moreover, Section 5 currently states that exercising options under the Plan does not require the approval of Clearing Members, Exchanges, or any other external stakeholders. The proposed rule change would maintain this provision largely as is but would change the word “exercising” to “implementing.” Similarly, the proposed rule change would change the word “exercising” to “implementing” in another part of Section 5 concerning communication with regulators.
Section 5 also describes how ICE Clear Europe will communicate and coordinate with external stakeholders when taking actions under the Plan. Currently, the Plan provides that ICE Clear Europe's overall communication and coordination objectives in recovery are to (i) provide Clearing Members, regulators, and the wider market with timely and accurate information and (ii) ensure effective coordination and escalation across affiliated ICE exchanges, clearing houses, and other financial market intermediaries. The Plan further provides that ICE Clear Europe manages this communication and coordination by using its Crisis Communication and Management Plan and Major Incident Response Plan. The proposed rule change would maintain these provisions but would change the Crisis Communication and Management Plan to the Communications Plan (or CP) and the Major Incident Response Plan to the Crisis Management Plan (or CMP). In other parts of Section 5, the proposed rule change similarly would update the name of each plan to the Communications Plan/CP and the Crisis Management Plan/CMP, respectively. Finally, the proposed rule change would add language that notes that the CP and CMP should be consulted when using the Plan.
Section 5 contains a table that describes certain personnel at ICE Clear Europe and their responsibilities with respect to communicating with stakeholders. For example, ICE Clear Europe's Head of Regulation and
Finally, throughout Section 5, the proposed rule change would replace references to “bridge calls” with references to “conference calls.”
Section 6 of the Plan is a recovery playbook. Section 6 describes how ICE Clear Europe might use the Plan, including how ICE Clear Europe might incur losses and the steps it would take in response to those losses. Section 6 provides this information for both the default loss and non-default loss Recovery Scenarios.
In this section the proposed rule change would make updates and amendments like those discussed above. Specifically, the proposed rule change would update the name of the Capital Replenishment Framework to the Capital Replenishment Plan or CRP. The proposed rule change also would update the name of the Crisis Communications and Management Plan to the Communications Plan/CP and the Major Incident Response Plan to the Crisis Management Plan/CMP, in accordance with the changes discuss above.
The proposed rule change also would revise certain responsibilities of ICE Clear Europe's President. Section 6 describes a number of responsibilities and actions required of ICE Clear Europe's President under the Plan. For example, Section 6 notes that the President, together with the Default Management Committee, must assess whether default losses are, or are likely to, exhaust ICE Clear Europe's Guaranty Fund. Similarly, the President must consult with the Board for their approval of the decision to trigger the Plan, provided they can be convened on a timely basis. Given these responsibilities assigned to the President, the proposed rule change would add a general caveat at the beginning of Section 6 that would apply where the President is unavailable or incapacitated. In that situation, ICE Clear Europe would refer to its Delegation of Authority Framework to determine if another person at ICE Clear Europe could substitute for the President.
The proposed rule change also would clarify when the President would take certain steps under the Plan. For example, the Plan currently provides that if the Board cannot be convened on a timely basis, then the President will decide on whether to trigger the Plan and will convene the Board afterwards. The proposed rule change would maintain this requirement but would add a note to the effect that the President will convene the Board as soon as reasonably possible and update the Board on steps taken. The proposed rule change would add this same explanation to the requirement that if the Board cannot be convened on a timely basis, then the President will decide on which Recovery Options to use and convene the Board afterwards.
The proposed rule change would make similar amendments to certain responsibilities of ICE Clear Europe generally, rather than the President in particular. Section 6 of the Plan currently requires that ICE Clear Europe inform its regulators as to its intention to trigger the Plan and the reasons for triggering, provided that the regulators can be contacted on a timely basis. If its regulators cannot be contacted on a timely basis, then the President will proceed with triggering the Plan. The proposed rule change would maintain this requirement but would add a note that notification to regulators will take place as soon as reasonably possibly thereafter. The proposed rule change would add this same explanation to the requirement that ICE Clear Europe inform its regulators as to its intended use of Recovery Options. In that case, if ICE Clear Europe cannot contact its regulators on a timely basis, then the President will proceed with the chosen Recovery Options, and notification to regulators will take place as soon as reasonably possibly thereafter.
Finally, the proposed rule change would update the description of the non-default loss scenario that is currently found in Section 6. Currently Section 6 describes a non-default loss scenario as significant financial loss that has occurred, or is about to occur, that does not involve the default of any Clearing Members. The proposed rule change would update this description to a significant financial losses that has occurred, or is about to occur, that is not caused by the default of any Clearing Members. Moreover, the Plan currently provides that if a non-default loss event has occurred, then the President, together with the Executive Risk Committee, will assess whether there are, or are likely to be losses that breach ICE Clear Europe's Base Capital, and this assessment will be based on ICE Clear Europe's Regulatory Capital metrics. The proposed rule change would update this slightly. Under the proposed rule change, the President, together with the Executive Risk Committee, will assess whether there are, or are likely to be losses that breach ICE Clear Europe's Base Capital by holding insufficient EMIR eligible capital. In addition, this assessment will be based on relevant management information generally, rather than ICE Clear Europe's Regulatory Capital metrics specifically.
Section 7 of the Plan describes certain key limitations and assumptions associated with the Plan. In Section 7 the proposed rule change would make a minor typographical change and would change a reference to the Capital Replenishment Framework to the Capital Replenishment Plan, or CRP.
The proposed rule change would add Section 8 to the Plan. Section 8 would be titled Document Governance and Exception Handling. Under this section, the owner of the Plan would be responsible for ensuring that the Plan remains up-to-date and is reviewed in accordance with ICE Clear Europe's governance processes. Such reviews would encompass, at a minimum, regulatory compliance; documentation and purpose; implementation; use; and open items from previous validations or reviews (where appropriate). The results of the review, including any findings, would be reported to ICE Clear Europe's Executive Risk Committee along with the priority of findings, proposed remediations and target due date to remediate the findings.
The document owner also would be responsible for reporting material breaches or unapproved deviations from
Finally, under Section 8, exceptions to the Plan would be approved in accordance with ICE Clear Europe's governance process for the approval of changes, and changes to the Plan would have to be approved in in accordance with ICE Clear Europe's governance process. Such changes only would take effect after completion of all necessary internal and regulatory approvals.
The Plan currently has two appendices. Appendix A is a depiction of ICE Clear Europe's governance structure. The Board of Directors is at the top, followed by Board-level governance committees, and then executive-level governance committees. The proposed rule change would delete Appendix A. ICE Clear Europe believes the committee structure is fully defined in other documentation and does not need to be included in the Plan.
Appendix B is a table that describes certain scenarios that could lead ICE Clear Europe to invoking the Plan. Appendix B describes these scenarios as “stress scenarios.” The table contains entries for eleven different stress scenarios, with three related to losses stemming from a Clearing Member's default and eight related to non-default losses. For each scenario, the table summarizes the circumstances leading to losses at ICE Clear Europe, analyzes how such a scenario could trigger the Plan and thus become a Recovery Scenario, and explains how ICE Clear Europe would use the Plan to respond to the scenario. The proposed rule change would maintain the substance of this table while making minor updates to the language. For example, the proposed rule change would change the title of the first column to “Scenario Category (Key Risk).” The proposed rule change also would change the title of the last column to “Scenario Analysis” from just “Analysis.”
With respect to each of the scenarios, the proposed rule change would specify which key risk the scenario relates to. For example, the proposed rule change would specify that each of the default loss scenarios relates to financial risk, while the non-default loss scenarios relate to legal, regulatory, operational, information security, and business risk, respectively. ICE Clear Europe is making this change to identify each scenario with the key risks contained within its risk appetite statements, thus ensuring that each key risk type is covered within those scenarios. This is consistent with the change to Section 3 described above.
Finally, the proposed rule change would make a minor typographical correction in one part of the table, by deleting certain duplicative words.
Section 19(b)(2)(C) of the Act directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such organization.
Section 17A(b)(3)(F) of the Act requires, among other things, that the rules of ICE Clear Europe be designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions.
With respect to the governance and communication of actions taken under the Plan, among other things, the proposed rule change would clarify that where the President cannot convene the Board in advance of making a material decision, the Board will be convened afterwards. The proposed rule change also would specify that where the Board cannot be convened on a timely basis prior to deciding which Recovery Options to use, the President will decide on which Recovery Options to use and convene the Board afterwards. With respect to communications, the proposed rule change would, among other things, explain that ICE Clear Europe would seek to communicate its plans and/or intentions to relevant external stakeholders where possible, and as soon as reasonably practicable, to ensure appropriate transparency. The proposed rule change also would require that ICE Clear Europe notify its regulators as soon as reasonably possibly after triggering the Plan and using Recovery Options. The Commission believes that the proposed rule change therefore would help to ensure that ICE Clear Europe's Board is fully apprised of actions taken under the Plan and further that ICE Clear Europe communicates its actions to regulators and other external stakeholders.
The proposed rule change also would amend ICE Clear Europe's testing of the plan, as found in Section 1. Under the proposed rule change, ICE Clear Europe could test default-related recovery scenarios, including coordination with other covered clearing agencies, as part of its annual default fire drill. The proposed rule change also would require that ICE Clear Europe specifically test at least one default and one non-default scenario each year, with all recovery options tested over a three-year cycle. Moreover, the proposed rule change would add, as a key focus for testing, whether all services can continue to be provided, including those provided to affiliates. The Commission believes the proposed rule change therefore would improve testing of the plan and help ensure that ICE Clear Europe tests the plan in its entirety over a three-year cycle. The Commission further believes that testing of the plan can reveal potential errors and other issues, and therefore can help ICE Clear Europe to resolve potential problems prior to entering a Recovery Scenario or engaging its recovery options.
The Commission believes that other changes discussed above would help ensure that information found in the Plan is accurate and current. Among other things, the proposed rule change would correct typographical errors, thereby improving the accuracy of the information found in the Plan. The proposed rule change also would delete internal references to Appendix A because ICE Clear Europe is deleting that appendix. The proposed rule
The Commission believes that the proposed rule change also would help make the Plan more concise. For example, the proposed rule change would delete from Section 4 a description of how ICE Clear Europe's Recovery Options are comprehensive and effective because this description duplicates language already found in Section 1. The proposed rule change similarly would remove discussion of the expected coverage of partial tear-ups and powers of assessment. The proposed rule change also would remove Appendix A, given that ICE Clear Europe's committee structure is defined in other documentation and does not need to be included in the Plan. The Commission therefore believes that the proposed rule change, by making the Plan more concise, should improve the usability and readability of the Plan.
Thus, the Commission believes the proposed rule change would strengthen the Plan. Improving governance and communication of actions should help ensure that internal and external stakeholders are fully apprised of actions ICE Clear Europe takes during recovery, therefore enabling these stakeholders to assist in carrying out the actions or otherwise prepare for them. Requiring ICE Clear Europe to test on a three-year cycle should help reveal any potential deficiencies in the Plan ahead of when ICE Clear Europe would need to use it. Updating information should help ensure those utilizing the Plan have current information necessary to carry out recovery. Finally, making the plan more concise should make it easier and more efficient to use, by removing unnecessary or repetitive information. Overall, the Commission believes that the proposed rule change would strengthen the Plan and that in doing so, the proposed rule change should help ICE Clear Europe to continue promptly and accurately clearing and settling transactions during recovery.
Therefore, the Commission finds that the proposed rule change is consistent with section 17A(b)(3)(F) of the Act.
Rule 17Ad-22(e)(2)(i) and (v) require that ICE Clear Europe establish, implement, maintain, and enforce written policies and procedures reasonably designed to provide governance arrangements that, among other things, are clear and transparent and specify clear and direct lines of responsibility.
As discussed above, the proposed rule change would add a new Section 8 regarding document governance. Among other things, Section 8 would make the document owner responsible for ensuring that the Plan remains up-to-date and is reviewed in accordance with ICE Clear Europe's governance processes. The document owner also would be responsible for reporting material breaches or unapproved deviations from the Plan to their Head of Department, the Chief Risk Officer, and the Head of Regulation and Compliance (or, as applicable, their respective delegates). The Commission believes these changes would establish clear and direct responsibilities for the document owner of the Plan consistent with Rule 17Ad-22(e)(2)(v).
The proposed rule change also would add language to clarify what would happen where the ICE Clear Europe President is unavailable or incapacitated. In that situation, ICE Clear Europe would refer to its Delegation of Authority Framework to determine if another person at ICE Clear Europe could substitute for the President. This is an important clarification because, as discussed above, the President is responsible for significant actions under the Plan, such as making material decisions and triggering the Plan. The Commission believes that specifying what ICE Clear Europe would do when the President is incapacitated would therefore help clarify how ICE Clear Europe would use the Plan in such a situation, consistent with Rule 17Ad-22(e)(2)(i).
Rule 17Ad-22(e)(3)(ii) requires that ICE Clear Europe establish, implement, maintain, and enforce written policies and procedures reasonably designed to maintain a sound risk management framework for comprehensively managing legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by ICE Clear Europe, which includes plans for the recovery and orderly wind-down of ICE Clear Europe necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses.
The Commission believes the proposed change rule, as described above, would strengthen the Plan by adding details regarding the governance and communication processes associated with the Plan. The proposed rule change also would establish a three-year cycle for testing the Plan, update information in the Plan, and otherwise make the Plan more concise. The Commission believes that the proposed rule change, in strengthening the Plan, overall would help ICE Clear Europe to maintain a plan for recovery, consistent with Rule 17Ad-22(e)(3)(ii).
On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act, and in particular, with the requirements of section 17A(b)(3)(F) 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 (“Act”)
The proposed rule change consists of amendments to the Recovery and Wind-down Plan to reflect business and product developments that have taken place since the time it was last amended, and make certain changes to improve the clarity of the Plan and make other updates and technical revisions, as described in greater detail below.
In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The R&W Plan was adopted in August 2018
The R&W Plan is comprised of two primary sections: (i) the “Recovery Plan,” that sets out the tools and strategies to enable FICC to recover, in the event it experiences losses that exceed its prefunded resources, and (ii) the “Wind-down Plan,” that describes the tools and strategies to be used to conduct an orderly wind-down of FICC's business in a manner designed to permit the continuation of FICC's critical services in the event that its recovery efforts are not successful.
The purpose of the rule proposal is to amend the R&W Plan to reflect business and product developments that have taken place since the time it was last amended,
FICC believes that by helping to ensure that the R&W Plan reflects current business and product developments, providing additional clarity, and making necessary grammatical corrections, that the proposed rule change would help it continue to maintain the Plan in a manner that supports the continuity of FICC's critical services and enables its Members and Limited Members to maintain access to FICC's services through the transfer of its membership in the event FICC defaults or the Wind-down Plan is ever triggered by the Board.
The R&W Plan is managed by the Office of Recovery & Resolution Planning (referred to in the Plan as the “R&R Team”) of FICC's parent company, the Depository Trust & Clearing Corporation (“DTCC”),
FICC is proposing the changes to the following sections of the Plan based upon business updates and product
Section 2.3 (MBSD) describes the way in which TBA transactions are processed by FICC. For purposes of completeness, the proposed rule change would augment the existing description to add that the processing consists of the following steps: trade matching, novation, the Do Not Allocate (“DNA”) process, TBA Netting, electronic pool notification (“EPN”) allocation, pool comparison, Pool Netting, pool conversion and settlement. Similarly, in the paragraph of this section that describes the TBA Netting process,
Section 2.4 (Intercompany Arrangements) describes how corporate support services are provided to FICC from DTCC and DTCC's other subsidiaries, through intercompany agreements under a shared services model. This section includes a table, (Facilities, Table 2-B), that lists each of the DTCC facilities utilized by the Clearing Agencies and indicates whether the facility is owned or leased. FICC proposes to update this table to add Washington DC, London, UK, and McLean, Virginia as additional DTCC facility locations.
Section 2.5 (FMI Links)
Section 3 (Critical Services) defines the criteria for classifying certain of FICC's services as “critical,”
Section 5.2.4 (Recovery Corridor and Recovery Phase) outlines the early warning indicators to be used by FICC to evaluate its options and potentially prepare to enter the “Recovery Phase,” which phase refers to the actions to be taken by FICC to restore its financial resources and avoid a wind-down of its business. This section contains descriptions of potential stress events that could lead to recovery, and several early warning indicators and metrics that FICC has established to evaluate its options and potentially prepare to enter the Recovery Phase. These indicators, which are referred to in the Recovery Plan as recovery corridor indicators (“Corridor Indicators” or “Indicator(s)”),
First, for purposes of providing additional context on the applicable measurement, the proposed rule change would clarify the “Hedge Effectiveness” Indicator
FICC is also proposing to make other updates and technical revisions to the Plan. These technical revisions would, for example, make grammatical corrections, update the names of certain FICC internal groups, and clarify the description of internal organizations, without changing the substantive statements being revised.
For example, in Section 2.4, Table 2-A (SIFMU Legal Entity Structure and Intercompany Agreements), for purposes of clarifying the full scope of services provided by FICC's affiliate, DTC, the description of DTC's services would be revised from “Underwriting, Securities Processing, Corporate Actions,” to “Asset Services.” Some other examples include: (i) a revision would be made throughout the Plan to reflect an internal name change from DTCC's “Operational Risk Management” to “Operational Risk,” and add a new internal organization, “Embedded Risk Management,”
FICC believes the proposed updates and technical revisions would improve the clarity and accuracy of the Plan and, therefore, would help facilitate the execution of Plan, if necessary.
FICC believes that the proposal is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a registered clearing agency. In particular, FICC believes that the amendments to the R&W Plan are consistent with section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires, in part, that the rules of FICC be designed to promote the prompt and accurate clearance and settlement of securities transactions. As described above, the proposed rule change would update the R&W Plan to reflect business and product developments and make certain technical corrections. By helping to ensure that the R&W Plan reflects current business and product developments, and providing additional clarity, FICC believes that the proposed rule change would help it continue to maintain the Plan in a manner that supports the continuity of FICC's critical services and enables its Participants and Pledgees to maintain access to FICC's services through the transfer of its membership in the event FICC defaults or the Wind-down Plan is ever triggered by the Board. Further, by facilitating the continuity of its critical clearance and settlement services, FICC believes the Plan and the proposed rule change would continue to promote the prompt and accurate clearance and settlement of securities transactions. Therefore, FICC believes the proposed amendments to the R&W Plan are consistent with the requirements of section 17A(b)(3)(F) of the Act.
Rule 17Ad-22(e)(3)(ii) under the Act requires FICC to establish, implement, maintain and enforce written policies and procedures reasonably designed to maintain a sound risk management framework for comprehensively managing legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by the covered clearing agency, which includes plans for the recovery and orderly wind-down of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses.
Specifically, the Recovery Plan defines the risk management activities, stress conditions and indicators, and tools that FICC may use to address stress scenarios that could eventually prevent it from being able to provide its critical services as a going concern. Through the framework of the Crisis Continuum, the Recovery Plan addresses measures that FICC may take to address risks of credit losses and liquidity shortfalls, and other losses that could arise from a Participant default. The Recovery Plan also addresses the management of general business risks and other non-default risks that could lead to losses. The Wind-down Plan would be triggered by a determination by the Board that recovery efforts have not been, or are unlikely to be, successful in returning FICC to viability as a going concern. Once triggered, the Wind-down Plan sets forth clear mechanisms for the transfer of FICC's membership and business and is designed to facilitate continued access to FICC's critical services and to minimize market impact of the transfer. By establishing the framework and strategy for the execution of the transfer and wind-down of FICC in order to facilitate continuous access to its critical services, the Wind-down Plan establishes a plan for the orderly wind-down of FICC.
As described above, the proposed rule change would update the R&W Plan to reflect business and product developments and make certain technical corrections. By ensuring that material provisions of the Plan are current, clear, and technically correct, FICC believes that the proposed amendments are designed to support the maintenance of the Plan for the recovery and orderly wind-down of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses, and, as such, meets the requirements of Rule 17Ad-22(e)(3)(ii) under the Act.
FICC does not believe that the proposed rule change would have any impact, or impose any burden, on competition. FICC does not anticipate that the proposal would affect its day-to-day operations under normal circumstances, or in the management of a typical Member default scenario or non-default event. The R&W Plan was developed and documented in order to satisfy applicable regulatory requirements, as discussed above. The proposal is intended to enhance and update the Plan to ensure it is clear and remains current in the event it is ever necessary to be implemented. The proposed revisions would not affect any changes to the overall structure or operation of the Plan or FICC's recovery and wind-down strategy as set forth under the current Plan. As such, FICC believes the proposal would not have any impact, or impose any burden, on competition.
FICC has not received or solicited any written comments relating to this proposal. If any written comments are received, FICC will amend this filing to publicly file such comments as an Exhibit 2 to this filing, as required by Form 19b-4 and the General Instructions thereto.
Persons submitting written comments are cautioned that, according to Section IV (Solicitation of Comments) of the Exhibit 1A in the General Instructions to Form 19b-4, the Commission does not edit personal identifying information from comment submissions. Commenters should submit only information that they wish to make available publicly, including their name, email address, and any other identifying information.
All prospective commenters should follow the Commission's instructions on How to Submit Comments,
FICC reserves the right to not respond to any comments received.
The foregoing rule change has become effective pursuant to section 19(b)(3)(A)
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.
All submissions should refer to file number SR-FICC-2023-013. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website (
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange proposes to amend the Short Term Option Series Program in MEMX Rule 19.5, Interpretation and Policy .05 and a related definition in Rule 16.1. The text of the proposed rule change is provided in Exhibit 5.
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 Short Term Option Series Program in Rule 19.5, Interpretation and Policy .05, and amend the definition of Short Term Option Series in Rule 16.1.
In August 2022, the Commission approved the Exchange's adoption of rules to govern the trading of options on the Exchange by MEMX Options,
Specifically, the Exchange proposes to amend the Short Term Option Series Program to: (i) limit the number of Short Term Option Expiration Dates for options on SPDR S&P 500 ETF Trust (SPY), the INVESCO QQQ TrustSM, Series 1 (QQQ), and iShares Russell 2000 ETF (IWM) from five to two expirations for Monday and Wednesday expirations; and (ii) expand the Short Term Option Series program to permit the listing and trading of options series with Tuesday and Thursday expirations for options on SPY and QQQ listed pursuant to the Short Term Option Series Program, subject to the same proposed limitation of two expirations. The Exchange also proposes to amend the definition of Short Term Option Series in Rule 16.1.
Currently, after an option class has been approved for listing and trading on the Exchange, the Exchange may open for trading on any Thursday or Friday that is a business day (“Short Term Option Opening Date”) series of options on that class that expire at the close of business on each of the next five Fridays that are business days and are not Fridays on which monthly options series or Quarterly Options Series expire (“Short Term Option Expiration Dates”). The Exchange may have no more than a total of five Short Term Option Expiration Dates not including any Monday or Wednesday SPY, QQQ, and IWM Expirations. Further, if the Exchange is not open for business on the respective Thursday or Friday, the Short Term Option Opening Date will be the first business day immediately prior to that respective Thursday or Friday. Similarly, if the Exchange is not open for business on a Friday, the Short Term Option Expiration Date will be the first business day immediately prior to that Friday.
Today, with respect to Wednesday SPY, QQQ, and IWM Expirations, the Exchange may open for trading on any Tuesday or Wednesday that is a business day series of options on SPY, QQQ, and IWM to expire on any Wednesday of the month that is a business day and is not a Wednesday in which Quarterly Options Series expire (“Wednesday SPY Expirations,” “Wednesday QQQ Expirations,” and “Wednesday IWM Expirations”). With respect to Monday SPY, QQQ, and IWM Expirations, the Exchange may open for trading on any Friday or Monday that is a business day series of options on the SPY, QQQ, or IWM to expire on any Monday of the month that is a business day and is not a Monday in which Quarterly Options Series expire (“Monday SPY Expirations,” “Monday QQQ Expirations,” and “Monday IWM Expirations”), provided that Monday SPY Expirations, Monday QQQ Expirations, and Monday IWM Expirations that are listed on a Friday must be listed at least one business week and one business day prior to the expiration. The Exchange may list up to five consecutive Wednesday SPY Expirations, Wednesday QQQ Expirations, and Wednesday IWM Expirations and five consecutive Monday SPY Expirations, Monday QQQ Expirations, and Monday IWM Expirations at one time; the Exchange may have no more than a total of five each of Wednesday SPY Expirations, Wednesday QQQ Expirations, and Wednesday IWM Expirations and a total of five each of Monday SPY Expirations, Monday QQQ Expirations, and Monday IWM Expirations. Monday and Wednesday SPY Expirations, Monday and Wednesday QQQ Expirations, and Monday and Wednesday IWM Expirations will be subject to the provisions of Rule 19.5, Interpretation and Policy .05.
At this time, the Exchange proposes to curtail the number of Short Term Option Expiration Dates from five to two
In addition to the above, the Exchange may open for trading series of options on the symbols provided in Table 1 below that expire at the close of business on each of the next two Mondays, Tuesdays, Wednesdays, and Thursdays, respectively, that are business days beyond the current week and are not business days on which monthly options series or Quarterly Options Series expire (“Short Term Option Daily Expirations”). The Exchange may have no more than a total of two Short Term Option Daily Expirations beyond the current week for each of Monday, Tuesday, Wednesday, and Thursday expirations at one time. Short
SPY, QQQ, and IWM Friday expirations and other option symbols expiring on a Friday that are not noted in Table 1 will continue to have a total of five Short Term Option Expiration Dates, provided those Friday expirations are not Fridays on which monthly options series or Quarterly Options Series expire (“Friday Short Term Option Expiration Dates”). These expirations would be referred to as “Short Term Option Weekly Expirations” to distinguish them from the proposed expirations that would be subject to Short Term Option Daily Expirations. The Exchange proposes to add rule text to Rule 19.5, Interpretation and Policy .05(h) which states that Monday Short Term Option Expiration Dates, Tuesday Short Term Option Expiration Dates, Wednesday Short Term Option Expiration Dates, and Thursday Short Term Option Expiration Dates, together with Friday Short Term Option Expiration Dates, are collectively “Short Term Option Expiration Dates.”
At this time, the Exchange proposes to expand the Short Term Option Series Program for Short Term Option Daily Expirations on Tuesday (“Tuesday Short Term Option Daily Expirations) and Short Term Option Daily Expirations on Thursday (“Thursday Short Term Option Daily Expirations”). No more than a total of two Tuesday Short Term Option Daily Expirations or Thursday Short Term Option Daily Expirations in SPY and QQQ will be listed at any one time beyond the current week. Tuesday and Thursday Short Term Option Daily Expirations would be subject to Rule 19.5, Interpretation and Policy .05.
A Short Term Option Series means a series in an option class that is approved for listing and trading on the Exchange in which the series is opened for trading on any Monday, Tuesday, Wednesday, Thursday, or Friday that is a business day and that expires on the Monday, Wednesday, or Friday of the following business week that is a business day, or, in the case of a series that is listed on a Friday and expires on a Monday, is listed one business week and one business day prior to that expiration. If a Tuesday, Wednesday, Thursday or Friday is not a business day, the series may be opened (or shall expire) on the first business day immediately prior to that Tuesday, Wednesday, Thursday or Friday. For a series listed pursuant to this section for Monday expiration, if a Monday is not a business day, the series shall expire on the first business day immediately following that Monday.
The Exchange proposes to amend this definition in Rule 16.1 to accommodate the listing of options series that expire on Tuesdays and Thursdays. Specifically, the Exchange proposes to add Tuesday and Thursdays to the permitted expiration days, which currently include Monday, Wednesday, and Friday, that it may open for trading.
The Exchange also proposes corresponding changes within Rule 19.5, Interpretation and Policy .05, which sets forth the requirements for SPY and QQQ options that are listed pursuant to the Short Term Option Series Program as Short Term Option Daily Expirations, to accommodate the listing of options series that expire on Tuesdays and Thursdays.
Similar to Monday and Wednesday SPY, QQQ, and IWM Short Term Option Daily Expirations within Rule 19.5, Interpretation and Policy .05, the Exchange proposes that it may open for trading on any Monday or Tuesday that is a business day series of options on the symbols provided in Table 1 that expire at the close of business on each of the next two Tuesdays beyond the current week that are business days and are not business days in which monthly options series or Quarterly Options Series expire (“Tuesday Short Term Option Expiration Date”).
Likewise, the Exchange proposes that it may open for trading on any Wednesday or Thursday that is a business day series of options on symbols provided in Table 1 that expire at the close of business on each of the next two Thursdays that are business days and are not business days in which monthly options series or Quarterly Options Series expire (“Thursday Short Term Option Expiration Date”).
In the event that options on SPY and QQQ expire on a Tuesday or Thursday and that Tuesday or Thursday is the same day that a monthly option series or Quarterly Options Series expires, the Exchange would skip that week's listing and instead list the following week; the two weeks would therefore not be consecutive. Today, Monday and Wednesday Expirations in SPY, QQQ, and IWM skip the weekly listing in the event the weekly listing expires on the same day in the same class as a Quarterly Options Series. Currently, there is no rule text provision that states that Monday and Wednesday Expirations in SPY, QQQ, and IWM skip the weekly listing in the event the weekly listing expires on the same day in the same class as a monthly option series. Practically speaking, Monday and Wednesday Expirations in SPY, QQQ, and IWM would not expire on the same day as a monthly expiration.
The interval between strike prices for the proposed Tuesday and Thursday SPY and QQQ Short Term Option Daily Expirations will be the same as those for the current Short Term Option Series for Monday, Wednesday, and Friday expirations applicable to the Short Term Option Series Program.
Pursuant to proposed Rule 19.5, Interpretation and Policy .05, with respect to the Short Term Option Series Program, a Tuesday or Thursday expiration series will expire on the first business day immediately prior to that Tuesday or Thursday,
Currently, for each option class eligible for participation in the Short Term Option Series Program, the Exchange is limited to opening thirty (30) series for each expiration date for the specific class.
Finally, the Exchange is amending Rule 19.5, Interpretation and Policy .05(b) to conform the rule text to the usage of the term “Short Term Option
Short Term Option Daily Expirations will be permitted to expire in the same week in which monthly option series on the same class expire. Not listing Short Term Option Daily Expirations for one week every month because there was a monthly on that same class on the Friday of that week would create investor confusion. Further, as with Monday and Wednesday SPY, QQQ, and IWM Expirations, the Exchange would not permit Tuesday and Thursday Short Term Option Daily Expirations to expire on a business day in which monthly options series or Quarterly Options Series expire.
The Exchange believes that it is reasonable to not permit two expirations on the same day in which a monthly options series or a Quarterly Options Series would expire.
The Exchange does not believe that any market disruptions will be encountered with the introduction of P.M.-settled Tuesday and Thursday Short Term Option Daily Expirations, as other Exchanges have already adopted identical rules, and the Exchange will have surveillance programs in place to support and properly monitor trading in Short Term Option Series that expire Monday and Wednesday for SPY, QQQ and IWM.
The Exchange believes that 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 proposal is consistent with the Act as the overall reduction offered by this proposal reduces the number of Short Term Option Expirations to be listed on the Exchange. This reduction would remove impediments to and perfect the mechanism of a free and open market by encouraging Market-Makers to continue to deploy capital more efficiently and improve displayed market quality.
Similar to SPY, QQQ, and IWM Monday and Wednesday Expirations (proposed to be SPY, QQQ and IWM Monday and Wednesday Short Term Daily Expirations), the introduction of SPY and QQQ Tuesday and Thursday Short Term Daily Expirations is consistent with the Act as it will, among other things, expand hedging tools available to market participants and continue the reduction of the premium cost of buying protection. The Exchange believes that SPY and QQQ Tuesday and Thursday expirations (proposed to be SPY and QQQ Tuesday and Thursday Short Term Daily Expirations) will allow market participants to purchase SPY and QQQ options based on their timing as needed and allow them to tailor their investment and hedging needs more effectively. Further, the proposal to permit Tuesday and Thursday Short Term Daily Expirations for options on SPY and QQQ listed pursuant to the Short Term Option Series Program, subject to the proposed limitation of two expirations, would protect investors and the public interest by providing the investing public and other market participants more flexibility to closely tailor their investment and hedging decisions in SPY and QQQ options, thus allowing them to better manage their risk exposure.
In particular, the Exchange believes the Short Term Option Series Program as implemented by other exchanges has been successful to date and that Tuesday and Thursday SPY and QQQ Short Term Daily Expirations should simply expand the ability of investors to hedge risk against market movements stemming from economic releases or market events that occur throughout the month in the same way that the Short Term Option Series Program has expanded the landscape of hedging. Similarly, the Exchange believes Tuesday and Thursday SPY and QQQ Short Term Daily Expirations should create greater trading and hedging opportunities and flexibility and will provide customers with the ability to tailor their investment objectives more effectively.
Today, with the exception of Monday and Wednesday SPY Expirations, Monday and Wednesday QQQ Expirations, and Monday and Wednesday IWM Expirations, no Short Term Option Series may expire in the same week in which monthly option series on the same class expire. With this proposal, Tuesday and Thursday SPY Expirations and Tuesday and Thursday QQQ Expirations would be treated similarly to existing Monday and Wednesday SPY, QQQ, and IWM Expirations. The Exchange believes that permitting Short Term Option Daily Expirations to expire in the same week that standard monthly options expire on Fridays is consistent with the Act. Not listing Short Term Option Daily Expirations for one week every month because there was a monthly on that same class on the Friday of that week would create investor confusion.
Further, as with Monday and Wednesday SPY, QQQ, and IWM Expirations, the Exchange would not permit Tuesday and Thursday Short Term Option Daily Expirations to expire on a business day in which monthly
There are no material differences in the treatment of Wednesday SPY and QQQ expirations for Short Term Option Series as compared to the proposed Tuesday and Thursday SPY and QQQ Short Term Daily Expirations. Given the similarities between Wednesday SPY, QQQ and IWM Expirations and the proposed Tuesday and Thursday SPY and QQQ Short Term Daily Expirations, the Exchange believes that applying the provisions in Rule 19.5, Interpretation and Policy .05 that will apply to Wednesday SPY, QQQ and IWM Expirations to Tuesday and Thursday SPY and QQQ Short Term Daily Expirations is justified.
The Exchange further represents that it has an adequate surveillance program in place to detect manipulative trading in the proposed Tuesday and Thursday SPY and QQQ Short Term Daily Expirations, in the same way that it monitors trading in the current Short Term Option Series and trading in Monday and Wednesday SPY, QQQ, and IWM Expirations. The Exchange also represents that it has the necessary systems capacity to support the new options series.
Finally, as previously noted, the proposed rule change is substantively the same as a rule change proposed by BZX Options and EDGX Options, which the Commission approved in 2022.
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 proposal will provide an overall reduction in the number of Short Term Option Expirations to be listed on the Exchange. The Exchange believes this reduction will not impose an undue burden on competition, rather, it should encourage Market- Makers to continue to deploy capital more efficiently and improve displayed market quality.
Similar to SPY, QQQ and IWM Monday and Wednesday Expirations, the Exchange believes the introduction of SPY and QQQ Tuesday and Thursday Short Term Daily Expirations will not impose an undue burden on competition. The Exchange believes that it will, among other things, expand hedging tools available to market participants and continue the reduction of the premium cost of buying protection. The Exchange believes that SPY and QQQ Tuesday and Thursday Short Term Daily Expirations will allow market participants to purchase SPY and QQQ options based on their timing as needed and allow them to tailor their investment and hedging needs more effectively. The Exchange does not believe the proposal will impose any burden on intermarket competition, as other options exchanges have already adopted similar rules to list and trade Short-Term Option Series with Tuesday and Thursday Short Term Daily Expirations. Additionally, the Commission recently approved a substantively identical proposal of another exchange and other exchanges have filed to modify their rules in a similar fashion.
The Exchange neither solicited nor received comments on the proposed rule change.
Because the foregoing proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to section 19(b)(3)(A) 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
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to section 19(b)(1)
The Exchange proposes to modify the NYSE American Options Fee Schedule (“Fee Schedule”) to provide for certain temporary fee changes in connection with the Exchange's migration to the Pillar trading platform. The Exchange proposes to implement the fee changes effective August 29, 2023. The proposed rule change is available on the Exchange's website at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The purpose of this filing to amend the Fee Schedule to provide for certain temporary changes in connection with the Exchange's migration to a new trading platform known as Pillar. Currently, the Exchange conducts options trading on an electronic platform known as “the Exchange System,” which refers to the Exchange's electronic order delivery, execution, and reporting system for designated option issues through which orders and quotes of users are consolidated for execution and/or display.
Specifically, the Exchange proposes to (1) provide ATP Holders and ATP Firms (collectively, “ATP Holders”) with certainty regarding their eligibility for certain tiers, incentives, and discounts during the migration to Pillar; (2) waive Monthly Excessive Bandwidth Utilization Fees (“EBUF”) during the migration to Pillar and for a six-month period thereafter; and (3) cap certain port fees during the migration to Pillar. The Exchange proposes to implement the rule changes on August 29, 2023.
The Exchange currently offers various volume- and performance-based incentives and discounts to encourage ATP Holders to use the Exchange as their primary venue for order routing and execution and for market making activity. Many of these incentive and discount programs include multiple tiers, which are intended to encourage greater participation in the programs and to incent ATP Holders to continually grow their business on the Exchange in order to qualify for the benefits offered in a higher tier.
In advance of the Exchange's migration to the Pillar platform, the Exchange has noted concern among ATP Holders regarding their ability to achieve various volume qualifications and thresholds during the migration. Specifically, because ATP Holders may choose to moderate their order flow and quotation sizes to reduce risk as they familiarize themselves with the new trading platform, they may not achieve the tier(s), incentive(s), and discount(s) they qualified for pre-migration. Accordingly, the Exchange believes that providing ATP Holders with certainty with respect to certain pricing they would receive during the transition to Pillar would provide ATP Holders with an opportunity to adjust to new functionality and new order handling mechanisms without taking on an additional financial burden.
To this end, the Exchange proposes to amend Section I of the Fee Schedule to provide that, for the month during which the Exchange commences its migration to the Pillar platform (the “Migration Month”), ATP Holders will receive the tier(s), incentive(s), and discount(s) they achieved in the month prior to the Migration Month or the tier(s), incentive(s), and discount(s) achieved during the Migration Month, whichever are better. Specifically, the Exchange will compare an ATP Holder's performance in each of the programs set forth below during the Migration Month and during the month prior (currently anticipated to be September 2023) and will bill the ATP Holder for the Migration Month at the most favorable rates based on each qualification level achieved.
The following tiers, incentives, and discount programs would be covered by the proposed change:
The Exchange also proposes the same modification to Section III.E. of the Fee Schedule,
The Exchange believes that, to the extent ATP Holders choose to modify their trading activity during the Migration Month, the proposed change would mitigate the impact of potential pricing disruption by providing ATP Holders with certainty regarding the tier(s), incentive(s), and discount(s) they would be eligible for in the Migration Month, which would in turn encourage ATP Holders to continue to send orders and quotes to the Exchange during the transition to Pillar.
In addition, by offering ATP Holders the better pricing of the month before the Migration Month or the Migration Month, the Exchange believes ATP Holders will be incented to take full advantage of new Pillar functionality and possibly even increase their volume and participation during the migration.
The Exchange is not proposing any changes to the underlying tiers, incentives, or discounts covered by the proposed change described above.
Section II of the Fee Schedule describes two alternative fees that are charged for exceeding the ratio of orders or messages sent to the Exchange compared to the number of executions or contracts traded and are intended to deter ATP Holders from submitting an excessive number of orders that are not executed.
The Exchange proposes to amend Section II of the Fee Schedule to specify that the Monthly Excessive Bandwidth Utilization Fees (“EBUF”) assessed to ATP Holders will be waived for the duration of the migration and for six months after the completion of the migration.
The Exchange proposes to adopt a cap on the monthly fees assessed for the use of certain ports connecting to the Exchange, which will go into effect on the day the Exchange commences its migration to the Pillar platform and remain in effect until the end of the month in which the migration is completed (the “Migration Period”).
Specifically, the Exchange proposes to cap the monthly fees charged to an ATP Holder for the use of Order/Quote Entry Ports, Quote Takedown Ports, and Drop Copy Ports (collectively, the “Port Fees”) during the Migration Period (the “Migration Cap”). The Migration Cap will be based on the number of ports an ATP Holder is billed for in the month preceding the beginning of the Exchange's migration to the Pillar platform, except that if an ATP Holder reduces the number of ports used during the Migration Period (
Without this proposed rule change, the Fee Schedule provides that ATP Holders would be charged for the use of both legacy Exchange System platform ports and new Pillar platform ports, which could significantly increase costs to ATP Holders during the Migration Period. Thus, the proposed Migration Cap is intended to encourage ATP Holders to maintain the same levels of interaction with Exchange during the Migration Period, as well as promptly migrate to the more efficient Pillar technology platform, without incurring additional Port Fees as a result of the transition.
The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act,
The Exchange operates in a highly competitive market. The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, 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 broader forms that are most important to investors and listed companies.”
There are currently 16 registered options exchanges competing for order flow. Based on publicly-available information, and excluding index-based options, no single exchange has more than 16% of the market share of executed volume of multiply-listed equity and ETF options trades.
The Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow or discontinue or reduce use of certain categories of products, in response to fee changes. Accordingly, competitive forces constrain options exchange transaction fees.
The Exchange believes that the proposed change is reasonable because it is intended to encourage ATP Holders to maintain active participation on the Exchange during the Pillar migration by offering ATP Holders pricing at each of the tier(s), incentive(s), and discount(s) they qualify for during either the Migration Month or in the month prior to the Migration Month, whichever is more favorable to the ATP Holder, and to maintain sufficient active connections to the Exchange during its migration to Pillar by providing for the Migration Cap. Similarly, the Exchange believes that the proposed EBUF waiver is reasonable because it is intended to encourage ATP Holders to maintain active participation on the Exchange during and after its migration to Pillar. The Exchange further believes that the proposed change would lessen the impact of the migration on ATP Holders by enabling them to adapt their trading activity as needed to transition to Pillar functionality during the migration and ensure they have sufficient data connections and would thus encourage ATP Holders to promptly transition to the more efficient Pillar platform.
To the extent the proposed rule change encourages ATP Holders to migrate to the new platform while maintaining their level of trading activity, the Exchange believes the proposed change would sustain the Exchange's overall competitiveness and its market quality for all market participants. In the backdrop of the competitive environment in which the Exchange operates, the proposed rule change is a reasonable attempt by the Exchange to mitigate the impact of the migration without affecting its competitiveness.
The Exchange believes the proposed rule change is an equitable allocation of its fees and credits because the more favorable tier, incentive, and discount eligibility, Migration Cap, and EBUF waiver would be available to all ATP Holders. In addition, the proposed change relating to tiers, incentives, and discounts is based on each ATP Holder's activity levels before and during the Migration Month, just as the Migration Cap is based on each ATP Holder's use of ports before and during the Pillar migration. Accordingly, all ATP Holders would have the opportunity to adapt their trading activity and moderate their order flow and use of ports as needed to transition to Pillar functionality. Thus, the Exchange believes the proposed rule change would facilitate a smooth transition to the Pillar technology platform for all market participants on the Exchange by encouraging ATP Holders to continue to participate actively on the Exchange during the transition period, thereby promoting continued market-wide quality.
The Exchange believes the proposed rule change is not unfairly discriminatory because it would be available to all similarly-situated market participants on an equal and non-discriminatory basis.
All ATP Holders would be eligible for the more favorable tier(s), incentive(s), and discount(s) they achieve in either the Migration Month or the preceding month, the Migration Cap, and the EBUF waiver. Moreover, the proposed change is based on each ATP Holder's achievement of tiers, incentives, and discounts prior to and during the Migration Month use of ports. The proposed change would thus allow ATP Holders to adjust their interactions with Exchange systems during the migration as needed and take advantage of the new functionality offered by Pillar by mitigating the impact of potential pricing disruptions. To the extent the proposal encourages ATP Holders to maintain or increase their current level of activity on the Exchange, such activity would result in trading opportunities for all market participants
Finally, the Exchange believes that it is subject to significant competitive forces, as described below in the Exchange's statement regarding the burden on competition.
In accordance with section 6(b)(8) of the Act, the Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Instead, as discussed above, the Exchange believes that the proposed changes would encourage the submission of additional liquidity to a public exchange, thereby promoting market depth, price discovery and transparency and enhancing order execution opportunities for all market participants. As a result, the Exchange believes that the proposed change furthers the Commission's goal in adopting Regulation NMS of fostering integrated competition among orders, which promotes “more efficient pricing of individual stocks for all types of orders, large and small.”
The Exchange does not believe the proposed rule change would impose any burden on intermarket competition that is not necessary or appropriate because the Exchange operates in a highly competitive market in which market participants can readily choose to send their orders to other exchanges if they deem fee levels at those other venues to be more favorable. The Exchange believes that its fees are constrained by the robust competition for order flow among exchanges and thus believes that the proposed change is reasonably designed to encourage ATP Holders to transition to the Pillar platform while mitigating the risk of a significant change to the fees they would be subject to during the migration. Accordingly, the Exchange believes that the proposed change would continue to make the Exchange a competitive venue for order execution by enabling ATP Holders to maintain their current levels of interaction with the Exchange (or make adjustments as needed) during the migration, thus encouraging prompt migration to the newer, more efficient Pillar technology platform and sustained activity on the Exchange during the Pillar transition.
No written comments were solicited or received with respect to the proposed rule change.
The foregoing rule change is effective upon filing pursuant to section 19(b)(3)(A)
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under section 19(b)(2)(B)
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The proposed rule change consists of amendments to the Recovery and Wind-down Plan to reflect business and product developments that have taken place since the time it was last amended, and make certain changes to improve the clarity of the Plan and make other updates and technical revisions, as described in greater detail below.
In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The R&W Plan was adopted in August 2018
The R&W Plan is comprised of two primary sections: (i) the “Recovery Plan,” which sets out the tools and strategies to enable DTC to recover, in the event it experiences losses that exceed its prefunded resources, and (ii) the “Wind-down Plan,” which describes the tools and strategies to be used to conduct an orderly wind-down of DTC's business in a manner designed to permit the continuation of DTC's critical services in the event that its recovery efforts are not successful.
The purpose of the rule proposal is to amend the R&W Plan to reflect business and product developments that have taken place since the time it was last amended,
• Changes to reflect the discontinuation of the Canadian dollar (“CAD”) settlement feature of the Canadian-Link Service.
• Removal of DTC's inbound link with the Peruvian central securities depository, based on its voluntary termination.
• The addition of The Bank of New York Mellon as a DTC Pledgee Bank.
DTC believes that by helping to ensure that the R&W Plan reflects current business and product developments, providing additional clarity, and making necessary grammatical corrections, that the proposed rule change will help DTC continue to maintain the Plan in a manner that supports the continuity of DTC's critical services and enables Participants and Pledgees to maintain access to DTC's services through the transfer of its membership in the event DTC defaults or the Wind-down Plan is ever triggered by the Board.
The R&W Plan is managed by the Office of Recovery & Resolution Planning (referred to in the Plan as the “R&R Team”) of DTC's parent company, the Depository Trust & Clearing Corporation (“DTCC”),
DTC is proposing changes to the following sections of the Plan based upon business updates that have occurred since the Plan was last amended.
Section 2.2 (DTC Settlement) currently states that DTC is the primary U.S. central securities depository (“CSD”) and Securities Settlement System for eligible securities and that Fedwire book entry securities (U.S. Treasuries and Federal Agencies) are also eligible for deposit at DTC. This section also includes a bullet point list of the primary services performed by DTC. The proposal would clarify that U.S. Treasuries and Federal Agencies securities are eligible for all activity at DTC (not deposit activity only). It would also clarify the fact that DTC provides a platform to support the book entry transfer of eligible security positions and an end-of-day net funds settlement relating to eligible securities transfers and the processing of principal and interest distributions.
Section 2.4 (Intercompany Arrangements) describes how corporate support services are provided to DTC from DTCC and DTCC's other subsidiaries, through intercompany agreements under a shared services model. This section includes a table, (Facilities, Table 2-B), that lists each of the DTCC facilities utilized by the Clearing Agencies and indicates whether the facility is owned or leased. DTC proposes to update this table to add Washington DC, London, UK, and McLean, Virginia as additional DTCC facility locations.
Section 2.5 (FMI Links)
This section of the Plan also includes two tables (Table 2-C, Links and Table 2-D: Schedule A Relationships)
Section 5 (Participant Default Losses through the Crisis Continuum) of the Plan is comprised of multiple subsections that identify the risk management surveillance, tools, and governance that DTC may employ across an increasing stress environment, referred to as the “Crisis Continuum.”
DTC is also proposing to make other updates and technical revisions to the Plan. These technical revisions would, for example, make grammatical corrections, update the names of certain DTC internal groups, and clarify the description of internal organizations, without changing the substantive statements being revised.
For example, in Section 2.4, Table 2-A (SIFMU Legal Entity Structure and Intercompany Agreements), for purposes of clarifying the full scope of DTC's services. the description of DTC's services would be revised from “Underwriting, Securities Processing, Corporate Actions,” to “Asset Services.” Some other examples include: (i) a revision would be made throughout the Plan to reflect an internal name change from DTCC's “Operational Risk Management” to “Operational Risk,” and add a new internal organization, “Embedded Risk Management,”
DTC believes the proposed updates and technical revisions would improve the clarity and accuracy of the Plan and, therefore, would help facilitate the execution of Plan, if necessary.
DTC believes that the proposal is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a registered clearing agency. In particular, DTC believes that the amendments to the R&W Plan are consistent with section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires, in part, that the rules of DTC be designed to promote the prompt and accurate clearance and settlement of securities transactions. As described above, the proposed rule change would update the R&W Plan to reflect business and product developments and make certain technical corrections. By helping to ensure that the R&W Plan reflects current business and product developments, and providing additional clarity, DTC believes that the proposed rule change would help it continue to maintain the Plan in a manner that supports the continuity of DTC's critical services and enables its Participants and Pledgees to maintain access to DTC's services through the transfer of its membership in the event DTC defaults or the Wind-down Plan is ever triggered by the Board. Further, by facilitating the continuity of its critical clearance and settlement services, DTC believes the Plan and the proposed rule change would continue to promote the prompt and accurate clearance and settlement of securities transactions. Therefore, DTC believes the proposed amendments to the R&W Plan are consistent with the requirements of section 17A(b)(3)(F) of the Act.
Rule 17Ad-22(e)(3)(ii) under the Act requires DTC to establish, implement, maintain and enforce written policies and procedures reasonably designed to maintain a sound risk management framework for comprehensively managing legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by the covered clearing agency, which includes plans for the recovery and orderly wind-down of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses.
Specifically, the Recovery Plan defines the risk management activities, stress conditions and indicators, and tools that DTC may use to address stress scenarios that could eventually prevent it from being able to provide its critical services as a going concern. Through the framework of the Crisis Continuum, the Recovery Plan addresses measures that DTC may take to address risks of credit losses and liquidity shortfalls, and other losses that could arise from a Participant default. The Recovery Plan also
As described above, the proposed rule change would update the R&W Plan to reflect business and product developments and make certain technical corrections. By ensuring that material provisions of the Plan are current, clear, and technically correct, DTC believes that the proposed amendments are designed to support the maintenance of the Plan for the recovery and orderly wind-down of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses, and, as such, meets the requirements of Rule 17Ad-22(e)(3)(ii) under the Act.
DTC does not believe that the proposed rule change would have any impact, or impose any burden, on competition. DTC does not anticipate that the proposal would affect its day-to-day operations under normal circumstances, or in the management of a typical Participant default scenario or non-default event. The R&W Plan was developed and documented in order to satisfy applicable regulatory requirements, as discussed above. The proposal is intended to enhance and update the Plan to ensure it is clear and remains current in the event it is ever necessary to be implemented. The proposed revisions would not affect any changes to the overall structure or operation of the Plan or DTC's recovery and wind-down strategy as set forth under the current Plan. As such, DTC believes the proposal would not have any impact, or impose any burden, on competition.
DTC has not received or solicited any written comments relating to this proposal. If any written comments are received, DTC will amend this filing to publicly file such comments as an Exhibit 2 to this filing, as required by Form 19b-4 and the General Instructions thereto.
Persons submitting written comments are cautioned that, according to Section IV (Solicitation of Comments) of the Exhibit 1A in the General Instructions to Form 19b-4, the Commission does not edit personal identifying information from comment submissions. Commenters should submit only information that they wish to make available publicly, including their name, email address, and any other identifying information.
All prospective commenters should follow the Commission's instructions on How to Submit Comments,
DTC reserves the right to not respond to any comments received.
The foregoing rule change has become effective pursuant to section 19(b)(3)(A)
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.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Rule 15g-2 (The “Penny Stock Disclosure Rule”) requires broker-dealers to provide their customers with a risk disclosure document, as set forth in Schedule 15G, prior to their first non-exempt transaction in a “penny stock.” As amended, the rule requires broker-dealers to obtain written acknowledgement from the customer that he or she has received the required risk disclosure document. The amended rule also requires broker-dealers to maintain a copy of the customer's written acknowledgement for at least three years following the date on which the risk disclosure document was provided to the customer, the first two years in an accessible place. Rule 15g-2 also requires a broker-dealer, upon request of a customer, to furnish the customer with a copy of certain information set forth on the Commission's website.
The risk disclosure documents are for the benefit of the customers, to assure that they are aware of the risks of trading in “penny stocks” before they enter into a transaction. The risk disclosure documents are maintained by the broker-dealers and may be reviewed during the course of an examination by the Commission.
The Commission estimates that approximately 175 broker-dealers are engaged in penny stock transactions and that each of these firms processes an average of three new customers for penny stocks per week. The Commission further estimates that half of the broker-dealers send the penny stock disclosure documents by mail, and the other half send them through electronic means such as email. Because the Commission estimates the copying and mailing of the penny stock disclosure document takes two minutes, this means that there is an annual burden of 27,456 minutes, or 457 hours, for this third-party disclosure burden of mailing documents. Additionally, because the Commission estimates that sending the penny stock disclosure document electronically takes one minute, the annual burden is 13,728 minutes, or 229 hours, for this third-party disclosure burden of emailing documents.
Broker-dealers also incur a recordkeeping burden of approximately two minutes per response when filing the completed penny stock disclosure documents as required pursuant to the Rule 15g-2(c), which means that the respondents incur an aggregate recordkeeping burden of 54,600 minutes, or 910 hours.
Furthermore, Rule 15g-2(d) requires a broker-dealer, upon request of a customer, to furnish the customer with a copy of certain information set forth on the Commission's website, which takes a respondent no more than two minutes per customer. Because the Commission estimates that a quarter of customers who are required to receive the Rule 15g-2 disclosure document will request that their broker-dealer provide them with the additional microcap and penny stock information posted on the Commission's website, the Commission therefore estimates that each broker-dealer respondent processes approximately 39 requests for paper copies of this information per year or an aggregate total of 78 minutes per respondent, which amounts to an annual burden of 13,650 minutes, or 228 hours. There was an overall decrease in the total burden hours because the number of registered broker-dealers the Commission estimates will be engaged in penny stock transactions decreased from 182 to 175.
The Commission does not maintain the risk disclosure document. Instead, it must be retained by the broker-dealer for at least three years following the date on which the risk disclosure document was provided to the customer, the first two years in an accessible place. The collection of information required by the rule is mandatory. The risk disclosure document is otherwise governed by the internal policies of the broker-dealer regarding confidentiality, etc.
Written comments are invited on: (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 estimates of the burden of the proposed collection of information; (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 respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted by November 13, 2023.
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.
Please direct your written comments to: David Bottom, Director/Chief Information Officer, Securities and Exchange Commission, c/o John Pezzullo, 100 F Street NE, Washington, DC 20549, or send an email to:
Pursuant to section 19(a)(3) of the Securities Exchange Act of 1934 (“Exchange Act” or “Act”),
The statements in this Item II concerning the background of ICE Clear Europe's request for withdrawal from registration as a clearing agency and its reasons for making the request have been submitted by ICE Clear Europe in its Written Request. ICE Clear Europe is registered with the Commission as a clearing agency under section 17A of the Exchange Act.
ICE Clear Europe states in the Written Request that it is a clearing agency registered with the Commission that is based in London, United Kingdom (“UK”) and incorporated as a private limited company under English law.
In addition to its registration as a clearing agency under the Act, ICE Clear Europe further states in the Written Request that it is: authorized as a recognized clearing house under UK law;
In addition, on July 23, 2009, the Commission granted ICE Clear Europe a temporary conditional exemption from the requirement to register as a clearing agency under section 17A of the Act solely to perform the functions of a clearing agency for “Cleared CDS.”
Section 763(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”)
Subsequently, in connection with the proposed merger of ICE Clear Europe's indirect parent company, Intercontinental Exchange, Inc., and NYSE Euronext, ICE Clear Europe requested from the Commission an exemption from clearing agency registration under section 17A(b) of the Act and Rule 17Ab2-1 thereunder in connection with ICE Clear Europe's clearing of certain futures and options contracts on underlying U.S. equity securities, which contracts were traded on the LIFFE Administration and Management Market (and subsequently have been traded on the ICE Futures Europe market), as part of ICE Clear Europe's F&O Business.
As it has publicly announced, ICE Clear Europe has determined to cease acting as a clearing agency for all classes of CDS contracts, thus terminating its CDS Business in its entirety.
By Circular, ICE Clear Europe has designated October 27, 2023 as the date on which it will terminate all services
ICE Clear Europe states that, as a result of these provisions, effective as of the Withdrawal Date, it will cease to clear any CDS contracts, no additional CDS contracts will be accepted for clearing, and all outstanding CDS transactions will be terminated. Thus, as of the Withdrawal Date, ICE Clear Europe's CDS Business will be terminated. Both ICE Clear Europe and CDS Clearing Members will be obligated to satisfy any respective final settlement amount arising from such termination, including with respect to any final fees and interest payments (for the October 2023 period). ICE Clear Europe represents in the Written Request that the termination of the CDS Business will have no effect on the F&O Business, and that Clearing Members that are both F&O Clearing Members and CDS Clearing Members will continue in their capacities as F&O Clearing Members after the Withdrawal Date.
ICE Clear Europe represents in the Written Request that, upon termination of the CDS Business on the Withdrawal Date as described above, ICE Clear Europe would no longer be engaged in any clearing agency activity relating to security-based swaps. As a result, ICE Clear Europe would no longer be required to be registered as a clearing agency under section 17A of the Act. Accordingly, ICE Clear Europe requests withdrawal of its registration as of the Withdrawal Date, or as soon as practicable thereafter.
In support of this request, ICE Clear Europe represents as follows:
1. ICE Clear Europe has notified its CDS Clearing Members, by Circular, that under ICE Clear Europe Rule 105 they are obligated to use reasonable endeavors to close out all open positions in CDS Contracts by the Withdrawal Date of October 27, 2023.
2. At end-of-day (18:00 London time) on October 26, 2023, ICE Clear Europe will be permanently closed for CDS trade submission. Accordingly, effective as of the Withdrawal Date, ICE Clear Europe will no longer accept any CDS Contracts for clearing, and all open positions in CDS Contracts will have been closed out by the CDS Clearing Members holding the positions. To the extent any CDS Clearing Member has not completed the closing out of any open CDS positions as of the Withdrawal Date, ICE Clear Europe will be entitled and expects, pursuant to ICE Clear Europe Rule 105(b), to terminate and cash settle such positions. As a result, all liabilities in respect of the close out and/or termination of any open positions in CDS Contracts will be finally determined by end-of-day (18:00 London time) on the Withdrawal Date.
3. Accordingly, effective as of the Withdrawal Date, ICE Clear Europe will no longer be performing any activities of a clearing agency with respect to security-based swaps that would require registration under the Act.
4. On the next business day following the Withdrawal Date (
5. On the following Monday, November 6, 2023, ICE Clear Europe will follow its business-as-usual established processes for clearing membership terminations to calculate a final settlement amount reflecting any remaining net amount owed to or by each CDS Clearing Member, including with respect to any final fees and interest payments for the October 2023 period. Any such final amounts will be settled by 09:00 London time on November 7, 2023.
6. ICE Clear Europe, based on the above, believes that all known claims of ICE Clear Europe and CDS Clearing Members relating to the CDS Business will have been determined and settled as of the Withdrawal Date or, if any claims are not yet settled as of the Withdrawal Date, they will be settled on November 7, 2023 pursuant to its business-as-usual established processes described above. Based on ICE Clear
7. ICE Clear Europe will retain and maintain all documents, books, and records, including correspondence, memoranda, papers, notices, accounts, and other records made or received by it in the ordinary course of its CDS Business and its activities as a registered clearing agency, in accordance with the requirements of Exchange Act Rule 17a-1(a) and (b),
8. Following the effectiveness of its withdrawal from registration hereunder, ICE Clear Europe will not seek to engage in securities clearing activity relating to security-based swaps in reliance on any deemed registered status pursuant to section 17A(
ICE Clear Europe therefore requests that the Commission issue an order, pursuant to section 19(a)(3) of the Act,
In the Written Request, ICE Clear Europe also requests that, effective as of the withdrawal of its registration hereunder, the Securities Product Exemption be withdrawn. As noted above, ICE Clear Europe requested, and the Commission granted, the Securities Product Exemption in light of the combination of security-based swap clearing activity and securities option clearing activity contemplated by ICE Clear Europe at the time. ICE Clear Europe represents in the Written Request that, upon cessation of security-based swap clearing activity and withdrawal of its clearing agency registration, ICE Clear Europe will fall within the category of foreign clearing agencies for which registration (or an exemption) is not required due to its lack of contact with the U.S.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the requested withdrawal is consistent with the Exchange 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 to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC, 20549-1090.
Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to File Number 4-809 and should be submitted on or before October 5, 2023.
By the Commission.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange proposes to amend MEMX Rule 19.5. The text of the proposed rule change is provided in Exhibit 5.
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 Rule 19.5, Interpretation and Policy .05. Specifically, the Exchange proposes to amend Rule 19.5, Interpretation and Policy .05(f) to account for conflicts between different provisions within the Short Term Option Series Rules, extend current $0.50 strike price intervals in equity options to short term options with strike prices less than $100, and make other clarifying changes.
In August 2022, the Commission approved the Exchange's adoption of rules to govern the trading of options on the Exchange by MEMX Options,
Specifically, the Exchange's current Rule 19.5, Interpretation and Policy .05 limits the intervals between strikes in equity options listed as part of the Short Term Option Series Program, excluding Exchange-Traded Fund Shares and ETNs, that have an expiration date more than twenty-one days from the listing date (“Strike Interval Proposal”). The Strike Interval Proposal paragraph (f) includes a table that specifies the applicable strike intervals that would supersede subparagraph (e)
The Exchange proposes to amend Rule 19.5, Interpretation and Policy .05 to clarify the current rule text and amend the application of the table to account for potential conflicts within the Short Term Option Series Rules. Currently, Rule 19.5, Interpretation and Policy .05(f) provides that notwithstanding subparagraph (e),
First, the Exchange proposes to add the phrase “which specifies the applicable interval for listing” to the end of the first sentence of paragraph (f). The table within that paragraph provides for the listing of intervals based on certain parameters (average daily volume and share price). The Exchange proposes to add the phrase “which specifies the applicable interval for listing” to clarify that the only permitted intervals are as specified in
Second, the Exchange proposes to delete the final sentence of paragraph (f) which indicates that in the event of a conflict between applying subparagraph (e) and the below table, the greater interval would apply, and amend the table in paragraph (f) to address situations in which there is a conflict between applying the intervals in paragraph (e) and the table in paragraph (f). Today, there are instances where a conflict is presented as between the application of the table within paragraph (f) and the rule text within paragraph (e) with respect to the correct interval. To address these potential conflicts, the Exchange included the final sentence in paragraph (f) that indicates to the extent there is a conflict between applying the current table within paragraph (f) and the rule text within paragraph (e), the greater interval would apply. However, in order to more clearly reflect this within the Rules and maintain consistency with other exchanges
Below are some examples to demonstrate the application of the proposed table:
Finally, the Exchange proposes to amend Rule 19.5, Interpretation and Policy .05(e) to extend $0.50 strike price intervals in equity options to short-term options with strike prices less than $100 instead of the current $75. This proposed change is intended to conform this provision of the Short Term Option Series Program to that of other options exchanges.
The Exchange believes that the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of section 6(b) of the Act.
In particular, the Exchange's proposed addition to the first sentence of Rule 19.5, Interpretation and Policy .05(f) is consistent with the Act because it clarifies that the only permitted intervals are as specified in the table within that subparagraph, as amended.
The Exchange believes this proposed rule change will bring greater transparency to the rule. The proposed rule change to delete the final sentence of the introductory paragraph and amend the table within Rule 19.5, Interpretation and Policy .05(f) to address potential conflicts between that paragraph and paragraph (e) with respect to the correct strike interval is consistent with the Act because it protects investors and the public interest by adding transparency to the manner in which the Exchange implements its listing rules and removes potential uncertainty. The proposed rule text specifies the applicable intervals when there is a conflict between the rule text within paragraphs (e) and (f), thereby providing certainty as to the outcome.
The Strike Interval Proposal was designed to reduce the density of strike intervals that would be listed in later weeks, within the Short Term Option Series Program, by utilizing limitations for intervals between strikes which have an expiration date more than twenty-one days from the listing date. The Exchange's proposal intends to continue to remove certain strike intervals where there exist clusters of strikes whose characteristics closely resemble one another and, therefore, do not serve different trading needs,
Additionally, by providing more clarity as to which interval would apply between the current rule text within Rule 19.5, Interpretation and Policy .05(e) and (f), the Exchange is reducing the number of strikes listed in a manner consistent with the intent of the Strike Interval Proposal, which was to reduce strikes which were farther out in time. The result of this clarification is to select wider strike intervals for Short Term Option Series in equity options which have an expiration date more than twenty-one days from the listing date. This rule change would harmonize strike intervals as between inner weeklies (those having less than twenty-one days from the listing date) and outer weeklies (those having more than twenty-one days from the listing date) so that strike intervals are not widening as the listing date approaches.
The proposed rule change to extend current $0.50 strike price intervals in equity options to short term options with strike prices less than $100 will remove impediments to and perfect the mechanism of a free and open market and a national market system, because it will conform this portion of the Short Term Option Series Program to that of other options exchanges.
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 Strike Interval Proposal continues to limit the number of Short Term Option Series Program strike intervals available for quoting and trading on the Exchange for all Options Members.
The Exchange believes adding clarifying language to the first sentence of Rule 19.5, Interpretation and Policy .05(f) regarding which parameter the table within that provision amends within the Short Term Option Series Program will bring greater transparency to the rules. Amending the table within paragraph (f) to address potential conflicts as between the rule text of Rule 19.5, Interpretation and Policy .05(e) and (f) will bring greater transparency to and reduce potential confusion regarding the manner in which the Exchange implements its listing rules. Deleting the last sentence of the first paragraph of the introductory paragraph of Rule 19.5, Interpretation and Policy .05(f) does not impose an undue burden on competition and will avoid potential confusion because the table within paragraph (f) clarifies which strike intervals will apply in all scenarios. Extending current $0.50 strike price intervals in equity options to short term options with strike prices less than $100 will not impose an undue burden on competition, because it is consistent
While this proposal continues to limit the intervals of strikes listed on the Exchange, the Exchange continues to balance the needs of market participants by continuing to offer a number of strikes to meet a market participant's investment objective. The Exchange's Strike Interval Proposal does not impose an undue burden on intermarket competition as this Strike Interval Proposal does not impact the listings available at another self-regulatory organization.
The Exchange neither solicited nor received comments on the proposed rule change.
Because the foregoing proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to section 19(b)(3)(A) of the Act
A proposed rule change filed under Rule 19b-4(f)(6)
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The proposed rule change consists of amendments to the Recovery and Wind-down Plan to reflect business and product developments that have taken place since the time it was last amended, and make certain changes to improve the clarity of the Plan and make other updates and technical revisions, as described in greater detail below.
In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The R&W Plan was adopted in August 2018
The R&W Plan is comprised of two primary sections: (i) the “Recovery Plan,” that sets out the tools and strategies to enable NSCC to recover, in the event it experiences losses that exceed its prefunded resources, and (ii) the “Wind-down Plan,” that describes the tools and strategies to be used to conduct an orderly wind-down of NSCC's business in a manner designed to permit the continuation of NSCC's critical services in the event that its recovery efforts are not successful.
The purpose of the rule proposal is to amend the R&W Plan to reflect business and product developments that have taken place since the time it was last amended,
NSCC believes that by helping to ensure that the R&W Plan reflects current business and product developments, providing additional clarity, and making necessary grammatical corrections, that the proposed rule change would help it continue to maintain the Plan in a manner that supports the continuity of NSCC's critical services and enables its Members and Limited Members to maintain access to NSCC's services through the transfer of its membership in the event NSCC defaults or the Wind-down Plan is ever triggered by the Board.
The R&W Plan is managed by the Office of Recovery & Resolution Planning (referred to in the Plan as the “R&R Team”) of NSCC's parent company, the Depository Trust & Clearing Corporation (“DTCC”),
NSCC is proposing the changes to the following sections of the Plan based upon business updates and product developments that have occurred since the Plan was last amended.
Section 2.2 (NSCC Guaranteed Services Summary) describes those services in which NSCC in its role as a clearing agency and a central counterparty, provides clearing, netting, and settlement service and a guarantee of completion for broker-to-broker equity, corporate and municipal debt, exchange-traded products and unit investment trust transactions executed on exchanges and other trading venues in the U.S. NSCC proposes to update this section to add a description of a new service, the Securities Financing Transaction (“SFT”) clearing service, which was approved by the Commission in 2022.
Section 2.4 (Intercompany Arrangements) describes how corporate support services are provided to NSCC
Section 2.5 (FMI Links)
Section 3 (Critical Services) defines the criteria for classifying certain of NSCC's services as “critical,”
Section 5.2.4 (Recovery Corridor and Recovery Phase) outlines the early warning indicators to be used by NSCC to evaluate its options and potentially prepare to enter the “Recovery Phase,” which phase refers to the actions to be taken by NSCC to restore its financial resources and avoid a wind-down of its business. This section contains descriptions of potential stress events that could lead to recovery, and several early warning indicators and metrics that NSCC has established to evaluate its options and potentially prepare to enter the Recovery Phase. These indicators, which are referred to in the Recovery Plan as recovery corridor indicators (“Corridor Indicators” or “Indicator(s)”),
First, for purposes of providing additional context on the applicable measurement, the proposed rule change would clarify the entry for the “Hedge Effectiveness” Indicator
Second, regarding “Commercial Paper/Extendible Notes,”
Third, for the “Retirements/Trade Volume Reductions” Indicator,
Section 5.3 (Liquidity Shortfalls) identifies tools that may be used to address foreseeable shortfalls in NSCC's liquidity resources following a Member default. The goal in managing NSCC's qualifying liquidity resources is to maximize resource availability in an evolving stress situation, to maintain flexibility in the order and use of sources of liquidity, and to repay any third-party lenders of liquidity in a timely manner. This section includes a table (Table 5-C) that lists NSCC liquidity tools and resources.
NSCC is also proposing to make other updates and technical revisions to the Plan. These technical revisions would, for example, make grammatical corrections, update the names of certain NSCC internal groups, and clarify the description of internal organizations, without changing the substantive statements being revised.
For example, in Section 2.4, Table 2-A (SIFMU Legal Entity Structure and Intercompany Agreements), for purposes of clarifying the full scope of services provided by NSCC's affiliate, DTC, the description of DTC's services would be revised from “Underwriting, Securities Processing, Corporate Actions,” to “Asset Services.” Some other examples include: (i) a revision would be made throughout the Plan to reflect an internal name change from DTCC's “Operational Risk Management” to “Operational Risk,” and add a new internal organization, “Embedded Risk Management,”
NSCC believes the proposed updates and technical revisions would improve the clarity and accuracy of the Plan and, therefore, would help facilitate the execution of Plan, if necessary.
NSCC believes that the proposal is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a registered clearing agency. In particular, NSCC believes that the amendments to the R&W Plan are consistent with section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires, in part, that the rules of NSCC be designed to promote the prompt and accurate clearance and settlement of securities transactions. As described above, the proposed rule change would update the R&W Plan to reflect business and product developments and make certain technical corrections. By helping to ensure that the R&W Plan reflects current business and product developments, and providing additional clarity, NSCC believes that the proposed rule change would help it continue to maintain the Plan in a manner that supports the continuity of NSCC's critical services and enables its Members and Limited Members to maintain access to NSCC's services through the transfer of its membership in the event NSCC defaults or the Wind-down Plan is ever triggered by the Board. Further, by facilitating the continuity of its critical clearance and settlement services, NSCC believes the Plan and the proposed rule change would continue to promote the prompt and accurate clearance and settlement of securities transactions. Therefore, NSCC believes the proposed amendments to the R&W Plan are consistent with the requirements of section 17A(b)(3)(F) of the Act.
Rule 17Ad-22(e)(3)(ii) under the Act requires NSCC to establish, implement, maintain and enforce written policies and procedures reasonably designed to maintain a sound risk management framework for comprehensively managing legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by the covered clearing agency, which includes plans for the recovery and orderly wind-down of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses.
Specifically, the Recovery Plan defines the risk management activities, stress conditions and indicators, and tools that NSCC may use to address stress scenarios that could eventually prevent it from being able to provide its critical services as a going concern. Through the framework of the Crisis Continuum, the Recovery Plan addresses measures that NSCC may take to address risks of credit losses and liquidity shortfalls, and other losses that could arise from a Participant default. The Recovery Plan also addresses the management of general business risks
As described above, the proposed rule change would update the R&W Plan to reflect business and product developments and make certain technical corrections. By ensuring that material provisions of the Plan are current, clear, and technically correct, NSCC believes that the proposed amendments are designed to support the maintenance of the Plan for the recovery and orderly wind-down of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses, and, as such, meets the requirements of Rule 17Ad-22(e)(3)(ii) under the Act.
NSCC does not believe that the proposed rule change would have any impact, or impose any burden, on competition. NSCC does not anticipate that the proposal would affect its day-to-day operations under normal circumstances, or in the management of a typical Member default scenario or non-default event. The R&W Plan was developed and documented to satisfy applicable regulatory requirements, as discussed above. The proposal is intended to enhance and update the Plan to ensure it is clear and remains current in the event it is ever necessary to be implemented. The proposed revisions would not affect any changes to the overall structure or operation of the Plan or NSCC's recovery and wind-down strategy as set forth under the current Plan. As such, NSCC believes the proposal would not have any impact, or impose any burden, on competition.
NSCC has not received or solicited any written comments relating to this proposal. If any written comments are received, NSCC will amend this filing to publicly file such comments as an Exhibit 2 to this filing, as required by Form 19b-4 and the General Instructions thereto.
Persons submitting written comments are cautioned that, according to Section IV (Solicitation of Comments) of the Exhibit 1A in the General Instructions to Form 19b-4, the Commission does not edit personal identifying information from comment submissions. Commenters should submit only information that they wish to make available publicly, including their name, email address, and any other identifying information.
All prospective commenters should follow the Commission's instructions on How to Submit Comments,
General questions regarding the rule filing process or logistical questions regarding this filing should be directed to the Main Office of the Commission's Division of Trading and Markets at
NSCC reserves the right to not respond to any comments received.
The foregoing rule change has become effective pursuant to section 19(b)(3)(A)
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.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On July 17, 2023, the Fixed Income Clearing Corporation (“FICC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change SR-FICC-2023-010 (“Proposed Rule Change”) pursuant to section 19(b) of the Securities Exchange Act of 1934 (“Exchange Act”)
FICC is a central counterparty (“CCP”), which means it interposes itself as the buyer to every seller and seller to every buyer for the financial transactions it clears. FICC operates two divisions: the Government Securities Division (“GSD”) and the Mortgage-Backed Securities Division (“MBSD”). GSD provides trade comparison, netting, risk management, settlement, and central counterparty services for the U.S. Government securities market. As such, FICC is exposed to the risk that one or more of its members may fail to make a payment or to deliver securities.
A key tool that FICC uses to manage its credit exposures to its members is the daily collection of margin from each member. A member's margin is designed to mitigate potential losses associated with liquidation of the member's portfolio in the event of that member's default. The aggregated amount of all GSD members' margin constitutes the GSD Clearing Fund, which FICC would be able to access should a defaulted member's own margin be insufficient to satisfy losses to FICC caused by the liquidation of that member's portfolio. Each member's margin consists of a number of applicable components, including a value-at-risk (“VaR”) charge (“VaR Charge”) designed to capture the potential market price risk associated with the securities in a member's portfolio. The VaR Charge is typically the largest component of a member's margin requirement. The VaR Charge is designed to cover FICC's projected liquidation losses with respect to a defaulted member's portfolio at a 99 percent confidence level.
Margin requirements are typically designed, in part, to recognize the potential relationship between products in a member's portfolio (
To recognize potential offsets in the risk presented by related products, FICC has an ongoing cross-margining arrangement with CME, which acts as a CCP for futures related to the debt instruments that FICC clears.
The proposed changes to the cross-margining arrangement are primarily designed to (i) expand the scope of CME products eligible for cross-margining, (ii) replace the methodology for calculating the margin reductions available to FICC's members;
The following sections describe the proposed changes to the cross-margining arrangement in more detail.
The margin reductions provided by FICC and CME to common members are based on the relationship between the products that each CCP clears. Only products specified in the Existing Agreement currently may be considered when determining margin reductions (the “Eligible Products”). As noted above, in the Restated Agreement, FICC proposes to expand the scope of CME products eligible for cross-margining.
In addition to changing the set of products eligible for cross-margining, FICC proposes replacing the methodology for calculating margin requirements for cross-margined positions. The proposed methodology is designed to more accurately estimate the risk presented by the cross-margined positions. Margin requirements set by the proposed methodology would allow for, on average, a wider range of margin reductions;
The proposed methodology is also less complex than the current methodology. FICC proposes to calculate the margin reduction from cross-margining based on the combined portfolio of eligible products of a common member (
Conversely, the current methodology involves a series of steps to allow FICC and CME to separately consider offsets for their respective products. Such steps include the conversion of products into other products to facilitate comparison of a common member's Treasury and futures contracts (
FICC proposes to strengthen its default management coordination with CME and to simplify the sharing of losses arising out of a common member default. The Restated Agreement would provide three potential default management paths and would favor joint action by FICC and CME as a first, best option. In contrast, the Existing Agreement merely seeks to align the time at which the CCPs liquidate a common member's positions. With regard to loss sharing, the Restated Agreement provides for a relatively simple division of gains and losses. Further, the Restated Agreement would align cashflows through the exchange of variation margin, which is not contemplated by the Existing Agreement.
In the case of a joint liquidation, the Restated Agreement would also provide for an exchange of variation margin.
The Restated Agreement would also simplify the sharing of losses where FICC and CME liquidate the defaulter's cross-margin positions separately. In the case of separate liquidations, if either FICC or CME has a net gain and the other has a net loss, then the CCP with the net gain would make a payment to the CCP with the net loss. Such payment would be the lesser of the net gain or net loss realized by the CCPs.
Section 19(b)(2)(C) of the Exchange Act directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Exchange Act and the rules and regulations thereunder applicable to such organization.
Section 17A(b)(3)(F) of the Exchange Act requires, among other things, that the rules of a clearing agency be designed to remove impediments to and help perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions; and to foster cooperation and coordination with persons engaged in the clearance and settlement of securities transactions.
The Commission has historically supported and approved cross-margining at clearing agencies and has recognized the potential benefits of cross-margining systems, which include freeing capital through reduced margin requirements, reducing clearing costs by integrating clearing functions, reducing clearing agency risk by centralizing asset management, and harmonizing liquidation procedures.
The Commission continues to view cross-margining programs as consistent with clearing agency responsibilities under section 17A of the Exchange Act.
As described above, FICC proposes to expand the set of products accepted as part of its cross-margining arrangement with CME. Expanding the set of Eligible Products will increase the opportunities to reduce member margin requirements, which could support the maintenance of market participants' liquidity during periods of market volatility. The expansion of product eligibility would also support market participants' use of the national system for the prompt and accurate clearance and settlement without being impeded by the market structure in which different CCPs serve different asset classes.
Also as described above, the proposed changes would reduce margin requirements overall by a small amount without reducing FICC's ability to cover the credit risk posed by its members. Although the margin reductions provided by the proposed changes would not diminish FICC's ability to cover the credit risk posed by its members, the link represented by the cross-margining arrangement necessitates cooperation not only during normal operations, but also following the default of a common member. The proposed Restated Agreement details the processes for default management and loss sharing. The Restated Agreement favors joint liquidation by the parties and also contemplates alternative default management scenarios in which a joint liquidation is not feasible or advisable. The Proposed Rule Change would also introduce variation margin sharing across the CCPs to facilitate default management.
The Commission finds, therefore, that the Proposed Rule Change is consistent with the requirements of section 17A(b)(3)(F) of the Exchange Act.
Rule 17Ad-22(e)(6)(v) under the Exchange Act requires that a covered clearing agency establish, implement, maintain, and enforce written policies and procedures reasonably designed to cover, if the covered clearing agency provides central counterparty services, its credit exposures to its participants by establishing a risk-based margin system that, at a minimum, uses an appropriate method for measuring credit exposure that accounts for relevant product risk
The Proposed Rule Change would support the continued allowance of margin reductions in recognition of the correlation between products cleared by CME and FICC. Whether the reduced margin represents an appropriate measure of the credit exposure posed to FICC may be viewed in terms of whether such margin is sufficient to cover the potential losses associated with cross-margined positions following a member default. As described above, backtesting data demonstrates that the proposed margin methodology would not reduce FICC's ability to cover the credit risk posed by its members within the context of cleared products eligible for cross-margining under the Restated Agreement.
Accordingly, the Commission finds that the proposed model changes are consistent with Rule 17Ad-22(e)(6)(v) under the Exchange Act.
Rule 17Ad-22(e)(20) under the Exchange Act requires that a covered clearing agency establish, implement, maintain, and enforce written policies and procedures reasonably designed to identify, monitor, and manage risks related to any link the covered clearing agency establishes with one or more other clearing agencies, financial market utilities, or trading markets.
In adopting Rule 17Ad-22(e)(20), the Commission provided guidance that a covered clearing agency generally should consider in establishing and maintaining policies and procedures that address links.
CME is a CCP for futures contracts and also meets the definition of a financial market utility.
Further, the incorporation of certain timing and operational aspects of the cross-margining arrangement in a separate SLA would streamline the language of the Restated Agreement and more clearly present operational details, such as those related to daily settlement procedures. The CCPs would also have the ability to review the service level details separately and modify them without requiring changes to the full agreement. Simplifying the presentation and maintenance of such operational details would serve to reduce risks associated with the link between FICC and CME.
The Proposed Rule Change also addresses margin reductions, default management, and loss sharing. With regard to margin, backtesting data demonstrates that the proposed margin methodology would not reduce FICC's ability to cover the credit risk posed by its members.
Accordingly, the Commission finds that the proposed model changes are consistent with Rule 17Ad-22(e)(20) under the Exchange Act.
On the basis of the foregoing, the Commission finds that the Proposed Rule Change is consistent with the requirements of the Exchange Act, and in particular, the requirements of section 17A of the Exchange Act
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Federal Aviation Administration (FAA).
Notice of Funding Opportunity.
The Department of Transportation (DOT), Federal Aviation Administration (FAA) announces the opportunity to apply for approximately $1 billion in FY 2024 discretionary funds for the Airport Terminal Program (ATP), made available under the Infrastructure Investment and Jobs Act of 2021 (IIJA), Public Law 117-58, herein referred to as the Bipartisan Infrastructure Law (BIL). The purpose of the ATP is to make annual grants available to eligible airports for airport terminal and airport-owned Airport Traffic Control Towers development projects that address the aging infrastructure of our nation's airports.
In addition, ATP grants will align with DOT's Strategic Framework FY2022-2026 at
Airport sponsors that wish to be considered for FY 2024 ATP discretionary funding should submit an application that meets the requirements of this Notice of Funding Opportunity (NOFO) as soon as possible, but no later than 5:00 p.m. Eastern time, October 16, 2023.
Submit applications electronically at
Robin K. Hunt, Manager, BIL Branch APP-540, FAA Office of Airports, at (202) 267-3263 or our FAA BIL email address:
BIL established the ATP, a competitive discretionary grant program, which provides approximately $1 billion in grant funding annually for five years (Fiscal Years 2022-2026) to upgrade, modernize, and rebuild our nation's airport terminals and airport-owned Airport Traffic Control Towers (ATCTs). This includes bringing airport facilities into conformity with current standards; constructing, modifying, or expanding facilities as necessary to meet demonstrated aeronautical demand; enhancing environmental sustainability; encouraging actual and potential competition; and providing a balanced system of airports to meet the roles and functions necessary to support civil aeronautical demand. The FAA is committed to advancing safe, efficient transportation, including projects funded under the ATP. The ATP also supports the President's goals to mobilize American ingenuity to build modern infrastructure and an equitable, clean energy future. In support of Executive Order 13985,
The ATP falls under the project grant authority for the Airport Improvement Program (AIP) in 49 United States Code (U.S.C.) § 47104. Per 2 Code of Federal Regulations (CFR) part 200—
The FAA will also consider projects that advance the goals of the Executive Orders listed under Section E.2.
This NOFO announces up to $1,000,000,000, subject to availability of funds, for the Fiscal Year 2024 ATP. The ATP is a $5 billion grant program, distributed as approximately $1 billion annually for five years (Fiscal Years 2022, 2023, 2024, 2025, and 2026), subject to annual allocations limitations based on airport roles found in the published National Plan of Integrated Airport Systems (NPIAS), as updated with current year data. In general, the $5 billion in ATP grant funding is subject to the following annual award allocation limitations: not more than 55 percent shall be for large hub airports, not more than 15 percent shall be for medium hub airports, not more than 20 percent shall be for small hub airports, and not less than 10 percent shall be for nonhub and nonprimary airports.
The FAA will consider projects that increase capacity and passenger access; projects that replace aging infrastructure; projects that achieve compliance with the Americans with Disabilities Act (42 U.S.C. 12101,
Projects for relocating, reconstructing, repairing, or improving an airport-owned ATCT will also be considered. In addition to the considerations above, these projects will also be evaluated based on overall impact on the National Airspace System, including age of facility, operational constraints, and nonstandard facilities.
The FAA will publish a NOFO annually to announce additional funding made available, approximately $1 billion per year, for Fiscal Years 2025-2026.
Eligible applicants are those airport sponsors normally eligible for Airport Improvement Program (AIP) discretionary grants as defined in 49 U.S.C. 47115. This includes a public agency, private entity, state agency, Indian Tribe or Pueblo owning a public-use NPIAS airport, the Secretary of the Interior for Midway Island airport, the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau.
