11–6–03 Thursday Vol. 68 No. 215 Nov. 6, 2003

Pages 62731–63010

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1 II Federal Register / Vol. 68, No. 215 / Thursday, November 6, 2003

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2 III

Contents Federal Register Vol. 68, No. 215

Thursday, November 6, 2003

Agriculture Department Fishing Vessels— See Foreign Agricultural Service MADAM CHING et al., 62836 See Forest Service Kentucky Derby Hosiery, 62836 See Rural Telephone Bank McMurray Fabrics Jamesville, Inc., 62836 Reed-Rico, 62836 Army Department Solectron, 62836 See Engineers Corps Sure-Fit, Inc., 62837 W.B. Place, 62837 Centers for Disease Control and Prevention NOTICES Engineers Corps Reports and guidance documents; availability, etc.: NOTICES Diseases transmitted through food supply; annual list, Environmental statements; notice of intent: 62809–62810 Cochiti Dam Outlet Works/Al Black Recreation Area, NM; proposed closure, 62778–62779 Commerce Department See Foreign-Trade Zones Board Environmental Protection Agency See International Trade Administration RULES See National Oceanic and Atmospheric Administration Air quality implementation plans; approval and Commodity Futures Trading Commission promulgation; various States: NOTICES California, 62738–62740 Committees; establishment, renewal, termination, etc.: Missouri; correction, 62869 Technology Advisory Committee, 62776 Superfund program: National oil and hazardous substances contingency Corporation for National and Community Service plan— NOTICES National priorities list update, 62747–62748 Agency information collection activities; proposals, Water programs: submissions, and approvals, 62776–62777 Water quality standards— Arizona; Federal nutrient standards withdrawn, 62740– Defense Department 62744 See Engineers Corps South San Francisco Bay, CA; Federal aquatic life NOTICES water quality criteria for copper and nickel; Agency information collection activities; proposals, withdrawn, 62744–62747 submissions, and approvals, 62777 NOTICES Meetings: Grants and cooperative agreements; availability, etc.: Capabilities for Domestic Response to Terrorist Attacks Solid Waste and Emergency Response Office Internship Involving Weapons of Mass Destruction Advisory Program, 62780–62784 Panel, 62777 Meetings: Defense Policy Board Advisory Committee, 62777–62778 Border 2012 National Coordinators, 62784–62785 U.S. Strategic Command Strategic Advisory Group, 62778 Pesticide, food, and feed additive petitions: Senior Executive Service: BASF Corp., 62798–62807 Defense Threat Reduction Agency Performance Review Pesticide registration, cancellation, etc.: Boards; membership, 62778 Maintenance fees; registrations canceled for non- payment; list, 62785–62798 Drug Enforcement Administration Project XL (eXcellence and Leadership) innovative RULES technologies projects: National Defense Authorization Act: Buncombe County Landfill, NC; Leachate Recirculation/ Federal departments or agencies; sale of chemicals that Gas Recovery (Bioreactor) Project, 62807–62808 could be used in illicit manufacture of controlled substances, 62735–62738 Executive Office of the President See National Drug Control Policy Office Education Department NOTICES Federal Aviation Administration Agency information collection activities; proposals, RULES submissions, and approvals, 62779 Class E5 airspace, 62733–62735 Class E5 airspace; correction, 62735 Employment and Training Administration Class E airspace, 62732 NOTICES PROPOSED RULES Adjustment assistance: Class E airspace, 62758–62763 American Bag Corp., 62831 NOTICES Clayson Knitting Co., Inc., 62831 Aeronautical land-use assurance; waivers: Dana Glacier Vandervell et al., 62831–62836 Monroe Regional Airport, LA, 62864

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Airport noise compatibility program: NOTICES Noise exposure maps— Agency information collection activities; proposals, Indianapolis International Airport, IN; correction, submissions, and approvals, 62765 62869 Trade adjustment assistance; applications, petitions, etc.: Aviation insurance: United Fishermen of Alaska et al., 62766 Premium war risk insurance, 62864–62865 Wild Blueberry Commission of Maine, 62766 Environmental statements; availability, etc.: Mojave Airport, CA; East Kern Airport District launch Foreign-Trade Zones Board site operator license, 62865–62866 NOTICES Meetings: Applications, hearings, determinations, etc.: RTCA, Inc., 62866–62867 Mississippi Nissan North America, Inc.; motor vehicle Federal Communications Commission manufacturing plant, 62767 RULES Forest Service Common carrier services: Telecommunications Act of 1996; implementation— NOTICES Pay telephone reclassification and compensation Meetings: Klamath Provincial Advisory Committee, 62766 provisions, 62751–62757 General Services Administration Federal Deposit Insurance Corporation NOTICES NOTICES Acquisition regulations: Meetings; Sunshine Act, 62808 Diplomatic Pouch Certification and Receipt (OF 253); Federal Emergency Management Agency form cancellation, 62809 RULES Health and Human Services Department Flood insurance; communities eligible for sale: See Centers for Disease Control and Prevention Various States, 62748–62750 See Food and Drug Administration Federal Highway Administration See Health Resources and Services Administration NOTICES See Public Health Service RULES Environmental statements; notice of intent: Privacy Act: Bartow, Cherokee, and Forsyth Counties, GA, 62867 Systems of records, 62750–62751 Federal Railroad Administration Health Resources and Services Administration PROPOSED RULES NOTICES Railroad safety: National Vaccine Injury Compensation Program: Rail freight rolling stock reflectorization, 62941–62969 Petitions received, 62813–62825 Federal Reserve System Homeland Security Department NOTICES See Federal Emergency Management Agency Banks and bank holding companies: Formations, acquisitions, and mergers, 62808–62809 Housing and Urban Development Department Permissible nonbanking activities, 62809 NOTICES Agency information collection activities; proposals, Fish and Wildlife Service submissions, and approvals, 62827–62828 NOTICES Endangered and threatened species: Interior Department Recovery plans— See Fish and Wildlife Service Star cactus, 62828–62829 See Reclamation Bureau Food and Drug Administration International Trade Administration NOTICES NOTICES Agency information collection activities; proposals, Antidumping: submissions, and approvals, 62810 Creatine monohydrate from— Human drugs: China, 62767–62770 Drug products withdrawn from sale for reasons other Cut-to-length carbon-quality steel plate products from— than safety or effectiveness— Korea, 62770–62774 Hyaluronidase for injection, 62810–62811 Freshwater crawfish tail meat from— Medical devices: China, 62774–62775 Premarket approval applications, list; safety and North American Free Trade Agreement (NAFTA); effectiveness summaries availability, 62812–62813 binational panel reviews: Medical Device User Fee and Modernization Act of 2002: Gray portland cement and clinker from— Accredited Persons Inspection Program; list, 62811– Mexico, 62775 62812 Justice Department Foreign Agricultural Service See Drug Enforcement Administration RULES NOTICES Farmers Trade Adjustment Assistance Program Pollution control; consent judgments: Technical corrections, 62731–62732 Alliant Techsystems, Inc., 62829

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Fansteel, Inc., et al., 62829–62830 Rural Telephone Bank Plainwell, Inc. et al., 62830–62831 NOTICES Meetings; Sunshine Act, 62766–62767 Labor Department See Employment and Training Administration Securities and Exchange Commission NOTICES PROPOSED RULES Meetings: Securities: North American Agreement on Labor Cooperation Broker-dealers; alternative net capital requirements, National Advisory Committee, 62831 62871–62907 Short sales, 62973–63009 Maritime Administration Supervised investment bank holding companies, 62909– NOTICES 62939 Coastwise trade laws; administrative waivers: NOTICES BRANDY, 62867 Agency information collection activities; proposals, RUMBOW, 62867–62868 submissions, and approvals, 62839–62840 Investment Company Act of 1940: National Drug Control Policy Office Deregistration applications— NOTICES Vega Capital Corp. et al., 62858–62860 Committees; establishment, renewal, termination, etc.: Meetings; Sunshine Act, 62860 Drug Control Research, Data, and Evaluation Committee, Public Company Accounting Oversight Board: 62837 Auditing and related professional practice standards and Meetings: advisory groups; proposed rules filed, 62860–62861 Drug Free Communities Advisory Commission, 62837 Self-regulatory organizations; proposed rule changes: Pacific Exchange, Inc., 62861–62862 National Oceanic and Atmospheric Administration Pacific Exchange, Inc.; correction, 62869 PROPOSED RULES Applications, hearings, determinations, etc.: Fishery conservation and management: Bear, Stearns & Co. Inc. et al., 62840–62842 West Coast and Western Pacific fisheries— Citigroup Global Markets Inc. et al., 62842–62844 Highy migratory species, 62763–62764 Credit Suisse First Boston LLC et al., 62844–62846 NOTICES Goldman Sachs & Co. et al., 62846–62848 Marine mammals: J.P. Morgan Securities Inc. et al., 62848–62849 Incidental taking; authorization letters, etc.— Lehman Brothers Inc. et al., 62849–62851 Seabrook Station, NH; power plant operations, 62775– Merrill Lynch Investment Managers, L.P., et al., 62851– 62776 62853 Morgan Stanley Investment Advisors Inc. et al., 62853– Nuclear Regulatory Commission 62855 NOTICES U.S.Bancorp Piper Jaffray Inc. et al., 62855–62856 Regulatory guides; issuance, availability, and withdrawal, UBS Securities L.L.C. et al., 62857–62858 62838 Applications, hearings, determinations, etc.: Small Business Administration FirstEnergy Nuclear Operating Co., 62837–62838 NOTICES Agency information collection activities; proposals, Office of National Drug Control Policy submissions, and approvals, 62862 See National Drug Control Policy Office Loan programs: Certified Development Company Loan Program; job Personnel Management Office opportunity requirement, 62862–62863 NOTICES Agency information collection activities; proposals, Social Security Administration submissions, and approvals, 62838–62839 NOTICES Foreign insurance or pensions systems: Public Health Service Norway, 62863 NOTICES National Toxicology Program: State Department Carcinogens Report, Eleventh Edition— NOTICES Agents, substances, mixtures, and exposure Agency information collection activities; proposals, circumstances for listing or delisting, 62825–62827 submissions, and approvals, 62863 Meetings: Reclamation Bureau International Law Advisory Committee, 62863–62864 NOTICES Environmental statements; availability, etc.: Surface Transportation Board Water service contract amendment between U.S.and NOTICES Sacramento Municipal Utility District, CA; canceled, Rail carriers: 62829 Waybill data; release for use, 62868

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Transportation Department Part IV See Federal Aviation Administration Transportation Department, Federal Railroad See Federal Highway Administration Administration, 62941–62969 See Federal Railroad Administration See Maritime Administration Part V See Surface Transportation Board Securities and Exchange Commission, 62973–63009

Reader Aids Separate Parts In This Issue Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, reminders, and notice of recently enacted public laws. Part II Securities and Exchange Commission, 62871–62907 To subscribe to the Federal Register Table of Contents LISTSERV electronic mailing list, go to http:// listserv.access.gpo.gov and select Online mailing list Part III archives, FEDREGTOC-L, Join or leave the list (or change Securities and Exchange Commission, 62909–62939 settings); then follow the instructions.

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CFR PARTS AFFECTED IN THIS ISSUE

A cumulative list of the parts affected this month can be found in the Reader Aids section at the end of this issue.

7 CFR 1580...... 62731 14 CFR 71 (5 documents) ...... 62732, 62733, 62734, 62735 Proposed Rules: 71 (5 documents) ...... 62758, 62759, 62760, 62761, 62762 17 CFR Proposed Rules: 240 (3 documents) ...... 62872, 62910, 62972 242...... 62972 21 CFR 1310...... 62735 40 CFR 52 (2 documents) ...... 62738, 62869 131 (2 documents) ...... 62740, 62744 300...... 62747 44 CFR 64...... 62748 45 CFR 5b...... 62750 47 CFR 64...... 62751 49 CFR Proposed Rules: 224...... 62942 50 CFR Proposed Rules: 660...... 62763

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Rules and Regulations Federal Register Vol. 68, No. 215

Thursday, November 6, 2003

This section of the FEDERAL REGISTER ‘‘Each certification shall specify the date Section 1580.303(d) of the regulation contains regulatory documents having general on which eligibility under this chapter states: ‘‘The total amount of payments applicability and legal effect, most of which begins.’’ The Trade Act authorizes the made under this part to a person during are keyed to and codified in the Code of Department to announce for each any fiscal year when considered with Federal Regulations, which is published under certification the date on which the total amount of counter-cyclical 50 titles pursuant to 44 U.S.C. 1510. eligibility begins not restricted to the payments made in accordance with part The Code of Federal Regulations is sold by date of the Federal Register notice. 1412 of this title for a corresponding the Superintendent of Documents. Prices of Therefore, this flexibility to announce crop year shall not exceed $65,000 per new books are listed in the first FEDERAL an eligibility date other than the date of fiscal year, as determined by the REGISTER issue of each week. publication in the Federal Register, as Administrator.’’ Section 296(a)(2)(B) of currently provided for in the rule, will the Trade Act states: ‘‘The total amount be made available to the Administrator. of payments made to an agricultural DEPARTMENT OF AGRICULTURE Section 1580.203(a)(1) of the producer under this chapter during any regulation states, as a condition for crop year may not exceed the limitation Foreign Agricultural Service adjustment assistance: ‘‘The national on counter-cyclical payments set forth average price for the agricultural in section 1001(c) of the Food Security 7 CFR Part 1580 commodity for the marketing year under Act of 1985.’’ The Trade Act applies the RIN 0551–AA66 review is equal to or less than 80 $65,000 counter-cyclical payment percent of the average of the national limitation on a crop year basis. The final Trade Adjustment Assistance for average prices for the 5 marketing years rule applies the $65,000 limitation on a Farmers preceding the most recent marketing fiscal year basis. To be consistent with year.’’ Section 292(c)(1) of the Trade Act section 1001(c) of the Food Security Act AGENCY: Foreign Agricultural Service, states, as a condition for adjustment of 1985, the $65,000 TAA counter- USDA. assistance: ‘‘that the national average cyclical payment limitation will be ACTION: Technical amendments. price for the agricultural commodity imposed on a crop year basis. * * * produced by the group for the SUMMARY: This final rule makes Corrections to the Final Rule technical corrections to the final rule most recent marketing year for which published on August 20, 2003, the national average price is available is ■ Accordingly, FR Rule Doc. No. implementing the Trade Adjustment less than 80 percent of the average of the 03–21338, as published at 68 FR 50048, Assistance for Farmers (TAA) program. national average price for such August 20, 2003, is corrected by revising agricultural commodity * * * for the 5 sections 1580.102, 1580.203(a)(1), DATES: Effective on November 6, 2003. marketing years preceding the most 1580.302(e) and 1580.303(d) to read as FOR FURTHER INFORMATION CONTACT: recent marketing year.’’ To be consistent follows: Richard Blabey, Director, Import with the Trade Act, the Administrator Policies and Programs Division, Foreign shall certify initial petitions for TAA PART 1580—[CORRECTED] Agricultural Service, 1400 only when the national average price is ■ 1. The authority citation for part 1580 Independence Avenue, SW., STOP less than 80 percent of the average price continues to read as follows: 1021, by e-mail at: for the commodity for the 5 preceding [email protected], marketing years. Authority: 19 U.S.C. 2401. telephone (202) 720–2916, or fax at Section 1580.302(e) of the regulation § 1580.102 [Corrected] (202) 720–0876. states: ‘‘Producers shall be entitled to ■ SUPPLEMENTARY INFORMATION: A final employment services and training 2. In § 1580.102, on page 50050, in the rule implementing the TAA program benefits under trade adjustment second column, the definition for was published on August 20, 2003 (60 assistance for workers managed by the ‘‘Certification date’’ is revised as follows: FR 50048). The rule, which is codified U.S. Department of Labor.’’ Section * * * * * at 7 CFR part 1580, implements Chapter 296(d) of the Trade Act states: ‘‘An Certification date means the effective 6 of Title II of the Trade Act of 1974, agricultural commodity producer date on which the Administrator as amended by subtitle C of Title I of the entitled to receive a cash benefit under announces in the Federal Register or by Trade Act of 2002 (Pub. Law 107–210) this chapter * * * (2) shall be entitled Department news release a certification (19 U.S.C. 2551, et seq.) (the Trade Act). to employment services and training of eligibility to apply for adjustment As published, the final rule contained benefits under part II of subchapter B of assistance. four technical errors or inadvertent chapter 2.’’ The Trade Act authorizes * * * * * omissions. The corrections being made Department of Labor employment ■ 3. Section 1580.203(a)(1), on page are described as follows: services and training benefits to 50051, in the second column, is revised Section 1580.102 of the regulation producers entitled to receive a cash as follows: defines certification date to mean ‘‘the benefit. The final rule offers these date on which the Administrator services and benefits to all TAA § 1580.203 Determination of eligibility and announces in the Federal Register or by applicants. To be consistent with the certification by the Administrator. Department news release, whichever Trade Act, employment services and * * * * * comes first, a certification of eligibility training benefits will be available only (a) * * * to apply for adjustment assistance.’’ to those TAA applicants who are (1) The national average price for the Section 293(a) of the Trade Act states: eligible for cash benefits. agricultural commodity for the

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marketing year under review is less than surface of the earth is needed to contain traffic procedures and air navigation, it 80 percent of the average of the national aircraft executing these approaches. is certified that this rule will not have average prices for the 5 marketing years This action establishes an area of a significant economic impact on a preceding the most recent marketing controlled airspace for Viroqua substantial number of small entities year, and Municipal Airport. under the criteria of the Regulatory * * * * * EFFECTIVE DATE: 0901 UTC, December Flexibility Act. ■ 25, 2003. 4. Section 1580.302(e), on page 50052, List of Subjects in 14 CFR Part 71 in the first column, is revised to read as FOR FURTHER INFORMATION CONTACT: follows: Denis C. Burke, Air Traffic Division, Airspace, Incorporation by reference, Airspace Branch, AGL–520, Federal Navigation (air). § 1580.302 Technical assistance and Aviation Administration, 2300 East services. Devon Avenue, Des Plaines, Illinois Adoption of the Amendment * * * * * 60018, telephone (847) 294–7568. (e) Producers that furnish all ■ In consideration of the foregoing, the SUPPLEMENTARY INFORMATION: certifications required under Federal Aviation Administration § 1580.301(e) shall be entitled to History amends 14 CFR part 71 as follows: employment services and training On Friday, June 20, 2003, the FAA benefits under trade adjustment proposed to amend 14 CFR part 71 to PART 71—DESIGNATION OF CLASS A, assistance for workers managed by the establish Class E airspace at Viroqua, WI CLASS B, CLASS C, CLASS D, AND Department of Labor. (68 FR 36949). The proposal was to CLASS E AIRSPACE AREAS; * * * * * establish controlled airspace extending AIRWAYS; ROUTES; AND REPORTING ■ 5. Section § 1580.303(d), on page upward from 700 feet or more above the POINTS 50052, in the second column, is revised surface of the earth to contain to read as follows: Instrument Flight Rules (IFR) operations ■ 1. The authority citation for part 71 in controlled airspace during portions of continues to read as follows: § 1580.303 Adjustment Assistance Payments. the terminal operation and while Authority: 49 U.S.C. 106(g), 40103, 40113, transmitting between the enroute and 40120; E.O. 10854, 24 FR 95665, 3 CFR, * * * * * terminal environments. 1959–1963 Comp., p. 389. (d) The total amount of payments Interested parties were invited to made under this part to a person during participate in this rulemaking § 71.1 [Amended] any crop year when considered with the proceeding by submitting written ■ 2. The incorporation by reference in 14 total amount of counter-cyclical comments on the proposal to the FAA. payments made in accordance with part No comments objecting to the proposal CFR 71.1 of the Federal Aviation 1412 of this title for a corresponding were received. Class E airspace Administration Order 7300.9L, Airspace crop year shall not exceed $65,000 per designations for airspace areas Designations and Reporting Points, crop year, as determined by the extending upward from 700 feet or more dated September 2, 2003, and effective Administrator. above the surface of the earth are September 16, 2003, is amended as * * * * * publish in paragraph 6005 of FAA Order follows: Signed at Washington, DC on October 27, 7400.9L dated September 2, 2003, and * * * * * 2003. effective September 16, 2003, which is Paragraph 6005 Class E airspace areas incorporated by reference in 14 CFR A. Ellen Terpstra, extending upward from 700 feet or more Administrator, Foreign Agricultural Service. 71.1. The Class E airspace designation above the surface of the earth [FR Doc. 03–27962 Filed 11–5–03; 8:45 am] listed in this document will be published subsequently in the Order. * * * * * BILLING CODE 3410–10–P The Rule AGL WI E5 Viroqua, WI [New] Viroqua Municipal Airport, WI This amendment to 14 CFR part 71 ° ′ ″ ° ′ ″ DEPARTMENT OF TRANSPORTATION establishes Class E airspace at Viroqua, (Lat. 43 34 46 N., long. 90 53 47 W) That airspace extending upward from 700 Federal Aviation Admiration WI, to accommodate aircraft executing instrument flight procedures into and feet above the surface within a 6.4-mile radius of Viroqua Municipal Airport. 14 CFR Part 71 out of Viroqua Municipal Airport. The area will be depicted on appropriate * * * * * [Docket No. FAA–2003–16058; Airspace aeronautical charts. Issued in Des Plaines, Illinois on October Docket No. 03–AGL–06] The FAA has determined that this 9, 2003. regulation only involves an established Nancy B. Shelton, Establishment of Class E Airspace; body of technical regulations for which Viroqua, WI frequent and routine amendments are Manager, Air Traffic Division, Great Lakes Region. AGENCY: Federal Aviation necessary to keep them operationally Administration (FAA), DOT. current. Therefore, this regulation—(1) [FR Doc. 03–27749 Filed 11–5–03; 8:45 am] ACTION: Final rule. is not a ‘‘significant regulatory action’’ BILLING CODE 4910–13–M under Executive Order 12866; (2) is not SUMMARY: This action establishes Class a ‘‘significant rule’’ under DOT E airspace at Viroqua, WI. Area Regulatory Policies and procedures (44 Navigation (RNAV) Standard Instrument FR 11034; February 26, 1979); and (3) Approach Procedures (SIAPS) have does not warrant preparation of a been developed for Viroqua Municipal Regulatory Evaluation as the anticipated Airport. Controlled airspace extending impact is so minimal. Since this is a upward from 700 feet or more above the routine matter that will only affect air