The Federal cost share of ATP grants is 80 percent for large and medium hub airports, and 95 percent for the remainder of airports eligible to receive ATP grants, which includes small hub, nonhub, and nonprimary airports.
All projects funded from the ATP must be:
i. Airport terminal development, defined in 49 U.S.C. 47102(28) as development of an airport passenger terminal building, including terminal gates; access roads servicing exclusively airport traffic that leads directly to or from an airport passenger terminal building; and walkways that lead directly to or from an airport passenger terminal building. Under the ATP, the FAA may consider projects that qualify as “terminal development” (including multimodal terminal development), as that term is defined in 49 U.S.C. 47102(28); or
ii. On-airport rail access projects as set forth in Passenger Facility Charge (PFC) Update 75-21 (86 FR 48793, August 31, 2021); or
iii. Airport-owned ATCT that includes relocating, reconstructing, repairing, or improving the ATCT; and
iv. Justified based on civil aeronautical demand.
An application for ATP terminal or ATCT projects, FAA Form 5100-144,
Direct all inquiries regarding applications to the appropriate Regional Office (RO) or Airports District Office (ADO). RO/ADO contact information is available at:
Applicants are required to submit FAA Form 5100-144,
The “Submit by Email” button at the bottom of the form will generate an email for the applicant to send to the FAA BIL Team at:
Applicants selected to receive an ATP grant will then be required to follow AIP grant application procedures prior to award, which include meeting all prerequisites for funding, and submission of Standard Form SF-424,
Airports covered under the FAA's State Block Grant Program or airports in a channeling act state should coordinate with their associated state agency on the process for who should submit an application, via the procedures listed above.
Applicants must address Administration and Departmental priorities in safety, climate change and sustainability, equity, and workforce development which are further defined in Section E.1 Criteria.
Applicants must comply with 2 CFR part 25—
Once awarded, the FAA grant recipient must maintain the currency of its information in SAM until the grantee submits the final financial report required under the grant or receives the final payment, whichever is later. A grant recipient must review and update the information at least annually after the initial registration and more frequently if required by changes in information or another award term.
The FAA may not make an award until the applicant has complied with all applicable UEI and SAM requirements. If an applicant has not fully complied with the requirements by the time the FAA is ready to make an award, the FAA may determine that the applicant is not qualified to receive an award and use that determination as a basis for making a federal award to another applicant.
Non-federal entities that have received a federal award are required to report certain civil, criminal, or administrative proceedings to SAM (currently the Federal Awardee Performance and Integrity Information System (FAPIIS)
Airports that wish to be considered for FY 2024 ATP discretionary funding must submit an application that meets the requirements of this NOFO as soon as possible, but no later than 5:00 p.m. Eastern time on October 16, 2023. Submit applications electronically to
Not applicable.
All projects funded from the ATP must be airport terminal development or for relocation, reconstruction, repair, or improvement of an airport-owned air traffic control tower, defined under Section C-3 Project Eligibility. ATP funds may not be used to support or oppose union organizing.
Applications will only be accepted on FAA Form 5100-144 fillable PDF via email and must be received on or before October 16, 2023, 5:00 p.m. Eastern time. No other forms of applications will be accepted.
Applications for FY 2024 ATP will be rated using the following criteria:
i. Projects must meet eligibility requirements under the ATP, which includes terminal development (including multimodal terminal development) as defined in 49 U.S.C 47102(28): on-airport rail access projects: or airport-owned ATCT relocation, reconstruction, repair, or improvements.
ii. The FAA will consider timeliness of implementation, with priority given to those projects, including “design only” projects, that can satisfy all statutory and administrative requirements for grant award by June 2024.
iii. Favorable consideration will be given to eligible and justified (based on civil aeronautical demand) terminal development projects (including multimodal terminal development), on-airport rail access projects, and ATCT projects that:
a.
b.
c.
d.
e.
f.
g.
iv. ATCT projects that relocate, reconstruct, repair, or improve an airport-owned ATCT will also be evaluated based on overall impact on the National Airspace System, including age of facility, operational constraints, and nonstandard facility conditions.
v. The FAA will provide a preference to projects that achieve a complete development objective, even if awards for the project must be phased; and prioritize projects that have received partial awards.
vi. The applicant should describe whether and how project delivery and implementation create good-paying jobs with the free and fair choice to join a union to the greatest extent possible; the use of demonstrated strong labor standards, practices and policies (including for direct employees, contractors, sub-contractors, and service workers on airport property); use of project labor agreements; distribution of workplace rights notices; union neutrality agreements; wage and/or benefit standards; safety and health standards; the use of Local Hire Provisions;
Applicants are encouraged to submit projects that meet as many of the above criteria as possible, but do not need to meet all criteria to be considered.
Federal awarding agency personnel will evaluate applications based on how well the projects meet the criteria in E.1, including project eligibility, justification, readiness, impact on the National Airspace System, and the availability of matching funds. The FAA will also consider how well projects advance the goals of the following Executive Orders, which are incorporated into the criteria under E.1.: the President's January 20, 2021, Executive Order 13990,
Applications are first reviewed for eligibility, justification, and timeliness of implementation consistent with the requirements of this NOFO and the intent of the ATP. Applications are then reviewed for how well the proposed project(s) meets the criteria in E.1. and ranked by field and Regional office staff. The top projects for each airport category (as outlined in BIL) are then evaluated by a National Control Board (NCB). The NCB has representatives from each Region and Headquarters management. The NCB recommends project and funding levels to senior leadership.
Prior to making a Federal award with a total amount of Federal share greater than the simplified acquisition threshold, the FAA is required to review and consider any information about the applicant that is in the designated integrity and performance system accessible through SAM (currently FAPIIS) (see 41 U.S.C. 2313). An applicant, at its option, may review information in the designated integrity and performance systems accessible through SAM and comment on any information about itself that a federal awarding agency previously entered. The FAA will consider any comments by the applicant, in addition to the other information in the designated integrity and performance system, in making a judgment about the applicant's integrity, business ethics, and record of performance under Federal awards when completing the review of risk posed by applicants as described in 2 CFR 200.206.
BIL awards are announced through a Congressional notification process and a DOT Secretary's Notice of Intent to Fund. The FAA RO/ADO representative will contact the airport with further information and instructions. Once all pre-grant actions are complete, the FAA RO/ADO will offer the airport sponsor a grant for the announced project. This offer may be provided through postal mail or by electronic means. Once this offer is signed by the airport sponsor, it becomes a grant agreement. Awards made under this program are subject to conditions and assurances in the grant agreement.
All grant recipients are subject to the grant requirements of the AIP, found in 49 U.S.C. chapter 471. Grant recipients are subject to requirements in the FAA's
The U.S. Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) is charged with enforcing Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and the Vietnam Era Veterans' Readjustment Assistance Act of 1974. OFCCP has a Mega Construction Project Program through which it engages with project sponsors as early as the design phase to help promote compliance with non-discrimination and affirmative action obligations. OFCCP will identify projects that receive an award under this notice and are required to participate in OFCCP's Mega Construction Project Program from a wide range of Federally-assisted projects over which OFCCP has jurisdiction and that have a project cost above $35 million. DOT will require project sponsors with costs above $35 million that receive awards under this funding opportunity to partner with OFCCP, if selected by OFCCP, as a condition of their DOT award.
Each grant recipient must assure that it will comply with all applicable federal statutes, regulations, executive orders, directives, FAA circulars, and other federal administrative requirements in carrying out any project supported by the ATP grant. The grant recipient must acknowledge that it is under a continuing obligation to comply with the terms and conditions of the grant agreement issued for its project with the FAA. The grant recipient understands that federal laws, regulations, policies, and administrative practices might be modified from time to time and may affect the implementation of the project. The grant recipient must agree that the most recent Federal requirements will apply to the project unless the FAA issues a written determination otherwise.
The grant recipient must submit the Certifications at the time of grant application and Assurances must be accepted as part of the grant agreement at the time of accepting a grant offer. Grant recipients must also comply with the requirements of 2 CFR part 200, which “are applicable to all costs related to Federal awards,” and which are cited in the grant assurances of the grant agreements. The Airport Sponsor Assurances are available on the FAA website at:
Grant recipients are subject to financial reporting per 2 CFR 200.328 and performance reporting per 2 CFR 200.329. Under the ATP, the grant recipient is required to comply with all Federal financial reporting requirements and payment requirements, including the submittal of timely and accurate reports. Financial and performance reporting requirements are available in the FAA October 2020 Financial Reporting Policy, which is available at
The grant recipient must comply with annual audit reporting requirements. The grant recipient and sub-recipients, if applicable, must comply with 2 CFR part 200, subpart F,
For further information concerning this notice, please contact the FAA BIL Branch via email at
All applicants, including those requesting full federal share of eligible projects costs, should have a plan to address potential cost overruns as part of an overall funding plan.
Federal Aviation Administration (FAA), DOT.
Withdrawal of the Record of Decision (ROD) for the LaGuardia Airport (LGA) Access Improvement Project (Project).
The FAA is withdrawing the July 2021 ROD for the Project. The Port Authority of New York and New Jersey has notified the FAA of its intent to terminate the Project and pursue alternative access improvements to LGA. Accordingly, the components identified in the LGA Access Improvement Project ROD are no longer needed at this time. Following the issuance of the ROD, New York Governor Kathy Hochul tasked the Port Authority of New York and New Jersey with reexamining alternative mass transit options to LGA. The resulting recommendations from the corresponding study identified improvements to an existing bus service and construction of a new non-stop airport shuttle service. On July 20, 2023, the Port Authority of New York and New Jersey, as the airport sponsor, notified the FAA of its intent to officially abandon the Project as approved by the FAA's ROD in favor of pursuing the recommended bus service and shuttle improvements. In response to this decision, the FAA has withdrawn the ROD for the LGA Access Improvement Project. Accordingly, all approvals for FAA actions within the ROD are also withdrawn. The Port Authority of New York and New Jersey must reinitiate any requests for FAA review and approval as necessary for all aspects of the Project contained within the now-withdrawn ROD should it wish to proceed with any component of the Project, in part or as a whole.
The effective date of the FAA's Withdrawal Order for the LGA Access Improvement Project ROD is September 1, 2023.
Andrew Brooks, Environmental Program Manager, Eastern Regional Office, AEA-610, Federal Aviation Administration, 1 Aviation Plaza, Jamaica, NY 11434. Telephone: 718-553-2511.
In 2015, former New York Governor Andrew Cuomo convened an Airport Advisory Panel to address the deficiencies of LGA as a major transportation facility. The resulting report recommended that the redevelopment of LGA include new ways to access the airport, including a future AirTrain.
In 2018, based on recommendations from the Airport Advisory Panel, the Port Authority of New York and New Jersey (Port Authority), as operator of LGA, proposed the Project to construct and operate a new Automated People Mover (APM) system to provide a reliable transit alternative for air passenger and employee access to the Airport. The Project would connect two on-Airport stations with an off-Airport transfer station at Willets Point. The off-Airport station would provide connections to the Mets-Willets Point stations of the Long Island Railroad (LIRR) Port Washington Branch and the New York City Transit (NYCT) Subway Flushing Station (7 Line). The off-Airport station would also provide a connection to a new off-Airport employee parking option located at
Following the issuance of the ROD, New York Governor Kathy Hochul directed the Port Authority to review alternative mass transit options to the Airport. In November 2021, per the governor's request, the Port Authority assembled a 3-person panel to oversee the study and provide recommendations based on the study's results.
In March 2023, the Port Authority released the “Options for Mass Transit Solutions to LGA” report, which included the panel's independent analysis of 14 different mass transit options to LGA. The panel recommended that the Port Authority proceed with implementing improvements to the existing Metropolitan Transportation Authority (MTA) Q70 LaGuardia Link bus service and constructing a new non-stop airport shuttle service from Ditmars Boulevard, the terminus of the N/W subway line in Astoria, Queens. Due to foreseeable construction and cost constraints, the expert panel recommended that the Port Authority focus on improving bus services at LGA in the near-term to provide more efficient transit capabilities, and to focus on implementing the shuttle service in the long-term. The Port Authority indicates that improved bus service is projected to serve approximately 5 million passengers annually and cost an estimated $500 million compared to costs ranging from $2.4 billion to $6.2 billion for alternative light rail options (Port Authority Board of Commissioners Approves $30 Million for Planning and Preliminary Design to Improve Mass Transit Access to LaGuardia Airport,
Based on consideration of this substantial new information and the changed circumstances concerning the Port Authority's planned access improvements at LGA as discussed above, the July 2021 ROD for the LGA Access Improvement Project has been withdrawn. Accordingly, all approvals for FAA actions within the ROD are also withdrawn. The Port Authority must reinitiate any requests for FAA review and approval as necessary for all aspects of the Project contained within the now-withdrawn ROD should it wish to proceed with any component of the Project, in part or as a whole.
Andrew Brooks, Environmental Program Manager, Eastern Regional Office, AEA-610, Federal Aviation Administration, 1 Aviation Plaza, Jamaica, NY 11434. Telephone: 718-553-2511.
Federal Motor Carrier Safety Administration (FMCSA), U.S. Department of Transportation (DOT).
Notice; request for comments.
FMCSA proposes the development and implementation of a Federal appeals process for Requests for Data Review (RDRs) submitted to the Agency through its DataQs system. DataQs is the online system for motor carriers, commercial motor vehicle drivers and other interested parties to request and track a review of Federal and State crash and inspection data submitted to and stored by FMCSA that the requester believes is incomplete or incorrect. The proposed review process would provide users with an opportunity to have their requests reviewed by FMCSA after the request has been reviewed and denied after reconsideration by the State agency. FMCSA would include requirements for ensuring an independent review of all requests. The outcome of the FMCSA review would be deemed final. FMCSA requests public comments on the proposed process.
Comments must be received on or before November 13, 2023.
You may submit comments identified by docket number FMCSA-2023-0190 using any of the following methods:
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Scott Valentine, Data Quality Program Manager, Analysis Division, Office of Analysis, Research and Technology, FMCSA, 1200 New Jersey Avenue SE, Washington, DC 20590-0001, (202) 366-4869,
FMCSA organizes this notice as follows:
FMCSA encourages you to participate by submitting comments and related materials.
If you submit a comment, please include the docket number for this notice (FMCSA-2023-0190), indicate the specific section of this document to which your comment applies, and provide a reason for each suggestion or recommendation. You may submit your comments and material online or by fax,
To submit your comment online, go to
If you submit your comments by mail or hand delivery, submit them in an unbound format, no larger than 8
FMCSA will consider all comments and material received during the comment period.
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 United States Code (U.S.C.) 552, CBI is exempt from public disclosure. If your comments responsive to the notice contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to the notice, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission that constitutes CBI as “PROPIN” to indicate it contains proprietary information. FMCSA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of the notice. Submissions containing CBI should be sent to Brian Dahlin, Chief, Regulatory Evaluation Division, Office of Policy, FMCSA, 1200 New Jersey Avenue SE, Washington, DC 20590-0001 or via email at
To view any documents mentioned as being available in the docket, go to
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its regulatory process. DOT posts these comments, without edit, including any personal information the commenter provides, to
The foundation of FMCSA's data-driven safety activities is the Motor Carrier Management Information System (MCMIS). MCMIS is a computerized system in which FMCSA maintains a record of the safety performance of motor carriers and hazardous materials shippers that are subject to Federal Motor Carrier Safety Regulations (FMCSRs) and the Hazardous Materials Regulations. MCMIS contains crash, registration, inspection, investigation, and enforcement information. FMCSA is committed to ensuring the integrity of State and Federally reported safety data in MCMIS.
States collect and submit crash and inspection data, including violations documented during such inspections, into State data systems. The State data systems transmit the State-reported crash and inspection data into MCMIS.
The MCMIS data is propagated to other FMCSA data systems, including, but not limited to, the Pre-Employment Screening Program (PSP), the Safety Measurement System (SMS), and Analysis and Information Online (A&I). These data systems provide enforcement personnel, industry, and the public with information on the safety performance of motor carriers and drivers.
DataQs is the online system for drivers, motor carriers, Federal and State agencies, and others to request and track a review of MCMIS data they believe to be incomplete or incorrect. The DataQs system is available to the public at
The Fiscal Year (FY) 2001 Consolidated Appropriations Act, section 515, Public Law 106-554, required the Office of Management and Budget (OMB) to develop standards for Federal agency data. The OMB Guidelines required Federal agencies to take certain steps to ensure the quality, objectivity, utility, and integrity of data that the agencies publicly disseminate. The agencies were also required to provide “administrative mechanisms” for affected persons to seek and obtain correction of data.
The OMB Guidelines on agencies' required mechanisms for correction of data is stated, in relevant part, as follows:
3. To facilitate public review, agencies shall establish administrative mechanisms allowing affected persons to seek and obtain, where appropriate, timely correction of information maintained and disseminated by the agency that does not comply with OMB or agency guidelines. These administrative mechanisms shall be flexible, appropriate to the nature and timeliness of the disseminated information and incorporated into agency information resources management and administrative practices.
i. Agencies shall specify appropriate time periods for agency decisions on whether and how to correct the information. Agencies shall notify the affected persons of the corrections made.
ii. If the person who requested the correction does not agree with the agency's decision (including the corrective action, if any), the person may file for reconsideration within the agency. The agency shall establish an administrative appeal process to review the agency's initial decision, and specify
As noted, pursuant to 49 CFR 350.201(s), one condition for participation in the Motor Carrier Safety Assistance Program (MCSAP)
DataQs system users may submit an RDR for the review of data within an FMCSA system and, if applicable, may provide supporting documentation. Based on the type of request, the RDR is routed to the appropriate DataQs program office. This program office can be a State agency, FMCSA field office, or FMCSA headquarters. Most RDRs are assigned to the State MCSAP agency for review since that agency most often uploaded the data to MCMIS.
The program office is responsible for investigating the request, communication with the requestor, if needed, and deciding whether a data correction is warranted. If a State agency is the assigned program office, and a data correction is warranted, the program office updates the record locally and uploads corrected data to MCMIS. Program offices are also responsible for updating DataQs with the review results and for notifying the requestor of the outcome. FMCSA provides State DataQs analysts with best practices and guidance for addressing RDRs in the DataQs Analyst Guide.
After a decision is made on the initial review of the RDR, the requestor may request that the RDR be reviewed again (RDR Reconsideration). This RDR Reconsideration may be routed to the same program office as the initial review or follow a different process. State approaches for handling RDR Reconsideration requests vary. Some States address RDR Reconsideration requests within the program office. If the reviewer performing the RDR Reconsideration review is a State agency, they may consult with FMCSA for a recommendation. Some States have implemented review councils or committees. These groups are comprised of members with CMV experience from the State, and at times industry, that can perform an independent review of the request. Decisions on the RDR Reconsiderations are final.
Stakeholders from industry, CMV drivers, and the public have expressed concerns regarding the transparency and uniformity of addressing RDRs, and specifically, RDR Reconsiderations. Stakeholders note that program offices do not have a uniform process for initial RDR reviews or for handling RDR Reconsiderations. They have also noted concern that RDR Reconsiderations are, in many instances, reviewed and decided by the same reviewer as the initial request. Users are calling on FMCSA to ensure an opportunity for an independent review, with consistently applied standards, for data correction requests.
FMCSA proposes the development and implementation of an independent FMCSA appeal process for RDRs. The Agency expects to use the DataQs system to accept, track, and respond to requests for FMCSA appeal review. For this process, FMCSA proposes that DataQs users would be able to initiate a request for an FMCSA appeal but only after the RDR has been denied through both the initial review and the RDR Reconsideration processes. All information and documents provided to FMCSA would be contained in the DataQs RDR itself. Neither the requestor nor the program office may submit new facts or evidence at the time of this third and final appeal request or during its review.
The Agency proposes to limit RDRs accepted for FMCSA appeal to requests that pertain to significant matters of legal interpretation or implementation of enforcement policies or regulations. Requests involving mere factual dispute between parties would not ordinarily be accepted for review through the FMCSA appeal process. Additionally, RDRs submitted to the Crash Preventability Determination Program and petitions to the Drug and Alcohol Clearinghouse, would not be eligible for an FMCSA appeal. The proposed appeal process would not directly pertain to regulatory procedures external to DataQs, such as requests for safety rating upgrades, or appeals of registration rejections, although decisions from the appeals subsequently could be used by the affected party in such external procedures. If an RDR appeal is accepted by FMCSA, the determination made as a result of the appeal would be final.
Table 1 below contains examples of RDRs that might meet the proposed acceptance criteria for an FMCSA appeal.
Table 2 below contains examples of RDRs that would not meet the proposed acceptance criteria for an FMCSA appeal.
The outcome of the FMCSA appeal generally will include a clarification of the relevant regulation or policy as applied in such circumstances, and a determination whether correction of the data is warranted. When an FMCSA appeal results in a clarification that precipitates the need for a change to State-reported data, FMCSA proposes to notify the State via DataQs to ensure that the safety data is updated at the source. Some States may not be able to update their source data, and in these cases, FMCSA proposes to update the data in its MCMIS system. Changing data in MCMIS would not update State source systems, but the changes would flow to downstream Federal systems such as PSP, SMS, A&I, and the FMCSA Portal.
In addition to proposing the establishment of an FMCSA appeals process, the Agency wishes to address stakeholder concerns about independent reviews for all RDRs, not just those related to regulations, policy, or standards. As such, FMCSA proposes to issue new requirements for the review of RDR Reconsiderations to program offices. These proposed guidelines may include requirements to ensure and certify that each reconsideration request is addressed by a different reviewer than the person who performed the initial review of the RDR.
FMCSA seeks comments on the proposals described above. FMCSA seeks comments on the following specific questions.
1. Should FMCSA appeals be considered for RDRs that are not related to the interpretation or understanding of regulations, policy, or standards.
2. If so, what are some examples of RDRs that should be reviewed in an appeal?
3. As mentioned above, some States and program offices have created review boards and panels with processes for managing requests or referrals that occur during the initial RDR review or an RDR Reconsideration. How would the addition of the FMCSA appeal impact these review boards and their processes?
4. What burdens, if any, will States face when updating their source data when notified in DataQs of an FMCSA appeal result that requires a data change?
a. If a State declined to change the violation in its data systems as a result of a decision in an FMCSA appeal, or was unable to, what would be the impact be of having FMCSA update the data in MCMIS directly while the State retained the original data in the its source systems?
5. One purpose of the FMCSA review is to provide clarity on significant regulatory or policy issues. FMCSA appeals may identify instances where this clarity could be helpful for future RDRs and RDR Reconsiderations. Are there recommended practices for disseminating appeal outcomes?
6. Are there any factors that FMCSA should consider relating to its proposed requirement for a separate reviewer, independent from the initial reviewer, for program office review for all RDR Reconsiderations?
Once comments are reviewed and any needed program changes are made, the Agency will respond to comments received to this notice and announce the start of the updated program in the
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Internal Revenue Service, as part of its continuing effort to reduce paperwork and respondent burden, invites the public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995. Currently, the IRS is soliciting comments concerning Form 8824,
Written comments should be received on or before November 13, 2023 to be assured of consideration.
Direct all written comments to Andrés Garcia, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or by email to
Requests for additional information or copies of the form and instructions should be directed to Ronald J. Durbala, at (202) 317-5746, at Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or through the internet at
The following paragraph applies to all the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.
Books or records relating to a collection of information must be retained if their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
• 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.
• 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.
• Enhance the quality, utility, and clarity of the information to be collected; and
• 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,
Comments submitted in response to this notice will be summarized and/or included in the ICR for OMB approval of the extension of the information collection; they will also become a matter of public record.
Department of the Treasury.
Notice of modified systems of records.
In accordance with the Privacy Act of 1974, the Department of the Treasury (“Treasury” or the “Department”) proposes to modify a current Treasury system of records titled, “Treasury Fiscal Service Systems.”
Submit comments on or before October 16, 2023. The modification will be applicable on October 16, 2023 unless Treasury receives comments and determines that changes to the system of records notice are necessary.
Comments may be submitted to the Federal eRulemaking Portal electronically at
For general questions and questions regarding privacy issues, please contact: Ryan Law, Deputy Assistant Secretary for Privacy, Transparency, and Records (202-622-5710), Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC 20220.
In accordance with the Privacy Act of 1974, as amended (5 U.S.C. 552a), the Department of the Treasury (Treasury), proposes to modify a system of records notice, 81 FR 78266, relating to the Treasury system of records titled, “Department of the Treasury, Treasury Fiscal Service Systems.”
Treasury is modifying its system of records notice referenced in the original notice (81 FR 78266) to add a new authority, the Tax Cuts and Jobs Act, 26 CFR 1.6050X-1(a)(3). This new authority will add a new category of individuals, a new category of records, an additional purpose, and an additional routine use to the SORN. This Act mandates Treasury to collect Tax Identification Numbers (TIN) from those against whom Treasury has assessed certain penalties or fines. Treasury collects TINs to comply with the statutory requirement to file form 1098-F related to certain fines, penalties and other amounts, with payors and the Internal Revenue Service (IRS) in accordance with 26 U.S.C. 6050X and 26 CFR 1.6050X-1(a)(3).
Additionally, Treasury is modifying this SORN to add three new routine uses. Two of these routine uses will allow Treasury to share information with Federal agencies, entities, and persons for suspected, confirmed, or mitigating breaches. The additional routine use is to share information with National Archives and Records Administration (NARA) for use in its records management inspections and its role as an Archivist under the authority of 44 U.S.C. 2904 and 2906.
Treasury has provided a report of this system of records to the Committee on Oversight and Government Reform of the House of Representatives, the Committee on Homeland Security and Governmental Affairs of the Senate, and OMB, pursuant to 5 U.S.C. 552a(r) and OMB Circular A-108, “Federal Agency Responsibilities for Review, Reporting, and Publication under the Privacy Act,” dated December 23, 2016.
Department of the Treasury.009—Treasury Fiscal Service Systems.
Unclassified.
Department of the Treasury, 1500 Pennsylvania Ave. NW, Washington, DC 20220. The locations at which the system is maintained by Treasury components and their associated field offices are:
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a. Chief Financial Officer, Comptroller of the Currency, 400 7th Street SW, Washington, DC 20024.
b. Chief Counsel's Office, 400 7th Street SW, Washington, DC 20024.
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31 U.S.C. 3512, 31 U.S.C. 3711, 31 U.S.C. 3721, 5 U.S.C. 5701
The Treasury Integrated Financial Management and Revenue System is to account for and control appropriated resources; maintain accounting and financial information associated with the normal operations of government organizations such as billing and follow-up, for paying creditors, to account for goods and services provided and received, to account for monies paid and received, process travel authorizations and claims, process training claims, and process employee claims for lost or damaged property, and for certain tax purposes. The records management and statistical analysis subsystems provide a data source for the production of reports, statistical surveys, documentation and studies required for integrated internal management reporting of costs associated with the Department's operation.
(1) Current and former Treasury employees, non-Treasury personnel on detail to the Department, current and former vendors, all debtors including employees or former employees; (2) persons paying for goods or services, returning overpayment or otherwise delivering cash; (3) individuals, private institutions and business entities who are currently doing business with, or who have previously conducted business with the Department of the Treasury to provide various goods and services; (4) individuals who are now or were previously involved in tort claims with Treasury; (5) individuals who are now or have previously been involved in payments (accounts receivable/revenue) with Treasury; (6) individuals who have been recipients of awards; and (7) individuals who have been assessed with certain fines or penalties. Only records reflecting personal information are subject to the Privacy Act. The system also contains records concerning corporations, other business entities, and organizations whose records are not subject to the Privacy Act.
The financial systems used by the Treasury components to collect, maintain and disseminate information include the following types of records: Routine billing, payment, property accountability, and travel information used in accounting and financial processing; information related to certain fines and penalties for tax reporting purposes; administrative claims by employees for lost or damaged property; administrative accounting documents, such as relocation documents, purchase orders, vendor invoices, checks, reimbursement documents, transaction amounts, goods and services descriptions, returned overpayments, or otherwise delivering cash, reasons for payment and debt, travel-related documents, training records, uniform allowances, payroll information, etc., which reflect amount owed by or to an individual for payments to or receipt from business firms, private citizens and or institutions. Typically, these documents include the individual's name, social security number, address, amounts of fines or penalties, and taxpayer identification number. Records in the system also include employment data, payroll data, position and pay data.
Individuals, private firms, other government agencies, contractors, documents submitted to or received from a budget, accounting, travel, training, or other office maintaining the records in the performance of their duties.
In addition to those disclosures generally permitted under the Privacy Act of 1974, 5 U.S.C. 552a(b), records and/or information or portions thereof maintained as part of this system may be disclosed outside Treasury as a routine use pursuant to 5 U.S.C. 552a(b)(3) as follows:
(1) To the United States Department of Justice (“DOJ”), for the purpose of representing or providing legal advice to the Department in a proceeding before a court, adjudicative body, or other administrative body before which the Department is authorized to appear, when such proceeding involves:
(a) The Department or any component thereof;
(b) Any employee of the Department in his or her official capacity;
(c) Any employee of the Department in his or her individual capacity where DOJ or the Department has agreed to represent the employee; or
(d) The United States, when the Department determines that litigation is likely to affect the Department or any of its components; and the use of such records by the DOJ is deemed by the DOJ or the Department to be relevant and necessary to the litigation provided that the disclosure is compatible with the purpose for which records were collected.
(2) To appropriate Federal, State, local, or foreign agencies, or other
(3) To a Federal, State, local, or other public authority maintaining civil, criminal or other relevant enforcement information or other pertinent information, which has requested information relevant to or necessary to the requesting agency's, bureau's, or authority's hiring or retention of an individual, or issuance of a security clearance, license, contract, grant, or other benefit;
(4) In a proceeding before a court, adjudicative body, or other administrative body before which the agency is authorized to appear when: (a) The agency, or (b) or any component thereof, or (c) any employee of the agency in his or her official capacity, or (d) any employee of the agency in his or her individual capacity where the Department of Justice or the agency has agreed to represent the employee; or (e) the United States, when the agency determines that litigation is likely to affect the agency, is a party to litigation or has an interest in such litigation, and the use of such records by the agency is deemed to be relevant and necessary to the litigation or administrative proceeding and not otherwise privileged;
(5) To a Congressional office in response to an inquiry made at the request of the individual to whom the record pertains;
(6) To the news media in accordance with guidelines contained in 28 CFR 50.2 which pertain to an agency's functions relating to civil and criminal proceedings;
(7) To third parties during the course of an investigation to the extent necessary to obtain information pertinent to the investigation;
(8) To a public or professional licensing organization when such information indicates, either by itself or in combination with other information, a violation or potential violation of professional standards, or reflects on the moral, educational, or professional qualifications of an individual who is licensed or who is seeking to become licensed;
(9) To a contractor for the purpose of compiling, organizing, analyzing, programming, processing, or otherwise refining records subject to the same limitations applicable to U.S. Department of the Treasury officers and employees under the Privacy Act;
(10) To a court, magistrate, or administrative tribunal in the course of presenting evidence, including disclosures to opposing counsel or witnesses in the course of civil discovery, litigation, or settlement negotiations or in connection with criminal law proceedings or in response to a court order;
(11) Through a computer matching program, information on individuals owing debts to the Department of the Treasury, or any of its components, to other Federal agencies for the purpose of determining whether the debtor is a Federal employee or retiree receiving payments which may be used to collect the debt through administrative or salary offset;
(12) To other Federal agencies to effect salary or administrative offset for the purpose of collecting debts, except that addresses obtained from the IRS shall not be disclosed to other agencies;
(13) To disclose information to a consumer reporting agency, including mailing addresses obtained from the Internal Revenue Service, to obtain credit reports;
(14) To a debt collection agency, including mailing addresses obtained from the Internal Revenue Service, for debt collection services;
(15) To unions recognized as exclusive bargaining representatives under the Civil Service Reform Act of 1978, 5 U.S.C. 7111 and 7114, the Merit Systems Protection Board, arbitrators, the Federal Labor Relations Authority, and other parties responsible for the administration of the Federal labor-management program for the purpose of processing any corrective actions, or grievances, or conducting administrative hearings or appeals, or if needed in the performance of other authorized duties;
(16) To a public or professional auditing organization for the purpose of conducting financial audit and/or compliance audits;
(17) To a student participating in a Treasury student volunteer program, where such disclosure is necessary to support program functions of Treasury, and
(18) To insurance companies or other appropriate third parties, including common carriers and warehousemen, in the course of settling an employee's claim for lost or damaged property filed with the Department.
(19) To appropriate agencies, entities, and person when (1) the Department of the Treasury suspects or has confirmed that there has been a breach of the system of records; (2) the Department of the Treasury has determined that as a result of the suspected or confirmed breach there is a risk of harm to individuals, the Department of the Treasury (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 Department of the Treasury's efforts to respond to the suspected or confirmed breach or to prevent, minimize, or remedy such harm.
(20) To another Federal agency or Federal entity, when the Department of the Treasury 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.
(21) The National Archives and Records Administration (“NARA”) for use in its records management inspections and its role as an Archivist under the authority of 44 U.S.C. 2904 and 2906.
(22) To the IRS for any applicable tax reporting purposes.
Disclosures made pursuant to 5 U.S.C. 552a(b)(12): Debt information concerning a government claim against an individual may be furnished in accordance with 5 U.S.C. 552a(b)(12) and section 3 of the Debt Collection Act of 1982 (Pub. L. 97-365) to consumer reporting agencies to encourage repayment of an overdue debt.
Paper, microform, and electronic media.
Name, social security number, vendor ID number, TIN, and document number (travel form, training form, purchase order, check, invoice, etc.).
Record maintenance and disposal is in accordance with National Archives and Records Administration retention schedules, and any supplemental guidance issued by individual components.
Protection and control of sensitive but unclassified (SBU) records in this system is in accordance with TD P 71-10, Department of the Treasury Security Manual, and any supplemental guidance issued by individual components.
See “Notification Procedure” below.
See “Notification Procedure” below.
Individuals seeking notification and access to any record contained in this system of records, or seeking to contest its content, may inquire in writing in accordance with instructions appearing at 31 CFR part 1, subpart C, appendices A-M. Requests for information and specific guidance on where to send requests for records may be addressed to: Privacy Act Request, DO, Director, Disclosure Services Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC 20220.
None.
Notice of this system of records was last published in full in the
Securities and Exchange Commission.
Final rule.
The Securities and Exchange Commission (“Commission” or “SEC”) is adopting new rules under the Investment Advisers Act of 1940 (“Advisers Act” or “Act”). The rules are designed to protect investors who directly or indirectly invest in private funds by increasing visibility into certain practices involving compensation schemes, sales practices, and conflicts of interest through disclosure; establishing requirements to address such practices that have the potential to lead to investor harm; and restricting practices that are contrary to the public interest and the protection of investors. These rules are likewise designed to prevent fraud, deception, or manipulation by the investment advisers to those funds. The Commission is adopting corresponding amendments to the Advisers Act books and records rule to facilitate compliance with these new rules and assist our examination staff. Finally, the Commission is adopting amendments to the Advisers Act compliance rule, which affect all registered investment advisers, to better enable our staff to conduct examinations.
Shane Cox, Robert Holowka, and Neema Nassiri, Senior Counsels; Tom Strumpf, Branch Chief; Adele Murray, Private Funds Attorney Fellow; Melissa Roverts Harke, 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 is adopting rule 17 CFR 275.206(4)-10 (final rule 206(4)-10), 17 CFR 275.211(h)(1)-1 (final rule 211(h)(1)-1), 17 CFR 275.211(h)(1)-2 (final rule 211(h)(1)-2), 17 CFR 275.211(h)(2)-1 (final rule 211(h)(2)-1), 17 CFR 275.211(h)(2)-2 (final rule 211(h)(2)-2), and 17 CFR 275.211(h)(2)-3 (final rule 211(h)(2)-3) under the Investment Advisers Act of 1940 [15 U.S.C. 80b-1
The Commission oversees private fund advisers, many of which are registered with the SEC or report to the SEC as exempt reporting advisers. Despite the Commission's examination and enforcement efforts with respect to private fund advisers, such advisers continue to engage in certain practices that may impose significant risks and harms on investors and private funds. Consequently, there is a compelling need for the Commission to exercise its congressional authority for the protection of investors.
Private funds are privately offered investment vehicles that pool capital from one or more investors and invest in securities and other instruments or investments.
Congress expanded the Commission's role overseeing private fund advisers and their relationship with private funds and their investors in the wake of the 2007-2008 financial crisis, when it passed, and the President signed, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”). While the antifraud provisions of section 206 already applied to private fund advisers and the Commission already had brought enforcement actions against private fund advisers before the enactment of the Dodd-Frank Act, Congress increased the Commission's oversight responsibility of private fund advisers. Among other things, Congress amended the Advisers Act generally to require advisers to private funds to register with the Commission and to authorize the Commission to establish reporting and recordkeeping requirements for advisers to private funds for investor protection and systemic risk purposes.
Investment advisers' private fund assets under management have steadily increased over the past decade, growing from $9.8 trillion in 2012 to $26.6 trillion in 2022.
While there are many different ways that private funds are structured and organized, private funds typically rely on an investment adviser (or affiliated entities, such as the fund's general partner or managing member) to provide management, investment, and other services, and such person usually has delegated authority to take actions on behalf of the private fund without the consent or approval of any other person. A private fund rarely has employees of its own—its officers, if any, are usually employed by the private fund's adviser. As a result, it is the adviser or its affiliated entities who generally draft the private fund's private placement memorandum and governing documents,
Investors in a private fund generally pay both fees and expenses to the private fund adviser and/or its related persons. Investors typically, directly or indirectly through the fund interests they hold, pay management fees
There are many different types of private funds. Two broad categories of private funds are hedge funds and private equity funds. Hedge funds tend to invest in more liquid assets and generally allow investors the opportunity to voluntarily withdraw their interests with certain limitations, including for example, restrictions on timing and notice requirements and, for certain funds, the amount that can be redeemed at one time or over a period of time. Private equity funds, on the other hand, tend to invest in illiquid assets and generally do not permit investors to voluntarily withdraw their interests in the fund. Hedge funds engage in trillions of dollars in listed equity and futures transactions each month,
With over a decade since the Dodd-Frank Act required private fund advisers to register with us, the Commission now has extensive experience in overseeing and regulating private fund advisers. Form ADV and Form PF reporting have been critical to improving our ability to understand private fund advisers' operations and relationships with funds and investors as private funds continue growing in size, complexity, and number.
In the course of this oversight of private fund advisers, we have observed three primary factors that contribute to investor protection risks and harms: lack of transparency, conflicts of interest, and lack of governance mechanisms.
Accordingly, we proposed a series of new rules under the Advisers Act to protect investors, promote more efficient capital markets, and encourage capital formation.
These rules and amendments are important enhancements to private fund adviser regulation because they protect the adviser's private fund clients and those who invest in private funds by increasing visibility into certain activities, curbing practices that lead to harm to funds and their investors, and restricting adviser activity that is contrary to the public interest and the protection of investors. The private fund adviser reforms are designed specifically to address the following three factors for risks and harms that are common in an adviser's relationship with private funds and their investors: lack of transparency, conflicts of interest, and lack of effective governance mechanisms for client disclosure, consent, and oversight.
Certain conflicts of interest between advisers and private funds also involve sales practices or compensation schemes that are problematic for investors. For example, advisers have a conflict of interest with private funds (and, indirectly, 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. Similarly, advisers have a conflict of interest with the fund (and, indirectly, its investors) when they offer existing fund investors the choice between selling and exchanging their interests in the private fund for interests in another vehicle advised by the adviser or any of its related persons as part of an adviser-led secondary transaction.
For example, although some private funds may have limited partner advisory committees (“LPACs”) or boards of directors, these types of bodies may not have sufficient independence, authority, or accountability to oversee and consent to these conflicts.
The rules we are adopting are designed to protect private fund investors by addressing private fund advisers' conflicts of interest, sales practices, and compensation schemes. Such protection is necessary because investors face difficulties in negotiating for reformed practices, including stronger governance structures, because of the bargaining power held by advisers and by investors who benefit from current adviser practices, such as investors who receive preferential treatment from their advisers.
The Commission proposed rules to address the risks and harms to investors and funds, and we received many comment letters on the proposal.
○ Advisers to illiquid funds are required to calculate performance information with and without the impact of subscription facilities, rather than only without;
○ We have refined the definition of illiquid fund to be based primarily on withdrawal and redemption capability;
○ Instead of requiring advisers to present liquid fund performance since inception, we are only requiring a 10-year lookback; and
○ We are allowing additional time for delivery of fourth quarter statements and additional time for delivery of all statements for funds of funds.
As discussed more fully below, we are adopting the quarterly statement rule because we see this lack of transparency in many areas, including investment advisers' disclosure regarding private fund fees, expenses, and performance. For example, some private fund investors do not have sufficient information regarding private fund fees and expenses because those fees and expenses have varied labels across private funds and are subject to complicated calculation methodologies.
Investors will also benefit from increased transparency into how private fund performance is calculated. Currently, private fund advisers use different metrics and specifications for calculating performance, which makes it difficult for investors to compare data across funds and advisers, even when advisers disclose the assumptions they used. More standardized requirements for performance metrics will allow private fund investors to compare more effectively the returns of similar fund strategies over different market environments and over time. In addition, they 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.
○ Charging or allocating to the private fund fees or expenses associated with an investigation of the adviser or its related persons by any governmental or regulatory authority; however, regardless of any disclosure or consent, an adviser may not charge or allocate fees and expenses related to an investigation that results or has resulted in a court or governmental authority imposing a sanction for violating the Investment Advisers Act of 1940 or the rules promulgated thereunder;
○ Charging or allocating to the private fund any regulatory or compliance fees or expenses, or fees or expenses associated with an examination, of the adviser or its related persons;
○ Reducing the amount of an adviser clawback by actual, potential, or hypothetical taxes applicable to the adviser, its related persons, or their respective owners or interest holders;
○ 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, where such non-pro rata allocation is fair and equitable; and
○ Borrowing money, securities, or other private fund assets, or receiving a loan or an extension of credit, from a private fund client.
In a change from the proposal, we are not adopting the prohibition on fees for unperformed services because we believe this activity generally already runs contrary to an adviser's obligations to its clients under the Federal fiduciary duty. We are also not adopting the indemnification prohibition that we proposed because much of the activity that it would have prohibited is already prohibited by the Federal fiduciary duty and antifraud provisions.
We are also adopting the preferential treatment rule, in part, because all investors will benefit from increased transparency regarding the preferred terms granted to certain investors in the same private fund (
The Commission regulates investment advisers under the Advisers Act.
We have authority under section 206(4) to adopt rules “reasonably designed to prevent, such acts, practices, and courses of business as are fraudulent, deceptive or manipulative.”
Sections 206(4) and 211(h) of the Advisers Act are the principal authority for all of the five new rules to regulate the activities of investment advisers to private funds. The new rules are within the Commission's legal authority under those sections of the Advisers Act as a means reasonably designed to prevent fraudulent or deceptive acts and practices, facilitate simple and clear disclosures to investors, and prohibit or restrict certain sales practices, conflicts of interest, and compensation schemes in the market for advisory services to private funds. The quarterly statement rule is designed to facilitate the provision of simple and clear disclosures to private fund investors regarding some of the most important and fundamental terms of their relationships with investment advisers—namely what fees and expenses those investors will pay and what performance they receive for their private fund investments. The audit rule is designed to help prevent the fraud, deception, or manipulation that might result from material misstatements in financial statements, and it is intended to address the conflicts of interest and potential compensation schemes that may result from an adviser valuing assets and charging fees related to those assets. When advisers offer investors the choice between selling and exchanging their interests in the private fund for interests in another vehicle advised by the adviser or any of its related persons as part of an adviser-led secondary transaction, advisers have a conflict of interest with the fund and its investors, and the adviser-led secondaries rule is designed to address this concern. The restricted activities rule is designed to prohibit certain activities that involve conflicts of interest and compensation schemes that are contrary to the public interest and the protection of investors unless such activities are disclosed to, and in some cases, consented to, by investors. Finally, the preferential treatment rule addresses our concern that an adviser's current sales practices do not provide all investors with sufficient detail regarding preferential terms granted to other investors, and we believe that disclosure (and in some cases prohibition) of preferential treatment is necessary to guard against fraudulent and deceptive practices. We have examined a range of alternatives to
Some commenters supported the Commission's legal foundation for the rulemaking.
Section 913 of the Dodd-Frank Act contains numerous sub-parts, several of which specifically pertain to “retail customers,” which Congress defined as “a natural person, or the legal representative of such natural person, who (1) receives personalized investment advice about securities from a broker or dealer or investment adviser; and (2) uses such advice primarily for personal, family, or household purposes.”
Another commenter similarly argued that, because Congress added section 211(e) to the Advisers Act requiring the promulgation of rules to establish the form and content of certain reports regarding private funds required to be filed with the Commission under subsection 204(b) of the Advisers Act, it “is inconceivable that Congress intended Section 211(h) to grant the broad private fund disclosure authority it claims when Congress spoke with such precision [in adding section 211(e)] within the same section of the Advisers Act.”
Some commenters challenged our ability to rely on sections 211(h) and 206 of the Advisers Act on the grounds that our use of such authority directly conflicts with Congress's intent in enacting the Investment Company Act of 1940 (“Investment Company Act”).
One commenter stated that Congress amended the Advisers Act to address private fund adviser registration and did not authorize a disclosure system for private funds or allow the Commission to circumvent that by putting the obligation on advisers.
Some commenters stated that the rules are inconsistent with precedent treating the Advisers Act as a disclosure-based regime, that the 2019 IA Fiduciary Duty Interpretation re-affirmed the practice of consent through disclosure, and that the Commission is abandoning this approach in favor of acting as a merit regulator.
Similarly, the 2019 IA Fiduciary Duty Interpretation addressed advisers' fiduciary duties to their fund clients but did not state or seek to imply that advisers to private funds were otherwise exempt from the specifically worded provisions in the Advisers Act. We are not seeking to amend or change the Commission's existing rules or past interpretations of the Advisers Act with respect to private fund advisers. Rather, in this rulemaking, we are seeking to employ the rulemaking authority in sections 206(4) and 211(h) of the Act, as Congress set forth, to address the types of harms Congress specifically identified in those sections.
Other commenters argued that the Commission cannot rely on section 206 because the Commission has neither proposed to define fraudulent practices nor demonstrated how the rules would prevent fraud.
Some commenters stated that the “sales practices,” “conflicts of interest” and “compensation schemes” referenced in section 211(h) should be read and understood all together in the context of an advisory relationship, not as a list of distinct items, but as sales practices that lead to conflicts of interest with associated compensation schemes, and that the word “certain” also underscores the limited reach of these terms' combined meaning.
Some commenters offered their own interpretations of the term “sales practices.”
Likewise, the staff has broadly interpreted the term “compensation,” explaining that “the receipt of any economic benefit, whether in the form of an advisory fee or some other fee relating to the total services rendered, commissions, or some other combination of the foregoing” would satisfy the “for compensation” prong of the definition of investment adviser set forth in Section 202(a)(11) of the Advisers Act.
Commenters also argued that the Commission's approach runs contrary to the D.C. Circuit Court's decision in
Relatedly, some commenters stated that our interpretation of our authority under section 211(h) is inconsistent with the fact that, at the same time it added section 211(h), Congress amended 211(a) to clarify that advisers do not owe a duty to private fund investors.
Some commenters stated that section 205 provides the only authority under the Advisers Act to regulate contracts and that section 205(b) carves out contracts with funds exempt from the Investment Company Act under section 3(c)(7) of that Act.
The scope of advisers subject to the final private fund adviser rules is unchanged from the proposal, except as discussed below with respect to advisers to securitized asset fund.
Commenters generally supported the proposed application of the quarterly statement rule, audit rule, and adviser-led secondaries rule to SEC-registered advisers.
We are applying these three rules to SEC-registered advisers, as proposed. No commenter requested we extend application of the adviser-led secondaries rule to ERAs or other unregistered advisers. Regarding the quarterly statement rule, we believe extending the rule to ERAs, such as venture capital fund advisers, would raise matters that we believe would benefit from further consideration—for example, whether different fee, expense, and performance information might be informative in the context of start-up investments. Similarly, while one commenter asserted that many ERAs are already obtaining audits and thus application of the audit rule would benefit investors in ERA-advised funds, we received no other comments on this topic and believe we would benefit from further comment on the benefits and costs of such a requirement, particularly from smaller ERAs.
We have previously stated, and continue to take the position, that we do not apply most of the substantive provisions of the Advisers Act with respect to the non-U.S. clients (including private funds) of an SEC-registered offshore adviser.
The restricted activities rule prohibits all private fund advisers, regardless of registration status, from engaging in certain sales practices, conflicts of interest, and compensation schemes, unless the adviser satisfies certain disclosure, and, in some cases, consent obligations. Likewise, the preferential treatment rule prohibits all private fund advisers, regardless of registration status, from providing preferential treatment to any investor in a private fund (and in some cases to any investor in a similar pool of assets), unless the adviser satisfies certain disclosure obligations.
We proposed to continue to apply the Commission's historical position on the substantive provisions of the Advisers Act to the prohibited activities rule such that the rule would not apply with respect to a registered offshore adviser's non-U.S. private funds, regardless of whether those funds have U.S. investors.
One commenter stated that the proposed prohibited activities rule and the preferential treatment rule should not apply to an
It is appropriate to apply these two rules to all investment advisers, regardless of registration status, because these rules focus on prohibiting advisers from engaging in certain problematic sales practices, conflicts of interest, or compensation schemes.
Several commenters addressed the proposed scope of the prohibited activities rule and the preferential treatment rule, and many commenters supported a narrower scope.
We are not narrowing the scope of the restricted activities and preferential treatment rules to exclude ERAs, State-regulated advisers, advisers relying on the foreign private adviser exemption, or advisers that are otherwise unregistered. The sales practices, conflicts of interest, and compensation schemes addressed by the restricted activities rule and the preferential treatment rule can lead to advisers placing their interests ahead of their clients' (and, by extension, their investors') interests, and can result in significant harm to the private fund and its investors. As a result, all of these advisers are subject to the restricted activities rule and the preferential treatment rule. A number of our enforcement cases against advisers to private funds based on conflicts of interests have been brought against advisers that are not registered under the Advisers Act,
The final quarterly statement, restricted activities, adviser-led secondaries, preferential treatment, and audit rules do not apply to investment advisers with respect to securitized asset funds (we refer to these advisers,
Some commenters requested for all or some of the proposed rules not to apply to advisers to securitization vehicles or vehicles that issue asset-backed securities (in particular, collateralized loan obligations (“CLOs”)).
After considering comments, we are not applying the five private fund adviser rules to SAF advisers.
Definition of Securitized Asset Fund
The final rule will define SAF as “any private fund whose primary purpose is to issue asset backed securities and whose investors are primarily debt holders.”
In the context of requesting that the rule not apply with respect to collateralized loan obligations, one commenter stated that the final rule should use the following definition: any special purpose vehicle advised by an investment adviser that (A) (i) issues tradeable asset-backed securities or loans, the debt tranches of which are rated; and (ii) has at least 80% of its assets comprised of leveraged loans and cash equivalents; (B) is required by its governing transaction documents to appoint an unaffiliated person to, among other things, (i) calculate certain overcollateralization and interest coverage tests; (ii) prepare and make available to investors reports on the CLO, and (iii) make the indenture readily available to investors; and (C) appoints an independent accounting firm to perform a series of agreed upon procedures. Another commenter, when requesting exemptions or other relief from the rules, generally referred to these vehicles as “special purpose vehicles that issue asset backed securities,” while another commenter used the term “collateralized loan obligations and similar credit securitization products.”
The definition in the final rule will include the types of funds described by these commenters. The definition of SAFs in the final rule, however, is one that many advisers are familiar with because it is used in both Form PF and Form ADV. For example, Item 7.B. and Schedule D of Form ADV ask whether the private fund is a securitized asset
Although SAFs generally rely on the same exclusions from treatment as an “investment company” under the Investment Company Act as other types of private funds (
We agree with commenters that SAFs have structural features that distinguish them from most other private funds that are relevant in assessing the benefit of an audit to investors. Commenters stated that Generally Accepted Accounting Principles (“GAAP”) financial statements are not typically considered relevant for SAFs.
SAFs also have features that distinguish them from most other private funds that are relevant in assessing the benefit of the preferential treatment rule. Based on staff experience, SAFs typically issue primarily tradeable, interest-bearing debt securities backed by income-producing assets, unlike other private funds that typically issue equity securities to investors. These debt securities are typically structured as notes and issued in different tranches to investors. The tranches offer different priority of payments subject to a “waterfall” and defined levels of risk with upside participation caps or limits, which are compensated through the payment of increasing coupon rates on the more subordinated notes. Unlike investors in other private funds, the noteholders are similarly situated with all of the other noteholders in the same tranche and they cannot redeem or “cash in” their note ahead of other noteholders in the same tranche. As a result, in our experience, this structure has generally deterred investors from requesting, and SAF advisers from granting, preferential treatment. Thus, we do not believe that preferential treatment for SAFs presents the same conflicts of interest and investor protection concerns as it does for non-SAF funds.
We also believe that the quarterly statement would generally not provide meaningful information for SAF investors. For example, some commenters highlighted that the performance information required to be included in private fund quarterly statements would generally not constitute relevant or useful information for SAF investors, because the performance of a SAF, as a cash flow investment vehicle, primarily depends on the cash proceeds it realizes from its portfolio assets, as opposed to an increase in the value of its portfolio assets.
As another example, the “distribution” requirements under the final rules would likely be impracticable for most SAF advisers. Unlike other private funds that are primarily purchased, with respect to U.S. persons, through a primary issuance pursuant to Regulation D, which generally restricts a security's transferability and does not contemplate an investor's resale of the security to a third party, SAF interests
Finally, SAF advisers often have a more limited role in the management of a private fund, and SAFs or their sponsors typically engage more independent service providers than non-SAF funds. The primary role of an adviser to a SAF is, in many cases, to select and monitor the fund's pool of assets in compliance with certain portfolio requirements and quality tests (such as overcollateralization, diversification, and interest coverage tests) that are set forth in the fund's securitization transaction agreements. In many cases, the SAF's transaction agreement appoints an independent trustee to serve as custodian for the underlying investments. The trustee and collateral administrator are typically responsible for preparing detailed monthly and quarterly reports for the investors regarding the SAF's assets and expenses. We believe that these structural protections provide an important check on the adviser's activity or otherwise limit the actions the adviser can take to harm investors.
For the reasons described above, we believe it is appropriate not to apply all five private fund adviser rules to advisers with respect to SAFs they advise.
Section 211(h)(1) of the Act states that the Commission shall facilitate the provision of simple and clear disclosures to investors regarding the terms of their relationships with brokers, dealers, and investment advisers, including any material conflicts of interest. The quarterly statement rule is designed to facilitate the provision of simple and clear disclosures to investors regarding some of the most important and fundamental terms of their relationships with investment advisers to private funds in which those investors invest—namely what fees and expenses those investors will pay and what performance they receive on their private fund investments. These disclosures will allow investors to better understand their private fund investments and the terms of their relationship with the adviser to those funds.
Several commenters stated that section 211(h)(1) of the Act does not authorize the quarterly statement rule because details about past performance of funds and fees paid to the adviser are not terms of the relationship between investors and advisers.
Calculating performance is also complicated, and methods generally differ among advisers. Without comparable performance metrics and methodologies, it can be unclear how different advisers perform against one another. Performance calculations also generally are the product of many assumptions and criteria, such as the manner in which management fee rates are applied. Without simple and clear disclosures of such assumptions and criteria, investors are at a disadvantage with respect to understanding or being able to verify how their investments are performing.
Section 206(4) of the Act gives the Commission the authority to prescribe means reasonably designed to prevent fraud, deception, and manipulation. The quarterly statement rule is reasonably designed to prevent fraud, deception, and manipulation because it requires advisers to provide timely and consistent disclosures that will improve the ability of investors to assess and monitor fees, expenses, and performance. This will decrease the likelihood that investors will be defrauded, deceived, or manipulated because they will be in a better position to monitor the adviser and their respective investments, and it increases the likelihood that any such misconduct will be detected sooner.
Several commenters stated that Commission, in the proposal, failed to define a fraudulent, deceptive, or manipulative act as required by section 206(4) of the Act.
The rule requires 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, unless a quarterly statement that complies with the rule is prepared and distributed by another person.
Many commenters supported the quarterly statement rule as proposed and agreed that it would provide increased transparency to private fund investors who may not currently receive sufficiently detailed, comprehensible, or regular fee, expense, and performance information for each of their private fund investments.
As stated elsewhere, we have observed that private fund investments are often opaque; advisers frequently do not provide investors with sufficiently detailed information about private fund investments.
While we acknowledge that quarterly statements may increase costs, we believe these costs are justified in light of the benefits of the rule.
Moreover, we anticipate the costs of compliance with this rule may be of limited magnitude in light of the fact that many private fund advisers already maintain and, in many cases, already disclose similar information to investors.
We also disagree with commenters that suggested the quarterly statement would confuse investors. For example, some commenters asserted that standardized quarterly statement disclosures could confuse investors because the required information may not reflect an investor's actual, particularized investment experience in a fund.
Certain commenters argued that the quarterly statement requirement would be particularly burdensome for small and emerging advisers.
In addition to general comments on the proposed quarterly statement rule, commenters made specific suggestions or sought clarification on discrete parts of the proposal.
Some commenters suggested that we require investor-specific or class-specific reporting in addition to fund-level reporting.
Similarly, while we recognize the value of class-level reporting, requiring class-level reporting on quarterly statements is not necessary for the same reasons as those discussed above for investor-specific reporting. Additionally, requiring class-level reporting would not increase comparability across different advisers. For example, an investor might be in substantially different classes in funds advised by different advisers and thus might have difficulty comparing class-level reporting across these funds.
Commenters suggested that we should allow investors to waive this quarterly statement requirement.
Some commenters suggested requiring statements annually instead of quarterly.
The rule requires an investment adviser that is registered or required to be registered to prepare and distribute quarterly statements for any private fund that it advises with certain information regarding the fund's fees and expenses and any compensation paid or allocated to the adviser or its related persons by the fund, as well as any compensation paid or allocated by the fund's underlying portfolio investments. The statement will provide investors in those funds 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 fiscal quarters of operating results).
Many commenters generally supported the fee and expense disclosure requirement for the quarterly statements and agreed that establishing a standardized baseline level (
Although the required fee and expense disclosure in the quarterly statement will impose some additional costs, it is essential that investors receive this information in a timely, detailed, and consistent manner. 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 and complex. Although the types of fees and expenses charged to private funds can vary across the industry, investors typically compensate the adviser for managing the affairs of a private fund, often in the form of management fees
We disagree with the suggestion from some commenters that current fee and expense disclosure practices are sufficient. We understand that some fund investors have struggled to obtain complete and usable expense information, including when institutionally required to do so, for example, by the laws applicable to State and municipal plan investors.
Some commenters suggested requiring an expense ratio to help provide context as to the relative magnitude of a fund's expenses.
Furthermore, as stated above, advisers under the rule will remain able to provide, and investors are free to request and negotiate for, disclosure of expense ratios, as well as other information, to supplement the standardized baseline level (
The quarterly statement rule will 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 (“adviser compensation”) during the reporting period;
(2) A detailed accounting of all fees and expenses allocated to or 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 is designed to provide investors with comprehensive fund 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 fiscal quarters of operating results).
Many commenters generally supported the requirement to report adviser compensation on the quarterly statements.
Many private funds compensate advisers with a “2 and 20” or similar arrangement, consisting of a 2% management fee and a 20% share of any profits generated by the fund. Certain advisers, however, receive other forms or amounts of compensation from private funds in addition to, or in lieu of, such arrangements.
In addition to compensation paid to the adviser, the rule requires the fund table to include disclosure of compensation, fees, and other amounts allocated or paid to the adviser's “related persons.” We are defining “related persons” to include: (i) all officers, partners, or directors (or any
Many advisers conduct a single advisory business through multiple separate legal entities and provide advisory services to a private fund through different affiliated entities or personnel. The “related person” and “control” definitions are designed to capture the various entities and personnel that an adviser may use to provide advisory services to, and receive compensation from, private fund clients. Some commenters supported broadening the “related person” and “control” definitions to include, for example, unaffiliated service providers that provide payments to an adviser or over which an adviser has economic influence, former personnel and family members, operational partners, senior advisors, or similar consultants of an adviser, a private fund, or its portfolio investments, and/or any recipient of fund management fees or performance-based compensation.
One commenter suggested that the rule's reference to “sub-advisory fees” in the non-exhaustive list of compensation types covered by the adviser compensation disclosure requirement is inappropriate, because sub-advisory fees are generally not paid to the sub-adviser by a private fund and instead are often paid out of the management fee or other adviser compensation received by the fund's primary adviser from the fund.
Substantially as proposed, we are defining “performance-based compensation” as allocations, payments, or distributions of capital based on a private fund's (or its investments') capital gains, capital appreciation, and/or profit.
Similar to the approach taken with respect to adviser compensation discussed above, the rule captures all fund fees and expenses allocated to or paid by the fund during the reporting period, including, but not limited to, organizational, accounting, legal, administration, audit, tax, due diligence, and travel expenses. The rule's capturing of all, rather than limited categories of, fund fees and expenses is appropriate because this requirement will encompass the various and evolving forms of private fund fees and expenses. Advisers must list each category of expense as a separate line item under the rule, rather than group fund expenses into broad categories that obfuscate the nature and/or extent of the fees and expenses borne by the fund. 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 will not satisfy the rule's detailed accounting requirement. Instead, an adviser is required to separately list each category of expense (
A number of commenters generally supported this requirement to report all fees and expenses paid by the private fund during the reporting period on the quarterly statements.
We have observed two general trends among private fund advisers that support the rule's approach to adviser disclosure of fund fees and expenses. First, we have observed certain advisers shift certain expenses related to their advisory business to private fund clients.
Some commenters stated that we should allow advisers to group smaller expenses generally into broad categories or disclose them as “miscellaneous” expenses.
As discussed above,
To the extent that a fund expense also could be characterized as adviser compensation under the rule, the rule requires advisers to disclose such payment or allocation as adviser compensation as opposed to a fund expense in the quarterly statement. For example, certain private funds may engage the adviser or its related persons to provide non-advisory services to the fund, such as consulting, legal, or back-office services. The rule requires advisers to disclose any compensation, fees, or other amounts allocated or paid by the fund for such services, whether advisory or non-advisory, as part of the detailed accounting of adviser compensation. This approach will 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 by the fund.
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 that 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.
Some commenters generally supported the requirement that advisers disclose adviser compensation and fund expenses both before and after the application of any offsets, rebates, or waivers.
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. However, after considering comments, we believe that presenting both figures will 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, even with respect to
In addition, we are requiring advisers to disclose the amount of any offsets or rebates carried forward during the reporting period to subsequent periods to reduce future adviser compensation.
The quarterly statement rule requires advisers to disclose a detailed accounting of all portfolio investment compensation
The rule defines “portfolio investment” as any entity or issuer in which the private fund has invested directly or indirectly, as proposed.
One commenter supported the proposed definition of “portfolio investment.”
Many commenters discussed how the proposed definitions of “portfolio investment” and “covered portfolio investment” would impact advisers to funds of funds. Some commenters suggested that we exclude from these definitions funds of funds and other pooled vehicles that invest indirectly through underlying funds or unaffiliated structures.
We recognize 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 final rule, advisers are required to disclose information regarding only
Similar to the approach taken with respect to adviser compensation and fund expenses discussed above, the rule requires a detailed accounting of
The rule requires advisers to disclose the amount of portfolio investment compensation attributable to a private fund's interest in a covered portfolio investment.
Similar to the approach discussed above with respect to adviser compensation and fund expenses, an adviser is required to list the amount of portfolio investment compensation allocated or paid with respect to each covered portfolio investment both
We continue to believe that this approach is appropriate given that portfolio investment compensation can take many different forms and often varies based on fund type. For example, portfolio investments of private credit funds may pay the adviser a servicing fee for managing a pool of loans held directly or indirectly by the fund. Portfolio investments of private real estate funds may pay the adviser a property management fee or a mortgage-servicing fee for managing the real estate investments held directly or indirectly by the fund.
This disclosure will help inform investors about the scope of portfolio investment compensation allocated or paid to the adviser and related persons and provide insight to investors into the nature of some of the potential or actual conflicts of interest their private fund advisers face. For example, in cases where an adviser controls a fund's 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 will help investors monitor the application of such offsets or rebates.
As with adviser compensation and fund expenses, this approach should provide investors with sufficient detail to validate that portfolio investment compensation borne by the fund conforms to contractual agreements.
Some commenters supported this portfolio investment compensation reporting requirement, stating that it will increase transparency.
To clarify, this portfolio investment compensation disclosure requirement does not include distributions representing profit or return of capital to the fund, in each case, in respect of the fund's ownership or other interest in a portfolio investment (
The rule requires an adviser to include the portfolio investment compensation paid to a related person, including, without limitation, a related person that is a sub-adviser, in its quarterly statement. Because portfolio investment compensation to related sub-advisers presents the same conflicts of interest concerns discussed above with respect to portfolio investment compensation to advisers, the portfolio investment compensation disclosure requirements under the rule extends to portfolio investment compensation to an
Some commenters stated that we should require only aggregate portfolio investment-level disclosure and not each instance of portfolio investment compensation in order to provide more helpful information to investors, reduce costs and compliance burdens for advisers, or to avoid potentially causing portfolio companies to decline private fund investments.
Several commenters stated that the requirement to disclose portfolio investment compensation should be limited to circumstances in which an adviser has the discretion or authority to cause a portfolio investment to compensate the adviser or its related persons, as those are the circumstances in which conflicts of interest would arise.
Some commenters raised concerns about potential confidentiality issues if advisers are required to disclose the names of portfolio investments as part of this portfolio investment compensation disclosure.
One commenter indicated that these ownership percentages would not be helpful for investors in practice.
As proposed, the quarterly statement rule requires each statement to include prominent disclosure regarding the manner in which expenses, payments, allocations, rebates, waivers, and offsets are calculated.
Some commenters supported this calculation and cross-reference disclosure requirement, stating that it would help investors monitor and understand fees and expenses.
The required cross-references to the fund's documents will enable investors to compare what the private fund's documents establish that the fund (and indirectly the investors) will be
As proposed, in addition to providing information regarding fees and expenses, the rule requires advisers to include standardized fund performance information in each quarterly statement provided to fund investors. The rule requires advisers to liquid funds
Many commenters supported the performance disclosure requirement and generally suggested that it would better enable investors to monitor, compare, or otherwise alter their private fund investments.
While we acknowledge that quarterly statements may increase costs, we believe these costs are justified in light of the benefits of the rule.
One commenter stated that we should align the performance reporting standards with the principles-based approach reflected in the marketing rule.
Without standardized performance metrics (and adequate disclosure of the criteria used and assumptions made in calculating the performance),
Standardized performance information will help an investor decide whether to continue to invest in the private fund or, if applicable, redeem or withdraw from the private fund, as well as more holistically to make decisions about other components of the investor's portfolio. Furthermore, requiring advisers to show performance information alongside fee and expense information in the quarterly statement will provide a more complete picture of an investor's private fund investment. This information will help investors understand the true cost of investing in the private fund and be particularly valuable for investors that are paying performance-based compensation. This performance reporting will also provide greater transparency into how private fund performance is calculated, improving an investor's ability to understand performance.
One commenter requested that we clarify that investors may negotiate for performance and other reporting in addition to what is required by this rule.
Some commenters suggested that we should also require a public market equivalent (“PME”) as part of the
Certain commenters suggested that we should clarify that the adviser's (and its affiliate's) interests should be excluded when calculating performance because such interests are typically non-fee paying.
One commenter suggested that we should not require performance metrics until the fund has at least four quarters of results.
The performance disclosure requirements of the quarterly statement rule require an adviser first to determine whether its private fund client is an illiquid or liquid fund, as defined in the rule, no later than the time the adviser sends the initial quarterly statement.
We are defining “illiquid fund” as a private fund that: (i) is not required to redeem interests upon an investor's request and (ii) has limited opportunities, if any, for investors to withdraw before termination of the fund.
At proposal, we had listed six factors used to identify an illiquid fund: 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. The proposed factors were aligned with the factors for determining how certain types of private funds should report performance under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).
Many commenters supported the liquid and illiquid fund distinction as part of the required performance reporting,
After considering responses from commenters, we have decided that the definition of an illiquid fund should focus only on number three and number five of the proposed six factors,
Generally, if a private fund allows voluntary redemptions/withdrawals, then it is a liquid fund and must provide total returns. Similarly, if a private fund does not allow voluntary redemptions/withdrawals, then it is an illiquid fund and must provide internal rates of return and multiples of invested capital. Private funds that fall into the “illiquid fund” definition are generally closed-end funds that do not offer periodic redemption/withdrawal options other than in exceptional circumstances, such as in response to regulatory events. For example, most private equity and venture capital funds will likely fall under the illiquid fund definition, and the rule requires advisers to these types of funds to provide performance metrics that suit their particular characteristics, such as irregular cash flows, which otherwise make measuring performance difficult for both advisers and investors. We recognize, however, that even traditional, closed-end private equity funds have certain redemption or withdrawal rights for regulatory events (
As proposed, we are defining a “liquid fund” as any private fund that is not an illiquid fund. Some commenters generally supported the liquid and illiquid fund distinction as noted above,
We continue to believe that the performance metrics for liquid funds—which are discussed in detail below—will allow investors to assess better these funds' performance. We understand that 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 invest a substantial amount of their assets in primarily liquid holdings (
Some commenters suggested creating a third category to capture certain “hybrid” funds.
Other commenters requested that we let advisers choose the most appropriate approach with respect to performance reporting instead of requiring these categories.
The final rule requires 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 will result in funds with similar liquidity characteristics presenting the same type of performance metrics, this approach will improve comparability of private fund performance reporting for fund investors.
We are adopting the performance requirements for liquid funds as proposed, other than (i) the proposed requirement for an adviser to disclose annual net total returns since inception and (ii) the proposed use of calendar year reporting periods. Under the final rule, an adviser to a liquid fund is required to provide annual net total returns
Some commenters stated that the proposed requirement of performance since inception is unworkable.
Annual net total returns will provide fund investors with a comprehensive overview of the fund's performance over the life of the fund or the prior 10 years, whichever is shorter, and improve an investor's ability to compare the fund's performance with other similar funds. As noted above, investors can use performance information in connection with fee and expense information to analyze the value of their private fund investments. This requirement helps ensure that advisers do not present only recent performance results or only results for periods with strong performance. The rule also requires advisers to present each time period with equal prominence.
One commenter suggested that we should include a definition for “net total returns.”
Certain commenters stated that requiring liquid funds to report the one-, five-, and 10-year periods would provide data to investors that the Commission recently determined in the marketing rule was not useful information for private funds.
These required performance metrics should allow investors to better assess these funds' performance. Liquid funds generally should be 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 open-end funds, which typically invest a substantial amount of their assets in primarily liquid underlying holdings (
One commenter suggested that we should reevaluate the requirement for liquid funds to show both annualized and cumulative net performance and grant private funds flexibility in providing either annualized or cumulative net performance.
Another commenter suggested that we should also require liquid funds to provide average annual net returns over a three-year period in addition to the one-, five- and 10-year periods to potentially provide additional transparency to private fund investors.
We are adopting the performance requirements for illiquid funds largely as proposed, other than the requirement for an adviser to disclose performance figures solely
The rule requires advisers to illiquid funds to disclose the following performance measures in the quarterly statement, shown since inception of the illiquid fund and computed
(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 rule also requires advisers to provide investors with a statement of contributions and distributions for the illiquid fund.
The rule requires 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 is 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 rule requires the quarterly statement to reference the date the performance information is current through (
Some commenters supported the since inception performance disclosure requirement for illiquid funds,
In response to our requests for comment, a number of commenters suggested that we require performance measures for illiquid funds both with and without the impact of fund-level subscription facilities.
Some commenters suggested exempting advisers from the requirement to present unlevered returns to the extent they used subscription facilities on a short term basis to efficiently manage capital, rather than to increase returns.
As proposed, we are defining “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.
Many advisers currently provide performance figures that reflect the impact of fund-level subscription facilities. We believe that these “levered” performance figures, alone, have the potential to mislead investors.
We stated in the proposal that 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. One commenter suggested that excluding subscription line fees and expenses from net performance should be optional, rather than required.
While there may be certain circumstances under which including subscription line fees and expenses in unlevered performance metrics may have advantages, standardization is important. If we were to make the exclusion of subscription line fees and expenses from net performance for illiquid funds optional instead of required, some advisers might include such fees and expenses while others might exclude them. This variability could make it difficult for investors to assess unlevered performance metrics across illiquid funds that are managed by different advisers. Additionally, some advisers might start by including subscription line fees and expenses from unlevered performance metrics and then switch to excluding such fees and expenses if there was a downward trend in performance. This potential gamesmanship could mislead investors. Accordingly, we are not allowing such optionality.
Some commenters supported this performance disclosure requirement as providing a useful component in the totality of information that would be required to be provided to private fund investors under the rule.
We recognize that most illiquid funds have particular 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 have their drawbacks as performance metrics.
As proposed, we are defining “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 are defining “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 received few comments on the proposed definitions, with one commenter stating that neither definition takes into account the timing of fund transactions.
As proposed, the final rule requires advisers to present each performance metric on a gross and net basis.
We are defining a statement of contributions and distributions as a document that presents:
(i) All capital inflows the private fund has received from investors and all
(ii) The net asset value of the private fund as of the end of the reporting period covered by the quarterly statement.
Some commenters supported the requirement to provide a statement of contributions and distributions.
We believe that the statement of contributions and distributions will provide private fund investors with important information regarding the fund's performance, because it will 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 will allow investors to diligence the various performance measures presented in the quarterly statement. In addition, this data will allow the investors to calculate additional performance measures based on their own preferences.
Some commenters suggested that subscription facility fees and expenses should be included in the statement of contributions and distributions.
One commenter suggested that we should require additional detail in the statement of contributions and distributions.
Some commenters supported this requirement to disclose realized and unrealized performance metrics for illiquid funds as contributive to the policy goals of transparency and comparability of private fund investments promoted by the rule.
We recognize that it may be difficult to determine whether a partially realized investment has been realized under the final rule, for example, following a significant dividend recapitalization where the fund recoups all or a substantial portion of its initial investment. We continue to believe, however, that disclosure of realized and unrealized performance will provide investors with important context for analyzing the adviser's valuations and for weighing their impact on the fund's overall performance.
We recognize that categorizing a partially realized investment as realized or unrealized for purposes of the rule will depend on the facts and circumstances and may not always be purely objective. We agree with
One commenter suggested requiring reporting of distributions to paid-in capital (“DPI”) and residual value to paid-in capital (“RVPI”) instead of gross multiple of invested capital (“MOIC”) for realized and unrealized investments.
The rule only requires an adviser to disclose gross performance measures for the realized and unrealized portions of the illiquid fund's portfolio, as proposed. Commenters generally agreed with this approach.
As proposed, the final rule will require advisers to include prominent disclosure of the criteria used and assumptions made in calculating the performance. This information will enable the private fund investor to understand how the performance is calculated and help provide useful context for the presented performance metrics. Additionally, while the rule includes detailed information about the type of performance an adviser must present for liquid and illiquid funds, it is still possible that advisers will make certain assumptions or rely on criteria that the rule's requirements do not address specifically. This information is integral to the quarterly statement because it will enable the investor to understand and analyze the performance information better and better compare the performance of funds and advisers without having to access other ancillary documents. As a result, investors should receive this information as part of the quarterly statement itself.
For example, the rule requires an adviser to display, for a liquid fund, the annual returns for each fiscal year over the past 10 years or since the fund's inception, whichever is shorter. If the adviser makes any assumptions in performing that calculation, such as
Some commenters supported this requirement to include prominent disclosure of the criteria used and assumptions made in calculating the performance.
We believe this prominently displayed information is vital in making these disclosures as simple and clear as possible for investors. Furthermore, permitting advisers to provide quarterly statements without prominent disclosure of the criteria used and assumptions made in calculating performance would not sufficiently prevent practices that may be fraudulent, deceptive, or manipulative. For instance, advisers may use a deceptive assumed fee rate to calculate performance and investors may not be aware of it if it is not prominently disclosed in the quarterly statement. Accordingly, it is crucial that private fund investors receive this prominent disclosure as part of the quarterly statement itself.
The rule requires quarterly statements to be prepared and distributed to investors in private funds that are not funds of funds within 45 days after the first three fiscal quarter ends of each fiscal year and 90 days after the end of each fiscal year. Advisers to funds of funds must prepare and distribute quarterly statements within 75 days after the first three fiscal quarter ends of each year and 120 days after the fiscal year end.
For a newly formed private fund, the rule requires a quarterly statement to be prepared and distributed beginning after the fund's second full quarter of generating operating results, as proposed. However, one commenter stated that the requirement to provide performance metrics should not be triggered until the private fund has four quarters of operating results, rather than two.
Some commenters supported the proposed rule's 45-day timing requirement.
Some commenters suggested allowing additional time for the first three quarterly statements of the year as well.
We asked in the proposal whether advisers should be required to report based on the private fund's fiscal periods, rather than calendar periods, as proposed. Because the proposed rule required advisers to distribute all four reports, including the fourth quarter report, within the same time period (
Some commenters suggested providing additional time for funds of funds because they would likely need to receive quarterly statements from their private fund investments before being able to prepare their own quarterly statements.
An adviser generally will satisfy the requirement to “distribute” the quarterly statements when the statements are sent to all investors in the private fund.
Some commenters suggested allowing distribution via a data room instead of requiring delivery to investors.
The rule requires advisers to consolidate reporting for similar pools of assets to the extent doing so provides more meaningful information to the private fund's investors and is not misleading, as proposed.
Due to the complexity of private fund structures, the rule takes a principles-based approach with respect to whether private fund advisers must consolidate reporting for a specific fund structure.
Some commenters supported this principles-based approach to consolidated reporting for certain fund structures, arguing that it will provide more meaningful information to investors.
We acknowledge that, in certain circumstances, requiring reporting by each private fund separately may result in more granular information. For example, in certain parallel fund structures, an investor would receive information specific to the parallel fund in which it is invested instead of the consolidated information for all parallel funds. However, in many of these circumstances, consolidated reporting of the cost and performance information by all private funds in the structure would provide a more comprehensive picture of the fees and expenses borne and performance achieved than reporting by each private fund separately. For instance, in a master-feeder fund structure, a quarterly statement that only covers the feeder fund could provide fragmented information that does not reflect the true costs and performance relevant to a feeder fund investor. For example, a feeder fund's returns may be significantly impacted by costs at the master fund-level, but unconsolidated quarterly statements would mean these costs would not necessarily appear in the feeder fund's quarterly statement. Additionally, absent a principles-based consolidation requirement, advisers may be incentivized to establish as many feeder or parallel funds in a particular fund structure as feasible to separate investors. Investors may then each be receiving different fee, expense, and performance information, which could make it difficult for them to communicate and address collective concerns with the adviser. For these reasons, we believe that a principles-based approach to consolidated reporting is superior to a requirement to report by each private fund separately.
Similarly, the absence of any consolidation requirement could lead to differing practices across advisers and result in greater investor confusion. Some advisers could choose to consolidate all fund structures, while other choose to do no consolidation, and still others choose to consolidate some fund structures—such as parallel funds—but not others—such as master-feeder arrangements. Investors with minimal negotiating power may have a difficult time obtaining accurate information on an adviser's approach to consolidation or requiring that an adviser take a consistent approach if the fund structure is expanded over the course of its life. By requiring a similar, principles-based approach to all fund structures, we believe the quarterly statement will be generally easier for investors to understand across advisers.
Some commenters suggested that we should provide additional specific clarification on when consolidated reporting is and is not required.
As proposed, the rule requires the adviser to use clear, concise, plain English in the quarterly statement.
Some commenters supported this format and content requirement, stating that consistent formatting for quarterly statements will better enable investors to gauge adviser track records and appropriateness of costs.
Although some investors may be able to negotiate for bespoke content and formatting for investor reporting, many investors may not have the bargaining power to do so. A goal of the quarterly statement requirement is to better enable all investors to effectively monitor and assess the costs and performance of their private fund investments with an investment adviser over time. The format and content requirements apply to all aspects of a quarterly statement, including the 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.
These requirements are intended to support every investor's ability to understand better the context of the information provided in the quarterly statement regarding fees, expenses, and performance and monitor their private fund investments. For instance, providing investors with clear and easily accessible cross-references to the fund governing documents will make it easier for all investors to assess and monitor whether the fees and expenses in the quarterly statement comply with the fund's governing documents.
We believe the final rule strikes an appropriate balance in prescribing the baseline content of the tables and performance information that is required to be included in quarterly statements while also taking a generally principles-based approach with respect to the formatting of such information. This approach will help provide investors with standardized baseline information about their private fund investments and advisers with flexibility in presenting the required information, without being overly prescriptive or sacrificing readability. Additionally, as stated above, advisers under the rule remain able to provide, and investors are free to request and negotiate for, additional information to supplement the required information in the quarterly statement, subject to applicable rules and other disclosure requirements.
We are requiring a tabular format to ensure the information in the quarterly statements is presented in an organized fashion, but we view further prescriptive formatting as potentially more harmful than beneficial in many cases. We considered, but are not adopting, more prescriptive formatting because we recognize it might result in investor confusion if an adviser includes inapplicable line items to satisfy our form requirements, while omitting additional relevant information that might be unique to a particular fund. The private fund space is diverse, and specific reporting formats could be appropriate for certain types of funds but inappropriate for different types of funds. For instance, the fees and expenses associated with a private equity buyout fund will differ from those for a private credit fund.
We are amending rule 204-2 (“books and records rule”) under the Advisers Act to require advisers to retain books and records related to the quarterly statement rule.
Some commenters supported this recordkeeping requirement
One commenter suggested that, instead of requiring, for each quarterly statement, recordkeeping of each addressee, the date(s) sent, address(es) and delivery method(s), we should require only records necessary to demonstrate compliance with the quarterly statement distribution requirement.
We are requiring private fund advisers to obtain an annual financial statement audit of the private funds they advise, directly or indirectly.
We are adopting the substance of the mandatory private fund adviser audit rule largely as proposed. The proposed rule was primarily drawn from the Advisers Act custody rule but differed from that rule in several respects.
The mandatory private fund adviser audit rule requires 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 requirements set forth in paragraphs (b)(4)(i) through (b)(4)(iii) of the custody rule applicable to pooled investment vehicles subject to annual audit and to cause audited financial statements to be delivered in accordance with paragraph (c) of that rule. As a result, each of the following is required under the final rule:
(1) The audit must be performed by an independent public accountant that meets the standards of independence in 17 CFR 210.2-01 (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 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);
(3) Audited financial statements must be prepared in accordance with generally accepted accounting principles;
(4) Annually within 120 days of the private fund's fiscal year-end and promptly upon liquidation, the private fund's audited financial statements are delivered to investors in the private fund.
Additionally, in recognition that a surprise examination under the custody rule does not satisfy the requirements of this rule, we are adopting the proposed
Some commenters supported the proposed rule,
While the mandatory private fund adviser audit rule would effectively eliminate the surprise examination option under the custody rule for private fund advisers and may increase costs to some investors, we believe that financial statement audits provide a critical set of additional protections for private fund investors. During a financial statement audit, independent public accountants not only typically verify the existence of pooled investment vehicle investments similar to a surprise examination, but they also test other assertions associated with the pooled investment vehicle investments and other significant accounts (
We disagree with commenters' assertions that the audit requirement will not serve the stated policy goals of acting as a check on the adviser's valuation of private fund assets.
One commenter expressed concerns that private equity fund audits are unnecessary because “[p]rivate equity funds typically charge management fees based on capital commitments, or sometimes invested capital, neither of which is affected by subjective valuation methods.”
One commenter expressed concern that the mandatory audit requirement may give investors a false sense of security because the PCAOB does not have the authority to inspect audit engagements that involve private fund financial statements.
Commenters also expressed concerns that advisers may have increased difficulty finding an auditor in certain jurisdictions because requiring independent public accountants conducting the audit to be registered with, and subject to inspection by, the PCAOB would greatly limit the pool of accountants available to conduct audits.
In addition, we do not believe that advisers will have significant difficulty in finding an accountant that is eligible under the rule in most jurisdictions because many PCAOB-registered independent public accountants who are subject to regular inspection currently have practices in various jurisdictions, which may ease concerns regarding offshore availability. An independent public accounting firm would not, however, 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, in accordance with PCAOB Rule 6100, it is unable to inspect or investigate completely because of a position taken by one or more authorities in that jurisdiction.
Some industry commenters
Commenters also requested clarification about whether advisers would need to obtain a separate audit of an SPV to comply with the mandatory audit requirement.
Although there are substantive differences between the proposed rule and the final rule, we do not believe that these differences are significant. The mandatory private fund adviser audit rule includes certain requirements regarding the accountant performing a private fund audit, as currently required under the custody rule.
Some commenters suggested that we should allow auditors to meet AICPA standards of independence as opposed to the standards of independence described in rule 2-01(b) and (c) of Regulation S-X.
Under the mandatory private fund adviser audit rule, an audit must meet the definition in rule 1-02(d) of Regulation S-X, as proposed and as currently required under the custody rule. Pursuant to that definition, financial statement audits performed for purposes of the audit rule would generally be performed in accordance with U.S. GAAS.
Some commenters suggested that we consider whether auditing standards other than U.S. GAAS or PCAOB standards may meet the requirements of the rule,
The mandatory private fund adviser audit rule also requires the audited financial statements to be prepared in accordance with generally accepted accounting principles as currently required under the custody rule and as proposed.
We had proposed to require that 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 contain information substantially similar to statements prepared in accordance with U.S. GAAP and any material differences must be required to be reconciled to U.S. GAAP. While one commenter suggested that we continue to require audited financial statements prepared in accordance with U.S. GAAP,
We continue to believe that U.S. GAAP is well understood by U.S. investors. U.S. GAAP also has important industry specific accounting principles for certain pooled vehicles, including private funds, and requires measurement of trades on trade date as opposed to settlement date, presentation of a schedule of investments, and certain financial highlights that may not be required under other accounting standards.
The mandatory private fund adviser audit rule requires a fund's audited financial statements to be distributed to current investors within 120 days of the end of a private fund's fiscal year, as currently required under the custody rule.
We proposed that the audited financials be distributed “promptly” after the completion of the audit. Commenters requested that we clarify the “promptly” standard,
In rare instances, an adviser may be unable to distribute a fund's audited financial statements within the required timeframe because of reasonably unforeseeable circumstances. For example, during the COVID-19 pandemic, some advisers were unable to deliver audited financial statements in the timeframe required under the custody rule due to logistical disruptions. Accordingly, because there
Under the mandatory private fund adviser audit rule, the audited financial statements must be sent to all of the private fund's investors, as proposed and as currently required under the custody rule.
Key to the effectiveness of the audit in protecting investors is timely and regular administration and distribution. We are requiring that an audit be obtained at least annually, as proposed.
Requiring the audit on an annual basis will help alert investors within months, rather than years, as to whether the financial statements are free of material misstatements and will increase the likelihood of mitigating losses or reducing exposure to other investor harms. Similarly, a liquidation audit will help ensure the appropriate and prompt accounting of the proceeds of a liquidation so that investors can take timely steps to mitigate losses or 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 remediate losses or other investor harms resulting from a material misstatement the longer it goes undetected. The audit requirement addresses these concerns while also balancing the cost, burden, and utility of requiring frequent audits.
Requiring the audit on an annual basis is consistent with current practices of private fund advisers that obtain an audit to comply with the custody rule under the Advisers Act, or to satisfy investor demand for an audit, and will 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.
Commenters suggested that we clarify how these requirements apply to stub period audits.
The proposed mandatory private fund adviser audit rule would have required 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
Some commenters asserted that the notification requirement would be of limited benefit to the Commission,
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 satisfies the mandatory private fund adviser rule. This could be the case, for instance, where a sub-adviser is unaffiliated with the fund. In a minor change from proposal, we are clarifying that if a fund is already undergoing an audit, a non-control adviser does not have to take reasonable steps to cause its private fund client to undergo an audit.
One commenter suggested that the “all reasonable steps” standard is unclear.
Finally, we are amending 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.
We are requiring SEC-registered advisers to satisfy certain requirements if they initiate a transaction that offers fund investors the option between selling all or a portion of their interests in the private fund and converting or exchanging them for new interests in another vehicle advised by the adviser or any of its related persons (an “adviser-led secondary transaction”).
Some commenters supported the proposed rule,
Some commenters argued that the SEC would exceed its authority if it were to require advisers to obtain a fairness opinion and that the proposed rule conflicts with SEC statements that advisers and clients can shape their relationships by agreement, provided that there is appropriate disclosure.
One commenter argued that the proposed rule would be contrary to Section 211(h) of the Advisers Act because the proposed rule would significantly and needlessly expand an adviser's obligations and would disadvantage investors and the industry.
Adviser-led secondary transactions also involve compensation schemes as, typically, the adviser receives compensation as a result of the transaction. Advisers stand to profit from being on both sides of the transaction by earning additional compensation in the form of management fees or carried interest which is ultimately paid by fund investors. For example, in the continuation fund context, when an asset is sold from an existing fund to the continuation fund, the adviser has the potential to realize carried interest as part of that sale, depending on the performance of the existing fund. Advisers are thus incentivized to over- or undervalue the underlying asset depending on how they will receive the most compensation. This rule's requirement that private fund investors receive a third-party check on price via a fairness or valuation opinion and are provided disclosures about the opinion provider's relationship with the adviser will help protect them against such conflicted compensation schemes.
One commenter stated that, if adopted, this rule would be the first and only Federal securities law requiring a fairness opinion.
After considering comments, we are adopting this rule largely as proposed. In contrast to the proposal, we are providing advisers the option to obtain a valuation opinion
Adviser-led secondary transactions are defined as transactions initiated by the investment adviser or any of its related persons that offer the private fund's investors the choice between: (i) selling all or a portion of their interests in the private fund and (ii) converting or exchanging 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 includes secondary transactions where a fund is selling one or more assets to another vehicle managed by the adviser, if investors have the option between obtaining liquidity and rolling 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).
We generally would consider a transaction to be initiated by the adviser if the adviser commences a process, or causes one or more other persons to commence a process, that is designed to offer private fund investors the option to obtain liquidity for their private fund interests. However, whether the adviser or its related person initiates a secondary transaction requires a facts and circumstances analysis. We generally would not view a transaction as initiated by the adviser if the adviser, at the unsolicited request of the investor, assists in the secondary sale of such investor's fund interest.
Adviser-led transactions raise certain conflicts of interest because the adviser and its related persons are involved on both sides of the transaction and have interests in the transaction that are different from, 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 (including “premium” carry), the adviser generally has a conflict of interest in setting and negotiating the transaction terms. We believe that the definition is sufficiently broad to remain evergreen as secondary transactions continue to evolve and capture transactions that present these or other conflicts of interest. It also is sufficiently narrow to avoid capturing certain types of transactions that would not raise the same regulatory and conflict of interest concerns. For example, some commenters expressed concerns that the definition would capture rebalancing between parallel funds, “season and sell” transactions, and other scenarios where it may be unclear whether the adviser initiated the transaction.
In the Proposing Release, we classified “tender offers” as falling within the definition of “adviser-led secondary transactions” and we requested comment on this treatment and asked whether the rule should treat tender offers differently. Some commenters responded that the definition should not capture tender offers where the adviser or its related person is not acting as the purchaser.
We found commenters' statements on this point persuasive in the context of this rule and, in a change from the proposal, are revising the rule text to exclude tender offers generally from the definition of “adviser-led secondary transactions.” We have modified the definition from the proposal to establish that the definition contemplates a choice between clauses (i) and (ii) of the definition. Accordingly, tender offers will not be captured by the definition if an investor is not faced with the decision between (1) selling all or a portion of its interest and (2) converting or exchanging all or a portion of its interest. Generally, if an investor is allowed to retain its interest in the same fund with respect to the asset subject to the transaction on the same terms (
To complete an adviser-led secondary transaction, advisers must either (i) obtain a written opinion stating that the price being offered to the private fund for any assets being sold as part of an adviser-led secondary transaction is fair (a “fairness opinion”), or (ii) obtain a written opinion stating the value (as a single amount or a range) of any assets being sold (a “valuation opinion”).
Many commenters supported the proposed requirement that advisers obtain a fairness opinion in part because they believed it would provide investors with important information to inform their decisions.
Several commenters suggested that we exempt adviser-led transactions where price can otherwise be determined through a market-driven discovery process independent of the adviser, such as when a recent sale of a minority stake in the relevant portfolio investment has occurred or shares of an underlying asset are publicly traded.
Some commenters supported the fairness opinion requirement as a guard against suspect valuations, especially when such valuations determine the carried interest, management fees, and/or other transaction fees an adviser may receive from the transaction.
Some commenters suggested that we expand the fairness opinion requirement to cover information in addition to pricing/valuation of the asset (
The final rule requires an adviser to obtain the opinion from an independent opinion provider, which is defined as a person that provides fairness opinions or valuation opinions in the ordinary course of its business and is not a related person of the adviser.
One commenter suggested expanding the proposed definition of “independent opinion provider” to allow a broader group of opinion providers to satisfy the definition (
We also are requiring advisers to prepare a written summary of any material business relationships the adviser or any of its related persons has, or has had, with the independent opinion provider within the two-year period immediately prior to the issuance date of the fairness opinion or valuation opinion. We are adopting this requirement largely as proposed, but we are specifying that the lookback period for which disclosures must be provided for material business relationships that existed during the two-year period is measured from
We are adopting this requirement because 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 opinion). By requiring disclosure of such material relationships, the rule puts 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. This required disclosure would also deter advisers from seeking opinions from highly conflicted opinion providers as it may raise objections from investors. Whether a business relationship is material requires a facts and circumstances analysis; however, for purposes of the rule, audit, consulting, capital raising, investment banking, and other similar services would typically meet this standard.
Some commenters stated that this requirement is unnecessary because advisers are already required to disclose material conflicts of interest to private fund investors.
Under the final rule, an adviser must distribute
We are amending rule 204-2 under the Advisers Act to require advisers to make and retain books and records to support their compliance with the adviser-led secondaries rule and facilitate the Commission's inspection and enforcement capabilities.
Some commenters supported the recordkeeping requirement.
In a modification from the proposal, final rule 211(h)(2)-1 restricts advisers to a private fund from engaging in the following activities, unless they satisfy
• Charging or allocating to the private fund fees or expenses associated with an investigation of the adviser or its related persons by any governmental or regulatory authority; however, regardless of any disclosure or consent, an adviser may not charge or allocate fees and expenses related to an investigation that results or has resulted in a court or governmental authority imposing a sanction for violating the Investment Advisers Act of 1940 or the rules promulgated thereunder;
• Charging the private fund for any regulatory, examination, or compliance fees or expenses of the adviser or its related persons;
• 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;
• Charging or allocating fees and expenses related to a portfolio investment on a non-pro rata basis when more than one private fund or other client advised by the adviser or its related persons have invested in the same portfolio company; and
• Borrowing money, securities, or other private fund assets, or receiving a loan or extension of credit, from a private fund client.
We proposed to prohibit these activities without disclosure or consent exceptions.
We requested comment on the proposed prohibitions, including on whether the final rule should prohibit these activities unless the adviser satisfies certain governance or other conditions, such as disclosures to the private fund's investors, approval by an independent representative of the fund, or approval by a majority (by number and/or in interest) of investors.
Other commenters generally supported the proposed prohibitions, stating that they would prevent advisers from engaging in activities that generally disadvantage and shift costs to funds and their investors.
We continue to believe that these activities involve conflicts of interest (
Many of our concerns with these activities have persisted despite our related enforcement actions, and we believe therefore that further regulation is required. Investors often lack sufficient insight into the nature, scope, and impact of these activities, given that advisers do not frequently or consistently provide investors with sufficiently detailed information about them. In this regard, some commenters stated that many advisers do not provide disclosure of the activities covered by the restrictions and, when disclosure is provided about those activities, it is often incomplete or includes unhelpful information.
After considering comments, and for the reasons discussed below in
In light of this change from the proposal to allow an adviser to satisfy disclosure and, in some cases, consent requirements, as applicable, instead of being prohibited from certain activities, we are amending rule 204-2 under the Advisers Act to require SEC-registered investment advisers to retain books and records to document their compliance with the disclosure and consent aspects, as applicable of the restricted activities rule. This will help facilitate the Commission's inspection and enforcement capabilities. Accordingly, we are requiring SEC-registered investment advisers to retain a copy of any notification, consent, or other document distributed to or received from private fund investors pursuant to this rule, along with a record of each addressee and the corresponding date(s) sent for each such document distributed by the adviser.
The exceptions require advisers to “distribute” certain written notices or consent requests to investors.
In addition, the disclosure-based exceptions to the restrictions on certain regulatory, compliance, and examination fees and expenses and post-tax clawbacks require advisers to distribute written notices to investors within 45 days after the end of the fiscal quarter in which the relevant activity occurs. This disclosure timeline is appropriate because it emphasizes the need for the notices to be distributed to investors within a reasonable period of time to help ensure their timeliness, while affording advisers a limited degree of flexibility. The 45-day timeline generally matches the timeline required for advisers to distribute quarterly statements under the quarterly statement rule, except for quarterly statements distributed at fiscal year-end or quarterly statements prepared for a fund of funds. This will allow advisers that are subject to the quarterly statement rule to include disclosures related to the restricted activities rule in their quarterly reports, subject to those exceptions.
We proposed to prohibit advisers from charging their private fund clients for (i) regulatory or compliance fees and expenses of the adviser or its related persons and (ii) fees and expenses associated with an examination of the adviser or its related persons by any governmental or regulatory authority. We are adopting these provisions
Some commenters supported the proposed prohibition, stating that advisers should not be charging examination, regulatory, and compliance fees and expenses to the fund.
It is in investors' best interest for advisers to develop robust regulatory and compliance programs that enable advisers to comply with their legal and regulatory obligations. Regulatory, compliance, and examination fees and expenses are customary costs of doing business that enable advisers to operate and attract clients as well as investors. For example, advisers may incur filing and other fees associated with SEC filings, such as Form ADV and Form PF, as well as certain state filings. Advisers may also pay fees and expenses for a compliance consultant to help them with mock or real examinations. Most private fund advisers charge management fees, in part, to pay for costs incurred as a result of legal and regulatory obligations imposed on them in connection with providing advisory services. These and other costs of doing business are integral to managing a private fund and are generally considered overhead payable by the adviser out of its own resources. Charging investors separately for regulatory or compliance fees and expenses of the adviser or its related persons, or fees and expenses associated with an examination of the adviser or its related persons by any governmental or regulatory authority, is therefore a compensation scheme contrary to the public interest and protection of investors because an investment adviser, despite the management fees, is taking additional compensation for these fees and expenses.
The requirement to disclose these charges for regulatory, compliance, and examination fees and expenses within 45 days after the end of the fiscal quarter is also appropriate. This timeline emphasizes the need for the notices to be distributed to investors within a reasonable period of time to help ensure their timeliness, while affording advisers a limited degree of flexibility. The 45-day timeline generally matches the timeline required for advisers to distribute quarterly statements under the quarterly statement rule, except for quarterly statements distributed at fiscal year-end or quarterly statements prepared for a fund of funds. This structure will allow advisers that are subject to the quarterly statement rule to generally include disclosures related to the restricted
After reviewing responses from commenters, we acknowledge that a prohibition of certain of these charges without an exception for instances in which the adviser provides effective disclosure could result in unfavorable outcomes for investors. For example, as some commenters also suggested,
To illustrate, an adviser may charge a private fund client for fees it pays to a compliance consultant to assess the adviser's compliance program, provided the adviser discloses those fees pursuant to this rule. An adviser may also charge a private fund client for fees and expenses associated with an examination of the adviser or its related persons, such as by staff from our Division of Examinations, provided those fees and expenses are adequately disclosed pursuant to this rule.
Some commenters expressed concerns about how the proposed prohibition would adversely impact funds with “pass-through” expense models.
Some commenters suggested that we should explicitly clarify which compliance fees and expenses are related to the adviser's activities or the fund's activities.
(b) Reducing Adviser Clawbacks for Taxes
We proposed to 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.
Some commenters supported the proposal to prohibit advisers from reducing the amount of any adviser clawback by actual, potential, or hypothetical taxes.
The majority of commenters, however, opposed this aspect of the proposal. Many commenters suggested that our proposal was unnecessary to ensure that private fund investors receive their full share of fund profits, because clawback mechanisms are structured to restore private funds with
We believe that reducing the amount of any adviser clawback by taxes applicable to the adviser presents an opportunity for an adviser to put its own interests ahead of its clients' interests by allocating to the client (and indirectly, to fund investors) the risk of a tax liability otherwise attributable to and borne by the adviser, which reduces its client's (and indirectly, fund investors') returns. We therefore believe that, unless this practice is adequately disclosed to investors, it creates a compensation scheme that is contrary to the public interest and the protection of investors.
We appreciate commenters' concerns that the proposed rule could ultimately result in unintended consequences that would be inconsistent with our proposal's purpose, such as, among others, the following: fewer advisers choosing to offer clawback mechanisms in their private funds when such mechanisms benefit investors; restructuring performance-based compensation arrangements in a way that would be less favorable for investors (
Many investors lack information regarding adviser clawbacks and their impact on fund profits. For example, many fund agreements only require advisers to restore the excess performance-based compensation (less taxes) to the fund, without requiring them to provide investors with any information regarding the adviser's related determinations and calculations, such as whether a clawback was triggered and the aggregate amount of the clawback. Without adequate disclosure, investors are unable to
Accordingly, the final rule will not prohibit advisers from engaging in after-tax adviser clawback reductions, if advisers satisfy certain disclosure requirements designed to better inform private fund investors of the impact of after-tax adviser clawback reductions.
In order to satisfy the disclosure requirement, within 45 days after the end of the fiscal quarter in which the clawback occurs, an adviser must distribute a written notice to the investors of the affected private fund client that sets forth the aggregate dollar amounts of the adviser clawback both before and after the application of any tax reduction. These aggregate dollar amounts should reflect the gross amount of excess compensation received by the adviser (or its related persons) that is being clawed back. The aggregate dollar amount of the clawback before the application of any tax reductions must not be reduced by taxes paid, or deemed paid, by the recipients or other persons on their behalf, whereas the aggregate dollar amount of the clawback after the application of any tax reduction needs to be so reduced. As an example of disclosure that an adviser can make to satisfy this requirement, an adviser that is subject to a clawback could at the end of a private fund's term include disclosure in the fund's quarterly statement regarding the aggregate dollar amounts of the adviser clawback before and after the application of any tax reduction (if the adviser is subject to the quarterly statement requirement and to the extent that the quarterly statement is delivered within 45 days following the end of the relevant fiscal quarter). An investor will be able to compare these reported aggregate dollar amounts of the adviser clawback both before and after any tax reduction to evaluate the actual impact of a tax reduction on the clawback.
An investment adviser may wish to consider providing private fund client investors with, and investors may request and negotiate for, additional information that is not specifically required by the final rule. For example, advisers that routinely monitor their potential clawback liability could provide their private fund client investors with information regarding their currently estimated clawback amounts.
We proposed to 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.
Charging or allocating fees and expenses related to a portfolio investment (or potential portfolio investment) on a non-pro rata basis presents a conflict of interest because advisers have economic and/or other
We have observed these considerations leading advisers to favor one private fund client (and its investors) over another private fund client (and its investors) because of the fund's investor base. For example, as part of their strategy, some advisers agree to perform certain services,
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 is a conflict of interest for the adviser and can also lead, and in our experience often does lead, to a compensation scheme that we deem contrary to the public interest and protection of investors, unless this practice is fair and equitable and is adequately disclosed to investors in advance. It also may be fraudulent or deceptive, and result in investor harm. For instance, if two funds invest in the same portfolio investment but only one fund pays an incentive allocation, the adviser may have an incentive to avoid charging or allocating fees and expenses to the fund paying an incentive allocation in an effort to increase the adviser's incentive allocation. Similarly, if the adviser's ownership interests vary from fund to fund, the adviser may have an incentive to charge or allocate fees and expenses away from the fund in which the adviser holds a greater interest.
Moreover, this practice can result in a conflict of interest and compensation scheme contrary to the protection of investors by favoring not only the adviser but also the adviser's related persons. For example, an adviser may set up co-investment vehicles for related persons, such as executives, family members, and certain consultants, that invest alongside the adviser's main fund.
Some commenters supported the proposed prohibition and stated it would protect investors, including those who do not benefit from co-investment opportunities.
Many commenters suggested that we instead allow advisers to allocate fees and expenses related to portfolio expenses in a fair and equitable manner.
After considering comments, we are adopting a rule that focuses on ensuring that clients are treated fairly and equitably, which we recognize may not always mean clients must be treated identically. Accordingly, in a change from the proposal, the final rule prohibits a private fund adviser from charging or allocating fees and expenses related to a portfolio investment (or potential portfolio investment) on a non-pro rata basis, unless the adviser meets two requirements.
First, the adviser's non-pro rata allocation must be fair and equitable under the circumstances. Whether it is fair and equitable will depend on factors relevant for the specific expense. For example, it would be relevant whether the expense relates to a specific type of security that one private fund client holds. In another example, a factor could be whether the expense relates to a bespoke structuring arrangement for one private fund client to participate in the portfolio investment. As yet another example, another factor could be that one private fund client may receive a greater benefit from the expense relative to other private fund clients, such as the potential benefit of certain insurance policies.
Second, before charging or allocating such fees or expenses to a private fund client, the adviser must
We believe that it is important for all investors in the private fund to receive this disclosure before the adviser charges or allocates non-pro rata fees or expenses to a private fund client. Private fund investors generally do not have insight into (and the quarterly statement rule will not require advisers to disclose) the amounts of joint fees or expenses that the adviser allocated to its other clients, and investors are unable to compare amounts borne by their fund with amounts borne by the adviser's other clients to assess whether the adviser allocated joint costs consistently with the fund's terms and other disclosures and representations made by the adviser. To make this assessment, an investor would need access to information regarding the terms of the adviser's relationships with its clients other than the fund, as well as certain information (including potentially accounting information) about those other clients. This advance disclosure timeline therefore is appropriate because it provides investors with access to important fee and expense information to enable investors to discuss the non-pro rata allocation with the adviser before being charged.
As explained above, we believe it is important to restrict the practice of charging or allocating fees and expenses related to a portfolio investment (or potential portfolio investment) on a non-pro rata basis because this practice presents a conflict of interest and can result in a compensation scheme that is contrary to the public interest and the protection of investors. We have not, however, prohibited this practice where an adviser's non-pro rata allocation would be fair and equitable under the circumstances. We recognize that private fund advisers may structure investments for specific tax, regulatory, accounting, or other reasons for the benefit of certain investors, creating a diversity of investment structures. We believe this framework offers investors additional protections while simultaneously offering advisers the flexibility to execute investment strategies and offer a diversity of investment structures in a way that may benefit investors.
This framework will also encourage advisers, as fiduciaries, to review their approach to allocating fees and expenses to their clients, particularly if advisers must disclose to investors why an allocation is fair and equitable. This framework provides more comprehensive information for investors so that investors can evaluate the adviser's allocation approach.
Several commenters, including a commenter that generally supported this rule, expressed concern that the proposed rule could impair co-investment opportunities.
We requested comment on whether we should define “pro rata.” In the past, we have generally observed that advisers implement pro rata allocations based on ownership percentages.
A commenter specifically suggested that we refrain from defining “pro rata” to allow advisers flexibility because there are multiple methods that can be used to allocate pro rata.
We proposed to prohibit advisers from charging their private fund clients for fees and expenses associated with an investigation of the adviser or its related persons by any governmental or regulatory authority. We are adopting this provision
The heightened protection of investor consent is particularly appropriate with respect to the investigation restriction because such investigations are focused on the adviser's own potential or actual wrongdoing. If an adviser is able to pass on expenses associated with an investigation related to its own misfeasance, without providing
We recognize that governmental or regulatory bodies may not formally notify an adviser that it is under investigation. In such a circumstance, whether an adviser is under investigation would be determined based on the information available.
Some commenters supported the proposed prohibition, stating that advisers should not be charging investigation fees and expenses to the fund.
Charging investors separately for fees and expenses associated with an investigation of the adviser or its related persons by any governmental or regulatory authority is a compensation scheme contrary to the public interest, unless this practice is consented to, in writing, by investors who are not related persons of the adviser. Such fees and expenses are related to the adviser's potential or actual wrongdoing and should be borne by the adviser unless investors consent in writing to paying them for each specific investigation. Accordingly, the allocation or charging of these types of expenses to private fund clients constitutes a compensation scheme within the meaning of section 211(h) of the Advisers Act because it is a method by which an investment adviser may take additional compensation in the form of reimbursement for expenses that the adviser should bear.
After reviewing responses from commenters, however, we acknowledge that a prohibition of certain of these charges without an exception for instances in which the adviser obtains investor consent could result in unfavorable outcomes for investors. For example, as some commenters suggested,
The final rule, however, does not contain a consent-based exception for an adviser to charge a fund for fees or expenses related to an investigation that results or has resulted in a court or governmental authority imposing a sanction for a violation of the Act or the rules promulgated thereunder. Such charges will be outright prohibited. If an adviser were to charge a client for such fees and expenses, we would view that adviser as requiring its client to acquiesce to the adviser's violation of the Act. Advisers must comply with all applicable provisions of the Act, and the SEC would view a waiver of any provision of the Act as invalid under section 215(a) of the Act. Section 215(a) of the Act provides that any condition, stipulation, or provision binding any person to waive compliance with any provision of the Act shall be void.
To illustrate, an adviser may charge a private fund client for fees and expenses associated with an investigation by the SEC of the adviser or its related persons for a potential violation of Section 206 of the Act or the rules thereunder, provided those fees and expenses are consented to by investors pursuant to this rule. However, if the investigation results in a court or governmental authority imposing a sanction on the adviser for a violation of the Act or the rules promulgated thereunder, then the adviser must refund the fund for the fees and expenses associated with the investigation, such as lawyer's fees.
Some commenters also expressed concerns about how the proposed prohibition related to investigation expenses would adversely impact funds with “pass-through” expense models.
We proposed to 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”).
Some commenters opposed the prohibition,
Under section 211(h)(2) of the Advisers Act, the Commission has the authority to promulgate rules to prohibit or restrict certain conflicts of interest that the Commission deems contrary to the public interest and the protection of investors. We believe it is important to restrict the practice of borrowing from a private fund client because it presents a conflict of interest that is contrary to the public interest and the protection of investors. When an adviser borrows from a private fund, that adviser has a conflict of interest because it is on both sides of the transaction (
Additionally, this practice may prevent the fund client from using those assets to further the fund's investment strategy. Even where disclosed to
Further, section 206(4) of the Advisers Act permits the Commission to prescribe a means to prevent acts, practices, and courses of business that are fraudulent, deceptive, or manipulative. Restricting the ability of an adviser to borrow from a private fund client would help prevent fraud, deception, and manipulation that can occur when an adviser engages in this practice. The Commission has previously settled enforcement actions against advisers that directly or indirectly borrowed from private fund clients without providing appropriate disclosure or obtaining approval.
After considering comments and in a change from the proposal, the final rule prohibits advisers from engaging in borrowings from a private fund client unless the adviser distributes a written notice and description of the material terms of the borrowing to the investors of the private fund, seeks their consent for the borrowing, and obtains written consent from at least a majority in interest of the fund's investors that are not related persons of the adviser (as described above).
The heightened protection of investor consent is particularly appropriate with respect to the borrowing restriction. Borrowing from a private fund creates a conflict of interest where the adviser is incentivized to favor its own interest over the interest of the fund. Additionally, there are other potential conflicts that arise in the event that the adviser is unable to repay the borrowing, or it has to choose whether to repay the borrowing among other uses of the capital when funds are limited. This restriction will not apply to borrowings from a third party on the fund's behalf or to the adviser's borrowings from individual investors outside of the fund, such as a bank that is invested in the fund; instead the restriction focuses on the types of borrowings that, based on our experience, present the greatest opportunities for an adviser to abuse its control over a client's assets; namely, when an adviser borrows its client's assets, directly or indirectly, for its own use. However, we recognize that, in certain instances, such as in connection with enabling a smaller adviser to satisfy a sponsor commitment to the fund, investors may under certain terms be willing to accept a borrowing from the fund by the adviser.
Because we are providing a consent-based exception from this prohibition, the revised approach is responsive to commenters who stated that the rule should be based on more express disclosure to, and consent from, investors rather than prohibition-based. We were not persuaded, however, by comments suggesting that the
Finally, in response to commenters, we are clarifying that we did not intend for the proposed rule to prohibit certain practices that have the potential to benefit investors, and we would not interpret ordinary course tax advances and management fee offsets as borrowings that are subject to this final rule, as discussed below.
A tax advance occurs when a fund provides an adviser or its affiliate an advance of money against the adviser's actual or expected future share of the fund's assets (
Similarly, management fee offsets are not borrowings subject to the final rule because they do not involve the adviser or its affiliates taking fund assets and promising to repay such assets at a later date. Management fee offsets typically occur when an adviser reduces the management fee owed by the fund by other amounts that the fund has already paid to, or on behalf of, the adviser, its affiliates, or certain other persons. For example, fund governing documents may require an adviser to reduce the management fee by any amounts the adviser's affiliates receive for providing services to a portfolio company that the fund invests in. Also, some private fund governing documents limit organizational expenses and provide that any amount of organizational expenses paid by the fund above the expense cap may be offset against the adviser's management fee. Management fee offsets benefit investors because they reduce the fees and expenses the fund pays to the adviser and its affiliates, typically on a dollar-for-dollar basis with the amount initially paid, directly or indirectly, by the fund. We therefore consider a management fee offset to be a calculation methodology that reduces the amount a fund pays the adviser and its affiliates in the future.
We also remind advisers of their fiduciary obligations when engaging in transactions with private fund clients and of their antifraud obligations when engaging with private fund investors. To satisfy its fiduciary duty, an adviser must eliminate or at least expose through full and fair disclosure all conflicts of interest which might incline an investment adviser to provide advice that is not disinterested.
We are not adopting the proposed prohibition on 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.
Some commenters supported this prohibition.
Other commenters opposed this prohibition for several reasons. First, commenters stated that this prohibition may be unnecessary because it is generally market practice for fund documents to prohibit advisers from charging fees for unperformed services or, less commonly, to disclose such practices.
Fees for unperformed services may incentivize an adviser to cause a private fund to exit a portfolio investment earlier than anticipated. We stated in the proposal that such fees may cause an adviser to seek portfolio investments for its own benefit rather than for the private fund's benefit.
We believe that charging a client fees for unperformed services (including indirectly by charging fees to a portfolio investment held by the fund) where the adviser does not, or does not reasonably expect to, provide such services is inconsistent with an adviser's fiduciary duty.
Previously, we have charged advisers for violating section 206(2) of the Advisers Act when improperly charging monitoring, servicing, consulting, or other fees, which may accelerate upon the occurrence of certain events, to a portfolio investment.
Under our interpretation, an adviser could receive payment for services actually provided. An adviser could also receive payments in advance for services that it reasonably expects to provide to the portfolio investment in the future, whether such arrangements are based on a time-worked model (
We proposed to 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 (“waiver or indemnification prohibition”).
Some commenters supported this prohibition
In contrast, most commenters opposed it.
After considering comments, we are not adopting this prohibition, in part, because we believe that it is not needed to address this problematic practice. Rather, we are reaffirming and clarifying our views on how an adviser's fiduciary duty applies to its private fund clients and how the antifraud provisions apply to the adviser's dealings with clients and fund investors. We remind advisers of their obligation to act consistently with their Federal fiduciary duty and their legal obligations under the Advisers Act, including the antifraud provisions.
An adviser's Federal fiduciary duty is to its clients and the obligations that flow from the adviser's fiduciary duty depend upon what functions the adviser, as agent, has agreed to assume for the client, its principal.
After considering comments on the waiver or indemnification prohibition, we provide the following examples, partly based on staff observations, of how this interpretation applies to certain facts and circumstances. We have taken the position that an adviser violates the antifraud provisions of the
We continue to not take a position on the scope or substance of any fiduciary duty that applies to an adviser under applicable State law.
We proposed to prohibit all private fund advisers, regardless of whether they are registered with the Commission, from: (i) 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 and (ii) providing information regarding portfolio holdings or exposures of a 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.
Some commenters supported the proposed rule.
After considering comments, we are adopting the preferential treatment rule in a modified form.
However, in a change from the proposal, the final rule requires the adviser to distribute to current investors a written notice of all preferential treatment the adviser or its related persons has provided to other investors in the same private fund (i) for an illiquid fund, as soon as reasonably practicable following the end of the fund's fundraising period and (ii) for a liquid fund, as soon as reasonably practicable following the investor's investment in the private fund. Fourth, we are changing the defined term “substantially similar pool of assets” to “similar pool of assets” as used throughout the preferential treatment rule so that the term better reflects the breadth of the definition. Fifth, we are revising the rule text to apply the disclosure obligations in final rule 211(h)(2)-3(b) to all preferential treatment, including any preferential treatment granted in accordance with final rule 211(h)(2)-3(a). We discuss each of these changes and provisions below.
Under section 211(h)(2) of the Advisers Act, the Commission shall examine and, where appropriate, promulgate rules prohibiting or restricting certain sales practices, conflicts of interest, and compensation schemes for investment advisers that the Commission deems contrary to the public interest and the protection of investors. Our staff has examined private fund advisers to assess both the investor protection risks presented by their business models in terms of compensation schemes, conflicts of interest, and sales practices and the firms' compliance with their existing legal obligations. As discussed below, the Commission deems granting preferential treatment a sales practice and conflict of interest under section 211(h)(2), that is contrary to the public interest and the protection of investors and is restricting the practice and conflict by (i) prohibiting investment advisers from providing certain preferential treatment that the adviser reasonably expects to have a material negative effect on other investors and (ii) requiring investment advisers to disclose any other preferential treatment to prospective and current investors. We believe these activities give advisers an incentive to place their interests ahead of their clients' (and, by extension, their investors'), and can result in private funds and their investors, particularly smaller investors that are not able to negotiate preferential deals with the adviser and its related persons, being misled, deceived, or otherwise harmed.
Granting preferential treatment is a conflict of interest because advisers have economic and/or other business incentives to provide preferential terms to one or more investors (
Granting preferential treatment also involves a sales practice under section 211(h)(2) of the Advisers Act. Advisers typically attract preferred, strategic, or large investors to invest in the fund by offering preferential terms as part of negotiating with those investors. The adviser typically enters into a separate agreement, commonly referred to as a “side letter,” with the particular investor in connection with such investor's admission to a fund. Side letters have the effect of establishing rights, benefits, or privileges under, or altering the terms of, the private fund's governing agreement, which advisers offer to certain prospective investors to secure their investments in the private fund. Because advisers induce investors to invest in the private fund based on those rights, benefits, or privileges, the practice of granting preferential treatment is a sales practice under section 211(h)(2).
The practice of granting certain preferential treatment (or, in some cases, granting preferential treatment without sufficient disclosure) is contrary to the public interest and the protection of investors because it can harm, mislead, or deceive other investors. For example, to the extent an investor has negotiated limitations on its indemnification obligations, other investors may be required to bear an increased portion of indemnification costs. As another example, to the extent an investor negotiates to limit its participation in a particular investment, the aggregate returns realized by other investors could be more adversely affected than otherwise by the unfavorable performance of such investment. Moreover, other investors will have a larger position in such investment and, as a result, their holdings will be less diversified.
Like the proposed rule, the final rule includes a prohibitions component and a disclosure component that address activity across the spectrum of preferential treatment. We recognize that advisers provide a range of preferential treatment, some of which does not necessarily have a material, negative effect on other fund investors. In this case, we believe that disclosure effectively addresses our concerns related to this practice because transparency will provide investors with helpful information they otherwise may not receive. Investors can use this information to protect their interests, including through negotiations regarding new investments and re-negotiations regarding existing investments, and make more informed business decisions. For example, an investor could seek to limit its liability or otherwise negotiate an expense cap if it knows that other investors have been granted similar rights by the adviser. In
Other types of preferential treatment, however, have a material, negative effect on other fund investors or investors in a similar pool of assets. We are prohibiting these types of preferential treatment because they involve sales practices and conflicts of interest that are contrary to the public interest and protection of investors. These practices are contrary to the public interest because they have the potential to harm private funds and their investors, which include, among other investors, public and private pension plans, educational endowments, non-profit organizations, and high net worth individuals.
Section 206(4) of the Advisers Act also authorizes the Commission to adopt rules and regulations that “define, and prescribe means reasonably designed to prevent, such acts, practices, and courses of business as are fraudulent, deceptive, or manipulative.”
The final rule applies to preferential treatment provided through various means, including written side letters. 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. Side letters generally grant more favorable rights and privileges to certain preferred investors (
We are adopting the preferential treatment rule because all investors would benefit from information regarding the preferred terms granted to other investors in the same private fund (
Except in limited circumstances, the final rule prohibits preferential information and redemption terms when the adviser reasonably expects the terms to have a material, negative effect. Some commenters argued that the “adviser reasonably expects” standard is unworkable because an adviser cannot predict how others will react to information
Other commenters asked us to provide more specificity around what constitutes a “material, negative effect,” and they stated that if advisers broadly interpret this term, then advisers could lack incentive to offer certain side letter terms to investors, including, for example, necessary investor-specific rights.
Another commenter stated that the materiality of preferential redemption terms or information rights should be assessed in the “basic framework under the securities laws (
Commenters did not offer specific examples of what types of activity or information would have a “material, negative effect,” and we believe it is important for this standard to remain evergreen so that it can be applied to various types of arrangements between advisers and investors and fund structures. For example, we believe an adviser could form a reasonable expectation that certain redemption terms would have a material, negative effect on other fund investors if a majority of the portfolio investments were not likely to be liquid.
One commenter stated that requiring advisers to determine whether a preferential term has a material, negative effect on other “investors” suggests that advisers are required to second-guess each investor's individual circumstances rather than the impact such term has on the private fund as a whole.
We proposed to prohibit a private fund adviser from, directly or indirectly, 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.
One commenter stated that the proposed prohibition on preferential redemption terms would establish helpful baseline protections for all investors, including those who cannot negotiate for sufficient protections
We understand, based on staff experience, that preferential terms provided to certain investors or one investor do not necessarily benefit the fund or other investors that are not party to the side letter agreement and, at times, we believe these terms can have a material, negative effect on other investors.
After considering comments, we are adopting the prohibition on certain preferential redemption terms, but with two exceptions. In general, we believe that granting preferential liquidity rights on terms that the adviser reasonably expects to have a material, negative effect on other investors in the private fund or in a similar pool of assets is a sales practice that is harmful to the fund and its investors. An adviser can attract preferred investors to invest in the fund by offering preferential terms, such as more favorable liquidity rights.
In a change from the proposal, and after considering comments, we are adopting two exceptions from this prohibition. First, an adviser is not prohibited from offering preferential redemption rights if the investor is required to redeem due to applicable laws, rules, regulations, or orders of any relevant foreign or U.S. Government, State, or political subdivision to which the investor, private fund, or any similar pool of assets is subject. Commenters suggested that, if we retain the rule, we should permit an exclusion from this rule with respect to investors that are required to obtain such liquidity terms because of regulations and laws (
Second, an adviser is not prohibited from offering preferential redemption rights if the adviser has offered the same redemption ability to all other existing investors and will continue to offer such redemption ability to all future investors in the same private fund or any similar pool of assets. Several commenters supported giving investors a choice of various liquidity options and disclosing this in the fund's governing and offering documents.
Advisers are prohibited from acting directly or indirectly under the final rule.
We proposed 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.
Some commenters supported the proposal,
We have decided to adopt the prohibition on certain preferential transparency as proposed but with an exception that is discussed below. We continue to believe that 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, providing such information in a fund with redemption rights could enable an investor to trade in a way that “front-runs” or otherwise disadvantages the fund or other clients of the adviser. Granting preferential transparency 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, for example through side letters, is contrary to the public interest and protection of investors because it preferences one investor at the expense of another. For example, if an adviser provides preferential information about a hedge fund's holdings to one investor as opposed to another investor, the investor with preferential information may use that information to redeem from the hedge fund during the next redemption cycle, even if both investors have the same redemption rights. In addition, an adviser can have a conflict of interest that may cause it to agree to provide preferential information rights to a certain investor in exchange for something of benefit to the adviser. For example, an adviser may agree to offer preferential terms to a large financial institution that agrees to provide services to the adviser. The 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.
Selective disclosure to certain parties is a fundamental concern often prohibited or restricted under other Federal securities laws. For example, the Commission adopted Regulation FD to address selective disclosure by certain issuers of material nonpublic information under the Exchange Act. The Commission stated that selective disclosure occurs when issuers release material nonpublic information about a company to selected persons, such as securities analysts or institutional investors, before disclosing the information to the general public.
Many commenters stated that the proposed rule would have a chilling effect on ordinary course investor communications
In addition, any chilling effect is further reduced as, in a change from the proposal, we are adopting an exception to this prohibition for preferential information made broadly available by the adviser. Specifically, the rule states that an adviser is not prohibited from providing preferential information if the adviser offers such information to all existing investors in the private fund and any similar pool of assets at the same time or substantially the same time. Although the disclosure-based exception we are adopting is not identical to commenters' suggestions, we believe the final rule is responsive to suggestions that the rule should be disclosure based rather than prohibition based.
As discussed above, we agree with commenters that it is important for investors to be able to continue to receive information and, without an exception, they may not be able to do so under the proposed rule. As a result, the exception requires that when an adviser discloses otherwise prohibited information to one investor, it must also provide such information to all investors. This is designed to help ensure that investors are treated fairly and that investors have equal access to the same information. We believe that this exception balances our policy goals while preserving the ability for investors to access information that is important to their investment decisions. To qualify for the exception, an adviser must offer the information to all other investors at the same time or substantially the same time. For example, an adviser could provide, to one current investor, ESG data related to a specific portfolio company that the private equity fund holds only if the adviser offers that same information to all other investors in the private equity fund and any similar pools of assets. To qualify for the exception, the adviser must offer to provide the information to other investors at the same time or substantially the same time.
As with the redemptions prohibition, some commenters requested that we provide an exception from this prohibition for preferential information that an investor must obtain as a requirement of State or other law.
The prohibition is narrowly drawn in that it applies only to preferential information that would have a material, negative effect on other investors in that private fund or in a similar pool of assets. Commenters suggested that the preferential treatment rule should apply only to open-end funds because the redemption ability in the open-end fund structure makes it more likely for preferential information rights to materially harm other investors.
We proposed to 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.
We are adopting the definition as proposed, but we are changing the defined term to “similar pool of assets” so that the defined term better reflects
We are also excluding securitized asset funds from the definition of similar pool of assets. We believe that this change is appropriate because, as discussed above, we believe that certain distinguishing structural and operational features of SAFs have prevented or deterred SAF advisers from engaging in the type of conduct that the final rules seek to address, such as the granting of preferential treatment.
We believe the final definition provides the appropriate scope to address our concerns, which include an adviser providing more favorable terms to investors in another similar pool of assets to the detriment of private fund investors.
Whether a pool of assets managed by the adviser is “similar” to the private fund requires a facts and circumstances analysis. A pool of assets with a materially different target return or sector focus, for example, would likely not have substantially similar investment policies, objectives, or strategies to those of the subject private fund, depending on the facts and circumstances.
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 vehicles meet the definition of “similar pool of assets.” We believe this scope is appropriate, and we note our staff also has observed scenarios where an adviser establishes investment vehicles that invest side-by-side along with the private fund that have better liquidity terms than the terms provided to investors in the private fund.
This definition is designed to capture most commonly used private fund structures (or similar arrangements) 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 broad definition of similar pool of assets, the 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.
Many commenters argued that the proposed definition of “substantially similar pool of assets” was overbroad and suggested that we narrow the definition.
Certain advisers offer existing investors, related persons, or third parties the opportunity to co-invest alongside the private fund through one or more co-investment vehicles established or advised by the adviser or its related persons.
We proposed to prohibit other preferential terms unless the adviser provided certain written disclosures to prospective and current investors.
We are adopting this aspect of the rule largely as proposed because we are concerned that an adviser's current sales practices do not provide all investors with sufficient detail regarding preferential terms granted to certain investors. Increased transparency will better inform investors about 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. This disclosure will help investors understand whether, and how, such terms present conflicts of interest or otherwise impact the adviser's compensation schemes with the private fund. The disclosure will also help prevent investors from being potentially defrauded or deceived by preferential treatment that negatively impacts their investment in the private fund.
One commenter generally opposed the disclosure portion of the preferential treatment rule because advisers may seek to deny investors certain terms to avoid being required to disclose those concessions to all investors.
In response to commenter concerns, we are making three changes to the proposal. First, we are limiting the advance written notice requirement to “any preferential treatment related to
While we understand commenter views about the timing concerns associated with advance disclosure, we believe that it is crucial for prospective investors to have access to certain information before they invest. This is designed to prevent investors from being misled because it will provide them with transparency regarding how the terms may affect their investment, how the terms may affect the adviser's relationship with the private fund and
Second, we are requiring advisers to disclose all other preferential treatment, in writing, to current investors on the following timeline: for illiquid funds, as soon as reasonably practicable following the end of the private fund's fundraising period, and for liquid funds, as soon as reasonably practicable following the investor's investment in the private fund.
An example of preferential treatment that the final rule prohibits unless it is disclosed post investment and/or pursuant to the annual notice requirement is if an adviser to a private equity fund provides “excuse rights” (
Third, we are revising the rule text to apply the disclosure obligations in final rule 211(h)(2)-3(b) to all preferential treatment, including any preferential treatment granted in accordance with final rule 211(h)(2)-3(a). Specifically, we are removing the reference to “other” from the first sentence in rule 211(h)(2)-3(b) to avoid the implication that the preferential treatment granted pursuant to the disclosure exceptions in final rule 211(h)(2)-3(a) would not be captured. This change is a necessary clarification because the granting of preferential treatment with respect to redemption rights or fund portfolio holdings or exposures information would have been prohibited under proposed rule 211(h)(2)-3(a) and, accordingly, there would have been nothing to disclose under proposed rule 211(h)(2)-3(b) with respect to these types of preferential treatment. Transparency into these terms will better inform investors regarding the breadth of preferential treatment, the potential for such terms to affect their investment in the private fund, and the potential costs associated with these preferential terms. Moreover, such disclosure may assist investors in determining whether the adviser offered the same redemption ability or information to all investors in the private fund, if applicable.
We are adopting the annual written notice requirement as proposed. One commenter supported the ability of an adviser to choose when to provide the annual disclosure as long as the adviser provides it on an annual basis.
We were not persuaded by commenters who urged us not to adopt this portion of the rule on the basis that advisers may use it to deny investors certain terms. Continuing to allow advisers to negotiate undisclosed side arrangements with certain investors that may impact other investors would be contrary to the public interest and the protection of investors because such arrangements can harm, mislead, or deceive other investors. It would also be inconsistent with promoting transparency into such arrangements. Moreover, even if advisers cease to offer certain provisions to investors, we believe the benefits associated with disclosure of preferential treatment justify such incremental burden.
Like the proposed rule, the final rule will require an adviser to describe specifically the preferential treatment to convey its relevance. One commenter argued that advisers should not be required to disclose the exact fees or other contractual terms that they negotiated and instead disclosure that some investors received preferential fees should be sufficient.
As proposed, the timing of the final rule's delivery requirements differs depending on whether the recipient is a prospective or current investor in the private fund. For a prospective investor the notice needs to be provided, in writing, prior to the investor's investment in the fund. For a current investor, the adviser must “distribute” the notice as soon as reasonably practicable after the end of the fund's fundraising period (for illiquid funds) or as soon as reasonably practicable following the investor's investment in the fund (for liquid funds).
We are not adopting a requirement for advisers to distribute the various notices within a specified deadline (
One commenter suggested that we require advisers to provide the preferential treatment disclosures only upon request to reduce the burden on advisers and require investors to consider what information is important to them.
We proposed 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.
Regardless of whether the investor actually receives any preferential treatment, this recordkeeping obligation is necessary to help ensure that advisers complied with the preferential treatment rule. Many advisers track which prospective investors have been contacted and what documents have been provided to them, whether through a virtual data room or otherwise. They also typically require placement agents or other third parties that are distributing fund documents on their behalf to retain an investor log, which typically includes prospective investors. Accordingly, we believe that the benefits justify the burdens associated with the rule.
We are adopting these amendments as proposed, and advisers are required to retain copies of all written notices sent to current and prospective investors in a private fund pursuant to the preferential treatment rule.
We are adopting the proposed amendments to the Advisers Act compliance rule to require all SEC-registered advisers to document the annual review of their compliance policies and procedures in writing, as proposed.
The amendment to the compliance rule requires advisers to review and document in writing, 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, we understand that some investment advisers do not make and preserve written documentation of the annual review of their compliance policies and procedures. Our examination staff relies on documentation of the annual review to help the staff understand an adviser's compliance program, determine whether the adviser is complying with the rule, and identify potential weaknesses in the compliance program. Without documentation that the adviser conducted the review, including information about the substance of the review, our staff has had limited visibility into the adviser's compliance practices. The amendment to rule 206(4)-7 establishes a written documentation requirement applicable to all advisers subject to the compliance rule.
Some commenters supported this rule,
Although we acknowledge commenters' concerns, we continue to believe that written documentation of the annual review is necessary for three key reasons. First, written documentation of the annual review may help advisers better assess whether they have considered any compliance matters that arose during the previous year, any changes in the adviser's or an affiliate's business activities during the year, and any changes to the Advisers Act or other rules and regulations that may suggest a need to revise an adviser's policies and procedures. Second, the availability of written documentation of the annual review should allow the Commission and the Commission staff to determine if the adviser is regularly reviewing the adequacy of the adviser's policies and procedures. Third, clients and investors conducting due diligence may request written documentation of the annual review to assess whether the adviser applies a structured framework and rigor to its compliance program.
We do not believe the amended rule will significantly increase costs for advisers. Since adopting the annual review requirement,
Nor do we believe that the amended rule will deter an adviser from using service providers (
One commenter stated that the amendment would be unnecessarily burdensome and duplicative for asset managers that have multiple registered investment advisers operating under a common compliance program.
The amended rule 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. Some commenters suggested that we offer flexibility in the approach to the written annual review requirement.
A commenter suggested that we should require advisers to provide the written documentation to the private fund's LPAC.
The required written documentation of the annual review under the compliance rule is meant to be made available to the Commission and the Commission staff and therefore should promptly
For the audit rule and the quarterly statement rule, we are adopting an 18-month transition period for all private fund advisers. For the adviser-led secondaries rule, the preferential treatment rule, and the restricted activities rule, we are adopting staggered compliance dates that provide for the following transition periods: for advisers with $1.5 billion or more in private funds assets under management (“larger private fund advisers”), a 12-month transition period and for advisers with less than $1.5 billion in private funds assets (“smaller private fund advisers”), an 18-month transition period. Compliance with the amended Advisers Act compliance rule will be required 60 days after publication in the
We proposed a one-year transition period to provide time for advisers to come into compliance with these new and amended rules. Some commenters suggested adopting a longer transition period, such as 18 months,
We believe that the audit rule and the quarterly statement rule warrant longer transition periods because they may require advisers to enter into new, or renegotiate existing, contracts with third-party service providers, such as accountants and administrators.
First, for the mandatory audit requirement, commenters suggested that the Commission extend, for at least one additional year, the transition period to allow private funds and their auditors enough time to properly assess auditor independence requirements.
Second, under the quarterly statement requirement, commenters expressed concern that one year may not be enough time to come into compliance with a new rule as many advisers will need to find new reporting vendors or renegotiate agreements with existing vendors to implement the required rule changes
Commenters requested an extended transition period for smaller or newer managers, stating that smaller or newer managers may require more time to modify practices to come into compliance.
We are differentiating between larger private fund advisers and smaller private fund advisers based on private fund assets under management, calculated as of the last day of the adviser's most recently completed fiscal year. An adviser's private fund assets under management are the portion of such adviser's regulatory assets under management that are attributable to private funds it advises.
One commenter suggested differentiating between advisers based on specific parameters (
We believe that $1.5 billion in private fund assets under management is the appropriate threshold for a tiered compliance date for smaller private fund advisers.
We also chose the $1.5 billion threshold because we believe advisers with $1.5 billion or more in private fund assets generally have larger back offices to assist with the adoption and implementation of the new rules. Larger advisers are more likely to have launched more than one private fund and thus may have more experience in complying with Commission rules and potentially have been registered with us for a longer period of time. Accordingly, we believe that the $1.5 billion threshold strikes an appropriate balance between ensuring that a significant portion of private fund advisers implements the various rules reasonably quickly, while seeking to minimize the initial burdens imposed on certain private fund advisers.
The written documentation of an adviser's annual review impacts all advisers, whether they advise private funds or not. This requirement to document in writing, at least annually, the adviser's annual review of the adequacy and effectiveness of its policies and procedures is an important part of an effective compliance program. Because of this importance, we have decided to require compliance with this rule 60 days after publication in the
In summary, the following tables set forth the compliance dates:
Commenters requested the Commission not to apply the final rules to existing funds and their contractual agreements (
After considering these comments, we are providing legacy status under the prohibitions aspect of the preferential treatment rule, which prohibits advisers from providing certain preferential redemption rights and information about portfolio holdings. We are also providing legacy status for the aspects of the restricted activities rule that require investor consent, which restrict an adviser from borrowing from a private fund and from charging for certain investigation fees and expenses. However, such legacy status does not permit advisers to charge for fees or expenses related to an investigation that results or has resulted in a court or governmental authority imposing a sanction for a violation of the Act or the rules promulgated thereunder.
The legacy status provisions apply to governing agreements, as specified below, that were entered into prior to the compliance date if the rule would require the parties to amend such an agreement.
Some commenters suggested that we also apply legacy status to the disclosure portions of the preferential treatment rule so that the rule would only apply to new agreements (
This legacy treatment is designed to address commenters' concerns that the rules would require advisers and investors to renegotiate contractual agreements at a significant cost to the industry,
The legacy provisions apply with respect to contractual agreements that (i) govern the fund, which include, but are not limited to, the private fund's operating or organizational agreements (
The legacy provisions apply only with respect to advisers' existing agreements with parties as of the compliance
We are not providing legacy status under the other final rules because we do not believe that the requirements of those rules will typically require advisers and investors to amend binding contractual agreements. Also, the quarterly statement rule, the audit rule, the disclosure aspects of the restricted activities rule, and the adviser-led secondaries rule do not flatly prohibit activities, except for the charging of fees and expenses related to sanctions for violations of the Act. Rather, these rules generally require advisers to provide certain information to or obtain consent from investors.
Pursuant to the Congressional Review Act,
We are mindful of the costs imposed by, and the benefits obtained from, the final 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 these final rules, including the benefits and costs to market participants as well as the implications of the final rules for efficiency, competition, and capital formation.
Where possible, the Commission quantifies the likely economic effects of its final 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 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 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 rules and amendments. 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.
As discussed above, private fund assets under management have steadily increased over the past decade.
Many commenters argued in response to the Proposing Release that the private fund industry is competitive and not in need of further regulation, and that private incentives and negotiations already yield competitive outcomes.
One commenter representing a fund adviser group stated that the development of the potentially harmful practices at issue in the proposal is evidence of market efficiency, as it shows the development of differentiated investor terms that are responsive to
We view these commenters' statements as contributing to three principal arguments that will be analyzed in this section.
Separately, one commenter stated that the proposal failed to meet the Office of Management and Budget's guidelines for performing a regulatory impact analysis as set out under certain executive orders and laws.
Conversely, several investor commenters provided insight into the specific private fund market structures and resulting market failures that motivate regulation of private fund advisers and inform the specific types of regulations that would be appropriate. Specifically, investor commentary suggests that investors face difficulties in negotiating reforms because of the bargaining power held by fund advisers and because of the bargaining power held by larger investors who are able to secure preferential terms that carry a risk of having a material, negative effect on other investors.
Analysis of industry comments demonstrates that fund advisers have multiple sources of bargaining power, which we discuss in turn, and we also discuss the bargaining power held by certain investors that may harm other investors with less bargaining power.
This analysis yields six key conclusions. First, investors and advisers may have asymmetric abilities to gather information, as fund advisers often have greater information as to their negotiation options available to them than do many investors. Second, it may be difficult solely as a matter of coordination for private fund advisers to adopt a common, standardized set of detailed disclosures and possibly further consent requirements that achieve sufficient transparency. The remaining sources of asymmetric bargaining power between investors and advisers and among investors necessitate reforms beyond disclosures and consent requirements. Third, investors have worse outside options to a given negotiation than the adviser, including cases where investors are limited in their ability to exit a negotiation with a private fund adviser in favor of turning to public markets or other investment options. Fourth, these descriptions of bargaining difficulties for investors are consistent with a view
First, investors and advisers may have asymmetric abilities to gather information, as fund advisers often have greater information as to their negotiation options available to them than do many investors.
Meanwhile, and by contrast, many fund advisers can negotiate with comparatively more investors simultaneously. In particular, although advisers face restrictions around their ability to admit certain investors such as benefit plans subject to ERISA,
The ILPA comment letter and industry report also states that many investor negotiations are with advisers that are represented by the same law firms. As a result, advisers represented by those law firms gain bargaining power from being able to gather information about negotiations between other investors and other advisers represented by the same law firm.
However, investor consultants can also provide services such as negotiating for fee reductions, providing analytics on a specific fund or investor portfolio performance, or valuation reporting, among others.
However, there are two reasons we believe the involvement of investor consultants may not sufficiently offset all information asymmetries and resulting bargaining asymmetries. First, one survey result indicates that these consultants may not entirely offset all such information asymmetries, as the survey reports that 73% of private equity investor respondents disagree or strongly disagree with the statement that the private equity industry is unconcentrated, such that investors have flexibility to switch advisers.
The second factor that may give advisers bargaining power is that it may be difficult solely as a matter of coordination for private fund advisers to adopt a common, standardized set of detailed disclosures and consent practices that achieve sufficient transparency, because investors and advisers compete and negotiate independently of each other on many dimensions, including performance statistics, management fees, fund expenses, performance-based compensation, and more.
While asymmetric information and difficulties in coordinating standardized disclosures and consent practices provide an economic rationale for new regulations for practices of private fund advisers to the extent that those issues result in investor harm or negatively affect efficiency, competition, or capital formation, they do not offer a complete picture as to the necessary degree of regulation. As one commenter states, many imbalances in bargaining power can be resolved through enhanced disclosure alone, and do not necessitate either prohibiting any activities or making any non-disclosure activities mandatory.
While this commenter did not discuss consent requirements,
We believe that many of the bargaining imbalances described in the Proposing Release and in this release may be improved through enhanced disclosure and, in some cases, consent requirements, and have tailored many of the final rules accordingly. This includes revising several proposed rules that would have prohibited certain activities outright to instead provide for certain exceptions in the final rules where the adviser makes an appropriate enhanced disclosure and, in some cases, obtains investor consent. We believe these revisions substantially preserve economic benefits, including positive effects on the process by which investors search for and match with advisers, the alignment of investor and adviser interests, investor confidence in private fund markets, and competition between advisers. Because consent requirements for certain restricted activities also directly enhance the bargaining power of investors, by providing investors an opportunity to offer consent only upon receiving certain concessions, the inclusion of certain consent requirements also enhances investor ability to secure additional information from advisers. These positive effects may improve efficiency, competition, and capital formation in addition to benefiting investors,
However, we believe that certain targeted further reforms, namely the prohibition of certain preferential terms that the adviser reasonably expects would have a material, negative effect on other investors and the mandatory audits, are necessitated by several additional sources of asymmetric bargaining power between investors and advisers and among investors. We believe those imbalances are not fully resolved by enhanced disclosure and would also not be fully resolved by requiring investor consent, and that those imbalances may further negatively affect the efficiency with which investors search for and match with advisers, the alignment of investor and adviser interests, investor confidence in private fund markets, and competition between advisers.
As a third source of bargaining power imbalances between investors and advisers, investors have worse outside options to a given negotiation than the adviser. As discussed above, many investors face complex internal administrative and regulatory requirements that govern their negotiations with advisers.
As a related matter, even outside these predetermined allocations, many public pension plans have turned to private funds in an attempt to address underfunding problems.
These issues indicate that many investors therefore have strong incentives to compromise to pursue repeat business with the same fund adviser,
Investors may have fewer outside options as to who their next negotiating partner will be if they leave their current private fund or other funds with the same adviser, for example because of the consolidation of law firms representing advisers.
Fourth, these descriptions of bargaining difficulties for investors are consistent with a view that smaller investors who lack bargaining power also face a collective action problem. Investors are unable to negotiate with each other because advisers often impose non-disclosure agreements or other confidentiality provisions that restrict each investor from being able to learn from the adviser who the other investors are, and as a result investors are hindered from collectively negotiating. To the extent that advisers have differential pricing power over different kinds of investors, they are incentivized to offer terms to some investors that extract surplus from investors with the least bargaining power and transfer it to the investors with the most bargaining power. The non-disclosure agreements and other confidentiality restrictions currently benefit larger investors who have sufficient bargaining power to negotiate unilaterally but may prevent smaller investors from engaging in collective action.
Specifically, contract terms that offer preferential treatment to advantaged investors may impose a negative externality on disadvantaged investors. If the disadvantaged investors could collectively bargain with the advantaged investors and the adviser, all parties could potentially agree to terms in which the disadvantaged investors would pay greater fees, the advantaged investors would pay reduced fees (or even received some fixed payout), and the preferential terms would be removed from the contract. As one commenter states, “[p]rivately negotiating various side letters[,] however[,] has instead pitted LPs against one another rather than collectively trying to negotiate for a standard set of disclosures and investment terms from the GPs.”
For example, when advisers offer preferential redemption terms to only certain advantaged investors that materially negatively affect other investors, those advantaged investors experience a reduction in the risk of their payouts from the private fund, and the disadvantaged investors who do not receive preferential redemption terms face an increase in the risk of their payouts from the private fund. Depending on the relative risk preferences of the two sets of investors, there may exist some payout from the disadvantaged investors to the advantaged investors in exchange for the removal of the preferential redemption terms that could leave all parties better off. Because contracts are individually negotiated between single investors and the adviser and because advisers are typically not permitted to reveal identities of other investors, which prevents investors from communicating with each other, there is no scope for a private resolution to this collective action problem.
Fifth, even if investors could coordinate, there is substantial variation across investors in the private fund space in terms of their ability to bargain, and larger investors with more bargaining power may benefit from using their bargaining power to extract terms that may risk materially, negatively affecting other investors. Not all private fund investors are large negotiators with the resources to bargain effectively, and the largest investors who negotiate the most intensely may not want to coordinate or collectively negotiate with smaller advisers or may benefit from negotiating separately from smaller advisers.
Specifically, as we discuss in detail further below, the ability for certain preferred investors with sufficient bargaining power to secure preferential terms that would have a material, negative effect on other investors leaves the preferred investors in a scenario where they can opportunistically “hold-up” other investors, exploiting their preferred terms.
Those private fund investors who are smaller than the largest investors, and therefore may be less able to bargain than the largest investors, may not be able to appreciate, even with disclosure, and also may not be able to appreciate after providing investor consent, the full ramifications of these bargaining outcomes or the contractual terms that they agree to in the case of preferential treatment that the adviser reasonably expects to have a material, negative effect on the investors who do not receive it. As stated above, in one recent survey of private equity investors, nearly 50% of respondents reported that they accept poor legal terms because the commitment size of their institution is too small,
This asymmetry in bargaining power across investors, and the lack of incentive to coordinate across investors with different levels of bargaining power, provides a specific economic rationale for the prohibition of certain preferential terms that would have a material, negative effect on other investors. Several commenters' letters supported this economic rationale, commenting on these types of asymmetries across investors for all categories of private funds.
These specific problems may be difficult, or unable, to be addressed via enhanced disclosures and consent requirements alone. For example, investors facing a collective action problem today, in which they are unable to coordinate their negotiations, would still be unable to coordinate their negotiations even if consent was sought from each investor for a particular adviser practice. As another example, in cases where certain preferred investors with sufficient bargaining power secure preferential terms over disadvantaged investors, majority consent by investor interest requirements may have minimal ability to protect the disadvantaged investors, as we would expect the larger, preferred investors to outvote the disadvantaged investors.
While there are cases where the prohibited preferential treatment terms can result in investor harm outside the context of redemptions, and we discuss all such cases below,
As a final matter, one commenter points to additional internal principal-agent problems at private fund investors, between investment committees and their own beneficiaries, in which investment committees have limited incentives to intensely negotiate for reforms that are in the interests of their beneficiaries, but not necessarily further the interests of the investment committee.
In light of these enhanced considerations from the comment file, we can more closely evaluate statements by commenters presenting arguments that no further regulation is needed. In particular, and as briefly noted above, one commenter and industry report stated that, because the private equity industry has a large number of advisers and funds with low concentrations of assets under management and capital raised, the industry must already be competitive.
However, we believe this analysis may not fully take into account the imbalances and inefficiencies in the bargaining process discussed above. For example, this analysis does not take into account investor limitations on size of the investors' potential investments institutional track record, and diversification across vintage years, size, sector, strategy, and geography, and therefore overstates the number of advisers and funds available to any given investor.
The commenter and report also argue that the presence of price competition in the market for private equity is evidence that the market is competitive and not in need of further regulation.
For these reasons, we believe certain particularly harmful practices can warrant stricter regulation, such as mandating protective actions like audits or prohibiting particularly problematic or harmful practices.
Many commenters argued that private fund investors are sophisticated negotiators, and that the Commission should not insert itself into commercial negotiations between sophisticated parties.
While we acknowledge commenters' concerns, we remain convinced by the evidence of market failures in the private fund adviser industry. We believe, as discussed further below, that these commenters fail to acknowledge that (i) the substantial growth of private funds has included interest and participation by smaller investors who may lack bargaining resources, and be more vulnerable than the largest investors,
We have revised the final rules accordingly to take into consideration the specific causes of bargaining failure. In doing so, we also believe we have not overly prescribed market practices. We also believe we have addressed commenters' concerns that overly prescriptive market practices should not be imposed based solely on self-reported survey evidence from investors, who may be incentivized to seek the assistance of industry researchers or the Commission to improve their negotiation outcomes, even absent any market failure.
In particular, we disagree with commenters who believe the Commission conceptualizes all investors as alike, or who interpret the Commission's goal as creating a one-size-fits-all solution for all private fund advisers.
We also believe we have preserved the ability for advisers and investors to flexibly negotiate fund terms, including via certain changes that are in response to commenters. For example, advisers and investors may still negotiate to identify any performance metrics that they believe will be beneficial to investors, so long as the minimum requirements of the quarterly statement rule are met.
The economic baseline against which we evaluate and measure the economic effects of the final rules, including their potential effects on efficiency, competition, and capital formation, is the state of the world in the absence of the final rules. The economic analysis appropriately considers existing regulatory requirements, including recently adopted rules, as part of its economic baseline against which the costs and benefits of the final rule are measured.
Specifically, 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, disclosure, and consent 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), consenting to certain adviser activities, and other purposes. We further consider the effectiveness of current disclosures and consent practices in providing useful information to the investor. For example, fund disclosures and requirements to obtain investor consent 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 and consent requirements 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 and consent requirements can therefore influence the matches between investor choices of private funds and preferences over private fund terms, investment strategies, and investment outcomes, with more
The final quarterly statement, audit, and adviser-led secondary rules will apply to all SEC registered investment advisers (“RIAs”) with private fund clients.
According to Form ADV filing data between October 1, 2021, and September 30, 2022, there were 5,517 RIAs with private fund clients. This includes 230 RIAs to 2554 SAFs.
The final prohibited activity and preferential treatment rules will apply to all advisers to private funds, regardless of whether the advisers are registered with, required to be 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. ERAs generally rely on two possible exemptions to forgo registration: (1) an exemption for advisers that solely manage private funds and have less than $150 million regulatory assets under management in the United States, and (2) investment advisers that solely advise venture capital funds.
The final amendments to the books and records rule will also impose corresponding recordkeeping obligations on private fund advisers if they are registered or required to be registered with the Commission.
The final amendments to the compliance rule will affect all RIAs, regardless of whether they have private fund clients. According to Form ADV filing data between October 1, 2021, and September 30, 2022, there were 15,330 RIAs, across both those who did and did not have private fund clients.
The parties affected by the rules and amendments will include private fund advisers, advisers to other client types (with respect to the 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, accountants providing audits under the final audit rule, and others to whom those affected parties will turn for assistance in responding to the rules and amendments. 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 rules could include private fund portfolio investments, such as 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.
Similarly, relationships between advisers, funds, and investors may rely on investor consent to govern fund and adviser behavior. For example, one private equity fund document template uses investor consent as a prerequisite for revising fund documents.
However, the interests of one or more private fund investors may not represent the interests of, or may otherwise conflict with the interests of, other investors in the private fund due to business or personal relationships or other private fund investments, among other factors. To the extent investors are afforded governance or similar rights, such as LPAC representation, certain fund agreements permit such investors to exercise their rights in a manner that places their interests ahead of the private fund or the investors as a whole. For example, certain fund agreements state that, subject to applicable law, LPAC members owe no duties to the private fund or to any of the other investors in the private fund and are not obligated to act in the interests of the private fund or the other investors as a whole.
Some commenters further stated that relationships between the affected parties are governed in part by reputational mechanisms and active monitoring directly by investors. For example, one commenter stated that preferential terms offered to certain investors provide flexibility for the adviser, but that if the adviser “abuses the flexibility in some way (for example, by providing some benefit to a preferred client), it imposes a reputational cost for the adviser and adversely affects the adviser's future fundraising efforts.”
As discussed above, SAFs are special purpose vehicles or other entities that securitize assets by pooling and converting them into securities that are offered and sold in the capital markets.
Some commenters stated that the governance structure of CLOs and other SAFs differ from other types of funds.
Based on Form ADV filing data between October 1, 2021, and September 30, 2022, 5,517 RIAs and 5,381 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 (from Oct. 1, 2017 to Sept. 30, 2022) grew from $2.9 trillion to $6.5 trillion, or by 124%. The assets under management of hedge funds reported by ERAs grew from $7.1 trillion to $9.7 trillion, or by 37%. The trends for private funds as a whole are given in Figure 2. The assets under management of all private funds reported by RIAs grew by 62% over the past five years from $13 trillion to over $21 trillion, while the number of private funds reported by RIAs grew by 42% from 36.5 thousand to 51.7 thousand. The assets under management of all private funds reported by ERAs grew by 89% over the past five years from $2.75 trillion to over $5.2 trillion, while the number of private funds reported by ERAs grew by 105% from 15.2 thousand to 31.1 thousand, as shown in Figure 2A.
Despite commenter assertions that all private fund investors are sophisticated and can “fend for themselves,”
Private funds and their advisers also play an increasingly important role in the lives of millions of Americans. Some of the largest groups of private fund investors include State and municipal pension plans, college and university endowments, non-profit organizations, and high net worth individuals.
Private fund advisers have also sought to be included in individual investors' retirement plans, including their 401(k)s,
The relationship between the adviser and the private fund client in which the investor is participating begins with the investor conducting initial screening for private funds that meet the investor's specified criteria, potentially with the assistance of investment consultants.
Once investors identify potential advisers, they enter into negotiations to determine whether they will invest in one or more of the adviser's private fund clients. The process during which fund terms may be disclosed and negotiated before investors commit to investing in a fund is known as the “closing process.”
Because different investors may receive disclosures or opportunities to negotiate over fund terms at different times, private funds face a fundamental incentive obstacle in making successful closings: later investors may be able to ask the fund adviser what contractual terms were awarded to early investors, and armed with that information they may attempt to negotiate contractual terms at least as good as the early investors. This is one of several difficulties advisers may currently face in successfully closing early investors into a private fund, as the early investor has an incentive to wait for the latest possible opportunity to close.
There are two leading ways that advisers may currently overcome these operational difficulties with respect to the closing process. First, an adviser may allow investors, particularly early investors, to have MFN status. An MFN investor may have, for example, subject to certain restrictions, the ability to receive substantially the same rights granted by the fund or the adviser in any side letter or similar agreement that are materially different from the rights granted to the MFN investor.
Once the closing process is complete, investors are participants in the adviser's private fund client, and the adviser has a fiduciary duty to the private fund client 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.
Despite existing fiduciary duties, existing antifraud provisions of section 206 and the other Federal securities laws, and existing rule 206(4)-8, there are no current particularized requirements that deal with many of the revised requirements in the final rule. For example, there is no current Federal regulation requiring a private fund adviser to disclose multiple different measures of performance to its investors, to refrain from borrowing from a private fund client without disclosure or investor consent, to obtain a fairness opinion or valuation 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 that 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 or their related persons 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.
The Proposing Release cited 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.
However, we continue to believe that, to the extent advisers charge to a private fund certain expenses that benefit the adviser more than the investors, such as fees and expenses related to regulatory, compliance, and examination costs, and expenses related to investigations of the adviser or its related persons by any governmental or regulatory authority, that practice represents a potentially economically problematic outcome.
Whether such arrangements distort adviser incentives to pay attention to compliance and legal matters, including matters related to investigations of potential conflicts of interest, may vary from adviser to adviser. This is because adviser-level attention to compliance and legal matters can depend on both investor and adviser risk preferences. As one commenter stated, in some cases, if advisers bear the cost of compliance, including costs of compliance for investigations by government or regulatory authorities, advisers may have incentives to recommend investments that are less diversified.
However, we also continue to believe that, when investors bear the costs, advisers may have distorted incentives with respect to their treatment of compliance and legal matters, namely incentives to pay suboptimal attention to these matters. Advisers who pay suboptimal attention to compliance costs, for example, receive profits associated with their reduced compliance expenses, but in doing so generate risks that may be borne by investors. Thus, for some advisers, funds, and their investors, it may align economic incentives for the fund (and, by extension, the investors) to bear regulatory, compliance, and examination costs, and expenses related to investigations of the adviser or its related persons by any governmental or regulatory authority. In other cases, it may better align economic incentives for the adviser to bear these expenses, if the benefits from undertaking the expenses primarily accrue to the adviser.
Even when investors may benefit from bearing these costs, full disclosure is necessary and investors may not be able to secure such disclosures today. As the above commenter stated, even when economic incentives are aligned by investors bearing the costs of compliance expenses, it is so that the investor can determine for themselves the appropriate magnitude of compliance expenses (subject to minimum required amounts of expenses, for example minimum expenses necessary for compliance with rule 206(4)-7).
As a final matter, we believe that these considerations vary according to the type of expense. For regulatory, compliance, and examination expenses, the risk of distorted adviser incentives when the investor bears the costs may be comparatively low, and with disclosure many investors may prefer to bear these costs and determine appropriate allocation of fund resources towards these expenses themselves. For example, investors are more likely to have varying preferences over whether the adviser hires a compliance consultant, the scope of legal services that will be provided to the fund, or whether the fund will conduct mock examinations in order to prepare for real examinations.
Meanwhile, the risk of distorted adviser incentives may be higher in the case of investors bearing the costs of investigations by government or regulatory authorities. A fund in which the adviser, without having secured consent from investors, is able to pass on expenses associated with an investigation has adverse incentives to engage in conduct likely to trigger an investigation. While reputational effects may mitigate the effects of these adverse incentives, as advisers who pass on such expenses may be less able to attract investors in the future, reputational effects do not resolve these effects. Examinations may not necessarily implicate the adviser's wrongdoing,
We have also observed some cases where private fund advisers have directly or indirectly (including through a related person) borrowed from private fund clients.
However, as commenters stated, advisers may also borrow from funds in cases where it is beneficial to the fund and its investors for the adviser to do so, such as borrowing to facilitate tax advances,
As a final matter, unlike the case of adviser-led secondaries, it can be easier to reduce the risk of this conflict of interest distorting the terms, price, or interest rate of the fund's loan to the adviser with disclosure and consent practices.
The staff also has observed harm to investors when advisers lead co-investments, leading multiple private funds and other clients advised by the adviser or its related persons to invest in a portfolio investment.
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 similar pools of assets with better liquidity terms than other investors.
We believe that it may be hard for many investors, even with full and fair disclosure and if investor consent is obtained, to understand the future implications of materially harmful contractual terms, in particular when certain investors are granted preferential liquidity terms or preferential information, 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 these practices. For example, some forms of negotiation may occur through repeat-dealing that may not be available to some smaller private fund investors. While commenters argue that many investors are sophisticated, for whom disclosure may suffice, other smaller investors may be more vulnerable and thus still be harmed even with disclosure and if investor consent is
Our staff has also observed that investors are generally not provided with detailed information about broader types of 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 registered 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 certain fees and expenses typically are not presented with the level of detail the final quarterly statement rule will require. In addition, Form ADV Part 2A (“brochure”) requires certain information about a registered adviser's fees and compensation. For example, Part 2A, Item 6 of Form ADV requires a registered 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. 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 advisers are subject to the antifraud provisions of the federal securities laws and any relevant requirements of the marketing rule and private placement rules. 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
Form PF requires certain additional fee, expense, and performance reporting, but unlike Form ADV, Form PF is not an investor-facing disclosure form. Information that private fund advisers report on Form PF is provided to regulators on a confidential basis and is nonpublic.
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, and we discuss this variety in practices throughout this section. Broadly, current investors often use this information in determining whether to invest in subsequent funds and investment opportunities with the same adviser, or to pursue alternative
The private equity investor industry group ILPA, observing the variation in reporting practices across funds, has suggested the use of a standardized template for this purpose.
Investors may, as a result, find it difficult to assess and compare alternative fund investments, which can make it harder to allocate capital among competing fund investments or among private funds and other potential investments. In one industry survey, 55% of respondents either disagreed or strongly disagreed that the reporting provided by advisers across fees, expenses, and performance provides the needed level of transparency.
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.
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, yet the information may not be standardized or uniform. Many advisers to private equity funds and other illiquid funds 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
Management fee compensation figures and performance-based compensation figures are not widely disclosed or reported publicly,
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 final rules, standardized industry methods for measuring performance must contend with the complexity of the timing of potentially illiquid investments and must also reflect the adviser's discretion in the timing of distributing proceeds to investors.
One approach that has emerged for computing returns for private equity and other funds 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.
This practice has several key implications for investors. First, this practice has been used by private equity funds to artificially boost reported IRRs, but investors must pay the interest on the debt used and can potentially suffer lower total returns.
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 private equity and other funds that would be determined to be illiquid under the final rule. These measures compensate for some of the shortcomings of IRR at the cost of their own drawbacks. Multiple of invested capital (“MOIC”), used by private equity funds, is the sum of the net asset value of the investment plus all the distributions received divided by the total amount paid in. MOIC is simple to understand in that it is the ratio of value received divided by money invested, but has a key drawback that, unlike IRR, MOIC does not take into account the time value of money.
Another measure closely related to MOIC is the TVPI, or “total value to paid-in capital” ratio.
Another measure, Public Market Equivalent (“PME”), also used by private equity and other illiquid funds, is sometimes used to compare the performance of a fund with the performance of an index.
Regardless of the performance measure applied, another fundamental difficulty in reporting the performance of illiquid funds is accounting for differences in realized and unrealized gains. Illiquid funds generally pursue longer-term investments, and reporting of performance before the fund's exit requires estimating the unrealized value of investments.
One paper cited by commenters argues that even when advisers do manipulate their investment valuations, “investors can see through [the adviser's] manipulation on average.”
Commenters also added to this discussion that there are different methods and norms for calculating gross performance and then net performance that is net of fees and expenses. In particular, the CFA Institute described the role of GIPS standards in providing definitions and methods for calculating gross returns and net returns.
The CFA Institute also acknowledged the role of the recent marketing rule in defining gross and net performance.
The marketing rule defines net performance as “the performance results of a portfolio (or portions of a portfolio that are included in extracted performance, if applicable) after the deduction of all fees and expenses that a client or investor has paid or would have paid in connection with the investment adviser's investment advisory services to the relevant portfolio, including, if applicable, advisory fees, advisory fees paid to underlying investment vehicles, and payments by the investment adviser for which the client or investor reimburses the investment adviser.”
For illiquid funds under the final rules, standard industry methods for reporting performance do not use annual returns, because annual returns for individual years may be substantially less informative for investors. For an investor in an illiquid fund who has limited or no ability to withdraw or redeem from a fund, we understand that the investor's primary concern is more typically measurement of the total increase in the value of its investment over the life of the illiquid fund and the average cumulative return as measured by MOIC and IRR, rather than the annual returns in any given year. Consistent with this, many commenters expressed support for the proposal's rules that would require MOIC and IRR for private equity funds and other illiquid funds, as compared to requiring annual returns.
Private equity funds and other illiquid funds also must, as discussed above,
Other approaches tend to be used for evaluating the performance of hedge funds and other liquid funds. In particular, investors who are determining whether and when to withdraw from or request a redemption from a liquid fund typically find annual net total returns more informative than metrics such as an IRR measured since the fund's inception, as annual net total returns allow the investor to measure whether the liquid fund's performance is likely to continue to outperform its next best investment alternative. Consistent with this, many commenters disagreed with the proposed rule requirement of annual net total returns since inception, stating that more recent returns are more relevant.
Because CLOs and other SAFs primarily issue debt to investors, typically structured as notes and issued in different tranches to investors, typical fee, expense, and performance reporting practices for these funds differ from other types of funds.
While the Commission believes that many advisers currently select from these varying standardized industry methods 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, 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, approximately 90% of the total number of hedge funds and private equity funds that are advised by RIAs currently undergo a financial statement audit, 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.
Funds of different sizes do vary in their propensity to get audits, but audits are common for funds of all sizes. Figures 4A and 4B below show that for funds of size <$2 million, excluding securitized asset funds, approximately 4800 out of approximately 6100 funds already get an audit from a PCAOB-registered and -inspected independent auditor, or approximately 76%. For funds of size $2 million to $10 million, this percentage is approximately 82%. This percentage generally increases as funds get larger, such that for funds of size >$500 million, approximately 6400 out of approximately 7000 funds already get an audit from a PCAOB-registered and -inspected independent auditor, or approximately 91%. However, of course, because larger funds have more assets, these larger funds still represent a large volume of unaudited assets. Funds of size <$10 million have approximately $7.1 billion in assets not audited by a PCAOB registered and inspected independent auditor, while funds of size >$500 million have approximately $1.9 trillion in assets not audited by a PCAOB-registered and -inspected independent auditor.
Funds also vary by their fund type in their propensity to get audits. Many commenters stated that CLOs and other asset-backed securitization vehicles generally do not get such audits, in particular because audited financial statements prepared under U.S. GAAP may not be as useful for investors with debt interests in cash flow vehicles such as CLOs and other such vehicles who are primarily focused on the underlying cash flows of the fund.
Figures 4A, 4B, and 5 also show that fund audits have also grown over time at a rate approximately consistent with the growth of the rest of private funds. Figure 5 shows that the average percentage of audited funds, across all fund sizes, has remained high at approximately 85% for the last five years. An implication of this fact is that the number of audits being added to the industry each year is not substantially larger than the number of outstanding funds not receiving audits: Figure 4B shows that approximately 8,100 funds did not get audits in 2022 from PCAOB-registered and -inspected independent auditors. Figure 4A shows that, excluding securitized asset funds, approximately 5,800 funds did not get audits in 2022 from PCAOB-registered and -inspected independent auditors. There was growth in the number of audits from PCAOB-registered and -inspected independent private fund auditors of approximately 2,000 in 2020, approximately 3,000 in 2021, and approximately 6,000 in 2022.
As a final matter, several commenters state that certain funds get an audit from a Big Four firm because of their investors' demands, but none of the Big Four firms would meet the independence requirement under the proposed rules.
Figure 6 further analyzes the funds from Figure 4 who do not get an audit by a PCAOB-registered and -inspected independent auditor. In particular, while some funds do not get audits at all, Figure 6 analyzes the funds that may get an audit, but not an audit from a PCAOB-registered and -inspected independent auditor. Figure 6 shows that less than one percent of all funds get an additional surprise exam alongside an audit from an auditor who is not independent, which indicates that no more than one percent of funds are managed by advisers who face difficulty in complying with existing audit requirements because of the independence standard. Figure 6 also shows that only a
Regarding fairness opinions, our staff has observed a recent rise in adviser-led secondary transactions where an adviser offers fund investors the choice between selling their interests in the private fund or converting or exchanging them for new interests in another vehicle advised by the adviser.
In part because of these risks of conflicts of interest, we understand that some, but not all, advisers obtain fairness opinions in connection with these transactions that typically address whether the price offered is fair. These fairness opinions are meant to provide investors with some third-party assurance as a means to help protect participating investors. The Commission's recently adopted amendments to Form PF require advisers to private equity funds who must file Form PF (registered advisers with at least $150 million in private fund assets under management) to file on a quarterly basis on the occurrence of adviser-led secondary transactions.
Some commenters stated that other alternatives to fairness opinions are also commonly used tools.
We believe, based on commenter arguments and typical fairness opinion and valuation opinion practices, that to the extent that the information asymmetry between investors and advisers is concentrated in the valuation of the assets, and not other terms of the deal, a valuation opinion can alleviate this problem as effectively as a fairness opinion. We believe valuation opinions are viable options for providing price transparency to an investor, and that a valuation opinion will still provide investors with a strong basis to make an informed decision.
As discussed above, adviser-led secondaries may differ from other practices such as tender offers.
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
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.
The final rules will (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) with certain exceptions, prohibit all private fund advisers, including those that are not registered with the Commission, from providing certain types of preferential treatment that the advisers reasonably expect to have a material negative effect on other investors, (d) restrict 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, with certain exceptions for when the adviser satisfies certain disclosure requirements and, in some cases, when the adviser also satisfies certain consent requirements, (e) 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 or valuation opinion from an independent opinion provider, and (f) impose compliance rule amendments and recordkeeping requirements, including certain requirements that apply to all advisers, to enhance the level of regulatory and other external monitoring of private funds and other clients.
Without Commission action, private funds and private fund advisers would have limited abilities and incentives to implement effective reforms such as those in the final rules. As discussed in the Proposing Release, private fund investments can have insufficient transparency in negotiations as well as in reporting of performance and fees/expenses, and 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 results are costs and risks of investor harm in financial markets, and by extension costs and risks of harm to millions of Americans through State and municipal pension plans, college and university endowments, and non-profit organizations. 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 final rules provide a regulatory solution that enhances the protection of investors and improves the current state of many of these problems. Moreover, the final rules do so in a way that does not deprive fund advisers of compensation for their services: Insofar as the 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 transparently disclosed and, in some cases, where investor consent is obtained.
Some commenters stated that the proposed private fund adviser rules and other recently proposed or adopted rules would have interacting effects, and that the effects should not be analyzed independently.
In particular, the Commission's analysis here considers three primary ways in which preceding adopted rules impact the baseline, meaning the state of the world in the absence of the final rules, and as such we believe the analysis is responsive to commenter concerns. First, as a general matter, the incremental effect of new compliance costs on advisers from the final rules can vary depending on the total amount of compliance costs already facing advisers. Whether an adviser is likely to respond to new compliance costs without exiting or without substantially passing on costs to investors depends on the adviser's profits today above existing compliance costs. Recently adopted rules impact advisers' profits, and so impact the degree to which new compliance costs may result in advisers exiting the market or in costs being passed on to investors. Second, as a related matter, if other rules have been adopted sufficiently recently, the state of the world in the absence of the final rules may specifically include the transition periods for recently adopted rules. Certain advisers may face increased costs from coming into compliance with multiple rules simultaneously. Third, to the extent recently adopted rules address matters related to those in the final rules, the benefits of the final rules may be mitigated to the extent recently adopted rules already offer certain investor protections.
Specifically, the recent amendments to Form PF may result in these three effects. First, the recent amendments to Form PF result in economic costs of new required current reporting for advisers to hedge funds and new quarterly and annual reporting for advisers to private equity funds. Second, the incremental new costs of the final private fund adviser rules may be borne, in part, at the same time as the new Form PF costs, as the effective date of the new Form PF current reporting is December 11, 2023. Third, the recently adopted Form PF amendments result in required reporting related to performance, clawbacks, and adviser-led secondaries, which may impact the benefits of the final quarterly statement rule and the final adviser-led secondaries rule.
While the Commission acknowledges these potential effects, we also believe we have mitigated the consequences of these overlapping costs for many advisers in the final rules by adopting a longer transition period for the private fund adviser rules, in particular for smaller advisers, as discussed further below.
Finally, enhanced disclosures and, in some cases, consent requirements will help investors shape the terms of their relationship with the adviser of the private fund. As discussed above, many investors report that they accept poor terms because they do not know what is “market.”
The rules may also improve the quality and accuracy of information received by investors through the final audit requirement, both by providing independent checks of financial statements, and by potentially improving advisers' regular performance reporting, to the extent that regular audits improve the completeness and accuracy of fund adviser valuation of investments. The final rules will lastly improve the quality and accuracy of information received by investors through the rules providing for restrictions of certain activities unless those activities are specifically disclosed.