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DEPARTMENT OF TRANSPORTATION keep them operationally current. It, Issued in College Park, Georgia on October therefore, (1) is not a ‘‘significant 10, 2003. Federal Aviation Administration regulatory action’’ under Executive Walter R. Cochran, Order 12866; (2) is not a ‘‘significant Acting Manager, Air Traffic Division, 14 CFR Part 71 rule’’under DOT Regulatory Policies and Southern Region. [Docket No. FAA–2003–15846; Airspace Procedures (44 FR 11034; February 26, [FR Doc. 03–27904 Filed 11–5–03; 8:45 am] Docket No. 03–ASO–12] 1979); and (3) does not warrant BILLING CODE 4910–13–M preparation of a Regulatory Evaluation Amendment of Class E Airspace; as the anticipated impact is so minimal. Jacksonville, NC Since this is a routine matter that will DEPARTMENT OF TRANSPORTATION only affect air traffic procedures and air AGENCY: Federal Aviation navigation, it is certified that this rule, Federal Aviation Administration Administration (FAA), DOT. when promulgated, will not have a ACTION: Final rule. significant economic impact on a 14 CFR Part 71 substantial number of small entities SUMMARY: This action amends Class E5 [Docket No. FAA–2003–15847; Airspace airspace at Jacksonville, NC. A Area under the criteria of the Regulatory Docket No. 03–ASO–13] Navigation (RNAV) Global Positioning Flexibility Act. System (GPS) Standard Instrument List of Subjects in 14 CFR part 71 Amendment of Class E Airspace; Approach Procedure (SIAP), helicopter Maxton, NC Airspace, Incorporation by reference, point in space approach, has been Navigation (Air). AGENCY: Federal Aviation developed for Onslow Memorial Administration (FAA), DOT. Hospital, Jacksonville, NC. As a result, Adoption of the Amendment controlled airspace extending upward ACTION: Final rule. ■ In consideration of the foregoing, the from 700 feet Above Ground Level Federal Aviation Administration SUMMARY: This action amends Class E5 (AGL) is needed to contain the SIAP. proposes to amend 14 CFR Part 71 as airspace at Maxton, NC. A Area DATES: 0901 UTC, December 25, 2003. follows: Navigation (RNAV) Global Positioning FOR FURTHER INFORMATION CONTACT: System (GPS) Standard Instrument Walter R. Cochran, Manager, Airspace PART 71—DESIGNATION OF CLASS A, Approach Procedure (SIAP), helicopter Branch, Air Traffic Division, Federal CLASS B, CLASS C, CLASS D, AND point in space approach, has been Aviation Administration, P.O. Box CLASS E AIRSPACE AREAS; developed for Scotland Memorial 20636, Atlanta, Georgia 30320; AIRWAYS; ROUTES; AND REPORTING Hospital, Laurinburg, NC. As a result, telephone (404) 306–5627. POINTS controlled airspace extending upward SUPPLEMENTARY INFORMATION: ■ 1. The authority citation for part 71 from 700 feet Above Ground Level (AGL) is needed to contain the SIAP. History continues to read as follows: EFFECTIVE DATE: 0901 UTC, December Authority: 49 U.S.C. 106(g); 40103, 40113, On September 2, 2003, the FAA 25, 2003. proposed to amend part 71 of the 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959– FOR FURTHER INFORMATION CONTACT: Federal Aviation Regulations (14 CFR 1963 Comp., p. 389. Walter R. Cochran, Manager, Airspace part 71) by amending Class E5 airspace § 71.1 [Amended] at Jacksonville, NC (68 FR 52148). This Branch, Air Traffic Division, Federal ■ 2. The incorporation by reference in 14 action provides adequate Class E5 Aviation Administration, P.O. Box CFR 71.1 of Federal Aviation airspace for IFR operations at Onslow 20636, Atlanta, Georgia 30320; Administration Order 7400.9L, Airspace Memorial Hospital, Jacksonville, NC. telephone (404) 305–5627. Designations and Reporting Points, Designations for Class E are published SUPPLEMENTARY INFORMATION: dated September 16, 2003, and effective in FAA Order 7400.9L, dated September September 15, 2004, is amended as History 16, 2003, and effective September 15, follows: 2004, which is incorporated by On August 20, 2003, the FAA reference in 14 CFR part 71.1. The Class proposed to amend part 71 of the Paragraph 6005 Class E airspace areas Federal Aviation Regulations (14 CFR E designations listed in this document extending upward from 700 feet or more will be published subsequently in the above the surface of the earth part 71) by amending Class E5 airspace at Maxton, NC, (68 FR 50081). This Order. * * * * * Interested parties were invited to action provides adequate Class E5 participate in this rulemaking ASO NC E5 Jacksonville, NC [Revised] airspace for IFR operations at Scotland proceeding by submitting written Jacksonville, New River MCAS, NC Memorial Hospital, Laurinburg, NC. comments on the proposal to the FAA. (Lat. 34°42′31″ N, long. 77°26′23″ W) Designations for Class E are published Albert J. Ellis Airport in FAA Order 7400.9L, dated September No comments objecting to the proposal ° ′ ″ ° ′ ″ were received. (Lat. 34 49 45 N, long. 77 36 44 W) 16, 2003, and effective September 15, Onslow Memorial Hospital 2004, which is incorporated by The Rule Point In Space Coordinates reference in 14 CFR part 71.1. The Class (Lat. 34°45′36″ N, long. 77°22′28″ W) This amendment to part 71 of the E designations listed in this document Federal Aviation Regulations (14 (CFR That airspace extending upward from 700 will be published subsequently in the feet or more above the surface within a part 71) amends Class E5 airspace at 7-mile radius of New River MCAS, within a Order. Jacksonville, NC. 6.4-mile radius of Albert J. Ellis Airport and Interested parties were invited to The FAA has determined that this that airspace within a 6-mile radius of the participate in this rulemaking proposed regulation only involves an point in space (Lat. 34°45′36″ N, long. proceeding by submitting written established body of technical 77°22′28″ W) serving Onslow Memorial comments on the proposal to the FAA. regulations for which frequent and Hospital. No comments objecting to the proposal routine amendments are necessary to * * * * * were received.

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The Rule That airspace extending upward from 700 reference in 14 CFR part 71.1. The Class feet or more above the surface within a 7- E designations listed in this document This amendment to part 71 of the mile radius of the Laurinburg—Maxton Federal Aviation Regulations (14 CFR will be published subsequently in the Airport and within 2.5 miles each side of the Order. part 71) amends Class E5 airspace at Sandhills VORTAC 157° radial, extending Maxton, NC. from the 7-mile radius to 19 miles southeast Interested parties were invited to The FAA has determined that this of the airport, and that airspace within a 6- participate in this rulemaking proposed regulation only involves an mile radius of the point in space (Lat. proceeding by submitting written established body of technical 34°45′49″ N, long. 79°28′10″ W) serving comments on the proposal to the FAA. regulations for which frequent and Scotland Memorial Hospital. No comments objecting to the proposal routine amendments are necessary to * * * * * were received. keep them operationally current. It, Issued in College Park, Georgia, on The Rule therefore, (1) is not a ‘‘significant September 29, 2003. regulatory action’’ under Executive Walter R. Cochran, This amendment to part 71 of the Federal Aviation Regulations (14 CFR Order 12866; (2) is not a ‘‘significant Acting Manager, Air Traffic Division, rule’’ under DOT Regulatory Policies Southern Region. part 71) amends Class E5 airspace at Raleigh, NC. and Procedures (44 FR 11034; February [FR Doc. 03–27903 Filed 11–5–03; 8:45 am] 26, 1979); and (3) does not warrant The FAA has determined that this BILLING CODE 4910–13–M preparation of a Regulatory Evaluation proposed regulation only involves an as the anticipated impact is so minimal. established body of technical Since this is a routine matter that will DEPARTMENT OF TRANSPORTATION regulations for which frequent and only affect air traffic procedures and air routine amendments are necessary to navigation, it is certified that this rule, Federal Aviation Administration keep them operationally current. It, when promulgated, will not have a therefore, (1) is not a ‘‘significant significant economic impact on a 14 CFR Part 71 regulatory action’’ under Executive substantial number of small entities Order 12866; (2) is not a ‘‘significant [Docket No. FAA–2003–15845; Airspace under the criteria of the Regulatory Docket No. 03–ASO–11] rule’’ under DOT Regulatory Policies Flexibility Act. and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant List of Subjects in 14 CFR Part 71 Amendment of Class E Airspace; Raleigh, NC preparation of a Regulatory Evaluation Airspace, Incorporation by reference, as the anticipated impact is so minimal. Navigation (Air). AGENCY: Federal Aviation Since this is a routine matter that will Administration (FAA), DOT. Adoption of the Amendment only affect air traffic procedures and air ACTION: Final rule. navigation, it is certified that this rule, ■ In consideration of the foregoing, the when promulgated, will not have a Federal Aviation Administration SUMMARY: This action amends Class E5 significant economic impact on a amends 14 CFR part 71 as follows: airspace at Raleigh, NC. A Area substantial number of small entities Navigation (RNAV) Global Positioning under the criteria of the Regulatory PART 71—DESIGNATION OF CLASS A, System (GPS) Standard Instrument Flexibility Act. CLASS B, CLASS C, CLASS D, AND Approach Procedure (SIAP), helicopter CLASS E AIRSPACE AREAS; point in space approach, has been List of Subjects in 14 CFR Part 71 AIRWAYS; ROUTES; AND REPORTING developed for Duke Medical Center, Airspace, Incorporation by reference, POINTS Durham, NC. As a result, controlled Navigation (Air). airspace extending upward from 700 ■ 1. The authority citation for part 71 feet Above Ground Level (AGL) is Adoption of the Amendment continues to read as follows: needed to contain the SIAP. Authority: 49 U.S.C. 106(g); 40103, 40113, ■ In consideration of the foregoing, the EFFECTIVE DATE: 0901 UTC, December 40120; E.O. 10854, 24 FR 9565, 3 CFR 1959– Federal Aviation Administration 25, 2003. 1963 Comp., p. 389. amends 14 CFR part 71 as follows: FOR FURTHER INFORMATION CONTACT: § 71.1 [Amended] Walter R. Cochran, Manager, Airspace PART 71—DESIGNATION OF CLASS A, ■ 2. The incorporation by reference in 14 Branch, Air Traffic Division, Federal CLASS B, CLASS C, CLASS D, AND CFR 71.1 of Federal Aviation Aviation Administration, P.O. Box CLASS E AIRSPACE AREAS; Administration Order 7400.9L, Airspace 20636, Atlanta, Georgia 30320; AIRWAYS; ROUTES; AND REPORTING Designations and Reporting Points, telephone (404) 305–5627. POINTS dated September 16, 2003, and effective SUPPLEMENTARY INFORMATION: September 15, 2004, is amended as ■ 1. The authority citation for part 71 History follows: continues to read as follows: On August 20, 2003, the FAA Authority: 49 U.S.C. 106(g); 40103, 40113, Paragraph 6005 Class E airspace areas proposed to amend part 71 of the 40120; E.O. 10854. 24 FR 9565, 3 CFR, 1959– extending upward from 700 feet or more Federal Aviation Regulations (14 CFR 1963 Comp., p. 389. above the surface of the earth part 71) by amending Class E5 airspace § 71.1 [Amended] * * * * * at Raleigh, NC, (68 FR 50084). This ASO NC E5 Maxton, NC [Revised] action provides adequate Class E5 ■ 2. The incorporation by reference in 14 Maxton, Laurinburg—Maxton Airport, NC ° ′ ″ ° ′ ″ airspace for IFR operations at Duke CFR 71.1 of Federal Aviation (Lat. 34 47 31 N, long. 79 21 57 W) Medical Center, Durham, NC. Administration Order 7400.9L, Airspace Sandhills VORTAC (Lat. 35°12′56″ N. long 79°35′17″ W) Designations for Class E are published Designations and Reporting Points, Scotland Memorial Hospital in FAA Order 7400.9L, dated September dated September 16, 2003, and effective Point in Space Coordinates 16, 2003, and effective September 15, September 15, 2004, is amended as (Lat. 34°45′49″ N, long. 79°28′10″ W) 2004, which is incorporated by follows:

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Paragraph 6005 Class E airspace areas Background Azalea Park NDB extending upward from 700 feet or more (Lat. 38°00′37″ N., long. 78°31′05″ W.) above the surface of the earth Airspace Docket No. 00–AEA–11, published in the Federal Register on That airspace extending upward from 700 * * * * * feet above the surface within a 6.5-mile February 20, 2001 (66 FR 10812), radius of Charlottesville-Albemarle airport ASO NC E5 Raleigh, NC [Revised] amended the description of the Class E and within 4 miles each side of the Raleigh-Durham International Airport, NC airspace area at Charlottesville- Charlottesville-Albemarle Airport ILS (Lat. 35°52′40″ N, long. 78°47′15″ W) Albemarle Airport, Charlottesville, VA. localizer southwest course extending from Leevy NDB The final rule established Class E the 6.5-mile radius to 9.6 miles southwest of (Lat. 35°55′38″ N, long. 78°43′19″ W) airspace for the University of Virginia the Azalea Park NDB and within a 6-mile Horace Williams Airport Medical Center Heliport as the primary radius of the University of Virginia Medical ° ′ ″ ° ′ ″ (Lat. 35 56 06 N, long. 79 03 57 W) airport for the Class E description. Center Heliport. Duke Medical Center * * * * * Point In Space Coordinates Need for Correction (Lat. 35°59′48″ N, long. 78°55′49″ W) Issued in Jamaica, New York, on The final rule for the Class E airspace September 16, 2003. That airspace extending upward from 700 at Charlottesville omitted the feet or more above the surface within a 10- John G. McCartney, mile radius of Raleigh-Durham International description for the Charlottesville- Assistant Manager, Air Traffic Division, Airport and within 2.5 miles each side of the Albemarle Airport. This error was Eastern Region. ° 045 bearing from Leevy NDB, extending discovered in the description of the [FR Doc. 03–27899 Filed 11–5–03; 8:45 am] from the 10-mile radius to 7 miles northeast airspace as published. This action BILLING CODE 4910–13–M of the NDB; within a 6.3-mile radius of corrects that error. Horace Williams Airport and that airspace within a 6-mile radius of the point in space List of Subjects in 14 CFR Part 71 (lat. 35°59′48″ N, long. 78°55′49″ W) serving Airspace, Incorporation by reference, DEPARTMENT OF JUSTICE Duke Medical Center. Navigation (air). Drug Enforcement Administration * * * * * PART 71—DESIGNATION OF CLASS A, Issued in College Park, Georgia on CLASS B, CLASS C, CLASS D, AND 21 CFR Part 1310 September 29, 2003. CLASS E AIRSPACE AREAS; [Docket No. DEA–176F] Walter R. Cochran, AIRWAYS; ROUTES; AND REPORTING Acting Manager, Air Traffic Division Southern POINTS RIN 1117–AA47 Region. ■ Accordingly, pursuant to the authority Sale by Federal Departments or [FR Doc. 03–27902 Filed 11–5–03; 8:45 am] Agencies of Chemicals Which Could BILLING CODE 4910–13–M delegated to me, the legal description for the Class E–5 airspace area at Be Used in the Illicit Manufacture of Charlottesville, VA, as published in the Controlled Substances DEPARTMENT OF TRANSPORTATION Federal Register on February 20, 2001 AGENCY: Drug Enforcement (66 FR 10812) and incorporated by Administration (DEA), Justice. Federal Aviation Administration reference in 14 CFR 71.1 of the Federal ACTION: Final rule. Aviation Administration Order 7400.9K, 14 CFR Part 71 Airspace Designations and Reporting SUMMARY: The Drug Enforcement Points, dated August 30, 2002 and Administration is finalizing the Notice [Docket No. FAA–2003–15789; Airspace effective September 16, 2002, is of Proposed Rulemaking (NPRM) Docket No. 03–AEA–09] corrected by making the following published in the Federal Register on Amendment to Class E Airspace; amendment: May 8, 2003 (68 FR 24689). That NPRM ■ 1. The authority citation for part 71 Charlottesville, VA proposed to conform DEA regulations to continues to read as follows: provisions of the National Defense AGENCY: Federal Aviation Authority: 49 U.S.C. 106(g); 40103, 40113, Authorization Act which provides that Administration (FAA), DOT. 40120; E.O. 10854, 24 FR 9565, 3 CFR 1959— a Federal department or agency may not ACTION: Final rule; correction. 1963 Comp., p. 389. sell from its stocks any chemical which could be used in the manufacture of a SUMMARY: This action corrects an error § 71.1 [Corrected] controlled substance unless the and omission in the description of the ■ 2. The incorporation by reference in 14 Administrator of DEA certifies in Charlottesville, VA Class E–5 designated CFR 71.1 of the Federal Aviation writing that there is no reasonable cause airspace that was published in a final Administration Order 7400.9L, Airspace to believe that such a sale would result rule on February 20, 2001 (66 FR Designations and Reporting Points, in the illegal manufacture of a 10812), Airspace Docket No. 00–AEA– dated September 16, 2003, and effective controlled substance. This final rule 11. The Final Rule amended the September 15, 2004, is corrected as codifies current practice established description of the Class E airspace for follows: pursuant to statutory authority by which Charlottesville, VA. Paragraph 6005 Class E airspace areas Federal agencies provide DEA with the DATES: Effective November 6, 2003. extending upward from 700 feet or more opportunity to ensure that the sale of FOR FURTHER INFORMATION CONTACT: Mr. above the surface of the earth chemicals by them will not result in the Francis Jordan, Airspace Specialist, * * * * * illegal manufacture of controlled substances. Airspace Branch, AEA–520, Air Traffic AEA VA E5 Charlottesville, VA [Corrected] Division, Eastern Region, Federal EFFECTIVE DATE: December 8, 2003. Aviation Administration, 1 Aviation Charlottesville-Albemarle Airport, VA (Lat. 38°08′19″ N., long. 78°27′10″ W.) FOR FURTHER INFORMATION CONTACT: Plaza, Jamaica, New York 11434–4809, University of Virginia Medical Center Patricia M. Good, Chief, Liaison and telephone: (718) 553–4521. Heliport Policy Section, Office of Diversion SUPPLEMENTARY INFORMATION: (Lat. 38°01′18″ N., long. 78°30′30″ W.) Control, Drug Enforcement

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Administration, Washington, DC 20537, Surveillance List of Chemicals, substance will apply to future sales to Telephone: (202) 307–7297. Products, Materials and Equipment the same prospective bidder and end- SUPPLEMENTARY INFORMATION: Used in the Clandestine Production of user for the same chemical for one Controlled Substances or Listed calendar year unless DEA notifies the Background Chemicals’ published, and updated agency to the contrary in writing. Section 520 of the National Defense from time to time, in the Federal Factors Considered in Certifying a Authorization Act (Pub. L. 104–201) Register (64 FR 25910, May 13, 1999; Bidder or End-User amended the Controlled Substances Act corrected at 64 FR 50541, Sept. 17, (CSA) to prohibit a Federal department 1999) are affected by these regulations. In determining whether there is or agency from selling from its stocks Finally, any chemical which is neither reasonable cause to believe that the sale any chemical which, as determined by a listed chemical nor is listed in the of a specific chemical to a specific the Administrator of the Drug special surveillance list but which could bidder or end-user would result in the Enforcement Administration (DEA), be used in the illicit manufacture of a illegal manufacture of a controlled could be used in the manufacture of a controlled substance is affected by these substance, the Administrator will controlled substance. However, the CSA implementing regulations. Such consider the following factors: (1) The as amended permits sales of such chemicals could include, but are not prospective bidder’s and end-user’s past chemicals if the Administrator of DEA limited to, those chemicals used in the experience in the maintenance of certifies in writing to the head of the direct illegal manufacture of a effective controls against diversion of selling Federal department or agency controlled substance, those chemicals particular chemicals into other than that there is no reasonable cause to used as cutting agents, and those legitimate medical, scientific, and believe that the sale of the chemical chemicals used to process the controlled industrial channels; (2) the prospective would result in the illegal manufacture substance into a dosage form. DEA bidder’s and end-user’s compliance of a controlled substance (21 U.S.C. STRONGLY recommends that ANY with applicable Federal, state and local 890). Federal department or agency law; (3) the prior conviction record of On May 8, 2003, DEA published a considering the sale of any chemical the prospective bidder and end-user Notice in the Federal Register from its stocks contact DEA to relating to controlled substances or to proposing to conform its regulations to determine whether such chemical could chemicals controlled under Federal or the provisions of the National Defense be used in the illicit manufacture of a state laws; and (4) such other factors as Authorization Act (68 FR 24689). The controlled substance as far in advance of may be relevant to and consistent with rule proposed requiring Federal the sale of such chemical as possible. the public health and safety. departments or agencies to notify DEA Requirements of This Final Rule Recourse Available to a Bidder or End- of the names of prospective bidders and User if DEA Refuses To Certify a By this final rule, a Federal end-users prior to the sale of chemicals Prospective Bidder or End-User or department or agency is required to which could be used in the manufacture Withdraws an Existing Certification of controlled substances. This notify the Administrator of DEA in notification will allow DEA to identify writing at least fifteen calendar days in If the Administrator determines there whether there is reasonable cause to advance of a proposed sale of chemicals is reasonable cause to believe the sale of believe that the sale of a specific covered by the Act. (DEA strongly a specific chemical to a specific bidder chemical to a specific bidder or end- encourages Federal departments or or end-user would result in the illegal user would result in the illegal agencies to notify it further in advance manufacture of a controlled substance manufacture of a controlled substance. if possible.) Written notification must be and refuses to certify a prospective DEA will work with Federal submitted on official agency letterhead bidder or end-user, DEA will notify both departments and agencies to determine to the Drug Enforcement the Federal department or agency and which chemicals could be used in the Administration, Office of Diversion the prospective bidder and end-user in illicit manufacture of a controlled Control, Domestic Chemical Control writing. The written notice to the substance. Unit (ODID) Washington, DC 20537 and prospective bidder and end-user will include: (1) The name and amount of contain a statement of the legal and Comments Received Regarding the May the chemical to be sold; (2) the name factual basis for certifying that there is 8, 2003 Notice of Proposed Rulemaking and address of the prospective bidder(s); reasonable cause to believe the sale of DEA received no written comments (3) the name and address of the the specific chemical to that specific regarding the Notice of Proposed potential end-user(s), in cases where a person would result in the illegal Rulemaking published on May 8, 2003. sale is being brokered; (4) point(s) of manufacture of a controlled substance. Accordingly, this Notice of Proposed contact for the prospective bidder and The prospective bidder and end-user Rulemaking is being finalized here end-user; and (5) the end use of the may, within thirty calendar days of without change. chemical. notification, submit written comments Within fifteen calendar days from the or objections to the Administrator, Chemicals Affected by These date the written notification is received, providing reasons and supporting Implementing Regulations DEA will respond in writing to the documentation to contest the decision. As stated in the NPRM, these Federal department or agency certifying The Administrator will take the written implementing regulations affect any that there is, or is not, reasonable cause comments or objections under chemical which DEA determines could to believe that the sale of the specific consideration and will either (1) provide be used in the illicit manufacture of a chemical to the specific bidder and end- a written statement that affirms the controlled substance. Chemicals that user would result in the illegal original decision is final and that can be used in the manufacture of a manufacture of a controlled substance. provides reasons why the written controlled substance include, but are The certification that there is no comments or objections are overruled or not limited to, all List I and List II reasonable cause to believe that the sale are not considered; or (2) confirm the chemicals as provided in 21 CFR of the specific chemical to the specific written response and certify the 1310.02. Further, any chemicals bidder and end-user would result in the transaction, thereby reversing the mentioned in the DEA ‘‘Special illegal manufacture of a controlled original decision.