The direct costs of the final rules will include the costs of meeting the minimum regulatory requirements of the rules, including the costs of providing standardized disclosures, in some cases obtaining the required investor consent, and, for some advisers, refraining from restricted activities, and obtaining the required external financial statement audit and fairness opinions or valuation opinions.
Below we discuss these benefits and costs in more detail and in the context of the specific elements of the final rule.
The final rules will 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 fiscal quarters of operating results, and distribute the quarterly statement to the private fund's investors within 45 days after each fiscal quarter end after the first three fiscal quarter ends of each fiscal year (and 90 days after the end of each fiscal year), unless such a quarterly statement is prepared and distributed by another person.
We discuss the costs and benefits of these requirements below. 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 will be required to be provided under the final 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 will 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 final rule will require an investment adviser that is registered or required to be registered and that provides investment advice to a private fund to provide 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. The quarterly statement will 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 will 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. The lack of legacy status for this rule provision means that these benefits will accrue across all private funds and advisers.
We continue to believe that the final rules will achieve the benefits as stated in the Proposing Release. 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 fund adviser compensation may be complex and opaque.
With respect to hedge funds, as discussed above, one commenter criticized the Proposing Release's statement that there can be substantial variation in the fees private fund advisers charge for similar services and performances.
Investors may also find it easier to compare alternative funds to 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 will 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 will 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 will 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 will 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 will 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 will be reported in the quarterly statement in an easily understandable format and will use the information once provided. Several commenters argue that advisers are already providing investors with sufficient disclosures on all items described in the required quarterly statements, or that investors rarely ask for more information than is provided by current practices.
However, many other commenters broadly supported these categories of benefits, both from the required quarterly statements in general and from the final rule's overall enhancement of disclosures.
Moreover, as discussed above, industry literature provides a countervailing view to these industry commenters, at least for private equity investors.
Because we have not applied the rules to advisers with respect to their CLOs and other SAFs,
Benefits of the required disclosures may also be slightly reduced for investors in funds of funds, because (1) investors in funds of funds will generally receive the information in a less timely manner as compared to other types of funds, and because (2) certain fund of funds advisers may lack information or may not be given information in respect of underlying entities, and depending on a private fund's underlying investment structure, a fund of funds adviser may have to rely on good faith belief to determine which entity or entities constitute a portfolio investment under the rule.
Lastly, 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.
As a result of this variation across advisers in quarterly statement practices, the final rules will have two key interactions with Form PF reporting that affect the benefits of the final rules. First, Form PF requires information pertaining to fees and expenses (namely gross performance and then net performance after management fees, incentive fees, and allocations). The Commission may rely on data in Form PF to pursue potential outreach, examinations, or investigations, in response to any potential harm to investors associated with fees and expenses being charged to investors.
Second, the final rules may enhance the benefits from Form PF reporting, because Form PF reporting often only requires reporting on the basis of how advisers report information to investors.
As discussed above, we believe that some investors in hedge funds whose advisers are operating in reliance on the exemption set forth in CFTC Regulation §4.7 may currently receive quarterly 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.
The magnitude of the effect also depends on how investors will use the fee and expense information in the quarterly statement. In addition, reports of fund expenses often do not include data about payments at the level of portfolio investments, or about how offsets are calculated, allocated and applied. Lack of disclosure has been at issue in enforcement actions against fund managers.
The cost of the changes in fee and expense disclosure will 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 will 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 will generally be ongoing costs. For advisers who already both maintain the records needed to generate the required
Costs of delivery may be mitigated by the fact that the final rule generally allows for distribution of statements via a data room, if the adviser notifies investors when the quarterly statements are uploaded to the data room within the applicable time period under the rule and ensures that investors have access to the quarterly statement therein.
Other costs may include advisers needing to make determinations about what must be included on their fee and expense quarterly statements. In particular, even though portfolio investments of certain private funds may not pay or allocate portfolio investment compensation to an adviser or its related persons, advisers to those funds may still have costs associated with reviewing payments and allocations made by their portfolio investments to determine whether they must provide the required portfolio investment compensation disclosures under the final rule.
Advisers will also incur costs associated with determining and verifying that the required disclosures comply with the format requirements under the final 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 consistently with the information in fund offering documents, to avoid inconsistent interpretations across fund documents and resulting confusion for investors. Many of these costs we would expect would be borne more heavily in the initial compliance phases of the rule and would wane on an ongoing basis.
Some commenters emphasized the potential costs of the required quarterly statements, and that these costs would be likely to be borne by the fund and thus investors instead of by advisers.
Some commenters lastly expressed concerns over unintended consequences from the rule from changes in adviser behavior in response to the rule. For example, some commenters stated that, with a required framework in place governing fund expense reporting, investors would face difficulties in negotiating for any reporting not specified in the final rules.
Some of these costs of compliance could be reduced by the rule provision providing that, to the extent doing so would provide more meaningful information and not be misleading, advisers must consolidate the quarterly statement reporting to cover 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 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 is 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. Commenters did not offer any opinion as to which of these two scenarios is generally more likely to be the case.
Advisers to funds of funds may face certain additional costs associated with needing to determine whether an entity paying itself, or a related person, is a portfolio investment of the fund of funds under the final rule.
There are other aspects of the rule that will impose costs. In particular, some advisers may choose to update their systems and internal processes and procedures for tracking fee and expense information 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 final 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 final rules 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 may be mitigated to the extent that some advisers attract new capital under the final rules, and so those advisers and their related persons may become more competitive as employers.
Advisers will also be required to include standardized fund performance information in each quarterly statement provided to fund investors. Specifically, the final rules will require an adviser to a fund considered a liquid fund under the final rule to disclose the fund's annual net total returns for each fiscal year for the prior year, prior five-year period, and prior 10-year period or since inception (whichever is shorter) and the cumulative result for the year as of the most recent quarter.
As a result of these performance disclosures, some investors will 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.
We understand that some investors receive the required performance information under the baseline, independently of the final rule. For
Because the rules will not apply to advisers with respect to SAFs that they advise, investors in SAFs will not benefit under the final rules.
However, we believe these forgone benefits are likely to be minimal, consistent with statements by commenters.
The performance reporting terms that CLOs and other SAFs typically currently rely on, by contrast, focus on tests of fund performance designed to measure the likelihood of successful payment of cash flows owed under an indenture, such as overcollateralization tests and interest coverage tests (
Other commenters supported the proposed economic benefits of the enhanced and standardized performance disclosures.
Similar to fee and expense reporting, variation across advisers in reporting practices means that the final rules will have two key interactions with Form PF reporting that affect the benefits of the final rules. First, because Form PF already collects performance information, the Commission may rely on data in Form PF to pursue potential outreach, examinations, or investigations, in response to any potential harm to investors associated with fund performance.
Second, the final rules may enhance the benefits from Form PF reporting, because Form PF reporting often only requires reporting on the basis of how advisers report information to investors.
The required presentation of performance information and the resulting economic benefits will vary based on whether the fund is determined to be a liquid fund or an illiquid fund. For example, for private equity and other illiquid funds, investors will benefit from receiving multiple pieces of performance information, because the shortcomings discussed above that are associated with each method of measuring performance
One commenter questioned the benefits of mandatory reporting of performance without the impact of subscription facilities, stating that reporting of performance without the impact of subscription facilities “does not provide a better view of `actual' performance.”
We believe, therefore, that reporting of performance without the impact of subscription facilities does provide the investor with a better understanding of the value delivered by the adviser, absent any possible distortionary effect of the subscription facility, and enhances the standardization of disclosures about private funds.
This commenter also stated that “the Commission is mistaken that excluding the impact of subscription facilities would necessarily increase net returns.”
One commenter questioned the benefits of disclosure of MOIC for unrealized and realized portions of a portfolio, and questioned if the proposed framework was intended to be analogous to TVPI/RVPI/DPI.
For hedge funds, the primary benefit is the mandating of regular reporting of returns by advisers, standardizing the information provided by advisers across investors and over time.
For both types of funds, because the factors used to distinguish between liquid and illiquid funds rely on a narrow set of key distinguishing features that are included in the set of factors for determining how certain types of
The cost of the required performance disclosure by fund advisers will 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 will 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. For example, because most advisers with fund-level subscription facilities are already reporting performance with the impact of such facilities, we do not anticipate that this requirement will entail substantial additional burdens for most advisers. For advisers who already both maintain the records needed to generate the required information and make the required disclosures, the costs will be even more limited. We anticipate this may be the case for many private fund advisers, as we believe many private fund advisers already maintain and disclose similar information to what is required by the rule.
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 will 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 will be indirect costs of the rule. We expect the bulk of the costs associated with complying with this aspect of the final rules will likely be most substantial initially rather than on an ongoing basis.
Some of these costs of compliance may again be affected by the rule provision providing that, to the extent doing so would provide more meaningful information and not be misleading, advisers must consolidate the quarterly statement reporting to cover similar pools of assets. These costs of compliance will be reduced to the extent that advisers are able to avoid duplicative costs across multiple statements, but will 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. Commenters did not offer any opinion as to which of these two scenarios is generally more likely to be the case.
The required presentation of performance, and the resulting costs, will vary based on whether the fund is categorized as liquid or illiquid. In particular, for liquid funds, the cost is mitigated by the limited nature of the required disclosure, while the more detailed required disclosures for illiquid funds may require greater cost (yielding, as just discussed, greater benefit).
Under the final 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 (
Some commenters lastly expressed concerns that the rule posits a one-size-fits-all solution to performance reporting, and that with a required framework in place governing performance reporting, investors would face difficulties in negotiating for any reporting not specified in the final rules.
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.
The final rules restrict a private fund adviser from engaging in five types of activities with respect to the private fund or any investor in that private fund, with certain exceptions for where the adviser makes required disclosures and, in some cases, also obtains required investor consent.
(i) Charging fees or expenses associated with an examination or investigation of the adviser or its related persons;
(ii) Charging regulatory or compliance expenses or fees of the adviser or its related persons;
(iii) Reducing the amount of any adviser clawback by the amount of certain taxes;
(iv) Charging fees and expenses related to a portfolio investment on a non-pro rata basis;
(v) Borrowing money, securities, or other fund assets, or receiving an extension of credit, from a private fund client.
The non-pro rata restriction will be subject to an exception if the allocation approach is fair and equitable as well as a before-the-fact disclosure-based exception while the certain fees and expenses restrictions and the post-tax clawback restriction will be subject to after-the-fact disclosure-based exceptions only. The borrowing restriction and the investigation restriction will be subject to consent-based exceptions, which will require an adviser to receive advance consent from at least a majority in interest of a fund's investors that are not related persons of the adviser in order to engage in these activities. However, the exception to the investigation restriction will not apply if the investigation results or has resulted in in the governmental or regulatory authority, or a court of competent jurisdiction, sanctioning the adviser or its related persons for violating the Act or the rules thereunder.
These restrictions will apply to activities of the private fund advisers even if they are performed indirectly, for example, by an adviser's related persons, recognizing that the potential for harm to the fund and its investors arises independently of whether the adviser engages in the activity directly or indirectly.
We discuss the costs and benefits of each of the final rules below.
The final rules will restrict 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.
We stated in the Proposing Release that we believed that these charges, even when disclosed, may create adverse incentives for advisers to allocate expenses to the fund at a cost to the investor, and as such they represent a possible source of investor harm.
Some commenters agreed with these benefits, stating that advisers should not be charging examination, investigation, regulatory and compliance fees and
We recognize commenters' concerns, and as stated above we believe that our policy choice has benefited from taking into consideration the market problem that the policy is designed to address.
As discussed above, we believe whether such arrangements risk distorting adviser incentives to pay attention to compliance and legal matters, including matters related to investigations of potential conflicts of interest, may vary from adviser to adviser and may vary according to the type of expense. For regulatory, compliance, and examination expenses, the risk may be comparatively low, and requiring investor consent or prohibiting the activity altogether may not be necessary. However, even when investors bear these costs, it is necessary for them to at minimum receive disclosures of these costs. By contrast, in the case of investors bearing the costs of investigations by government or regulatory authorities, the risk of distorted adviser incentives may be higher, motivating further protections from additional consent requirements. Lastly, we do not believe there are reasonable cases where incentives are appropriately aligned by investors bearing the costs of investigations by government or regulatory authorities that results in the governmental or regulatory authority, or a court of competent jurisdiction, sanctioning the adviser or its related persons for violating the Act or otherwise finding that the adviser or its related persons violated the Act. Thus, in response to commenters, the final rules provide an exception to the restriction on regulatory, compliance, and examination expenses where the adviser makes certain disclosures, and an exception to the restriction on investigation expenses where the adviser obtains investor consent, but with the investigation expense exception not applying if the investigation results in a sanctioning or a finding as described above.
We continue to believe that the pass-through of these types of expenses can be associated with risks of adverse incentives for the adviser, such as allocating inappropriate expenses to the fund, or risks of incentives for the adviser to engage in excessive risk-taking. Under the final rules, investors will benefit from greater transparency into the risks that they will have to incur costs associated with these problems. Investors will be able to search across fund advisers knowing more clearly whether these charges will be assessed on a fund, which may lead to a better match between investor choices of private funds and their preferences over private fund terms, investment strategies, and investment outcomes.
Investors will also benefit in cases where the adviser no longer charges the private fund clients for the restricted expenses, in particular with respect to costs of investigations that result in a sanctioning or a finding as described in the final rules. For the types of fees and expenses with a disclosure exception and, in some cases, a consent exception, investors may also benefit in cases where the adviser either opts to not make the required disclosure or obtain the required consent that would facilitate an exception, or may also occur in cases where the investors, having received disclosure of these expenses or when consent is sought, are able to negotiate for the adviser to bear the expense. We are providing legacy status for the aspects of the restricted activities rule that require investor consent, which include restricting an adviser from charging for certain investigation fees and expenses.
As discussed further below, we believe most advisers will pursue compliance via the required disclosures and, in some cases, by obtaining the required consent, where they are able.
In these cases, the magnitude of the benefit will to some extent depend on whether advisers can introduce
Because Form PF's recently adopted new reporting requirements for private equity fund advisers will already collect annual information on the occurrence of general partner and limited partner clawbacks from large private equity advisers,
The restriction will impose direct costs on advisers from the need to update their charging and contracting practices to bring them into compliance with the new requirements, in particular by making certain new disclosures and, in some cases, obtaining the new required investor consent. As discussed further below, in the context of the rule's impact on competition, commenters generally stated that they believed the direct costs of the rule would be high, given the compliance requirements involved.
Under the final rules, advisers will face costs both in the case where (1) the activity in question continues but with costs for enhanced disclosure, and (2) the adviser ceases the activity, with costs related to restructuring fund documents, higher expenses, or new or additional fees. For the restriction on passing through of expenses related to investigations by government or regulatory authorities that result or have resulted in the governmental or regulatory authority, or a court of competent jurisdiction, sanctioning the adviser or its related persons for violating the Act or the rules thereunder, advisers and funds will have no exception from the rule regardless of disclosures made or consent obtained. Similar to benefits, the costs will be reduced to the extent advisers today already do not pass through these types of expenses to funds, or already do so subject to what will be required disclosures and after obtaining what will be required consent, for example as a result of reputational effects.
We assume that this time is inclusive of time needed for advisers to make the determination that the requisite disclosure and, in some cases, consent is the appropriate path to compliance for that adviser. These costs also include the costs of making the requisite distributions of required disclosures to investors. For many private fund advisers, these costs will be limited by the timeline provided in the final rule for the requisite disclosures, requiring distribution within 45 days after the end of the fiscal quarter in which the relevant activity occurs, or 90 days after the end of the fiscal year for the fourth quarterly report, allowing many advisers that are subject to the quarterly statement rule to include these disclosures in their quarterly reports.
However, advisers may instead face direct costs associated with the need to update their charging and contracting practices to bring them into compliance with the new requirements in the case where advisers cease the restricted expense pass-through instead of making the required disclosures or instead of obtaining the required investor consent. These costs will be separate from PRA costs, which are limited to the costs associated with coming into compliance with the rules on restricted activities through making the required disclosures and, in some cases, obtaining the required investor consent.
As discussed in the Proposing Release, several factors make the quantification of these costs difficult, such as a lack of data on the extent to which advisers engage in the pass-through of expenses that will be restricted under the final rules.
Advisers are likely to vary in the complexity of their contracts and expense arrangements, because for example some advisers may not charge any expenses to a fund at all beyond management fees and carried interest. At minimum, we estimate that the additional work will require time from accounting managers ($337/hour), compliance managers ($360/hour), a chief compliance officer ($618/hour), attorneys ($484/hour), assistant general counsels ($543/hour), junior business analysts ($204/hour), financial reporting managers ($339), senior business analysts ($320/hour), paralegals ($253/hour), senior operations managers ($425/hour), operations specialists ($159/hour), compliance clerks ($82/hour), and general clerks ($73/hour).
To estimate monetized costs to advisers, we multiply the hourly rates above by estimated hours per professional. Based on staff experience, we estimate that on average, advisers will require at minimum 24 hours of time from each of the personnel identified above as an initial burden for each of the restricted activities.
However, many of these potential direct costs of updates may be higher for certain advisers. Larger advisers, with more complex contracts and expense arrangements that are more complex to update, may have greater costs. Advisers may also vary in which investors consent to pass-through of investigation expenses. These variations across advisers could impact how many hours are needed from personnel. While the factors that may increase these costs are difficult to fully quantify, we anticipate that very few advisers would face a burden that exceeds 10 times the minimum estimate.
The aggregate costs to the industry will depend on the proportion of advisers who pursue compliance via the required disclosures and via the required consent and the proportion of advisers who pursue compliance by forgoing the restricted activities. We believe that, in general, the substantial majority of advisers will pursue compliance with the final rule via disclosures and via consent as opposed to by ceasing the required activities.
Similar to the benefits, advisers may also incur costs related to this restriction in connection with not being able to charge private fund clients for the restricted expenses, in cases where the adviser opts to not make the required disclosure or, in some cases, obtain the required consent that would facilitate an exception. This may also occur in cases where the investors, having received disclosure of these expenses or when consent is sought, are able to negotiate for the adviser to bear the expense, for example by withholding consent. In addition, in these cases, advisers may incur indirect costs related to adapting their business models to identify and substitute non-restricted sources of revenue. For example, advisers may identify, negotiate, and implement methods of replacing the lost charges from the restricted practice with other charges to the fund, and so investors may bear such additional costs.
Further, as discussed above, we understand that certain private fund advisers, most notably advisers to hedge funds and other liquid funds,
The final rules substantially address these commenters' concerns, in that pass-through expense models would not have most aspects of their business model expressly prohibited by the final rules (except for the pass-through of expenses associated with investigations that result or have resulted in sanctioning the adviser for violating the Act or the rules thereunder as described in the final rules), as advisers to those fund models can comply with the restrictions in the rules via the required disclosures. The final rules will, however, likely impact certain aspects of pass-through expense models or other similar models in which advisers charge investors expenses associated with certain of the adviser's cost of being an investment adviser, because these business models may in general need to pursue the necessary disclosures to have an exception from the restriction, or otherwise undertake substantial costs to restructure their fund's business model to generate other sources of revenue, such as a new management fee,
There are two factors that mitigate these impacts for advisers to pass-through funds and their investors. First, as the Commission may already require advisers to pass-through funds to pay penalties associated with a violation the Act, we anticipate that this rule will not cause a significant disruption from current practice for advisers to pass-through funds.
To the extent advisers to pass-through expense funds pursue such restructuring, the expenses that will no longer be passed through to the fund will require the adviser to negotiate a new fixed management fee to compensate for the new costs. In addition, any such fund restructurings that are undertaken will likely impose costs that will be borne by advisers. The costs may also be borne partially or entirely by the private funds, to the extent permissible or to the extent advisers are able to compensate for their costs with substitute charges (for example, increased management fees). To the extent that existing pass-through structures are more efficient than the resulting structures that may emerge, as some commenters have stated, that may represent an additional cost of the rule.
In addition, investors may incur costs from this restriction that take the form of lower returns from some fund investments, depending on the extent to which the restriction limits the adviser's efficiency or effectiveness in providing the services that generate returns from those investments. For example, in the case of pass-through expense models, fund advisers who would have to bear new costs of providing certain services under the restriction may reduce or eliminate those services to reduce costs, which may be to the detriment of the fund's performance or lead to an increase of compliance risk. The restriction in the final rules may also represent an incentive for advisers to take fewer risks, to reduce risks of examinations or investigations occurring in the first place, which may lower investor returns.
Moreover, to the extent that restructuring a pass-through expense model of a hedge fund under the final rule diverts the hedge fund adviser'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 certain 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.
The final rule will restrict certain uses of fund resources by the private fund adviser by restricting 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, unless the adviser distributes a written
Investors in funds with advisers who would have otherwise reduced clawbacks for taxes, but under the rule will make no such reduction, will benefit from this rule from increases to clawbacks (and thus investor returns) by actual, potential, or hypothetical tax rates. Investors in funds with advisers who will continue to reduce clawbacks for taxes but will make the required disclosure will benefit from their enhanced ability to monitor the adviser and prevent the adviser from putting its interests ahead of the funds' interests. Current investors in a fund who receive these disclosures, and who are contemplating investing in a follow-on fund with the same adviser, may also benefit from these disclosures through an enhanced ability to negotiate terms of the follow-on fund, for example by negotiating that the adviser to the follow-on fund will not reduce clawbacks for taxes in the follow-on fund. The disclosures may enhance investor negotiating positions because, as discussed above, many investors report that they accept poor terms because they do not know what is “market.”
Commenters who opposed a prohibition generally did not specify any objection to the purported benefits of the rule, and instead emphasized the indirect costs of the rule. Specifically, many commenters stated that the indirect costs of the rule, as proposed, would have been very high. As discussed above, commenters stated that indirect costs and unintended consequences could have included the reduction of advisers that choose to offer clawback mechanisms in their private funds, the restructurings of current performance-based compensation arrangements into arrangements that would be less favorable for investors, offsetting changes to other economic terms applicable to investors (
This restriction will still impose direct costs on advisers of either (i) updating their charging and contracting practices to bring them into compliance with the new requirements, or (ii) making the relevant disclosures. Advisers may also attempt to mitigate the greater costs of clawbacks under the restriction, including the costs of disclosures, by introducing some new fee, charge, or other contractual provision that would make up for the lost tax reduction on the clawback, and they will then incur costs of updating their contracting practices to introduce these new provisions.
Advisers who forgo reducing clawbacks for taxes because of the final rule, either voluntarily or in a follow-on fund where investors used the enhanced disclosure in the prior fund to negotiate such terms, 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, to limit the possibility of a clawback or reduce the possible sizes of clawbacks. In this case, investors will 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 will reduce the benefits of the rule, as investors would continue to receive the reduced clawback amounts and bear portions of the adviser's tax burden. In either case, advisers will also bear additional costs from the final rule of updating their business practices.
Advisers could, therefore, incur transitory costs related to adapting their business models to identify and substitute non-restricted sources of revenue. These direct costs may be particularly high in the short term to the
In the case where advisers comply with the final rule by making the required disclosures, costs are quantified by examination of the analysis in section VII, which have been tallied along with all other disclosure costs of the restricted activities above and include time needed for advisers to make the determination that the requisite disclosure is the appropriate path to compliance for that adviser.
However, advisers may instead face direct costs associated with the need to update their charging and contracting practices to bring them into compliance with the new restriction, in particular in the case where advisers cease the restricted clawbacks instead of making the required disclosures. These costs will be separate from PRA costs, which are limited to the costs associated with coming into compliance with the rules on restricted activities through making the required disclosures, and include time needed for advisers to make the determination that the ceasing the restricted activity is the appropriate path to compliance for that adviser.
As discussed in the Proposing Release, several factors make the quantification of these costs difficult, such as a lack of data on the extent to which advisers engage in the reduction clawbacks for taxes that will restricted under the final rules.
Advisers are likely to vary in the complexity of their contracts and clawback arrangements, because for example some advisers may already refrain from reducing clawbacks for taxes. At minimum, we estimate that the additional work will require time from accounting managers ($337/hour), compliance managers ($360/hour), a chief compliance officer ($618/hour), attorneys ($484/hour), assistant general counsel ($543/hour), junior business analysts ($204/hour), financial reporting managers ($339), senior business analysts ($320/hour), paralegals ($253/hour), senior operations managers ($425/hour), operations specialists ($159/hour), compliance clerks ($82/hour), and general clerks ($73/hour).
To estimate monetized costs to advisers, we multiply the hourly rates above by estimated hours per professional. Based on staff experience, we estimate that on average, advisers will require at minimum 24 hours of time from each of the personnel identified above as an initial burden.
However, many of these potential direct costs of updates may be higher for certain advisers. Larger advisers, with more complex contracts and expense arrangements that are more complex to update, may have greater costs. While the factors that may increase these costs are difficult to fully quantify, we anticipate that very few advisers would face a burden that exceeds 10 times the minimum estimate.
The aggregate costs to the industry will depend on the proportion of advisers who pursue compliance via the required disclosures and the proportion of advisers who pursue compliance by forgoing the restricted activity. We believe that, in general, almost all advisers will pursue compliance with the final rule via disclosures as opposed to by ceasing the restricted activity.
The final rule will restrict 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
The Proposing Release stated that these non-pro rata fee and expense allocations tend to adversely affect some investors who are placed at a disadvantage to other investors.
We continue to believe that this may generally be the case. Several commenters supported the proposed provision, agreeing that it may protect investors.
Investors in funds with advisers who forgo non-pro rata fee and expense allocations because of the final rule, either voluntarily or in a follow-on fund where investors used the enhanced disclosure in the prior fund to negotiate such terms, may either benefit or face costs from the resulting revised apportionment of expenses. This will depend 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 will benefit as a result of lowered fees and expenses. 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.
The enhanced disclosures will also benefit investors directly. Investors may not be aware of the extent to which fees and expenses are charged on a non-pro-rata basis. Even if an adviser discloses upfront that non-pro rata fee and expense allocations may occur throughout the life of the fund, the complexity of fee and expense arrangements may mean that these arrangements are hard to follow. Even larger or more sophisticated investors, with greater bargaining power, may be aware that they risk non-pro-rata fees, but nonetheless be harmed by the uncertainty from complex fee arrangements, and so even larger investors may benefit from this enhanced transparency.
The lack of legacy status for this rule provision means that these benefits will accrue across all private funds and advisers who currently engage in non pro-rata allocations of fees and expenses. Because such allocations are more common for private equity funds and other illiquid funds,
The final rule will impose direct costs on advisers who must either update their charging and contracting practices to bring them into compliance with the new requirements or provide the required disclosures. These compliance costs may be particularly high in the short term to the extent that advisers renegotiate, restructure, and/or revise certain existing deals or existing economic arrangements in response to this restriction. Advisers who forgo non-pro rata fee and expense allocations because of the final rule, either voluntarily or in a follow-on fund where investors used the enhanced disclosure in the prior fund to negotiate such terms, 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. These effects may impact the use of co-investment vehicles: To the extent that advisers, in response to the final rule, increase the fees passed on to co-investment vehicles that absent the rule would have borne less than their pro-rata share of fees, the rule may reduce the attractiveness of co-investment vehicles to investors. This may reduce the liquidity available for certain illiquid funds that currently rely on co-investment vehicles for raising money for specific portfolio investments.
In the case where advisers comply with the final rule by making the required disclosures, costs are quantified by examination of the analysis in section VII, which have been tallied along with all other disclosure costs of the restricted activities above and include time needed for advisers to make the determination that the requisite disclosure is the appropriate path to compliance for that adviser.
However, advisers may instead face direct costs associated with the need to update their charging and contracting practices to bring them into compliance with the new requirements, in particular in the case where advisers cease non-pro rata allocations of fees and expenses instead of making the required disclosures. As discussed in the Proposing Release, several factors make the quantification of these costs difficult, such as a lack of data on the extent to which advisers engage in non-pro rata allocations of fees and expenses.
Advisers are likely to vary in the complexity of their contracts and fee and expense allocation arrangements, because for example some advisers may already refrain from ever implementing non-pro rata allocations of fees and expenses. At minimum, we estimate that the additional work will require time from accounting managers ($337/hour), compliance managers ($360/hour), a chief compliance officer ($618/hour), attorneys ($484/hour), assistant general counsel ($543/hour), junior business analysts ($204/hour), financial reporting managers ($339), senior business analysts ($320/hour), paralegals ($253/hour), senior operations managers ($425/hour), operations specialists ($159/hour), compliance clerks ($82/hour), and general clerks ($73/hour).
To estimate monetized costs to advisers, we multiply the hourly rates above by estimated hours per professional. Based on staff experience, we estimate that on average, advisers will require at minimum 24 hours of time from each of the personnel identified above as an initial burden.
However, many of these potential direct costs of updates may be higher for certain advisers. Larger advisers, with more complex contracts and expense arrangements that are more complex to update, may have greater costs. While the factors that may increase these costs are difficult to fully quantify, we anticipate that very few advisers would face a burden that exceeds 10 times the minimum estimate.
The aggregate costs to the industry will depend on the proportion of advisers who pursue compliance via the required disclosures and the proportion of advisers who pursue compliance by forgoing the restricted activity. We believe that, in general, almost all advisers will pursue compliance with the final rule via disclosures as opposed to by ceasing the restricted activity.
The lack of legacy status for this rule provision means that these costs will be borne across all private funds and advisers who currently engage in non pro-rata allocations of fees and expenses. Because such allocations are more common for private equity funds and other illiquid funds,
The final rule restricts 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, unless it satisfies certain disclosure requirements and consent requirements.
In the Proposing Release we stated that in cases where, as the Commission has observed, fund assets were used to address personal financial issues of one of the adviser's principals, used to pay for the advisory firm's expenses, or used in association with any other harmful conflict of interest,
Some commenters agreed that a prohibition would generate benefits,
Similar to the restricted activities rule for certain fees and expenses, we believe that the risks to investors where advisers borrow against the fund motivate greater investor protections than is provided for in the case of the final rule restricting certain fees and expenses and clawbacks (and, similarly, the other types of preferential terms that must be disclosed but are not prohibited). Because the adviser borrowing from the fund is at a greater risk of being explicitly in the adviser's interest at the expense of the fund's interest, investors will benefit from the adviser being required to satisfy the necessary consent requirements. Moreover, because the adviser borrowing from the fund is less associated with the adviser benefiting certain advantaged investors at the expense of disadvantaged investors, the benefits are preserved by only requiring at least a majority in interest of investors that are not related persons of the adviser. As a final matter, as discussed above there is a reduced risk of this conflict of interest distorting the terms, price, or interest rate of the fund's loan to the adviser, because the fund's investors can, if the borrow is disclosed and investor consent is sought, compare the terms of the loan to publicly available commercial rates to determine if the terms are appropriate given market conditions.
Advisers who currently borrow from their funds will experience costs as a result of this rule from updating their practices to bring them into compliance with the new requirements, in particular by making the required new disclosures and by obtaining new consent. Advisers who cease borrowing from their funds, either voluntarily to avoid the cost of disclosure or in a follow-on fund where investors used the enhanced disclosure in the prior fund to negotiate such terms, may also face direct compliance costs associated with updating their business practices and fund documents to remove the ability of the adviser to borrow from the fund.
In the case where advisers comply with the final rule by making the required disclosures and by obtaining the required investor consent, costs are quantified by examination of the analysis in section VII, which have been tallied along with all other disclosure costs of the restricted activities above and include time needed for advisers to make the determination that the requisite disclosure is the appropriate path to compliance for that adviser.
However, advisers may instead face direct costs associated with the need to update their borrowing practices to bring them into compliance with the new requirements, in particular in the case where advisers cease borrowing from their funds instead of making the required disclosures and obtaining the required consent. As discussed in the Proposing Release, several factors make the quantification of these costs difficult, such as a lack of data on the extent to which advisers borrow from their funds today.
Advisers are likely to vary in the complexity of their contracts and borrowing practices, because for example some advisers may already refrain from ever borrowing from their funds. At minimum, we estimate that the additional work will require time from accounting managers ($337/hour), compliance managers ($360/hour), a chief compliance officer ($618/hour), attorneys ($484/hour), assistant general counsel ($543/hour), junior business analysts ($204/hour), financial reporting managers ($339), senior business analysts ($320/hour), paralegals ($253/hour), senior operations managers ($425/hour), operations specialists ($159/hour), compliance clerks ($82/
To estimate monetized costs to advisers, we multiply the hourly rates above by estimated hours per professional. Based on staff experience, we estimate that on average, advisers will require at minimum 24 hours of time from each of the personnel identified above as an initial burden.
However, many of these potential direct costs of updates may be higher for certain advisers. Larger advisers, with more complex contracts and borrowing arrangements that are more complex to update, may have greater costs. Advisers may also vary in which investors consent to advisers' borrowing activities. While the factors that may increase these costs are difficult to fully quantify, we anticipate that very few advisers would face a burden that exceeds 10 times the minimum estimate. Multiplying minimum initial cost estimates by 10 wages yields a maximum initial cost of $2,243,689.20 per adviser. These costs are likely to be higher initially than they are ongoing. We estimate maximum ongoing costs will likely be one third of the initial costs, or $747,896.40 per year.
The aggregate costs to the industry will depend on the proportion of advisers who pursue compliance via the required disclosures and the required consent and the proportion of advisers who pursue compliance by forgoing the restricted activities. We believe that, in general, almost all advisers will pursue compliance with the final rule via disclosures and consent as opposed to by ceasing the required activities.
However, to the extent that more than a
Other commenters who discussed the costs of the proposed rule primarily stated that the costs of the rule would be indirect, in that the proposed rule would have prohibited activity that could benefit investors, such as tax advances, borrowing arrangements outside of the fund structure, an adviser purchasing securities from a client under section 206(3) of the Advisers Act, and the activity of large financial institutions that play many roles in a private fund complex.
The final rules will, as proposed, prohibit a private fund adviser from providing certain preferential terms to some investors that the adviser reasonably expects to have a material negative effect on other investors in the private fund or in a similar pool of assets,
Benefits may accrue from these prohibitions in two situations. First, we associate these practices with a tendency towards opportunistic hold-up of investors by advisers or the investors receiving the preferential treatment, involving the exploitation of an informational or bargaining advantage by the adviser or advantaged investor.
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. With respect to preferential redemption rights, 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 has a first-mover advantage and could submit a redemption request, securing its funds early but forcing the fund to sell assets in a declining market, harming the other investors in three possible ways. First, if the fund sells a portion of a profitable or valuable asset to satisfy the redemption, the remaining investors' interests in that valuable asset is diluted. Second, if the fund is forced to sell a portion of an illiquid asset in a declining market, the forced sale could further depress the value of the asset, reducing the remaining investors' interests in the asset. Third, the remaining investors may have an impaired ability to successfully redeem their own interests after the first mover's redemption. In these situations, the prohibitions would provide a solution to the hold-up problem that is not currently available. The rule will benefit the disadvantaged investors by prohibiting such a situation, and so the disadvantaged investors would be less susceptible to hold-up and experience either less dilution on their fund investments or potentially greater valuations on certain illiquid assets, and potentially enhanced abilities to redeem without impairment from the preferred investors' first-mover advantage, as benefits of the final rule.
With respect to preferential information rights, we believe a similar situation could occur. If a fund were heavily invested in a particular sector and an investor with any redemption rights at all received preferential information that the sector was expected to suffer deterioration, that investor could submit a redemption request, securing its funds early but forcing the fund to sell assets in a declining market, again harming the other investors similar to the above scenarios. In these situations, the prohibitions would provide a solution to the hold-up problem that is not currently available. The Commission has recognized these potential problems in past rulemakings.
As discussed above, commenters argued that the use of preferential information to exercise redemption is an important element of determining whether providing information would have a material, negative effect on other investors and thus whether an adviser triggers the preferential information prohibition.
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 benefits, in particular the benefits from the prohibition on preferential redemption rights, may be mitigated by the two new exceptions to the rule allowed for in the final rule. Specifically, investors in private funds where other investors receive preferential redemption rights required by applicable law will not benefit from any prohibition. However, those investors will still benefit from enhanced disclosures of those preferential terms.
The benefits of the prohibition on preferential redemption rights may generally be lessened for investors in funds managed by ERAs relying on the venture capital exemption, because such venture capital funds must prohibit investor redemptions except in extraordinary circumstances to qualify for the registration exemption.
The cost of the prohibitions will 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 have obtained and made use of the preferential terms will incur a cost of losing the prohibited redemption and information rights. This will 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.
Commenters also expressed concerns that both investors and advisers may face costs in the case of smaller funds who rely on offering preferential treatment to anchor or seed investors, including preferential redemption terms that will be prohibited under the final rules that prohibit preferential terms to some investors that the adviser reasonably expects to have a material negative effect on other investors in the private fund or in a similar pool of assets.
To the extent advisers respond to the prohibitions on certain preferential redemption rights and preferential information by developing new preferential terms and disclosing them to all investors, there may be new potential harms to investors who do not receive these new preferential terms. For example, advisers may offer greater fee breaks to anchor or seed investors instead of the prohibited terms and may accordingly charge higher fees to non-preferred investors.
In addition, advisers will 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 renegotiate, restructure and/or revise certain existing deals or existing economic arrangements in response to this prohibition. However, because such deals will have legacy status under the rule and will therefore not require a restructuring under the rules,
The costs of the prohibition on preferential redemption rights are mitigated by the two exceptions adopted in the final rule: for redemption rights that are required by applicable law and redemption rights where the adviser offers the same redemption ability to all existing and future investors, there will be limited new compliance costs, and the investors who currently benefit from such terms will continue to do so, in a change from the proposal's costs.
As discussed in the Proposing Release, several factors make the quantification of these costs difficult, such as a lack of data on the extent to which advisers currently offer preferential terms that will be prohibited under the final rule.
We estimate a range of costs because advisers are likely to vary in the complexity of their contractual arrangements, because for example some advisers may not offer any preferential terms today that will be prohibited. At minimum, we estimate that the additional work will require time from accounting managers ($337/hour), compliance managers ($360/hour), a chief compliance officer ($618/hour), attorneys ($484/hour), assistant general counsel ($543/hour), junior business analysts ($204/hour), financial reporting managers ($339), senior business analysts ($320/hour), paralegals ($253/hour), senior operations managers ($425/hour), operations specialists ($159/hour), compliance clerks ($82/hour), and general clerks ($73/hour).
To estimate monetized costs to advisers, we multiply the hourly rates above by estimated hours per professional. To estimate the minimum number of hours required, we consider the minimum amount of burden that may result from the prohibitions on certain preferential redemption rights and certain preferential information. We expect most advisers will also only face direct costs of updating their contracts for new funds, and therefore the minimum costs in the estimated range do not include direct costs for renegotiating or restructuring contracts for existing funds. Each adviser will also require a minimum amount of time from these personnel to at least evaluate whether any revisions to their contracts are warranted at all. Based on staff experience, we estimate that on average, advisers will require at minimum 72 hours of time from each of the personnel identified above as an initial burden. Multiplying these minimum hours by the above hourly wages yields a minimum initial cost of $673,106.76 per adviser. These costs are likely to be higher initially than they are ongoing. We estimate minimum ongoing costs will likely be one third of the initial costs, or $224,368.92 per year.
However, many of these potential direct costs of updates may be higher for certain advisers. Larger advisers, with more complex contractual arrangements that are more complex to update, may have greater costs. Some advisers may also need to restructure or renegotiate contracts for existing funds, in response to pressure from investors resulting from the final rules, despite the legacy status.
In addition to compliance costs, some commenters stated that the prohibition on preferential information may have an unintended chilling effect on ordinary investor communications and will impede the co-investment process.
Certain elements of the prohibition may result in these types of costs. For example, the application of the prohibition to all forms of communication, both formal and informal, may drive certain advisers to conservatively evaluate what information can be provided on a preferential basis.
Any preferential information that does not meet the specified reasonable expectation of a material, negative effect criteria would only be subject to the disclosure portions of this rule.
Because fund agreements entered into before the compliance date will have legacy status, benefits to investors will generally not accrue for current funds unless they are able to negotiate revised terms to their existing contracts, but benefits to investors in future funds will benefit from advisers ceasing prohibited preferential treatment activity. This will also generally be the case for costs of the final rules prohibiting a private fund adviser from providing certain preferential terms to some investors that the adviser reasonably expects to have a material negative effect on other investors in the private fund or in a similar pool of assets. However, investors in liquid funds who have the ability to redeem may do so in response to the final rules, if they do not currently receive preferential terms, to reallocate their investments into new private funds that are subject to the rules and do not offer preferential terms reasonably expected to have a material, negative effect on other investors. Those investors may be able to benefit from the final rules, and advisers correspondingly may face costs associated with reduced compensation from losing the assets of those investors.
The final rule also will 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.
This rule will reduce the risk of harm that some investors face from expected favoritism toward other investors, and help investors understand the scope of preferential terms granted to other investors, which could help investors shape the terms of their relationship with the adviser of the private fund. Because these disclosures would need to be provided to prospective investors prior to their investments and to current investors annually, these disclosures would help investors shape the terms of their relationship with the adviser of the private fund. This may lead the investor to request additional information on other benefits to be obtained, such as co-investment rights, and would allow an investor to understand better certain potential conflicts of interest and the risk of potential harms or other disadvantages.
Some commenters who supported the rule in general offered perspectives consistent with these benefits. In particular, as discussed above, many investors report that they accept poor legal terms in LPAs largely because they do not think that they have sufficient information on “what's market” to be included in LPA terms.
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 renegotiate, restructure 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. Both the costs and the benefits may be mitigated to the extent that advisers already make the required disclosures, for example in response to any relevant State laws.
As discussed below, for purposes of the PRA, we anticipate that the total costs of making the required disclosures pursuant to the rule prohibiting preferential treatment without disclosure will impose an aggregate annual internal cost of $364,386,264.48 and an aggregate annual external cost of $41,475,520 for a total cost of $405,861,784.48 annually.
However, private fund advisers, in addition to having to undertake direct compliance costs associated with their disclosures, may ultimately face direct costs as described by commenters associated with revising their business practices, policies, and procedures to ensure successful fund closings that are in compliance with the final rules.
Advisers are likely to vary in the complexity of their contractual arrangements, because for example some advisers may not offer any preferential terms today that will be prohibited. At minimum, we estimate that the additional work will require time from accounting managers ($337/hour), compliance managers ($360/hour), a chief compliance officer ($618/hour), attorneys ($484/hour), assistant general counsel ($543/hour), junior business analysts ($204/hour), financial reporting managers ($339), senior business analysts ($320/hour), paralegals ($253/hour), senior operations managers ($425/hour), operations specialists ($159/hour), compliance clerks ($82/hour), and general clerks ($73/hour).
To estimate monetized costs to advisers, we multiply the hourly rates above by estimated hours per professional. Based on staff experience, we estimate that on average, advisers will require at minimum 36 hours of time from each of the personnel identified above as an initial burden. For example, at minimum, each adviser may require time from these personnel to at least evaluate whether any revisions to their contracts are warranted at all. Multiplying these minimum hours by the above hourly wages yields a minimum initial cost of $336,553.38 per adviser. These costs are likely to be higher initially than they are ongoing. Based on staff experience, we estimate minimum ongoing costs will likely be one fifth of the initial costs, or $112,184.46 per year.
However, many of these potential direct costs of updates may be higher for certain advisers. Larger advisers, with more complex contracts and preferential treatment arrangements that are more complex to update, may have greater costs. While the factors that may increase these costs are difficult to fully quantify, we anticipate that very few advisers would face a burden that exceeds 10 times the minimum estimate.
We believe the direct costs of the final rule will be equal to the sum of the PRA direct costs and non-PRA direct costs, as we believe the preferential treatment rule will in general require advisers to both undertake additional disclosures of preferential treatment offered to investors as well as revise their business practices, policies, and procedures. We do not believe that, in general, any advisers will come into compliance with the final rule by, for example, forgoing offering preferential treatment altogether, thereby avoiding all disclosures-based PRA costs.
In addition to these direct compliance costs, at the proposing stage, we stated that 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.
Some commenters also stated that the prohibition on preferential treatment without disclosure would impede fund closing processes. Specifically, commenters stated that the Commission's proposal would disadvantage investors that participate in earlier closings, as the investors in later closings would have access to an even larger set of disclosed agreements. This dynamic would provide investors with an incentive to wait—it encourages investors to try to be the last investor to sign up for a fund—making fundraising even more difficult and time consuming.
While commenters may be correct that, at the margin, there may be certain increased difficulties associated with the fund closing process under the new rule, we believe there are two key factors mitigating any concern that the final rule will create any meaningful fund closing problems.
First, as discussed in the economic baseline, there already exists today an incentive for investors to wait for their latest possible opportunity to close, freeriding on the due diligence and resulting negotiated terms conducted by earlier investors,
Second, at least some portion of any increased difficulty in securing fund closings is likely to be because many advisers, having disclosed greater terms to prospective investors, now must compete more intensely to secure capital from those investors. In these cases, the increased operational difficulties for advisers are at least partially offset by the benefits of greater competition to investors.
The lack of legacy status for this rule provision means that these benefits will accrue across all private funds and advisers. This will also be the case for costs of the rule.
The final audit rule will 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 audits in accordance with the audit provision under the custody rule.
We discuss the costs and benefits of this rule below. Several factors, however, make the quantification of many of the economic effects of the final amendments and rules difficult. For example, there is a lack of quantitative data on the extent to which auditors may raise their prices in response to new demand for audits. It would also be difficult to quantify how advisers may pass on any additional costs for audits in response to the final rule. 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.
Because advisers to funds that an adviser does not control and that are neither controlled by nor under common control with the adviser (
We further understand that agreed-upon procedures are a more common practice for these funds, and such procedures often relate to the securitized asset fund's cash flows and the calculations relating to a securitized asset fund portfolio's compliance with the portfolio requirements and quality tests (such as overcollateralization, diversification, interest coverage, and other tests) set forth in the fund's securitization transaction agreements.
The audit requirement will provide an important check on the adviser's valuation of private fund assets, which often has an impact on the calculation of the adviser's fees. 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 that are not captured by surprise examinations, which only test the existence of assets:
However, audits do not perfectly prevent all forms of investor harm, and investor benefits can be mitigated to the extent that checks on valuation, even independent checks, are influenced by adviser behavior in a way that is not possible for audits to detect. For example, an adviser trading an illiquid asset between different funds owned by the adviser or the adviser's related entities may bias data reported by independent pricing services, to the extent that the asset's illiquidity causes the pricing service to overly weight the adviser's own transactions in publishing an independent estimate of the asset's price.
As discussed above, currently not all financial statement audits of private funds are necessarily conducted by a PCAOB-registered independent public accountant that is subject to regular inspection.
In a change from the proposal, investors will not receive potential benefits from any enhanced regulatory oversight that would have accrued as a result of the proposed requirement for the adviser to engage the auditor to notify the Commission under some conditions.
One commenter argued that audits do not provide benefits to private fund investors.
Moreover, a key focus on one study is estimating the impact of an audit on an adviser's ability to raise new funds.
As discussed above, another commenter cites an academic study as stating that investors can “see through” any potential valuation manipulation that would be uncovered by an audit.
Other commenters who questioned the benefits of a mandatory audit rule agreed that audits provide benefits but characterized the rule as unnecessary given current market practices around audits. For example, one commenter
As discussed above, some commenters criticized the proposed rule for eliminating the surprise examination option under the custody rule without evidence that surprise examinations have not adequately protected private fund investors.
The benefits from mandatory audits 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 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 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 IARD data, as of December 31, 2022, there were 5,248 registered advisers providing advice to private funds, excluding advisers managing solely SAFs, and we estimate that these advisers would, on average, each provide advice to 10 private funds, excluding SAFs.
However, some advisers to funds would obtain the required financial statement audits even in the absence of the final rule. The cost of the final audit requirement will therefore depend on the extent to which advisers currently obtain audits and, if so, whether the auditors are registered with the PCAOB and independent. We therefore believe that the costs incurred will approximate 12% of these amounts, because across all types of advisers to private funds besides securitized asset funds, approximately 88% of funds are currently audited in connection with the fund adviser's alternative compliance under the custody rule.
Moreover, even estimated costs of $474 million may be overstated, because we have not deducted costs of surprise exams from advisers who do not get an
For funds that had received an audit by an auditor that is not registered with the PCAOB, the costs of audits will also be offset by a reduction in costs from no longer obtaining their previous audit, although we anticipate that the cost of the required audit will likely be greater because a PCAOB-registered and -inspected auditor who is independent may cost more than an auditor that is not subject to the same requirements. We requested comment on data that may facilitate quantification of these offsets,
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 by such auditors.
We are not convinced that there may be an insufficient number of suitable auditors available. As shown in Figures 4 and 5 above, Form ADV shows growth in the number of audits by PCAOB-registered and -inspected independent private fund auditors of approximately 2,000 in 2020, approximately 3,000 in 2021, and approximately 6,000 in 2022.
In other words, the audit industry has already organically, of its own accord, added a number of audits to its workload in the past year commensurate with the workload that will be added by the final rule. Moreover, the number of audits that will be added by the final rule is of the same order of magnitude as the number of audits added organically by the industry in each of the last several years. We believe this indicates that the audit industry is equipped to expand to meet the demand for additional audits without substantial additional costs, and so we do not believe that supply constraints on auditors because of the final rule will substantially increase the costs of private fund audits. This pattern and conclusion holds by type of private fund and by fund size.
Several commenters further specify that the concern over a lack of a sufficient number of suitable auditors will particularly apply to funds that rely on Big Four auditing firms for various non-audit services. Several commenters state that certain funds get an audit from a Big Four firm because of their investors' demands, but none of the Big Four firms meet the independence requirements associated with the current custody rule for the fund.
Because the case of funds that the adviser does not control and are neither controlled by nor under common control with the adviser (
The proposed Commission notification requirement is not present in the final rule, and thus does not represent a new cost.
Because the final rule aligns the private fund mandatory audit requirement with the custody rule audit requirement, advisers under the final rule will also face lower costs than under the proposal by avoiding any confusion associated with differences in the requirements of the two rules. Several commenters stated that differences between the two rules could create a risk of confusion.
The indirect costs of the audit requirement will 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 (
In addition, the final adviser-led secondaries rule will require advisers to obtain fairness opinions or valuation opinions from an independent opinion provider in connection with certain adviser-led secondary transactions with respect to a private fund. In connection with this opinion, the final rule also requires 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 final adviser-led secondaries rule differs from the proposal in that it allows a fund to obtain either a fairness opinion or a valuation opinion in connection with certain adviser-led secondary transactions instead of requiring a fairness opinion and specifies a timeline for the delivery of this opinion to investors.
This requirement will 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. This requirement will also not apply where the transaction is a tender offer instead of an adviser-led secondary transaction as defined in the rule, and so neither the benefits nor the costs will apply in the case of tender offers.
The final rule's requirement that an adviser distribute a fairness opinion or valuation opinion and summary of material business relationships with the opinion provider in connection with certain adviser-led secondary transactions may provide benefits to investors in the specific context of adviser-led secondary transactions similar to the effects of the mandatory audit rule.
While the final rule, in a change from the proposal, will also allow for the use of a valuation opinion instead of a fairness opinion, we understand that a valuation opinion will still provide investors with a strong basis to make an informed decision.
Because the final rule differs from the proposal in that tender offers will not be captured by the definition in the rule when the investor is not faced with the decision between (1) selling all or a portion of its interest and (2) converting or exchanging all or a portion of its interest, advisers may have additional incentives to structure transactions as tender offers instead of as adviser-led secondary transactions.
Because the final rule specifies that the adviser-led secondaries rule will not apply to advisers in the case of SAFs,
Some commenters agreed with the stated benefits of the final rule as outlined in the Proposing Release, and generally supported it.
However, we continue to believe that this requirement will, in many cases, provide the above benefits to investors. Moreover, it is the staff's understanding that adviser-led secondaries also occur during times of stress, and may be associated with an adviser who needs to restructure a portfolio investment.
Similar to the final mandatory audit rule, the benefits from mandatory fairness opinions/valuation opinions are particularly relevant for illiquid investments. Illiquid assets currently are where we believe it is most feasible 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 and where there is the greatest risk of asymmetry of information between investors and the adviser. 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 to generate a more favorable price in the secondary transaction.
Because Form PF's recently adopted new quarterly reporting requirements for private equity fund advisers will already collect quarterly information on the occurrence of adviser-led secondaries (after the effective date of the Form PF final amendments, albeit with a definition of “adviser-led secondary” that is not identical to the definition used for the adviser-led secondaries rule), any investor protection benefits of the final rules may be mitigated to the extent that Form PF is already a sufficient tool for investor protection purposes.
Costs would also be incurred related to obtaining the required fairness opinion or valuation 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 $100,565 for each fairness opinion or valuation opinion and material business relationship summary.
To the extent that certain hedge fund or other open-end private fund transactions are captured by the rule, these funds and their investors would also face comparable fees and costs. The costs associated with obtaining fairness opinions or valuation opinions could dissuade some private fund advisers from leading these transactions, which could decrease liquidity opportunities for some private fund advisers and their investors. Under current practice, some investors bear the expense associated with obtaining a fairness opinion or valuation opinion if there is one. We expect similar arrangements may be made going forward to comply with the final rule, with disclosure where required. Advisers could alternatively attempt to introduce substitute charges (for example, increased management fees) 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. We do not believe that specifying a timeline for delivery of the opinion will significantly change the cost of compliance.
Conversely, to the extent that advisers restructure their transactions as tender offers to avoid being captured by the definition of adviser-led secondary, private fund advisers and their investors may be able to mitigate the costs of the final rule.
Some commenters highlighted the costs associated with obtaining a fairness opinion.
Amendments to rule 206(4)-7 under the Advisers Act will require all advisers, not just those to private funds, to document the annual review of their compliance policies and procedures in writing. These requirements will apply to advisers with respect to their SAFs, and so the benefits and costs below will apply even in the case of SAFs. We discuss the costs and benefits of this amendment below. Several factors, however, make the quantification of many of the economic effects of the final amendments and rules difficult. As a result, parts of the discussion below are qualitative in nature.
The rule amendment requiring all SEC-registered advisers to document the annual review of their compliance policies and procedures in writing will allow our staff to better determine whether an adviser has complied with the review requirement of the compliance rule, and will 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 amendment may reduce the risk of non-compliance, as well as any risk to investors associated with non-compliance. Several commenters agreed with these benefits.
The commenters who disagreed with the rule amendment generally emphasized the costs of the change, instead of questioning the benefits, as discussed further below in this section. However, one commenter stated that the amendment would be unnecessarily burdensome and duplicative for asset managers that have multiple registered investment advisers operating under a common compliance program
The benefits from documentation of compliance programs will be relevant for all investors, as the rule applies to all advisers that are registered or required to register, not just private fund advisers. In addition, the lack of legacy status for this rule amendment mean that these benefits will accrue across all registered advisers.
Lastly, the required documentation of the annual review of the adviser's 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 cost of approximately $40,890,982 for internal time, and approximately $3,525,579 for external costs.
1 In connection with the written report required under rule 38a-1, the Compliance Rule Adopting Release stated that “[a]ll reports required by our rules are meant to be made available to the Commission and the Commission staff and, thus, they are not subject to the attorney-client privilege, the work-product doctrine, or other similar protections.”
Finally, the amendment to the Advisers Act recordkeeping rule will require advisers who are registered or required to be registered to retain books and records related to the quarterly statement rule,
These requirements will impose costs on advisers related to maintaining these records. Several commenters stated that the recordkeeping requirements would be burdensome.
While the final rules may result in some of these effects, we do not have a basis for quantifying the cost of these effects, and no basis was provided by the commenters. As discussed below, for purposes of the PRA, we anticipate that the additional recordkeeping obligations would impose, for all advisers, an annual cost of approximately $22,430,631.25.
The final rules will 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 final rules may 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 as well as consent requirements discussed above.
Regarding preferential treatment, the final rules further align fund adviser actions and investor interests by prohibiting certain preferential treatment practices altogether (instead of only requiring disclosure or consent), specifically prohibiting preferential terms regarding liquidity or transparency that have a material, negative impact on investors in the fund or a similar pool of assets.
While many of the final disclosure and consent requirements involve making disclosures to and, in some cases, obtaining consent from only current investors, and not prospective investors, the rule's 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 rules prohibit certain activities that represent possible conflicting arrangements between investors and fund advisers, with certain exceptions where certain disclosures regarding those activities are made and, in some cases, where the required investor consent is also obtained. 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 investments. This may particularly be the case for smaller investors who are currently more frequently harmed by the activities being considered. The same effect may occur in the case of the final rules' requirements for advisers to obtain audits of fund financial statements. To the extent that investors currently bear costs of searching for fund advisers who do have their funds undergo audits, or bear costs associated with monitoring fund adviser conduct to avoid harm when the adviser does not have the fund undergo an audit, the final mandatory audit rule will enhance investor protection and thereby improve the efficiency of the investment adviser search process.
The above pro-efficiency effects may also be strengthened by the reduced risks of non-compliance and increased efficiency of the Commission's enforcement and examination of non-compliance resulting from the final amendments to the compliance rule for a written documentation requirement and the amendments to the books and records rule.
There may be losses of efficiency from the rules prohibiting various activities, and from any changes in fund practices in response to the 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 will be prohibited under the final rules 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 reevaluate 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 reevaluation, those investors may choose to incur costs of searching for new fund advisers or alternative investments.
Other risks to efficiency may arise from the scope of the final rules, for example the private fund adviser rules not applying to advisers with respect to their CLOs and other SAFs. Because advisers to SAFs will face no costs under the private fund adviser rules with respect to their SAFs, more advisers may choose to structure their funds as an SAF so as to avoid the costs of the rules. To the extent this choice by advisers only occurs because advisers are incentivized to reduce their compliance costs, but those advisers would have greater skill or comparative advantage in advising other types of private funds, the effect the final rules have on adviser choice of fund structure may reduce efficiency.
The limited scope regarding SAF advisers may also result in a rule with lower efficiency gains relative to a rule with no such limitation. This is because the efficiency gains from the rule accrue, in part, from the enhanced comparability and transparency across private funds, and comparability effects are strongest when a rule is applied across all types of funds. The limitation may make SAFs less comparable to other types of funds, which may yield lower efficiency benefits when investors search across fund types for an adviser. However, we believe that the distinct features that we understand CLOs and other SAFs already have today likely result in investors already viewing CLOs and other SAFs as distinct types of investments and not comparable to an equity interest in other funds.
There may also be a risk of the transparency benefits of the rule getting reduced by advisers restructuring their funds to be SAFs to meet the exclusion under the final rules. Any adviser restructuring their fund into a SAF to reduce their compliance costs or avoid the restrictions and prohibitions in the private fund adviser rules would result in a fund less comparable to other types of private funds. However, these risks are also likely to be mitigated by the fact that any such adviser would need to compete with the existing CLO and broader SAF landscape. In particular, any such adviser seeking to attract investors to a new SAF would likely need to arrange for or issue independent collateral administrator reports that, like existing CLOs and other SAFs, detail all cash flows associated with the assets in their fund portfolio and list all market values of the assets in their fund portfolio.
Many commenters emphasized the risks to potential losses of efficiency and questioned the possible benefits to efficiency.
The final rules may also affect competition in the market for private fund investing.
First, to the extent that the enhanced transparency of certain fees, expenses, and performance of private funds under the final rules may reduce the cost to some investors of comparing private fund investments, then current investors evaluating whether to continue investing in subsequent funds with their current adviser may be more likely to reject future funds raised by their current adviser in favor of the terms of competing funds offered by competing advisers, including new funds that advisers may offer as alternatives that they would not have offered absent the increased transparency, or competing advisers whom the investor would not have considered absent the increased transparency, including newer or smaller advisers. For example, we understand that subscription facilities can distort fund performance rankings and distort future fundraising outcomes,
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 advisers may lose investors from their future funds if those investors only participated in that adviser's prior funds 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.
These pro-competitive effects of the rule will directly benefit private funds with advisers within the scope of the final rules and investors in those funds.
The above pro-competitive effects may also be strengthened by the reduced risks of non-compliance and increased efficiency of the Commission's enforcement and examination of non-compliance resulting from the final amendments to the compliance rule for a written documentation requirement and the amendments to the books and records rule.
However, certain commenters expressed concerns that there may be negative effects on competition as well. Commenters stated that various individual components of the rule could reduce competition, such as the prohibition on reducing clawbacks for taxes (by delaying performance-based compensation that may increase employee turnover)
Some commenters also stated restrictions on preferential treatment
We believe that the concerns with respect to preferential treatment for smaller advisers will be mitigated in part by the fact that smaller advisers are only prevented from offering anchor investors preferential redemption rights and preferential information that the advisers reasonably expects to have a material negative effect on other investors. Therefore, these potential harms to competition will be mitigated to the extent that smaller, emerging advisers do not need to be able to offer anchor investors preferential rights that have a material negative effect on other investors to effectively compete, and to the extent that smaller emerging advisers are able to compete effectively by offering anchor investors other types of preferential terms. We have also provided certain legacy status, namely regarding contractual agreements that govern a private fund and that were entered into prior to the compliance date if the rule would require the parties to amend such an agreement, for all advisers under the prohibitions aspect of the preferential treatment rule and all aspects of the restricted activities rule requiring investor consent.
Commenters also stated more generally that increased compliance costs on advisers may reduce competition by causing advisers to close their funds and reducing the choices investors have among competing advisers and funds.
However, the effects on the smallest advisers will be mitigated where those advisers do not meet the minimum assets under management required to register with the SEC.
As discussed above, some commenters also expressed concerns that the loss of smaller advisers would result in reduced diversity of investment advisers, based on an assertion that most women- and minority-owned advisers are smaller and associated with first time funds.
As stated above, some commenters stated that the proposed private fund adviser rules and other recently proposed or adopted rules would have interacting effects, and that the effects should not be analyzed independently.
To the extent advisers respond to these costs by exiting the market, or by forgoing entry, competition may be negatively affected. In particular, competition may be negatively affected because smaller advisers may be more likely than larger advisers to respond to new compliance costs by exiting or by forgoing entry. To the extent smaller or newer advisers attempt to respond to new compliance costs by passing them on to their funds, this may hinder their ability to compete, as larger advisers may be more able to lower their own profit margins instead of passing some or all of their new costs on to funds and investors.
We have also responded to commenter concerns by providing for a longer transition period for smaller advisers. The costs of having multiple ongoing rulemakings primarily accrue during transition periods, when advisers may have to revise processes, procedures, or fund documents with multiple new rulemakings in mind. In consideration of those costs, we are providing that advisers with less than $1.5 billion in assets under management will have 18 months to comply with the adviser-led secondaries, preferential treatment, and restricted activities rules, compared to the 12 months for larger advisers.
To the extent these effects occur, competition may be reduced, but these potential negative effects on competition must be evaluated in light of (1) the other pro-competitive aspects of the final rules, in particular the pro-competitive effects from enhancing transparency, which are likely to help smaller advisers effectively compete and may therefore benefit those advisers,
Commenters emphasized the risks that the rules may reduce capital formation through several different types of arguments. Several commenters made general statements that the high compliance costs of the rule may negatively affect capital formation.
While we believe we have resolved certain of these concerns in the final rules, in particular by revising the restricted activities in the final rules relative to the proposal, the final rules still carry a risk that capital formation may be negatively affected. The Proposing Release stated that there may be reduced capital formation associated with the final rules to prohibit various activities, to the extent that investors currently benefit from those activities.
In further response to commenter concerns, we have also reexamined the risks of reduced capital formation in two ways related to the scope of the final rule. In particular, we have examined in two ways how the adviser incentives induced by the boundaries of the scope of the rules may carry unintended consequences of changes to adviser behavior that could risk reducing capital formation.
First, as discussed above, all of the elements of the final rule will in general not apply with respect to non-U.S. private funds managed by an offshore investment adviser, regardless of whether that adviser is registered.
Second, the quarterly statements, mandatory audit, and adviser-led secondaries rules will not apply to ERAs.
As part of our analysis in response to commenter concerns on risks of reduced capital formation, we have investigated the potential likelihood of advisers responding to differences in RIA and ERA requirements under the final rules by examining how advisers respond to differences in RIA and ERA requirements today. In particular, if there is evidence today that certain private fund advisers respond to different requirements for RIAs and ERAs by avoiding crossing the threshold of $150 million in private fund assets, we may expect that the increasing differential for RIAs and ERAs under the final rules will, at the margin, impede capital formation by inducing advisers to keep their assets under $150 million. Figure 8 examines the joint distribution of assets under management by (1) RIAs and (2) ERAs relying on the size exemption for advisers with only private funds and less than $150 million in RAUM. The figure does not demonstrate any evidence of disproportionately fewer advisers just above the $150 million threshold compared to the proportion of advisers with less than $150 million in assets.
In addition, as discussed above, some advisers to venture capital funds have recently registered as RIAs to be able to have their portfolio allocations outside of direct equity stakes in private companies exceed 20%.
Lastly, certain elements of the rules provide for certain relief to funds of funds. For example, the quarterly statement rule requires advisers to private funds that are not funds of funds to distribute statements within 45 days after the first three fiscal quarter ends of each fiscal year (and 90 days after the end of each fiscal year), but advisers to funds of funds are allowed 75 days after the first three quarter ends of each fiscal year (and 120 days after fiscal year end).
However, we also continue to believe the final rules will facilitate capital formation by causing advisers to manage private fund clients more efficiently, by restricting or 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 may lead to enhanced capital formation in the real economy, as portfolio companies will have greater access to the supply of financing from private fund investors. This may contribute to greater capital formation through greater investment into those portfolio companies.
The final rules may also enhance capital formation through their competitive effects by inducing new fund advisers to enter private fund markets.
Similarly, the final rules may enhance capital formation by inducing new investors to enter private fund markets. Restricting activities that represent conflicting arrangements, requiring mandatory audits and mandatory fairness or valuation opinions for adviser-led secondaries, and heightened transparency around fee/expense/performance information may increase investor confidence in the safety of their investments.
Similarly, and in addition to lower costs of intermediation between investors and portfolio investments, the final rules may directly lower the costs charged by fund advisers to investors by improving transparency over fees and expenses. The final 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, restricting or 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 may be further benefits to capital formation.
Several commenters stated their view that the Commission had not considered sufficient alternatives in its proposal.
First, the Commission could have broadened 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 final 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 subject to 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, an extension of the 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 audit rule, we considered narrowing the rule by providing further full or partial exemptions. For example, we could have exempted advisers from obtaining audits for smaller funds or we could exempt an adviser from compliance with the rule where an adviser receives little or no compensation for its services or receives no compensation based on the value of the fund's assets. We could also have exempted advisers to hedge funds and other liquid funds or funds of funds. Further, we could have provided an exemption to advisers from obtaining audits for private funds below a certain asset threshold, for funds that have only related person investors, or for funds
These exemptions could also have been applied in tandem, for example by exempting only advisers to hedge funds and other liquid funds below a certain asset threshold. For each of these categories, we considered 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 final 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 audit rule.
Moreover, we have already recognized 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 satisfies the mandatory private fund adviser audit rule.
As a last alternative, instead of requiring an audit as described in the audit rule, we considered requiring that advisers provide other means of checking the adviser's valuation of private fund assets. For example, we considered requiring that an adviser subject to the 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 audit rule as adopted. As an immediate matter, limiting the requirement in this way would undermine the broader goal of the rule to protect investors against misappropriation of fund assets and providing an important check on the adviser's valuation of private fund assets. 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 also considered requiring additional and more granular information to be provided in the quarterly statements that registered investment advisers will be required to provide to investors in private funds. For example, we could have required 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 do not believe that the policy goals of the rule would be achieved by further increasing the costs of the rule, including potential harms to competition and capital formation.
We could also, for example, have required disclosure of performance information for each portfolio investment. For illiquid funds in particular, we could have required 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 quarterly statement rule, calculating performance information for each portfolio investment could add significant operational burdens and costs. Because these costs would vary based on the number of portfolio investments held by a private fund, such a rule would distort adviser incentives by incentivizing them to take on fewer portfolio investments. The operational burden and cost would also depend on whether the alternative rule 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 with and without the impact of fund-level subscription facilities, this calculation may be more burdensome than the single calculation required to make the required fund-level performance information disclosures with and without the impact of fund-level subscription facilities.
As a final granular addition to performance disclosures, the Commission could have required the reporting of a wider variety of performance metrics for hedge funds and other liquid funds, similar to the detailed disclosure requirements for illiquid funds. These could have included requirements for liquid funds to report estimates of fund-level alphas, betas, Sharpe ratios, or other performance metrics. We believe that for investors in 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. Commenter concerns also indicate that further standardized required reporting would continue to raise costs,
As discussed above, one commenter suggested requiring DPI and RVPI instead of MOIC for realized and unrealized investments.
Further, the Commission also considered 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 have required 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. While we believe some commenters would support such an alternative, based on the lower cost,
We also considered 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. One commenter suggested that advisers should be required to report information about borrowing from the fund on Form ADV and Form PF,
Instead of requiring disclosure of comprehensive fee and expense information to investors, we considered prohibiting certain fee and expense practices. For example, we could have prohibited 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 have prohibited 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 might 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 considered prohibiting certain performance disclosure practices. For example, instead of requiring disclosure of performance with and without the effect of fund-level subscription facilities, we considered prohibiting advisers from presenting performance with the effect of such facilities unless they also presented performance without the effect of such facilities. Similarly, we considered 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. Commenters did not generally either support or criticize this alternative. However, while we believe that the required disclosures present the correct standardized, detailed information for investors to be able to evaluate performance, we do not believe there are harms from advisers electing to disclose additional information, and we again believe investors and advisers should have the flexibility to negotiate for that additional information if they believe it would be valuable. 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 considered broadening the application of this rule to, for example, apply to all advisers to private funds, rather than to only private fund advisers that are registered or required to be registered. Extending the application of the final 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. However, the extension of the final 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 and advisers, 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, and thus extending the rule to those advisers would further increase the costs of the rule, potentially increasing any potential harms to competition or capital formation.
The final rules will 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 final 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 final rule, 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 costs resulting from an
The Commission also considered restricting other activities, in addition to those currently restricted in the final rule. For example, we could have restricted 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 restriction of such charges and the enhancement of disclosures or consent practices around those costs 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 restriction could risk effectively limiting an adviser's ability to outsource certain activities that could be better performed by a consultant, because under the restriction the adviser would not be able to pass those costs on to the fund.
Further, the Commission considered providing an exemption for funds utilizing a pass-through expense model from the restriction 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 restructuring any arrangements not compliant with the restriction, including the costs associated with having to make enhanced disclosures of those expenses.
The Commission also considered requiring consent for all of the restricted activities instead of just investigation expenses and borrowing.
We lastly considered prohibiting all of the activities outright instead of providing for certain exceptions for when advisers make certain disclosures and, in some cases, also obtain the required investor consent. However, as discussed above, we are convinced by commenters that our concerns with certain of these activities will be substantially alleviated, so long as advisers satisfy the disclosure requirements and, in some cases, consent requirements provided for in the final rules.
The Commission also considered changing the scope of the requirement for advisers to obtain a fairness opinion or valuation opinion in connection with adviser-led secondary transactions.
For example, we considered 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. Under that alternative, investors would receive the assurance of the fairness of more adviser-led secondary transactions. An extension of the final rule to apply to all advisers would, however, likely impose the costs of obtaining fairness opinions or valuation 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. This could discourage those advisers from undertaking these transactions. This could ultimately reduce liquidity opportunities for fund investors.
We also considered consent requirements for the rule, where instead of requiring advisers to obtain a fairness opinion or valuation opinion, advisers would have been required to obtain investor consent prior to implementing an adviser-led secondary transaction. We considered this alternative because the market friction in these transactions bears certain similarities to the case
However, as discussed in the baseline, unlike the case of adviser borrowing, there is a heightened risk of this conflict of interest distorting the terms or price of the transaction, and it may be difficult for disclosure practices or consent practices alone to resolve these conflicts.
We also considered providing exemptions from the rule. 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 liquid funds for whom the concerns regarding pricing of illiquid assets may be less relevant. Several commenters requested such exemptions.
Some commenters suggested that we expand the final rule to offer additional protections to investors, such as requiring advisers to use reasonable efforts to allow investors to remain invested on their original terms without carry crystallization.
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 considered 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 that would have a material negative effect on other investors. As discussed above, we believe that certain types of preferential terms raise relatively few concerns, if disclosed.
Further, we considered prohibiting
In addition, for preferential terms not regarding redemption or information about portfolio holdings or exposures, we considered 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.
We lastly considered implementing consent requirements, both as an alternative to the prohibition from providing certain preferential terms and as an alternative to the requirement to disclose all preferential treatment. With respect to the prohibition, as we have
Certain provisions of our new rules will result in new “collection of information” requirements within the meaning of the PRA.
In addition, the title of the new collection of information requirement we are proposing is “Rule 211(h)(2)-1 under the Advisers Act.” In the Proposing Release, we did not submit a PRA analysis for rule 211(h)(2)-1 because the proposed rule flatly prohibited certain conduct and, accordingly, did not contain a “collection of information” requirement within the meaning of the PRA. However, final rule 211(h)(2)-1 prohibits an adviser from engaging in certain activities, unless the adviser provides certain disclosure to investors, as discussed in greater detail below. In the Proposing Release, we solicited comment on whether rule 211(h)(2)-1 should include disclosure requirements. In response to comments received, we have decided to adopt such a requirement. Accordingly, we are requesting comment on this collection of information requirement, and intend to submit these requirements to the OMB for review under the PRA. Responses to the information collection will not be kept confidential. 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.
We published notice soliciting comments on the collection of information requirements in the Proposing Release for the other rules and submitted the proposed collections of information to OMB for review and approval in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. We received general comments to our time and cost burdens stating that we underestimated the burdens.
As discussed above, we are not applying certain of these rules to advisers regarding SAFs they advise.
We discuss below the new collection of information burdens associated with final rules 211(h)(1)-2, 206(4)-10, 211(h)(2)-1, 211(h)(2)-2, and 211(h)(2)-3 as well as the revised existing collection of information burdens associated with the 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 will be kept confidential subject to the provisions of applicable law. Because the information collected pursuant to final rules 211(h)(1)-2, 211(h)(2)-1, 211(h)(2)-2, 206(4)-10, and 211(h)(2)-3 requires disclosures to existing investors and in some cases potential investors, these disclosures will not be kept confidential.
Final rule 211(h)(1)-2 requires 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 fiscal quarters of operating results, and distribute the quarterly statement to the
The collection of information is necessary to provide private fund investors with information about their private fund investments. The quarterly statement is designed to allow a private fund investor to compare standardized cost and performance information across its private fund investments. We believe this information will 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 will 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 will 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 December 31, 2022, there were 15,361 investment advisers registered with the Commission.
Some commenters highlighted the potential costs of the required quarterly statements.
We were persuaded by commenters who asserted that the proposed burdens underestimated the time and expense associated with the proposed quarterly statement rule. We believe that it will take more time than initially contemplated in the proposal to collect the applicable data, perform and review calculations, prepare the quarterly statements, and distribute them to investors. To address commenters' concerns, and recognizing the changes from the proposal discussed above in Section II.B (Quarterly Statements), we are revising the estimates upwards as reflected in the chart below. For instance, to address one commenter's contention that we underestimated the burdens generally, and recognizing the changes from the proposal, we are revising the internal initial burden for the preparation of the quarterly statement estimate upwards to 12 hours. We believe this is appropriate because advisers will likely need to develop, or work with service providers to develop, new systems to collect and prepare the statements. We have also adjusted these estimates to reflect that the final rule will not apply to SAF advisers with respect to SAFs they advise.
We have made certain estimates of this data solely for this PRA analysis. The table below summarizes the initial and ongoing annual burden estimates associated with the final quarterly statement rule.
Final rule 206(4)-10 will 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 in accordance with the audit provision (and related requirements for delivery of audited financial statements) under the custody rule.
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 will 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 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.
Based on IARD data, as of December 31, 2022, there were 15,361 investment advisers registered with the Commission.
One commenter generally criticized the hours estimates underlying the cost estimates in the Proposing Release as unsupported, arbitrary, and possibly underestimated.
We have made certain estimates of this data, as discussed below, solely for
Final rule 211(h)(2)-1 prohibits all private fund advisers from, directly or indirectly, engaging in the following activities, unless they provide written disclosure to investors and, in some cases, obtain investor consent regarding such activities: charging the private fund for fees or expenses associated with an investigation of the adviser or its related persons by any governmental or regulatory authority (other than fees and expenses related to an investigation that results or has resulted in a court or governmental authority imposing a sanction for a violation of the Investment Advisers Act of 1940 or the rules promulgated thereunder); charging the private fund for any regulatory or compliance fees or expenses, or fees or expenses associated with an examination, of the adviser or its related persons; 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; charging or allocating fees and expenses related to a portfolio investment on a non-pro rata basis when more than one private fund or other client advised by the adviser or its related persons have invested in the same portfolio company; and borrowing money, securities, or other private fund assets, or receiving a loan or extension of credit, from a private fund client.
As noted above, in the Proposing Release we did not submit a PRA analysis for rule 211(h)(2)-1 because the proposed rule flatly prohibited certain conduct and, accordingly, proposed rule 211(h)(2)-1 did not contain a “collection of information” requirement within the meaning of the PRA. However, final rule 211(h)(2)-1 prohibits an adviser from engaging in certain activity, unless the adviser provides certain disclosure to investors. Accordingly, we are requesting comment on this collection of information requirement in this release and intend to submit these requirements to the OMB for review under the PRA.
The collection of information is necessary to provide private fund investors with information about their private fund investments. We believe that many advisers fail to provide disclosure of the activities covered by the restrictions or, when disclosure is provided, it is often insufficient.
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)-1 and is mandatory if the adviser engages in the restricted activity. 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 December 31, 2022, there were 12,234 investment advisers (including both registered and unregistered advisers, but excluding advisers managing solely SAFs) that provide advice to private funds.
We have made certain estimates of this data solely for this PRA analysis. The table below summarizes the initial and ongoing annual burden estimates associated with the rule. We request comment on whether the estimates associated with the new collection of information requirements in “Rule 211(h)(2)-1 under the Advisers Act” are reasonable in Section VII.I below.
Final rule 211(h)(2)-2 requires an adviser registered or required to be registered with the Commission that is conducting an adviser-led secondary transaction to distribute to investors a fairness opinion or valuation 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 will 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 December 31, 2022, there were 15,361 investment advisers registered with the Commission.
One commenter generally criticized the hours estimates underlying the cost estimates in the Proposing Release as unsupported, arbitrary, and possibly underestimated.
We have made certain estimates of this data solely for this PRA analysis. The table below summarizes the annual burden estimates associated with the rule's requirements.
Final rule 211(h)(2)-3 prohibits all private fund advisers from providing preferential terms to investors regarding certain redemptions or providing certain information about portfolio holdings or exposures, subject to certain limited exceptions.
The new rule is designed to protect investors and serve the public interest by requiring disclosure of preferential treatment afforded to certain investors. The new rule will increase transparency 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 will help investors shape the terms of their relationship with the adviser of the private fund. The collection of information is necessary to provide
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 will be all investment advisers that advise one or more private funds. Based on IARD data, as of December 31, 2022, there were 12,234 investment advisers (including both registered and unregistered advisers, but excluding advisers managing solely SAFs) that provide advice to private funds.
One commenter generally criticized the hours estimates underlying the cost estimates in the Proposing Release as unsupported, arbitrary, and possibly underestimated.
We have adjusted this estimate upwards from the proposal to reflect the final rule (including with respect to the exceptions in paragraph (a) of the final rule), updated data, new methodology for certain estimates, and comments we received to our estimates asserting that we underestimated these figures in the proposal. We have also adjusted these estimates to reflect that the final rule will not apply to SAF advisers with respect to SAFs they advise.
We have made certain estimates of this data solely for this PRA analysis. The table below summarizes the initial and ongoing annual burden estimates.
The amendment to rule 206(4)-7 requires 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 amendments to rule 206(4)-7 will be kept confidential subject to the provisions of applicable law.
Based on IARD data, as of December 31, 2022, there were 15,361 investment advisers registered with the Commission. In our most recent PRA submission for rule 206(4)-7, we estimated a total hour burden of 1,293,840 hours and a total monetized time burden of $322,036,776. As noted above, all advisers that are registered or required to be registered, including advisers to SAFs, will be required to document their annual review in writing.
Commenters argued there would be certain additional costs associated with the amendment to rule 206(4)-7, such as compliance consultants or outside counsel.
The amendments to rule 204-2 will require advisers to private funds, where the adviser is registered or required to be registered with the Commission, to retain books and records related to the quarterly statement rule, the audit rule, the adviser-led secondaries rule, the restricted activities rules, and the preferential treatment rule.
Specifically, the books and records amendments related to the quarterly statement rule will require advisers to (i) retain a copy of any quarterly statement distributed to fund investors as well as a record of each addressee and the date(s) the statement was sent; (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 quarterly statement rule; and (iii) make and keep documentation substantiating the adviser's determination that the private fund it manages is a liquid fund or an illiquid fund pursuant to the quarterly statement rule.
The books and records amendments related to the audit rule will require advisers to keep a copy of any audited financial statements distributed along
The books and records amendments related to the adviser-led secondaries rule will require advisers to retain a copy of any fairness or valuation opinion and summary of material business relationships distributed pursuant to the rule along with a record of each addressee and the corresponding date(s) sent.
The books and records amendments related to the preferential treatment rule will require advisers to retain copies of all written notices sent to current and prospective investors in a private fund pursuant to final rule 211(h)(2)-3.
The books and records amendments related to the restricted activities rule will require advisers to retain copies of all notifications, consent forms, or other documents distributed to (and received from) private fund investors pursuant to the restricted activities rule, along with a record of each addressee and the corresponding date(s) sent.
The respondents to these collections of information requirements will 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 December 31, 2022, there were 15,361 investment advisers registered with the Commission. According to this data, 5,248 registered advisers provide advice to private funds.
In our most recent PRA submission for rule 204-2,
Several commenters stated that the recordkeeping requirements would be burdensome.
The table below summarizes the initial and ongoing annual burden estimates associated with the amendments to rule 204-2.
We request comment on whether the estimates associated with the new collection of information requirements in “Rule 211(h)(2)-1 under the Advisers Act” are reasonable. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits comments 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 should direct them to the OMB Desk Officer for the Securities and Exchange Commission,
The Commission has prepared the following Final Regulatory Flexibility Analysis (“FRFA”) in accordance with section 4(a) of the RFA.
We are adopting final rule 211(h)(1)-1 under the Advisers Act (“definitions rule”), which contains numerous definitions for purposes of final rules 211(h)(1)-2, 206(4)-10, 211(h)(2)-1, 211(h)(2)-2, and 211(h)(2)-3 and the
We are adopting final 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 (other than a SAF) that has at least two full fiscal quarters of operating results to prepare and distribute a quarterly statement to private fund investors that includes certain standardized disclosures regarding the costs of investing in the private fund and the private fund's performance.
We are adopting final rule 206(4)-10 under the Advisers Act, which will generally require all investment advisers that are registered or required to be registered with the Commission to have their private fund clients (other than a SAF client) undergo a financial statement audit that meets the requirements of the audit provision of the custody rule (
Final rule 211(h)(2)-1 will restrict all private fund advisers (other than an adviser to SAFs with respect to such funds) 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 prohibits an adviser from engaging in the following activities, unless it provides written disclosure to investors and, in some cases, obtain investor consent: (1) charging certain fees and expenses to a private fund (including fees or expenses associated with an investigation of the adviser or its related persons by governmental or regulatory authorities, regulatory, examination, or compliance expenses or fees of the adviser or its related persons,
We are adopting final rule 211(h)(2)-2 under the Advisers Act, which generally requires an adviser that is registered or required to be registered with the Commission and is conducting an adviser-led secondary transaction with respect to any private fund that it advises (other than a SAF), where the adviser (or its related persons) offers fund investors the option between selling their interests in the private fund, and converting or exchanging them for new interests in another vehicle advised by the adviser or its related persons, to, prior to the due date of an investor participation election form in respect of the transaction, obtain and distribute to investors in the private fund a fairness opinion or valuation opinion from an independent opinion provider and a summary of any material business relationships that the adviser or any of its related persons has, or has had within the two-year period immediately prior to the issuance date of the fairness opinion or valuation opinion, with the independent opinion provider. The specific requirements of the final rule are described above in section II. The final 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 final rule are discussed in more detail in sections I and II above. The burdens of these requirements on small advisers are discussed below as well as above in sections VI and VII, which discuss the burdens on all advisers. The professional skills required to meet these specific burdens also are discussed in section VII.
Final rule 211(h)(2)-3 will prohibit a private fund adviser (other than an adviser to SAFs with respect to such funds), directly or indirectly, from: (1) granting an investor in a private fund or in a 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 similar pool of assets, with an exception
We are also adopting related amendments to rule 204-2, the books and records rule, which sets forth various recordkeeping requirements for registered investment advisers. We are amending the current rule to require investment advisers to private funds to make and keep records relating to the quarterly statements required under final rule 211(h)(1)-2, the financial statement audits performed under final rule 206(4)-10, disclosures regarding restricted activities provided under final rule 211(h)(2)-1, fairness opinions or valuation opinions required under final rule 211(h)(2)-2, and disclosure of preferential treatment required under final rule 211(h)(2)-3. The reasons for, and objectives of, the final amendments to the books and records rule are discussed in more detail in sections I and II above. The burdens of these requirements on small advisers are discussed below as well as above in sections VI and VII, which discuss the burdens on all advisers. The professional skills required to meet these specific burdens also are discussed in section VII.
We are adopting 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 final amendments are designed to focus renewed attention on the importance of the annual compliance review process and will 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 final amendments are discussed in more detail in sections I and III, above. The burdens of these requirements on small advisers are discussed below as well as above in sections VI and VII, which discuss the burdens on all advisers. The professional skills required to meet these specific burdens also are discussed in section VII.
One commenter provided its own calculations of the number of small entities impacted by the rules using both the Commission's definition of small entity and a different definition, and the commenter's reasoning for using a different definition is premised on the commenter's belief that the Commission is required to conduct a regulatory impact analysis.
Additionally, in providing its own calculations, this commenter calculated the number of private funds that would be “small entities” according to its own definition,
More generally, as discussed above, many commenters expressed broader concerns that there may be negative effects on competition, including through effects on smaller, emerging advisers.
The Commission's analysis more generally considered potential impact on small entities, meaning small advisers, and identified several factors that may mitigate potential negative effects.
We have also taken several steps to lessen the possible burden on smaller advisers. First, for significant portions of the rules, we have allowed a longer transition period,
The Commission is adopting final 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 adopting 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 adopting 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 rules and amendments, we have considered their potential impact on small entities. Some of the rules and amendments will affect many, but not all, investment advisers registered with the Commission, including some small entities. The amendments to rule 206(4)-7 will affect all investment advisers that are registered or required to be registered with the Commission, including some small entities, and final rules 211(h)(2)-1 and 211(h)(2)-3 will apply to all advisers to private funds (even if not registered), including some small entities. Final rule 211(h)(1)-1 will affect all advisers that are also affected by one of the rules applying to private fund advisers discussed below, including all that are small entities, regardless of whether they are registered. 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 definitions rule, restrictions rule, and preferential treatment rule, our rules and amendments will 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 December 31, 2022,
The restricted activities rule and the preferential treatment rule, however, will have an impact on
Additionally, the restricted activities rule and the preferential treatment rule will 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 definitions rule will affect all advisers that are also affected by one of the rules applying to private fund advisers 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 discussions and not separately and additionally delineated.
Final rule 211(h)(1)-1 will not impose any reporting, recordkeeping, or other compliance requirements on investment advisers because it has no independent substantive requirements or economic impacts. The rule will not affect an adviser unless it was complying with final rules 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.
Final rule 211(h)(1)-2 will impose certain compliance requirements on investment advisers, including those that are small entities. It will require any investment adviser registered or required to be registered with the Commission that provides investment advice to a private fund (other than a SAF) that has at least two full fiscal quarters of operating results to prepare and distribute quarterly statements with certain fee and expense and performance disclosure to private fund investors. The final requirements, including compliance and related recordkeeping requirements that will be required under the final amendments to rule 204-2 and rule 206(4)-7, are summarized in this FRFA (section VIII.A. above). All of these final requirements are also discussed in detail, above, in sections I and II, and these requirements and the burdens on respondents, including those that are small entities, are discussed above in sections VI and VII (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 VII.
As discussed above, there are approximately 26 small advisers to private funds currently registered with us, and we estimate that 100 percent of these advisers will be subject to the final rule 211(h)(1)-2. As discussed in our Paperwork Reduction Act Analysis in section VII above, we estimate that the final rule 211(h)(1)-2 under the Advisers Act, which will require advisers to prepare and distribute quarterly statements, will create a new annual burden of approximately 190 hours per adviser, or 4,940 hours in aggregate for small advisers. We therefore expect the annual monetized aggregate cost to small advisers associated with the final rule to be $2,416,310.
Final rule 206(4)-10 will impose certain compliance requirements on investment advisers, including those that are small entities. All SEC-registered investment advisers that provide investment advice, including small entity advisers, to private fund clients (other than a SAF) will be required to comply with the final 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, in alignment with the requirements of the audit provision of the custody rule (which the final rule will incorporate by reference). The final requirements, including compliance and related recordkeeping requirements that will be imposed under the final amendments to rule 204-2 and rule 206(4)-7, are summarized in this FRFA (section VIII.A. above). All of these final requirements are also discussed in detail, above, in sections I and II, and these requirements and the burdens on respondents, including those that are small entities, are discussed above in sections VI and VII (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 VII.
As discussed above, there are approximately 26 small advisers to private funds currently registered with us, and we estimate that 100 percent of these advisers will be subject to the final rule 206(4)-10. As discussed above in our Paperwork Reduction Act Analysis in section VII above, we estimate that final rule 206(4)-10 under the Advisers Act will create a new annual burden of approximately 13.30 hours per adviser, or 345.80 hours in aggregate for small advisers. We therefore expect the annual monetized aggregate cost to small
Final rule 211(h)(2)-1 will impose certain compliance requirements on investment advisers, including those that are small entities. Final rule 211(h)(2)-1 will restrict all private fund advisers (other than an adviser to SAFs with respect to such funds) 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 prohibits advisers from engaging in the following activities, unless they provide written disclosure to investors regarding such activities and in some cases obtain investor consent: (1) charging certain fees and expenses to a private fund (including fees or expenses associated with an investigation of the adviser or its related persons by governmental or regulatory authorities, regulatory, examination, 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 actual, potential, or hypothetical taxes applicable to the adviser, its related persons, or their respective owners or interest holders; and (3) borrowing money, securities, or other fund assets, or receiving a loan or an extension of credit from a private fund client. The requirements, including compliance and related recordkeeping requirements that will be imposed under the final amendments to rule 204-2 and rule 206(4)-7, are summarized in this FRFA (section VIII.A. above). All of these final requirements are also discussed in detail, above, in sections I and II, and these requirements and the burdens on respondents, including those that are small entities, are discussed above in sections VI and VII (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 VII.
As discussed above, there are approximately 26 small advisers to private funds currently registered with us, and we estimate that 100 percent of these advisers will be subject to the final rule 211(h)(2)-1. As discussed above, we estimate that there are no ERAs that 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 meet the definition of “small entity.”
Final rule 211(h)(2)-2 will impose certain compliance requirements on investment advisers, including those that are small entities. The rule generally requires an adviser that is registered or required to be registered with the Commission and is conducting an adviser-led secondary transaction with respect to any private fund that it advises (other than a SAF), where the adviser (or its related persons) offers fund investors the option between selling their interests in the private fund, or converting or exchanging them for new interests in another vehicle advised by the adviser or its related persons, to, prior to the due date of an investor participation election form in respect of the transaction, obtain and distribute to investors in the private fund a fairness opinion or valuation opinion from an independent opinion provider and a summary of any material business relationships that the adviser or any of its related persons has, or has had within the two-year period immediately prior to the issuance date of the fairness opinion or valuation opinion, with the independent opinion provider. The final requirements, including compliance and related recordkeeping requirements that will be imposed under final amendments to rule 204-2 and 206(4)-7, are summarized in this FRFA (section VIII.A. above). All of these final requirements are also discussed in detail, above, in sections I and II, and these requirements and the burdens on respondents, including those that are small entities, are discussed above in sections VI and VII (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 VII.
As discussed above, there are approximately 26 small advisers to private funds currently registered with us, and we estimate that 100 percent of these advisers will be subject to final rule 211(h)(2)-2. As discussed above in our Paperwork Reduction Act Analysis in section VII above, we estimate that final rule 211(h)(2)-2 under the Advisers Act will create a new annual burden of approximately 1.5 hours per adviser, or 39 hours in aggregate for small advisers.
Final rule 211(h)(2)-3 will impose certain compliance requirements on investment advisers, including those that are small entities. Final rule 211(h)(2)-3 will prohibit a private fund adviser (other than an adviser to SAFs with respect to such funds), including indirectly through its related persons, from: (1) granting an investor in the private fund or in a 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 similar pool of assets, with an exception for redemptions that are required by applicable law, rule, regulation, or order of certain governmental authorities and another if the adviser offers the same redemption ability to all existing and future investors in the private fund or similar pool of assets; and (2) providing information regarding the private fund's portfolio holdings or exposures of the private fund or of a similar pool of assets to any investor in the private fund 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 similar pool of assets, with an exception where the adviser offers such information to all other existing investors in the private fund and any similar pool of assets at the same time or substantially the same time. The rule will also prohibit these advisers from providing any other preferential
As discussed above, there are approximately 26 small advisers to private funds currently registered with us, and we estimate that 100 percent of these advisers will be subject to the final rule 211(h)(2)-3. As discussed above, we estimate that there are no ERAs that 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 meet the definition of “small entity.”
The final amendments to rule 204-2 will impose certain recordkeeping requirements on investment advisers to private funds, including those that are small entities. All SEC-registered investment advisers to private funds, including small entity advisers, will be required to comply with recordkeeping amendments. Although all SEC-registered investment advisers, and advisers that are required to be registered with the Commission, are subject to rule 204-2 under the Advisers Act, our final amendments to rule 204-2 will only impact private fund advisers that are SEC registered. The final amendments are summarized in this FRFA (section VIII.A. above). The final amendments are also discussed in detail, above, in sections I and II, and the requirements and the burdens on respondents, including those that are small entities, are discussed above in sections VI and VII (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 VII.
As discussed above, there are approximately 26 small advisers to private funds currently registered with us, and we estimate that 100 percent of advisers registered with us will be subject to the final amendments to rule 204-2. As discussed above in our Paperwork Reduction Act Analysis in section VII above, we estimate that the final amendments to rule 204-2 under the Advisers Act, which will require advisers to retain certain copies of documents required under final rules 206(4)-10, 211(h)(1)-2, 211(h)(2)-1, 211(h)(2)-2, and 211(h)(2)-3, will create a new annual burden of approximately 55.17 hours per adviser, or 1,434.50 hours in aggregate for small advisers. We therefore expect the annual monetized aggregate cost to small advisers associated with our final amendments to be $111,173.75.
Final amendments to rule 206(4)-7 will impose certain compliance requirements on investment advisers, including those that are small entities. All SEC-registered investment advisers, and advisers that are required to be registered with the Commission, will be required to document the annual review of their compliance policies and procedures in writing. The final requirements are summarized in this FRFA (section VIII.A. above). All of these final requirements are also discussed in detail in sections I and III above, and these requirements and the burdens on respondents, including those that are small entities, are discussed above in sections VI and VII (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 VII. As discussed above, there are approximately 489 small advisers currently registered with us, and we estimate that 100 percent of these advisers will be subject to the final amendments to rule 206(4)-7. As discussed above in our Paperwork Reduction Act Analysis in section VII above, we estimate that these amendments will create a new annual burden of approximately 5.5 hours per adviser, or 2,689.50 hours in aggregate for small advisers. We therefore expect the annual monetized aggregate cost to small advisers associated with our final amendments to be $1,414,173.
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 adopting these 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 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 rules and rule amendments, or any part thereof, for such small entities.
Regarding the first alternative, we are adopting staggered compliance dates based on adviser size for certain of the rules. We believe that smaller private fund advisers will likely need additional time to modify existing practices, policies, and procedures to come into compliance. Accordingly, we are providing certain staggered compliance dates, with a longer transition period for smaller private fund advisers.
Regarding the fourth alternative, we do not believe that differing reporting requirements or an exemption from coverage of the rules and rule amendments, or any part thereof, for small entities, would be appropriate or consistent with investor protection. Because the specific protections of the Advisers Act that underlie the rules and rule amendments apply equally to clients of both large and small advisory firms, it would be inconsistent with the
Regarding the second alternative, the restricted activities rule and the 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 authority to promulgate rules reasonably designed to prevent fraudulent, deceptive, or manipulative acts, or to prohibit or restrict sales practices, conflicts of interest or compensation schemes, that we deem contrary to the public interest and protection of investors by investment advisers.
The Commission is adopting final 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 adopting 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 adopting 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 amending 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.
Section 275.204-2 is also issued under 15 U.S.C. 80b-6.
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.
(20)(i) A copy of any quarterly statement distributed pursuant to § 275.211(h)(1)-2, along with a record of each addressee and the corresponding date(s) sent; and
(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
(24) A copy of any notification, consent or other document
(b)
(a) 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 (other than a
(b) For a private fund (other than a
(c) For purposes of this section, defined terms shall have the meanings set forth in § 275.206(4)-2(d), except for the term
For purposes of §§ 275.206(4)-10, 275.211(h)(1)-2, 275.211(h)(2)-1, 275.211(h)(2)-2, and 275.211(h)(2)-3:
(1) Selling all or a portion of their interests in the private fund; and
(2) Converting or exchanging 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.
(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 percent or more of a class of the corporation's voting securities; or
(ii) Has the power to sell or direct the sale of 25 percent 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 percent 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 percent 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 percent or more of the capital of the limited liability company; or
(iii) Is an elected manager of the limited liability company;
(5) A person is presumed to control a trust if the person is a trustee or managing agent of the trust.
(1) Is not required to redeem interests upon an investor's request; and
(2) Has limited opportunities, if any, for investors to withdraw before termination of the fund.
(1) Provides fairness opinions or valuation opinions in the ordinary course of its business; and
(2) Is not a related person of the adviser.
(1) The sum of:
(i) The unrealized value of the illiquid fund; and
(ii) The value of all distributions made by the illiquid fund;
(2) Divided by the total capital contributed to the illiquid fund by its investors.
(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 control with the adviser.
(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 reporting period.
(a)
(b)
(1) A detailed accounting of all compensation, fees, and other amounts allocated or paid to the investment adviser or any of its related persons by the private fund during the reporting period, with separate line items for each category of allocation or payment reflecting the total dollar amount, including, but not limited to, management, advisory, sub-advisory, or similar fees or payments, and performance-based compensation;
(2) A detailed accounting of all fees and expenses allocated to or paid by the private fund during the reporting period (other than those listed in paragraph (b)(1) of this section), with separate line items for each category of fee or expense reflecting the total dollar amount, including, but not limited to, organizational, accounting, legal, administration, audit, tax, due diligence, and travel fees and expenses; and
(3) The amount of any offsets or rebates carried forward during the reporting period to subsequent periods to reduce future payments or allocations to the adviser or its related persons.
(c)
(d)
(e)
(2) The quarterly statement must present the following with equal prominence:
(i)
(A) Annual net total returns for each fiscal year over the past 10 fiscal years or since inception, whichever time period is shorter;
(B) Average annual net total returns over the one-, five-, and 10-fiscal-year periods; and
(C) The cumulative net total return for the current fiscal year as of the end of the most recent fiscal quarter covered by the quarterly statement.
(ii)
(A) The following performance measures, shown since inception of the illiquid fund through the end of the quarter covered by the quarterly statement (or, to the extent quarter-end numbers are not available at the time the adviser distributes the quarterly statement, through the most recent practicable date) and computed with and without the impact of any fund-level subscription facilities:
(
(
(
(B) A statement of contributions and distributions for the illiquid fund.
(iii)
(f)
(g)
(h)
(a) An investment adviser to a private fund (other than a securitized asset fund) may not, directly or indirectly, do the following with respect to the private fund, or any investor in that private fund:
(1) Charge or allocate to the private fund fees or expenses associated with an investigation of the adviser or its related persons by any governmental or regulatory authority, unless the investment adviser requests each investor of the private fund to consent to, and obtains written consent from at least a majority in interest of the private fund's investors that are not related persons of the adviser for, such charge or allocation; provided, however, that the investment adviser may not charge or allocate to the private fund fees or expenses related to an investigation that results or has resulted in a court or governmental authority imposing a sanction for a violation of the Investment Advisers Act of 1940 or the rules promulgated thereunder;
(2) Charge or allocate to the private fund any regulatory or compliance fees or expenses, or fees or expenses associated with an examination, of the adviser or its related persons, unless the investment adviser distributes a written notice of any such fees or expenses, and the dollar amount thereof, to the investors of such private fund client in writing within 45 days after the end of the fiscal quarter in which the charge occurs;
(3) Reduce the amount of an adviser clawback by actual, potential, or hypothetical taxes applicable to the adviser, its related persons, or their respective owners or interest holders, unless the investment adviser distributes a written notice to the investors of such private fund client that sets forth the aggregate dollar amounts of the adviser clawback before and after any reduction for actual, potential, or hypothetical taxes within 45 days after the end of the fiscal quarter in which the adviser clawback occurs;
(4) Charge or allocate fees or 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 (other than a securitized asset fund) have invested (or propose to invest) in the same portfolio investment, unless:
(i) The non-pro rata charge or allocation is fair and equitable under the circumstances; and
(ii) Prior to charging or allocating such fees or expenses to a private fund client, the investment adviser distributes to each investor of the private fund a written notice of the non-pro rata charge or allocation and a description of how it is fair and equitable under the circumstances; and
(5) Borrow money, securities, or other private fund assets, or receive a loan or an extension of credit, from a private fund client, unless the adviser:
(i) Distributes to each investor a written description of the material terms of, and requests each investor to consent to, such borrowing, loan, or extension of credit; and
(ii) Obtains written consent from at least a majority in interest of the private fund's investors that are not related persons of the adviser.
(b) Paragraphs (a)(1) and (a)(5) of this section shall not apply with respect to contractual agreements governing a private fund (and, with respect to paragraph (a)(5) of this section, contractual agreements governing a borrowing, loan, or extension of credit entered into by a private fund) that has commenced operations as of the compliance date and that were entered into in writing prior to the compliance date if paragraph (a)(1) or (a)(5) of this section, as applicable, would require the parties to amend such governing agreements; provided that this paragraph (b) does not permit an investment adviser to such a fund to charge or allocate to the private fund fees or expenses related to an investigation that results or has resulted in a court or governmental authority imposing a sanction for a violation of the Investment Advisers Act of 1940 or the rules promulgated thereunder.
(c) 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 Investment Advisers Act of 1940 (15 U.S.C. 80b-6(4), an investment adviser that is registered or required to be registered under section 203 of the Act (15 U.S.C. 80b-3) conducting an adviser-led secondary transaction with respect to any private fund that it advises (other than a securitized asset fund) shall comply with paragraphs (a)(1) and (2) of this section. The investment adviser shall:
(1) Obtain, and distribute to investors in the private fund, a fairness opinion or valuation opinion from an independent opinion provider; and
(2) Prepare, and distribute to investors in the private fund, a written summary of any material business relationships the adviser or any of its related persons has, or has had within the two-year period immediately prior to the issuance of the fairness opinion or valuation opinion, with the independent opinion provider; in each case, prior to the due date of the election form in respect of the adviser-led secondary transaction.
(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 (other than a securitized asset 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 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 similar pool of assets, except:
(i) If such ability to redeem is required by the applicable laws, rules, regulations, or orders of any relevant foreign or U.S. Government, State, or political subdivision to which the investor, the private fund, or any similar pool of assets is subject; or
(ii) If the investment adviser has offered the same redemption ability to all other existing investors, and will continue to offer such redemption ability to all future investors, in the private fund and any similar pool of assets;
(2) Provide information regarding the portfolio holdings or exposures of the private fund, or of a similar pool of assets, to any investor in the private fund 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 similar pool of assets, except if the investment adviser offers such information to all other existing investors in the private fund and any similar pool of assets at the same time or substantially the same time.
(b) An investment adviser to a private fund (other than a securitized asset fund) may not, directly or indirectly, provide any preferential treatment to any investor in the private fund unless
(1)
(2)
(i) For an illiquid fund, as soon as reasonably practicable following the end of the private fund's fundraising period, written disclosure of all preferential treatment the adviser or its
(ii) For a liquid fund, as soon as reasonably practicable following the investor's investment in the private fund, written disclosure of all preferential treatment the adviser or its related persons has provided to other investors in the same private fund; and
(iii) On at least an annual basis, a written notice that provides specific information regarding any preferential treatment provided by the adviser or its related persons to other investors in the same private fund since the last written notice provided in accordance with this section, if any.
(c) For purposes of this section, defined terms shall have the meanings set forth in § 275.211(h)(1)-1.
(d) Paragraph (a) of this section shall not apply with respect to contractual agreements governing a private fund that has commenced operations as of the compliance date and that were entered into in writing prior to the compliance date if paragraph (a) of this section would require the parties to amend such governing agreements.
By the Commission.
Office for Civil Rights (OCR), Office of the Secretary, HHS.
Proposed rule.
The Department of Health and Human Services (HHS or the Department) is committed to protecting the civil rights of individuals with disabilities under section 504 of the Rehabilitation Act of 1973 (section 504). To implement the prohibition of discrimination on the basis of disability, the Department proposes to update and amend its section 504 regulation. The proposed rule would add new provisions that clarify existing requirements under section 504 prohibiting recipients of financial assistance from the Department (recipients) from discriminating on the basis of disability in their programs and activities, including in health care, child welfare, and other human services. The proposed rule includes new requirements prohibiting discrimination in the areas of medical treatment; the use of value assessments; web, mobile, and kiosk accessibility; and requirements for accessible medical equipment, so that persons with disabilities have an opportunity to participate in or benefit from health care programs and activities that is equal to the opportunity afforded others. It also adds a section on child welfare to expand on and clarify the obligation to provide nondiscriminatory child welfare services. The proposed rule would also update the definition of disability and other provisions to ensure consistency with statutory amendments to the Rehabilitation Act, enactment of the Americans with Disabilities Act and the Americans with Disabilities Amendments Act of 2008, the Affordable Care Act, as well as Supreme Court and other significant court cases. It also further clarifies the obligation to provide services in the most integrated setting. Finally, the proposed rule would make other clarifying edits, including updating outdated terminology and references.
All comments sent by the methods and received or officially postmarked by the due date specified above will be posted without change to content to
We will consider all comments received or officially postmarked by the date and time specified in the
Please allow sufficient time for mailed comments to be timely received in the event of delivery or security delays. Electronic comments with attachments should be in Microsoft Word or Portable Document Format (PDF).
Molly Burgdorf, Office for Civil Rights, Department of Health and Human Services at (202) 545-4884 or (800) 537-7697 (TDD), or via email at
Section 504 prohibits discrimination on the basis of disability in programs and activities
No otherwise qualified individual with a disability in the United States, as defined in Section 705(20) of this title, shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance or under any program or activity conducted by any Executive agency or by the United States Post Office.
The Office for Civil Rights (OCR) in HHS enforces section 504 as well as two other statutes that prohibit discrimination on the basis of disability. Title II of the Americans with Disabilities Act (ADA) prohibits discrimination on the basis of disability in, among other areas, all health care and social services programs and activities of State and local government entities.
Congress passed the Rehabilitation Act in 1973, and what was then the U.S. Department of Health, Education, and Welfare (HEW) issued regulations to implement section 504 in 1977.
In addition, since section 504 also covers programs and activities conducted by the Department, the Department intends to publish a separate rulemaking to update its existing federally conducted regulation, which has not been amended since it was enacted in 1998 (part 85).
The Department proposes to amend its existing regulation implementing section 504 for federally assisted programs and activities to address the obligations of recipients of Federal financial assistance to comply with section 504 across a variety of contexts. The proposed rule clarifies the application of section 504 to several areas not explicitly addressed through the existing regulation, including medical treatment decisions; the use of value assessments; web, mobile, and kiosk accessibility; and accessible medical equipment. The proposed rule also expands on and clarifies the requirements in the current regulation applicable to federally funded child welfare programs and activities.
In addition, the Department proposes to update pertinent provisions throughout the rule to promote consistency with title II of the ADA and the corresponding U.S. Department of Justice (DOJ) ADA regulations. The proposed rule will add the following new sections to the section 504 regulations that track the ADA regulations: definition of “disability,” notice, maintenance of accessible features, retaliation and coercion, personal devices and services, service animals, mobility devices, and communications. The proposed rule also contains the following sections that are similar to the ADA regulations: purpose and broad coverage, definitions, general prohibitions against discrimination, program accessibility, illegal use of drugs, direct threat, and integration. The proposed rule will also provide more detailed standards on the obligation to provide programs and activities in the most integrated setting appropriate and will make non-substantive clarifying edits, including updating outdated terminology and references and omitting obsolete regulatory sections.
Section 504 and the ADA are generally understood by courts to impose similar requirements. Moreover, the vast majority of recipients have been covered by either title II of the ADA (State and local government entities) or title III of the ADA (certain private entities) since 1991. Therefore, the rule proposes to adopt ADA language in appropriate circumstances. Doing so will allow for greater public understanding and ease of compliance by regulated entities.
The Department is issuing this proposed rule to address discrimination on the basis of disability by recipients of HHS financial assistance.
Furthermore, the proposed rule is consistent with the goals and objectives of several recent Executive Orders that address equitable access to benefits and services for underserved populations. As detailed below, people with disabilities have historically been underserved by, denied equitable access to, or excluded from health programs and activities. Executive Order 14035 (Advancing Diversity, Equity, Inclusion, and Accessibility Across the Federal Government) and Executive Order 13985 (Advancing Racial Equity and Support for Underserved Communities Through the Federal Government) explicitly describe people with disabilities as an underserved community and priority population for Federal policy intervention. The rulemaking is also consistent with Executive Order 14009 (Strengthening Medicaid and the Affordable Care Act), which requires agencies with authorities and responsibilities related to Medicaid and the ACA to review existing regulations to ensure they promote equitable access to high-quality health care accessible and affordable for every American, including reviewing policies or practices that may undermine protections for people with pre-existing conditions, including complications related to COVID-19, under the ACA. Finally, this rulemaking is consistent with Executive Order 14070 (Continuing to Strengthen Americans' Access to Affordable, Quality Health Coverage), which directs the Department to examine policies or practices that strengthen benefits and improve access to health care providers.
People with disabilities are often excluded from health programs and activities and denied an equal opportunity to participate in and benefit from quality health care.
The National Council on Disability (NCD), an independent Federal agency, has observed that “[o]ne of the hallmarks of societal attitudes toward disabilities has been a tendency of people without disabilities to overestimate the negative aspects and underestimate the positive features of the lives of those who have disabilities.”
These issues are not limited to health care. For example, the NCD 2012 report, “Rocking the Cradle: Ensuring the Rights of Parents with Disabilities and Their Children,” included research and accounts of parents who had been treated unfairly because of their disabilities, documenting persistent and systemic discrimination against parents with disabilities whose children were involved with the child welfare system.
This preamble will address first the new provisions being added to the existing section 504 rule (Section III(A) in the Table of Contents above)—medical treatment; value assessment; child welfare; web, mobile, and kiosk accessibility; and accessible medical equipment—and then will address the updated provisions (Section III(B) in the Table of Contents). However, the text of the rule itself does not start with the
Throughout this NPRM, the terms “individual with a disability,” “people with disabilities,” and “person with a disability” are used interchangeably. No substantive difference is intended.
The Department funds a wide array of programs and activities in which recipients make decisions regarding medical treatment. Medical literature, government agency reports, and court decisions demonstrate that individuals with disabilities face discrimination at every stage of the medical treatment process. Biases and stereotypes about the impact of disability affect decisions in different contexts, including diagnoses, day-to-day treatment decisions, emergency care decisions, and the allocation of scarce medical resources in health crises.
We propose to clarify the general prohibition on discrimination against qualified individuals with disabilities in the medical treatment context and elaborate on specific prohibitions in this context. “Medical treatment” is used in this section in a generic, nonspecific manner; it is intended to be broad and inclusive. It refers to the management and care of a patient to identify, address, treat, or ameliorate a physical or mental health condition, injury, disorder, or symptom, whether or not the condition constitutes a disability and whether the medical approach is preventive, curative, rehabilitative, or palliative. It includes the use of a wide range of regimens for both physical and mental conditions, interventions, or procedures, such as surgery; the prescribing, dispensing, or management of medications; exercise; physical therapy; rehabilitation services; and the provision of durable medical equipment.
Throughout this section, the terms “provider” and “medical professional” are sometimes used in place of “recipient,” which is defined in § 84.10.
Although section 504 has prohibited discrimination in any program or activity receiving Federal financial assistance since it was enacted, discrimination continues to underpin health inequities faced by people with disabilities.
Although many factors contribute to these health inequities, discriminatory medical decisions—often driven by stereotypes about disability—are a key factor. The National Academies of Sciences, Engineering, and Medicine report that provider assumptions about people with disabilities limit health and health care for people with disabilities, noting that health care providers assume that people with disabilities “differ in significant, meaningful, and somewhat undefined ways from other people[;] that people with disabilities have a lower level of cognitive ability, independence, and interest in improving and maintaining current function; [and] that the quality of life for a disabled person is severely compromised, [which] limits the type, scope, and aggressiveness of considered treatment options.”
These assumptions have been documented in many programs and activities that frequently receive HHS funding. For example, a 2021 study entitled “Physicians' Perceptions of People with Disability and Their Health Care” found that large proportions of practicing U.S. physicians appeared to hold biased or stigmatized perceptions of people with disabilities, such as perceiving worse quality of life for people with disabilities.
Stereotypes about the value and quality of the lives of people with disabilities have led to discriminatory medical decisions in both the provision and denial of medical treatment.
Below is a discussion of several of the most significant contexts in which this pattern of discrimination has come to the Department's attention, including in the areas of organ transplantation, denial of life-sustaining care, crisis standards of care, participation in clinical research, and other forms of medical treatment for people with disabilities, including forced sterilization. Following that is a subsection-by-subsection analysis of this proposed section.
The Department plays a significant role in organ transplantation in the U.S. Within the Department, the Health Resources & Services Administration (HRSA) exercises oversight of solid organ transplantation according to a statutory and regulatory framework. The National Organ Transplant Act of 1984, as amended (NOTA) authorized the establishment of the Organ Procurement and Transplantation Network (OPTN) to allocate donor organs to individuals waiting for an organ transplant.
NCD published a 2019 report, “Organ Transplant Discrimination Against People with Disabilities,” describing how people with disabilities who are otherwise qualified candidates for an organ transplant are excluded at many phases of the transplant process because of health care providers' inaccurate assumptions about quality of life, lifespan, and post-transplant compliance.
OCR's investigative experience confirms ongoing concerns about discrimination at various points in the transplant process. Medical providers and transplant programs continue to refuse to evaluate patients with disabilities who are otherwise qualified for transplant eligibility and fail to place qualified patients on transplant waiting lists because of exclusions and limitations for certain disabilities that are not supported by objective evidence or that do not take into account reasonable modifications in assessing an individual's ability to manage postoperative care needs and other aspects of transplantation.
The Department has heard from a number of stakeholders urging action on this issue. On May 6, 2019, 17 major organizations that serve and advocate for individuals with disabilities sent a letter asking OCR to issue a regulation and guidance that addresses discriminatory practices in organ transplantation.
Research has documented the persistence of organ transplantation policies that discriminate against individuals with disabilities,
In a policy statement, the American Society of Transplant Surgeons recommends “that no patient will be discriminated against or precluded from transplant listing solely due to the presence of a disability or handicap, whether physical or psychological . . . This [transplant] decision would be made due to the clinical risk benefit analysis for the specific patient, and not on any external factors.” The Society further indicates support for “efforts to identify and eliminate any Transplant Center processes or practices that allow discrimination.”
Media reports have also documented denials of organ transplants based on disability.
The continuing evidence of discrimination against individuals with disabilities in organ transplantation demonstrates the need for a rule specifically discussing the application of section 504's requirements in the medical treatment context.
People with disabilities face significant discrimination in access to life-sustaining care. These discriminatory judgments arise when clinicians seek to end the continued provision of life-sustaining care that is still actively sought by a person with a disability or their authorized representative. This proposed rule uses the term “life-sustaining care” here broadly, to encompass both critical care treatment and life-saving or life-extending care provided outside the context of an acute medical crisis. Discrimination is particularly salient in the context of medical futility determinations, when hospitals and providers decide to discontinue or deny medical treatment based on the judgment that the treatment would do little or nothing to benefit the patient.
NCD published a report in 2019 examining the issue of medical futility determinations and disability bias, discussing decisions by health care providers to withhold or withdraw life-sustaining care for individuals with disabilities that are driven by subjective quality of life judgments.
Of particular concern are determinations by providers that an intervention should not be provided if it “fails to return or sustain an acceptable quality of life” for a patient in the judgment of the provider, even if the patient or their authorized representative would consider such an outcome acceptable.
Physicians discriminate on the basis of disability when they act based on judgments that a patient's life is not worth living because they have a disability that substantially limits their major life activities and bodily functions,
One study of the application of medical futility determinations found that mobility status, and particularly a patient's immobility (defined as being “bed-bound or only able to move from bed to chair”), played a significant role in providers' determinations of qualitative futility—that is, determinations that an intervention will not return or sustain an acceptable quality of life—suggesting that physicians may be more likely to determine that a patient's likely outcome is unacceptably poor and should thus be considered medically futile if the patient has a mobility impairment.
In a 2015 policy statement from the American Thoracic Society, the American Association for Critical Care Nurses, the American College of Chest Physicians, the European Society for Intensive Care Medicine, and the Society of Critical Care Medicine entitled “Responding to Requests for Potentially Inappropriate Treatments in Intensive Care Units,” the term medical futility was defined more narrowly, referring only to “treatments that have no chance of achieving the intended physiologic goal.” The policy statement contrasts this narrow definition of futility with broader definitions that include futility based on quality-of-life judgments, stating that “broader definitions of futility are problematic because they often hinge on controversial value judgments about quality of life or require a degree of prognostic certainty that is often not attainable.”
Disability and civil rights organizations have expressed serious concern regarding disability discrimination in medical futility decisions and other areas regarding denial of life-sustaining care. In a July 10, 2018, letter from 22 disability organizations to OCR and to HHS' Administration for Community Living (ACL), the writers noted that sometimes medical determinations of futility are motivated by inappropriate consideration of cost or value judgments regarding the quality of life of individuals with disabilities seeking life-saving medical treatment rather
On May 6, 2019, a coalition of 17 leading organizations that advocate for or serve individuals with disabilities wrote to OCR, raising selected disability discrimination issues.
When an emergency or crisis has a substantial effect on usual health care operations and the level of care that is possible to deliver, hospitals and health systems may adopt crisis standards of care. These policies may authorize or recommend prioritization of scarce resources through means not used outside of crisis conditions. OCR received numerous complaints against states alleging disability discrimination relating to crisis standards of care during the early months of the COVID-19 public health emergency. Federal agencies, advocates, the media, members of the public, and other stakeholders also raised general concerns about the potential for discrimination on the basis of disability in the application of these standards.
OCR resolved a number of civil rights complaints and provided technical assistance to recipients, including complaints against Tennessee,
The COVID-19 public health emergency has illustrated the importance of regulating in this area, including within the context of crisis standards of care. For example, many crisis standards of care protocols issued prior to and during the COVID-19 public health emergency included categorical exclusions of people with disabilities from access to critical care despite their possessing the potential to benefit from treatment. Recipients may not categorically exclude individuals with disabilities or groups of individuals with disabilities from critical care provided that treatment is
Clinical research participation can offer considerable benefit to both the individuals participating within it and society at large. In addition to the intangible benefits of advancing scientific discovery and contributing to the development of potential medical interventions, those participating in clinical research are often able to obtain access to diagnostic, preventative, or therapeutic interventions and treatments that would not otherwise be available to them. Longstanding literature, including a recent report from the National Academies of Science, Engineering and Medicine, has highlighted the problem of the systemic exclusion of women, people of color, and other marginalized groups from clinical research.
Recent research has documented that people with disabilities also face systemic and unnecessary exclusion from clinical research.
Similarly, overly broad exclusion criteria may be motivated by concerns regarding the ability of potential study participants with disabilities to perform research-related tasks that can be reasonably modified, such as filling out tests or responding to instructions from research personnel, or by the failure to take into account the recipient's obligation to provide for effective communication with persons who are deaf, have vision loss, or otherwise need alternative forms of communication.
Section 84.4(b)(4), while being revised in the amendment segment of this proposed rule, results in the text being redesignated as § 84.68(b)(3), prohibits the use of discriminatory methods of administration, criteria, and protocols, including discrimination in the allocation of scarce resources. Resources necessary for medical treatment are sometimes scarce for a variety of reasons. A therapeutic agent or vaccine may be newly developed, and production may not yet have caught up to the level of demand for it. More generally, supply chain issues may prevent drugs, devices, and equipment from getting to places where they are needed. And, as was evidenced in the response to COVID-19, medical emergencies may overtax hospitals and the larger health care system. In circumstances like these, recipients may find it necessary to create a protocol or methodology for allocating those treatments and resources.
This section does not require hospitals or the broader health care system to allocate resources in any specific way; it just prohibits them from using criteria that subject individuals with disabilities to discrimination on the basis of disability. For example, as OCR has previously indicated in guidance,
Certain criteria for allocating scarce medical treatments may discriminate against people with disabilities even if they rely on predictions of short-term mortality. For example, throughout the COVID-19 pandemic, many states and hospitals indicated they planned to make use of the Sequential Organ Failure Assessment (SOFA) to make judgments about short-term life expectancy in the event that crisis standards of care were activated. The SOFA is a composite instrument, incorporating scores from multiple other instruments into a composite score that has been used within crisis standards of
As the American Academy of Developmental Medicine and Dentistry (AADMD) notes, “in the field of developmental medicine, there are patients who, at their natural baseline often cannot hear a command, move their limbs or communicate verbally. Given the combination of characteristics inherent in the population of people with intellectual and developmental disabilities, it would be possible to use 'objective' data surrounding the SOFA score to predict a significantly higher mortality risk than is really the case.”
The general requirement that recipients must provide reasonable modifications when necessary to avoid discrimination that appears in proposed § 84.68(b)(7) applies in circumstances of scarce resources, just as it does elsewhere. Section 504 might, for example, require reasonable modifications in the administration of assessment tools such as the SOFA and the GCS (which may be used within a larger scoring rubric for the allocation of scarce resources) to ensure that the tools measure accurately what they are intended to measure in people with disabilities. For example, a scoring tool may assess the inability of a person with cerebral palsy to articulate words, but it would be discriminatory to use that determination to indicate an actual mortality risk that is not implied by that disability. Similarly, some crisis standards of care protocol have used “therapeutic trials” involving the provision of mechanical ventilation for a set period of time to evaluate the effectiveness of ventilator treatment for a particular patient. However, patients with particular types of disabilities may take longer to respond to treatment, and the test period may need to be longer to accurately evaluate the effectiveness of mechanical ventilation for these patients. In this situation, a recipient may need to allow an individual with a disability some additional time on a ventilator to assess likely clinical improvement, unless doing so would constitute a fundamental alteration of the ventilator trial.
Proposed § 84.56(a) confirms the basic requirement that no qualified individual with a disability shall, on the basis of disability, be subjected to discrimination in medical treatment under any program or activity that receives Federal financial assistance, including in the allocation or withdrawal of any good, benefit, or service. Section 84.56(a) makes specific the general prohibition of disability-based discrimination proposed in § 84.68(a), as well as the general prohibition that applies to health, welfare, and other social services in § 84.52(a), and underscores that those prohibitions broadly apply to medical treatment decisions made by recipients.
For example, a patient with HIV seeks surgery for an orthopedic condition. A recipient refuses to provide treatment because of a belief that individuals with HIV are responsible for their condition and should thus not receive costly medical resources. This rationale is discriminatory on the basis of disability in this context.
The text of section 504 is clear and broad. Section 504 prohibits discrimination on the basis of disability in programs or activities receiving Federal financial assistance. Section 504's “program or activity” language provides no basis for excluding
The intended breadth of section 504 is reflected in the Civil Rights Restoration Act (CRRA), which made clear that section 504 applies to “all the operations of an entity that receives Federal financial assistance.”
Indeed, the Supreme Court has itself applied both section 504 and the ADA to medical treatment decisions. In
Some lower Federal courts have questioned the manner and reach of section 504 as applied to medical treatment decisions. In
Consistent with what we believe to be the correct reading of the statute and the case law, we propose in this rule to draw a distinction between circumstances where individuals are seeking treatment for the underlying disability and those in which individuals are seeking treatment for a separately diagnosable condition or symptom. Compare proposed § 84.56(b)(1) (providing specific, albeit non-exhaustive, circumstances in which forbidden discrimination exists whether or not the individual seeks treatment for a condition or symptom that is separately diagnosable from the underlying disability) with proposed § 84.56(b)(2) (providing a broader general rule of nondiscrimination for cases in which a recipient uses the underlying disability as the basis for discriminating against an individual who seeks treatment for a separately diagnosable symptom or medical condition).
As discussed below, with respect to separately diagnosable conditions, the proposed rule does not require that the condition be entirely unrelated to the underlying disability; it is instead intended to reach circumstances in which the condition for which medical treatment is sought is sufficiently distinct from the underlying disability such that the person with the disability can be considered similarly situated to a person without the disability for treatment purposes. That a separately diagnosable heart condition is related to an underlying disability in some manner is irrelevant under the proposed rule if the underlying disability makes no difference to the “clinically appropriate treatment” for the heart condition. This approach is consistent with the mandate that persons with disabilities be accorded equal treatment under section 504.
In circumstances in which an individual is seeking treatment for a condition that is not “separately diagnosable” under proposed § 84.56(b)(2), the rule's application is relatively narrow but nonetheless is critical to prevent prohibited discrimination. Consistent with proposed § 84.56(c)(1)(ii), the rule would not apply if the refusal to treat is in circumstances in which the “recipient typically declines to provide the treatment to any individual, or reasonably determines based on current medical knowledge or the best available objective evidence that such medical treatment is not clinically appropriate for a particular individual.” The rule, however, specifies in proposed § 84.56(c)(1)(ii) that providers do not make legitimate medical judgments when they base decisions on the criteria contained in § 84.56(b)(1)(i)-(iii): “[b]ias or stereotypes about a patient's disability,” “[j]udgments that the individual will be a burden on others,” or “[a] belief that the life of a person with a disability has lesser value than the life of a person without a disability, or that life with a disability is not worth living.”
The recognition of the need to defer to reasonable medical judgment but to prohibit biased decision-making is consistent with
Proposed § 84.56(b) elaborates on the basic requirement in § 84.56(a) by providing a non-exhaustive set of examples of conduct that would violate that requirement.
Proposed § 84.56(b)(1) addresses denial of treatment. It makes explicit that a recipient is prohibited from denying or limiting medical treatment to a qualified individual with a disability
As defined in the proposed rule at § 84.10, a “qualified individual with a disability” is “an individual with a disability who, with or without reasonable modifications to rules, policies, or practices, the removal of architectural, communication, or transportation barriers, or the provision of auxiliary aids and services, meets the essential eligibility requirements for the receipt of services or the participation in programs or activities provided by a recipient.” Proposed § 84.56(b)(1) clarifies that bias, stereotypes, judgments about burden on others, and beliefs that disabled lives have lesser value or worth or are not worth living are not permissible “essential” eligibility requirements for medical treatment. As noted by the Supreme Court in
In
Proposed paragraph 84.56(b)(1)(i) confirms the prohibition against denying or limiting medical treatment based on bias or stereotypes. For example, refusing to provide a person with an Opioid Use Disorder (OUD) a referral for Medications for Opioid Use Disorder (MOUD) due to a provider's belief that persons with OUD will not adhere to treatment protocols would be prohibited under this paragraph.
Proposed paragraph (b)(1)(ii) prohibits denying or limiting medical treatment based on judgments that an individual will be a burden on others due to their disability, including but not limited to caregivers, family, or society. For example, § 84.56(b)(1)(ii) would be violated if an individual with a disability needed a medically indicated surgical procedure but it was denied because of a recipient's judgment that the postoperative care the patient would need after the surgery because of the patient's disability would be an unfair burden on the individual's caregivers, family, or society.
Proposed paragraph (b)(1)(iii) prohibits denying or limiting medical treatment based on the provider's belief that the life of a person with a disability has a lesser value than a person without a disability, or that life with a disability is not worth living. For example, determinations that an individual with a disability's life is not worth living because of dependence on others for support or need for mechanical ventilation, intensive care nursing, tracheotomy, or other ongoing medical care rest on judgments that do not properly relate to the individual's “qualification” for medical treatment under section 504. Qualification for the service of life-sustaining treatment must be based on whether the treatment would be effective for the medical condition it would be treating, not broader societal judgments as to the relative value of a person's life due to their disability or whether life with a disability is worth living.
Many people with disabilities require these kinds of supports, often on a long-term basis, to survive and thrive. With such supports, individuals with disabilities can and do live many years, enjoying meaningful social, family, and professional relationships. By denying patients with disabilities the opportunity to make their own decisions regarding whether to receive or continue medically effective life-sustaining care, recipients override patient autonomy in favor of their own beliefs regarding the value of the lives of individuals with disabilities who are dependent on others.
For example, a patient with Alzheimer's disease covered as a disability under section 504 has developed pneumonia and is in need of a ventilator to provide assistance breathing. His husband has requested that physicians start the patient on a ventilator, consistent with what the patient's husband believes would be his spouse's wishes. The attending physician, who is a recipient of Federal financial assistance from HHS and works in a hospital that is also a recipient, tells the patient and his husband that the patient should not receive such support, given the poor quality of life the physician believes the patient experiences, because the latter has Alzheimer's disease. This situation occurs even though the attending physician normally would start ventilator support for a patient with pneumonia who needs assistance breathing. The physician believes that the patient's Alzheimer's disease renders the continuation of the patient's life to have no benefit, and therefore the physician declines to put the patient on the ventilator. The physician has denied life-sustaining care for the patient based on judgments that the patient's quality of life renders continued life with a disability not worth living and has failed to provide care that he would have provided to an individual without a disability. In denying access to ventilator support, the doctor has violated proposed § 84.56(b)(1)(iii). If the physician also denied the ventilator support because of a perception that it would be a burden for his husband to care for the patient, the physician would also have violated § 84.56(b)(1)(ii).
As another example, a teenage boy with intellectual and developmental disabilities develops periodic treatable respiratory infections and pneumonia due to a chronic condition. Judging his quality of life to be poor due to cognitive and communication disabilities, his provider decides to withhold antibiotics and other medical care when the boy becomes ill. Instead, his provider—who is a recipient of Federal financial assistance—refers the boy to hospice care and declines to provide life-sustaining treatment. The provider makes this decision not because she anticipates that care would be ineffective, but because she determines that such care would be effective at prolonging the patient's life and that the patient's life would not be
The Department notes that this provision does not require clinicians or other health care providers to offer medical treatment that is outside their scope of practice. That a treatment is outside the typical scope of practice of a given provider is a legitimate nondiscriminatory reason for the denial or limitation of treatment. However, if the provider would typically provide a referral to another provider for whom a given treatment is within their scope of practice, a refusal to provide such a referral on the basis of disability would likely constitute a violation of this paragraph.
Proposed § 84.56(b)(2) addresses situations where a person with a disability seeks or consents to treatment for a separately diagnosable symptom or medical condition, whether or not the symptom or condition is itself a disability or is causally connected to the disability that is the basis for coverage under section 504. (In this proposed rule, we use the phrase “underlying disability” to refer to a disability that triggers coverage under section 504 and that is different than the separately diagnosable symptom or medical condition for which the patient seeks treatment.) Often individuals with a disability will seek treatment for a separately diagnosable symptom or medical condition. For example, a person with Down syndrome might seek a heart transplant to address a heart condition; a person with spinal muscular atrophy might seek treatment for a severe case of COVID-19; or a person with a spinal cord injury might seek treatment for depression with suicidal ideation. The section makes clear that a recipient may not deny or limit clinically appropriate treatment if it would be offered to a similarly situated individual without an underlying disability, including based on predictions about the long-term impact of the underlying disability on the individual's life expectancy.
Violations of § 84.56(b)(1)(iii) may also violate § 84.56(b)(2). For example, as described above in the discussion of § 84.56(b)(1)(iii), a recipient who denies a ventilator to a patient with severe Alzheimer's disease who has pneumonia because of a belief that the patient's life is not worth living based on their disability has violated § 84.56(b)(1)(iii) if the ventilator would have been offered to a similarly situated individual without an underlying disability, in this case, Alzheimer's disease. In addition, the recipient has also violated § 84.56(b)(2) because of the denial of treatment of a separate condition.
As another example described above in the discussion of § 84.56(b)(1)(iii), a recipient who withholds antibiotics and other medical care from a teenage boy with intellectual and developmental disabilities because of a belief that the boy's life has a lesser value than the life of a person without a disability violates § 84.56(b)(1)(iii) when the antibiotics and medical care would have been offered to a similarly situated individual without an underlying disability . In this situation, § 84.56(b)(2) has also been violated because of the failure to treat a separate condition.
For purposes of proposed paragraph (b)(2), it does not matter whether the symptom or condition for which the individual is seeking treatment is also a disability under section 504. Heart conditions, COVID-19, and depression could all meet the statute's definition of disability in appropriate circumstances, but people who experience discriminatory treatment for these conditions based on an underlying disability are entitled to the protections of this paragraph. Nor does it matter for these purposes whether the condition for which the individual is seeking treatment is in some sense causally related to the underlying disability if the decision to refuse treatment would not be made as to similarly situated individuals without the disability. Individuals with Down syndrome are more likely to experience heart conditions, and a spinal cord injury may be the event that triggers an individual's depression. But a refusal to treat a heart condition because of a judgment regarding the disability of Down syndrome, or a refusal to treat depression because of a patient's underlying spinal cord injury, will violate this paragraph if it is made on the basis of the prohibited grounds.
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Similarly, a symptom or condition that arises from a common underlying biological mechanism as a patient's underlying disability, such as Kaposi's sarcoma in a person with AIDS, is a separately diagnosable symptom or condition for the purposes of this section. The crucial point is that where a qualified individual or their authorized representative seeks or consents to treatment for a separately diagnosable symptom or condition, a recipient may not deny or limit that treatment if it would offer that treatment to a similarly situated person without the underlying disability. In each of these cases, the recipient will have discriminated against a qualified individual with a disability on the basis of disability in violation of proposed § 84.56(b)(2).
These obligations must be interpreted in light of the rule of construction in proposed § 84.56(c) on professional medical judgment, which indicates that nothing in this section requires the provision of medical treatment where the recipient has a legitimate, nondiscriminatory reason for denying or limiting that service or where the disability renders the individual not qualified for the treatment. For example, under this rule of construction, a recipient may take into account a patient's underlying disability to deny a medical treatment based on their judgment that the treatment would not be effective at accomplishing its intended effect or because an alternative course of treatment to the one that would typically be provided to patients without disabilities would be more likely to be successful in light of a patient's disability.
Proposed § 84.56(b)(3) addresses the discriminatory provision of medical treatment. It states that if a medical professional provides an individual with a disability different treatment than the professional would provide an individual without a disability seeking assistance with the same condition—and there is nothing about the disability that impairs the effectiveness, or ease of administration of the treatment itself or has a medical effect on the condition to which the treatment is directed—proposed § 84.56(b)(3) has been violated. For example, if a woman with an intellectual disability seeks a prescription for contraception but her provider, due to a belief that any children she may have are likely to have an intellectual disability, offers only surgical sterilization, the recipient has violated proposed § 84.56(b)(3) if the provider prescribes contraception for her other patients without disabilities. However, proposed § 84.56(b)(3) does not prohibit a recipient from providing
Where an underlying disability would interfere with the efficacy of a particular treatment, a recipient could provide a person with that disability a different treatment than it would provide to similarly situated nondisabled individuals. For example, an underlying health condition that itself is a disability might require an individual to take a medication that is contraindicated with a particularly effective antiviral drug. If that individual contracts COVID-19, it would not violate this section for a recipient to offer a different treatment than the contraindicated antiviral drug, even if it is generally less effective. Because the underlying disability would directly inhibit the utility of the generally more effective drug, the individual would not be qualified for that treatment under this part.
The Department proposes this provision in part to address discriminatory conduct based on the belief that persons with disabilities are entitled to less bodily autonomy than nondisabled persons—a belief that underpins the history of forced sterilization provided as “medical treatment” for individuals with intellectual, mental health, and developmental disabilities. In the twentieth century, over thirty states allowed and funded involuntary sterilization of disabled women and men with disabilities. In 1927, the Supreme Court sanctioned such sterilization programs in
Yet, many individuals who were subjected to such involuntary sterilizations experienced and continue to experience trauma and grief because of these State-sanctioned practices. In June 2022, the
While State-run sterilization programs have ended, involuntary sterilization continues today. According to a 2021 report, fourteen states allow a judge to order the sterilization of a person with a disability who is not under guardianship.
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Proposed § 84.56(c) sets forth a series of principles guiding how § 84.56 should be interpreted.
Proposed § 84.56(c)(1) specifically addresses professional judgment in treatment and its relationship to the proposed nondiscrimination provisions regarding medical treatment. Paragraph (c)(1)(i) provides that nothing in this section requires the provision of medical treatment where the recipient has a legitimate, nondiscriminatory reason for denying or limiting that service or where the disability renders the individual not qualified for the treatment. For example, it would not violate § 84.56(c)(1)(i) if a recipient declines to provide chemotherapy to a patient with a disability based on a judgment that it would not extend the patient's life or mitigate the symptoms of the patient's cancer. Similarly, a provider who refuses to perform cardiopulmonary resuscitation on a patient with signs of irreversible death or a clinician who refuses to administer antifungals as a treatment for a heart attack would not be in violation of this section where such interventions would not accomplish the intended goal of treatment. Nor would a recipient be in violation of this section if it determined that a patient with a disability would be exceedingly unlikely to survive cardiac surgery and thus judged that it would not be medically appropriate to provide such treatment.
Similarly, a recipient would not be in violation of this section if it determined that an alternative course of treatment to the one that would typically be provided to patients without disabilities would be more likely to be successful in light of a patient's disability. For example, should a recipient determine that the use of an older medication has a lower risk of side effects because of interactions with a patient's disability as compared to a newer medication that is now commonly prescribed, using the older medication would not constitute an impermissible limitation on access to medical treatment. These examples, which are based on individualized, fact-specific inquiries, are legitimate nondiscriminatory reasons for denying or limiting treatment and remain within the appropriate province of medical judgment.
We note that proposed § 84.68(b)(8) permits the imposition of eligibility criteria that screen out people with disabilities from receiving the benefit of medical care only when they are shown to be necessary for the provision of this aid, benefit, or service. The rule does nothing to disturb the ability of physicians to exercise their professional judgment based on the current medical knowledge or the best available objective evidence that a treatment is or is not clinically appropriate.
Paragraph (c)(1)(ii) states that circumstances in which the denial of treatment is permitted include those in which the recipient typically declines to provide the treatment to any individual, and those in which the recipient
A provider might also decline to provide a service to any individual if it is outside their scope of practice. For example, an orthopedic surgeon might decline to provide a treatment to children, including children with disabilities, if pediatric surgery is not within her scope of service. However, the provider could not refuse to offer pediatric referrals for children with disabilities when it typically refers children without disabilities to appropriate care.
As another example, assume that a recipient decides to deny a person with an intellectual disability who uses mechanical ventilation access to sought-after life-saving care on the grounds that they believe the presence of a cognitive disability and a need for breathing support together render the patient's quality of life so poor as to render continued life of no benefit to them and not worth living (despite the patient themself or their authorized representative seeking life-saving treatment). This is not a permissible basis for determining that a disability has rendered an individual with a disability unqualified for treatment. Nor is this a legitimate nondiscriminatory reason for denying or limiting a health service on the basis of disability, as the denial is motivated by the provider's belief that a person with a disability has lesser value than a person without a disability and that life with a disability is not worth living, both of which are prohibited under paragraph (b)(1)(iii).
In contrast, a recipient could deny medical treatment to a person with a disability on the grounds that it is not clinically appropriate if it poses substantial added risk to the patient that cannot be ameliorated. For example, for a person with a disability at much higher risk of death from a potential surgery, a recipient's decision not to provide such a surgical intervention in light of that heightened mortality risk would be a legitimate, nondiscriminatory reason to deny the surgery in question even if it was sought by a patient with a disability.
Similarly, if a recipient declines to provide a treatment on the grounds that existing evidence only supports its medical effectiveness for a particular subpopulation that the patient with a disability seeking treatment is not a part of, this might be a legitimate nondiscriminatory reason for denying access to the treatment under some circumstances, provided the recipient generally denies such or similar treatments to patient populations for whom the evidentiary basis is similarly lacking or inconclusive. However, if a recipient generally provides such or similar treatments even in the presence of a similar evidentiary record for their effectiveness (or lack of effectiveness), denying such treatments to a patient with a disability on those grounds may not be a legitimate nondiscriminatory reason.
The Department notes that many types of treatment, such as pharmacological interventions, are often studied on populations that are not completely representative of the general patient population, but these treatments nonetheless are routinely prescribed to patient populations with conditions excluded from participation in the clinical trial without further research. In those circumstances, it would not necessarily be a legitimate nondiscriminatory reason to deny a patient with a disability access to a broadly prescribed heart medication simply because patients with her disability were excluded from the clinical trial that established the medication's effectiveness. However, should a recipient believe based on current medical knowledge or the best available objective evidence that the heart medication is likely to be ineffective, have dangerous side effects, or otherwise be harmful to patients with that disability, this would constitute a legitimate nondiscriminatory reason to deny access. Physicians have substantial discretion to assess mixed or inconclusive evidence regarding effectiveness according to their own judgment.
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Proposed § 84.56(c)(2) addresses consent. Section 84.56(c)(2)(i) makes clear that this section does not require a recipient to provide medical treatment to an individual where the individual, or the person legally authorized to make medical decisions on behalf of that individual, does not consent to that treatment. This subsection thus adopts the plurality's holding in
Another issue arising from the
Denial of treatment is not the only way a recipient can discriminate on the basis of disability in its covered programs or activities. When it enacted the Civil Rights Restoration Act two years after
Numerous reports have demonstrated the existence of this sort of biased treatment. The case of Sarah McSweeney, documented as part of a National Public Radio (NPR) investigation into multiple reports of individuals with disabilities pressured to agree to the withdrawing or withholding of life-sustaining care, offers one example of potential discrimination in access to life-sustaining care.
In some cases, patients with disabilities with routine illnesses or their authorized representatives are pressured by their physicians to agree to not be resuscitated, against their desires and wishes,
In its report,
Proposed § 84.56(c)(3) addresses the information exchange between the recipient and the patient with a disability concerning the provision of information and potential courses of treatment and their implications, including the option of foregoing treatment. This provision indicates that nothing in this section precludes a provider from providing an individual with a disability or their authorized representative with information regarding the implications of different courses of treatment based on current medical knowledge or the best available objective evidence.
The Department realizes that providing regulatory requirements concerning medical treatment requires careful consideration.
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The proposed rule seeks to address discrimination on the basis of disability in the use of value assessment methods. The Department has been aware of potential disability discrimination in value assessment for some time. For example, in 1992, the Department declined to authorize a demonstration program in Oregon that relied on the use of the Quality Adjusted Life Year (QALY), one specific methodology of value assessment whose application in Oregon (and common application elsewhere in the present day) discounted the value of life extension on the basis of disability, to determine whether certain treatments for people living with certain disabilities would be covered. The Department cited concerns of discrimination in value assessment methods in its response, stating that “Oregon's plan in substantial part values the life of an individual with a disability less than the life of an individual without a disability. This premise is discriminatory and inconsistent with the Americans with Disabilities Act.”
Despite this prior history, value assessment methods have been increasingly used by recipients to determine the cost-effectiveness of goods and services. These determinations can inform price negotiations, value-based purchasing arrangements that link provider payment to performance and outcomes, and other things that affect the degree to which individuals can access aids, benefits, or services, as well as the terms or conditions under which they can access them.
Not all methods of value assessment or their uses are discriminatory. Many value assessment methods can play an important role in cost containment and quality improvement efforts. However, the Department is concerned that some value assessment frameworks that have been adopted by recipients may discriminate on the basis of disability, in violation of existing prohibitions against such discrimination in health services.
Where value assessments use methods for calculating value that place a lower value on life extension for a group of individuals based on disability
An analysis from the Institute for Clinical and Economic Review (ICER)—whose work is often used to inform decision-making by recipients—valued a year of life of a person with multiple sclerosis with a score of eight on the Expanded Disability Status Scale (describing an individual who relies entirely on a wheelchair for mobility but is nonetheless able to be out of bed for much of the day
This remains the case even if the value of extending the lives of people with disabilities is compared to a less discounted population rather than a hypothetical non-disabled, healthy adult. For example, a value assessment calculation using a general population average utility of 0.816 for life extension for persons without cystic fibrosis and a utility of 0.653 for life extension for persons with cystic fibrosis would still assign lower value to extending the lives of persons with cystic fibrosis relative to persons without. The outcome remains the same even if the general population was also receiving a less severe discount to the value of life extension.
Recipients often rely on value assessments to make decisions regarding coverage, cost, and other decisions with serious implications for access for individuals with disabilities. Relying on a measure that discounts the value of extending the lives of people with disabilities relative to people without disabilities raises serious concerns in light of the consequences for access for individuals with disabilities. It is important that recipients do not engage in discriminatory uses of value assessment methods.
In its report, “Quality-Adjusted Life Years and the Devaluation of Life with Disability,” NCD discussed the way that the QALY places a lower value on extending the lives of individuals with disabilities and chronic illnesses.
For the reasons discussed above, the Department proposes to add § 84.57 on value assessment methods, indicating that a recipient shall not, directly or through contractual, licensing, or other arrangements, use any measure, assessment, or tool that discounts the value of life extension on the basis of disability to deny or afford an unequal opportunity to qualified individuals with disabilities with respect to the eligibility or referral for, or provision or withdrawal of any aid, benefit, or service, including the terms or conditions under which they are made available. The proposed provision does not identify the use of any specific method of value assessment but instead prohibits measures that discount the value of life extension on the basis of disability when used to deny or provide an unequal opportunity for a qualified person with a disability to participate in or benefit from an aid, benefit, or service.
We note that the discriminatory
Similarly, elements of value assessment methods that are discriminatory in some contexts—such as for valuing life extension—may not be discriminatory in other contexts. For example, the use of utility weights for valuing quality of life improvements can be used in a way that is not discriminatory, even if the use of the same utility weights to discount life extension would be discriminatory, if used to restrict or limit access by people with disabilities. For example, if recipients use a measure of value that does not discount the value of life extension on the basis of disability but does use utility weights for valuing quality of life improvements from a treatment in a way that is not discriminatory, such use of utility weights for assessing quality of life improvements likely would not violate this provision. However, using a measure that does discount life-extension to restrict or limit access could violate the proposed provision.
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Children, parents, caregivers, foster parents, and prospective parents with disabilities may encounter a wide range of discriminatory barriers when accessing critical child welfare programs and services that are designed to protect children and strengthen families. These barriers arise in a variety of contexts, including parent-child reunification services; policies or practices that discourage and/or prohibit parents from receiving assistance with childcare responsibilities from professional and natural supports; and safety and risk assessment policies that conflate disability with parental unfitness.
Federally funded child welfare programs and activities are covered social service programs under section 504. As such, the children with disabilities served by the child welfare system, as well as parents, caregivers, foster parents, and prospective parents with disabilities, are within the class of individuals with disabilities to whom section 504 protections extend. The Department proposes to add a new § 84.60 to the section 504 regulation that will more clearly apply the nondiscrimination requirements of section 504, which are consistent with and reflect the requirements of the ADA, to child welfare programs and activities. Additionally, the proposed section adds specific regulatory provisions that illustrate the types of child welfare actions that are prohibited discrimination under section 504.
A 2012 NCD report, “Rocking the Cradle: Ensuring the Rights of Parents with Disabilities and Their Children,”
NCD's report provided case studies where children were removed from parents based on the presumption of unfitness due to parental disability. The report includes ten case studies of parents with disabilities with firsthand experience with the child welfare system. The studies provide examples of discriminatory barriers and bias parents with disabilities encounter at key decision points in the child welfare system, including reporting for abuse and neglect, safety and risk assessments, case opening, and permanency decision. One study described the experience of a couple who were presumed to be unfit to care for their two-day-old daughter because both parents were blind. The concerns centered on the parents' visual impairments, the mother's unsuccessful first attempts at breastfeeding, and the parents' lack of specialized parenting training. The infant was held in state custody for 57 days until a court dismissed the child protective action against the parents.
Another case study described the experience of a mother with intellectual disabilities who lived in supported
In examining the use of IQ scores to determine a parent's capacity or fitness to safely care for a child, NCD found that, particularly for parents with intellectual disabilities, reliance on the tests results in high rates of removal and loss of child custody. These tests continue to be administered for the purpose of child custody planning despite the research evidence demonstrating that parental IQ is a poor predictor of parenting competence.
[In] a majority of US cases involving a parent with intellectual and developmental disabilities, appealing a termination of their parental rights, parental IQ or intellectual functioning range often was considered and relied upon by the court in upholding the decision. The rate of reversal was far lower than the dependency and general civil bench trial rates of reversal. It is worrying that while every decision was reasoned differently, and all cases had multiple issues, the courts consistently considered parental IQ, rarely reviewed evaluation methods and results and frequently made statements that reflected a view of parental IQ as static, fixed and necessarily undermining of parenting capacity and ability to learn.
Support for protecting the rights of parents, caregivers, foster parents, and prospective parents with disabilities involved in the child welfare system continues to gain momentum. In 2017, the American Bar Association adopted a resolution urging Federal, State, territorial, and tribal governments to enact legislation and implement policies limiting the circumstances when a parent's disability could be a basis for the denial of parental access to their child or termination of parental rights, or when a prospective parent's disability could be a bar in adoption and foster care.
OCR has received over 300 complaints alleging disability discrimination in child welfare services and activities within the last six years. The complaints allege discrimination in a wide range of child welfare services that are subject to nondiscrimination requirements including: child protection investigations; child and family assessments; case plan development; parent-child visitation; child placement decision-making; provision of community-based services; foster and adoptive parent assessments; and determinations to terminate parent-child reunification efforts. OCR's investigations have revealed that some child welfare entities have implemented policies, practices, and procedures that contribute to unnecessary removals of children from parents with disabilities and create barriers to parent-child reunification, permanency planning, and other critical child welfare services. Additionally, as discussed later in this section, OCR has investigated complaints of discrimination against children with disabilities in the child welfare system. As a result of these investigations, child welfare entities and OCR have worked
According to data submitted to the Administration for Children and Families (ACF) through its Adoption and Foster Care Analysis and Reporting System (AFCARS) as reported in November 2021, more than 216,838 children entered the U.S. foster care system due at least in part to safety concerns related to parental fitness during 2020.
As noted by research published in Children and Youth Services Review, in the 2012 AFCARS data, parental disability was the only parental characteristic based on a parent's physical or mental attributes categorized in State child welfare policies or in Federal data collection tools as a consideration when determining whether to remove a child from their home or to terminate parental rights.
The University of Minnesota, Center for Advanced Studies in Child Welfare noted in its child welfare policy brief on the use of parental disability as a consideration in removing children and termination of parental rights (TPR), that having parental disability listed as a removal reason or as grounds for TPR “can lead those involved in the system to believe that parental disabilities lead to abuse, rather than focusing on how to appropriately provide services.”
In 2015, in response to increased disability-related child welfare complaints and calls from entities such as NCD for the Federal Government to take immediate action to protect the rights of individuals with disabilities, OCR, ACF, and DOJ jointly published
Despite HHS efforts to raise awareness of Federal disability rights protections, OCR continues to receive new complaints about discrimination against individuals with disabilities in the child welfare system. These cases involve, for example, the removal of children from parents with intellectual disabilities. In the section that follows, we discuss complaints where child welfare agencies allegedly made custody decisions based on stereotypes of disability, failed to offer reasonable modifications in the parental evaluation process, and failed to recognize the need for modifications on the basis of disability as required by section 504. The creation of revised policies and procedures by each of these agencies shows that the many child welfare agencies' current policies do not reflect the longstanding antidiscrimination requirements of section 504. This rulemaking seeks to clarify child welfare agency obligations and alleviate the need to correct agency policies through enforcement actions.
In a recent case, OCR investigated allegations involving a State child welfare agency's removal of two infant children from a mother and father with intellectual disabilities. The parents alleged that the State agency acted based in significant part on their IQ scores. OCR's investigation raised concerns that the agency subjected parents with intellectual disabilities to unlawful treatment when it removed the children from their custody, refused to reunify them with their children, limited their visitation rights, and failed to provide them with appropriate reunification services. In response to that investigation, the state agency agreed to update those policies to clarify that it will not make decisions about whether a participant with a disability represents a threat to the safety of a child on the basis of stereotypes or generalizations about persons with disabilities, or on a participant's diagnosis or intelligence measure (
In another case, an OCR investigation revealed that a State denied a prospective parent with chronic fatigue syndrome and other disabilities the opportunity to become a foster parent. OCR determined that the child welfare agency failed to make an individualized assessment of the applicant's ability to be a foster/adoptive parent and improperly used disability as a criterion to make placement decisions.
OCR also investigated a complaint filed by an aunt and uncle who alleged that a State child welfare agency denied their request for emergency custody and placement of their young niece and nephew based on the uncle's being in recovery from Opioid Use Disorder (OUD), and his long-term use of physician-prescribed Suboxone as a medication for opioid use disorder (MOUD). The investigation indicated that the uncle had not tested positive for illegal use of drugs during his treatment and the aunt expected to be the children's primary caregiver as her husband worked full-time. OCR's investigation identified systemic deficiencies regarding the agency's implementation of its policies, practices, and procedures to ensure the civil rights of individuals with disabilities, including individuals in recovery from OUD, in the State child welfare system. To address these concerns, the State agency agreed to update its policies to clarify that section 504 and title II of the ADA protect qualified individuals with substance use disorder from unlawful discrimination. The updated policies reflect that MOUD is not the illegal use of drugs and that an individual's prescribed use of MOUD does not mean that the individual is substituting one addiction for another. The agency also agreed to develop and provide mandatory annual training for its staff on the requirements of Federal civil rights laws and working with people with disabilities, including individuals in recovery from substance use disorder.
After a joint investigation, OCR and DOJ found that a State child welfare agency seeking to terminate parental rights of a mother with a developmental disability violated title II of the ADA and section 504 by denying the mother supports and services provided to nondisabled parents and denying the mother reasonable modifications to accommodate her disability.
Similarly, OCR investigated a complaint alleging a State agency failed to provide modified support services and modifications necessary for a young mother with an intellectual disability to have an effective and meaningful opportunity to reunite with her young child. The investigation led to significant technical assistance to the agency. The State agency revised its nondiscrimination policies, issued an administrative order committing the agency to inclusivity and reasonable modifications in the provision of child welfare services, and implemented new disability rights training for agency staff.
A recent settlement of a Federal lawsuit brought against a State agency which alleged violations of the ADA and section 504 demonstrates the agency's failure to provide required modifications. The plaintiff, a mother with physical disabilities, alleged her newborn son was removed from the hospital, four days after his birth, based on discriminatory assumptions about the parenting abilities of people with disabilities. The State agency and the parent entered into a settlement agreement, which requires that the State agency implement policy changes to protect the rights of people with disabilities from discrimination, to ensure (1) that an individual assessment of a parent's disability is obtained prior to referring the family for services; (2) that the provision of any “reasonable modification” needed by a parent with a disability is made in order that the disabled parent can participate in recommended programs and/or services, and (3) that the agency will develop and implement training to address stereotypes about people with disabilities.
The Department's enforcement actions related to disability discrimination, as well as Federal litigation involving child welfare entities under section 504, demonstrate the need for rulemaking to clarify child welfare entities' nondiscrimination obligations under the Rehabilitation Act. The numerous and diverse range of issues raised in complaints received by OCR show that covered child welfare entities need specific articulation of their longstanding obligations under section 504.
Child welfare agencies must place qualified individuals with disabilities in the most integrated setting appropriate to the needs of the child, consistent with the requirements of existing § 84.4(b)(2) and proposed § 84.68(d), which is identical to 28 CFR 35.130(d) in the ADA title II regulations, and proposed § 84.76. The integration mandate is discussed in depth in the preamble discussion of § 84.76. Pursuant to these requirements, a recipient may not engage in the unnecessary or unjustified segregation of children with disabilities, such as default placement in institutional or other congregate care, and it must work
Title IV-E agencies accept billions of dollars from HHS to provide safe foster care placements for children and youth who cannot remain in their homes. As a condition of receiving these funds, child welfare entities must comply with Federal child welfare law and disability rights laws that require agencies to place foster children and youth in the least restrictive and most family-like setting appropriate to their needs. Congregate care should never be considered the most appropriate long-term placement for children, regardless of their level of disability. This stance is reflected in the Federal enforcement of the integration mandate. After investigating one children's mental health system, DOJ found that “[w]ith access to timely and appropriate services, even children with intensive behavioral health needs and a history of congregate facility placement are able to return to or remain in family homes where they are more likely to have improved clinical and functional outcomes, better school attendance and performance, and increased behavioral and emotional strengths compared to children receiving care in institutions.”
In 2015, a class action was brought on behalf of children under the care and custody of the Arizona Department of Child Safety that alleged the State agency failed, in part, to ensure that foster children with disabilities receive behavioral health services and placements in family-like foster homes. The February 2021 Settlement Agreement requires that the State agency make considerable improvements in providing behavioral health and other necessary services to children in foster care.
In a recent case in Maine, DOJ found that the State of Maine violated the title II integration mandate by unnecessarily segregating children with mental health and developmental disabilities in psychiatric hospitals, residential treatment facilities, and a State-operated juvenile detention facility.
In other lawsuits, plaintiffs' claims have not yet been fully adjudicated. However, the allegations supporting the claims suggest that there may be a need for regulation in this area. For example, there have been other lawsuits relating to the treatment of children with disabilities under State care. In Illinois, the Cook County Public Guardian was sued on behalf of children with disabilities under the care and custody of the Illinois Department of Children and Family Services.
In Oregon, two separate class actions were filed on behalf of children with disabilities under the care and custody of Oregon Department of Human Services. The first lawsuit alleged the State agency systematically placed foster children with mental health disabilities in hotel rooms or offices and denied children with disabilities family foster homes and other community-based therapeutic placements. The lawsuit also alleged the children are disproportionately denied, by reason of their disability, the opportunity to benefit from a State program to provide safe, nurturing homes for children and from the mental health services offered by the child welfare agency.
In 2021, lawsuits were filed by advocates on behalf of foster children and youth with disabilities in the custody of the Washington State Department of Children, Youth and Families (DCYF) and the Alabama Department of Human Resources. The Washington complaint alleges that the State agency denies foster children with behavioral and developmental disabilities appropriate services, supports, and stable placements in family-like settings. The action further alleges that foster children with disabilities experience multiple, short-term emergency placements in motels, one-night stay foster care homes, and DCYF offices. It also alleges that some foster children are segregated with other youth with behavioral and developmental disabilities in congregate care settings or are sent to out-of-state institutions away from their families and communities.
The Alabama lawsuit alleges that the State child welfare agency discriminates against youth with mental impairments by unnecessarily segregating them in restrictive, institutional psychiatric facilities. The complaint alleges that a foster youth with a “mental impairment” was held unnecessarily in a psychiatric residential treatment facility because the State agency failed to locate a community-based placement with appropriate supports and services. Though the State child welfare agency determined the foster youth was eligible for community-based placement, according to the complaint, she remained in a restricted and segregated placement for more than a year due to the agency's failure to develop an adequate system of community support and recruit and train foster families. The complaint asserts that children placed in institutional settings are less likely to achieve permanency, experience poor child welfare outcomes, and are more likely to age out of foster care without appropriate community-based care to facilitate a successful transition to adulthood.
In 2022, a class action complaint was filed by advocates on behalf of foster children with disabilities in the custody of the North Carolina Department of Health and Human Services (DHHS). The complaint alleges DHHS unnecessarily segregates foster children with disabilities from their home communities and routinely isolates them in restrictive, and often clinically inappropriate, institutional settings, such as psychiatric residential treatment facilities (PRTF).
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Proposed § 84.60(a) states that no qualified individual with a disability may be excluded from participation in, be denied the benefits of, or otherwise be subjected to discrimination under any child welfare program or activity. This section is consistent with the general nondiscrimination provisions contained at § 84.68(a), as well as the general nondiscrimination provisions applicable to health, welfare, and social services programs at § 84.52(a), and applies them directly to child welfare entities who are recipients of Federal funding. This proposed provision does not enlarge the existing protections of section 504, but the foregoing discussion, as well as OCR's own outreach initiatives to child welfare advocates and recipients, strongly indicate that child welfare entities who are recipients of Federal funding are not all aware of their responsibilities under the statute. This section is meant to ensure that individuals with disabilities served by child welfare programs are afforded full and equal opportunities to access and benefit from child welfare programs and activities as required by section 504.
Proposed § 84.60(a)(2)(i) states that discrimination includes decisions based on speculation, stereotypes, or generalizations about a parent, caregiver, foster parent, or prospective parent. Section 84.60(a)(2)(ii) prohibits such discriminatory decisions about a child with a disability.
The term “parents” is defined in proposed § 84.10 as biological or adoptive parents or legal guardians, as determined by applicable State law. The definition is consistent with 42 U.S.C. 675(2) in title IV-E of the Social Security Act, the statute governing Federal payments for foster care, adoption assistance, and prevention services. The term “caregivers” as used in this section includes relatives and other kinship caregivers who provide for the physical, emotional, and social needs of the child. The term “foster parents” means individuals who provide a temporary home and support for children in foster care as defined in 45 CFR 1355.20. This category may include relatives or nonrelatives that are licensed or approved to provide care for foster children. The term “companion” as defined in § 84.10 means a family member, friend, or associate of an individual seeking access to a program or activity of a recipient, who, along with such individual, is an appropriate person with whom the recipient should communicate. The term “prospective parents” as defined in § 84.10 means individuals who are seeking to become foster or adoptive parents.
The term “qualified person with a disability” or “qualified individual with a disability” means a person with a disability who meets the essential eligibility requirements of the child welfare program or activity, with or without the provision of reasonable modifications, the provision of appropriate auxiliary aids and services, or the removal of architectural,
Proposed paragraph (b) of § 84.60 articulates prohibitions included under paragraph (a) and outlines the types of child welfare actions that are prohibited when they occur based on the fact that a qualified individual who is a parent, caregiver, foster parent, or prospective parent has a disability, including the denial of custody, control, or visitation related to a child; termination of parental rights; and the denial of access to adoption or foster care services;. This list is not exhaustive, but rather, illustrative.
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Proposed paragraph (b)(1) of § 84.60 addresses the denial of custody or control of children from qualified parents with disabilities. This paragraph prohibits child welfare programs from petitioning for the removal of a child from a parent because of speculation, stereotypes, or generalizations about a parent's disability.
Proposed paragraph (b)(2) of § 84.60 requires that recipients ensure that qualified parents with disabilities are not denied the opportunity to preserve their families that is equal to the opportunity that recipients offer to parents without disabilities. Child welfare programs or activities may not limit access to reunification services for parents with disabilities or provide reunification services to parents with disabilities that are inaccessible.
Proposed paragraph (b)(3) of § 84.60 addresses the termination of parental rights or legal guardianship of a qualified parent or legal guardian with a disability. Much like paragraph (b)(1), it means that a child welfare entity may not file a petition to terminate a parent's legal rights over a child because of speculation, stereotypes, or generalizations surrounding the parent's disability.
Proposed paragraph (b)(4) of § 84.60 affirms the right of a qualified caregiver, foster parent, companion, or prospective parent with a disability to be given an opportunity to participate in or benefit from child welfare programs and activities. Child welfare programs must ensure that they provide equal opportunities for caregivers, foster parents, companions, or prospective parents with disabilities to benefit from those programs, including by providing auxiliary aids and services and reasonable modifications.
Pressuring a qualified individual with a disability not to seek, apply, or participate in Federally funded child welfare aids, benefits, or services may also result in a denial of the opportunity to participate in or benefit from child welfare programs and activities under proposed paragraph (b)(4) of § 84.60. For example, child welfare entities may not inappropriately pressure parents with disabilities towards voluntary relinquishment of parental rights or improperly influence a parent's decision to participate in visitation and reunification activities on the basis of the parent's disability. Another example of prohibited conduct under paragraph (b)(4) is using criteria that discriminate on the basis of disability. This includes the use of discriminatory screening processes or requirements for service.
Proposed paragraph (c) of § 84.60 requires recipients to establish procedures for referring qualified parents who, because of disability, need or are believed to need modified or adaptive services (
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Section 504 requires that these assessments consider the strengths and needs of a parent, caregiver, foster parent, or prospective parent with a disability and not base decisions on preconceived notions resulting from generalizations and stereotypes about individuals with disabilities. It prohibits child welfare agencies from making decisions about foster parents and prospective foster parents that are based on assumptions or generalizations about people with disabilities. Disabilities rarely manifest in the exact same way from person to person, and decisions about a parent, caregiver, foster parent, or prospective parent's ability to care for a child, must be based on facts regarding each individual.
In some circumstances, the risk of harm to a child may warrant removal, denial of reunification, denial of visitation, or termination of parental rights. Risk of harm to a child may be analyzed through section 504's provision addressing “direct threat.” Proposed § 84.75 states that recipients are not required to provide benefits or services to individuals with disabilities if those individuals pose a direct threat to others. In determining whether an
The Department believes that the proposed regulation furthers the best interests of the children involved in child-welfare matters governed by this section. Basing decisions to remove children from their parents or caretakers, to terminate their parents' rights, or to limit visitation on stereotypes, assumptions, and unsubstantiated beliefs is not in children's best interests. We therefore believe that the proposed rule both implements the plain requirements of section 504 and advances the best interests of children and their caretakers.
Web content and mobile applications provide increasingly crucial gateways to health and human service programs and activities. Inaccessible technology can cause severe harm, from denials of cancer screenings to limitations in reunification services for parents and children. Current Federal laws and regulations require the accessibility of all programs and activities of recipients of Federal financial assistance, including those provided through web content, mobile applications, and kiosks.
Section 504 provides that individuals with disabilities shall not, solely by reason of such disability, be excluded from participation in or be denied the benefits of programs or activities of a recipient, or be subjected to discrimination by any such entity.
As with many other civil rights statutes, section 504's requirements are broad and its implementing regulations do not include specific standards for every obligation under the statute. This has been the case in the context of web and mobile app content accessibility under section 504. Because the Department has not adopted specific technical requirements for web content through rulemaking, recipients have not had specific direction on how to comply with section 504's general requirements of nondiscrimination and effective communication. However, recipients must still comply with these section 504 obligations with respect to their websites and mobile apps, including before this rule's effective date.
As the use of technology has become more prevalent in health programs and activities, the Department has articulated its position about the ways that Federal civil rights laws that prohibit discrimination on the basis of disability require accessibility for individuals with disabilities. In December of 2016, the Department issued a guidance document titled “Guidance and Resources for Electronic Information Technology: Ensuring Equal Access to All Health Services and Benefits Provided through Electronic Means.”
In 2016, when the Department first issued its implementing regulation for section 1557 of the ACA, it required covered entities to ensure that their health programs or activities provided through electronic and information technology, including web content, mobile applications, and kiosks, were accessible to individuals with disabilities, unless doing so would result in a fundamental alteration in the nature of the health programs or activities or undue financial and administrative burdens.
Title II of the ADA provides that individuals with disabilities shall not, by reason of such disability, be excluded from participation in or be denied the benefits of the services, programs or activities of a State or local government entity, or be subjected to discrimination by any such entity.
Title II of the ADA and section 504 are generally understood to impose similar requirements, given the similar language employed in the ADA and the Rehabilitation Act.
DOJ first articulated its interpretation that the ADA applies to websites of covered entities in 1996.
In June 2003, DOJ published a document titled “Accessibility of State and Local Government websites to People with Disabilities,”
DOJ previously pursued rulemaking efforts regarding website accessibility under title II. On July 26, 2010, DOJ's advance notice of proposed rulemaking (ANPRM) titled “Accessibility of Web Information and Services of State and Local Government Entities and Public Accommodations” was published in the
On May 9, 2016, DOJ followed up on its 2010 ANPRM with a detailed Supplemental ANPRM that was published in the
On December 26, 2017, DOJ published a Notice in the
The guidance did not include 24/7 staffed telephone lines as an alternative to accessible websites as was included in both the Department's 2016 Guidance on Electronic and Information Technology and in DOJ's 2003 guidance. Given the way the modern web has developed, the Department no longer believes that 24/7 staffed telephone lines can realistically provide equal access to people with disabilities. Websites—and often mobile apps—allow the public to get information or request a service within just a few minutes. Getting the same information or requesting the same service using a staffed telephone line takes more steps and may result in wait times or difficulty getting the information.
For example, a health care provider's website may allow members of the public to quickly review large quantities of information, like information about how to schedule an appointment, a certain specialty service, or health tips during a public health emergency. Members of the public can then use recipient websites to promptly act on that information by, for example, scheduling an appointment, attending a virtual telehealth appointment, or requesting a prescription refill through a virtual portal. A member of the public could not realistically accomplish these tasks efficiently over the phone. Additionally, a person with a disability who cannot use an inaccessible online new patient form might have to call to request assistance with filling out either online or mailed forms, which could involve significant delay and may require providing private information such as banking details or Social Security numbers over the phone without the benefit of certain security features available for online transactions. Finally, calling a staffed telephone line lacks the privacy of looking up information on a website. A caller needing public safety resources, for example, might be unable to access a private location to ask for help on the phone, whereas an accessible website would allow users to privately locate resources. For these reasons, the Department does not believe that a staffed telephone line—even if it is offered 24/7—provides equal access in the way that an accessible website can.
DOJ is now reengaging in efforts to promulgate regulations establishing technical standards for web accessibility for public entities and has begun distinct rulemaking to address web access under title II of the ADA.
Recipients regularly use the web to disseminate information and offer programs and activities to the public. Health care providers frequently advertise their services, post health related information, and offer methods to schedule appointments through websites. Additionally, applications for many benefits are available through social service websites.
People also rely on recipients' websites to engage in health and human service programs and activities, particularly when more individuals prefer or need to stay at home following the COVID-19 pandemic. The Department believes that although many public health measures addressing the COVID-19 pandemic are no longer in place, there have been durable changes to recipient operations and public preferences that necessitate greater access to online programs and activities.
Health care provider websites and applications are important platforms for centralizing relevant health information for patients, scheduling appointments and procedures, accessing patient information, and providing contact information. During the COVID-19 Public Health Emergency, websites and applications were often used as the only means to schedule COVID testing and vaccination appointments, making it crucial for those appointment web pages and their navigation paths to be accessible to individuals with disabilities.
Telehealth has been increasing in popularity, availability, and reliability among providers and patients, with the COVID-19 pandemic coinciding with a marked increase in telehealth capacity and use.
The Department is aware of numerous allegations that existing telehealth platforms are not accessible to individuals with disabilities, resulting in ineffective services. Even if the United States returns to pre-pandemic levels of in-person health care visits, telehealth will remain an integral part of health care and give a lifeline to individuals in rural communities and others who cannot access timely in-person health care or choose not to visit in person. Recently, the Department released joint guidance with DOJ on ensuring the accessibility of telehealth.
Similar to its use in health programs and activities, web content has become a common method to disseminate information on and deliver human service programs and activities. If an individual with a disability is unable to access web content that a recipient uses for its programs or activities, they may be denied access to critical benefits they are entitled to receive. For example, a human service program that requires applicants to fill out an online application for benefits that is incompatible with screen readers, voice dictation, or hands-free devices will likely deny certain individuals with disabilities an equal opportunity to apply for those benefits. Even situations where application forms are also available in other formats, such as paper copies at a single physical location, may still result in unequal access and a delay in benefits if online forms are inaccessible.
As noted previously, access to the web has become increasingly important as a result of the COVID-19 pandemic, which shut down workplaces, schools, and in-person services, and has forced millions of Americans to stay home for extended periods.
Currently, a large number of Americans interact with recipients remotely and many recipients provide vital information and services for the general public online. Access to web-based information and services, while important for everyone during the pandemic, took on heightened importance for people with disabilities, many of whom face a greater risk of COVID-19 exposure, serious illness, and death.
According to the CDC, some people with disabilities “might be more likely to get infected or have severe illness because of underlying medical conditions, congregate living settings, or systemic health and social inequities.
Individuals with disabilities can often be denied equal access to programs and activities because many recipients' web content is not fully accessible. Thus, there is a digital divide between the ability of people with certain types of disabilities and people without those disabilities to access the programs and activities of recipients.
The Department is also proposing that recipients make their mobile apps accessible under proposed § 84.84, because recipients also use mobile apps to offer their programs and activities to the public. As discussed in the proposed definition, a mobile app is a software application that is downloaded and designed to run on mobile devices such as smartphones and tablets. Mobile apps are distinct from a website that can be accessed by a mobile device because, in part, mobile apps are not directly accessible on the web—they are often downloaded on a mobile device.