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If the Administrator determines that Executive Order 13132 agency that there is no reasonable cause there is reasonable cause to believe that This rulemaking does not preempt or to believe that the sale of the specific an existing certification must be modify any provision of state law; nor chemical to a specific person would withdrawn, DEA will notify both the does it impose enforcement result in the illegal manufacture of a Federal department or agency and the responsibilities on any state; nor does it controlled substance. For purposes of specific bidder and end-user in writing. diminish the power of any state to this requirement, reasonable cause to The written notice to the specific bidder enforce its own laws. Accordingly, this believe means that the Administration and end-user will contain a statement of rulemaking does not have federalism has knowledge of facts which would the legal and factual basis for certifying implications warranting the application cause a reasonable person to reasonably that there is reasonable cause to believe of Executive Order 13132. conclude that a chemical would be the certification must be withdrawn. diverted to the illegal manufacture of a The bidder and end-user may, within Unfunded Mandates Reform Act of controlled substance. thirty calendar days of notification, 1995 (b) A Federal department or agency submit written comments or objections This rule will not result in the must request certification by submitting to the Administrator, providing reasons expenditure by state, local, and tribal a written request to the Administrator, and supporting documentation to governments, in the aggregate, or by the Drug Enforcement Administration, contest the decision. The Administrator private sector, of $100 million or more Washington, DC 20537, Attention: will take the written comments or in any one year, and will not Domestic Chemical Control Unit objections under consideration and will significantly or uniquely affect small (ODID). A request for certification may be transmitted directly to the Drug either (1) provide a written statement governments. Therefore, no actions were Enforcement Administration, Domestic that affirms the original decision is final deemed necessary under the provisions Chemical Control Unit through and that provides reasons why the of the Unfunded Mandates Reform Act electronic facsimile media. A request for written comments or objections are of 1995. certification must be submitted no later overruled or are not considered; or (2) Small Business Regulatory Enforcement than fifteen calendar days before the confirm the written response and Fairness Act of 1996 proposed sale is to take place. In order reinstate a certification, thereby to facilitate the sale of chemicals from reversing the original decision. This rule is not a major rule as defined by Section 804 of the Small Federal departments’ or agencies’ Regulatory Certifications Business Regulatory Enforcement stocks, Federal departments or agencies may wish to submit requests as far in Regulatory Flexibility Act Fairness Act of 1996. This rule will not result in an annual effect on the advance of the fifteen calendar days as The Acting Deputy Administrator economy of $100 million or more; a possible. The written notification of the hereby certifies that this rulemaking has major increase in costs or prices; or proposed sale must include: (1) The name and amount of the been drafted in accordance with the significant adverse effects on competition, employment, investment, chemical to be sold; Regulatory Flexibility Act (5 U.S.C. (2) The name and address of the 605(b)), has reviewed this regulation, productivity, innovation, or on the ability of United States-based prospective bidder; and by approving it certifies that this (3) The name and address of the companies to compete with foreign- regulation will not have a significant prospective end-user, in cases where a based companies in domestic and economic impact on a substantial sale is being brokered; number of small entities. This final rule export markets. (4) Point(s) of contact for the only affects Federal departments or List of Subjects in 21 CFR Part 1310 prospective bidder and, where agencies which plan to sell from their appropriate, prospective end-user; and stocks chemicals which could be used Drug traffic control, List I and List II (5) The end use of the chemical. in the manufacture of a controlled chemicals, Reporting and recordkeeping (c) Within fifteen calendar days of substance. The rule provides DEA with requirements. receipt of a request for certification, the advance notice of the sale and the ■ For the reasons set out above, 21 CFR Administrator will certify in writing to opportunity to prevent sales of part 1310 is amended as follows: the head of the Federal department or chemicals which could result in the agency that there is, or is not, reasonable illicit manufacture of controlled PART 1310—[AMENDED] cause to believe that the sale of the substances. ■ 1. The authority citation for part 1310 specific chemical to the specific bidder is amended to read as follows: and end-user would result in the illegal Executive Order 12866 manufacture of a controlled substance. Authority: 21 U.S.C. 802, 830, 871(b), 890. The Acting Deputy Administrator In making this determination, the further certifies that this rulemaking has ■ 2. Part 1310 is amended by adding following factors must be considered: been drafted in accordance with the § 1310.21 to read as follows: (1) Past experience of the prospective bidder or end-user in the maintenance principles in Executive Order 12866, § 1310.21 Sale by Federal departments or of effective controls against diversion of Section 1(b). DEA has determined that agencies of chemicals which could be used listed chemicals into other than this is not a significant regulatory to manufacture controlled substances. legitimate medical, scientific, and action. Therefore, this action has not (a) A Federal department or agency industrial channels; been reviewed by the Office of may not sell from the stocks of the (2) Compliance of the prospective Management and Budget. department or agency any chemical bidder or end-user with applicable Executive Order 12988 which, as determined by the Federal, state and local law; Administrator of the Drug Enforcement (3) Prior conviction record of the This regulation meets the applicable Administration, could be used in the prospective bidder or end-user relating standards set forth in sections 3(a) and manufacture of a controlled substance, to listed chemicals or controlled 3(b)(2) of Executive Order 12988 Civil unless the Administrator certifies in substances under Federal or state laws; Justice Reform. writing to the head of the department or and

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(4) Such other factors as may be an existing certification should be Quality Management District relevant to and consistent with the withdrawn, DEA will provide written (AVAQMD), Butte County Air Quality public health and safety. notice to the head of a Federal Management District (BCAQMD), Kern (d) If the Administrator certifies to the department or agency of such County Air Pollution Control District head of a Federal department or agency withdrawal under the authority of 21 (KCAPCD), Mojave Desert Air Quality that there is no reasonable cause to U.S.C. 890. DEA also will provide, Management District (MDAQMD), and believe that the sale of a specific within fifteen calendar days of Shasta County Air Quality Management chemical to a prospective bidder and withdrawal of an existing certification, District (SHCAQMD) portions of the end-user will result in the illegal the same written notice to the bidder California State Implementation Plan manufacture of a controlled substance, and end-user, and this notice also will (SIP). This action was proposed in the that certification will be effective for contain a statement of the legal and Federal Register on June 6, 2003 (68 FR one year from the date of issuance with factual basis for the withdrawal. The 33899) and concerns excess emissions respect to further sales of the same bidder and end-user may, within thirty and breakdown provisions. Under chemical to the same prospective bidder calendar days of receipt of notification authority of the Clean Air Act as and end-user, unless the Administrator of the withdrawal of the existing amended in 1990 (CAA or the Act), this notifies the head of the Federal certification, submit written comments action directs California to correct rule department or agency in writing that the or written objections to the deficiencies in AVAQMD Rule 430, certification is withdrawn. If the Administrator’s withdrawal. At the BCAQMD Rule 275, KCAPCD Rule 111, certification is withdrawn, DEA will same time, the bidder and end-user also MDAQMD Rule 430, and SHCAQMD also provide written notice to the bidder may provide supporting documentation Rule 3:10. and end-user, which will contain a to contest the Administrator’s statement of the legal and factual basis EFFECTIVE DATE: This rule is effective on withdrawal. If such written comments December 8, 2003. for this determination. or written objections raise issues (e) If the Administrator determines regarding any finding of fact or ADDRESSES: You can inspect copies of there is reasonable cause to believe the conclusion of law upon which the the administrative record for this action sale of the specific chemical to a withdrawal of the existing certification at EPA’s Region IX office during normal specific bidder and end-user would is based, the Administrator will business hours. You can inspect copies result in the illegal manufacture of a reconsider the withdrawal of the of the submitted SIP revision at the controlled substance, DEA will provide existing certification in light of the following locations: written notice to the head of a Federal written comments or written objections Environmental Protection Agency, Region IX, department or agency refusing to certify filed. Thereafter, within a reasonable 75 Hawthorne Street, San Francisco, CA the proposed sale under the authority of time, the Administrator will withdraw 94105–3901. 21 U.S.C. 890. DEA also will provide, or affirm the original withdrawal of the California Air Resources Board, Stationary within fifteen calendar days of receiving existing certification as he determines Source Division, Rule Evaluation Section, a request for certification from a Federal 1001 ‘‘I’’ Street, Sacramento, CA 95814. appropriate. The Administrator will department or agency, the same written Antelope Valley Air Quality Management provide written reasons for any notice to the prospective bidder and District, 43301 Division St., Ste. 206, affirmation of the original withdrawal of end-user, and this notice also will Lancaster, CA 93535–4649 the existing certification. Such contain a statement of the legal and Butte County Air Quality Management affirmation of the original withdrawal of District, 2525 Dominic Drive, Suite J, factual basis for the refusal of the existing certification will constitute Chico, CA 95928–7184 certification. The prospective bidder a final decision for purposes of judicial Kern County Air Pollution Control District, and end-user may, within thirty review under 21 U.S.C. 877. 2700 ‘‘M’’ Street, Suite 302, Bakersfield, calendar days of receipt of notification CA 93301–2370 of the refusal, submit written comments Dated: October 28, 2003. Mojave Desert Air Quality Management or written objections to the Michele M. Leonhart, District, 14306 Park Avenue, Victorville, Administrator’s refusal. At the same Acting Deputy Administrator. CA 92392–2310 time, the prospective bidder and end- [FR Doc. 03–27889 Filed 11–5–03; 8:45 am] Shasta County Air Quality Management District, 1855 Placer Street, Ste. 101, user also may provide supporting BILLING CODE 4410–09–P documentation to contest the Redding, CA 96001–1759 Administrator’s refusal. If such written Copies of the rules may also be comments or written objections raise ENVIRONMENTAL PROTECTION available via the Internet at http:// issues regarding any finding of fact or AGENCY www.arb.ca.gov/drdb/drdbltxt.htm. conclusion of law upon which the Please be advised that this is not an EPA refusal is based, the Administrator will 40 CFR Part 52 website and may not contain the same reconsider the refusal of the proposed [CA 140–0415; FRL–7583–5] version of the rule that was submitted sale in light of the written comments or to EPA. written objections filed. Thereafter, Disapproval of State Implementation FOR FURTHER INFORMATION CONTACT: within a reasonable time, the Plan Revisions, Antelope Valley, Butte Thomas C. Canaday, EPA Region IX, Administrator will withdraw or affirm County, Mojave Desert, and Shasta (415) 947–4121. the original refusal of certification as he County Air Quality Management SUPPLEMENTARY INFORMATION: determines appropriate. The Districts and Kern County Air Pollution Throughout this document, ‘‘we,’’ ‘‘us’’ Administrator will provide written Control District reasons for any affirmation of the and ‘‘our’’ refer to EPA. original refusal. Such affirmation of the AGENCY: Environmental Protection I. Proposed Action original refusal will constitute a final Agency (EPA). decision for purposes of judicial review ACTION: Final rule. On June 6, 2003 (68 FR 33899), EPA under 21 U.S.C. 877. proposed to disapprove the following (f) If the Administrator determines SUMMARY: EPA is finalizing disapproval rules that were submitted for there is reasonable cause to believe that of a revision to the Antelope Valley Air incorporation into the California SIP.

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Local agency Rule Rule title Adopted Submitted

AVAQMD ...... 430 Breakdown Provisions...... 03/17/98 02/16/99 BCAQMD ...... 275 Reporting Procedures for Excess Emissions ...... 02/15/96 05/10/96 KCAPCD ...... 111 Equipment Breakdown...... 05/02/96 07/23/96 MDAQMD ...... 430 Breakdown Provisions...... 12/21/94 01/24/95 SHCAQMD ...... 3:10 Excess Emissions...... 12/05/95 05/10/96

We proposed to disapprove these C. Regulatory Flexibility Act not include a Federal mandate that may rules because some rule provisions The Regulatory Flexibility Act (RFA) result in estimated costs of $100 million conflict with section 110 and part D of generally requires an agency to conduct or more to either State, local, or tribal the Act. In particular, we are a regulatory flexibility analysis of any governments in the aggregate, or to the disapproving AVAQMD Rule 430, rule subject to notice and comment private sector. This Federal action KCAPCD Rule 111, and MDAQMD Rule rulemaking requirements unless the disapproves pre-existing requirements 430 because the rules describe how the agency certifies that the rule will not under State or local law, and imposes districts intend to apply their have a significant economic impact on no new requirements. Accordingly, no enforcement discretion in instances a substantial number of small entities. additional costs to State, local, or tribal where facilities exceed emissions limits Small entities include small businesses, governments, or to the private sector, due to breakdown. We are disapproving small not-for-profit enterprises, and result from this action. BCAQMD Rule 275 and SHCAQMD small governmental jurisdictions. E. Executive Order 13132, Federalism Rule 3:10 because they fail to make clear These rules will not have a significant that the excess emissions are violations impact on a substantial number of small Federalism (64 FR 43255, August 10, of the applicable emissions limitations entities because this SIP disapproval 1999) revokes and replaces Executive and that a determination by the APCO under section 110 and subchapter I, part Orders 12612 (Federalism) and 12875 not to take an enforcement action (or D of the Clean Air Act does not create (Enhancing the Intergovernmental finding by the APCD that an emergency any new requirements but simply Partnership). Executive Order 13132 exists) would not bar EPA or citizen disapproves requirements that the State requires EPA to develop an accountable action. is already imposing. Therefore, because process to ensure ‘‘meaningful and Our proposed action contains more the Federal SIP disapproval does not timely input by State and local officials information on the basis for this create any new requirements, I certify in the development of regulatory rulemaking and on our evaluation of the that this action will not have a policies that have federalism submittal. significant economic impact on a implications.’’ ‘‘Policies that have substantial number of small entities. federalism implications’’ is defined in II. Public Comments and EPA the Executive Order to include Responses Moreover, due to the nature of the Federal-State relationship under the regulations that have ‘‘substantial direct EPA’s proposed action provided a 30- Clean Air Act, preparation of flexibility effects on the States, on the relationship day public comment period. During this analysis would constitute Federal between the national government and period, we received no comments. inquiry into the economic the States, or on the distribution of power and responsibilities among the III. EPA Action reasonableness of state action. The various levels of government.’’ Under Therefore, as authorized in section Clean Air Act forbids EPA to base its actions concerning SIPs on such Executive Order 13132, EPA may not 110(k)(3) of the Act, EPA is finalizing a issue a regulation that has federalism disapproval of the submitted rules. grounds. Union Electric Co., v. U.S. EPA, 427 U.S. 246, 255–66 (1976); 42 implications, that imposes substantial These are not required SIP submittals, U.S.C. 7410(a)(2). direct compliance costs, and that is not so this disapproval has no sanction or required by statute, unless the Federal FIP implications under CAA sections D. Unfunded Mandates Reform Act government provides the funds 179 or 110(c). Note that the submitted Under sections 202 of the Unfunded necessary to pay the direct compliance rules have been adopted by the Mandates Reform Act of 1995 costs incurred by State and local AVAQMD, BCAQMD, KCAPCD, (‘‘Unfunded Mandates Act’’), signed governments, or EPA consults with MDAQMD, and SHCAQMD, and EPA’s into law on March 22, 1995, EPA must State and local officials early in the final disapproval does not prevent the prepare a budgetary impact statement to process of developing the proposed local agency from enforcing them. accompany any proposed or final rule regulation. EPA also may not issue a IV. Statutory and Executive Order that includes a Federal mandate that regulation that has federalism Reviews may result in estimated costs to State, implications and that preempts State local, or tribal governments in the law unless the Agency consults with A. Executive Order 12866, Regulatory aggregate; or to the private sector, of State and local officials early in the Planning and Review $100 million or more. Under section process of developing the proposed The Office of Management and Budget 205, EPA must select the most cost- regulation. (OMB) has exempted this regulatory effective and least burdensome These rules will not have substantial action from Executive Order 12866, alternative that achieves the objectives direct effects on the States, on the entitled ‘‘Regulatory Planning and of the rule and is consistent with relationship between the national Review.’’ statutory requirements. Section 203 government and the States, or on the requires EPA to establish a plan for distribution of power and B. Paperwork Reduction Act informing and advising any small responsibilities among the various These rules do not impose an governments that may be significantly levels of government, as specified in information collection burden under the or uniquely impacted by the rule. Executive Order 13132, because it provisions of the Paperwork Reduction EPA has determined that the merely disapproves a state rule Act of 1995 (44 U.S.C. 3501 et seq.) disapproval action promulgated does implementing a federal standard, and

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does not alter the relationship or the I. National Technology Transfer and Dated: August 25, 2003. distribution of power and Advancement Act Wayne Nastri, responsibilities established in the Clean Regional Administrator, Region IX. Section 12 of the National Technology Air Act. Thus, the requirements of ■ Transfer and Advancement Act Part 52, Chapter I, Title 40 of the Code section 6 of the Executive Order do not of Federal Regulations is amended as apply to this rule. (NTTAA) of 1995 requires Federal agencies to evaluate existing technical follows: F. Executive Order 13175, Coordination standards when developing a new PART 52—[AMENDED] With Indian Tribal Governments regulation. To comply with NTTAA, EPA must consider and use ‘‘voluntary ■ 1. The authority citation for part 52 Executive Order 13175, entitled consensus standards’’ (VCS) if available continues to read as follows: ‘‘Consultation and Coordination with and applicable when developing Indian Tribal Governments’’ (65 FR Authority: 42 U.S.C. 7401 et seq. programs and policies unless doing so 67249, November 9, 2000), requires EPA would be inconsistent with applicable to develop an accountable process to Subpart F—California law or otherwise impractical. ensure ‘‘meaningful and timely input by tribal officials in the development of The EPA believes that VCS are ■ 2. Section 52.271 is amended by regulatory policies that have tribal inapplicable to this action. Today’s adding paragraphs (b)(5) and (b)(6) and implications.’’ These final rules do not action does not require the public to (d) to read as follows: have tribal implications, as specified in perform activities conducive to the use § 52.271 Malfunction, startup, and Executive Order 13175. It will not have of VCS. shutdown regulations. substantial direct effects on tribal J. Congressional Review Act * * * * * governments, on the relationship (a) * * * between the Federal government and The Congressional Review Act, 5 (5) Butte County AQMD. Indian tribes, or on the distribution of U.S.C. 801 et seq., as added by the Small (i) Rule 275, Reporting Procedures for power and responsibilities between the Business Regulatory Enforcement Excess Emissions, submitted on May 10, Federal government and Indian tribes. Fairness Act of 1996, generally provides 1996. Thus, Executive Order 13175 does not that before a rule may take effect, the (6) Shasta County AQMD. apply to this rule. agency promulgating the rule must (i) Rule 3:10, Excess Emissions, G. Executive Order 13045, Protection of submit a rule report, which includes a submitted on May 10, 1996. Children from Environmental Health copy of the rule, to each House of the * * * * * Risks and Safety Risks Congress and to the Comptroller General (d) The following regulations are of the United States. EPA will submit a disapproved because they merely Protection of Children from report containing these rules and other describe how state agencies intend to Environmental Health Risks and Safety required information to the U.S. Senate, apply their enforcement discretion and Risks (62 FR 19885, April 23, 1997), the U.S. House of Representatives, and thus, if approved, the regulations would applies to any rule that: (1) Is the Comptroller General of the United have no effect on the State determined to be ‘‘economically States prior to publication of the rule in Implementation Plan. significant’’ as defined under Executive the Federal Register. A major rule (1) Antelope Valley AQMD. Order 12866, and (2) concerns an cannot take effect until 60 days after it (i) Rule 430, Breakdown Provisions, environmental health or safety risk that is published in the Federal Register. submitted on February 16, 1999. EPA has reason to believe may have a This action is not a ‘‘major rule’’ as (2) Kern County APCD. disproportionate effect on children. If defined by 5 U.S.C. section 804(2). This (i) Rule 111, Equipment Breakdown, the regulatory action meets both criteria, rule will be effective December 8, 2003. submitted on July 23, 1996. the Agency must evaluate the (3) Mojave Desert AQMD. environmental health or safety effects of K. Petitions for Judicial Review (i) Rule 430, Breakdown Provisions, submitted on January 24, 1995. the planned rule on children, and Under section 307(b)(1) of the Clean explain why the planned regulation is Air Act, petitions for judicial review of [FR Doc. 03–27848 Filed 11–5–03; 8:45 am] preferable to other potentially effective this action must be filed in the United BILLING CODE 6560–50–P and reasonably feasible alternatives States Court of Appeals for the considered by the Agency. appropriate circuit by January 5, 2004. These rules are not subject to Filing a petition for reconsideration by ENVIRONMENTAL PROTECTION Executive Order 13045 because they do the Administrator of this final rule does AGENCY not involve decisions intended to not affect the finality of this rule for the mitigate environmental health or safety purposes of judicial review nor does it 40 CFR Part 131 risks. extend the time within which a petition [FRL–7584–1] for judicial review may be filed, and H. Executive Order 13211, Actions That shall not postpone the effectiveness of Water Quality Standards; Withdrawal Significantly Affect Energy Supply, such rule or action. This action may not of Federal Nutrient Standards for the Distribution, or Use be challenged later in proceedings to State of Arizona enforce its requirements. (See section These rules are not subject to AGENCY: Environmental Protection Executive Order 13211, ‘‘Actions 307(b)(2).) Agency. Concerning Regulations That List of Subjects in 40 CFR Part 52 ACTION: Final rule. Significantly Affect Energy Supply, Distribution, or Use’’ (66 FR 28355, May Environmental protection, Air SUMMARY: EPA is taking final action to 22, 2001) because it is not a significant pollution control, Intergovernmental amend the Federal regulations to regulatory action under Executive Order relations, Ozone, Reporting and withdraw water quality criteria 12866. recordkeeping requirements. applicable to Arizona. In 1976, EPA