Recipients use mobile apps to provide services and reach the public in various ways. For example, some recipients use mobile apps as a method to access a patient portal and engage in a number of activities related to that patient, such as scheduling appointments, messaging physicians, and requesting medical records.
Although many individuals access web content, including telehealth platforms, on desktop computers and laptops, many others rely on mobile applications used on mobile devices such as smart phones and tablets. As of 2021, 15% of American adults relied on smartphones for internet access,
The Department is aware that some recipients, including doctors' offices, hospitals, and social service offices, use kiosks or similar self-service transaction machines for members of the public to perform a number of tasks including checking in for appointments, providing information for the receipt of services, procuring services, measuring vitals, and performing other services without interacting directly with recipient staff.
While these kiosks may be convenient in certain instances, they may also be inaccessible to individuals with certain disabilities, especially when they were not designed with the needs of individuals with disabilities in mind. The use of inaccessible kiosks that result in delays checking in, privacy concerns, and even the complete inability of people with disabilities to check in for their appointments results in avoidable lack of access to health and human services.
The Department is also aware that some recipients, including health care providers, regularly use mobile devices and applications to coordinate check-in procedures, gather information, and communicate between patients, providers, and third parties, such as pharmacies and other clinicians. In some instances, recipients have begun to provide mobile devices, such as iOS or Android tablets, in waiting rooms so that individuals may fill out forms or questionnaires prior to an appointment, or during the process of interacting with the recipient, while others provide the tablets for check-in and other informational purposes. Much like with kiosks, the use of mobile devices for check-in and other purposes may present barriers to services if they are not accessible to individuals with disabilities.
Millions of individuals in the United States have disabilities that can affect their use of the web and mobile apps. Many of these individuals use assistive technology to enable them to navigate websites or access information contained on those sites. For example, individuals who are unable to use their hands may use speech recognition software to navigate a website, while individuals who are blind may rely on a screen reader to convert the visual information on a website into speech. Many websites and mobile apps fail to incorporate or activate features that enable users with certain types of disabilities to access all of the information or elements on the website or app. For instance, individuals who are deaf may be unable to access information in web videos and other multimedia presentations that do not have captions. Individuals with low vision may be unable to read websites or mobile apps that do not allow text to be resized or do not provide enough contrast. Individuals with limited manual dexterity or vision disabilities who use assistive technology that enables them to interact with websites may be unable to access sites that do not support keyboard alternatives for mouse commands. These same individuals, along with individuals with cognitive and vision disabilities, often experience difficulty using portions of websites that require timed responses from users but do not give users the opportunity to indicate that they need more time to respond.
Individuals who are blind or have low vision often face significant barriers attempting to access websites and mobile apps. For example, a study from the University of Washington analyzed approximately 10,000 mobile apps and found that many are highly inaccessible to people with disabilities.
Furthermore, many websites provide information visually, without features that allow screen readers or other assistive technology to retrieve information on the website so it can be presented in an accessible manner. A common barrier to website accessibility is an image or photograph without corresponding text describing the image. A screen reader or similar assistive technology cannot “read” an image without corresponding text, leaving individuals who are blind with no way of independently knowing what information the image conveys (
Web-based forms, which are an essential part of accessing certain health and human services, are often inaccessible to individuals with disabilities who use screen readers. For example, field elements on forms, which are the empty boxes on forms that hold specific pieces of information, such as a last name or telephone number, may lack clear labels that can be read by assistive technology. Inaccessible form fields make it difficult for persons using screen readers to fill out online forms, pay fees, submit inquiries, or otherwise participate in recipient programs or activities using a website. Some recipients use inaccessible third-party websites to accept online payments, while others request patients check in through their own inaccessible websites. These barriers greatly impede the ability of individuals with disabilities to access the programs and activities offered by recipients on the web. In many instances, removing certain website barriers is neither difficult nor especially costly. For example, the addition of invisible attributes known as alternative (alt) text or alt tags to an image helps orient an individual using a screen reader and allows them to gain access to the information on the website. This can be done without any specialized equipment.
Beyond web and mobile content, kiosks may contain a host of barriers that limit accessibility. The Department has received information from individuals with physical disabilities who have experienced difficulty reaching the controls on kiosks, or operating controls that require tight grasping, pinching, or twisting. Individuals with hearing loss may not be able to operate a kiosk effectively if audio commands or information are not provided in an alternative format. The Department is aware of the barriers created by inaccessible kiosks, particularly in health care, so the proposed rule includes a provision specifically addressing recipients' existing obligations with respect to kiosks. Of course, the existing general nondiscrimination provision in § 84.4 (which this NPRM proposes to redesignate as § 84.68) continues to apply to all HHS-funded programs and activities, including those provided via technology.
The web has changed significantly and its use has become far more prevalent since Congress enacted the Rehabilitation Act in 1973 and the ADA in 1990. Neither of the laws specifically addressed recipients' or public entities' use of websites, mobile apps, or kiosks to provide their programs and activities.
A variety of voluntary standards and structures have been developed for the web through nonprofit organizations using multinational collaborative efforts. For example, domain names are issued and administered through the Internet Corporation for Assigned Names and Numbers (ICANN), the Internet Society (ISOC) publishes computer security policies and procedures for websites, and the World Wide Web Consortium (W3C®) develops a variety of technical standards and guidelines ranging from issues related to mobile devices and privacy to internationalization of technology. In the area of accessibility, the Web Accessibility Initiative (WAI) of the W3C® created the Web Content Accessibility Guidelines (WCAG).
Many organizations, however, have indicated that voluntary compliance with these accessibility guidelines has not resulted in equal access for people with disabilities; accordingly, they have urged the Department and its Federal partners to take regulatory action to ensure web and mobile app accessibility.
Recent research documents the digital inaccessibility of the websites of more than 100 top hospitals across the United States, finding that only 4.9 percent are compliant with Web Content Accessibility Guidelines (WCAG) 2.1.
Despite the availability of voluntary web and mobile app accessibility standards; the Department's position that programs and activities of recipients, including those available on websites, must be accessible; and case law supporting that position, individuals with disabilities continue to struggle to obtain access to the websites of recipients.
Moreover, other Federal agencies have also taken enforcement action against public entities regarding the lack of accessible websites for people with disabilities. In December 2017, for example, the U.S. Department of Education entered into a resolution agreement with the Alaska Department of Education and Early Development for violating Federal statutes, including section 504 and title II of the ADA, by denying people with disabilities an equal opportunity to participate in Alaska Department of Education and Early Development's services, programs, and activities, due to website inaccessibility.
The Department believes that adopting technical standards for web and mobile app accessibility will provide clarity to recipients regarding how to make the programs and activities they offer the public via the web and mobile apps accessible. Adopting specific technical standards for web and mobile app accessibility will also provide individuals with disabilities with consistent and predictable access to the websites and mobile apps of recipients.
This section details the Department's proposed changes to the section 504 regulation, including the reasoning behind the proposals, and poses questions for public comment.
The Department proposes to add to § 84.10, the Definitions section, the following terms applicable to this subpart: “Archived web content,” “Conventional electronic documents,” “Kiosks,” “Mobile applications (apps),” “WCAG 2.1,” and “Web content.” Each term is explained in the preamble discussion for § 84.10.
The Department poses questions for feedback about its proposed approach. Comments on all aspects of this proposed rule, including these proposed definitions, are invited. Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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The Department is proposing to create a new subpart to its section 504 regulation. Subpart I will address the accessibility of recipients' web content, mobile apps, and kiosks.
This proposed section states that this subpart applies to all programs or activities that receive Federal financial assistance from the Department.
This section provides general nondiscrimination requirements for programs or activities that recipients provide through or with the use of kiosks. It provides that no qualified individual with a disability shall, on the basis of disability, be excluded from participation in, be denied the benefits of, or otherwise be subjected to discrimination under any program or activity of a recipient provided through or with the use of kiosks.
The Department proposes this section in light of the increasingly common use of kiosks in health care settings for purposes of checking in patients, gathering information from them, and taking vital signs. The Department is not proposing specific technical requirements for kiosks, but proposes to include general language recognizing that section 504 prohibits recipients from discriminating on the basis of disability in their programs or activities provided through kiosks because of the inaccessibility of those devices. This language also aligns with DOJ's view that the ADA's protections apply when a covered entity uses kiosks to deliver its programs, services, or activities.
Recipients that use kiosks may make their programs accessible by instituting procedures that would allow persons with disabilities who cannot use kiosks because of their inaccessible features to access the program without using kiosks.
In instances where kiosks are closed functionality devices that do not rely on web content or mobile apps, the proposed technical standards in § 84.84 will not apply. Under these circumstances, recipients are still obligated to ensure that individuals with disabilities are not excluded from participation in, denied the benefits of, or otherwise subjected to discrimination in any program or activity of the recipient, including the information exchange that would occur at the kiosk.
The Department is aware that the U.S. Access Board is working on a rulemaking to amend the ADA Accessibility Guidelines to address the accessibility of fixed self-service transaction machines, self-service kiosks, information transaction machines, and point-of-sale devices. The Access Board issued an advance notice of proposed rulemaking on these issues in September 2022 and heard from more than 70 commenters.
Proposed § 84.84 sets forth specific requirements for the accessibility of web content and mobile apps of recipients. Proposed § 84.84(a) requires a recipient to “ensure the following are readily accessible to and usable by individuals with disabilities: (1) web content that a recipient makes available to members of the public or uses to offer programs or activities to members of the public; and (2) mobile apps that a recipient makes available to members of the public or uses to offer programs and activities to members of the public.” As detailed below, the remainder of proposed § 84.84 sets forth the specific standards that recipients are required to meet to make their web content and mobile apps accessible and the proposed timelines for compliance.
On August 4, 2023, DOJ published an NPRM in the
Since 1994, the World Wide Web Consortium (W3C®) has been the principal international organization involved in developing protocols and guidelines for the web.
The first version of WCAG, WCAG 1.0, was published in 1999. WCAG 2.0 was published in December 2008.
WCAG 2.1 contains four principles that provide the foundation for web accessibility: perceivable, operable, understandable, and robust.
The Department is proposing to adopt WCAG 2.1 as the technical standard for web and mobile app accessibility under section 504. WCAG 2.1 represents the most recent and updated published recommendation of WCAG. WCAG 2.1 incorporates and builds upon WCAG 2.0—meaning that WCAG 2.1 includes all of the WCAG 2.0 success criteria, in addition to success criteria that were developed under WCAG 2.1.
The Department expects that adopting WCAG 2.1 as the technical standard will have benefits that are important to ensuring access for people with disabilities to recipients' programs and activities. For example, WCAG 2.1 requires that text be formatted so that it is easier to read when magnified.
WCAG 2.1 also has new success criteria addressing the accessibility of mobile apps or web content viewed on a mobile device. For example, WCAG 2.1 Success Criterion 1.3.4 requires that page orientation (
Such accessibility features are critical for people with disabilities to have equal access to recipients' programs and activities. This is particularly true given that using mobile devices to access government services is commonplace. For example, in August 2022, about 54 percent of visits to Federal Government websites over the previous 90 days were from mobile devices.
Because WCAG 2.1 is the most recent recommended version of WCAG and generally familiar to web professionals, the Department expects it is well-positioned to continue to be relevant even as technology inevitably evolves. In fact, the W3C® advises using WCAG 2.1 over WCAG 2.0 when possible because WCAG 2.1 incorporates more forward-looking accessibility needs.
The Department also expects that recipients are likely already familiar with WCAG 2.1 or will be able to become familiar quickly. This is because WCAG 2.1 has been available since 2018, and it builds upon WCAG 2.0, which has been in existence since 2008 and has been established for years as a benchmark for accessibility. In other words, the Department expects that web developers and professionals who work for or with recipients are likely to be familiar with WCAG 2.1, and if they are not already familiar with WCAG 2.1, the Department expects that they are at least likely to be familiar with WCAG 2.0 and will be able to become acquainted quickly with WCAG 2.1's 12 additional Level A and AA success criteria. The Department also believes that resources exist to help recipients implement or understand how to implement not only WCAG 2.0 Level AA, but also WCAG 2.1 Level AA. Additionally, recipients will have two or three years to come into compliance with a final rule, which should also provide sufficient time to get acquainted with and implement WCAG 2.1.
According to the Department's research, WCAG 2.1 is also being increasingly used by members of the public and recipients. In fact, DOJ recently included WCAG 2.1 in several settlement agreements with covered entities addressing inaccessible websites.
In evaluating what technical standard to propose, the Department also considered WCAG 2.0. In addition, the Department considered the standards set forth under section 508 of the Rehabilitation Act, which governs the accessibility of the Federal Government's web content and is harmonized with WCAG 2.0.
The Department expects that the wide usage of WCAG 2.0 lays a solid foundation for recipients to become familiar with and implement WCAG 2.1's additional Level A and AA criteria. According to the Department's research, approximately 48 States either use or strive to use a WCAG 2.0 standard or
WCAG 2.1 represents the most up-to-date recommendation and is generally familiar to web professionals. It offers important accessibility benefits for people with disabilities that affect manual dexterity, adds some criteria to reduce barriers for those with low vision and cognitive disabilities, and expands coverage of mobile content. Given that recipients will have two or three years to comply, the Department views WCAG 2.1 as the appropriate technical standard to propose at this time.
The Department is aware that a working draft for WCAG 2.2 was published in May 2021 with a newer draft published in July of 2023.
The Department is seeking feedback from the public about its proposal to use WCAG 2.1 as the standard under this rule and its assumptions underlying this decision. Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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For a web page to conform to WCAG 2.1, the web page must satisfy the success criteria under one of three levels of conformance: A, AA, or AAA. The three levels of conformance indicate a measure of accessibility and feasibility. Level A, which is the minimum level of accessibility, contains criteria that provide basic web accessibility and are the least difficult to achieve for web developers.
Based on review of previous public feedback and independent research, the Department believes that WCAG 2.1 Level AA is an appropriate conformance level because it includes criteria that provide web accessibility to individuals with disabilities—including those with visual, auditory, physical, speech, cognitive, and neurological disabilities—and yet is feasible for recipients' web developers to implement. In addition, Level AA conformance is widely used, making it more likely that web developers are already familiar with its requirements. While many of the entities that conform to Level AA do so under WCAG 2.0, not 2.1, this still suggests a widespread familiarity with most of the Level AA success criteria, given that 38 of the 50 Level A and AA success criteria in WCAG 2.1 are also included in WCAG 2.0. The Department believes that Level A conformance alone is not appropriate for recipients because it does not include criteria for providing web accessibility that the Department understands are critical, such as minimum level of color contrast so that items like text boxes or icons are easier to see, which is important for people with vision disabilities. Also, while Level AAA conformance provides a richer user experience, it is the most difficult to achieve for many entities. Therefore, the Department is proposing Level AA conformance for public feedback as to whether it strikes the right balance between accessibility for individuals with disabilities and achievability for recipients.
Adopting a WCAG 2.1 Level AA conformance level would make the ADA requirements consistent with a standard that has been widely accepted internationally. Many nations have selected Level AA conformance as their standard for web accessibility.
In its proposed regulatory text in § 84.84(b)(1) and (2), the Department provides that recipients must “comply with Level A and Level AA success criteria and conformance requirements specified in WCAG 2.1.” WCAG 2.1 provides that for “Level AA conformance, the web page [must] satisf[y] all the Level A and Level AA Success Criteria. . . .”
The Department considered proposing another population threshold of very small recipients that would be subject to a lower conformance level or WCAG version, to reduce the burden of compliance on those recipients. However, the Department decided against this proposal due to a variety of factors. First, this would make for inconsistent levels of WCAG conformance across recipients, and a universal standard for consistency in implementation would promote predictability. A universal level of conformance would reduce confusion about which standard applies, and it would create a basic level of compliance for all recipients to follow. It would also allow for people with disabilities to know what they can expect when navigating a recipient's website; for example, it will be helpful for people with disabilities to know that they can expect to be able to navigate a recipient's website independently using their assistive technology. Finally, for the reasons discussed above, the Department believes that WCAG 2.1 Level AA contains criteria that are critical to accessing programs and activities of recipients, which may not be included under a lower standard. However, the Department recognizes that small recipients—those with fewer than fifteen employees—might initially face more technical and resource challenges in complying than larger recipients. Therefore, as discussed below, the Department has decided to propose different compliance dates according to a recipient's size to reduce burdens on small recipients.
The Department considered proposing to adopt the section 508 standards for ICT, but decided not to take this approach. The section 508 standards are harmonized with WCAG 2.0 for web content and certain other ICT, and for the reasons discussed above, the Department believes WCAG 2.1—which had not been finalized at the time the section 508 standards were promulgated—is the more appropriate recommendation for this proposed rule. Moreover, by adopting WCAG on its own rather than adopting it through the section 508 standards, the Department can then tailor the rules to recipients as it does in this proposed rule.
The Department also considered adopting performance standards instead of specific technical standards for accessibility of web content. Performance standards establish general expectations or goals for web accessibility and allow for compliance via a variety of unspecified methods. Performance standards could provide greater flexibility in ensuring accessibility as web technologies change. However, based on what the Department has heard previously from the public and its own knowledge of this area, the Department understands that performance standards might be too vague and subjective and could prove insufficient in providing consistent and testable requirements for web accessibility. Additionally, the Department expects that performance standards would likely not result in predictability for either recipients or people with disabilities in the way that a more specific technical standard would. Further, similar to a performance standard, WCAG has been designed to allow for flexibility and innovation in the evolving web environment. The Department recognizes the importance of adopting a standard for web accessibility that provides not only specific and testable requirements, but also sufficient flexibility to develop accessibility solutions for new web technologies. The Department believes that WCAG achieves this balance because it provides flexibility similar to a performance standard, but it also provides more clarity, consistency, predictability, and objectivity. Using WCAG also enables recipients to know precisely what is expected of them under section 504, which may be of particular benefit to jurisdictions with less technological experience. This will assist recipients in targeting accessibility errors, which may reduce costs they would incur without clear expectations.
Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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Recipients are increasingly using social media platforms to provide information and communicate with the public about their programs and activities in lieu of or in addition to engaging the public on their own websites. The Department is using the term “social media platforms” to refer to websites or mobile apps of third parties whose primary purpose is to enable users to create and share content in order to participate in social networking (
The Department is proposing to require that web content that recipients make available to members of the public or use to offer programs and activities to members of the public be accessible within the meaning of proposed § 84.84. This requirement would apply regardless of whether that web content is located on the recipient's own website, or elsewhere on the web. It therefore covers web content that a recipient offers via a social media platform. Even where a social media platform is not fully accessible, a recipient can generally take actions to ensure that the web content that it posts is accessible and in conformance with WCAG 2.1.
At this time, the Department is not proposing any regulatory text specific to the web content that recipients offer the public via social media platforms because content posted on social media platforms will be treated the same as any other content recipients post on the web. However, the Department is considering creating an exception from coverage under the rule for social media posts if they were posted before the effective date of the rule. This exception would recognize that making preexisting social media content accessible may be impossible at this time or result in a significant burden. Many recipients have posted social media content for several years, often numbering thousands of posts, which may not all be accessible. The benefits of making all preexisting social media posts accessible might also be limited as these posts are intended to provide current updates on platforms that are frequently refreshed with new information. The Department is considering this exception in recognition of the fact that for many recipients their resources may be better spent ensuring that current web content is accessible, rather than reviewing all preexisting social media content for compliance or possibly deleting their previous posts. The Department is looking for input on whether this approach would make sense and whether any limitations to this approach are necessary, such as providing that the exception does not apply when preexisting social media content is currently used to offer a program or activity, or possibly limiting this exception when the public requests certain social media content to be made accessible.
The Department is also weighing whether recipients' preexisting videos posted to social media platforms such as YouTube should be excepted from coverage due to these same concerns or otherwise be treated differently.
Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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The Department is proposing to adopt the same technical standard for mobile app accessibility as it is for web content—WCAG 2.1 Level AA. As discussed earlier, WCAG 2.1 was published in June 2018 and was developed, in part, to address mobile accessibility.
The Department considered applying WCAG 2.0 Level AA to mobile apps, which is a similar approach to the requirements in the final rule promulgated by the United States Access Board in its update to the section 508 Standards.
The Access Board's section 508 Standards include additional requirements applicable to mobile apps that are not in WCAG 2.1, and the Department is requesting feedback on whether to adopt those requirements as well. For example, the Section 508 Standards apply the following requirements not found in WCAG 2.1 to mobile apps: interoperability requirements to ensure that a mobile app does not disrupt a device's assistive technology for persons with disabilities (
Adopting WCAG 2.1 Level AA for mobile apps will help ensure this rule's accessibility standards for mobile apps are consistent with this rule's accessibility standards for web content. We seek comments on this approach below. Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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Section 84.84(b) sets forth the proposed specific standard with which the web content and mobile apps that recipients make available to member of the public or use to offer programs and activities to members of the public must comply, and also proposes time frames for compliance. The proposed requirements of § 84.84(b) are generally delineated by the size of the recipient.
Section 84.84(b)(1) sets forth the proposed web and mobile app accessibility requirements for recipients with fifteen or more employees. The requirements of § 84.84(b)(1) are meant to apply to larger recipients.
Proposed § 84.84(b)(1) requires that a recipient with fifteen or more employees shall ensure that the web content and mobile apps it makes available to members of the public or uses to offer programs or activities to members of the public, comply with Level A and Level AA success criteria and conformance requirements specified in WCAG 2.1. Recipients subject to § 84.84(b)(1) have two years after the publication of a final rule to make their web content and mobile apps accessible, unless they can demonstrate that compliance with § 84.84(b)(1) would result in a fundamental alteration in the nature of a program or activity or undue financial and administrative burdens. The limitations on a recipient's obligation to comply with the proposed requirements are discussed in more detail below.
The Department is aware that members of the public have differing views on an appropriate time frame for requiring compliance with technical web accessibility standards. Individuals with disabilities or disability advocacy organizations tended to prefer a shorter time frame, often arguing that web accessibility has long been required by section 504 and that extending the deadline for compliance rewards recipients that have not made efforts to make their websites accessible. Some recipients have asked for more time to comply. Some recipients have been particularly concerned about shorter compliance deadlines, often citing budgets and staffing as major limitations. In the past, some recipients stated that they lacked qualified personnel to implement the web accessibility requirements of WCAG 2.0, which was relatively new at the time. Those recipients asserted that in addition to needing time to implement the changes to their websites, they also needed time to train staff or contract with professionals who are proficient in developing accessible websites.
Considering all these factors, the Department is proposing a two-year implementation time frame for recipients with 15 or more employees. Regulated entities and the community of web developers have had over a decade to familiarize themselves with WCAG 2.0, which was published in 2008 and serves as the foundation for WCAG 2.1, and five years to familiarize themselves with the additional 12 success criteria of WCAG 2.1. Though the Department is now proposing requiring recipients to conform with WCAG 2.1 instead of WCAG 2.0, the Department believes the time allowed to come into compliance is appropriate. As discussed above, WCAG 2.1 Level AA only adds 12 Level A and AA success criteria that were not included in WCAG 2.0. The Department believes these additional success criteria will not significantly increase the time or resources that it will take for a recipient to come into compliance with the proposed rule, beyond what would have already been required to conform with WCAG 2.0, though the Department seeks the public's input on this belief. The Department therefore believes this proposal balances the resource challenges reported by recipients with the interests of individuals with disabilities in accessing the multitude of programs and activities that recipients now offer via the web and mobile apps.
The Department is also aware that some recipients believe there should be different compliance requirements or a different compliance date for small recipients in order to take into account the impact on small entities as required by the Regulatory Flexibility Act of 1980 and Executive Order 13272.
Many of those expressing concerns about compliance dates, including web developers, have stated that compliance in incremental levels would help recipients allocate resources—both financial and personnel—to bring their websites into compliance. The Department is aware that many small recipients do not have a dedicated web developer or staff. The Department is also aware that when these small recipients develop or maintain their own websites, they often do so with staff who have only a cursory knowledge of web design and use manufactured web templates or software, which may create inaccessible web pages. Some small recipients have expressed concern that even when they do use outside help, there is likely to be a shortage of professionals who are proficient in web accessibility and can assist all recipients in bringing their websites into compliance.
In light of these concerns, § 84.84(b)(2) sets forth the Department's proposed web and mobile app accessibility requirements for small recipients. Specifically, proposed § 84.84(b)(2) covers those recipients with fewer than fifteen employees. Section 84.84(b)(2) would require these recipients to ensure that the web content and mobile apps they make available to the public or use to offer programs and activities to members of the public comply with Level A and Level AA success criteria and conformance requirements specified in WCAG 2.1, unless they can demonstrate that compliance would result in a fundamental alteration in the nature of a program or activity or undue financial and administrative burdens. This is the same substantive standard that applies to larger recipients. However, the Department is proposing to give these small recipients additional time to bring their web content and mobile apps into compliance with § 84.84(b)(2). Specifically, small recipients covered by § 84.84(b)(2) will have three years after the publication of a final rule to make their web content and mobile apps compliant with the Department's proposed requirements. The Department believes this longer phase-in period would be prudent to allow small recipients to properly allocate their personnel and financial resources in order to bring their web content and mobile apps into compliance with the Department's proposed requirements.
Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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The proposed rule sets forth the limitations on recipients' obligations to comply with the specific requirements of this proposed rule. For example, where it would impose an undue financial and administrative burden to conform with WCAG 2.1 (or part of WCAG 2.1), recipients would not be required to remove their web content and mobile apps, forfeit their web presence, or otherwise undertake changes that would be unduly burdensome. Further, as proposed in § 84.84(b), the web and mobile app accessibility requirements would not require any recipient to take actions that would result in a fundamental alteration in the nature of a program or activity.
In circumstances where officials of a recipient believe that the proposed action would fundamentally alter the program or activity or would result in undue financial and administrative burdens, a recipient has the burden of proving that compliance would result in such alteration or burdens. The decision that compliance would result in such alteration or burdens must be made by the head of the recipient or their designee after considering all resources available for use in the funding and operation of the program or activity and must be accompanied by a written statement of the reasons for reaching that conclusion. If an action required to comply with proposed § 84.84(b) would result in such an alteration or such burdens, a recipient must take any other action that would not result in such an alteration or such burdens but would nevertheless ensure that, to the maximum extent possible, individuals with disabilities receive the benefits or services provided by the recipient. For more information, see the discussion below regarding limitations on obligations under proposed § 84.85.
Compliance with this regulation does not necessarily ensure compliance with other statutes and their implementing regulations. For example, the Department is aware that DOJ is pursuing rulemaking regarding web and mobile application standards under title II of the ADA, and that some recipients under section 504 are also public entities covered by title II of the ADA. Because this regulation does not affect recipients' obligations under other laws, recipients who are subject to both section 504 and title II of the ADA must comply with both regulations.
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WCAG 2.1 Level AA Success Criterion 1.2.4 requires synchronized captions for live-audio content. The intent of this success criterion is to “enable people who are deaf or hard of hearing to watch
The Department proposes to apply the same compliance date to all of the WCAG 2.1 Level AA success criteria, including live-audio captioning requirements. As noted above, this would allow for three years after publication of the final rule for small recipients to comply, and two years for large recipients. The Department believes this approach is appropriate for several reasons. First, the Department understands that technology utilizing live-audio captioning has developed in recent years and continues to develop. In addition, the COVID-19 pandemic moved a significant number of formerly in-person appointments, meetings, activities, and other gatherings to online settings, many of which incorporated live-audio captioning. As a result of these developments, live-audio captioning has become even more critical for individuals with certain types of disabilities to participate fully in health and human service programs and activities. And while the Department believes that the two and three-year periods described above afford a sufficient amount of time for recipients to allocate resources towards live-audio captioning, recipients have the option to demonstrate that compliance with any success criterion would result in a fundamental alteration in the nature of a program or activity or undue financial and administrative burdens.
While at least one country that has adopted WCAG 2.0 Level AA as its standard for web accessibility has exempted entities from having to comply with the live-audio captioning requirements,
Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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This rule would require recipients to make their web content and mobile apps accessible. However, the Department believes it may be appropriate in some situations for certain content to be excepted from compliance with the technical requirements of this proposed rule. The Department is aware of a range of views on this issue, including that a section 504 regulation should not include any exceptions because the compliance limitations for undue financial and administrative burdens would protect recipients from any unrealistic requirements. On the other hand, the Department has also heard that exceptions are necessary to avoid substantial burdens on recipients. The Department also expects that such exceptions may help recipients avoid uncertainty about whether they need to ensure accessibility in situations where it might be extremely difficult. After consideration of the public's views and after its independent assessment, the Department is proposing the following exceptions and poses questions for public feedback. The Department is interested in feedback about whether these proposed exceptions would relieve the burden on public entities, and also how these proposed exceptions would impact people with disabilities.
The Department is proposing exceptions from coverage—subject to certain limitations—for the following seven categories of web content: (1) archived web content; (2) preexisting conventional electronic documents; (3) web content posted by third parties on a recipient's website; (4) third-party web content linked from a recipient's website; (5) course content on a recipient's password-protected or otherwise secured website for admitted students enrolled in a specific course offered by a public postsecondary institution; (6) class or course content on a recipient's password-protected or otherwise secured website for students enrolled, or parents of students enrolled, in a specific class or course at an elementary or secondary school; and (7) conventional electronic documents that are about a specific individual, their property, or their account and that are password-protected or otherwise secured. Additionally, there are certain limitations to these exceptions—situations in which the otherwise excepted content still must be made accessible. This proposed rule's exceptions as well as the limitations on those exceptions are explained below.
Recipients' websites can often include a significant amount of archived web content, which may contain information that is outdated, superfluous, or replicated elsewhere. The Department's impression is that generally, this historic information is of interest to only a small segment of the general population. Still, the information may be of interest to some members of the public, including some individuals with disabilities, who are conducting research or are otherwise interested in these historic documents. The Department is aware and concerned, however, that recipients would need to expend considerable resources to retroactively make accessible the large quantity of historic or otherwise outdated information available on recipients' websites. Thus, proposed § 84.85(a) provides an exception from the web access requirements of § 84.84 for web content that meets the definition of “archived web content” in § 84.10. As mentioned previously, § 84.10 defines “archived web content” as “web content that (1) is maintained exclusively for reference, research, or recordkeeping; (2) is not altered or updated after the date of archiving; and (3) is organized and stored in a dedicated area or areas clearly identified as being archived.” The archived web content exception allows recipients to keep and maintain historic web content, while utilizing their resources to make accessible the many up-to-date materials that people need to currently access public services or to participate in civic life.
The Department notes that under this exception, recipients may not circumvent their accessibility obligations by merely labeling their web content as “archived” or by refusing to make accessible any content that is old. The exception focuses narrowly on content that satisfies all three of the criteria necessary to qualify as “archived web content,” namely content that is maintained exclusively for reference, research, or recordkeeping; is not altered or updated after the date of archiving; and is organized and stored in a dedicated area or areas clearly identified as being archived. If any one of those criteria is not met, the content does not qualify as “archived web content.” For example, if a recipient maintains content for any purpose other than reference, research, or recordkeeping—such as for purposes of offering a current program or activity—then that content would not fall within the exception, even if a recipient labeled it as “archived.” Similarly, a recipient would not be able to circumvent its accessibility obligations by rapidly moving newly posted content that is maintained for a purpose other than reference, research, or recordkeeping, or that the recipient continues to update, from a non-archived section of its website to an archived section.
Though the Department proposes that archived web content be excepted from coverage under this rule, if an individual with a disability requests that certain archived web content be made accessible, recipients generally have an existing obligation to make these materials accessible in a timely manner and free of charge.
Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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As discussed in the section-by-section analysis for § 84.5 above, the Department is proposing to add a definition for “conventional electronic documents.” Specifically, the proposed definition provides that the term conventional electronic documents “means web content or content in mobile apps that is in the following electronic file formats: portable document formats (PDF), word processor file formats, presentation file formats, spreadsheet file formats, and database file formats.” This list of conventional electronic documents is intended to be an exhaustive list of file formats, rather than an open-ended list.
Proposed § 84.85(b) provides that “conventional electronic documents created by or for a recipient that are available on a recipient's website or mobile app before the date the recipient is required to comply with this rule” do not have to comply with the web accessibility requirements of § 84.84, “unless such documents are currently
The Department is aware that many websites of recipients contain conventional electronic documents. The Department expects that many of these conventional electronic documents are in PDF format, but many conventional electronic documents are formatted as word processor files (
Because of the presence of conventional electronic documents on recipient websites and mobile apps, and because of the difficulty of remediating some complex types of information and data to make them accessible after-the-fact, the Department believes recipients should generally focus their personnel and financial resources on developing new conventional electronic documents that are accessible and remediating existing conventional electronic documents that are currently used by members of the public to access the recipient's programs or activities. For example, if before the date a recipient is required to comply with this rule, the recipient's website contains a series of out-of-date PDF reports on local COVID-19 statistics, those reports need not conform with WCAG 2.1. Similarly, if a recipient maintains decades' worth of influenza infection reports in conventional electronic documents on the same web page as its current influenza infection report, the historic reports that were posted before the date the recipient was required to comply with this rule generally do not need to comply with WCAG 2.1. As the recipient posts new reports going forward, however, those reports must be accessible under WCAG 2.1. This approach is expected to reduce the burdens on recipients.
This exception is subject to a limitation: it does not apply to any existing documents that are currently used by members of the public to apply for, access, or participate in the recipient's programs or activities. In referencing “documents that are currently used,” the Department intends to cover documents that are used by members of the public at any given point in the future, not just at the moment in time when this rule is published. This limitation includes documents that provide instructions or guidance. For example, a recipient must not only make a new patient form accessible, but it must also make accessible other materials that may be needed to complete the form, understand the process, or otherwise take part in the program.
The Department notes that a recipient may not rely on this “preexisting conventional electronic documents” exception to circumvent its accessibility obligations by, for example, converting all of its web content to conventional electronic document formats and posting those documents before the date the recipient must comply with this rule. As noted above, any documents that are currently used by members of the public to access the recipient's programs or activities would need to be accessible as defined under this rule, even if those documents were posted before the date the recipient was required to comply with the rule. And if a recipient updates a conventional electronic document after the date the recipient must comply with this rule, that document would no longer qualify as “preexisting,” and would thus need to be made accessible as defined under this rule.
Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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Recipients' websites can include or link to many different types of third-party content (
The Department has heard a variety of views regarding whether or not recipients should be responsible for ensuring that third-party content on their websites and linked third-party content are accessible. Some maintain that recipients cannot be held accountable for third-party content on their websites, and without such an exception, recipients may have to remove the content altogether. Others have suggested that recipients should not be responsible for third-party content and linked content unless that content is necessary for individuals to access recipients' programs or activities. The Department has also previously heard the view, however, that recipients should be responsible for third-party content because an entity's reliance on inaccessible third-party content can prevent people with disabilities from having equal access to the recipient's own programs and activities. Furthermore, boundaries between web content generated by a recipient and a third party are often difficult to discern.
At this time, the Department is proposing the following two limited exceptions related to third-party content in § 84.85(c)-(d) and is posing questions for public comment:
Proposed § 84.85(c) provides an exception to the web accessibility requirements of § 84.84 for “web content posted by a third party that is available on a recipient's website.”
The Department is proposing this exception in recognition of the fact that individuals other than a recipient's agents sometimes post content on a recipient's website. For example, members of the public may sometimes post on a recipient's online message boards, wikis, social media, or other web forums, many of which are unregulated, interactive spaces designed to promote the sharing of information and ideas. Members of the public may post frequently, at all hours of the day or night, and a recipient may have little or no control over the content posted. In some cases, a recipient's website may include posts from third parties dating back many years, which are likely of
This exception applies to, among other third-party content, documents filed by third parties in administrative, judicial, and other legal proceedings that are available on a recipient's website. This example helps to illustrate why the Department believes this exception is necessary. Many recipients have either implemented or are in the process of developing an automated process for electronic filing of documents in administrative, judicial, or legal proceedings in order to improve efficiency in the collection and management of these documents. Courts and other recipients receive high volumes of filings in these sorts of proceedings each year. The majority of these documents are submitted by third parties—such as a private attorney in a legal case or other members of the public—and often include appendices, exhibits, or other similar supplementary materials that may be difficult to make accessible.
However, the Department notes that recipients have existing obligations under section 504 and title II of the ADA to ensure the accessibility of their programs and activities.
Sometimes a recipient itself chooses to post content created by a third party on its website. This exception does not apply to content posted by the recipient itself, even if the content was originally created by a third party. For example, many recipients post third-party content on their websites, such as calendars, scheduling tools, maps, reservations systems, and payment systems that were developed by an outside technology company. To the extent a recipient chooses to rely on third-party content on its website, it must select third-party content that meets the requirements of § 84.84.
Moreover, a recipient may not delegate away its obligations under section 504.
Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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Proposed § 84.85(d) provides that a recipient is not responsible for the accessibility of third-party web content linked from the recipient's website “unless the recipient uses the third-party web content to allow members of the public to participate in or benefit from the recipient's programs or activities.” Many recipients' websites include links to other websites that contain information or resources in the community offered by third parties that are not affiliated with the recipient. Clicking on one of these links will take an individual away from the recipient's website to the website of a third party. Typically, the recipient has no control over or responsibility for the web content or the operation of the third party's website. Accordingly, the recipient has no obligation to make the content on a third party's website accessible. For example, if for purely informational or reference purposes, a university posts a series of links to restaurants and tourist attractions in the surrounding area, the recipient is not responsible for ensuring the websites of those restaurants and tourist attractions are accessible.
Proposed § 84.85(d) generally allows recipients to provide relevant links to third-party web content that may be helpful without making them responsible for the third party's web content. However, because the Department's section 504 regulation prohibits discrimination in the provision of any aid, benefit, or service provided by recipients directly or through contractual, licensing, or other arrangements, if the recipient uses the linked third-party web content to allow members of the public to participate in or benefit from the recipient's programs or activities, then the recipient must ensure it links only to third-party web content that complies with the web accessibility requirements of § 84.84. This approach is consistent with recipients' obligation to make all of their programs or activities accessible to the public, including those they provide through third parties.
The Department believes this approach strikes the appropriate balance between acknowledging that recipients may not have the ability to make third parties' websites accessible and recognizing that recipients do have the ability to choose to use only third-party content that is accessible when that content is used to allow members of the public to participate in or benefit from the recipient's programs or activities.
Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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Many recipients use mobile apps that are developed, owned, and operated by third parties, such as private companies, to allow the public to access the entity's programs or activities. We will refer to these mobile apps as “external mobile apps.”
At this time, the Department is not proposing to create an exception for recipients' use of external mobile apps (
Accordingly, the Department is seeking comment and additional information on external mobile apps that recipients use to offer their programs and activities. Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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Proposed § 84.85(e) and (f) provide exceptions for educational institutions' password-protected class or course content where there is no student with a disability enrolled in the class or course (or, in the elementary and secondary school context, where there is no student enrolled in the class or course who has a parent with a disability) who needs the password-protected content to be made accessible.
Educational institutions, like many other recipients, use their websites to provide a variety of programs and activities to members of the public. Many of the programs and activities on these websites are available to anyone. The content on these websites can include such general information as the academic calendar, enrollment process, admission requirements, school lunch menus, school policies and procedures, and contact information. Under the proposed regulation, all such programs or activities available to the public on the websites of public educational institutions must comply with the requirements of § 84.84 unless the content is subject to a proposed exception.
In addition to the information available to the general public on the websites of educational institutions, the websites of many schools, colleges, and universities also make certain programs and activities available to a discrete and targeted audience of individuals (
The Department's regulatory proposal would require that the LMS platforms that recipient elementary and secondary schools, colleges, and universities use comply with § 84.84. However, subject to limitations, the Department is proposing an exception for password-protected class or course content. Thus, while the LMS platform would need to be accessible, class or course content (such as syllabi and assigned readings) posted on the password-protected LMS
The Department proposes this exception for class and course content based on its understanding that it would be burdensome to require educational institutions to make all of the documents, videos, and other content that many instructors upload and assign via LMS websites accessible. For instance, instructors may scan hard-copy documents and then upload them to LMS sites as conventional electronic documents. In some instances, these documents comprise multiple chapters from books and may be hundreds of pages long. Similarly, instructors may upload videos or other multimedia content for students to review. The Department believes that making all of this content accessible when students with disabilities (or their parents in the elementary and secondary context) are not enrolled in the course may be onerous for educational institutions, but the Department also understands that it is critical for students and parents with disabilities to have access to needed course content.
The Department believes its proposal provides a balanced approach by ensuring access to students with disabilities (or, in primary and secondary education settings, parents with disabilities) enrolled in the educational institution, while recognizing that there are large amounts of class or course content that may not immediately need to be accessed by individuals with disabilities because they have not enrolled in a particular class or course.
By way of analogy and as an example, under the Department's existing section 504 regulations, educational institutions are not required to proactively provide accessible course handouts to all students in a course, but they are required to do so for a student with a disability who needs them to access the course content. The Department envisions the requirements proposed here as an online analogue: while educational institutions are not required to proactively make all password-protected course handouts accessible, for example, once an institution knows that a student with a disability is enrolled in a course and, accordingly, needs the content to be made accessible, the institution must do so. The institution must also comply with its obligations to provide accessible course content under all other applicable laws, including the IDEA.
The Department appreciates that some educational institutions may find it preferable or more effective to make all class or course content accessible from the outset without waiting for a student with a disability (or, in the elementary and secondary school context, a student with a parent with a disability) to enroll in a particular class or course, and nothing in this rule would prevent educational institutions from taking that approach. Even if educational institutions do not take this approach, the Department expects that those institutions will likely need to take steps in advance so that they are prepared to make all class or course content for a particular course accessible within the required time frames discussed below when there is an enrolled student with a disability (or, in the elementary and secondary school context, an enrolled student with a parent with a disability) who needs access to that content.
Because the nature, operation, and structure of elementary and secondary schools are different from those of public colleges and universities, the proposed regulation sets forth separate requirements for the two types of institutions.
Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following question.
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In proposed § 84.85(e), the Department is considering an exception to the requirements proposed in § 84.84 for public postsecondary institutions, subject to two limitations. This exception would provide that “course content available on a recipient's password-protected or otherwise secured website for admitted students enrolled in a specific course offered by a public postsecondary institution” would not need to comply with the web accessibility requirements of § 84.84 unless one of the two limitations described below applies. As used in this context, “admitted students” refers to students who have applied to, been accepted by, and are enrolled in a particular educational institution. These students include both matriculated students (
The exception is not intended to apply to password-protected content for classes or courses that are made available to the general public, or a subset thereof, without enrolling at a particular educational institution. Such classes or courses generally only require
The phrase “enrolled in a specific course” as used in § 84.85(f) limits the exception to password-protected web content for a particular course, at a particular time, during a particular term. For example, if a university offers a 20th Century Irish Literature course at 10 a.m. that meets on Mondays, Wednesdays, and Fridays for the fall semester of the 2029-2030 academic year, the exception would apply to the password-protected web content for that course, subject to the limitations discussed below.
The proposed exception in § 84.85(e) would not apply to non-course content on the recipient's password-protected website that is generally available to all admitted students. For example, content available on the recipient's password-protected website that is available to all admitted students, such as forms for registering for class, applications for meal plans or housing, academic calendars, and announcements generally made available to all students enrolled in the postsecondary institution would all be required to comply with § 84.84. In addition, if a postsecondary institution makes course content for specific courses available to all admitted students on a password-protected website, regardless of whether students had enrolled in that specific course, the exception would not apply, even if such content was only made available for a limited time, such as within a set time frame for course shopping.
As noted previously, there are two important limitations to the general exception for course content on password-protected websites of postsecondary institutions in proposed § 84.85(e); both limitations apply to situations in which an admitted student with a disability is enrolled in a particular course at a postsecondary institution and the student, because of a disability, would be unable to access the content on the password-protected website for the specific course. The phrase “the student, because of a disability, would be unable to access” is meant to make clear that these limitations are not triggered merely by the enrollment of a student with a disability, but instead they are triggered by the enrollment of a student whose disability would make them unable to access the content on the password-protected course website. These limitations would also be triggered by the development or identification of such a disability while a student is enrolled, or the realization that a student's disability makes them unable to access the course content during the time that they are enrolled. The phrase “unable to access” does not necessarily mean a student has no access at all. Instead, the phrase “unable to access” is intended to cover situations in which a student's disability would limit or prevent their ability to equally access the relevant content.
The provisions set forth in the limitations to the exception are consistent with longstanding obligations of recipients under section 504 and title II of the ADA. Recipients are already required to make appropriate reasonable modifications and ensure effective communication, including by providing the necessary auxiliary aids and services to students with disabilities. It is the educational institution, not the student, that is responsible for ensuring that it is meeting these obligations. Such institutions, therefore, should be proactive in addressing the access needs of admitted students with disabilities, including those who would be unable to access inaccessible course content on the web. This also means that when an institution knows that a student with a disability is unable to access inaccessible content, the institution should not expect or require that the student first attempt to access the information and be unable to do so before the institution's obligation to make the content accessible arises.
Correspondingly, when an institution has notice that such a student is enrolled in a course, all of the content available on the password-protected website for that course must be made accessible in compliance with the accessibility requirements of proposed § 84.84. The difference between the two limitations to the exception to § 84.85(e) is the date that triggers compliance. The triggering event is based on when the institution knew, or should have known, that such a student with a disability would be enrolled in a specific course and would be unable to access the content available on the password-protected website.
The application of the limitation in proposed § 84.85(e)(1) and (2), discussed in detail below, is contingent upon the institution having notice both that a student with a disability is enrolled in a specific course and that the student cannot access the course content because of their disability. Once an institution is on notice that a student with a disability is enrolled in a specific course and that the student's disability would render the student unable to access the content available on the password-protected website for the specific course, the password-protected web content for that course must be made accessible within the time frames set forth in proposed § 84.85(e)(1) and (2), which are described in greater detail below.
The first proposed limitation to the exception for postsecondary institutions, proposed § 84.85(e)(1), would require that “if a recipient is on notice that an admitted student with a disability is pre-registered in a specific course offered by a postsecondary institution and that the student, because of a disability, would be unable to access the content available on the recipient's password-protected or otherwise secured website for the specific course,” then “all content available on the recipient's password-protected or otherwise secured website for the specific course must comply with the requirements of § 84.84 by the date the academic term begins for that course offering. New content added throughout the term for the course must also comply with the requirements of § 84.84 at the time it is added to the website.” Students may register for classes and make accessibility requests ahead of the start of the term—often during the previous term. The institution therefore knows, or should know, that a student with a disability has registered for a particular course or notified the school that content must be made accessible for a particular course. This provision would ensure that students with disabilities have timely access to and equal opportunity to benefit from content available on a password-protected website for their particular courses.
The second proposed limitation to the exception for postsecondary institutions, § 84.85(e)(2), applies to
In proposing the five-day remediation requirement in this limitation, the Department is attempting to strike the appropriate balance between providing postsecondary institutions with a reasonable opportunity to make the content on the password-protected or otherwise secured website accessible and providing individuals with disabilities full and timely access to this information that has been made available to all other students in the course. The Department believes five days provides a reasonable opportunity to make the relevant content accessible in most cases, subject to the general limitations under proposed § 84.88. However, the Department is interested in the public's feedback and data on whether this remediation requirement provides a reasonable opportunity to make the relevant content accessible, and whether a shorter or longer period would be more appropriate in most cases.
If, for example, a college offers a specific fall semester course, a student with a disability pre-registers for it and, because of disability, that student would be unable to access the content available on the password-protected website for that course, all content available on the institution's password-protected website for that specific course must comply with the requirements of § 84.84 by the date the academic semester begins for the fall semester (according to the first limitation). If, instead, that same student does not enroll in that particular course until two days after the start of the fall semester, all content available on the institution's password-protected or otherwise secured website for that specific course must comply with the requirements of § 84.84 within five business days of notice that a student with a disability is enrolled in that particular course and, because of disability, would be unable to access the content (according to the second limitation).
The exception applies to course content such as conventional electronic documents, multimedia content, or other course material “available” on a recipient's password-protected or otherwise secured website. As such, the two limitations apply when that content is made “available” to students with disabilities enrolled in a specific course who are unable to access course content. Although a professor may load all of their course content on the password-protected website at one time, they may also stagger the release of particular content to their students at various points in time during the term. It is when this content is made available to students that it must be made accessible in compliance with proposed § 84.84.
The two limitations to the exception for password-protected course content state that the limitations apply whenever “the student, because of a disability, would be unable to access the content available on the recipient's password-protected website for the specific course.” Pursuant to longstanding obligations of recipients under section 504, the postsecondary institution must continue to take other steps necessary to timely make inaccessible course content accessible to an admitted student with a disability during the five-day period proposed in the second limitation, unless doing so would result in a fundamental alteration or undue financial and administrative burdens. This could include timely providing alternative formats, a reader, or a notetaker for the student with a disability, or providing other auxiliary aids and services that enable the student with a disability to participate in and benefit from the programs and activities of the recipient while the recipient is making the course content on the password-protected website accessible.
Once the obligation is triggered to make password-protected web content accessible for a specific course, the obligation is ongoing for the duration of the course (
With regard to third-party content linked to from a password-protected or otherwise secured website for a specific course, the exception and limitations set forth in proposed § 84.85(d) apply to this content, even when a limitation under proposed § 84.85(e)(1) or (2) has been triggered requiring all the content available to students on a password-protected website for a specific course to be accessible. Accordingly, third-party web content to which a recipient provides links for informational or resource purposes is not required to be accessible; however, if the postsecondary institution uses the third-party web content to allow members of the public to participate in or benefit from the institution's programs or activities, then the postsecondary institution must ensure it links to third-party web content that complies with the web accessibility requirements of § 84.84. For example, if a postsecondary institution requires students to use a third-party website it links to on its password-protected course website to complete coursework, then the third-party web content must be accessible.
The Department believes that this approach strikes a proper balance of providing necessary and timely access to course content, while not imposing
Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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In proposed § 84.85(f), the Department is considering an exception to the requirements proposed in § 84.84 for elementary and secondary schools that would provide, subject to four limitations, that “class- or course content available on a recipient's password-protected or otherwise secured website for students enrolled, or parents of students enrolled, in a specific class or course at an elementary or secondary school” would not need to comply with the web accessibility requirements of § 84.84.
Because parents of students in elementary and secondary schools have greater rights, roles, and responsibilities with regard to their children and their children's education than in the postsecondary education setting, and because these parents typically interact with such schools much more often and in much greater depth and detail, parents are expressly included in both the general exception for password-protected web content in § 84.85(f) and its limitations.
Proposed exception § 84.85(f) provides that “class or course content available on a recipient's password-protected or otherwise secured website for students enrolled, or parents of students enrolled, in a specific class or course offered by an elementary or secondary school” does not need to comply with the accessibility requirements of § 84.84 unless and until a student is enrolled in that particular class or course and either the student or the parent would be unable, because of a disability, to access the content available on the password-protected website. As used in this context, “enrolled . . . in a specific class or course” limits the exception to password-protected class or course content for a particular class or course during a particular academic term. For example, content on a password-protected website for students, and parents of students, in a specific fifth-grade class would not need to be made accessible unless a student enrolled, or the parent of a student enrolled, in the class that term would be unable, because of a disability, to access the content on the password-protected website.
The proposed exception in § 84.85(f) is not intended to apply to password-protected content that is available to all students or their parents in an elementary or secondary school. Content on password-protected websites that is not limited to students enrolled, or parents of students enrolled, in a specific class or course, but instead is available to all students or their parents at the elementary or secondary school is not subject to the exception. For example, a school calendar available on a password-protected website to which all students or parents at a particular elementary school are given a password would not be subject to the exception for password-protected web content for a specific class or course. It would, therefore, need to comply with the requirements of proposed § 84.84.
There are four critical limitations to the general exception in § 84.85(f) for elementary and secondary schools' class or course content. These limitations are identical to those discussed above in the postsecondary context, except that they arise not only when a school is on notice that a student with a disability is enrolled in a particular class or course and cannot access content on the class or course's password-protected website because of their disability, but also when the same situation arises for a parent with a disability. The discussion above of the limitations in the postsecondary context applies with equal force here. A shorter discussion of the limitations in the elementary and secondary context follows. However, the Department acknowledges that there are existing legal frameworks specific to the public elementary and secondary education context which are described further in this section.
The first limitation, in proposed § 84.85(f)(1), addresses situations in which the recipient is on notice before the beginning of the academic term that
Similarly, the second limitation, proposed § 84.85(f)(2), addresses situations in which the pre-registered student's parent has a disability. Section 84.85(f)(2) applies when the recipient is on notice that a student is pre-registered in an elementary or secondary school's class or course, and that the student's parent needs the content to be accessible because of a disability that inhibits access to the content available on the password-protected website for the specific class or course. In such circumstances, all content available on the recipient's password-protected website for the specific class or course must comply with the requirements of § 84.84 by the date the school term begins for that class or course. New content added throughout the term for the class or course must also comply with the requirements of proposed § 84.84 at the time it is added to the website.
The third and fourth limitations to the exception for class or course content on password-protected websites for particular classes or courses at elementary and secondary schools are similar to the first and second limitations, but have different triggering events. These limitations apply to situations in which a student is enrolled in an elementary or secondary school's class or course after the term begins, or when a school is otherwise not on notice until after the term begins that there is a student or parent with a disability who is unable to access class or course content because of their disability. The third limitation, in proposed § 84.85(f)(3) would apply once a recipient is on notice that “a student with a disability is enrolled in an elementary or secondary school's class or course after the term begins, and the student, because of a disability, would be unable to access the content available on the recipient's password-protected or otherwise secured website for the specific class or course.” In such circumstances, all content available on the recipient's password-protected or otherwise secured website for the specific class or course must comply with the requirements of § 84.84 within five business days of such notice. New content added throughout the term for the class or course must also comply with the requirements of proposed § 84.84 at the time it is added to the website.
Proposed § 84.85(f)(4), the fourth limitation, applies the same triggering event as in § 84.85(f)(3) to situations in which the student's parent has a disability. Proposed § 84.85(f)(4) would apply once a recipient is on notice that a student is enrolled in an elementary or secondary school's class or course after the term begins, and that the student's parent needs the content to be accessible because of a disability that would inhibit access to the content available on the recipient's password-protected website for the specific class or course. In such circumstances, all content available on the recipient's password-protected or otherwise secured website for the specific class or course must comply with the requirements of § 84.84 within five business days of such notice. New content added throughout the term for the class or course must also comply with the requirements of proposed § 84.84 at the time it is added to the website.
The procedures for enrollment in the elementary or secondary school context likely vary from the postsecondary context. Unlike in postsecondary institutions, elementary and secondary schools generally have more autonomy and authority regarding student placement in a particular class or course. The student or parent generally does not control placement in a particular class or course. To the extent a parent or student has such autonomy or authority, the application of the limitations in § 84.85(f)(1) through (4) is contingent on whether the elementary or secondary school knows, or should know, that a student with a disability is enrolled, or a parent with a disability has a child enrolled, in a particular class or course, and that the student or parent would be unable to access the class or course content because of their disability.
Regardless of what process a school follows for notification of enrollment, accessibility obligations for password-protected class or course content come into effect once a school is on notice that materials need to be made accessible under these provisions. For example, some schools that allow students to self-select the class or course in which they enroll may require students with disabilities to notify their guidance counselor or the special education coordinator each time they have enrolled in a class or course. With respect to parents, some schools may have a form that parents fill out as part of the process for enrolling a student in a school, or in a particular class or course in that school, indicating that they (the parent) are an individual with a disability who, because of their disability, needs auxiliary aids or services. Other schools may publicize the schools' responsibility to make class or course content accessible to parents with disabilities and explain the process for informing the school that they cannot access inaccessible websites. Under this rule, regardless of the process a school follows, once the elementary or secondary school is on notice, the password-protected class or course content for that class or course must be made accessible within the time frames set forth in § 84.85(f)(1) through (4). We note that section 504 would prohibit limiting assignment of students with disabilities only to classes for which the content has already been made accessible.
The Department emphasizes that in the public elementary and secondary school context a variety of Federal laws include robust protections for students with disabilities, and this rule is intended to build on, but not to supplant those protections for students with disabilities. Public schools that receive Federal financial assistance already must ensure they comply with obligations under other statutes such as the IDEA and section 504 of the Rehabilitation Act, including the Department of Education's regulations implementing those statutes. The IDEA and section 504 already include affirmative obligations that covered schools work to identify children with disabilities, regardless of whether the schools receive notice from a parent that a student has a disability, and provide a Free Appropriate Public Education (FAPE).
Federal and state laws may have a process for students who are newly enrolled in a school and those who are returning to have their educational program or plan reviewed and revised annually. This generally would include a determination of the special education, related services, supplementary aids and services, program modifications, and supports from school personnel that the student needs. However, once the school is on notice that the student has a disability and requires access because of the disability, those processes and procedures cannot be used to delay or avoid compliance with the time frames set forth in § 84.85(f)(1) through (4). For example, if a school knows that a student who is blind is enrolled at the school for the first time over the summer, the school is then on notice that, in accordance with § 84.85(f)(1), the content on the school's password-protected website for the class to which the school assigns the student must be accessible in compliance with the requirements of § 84.84 by the date the term begins, regardless of the time frames for evaluation or the review or development of an Individualized Education Program or section 504 plan.
As in the postsecondary context, the Department believes that these exceptions and limitations strike a proper balance of providing necessary and timely access to class or course content, while not imposing burdens where class or course content is currently only utilized by a population of students and parents without relevant disabilities, but it welcomes public feedback on whether alternative approaches might strike a more appropriate balance.
Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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In proposed § 84.85(g), the Department is considering an exception to the accessibility requirements of § 84.84 for web-based “conventional electronic documents that are: (1) about a specific individual, their property, or their account; and (2) password-protected or otherwise secured.”
Many recipients use the web to provide access to digital versions of documents for their customers, constituents, and other members of the public. For example, many hospitals offer a virtual platform where health care providers can send digital versions of test results and scanned documents to their patients. The Department anticipates that a recipient could have many such documents. The Department also anticipates that making conventional electronic documents accessible in this context may be difficult for recipients, and that in many instances, the individuals who are entitled to view a particular individualized document will not need an accessible version. However, some recipients might be able to make some types of documents accessible relatively easily after they make the template they use to generate these individualized documents accessible. To help better understand whether these assumptions are accurate, the Department asks questions for public comment below about what kinds of individualized, conventional electronic documents recipients make available, how recipients make these documents available to individuals, and what experiences individuals have had in accessing these documents.
This proposed exception is expected to reduce the burdens on recipients. The Department expects that making such documents accessible for every individual, regardless of whether they need such access, could be too burdensome and would not deliver the same benefit to the public as a whole as if the recipient were to focus on making other types of web content accessible. The Department expects that it would generally be more impactful for recipients to focus resources on making documents accessible for those
This exception is limited to “conventional electronic documents” as defined in § 84.10. This exception would, therefore, not apply in a case where a recipient makes individualized information available in formats other than a conventional electronic document. For example, if a hospital makes individualized bills available on a password-protected web platform as HTML content (rather than a PDF), that content would not be subject to this exception. Such bills, therefore, would need to be made accessible in accordance with proposed § 84.84. On the other hand, if a recipient makes individualized bills available on a password-protected web platform in PDF form, that content would be excepted from the accessibility requirements of § 84.84, subject to the limitation discussed in further detail below.
This exception also only applies when the content is individualized for a specific person or their property or account. Examples of individualized documents include medical records or notes about a specific patient or receipts for purchases. Content that is broadly applicable or otherwise for the general public (
Finally, this exception applies only to password-protected or otherwise secured content. Content may be otherwise secured if it requires some process of authentication or login to access the content. Unless subject to another exception, conventional electronic documents that are on a recipient's general, public web platform would not be excepted.
This proposed exception for individualized, password-protected conventional electronic documents has certain limitations. While the exception is meant to alleviate the burden on recipients of making all individualized, password-protected or otherwise secured conventional electronic documents generally accessible, people with disabilities must still be able to access information from documents that pertain to them. An accessible version of these documents must be provided in a timely manner.
As in other situations involving a recipient's effective communication obligations—for example, when providing an American Sign Language interpreter—this exception and its accompanying limitation would also apply to the companion of the person receiving the recipient's services in appropriate circumstances.
Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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Generally, to meet the WCAG 2.1 standard, a web page must satisfy one of the defined levels of conformance—in the case of this proposed rule, Level AA.
Having direct access to an accessible web page provides the best user experience for many individuals with disabilities, and it may be difficult for recipients to reliably maintain conforming alternate versions, which must be kept up-to-date. Accordingly, the W3C® explains that providing a conforming alternate version of a web page is intended to be a “fallback option for conformance to WCAG and the preferred method of conformance is to make all content directly accessible.”
The Department is concerned that WCAG 2.1 can be interpreted to permit the development of two separate websites—one for individuals with relevant disabilities and another for individuals without relevant disabilities—even when doing so is unnecessary and when users with disabilities would have a better experience using the main web page. This segregated approach is concerning and appears inconsistent with section 504's core principles of inclusion and integration.
Due to the concerns about user experience, segregation of users with disabilities, unequal access to information, and maintenance burdens discussed above, the Department is proposing to adopt a slightly different approach to “conforming alternate versions” than that provided under WCAG 2.1. Instead of permitting entities to adopt “conforming alternate versions” whenever they believe this is appropriate, proposed § 84.86 makes it clear that use of conforming alternate versions of websites and web content to comply with the Department's proposed requirements in § 84.84 is permissible only where it is not possible to make websites and web content directly accessible due to technical limitations (
In addition to allowing conforming alternate versions to be used where it is not possible to make websites and web content directly accessible due to technical or legal limitations, this proposed rulemaking also incorporates general limitations if recipients can demonstrate that full compliance with § 84.84 would result in a fundamental alteration in the nature of a program or activity or undue financial and administrative burdens.
Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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Proposed § 84.87 provides that nothing prevents a recipient from using designs, methods, or techniques as alternatives to those prescribed in the proposed regulation, provided that such alternatives result in substantially equivalent or greater accessibility and usability. The 1991 and 2010 ADA Standards for Accessible Design both contain an equivalent facilitation provision.
Section 84.88 sets forth the general limitations on the obligations under subpart I. Proposed § 84.88(a) provides that in meeting the accessibility requirements set out in this subpart, a recipient is not required to take any action that would result in a
Generally, the Department believes it would not constitute a fundamental alteration of a recipient's programs or activities to modify web content or mobile apps to make them accessible, though the Department seeks the public's input on this view. Moreover, like the fundamental alteration and undue burdens limitations in the title II regulation referenced above, proposed § 84.88(a) does not relieve a recipient of all obligations to individuals with disabilities. Although a recipient under this proposed rule is not required to take actions that would result in a fundamental alteration in the nature of a program or activity or undue financial and administrative burdens, it nevertheless must comply with the requirements of this subpart to the extent that compliance does not result in a fundamental alteration or undue financial and administrative burdens. For instance, a recipient might determine that full Level AA compliance would result in a fundamental alteration or undue financial and administrative burdens. However, this same recipient must then determine whether it can take any other action that would not result in such an alteration or such burdens but would nevertheless ensure that individuals with disabilities receive the benefits or services provided by the recipient to the maximum extent possible. To the extent that the recipient can, it must do so. This may include the recipient bringing its web content into compliance with some of the WCAG 2.1 Level A or Level AA success criteria.
It is the Department's view that most entities that choose to assert a claim that full compliance with the proposed web or mobile app accessibility requirements would result in undue financial and administrative burdens will be able to attain at least partial compliance. The Department believes that there are many steps a recipient can take to comply with WCAG 2.1 that should not result in an undue financial and administrative burdens, depending on the particular circumstances.
In determining whether an action would result in undue financial and administrative burdens, all of a recipient's resources available for use in the funding and operation of the program or activity should be considered. The burden of proving that compliance with proposed § 84.88 would fundamentally alter the nature of a program or activity or would result in undue financial and administrative burdens rests with the recipient. The Department of Justice first promulgated this language in its title II regulation in 1991 and has consistently maintained that the decision that compliance would result in a fundamental alteration or impose undue burdens must be made by the head of the recipient or their designee, and must be memorialized with a written statement of the reasons for reaching that conclusion.
Once a recipient has complied with the web or mobile app accessibility requirements set forth in subpart I, it is not required to make further modifications to its web or mobile app content to accommodate an individual who is still unable to access, or does not have equal access to, the web or mobile app content due to their disability. Compliance with these web and mobile accessibility requirements does not remove covered entities' obligations as employers, with respect to job applicants and employees, under Title I of the ADA to not discriminate against qualified individuals on the basis of disability in regard to job application procedures; the hiring, advancement, or discharge of employees; employee compensation; job training; or other terms, conditions, and privileges of employment. These obligations include making reasonable accommodation to the known physical or mental limitations of applicants or employees, absent undue hardship. The Department realizes that the proposed rule is not going to meet the needs of and provide access to every individual with a disability, but believes that setting a consistent and enforceable web accessibility standard that meets the needs of a majority of individuals with disabilities will provide greater predictability for recipients, as well as added assurance of accessibility for individuals with disabilities.
Fully complying with the web and mobile app accessibility requirements set forth in subpart I means that a recipient is not required to make any further modifications to its web or mobile app content. However, if an individual with a disability, on the basis of disability, cannot access or does not have equal access to a program or activity through a recipient's web content or mobile app that conforms to WCAG 2.1 Level AA, the recipient still has an obligation to provide the individual an alternative method of access to that program or activity unless the recipient can demonstrate that alternative methods of access would result in a fundamental alteration in the nature of a program or activity or undue financial and administrative burdens.
The recipient must determine on a case-by-case basis how best to accommodate those individuals who cannot access the program or activity provided through the recipient's fully compliant web content or mobile app. A recipient should refer to 45 CFR 84.77 (effective communication) to determine its obligations to provide individuals with disabilities with the appropriate auxiliary aids and services necessary to afford them an equal opportunity to participate in, and enjoy the benefits of, the recipient's program or activity. A recipient should refer to 45 CFR 84.68(b)(7) (reasonable modifications) to determine its obligations to provide reasonable modifications in policies, practices, or procedures to avoid discrimination on the basis of disability. It is helpful to provide individuals with disabilities with information about how to obtain the modifications or auxiliary aids and services they may need. The Department therefore strongly recommends that the recipient provide notice to the public on how an individual who cannot use the web content or mobile app because of a disability can request other means of effective communication or reasonable modifications in order to access the recipient's programs or activities that are being provided through the web content or mobile app. The Department also strongly recommends that the recipient provide an accessibility statement that tells the public about how to bring web or mobile app accessibility problems to the recipient's attention, and that recipients consider developing and implementing a procedure for reviewing and addressing any such issues raised. For example, a recipient is encouraged to provide an email address, accessible link, accessible web page, or other accessible means of contacting the recipient to provide information about issues individuals with disabilities may encounter accessing web or mobile app content or to request assistance.
As discussed above, the Department is proposing to adopt specific standards for recipients to use to ensure that their web content and mobile apps are accessible to individuals with disabilities. Proposed § 84.84 requires recipients to ensure that any web content and mobile apps that they make available to members of the public or use to offer programs and activities to members of the public are readily accessible to and usable by individuals with disabilities. Proposed § 84.84(b) sets forth the specific technical requirements in WCAG 2.1 Level AA with which recipients must conform unless compliance results in a fundamental alteration in the nature of a program or activity or undue financial and administrative burdens. Now that the Department is proposing requiring recipients to conform with a specific technical standard for web accessibility, it seeks to craft a framework for determining when a recipient has complied with that standard. The framework will ensure the full and equal access to which individuals with disabilities are entitled, while setting forth obligations that will be achievable for recipients.
The Department is aware of two Federal agencies that have implemented requirements for complying with technical standards for web accessibility. Each agency has taken a different approach to defining what it means to comply with its regulation. As discussed above, for Federal agency websites covered by Section 508, the Access Board requires conformance with WCAG 2.0 Level A and Level AA.
Within the United States, different public entities have taken different approaches to measuring compliance with a technical standard under State laws. For example, Florida,
The Department understands that businesses open to the public, which are subject to title III of the ADA, have taken different approaches to web accessibility. These approaches may include collecting feedback from users with disabilities about inaccessible websites or mobile apps, or relying on external consultants to conduct periodic testing and remediation. Other businesses may have developed detailed internal policies and practices that require comprehensive automated and manual testing, including testing by people with disabilities, on a regular basis throughout their digital content development and quality control processes. Some businesses have also developed policies that include timelines for remediation of any accessibility barriers; these policies may establish different remediation time frames for different types of barriers.
The Department recognizes that it must move forward with care, weighing the interests of all stakeholders, so that as accessibility for individuals with disabilities is improved, innovation in the use of the web or mobile apps by public entities is not hampered. The Department appreciates that the dynamic nature of web content and mobile apps presents unique challenges in measuring compliance. For example, as discussed further below, this type of content can change frequently and assessment of conformance can be complex or subjective. Therefore, the Department is seeking public input on issues concerning how compliance should be measured, which the Department plans to address in its final rule.
The Department is concerned that the type of compliance measures it currently uses in the ADA and other portions of section 504, such as the one used to assess compliance with the ADA Standards, may not be practical in the web or mobile app context. Specifying what it means to comply with a technical standard for web accessibility is unlike the physical accessibility required by the UFAS or the 2010 ADA Design Standards. While section 504 physical accessibility standards can be objectively and reliably assessed with one set of tools, different automated testing tools may provide different assessments of the same website's accessibility. For example, using different web browsers with different testing tools or assistive technology can yield different results. Assessments of a website's or mobile app's accessibility may change frequently over time as the web content or mobile apps change. Automated testing tools also may report purported accessibility errors inaccurately. For example, an automated testing tool may report an error because an image lacks alt text, but WCAG does not require such alternative text if the content is purely decoration or used for formatting.
While the Department understands the challenges that full conformance with WCAG 2.1 Level AA at all times may pose for some recipients, the Department also appreciates the serious impact that a failure to conform with WCAG 2.1 Level AA can have on people with disabilities. For example, if a person who has limited manual dexterity and uses keyboard navigation is trying to apply for public benefits, and the “submit” button on the form is not operable using the keyboard, that person will not be able to apply for benefits independently for benefits online, even if the rest of the website is fully accessible. A person who is blind and uses a screen reader may not be able to make an appointment at a county health clinic if an element of the clinic's appointment calendar is not coded properly. Nearly all of a recipient's web content could conform with the WCAG 2.1 Level AA success criteria, but one instance of nonconformance could still prevent someone from accessing services on the website. People with disabilities must be able to access the many important government programs and activities that are offered through web content and mobile apps on equal terms, without sacrificing their privacy, dignity, or independence. The Department's concern about the many barriers to full and equal participation in civic life that inaccessible web content can pose for people with disabilities is an important motivating factor behind the Department's decision to propose requiring compliance with a technical standard. By clarifying what compliance with a technical standard means, the Department seeks to enhance the impact this requirement will have on the daily lives of people with disabilities by helping recipients to understand their obligations, thereby increasing compliance.
The Department believes that a more nuanced definition of compliance might be appropriate because some instances of nonconformance with WCAG success criteria may not impede access to the programs or activities offered through a public entity's web content or mobile app. For example, if the contrast between the text and background colors used for application instructions deviates by a few hundredths from the color contrast ratio required by WCAG 2.1 Level AA, most people with low vision will likely still be able to access those instructions without difficulty. However, the web content would be out of conformance with WCAG 2.1 Level AA. If the Department does not establish a more detailed compliance framework, a person with a disability would have a valid basis for filing a complaint with the Department or in Federal court about the scenario. This could expose recipients to extensive litigation risk, while potentially generating more complaints than the Department or the
Some may argue that the same risk of allegedly unjustified enforcement action also exists for some provisions of section 504. Yet, the Department believes that a recipient's website may be more likely to be out of full conformance with WCAG 2.1 Level AA than its buildings are to be out of compliance with the design standards required by Federal law, like UFAS or the 2010 ADA Standards. Sustained, perfect conformance with WCAG 2.1 Level AA may be more difficult to achieve on a website that is updated several times a week and includes thousands of pages of content than compliance with the ADA Standards is in a town hall that is renovated once a decade. The Department also believes that slight deviations from WCAG 2.1 Level AA may be more likely to occur without having a detrimental impact on access than is the case with the ADA Standards. Additionally, it may be easier for an aggrieved individual to find evidence of nonconformance with WCAG 2.1 Level AA than noncompliance with the ADA Standards, given the availability of many free testing tools and the fact that public entities' websites can be accessed from almost anywhere. The Department welcomes public comment on the accuracy of all of these assumptions, as well as about whether it is appropriate to consider the impact of nonconformance with a technical standard when evaluating compliance with the proposed rule.
The Department is considering a range of different approaches to measuring compliance with this proposed rule. These approaches involve linking noncompliance with a technical standard to:
(a) A numerical percentage of compliance with a technical standard;
(b) Situations that impact the ability to have equal access to the website or mobile app;
(c) The use of robust policies and practices for accessibility feedback, testing, and remediation; or
(d) Organizational maturity.
The Department is considering whether to require a numerical percentage of conformance with a technical standard, which could be 100 percent or less. This percentage could be a simple numerical calculation based on the number of instances of nonconformance across a website or mobile app, or the percentage could be calculated by weighting different instances of nonconformance differently. Weighting could be based on factors like the importance of the content; the frequency with which the content is accessed; the severity of the impact of nonconformance on a person's ability to access the services, programs, or activities provided on the website; or some other formula.
However, the Department does not believe that a percentage-based approach would achieve the purposes of this rule or be feasible to implement. First, a percentage-based approach seems unlikely to ensure access for people with disabilities. Even if the Department were to require that 95 percent or 99 percent of an entity's web content or mobile apps conform with WCAG 2.1 (or that all content or apps conform to 95 percent or 99 percent of the WCAG 2.1 success criteria), the relatively small percentage that does not conform could still block an individual with a disability from accessing a program or activity.
A percentage-based standard is also likely to be difficult to implement. If the Department adopts a specific formula for calculating whether a certain percentage-based compliance threshold has been met, it could be challenging for members of the public and recipients to determine whether web content and mobile apps comply with this rule. Calculations required to evaluate compliance could become complex, particularly if the Department were to adopt a weighted or tiered approach that requires certain types of core content to be fully accessible, while allowing a lower percentage of accessibility for less important or less frequently accessed content. People with disabilities who are unable to use inaccessible parts of a website or mobile app may have particular difficulty calculating a compliance percentage, because it could be difficult, if not impossible, for them to correctly evaluate the percentage of a website or mobile app that is inaccessible if they do not have full access to the entire website or app. For these reasons, the Department currently is not inclined to adopt a percentage-based approach to measuring compliance, though we welcome public comment on ways that such an approach could be implemented successfully.
Another possible approach would be to limit an entity's compliance obligations where nonconformance with a technical standard does not impact a person's ability to have equal access to programs or activities offered on a recipient's website or mobile app. For example, the Department could specify that nonconformance with WCAG 2.1 Level AA does not constitute noncompliance with this part if that nonconformance does not prevent a person with a disability from accessing or acquiring the same information, engaging in the same interactions, performing the same transactions, and enjoying the same programs and activities that the recipient offers visitors to its website without relevant disabilities, with substantially equivalent ease of use. This approach would provide equal access to people with disabilities, while limiting the conformance obligations of recipients where technical nonconformance with WCAG 2.1 Level AA does not affect access. If a recipient's compliance were to be challenged, in order to prevail, the recipient would need to demonstrate that, even though it was technically out of conformance with one or more of the WCAG 2.1 Level AA success criteria, the nonconformance had such a minimal impact that this provision applies, and the recipient has therefore met its obligations under the ADA despite nonconformance with WCAG 2.1.
The Department believes that this approach would have a limited impact on the experience of people with disabilities who are trying to use web content or mobile apps for two reasons. First, by its own terms, the provision would require a recipient to demonstrate that any nonconformance did not have a meaningful effect. Second, it is possible that few recipients will choose to rely on such a provision, because they would prefer to avoid assuming the risk inherent in this approach to compliance. A recipient may find it easier to conform to WCAG 2.1 Level AA in full so that it can depend on that clearly defined standard, instead of attempting to determine whether any nonconformance could be excused under this provision. Nonetheless, the Department believes some recipients may find such a provision useful because it would prevent them from facing the prospect of failing to comply with the ADA based on a minor technical error. The
The Department also believes such an approach may be logically consistent with the general nondiscrimination principles of Section 508, which require comparable access to information and data,
Another approach the Department is considering is whether a recipient could demonstrate compliance with this part by affirmatively establishing and following certain robust policies and practices for accessibility feedback, testing, and remediation. The Department has not made any determinations about what policies and practices, if any, would be sufficient to demonstrate compliance, and the Department is seeking public comment on this issue. However, for illustrative purposes only, and to enable the public to better understand the general approach the Department is considering, assume that a recipient proactively tested its existing web and mobile app content for conformance with WCAG 2.1 Level AA using automated testing on a regular basis (
This approach would enable a recipient to remain in compliance with section 504 even if its website or mobile app is not in perfect conformance with WCAG 2.1 Level AA at all times, if the entity is addressing any nonconformance within a reasonable period of time. A new policy that a recipient established in response to a particular complaint, or a policy that an entity could not demonstrate that it has a practice of following, would not satisfy such a provision. The Department could craft requirements for such policies in many different ways, including by requiring more prompt remediation for nonconformance with a technical standard that has a more serious impact on access to programs and activities; providing more detail about what testing is sufficient (
The Department is also considering whether a recipient should be permitted to demonstrate compliance with this rule by showing organizational maturity—that the organization has a sufficiently robust program for web and mobile app accessibility. Organizational maturity models provide a framework for measuring how developed an organization's programs, policies, and practices are—either as a whole or on certain topics (
A focus on organizational maturity would enable a recipient to demonstrate compliance with section 504 even if its website or mobile app is not in perfect conformance with WCAG 2.1 Level AA at all times, so long as the recipient can demonstrate sufficient maturity of its digital accessibility program, which would indicate its ability to quickly remedy any issues of nonconformance identified. The Department could define requirements for organizational maturity in many different ways, including by adopting an existing organizational maturity model in full, otherwise relying on existing organizational maturity models, establishing different categories of organizational maturity (
The Department has several concerns about whether allowing recipients to demonstrate compliance with this rule through their organizational maturity will achieve the goals of this rulemaking. First, this approach may not provide sufficient accessibility for individuals with disabilities. It is not clear that when recipients make their accessibility programs more robust, that
The Department seeks public comment on how compliance with the web and mobile app accessibility requirements should be assessed or measured, including comments on these approaches to measuring compliance and any alternative approaches it should consider.
Please provide as much detail as possible and any applicable data, suggested alternative approaches or requirements, arguments, explanations, and examples in your responses to the following questions.
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The Department is proposing adding a new subpart J to the existing section 504 regulation to address the lack of accessible medical equipment for people with disabilities. Disability advocates have long sought adoption of Federal accessibility standards for medical equipment—a step that will help endure nondiscriminatory access to critical, and potentially lifesaving, care for people with disabilities. In addition, regulated entities would benefit from specific technical guidance on how to fulfill their obligations and make their programs accessible. NCD has issued multiple reports recommending that HHS adopt the U.S. Access Board's Standards for Accessible Medical Diagnostic Equipment (MDE Standards).
OCR has recognized, in its enforcement, that section 504 requires covered medical practices to be accessible to persons with disabilities, including by utilizing accessible equipment.
The ACA added Section 510 to the Rehabilitation Act, directing the Access Board, in consultation with the Food and Drug Administration, to promulgate regulatory standards setting forth the minimum technical criteria for medical diagnostic equipment (MDE) used in (or in conjunction with) physicians' offices, clinics, emergency rooms, hospitals, and other medical settings.
Without accessible medical examination tables, dental chairs, radiological diagnostic equipment, scales, and rehabilitation equipment, individuals with disabilities do not have an equal opportunity to receive medical care. Individuals with disabilities may be less likely to get routine preventative medical care than people without disabilities because of barriers to accessing that care.
The ANPRM said that DOJ may propose regulations to ensure the accessibility of medical equipment that is used for treatment, rehabilitative, or other purposes. However, DOJ later formally withdrew the ANPRM.
In 2015, HHS issued an NPRM on Nondiscrimination in Health Programs and Activities under Section 1557 of the ACA prohibiting discrimination on various bases, including disability, in certain health programs and activities. In the NPRM, the Department stated that once the Access Board standards were promulgated, OCR “intends to issue regulations or policies that require covered entities to conform to those standards.” In 2017, the Access Board published the final rule on Standards for Accessible Medical Diagnostic Equipment.
The Department is coordinating its publication of this proposed rule with DOJ, which is concurrently publishing a proposed rule addressing the accessibility of medical diagnostic equipment under title II of the ADA. Given the relationship between section 504 and title II and Congressional intent
In implementing the mandate set forth in § 510 of the Rehabilitation Act to promulgate technical standards for accessible MDE, the Access Board received input from various stakeholders through a multi-year deliberative process and published the MDE Standards on January 9, 2017.
The technical requirements for MDE used by patients in the supine, prone, or side-lying position (such as examination tables) and MDE used by patients in the seated position (such as examination chairs) focus on ensuring that the patient can transfer from a mobility device onto the MDE. The other two categories set forth the necessary technical requirements to allow the patient to use the MDE while seated in their wheelchair (such as during a mammogram) or while standing (such as on a weight scale), respectively. The MDE Standards also include technical criteria for supports, including for transfer, standing, leg, head and back supports; instructions or other information communicated to patients through the equipment; and operable parts used by patients.
The Access Board's MDE Standards currently contain a temporary standard governing the minimum low height requirement for transfers from diagnostic equipment used by patients in a supine, prone, side-lying, or seated position. Specifically, the temporary standard provides for a minimum low transfer height requirement of 17 inches to 19 inches. The temporary nature of this standard was due to insufficient data on the extent to which, and how many, individuals would benefit from a transfer height lower than 19 inches. While this temporary standard is in effect, any low transfer height between 17 and 19 inches will meet the MDE Standards. Under a sunset provision, as extended, this low height range remains in effect only until January 10, 2025.
On May 23, 2023, the Access Board issued an NPRM that proposes removing the sunset provisions in the Board's existing MDE Standards related to the low-height specifications for transfer surfaces, and replacing them with final specifications for the low transfer height of medical diagnostic equipment used in the supine, prone, side-lying, and seated positions.
The accessibility of MDE is essential to providing equal access to medical care to people with disabilities. In developing this proposed subpart, the Department considered the well-documented barriers individuals with disabilities face when accessing MDE, as well as the benefits for people with disabilities and health care workers alike of using accessible MDE.
The Department has also consistently provided information to covered entities
The Department recognizes that in addition to its efforts to ensure that people with disabilities have equal access to medical care, including through technical assistance,
Accordingly, the Department is proposing changes to its section 504 regulations that can help ensure that vital health care programs and activities are equally available to individuals with disabilities. Specifically, the Department is considering adopting and incorporating into its section 504 regulation the specific technical requirements for accessible MDE that are set forth in the Access Board's MDE Standards.
This analysis discusses the Department's proposed changes to the section 504 regulation, including the reasoning behind the proposals, and poses questions for public comment.
This section states that the subpart applies to recipients of Federal financial assistance from the Department.
This section provides general accessibility requirements for programs and activities that recipients provide through or with the use of MDE. Recipients must ensure that their programs and activities offered through or with the use of MDE are accessible to individuals with disabilities.
Under this general provision (barring an applicable limitation or defense), a recipient cannot deny services that it would otherwise provide to a patient with a disability because the recipient lacks accessible MDE. A recipient also cannot require a patient with a disability to bring someone along with them to help during an exam. A patient may choose to bring another person such as a friend, family member, or personal care aide to an appointment, but regardless, the recipient may need to provide reasonable assistance to enable the patient to receive medical care. Such assistance may include helping a person who uses a wheelchair to transfer from their wheelchair to the exam table or diagnostic chair.
For MDE that recipients purchase, lease, or otherwise acquire after the effective date of this proposed rule (60 days after its publication in the
Paragraph (a) adopts the Access Board's MDE Standards as the standard governing whether MDE is accessible and establishes one of the proposed rule's key requirements: that subject to applicable limitations and defenses, all MDE that recipients purchase, lease, or otherwise acquire after the effective date must meet the MDE Standards unless and until the recipient already has a sufficient amount of accessible MDE to satisfy the scoping requirements of the proposed rule.
As explained above in more detail, the MDE Standards include technical criteria for equipment that is used when patients are either 1) in a supine, prone, or side-lying position; 2) in a seated position; 3) in a wheelchair; or 4) in a standing position. They also contain standards for supports, communication, and operable parts. In addition, the MDE Standards also contain requirements for equipment to be compatible with patient lifts where a patient would transfer under positions (1) and (2) above.
Consistent with the language in 29 U.S.C. 794f(b), MDE covered under this subpart includes examination tables, examination chairs (including chairs used for eye examinations or procedures, and dental examinations or procedures), weight scales, mammography equipment, x-ray machines, and other radiological
Given the many barriers to health care that people with disabilities encounter due to inaccessible MDE, adopting the MDE Standards will give many people with disabilities an equal opportunity to participate in and benefit from health care programs and activities.
Paragraph (b) proposes scoping requirements for accessible MDE. Accessibility standards generally contain scoping requirements (how many accessible features are needed) and technical requirements (what makes a particular feature accessible). For example, the 2010 ADA Standards for Accessible Design (2010 ADA Standards) provide scoping requirements for how many toilet compartments in a particular toilet room must be accessible and provide technical requirements on what makes these toilet compartments accessible.
The scoping requirements that the Department proposes are based on the requirements the 2010 ADA Standards establish for accessible patient sleeping rooms and parking in hospitals, rehabilitation facilities, psychiatric facilities, detoxification facilities, and outpatient physical therapy facilities.
According to the 2010 ADA Standards, licensed medical care facilities and licensed long-term care facilities where the period of stay exceeds 24 hours shall provide accessible patient or resident sleeping rooms and disperse them proportionately by type of medical specialty.
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Proposed paragraphs (b)(1)-(3) lay out scoping requirements for this section. Paragraph (b)(1) provides the general requirement for physician's offices, clinics, emergency rooms, hospitals, outpatient facilities, multi-use facilities, and other medical programs and activities that do not specialize in treating conditions that affect mobility. When these entities use MDE to provide programs or activities, they must ensure that at least 10 percent, but no fewer than one unit, of each type of equipment complies with the MDE Standards. For example, a medical practice with 20 examination chairs would be required to have two examination chairs (10 percent of the total) that comply with the MDE Standards. In a medical practice with five examination chairs, the practice would be required to have one examination chair that complies with the MDE Standards (because every covered entity must have no fewer than one unit of each type of equipment that is accessible). If a dental practice has one x-ray machine, that x-ray machine would be required to be accessible. Proposed paragraph (b)(2) provides the scoping requirement for rehabilitation facilities that specialize in treating conditions that affect mobility, outpatient physical therapy facilities, and other medical programs and activities that specialize in treating conditions that affect mobility. This paragraph requires that at least 20 percent of each type of MDE used in these types of programs and activities, but no fewer than one unit of each type of MDE, must comply with the MDE Standards. Because these facilities specialize in treating patients who are likely to need accessible MDE, it is reasonable for them to have more accessible MDE than is required for the health care providers covered by paragraph (b)(1), who do not have the same specialization. The Department considered whether to require 100 percent of MDE in these programs to be accessible, like ec. 223.2.2 of the 2010 ADA Standards for Accessible Design, which requires that 100 percent of patient sleeping rooms in similar facilities provide specific accessibility features for patients with mobility disabilities. However, the Department is instead proposing a scoping requirement analogous to sec. 208.2.2 of the 2010 ADA Standards, which requires 20 percent of visitor and patient parking spaces at such facilities to be accessible. The time-limited use of MDE is more analogous to the use of parking spaces at a rehabilitation facility than to the use of sleeping rooms. As with parking spaces, several different patients with mobility disabilities could use the same piece of MDE in a day, while patients generally occupy a sleeping room for all or a significant part of the day. Thus, the Department's proposed rule draws on the 2010 ADA Standards' scoping requirements by requiring at least 20 percent (but no fewer than one unit) of each type of
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Paragraph (b)(3) addresses facilities or programs with multiple departments, clinics, or specialties. The current ADA title II regulation requires medical care facilities that do not specialize in the treatment of conditions that affect mobility to disperse the accessible patient sleeping rooms in a manner that is proportionate by type of medical specialty.
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Paragraph (c) sets forth specific requirements for examination tables and weight scales. Proposed paragraph (c)(1) would require recipients that use at least one examination table in their program or activity to purchase, lease, or otherwise acquire, within two years after the publication of this part in final form, at least one examination table that meets the requirements of the MDE Standards, unless the entity already has one in place. Similarly, proposed paragraph (c)(2) requires recipients that use at least one weight scale in their program or activity to purchase, lease, or otherwise acquire, within two years after the publication of this part in final form, at least one weight scale that meets the requirements of the MDE Standards, unless the entity already has one in place. This requirement is subject to the other requirements and limitations set forth in § 84.92. Thus, this section does not require a recipient to acquire an accessible examination table and an accessible weight scale if doing so would result in a fundamental alteration in the nature of the program or activity or undue financial and administrative burdens, per § 84.92(e) and (f). In addition, recipients may use designs, products, or technologies as alternatives to those prescribed by the MDE Standards if the criteria set forth in § 84.92(d) are satisfied.
The Department notes that it is proposing to retain § 84.22(c) in the Existing Facilities section of its current section 504 rule, which applies to small health, welfare, or other social service providers. Under this provision, when a recipient with fewer than fifteen employees finds, after consultation with an individual with disabilities seeking its services, that there is no method of complying with these requirements other than making a significant alteration in its existing facilities, it may refer the patient with a disability who seeks health care services to other providers of those services that are accessible. The Department is considering applying the framework of that provision to this subpart. The recipient in question must ensure that the other medical practice is taking patients and that the practice is accessible. It should also be within a reasonable distance of the referring provider. The Department seeks comment on the advisability and equity implications of retaining this provision and applying it to the obligation to acquire accessible MDE under this proposed rule. The Department also seeks any suggestions for addressing its scope, including what should constitute a “reasonable distance” to a referred provider.
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Paragraph (d) specifies that a recipient may use designs, products, or technologies as alternatives to those prescribed by the MDE Standards, for example, to incorporate innovations in accessibility. However, this exception applies only where the recipient provides substantially equivalent or greater accessibility and usability than the MDE Standards require. It does not permit a recipient to use an innovation that reduces access below what the MDE Standards would provide. The responsibility for demonstrating equivalent facilitation rests with the recipient.
Paragraph (e) addresses the fundamental alteration and undue financial and administrative burdens defenses. While the proposed rule generally requires recipients to adhere to the MDE Standards when newly purchasing, leasing, or otherwise acquiring equipment, it does not require recipients to take steps that would result in a fundamental alteration in the nature of their programs or activities or undue financial or administrative burdens. These proposed limitations mirror the existing ADA title II regulation at 28 CFR 35.150(a)(3). If a particular action would result in a fundamental alteration or undue burdens, the recipient would be obligated to take other action that would not result in such an alteration or such burdens but would nevertheless ensure that individuals with disabilities receive the benefits or services the recipient provides.
Paragraph (f) incorporates what the Access Board's MDE Standards refer to as a General Exception. The paragraph states that, where a recipient can demonstrate that compliance with the MDE Standards would alter diagnostically required structural or operational characteristics of the equipment, preventing the use of the equipment for its intended diagnostic purpose, compliance with the Standards would result in a fundamental alteration and therefore would not be required. The Department expects that this provision will apply only in rare circumstances.
In such circumstances, the recipient would still be required to take other action that would not result in such an alteration or such burdens but would nevertheless ensure that individuals with disabilities could receive the programs or activities the recipient provides. For example, the Department has been informed that certain positron emission tomography (PET) machines cannot meet the MDE Standards' technical requirements for accessibility and still serve their diagnostic function. If this is so, then recipients would not be required to make those PET machines fully accessible, but they would be required to take other action that would enable individuals with disabilities to access PET machines in some other way without fundamentally altering the nature of the program or activity or imposing an undue financial or administrative burdens. Such actions may include assisting patients who use wheelchairs with transferring so that they can receive a PET scan.
In addition to the requirements for newly purchased, leased, or otherwise acquired MDE, proposed § 84.93 requires that recipients address access barriers resulting from a lack of accessible MDE in their existing inventory of equipment. Here the proposed rule adopts an approach analogous to the concept of program accessibility in the existing regulation at § 84.22. Under this approach, recipients may make their programs and activities available to individuals with disabilities without extensive retrofitting of their existing buildings and facilities that predate the regulations, by offering access to those programs through alternative methods. The Department intends to adopt a similar approach with MDE to provide flexibility to recipients, address financial concerns about acquiring new MDE, and at the same time ensure that individuals with disabilities will have access to the programs and activities of the recipient.
Proposed § 84.93 requires that each program or activity of a recipient, when viewed in its entirety, be readily accessible to and usable by individuals with disabilities. Section 84.93(a)(1) makes clear, however, that a recipient is not required to make each piece of its existing MDE accessible. Like § 84.92(e), § 84.93(a)(2) incorporates the concepts of fundamental alteration and undue financial and administrative burdens. These provisions do not excuse a recipient from addressing the accessibility of the program. If a particular action would result in a fundamental alteration or undue burdens, the recipient would still be obligated to ensure that individuals with disabilities are able to receive the recipient's benefits and services.
Paragraph (b) sets forth various methods by which recipients can make their programs and activities readily accessible to and usable by individuals with disabilities when the requirements in proposed § 84.92 have not been triggered by the new acquisition of MDE. Of course, the purchase, lease, or other acquisition of accessible MDE may often be the most effective way to achieve program accessibility. However, except as stated in proposed § 84.92, a recipient is not required to purchase, lease, or acquire accessible MDE if other methods are effective in achieving compliance with this subpart.
For example, if doctors at a medical practice have staff privileges at a local hospital that has accessible MDE, the medical practice may be able to achieve program accessibility by ensuring that the doctors see these patients at the hospital, rather than at the local office, so long as the person with a disability is afforded an opportunity to participate in or benefit from the program or activity equal to that afforded to others. Similarly, if a medical practice has offices in several different locations, and one of the locations has accessible MDE, the medical practice may be able to achieve program accessibility by serving the patient who needs accessible MDE at that location. However, such an arrangement would not provide an equal opportunity to participate in or benefit from the program or activity if it was, for example, significantly less convenient for the patient, or if the visit to a different location resulted in higher costs for the patient.
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Similarly, if the scoping requirements set forth in § 84.92(b) would require a recipient's medical practice to have three height-adjustable exam tables and an accessible weight scale, but the practice's existing equipment includes only one accessible exam table and one
If the means by which a recipient carries out its obligation under § 84.93(a) to make its program or activity readily accessible to and usable by individuals with disabilities is by purchasing, leasing, or otherwise acquiring accessible MDE, the requirements for newly purchased, leased, or otherwise acquired MDE set forth in § 84.92 apply.
The Department is also aware that there may be initial supply issues for accessible MDE, particularly if a large number of recipients seek to purchase accessible MDE at the same time. The Department does note that the fundamental alteration and undue financial and administrative burdens limitations may apply if supply chain issues hamper the ability of recipients to purchase, lease, or otherwise acquire accessible MDE.
The proposed rule's requirements apply regardless of whether recipients are using MDE that is leased, purchased, or acquired through other means. The Department is aware that some recipients may lease MDE, rather than purchasing it outright. The Department's existing section 504 regulation, at 45 CFR 84.4(b)(4), redesignated as § 84.68(b)(4), provides that a recipient may not, directly or through contractual or other arrangements, use criteria or methods of administration that subject qualified persons with disabilities to discrimination on the basis of disability. The Department's existing section 504 regulation, at 45 CFR 84.4(b)(1)(i)-(ii), redesignated as § 84.68(b)(1)(i)-(ii), also prohibits a recipient from, directly or through contractual or other arrangements, denying a qualified individual with a disability the opportunity to participate in or benefit from a service, or affording a qualified individual with a disability an opportunity to participate in or benefit from a service that is not equal to the opportunity afforded others. Under these longstanding regulatory provisions, the manner in which a recipient acquires its equipment does not alter the entity's obligation to provide an accessible program or activity. The proposed rule's requirements also apply if the recipient contracts with a third party to provide medical programs, services, or activities.
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Many types of medical equipment other than MDE are used in the provision of health care. The accessibility, or lack thereof, of these types of equipment can determine whether people with disabilities have an equal opportunity to participate in and benefit from health programs and activities. This non-diagnostic medical equipment may be used in federally assisted programs and includes, for example, devices intended to be used for therapeutic or rehabilitative care such as treatment tables and chairs for oncology, obstetrics, physical therapy, and rehabilitation medicines; lifts; infusion pumps used for dispensing chemotherapy drugs, pain medications, or nutrients into the circulatory system; dialysis chairs used while a patient's blood is pumped between a patient and a dialyzer; other tables or chairs designed for highly specialized procedures; general exercise and rehabilitation equipment used while seated or standing; and ancillary equipment
The Department is considering adding a provision establishing that when the MDE Standards contain technical standards that can be applied to a particular piece of non-diagnostic medical equipment, the requirements set forth in §§ 84.91-84.94 apply to the non-diagnostic medical equipment at issue. Although MDE Standards were promulgated by the Access Board in response to a statutory mandate to provide standards specific to diagnostic equipment, recipients have an obligation under section 504 to provide equal opportunity to benefit from medical care of all types, including through the use of equipment that does not satisfy the definition of MDE. The Department seeks comment on whether to apply the Access Board's MDE Standards to non-diagnostic equipment—for example, because the relevant characteristics of some types of non-diagnostic equipment may be sufficiently similar to MDE to warrant applying the same standards—and if there is adequate justification for applying the MDE Standards' technical specifications to non-diagnostic equipment, which non-diagnostic equipment should be covered. For example, infusion chairs used only to dispense chemotherapy drugs are not used for diagnostic purposes and therefore would not fall under the definition of MDE. But if the MDE Standards contained technical standards that could be applied to infusion chairs, the requirements set forth in §§ 84.91-84.94 could apply to such equipment. The Department seeks public comment on whether this rule should apply to medical equipment that is not used for diagnostic purposes, and if so, in what situations it should apply.
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The proposed rule requires recipients to ensure that their staff are able to successfully operate accessible MDE, assist with transfers and positioning of individuals with disabilities, and carry out the program access obligation with respect to existing MDE. This will enable recipients to carry out their obligation to make the programs and activities that they offer through or with the use of MDE readily accessible to and usable by individuals with disabilities. The Department believes recipients must have, at all times when services are provided to the public, appropriate and knowledgeable personnel who can operate MDE in a manner that ensures services are available and timely provided. Often, the most effective way for recipients to ensure that their staff are able to successfully operate accessible MDE is to provide staff training on the use of MDE.
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The Department seeks to revise its existing section 504 regulation for federally assisted programs to incorporate statutory amendments to the Rehabilitation Act, the enactment of the ADA and the ADAAA, the Affordable Care Act, and Supreme Court and other significant court cases. The regulations also need to be revised to update outdated terminology and regulatory provisions.
The ADA revised the Rehabilitation Act to include definitions of the terms “drugs” and “illegal use of drugs,” directing that these terms be interpreted consistent with the principles of the Controlled Substances Act, 21 U.S.C. 801
To ensure consistency with the ADA, the proposed rule contains the following provisions that mirror the ADA provisions: definition of “disability,” notice, maintenance of accessible features, retaliation or coercion, personal devices and services, service animals, mobility devices, and communications. Provisions that are similar to the ADA include purpose and broad coverage, definitions, general prohibitions against discrimination, program accessibility, illegal drugs, direct threat, and integration. Courts have generally interpreted section 504 consistently with title II of the ADA.
In addition, there have been significant U.S. Supreme Court decisions interpreting section 504 requirements relating to the “direct threat” limitation and to the obligation to provide “reasonable modifications” unless those modifications can be shown to pose a fundamental alteration to the program or activity.
Title II of the ADA prohibits discrimination on the basis of disability by public entities (
The Rehabilitation Act Amendments of 1992 revised the Rehabilitation Act's findings, purpose, and policy provisions to incorporate language acknowledging the discriminatory barriers faced by persons with disabilities, and recognizing that persons with disabilities have the right to “enjoy full inclusion and integration in the economic, political, social, cultural and educational mainstream of American society.”
Recipients of Federal financial assistance from HHS that are also State and local governments (subject to title II of the ADA) and those that are places of public accommodation (subject to title III of the ADA) have been obligated to comply with the ADA title II and title III regulations since 1991 when those regulations were promulgated. Most entities covered by section 504 that are not covered by title II are covered by title III. Accordingly, in most instances, this proposed section 504 regulation is not imposing new requirements on recipients. Rather, in such instances, it is aligning section 504 requirements with existing ADA requirements to which many entities have been subject since 1991.
The sections of the proposed regulation that track the ADA title II and/or III regulations are: definition of “disability,” notice, general prohibitions against discrimination, maintenance of accessible features, retaliation and coercion, personal devices and services, service animals, mobility devices, and communications. The following sections are similar to the ADA title II and/or title III regulations: purpose and broad coverage, definitions, program accessibility, illegal use of drugs, direct threat, and integration.
When the Department's section 504 regulation was issued in 1977, it followed the terminology of the statute, using the word “handicap” and the phrase “handicapped person.” However, the Rehabilitation Act Amendments of 1992 changed the term “handicapped person” to “individual with a disability.” The Department's proposed revisions incorporate these terminology changes into its rules. The revisions also include use of the phrase “qualified individual with a disability” rather than the phrase “qualified handicapped person.” The terminology changes also include substitution of the phrase “individual with a substance use disorder” for “drug addict” and “individual with an alcohol use disorder” for “alcoholic.” In making these changes as well as other similar ones, the Department is merely updating terminology and intends no substantive change to its interpretation of section 504 and its implementing regulation.
Proposed § 84.1(a) states that the purpose of this part is to implement section 504 of the Rehabilitation Act of 1973, as amended, which prohibits discrimination on the basis of disability in programs and activities receiving Federal financial assistance.
Proposed § 84.1(b) states that the definition of “disability” in this part shall be construed broadly in favor of expansive coverage. This is consistent with the ADAAA's purpose of reinstating a broad scope of protection under the ADA and ensuring that the Rehabilitation Act was interpreted consistently by including a conforming amendment for section 504. The ADAAA amended the definition of disability provisions of the ADA and applied the same new definitional provisions to section 504.
In the ADAAA, Congress made clear that it intended the definition of disability to be construed very broadly.
Paragraph (a) states that this part applies to the recipient's programs or activities that involve individuals in the United States. It does not apply to the recipient's programs and activities outside of the United States that do not involve individuals with disabilities in the United States.
Paragraph (b) states that the section 504 requirements do not apply to ultimate beneficiaries of any program or activity receiving Federal financial assistance. An ultimate beneficiary is a person who is entitled to benefits from, or otherwise participates in, a program or activity.
In paragraph (c), the Department proposes language addressing the issue of severability. The provision states that, if any provision at 45 CFR part 84 is held to be invalid or unenforceable by its terms, or as applied to any person or circumstance, it shall be construed to give maximum effect to the provision permitted by law, unless such holding shall be one of utter invalidity or unenforceability, in which case the provision shall be severable from this part and shall not affect the remainder thereof or the application of the provision to other persons not similarly situated or to other dissimilar circumstances. The Department seeks to ensure that, if a specific regulatory provision in this rule is found to be invalid or unenforceable, the remaining provisions of the rule will remain in effect.
This section states that this part does not invalidate or limit remedies, rights, and procedures of other laws that provide greater or equal protection for the rights of individuals with disabilities or those associated with them, such as the ACA and the Fair Housing Act. The section is substantially similar to the corresponding section in the ADA regulations at 28 CFR 35.103(b).
One of the main purposes of the ADAAA was to ensure that the term “disability”—in both the ADA and the Rehabilitation Act—would be construed broadly in favor of expansive coverage to the maximum extent possible. The ADAAA revised the meaning and interpretation of the definition of “disability” under section 504 to ensure that the term is interpreted consistently with the ADAAA, Public Law 110-325 (2008), and applied the same definitional provisions to section 504,
This proposed regulation recodifies many of the sections in the existing rule. Section 84.4 in the existing rule contains the general prohibitions. Those general prohibitions now appear in Subpart G, General Requirements, § 84.68. Proposed § 84.4 contains the definition of “disability.” Similar redesignations in the numbering of sections occur throughout the proposed regulation.
Proposed § 84.4(a)(1) states that, with respect to an individual, disability means “(i) a physical or mental impairment that substantially limits one or more of the major life activities of such individual; (ii) a record of such an impairment; or (iii) being regarded as having such an impairment as described in paragraph (f) of this section.”
Proposed § 84.4(a)(2)(i) states that the definition of “disability” is to be construed broadly in favor of expansive coverage to the maximum extent permitted by the terms of section 504.
Proposed § 84.4(a)(2)(ii) provides that an individual can establish coverage using any of the three prongs, the “actual disability” in the first prong, the “record of” in the second prong, or the “regarded as” in the third prong. The use of the word “actual disability” is a shorthand for the first prong and is not meant to suggest that individuals covered under the first prong have any more rights than those covered by the second or third prongs, with the exception that the ADAAA revised the ADA to expressly state that an individual who meets the definition of “disability” solely under the “regarded as” prong is not entitled to reasonable modifications of policies, practices, or procedures.
Proposed § 84.4(a)(2)(iii) indicates that consideration of coverage under the first two prongs will generally be unnecessary except when there has been a request for reasonable modifications. Accordingly, absent a claim of a failure to provide reasonable modifications, typically it is not necessary to rely on the “actual disability” or “record of” disability prongs. Instead, in such cases, coverage can be evaluated exclusively under the “regarded as” prong, which does not require a showing of an impairment that substantially limits a major life activity or a record of such an impairment. However, individuals can proceed under the first or second prongs if they choose.
Proposed § 84.4(b)(1) provides an illustrative and non-exhaustive list of examples of physiological disorders or conditions, cosmetic disfigurement, or anatomical loss affecting one or more body systems that may be affected by a physical impairment. It also provides an illustrative list of mental or psychological disorders. Section 84.4(b)(2) contains a non-exhaustive list of examples of physical or mental impairments. The preamble to the ADA title II regulations explains why there was no attempt made to set forth a comprehensive list of physical and mental impairments. The preamble states that “[i]t is not possible to include a list of all the specific conditions, contagious and noncontagious diseases, or infections that would constitute physical or mental impairments because of the difficulty of ensuring the comprehensiveness of such a list, particularly in light of the fact that other conditions or disorders may be identified in the future.” 28 CFR part 35, app. B. This proposed section adopts that reasoning.
On July 26, 2021, DOJ and HHS issued guidance on how “long COVID” can be a disability under the ADA, section 504, and Section 1557.
The guidance states that long COVID is a physiological condition affecting one or more body systems and is a physical or mental impairment. For example, some people experience lung damage, heart damage, kidney damage, neurological damage, damage to the circulatory system resulting in poor blood flow, and/or mental health symptoms. It, or its symptoms, can substantially limit one or more life activities. For example, a person with lung damage that causes shortness of breath, fatigue, and related effects is substantially limited in respiratory function, among other major life activities. The inclusion of long COVID as a physical or mental impairment aligns with DOJ's interpretation under the ADA.
Section 84.4(b)(3) states that sexual orientation is not included in the definition of physical or mental impairment. The Rehabilitation Act at 29 U.S.C. 705(20)(E) contains a specific exclusion of individuals on the basis of homosexuality or bisexuality. It states that the term “impairment” does not include homosexuality or bisexuality. Therefore, the term “individual with a disability” does not include individuals who are homosexual or bisexual. The ADA likewise states that homosexuality and bisexuality are not impairments and, as such, are not disabilities. 42 U.S.C. 12211(a). The title II regulations incorporate this exclusion in 28 CFR 35.108(b)(3).
The ADAAA significantly expanded the range of major life activities by directing that “major” be interpreted in a more expansive fashion than previously. It specified that major life activities include major bodily functions, and provided non-exhaustive lists of examples of major life activities. Proposed § 84.4(c) incorporates the title II regulation at 28 CFR 35.108(c). “Major life activities” includes not only activities such as caring for oneself, seeing, hearing, and walking, but also includes the operation of a major bodily function such as the functions of the immune system, normal cell growth, and reproductive systems.
Proposed § 84.2(c)(1)(i) and (ii) list examples of major life activities. The absence of a particular life activity or bodily function from the lists should not create a negative implication as to whether an activity or function is a major life activity.
Proposed § 84.4(c)(2) sets forth two specific principles applicable to major life activities. Proposed § 84.4(c)(2)(i) states that the term “major” should not be interpreted strictly. Proposed § 84.4(c)(ii) states that whether an activity is a “major life activity” is not determined by reference to whether it is of “central” importance to daily life. This language is included to align with the incorporation of the ADAAA in the ADA regulations and the ADAAA's rejection of standards articulated in
Proposed § 84.4(d)(1) sets forth nine rules of construction clarifying how to interpret the meaning of “substantially limits” when determining whether an individual's impairment substantially limits a major life activity. The language in these provisions reflects the rules of construction that Congress provided in the ADAAA.
Proposed § 84.4(d)(1)(i) states that the term “substantially limits” should be construed broadly in favor of expansive coverage to the maximum extent permitted by section 504. This is not meant to be a demanding standard.
Proposed § 84.4(d)(1)(ii) states that the primary object of attention should be whether entities have complied with their obligations and whether discrimination occurred, not the extent to which the impairment substantially limits a major life activity. Thus, the threshold issue of whether an impairment substantially limits a major life activity should not demand extensive analysis.
Proposed § 84.4(d)(1)(iii) indicates that an impairment that substantially limits just one major life activity is sufficient to be considered a substantially limiting impairment. For example, an individual seeking to establish coverage need not show a substantial limit in the ability to learn if that individual is substantially limited in another major life activity, such as walking or the functioning of the nervous or endocrine systems. The proposed section also is intended to clarify that where the major life activity is something that may include a range of different activities (such as manual tasks), the ability to perform some of those tasks does not preclude a finding that the person is substantially limited in the major life activity. For example, an individual with cerebral palsy could have the capacity to perform certain manual tasks and be unable to perform others. Such an individual still has a substantial limitation in the ability to carry out the “major life activity” of performing manual tasks.
Proposed § 84.4(d)(1)(iv) states that an impairment that is episodic or in remission is a disability if it would substantially limit a major life activity when active. This section is intended to reject the reasoning of court decisions concluding that certain individuals with certain conditions—such as epilepsy or post-traumatic stress disorder—were not protected by the ADA because their conditions were episodic or intermittent.
The legislative history provides that “[t]his . . . rule of construction thus rejects the reasoning of the courts in cases like
Proposed § 84.4(d)(1)(v) states that determinations as to whether an impairment substantially limits a major life activity should be based on a comparison to most people in the general population. The impairment does not need to prevent, or significantly or severely restrict an individual from performing a major life activity to be considered substantially limiting. For example, an individual with the physical impairment of carpal tunnel syndrome can demonstrate that the impairment substantially limits the major life activity of writing even if the impairment does not prevent or severely restrict the individual from writing. However, not every impairment will constitute a disability within the meaning of this section.
Proposed § 84.4(d)(1)(vi) states that determination as to whether an impairment substantially limits a major life activity requires an individualized assessment. Additionally, the paragraph requires that, in making this assessment, the term “substantially limits” shall be interpreted and applied to require a standard of functional limitation that is lower than that the standard applied prior to the ADAAA. These rules of construction reflect Congress's concern that prior to the adoption of the ADAAA, courts were using too high a standard to determine whether an impairment substantially limited a major life activity.
Proposed § 84.4(d)(1)(vii) states that comparison of an individual's performance of a major life activity to the performance of the same major life activity by most people in the general population does not usually require scientific, medical, or statistical evidence. This section seeks to prevent an overbroad, burdensome, and generally unnecessary requirement on individuals seeking accommodations or modifications. Other types of evidence that are less onerous to collect, such as statements or affidavits of affected individuals, school records, or determinations of disability status under other statutes should, in most cases, be considered adequate to establish that an impairment is substantially limiting. However, nothing in this paragraph is intended to prohibit or limit the presentation of scientific, medical, or statistical evidence where appropriate.
Proposed § 84.4(d)(1)(viii) prohibits any consideration of the ameliorative effects of mitigating measures when determining whether an individual's impairment substantially limits a major life activity, except for the ameliorative effects of ordinary eyeglasses or contact lenses. The determination as to whether an individual's impairment substantially limits a major life activity is unaffected by an individual's choice to forego mitigating measures. For individuals who do not use a mitigating measure (including, for example, medication or auxiliary aids and services that might alleviate the effects of an impairment), the availability of such measures has no bearing on whether the impairment substantially limits a major life activity.
Proposed § 84.4(d)(1)(ix) states that the six-month “transitory” part of the “transitory and minor” exception in § 84.4(f)(2), the “regarded as” prong of the definition, does not apply to the “actual disability” or “record of” prongs of the definition. The effects of an impairment lasting or expected to last less than six months can be substantially limiting within the meaning of this section for establishing an actual disability or a record of a disability. Whether an impairment is both “transitory and minor” is a question of fact that is dependent upon individual circumstances.
Proposed § 84.4(d)(2), Predictable assessments, states that the rules of construction in this section are intended to provide a generous and expansive application of the prohibition on discrimination. Specific rules of construction are contained in subsections discussing the definition of “disability,” § 84.4(a)(2); “major life activities,” § 84.4(c)(2); and “substantially limits,” § 84.4(d)(1). Proposed § 84.4(d)(2)(ii) states that the individualized assessment of some types of impairments will, in virtually all cases, result in a determination of coverage under the first prong of the definition (“actual disability”) or the second prong (“record of”). Therefore, with respect to these types of impairments, the necessary individualized assessment should be particularly simple and straightforward and should not demand extensive analysis.
Proposed § 84.4(d)(2)(iii) contains a non-exhaustive list of eleven types of impairments and the major life activity limited by those impairments. The list illustrates impairments that virtually always will result in a substantial limitation of one or more major life activities. It is consistent with the Equal Employment Opportunity Commission's (EEOC) predictable assessment list at 29 CFR 1630.2(g)(3)(iii), except that this section adds traumatic brain injury to the list. The section is intended to provide clear, strong, consistent, enforceable standards.
The absence of any particular impairment from the list of examples of predictable assessments does not indicate that the impairment should be subject to undue scrutiny. Also, the listed impairments may substantially limit additional major life activities not explicitly mentioned.
Proposed § 84.4(d)(3), Condition, manner, or duration, provides guidance on determining whether an individual is substantially limited in a major life activity. The determination is intended to be an appropriate threshold issue but not an onerous burden. However, individuals can still offer evidence needed to establish that their impairment is substantially limiting if they so desire. While condition, manner, and duration are not required factors that must be considered, to the extent that such factors may be useful or relevant, some or all of the factors may be considered. However, evidence relating to each of these factors often will not be necessary to establish coverage.
Proposed § 84.4(d)(3)(i) states that it may be useful to consider as compared to most people in the general population, the conditions under which the individual performs the major life activity; the manner in which the individual performs the major life activity; or the duration of time it takes the individual to perform the major life activity, or for which the individual can perform the major life activity.
Proposed § 84.4(d)(3)(ii) sets forth examples of the types of evidence that might demonstrate condition, manner, or duration limitations, including the way that an impairment affects the operation of a major bodily function, the difficulty or effort required to perform a major life activity, the pain experienced when performing a major life activity, and the length of time it takes to perform a major life activity. The section clarifies that the non-ameliorative effects of mitigating measures may be taken into account to
An impairment may substantially limit the “condition” or “manner” in which a major life activity can be performed in a number of ways. For example, it may refer to how the individual performs a major life activity,
Condition or manner may refer to the extent to which a major life activity, including a major bodily function, can be performed. In some cases, the condition or manner under which a major bodily function can be performed may be substantially limited when the impairment causes the operation of a bodily function to over-produce or under-produce in a harmful fashion. For example, the pancreas, which is part of the endocrine system, of a person with type 1 diabetes does not produce sufficient insulin. For that reason, compared to most people in the general population, the impairment of diabetes substantially limits the major bodily functions of endocrine function and digestion.
“Duration” refers to the length of time an individual can perform a major life activity or the length of time it takes an individual to perform a major life activity, as compared to most people in the general population. For example, a person whose back or leg impairment precludes them from standing for more than two hours without significant pain would be substantially limited in standing, because most people can stand for more than two hours without significant pain. Some impairments, such as Attention-Deficit/Hyperactivity Disorder (ADHD) may have two different types of impact on duration considerations. ADHD frequently affects both an ability to sustain focus for an extended period of time and the speed with which someone can process information. Each of these duration-related concerns could demonstrate that someone with ADHD, as compared to most people in the general population, takes longer to complete major life activities such as reading, writing, concentrating, or learning.
Proposed § 84.4(d)(3)(iii) states that in determining whether an individual has a disability under the “actual disability” or “record of” prongs, the focus should be on how a major life activity is substantially limited, and not on what outcomes an individual can achieve. For example, someone with a learning disability may achieve a high level of academic success, but may nevertheless be substantially limited in one or more of the major life activities of reading, writing, speaking, or learning because of the additional time or effort that he or she must spend to read, speak, write, or learn compared to most people in the general population.
Proposed § 84.4(d)(3)(iv) clarifies that analysis of condition, manner, or duration will not always be necessary, particularly with respect to certain impairments that can easily be found to substantially limit a major life activity such as those included in the list of impairments contained in § 84.4(d)(2)(iii). However, should an individual seeking coverage under the first or second prong wish to offer evidence establishing that their impairment is substantially limiting, they should be permitted to do so.
Proposed § 84.4(d)(1)(viii) described earlier makes clear that ameliorative effects of mitigating measures must not be considered when determining whether an impairment substantially limits a major life activity except that the ameliorative effects of ordinary eyeglasses or contact lenses must be considered. Proposed § 84.4(d)(4) provides a non-exclusive list of mitigating measures that may not be considered. As in § 84.4(d)(1)(viii), this section reiterates the exception for eyeglasses or contact lenses, stating that mitigating measures include “low-vision devices,” defined as devices that magnify, enhance, or otherwise augment a visual image, but not including ordinary eyeglasses or contact lenses. The absence of any particular measure from this list should not convey a negative implication as to whether it is a mitigating measure.
Proposed § 84.4(e)(1) states that an individual meets the second prong of the definition of disability, the “record of” prong, if the individual has a history of, or has been misclassified as having, a mental or physical impairment that substantially limits one or more major life activities. An example of the first group (those who have a history of an impairment) is a person with a history of mental or emotional illness or cancer who is denied entry to a program based on their record of disability. An example of the second group (those who have been misclassified as having an impairment) is an individual who does not have an intellectual or developmental disability, but has been misclassified as having that disability. There could be a violation of § 84.4(e)(1) if a recipient acts based on a “record of” disability. Proposed § 84.4(e)(2) states that whether an individual meets this prong shall be construed broadly to the maximum extent permitted by section 504. The determination should not demand extensive analysis.
There are many types of records that could potentially contain information demonstrating a record of an impairment, including but not limited to, education, medical, or employment records. However, past history need not be reflected in a specific document. Any evidence that an individual has a past history of an impairment that substantially limited a major life activity is all that is needed to establish coverage under this prong. An individual can meet this prong even if the recipient does not specifically know about the relevant record. However, the individual with a “record of” a substantially limiting impairment must prove that the recipient discriminated on the basis of the record of a disability.
Individuals who are covered under the “record of” prong may be covered under the first prong of the definition of “disability” as well. This is because an individual with an impairment that is episodic or in remission can be protected under the first prong if the impairment would be substantially limiting when active. For example, a person with cancer that is in remission is covered under the first “actual disability” prong because he has an impairment that would substantially limit normal cell growth when active. He also is covered under the “record of” prong because of his history of having had an impairment that substantially limited normal cell growth.
Proposed § 84.4(e)(3) provides that an individual who falls within this prong
The third prong of the definition of disability, “regarded as having such an impairment,” was included in the ADA specifically to protect individuals who might not meet the first two prongs of the definition but were subject to adverse decisions based upon unfounded concerns, mistaken beliefs, fears, myths, or prejudices about persons with disabilities. 42 U.S.C. 12102(3). The third prong was later amended by the ADAAA. Consistent with this amended version, proposed § 84.4(f)(1) states that an individual is regarded as having an impairment if the individual is subjected to a prohibited action because of an actual or perceived physical or mental impairment, whether or not that impairment substantially limits, or is perceived to substantially limit a major life activity, even if the recipient asserts, or may or does ultimately establish, a defense to the action prohibited by section 504.
The rationale for this prong was articulated by the Supreme Court in a case involving section 504,
In
This clarification of the “regarded as” prong by the ADAAA responded primarily to narrow interpretations of the ADA but ensured that the same amendments were made to 504 since the definitions were intended to be the same.
Thus, it is not necessary for an individual to demonstrate that a recipient perceived him as substantially limited in the ability to perform a major life activity to meet the “regarded as” requirements. Nor is it necessary to demonstrate that the impairment relied on by a recipient is (in the case of an actual impairment) or would be (in the case of a perceived impairment) substantially limiting for an individual to be “regarded as having such an impairment.” In short, to be covered under this prong, an individual is not subject to any functional test. The concepts of “major life activities” and “substantial limitation” are not relevant in evaluating whether an individual meets this prong.
Proposed § 84.4(f)(2) states that an individual is not “regarded as” having an impairment if the recipient demonstrates that the impairment is, objectively, both “transitory” and “minor.” It is not enough for a recipient to simply demonstrate that it subjectively believed that the impairment was transitory and minor; rather, the recipient must demonstrate that it is (in the case of an actual impairment) or would be (in the case of a perceived impairment), objectively, both “transitory” and “minor.” For purposes of this section, “transitory” is defined as lasting or expected to last six months or less. This section makes clear that the “transitory and minor” exception to a claim under this prong is a defense to a claim of discrimination and not part of the individual's prima facie case. For example, an individual with a minor back injury could be “regarded as” an individual with a disability if the back impairment lasted or was anticipated to last more than six months.
The relevant inquiry is whether the actual or perceived impairment is objectively “transitory and minor,” not whether the recipient claims it subjectively believed the impairment was transitory or minor. Moreover, as an exception to the general rule for broad coverage under the “regarded as” prong, this limitation on coverage should be construed narrowly. For example, a school that expelled a student whom it believes has Bipolar Disorder cannot take advantage of this exception by asserting that it believed the student's impairment was transitory and minor, because Bipolar Disorder is not objectively transitory and minor. It is important to note that the six-month “transitory” part of the “transitory and minor” exception does not apply to the “actual disability” or “record of” prongs of the disability definition.
Proposed § 84.4(f)(3) provides that an individual who is “regarded as” having an impairment does not establish liability based on that showing alone. Instead, the individual must prove that the recipient discriminated on the basis of disability within the meaning of section 504. This provision was intended to make clear that to establish liability, an individual must establish coverage as a person with a disability, as well as establish that they had been subjected to an action prohibited by section 504.
Proposed § 84.4(g), is taken directly from the Rehabilitation Act, 29 U.S.C. 705(20)(F), and is consistent with similar exclusions contained in the ADA.
(1) transvestism, transsexualism, pedophilia, exhibitionism, voyeurism, gender identity disorders not resulting from physical impairments, or other sexual behavior disorders;
(2) compulsive gambling, kleptomania, or pyromania; or
(3) psychoactive substance use disorders resulting from current illegal use of drugs.
The issue of gender identity disorders was recently addressed by the Fourth Circuit in
The Fourth Circuit reversed and remanded the district court's dismissal of the case, holding that the plaintiff “has plausibly alleged that gender dysphoria does not fall within section 504's and the ADA's exclusion for “gender identity disorders not resulting from physical impairments.”
Recognizing “Congress' express instruction that courts construe the ADA in favor of maximum protection for those with disabilities,”
Proposed § 84.10 contains the definitions. These definitions are revised to correspond to the ADA title II regulations, to delete terminology that is obsolete, to revise or add certain terms to incorporate statutory changes to the Rehabilitation Act, to add terms used in new sections specific to the Department, and to make other minor edits.
To ensure consistency of terminology between section 504 and title II of the ADA and include additional terms that are needed in the proposed rule, the Department is proposing to add definitions of the following terms: “2004 ADA Accessibility Guidelines (ADAAG),” “2010 Standards,” “ADA,” “Architectural Barriers Act,” “Archived web content,” “Auxiliary Aids and Services,” “Companion,” “Conventional electronic documents,” “Current illegal use of drugs,” “Direct threat,” “Disability,” “Drug,” “Existing facility,” “Foster care, ” “Illegal use of drugs,” “Individual with a disability,” “Kiosks,” “Medical diagnostic equipment,” “Mobile applications (apps),” “Most integrated setting,” “Other power-driven mobility device,” “Parents,” “Prospective parents,” “Qualified individual with a disability,” “Qualified interpreter,” “Qualified reader,” “Service animal,” “Standards for Accessible Medical Diagnostic Equipment,” “State,” “Ultimate beneficiary,” “Video remote interpreting (VRI) services,” “WCAG 2.1,” “Web content,” and “Wheelchair.”
Terms added without change from the title II ADA regulations are: “2004 ADA Accessibility Guidelines,” “2010 Standards,” “Auxiliary aids and services,” “Current illegal use of drugs,” “Direct threat,” “Disability,” “Drug,” “Existing facility,” “Facility,” “Illegal use of drugs,” “Individual with a disability,” “Other power-driven mobility device,” “Qualified individual with a disability,” “Qualified interpreter,” “Qualified reader,” “section 504,” “Service animal,” “State,” “Video Remote Interpreting (VRI),” and “Wheelchair.”
Terms added without change from the Department of Justice title II NPRM, “Nondiscrimination on the Basis of Disability: Accessibility of Web Information and Services of State and Local Government Entities” are: “Archived web content,” “Conventional electronic documents,” “Mobile applications (apps),” “WCAG 2.1,” and “Web content.”
The Department proposes to remove “The Act,” “Education of the Handicapped Act,” “Handicap,” “Handicapped person,” and “Qualified handicapped person.” The Department proposes to retain and make minor revisions to the following terms: “Applicant for assistance,” (changed to “Applicant”), “Federal financial assistance,” “Program or activity,” and “section 504.”
The definition of “Federal financial assistance” in the existing rule states that Federal financial assistance means “any grant, cooperative agreement, loan, contract (other than a procurement contract or a contract of insurance or guaranty) . . . .” The proposed revision adds “direct Federal” so that it reads “(other than a direct Federal procurement contract or a contract of insurance or guaranty”). No substantive change is intended.
Finally, the Department proposes to retain with no revisions the terms “Recipient,” “Director,” and “Department.”
New definitions of note are discussed below.
The Department proposes to add a definition for “archived web content” to proposed § 84.10. The proposed definition defines “archived web content” as “web content that (1) is maintained exclusively for reference, research, or recordkeeping; (2) is not altered or updated after the date of archiving; and (3) is organized and stored in a dedicated area or areas clearly identified as being archived.” The definition is meant to capture web content that, while outdated or superfluous, is maintained unaltered in a dedicated area on a recipient's website for historical, reference, or other similar purposes, and the term is used in the proposed exceptions set forth in § 84.85. Throughout this rule, a recipient's “website” is intended to include not only the websites hosted by the recipient, but also websites operated on behalf of a recipient by a third party. For example, recipients sometimes use vendors to create and host their web content. Such content would also be covered by this rule.
This section, added to be consistent with the title II regulations, sets forth a non-exhaustive list of auxiliary aids and services that reflect the latest technology and devices available in some places that may provide effective
This phrase, added to be consistent with the title II regulations, means a family member, friend, or associate of an individual seeking access to a program or activity of a recipient, who, along with such individual, is an appropriate person with whom the recipient should communicate.
The Department proposes to add a definition for “conventional electronic documents.” The proposal defines “conventional electronic documents” as “web content or content in mobile apps that is in the following electronic file formats: portable document formats (PDFs), word processor file formats, presentation file formats, spreadsheet file formats, and database file formats.” The definition thus provides an exhaustive list of electronic file formats that constitute conventional electronic documents. Examples of conventional electronic documents include: Adobe PDF files (
The term “conventional electronic documents” is intended to describe those documents created or saved as an electronic file that are commonly available on recipients' websites and mobile apps in either an electronic form or as printed output. The term is intended to capture documents where the version posted by the recipient is not open for editing by the public. For example, if a recipient maintains a Word version of a flyer on its website, that would be a conventional electronic document. A third party could technically download and edit that Word document, but their edits would not impact the “official” posted version. Similarly, a Google Docs file that does not allow others to edit or add comments in the posted document would be a conventional electronic document. The term “conventional electronic documents” is used in proposed § 84.85(b) to provide an exception for certain electronic documents created by or for a recipient that are available on a recipient's website before the compliance date of this rule and in proposed § 84.85(g) to provide an exception for certain individualized, password-protected documents, and is addressed in more detail in the discussion regarding proposed § 84.85(b) and (g).
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This phrase, added to be consistent with the title II regulations, means illegal use of drugs that occurred recently enough to justify a reasonable belief that the person's drug use is current or that continuing use is a real and ongoing problem.
The definition of “direct threat” under section 504 was added to be consistent with the title II regulations and with the Supreme Court case of
Although persons with disabilities are generally entitled to the protection of this part, a person who poses a significant risk to others constituting a direct threat will not be “qualified” if reasonable modifications to the recipient's policies, practices, or procedures will not eliminate that risk. The determination that a person poses a direct threat to the health or safety of others may not be based on generalizations or stereotypes about the effects of a particular disability.
Specific provisions concerning “direct threat” are derived from the ADA title II regulations and are contained in the proposed Direct threat section at § 84.75.
The ADAAA was passed to revise the meaning and interpretation of the definition of “disability” and to ensure that the definition is broadly construed and applied without extensive analysis. The definition of “disability” can be found at § 84.4. With respect to employment, the definition of “disability” is found at the regulations of the EEOC at 29 CFR 1630.2.
The term means 24-hour substitute care for children placed away from their parents or guardians and for whom the State agency has placement and care responsibility. This includes, but is not limited to, placements in foster family homes, foster homes of relatives, group homes, emergency shelters, residential facilities, childcare institutions, and preadoptive homes. A child is in foster care in accordance with this definition regardless of whether the foster care facility is licensed and payments are made by the State or local agency for the care of the child, whether adoption
The term, added for consistency with title II of the ADA, means the use of one or more drugs, the possession or distribution of which is unlawful under the Controlled Substances Act (21 U.S.C. 812
The definitions section includes “drug,” which means a controlled substance, as defined in schedules I through V of section 202 of the Controlled Substances Act (21 U.S.C. 812
The Department proposes to add a definition of “kiosks.” Kiosks are self-service transaction machines made available by recipients at set physical locations for the independent use of patients or program participants in health or human service programs or activities. The devices usually consist of a screen and an input device, either a keyboard, touch screen or similar device, onto which the program participant independently types in or otherwise enters requested information. In health and human service programs, recipients often make kiosks available so that patients or program participants can check in, provide information for the receipt of services, procure services, have their vital signs taken, or perform other similar actions. These devices may rely on web content or mobile apps or may be closed functionality devices,
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The term “medical diagnostic equipment” (MDE) comes from Section 510 of the Rehabilitation Act and means equipment used in, or in conjunction with, medical settings by health care providers for diagnostic purposes.
Mobile apps are software applications that are downloaded and designed to run on mobile devices such as smartphones and tablets. For the purposes of this part, mobile apps include, for example, native apps built for a particular platform (
The most integrated setting is described in Appendix B to the regulation implementing title II of the ADA as “a setting that enables individuals with disabilities to interact with nondisabled persons to the fullest extent possible.”
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The term “other power-driven mobility device” (OPDMD) is a term of art coined by DOJ in its regulations implementing the ADA at 28 CFR 35.104. It covers any mobility device powered by batteries, fuel, or other engines, whether or not designed primarily for use by individuals with mobility disabilities, that is used by individuals with mobility disabilities for the purpose of locomotion. Common OPDMD's include golf carts, electronic personal assistance mobility devices such as the Segway®, or other mobility devices designed to operate in areas without defined pedestrian routes but that is not a wheelchair within the meaning of this section.
The terms “parents” means biological or adoptive parents or legal guardians as determined by applicable State law. For purposes of this section, “prospective parents” means individuals who are seeking to become foster or adoptive parents. The proposed definition is based on the definition of “parents” in the Social Security Act title IV-E.
The Department proposes to replace the term and definition of “qualified handicapped person” with the term “qualified individual with a disability” and the corresponding definition drawn from title II of the ADA. The introduction of the definition from the Department's title II regulation will ensure consistency with title II of the ADA. Paragraph (1) states that except as provided in paragraph (2), a “qualified individual with a disability” is an individual with a disability who, with or without reasonable modifications to rules, policies, or practices, the removal of architectural, communication, or transportation barriers, or the provision of auxiliary aids and services, meets the essential eligibility requirements for the receipt of services or the participation in programs or activities provided by the recipient.
Paragraph (2) provides the definition of qualified individual with a disability in the employment context. The language tracks the corresponding EEOC provision at 29 CFR 1630.2(m) because the meaning of “qualified” is different in an employment context as compared to a nonemployment context. The employment portion of the definition
Paragraph (3) sets forth the definition with respect to childcare, preschool, elementary and secondary, and adult educational services. The definition in § 84.3 of the existing regulations limits the definition to public preschool, elementary, secondary, or adult education services. That rule makes a distinction between requirements for recipients that operate public elementary and secondary education programs and activities (§ 84.32 and 84.33) and recipients who provide private education (§ 84.39). The proposed rule is not retaining those provisions and makes no distinction between public and private programs or activities. Accordingly, the reference to “public” is deleted from this definition. It should be noted that the application section at § 84.31, which is being retained with the addition of “childcare,” states that the subpart applies to all preschool, elementary and secondary, and adult education and does not limit the coverage to public programs and activities. The requirement that the entity be public is contained only in the sections dealing specifically with recipients who operate elementary and secondary programs, sections that are not retained in the proposed rule.
Paragraph (4) provides the definition with respect to postsecondary education.
This definition is added for consistency with title II of the ADA. A qualified interpreter must be able to interpret effectively, accurately, and impartially. Qualified interpreters include sign language interpreters, oral transliterators, and cued-language transliterators.
This list of interpreters is illustrative. Different situations require different types of interpreters. For example, an oral interpreter who has special skill and training to mouth a speaker's words silently for individuals who are deaf or hard of hearing may be necessary for an individual who was raised orally and taught to read lips or was diagnosed with hearing loss later in life and does not know sign language. An individual who is deaf or hard of hearing may need an oral interpreter if the speaker's voice is unclear, if there is a quick-paced exchange of communications (
In addition to sign language interpreters, the illustrative list in the definition includes “cued-language transliterators” and “oral transliterators.” A cued-language transliterator is an interpreter who has special skill and training in the use of the Cued Speech system of handshapes and placements, along with non-manual information, such as facial expression and body language, to show auditory information visually, including speech and environmental sounds. An oral transliterator is an interpreter who has special skill and training to mouth a speaker's words silently for individuals who are deaf or hard of hearing.
This definition is added for consistency with the ADA. A qualified reader is a person who is able to read effectively, accurately, and impartially using any necessary specialized vocabulary. Failure to provide a qualified reader to an individual with a disability may constitute a violation of the requirement to provide appropriate auxiliary aids and services.
To be “qualified,” a reader must be skilled in reading the language and subject matters and must be able to be easily understood by the individual with a disability. For example, if a reader is reading aloud the questions for a college microbiology examination, that reader, to be qualified, must know the proper pronunciation of scientific terminology used in the text, and must be sufficiently articulate to be easily understood by the individual with a disability for whom he or she is reading.
This definition was added for consistency with the ADA. Service animals, which are limited to dogs, must be individually trained to do work or perform tasks for the benefit of an individual with a disability. The work and tasks must be directly related to the individual's disability. This includes alerting individuals who are deaf or hard of hearing to the presence of people or sounds and providing non-violent protection or rescue work. The phrase “non-violent protection” is used to exclude so-called “attack dogs” or dogs with traditional “protection training” as service animals. The crime-deterrent effect of a dog's presence, by itself, does not qualify as work or tasks for purposes of the definition. The crime deterrent effects of an animal's presence and the provision of emotional support, well-being, comfort, or companionship do not constitute work or tasks for the purposes of the definition.
The Department proposes that the term “Standards for Accessible Medical Diagnostic Equipment” means the standards at 36 CFR part 1195, promulgated by the Architectural and Transportation Barriers Compliance Board (Access Board) under section 510 of the Rehabilitation Act of 1973, as amended, found in the Appendix to 36 CFR part 1195.
This definition was added for consistency with the ADA. Video remote interpreting services are a means of providing interpreting services for persons who are deaf or hard of hearing that use video conference technology over dedicated lines or wireless technologies offering high-speed, wide-bandwidth video connection that delivers high-quality video images.
The Department proposes to add a definition of “WCAG 2.1.” The term “WCAG 2.1” refers to the 2018 version of the voluntary guidelines for web accessibility, known as the Web Content Accessibility Guidelines 2.1 (WCAG). The W3C®, the principal international organization involved in developing standards for the web, published WCAG 2.1 in June 2018, and it is available at
The Department proposes to add a definition for “web content” that is based on the WCAG 2.1 definition but is slightly less technical and intended to be more easily understood by the public generally. The Department's proposal defines “web content” as “information or sensory experience—including the encoding that defines the content's structure, presentation, and interactions—that is communicated to the user by a web browser or other software. Examples of web content include text, images, sounds, videos, controls, animations, and conventional
The definition of “web content” attempts to describe the different types of information and experiences available on the web. The Department's NPRM proposes to cover the accessibility of recipients' web content available on public entities' websites and web pages regardless of whether the web content is viewed on desktop computers, laptops, smartphones, or other devices.
The definition of “web content” also includes the encoding used to create the structure, presentation, or interactions of the information or experiences on web pages that range in complexity from, for example, pages with only textual information to pages where users can complete transactions. Examples of languages used to create web pages include Hypertext Markup Language (HTML), Cascading Style Sheets (CSS), Python, SQL, PHP, and JavaScript.
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The proposed rule adopts the definition of wheelchair used by the DOJ in its ADA rules. It defines wheelchair as a manually-operated or power-driven device designed primarily for use by an individual with a mobility disability for the main purpose of indoor, or of both indoor and outdoor locomotion.
This proposed rule is retaining existing sections on (1) Assurances (§ 84.5); (2) Remedial action, voluntary action, and self-evaluation (§ 84.6); and (3) Designation of responsible employee and adoption of grievance procedures (§ 84.7). The Notice section (§ 84.8) has been revised to be consistent with the title II regulations. It states that a recipient must make available to all employees, applicants, participants, beneficiaries, and other interested persons information regarding the provisions of this part and its applicability to the programs or activities of the recipient, and make such information available to them in such manner as the head of the recipient or his or her designee finds necessary to apprise such persons of the protections against discrimination assured them by section 504 and this part.
It is also retaining Administrative requirements for small recipients, § 84.9. That section states that recipients with fewer than 15 employees need not comply with the Designation of responsible employee and adoption of grievance procedures section or the Notice section unless the Director determines that compliance is appropriate because of a finding of a violation or a finding that such compliance will not significantly impair the ability of the recipient to provide benefits or services.
Proposed § 84.16 lists the general prohibitions in employment practices. This proposed rule replaces the existing employment section at § 84.11. Paragraph (a) states that no qualified individual with a disability shall be subjected to discrimination on the basis of disability. The Rehabilitation Act Amendments of 1992, Public Law 102-569 (Oct. 29,1992), amended title V of the Rehabilitation Act to apply the employment standards set forth in title I of the ADA to employment discrimination under section 504.
Section 84.21 states that except as provided in § 84.22, no qualified individual with a disability shall, because a recipient's facilities are inaccessible to or unusable by individuals with disabilities, be excluded from participation in, or be denied the benefits of the programs or activities of a recipient, or be subjected to discrimination by any recipient. This subpart addresses accessibility to the built environment with two approaches: (1) providing standards for new construction and alterations, and (2) applying the concept of program access for programs or activities carried out in new as well as previously existing facilities, even when those facilities are not directly controlled by the recipient. For example, where a recipient hospital contracts out certain health care activities to another entity, and those activities are inaccessible, then the recipient hospital may have impermissibly denied qualified individuals with disabilities the benefits of the programs and activities and subjected those individuals to discrimination.
The Department's existing rule at § 84.22, which is retained in part in the proposed rule, states that a recipient is not required to make each of its existing facilities accessible if its program as a whole is accessible. Access to a program may be achieved by a number of means, including reassignment of services to already accessible facilities, redesign of equipment, delivery of services at alternate accessible sites and, if necessary, structural changes.
Section 84.22(a)(2), which mirrors the ADA title II regulation and the section 504 regulations for federally conducted programs, provides that in meeting the program accessibility requirement, a recipient is not required to take any action that would result in a fundamental alteration in the program
This paragraph does not establish an absolute defense: it does not relieve a recipient of all obligations to individuals with disabilities. Although a recipient is not required to take actions that would result in a fundamental alteration in the nature of a program or activity or undue financial and administrative burdens, it nevertheless must take any other steps necessary to ensure that individuals with disabilities receive the benefits or services provided by the recipient.
It is the Department's view that compliance with § 84.22(a), like compliance with the corresponding provisions of the ADA title II regulation and the section 504 regulations for federally conducted programs, would in most cases not result in undue financial and administrative burdens on a recipient. In determining whether financial and administrative burdens are undue, all recipient resources available for use in the funding and operation of the program or activity should be considered. The burden of proving that compliance with § 84.22(a) would fundamentally alter the nature of a program or activity or would result in undue financial and administrative burdens rests with the recipient.
The decision that compliance would result in such alterations or burdens must be made by the head of the recipient or their designee and must be accompanied by a written statement of the reasons for reaching that conclusion. The Department recognizes the difficulty of identifying the official responsible for this determination, given the variety of organizational forms that may be taken by recipients and their components. The intention of this paragraph is that the determination must be made by a high level official or senior leader who has budgetary authority and responsibility for making spending decisions.
Section 84.22 (b), methods, is identical to the title II provision at 28 CFR 35.150 (b) and, with minor changes, the existing section 504 regulation at § 84.22(b). Any differences between this proposed section and the existing section are intended to be non-substantive. The proposed rule retains provisions based in the existing rule relating to small health, welfare, or other social services providers (§ 84.22(c)); time period for compliance (§ 84.22(d)); transition plan (§ 84.22(e)); and notice (§ 84.22(f)).
The requirements for new construction and alterations, set forth in § 84.23, are more stringent than § 84.22, which contains the requirements for existing facilities. Section 84.23(a)), Design and construction, requires each facility or part of a facility constructed by, on behalf of, or for the use of a recipient to be designed and constructed in such a manner that the facility or part of the facility is “readily accessible to and usable by” individuals with disabilities, if the construction was commenced after June 3, 1977.
Section 84.23(b), Alterations, states that each facility or part of a facility constructed by, on behalf of, or for the use of a recipient that affects or could affect the usability of the facility or part of the facility, shall, to the maximum extent feasible, be altered in such a manner that the altered portion is readily accessible and usable by individuals with disabilities, if the alteration was commenced after June 3, 1977.
Section 84.23(c) addresses accessibility standards and compliance dates for recipients that are public entities. The term “public entities” is derived from DOJ's ADA title II regulation and is incorporated in subsection (c)(1) and means any State or local government; any department, agency, special purpose district, or other instrumentality of a State or states or local government; and The National Railroad Passenger Corporation, and any commuter authority (as defined in section 103(8) of the Rail Passenger Service Act). (45 U.S.C. 541). Section 84.23(d) addresses accessibility standards and compliance dates for recipients that are private entities. The term “private entities” is derived from DOJ's ADA title III regulation and is incorporated in subsection (d)(1) and means any person or entity other than a public entity.
Section 84.23(c)(1) states that as of January 18, 1991, design, construction, or alteration of buildings in conformance with sections 3-8 of the Uniform Federal Accessibility Standards (UFAS)
In its regulations implementing the ADA, DOJ adopted more up-to-date and comprehensive accessibility standards, first the 1991 ADA Accessibility Guidelines (ADAAG) Standards and then the 2010 ADAAG Standards. For example, the 2010 Standards contain requirements for children's facilities, standards for a series of recreation facilities, higher requirements for the number of accessible entrances, and more detailed provisions on accessible toilet facilities. In addition, these Standards are written in a different format that follows the approach of private accessibility standards that are commonly used in state and local building codes. Under title II of the ADA, these Standards apply to all public entities; under title III of the ADA, these Standards apply to a wide range of private entities, including hospitals, the offices of health care providers, pharmacies, childcare centers, senior citizen centers, homeless shelters, food banks, adoption agencies, or other social service center establishments. Therefore, these Standards have applied to many recipients of HHS funding for many years.
For public entities subject to title II of the Americans with Disabilities Act, any facility, where construction was commenced after January 26, 1992, would be required to meet the accessibility requirements of either UFAS or the DOJ's 1991 Accessibility Standards, excluding the elevator exemption. 28 CFR 35.151(a). For such facilities where the physical construction commenced on or after March 15, 2012, the facility would be required to meet the accessibility requirements of DOJ's 2010 Accessibility Standards. 28 CFR 35.151(c).
In this rule, the Department seeks to use the Standards currently used in the ADA: the 2010 Standards. The 2010 Standards for Accessible Design consist of the 2004 ADAAG and the requirements contained in 28 CFR 35.151. To avoid making this regulation overly cumbersome, the Department incorporates the components of the 2010 Standards (that is, the 2004
One of the major advantages of using the 2010 Accessibility Standards rather than UFAS is that the 2010 Standards have been harmonized with private sector codes that form the basis for many State and local building codes. In addressing building accessibility, HHS recipients must now comply with local and State building codes as well as UFAS—distinct bodies of regulation that in many instances impose overlapping and sometimes inconsistent requirements. Because the 2010 Standards were designed to harmonize with other accessibility codes, HHS recipients will face less confusion and difficulty in determining how to undertake alterations to existing facilities or to construct new facilities. In addition, the 2010 Standards are much more complete, providing specific requirements for certain types of facilities, including medical care facilities and social service care establishments, and providing specific guidance on the types of features in buildings, such as standards for toilet rooms, assembly areas, and accessible routes both within a facility and from outside features like parking areas and public transportation stops. The new Standards also include technical requirements based on children's dimensions and anthropometrics.
The Department proposes that this new Standard will take effect on the effective date of this rule, which is 60 days after the publication date in the
To address how recipients of Federal financial assistance from the Department should address construction standards for projects that are being built during a variety of time periods, the proposed rule offers a detailed blueprint on how construction should proceed. The series of scenarios detailed in § 84.23(c) follow the approach used by the DOJ in its 2010 regulation implementing the ADA at 28 CFR 35.151(c).
For example, proposed § 84.23(c)(3) states that physical construction or alterations that commence after January 18, 1991, but before the effective date of the final rule, will be deemed in compliance with the new construction obligation if the recipient's construction meets the requirements of UFAS. Under proposed § 84.23(c)(4), if the construction commences after the effective date of the final rule but before one year from that publication date, the recipient will be in compliance if it follows either UFAS or the 2010 Standards. (However, if the recipient is also covered by the ADA, it will be required by the ADA and the proposed regulation to follow the 2010 Standards.) All new construction and alterations projects that start physical construction one year from the publication date in the
The adoption of a new standard for accessible buildings and facilities necessitates a change to the Department's existing regulation for existing facilities. The “program accessibility” requirement in regulations implementing section 504 requires that each program or activity, when viewed in its entirety, be readily accessible to and usable by individuals with disabilities.
Where a recipient opts to alter existing facilities to comply with its program access requirements, the recipient must look to the accessibility requirements in § 84.23(c). Under the Department's rule, these alterations will be required to comply with the 2010 Standards. The 2010 Standards introduce technical and scoping specifications for many elements not covered by UFAS, the Department's existing standard. In existing facilities, these supplemental requirements need to be taken into account by a recipient in ensuring program access. Also included in the 2010 Standards are revised technical and scoping requirements for a number of elements that were addressed in earlier standards. These revised requirements reflect incremental changes that were added either because of additional study by the Access Board or to harmonize Federal access requirements with those of private model codes.
Although the program accessibility standard offers recipients a level of discretion in determining how to achieve program access, in the NPRM, the Department proposes to follow the lead established by DOJ in its ADA regulations and include an addition to the existing facilities requirements, a new paragraph, § 84.22(g), entitled “Safe harbor,” to clarify that if a recipient has constructed or altered elements in accordance with the specifications of UFAS (or for facilities constructed or altered under ANSI), such recipient is not, solely because of the Department's proposed use of the 2010 Standards, required to retrofit such elements to reflect incremental changes in the
Section 84.23(g) states that nothing in this section relieves recipients whose facilities are covered by the Architectural Barriers Act from their responsibility of complying with that Act.
Section 84.23(h) sets forth requirements with regard to mechanical rooms.
The proposed rule clarifies two sections from the existing regulation: § 84.31, Application, and § 84.38, Preschool and adult education. The existing application section states that it applies to adult education among other things, but childcare is not mentioned. However, the existing § 84.38 refers both to day care (which was intended to include childcare) and adult education. We propose to add childcare to § 84.31, the application section, since the regulation was intended to broadly reach any form of childcare, whether or not it would be considered “day care.” We also propose to change the heading of § 84.38 to “Childcare, preschool, and adult education” to reflect the text of the section. In addition, we propose to add Child Care and Adult Education to the subpart heading to reflect what is contained in the two sections we are retaining. Other sections in the existing regulation concerning elementary and secondary education are reserved.
HHS administers the largest Federal funding source for childcare through the Child Care and Development Fund (CCDF) and provides significant Federal financial assistance to early childhood education through Early Head Start, Head Start, and the Preschool Development Birth through Five (PDG B-5) programs.
Although “day care” is included in the existing § 84.38, in recent years, there has been national attention to the lack of availability and accessibility of inclusive childcare and preschool for children with disabilities. Section 504 follows the precedent set by other civil rights laws based on the receipt of Federal funds, most prominently, Title VI of the Civil Rights Act of 1964, and Title IX of the Education Amendments of 1972. Thus, section 504 applies to recipients of Federal funding, including public or private preschools, childcare centers, family childcare homes, and other entities that receive Federal funds including through a grant, loan, contract, or voucher.
The proposed regulation clarifies existing obligations for childcare providers under subpart D of section 504 (childcare, preschool, elementary and secondary, and adult education.) Childcare providers must also comply with obligations in subpart A (general), B (employment), C (program accessibility), F (health, welfare, and social services), G (general requirements), H (communications), and I (web and mobile accessibility), subparts that apply to all recipients. The Department is aware that some childcare providers that receive financial assistance from HHS may not be familiar with these obligations.
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Upon finalizing this regulation, the Department would provide additional guidance to childcare providers to ensure that they understand the requirements of these provisions.
In January 2020, the Center for American Progress (CAP) issued a report, “The Child Care Crisis Disproportionately Affects Children With Disabilities.” Analyzing the 2016 Early Childhood Program Participation Survey and a combined sample of the 2016-2018 National Survey of Children's Health, as well as family interviews, CAP found that “compared with parents of nondisabled children, a larger proportion of parents with disabled children experience at least some difficulty finding care (34 percent vs. 25 percent).”
In 2015, the Department and the Department of Education issued a joint “Policy Statement on Inclusion of Children With Disabilities in Early Childhood Programs” that cited the ADA and section 504 as part of the legal foundation for inclusion.
In past years, OCR has received several complaints about discrimination on the basis of disability in childcare services. For example, OCR investigated a complaint filed by the parent of a child with autism spectrum disorder who was denied an opportunity to participate in the childcare program based on the child's disability. The childcare center committed to a corrective action plan aimed at remedying its discriminatory policy, including a requirement to provide staff training and to implement a grievance procedure. In another complaint, a child with a disability was denied enrollment in a childcare program because he needed assistance with toileting. Following the complaint, the program revised its policies. Diapering, medication assistance, and the need for one-on-one support are common reasons children with disabilities are denied enrollment. These complaints demonstrate that some covered childcare entities lack awareness of their obligations to comply with section 504. By explicitly including “childcare” providers in the regulatory language, the Department clarifies obligations for these recipients.
Recipients generally are subject to all the general and specific prohibitions against discrimination contained at proposed § 84.68 as well as the specific prohibition applicable to childcare and early education programs in § 84.38. Accordingly, recipients must provide auxiliary aids and services; make reasonable modifications to their policies, practices, and procedures; and integrate children, parents, and guardians with disabilities into their programs. The question of what is a “reasonable modification” will depend on a number of factors including the size of the entity, the types of services provided at the center, and staffing demands. For example, as explained in DOJ's “Commonly Asked Questions About Child Care Centers and the Americans with Disabilities Act” guidance document, “[c]enters that provide personal services such as diapering or toileting assistance for young children must reasonably modify their policies and provide diapering services for older children who need it due to a disability. Generally speaking, centers that diaper infants should diaper older children with disabilities when they would not have to leave other children unattended to do so.” However, if the program never provides toileting assistance to any child, the program is not required to do so for a child with a disability.
The Department is retaining current subpart E, Postsecondary Education.
The Department proposes to retain § 84.51, Application, as well as the general prohibitions in § 84.52(a) and the notice requirement in § 84.52(b). It is deleting paragraph (c), concerning emergency treatment of [individuals who are deaf or hard of hearing] and paragraph (d) concerning auxiliary aids, and is substituting in their place proposed new subpart H, §§ 84.77-84.81, Communications.
The Department also proposes to retain § 84.53, which states that a recipient that operates a general hospital or outpatient facility may not discriminate in admission or treatment against an individual with a [substance use disorder] who is suffering from a medical condition, because of the person's [substance use disorder]. The Appendix states that the section was included “pursuant to section 407, Public Law 92-255, the Drug Abuse Office and Treatment Act of 1972 (21 U.S.C. 1174), as amended, and section 321, Public Law 901-616, the Comprehensive Alcohol Abuse and Alcoholism Prevention, Treatment, and Rehabilitation Act of 1970 (42 U.S.C. 4581), as amended, and section 321, Public Law 93-282.” It notes that the section prohibits discrimination against [individuals with substance use disorders] not just by hospitals as in section 407 of the Drug Abuse Office and Treatment Act but it also includes outpatient facilities “because of the broader application of section 504.”
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This section should be read in conjunction with § 84.69, Illegal use of drugs.
The Department proposes to retain § 84.54, Education of institutionalized persons, which provides that individuals with disabilities who are institutionalized must be provided with an appropriate education. The existing regulation states that the appropriate education must be consistent with § 84.33(b), a section not retained in this rule. In its place, the proposed rule references the section 504 regulations of the Department of Education, 34 CFR 104.33(b).
The Department is also retaining paragraphs (a) and (f) of § 84.55, Procedures relating to health care for [infants with disabilities]. Paragraphs (b)-(e) are not retained because they are subject to an injunction prohibiting their enforcement. In
Paragraph (a) encourages, but does not require, that recipients that provide health care services to infants establish an Infant Care Review Committee (ICRC) to assist the provider in delivering health care services to infants. The committee would assist in the development of standards, policies, and procedures for providing treatment to infants with disabilities and in making decisions concerning medically beneficial treatment in specific cases. The ICRC should be composed of individuals representing a broad range of perspectives and should include a practicing physician, a representative of a disability organization, a practicing nurse, and other individuals. A suggested model ICRC is set forth in paragraph (f).
To accommodate provisions needed to update the Department's section 504 regulation to be consistent with the ADA and to incorporate these provisions in the Department's existing section 504 regulatory framework, the Department is proposing to add a new subpart G—General Requirements. This new subpart will house the provisions dealing with general prohibitions against discrimination, the illegal use of drugs, the maintenance of accessible features, retaliation and coercion, personal devices or services, service animals, mobility devices, and direct threat. In addition, it will address integration.
The Department proposes several changes to ensure consistency between section 504 and the ADA by revising and adding several paragraphs to the general existing prohibitions contained in § 84.4, Discrimination prohibited. The general prohibitions are now contained in § 84.68, General prohibitions against discrimination. These proposed regulations are intended to be interpreted in the same manner as the corresponding ADA regulatory provisions.
The Department is adopting these changes in order to preserve parity with the ADA regulations given Congress's intent that the ADA and section 504 be interpreted consistently. Both recipients and individuals with disabilities benefit from establishing consistent regulations. The preamble to the general prohibitions section contained at 28 CFR 35.130 of the title II ADA regulations explains that “[t]he general prohibitions against discrimination in the rule are generally based on the prohibitions in existing regulations implementing section 504 and, therefore, are already familiar to State and local entities covered by section 504. In addition, [this regulation] includes a number of provisions derived from title III of the Act that are implicit to a certain degree in the requirements of regulations implementing section 504.”
Existing § 84.4(a), the general prohibition against discrimination, is now contained in § 84.68(a). The Department has inserted the word “solely” in the text of this provision to be consistent with the statute because this regulatory language tracks the general nondiscrimination statement of the statute. This change is a technical amendment and is not intended to alter the Department's 46-year history of interpretation or alter the decades-long reach of the Department's regulations under this rule. As used in this part, solely on the basis of disability is consistent with, and does not exclude, the forms of discrimination delineated throughout the rule.
Paragraphs (b)(1)(i) to (vii) list prohibited actions that apply directly to recipients as well as those with whom it is connected through contractual, licensing, or other arrangements.
Paragraph (b)(1)(i) states that a recipient may not deny a qualified individual with a disability the opportunity to participate in or benefit from an aid, benefit, or service.
Paragraph (b)(1)(ii) states that a recipient may not afford an opportunity that is not equal to or as effective as that given to individuals without disabilities.
Paragraph (b)(1)(iii) states that a recipient may not provide a qualified individual with a disability an aid, benefit, or service that is not as effective in affording equal opportunity to obtain the same result, to gain the benefit of or to reach the same level of achievement as that provided to others.
Paragraphs (b)(1)(iv) states that a recipient may not provide different or separate aids, benefits, or services unless necessary to be as effective as provided to others.
Paragraph (b)(1)(v) states that a recipient may not provide significant assistance to an entity that discriminates on the basis of disability.
Paragraph (b)(1)(vi) states that a recipient may not deny the opportunity to be a member of a planning or advisory board.
Paragraph (b)(1)(vii) states that a recipient may not otherwise limit an individual with disabilities in the enjoyment of any right, privilege, advantage, or opportunity enjoyed by others.
Paragraph (b)(2) states that a recipient may not deny a qualified individual with a disability the opportunity to participate in programs or activities that are not separate or different, despite the existence of permissibly separate or different programs or activities.
Paragraph (b)(3) states that a recipient may not, directly or through contractual or other arrangements, utilize criteria or methods of administration (1) that have the effect of subjecting qualified individuals with disabilities to discrimination or (2) that have the purpose or effect of defeating or substantially impairing accomplishment of the objectives of the program or activity or (3) that perpetuate the discrimination of another recipient if both recipients are subject to common administrative control or are agencies of the same State.
Paragraph (b)(4) prohibits the same actions when determining the site or location of a facility although, as in the title II regulations, the third type of discrimination above is not included.
Proposed§ 84.68(b)(5) states that the regulation applies to recipients' selection of procurement contractors and includes proposed language prohibiting the use of criteria that would subject qualified individuals with disabilities to discrimination on the basis of disability This provision is contained in the Department's section 504 regulations for federally conducted programs at 45 CFR 85.21(b)(5), which were issued in 1988.
Proposed § 84.68(b)(6) includes language prohibiting a recipient from administering a licensing or certification program in a manner that subjects qualified individuals with disabilities to discrimination on the basis of disability and from establishing requirements for the programs or activities of licensees that subject qualified individuals with disabilities to discrimination on the basis of disability.
The Department proposes to add a new paragraph, § 84.68(b)(7), which reflects section 504's longstanding obligation that a recipient make reasonable modifications in policies, practices, or procedures when such modifications are necessary to avoid discrimination on the basis of disability, unless the recipient can demonstrate that making the modifications would fundamentally alter the nature of the program or activity.
The “reasonable modification” provision is the same as that in the ADA title II regulations.
To distinguish this requirement in the employment versus the non-employment context and to conform the Department's section 504 regulation to the ADA title II regulation, the regulation uses the term “reasonable modifications” when referring to the requirement to modify policies, procedures, and practices outside the employment context and “reasonable accommodations” when referring to its use in the employment context.
Although the reasonable modification concept is not contained in the Department's existing section 504 regulations, two major Supreme Court cases make clear that the statute imposes a reasonable modification requirement. Since those cases, the Department has consistently required the provision of reasonable modifications of policies, practices, or procedures when such modifications are necessary to avoid discrimination on the basis of disability, unless the recipient can demonstrate that making the modifications would fundamentally alter the nature of the health service or program.
The obligation to modify policies, practices, or procedures was first enunciated by the Supreme Court in
Proposed § 84.68(b)(7) only addresses fundamental alterations but does not mention undue financial and administrative burdens, which is a limitation applied to other sections of the rule. The Department does not propose an express limitation for undue financial and administrative burdens in this reasonable modifications provision because it believes this explicit limitation is unnecessary since the “reasonableness” limitation circumscribes the scope of the underlying obligation. The Department believes this approach is appropriate in this section because the degree to which a modification would create a financial or administrative burden could bear on whether the modification is “reasonable.” By contrast, other obligations in this proposed rule—§ 84.22 (Existing facilities); § 84.81, (Communications) § 84.88 (Web, mobile, and kiosk accessibility); and § 84.92(e), Accessible medical equipment—are framed in categorical terms. An explicit undue burdens limitation applies to those provisions because no “reasonableness” limitation is included. This approach is consistent with the Department's understanding of the Supreme Court precedent on limitations discussed above.
Reasonable modifications may include, but are not limited to, permitting the use of supported decision-making or a third-party support, where needed by a person with a disability. Supported decision-making is an approach used to assist individuals with disabilities in making decisions in an informed and accessible way, through the provision of person-centered decision-making that focuses on the wants and needs of the individual receiving support.
Supported decision-making allows an individual with a disability to collaborate with trusted sources and make their own decisions without the need for a substitute decision-maker. Supported decision-making reinforces an individual's autonomy in decision-making, involves the individual in the decision-making process, and recognizes that in some instances assistance may be needed.
As defined in the Uniform Guardianship, Conservatorship and Other Protective Arrangements Act,
The supporter's role may include helping an individual to understand the range of possible treatment options and their implications, placing that information in terms they can understand, and helping the individual apply their own values to the decision. In research contexts, supported decision-making may include a supporter providing such assistance in the informed consent process.
As an example of a reasonable modification in supported decision-making, a health care provider may need to modify their policy on disclosing information to third parties about a medical procedure, if the individual with a disability needs their supporter to help understand their treatment options. A human service provider who normally does not share benefit applicant information with third parties may need to make additional copies of information about an individual with a disability's benefits eligibility to share with their supporter so the supporter can help explain the options available.
In the context of human services, supported decision-making may be used to assist an individual with a disability who requires decision-making support to make decisions regarding different options, choose whether or not to continue a particular course of service-provision, and otherwise express their will and preference with the assistance of a supporter to ensure that the individual fully understands the range of options available and the implications of each. Once the individual has made a decision, the supporter can help to translate, explain, or substantiate that position to medical professionals, human services systems, or other relevant entities. In some instances, however, the use of supported decision-making will not require any modification at all. For example, a person with a disability may decide to obtain support for a decision by consulting with others ahead of time, but be in a position to communicate a decision to a provider without any reasonable modifications.
When Congress enacted the ADAAA, it expressly provided that a covered entity need not provide a reasonable modification to policies, practices, or procedures to an individual who meets the definition of disability solely under the “regarded as” prong.
Proposed § 84.68(b)(8) prohibits imposing or applying eligibility criteria that screen out or tend to screen out individuals with disabilities or classes of individuals with disabilities from “fully and equally” enjoying any program or activity, unless the criteria can be shown to be necessary for the provision of the program or activity being offered. This provision concerning eligibility criteria is contained in the current regulation at § 84.13(a) but there it is only applicable in the employment context.
The title II ADA regulations at § 35.130(b)(8) expanded the application of the provision to all covered services, programs, and activities. In the preamble to the title II ADA regulation, DOJ explained that this language comes directly from the HHS section 504 regulation at 45 CFR 84.13, Employment criteria.
For example, assume that a researcher employed by an entity receiving Federal financial assistance develops a protocol for use in clinical research evaluating a new intervention for diabetes care. In doing so, the researcher articulates inclusion and exclusion criteria for the study and includes a requirement that study participants must not have a visual impairment, based on the determination that patients who have diabetes-related visual impairments would be medically contraindicated from making use of the intervention. In this case, potential study participants with any form of visual impairment are excluded. A determination as to whether a qualified individual with a disability is eligible to participate in a clinical research program made based on broad-based categorical judgments related to their disability but unrelated to the study screens out individuals with disabilities from participating in the research study without being necessary for the operation of the research program. In contrast, a researcher in similar circumstances who excludes only patients with diabetes-related visual impairments from the study is not likely to be unnecessarily screening out individuals with disabilities, as these patients are medically contraindicated while patients with other forms of visual impairment may not be.
Proposed § 84.68(c) states that nothing in the part prohibits a recipient from providing benefits, services, or advantages beyond those required by this part. This paragraph maintains the longstanding approach of the Department, as reflected in § 84.4(c) of the Department's existing section 504 regulations, as well as DOJ's longstanding approach in its title II regulation. In its title II preamble, DOJ explained the rationale for this provision, noting that the ADA provision is derived from existing section 504 regulations. Those regulations permit programs conducted pursuant to Federal statute or Executive order that are designed to benefit only individuals with disabilities or a given class of individuals with disabilities to be limited to those with disabilities.
In explaining the revisions to the section in the ADA regulations, the title II preamble states that “section 504 ensures that federally assisted programs are made available to all individuals, without regard to disabilities, unless the Federal program under which the assistance is provided is specifically
Proposed § 84.68(d) states that a recipient shall administer programs and activities in the most integrated setting appropriate to the needs of qualified individuals with disabilities. This provision is discussed in detail in proposed § 84.76.
Proposed § 84.68(e)(1) states that nothing requires an individual with a disability to accept a modification, aid, service, opportunity, or benefit if the individual chooses not to so accept. As noted above in the discussion of § 84.68(b)(7), the concept of reasonable modifications is derived from section 504 case law.
Proposed § 84.68(e)(2) states that nothing in section 504 authorizes the representative or guardian of an individual with a disability to decline food, water, medical treatment, or medical services for that individual.
Proposed § 84.68(f) includes language that would prohibit a recipient from placing a surcharge on a particular individual with a disability or any group of individuals with disabilities to defray the costs of measures that are required by section 504 or this regulation to ensure nondiscriminatory treatment. In explaining the related ADA provision, DOJ stated in the preamble to the title II ADA regulations that the origin of the provision came from its section 504 regulation which stated that the imposition of the cost of courtroom interpreter services is impermissible under section 504.
Proposed § 84.68(g) prohibits discrimination against an individual or an entity because of the known disability of an individual with whom the individual or the entity is known to have a relationship or association. In
Proposed § 84.68(h) allows recipients to impose legitimate safety requirements that are necessary for the safe operation of their programs or activities as long as the safety requirements are based on actual risks, not on mere speculation, stereotypes, or generalizations about individuals with disabilities. This concept is derived from
Proposed § 84.68(i) states that this rule does not provide a basis for a claim that an individual without a disability is subject to discrimination because of a lack of disability, including any claim that an individual with a disability was granted a reasonable modification that was denied to an individual without a disability.
Proposed § 84.4 adopts the ADA's definition of disability. That definition states that a “physical or mental impairment” includes drug addiction and alcoholism.
However, proposed § 84.69 generally excludes from protection individuals engaged in the current illegal use of drugs if a recipient takes action against them based on that current illegal drug use, except as specified in proposed § 84.69(b). The ADA amended the Rehabilitation Act to exclude individuals currently engaging in the illegal use of drugs from section 504 coverage when a covered entity acts on the basis of such use.
Proposed § 84.69(a)(1) states that, except as provided in paragraph (b), this part does not prohibit discrimination based on an individual's current illegal use of drugs. Consistent with the language in section 705(10) of the Rehabilitation Act, the proposed section distinguishes between illegal use of drugs and the legal use of substances, whether or not those substances are “controlled substances,” as defined in the Controlled Substances Act (21 U.S.C. 812). Some controlled substances are prescription drugs that have legitimate medical uses. Proposed § 84.69 does not affect use of controlled substances pursuant to a valid
A distinction is made between the use of a substance and the status of being addicted to that substance. Section 84.4, the definition of disability, includes substance use disorder in the list of physical impairments. Since the addiction substantially limits major life activities, addicts are individuals with disabilities protected by the Act. In other words, an individual with a substance use disorder cannot use the fact of their substance use as a defense to an action based on illegal use of drugs. This distinction is not artificial. Congress intended to deny protection to people who engage in the illegal use of drugs, whether or not they are individuals with substance use disorders, but to provide protection to individuals with substance use disorders as long as they are not currently using drugs.
Another distinction is the difficult one between current use and former use. As defined in proposed § 84.10 and 28 CFR 35.104 of the ADA title II regulations, “current illegal use of drugs” means “illegal use of drugs that occurred recently enough to justify a reasonable belief that a person's drug use is current or that continuing use is a real and ongoing problem.” Proposed § 84.69(a)(2) describes the circumstances in which recipients are prohibited from discriminating against an individual who is not engaging in current illegal use of drugs. Paragraph (a)(2)(i) specifies that such an individual who has successfully completed a supervised drug rehabilitation program or has otherwise been rehabilitated successfully is protected. Paragraph (a)(2)(ii) clarifies that such an individual who is currently participating in a supervised rehabilitation program is protected. Paragraph (a)(2)(iii) provides that such an individual who is erroneously regarded as engaging in current illegal use of drugs is protected.
Paragraph (b)(1) provides an exception to the exclusion of current illegal users of drugs from the protections of section 504. It prohibits exclusion of an individual from the benefits of programs or activities providing health services and services provided under the Rehabilitation Act subchapters I (Vocational Rehabilitation Services), II (Research and Training), and III (Professional Development and Special Projects and Demonstrations) on the basis of that individual's current illegal use of drugs if the individual is otherwise entitled to such services.
The exception is different in some respects than the one contained in the ADA. The ADA prohibits the denial of health and drug rehabilitation services to an individual on the basis of that individual's current illegal use of drugs if the individual is otherwise entitled to such services.
However, assume that the individual who is currently using illegal drugs is not seeking health or drug rehabilitation services but, instead, is seeking vocational rehabilitation services and is otherwise entitled to these services, and a recipient denies those vocational rehabilitation services on the basis of the individual's current illegal use of drugs. In this situation, proposed § 84.69(b) has been violated because vocational rehabilitation services are provided under subchapter I of the Rehabilitation Act. However, the ADA has not been violated because, in the ADA, the exception that mandates treatment even for current users of illegal drugs applies only to health and drug rehabilitation services. Although § 84.69(a), the general prohibitions paragraph, is added to align with the ADA title II regulations, the statutory language of the ADA is different than the statutory language of the Rehabilitation Act with regard to required provision of services to current illegal drug users. Accordingly, proposed § 84.69(b) reflects that difference.
A recipient may not refuse treatment to an individual in need of the services it provides on the grounds that the individual is illegally using drugs, but it is not required by this section to provide services that it does not ordinarily provide. For example, a health care facility that specializes in a particular type of treatment, such as care of burn victims, is not required to provide drug rehabilitation services, but it cannot refuse to treat an individual's burns on the grounds that the individual is illegally using drugs. This is a longstanding position of the Department under section 504. Appendix A to the existing rule makes clear that denying treatment to an individual with a [substance use disorder] who is otherwise entitled to such treatment for unrelated conditions is prohibited.
Paragraph (b)(2) provides that a drug rehabilitation or treatment program may deny participation to individuals who engage in illegal use of drugs while they are in the program.
Paragraph (c)(1) addresses testing for illegal use of drugs. This paragraph is derived from the Rehabilitation Act at 29 U.S.C. 705(20)(C), and similar language in the title II regulations, which allows recipients to “adopt or administer reasonable policies or procedures, including but not limited to drug testing,” designed to ensure that an individual who formerly engaged in the illegal use of drugs is not now engaging in current illegal use of drugs. This paragraph does not authorize inquiries, tests, or other procedures that would disclose use of substances that are not controlled substances or are taken under supervision by a licensed health care professional, or other uses authorized by the Controlled Substances Act or other provisions of Federal law, because such uses are not included in the definition of “illegal use of drugs.”
Paragraph (c)(2) states that the section is not to be “construed to encourage, prohibit, restrict, or authorize the conducting of testing for the illegal use of drugs.”
This provision provides that a recipient must maintain in operable working condition those features of facilities and equipment that are required to be readily accessible to and usable by individuals with disabilities. The failure to maintain accessible features can deny equal opportunities,
This provision also addresses the situation where the 2010 Standards reduce either the technical requirements or the number of required accessible elements below that required by UFAS. In such a case, the recipient may choose to reduce the technical requirements or the number of accessible elements in a covered facility in accordance with the requirements of the 2010 Standards.