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promulgated Federal criteria for the purposes of the Act. States are for nutrients in Arizona that EPA is nutrients in Arizona. The Federal required to develop water quality withdrawing. criteria consisted of numeric ambient standards for waters of the United States Since EPA’s promulgation of nutrient water quality criteria for nutrients for within the State. Section 303(c) and water quality criteria in 1976, EPA has eleven river segments and narrative EPA’s implementing regulations provide approved the numeric and narrative water quality criteria for nutrients that a water quality standard shall water quality criteria for nutrients applicable to all surface waters in include the designated use or uses to be adopted by Arizona. See, e.g., EPA’s Arizona. Arizona has now adopted its made of the water, the water quality Federal Register notices of approvals at own numeric and narrative water criteria necessary to protect those uses, 53 FR 4209 (Feb. 12, 1988); 58 FR 62124 quality criteria for nutrients, which EPA and an antidegradation policy. 33 U.S.C. (Nov. 24, 1993); 60 FR 51793 (Oct. 3, has approved. Arizona has also 1313(t)(2)(A); 40 CFR 131.10–.12. States 1995). Specifically, in a series of established and EPA has approved may also include in their water quality actions, the Arizona Department of implementation procedures for its standards policies generally affecting Environmental Quality (ADEQ) adopted, narrative nutrient water quality criteria. the standards’ application and and EPA approved, numeric nutrient Therefore, EPA has determined that the implementation. 40 CFR 131.6(f); 40 criteria for total nitrogen and total Federally promulgated criteria for CFR 131.13. States are required to phosphorous applicable to specific Arizona are no longer needed and is review their water quality standards at water bodies in Arizona. See Arizona withdrawing the Federal criteria for least once every three years and, if Administrative Code, R18–11–109, nutrients in Arizona. appropriate, revise or adopt new 11–110, and 11–112. Arizona has also adopted and EPA has approved DATES: This rule is effective on standards. 33 U.S.C. 1313(c)(2). States narrative nutrient criteria applicable to December 8, 2003. are required to submit the results of their reviews to EPA. EPA then reviews all surface waters of the State. See ADDRESSES: The supporting record for Arizona Administrative Code, R18–11– this decision may be inspected at EPA the State’s standards for consistency with the CWA and EPA’s implementing 108. Arizona’s narrative nutrient criteria Region 9, 75 Hawthorne Street, Water provide that ‘‘navigable waters shall be Division, Clean Water Act Standards regulations at 40 CFR part 131 and approves or disapproves any new or free from pollutants in amounts or and Permits Office, San Francisco, CA combinations that cause the growth of 94105, Monday through Friday, revised standards. 33 U.S.C. 1313(c)(3). Section 303(c)(4) of the CWA authorizes algae or aquatic plants that inhibit or excluding legal holidays, during normal prohibit the habitation, growth or business hours of 9 a.m. to 5:00 p.m. EPA to promulgate water quality standards when necessary to supersede propagation of other aquatic life or that Please contact Gary Sheth, as listed in impair recreational uses’’. See Arizona the FOR FURTHER INFORMATION CONTACT disapproved State water quality standards, or in any case where the Administrative Code, R18–11–108.A.5. section, before arriving. In January 1996, ADEQ established Administrator determines that new or A copy of Arizona’s water quality implementation procedures for its revised standards are necessary to meet standards may be obtained narrative nutrient water quality criteria the requirements of the CWA. electronically from EPA’s Water Quality (see Arizona’s Implementation Standards Repository, at http:// EPA may issue a rule to withdraw Guidelines for the Narrative Nutrient www.epa.gov/waterscience/wqs/. Federal water quality standards Standard (http://www.sosaz.com/ FOR FURTHER INFORMATION CONTACT: Gary promulgated for a State when the State public_services/Title_18/18_table.htm)). Sheth at EPA Region 9, Water Division, adopts, and EPA approves, State water On April 26, 1996, EPA approved these Clean Water Act Standards and Permits quality standards that meet the implementation procedures. On May 7, Office (WTR–5), 75 Hawthorne Street, requirements of the CWA and the 1996, EPA promulgated additional San Francisco, CA 94105 (tel: 415–972– implementing Federal regulations. That water quality standards for Arizona, 3516, fax: 415–947–3545) or e-mail to is the situation here. noting that the State had identified its [email protected], or Kellie Kubena at B. What Actions Have EPA and Arizona own implementation procedures to EPA Headquarters, Office of Water Taken in the Past Relating to Water translate its narrative criteria. See 61 FR (4305T), 1200 Pennsylvania Ave, NW., Quality Standards for Nutrients in the 20686 (May 7, 1996). Although EPA did Washington, DC 20460 (tel: 202–566– State? not specifically address the continuing 0448, fax: 202–566–0409) or e-mail to need for the 1976 Federal nutrient [email protected]. In 1976, EPA determined that water criteria, EPA observed in that notice that quality standards for nutrients Arizona’s numeric and narrative SUPPLEMENTARY INFORMATION: submitted by Arizona as of that time did nutrient criteria, as supplemented by I. Potentially Regulated Entities not meet the CWA’s requirements. On the State’s newly established June 22, 1976, EPA promulgated Federal implementation procedures, were No one is regulated by this rule. This numeric nutrient criteria for total consistent with the CWA. See 61 FR rule merely withdraws certain Federal phosphates applicable to eleven river 20692 (May 7, 1996). Consistent with water quality criteria for nutrients segments in Arizona, Federal numeric this earlier finding, EPA has determined applicable in Arizona. nutrient criteria for total nitrates that the 1976 Federal criteria for II. Background applicable to four waterbodies, and nutrients for Arizona waters are Federal narrative nutrient criteria redundant and no longer necessary. On A. What Are the Statutory and applicable to all surface waters of the July 30, 2001, EPA proposed to Regulatory Requirements Relevant to United States in Arizona. See 40 CFR withdraw the Federal water quality This Action? 131.31(a); 41 FR 25000 (June 22, 1976). criteria for nutrients applicable to Section 303(c) (33 U.S.C. 1313(c)) of Although EPA used the phrase nutrient Arizona surface waters at 40 CFR the Clean Water Act (CWA or Act) standards to describe the water quality 131.31(a). (See Section III for a directs States, with oversight from EPA, criteria for nutrients codified at 40 CFR discussion of comments received). EPA to adopt water quality standards to 131.31(a), in today’s action, EPA is is now finalizing its decision to protect the public health and welfare, using the more precise term criteria to withdraw federally promulgated enhance the quality of water and serve refer to the Federal water quality criteria nutrient criteria applicable to Arizona.

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EPA notes that Arizona’s adopted and C. What Water Quality Standards Will Arizona’s water quality standards. For approved numeric water quality criteria Apply Now That EPA Is Withdrawing waterbodies or waterbody segments for nutrients are based on total the Federal Nutrient Criteria in Arizona? listed in rows 4, 8, 9, and 11, Arizona phosphorous and total nitrogen whereas The goal of EPA’s 1976 rulemaking in has adopted numeric nutrient water the numeric water quality criteria for Arizona was to establish water quality quality criteria for either total nitrogen, nutrients promulgated by EPA in 1976 criteria to protect the designated uses of total phosphorus, or both. In addition to are based on total phosphates and total Arizona surface waters. EPA withdraws the numeric nutrient criteria in Table 1 nitrates. Total phosphorous and total federally promulgated water quality for the listed stream segments, Arizona nitrogen are more encompassing standards after the State adopts, and has adopted numeric nutrient criteria measurements of the presence of these EPA approves, water quality standards for additional stream segments not types of nutrients than total phosphates that meet the requirements of the CWA covered by the Federal nutrient criteria. and total nitrates, for which EPA and the implementing Federal Between 1976 and 1996, EPA approved Arizona’s numeric nutrient criteria promulgated water quality criteria in regulations. As discussed earlier, in because the criteria were derived using 1976, because elemental phosphorous 1996, after approving Arizona’s nutrient criteria and implementation procedures, sound science and are protective of the and nitrogen can be present in different designated uses of those waters. Readers forms under different conditions EPA determined that Arizona’s standards met the requirements of the interested in viewing Arizona’s numeric (including, but not limited to, CWA and EPA’s implementing nutrient criteria not listed in Table 1 phosphates and nitrates). For this regulations and Federally promulgated should consult Arizona’s water quality reason, EPA currently recommends nutrient criteria were no longer standards (R18–11–109, 11–110, and adopting criteria for total phosphorous necessary. As a result of today’s action, 11–112). Arizona’s water quality and total nitrogen. See Nutrient Criteria Arizona’s numeric and narrative standards can be viewed on the EPA Technical Guidance Manual: Lakes and nutrient criteria, and the corresponding Office of Water Standards Repository Reservoirs, EPA–822–B–00–001; implementation procedures for the Web site at http://www.epa.gov/ Ambient Water Quality Criteria narrative criteria are the applicable waterscience/standards/wqslibrary/. Recommendations: Lakes and nutrient criteria. Not affected by this For waterbodies or waterbody Reservoirs in Nutrient Ecoregion II, proposal are Federal water quality segments where Arizona has not EPA–822–B–00–007; Ambient Water standards codified at 40 CFR 131.31(b) adopted any numeric nutrient water Quality Criteria Recommendations: and (c), which among other things quality criteria to replace the Federal Rivers and Streams in Nutrient designate fish consumption as a use for numeric water quality criteria for Ecoregion II, EPA 822–B–00–015; certain waters, and require nutrients (the waters listed in rows 1, 2, Ambient Water Quality Criteria implementation of a monitoring 3, 5, 6, 7, and 10), only the State’s Recommendations: Rivers and Streams program regarding mercury’s effects on narrative nutrient criteria apply. In in Nutrient Ecoregion III, EPA 822–B– wildlife. These provisions remain in 1996, EPA determined that the narrative 00–016. Although EPA is not able to effect. nutrient criteria, in conjunction with directly compare Arizona’s nutrient Table 1 below displays the Federal Arizona’s Implementation Guidelines criteria based on total phosphorous and numeric criteria for nutrients and the for the Narrative Nutrient Standard, total nitrogen with the Federally State’s corresponding criteria. The would provide the same intended level waterbody segments listed in Table 1 of protection as the Federal criteria by promulgated criteria based on total are the waters for which the Federal fully protecting the designated uses of phosphates and total nitrates, the CWA numeric nutrient criteria being these waters because they allow for and EPA’s regulations at 40 CFR 131.11 withdrawn today had applied. For consideration of site-specific water only require that States adopt criteria convenience, the Federal nutrient quality information. Indeed, when that are scientifically defensible and criteria and the corresponding State necessary, narrative criteria with the sufficiently detailed to protect the nutrient criteria are listed for each water appropriate implementation procedures designated uses of the waterbodies. body. See 40 CFR 131.31(a). Because the can be used to obtain quantitative When EPA approved these criteria, EPA Federal and State nutrient criteria are measures having a greater degree of determined that they met this based on measurements of different precision and site specificity than a requirement and adequately protected parameters (i.e., total phosphates and single numeric target. EPA reviewed Arizona waters from excess nutrients total nitrates versus total phosphorous and approved Arizona’s narrative (the same objective of the 1976 Federal and total nitrogen), this table does not nutrient criteria and the Implementation nutrients water quality criteria). For provide a direct comparison of the Guidelines for the Narrative Nutrient more detailed information on EPA’s Federal and State nutrient criteria but Standard as being scientifically analysis, see EPA’s approval decisions rather describes how individual waters defensible and consistent with the CWA contained in the docket for this that are currently covered by the Federal and EPA’s implementing regulations at rulemaking criteria for nutrients will be covered by 40 CFR 131.11.

TABLE 1.—FEDERAL NUTRIENT CRITERIA IN CFR 131.31(A) AND ARIZONA NUTRIENT CRITERIA

Federal criteria at 40 CFR Arizona criteria (mg/L) 131.31 (mg/L) (mean/90th (mean/90th percentile/ percentile) max) Water body segment Total Total Total phos- Total phosphates nitrates phorus nitrogen

1. Colorado River from Utah border to Willow Beach (main stem) ...... 0.04/0.06 4/7 nnc ...... nnc 2. Colorado River from Willow Beach to Parker Dam (main stem) ...... 0.06/0.10 5/– nnc ...... nnc 3. Colorado River from Parker Dam to Imperial Dam (main stem) ...... 0.08/0.12 5/7 nnc ...... nnc

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TABLE 1.—FEDERAL NUTRIENT CRITERIA IN CFR 131.31(A) AND ARIZONA NUTRIENT CRITERIA—Continued

Federal criteria at 40 CFR Arizona criteria (mg/L) 131.31 (mg/L) (mean/90th (mean/90th percentile/ percentile) max) Water body segment Total Total Total phos- Total phosphates nitrates phorus nitrogen

4. Colorado River from Imperial Dam to Morelos Dam (main stem) ...... 0.10/0.10 5/7 nnc/0.33/ nnc/2.50/nnc nnc. 5. Gila River from New Mexico border to San Carlos Reservoir (excluding San Carlos 0.50/0.80 –/– nnc ...... NA Reservoir. 6. Gila River from San Carlos Reservoir to Ashurst Hayden Dam (including San Car- 0.30/.050 –/– nnc ...... NA los Reservoir. 7. San Pedro River ...... 0.30/0.50 –/– nnc ...... NA 8. Verde River (except Granite Creek) ...... 0.20/0.30 –/– 0.10/0.30/ NA 1.00. 9. Salt River above Roosevelt Lake ...... 0.20/0.30 –/– 0.12/0.30/ NA 1.00. 10. Santa Cruz River from international boundary near Nogales to Sahuarita ...... 0.50/0.80 –/– nnc ...... NA 11. Little Colorado River above Lyman Reservoir ...... 0.30/0.50 –/– 0.20/0.30/ NA 0.75. – No Federal numeric nutrient criteria were promulgated. nnc The State’s narrative nutrient water quality criteria apply in conjunction with the State’s implementation procedures. NA EPA has not included the State’s nutrient criteria for total nitrogen for these waters because these waters were not subject to the 1976 Federal numeric nutrient water quality criteria for total nitrates.

D. What Current Efforts Are Underway its waters based on EPA’s most current regulations that States provide To Further Protect Waters From guidance. EPA will work with Arizona information addressing the Excessive Nutrients? to revise the State’s water quality implementation of State narrative In the time since EPA approved standards where recent information criteria. EPA recognizes that ADEQ is in Arizona’s nutrient criteria, EPA has shows new or revised nutrient criteria the process of developing revised, eco- developed waterbody specific technical are necessary to better protect its region specific implementation guidance manuals for deriving numeric designated uses. procedures for the narrative nutrients nutrient criteria as well as waterbody III. Response to Comments standard. This laudable effort, however, does not change the fact that Arizona and ecoregion specific criteria EPA received comments from the recommendations. For freshwaters, the presently has nutrient implementation Environmental Management Division of procedures that meet the requirements guidance recommends that States the International Boundary and Water address total nitrogen, total of the Act. Therefore, EPA believes that Commission United States and Mexico, there is no reason for it not to withdraw phosphorous, chlorophyll-a, and Office of the Commissioner (United turbidity when developing nutrient both numeric and narrative nutrient States Section) and from the Water criteria at the present time. criteria to protect designated uses. EPA Quality Division, Arizona Department of has also published recommended Environmental Quality, both supporting IV. Statutory and Executive Order ecoregion-specific nutrient water quality EPA’s action to withdraw Federal Reviews criteria for States to use as starting nutrient criteria. These comments have points in adopting water quality A. Executive Order 12866—Regulatory been included in the Administrative Planning and Review standards (see 66 FR 1671, January 9, Record. 2001). This information may be found at EPA also received a comment from This action withdraws Federal http://www.epa.gov/ost/standards/ Pima County Wastewater Management requirements applicable to Arizona and nutrient.html. EPA’s criteria documents Department that supports the imposes no regulatory requirements or include nutrient water quality criteria withdrawal of the Federal numeric costs on any person or entity, does not recommendations for rivers and streams criteria, but opposes EPA’s proposal to interfere with the action or planned and for lakes and reservoirs within also withdraw the Federal narrative action of another agency, and does not Arizona. When EPA determined that criteria in Arizona until that time when have any budgetary impacts or raise Arizona’s nutrient criteria were the State completes its planned novel legal or policy issues. Thus, it has consistent with the CWA and protective narrative nutrient implementation been determined that this rule is not a of designated uses, EPA did not have guideline stakeholder and rulemaking ‘‘significant regulatory action’’ under numeric nutrient criteria process. EPA appreciates the the terms of Executive Order 12866 (58 recommendations. EPA is currently commenter’s support for withdrawing FR 51735, October 4, 1993) and is withdrawing the Federal nutrient the Federal numeric criteria, but therefore not subject to the Office of criteria applicable to eleven waters in disagrees that it should maintain the Management and Budget (OMB) review. the State of Arizona because EPA Federal narrative criteria as requested B. Paperwork Reduction Act determined that Arizona’s nutrient by the commenter. As noted earlier, criteria are as protective as the federally EPA approved Arizona’s This rule does not impose an promulgated nutrient criteria for those Implementation Guidelines in 1996. information collection burden under the waters. Arizona is currently working on This approval was based on EPA’s provisions of the Paperwork Reduction a nutrient criteria plan to develop and determination that these guidelines Act of 1995 because it is adopt numeric nutrient criteria for all of satisfy the requirements of EPA’s administratively withdrawing Federal

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requirements that no longer need to F. Executive Order 13175—Consultation This action is not a ‘‘major rule’’ as apply to Arizona. and Coordination With Indian Tribal defined by 5 U.S.C. 804(2) and will be Governments effective on December 8, 2003. C. Regulatory Flexibility Act Again, this rule imposes no regulatory List of Subjects in 40 CFR Part 131 The Regulatory Flexibility Act (RFA) requirements or costs on any Tribal Environmental protection, Indians- (5 U.S.C. 601 et seq.), as amended by the government. It does not have substantial lands, Intergovernmental Relations, Small Business Regulatory Enforcement direct effects on Tribal governments, on Reporting and recordkeeping Fairness Act of 1996, generally requires the relationship between the Federal requirements, Water pollution control. an agency to prepare a regulatory Government and Indian tribes, or on the flexibility analysis of a rule that is distribution of power and Dated: October 30, 2003. subject to notice and comment responsibilities between the Federal Marianne Lamont Horinko, rulemaking requirements under the government and Indian tribes, as Acting Administrator. specified in Executive Order 13175, Administrative Procedure Act or any ■ For the reasons set out in the preamble, entitled ‘‘Consultation and Coordination other statute unless the agency certifies 40 CFR part 131 is amended as follows: that the rule will not have significant with Indian Tribal Governments’’ (65 FR 67249, November 6, 2000). economic impact on a substantial PART 131—WATER QUALITY number of small entities. This rule G. Executive Order 13045—Protection of STANDARDS Children From Environmental Health imposes no regulatory requirements or ■ 1. The authority citation for part 131 and Safety Risks costs on any small entity. Therefore, I continues to read as follows: certify that this action will not have a This rule is not subject to E.O. 13045, Authority: 33 U.S.C. 1251 et seq. significant economic impact on a entitled ‘‘Protection of Children from substantial number of small entities. Environmental Health Risks and Safety § 131.31 [Amended] Risks’’ (62 FR 19885, April 23, 1997), D. Unfunded Mandates Reform Act ■ 2. Section 131.31 is amended by because it is not economically removing and reserving paragraph (a). Title III of the Unfunded Mandates significant and EPA has no reason to Reform Act (UMRA) (Pub. L. 104–4) believe the environmental health or [FR Doc. 03–27948 Filed 11–5–03; 8:45 am] establishes requirements for Federal safety risks addressed by this action BILLING CODE 6560–50–P agencies to assess the effects of their present a disproportionate risk to children. regulatory actions on State, Tribal, and ENVIRONMENTAL PROTECTION local governments and the private H. Executive Order 13211—Actions AGENCY sector. Today’s rule contains no Federal That Significantly Affect Energy Supply, mandates (under the regulatory Distribution, or Use 40 CFR Part 131 provisions of Title II of the UMRA) for This rule is not subject to Executive [FRL–7583–9] State, Tribal, or local governments or Order 13211, ‘‘Actions Concerning the private sector because it imposes no Regulations That Significantly Affect Water Quality Standards; Withdrawal enforceable duty on any of these Energy Supply, Distribution, or Use’’ (66 of Federal Aquatic Life Water Quality entities. Thus, today’s rule is not subject FR 28355, May 22, 2001), because it is Criteria for Copper and Nickel to the requirements of UMRA sections not a significant regulatory action under Applicable to South San Francisco 202 and 205 for a written statement and Executive Order 12866. Bay, CA small government agency plan. Similarly, EPA has determined that this I. National Technology Transfer and AGENCY: Environmental Protection rule contains no regulatory Advancement Act Agency (EPA). requirements that might significantly or The requirements of section 12(d) of ACTION: Final rule. uniquely affect small governments and the National Technology Transfer and is therefore not subject to UMRA section Advancement Act of 1995 (15 U.S.C. SUMMARY: This final rule amends the 203. 272 note) do not apply because this rule Federal regulations to withdraw aquatic does not involve technical standards. life water quality criteria for copper and E. Executive Order 13132—Federalism nickel applicable to south San Francisco J. Congressional Review Act Bay, California. South San Francisco Executive Order 13132, entitled The Congressional Review Act, 5 Bay is the area of San Francisco Bay that ‘‘Federalism’’ (64 FR 43255, August 10, U.S.C. 801 et seq., as added by the Small is located south of the Dumbarton 1999), requires EPA to develop an Business Regulatory Enforcement Bridge. On May 18, 2000, EPA accountable process to ensure State and Fairness Act of 1996, generally provides promulgated Federal regulations local government officials have an that before a rule may take effect, the establishing water quality criteria for opportunity to provide input in the agency promulgating the rule must priority toxic pollutants for the State of development of regulatory policies that submit a rule report, which includes a California, since the State had not have substantial direct effects on the copy of the rule, to each House of the complied with the Clean Water Act. States, on the relationship between the Congress and to the Comptroller General This regulation is known as the national government and the States, or of the United States. EPA will submit a ‘‘California Toxics Rule’’ or ‘‘CTR.’’ On on the distribution of power and report containing this rule and other December 17, 2002, the State of responsibilities among the various required information to the U.S. Senate, California completed its adoption levels of governments. This rule the U.S. House of Representatives, and process to incorporate copper and imposes no regulatory requirements or the Comptroller General of the United nickel aquatic life water quality criteria costs on any State or local governments; States prior to publication of the rule in for south San Francisco Bay. The State therefore, it does not have federalism the Federal Register. A major rule of California calls these criteria site- implications under Executive Order cannot take effect until 60 days after it specific water quality objectives or site- 13132. is published in the Federal Register. specific objectives. On January 9, 2003,

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the State submitted the site-specific publish a rule notless than 30 days prior Federal Aquatic Life Water Quality objectives to EPA Region 9 for review to the effective date of the rule except Criteria for Copper and Nickel and approval. On January 21, 2003, EPA as otherwise provided for by the Agency Applicable to South San Francisco Bay, Region 9 approved the copper and for good cause found and published California,’’ at U.S. EPA Region 9, Water nickel aquatic life site-specific with the rule. The purpose of the 30-day Division, 75 Hawthorne Street, San objectives for south San Francisco Bay. waiting period is to give affected parties Francisco, California 94105, phone: Since the State of California now has a reasonable time to adjust their 415–972–3480. This Docket Facility is aquatic life site-specific objectives, behavior before the final rule takes open from 8:30 a.m. Pacific time to 4:30 effective under the Clean Water Act effect. See Omnipoint Corp. v. F.C.C., 78 p.m. Pacific time, Monday through (CWA), for copper and nickel for south F.3d 620, 630–631 (D.C. Cir. 1996); Friday, excluding legal holidays. A San Francisco Bay, EPA has determined Riverbend Farms, Inc. v. Madigan, 958 reasonable fee maybe charged for that the federally-promulgated copper F.2d 1479, 1485 (9th Cir. 1992). copies. and nickel aquatic life criteria are no In this instance, EPA finds good cause 2. Electronic Access. You may access longer needed for south San Francisco to make the final rule effective upon this Federal Register document Bay. On June 25, 2003, EPA requested publication. In order to find good cause, electronically through the EPA Internet comment on its proposed action to an Agency needs to find that the 30-day under the ‘‘Federal Register’’ listings at withdraw copper and nickel criteria period would be: (1) Impracticable, (2) http://www.epa.gov/fedrgstr/. applicable to the south San Francisco unnecessary, or (3) contrary to the An electronic version of the public Bay from the CTR. EPA did not receive public interest. Here EPA is relying on docket is available through EPA’s any adverse comments concerning the third reason to support its finding of electronic public docket and comment EPA’s proposal to withdraw the copper good cause. system, EPA Dockets. You may use EPA and nickel aquatic life criteria EPA finds that, in this instance, Dockets at http://www.epa.gov/edocket/ applicable to south San Francisco Bay waiting 30 days to make the rule to view public comments, access the from the CTR and is therefore effective is contrary to public interest. index listing of the contents of the publishing this final rule. As explained in this preamble, both the official public docket, and to access EFFECTIVE DATE: This rule is effective California Toxics Rule copper and those documents in the public docket November 6, 2003. nickel criteria and California’s copper that are available electronically. ADDRESSES: The public docket for and nickel site-specific objectives, Although not all docket materials may today’s final rule is available for public approved by EPA on January 21, 2003, be available electronically, you may still inspection at the U.S. Environmental apply to the south San Francisco Bay. access any of the publicly available Protection Agency, Region 9, 75 Therefore, it may be unclear which docket materials through the California Hawthorne Street, San Francisco, standards are the appropriate docket facility identified earlier. Once California 94105, between the hours of benchmarks when making permitting in the system, select ‘‘search,’’ then key 8 a.m. and 4:30 p.m. For access to the and CWA section 303(d) impaired in the appropriate docket identification public docket, call Diane E. Fleck at waters listing decisions. Since a 30-day number. 415–972–3480 or Nancy Yoshikawa at delay in effectiveness of this rule would Background 415–972–3535 for an appointment. A unnecessarily extend this potential On May 18, 2000, EPA promulgated a reasonable fee may be charged for confusion when making water final rule known as the ‘‘California photocopies. The public docket may management decisions, EPA has Toxics Rule’’ or ‘‘CTR’’ to establish also be viewed electronically by determined that it would be in the numeric water quality criteria for following the instructions as provided public interest to make this rule priority toxic pollutants for the State of under ‘‘How to Obtain Copies of This effective immediately. California, since the State had not Document and Other Related Potentially Regulated Entities complied fully with section 303(c)(2)(B) Information.’’ No one is regulated by this final rule. of the Clean Water Act (CWA) (65 FR FOR FURTHER INFORMATION CONTACT: This final rule merely withdraws 31682). The criteria, codified at 40 CFR Diane E. Fleck, P.E., Esq. (WTR–2) or Federal copper and nickel aquatic life 131.38, became the applicable water Nancy Yoshikawa (WTR–5) at U.S. EPA water quality criteria applicable to south quality criteria in California effective Region 9, Water Division, 75 Hawthorne San Francisco Bay, California. May 18, 2000, for all purposes and Street, San Francisco, CA 94105 (tel: programs under the CWA. 415–972–3480 or 415–972–3535, How Can I Get Copies of This EPA acknowledged in the preamble to respectively, fax: 415–947–3537 or 415– Document and Other Related the CTR that the State of California was 974–3545, respectively) or e-mail at Information? working to satisfy the requirements of [email protected] or 1. Docket. EPA has established an CWA section 303(c)(2)(B) and [email protected]. For general official public docket for this action anticipated that the Agency, once the or administrative questions, please under Docket ID No. OW–2003–0015. State submitted its water quality contact Manjali Vlcan at U.S. EPA The official public docket consists of the standards to EPA, would approve the Headquarters, Office of Water, 1200 documents specifically referenced in State-adopted water quality criteria for Pennsylvania Avenue, NW., this action, any public comments pollutants included in the CTR (65 FR Washington, DC 20460 (tel: 202–566– received, and other information related 31684, May 18, 2000). The State of 0373, fax: 202–566–0409) or e-mail at to this action. Although a part of the California calls these criteria site- [email protected]. official docket, the public docket does specific water quality objectives or site- SUPPLEMENTARY INFORMATION: not include Confidential Business specific objectives. The water quality Information (CBI) or other information standards program was developed with Effective Date whose disclosure is restricted by statute. an emphasis on State primacy. Although EPA is making this final rule effective The official public docket is the in the CTR EPA promulgated toxic upon publication. Under the collection of materials that is available criteria for the State of California, EPA Administrative Procedures Act, 5 U.S.C. for public viewing under, ‘‘Water prefers that States maintain primacy, 553(d)(3), agencies must generally Quality Standards; Withdrawal of revise their own standards, and achieve

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full compliance (see 57 FR 60860, the CTR table at 40 CFR 131.38(b)(1) are: Statutory and Executive Order Reviews December 22, 1992). 74 ug/l acute (exposure for a short 1. Executive Order 12866—Regulatory Under the procedures set out in the period of time) and 8.2 ug/l chronic Planning and Review National Toxics Rule, published (exposure for an extended [4 day] period December 22, 1992 (see 57 FR 60860, of time). Both the copper and nickel This action withdraws specific December 22, 1992), and referenced in criteria are further expressed as a Federal requirements applicable to the CTR, when a State adopts and EPA function of the water-effect ratio (WER). south San Francisco Bay, California and approves water quality criteria that meet The WER in the CTR is assumed to be imposes no regulatory requirements or the requirements of the CWA, EPA will 1 for all applicable pollutants but may costs on any person or entity, does not issue a rule amending the Federal be otherwise defined by the State using interfere with the action or planned regulations to withdraw the Federally appropriate procedures (see 65 FR action of another agency, and does not applicable criteria. If the State’s criteria 31718). have any budgetary impacts or raise are no less stringent than the novel legal or policy issues. Thus, it has promulgated Federal criteria, EPA will The aquatic life water quality been determined that this rule is not a withdraw its criteria without notice and objectives for dissolvedcopper adopted ‘‘significant regulatory action’’ under comment rulemaking because additional by the State of California and approved the terms of Executive Order 12866 (58 comment is unnecessary. However, if a by EPA for south San Francisco Bay are: FR 51735, October 4, 1993) and is State adopts criteria that are less 10.8 ug/l acute (exposure for a 1 hour therefore not subject to Office of stringent than the Federally- average period of time) and 6.9 ug/l Management and Budget (OMB) review. promulgated criteria, but that in the chronic (exposure for a 4 day average 2. Paperwork Reduction Act Agency’s judgement fully meet the period of time). The aquatic life water requirements of the Act, EPA will quality objectives for dissolvednickel This final rule does not impose an provide an opportunity for public adopted by the State of California and information collection burden under the comment before withdrawing the approved by EPA for south San provisions of the Paperwork Reduction Federally promulgated criteria. As Francisco Bay are: 62.4 ug/l acute Act of 1995 (44 U.S.C. 3501 et seq.) described in detail below under ‘‘Site- (exposure for a 1 hour average period of because it is administratively Specific Aquatic Life Objectives for time) and 11.9 ug/l chronic (exposure withdrawing Federal requirements that Copper and Nickel,’’ the State of for a 4 day average period of time). no longer need to apply to south San California recently adopted copper and EPA recognizes that three out of the Francisco Bay, California. nickel aquatic life site-specific four California criteria for copper and 3. Regulatory Flexibility Act objectives for the south San Francisco nickel are less stringent than the The Regulatory Flexibility Act (RFA) Bay which EPA subsequently approved. Federally promulgated criteria in the (5 U.S.C. 601 et seq.), as amended by the On June 25, 2003, EPA requested CTR. However, the site-specific Small Business Regulatory Enforcement comment on its proposed action to objectives were developed from the Fairness Act of 1996, generally requires withdraw copper and nickel criteria results of a number of detailed studies an agency to prepare a regulatory applicable to the south San Francisco and technical reports that were the flexibility analysis of a rule that is Bay from the CTR and received no subject of technical peer review and subject to notice and comment adverse comments on the proposal (68 were part of the collaborative rulemaking requirements under the FR 37926, June 25, 2003). stakeholder process known as the Administrative Procedure Act or any ‘‘Santa Clara Basin Watershed Site-Specific Aquatic Life Objectives for other statute unless the agency certifies Management Initiative.’’ Based on this Copper and Nickel that the rule will not have significant additional information, EPA determined On May 22, 2002, the California economic impact on a substantial that these adopted criteria are fully Regional Water Quality Control Board, number of small entities. This final rule protective of the aquatic life designated San Francisco Bay Region, adopted site- imposes no regulatory requirements or uses of California’s waters in the south specific water quality objectives for costs on any small entity. Therefore, I San Francisco Bay and meet the nickel and copper to protect aquatic life certify that this action will not have a requirements of the Clean Water Act. in the south San Francisco Bay. On significant economic impact on a EPA approved California’s water quality October 17, 2002, the State Water substantial number of small entities. Resources Control Board approved the objectives on January 21, 2003. site-specific objectives for copper and Therefore, EPA has determined that the 4. Unfunded Mandate Reform Act nickel in the lower south San Francisco Federal aquatic life water quality Title III of the Unfunded Mandates Bay. On December 17, 2002, the State of criteria for copper and nickel in these Reform Act (UMRA) (Pub. L. 104–4) California completed its adoption waters are no longer necessary. establishes requirements for Federal process to incorporate copper and Because three out of the four agencies to assess the effects of their nickel aquatic life water quality criteria California criteria for copper and nickel regulatory actions on State, Tribal and for south San Francisco Bay. On January are less stringent than the Federally local governments and the private 9, 2003, the SWRCB submitted the site- promulgated criteria, on June 25, 2003, sector. Today’s final rule contains no specific objectives to EPA Region 9 for EPA requested comments on its Federal mandates (under the regulatory review and approval. proposed action to withdraw copper provisions of Title II of the UMRA) for The saltwater aquatic life water and nickel criteria from the CTR. On State, Tribal, or local governments or quality criteria for dissolvedcopper July 25, 2003, EPA received two letters the private sector because it imposes no contained in the CTR table at 40 CFR in support of the proposed withdrawal enforceable duty on any of these 131.38(b)(1) are: 4.8 ug/l acute action. No other comments were entities. Thus, today’s final rule is not (exposure for a short period of time) and received regarding the proposed action. subject to the requirements of UMRA 3.1 ug/l chronic (exposure for an EPA is therefore publishing this final section 202 and 205 for a written extended [4 day] period of time). The rule to withdraw the copper and nickel statement and small government agency saltwater aquatic life water quality aquatic life criteria for south San plan. Similarly, EPA has determined criteria for dissolved nickel contained in Francisco Bay from the CTR. that this final rule contains no

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regulatory requirements that might 9. National Technology Transfer and Resources Control Board, approved by significantly or uniquely affect small Advancement Act EPA, and which continue to apply. For governments and is therefore not subject The requirements of section 12(d) of copper and nickel, criteria apply to to UMRA section 203. the National Technology Transfer and California waters except for waters south of Dumbarton Bridge in San 5. Executive Order 13132—Federalism Advancement Act of 1995 (15 U.S.C. 272 note) do not apply because this rule Francisco Bay that are subject to the Executive Order 13132, entitled, does not involve technical standards. objectives in the SFRWQCB’s Basin Plan Federalism (64 FR 43255, August 10, as amended by SFRWQCB Resolution 1999), requires EPA to develop an 10. Congressional Review Act R2–2002–0061, dated May 22, 2002, and accountable process to ensure State and The Congressional Review Act, 5 approved by the State Water Resources local government officials have an U.S.C. 801 et seq., as added by the Small Control Board. EPA approved the opportunity to provide input in the Business Regulatory Enforcement aquatic life site-specific objectives on development of regulatory policies that Fairness Act of 1996, generally provides January 21, 2003. The copper and nickel have substantial direct effects on the that before a rule may take effect, the aquatic life site-specific objectives States, on the relationship between the agency promulgating the rule must contained in the amended Basin Plan national government and the States, or submit a rule report, which includes a apply instead. on the distribution of power and copy of the rule, to each House of the * * * * * responsibilities among the various Congress and to the Comptroller General [FR Doc. 03–27949 Filed 11–5–03; 8:45 am] levels of governments. This final rule of the United States. EPA will submit a BILLING CODE 6560–50–P imposes no regulatory requirements or report containing this rule and other costs on any State or local governments; required information to the U.S. Senate, therefore, it does not have Federalism the U.S. House of Representatives, and ENVIRONMENTAL PROTECTION implications under Executive Order the Comptroller General of the United AGENCY 13132. States prior to publication of the rule in 40 CFR Part 300 6. Executive Order 13175—Consultation the Federal Register. A major rule and Coordination With Indian Tribal cannot take effect until 60 days after it Governments is published in the Federal Register. [FRL–7583–1] This action is not a ‘‘major rule’’ as Again, this final rule imposes no defined by 5 U.S.C. 804(2). This rule National Oil and Hazardous regulatory requirements or costs on any will be effective November 6, 2003. Substances Pollution Contingency Tribal government. It does not have Plan; National Priorities List Update substantial direct effects on Tribal List of Subjects in 40 CFR Part 131 governments, on the relationship Environmental protection, Indians- AGENCY: Environmental Protection between the Federal government and lands, Intergovernmental relations, Agency. Indian tribes, or on the distribution of Reporting and recordkeeping ACTION: Notice of deletion of the Gurley power and responsibilities between the requirements, Water pollution control. Pit Superfund Site from the National Federal government and Indian tribes, Dated: October 30, 2003. Priorities List. as specified in Executive Order 13175, Marianne Lamont Horinko, entitled ‘‘Consultation and Coordination Acting Administrator. SUMMARY: The U.S. Environmental with Indian Tribal Governments’’ (65 FR Protection Agency (EPA) announces the 67249, November 6, 2000). ■ For the reasons set out in the preamble, deletion of the Gurley Pit Superfund 7. Executive Order 13045—Protection of 40 CFR part 131 is amended as follows: Site (Site), located two miles north of Edmondson, Arkansas, from the Children From Environmental Health PART 131—WATER QUALITY and Safety Risks National Priorities List (NPL). The NPL STANDARDS is Appendix B of 40 CFR part 300, This final rule is not subject to ■ 1. The authority citation for part 131 which is the National Oil and Executive Order 13045, entitled continues to read as follows: Hazardous Substances Pollution ‘‘Protection of Children from Contingency Plan (NCP), promulgated Authority: 33 U.S.C. 1251 et seq. Environmental Health Risks and Safety pursuant to section 105 of the Risks’’ (62 FR 19885, April 23, 1997), Subpart D—[Amended] Comprehensive Environmental because it is not economically Response, Compensation, and Liability significant, and EPA has no reason to ■ 2. Section 131.38(b)(1) is amended by Act (CERCLA) of 1980, as amended. The believe the environmental health or revising Footnote b. to read as follows: EPA and the State of Arkansas, through safety risks addressed by this action the Arkansas Department of present a disproportionate risk to § 131.38 Establishment of numeric criteria Environmental Quality, have children. for priority toxic pollutants for the State of determined that the Site poses no California. 8. Executive Order 13211—Actions That significant threat to public health or the * * * * * environment and, therefore, no further Significantly Affect Energy Supply, (b)(1) * * * Distribution, or Use remedial measures pursuant to CERCLA Footnotes to Table in Paragraph (b)(1): are appropriate. This final rule is not subject to * * * * * EFFECTIVE DATE: Executive Order 13211, entitled b. Criteria apply to California waters November 6, 2003. ‘‘Actions Concerning Regulations That except for those waters subject to FOR FURTHER INFORMATION CONTACT: Significantly Affect Energy Supply, objectives in Tables III–2A and III–2B of Ernest R. Franke, Remedial Project Distribution, or Use’’ (66 FR 28355, May the San Francisco Regional Water Manager (RPM), U.S. EPA Region 6 22, 2001), because it is not a significant Quality Control Board’s (SFRWQCB) (6SF–AP), 1445 Ross Avenue, Dallas, regulatory action under Executive Order 1986 Basin Plan that were adopted by TX 75202–2733, (214) 665–8521 or 1– 12866. the SFRWQCB and the State Water 800–533–3508 ([email protected]).

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SUPPLEMENTARY INFORMATION: The site to DEPARTMENT OF HOMELAND will be suspended on the effective date be deleted from the NPL is: Gurley Pit SECURITY in the third column. As of that date, Superfund Site, Edmondson, Arkansas. flood insurance will no longer be Federal Emergency Management A Notice of Intent to Delete for this available in the community. However, Agency some of these communities may adopt Site was published in the Federal and submit the required documentation Register on July 28, 2003 (68 FR 44270). 44 CFR Part 64 of legally enforceable floodplain The closing date for comments on the [Docket No. FEMA–7819] management measures after this rule is Notice of Intent to Delete was August published but prior to the actual 27, 2003. No comments were received, Suspension of Community Eligibility suspension date. These communities and, therefore, EPA has not prepared a will not be suspended and will continue Responsiveness Summary. AGENCY: Federal Emergency their eligibility for the sale of insurance. The EPA identifies sites that appear to Management Agency, Emergency A notice withdrawing the suspension of present a significant risk to public Preparedness and Response Directorate, the communities will be published in health, welfare, or the environment and Department of Homeland Security. the Federal Register. maintains the NPL as the list of those ACTION: Final rule. In addition, the Federal Emergency Management Agency has identified the sites. Any site deleted from the NPL SUMMARY: This rule identifies remains eligible for Fund-financed special flood hazard areas in these communities, where the sale of flood communities by publishing a Flood remedial actions in the unlikely event insurance has been authorized under Insurance Rate Map (FIRM). The date of that conditions at the site warrant such the National Flood Insurance Program the FIRM if one has been published, is action. Section 300.425(e)(3) of the NCP (NFIP), that are suspended on the indicated in the fourth column of the states that Fund-financed actions may effective dates listed within this rule table. No direct Federal financial be taken at sites deleted from the NPL. because of noncompliance with the assistance (except assistance pursuant to Deletion of a site from the NPL does not floodplain management requirements of the Robert T. Stafford Disaster Relief affect responsible party liability or the program. If the Federal Emergency and Emergency Assistance Act not in impede agency efforts to recover costs Management Agency (FEMA) receives connection with a flood) may legally be associated with response efforts. documentation that the community has provided for construction or acquisition adopted the required floodplain of buildings in the identified special List of Subjects in 40 CFR Part 300 management measures prior to the flood hazard area of communities not Environmental protection, Air effective suspension date given in this participating in the NFIP and identified pollution control, Chemicals, Hazardous rule, the suspension will be withdrawn for more than a year, on the Federal waste, Hazardous substances, by publication in the Federal Register. Emergency Management Agency’s Intergovernmental relations, Penalties, EFFECTIVE DATES: The effective date of initial flood insurance map of the Reporting and recordkeeping each community’s suspension is the community as having flood-prone areas (section 202(a) of the Flood Disaster requirements, Water pollution control, third date (‘‘Susp.’’) listed in the third Protection Act of 1973, 42 U.S.C. Water supply. column of the following tables. ADDRESSES: If you wish to determine 4106(a), as amended). This prohibition Dated: September 30, 2003. whether a particular community was against certain types of Federal Lawrence Starfield, suspended on the suspension date, assistance becomes effective for the Deputy Regional Administrator, Region 6. contact the appropriate FEMA Regional communities listed on the date shown Office or the NFIP servicing contractor. in the last column. The Administrator ■ For the reasons set out in the preamble, finds that notice and public comment FOR FURTHER INFORMATION CONTACT: 40 CFR part 300 is amended as follows: under 5 U.S.C. 553(b) are impracticable Mike Grimm, Mitigation Division, 500 C and unnecessary because communities PART 300—[AMENDED] Street, SW., Room 412, Washington, DC listed in this final rule have been 20472, (202) 646–2878. adequately notified. ■ 1. The authority citation for part 300 SUPPLEMENTARY INFORMATION: The NFIP Each community receives a 6-month, continues to read as follows: enables property owners to purchase 90-day, and 30-day notification flood insurance which is generally not Authority: 42 U.S.C. 9601–9657; 33 U.S.C. addressed to the Chief Executive Officer otherwise available. In return, 1321(c)(2); E.O. 12777, 56 FR 54757, 3 CFR, that the community will be suspended communities agree to adopt and 1991 Comp., p.351; E.O. 12580, 52 FR 2923, unless the required floodplain administer local floodplain management 3 CFR, 1987 Comp., p. 193. management measures are met prior to aimed at protecting lives and new the effective suspension date. Since Appendix B—[Amended] construction from future flooding. these notifications have been made, this Section 1315 of the National Flood final rule may take effect within less ■ 2. Table 1 of Appendix B to part 300 Insurance Act of 1968, as amended, 42 than 30 days. is amended by removing the entry for the U.S.C. 4022, prohibits flood insurance National Environmental Policy Act. Gurley Pit site in Edmondson, Arkansas. coverage as authorized under the This rule is categorically excluded from National Flood Insurance Program, 42 [FR Doc. 03–27849 Filed 11–5–03; 8:45 am] the requirements of 44 CFR part 10, U.S.C. 4001 et seq.; unless an Environmental Considerations. No BILLING CODE 6560–50–P appropriate public body adopts environmental impact assessment has adequate floodplain management been prepared. measures with effective enforcement Regulatory Flexibility Act. The measures. The communities listed in Administrator has determined that this this document no longer meet that rule is exempt from the requirements of statutory requirement for compliance the Regulatory Flexibility Act because with program regulations, 44 CFR part the National Flood Insurance Act of 59 et seq. Accordingly, the communities 1968, as amended, 42 U.S.C. 4022,