This paragraph is intended to clarify that temporary obstructions or isolated instances of mechanical failure would not be considered violations of section 504. However, allowing obstructions or “out of service” equipment to persist beyond a reasonable period of time would violate this part, as would repeated mechanical failures due to improper or inadequate maintenance.
Proposed § 84.71(a) provides that a recipient shall not discriminate against an individual because that individual has opposed any act or practice made unlawful by this part, or because that individual has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under section 504 or this part.
Proposed § 84.71(b) provides that a recipient shall not coerce, intimidate, threaten, or interfere with any individual in the exercise of his or her rights under this part or because that individual aided or encouraged any other individual in the exercise or enjoyment of any right granted or protected by section 504 or this part.
This provision protects not only individuals who allege a violation of section 504 or this part, but also any individuals who support or assist them. This section applies to all investigations or proceedings initiated under section 504 or this part without regard to the ultimate resolution of the underlying allegations.
Proposed § 84.72, Personal devices and services, states that the provision of personal devices and services is not required by the section 504 regulation. The existing section addressing personal devices and services is contained in § 84.44(d)(2), the communications section in Subpart D, Postsecondary Education, which is retained in the proposed rule. Section § 84.72 supplements that section. A wide range of the programs funded by the Department incorporate the provision of personal care services. For example, hospitals, nursing homes, child welfare services, and home and community-based care by their very nature include the provision of personal care devices and services. Where personal services are customarily provided as part of recipient's programs or activities, then these personal services should also be provided to persons with disabilities.
The Department proposes to add a new “service animals” section to its regulation, which tracks the title II regulations. This new regulation is consistent with the recognition by the Third Circuit in
As defined in proposed § 84.10, a service animal is “any dog that is individually trained to do work or perform tasks for the benefit of an individual with a disability, including a physical, sensory, psychiatric, intellectual, or other mental disability. Other species of animals, whether wild or domestic, trained or untrained, are not service animals for the purposes of this definition. The work or tasks performed by a service animal must be directly related to the individual's disability. Examples of work or tasks include, but are not limited to, assisting individuals who are blind or have low vision with navigation and other tasks, alerting individuals who are deaf or hard of hearing to the presence of people or sounds, providing non-violent protection or rescue work, pulling a wheelchair, assisting an individual during a seizure, alerting individuals to the presence of allergens, retrieving items such as medicine or the telephone, providing physical support and assistance with balance and stability to individuals with mobility disabilities, and helping persons with psychiatric and neurological disabilities by preventing or interrupting impulsive or destructive behaviors. The crime deterrent effects of an animal's presence and the provision of emotional support, well-being, comfort, or companionship do not constitute work or tasks for the purposes of this definition.”
The definition limits service animals to dogs. No other species of animals is
The proposed definition states that a service animal must be “individually trained to do work or perform tasks for the benefit of an individual with a disability.” The work or tasks must be directly related to the individual's disability. The definition provides an illustrative and non-exhaustive list of examples of work or tasks. These include alerting individuals who are deaf or hard of hearing to the presence of people or sounds and providing non-violent protection or rescue work. The phrase “non-violent protection” is used to exclude so-called “attack dogs” or dogs with traditional “protection training” as service animals. The proposed regulation also notes that the crime-deterrent effect of a dog's presence, by itself, does not qualify as work or tasks for purposes of the service animal definition.
The proposed definition states that “the provision of emotional support, well-being, comfort, or companionship do not constitute work or tasks for purposes of this definition.” Unless the dog is individually trained to do something that qualifies as work or a task, the animal is a pet or support animal and does not qualify for coverage as a service animal. A pet or support animal may be able to discern that the individual is in distress, but it is what the animal is trained to do in response to this awareness that distinguishes a service animal from a pet or support animal.
An example of a service animal would be a psychiatric service dog that can help some individuals with dissociative identity disorder remain grounded in time or place. This animal does work or performs a task that would qualify it as a service animal as compared to an untrained emotional support animal whose presence affects a person's disability. It is the fact that the animal is trained to respond to the individual's needs that distinguishes an animal as a service animal. The process must have two steps: recognition and response. For example, if a service animal senses that a person is about to experience an exacerbation of their mental health symptoms, and it is trained to respond, for example, by nudging, barking, or removing the individual to a safe location until the episode subsides, then the animal has performed a task or done work on behalf of the individual with the disability, as opposed to merely sensing an event. Other tasks performed by psychiatric service animals may include reminding the individual to take medicine, providing safety checks or room searches for persons with post-traumatic stress disorder, interrupting self-harming behaviors, and removing disoriented individuals from dangerous situations. The difference between an emotional support animal and a psychiatric service animal is the work or tasks that the animal performs.
Proposed § 84.73(a) states that, generally, a recipient shall modify its policies, practices, or procedures to permit the use of a service animal by an individual with a disability. The section reflects a specific application of the general requirement in proposed § 84.68(b)(7) that a recipient make reasonable modifications to its policies, practices, or procedures when such modifications are necessary to avoid discrimination on the basis of disability, unless the modifications would fundamentally alter the nature of the health service, program or activity.
For example, assume that a recipient permits a service animal in a waiting area of a clinic where an individual with severe allergies to dog dander is sitting. As DOJ has explained in guidance entitled “ADA Requirements: Service Animals,” “Allergies and fear of dogs are not valid reasons for denying access or refusing service to people using service animals. When a person who is allergic to dog dander and a person who uses a service animal must spend time in the same room or facility, for example, in a school classroom or at a homeless shelter, they both should be accommodated by assigning them, if possible, to different locations within the room or different rooms in the facility.”
Although permitting the presence of a service animal will usually not constitute a fundamental alteration, there are some exceptions. In its guidance entitled “Frequently Asked Questions about Service Animals and the ADA,”
Proposed § 84.73(b) contains two exceptions to the requirement that a recipient permit the use of service animals by individuals with disabilities: (1) if the animal is out of control and the animal's handler does not take effective actions to control it, or (2) if the animal is not housebroken.
There are occasions when service animals are provoked to disruptive or aggressive behavior by agitators or troublemakers, as in the case of a blind individual whose service dog is taunted or pinched. While all service animals are trained to ignore and overcome these types of incidents, misbehavior in response to provocation is not always unreasonable. In circumstances where a service animal misbehaves or responds reasonably to a provocation or injury, the recipient must give the handler a reasonable opportunity to gain control of the animal. Further, if the individual with a disability asserts that the animal was provoked or injured, or if the recipient otherwise has reason to suspect that provocation or injury has occurred, the recipient should seek to determine the facts and, if provocation or injury occurred, the recipient should take effective steps to prevent further provocation or injury, which may include asking the provocateur to leave the recipient's facility.
Proposed § 84.73(c) states that if a recipient properly excludes a service animal under § 84.73(b), it shall give the individual with a disability the opportunity to participate in the program or activity without having the service animal on the premises.
Proposed § 84.73(d) states that a service animal shall be under the control of its handler. It shall have a harness, leash, or other tether, unless either the handler is unable because of a disability to use a harness, leash, or other tether, or the use of a harness, leash, or other tether would interfere with the service animal's safe, effective performance of work or tasks, in which case the service animal must be otherwise under the handler's control (
Proposed § 84.73(e) states that a recipient is not responsible for the care or supervision of a service animal. There may be occasions when a person with a disability is confined to bed in a hospital for a period of time and may not be able to walk or feed the service animal. In such cases, if the individual
Proposed § 84.73(f) states that a recipient shall not ask about the nature or extent of a person's disability. In its guidance entitled “Frequently Asked Questions about Service Animals and the ADA,”
Proposed § 84.73(g) provides that individuals with disabilities shall be permitted to be accompanied by their service animals in all areas of the recipient's facilities where members of the public, participants in programs or activities, or invitees, as relevant, are allowed to go.
Proposed § 84.73(h) provides that a recipient shall not ask or require an individual with a disability to pay a surcharge, even if people accompanied by pets are required to pay fees, or to comply with other requirements generally not applicable to people without pets. If a recipient normally charges individuals for the damage they cause, an individual with a disability may be charged for damage caused by their service animal.
Proposed § 84.73(i) addresses miniature horses. This provision is added to ensure consistency between this regulation and the regulation under title II of the ADA which has long recognized that use of miniature horses may need to be permitted as a reasonable modification. The section states that a recipient shall make reasonable modifications in policies, practices, or procedures to permit the use of a miniature horse by an individual with a disability if the miniature horse has been individually trained to work or perform tasks for the benefit of the individual with a disability. The traditional service animal is a dog, which has a long history of guiding individuals who are blind or have low vision, and over time dogs have been trained to perform an even wider variety of services for individuals with all types of disabilities. Miniature horses can be a viable alternative to dogs for individuals with allergies, or for those whose religious beliefs preclude the use of dogs. Also, miniature horses have a longer life span and greater strength as compared to dogs. Specifically, miniature horses can provide service for more than 25 years while dogs can provide service for approximately seven years and, because of their strength, miniature horses can provide services that dogs cannot provide. Accordingly, use of miniature horses reduces the cost involved to retire, replace, and train replacement service animals.
The miniature horse is not one specific breed, but may be one of several breeds, with distinct characteristics that produce animals suited to service animal work. They generally range in height from 24 inches to 34 inches and generally weigh between 70 and 100 pounds. These characteristics are similar to those of large breed dogs. Like dogs, miniature horses can be trained to be housebroken. They are trained to provide a wide array of services, primarily guiding individuals who are blind or have low vision, pulling wheelchairs, providing stability and balance for individuals with disabilities that impair the ability to walk, and supplying leverage that enables a person with a mobility disability to get up after a fall. They are particularly effective for large stature individuals.
The miniature horse is not included in the definition of service animal, which is limited to dogs. However, the proposed section makes it clear that a recipient must make reasonable modifications in policies, practices, or procedures to permit use of a miniature horse by an individual with a disability if the animal has been individually trained to do work or perform tasks for the benefit of the individual with a disability. The recipient may take into account a series of assessment factors in determining whether to allow a miniature horse into a specific facility. These include the type, size, and weight of the miniature horse; whether the handler has sufficient control of the miniature horse; whether the miniature horse is housebroken; and whether the miniature horse's presence in a specific facility compromises legitimate safety requirements that are necessary for safe operation. In addition, paragraphs (c)-(h) of this section, which are applicable to dogs, also apply to miniature horses.
The title II regulations were amended in 2010 to include a section on mobility devices. In 1991 when the initial ADA regulations were published, there was no pressing need to define the terms “wheelchair” or “other power-driven mobility device,” because relatively few individuals with disabilities were using nontraditional mobility devices in 1991. However, since the 1991 title II regulations and amendments to the ADA regulations in 2010, the choices of mobility devices available to individuals with disabilities have increased dramatically. The ADA regulation, 28 CFR 35.137, on which proposed § 84.74 is modeled, addresses the use of unique mobility devices, concerns about their safety, and the parameters for the circumstances under which these devices must be accommodated. section 504 cases have also addressed power-driven mobility devices.
The Department is aware that its recipients have encountered the increased use of “other power-driven mobility devices,” such as Segways®. Including regulatory provisions on how recipients should approach allowing such vehicles in a variety of health care settings is necessary to provide access to persons with disabilities who use these devices and also to ensure the safe and efficient operations of the programs and activities.
Under this proposed regulation, recipients must allow individuals with disabilities who use these devices into all areas where the public is allowed to go, unless the recipient can demonstrate that the particular type of device cannot be accommodated because of legitimate safety requirements. Such safety requirements must be based on actual risks, not on speculation or stereotypes about a particular class of devices or how individuals will operate them.
The proposed rule at § 84.74(b)(2) lists the factors that recipients must consider in determining whether to permit other power-driven mobility devices on their premises. They include the type, size, weight, dimensions, and speed of the device; the volume of pedestrian traffic (which may vary at different times of the day, week, month, or year); the facility's design and operational characteristics, such as its square footage, whether it is indoors or outdoors, the placement of stationary equipment, or devices, and whether it has storage space for the device if requested by the individual; whether legitimate safety standards can be established to permit the safe operation of the device; and whether the use of the device creates a substantial risk of serious harm to the environment or natural or cultural resources or poses a conflict with Federal land management laws and regulations.
As DOJ has set forth in a guidance document entitled “Wheelchairs, Mobility Aids, and Other Power-Driven Mobility Devices,” using these assessment factors, a recipient may decide, for example, that it can allow smaller electric devices like Segways® in a facility, but cannot allow the use of larger electric devices like golf carts for safety reasons, because the facility's corridors or aisles are not wide enough to accommodate these vehicles.
Proposed § 84.74(c) addresses the types of questions that a recipient's staff may ask of those using other power-driven mobility devices. Recipients may not ask individuals using such devices about their disability but may ask for a credible assurance that the device is required because of a disability. If the person presents a valid, State-issued disability parking placard or card or a State-issued proof of disability, that must be accepted as credible assurance on its face. However, recipients cannot demand or require the presentation of a valid disability placard or card, or state-issued proof of disability, as a prerequisite for use of a power-driven mobility device, because not all persons with mobility disabilities have such means of proof. If the person does not have this documentation, but states orally that the device is being used because of a mobility disability, that also must be accepted as credible assurance, unless the person is observed doing something that contradicts the assurance. For example, as DOJ's guidance document sets forth, if a person is observed running and jumping, that may be evidence that contradicts the person's assertion of a mobility disability. However, the fact that a person with a disability is able to walk for a short distance does not necessarily contradict a verbal assurance—many people with mobility disabilities can walk but need their mobility device for longer distances or uneven terrain. This is particularly true for people who lack stamina, have poor balance, or use mobility devices because of respiratory, cardiac, or neurological disabilities.
Proposed § 84.10 defines “direct threat” as a significant risk to the health or safety of others that cannot be eliminated by a modification of policies, practices, or procedures, or by the provision of auxiliary aids or services. This is similar to the definition in the title II ADA regulations although this proposed definition contains a subsection applicable to employment. Proposed § 84.75 likewise is similar to the direct threat provisions in the title II ADA regulations at 28 CFR 35.139 but, as in the definition, it contains a subsection applicable to employment, which uses a distinct definition of direct threat.
This provision of the ADA regulation is modeled on the section 504 Supreme Court case of
The determination that a person poses a direct threat to the health or safety of others may not be based on generalizations or stereotypes about the effects of a particular disability. It must be based on an individualized assessment, based on reasonable judgment that relies on current medical knowledge or on the best available objective evidence, to determine: the nature, duration, and severity of the risk; the probability that the potential injury will actually occur; and whether reasonable modifications of policies, practices, or procedures will mitigate the risk. This is the test established by the Supreme Court in
In the medical treatment context, when determining whether a recipient is required to treat an individual with a disability, the recipient must assess whether an individual poses a direct threat to the health or safety of others. Proposed § 84.56(b)(1) prohibits denial of medical treatment based on bias or stereotypes about a patient's disability.
The current section 504 regulation includes an “integration mandate” that requires recipients of Federal funds to administer programs and activities “in the most integrated setting appropriate to the . . . needs” of the person with a disability.
In
HHS has played a significant role in implementation of the
Additionally, changes in the administration of health services and long-term services and supports necessitate rulemaking to address unnecessary segregation in evolving service models. In recent years, there has been a growing shift away from traditional fee-for-service health care towards alternative payment models and other new approaches. Many recipients have adopted pay-for-performance frameworks and contract with third-party entities, such as accountable care organizations, pharmaceutical benefit managers, and managed care organizations, for the delivery or management of services to individuals with disabilities. The growing reliance on managed care in State Medicaid programs and other changes, such as quality incentives, quality assurance activities, and risk-sharing arrangements, necessitate addressing unnecessary segregation in these emerging models in this proposed rule.
The COVID-19 public health emergency underscored the importance of the integration mandate. During the pandemic, community services to people with disabilities have frequently been disrupted, forcing many to enter or remain in segregated settings that elevated their risk of infection and death and isolated them from the broader community.
The Department proposes a new § 84.76 articulating the obligations of recipients under section 504 to serve individuals with disabilities in the most integrated setting appropriate to their needs, as mandated in proposed § 84.68(d).
Proposed § 84.76(a) clarifies that the integration mandate applies to programs or activities that receive Federal financial assistance from the Department and to recipients that operate such programs and activities.
Although the specific factual context of the
The Department also notes that although the plaintiffs in
Proposed § 84.76(b) articulates the integration obligation in broad terms, indicating that a recipient of Federal financial assistance shall administer a program or activity in the most integrated setting appropriate to the needs of a qualified person with a disability. Administering a program or activity in a manner that results in unnecessary segregation of persons with disabilities—including through the failure to make reasonable modifications to policies, practices, or procedures, as required in proposed § 84.68(b)(7)—constitutes discrimination under this section.
Recipients cannot avoid their obligations under section 504 and
Proposed § 84.76(c) describes characteristics of segregated settings. In the context of the integration mandate, segregation means the unnecessary separation of people with disabilities from people without disabilities. Unnecessary segregation may occur in a variety of settings, such as board-and-care homes, sheltered workshops, and other congregate settings populated exclusively or primarily with individuals with disabilities. It is not limited to residential institutions such as a psychiatric hospital, an Intermediate Care Facility, or a nursing home. DOJ provides guidance that “[s]egregated settings include, but are not limited to: (1) congregate settings populated exclusively or primarily with individuals with disabilities; (2) congregate settings characterized by regimentation in daily activities, lack of privacy or autonomy, policies limiting visitors, or limits on individuals' ability to engage freely in community activities and to manage their own activities of daily living; or (3) settings that provide for daytime activities primarily with other individuals with disabilities.”
Even in smaller, disability-specific congregate settings located in mainstream society, regimentation in daily activities, lack of privacy or autonomy, policies limiting visitors, or limits on individuals' ability to engage freely in community activities and to manage their own activities of daily living may further isolate and segregate people with disabilities.
We note that these characteristics need not be present for a setting to be considered segregated.
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Proposed § 84.76(d) includes a non-exhaustive list of actions that may lead to unnecessary segregation and violate this section to the extent that such actions result in unnecessary segregation, or serious risk of unnecessary segregation, of persons with disabilities. These include: (1) establishing or applying policies and practices that limit or condition individuals with disabilities' access to the most integrated setting appropriate to their needs;
For example, a policy that individuals with mental health disabilities residing in institutional settings have access to additional hours of services not made available to individuals with comparable mental health disabilities residing in community-based settings may constitute a violation of section 504's integration mandate if it leads to unnecessary institutionalization or serious risk of such institutionalization.
Protections from discrimination on the basis of disability are violated by policies that place individuals at serious risk of institutionalization or segregation.
DOJ has promulgated guidance stating the ADA's integration mandate extends “to persons at serious risk of institutionalization or segregation and are not limited to individuals currently in institutional or other segregated settings.”
The Department proposes to codify this longstanding case law and DOJ guidance. A recipient could place individuals with disabilities at serious risk of unnecessary segregation in a variety of ways. It could do so by failing to provide services that are necessary for those individuals to live, work, and receive services in community-based settings. A recipient could also create such a risk by cutting services or budgets where those cuts will likely cause a decline in health, safety, or welfare that would lead to an individual's placement in an institution or other segregated setting. Examples include failing to provide services or alternatives other than institutional care to people with urgent needs who are on waiting lists for community services,
Service reductions resulting from budget cuts—even where permitted under Medicaid and other public program rules—may violate the integration mandate if they create a serious risk of institutionalization or segregation.
The Medicaid program, established in Title XIX of the Social Security Act, is a voluntary, joint Federal-State program. Under the program, the Federal Government matches a portion of expenses incurred by participating states for expenditures for Medicaid beneficiaries. State participation in the Medicaid program is not mandatory, but if a State chooses to participate, the Social Security Act requires it to comply with Federal statutory and regulatory requirements—and all states participate in the program.
For example, a State might violate the integration mandate, but not the Medicaid law or implementing regulations, by making cuts to HCBS programs while at the same time increasing funding to institutional services. The section 504 proposed rule would not change the requirements of the Medicaid program in the Social Security Act or in Medicaid regulations, nor would it require CMS to assess compliance with section 504 as part of their work approving Medicaid proposals (
CMS regularly communicates to states that they have separate and independent obligations under Medicaid and other civil rights laws. For example, CMS explicitly articulates that compliance with the Medicaid statute and rules is a separate determination and obligation from compliance with the ADA and section 504, in both its initial and final approval letters for State Transition Plans (STPs)
A State may violate the integration mandate in administering its system of services, including approved HCBS services under Medicaid waivers or other authorities, if it does so in a manner that unnecessarily segregates people with disabilities and fails to make available sufficient services in integrated, community-based settings.
Providing services beyond what a State currently provides under its Medicaid program may not be a fundamental alteration, and the ADA and section 504 may require states to provide those services, under certain circumstances. For example, the fact that a State is permitted to “cap” the number of individuals it serves in a particular waiver program under Medicaid does not exempt the State from serving additional people in the community to comply with the ADA or other laws.
A recipient's obligation under the integration mandate to provide services in the most integrated setting appropriate for the needs of a qualified individual is not unlimited. A recipient may be excused in instances where it can prove that the requested modification would result in a “fundamental alteration” of its service, program, or activity.
When section 504 was enacted in 1973, Congress recognized the shift to provide services to people with disabilities in the community instead of in institutions and to integrate people with disabilities into society. Congress' express goal was, in part, “to empower individuals with disabilities to maximize employment, economic self-sufficiency, independence, and inclusion and integration into society.”
For example, in the 2016 “Guidance and Resources for Long Term Care Facilities,” the Department described application of section 504's integration mandate to these recipients:
Long-term care facilities receive Federal financial assistance by participating in programs such as Medicare and Medicaid. Section 504 prohibits discrimination based on disability, including the unnecessary segregation of persons with disabilities. Unjustified segregation can include continued placement in an inpatient facility when the resident could live in a more integrated setting. This concept was set forth in the Olmstead decision, which interpreted the same requirements in the Americans with Disabilities Act.
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Communication failures in the context of the receipt of health and human services can be life-altering or even life-ending.
One such example is the VRA between OCR and a health system, that OCR announced on January 16, 2020.
Similarly, OCR reached a VRA with a health institute following a 2017 complaint alleging that it failed to provide a qualified ASL interpreter to a deaf six-year-old child requiring physical therapy, in violation of both section 504 and section 1557.
Notwithstanding OCR's extensive enforcement activities in this area, including through complaint resolutions, compliance reviews, and the provision of technical assistance, ineffective communication with individuals with disabilities remains a persistent and significant discrimination issue.
The Department is proposing to remove a limitation that currently appears in § 84.52(d) (a subsection being replaced by this Communications subpart, the auxiliary aids provision in the Health, Welfare, and other Social Services subpart. That subsection contains special rules for recipients with less than 15 employees.
Section 84.52(d) directs that the obligation to provide auxiliary aids is mandatory for recipients with 15 or more employees, but indicates that Departmental officials may require recipients employing fewer than 15 persons to comply with this requirement “when [compliance] would not significantly impair the ability of the recipient to provide its benefits or services.” The Department is proposing to remove this limitation for several reasons. First, this limitation is of minimal consequence because the vast majority of recipients of Federal financial assistance from the Department are already required by either title II or title III of the ADA to provide auxiliary aids or services in order to ensure effective communication. Second, all recipients, regardless of size, are not required, in providing effective communication, to take any action that the recipient can demonstrate would result in a fundamental alteration to the program or activity or pose undue financial and administrative burdens. Third, the Department already has the discretion whether to impose these obligations on recipients with fewer than 15 employees, and as of December 19, 2000, has required all recipients with fewer than fifteen employees to provide auxiliary aids to individuals with disabilities where the provision of such aids would not significantly impair the ability of the recipient to provide its benefits or services.
The Department has investigated and resolved numerous complaints regarding effective communication over the decades by recipients with fewer than fifteen employees. The importance of ensuring that individuals with disabilities are able to understand and engage in health and human services programs and activities drives this proposed change.
The current regulations implementing section 1557 require certain covered entities to ensure effective communication for individuals with
Part of effective communication is ensuring that individuals with disabilities, including those with cognitive, neurological, and psychiatric disabilities, have the appropriate information necessary to make health care decisions. Communication between a person seeking medical treatment and their health care provider is a basic component of health care and in some circumstances leads to a formal process of granting of permission for treatment, usually referred to as informed consent. The information being provided may include information on the names and details of procedures or treatment that the health care provider recommends, other available alternatives, and the risks and benefits of the treatment and other options, including foregoing any treatment. The success of this process requires the person seeking treatment to understand the options and make an informed choice in determining the course of treatment. Research suggests that methods of communication, along with the quality of the interactions between the provider and the patient with a cognitive disability, play more important roles in the patient's ability to make informed decisions than intellectual and adaptive functioning.
Effective communication for patients with cognitive, neurological, and psychiatric disabilities may require auxiliary aids and services or strategies different from those employed with patients with other disabilities. For example, while an individual who is deaf or hard of hearing may require an ASL interpreter to effectively communicate with a provider, an individual with a cognitive disability may require additional time with the provider to ask questions and receive plain language answers about a specific health care decision.
A specific type of auxiliary aid or service may be the acquisition or modification of equipment or devices, including for augmentative and alternative communication, and the provision of training and assistance to the individual with a disability on how to use them. Augmentative and alternative communications devices include, but are not limited to, speech generating devices, single-message devices, computers, tablets, smartphones, amplification devices, telecommunications devices, voice amplifiers, artificial phonation devices, picture and symbol boards, paper-based aids, and other equipment or devices used to compensate for impairments to speech-language production or comprehension, including spoken and written modes of communication.
In some instances, the use of augmentative and alternative communication is necessary for individuals with certain disabilities that impair speech production and comprehension to access vital health and human services programs and activities. Often, the most effective way for recipients to ensure effective communication is to provide training on the use of this equipment.
Section 504 also requires recipients to provide reasonable modifications to policies, practices, or procedures to individuals with disabilities when necessary to avoid discrimination unless the modification would fundamentally alter the nature of the program or activity at issue. Reasonable modifications may include modifications to how a provider communicates with or delivers information to a patient with a disability. For example, a reasonable modification for a patient with a mental disability may be to allow a third-party support person to join the conversation and allow that person to assist the patient in understanding their options and coming to an independent decision on how to proceed. The person with a disability may be in a supported decision-making arrangement with the third-party support person, but no such formal role is required.
Another reasonable modification may be for the recipient to provide information in a format that is accessible to individuals with cognitive, developmental, intellectual, or neurological disabilities such as through plain language. NCD has urged the Department to issue guidance to medical professionals requesting that they explain procedures and draft documents in plain language to better serve patients with disabilities.
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The Department proposes to add a new subpart H to the section 504 implementing regulations to address ongoing communication issues. The new provisions reflect the same requirements concerning effective communication adopted by the Department in the 2020 section 1557 Final Rule, which are based on the effective communication requirements of title II of the ADA.
Proposed § 84.77(c) states that recipients are not allowed to require an individual with a disability to bring another individual to interpret for them and provides limited exceptions where accompanying adults or children may be used to interpret or facilitate communication.
Section 84.77(d) proposes requirements for recipients that choose to provide qualified interpreters via Video Remote Interpreting (VRI) services. These requirements set certain usability standards for the instances where VRI services are appropriate auxiliary aids and services for communication.
This section contains requirements for recipients that communicate by telephone with applicants and beneficiaries with disabilities. Specifically, the section would require recipients to use telecommunications systems that ensure effective communication. When a recipient uses an automated-attendant system, that system must provide effective real-time communication with individuals using auxiliary aids and services. In addition, a recipient must respond to telephone calls from a telecommunications relay service established under title IV of the ADA in the same manner that it responds to other telephone calls.
Proposed § 84.79 states that telephone emergency services, including 911 services, shall provide direct access to individuals who use TTY's and computer modems.
Proposed § 84.80 provides specific requirements for information and signage to ensure that interested persons can obtain information as to the existence and location of accessible services, activities, and facilities while also pointing users to accessible entrances.
Proposed § 84.81 provides that, in meeting its communication requirements, a recipient is not required to take any action that would result in a fundamental alteration in the nature of its program or activity or undue financial and administrative burdens.
This paragraph does not establish an absolute defense; it does not relieve a recipient of all obligations to individuals with disabilities. Although a recipient is not required to take actions that would result in a fundamental alteration in the nature of a program or activity or undue financial and administrative burdens, it nevertheless must take any other steps necessary to ensure that individuals with disabilities receive the benefits or services provided by the recipient.
It is the Department's view that compliance with the communications requirements in subpart H, like compliance with the corresponding provisions of the ADA title II regulation and the section 504 regulations for federally conducted programs, would in most cases not result in a fundamental alteration or undue financial and administrative burdens on a recipient. In determining whether financial and administrative burdens are undue, all recipient resources available for use in the funding and operation of the program or activity should be considered. The burden of proving that compliance with any section in this subpart would fundamentally alter the nature of a program or activity or would result in undue financial and administrative burdens rests with the recipient.
The decision that compliance would result in such alteration or burdens must be made by the head of the recipient or their designee and must be accompanied by a written statement of the reasons for reaching that conclusion. The Department recognizes the difficulty of identifying the official responsible for this determination, given the variety of organizational forms that may be taken by recipients and their components. The intention of this paragraph is that the determination must be made by a high level official or senior leader who has budgetary authority and responsibility for making spending decisions.
Subpart G is redesignated as subpart K. Section 84.61, Procedures, is retained and redesignated as § 84.98. That section states that the procedural provisions applicable to Title VI of the Civil Rights Act of 1964 apply to this part. Those procedures are found at 45 CFR 80.6 through 80.10 and part 81. They include a requirement that recipients cooperate with the
In this proposed rule, the Department proposes to revise its existing section 504 regulation on nondiscrimination obligations for recipients of Federal financial assistance. More than 40 years have passed since the Department originally issued regulations implementing section 504, with only limited changes in the decades since. During that time, major legislative and judicial developments have shifted the legal landscape of disability discrimination protections under section 504, including statutory amendments to the Rehabilitation Act, the enactment of the ADA and the ADAAA, the ACA, and Supreme Court and other significant court cases. Section 504 should be updated and interpreted consistently with these developments and overlapping laws in order to bring the regulations into conformity with current law and to protect against discrimination on the basis of disability.
We have examined the impacts of the proposed rule under Executive Order (E.O.) 12866, as amended by E.O. 14094; E.O. 13563; the Regulatory Flexibility Act (5 U.S.C. 601-612); and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). E.O. 12866 and E.O. 13563 direct us to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). This proposed rule is a significant regulatory action under section 3(f)(1) of E.O. 12866.
The Regulatory Flexibility Act requires us to analyze regulatory options that would minimize any significant impact of a rule on small entities. Because the costs of the proposed rule are small relative to the revenue of recipients, including covered small entities, and because even the smallest affected entities would be unlikely to face a significant impact, we propose to certify that the proposed rule will not have a significant economic impact on a substantial number of small entities.
The Unfunded Mandates Reform Act of 1995 (Section 202(a)) generally requires the Department to prepare a written statement, which includes an assessment of anticipated costs and benefits, before proposing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $165 million, using the most current (2021) Implicit Price Deflator for the Gross Domestic Product. This proposed rule is not subject to the Unfunded Mandates Reform Act because it falls under an exception for regulations that establish or enforce any statutory rights that prohibit discrimination on the basis of race, color, religion, sex, national origin, age, handicap, or disability.
The Background and Reasons for the Proposed Rulemaking sections at the beginning of this preamble contain a summary of this proposed rule and describe the reasons it is needed.
Below is a summary of the results and methodology from our Regulatory Impact Analysis (RIA). A complete copy of this RIA will be available at
Section 504 has applied to medical care providers that receive Federal financial assistance from the Department for approximately fifty years. The Department issued regulatory language detailing specific requirements for health care providers in 1977.
The RIA considers the various proposed sections and quantifies several categories of costs that we anticipate recipients may incur. The RIA quantifies benefits people with disabilities are expected to receive due to higher percentages of accessible Medical Diagnostic Equipment (yielding improved health outcomes) at recipients' locations and discusses unquantified significant benefits and costs the proposed rule is expected to generate that could not be quantified or monetized (due to lack of data or for other methodological reasons). The RIA also quantifies benefits that will result from accessible web content and mobile applications while addressing unquantified benefits the proposed rule is expected to accrue.
Table 1 below summarizes RIA results with respect to the likely incremental monetized benefits and costs, on an annualized basis. All monetized benefits and costs were estimated for a 10-year time horizon using discount rates of 7 and 3 percent.
Quantified incremental costs concerning Accessible Medical Equipment under subpart J come from updating policies and procedures, acquiring accessible Medical Diagnostic Equipment (MDE), and ensuring staff are qualified to successfully operate accessible MDE. Quantified incremental costs concerning Web, Mobile, and Kiosk Accessibility under subpart I come from reviewing and updating existing web content and mobile apps while ensuring ongoing conformance with listed standards.
Additional costs for provisions under § 84.56—Medical Treatment, § 84.57—Value Assessment Methods, and § 84.60—Child Welfare, are calculated based on limited revisions to policies and procedures and training for employees on provisions that largely restate existing obligations and explicitly apply them to specific areas of health and human services. The RIA requests comment on more extensive transition and ongoing costs.
Concerning the proposed provisions to ensure consistency with the ADA, statutory amendments to the Rehabilitation Act, and Supreme Court and other significant court cases, the RIA finds that these proposed provisions will likely result in no additional costs to recipients.
Regarding costs, the RIA finds that the proposed rule would result in annualized costs over a 5-year time horizon of $1,782.0 million or $1,843.2 million, corresponding to a 3% or a 7% discount rate. The RIA separately reports a full range of cost estimates of about $1,615.5 million to $2,143.7 million at a 3% discount rate, and a range of cost estimates of about $1,674.5 million to $2,213.3 million at a 7% discount rate.
For quantified benefits, the RIA quantifies the benefits that people with disabilities are expected to receive due to higher percentages of accessible Medical Diagnostic Equipment (yielding improved health outcomes) at recipients' locations and more accessible web content, mobile apps, and kiosks. The RIA concludes that the proposed rule would result in total annualized benefits of $1,927.7 million at a 3% discount rate and $1,864.3 million at a 7% discount rate.
In addition to these quantified benefit estimates, the RIA includes discussions of potential unquantified benefits under the rule. Generally, the RIA anticipates that the proposed rule will result in a myriad of benefits for individuals with disabilities as a result of greater access to necessary health and human service programs and activities as well as limitations to discriminatory actions. Analogously, some costs have been quantified, while for others, the RIA requests comment that would facilitate more thorough estimation.
The RIA discusses both quantitatively and qualitatively the regulatory alternatives the Department has considered in an attempt to achieve the same statutory and regulatory goals while imposing lower costs on society.
The Department has examined the economic implications of this proposed rule as required by the Regulatory Flexibility Act. This analysis, as well as other sections in this Regulatory Impact Analysis, serves as the Initial Regulatory Flexibility Analysis, as required under the Regulatory Flexibility Act.
The Department deems that a proposed rule has a significant economic impact on a substantial number of small entities whenever the rule generates a change in revenues of more than 3% for 5% or more of small recipients.
The U.S. Small Business Administration (SBA) maintains a Table of Small Business Size Standards Matched to North American Industry Classification System Codes (NAICS).
As reported in the RIA, 97.4% of all firms in the Health Care and Social Assistance sector (NAICS 62) are small. With the exception of Hospitals (Subsector 622), at least 9 out 10 of all recipients within each Health Care and Social Assistance NAICS code are small.
Most firms—98.3%—in the Pharmacies and Drug Stores (NAICS 446110) group are small as well. About 60% of Direct Health and Medical Insurance Carriers (NAICS 524114) are small. About 60% of Colleges, Universities, and Professional Schools (NAICS 611310) are small.
Hence, almost all non-government recipients (
Moreover, the fraction of total small firms in each NAICS that falls under the smallest size group (fewer than 5 employees) is greater than 5% for all relevant NAICS.
As a consequence, it is sufficient to investigate the impact of the proposed rule on the average recipient in the smallest size group to determine whether the proposed rule may generate a change in revenues of more than 3%. We need to determine whether the average firm in the smallest size group will experience a reduction in revenues greater than 3%.
Below we discuss the two reasons for our conclusion that firms in the smallest groups will not experience a 3% reduction in revenues. Hence, we propose to certify that the proposed rule will not have a significant economic impact on a substantial number of small entities.
As for the first reason, we note that, with the exception of a handful of HMO Medical Centers (NAICS 621491) and about 24,500 Child Day Care Services (NAICS 624410) firms, the yearly average revenues (in 2019 dollars) for a recipient belonging to the smallest size group—for each 6-digit NAICS separately—are $160,000 or more.
Three percent of this sum is about $5,000, which we deem is enough to finance purchase of the limited set of inexpensive MDE the smallest entities typically need and training.
The average yearly revenue for a Child Day Care Services firm in the smallest size group (fewer than five employees) is about $98,000. As we expect that recipients in this group will incur only Child Welfare training costs (less than 1 hour per year, or less than $60 in costs), we conclude that the impact of the proposed rule is less than 3% of revenues (about $3,000 for these small recipients) for recipients in this group.
Even among the smallest recipient groups within the 6-digit NAICS groups that private recipients belong to, the typical (median) yearly revenue is about $300,000 for podiatrists' offices (the maximum is $0.5 million for general hospitals, the lowest is $98,000 for Child Day Care Services), which signals that in many cases the 3% revenue threshold is about $10,000. Costs of the proposed rule are mostly proportional to the size of the recipient, and typical recipients in the smallest size group (fewer than 5 employees) are not expected to incur $10,000 incremental costs.
In addition, we estimate that the obligation to ensure that web content and mobile applications for the Department's recipients that are small providers (those with fewer than fifteen employees) will be less than 3% of their revenues. We note that the vast majority of the Department's recipients are small providers and estimate that most of these small providers (approximately 85.9%) have websites. The websites of these small providers are typically one domain with up to a few thousand pages and limited visitors per month. Thus, the Department estimates that for a cost of approximately $440 per year these recipients will be able to ensure that their websites can be made accessible and kept accessible each year. The Department welcomes comments on the cost implications of subpart I for its recipients, particularly its small recipients.
As for the second reason, we stress that the proposed rule includes exemptions meant to ease the burden on small firms, including exemption when incremental compliance costs are an undue financial burden, and the ability to meet accessibility requirements via alternative, inexpensive methods (like reassignment of services to alternate accessible locations or home visits for MDE requirements).
As required by Executive Order 13132 on Federalism, the Department has examined the effects of provisions in the proposed regulation on the relationship between the Federal Government and the states. The Department has concluded that the proposed regulation has federalism implications but notes that State law will continue to govern unless displaced under standard principles of preemption.
The proposed regulation attempts to balance State autonomy with the necessity to create a Federal benchmark that will provide a uniform level of nondiscrimination protection across the country. It is recognized that the states generally have laws that relate to nondiscrimination against individuals on a variety of bases. Such State laws continue to be enforceable, unless they prevent application of the proposed rule. The proposed rule explicitly provides that it is not to be construed to supersede State or local laws that provide additional protections against discrimination on any basis articulated under the regulation. Provisions of State law relating to nondiscrimination that are “more stringent” than the proposed Federal regulatory requirements or implementation specifications will continue to be enforceable.
Section 3(b) of Executive Order 13132 recognizes that national action limiting the policymaking discretion of states will be imposed only where there is constitutional and statutory authority for the action and the national activity is appropriate considering the presence of a problem of national significance. Discrimination issues in relation to health care are of national concern by virtue of the scope of interstate health commerce.
Section 4(a) of Executive Order 13132 expressly contemplates preemption when there is a conflict between exercising State and Federal authority under a Federal statute. Section 4(b) of the Executive Order authorizes preemption of State law in the Federal rule making context when “the exercise of State authority directly conflicts with the exercise of Federal authority under the Federal statute.” The approach in this regulation is consistent with these standards in the Executive Order in superseding State authority only when such authority is inconsistent with standards established pursuant to the grant of Federal authority under the statute.
Section 6(b) of Executive Order 13132 includes some qualitative discussion of substantial direct compliance costs that State and local governments would
These costs represent the sum of costs for compliance with all provisions applying to State and local governments, namely those for subpart I (about 38% of costs for all recipients,
In addition, the Department is aware that DOJ has issued a Preliminary Regulatory Impact Analysis to accompany its rule proposing requirements for public entities covered by title II of the ADA and that its requirements are consistent with this Department's subpart I. DOJ examined the costs of its proposal for all public entities covered by title II and stated that the rule will not be unduly burdensome or costly for public entities. Because this Department's rule is consistent with the DOJ proposed rule, we believe that the DOJ analysis provides further support for our belief that subpart I will not be unduly burdensome or costly for the Department's recipients that are public entities.
The Department welcomes comments about the potential federalism implications of the proposed rule and on the proposed rule's effects on State and local governments.
This proposed rule contains information collection requirements that are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (PRA).
Section 3506(c)(2)(A) of the PRA requires that the Department solicit comment on the following issues:
1. Whether the information collection is necessary and useful to carry out the proper functions of the agency;
2. The accuracy of the agency's estimate of the information collection burden;
3. The quality, utility, and clarity of the information to be collected; and
4. Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.
The PRA requires consideration of the time, effort, and financial resources necessary to meet the information collection requirements referenced in this section.
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This Notice of Proposed Rulemaking does not modify several longstanding collections of information that have been required since 1977: § 84.5, (assurances); § 84.6(c) (self-evaluation); § 84.7(a)(designation of responsible employee and adoption of grievance procedures; § 84.22 (e) (existing facilities: transition plan); and § 84.61, redesignated as § 84.98 (Procedures). The Notice of Proposed Rulemaking slightly modifies one longstanding collection of information required since 1977 to align more closely with the requirement under title II of the ADA:
Like the assurances section, all of the other sections listed above are being retained from the current section 504 rule issued in 1977. Section 84.61, redesignated as § 84.98, states that the procedural provisions applicable to Title VI of the Civil Rights Act of 1964 apply to this part. The provision raising potential PRA issues is the requirement that recipients maintain records that the Department finds necessary to determine compliance. However, that section, like all of the others listed above, has existed since the original section 504 regulations were enacted in 1977. Accordingly, these sections impose no additional burden on recipients since they have been subject to this regulation since that time.
The notice requirement outlined in proposed § 84.8 implicates the third-party disclosure provisions of the PRA implementing regulations, which compels an agency to request comment and submit for OMB review any agency regulation that requires an individual “to obtain or compile information for the purpose of disclosure to members of the public or the public at large, through posting, notification, labeling or similar disclosure. . . .”
Table 6 of the Regulatory Impact Analysis reports that there are about 453,084 recipients covered by this rulemaking. We estimate the burden for responding to the proposed § 84.8 notice requirement assuming a single response per recipient, and that administrative or clerical support personnel will spend 34 minutes (0.5667 of an hour) to respond.
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Section 4(2) of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1503(2), excludes from coverage under that Act any proposed or final Federal regulation that “establishes or enforces any statutory rights that prohibit discrimination on the basis of race, color, religion, sex, national origin, age, handicap, or disability.” Accordingly, this rulemaking is not subject to the provisions of the Unfunded Mandates Reform Act.
The National Technology Transfer and Advancement Act of 1995 (NTTAA) directs that, as a general matter, all Federal agencies and departments shall use technical standards that are developed or adopted by voluntary consensus standards bodies, which are private, generally nonprofit organizations that develop technical standards or specifications using well-defined procedures that require openness, balanced participation among affected interests and groups, fairness and due process, and an opportunity for appeal, as a means to carry out policy objectives or activities.
The Department is proposing to adopt the Accessibility Standards for Accessible Medical Diagnostic Equipment issued by the U.S. Access Board to apply to the purchase and lease of medical equipment by recipients of HHS funds that provide health care services and programs. These Standards were adopted by the U.S. Access Board in 2017 after a five-year review period that included an Advisory Committee, composed of representatives from the health care industry, architects, persons with disabilities, and organizations representing a variety of interested stakeholders. The Standards were developed after extensive notice-and-comment. The development of these standards was required by Section 510 of the Rehabilitation Act of 1973, as amended, and were developed with the participation of the Food and Drug Administration. They have gained wide recognition in the United States. The Department is unaware of any privately developed standards created with the same wide participation and open process. As a result, the Department believes that it is appropriate to use these Standards for its section 504 rule.
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The Department is proposing to adopt the Web Content Accessibility Guidelines 2.1 Level AA as the accessibility standard to apply to web content and mobile apps of recipients. WCAG 2.1 was developed by the W3C®, which has been the principal international organization involved in developing protocols and guidelines for the web. The W3C® develops a variety of technical standards and guidelines, including ones relating to privacy, internationalization of technology, and accessibility. Thus, the Department believes it is complying with the NTTAA in selecting WCAG 2.1 as the applicable accessibility standard.
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Note that this question is similar to the questions asked in “Web Accessibility Question 4.”
Pursuant to E.O. 12250, the Attorney General has the responsibility to “review . . . proposed rules . . . of the Executive agencies” implementing nondiscrimination statutes such as section 504 “in order to identify those which are inadequate, unclear or unnecessarily inconsistent.”
The Department proposes that the effective date be 60 days after publication of the Final Rule.
The Department seeks comment on all issues raised by the proposed regulation.
Adoption and foster care, Civil rights, Childcare, Child welfare, Colleges and universities, Communications, Disabled, Discrimination, Emergency medical services, Equal access to justice, Federal financial assistance, Grant programs, Grant programs—health, Grant programs—social programs, Health, Health care, Health care access, Health facilities, Health programs and activities, Individuals with disabilities, Integration, Long term care, Medical care, Medical equipment, Medical facilities, Nondiscrimination, Public health.
For the reasons set forth in the preamble, the Department of Health and Human Services proposes to amend 45 CFR part 84 as follows:
29 U.S.C. 794.
Subpart G also issued under 21 U.S.C. 1174; 42 U.S.C. 4581.
(a)
(b)
(a) This part applies to each recipient of Federal financial assistance from the Department and to the recipient's programs or activities that involve individuals with disabilities in the United States. This part does not apply to the recipient's programs or activities outside the United States that do not involve individuals with disabilities in the United States.
(b) The requirements of this part do not apply to the ultimate beneficiaries of any program or activity operated by a recipient of Federal financial assistance.
(c) Any provision of this part held to be invalid or unenforceable by its terms, or as applied to any person or circumstance, shall be construed so as to continue to give maximum effect to the provision permitted by law, unless such holding shall be one of utter invalidity or unenforceability, in which event the provision shall be severable from this part and shall not affect the remainder thereof or the application of the provision to other persons not similarly situated or to other dissimilar circumstances.
This part does not invalidate or limit the remedies, rights, and procedures of any other Federal laws, or State or local laws (including State common law) that provide greater or equal protection for the rights of individuals with disabilities, or individuals associated with them.
(a)
(i) A physical or mental impairment that substantially limits one or more of the major life activities of such individual;
(ii) A record of such an impairment; or
(iii) Being regarded as having such an impairment as described in paragraph (f) of this section.
(2)
(ii) An individual may establish coverage under any one or more of the three prongs of the definition of “disability” in paragraph (a)(1) of this section, the “actual disability” prong in paragraph (a)(1)(i) of this section, the “record of” prong in paragraph (a)(1)(ii) of this section, or the “regarded as” prong in paragraph (a)(1)(iii) of this section.
(iii) Where an individual is not challenging a recipient's failure to provide reasonable modifications, it is generally unnecessary to proceed under the “actual disability” or “record of” prongs, which require a showing of an impairment that substantially limits a major life activity or a record of such an impairment. In these cases, the evaluation of coverage can be made solely under the “regarded as” prong of the definition of disability, which does not require a showing of an impairment that substantially limits a major life activity or a record of such an impairment. An individual may choose, however, to proceed under the “actual disability” or “record of” prong regardless of whether the individual is challenging a recipient's failure to provide reasonable modifications.
(b)
(ii) Any mental or psychological disorder such as intellectual disability, organic brain syndrome, emotional or mental illness, and specific learning disability.
(2)
(3) Physical or mental impairment does not include homosexuality or bisexuality.
(c)
(i) Caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, sitting, reaching, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, writing, communicating, interacting with others, and working; and
(ii) The operation of a major bodily function, such as the functions of the immune system, special sense organs and skin, normal cell growth, and digestive, genitourinary, bowel, bladder, neurological, brain, respiratory, circulatory, cardiovascular, endocrine, hemic, lymphatic, musculoskeletal, and reproductive systems. The operation of a major bodily function includes the operation of an individual organ within a body system.
(2)
(ii) Whether an activity is a major life activity is not determined by reference to whether it is of central importance to daily life.
(d)
(i) The term “substantially limits” shall be construed broadly in favor of expansive coverage, to the maximum extent permitted by the terms of section 504. “Substantially limits” is not meant to be a demanding standard.
(ii) The primary object of attention in cases brought under section 504 should be whether recipients have complied with their obligations and whether discrimination has occurred, not the extent to which an individual's impairment substantially limits a major life activity. Accordingly, the threshold issue of whether an impairment substantially limits a major life activity should not demand extensive analysis.
(iii) An impairment that substantially limits one major life activity does not need to limit other major life activities to be considered a substantially limiting impairment.
(iv) An impairment that is episodic or in remission is a disability if it would substantially limit a major life activity when active.
(v) An impairment is a disability within the meaning of this part if it substantially limits the ability of an individual to perform a major life activity as compared to most people in the general population. An impairment does not need to prevent, or significantly or severely restrict, the individual from performing a major life activity to be considered substantially limiting. Nonetheless, not every impairment will constitute a disability within the meaning of this section.
(vi) The determination of whether an impairment substantially limits a major life activity requires an individualized assessment. However, in making this assessment, the term “substantially limits” shall be interpreted and applied to require a degree of functional limitation that is lower than the standard for substantially limits applied prior to the ADAAA.
(vii) The comparison of an individual's performance of a major life activity to the performance of the same major life activity by most people in the general population usually will not require scientific, medical, or statistical evidence. Nothing in this paragraph (d)(1) is intended, however, to prohibit or limit the presentation of scientific, medical, or statistical evidence in making such a comparison where appropriate.
(viii) The determination of whether an impairment substantially limits a major life activity shall be made without regard to the ameliorative effects of mitigating measures. However, the ameliorative effects of ordinary eyeglasses or contact lenses shall be considered in determining whether an impairment substantially limits a major life activity. Ordinary eyeglasses or contact lenses are lenses that are intended to fully correct visual acuity or to eliminate refractive error.
(ix) The six-month “transitory” part of the “transitory and minor” exception in paragraph (f)(2) of this section does not apply to the “actual disability” or “record of” prongs of the definition of “disability.” The effects of an impairment lasting or expected to last less than six months can be substantially limiting within the meaning of this section for establishing an actual disability or a record of a disability.
(2)
(ii) Applying these principles, the individualized assessment of some types of impairments as set forth in paragraph (d)(2)(iii) of this section will, in virtually all cases, result in a determination of coverage under paragraph (a)(1)(i) of this section (the “actual disability” prong) or paragraph (a)(1)(ii) of this section (the “record of” prong). Given their inherent nature, these types of impairments will, as a factual matter, virtually always be found to impose a substantial limitation on a major life activity. Therefore, with respect to these types of impairments, the necessary individualized assessment should be particularly simple and straightforward.
(iii) For example, applying these principles it should easily be concluded that the types of impairments set forth in paragraphs (d)(2)(iii)(A) through (K) of this section will, at a minimum, substantially limit the major life activities indicated. The types of impairments described in this paragraph may substantially limit additional major life activities (including major bodily functions) not explicitly listed in paragraphs (d)(2)(iii)(A) through (K).
(A) Deafness substantially limits hearing;
(B) Blindness substantially limits seeing;
(C) Intellectual disability substantially limits brain function;
(D) Partially or completely missing limbs or mobility impairments requiring the use of a wheelchair substantially limit musculoskeletal function;
(E) Autism Spectrum Disorder substantially limits brain function;
(F) Cancer substantially limits normal cell growth;
(G) Cerebral palsy substantially limits brain function;
(H) Diabetes substantially limits endocrine function;
(I) Epilepsy, muscular dystrophy, and multiple sclerosis each substantially limits neurological function;
(J) Human Immunodeficiency Virus (HIV) infection substantially limits immune function; and
(K) Major depressive disorder, bipolar disorder, post-traumatic stress disorder, traumatic brain injury, obsessive compulsive disorder, and schizophrenia each substantially limits brain function.
(3)
(ii) Consideration of facts such as condition, manner, or duration may include, among other things, consideration of the difficulty, effort or time required to perform a major life activity; pain experienced when performing a major life activity; the length of time a major life activity can be performed; or the way an impairment affects the operation of a major bodily function. In addition, the non-ameliorative effects of mitigating measures, such as negative side effects of medication or burdens associated with following a particular treatment regimen, may be considered when determining whether an individual's impairment substantially limits a major life activity.
(iii) In determining whether an individual has a disability under the “actual disability” or “record of” prongs of the definition of “disability,” the focus is on how a major life activity is substantially limited, and not on what outcomes an individual can achieve. For
(iv) Given the rules of construction set forth in this section, it may often be unnecessary to conduct an analysis involving most or all of the facts related to condition, manner, or duration. This is particularly true with respect to impairments such as those described in paragraph (d)(2)(iii) of this section, which by their inherent nature should be easily found to impose a substantial limitation on a major life activity, and for which the individualized assessment should be particularly simple and straightforward.
(4)
(i) Medication, medical supplies, equipment, appliances, low-vision devices (defined as devices that magnify, enhance, or otherwise augment a visual image, but not including ordinary eyeglasses or contact lenses), prosthetics including limbs and devices, hearing aid(s) and cochlear implant(s) or other implantable hearing devices, mobility devices, and oxygen therapy equipment and supplies;
(ii) Use of assistive technology;
(iii) Reasonable modifications or auxiliary aids or services as defined in this part;
(iv) Learned behavioral or adaptive neurological modifications; or
(v) Psychotherapy, behavioral therapy, or physical therapy.
(e)
(2)
(3)
(f)
(1) Except as set forth in paragraph (f)(2) of this section, an individual is “regarded as having such an impairment” if the individual is subjected to a prohibited action because of an actual or perceived physical or mental impairment, whether or not that impairment substantially limits, or is perceived to substantially limit, a major life activity, even if the recipient asserts, or may or does ultimately establish, a defense to the action prohibited by section 504.
(2) An individual is not “regarded as having such an impairment” if the recipient demonstrates that the impairment is, objectively, both “transitory” and “minor.” A recipient may not defeat “regarded as” coverage of an individual simply by demonstrating that it subjectively believed the impairment was transitory and minor; rather, the recipient must demonstrate that the impairment is (in the case of an actual impairment) or would be (in the case of a perceived impairment), objectively, both “transitory” and “minor.” For purposes of this section, “transitory” is defined as lasting or expected to last six months or less.
(3) Establishing that an individual is “regarded as having such an impairment” does not, by itself, establish liability. Liability is established under section 504 only when an individual proves that a recipient discriminated on the basis of disability within the meaning of section 504.
(g)
(1) Transvestism, transsexualism, pedophilia, exhibitionism, voyeurism, gender identity disorders not resulting from physical impairments, or other sexual behavior disorders;
(2) Compulsive gambling, kleptomania, or pyromania; or
(3) Psychoactive substance use disorders resulting from current illegal use of drugs.
A recipient shall make available to employees, applicants, participants, beneficiaries, and other interested persons information regarding the provisions of this part and its applicability to the programs or activities of the recipient, and make such information available to them in such manner as the head of the recipient or his or her designee finds necessary to apprise such persons of the protections against discrimination assured them by section 504 and this part.
The additions and revisions read as follows:
(1) Is maintained exclusively for reference, research, or recordkeeping;
(2) Is not altered or updated after the date of archiving; and
(3) Is organized and stored in a dedicated area or areas clearly identified as being archived.
(1) Qualified interpreters on-site or through video remote interpreting (VRI) services; notetakers; real-time computer-aided transcription services; written materials; exchange of written notes; telephone handset amplifiers; assistive listening devices; assistive listening systems; telephones compatible with hearing aids; closed caption decoders; open and closed captioning, including real-time captioning; voice, text, and video-based telecommunications products and systems, including text telephones (TTYs), videophones, and captioned telephones, or equally effective telecommunications devices; videotext displays; accessible electronic and information technology; or other effective methods of making aurally delivered information available to individuals who are deaf or hard of hearing;
(2) Qualified readers; taped texts; audio recordings; Braille materials and displays; screen reader software; magnification software; optical readers; secondary auditory programs (SAP); large print materials; accessible electronic and information technology; or other effective methods of making visually delivered materials available to individuals who are blind or have low vision;
(3) Acquisition or modification of equipment or devices; and
(4) Other similar services and actions.
(1) Except as provided in paragraph (2) of this definition, a significant risk to the health or safety of others that cannot be eliminated by a modification of policies, practices, or procedures, or by the provision of auxiliary aids or services as provided in § 84.75.
(2) With respect to employment as provided in § 84.12, the term as defined by the Equal Employment Opportunity Commission's regulation implementing title I of the Americans with Disabilities Act of 1990, at 29 CFR 1630.2(r).
(1) Except as provided in paragraph (2) of this definition, the definition of
(2) With respect to employment, the definition of
(1) Funds;
(2) Services of Federal personnel;
(3) Real and personal property or any interest in or use of such property, including:
(i) Transfers or leases of such property for less than fair market value or for reduced consideration; and
(ii) Proceeds from a subsequent transfer or lease of such property if the Federal share of its fair market value is not returned to the Federal Government;
(4) Any other thing of value by way of grant, loan, contract, or cooperative agreement.
(1)(i) A department, agency, special purpose district, or other instrumentality of a State or of a local government; or
(ii) The entity of such State or local government that distributes such assistance and each such department or agency (and each other State or local government entity) to which the assistance is extended, in the case of assistance to a State or local government;
(2)(i) A college, university, or other postsecondary institution, a public system of higher education; or
(ii) A local educational agency (as defined in 20 U.S.C. 7801), system of career and technical education, or other school system;
(3)(i) An entire corporation, partnership, or other private organization, or an entire sole proprietorship—
(A) If assistance is extended to such corporation, partnership, private organization, or sole proprietorship as a whole; or
(B) Which is principally engaged in the business of providing education, health care, housing, social services, or parks and recreation; or
(ii) The entire plant or other comparable, geographically separate facility to which Federal financial assistance is extended, in the case of any other corporation, partnership, private organization, or sole proprietorship; or
(4) Any other entity which is established by two or more of the entities described in paragraph (1), (2), or (3) of this definition.
(1) Except as provided in paragraphs (2), (3), and (4) of this definition, an individual with a disability who, with or without reasonable modifications to rules, policies, or practices, the removal of architectural, communication, or transportation barriers, or the provision of auxiliary aids and services, meets the essential eligibility requirements for the receipt of services or the participation in programs or activities provided by a recipient; and
(2) With respect to employment, an individual with a disability who meets the definition of “qualified” in the Equal Employment Opportunity Commission's regulation implementing title I of the Americans with Disabilities Act of 1990, 29 CFR 1630.2(m).
(3) With respect to childcare, preschool, elementary, secondary, or adult educational services, a person with a disability—
(i) Of an age during which nondisabled persons are provided such services;
(ii) Of any age during which it is mandatory under State law to provide such services to persons with a disability; or
(iii) To whom a State is required to provide a free appropriate public education under the Individuals with Disabilities Education Act; and
(4) With respect to postsecondary and career and technical education services, a person with a disability who with or without reasonable modifications to policies, practices, or procedures, or the provision of auxiliary aids and services, meets the academic and technical requirements for receipt of services or the participation in the recipient's program or activity;
(a) No qualified individual with a disability shall, on the basis of disability, be subjected to discrimination in employment under any program or activity receiving Federal financial assistance from the Department.
(b) The standards used to determine whether paragraph (a) of this section has been violated shall be the standards applied under title I of the Americans with Disabilities Act of 1990 (ADA), 42 U.S.C. 12111
Except as otherwise provided in § 84.22, no qualified individual with a disability shall, because a recipient's facilities are inaccessible to or unusable by individuals with disabilities, be excluded from participation in, or be denied the benefits of the programs or activities of a recipient, or be subjected to discrimination by any recipient.
The revisions and addition read as follows:
(a)
(1) Necessarily require a recipient to make each of its existing facilities accessible to and usable by individuals with disabilities; or
(2) Require a recipient to take any action that it can demonstrate would result in a fundamental alteration in the nature of a program or activity or undue financial and administrative burdens. In those circumstances where a recipient's personnel believe that the proposed action would fundamentally alter the program or activity or would result in undue financial and administrative burdens, the recipient has the burden of proving that compliance with this paragraph (a) would result in such an alteration or burdens The decision that compliance would result in such alteration or burdens must be made by the head of the recipient or their designee after considering all the recipient's resources available for use in the funding and operation of the program or activity and must be accompanied by a written statement of the reasons for reaching that conclusion. If an action would result in such an alteration or such burdens, the recipient shall take any other action that would not result in such an alteration or such burdens but would nevertheless ensure that individuals with disabilities receive the benefits or services provided by the recipient.
(b)
(g)
(a)
(b)
(c)
(2) If physical construction or alterations commenced after June 3, 1977, but before January 18, 1991, then construction and alterations subject to this section shall be deemed in compliance with this section if they meet the requirements of the ANSI Standards (ANSI A117.1-1961(R1971) (ANSI). Departures from particular requirements of ANSI by the use of other methods are permitted when it is clearly evident that equivalent access to the facility or part of the facility is provided.
(3) If physical construction or alterations commence on or after January 18, 1991, but before [EFFECTIVE DATE OF FINAL RULE], then new construction and alterations subject to this section shall be deemed in compliance with this section if they meet the requirements of the Uniform Federal Accessibility Standards (UFAS). Departures from particular requirements of UFAS by the use of other methods shall be permitted when it is clearly evident that equivalent access to the facility or part of the facility is thereby provided.
(4) For physical construction or alterations that commence on or after [EFFECTIVE DATE OF FINAL RULE] but before [DATE ONE YEAR FROM PUBLICATION DATE OF FINAL RULE IN THE
(5) If physical construction or alterations commence on or after [DATE ONE YEAR FROM PUBLICATION DATE OF FINAL RULE IN THE
(6) For the purposes of this section, ceremonial groundbreaking or razing of structures prior to site preparation do not commence physical construction or alterations.
(d)
(2) New construction and alterations subject to this section shall comply with ANSI if the date when the last application for a building permit or permit extension is certified to be complete by a State, county, or local government or, in those jurisdictions where the government does not certify completion of applications, if the date when the last application for a building permit or permit extension is received by the State, county, or local government between June 3, 1977 and January 18, 1991, or if no permit is required, if the start of physical construction or alterations occurs between June 3, 1977 and January 18, 1991.
(3) New construction and alterations subject to this section shall comply with UFAS if the date when the last application for a building permit or permit extension is certified to be complete by a State, county, or local government (or, in those jurisdictions where the government does not certify completion of applications, if the date when the last application for a building permit or permit extension is received by the State, county, or local government) is on or after January 18, 1991, and before [EFFECTIVE DATE OF FINAL RULE], or if no permit is required, if the start of physical construction or alterations occurs on or after January 18, 1991, and before [EFFECTIVE DATE OF FINAL RULE].
(4) New construction and alterations subject to this section shall comply either with UFAS or the 2010 Standards if the date when the last application for a building permit or permit extension is certified to be complete by a State, county, or local government (or, in those jurisdictions where the government does not certify completion of applications, if the date when the last application for a building permit or permit extension is received by the State, county, or local government) is on or after [EFFECTIVE DATE OF FINAL RULE], and before [DATE ONE YEAR FROM PUBLICATION DATE OF FINAL RULE IN THE
(5) New construction and alterations subject to this section shall comply with the 2010 Standards if the date when the last application for a building permit or permit extension is certified to be complete by a State, county, or local
(6) For the purposes of this section, ceremonial groundbreaking or razing of structures prior to site preparation do not commence physical construction or alterations.
(e)
(2) Newly constructed or altered facilities or elements covered by paragraph (a) or (b) of this section that were constructed or altered on or after January 18, 1991 and before [DATE ONE YEAR FROM PUBLICATION DATE OF FINAL RULE IN THE
(3) Newly constructed or altered facilities or elements covered by paragraph (a) or (b) of this section that were constructed or altered before [DATE ONE YEAR FROM PUBLICATION DATE OF FINAL RULE IN THE
(f)
(g)
(h)
Subpart D applies to childcare, preschool, elementary and secondary, and adult education programs or activities that receive Federal financial assistance and to recipients that operate, or that receive Federal financial assistance for the operation of, such programs or activities.
A recipient to which this subpart applies that provides childcare, preschool, elementary and secondary, or adult education may not, on the basis of disability, exclude qualified individuals with disabilities and shall take into account the needs of such persons in determining the aids, benefits, or services to be provided.
A recipient to which this subpart applies that operates a general hospital or outpatient facility may not discriminate in admission or treatment against an individual with a substance or alcohol use disorder or individual with an alcohol use disorder who is suffering from a medical condition, because of the person's drug or alcohol use disorder.
A recipient to which this subpart applies and that provides aids, benefits, or services to persons who are institutionalized because of disability shall ensure that each qualified individual with disabilities, as defined in § 84.10, in its program or activity is provided an appropriate education, consistent with the Department of Education section 504 regulations at 34 CFR 104.33(b). Nothing in this section shall be interpreted as altering in any way the obligations of recipients under subpart D of this part.
(a)
(b)
(1)
(i) Bias or stereotypes about a patient's disability;
(ii) Judgments that the individual will be a burden on others due to their disability, including, but not limited to caregivers, family, or society; or
(iii) A belief that the life of a person with a disability has lesser value than the life of a person without a disability, or that life with a disability is not worth living.
(2)
(3)
(c)
(ii) These circumstances include those in which the recipient typically declines to provide the treatment to any individual, or reasonably determines based on current medical knowledge or the best available objective evidence that such medical treatment is not clinically appropriate for a particular individual. The criteria in paragraphs (b)(1)(i) through (iii) of this section are not a legitimate nondiscriminatory reason for denying or limiting medical treatment and may not be a basis for a determination that an individual is not qualified for the treatment, or that a treatment is not clinically appropriate for a particular individual.
(2)
(ii) Nothing in this section allows a recipient to discriminate against a qualified individual with a disability on the basis of disability in seeking to obtain consent from an individual or their authorized representative for the recipient to provide, withhold, or withdraw treatment.
(3)
A recipient shall not, directly or through contractual, licensing, or other arrangements, use any measure, assessment, or tool that discounts the value of life extension on the basis of disability to deny or afford an unequal opportunity to qualified individuals with disabilities with respect to the eligibility or referral for, or provision or withdrawal of any aid, benefit, or service, including the terms or conditions under which they are made available.
(a)
(2) Under the prohibition set forth in the previous subsection, discrimination includes:
(i) Decisions based on speculation, stereotypes, or generalizations that a parent, caregiver, foster parent, or prospective parent, because of a disability, cannot safely care for a child; and
(ii) Decisions based on speculation, stereotypes, or generalizations about a child with a disability.
(b)
(1) Deny a qualified parent with a disability custody or control of, or visitation to, a child;
(2) Deny a qualified parent with a disability an opportunity to participate in or benefit from reunification services is equal to that afforded to persons without disabilities;
(3) Terminate the parental rights or legal guardianship of a qualified individual with a disability; or
(4) Deny a qualified caregiver, foster parent, companion, or prospective parent with a disability the opportunity to participate in or benefit from child welfare programs and activities.
(c)
(a) No qualified individual with a disability shall, solely on the basis of disability, be excluded from participation in or be denied the benefits of the programs or activities of a recipient, or be subjected to discrimination by any recipient.
(b)(1) A recipient, in providing any aid, benefit, or service, may not, directly or through contractual, licensing, or other arrangements, on the basis of disability—
(i) Deny a qualified individual with a disability the opportunity to participate in or benefit from the aid, benefit, or service;
(ii) Afford a qualified individual with a disability an opportunity to participate in or benefit from the aid, benefit, or service that is not equal to that afforded others.
(iii) Provide a qualified individual with a disability an aid, benefit, or service that is not as effective in affording equal opportunity to obtain the same result, to gain the benefit or to reach the same level of achievement as that provided to others.
(iv) Provide different or separate aids, benefits, or services to individuals with disabilities or to any class of individuals with disabilities than is provided to others unless such action is necessary to provide qualified individuals with disabilities with aids, benefits, or services that are as effective as those provided to others;
(v) Aid or perpetuate discrimination against a qualified individual with a disability by providing significant assistance to an agency, organization, or person that discriminates on the basis of disability in providing any aid, benefit, or service to beneficiaries of the recipient's program;
(vi) Deny a qualified individual with a disability the opportunity to participate as a member of planning or advisory boards;
(vii) Otherwise limit a qualified individual with a disability in the enjoyment of any right, privilege, advantage, or opportunity enjoyed by others receiving the aid, benefit, or service.
(2) A recipient may not deny a qualified individual with a disability the opportunity to participate in programs or activities that are not separate or different, despite the existence of permissibly separate or different programs or activities.
(3) A recipient may not, directly or through contractual or other arrangements, utilize criteria or methods of administration—
(i) That have the effect of subjecting qualified individuals with disabilities to discrimination on the basis of disability;
(ii) That have the purpose or effect of defeating or substantially impairing accomplishment of the objectives of the recipient's program with respect to individuals with disabilities; or
(iii) That perpetuate the discrimination of another recipient if both recipients are subject to common administrative control or are agencies of the same state.
(4) A recipient may not, in determining the site or location of a facility, make selections—
(i) That have the effect of excluding individuals with disabilities from, denying them the benefits of, or otherwise subjecting them to discrimination; or
(ii) That have the purpose or effect of defeating or substantially impairing the accomplishment of the objectives of the program or activity with respect to individuals with disabilities.
(5) A recipient, in the selection of procurement contractors, may not use criteria that subject qualified individuals with disabilities to discrimination on the basis of disability.
(6) A recipient may not administer a licensing or certification program in a manner that subjects qualified individuals with disabilities to discrimination on the basis of disability, nor may a recipient establish requirements for the programs or activities of licensees or certified entities that subject qualified individuals with disabilities to discrimination on the basis of disability. The programs or activities of entities that are licensed or certified by the recipient are not, themselves, covered by this part.
(7)(i) A recipient shall make reasonable modifications in policies, practices, or procedures when such modifications are necessary to avoid discrimination on the basis of disability, unless the recipient can demonstrate that making the modifications would fundamentally alter the nature of the program or activity.
(ii) A recipient is not required to provide a reasonable modification to an individual who meets the definition of
(8) A recipient shall not impose or apply eligibility criteria that screen out or tend to screen out an individual with a disability or any class of individuals with disabilities from fully and equally enjoying any service, program, or activity, unless such criteria can be shown to be necessary for the provision of the program or activity being offered.
(c) Nothing in this part prohibits a recipient from providing benefits, services, or advantages to individuals with disabilities, or to a particular class of individuals with disabilities beyond those required by this part.
(d) A recipient shall administer programs and activities in the most integrated setting appropriate to the needs of qualified individuals with disabilities.
(e)(1) Nothing in this part shall be construed to require an individual with a disability to accept a modification, aid, service, opportunity, or benefit provided under section 504 or this part which such individual chooses not to accept.
(2) Nothing in section 504 or this part authorizes the representative or guardian of an individual with a disability to decline food, water, medical treatment, or medical services for that individual.
(f) A recipient may not place a surcharge on a particular individual with a disability or any group of individuals with disabilities to cover the costs of measures, such as the provision of auxiliary aids or program accessibility, that are required to provide that individual or group with the nondiscriminatory treatment required by section 504 or this part.
(g) A recipient shall not exclude or otherwise deny equal programs or activities to an individual or entity because of the known disability of an individual with whom the individual or entity is known to have a relationship or association.
(h) A recipient may impose legitimate safety requirements necessary for the safe operation of its programs or activities. However, the recipient must ensure that its safety requirements are based on actual risks, not on mere speculation, stereotypes, or generalizations about individuals with disabilities.
(i) Nothing in this part shall provide the basis for a claim that an individual without a disability was subject to discrimination because of a lack of disability, including a claim that an individual with a disability was granted a reasonable modification that was denied to an individual without a disability.
(a)
(2) A recipient shall not discriminate on the basis of illegal use of drugs against an individual who is not engaging in current illegal use of drugs and who—
(i) Has successfully completed a supervised drug rehabilitation program or has otherwise been rehabilitated successfully;
(ii) Is participating in a supervised rehabilitation program; or
(iii) Is erroneously regarded as engaging in such use.
(b)
(2) A drug rehabilitation or treatment program may deny participation to individuals who engage in illegal use of drugs while they are in the program.
(c)
(2) Nothing in paragraph (c) of this section shall be construed to encourage, prohibit, restrict, or authorize the conduct of testing for the illegal use of drugs.
(a) A recipient shall maintain in operable working condition those features of facilities and equipment that are required to be readily accessible to and usable by persons with disabilities by section 504 or this part.
(b) This section does not prohibit isolated or temporary interruptions in service or access due to maintenance or repairs.
(c) For a recipient, if the 2010 Standards reduce the technical requirements or the number of required accessible elements below the number required by UFAS, the technical requirements or the number of accessible elements in a facility subject to this part may be reduced in accordance with the requirements of the 2010 Standards.
(a) A recipient shall not discriminate against any individual because that individual has opposed any act or practice made unlawful by this part, or because that individual made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under section 504 or this part.
(b) A recipient shall not coerce, intimidate, threaten, or interfere with any individual in the exercise or enjoyment of, or on account of their having exercised or enjoyed, or on account of their having aided or encouraged any other individual in the exercise or enjoyment of any right granted or protected by section 504 or this part.
This part does not require a recipient to provide to individuals with disabilities personal devices, such as wheelchairs; individually prescribed devices, such as prescription eyeglasses or hearing aids; readers for personal use or study; or services of a personal nature including assistance in eating, toileting, or dressing.
(a)
(b)
(1) The animal is out of control and the animal's handler does not take effective action to control it; or
(2) The animal is not housebroken.
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(2)
(i) The type, size, and weight of the miniature horse and whether the facility can accommodate these features;
(ii) Whether the handler has sufficient control of the miniature horse;
(iii) Whether the miniature horse is housebroken; and
(iv) Whether the miniature horse's presence in a specific facility compromises legitimate safety requirements that are necessary for safe operation.
(3)
(a)
(b)
(2)
(i) The type, size, weight, dimensions, and speed of the device;
(ii) The facility's volume of pedestrian traffic (which may vary at different times of the day, week, month, or year);
(iii) The facility's design and operational characteristics,
(iv) Whether legitimate safety requirements can be established to permit the safe operation of the other power-driven mobility device in the specific facility;
(v) Whether the use of the other power-driven mobility device creates a substantial risk of serious harm to the immediate environment or natural or cultural resources, or poses a conflict with Federal land management laws and regulations; and
(c)
(2)
(a) This part does not require a recipient to permit an individual to participate in or benefit from the programs or activities of that recipient when that individual poses a direct threat.
(b) Except as provided in paragraph (c) of this section, in determining whether an individual poses a direct threat, a recipient must make an individualized assessment, based on reasonable judgment that relies on current medical knowledge or on the best available objective evidence, to ascertain: the nature, duration, and severity of the risk; the probability that the potential injury will actually occur; and whether reasonable modifications of policies, practices, or procedures or the provision of auxiliary aids or services will mitigate the risk.
(c) In determining whether an individual poses a direct threat in employment, the recipient must make an individualized assessment according to the Equal Employment Opportunity Commission's regulation implementing title I of the Americans with Disabilities Act of 1990, at 29 CFR 1630.2(r).
(a)
(b)
(c)
(d)
(1) Establishing or applying policies or practices that limit or condition individuals with disabilities' access to the most integrated setting appropriate to their needs;
(2) Providing greater benefits or benefits under more favorable terms in segregated settings than in integrated settings;
(3) Establishing or applying more restrictive rules and requirements for individuals with disabilities in integrated settings than for individuals with disabilities in segregated settings; or
(4) Failure to provide community-based services that results in institutionalization or serious risk of institutionalization. This category includes, but is not limited to planning, service system design, funding, or service implementation practices that result in institutionalization or serious risk of institutionalization. Individuals with disabilities need not wait until the harm of institutionalization or segregation occurs to assert their right to avoid unnecessary segregation.
(e)
(a)(1) A recipient shall take appropriate steps to ensure that communications with applicants, participants, members of the public, and companions with disabilities are as effective as communications with others.
(2) For purposes of this section, “companion” means a family member, friend, or associate of an individual seeking access to a program or activity of a recipient, who, along with such individual, is an appropriate person with whom the recipient should communicate.
(b)(1) The recipient shall furnish appropriate auxiliary aids and services where necessary to afford qualified individuals with disabilities, including applicants, participants, beneficiaries, companions, and members of the public, an equal opportunity to participate in, and enjoy the benefits of, a program or activity of a recipient.
(2) The type of auxiliary aid or service necessary to ensure effective communication will vary in accordance with the method of communication used by the individual; the nature, length, and complexity of the communication involved; and the context in which the communication is taking place. In determining what types of auxiliary aids and services are necessary, a recipient shall give primary consideration to the requests of individuals with disabilities. In order to be effective, auxiliary aids and services must be provided in accessible formats, in a timely manner, and in such a way as to protect the privacy and independence of the individual with a disability.
(c)(1) A recipient shall not require an individual with a disability to bring another individual to interpret for him or her.
(2) A recipient shall not rely on an adult accompanying an individual with a disability to interpret or facilitate communication except—
(i) In an emergency involving an imminent threat to the safety or welfare of an individual or the public where there is no interpreter available; or
(ii) When the individual with a disability specifically requests that the accompanying adult interpret or facilitate communication, the accompanying adult agrees to provide such assistance, and reliance on that adult for such assistance is appropriate under the circumstances.
(3) A recipient shall not rely on a minor child to interpret or facilitate communication, except in an emergency involving an imminent threat to the safety or welfare of an individual or the public when there is no interpreter available.
(d). When the recipient chooses to provide qualified interpreters via video remote interpreting services (VRI), it shall ensure that it provides—
(1) Real-time, full-motion video and audio over a dedicated high-speed, wide-bandwidth video connection or wireless connection that delivers high-quality video images that do not produce lags, choppy, blurry, or grainy images, or irregular pauses in communication;
(2) A sharply delineated image that is large enough to display the interpreter's face, arms, hands, and fingers, and the participating individual's face, arms, hands, and fingers, regardless of their body position;
(3) A clear, audible transmission of voices; and
(4) Adequate training to users of the technology and other involved individuals so that they may quickly and efficiently set up and operate the VRI.
(a) Where a recipient communicates by telephone with applicants and beneficiaries, text telephones (TTYs) or equally effective telecommunications systems shall be used to communicate with individuals who are deaf or hard of hearing or have speech impairments.
(b) When a recipient uses an automated-attendant system, including, but not limited to, voice mail and messaging, or an interactive voice response system, for receiving and directing incoming telephone calls, that system must provide effective real-time communication with individuals using auxiliary aids and services, including TTYs and all forms of FCC-approved telecommunications relay systems, including internet-based relay systems.
(c) A recipient shall respond to telephone calls from a telecommunications relay service established under title IV of the ADA in the same manner that it responds to other telephone calls.
Telephone emergency services, including 911 services, shall provide
(a) A recipient shall ensure that interested persons, including persons with impaired vision or hearing can obtain information as to the existence and location of accessible services, activities, and facilities.
(b) A recipient shall provide signage at all inaccessible entrances to each of its facilities, directing users to an accessible entrance or to a location at which they can obtain information about accessible facilities. The international symbol for accessibility shall be used at each accessible entrance of a facility.
This subpart does not require a recipient to take any action that it can demonstrate would result in a fundamental alteration in the nature of a program or activity or undue financial and administrative burdens. In those circumstances where a recipient's personnel believe that the proposed action would fundamentally alter the program or activity or would result in undue financial and administrative burdens, the recipient has the burden of proving that compliance with this subpart would result in such alteration or burdens. The decision that compliance would result in such alteration or burdens must be made by the head of the recipient or their designee after considering all the recipient's resources available for use in the funding and operation of the program or activity and must be accompanied by a written statement of reasons for reaching that conclusion. If an action required to comply with this part would result in such an alteration or such burdens, the recipient shall take any other action that would not result in such an alteration or such burdens but would nevertheless ensure that, to the maximum extent possible, individuals with disabilities receive the benefits or services provided by the recipient.
This subpart applies to all programs or activities that receive Federal financial assistance from the Department.
No qualified individual with a disability shall, on the basis of disability, be excluded from participation in, be denied the benefits of, or otherwise be subjected to discrimination under any program or activity of a recipient provided through kiosks.
(a)
(1) Web content that a recipient makes available to members of the public or uses to offer programs or activities to members of the public; and
(2) Mobile apps that a recipient makes available to members of the public or uses to offer programs or activities to members of the public.
(b)
(2) Effective [DATE THREE YEARS AFTER PUBLICATION OF FINAL RULE IN THE
(3) WCAG 2.1 is incorporated by reference into this section with the approval of the Director of the Federal Register under 5 U.S.C. 552(a) and 1 CFR part 51. All approved incorporation by reference (IBR) material is available for inspection at HHS and at the National Archives and Records Administration (NARA). Contact HHS, OCR at: Phone line: (202) 545-4884; Email:
The requirements of § 84.84 do not apply to the following:
(a)
(b)
(c)
(d)
(e)
(1) This exception does not apply if a recipient is on notice that an admitted student with a disability is pre-registered in a specific course offered by a postsecondary institution and that the student, because of a disability, would
(2) This exception does not apply once a recipient is on notice that an admitted student with a disability is enrolled in a specific course offered by a postsecondary institution after the start of the academic term and that the student, because of a disability, would be unable to access the content available on the recipient's password-protected or otherwise secured website for the specific course. In such circumstances, all content available on the recipient's password-protected or otherwise secured website for the specific course must comply with the requirements of § 84.84 within five business days of such notice. New content added throughout the term for the course must also comply with the requirements of § 84.84 at the time it is added to the website.
(f)
(1) This exception does not apply if the recipient is on notice of the following: a student with a disability is pre-registered in a specific class or course offered by an elementary or secondary school and that the student, because of a disability, would be unable to access the content available on the recipient's password-protected or otherwise secured website for the specific class or course. In such circumstances, all content available on the recipient's password-protected or otherwise secured website for the specific class or course must comply with the requirements of § 84.84 by the date the term begins for that class or course. New content added throughout the term for the class or course must also comply with the requirements of § 84.84 at the time it is added to the website.
(2) This exception does not apply if the recipient is on notice of the following: a student is pre-registered in an elementary or secondary school's class or course, the student's parent has a disability, and the parent, because of a disability, would be unable to access the content available on the password-protected or otherwise secured website for the specific class or course. In such circumstances, all content available on the recipient's password-protected or otherwise secured website for the specific class or course must comply with the requirements of § 84.84 by the date the term begins for that class or course. New content added throughout the term for the class or course must also comply with the requirements of § 84.84 at the time it is added to the website.
(3) This exception does not apply once a recipient is on notice of the following: a student with a disability is enrolled in an elementary or secondary school's class or course after the term begins and that the student, because of a disability, would be unable to access the content available on the recipient's password-protected or otherwise secured website for the specific class or course. In such circumstances, all content available on the recipient's password-protected or otherwise secured website for the specific class or course must comply with the requirements of § 84.84 within five business days of such notice. New content added throughout the term for the class or course must also comply with the requirements of § 84.84 at the time it is added to the website.
(4) This exception also does not apply once a recipient is on notice of the following: a student is enrolled in an elementary or secondary school's class or course after the term begins, and the student's parent has a disability, and the parent, because of a disability, would be unable to access the content available on the recipient's password-protected or otherwise secured website for the specific class or course. In such circumstances, all content available on the recipient's password-protected or otherwise secured website for the specific class or course must comply with the requirements of § 84.84 within five business days of such notice. New content added throughout the term for the class or course must also comply with the requirements of § 84.84 at the time it is added to the website.
(g)
(1) About a specific individual, their property, or their account; and
(2) Password-protected or otherwise secured.
(a) A recipient may use conforming alternate versions of websites and web content, as defined by WCAG 2.1, to comply with § 84.84 only where it is not possible to make websites and web content directly accessible due to technical or legal limitations.
(b) WCAG 2.1 is incorporated by reference into this section with the approval of the Director of the
Nothing in this subpart prevents the use of designs, methods, or techniques as alternatives to those prescribed, provided that the alternative designs, methods, or techniques result in substantially equivalent or greater accessibility and usability of the web content or mobile app.
Where a recipient can demonstrate that full compliance with the requirements of § 84.84 would result in a fundamental alteration in the nature of a program or activity or undue financial and administrative burdens, compliance with § 84.84 is required to the extent that it does not result in a fundamental alteration or undue financial and administrative burdens. In those circumstances where personnel of the recipient believe that the proposed action would fundamentally alter the program or activity or would result in undue financial and administrative burdens, a recipient has the burden of proving that compliance with § 84.84 would result in such alteration or burdens. The decision that compliance would result in such alteration or burdens must be made by the head of
This subpart applies to programs or activities that receive Federal financial assistance from the Department and to recipients that operate, or that receive Federal financial assistance for the operation of, such programs or activities.
No qualified individual with a disability shall, on the basis of disability, be excluded from participation in, be denied the benefits of the programs or activities of a recipient offered through or with the use of medical diagnostic equipment (MDE), or otherwise be subjected to discrimination under any program or activity that receives Federal financial assistance because the recipient's MDE is not readily accessible to or usable by persons with disabilities.
(a)
(b)
(2)
(3)
(c)
(1) At least one examination table that meets the Standards for Accessible MDE, if the recipient uses at least one examination table; and
(2) At least one weight scale that meets the Standards for Accessible MDE, if the recipient uses at least one weight scale.
(d)
(e)
(f)
(a)
(1) Necessarily require a recipient to make each of its existing pieces of medical diagnostic equipment accessible to and usable by individuals with disabilities; or
(2) Require a recipient to take any action that it can demonstrate would result in a fundamental alteration in the nature of a program or activity, or in undue financial and administrative burdens. In those circumstances where personnel of the recipient believe that the proposed action would fundamentally alter the program or activity or would result in undue financial and administrative burdens, a recipient has the burden of proving that
(3) A recipient meets its burden of proving that compliance with § 84.92(a) or (c) would result in a fundamental alteration under paragraph (a)(2) of this section if it demonstrates that compliance with § 84.92(a) or (c) would alter diagnostically required structural or operational characteristics of the equipment, and prevent the use of the equipment for its intended diagnostic purpose.
(b)
Recipients must ensure their staff are able to successfully operate accessible MDE, assist with transfers and positioning of individuals with disabilities, and carry out the program access obligation regarding existing MDE.
The procedural provisions applicable to title VI of the Civil Rights Act of 1964 apply to this part. These procedures are found in §§ 80.6 through 80.10 and 45 CFR part 81.