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prohibits flood insurance coverage Paperwork Reduction Act. This rule ■ Accordingly, 44 CFR part 64 is unless an appropriate public body does not involve any collection of amended as follows: adopts adequate floodplain management information for purposes of the measures with effective enforcement Paperwork Reduction Act, 44 U.S.C. PART 64—[AMENDED] measures. The communities listed no 3501 et seq. ■ longer comply with the statutory Executive Order 12612, Federalism. 1. The authority citation for part 64 requirements, and after the effective This rule involves no policies that have continues to read as follows: date, flood insurance will no longer be federalism implications under Executive Authority: 42 U.S.C. 4001 et seq.; Order 12612, Federalism, October 26, available in the communities unless Reorganization Plan No. 3 of 1978, 3 CFR, 1987, 3 CFR, 1987 Comp.; p. 252. 1978 Comp.; p. 329; E.O. 12127, 44 FR 19367, they take remedial action. Executive Order 12778, Civil Justice 3 CFR, 1979 Comp.; p. 376. Regulatory Classification. This final Reform. This rule meets the applicable rule is not a significant regulatory action standards of section 2(b)(2) of Executive § 64.6 [Amended] under the criteria of section 3(f) of Order 12778, October 25, 1991, 56 FR Executive Order 12866 of September 30, 55195, 3 CFR, 1991 Comp.; p. 309. ■ 2. The tables published under the authority of § 64.6 are amended as 1993, Regulatory Planning and Review, List of Subjects in 44 CFR Part 64 58 FR 51735. follows: Flood insurance, Floodplains.

Date certain Federal assist- Community Effective date authorization/cancellation of Current effective ance no longer State and location No. sale of flood insurance in community map date available in special flood hazard areas

Region IV Mississippi: Puckett, Township of, Rankin 280147 May 22, 1987, Emerg.; Dec. 1, 1990, Reg.; 11/5/03 ...... 11/5/03. County. Nov. 5, 2003, Susp. Region V Illinois: Alorton, Village of, St. Clair County ...... 170617 Apr. 26, 1974, Emerg.; June 4, 1980, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. Belleville, City of, St. Clair County ...... 170618 July 5, 1973, Emerg.; Nov. 19, 1980, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. Brooklyn, Village of, St. Clair County .... 170619 May 1, 1974, Emerg.; Mar. 28, 1980, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. Cahokia, Village of, St. Clair County ..... 170620 Oct. 4, 1973, Emerg.; Oct. 17, 1978, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. Caseyville, Village of, St. Clair County 170621 Apr. 26, 1973, Emerg.; Mar. 16, 1981, ...... do ...... Do. Reg.; Nov. 5, 2003, Susp. Centreville, City of, St. Clair County ..... 170622 May 16, 1973, Emerg.; Mar. 4, 1980, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. Dupo, Village of, St. Clair County ...... 170624 May 29, 1973, Emerg.; Feb. 4, 1981, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. East Carondelet, Village of, St. Clair 170625 Feb. 15, 1974, Emerg.; Mar. 2, 1981, Reg.; ...... do ...... Do. County. Nov. 5, 2003, Susp. East St. Louis, City of, St. Clair County 170626 May 1, 1973, Emerg.; Nov. 1, 1979, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. Fairmont City, Village of, St. Clair 170627 July 29, 1975, Emerg.; Mar. 28, 1980, Reg.; ...... do ...... Do. County. Nov. 5, 2003, Susp. Fairview Hgts., City of, St. Clair County 170895 Jan. 14, 1975, Emerg.; July 3, 1978, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. Fayetteville, Village of, St. Clair County 170628 May 12, 1976, Emerg.; June 15, 1981, ...... do ...... Do. Reg.; Nov. 5, 2003, Susp. Freeburg, Village of, St. Clair County ... 170790 Mar. 24, 1976, Emerg.; Jan. 18, 1980, ...... do ...... Do. Reg.; Nov. 5, 2003, Susp. Mascoutah, City of, St. Clair County ..... 170630 May 1, 1974, Emerg.; June 15, 1981, Reg.; ...... do ...... Do. . Nov. 5, 2003, Susp. Monmouth, City of, Warren County...... 170676 April 11, 1975, Emerg.; Sep. 30, 1988, ...... do ...... Do. Reg.; Nov. 5, 2003, Susp. New Athens, Village of, St. Clair County 170632 Sept. 3, 1975, Emerg.; Mar. 23, 1984, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. O’fallon, City of, St. Clair County ...... 170633 July 3, 1974, Emerg.; Oct. 15, 1982, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. Sauget, Village of, St. Clair County ...... 170635 July 6, 1976, Emerg.; Aug. 1, 1980, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. Shiloh, Village of, St. Clair County ...... 171043 Feb. 29, 1996, Reg.; Nov. 5, 2003, Susp ...... do ...... Do. Smithton, Village of, St. Clair County .... 170892 Jan. 7, 1976, Emerg.; June 25, 1976, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. St. Clair County, Unincorporated Areas 170616 Mar. 30, 1973, Emerg.; Dec. 15, 1981, ...... do ...... Do. Reg.; Nov. 5, 2003, Susp. St. Libory, Village of, St. Clair County .. 170634 July 16, 1975, Emerg.; Feb. 25, 1983, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp.

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Date certain Federal assist- Community Effective date authorization/cancellation of Current effective ance no longer State and location No. sale of flood insurance in community map date available in special flood hazard areas

Summerfield, Village of, St. Clair Coun- 170636 Aug. 11, 1976, Emerg.; Aug. 10, 1979, ...... do ...... Do ty. Reg.; Nov. 5, 2003, Susp. Swansea, Village of, St. Clair County ... 170637 Jan. 13, 1975, Emerg.; Dec. 1, 1981, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. Indiana: Allen County, Unincorporated Areas..... 180302 Feb. 14, 1974, Emerg.; Sep. 28, 1990, ...... do ...... Do. Reg.; Nov. 5, 2003, Susp. Fort Wayne, City of, Allen County ...... 180003 May 24, 1974, Emerg.; Apr. 3, 1985, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. Grabill, Town of, Allen County ...... 180499 Oct. 17, 1990, Reg.; Nov. 5, 2003, Susp ...... do ...... Do. Huntertown, Town of, Allen County ...... 180005 July 29, 1975, Emerg.; Nov. 2, 1983, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. Monroeville, Town of, Allen County ...... 180498 Oct. 17, 1990, Reg.; Nov. 5, 2003, Susp ...... do ...... Do. New Haven, City of, Allen County ...... 180004 Jan. 30, 1975, Emerg.; July 18, 1983, Reg.; ...... do ...... Do. Nov. 5, 2003, Susp. Minnesota: Isanti County, Unincorporated 270197 Apr. 4, 1972, Emerg.; May 19, 1981, Reg.; ...... do ...... Do. Areas. Nov. 5, 2003, Susp. Wisconsin: Darlington, City of, Lafayette County .... 550228 Aug. 18, 1972, Emerg.; Sep. 15, 1978, ...... do ...... Do. Reg.; Nov. 5, 2003, Susp. Lafayette County, Unincorporated 550223 Mar. 10, 1972, Emerg.; Sept. 15, 1978, ...... do ...... Do. Areas. Reg.; Nov. 5, 2003, Susp. Region IV South Carolina: Lancaster County, Unincor- 450120 July 3, 1975, Emerg.; Jan. 6, 1983, Reg.; 11/19/2003 ...... 11/19/2003 porated Areas. Nov. 19, 2003, Susp.. Region VIII South Dakota: Aurora County, Unincorporated Areas .. 460293 Nov. 19, 2003, Reg.; Nov. 19, 2003, Susp ...... do ...... Do. Plankinton, City of, Aurora County...... 460001 Sept. 29, 1975, Emerg.; Aug. 5, 1986, ...... do ...... Do. Reg.; Nov. 19, 2003, Susp. *do=Ditto. Code for reading third column: Emerg.-Emergency; Reg.-Regular; Susp.-Suspension.

Dated: October 30, 2003. OS/OCR (09–90–0051).’’ PIMS is a new programs or entities that receive Federal Anthony S. Lowe, integrated system with enhanced financial assistance. Additionally, OCR Mitigation Division Director, Emergency electronic storage, retrieval and tracking has jurisdiction over Federally Preparedness and Response Directorate. capacities. The final rule exempts the conducted programs in cases involving [FR Doc. 03–27976 Filed 11–5–03; 8:45 am] investigative records in PIMS from the disability based discrimination under BILLING CODE 6718–05–P notification, access, correction and section 504 of the Rehabilitation Act, amendment provisions of the Privacy over state and local public entities in Act, 5 U.S.C. 552a, pursuant to cases involving disability based DEPARTMENT OF HEALTH AND subsection (k)(2), which applies to discrimination under Title II of the HUMAN SERVICES investigative materials compiled for law Americans with Disabilities Act of 1990 enforcement purposes. and certain health plans, health clearing Office of the Secretary DATES: This is effective on November 6, houses, and health care providers with 2003. respect to enforcement of medical 45 CFR part 5b privacy obligations under the Heath FOR FURTHER INFORMATION CONTACT: Insurance Portability and Privacy Act; Implementation Norman Oslik, Chief Information Accountability Act (HIPAA). Officer, Office for Civil Rights, AGENCY: Office of the Secretary, HHS. Formerly, OCR maintained two Department of Health and Human systems of records: The ‘‘Case ACTION: Final rule. Services, Room 509F, Hubert H. Information Management System SUMMARY: The Office for Civil Rights Humphrey Building, 200 Independence (CIMS) HHS/OS/OCR (09–90–0050),’’ (OCR) of the Department of Health and Avenue, SW., Washington, DC 20201. and the ‘‘Complaint File and Log, HHS/ Human Services has implemented a Telephone number: (202) 619–0553. OS/OCR (09–90–0051).’’ CIMS included new system of records (SOR) entitled (TTY No. 1–800–537–7697). the Case Activity Tracking System the ‘‘Program Information Management SUPPLEMENTARY INFORMATION: The Office (CATS) which was created to use newer System (PTMS), HHS/OS/OCR (09–90– for Civil Rights (OCR) is responsible for technology (i.e., moved CIMS off a 0052).’’ This system has replaced OCR’s enforcing Title VI of the Civil Rights Act mainframe computer onto a local two previous systems of records, the of 1964, Section 504 of the network environment), but continued to ‘‘Case Information Management System Rehabilitation Act of 1973, the Age collect and store the same information (CIMS), HHS/OS/OCR (09–90–0050),’’ Discrimination Act of 1975, and other as in CIMS. Records maintained in the and the ‘‘Complaint File and Log, HHS/ statutes that prohibit discrimination by Complaint File and Log were exempted

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from the notification, access, correction part Sb of 45 CFR Subtitle A, is amended another facilities-based carrier’s and amendment provisions of the as follows: platform. Privacy Act under subsection (k)(2) DATES: PART 5b—PRIVACY ACT This Report and Order readopts, concerning records compiled for law on an interim basis until the effective REGULATIONS enforcement purposes. 49 FR 14107 date of the final rules in this document, (April 10, 1984). ■ 1. The authority citation for part 5b those rules initially adopted at 66 FR Pursuant to the notification of a new continues to read as follows: 21105, April 27, 2001 in the Second system of records (SOR), published in Authority: 5 U.S.C. 301; 5 U.S.C. 552a. Order on Reconsideration. These rules, the Federal Register on September 6, currently set forth at 47 CFR 64.1300(a), ■ 2. Section 5b.11 is amended by adding 2002 (67 FR 57011), OCR implemented 64.1310(a), and 64.1310(b), are effective paragraph (b)(2)(ii)(G) to read as follows: a new system of records, Program November 6, 2003. The final rules in Information Management System § 5b.11 Exempt systems. this document contain information (PIMS), HHS/OS/OCR (09–90–0052). collection requirements that are PIMS is used by OCR staff and consists * * * * * (b) * * * contingent upon approval of the Office of an electronic repository of of Management and Budget (OMB). The information and documents and (2) * * * Commission will publish a document in supplementary paper document files. (ii) * * * the Federal Register announcing the PIMS effectively combines and replaces (G) Investigative materials compiled effective date of these final rules. OCR’s two former systems of records for law enforcement purposes for the (CIMS and Complaint File and Log) into Program Information Management SUPPLEMENTARY INFORMATION: This is a a single integrated system with System, HHS/OS/OCR. summary of the Commission’s Report enhanced electronic storage, retrieval * * * * * and Order (R&O) in CC Docket No. 96– 128, FCC 03–235, adopted September and tracking capacities. While the types Dated: August 29, 2003. of information collected and stored in 30, 2003, and released October 3, 2003. Richard M. Campanelli, Filings and comments are also available PIMS are the same as those stored in Director, Office for Civil Rights. CIMS and Complaint File and Log, for public inspection and copying PIMS allows OCR to more effectively Dated: October 28, 2003. during regular business hours at the manage the data it collects. Tommy G. Thompson, FCC Reference Information Center, OCR investigative files maintained in Secretary. Portals II, 445 12th Street, SW., Room PIIMS either as paper records or [FR Doc. 03–27716 Filed 11–5–03; 8:45 am] CY–A257, Washington, DC 20554. They electronic documents are records BILLING CODE 4153–01–P may also be purchased from the compiled for law enforcement purposes. Commission’s duplicating contractor, In the course of investigations, OCR Qualex International, Portals II, 445 often has a need to obtain confidential FEDERAL COMMUNICATIONS 12th Street, SW., Room CY–B402, information involving individuals other COMMISSION Washington, DC 20554, telephone 202– than the complainant. In these cases, it 863–2893, facsimile 202–863–2898, or is necessary for OCR to preserve the 47 CFR Part 64 via e-mail [email protected]. confidentiality of this information to FOR FURTHER INFORMATION CONTACT: avoid unwarranted invasions of [CC Docket No. 96–128; FCC 03–235] Henry L. Thaggert, Attorney-Advisor, personal privacy and to assure The Pay Telephone Reclassification Competition Policy Division, Wireline recipients of Federal financial assistance and Compensation Provisions of the Competition Bureau, at (202) 418–7941, that such information provided to OCR Telecommunications Act of 1996 or via the Internet at will be kept confidential. This assurance [email protected]. is often central to resolving disputes AGENCY: Federal Communications Synopsis of the Report and Order concerning access by OCR to the Commission. recipient’s records, and is necessary to ACTION: Final rule. 1. The Commission adopts these rules facilitate prompt and effective to ensure that PSPs are ‘‘fairly completion of the investigations. SUMMARY: This document adopts new compensated’’ for all SBR completed Unrestricted disclosure of payphone compensation rules that place calls made from their payphones under confidential information in OCR files liability on the facilities-based long section 276 of the Communications Act can impede ongoing investigations, distance carrier to compensate of 1934, as amended. These rules satisfy invade personal privacy of individuals, payphone service providers (PSPs) for section 276 by identifying the party reveal the identities of confidential payphone-originated calls that are liable for compensation and establishing sources, or otherwise impair the ability completed on that facilities-based long a mechanism for PSPs to be paid. These of OCR to conduct investigations. For distance carrier’s platform. The rules are based on what the Commission these reasons, the Department published Commission also establishes a payment has learned from input over the past a notice of proposed rulemaking, 67 FR mechanism for switch-based resellers seven years from the payphone and SBR 56252 (September 3, 2002) to exempt all (SBRs) to compensate PSPs for this industries, and from experience in investigative records maintained in liability. In satisfying its liability implementing section 276 in various PIMS from the notification, access, obligation to a PSP, the SBR must orders addressing problems raised by correction and amendment provisions establish its own call tracking system, the parties over the years. under subsection (k)(2) of the Privacy have a third party attest that the system 2. Background. This R&O is the result Act. The Department received no public accurately tracks payphone calls to of a court remand of an earlier attempt comments. completion, and pay a PSP directly by the Commission to remedy problems based on the SBR’s own call tracking in the payphone compensation rules. In List of Subjects in 45 CFR Part 5b data. Other facilities-based long distance January 2003, on a petition for review, Privacy. carriers in the call path, if any, must the United States Court of Appeals for ■ For reasons set out in the preamble, the provide reports to the PSPs of the District of Columbia Circuit (DC Department’s Privacy Act Regulation, payphone-originated calls switched to Circuit) vacated and remanded this

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proceeding’s Second Order on shortfalls are addressed in the new rules contains collections of information Reconsideration (66 FR 21105, April 27, in a way that will more effectively result subject to OMB review. The information 2001) on the grounds that parties were in ‘‘fair compensation’’ under section collection requirements for the final not afforded proper notice and 276 than did the rules adopted in the rules adopted in this item are contingent opportunity for comment. The DC Second Order on Reconsideration. upon approval by OMB. Circuit held that the Commission 5–6. Carrier Reporting Duties. The violated the Administrative Procedure Commission adopts new reporting Final Regulatory Flexibility Analysis Act (APA) when it modified its rules obligations for all facilities-based long 9. Interim Rules. The Regulatory without proper notice. The DC Circuit distance carriers in the call path that Flexibility Act of 1980, as amended vacated the Commission’s order, but own or lease a switch and transfer (RFA), requires that a regulatory stayed its mandate and its vacatur of the payphone-originated calls to other flexibility analysis be prepared for Second Order on Reconsideration facilities-based long distance carriers. notice-and-comment rule making through September 30, 2003. As a result, The Commission refers to these carriers proceedings, unless the agency certifies the rules promulgated in the Second for purposes of these rules as the that ‘‘the rule will not, if promulgated, Order on Reconsideration remain in ‘‘Intermediate Carriers’’ to distinguish have a significant economic impact on effect through September 30, 2003, but them from the last facilities-based long a substantial number of small entities.’’ are vacated after that date. distance carrier that completes the call The RFA generally defines the term 3. On May 28, 2003, in response to the on a switch that it owns or leases. The ‘‘small entity’’ as having the same DC Circuit’s decision, the Commission reporting obligations adopted in this meaning as the terms ‘‘small business,’’ issued a Further Notice of Proposed R&O apply to a larger class of carriers ‘‘small organization,’’ and ‘‘small Rulemaking (Further Notice) (68 FR than those affected by the Second Order governmental jurisdiction.’’ In addition, 32720, June 2, 2003) to seek comment on Reconsideration, and require the the term ‘‘small business’’ has the same on whether the rules adopted in the submission of more detailed meaning as the term ‘‘small business Second Order on Reconsideration information. The Commission concern’’ under the Small Business Act. satisfied section 276’s requirements or concludes that these newly adopted A ‘‘small business concern’’ is one whether other new rules would be rules resolve two principle concerns: (1) which: (1) Is independently owned and necessary. In this R&O, the Commission The inability of PSPs to obtain operated; (2) is not dominant in its field adopts new final rules to address both information about the identity of the of operation; and (3) satisfies any the problems that PSPs have SBRs and the number of SBR completed additional criteria established by the experienced in obtaining compensation calls; and (2) the incentive of the SBRs Small Business Administration (SBA). from SBRs, and the problems that to avoid detection and compensating the The Commission certifies that, under interexchange carriers have experienced PSPs. the Regulatory Flexibility Act, 5 U.S.C. 7. Interim Rules. Due to information prior to and after the adoption of the 605(b), there will not be a significant collection and exchange requirements Second Order on Reconsideration. The economic impact on a substantial Commission cannot, however, make pursuant to OMB procedures and the number of small business entities these final rules effective before need to provide carriers time to resulting from the interim rules September 30, 2003, when the rules transition to our new rules, the new established in this R&O. These rules, adopted in the Second Order on rules will not take effect immediately. adopted in the Second Order on Reconsideration were vacated. On average, OMB approval requires as Reconsideration, will remain in place Additional time is needed to obtain few as 120 and up to 150 days from the until the new rules become effective. clearances from the OMB and to permit release of an order. Moreover, as The Commission finds that the interim carriers sufficient time to take the steps described above, carriers have indicated rules, while not optimal, have, as a necessary to come into compliance with that they need at least one full quarter practical matter, worked reasonably the new rules. Thus, the Commission after notice of the new rules to make must adopt interim rules to ensure that necessary changes to their networks, well, and there is no reason to believe PSPs continue to receive compensation and that it would be disruptive if the that small businesses would be during this transition period. For this new rules were to go into effect on a day burdened by a brief continuation of purpose, for the limited period until the other than the first day of a quarter. these rules during a transition period. final rules become effective, the Accordingly, the Commission finds it Additionally, in the absence of interim Commission adopts the rules originally reasonable to adopt, for an interim rules, it is likely that the industry would adopted in the Second Order on period, the rules initially adopted in the nevertheless continue to follow the Reconsideration, and currently set forth Second Order on Reconsideration. rules adopted in the Second Order on at 47 CFR. 64.1300(a), 64.1310(a), and These interim rules will remain in effect Reconsideration pursuant to their 64.1310(b). until the effective date of the final rules. existing contracts. Moreover, it would 4. Prior Compensation Regimes. The Following OMB approval of the be burdensome to adopt a third set of Commission affirms the Further Notice’s information collections in the final rules that would be effective for only a tentative conclusion that, prior to the rules, the Commission will publish a brief interim period. Thus, the regime adopted in the Second Order on notice in the Federal Register Commission adopts interim rules to Reconsideration, the PSPs suffered announcing the effective date for these ensure that PSPs continue to receive compensation shortfalls. The rules. This effective date will be the first compensation during the transition Commission finds that PSPs day of the first full quarter after the final period. experienced these shortfalls because: (1) rules receive OMB approval. 10. The Commission will send a copy The PSPs had insufficient information of this final certification, along with this about the identity of the SBRs and the Final Paperwork Reduction Act R&O, in a report to Congress pursuant number of calls they completed; and (2) Analysis to the Congressional Review Act, and to the SBRs lacked an incentive to 8. This Report and Order contains the Chief Counsel for Advocacy of the voluntarily identify themselves as the conclusions that have been analyzed as Small Business Administration. A copy liable parties and to pay compensation required by the Paperwork Reduction of this certification will be published in for every completed call. These Act of 1995, Pub. L. 104–13, and the Federal Register.

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11. Final Rules. As required by the they were engaged in the provision of 349 CAPs or competitive local exchange RFA, an Initial Regulatory Flexibility local exchange services. Of these 1,335 carriers and 60 other local exchange Analysis (IRFA) was incorporated in the carriers, 1,037 reported that they have carriers reported that they were engaged Federal Register summary of the 1,500 or fewer employees and 298 in the provision of either competitive Further Notice. The Commission sought reported that, alone or in combination access provider services or competitive written public comments on the with affiliates, they have more than local exchange carrier services. Of these proposals in the Further Notice 1,500 employees. The Commission does 349 competitive access providers and including comments on the IRFA. This not have data specifying the number of competitive local exchange carriers, 297 present Final Regulatory Flexibility these carriers that are either dominant reported that they have 1,500 or fewer Analysis (FRFA) conforms to the RFA. in their field of operations or are not employees and 52 reported that, alone independently owned and operated, and or in combination with affiliates, they Need for, and Objectives of, the Rules thus are unable at this time to estimate have more than 1,500 employees. Of the 12. Final Rules. This Order fulfills the with greater precision the number of 60 other local exchange carriers, 56 commitment the Commission undertook incumbent local exchange carriers that reported that they have 1,500 or fewer in the Further Notice to examine the would qualify as small business employees and 4 reported that, alone or need to amend our payphone concerns under the SBA’s definition. in combination with affiliates, they have compensation rules, and responds to a Consequently, we estimate that 1,037 or more than 1,500 employees. court remand of an earlier attempt by fewer providers of local exchange Consequently, the Commission the Commission to remedy problems service are small entitles that may be estimates that there are 297 or fewer with the rules. affected by the rules and policies small entity CAPS and 56 or fewer other Summary of Significant Issues Raised adopted herein. local exchange carriers that may be by Public Comments in Response to the 16. Competitive Local Exchange affected by the rules. Carriers. Neither the Commission nor 18. Local Resellers. SBA has IRFA the SBA has developed a specific developed a definition for small 13. There were no comments raised definition for small providers of businesses within the category of that specifically addressed the IRFA. competitive local exchange services. Telecommunications Resellers. Under Nonetheless, the agency considered the The closest applicable definition under that SBA definition, such a business is potential impact of the rules proposed the SBA rules is for Wired small if it has 1,500 or fewer employees. in the IRFA on small entities and Telecommunications Carriers. Under According to the Commission’s most reduced the compliance burden for all that SBA definition, such a business is recent Telephone Trends Report data, small entities in order to reduce the small if it has 1,500 or fewer employees. 87 companies reported that they were economic impact of the rules enacted According to the Commission’s engaged in the provision of local resale herein on such entities. Telephone Trends Report data, 349 services. Of these 87 companies, 86 Description and Estimate of the Number companies reported that they were reported that they have 1,500 or fewer of Small Entities to Which the Actions engaged in the provision of either employees and one reported that, alone Taken Will Apply competitive access provider services or or in combination with affiliates, it had competitive local exchange carrier more than 1,500 employees. 14. Final Rules. The RFA directs services. Of these 349 companies, 297 Consequently, the Commission agencies to provide a description of and, reported that they have 1,500 or fewer estimates that there are 86 or fewer local where feasible, an estimate of the employees and 52 reported that, alone resellers that may be affected by the number of small entities that will be or in combination with affiliates, they rules. affected by the proposed rules. The RFA have more than 1,500 employees. The 19. Toll Resellers. The SBA has generally defines the term ‘‘small Commission does not have data developed a definition for small entity’’ as having the same meaning as specifying the number of these carriers businesses within the category of the terms ‘‘small business,’’ ‘‘small that are either dominant in their field of Telecommunications Resellers. Under organization,’’ and ‘‘small governmental operations or are not independently that SBA definition, such a business is jurisdiction.’’ In addition, the term owned and operated, and thus is unable small if it has 1,500 or fewer employees. ‘‘small business’’ has the same meaning at this time to estimate with greater According to the Commission’s most as the term ‘‘small business concern’’ precision the number of competitive recent Telephone Trends Report data, under the Small Business Act. A small local exchange carriers that would 454 companies reported that they were business concern is one which: (1) Is qualify as small business concerns engaged in the provision of toll resale independently owned and operated; (2) under the SBA’s definition. services. Of these 454 companies, 423 is not dominant in its field of operation; Consequently, the Commission reported that they have 1,500 or fewer and (3) satisfies any additional criteria estimates that fewer than 297 providers employees and 31 reported that, alone established by the Small Business of competitive local exchange service or in combination with affiliates, they Administration (SBA). are small entities that may be affected have more than 1,500 employees. 15. Incumbent Local Exchange by the rules. Consequently, the Commission Carriers. Neither the Commission nor 17. Competitive Access Providers. estimates that there are 423 or fewer toll the SBA has developed a specific Neither the Commission nor the SBA resellers that may be affected by the definition of small providers of has developed a definition of small rules. incumbent local exchange services. The entities specifically applicable to 19. Payphone Service Providers. closest applicable definition under the competitive access providers (CAPS). Neither the Commission nor the SBA SBA rules is for Wired The closest applicable definition under has developed a definition of small Telecommunications Carriers. Under the SBA rules is for Wired entities specifically applicable to that SBA definition, such a business is Telecommunications Carriers. Under payphone service providers (PSPs). The small if it has 1,500 or fewer employees. that SBA definition, such a business is closest applicable definition under the According to the most recent Telephone small if it has 1,500 or fewer employees. SBA rules is for Wired Trends Report data, 1,335 incumbent According to the Commission’s most Telecommunications Carriers. Under local exchange carriers reported that recent Telephone Trends Report data, that SBA definition, such a business is

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small if it has 1,500 or fewer employees. calling cards. Of these 21 companies, 20 free payphone call) to establish a call- According to the Commission’s most reported that they have 1,500 or fewer tracking system, subject to an auditing recent Trends in Telephone Service employees and one reported that, alone requirement to ensure accuracy, to track data, 758 PSPs reported that they were or in combination with affiliates, it had coinless access code or subscriber toll- engaged in the provision of payphone more than 1,500 employees. free payphone calls to completion, and services. Of these 758 payphone service Consequently, the Commission to compensate the PSP for these calls on providers, 755 reported that they have estimates that there are 20 or fewer local a quarterly basis. With its payment, the 1,500 or fewer employees and 3 resellers that may be affected by the Completing Carrier must include a reported that, alone or in combination rules. sworn declaration from its Chief with affiliates, they have more than Financial Officer certifying that the Description of Projected Reporting, 1,500 employees. Consequently, the payment amount is accurate and is Recordkeeping, and Other Compliance Commission estimates that there are 755 based on 100 percent of actual calls Requirements or fewer PSPs that may be affected by completed. To support this certification, the rules. 23. Final Rules. The new rules the the Completing Carrier also must submit 20. Interexchange Carriers. Neither Commission adopts will enable a PSP to quarterly reports to the PSP, which must the Commission nor the SBA has identify SBRs that are not compensating include the following information: (1) A developed a definition of small entities it and to challenge the payments in list of the toll-free and access numbers specifically applicable to providers of instances where the PSP may believe dialed from each payphone and the ANI interexchange services. The closest that the data provided by other for each payphone; (2) the volume of applicable definition under the SBA facilities-based long distance carriers are calls for each listed number that the rules is for Wired Telecommunications out of proportion to the data provided completing carrier completed; (3) the Carriers. Under that SBA definition, by the final SBR in the call path. The name, address, and phone number of such a business is small if it has 1,500 new rules will have no adverse impact the person or persons responsible for or fewer employees. According to the on small carriers. Specifically, the new handling the completing carrier’s most recent Telephone Trends Report rules contain reporting obligations for payphone compensation; and (4) the data, 204 carriers reported that their an ‘‘Intermediate Carrier’’ (defined as carrier identification code of all primary telecommunications service any facilities-based long distance carrier facilities-based long distance carriers activity was the provision of in the call path that switches coinless that routed calls to the SBR. interexchange services. Of these 204 payphone calls to another facilities- carriers, 163 reported that they have based long distance carrier). The new Steps Taken To Minimize Significant 1,500 or fewer employees and 41 rules require each ‘‘Intermediate Economic Impact on Small Entities, and reported that, alone or in combination Carrier’’ to maintain, and provide to the Significant Alternatives Considered with affiliates, they have more than PSP, a quarterly report that includes, for 25. The RFA requires an agency to 1,500 employees. Consequently, we each facilities-based long distance describe any significant, specifically estimate that there are 163 or fewer carrier to which the Intermediate Carrier small business, alternatives that it has small entity IXCs that may be affected switched a toll-free or access code call: considered in reaching its proposed by the rules. (1) A list of all the facilities-based long approach, which may include the 21. Operator Service Providers. distance carriers to which the following four alternatives (among Neither the Commission nor the SBA Intermediate Carrier switched toll-free others): (1) The establishment of has developed a definition of small and access code calls dialed from each differing compliance or reporting entities specifically applicable to of that payphone service provider’s requirements or timetables that take into operator service providers. The closest payphones; (2) a list of all the toll-free account the resources available to small applicable definition under the SBA and access code numbers dialed from entities; (2) the clarification, rules is for Wired Telecommunications each of that payphone service provider’s consolidation, or simplification of Carriers. Under that SBA definition, payphones that all local exchange compliance or reporting requirements such a business is small if it has 1,500 carriers have delivered to the under the rule for small entities; (3) the or fewer employees. According to the Intermediate Carrier and that the use of performance, rather than design, Commission’s most recent Telephone Intermediate Carrier switched to the standards; and (4) an exemption from Trends Report data, 21 companies identified facilities-based long distance coverage of the rule, or any part thereof, reported that they were engaged in the carriers; (3) the volume of calls for each for small entities. provision of operator services. Of these toll-free and access code number, e.g., 26. The new rules impose a minimal 21 companies, 20 reported that they ‘‘800’’ and ‘‘888’’ numbers, that the burden on the facilities-based long have 1,500 or fewer employees and one Intermediate Carrier has received from distance carrier to compensate PSPs for reported that, alone or in combination each of that PSP’s payphones, identified all calls that are completed on that with affiliates, it had more than 1,500 by their ANIs, and switched to the facilities-based carrier’s platform. As the employees. Consequently, the facilities-based long distance carrier; record indicates, facilities-based long Commission estimates that there are 20 and (4) the name, address, telephone distance carriers in the call path already or fewer local resellers that may be number and other identifying collect the data necessary to comply affected by the rules. information for the person or persons with these reporting requirements as 22. Prepaid Calling Card Providers. for each of the facilities-based long part of their own call tracking and The SBA has developed a definition for distance carriers that serve as the billing systems. Thus, the Commission small businesses within the category of Intermediate Carrier’s contact at each does not impose any new collecting Telecommunications Resellers. Under listed facilities-based long distance responsibilities, and we find that the that SBA definition, such a business is carrier. additional reporting obligations the new small if it has 1,500 or fewer employees. 24. Our rules also require a rules impose are minimal in nature. According to the Commission’s most ‘‘Completing Carrier’’ (defined as a long Furthermore, the facilities-based long recent Telephone Trends Report data, distance carrier or switch-based long distance carrier that does not wish to 21 companies reported that they were distance reseller that completes a establish its own call tracking system engaged in the provision of prepaid coinless access code or subscriber toll- may instead enter into private

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contractual arrangements with other Federal Communications Commission. providers on a quarterly basis for each parties, outside of the established rules. Marlene H. Dortch, completed payphone call identified in Moreover, the rules established herein Secretary. the Completing Carrier’s quarterly provide carriers with ample time in report required by paragraph (a)(4) of Final Rules which to establish a verifiable call this section. tracking system. To the extent that a ■ Part 64 of the Code of Federal (3) At the conclusion of each quarter, PSP affirmatively declines the need for Regulations is amended to read as the chief financial officer of the such information, the PSP is free to follows: Completing Carrier shall submit to each negotiate alternative arrangements with payphone service provider to which the relevant carriers. Lastly, the new PART 64—MISCELLANEOUS RULES compensation is tendered a sworn rules will benefit PSPs, many of which RELATING TO COMMON CARRIERS statement that the payment amount for may be small businesses, because they ■ 1. The authority for part 64 continues that quarter is accurate and is based on give PSPs greater means to pursue to read as follows: 100% of all completed calls that payment from carriers that switch their originated from that payphone service payphone calls. Authority: 47 U.S.C. 154, 254(k); secs. provider’s payphones. 403(b)(2)(B), (c), Public Law 104–104, 110 (4) At the conclusion of each quarter, Stat. 56. Interpret or apply 47 U.S.C. 201, Federal Rules That May Duplicate, the Completing Carrier shall submit to Overlap, or Conflict With the Proposed 218, 225, 226, 228, and 254(k) unless otherwise noted. the payphone service provider, in Rules computer readable format, a report on ■ 2. Section 64.1300 is revised to read as 27. None. that quarter that includes: follows: (i) A list of the toll-free and access 28. Report to Congress. The numbers dialed from each of that Commission will send a copy of the § 64.1300 Payphone compensation obligation. payphone service provider’s payphones R&O, including this FRFA, in a report and the ANI for each payphone; (a) For purposes of this subpart, a to be sent to Congress pursuant to the (ii) The volume of calls for each Completing Carrier is a long distance Congressional Review Act. In addition, number identified in paragraph (a)(4)(i) carrier or switch-based long distance the Commission will send a copy of the of this section that were completed by reseller that completes a coinless access R&O, including this FRFA, to the Chief the Completing Carrier; Counsel for Advocacy of the SBA. A code or subscriber toll-free payphone (iii) The name, address, and phone copy of the R&O and FRFA (or call or a local exchange carrier that number of the person or persons completes a local, coinless access code summaries thereof) will also be responsible for handling the Completing or subscriber toll-free payphone call. published in the Federal Register. Carrier’s payphone compensation; and (b) Except as provided herein, a (iv) The carrier identification code Ordering Clauses Completing Carrier that completes a (‘‘CIC’’) of all facilities-based long coinless access code or subscriber toll- distance carriers that routed calls to the 29. Pursuant to authority contained in free payphone call from a switch that Completing Carrier, categorized sections 1, 4, 201–205, 215, 218–220, the Completing Carrier either owns or according to the list of toll-free and 226, and 276 of the Communications leases shall compensate the payphone access code numbers identified in Act of 1934, as amended, 47 U.S.C. 151, service provider for that call at a rate paragraph (a)(4)(i) of this section. 154, 201–205, 215, 218–220, 226, and agreed upon by the parties by contract. 276, that the policies, rules, and (c) The compensation obligation set (b) For purposes of this subpart, an requirements set forth herein are forth herein shall not apply to calls to Intermediate Carrier is a facilities-based adopted. emergency numbers, calls by hearing long distance carrier that switches payphone calls to other facilities-based 30. Part 64 of the Commission’s rules, disabled persons to a telecommunications relay service or long distance carriers. 47 CFR Part 64, is amended by revising (c) Unless the payphone service local calls for which the caller has made §§ 64.1300, 64.1310, and 64.1320, as set provider agrees to other reporting the required coin deposit. forth in the Final Rules of this arrangements, each Intermediate Carrier document. (d) In the absence of an agreement as required by paragraph (b) of this section, shall provide the payphone service 31. The final rules contained in this the carrier is obligated to compensate provider with quarterly reports, in document are contingent upon approval the payphone service provider at a per- computer readable format, that include: of the Office of Management and Budget (1) A list of all the facilities-based call rate of $.24. (OMB). The Commission will publish a 3. Section 64.1310 is revised to read long distance carriers to which the document in the Federal Register as follows: Intermediate Carrier switched toll-free announcing the effective date of these and access code calls dialed from each final rules. § 64.1310 Payphone compensation of that payphone service provider’s procedures. 32. Until the effective date of the payphones; Final Rules, the Commission readopts, (a) Unless the payphone service (2) For each facilities-based long on an interim basis, those rules initially provider agrees to other compensation distance carrier identified in paragraph adopted in the Second Order on arrangements, each Completing Carrier (c)(1) of this section, a list of the toll-free Reconsideration. identified in § 64.1300(a) shall and access code numbers dialed from compensate the payphone service each of that payphone service provider’s These rules, currently set forth at 47 provider as follows: payphones that all local exchange CFR 64.1300(a), 64.1310 (a), and (1) Each Completing Carrier shall carriers have delivered to the 64.1310(b), are effective November 6, establish a call tracking system that Intermediate Carrier and that the 2003. accurately tracks coinless access code or Intermediate Carrier switched to the List of Subjects in 47 CFR Part 64 subscriber toll-free payphone calls to identified facilities-based long distance completion. carrier; Communications common carriers, (2) Each Completing Carrier shall pay (3) The volume of calls for each Telecommunications, Telephones. compensation to payphone service number identified in paragraph (c)(2) of

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this section that the Intermediate Carrier § 64.1320 Payphone call tracking system paying payphone compensation, has received from each of that payphone audits. including rules used to: service provider’s payphones, identified (a) As a precondition to tendering (i) Identify calls originated from by their ANIs, and switched to each payment pursuant to § 64.1310(a), all payphones; facilities-based long distance carrier Completing Carriers must undergo a (ii) Identify compensable payphone identified in paragraph (c)(1) of this system audit of their § 64.1310(a)(1) calls; section; and tracking system by an independent third (iii) Identify incomplete or otherwise (4) The name, address and telephone party auditor whose responsibility shall noncompensable calls; and number and other identifying be, using audit methods approved by (iv) Determine the identities of the information of the person or persons for the American Institute for Certified payphone service providers to which each facilities-based long distance Public Accountants, to determine the Completing Carrier owes carrier identified in paragraph (c)(1) of whether the call tracking system compensation. (d) Consistent with standards this section who serves as the accurately tracks payphone calls to established by the American Institute of Intermediate Carrier’s contact at each completion. Certified Public Accountants for identified facilities-based long distance (b) By the effective date of these rules, attestation engagements, the System carrier. each Completing Carrier in paragraph (d) Local Exchange Carriers must Audit Report shall consist of: (a) of this section must file an audit (1) The Completing Carrier’s provide to carriers required to pay report from the auditor (the ‘‘System compensation pursuant to § 64.1300(a) a representation concerning its Audit Report’’) regarding the compliance; and list of payphone numbers in their Completing Carrier’s compliance with service areas. The list must be provided (2) The independent auditor’s opinion § 64.1310(a)(1) as of the date of the audit concerning the Completing Carrier’s on a quarterly basis. Local Exchange with the Commission’s Secretary in CC Carriers must verify disputed numbers representation of compliance. The Docket No. 96–128 and with each Completing Carrier’s representation in a timely manner, and must maintain payphone service provider for which it verification data for 18 months after must disclose completes calls and with each facilities- (i) Its criteria for identifying calls close of the compensation period. based long distance carrier from which (e) Local Exchange Carriers must originating from payphones; it receives payphone calls. (ii) Its criteria for identifying respond to all carrier requests for (c) The Completing Carrier must compensable payphone calls; payphone number verification in comply with, and the third-party (iii) Its criteria for identifying connection with the compensation auditor must verify, the Completing incomplete or otherwise requirements herein, even if such Carrier’s compliance with the following noncompensable calls; verification is a negative response. factors in establishing a call tracking (iv) Its criteria used to determine the (f) A payphone service provider that system pursuant to § 64.1310(a)(1): identities of the payphone service seeks compensation for payphones that providers to which the completing are not included on the Local Exchange (1) Whether the Completing Carrier’s procedures accurately track calls to carrier owes compensation; Carrier’s list satisfies its obligation to (v) The identity of any clearinghouses provide alternative reasonable completion; (2) Whether the Completing Carrier the Completing Carrier uses; and verification to a payor carrier if it (vi) The types of information that the provides to that carrier: has a person or persons responsible for tracking, compensating, and resolving Completing Carrier needs from the (1) A notarized affidavit attesting that payphone service providers in order to each of the payphones for which the disputes concerning payphone completed calls; compensate them. payphone service provider seeks (e) At the time of the filing of System (3) Whether the Completing Carrier compensation is a payphone that was in Audit Report with the Commission, the has effective data monitoring working order as of the last day of the Completing Carrier shall file with the compensation period; and procedures; Commission’s Secretary, and the (2) Corroborating evidence that each (4) Whether the Completing Carrier facilities-based long distance carriers such payphone is owned by the adheres to established protocols to and payphone service providers payphone service provider seeking ensure that any software, personnel or identified in paragraph (b) of this compensation and was in working order any other network changes do not section, a statement that includes the on the last day of the compensation adversely affect its payphone call name of the Completing Carrier, and the period. Corroborating evidence shall tracking ability; name, address and phone number for include, at a minimum, the telephone (5) Whether the Completing Carrier the person or persons responsible for bill for the last month of the billing has created a compensable payphone handling the Completing Carrier’s quarter indicating use of a line call file by matching call detail records payphone compensation and for screening service. against payphone identifiers; resolving disputes with payphone (g) Each Completing Carrier and each (6) Whether the Completing Carrier service providers over compensation, Intermediate Carrier must maintain has procedures to incorporate call data and this statement shall be updated verification data to support the quarterly into required reports; within 60 days of any changes of such reports submitted pursuant to (7) Whether the Completing Carrier persons. paragraphs (a)(4) and (c) of this section has implemented procedures and (f) One year after the filing of the for 18 months after the close of that controls needed to resolve payphone System Audit Report, and annually quarter. This data must include the time compensation disputes; thereafter, the Completing Carrier shall and date that each call identified in (8) Whether the independent third- engage an independent third-party paragraphs (a)(4) and (c) of this section party auditor can test all critical auditor to: was made. This data must be provided controls and procedures to verify that (1) Verify that no material changes to the payphone service provider upon errors are insubstantial; and have occurred concerning the request. (9) Whether the Completing Carriers Completing Carrier’s compliance with 4. Section 64.1320 is revised to read has in place adequate and effective the criteria of the prior year’s System as follows: business rules for implementing and Audit Report; or

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(2) If a material change has occurred system in its representation to the information, the Completing Carrier concerning the Completing Carrier’s auditor. The Completing Carrier shall shall provide, upon request, to the compliance with the prior year’s System file and provide copies of all System payphone service provider for Audit Report, verify that the material Audit Reports pursuant to the inspection any documents, including changes do not affect compliance with procedures set forth in paragraph (b) of working papers, underlying the System the audit criteria set forth in paragraph this section. Audit Report. (c) of this section. The Completing (g) Subject to protections safeguarding Carrier must fully disclose any material the auditor’s and the Completing [FR Doc. 03–27891 Filed 11–5–03; 8:45 am] changes concerning its call tracking Carrier’s confidential and proprietary BILLING CODE 6712–01–P

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Proposed Rules Federal Register Vol. 68, No. 215

Thursday, November 6, 2003

This section of the FEDERAL REGISTER of the Department of Transportation this notice. Persons interested in being contains notices to the public of the proposed NASSIF Building at the above address. placed on a mailing list for future issuance of rules and regulations. The An informal docket may also be NPRMs should contact the FAA’s Office purpose of these notices is to give interested examined during normal business hours of Rulemaking, (202) 267–9677 to persons an opportunity to participate in the at the office of the Regional Air Traffic request a copy of Advisory Circular No. rule making prior to the adoption of the final Division, Federal Aviation rules. 11–2A, which describes the application Administration, Eastern Region, 1 procedure. Aviation Plaza, Jamaica, NY 11434– The Proposal DEPARTMENT OF TRANSPORTATION 4809. FOR FURTHER INFORMATION CONTACT: Mr. The FAA is considering an Federal Aviation Administration Francis T. Jordan, Jr., Airspace amendment to part 71 of the Federal Specialist, Airspace Branch, AEA–520, Aviation Regulations (14 CFR Part 71) to 14 CFR Part 71 Eastern Region, 1 Aviation Plaza, amend the Class E airspace area at New Jamaica, NY 11434–4809, telephone: York, NY. The proposal would [Docket No. FAA–2003–16180; Airspace (718) 553–4521. consolidate the following Class E–5 Docket No. 03–AEA–14] SUPPLEMENTARY INFORMATION: airspace designations into the New York, NY designation: John F. Kennedy Proposed Amendment to Class E Comments Invited International Airport, NY; LaGuardia Airspace; New York, NY Interested parties are invited to Airport, NY; Republic Airport, participate in this proposed rulemaking Farmingdale, NY; Westchester County AGENCY: Federal Aviation Airport, White Plains, NY; Ossining, Administration (FAA), DOT. by submitting such written data, views, or arguments as they may desire. NY; Newark Liberty International ACTION: Notice of proposed rulemaking. Comments that provide the factual basis Airport, NJ; Teterboro Airport, NJ; supporting the views and suggestions Morristown Municipal Airport, NJ; SUMMARY: This notice proposes to Essex County Airport, Caldwell, NJ; amend the Class E airspace area at New presented are particularly helpful in developing reasoned regulatory Lincoln Park Airport, NJ; Linden York, NY. The development of multiple Airport, NJ; Greenwood Lake Airport, area naviagion (RNAV) Copter Standard decisions on the proposal. Comments are specifically invited on the overall West Milford, NJ; Somerset Airport, Instrument Approach Procedures (SIAP) Somerville, NJ; Sussex Airport, NJ; and the proliferation of airports within regulatory, economic, environmental, and energy-related aspects of the Aeroflex-Andover Airport, Andover, NJ; the metropolitan New York area with Old Bridge Airport, NJ; Princeton approved Instrument Flight Rules (IFR) proposal. Communications should identify the airspace docket number and Airport, NJ; Solberg-Hunterdon Airport, operations and the resulting overlap of Readington, NJ; Central Jersey Regional designated Class E–5 airspace has made be submitted in triplicate to the address listed above. Commenters wishing the Airport, Manville, NJ. This action would this proposal necessary. The proposal result in the recision of twelve Class E– would consolidate the Class E–5 FAA to acknowledge receipt of their comments on this notice must submit 5 designations under a separate docket. airspace designations for twelve airports The affected airspace would and result in the recision of five with those comments a self-addressed, stamped postcard on which the subsequently be incorporated into the separate Class E–5 descriptions through New York, NY description. The airspace separate rulemaking action. The area following statement is made: ‘‘Comments to Airspace Docket No. will be defined to accommodate the would be depicted on aeronautical approaches and contain IFR operations charts for pilot reference. FAA–2003–16180/Airspace Docket No. 03–AEA–14.’’ The postcard will be date/ to and from those airports. This change DATES: Comments must be received on time stamped and returned to the would have no impact on aircraft or before December 8, 2003. commenter. operations since the type of airspace ADDRESSES: Send comments on the designation is not changing. proposal to the Docket Management Availability of NPRMs Furthermore, the IFR approach System, U.S. Department of An electronic copy of this document procedures for the individual airports Transportation, Room Plaza 401, 400 may be downloaded through the within the area would not be affected. Seventh Street, SW., Washington, DC Internet at http://dms.dot.gov. Recently Class E airspace designations for 20590–0001. You must identify the published rulemaking documents can airspace areas extending upward from docket number FAA–2003–16180/ also be accessed through the FAA’s Web 700 ft. or more above the surface are Airspace Docket No. 03–AEA–14 at the page at http://www.faa.gov or the published in Paragraph 6005 of FAA beginning of your comments. You may Superintendent of Documents Web page Order 7400.9L, dated September 16, also submit comments on the Internet at at http://www.access.gpo.gov/nara. 2003 and effective September 15, 2004, http://dms.dot.gov. You may review the Additionally, any person may obtain a which is incorporated by reference in 14 public docket containing the proposal, copy of this notice by submitting a CFR 71.1. The Class E airspace any comments received, and any final request to the Office of Air Traffic designation listed in this document disposition in person in the Dockets Airspace Management, ATA–400, 800 would be published subsequently in the Office between 9 a.m. and 5 p.m., Independence Avenue, SW., Order. Monday through Friday, except Federal Washington, DC 20591 or by calling The FAA has determined that this holidays. The Docket Office (telephone (202) 267–8783. Communications must proposed regulation only involves an 1–800–647–5527) is on the plaza level identify both the docket numbers for established body of technical

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regulations for which frequent and Issued in Jamaica, New York, on FOR FURTHER INFORMATION CONTACT: Mr. routine amendments are necessary to September 25, 2003. Francis T. Jordan, Jr., Airspace keep them operationally current. Richard J. Dueharme, Specialist, Airspace Branch, AEA–520, Therefore, this proposed regulation—(1) Manager, Air Traffic Division, Eastern Region. Eastern Region, 1 Aviation Plaza, Is not a ‘‘significant regulatory action’’ [FR Doc. 03–27905 Filed 11–5–03; 8:45 am] Jamaica, NY 11434–4809, telephone: under Executive Order 12866; (2) is not BILLING CODE 4910–13–M (718) 553–4521. a ‘‘significant rule’’ under DOT SUPPLEMENTARY INFORMATION: Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) DEPARTMENT OF TRANSPORTATION Comments Invited does not warrant preparation of a Interested parties are invited to regulatory evaluation as the anticipated Federal Aviation Administration participate in this proposed rulemaking impact is so minimal. Since this is a by submitting such written data, views, routine matter that would only affect air 14 CFR Part 71 or arguments as they may desire. Comments that provide the factual basis traffic procedures and air navigation, it [Docket No. FAA–2003–16220; Airspace is certified that this proposed rule Docket No. 03–AEA–15] supporting the views and suggestions would not have significant economic presented are particularly helpful in impact on a substantial number of small Proposed Amendment to Class E developing reasoned regulatory entities under the criteria of the Airspace; Honesdale, PA decisions on the proposal. Comments Regulatory Flexibility Act. are specifically invited on the overall AGENCY: Federal Aviation regulatory, economic, environmental, List of Subjects in 14 CFR Part 71 Administration (FAA), DOT. and energy-related aspects of the Airspace, Incorporation by reference, ACTION: Notice of proposed rulemaking. proposal. Communications should Navigation (air). identify both docket numbers and be SUMMARY: This notice proposes to submitted in triplicate to the address The Proposed Amendment amend the Class E airspace area at listed above. Commenters wishing the In consideration of the foregoing, the Honesdale, PA. The development of a FAA to acknowledge receipt of their Federal Aviation Administration Standard Instrument Approach comments on this notice must submit proposes to amend 14 CFR Part 71 as Procedure (SIAP) based on area with those comments a self-addressed, follows: navigation (RNAV) to serve flights into stamped postcard on which the Spring Hill Airport, Sterling, PA under following statement is made: PART 71—[AMENDED] Instrument Flight Rules (IFR) has made ‘‘Comments to Docket No. FAA–2003– 1. The authority citation for 14 CFR this proposal necessary. Controlled 16220/Airspace Docket No. 03–AEA– Part 71 continues to read as follows: airspace extending upward from 700 15.’’ The postcard will be date/time feet Above Ground Level (AGL) is stamped and returned to the Authority: 49 U.S.C. 106(g), 40103, 40113, needed to contain aircraft executing the commenter. 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959– approach. The area would be depicted 1963 Comp., p. 389. on aeronautical charts for pilot Availability of NPRMs § 71.1 [Amended] reference. An electronic copy of this document may be downloaded through the 2. The incorporation by reference in DATES: Comments must be received on Internet at http://dms.dot.gov. Recently 14 CFR 71.1 of Federal Aviation or before December 8, 2003. published rulemaking documents can Administration Order 7400.9L, dated ADDRESSES: Send comments on the September 16, 2003, and effective als be accessed through the FAA’s Web proposal to the Docket Management page at http://www.faa.gov or the September 15, 2004, is proposed to be System, U.S. Department of amended as follows: Superintendent of Documents Web page Transportation, Room Plaza 401, 400 at http://www.access.gpo.gov/nara. Paragraph 6005 Class E airspace areas Seventh Street, SW., Washington, DC Additionally, any person may obtain extending upward from 700 feet or more 20590–0001. You must identify the a copy of this notice by submitting a above the surface of the earth. docket number FAA–2003–16220/ request to the Federal Aviation * * * * * Airspace Docket No. 03–AEA–15 at the Administration, Office of Air Traffic AEA NY E5 New York, NY (Revised) beginning of your comments. You may Airspace Management, ATA–400, 800 also submit comments on the Internet at Independence Avenue, SW., That airspace extending upward from 700 http://dms.dot.gov. feet above the surface within an area Washington, DC 20591, or by calling bounded by a line beginning at lat. You may review the public docket (202) 267–8783. Communications must 40°49′00″N., long. 73°17′02″W., to lat. containing the proposal, any comments identify both docket numbers for this 40°36′00″N., long. 73°12′27″W., to lat. received, and any final disposition in notice. Persons interested in being 40°29′42″N., long. 73°30′53″W., to lat. person in the Dockets Office between 9 placed on a mailing list for future 40°29′43″N., long. 73°52′12″W., to lat. a.m. and 5 p.m., Monday through NPRMs should contact the FAA’s Office 40°15′00″N., long. 40°00′00″W., to lat. Friday, except Federal holidays. The ° ′ ″ ° ′ ″ of Rulemaking, (202) 267–9677, to 40 14 32 N., long. 74 29 47 W., to lat. Docket Office (telephone 1–800–647– request a copy of Advisory Circular No. 40°24′45″N., long. 74°51′22″W., to lat. ° ′ ″ ° ′ ″ 5527) is on the plaza level of the 11–2A, Notice of Proposed Rulemaking 41 08 17 N., long. 75 00 00 W., to lat. Department of Transportation NASSIF 41°23′15″N., long. 74°43′13″W., to lat. Distribution System, which describes 41°26′08″N., long. 73°52′54″W., to lat. Building at the above address. the application procedure. ° ′ ″ ° ′ ″ An informal docket may also be 41 16 48 N., long. 73 34 53 W., to the point The Proposal of beginnning excluding the airspace that examined during normal business hours coincides with the Wrightstown, NJ, at the office of the Regional Air Traffic The FAA is considering an Blairstown, NJ, Pittstown, NJ, Philadelphia, Division, Federal Aviation amendment to Part 71 of the Federal PA, Poughkeepsie, NY, Newburg, NY, and Administration, Eastern Region, 1 Aviation Regulations (14 CFR Part 71) to Danbury, CT Class E airspace areas. Aviation Plaza, Jamaica, NY 11434– amend the Class E airspace area at * * * * * 4809. Honesdale, Pa. The development of a

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SIAP to serve flights operating IFR into AEA PA E5 Honesdale, PA (Revised) any comments received, and any final Spring Hill Airport make this action Cherry Ridge Airport, Honesdale, PA (lat. dispositions in person in the Docket necessary. Controlled airspace 41°30′55″ N., long. 75°15′05″ W.) Office between 9 a.m. and 5 p.m., extending upward from 700 feet AGL is Spring Hill Airport, Sterling, PA (lat. Monday through Friday, except Federal needed to accommodate the SIAPs. 41°20′50″ N., long. 75°24′57″ W.) holidays. The Docket Office (telephone Wilkes-Barre VORTAC (lat. 41°16′22″ N., number 1 (800) 647–5527) is on the Class E airspace designations for ° ′ ″ airspace areas extending upward from long. 75 41 22 W.) plaza level of the Department of That airspace extending upward from 700 Transportation NASSIF Building at the 700 feet or more above the surface are feet above the surface within a 6.3-mile published in Paragraph 6005 of FAA radius of Cherry Ridge Airport and within 4.4 above address. Order 7400.9L dated September 16, miles each side of the Wilkes-Barre VORTAC An informal docket may also be 2003, and effective September 15, 2004, 054° radial extending from the 6.3-mile examined during normal business hours which is incorporated by reference in 14 radius to 8.7 miles northeast of the VORTAC at the Office of the Regional Air Traffic CFR 71.1. The Class E airspace and within a 6-mile radius of Spring Hill Division, Northwest Mountain Region, designation listed in this document Airport. Federal Aviation Administration, Airspace Branch ANM–520, 1601 Lind would be published subsequently in the * * * * * Order. Avenue, SW., Renton, WA 98055. Issued in Jamaica, New York, on SUPPLEMENTARY INFORMATION: The FAA has determined that this September 30, 2003. proposed regulation only involves an John G. McCartney, Comments Invited established body of technical Assistant Manager, Air Traffic Division, Interested parties are invited to regulations for which frequent and Eastern Region. participate in this proposed rulemaking routine amendments are necessary to [FR Doc. 03–27906 Filed 11–5–03; 8:45 am] by submitting such written data, views, keep them operationally current. BILLING CODE 4910–13–M or arguments, as they may desire. Therefore, this proposed regulation—(1) Comments that provide the factual basis is not a ‘‘significant regulatory action’’ supporting the views and suggestions under Executive Order 12866; (2) is not DEPARTMENT OF TRANSPORTATION presented are particularly helpful in a ‘‘significant rule’’ under DOT developing reasoned regulatory, Regulatory Policies and Procedures (44 Federal Aviation Administration aeronautical, economic, environmental, FR 11034; February 26, 1979); and (3) and energy-related aspects of the does not warrant preparation of a 14 CFR Part 71 proposal. Communications should regulatory evaluation as the anticipated identify Docket No. FAA 2003–16029; impact is so minimal. Since this is a [Docket No. 2003–16029; Airspace Docket No. 03–ANM–08] Airspace Docket No. 03–ANM–08, and routine matter that would only affect air be submitted in triplicate to the address traffic procedures and air navigation, it Proposed Revision of Class E listed above. Commenters wishing the is certified that this proposed rule Airspace, La Junta, CO FAA to acknowledge receipt of their would not have significant economic comments on this action must submit, impact on a substantial number of small AGENCY: Federal Aviation with those comments, self-addressed entities under the criteria of the Administration (FAA), DOT. stamped postcard on which the Regulatory Flexibility Act. ACTION: Notice of proposed rulemaking. following statement is made: ‘‘Comments to Docket No. FAA 2003– List of Subjects in 14 CFR Part 71 SUMMARY: This action proposes to revise 16029; Airspace Docket No. 03–ANM– Class E airspace at La Junta Municipal 08.’’ The postcard will be date/time Airspace, Incorporation by reference, Airport, La Junta, CO. The stamped and returned to the Navigation (air). establishment of Area Navigation commenter. The Proposed Amendment (RNAV) Global Positioning System (GPS) Standard Instrument Approach Availability of NPRM’s In consideration of the foregoing, the Procedures (SIAP); RNAV (GPS) An electronic copy of this document Federal Aviation Administration Runway (RWY) 26, and RNAV (GPS) may be downloaded through the proposes to amend 14 CFR Part 71 as RWY 8 SIAPs at La Junta Municipal Internet at http://dms.dot.gov. Recently follows: Airport La Junta, CO, has made this published rulemaking documents can proposal necessary. The intended effect PART 71—[AMENDED] also be accessed through the FAA’s Web on this proposal is to provide adequate page at http://www.faa.gov or the controlled airspace for Instrument Flight 1. The authority citation for 14 CFR Superintendent of Document’s Web Rule (IFR) operations at La Junta Part 71 continues to read as follows: page at http:/www.access.gpo.gov/nara. Municipal Airport, La Junta, CO. Additionally, any person may obtain Authority: 49 U.S.C. 106(g), 40103, 40113, DATES: Comments must be received by a copy of this notice by submitting a 40120; E.O. 10854; 24 FR 9565, 3 CFR, 1959– December 22, 2003. 1963 Comp., p. 389. request to the Federal Aviation ADDRESSES: Send comments on this Administration, 1601 Lind Avenue, § 71.1 [Amended] proposal to the Docket Management SW., Renton, WA, 98055. System, U.S. Department of Communications must identify both 2. The incorporation by reference in Transportation, Room Plaza 401, 400 document numbers for this notice. 14 CFR 71.1 of Federal Aviation Seventh Street, SW., Washington, DC Persons interested in being placed on a Administration Order 7400.9L, dated 20590–0001. You must identify the mailing list for future NPRMs should September 16, 2003, and effective docket number FAA 2003–16029, contact the FAA’s Office of Rulemaking, September 15, 2004, is proposed to be Airspace Docket No. 03–ANM–08, at the (202) 267–9677, to request a copy of amended as follows: beginning of your comments. You may Advisory Circular No. 11–2A, Notice of Paragraph 6005 Class E airspace areas also submit comments on the Internet at Proposed Rulemaking Distribution extending upward from 700 feet or more http://dms.dot.gov. You may review the System, which describes the application above the surface of the earth. public docket containing the proposal, procedures.

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The Proposal PART 71—DESIGNATION OF CLASS A, Perry Stokes Airport, Trinidad, CO, has CLASS B, CLASS C, CLASS D, AND made this proposal necessary. The This action amends Title 14 Code of CLASS E AIRSPACE AREAS; intended effect of this proposal is to Federal Regulations, part 71 (14 CFR AIRWAYS; ROUTES; AND REPORTING provide adequate controlled airspace for part 71) by revising Class E airspace POINTS Instrument Flight Rule (IFR) operations around La Junta Municipal Airport at La at Perry Stokes Airport, Trinidad, CO. Junta, CO. The establishment of RNAV 1. The authority citation for 14 CFR (GPS) RWY 26 and RNAV (GPS) RWY part 71 continues to read as follows: DATES: Comments must be received by 8 SIAPs at La Junta Municipal Airport Authority: 49 U.S.C. 106(g), 40103, 40113, December 22, 2003. has made this proposal necessary. 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959– ADDRESSES: Send comments on this Additional controlled airspace 1963 Comp., p. 389. proposal to the Docket Management extending upward from 700 feet above § 71.1 [Amended] System, U.S. Department of the surface of the earth is needed to 2. The incorporation by reference in Transportation, Room Plaza 401, 400 contain aircraft executing the RNAV 14 CFR 71.1 of the Federal Aviation Seventh Street, SW., Washington, DC (GPS) RWY 26 and the RNAV (GPS) Administration Order 7400.9L, Airspace 20590–0001. You must identify the RWY &SIAPs at La Junta Municipal Designations and Reporting Points, docket number, FAA 2003–15996; Airport. The intended effect of this dated September 16, 2003, and effective Airspace Docket No. 03–ANM–04, at the proposal is to provide adequate September 15, 2004, is amended as beginning of your comments. You may controlled airspace for aircraft executing follows: also submit comments on the Internet at the RNAV (GPS) RWY 26 and RNAV http;//dms.dot.gov. You may review the Paragraph 6005. Class E airspace areas public docket containing the proposal, (GPS) RWY 8 SIAPs at La Junta extending upward from 700 feet or more Municipal Airport, La Junta, CO. any comments received, and any final above the surface of the earth dispositions in person in the Docket Class E airspace designations are * * * * * Office between 9 a.m. and 5 p.m., published in paragraph 6005 of FAA ANM CO E5 La Junta, CO [Revised] Monday through Friday, except Federal Order 7400.9L dated September 16, La Junta Municipal Airport, La Junta, CO holidays. The Docket Office (telephone 2003, and effective September 15, 2004, [Lat. 37°15′36″N., long. 104°20′24″W.] number 1 (800) 647–5527) is on the which is incorporated by reference in 14 That airspace extending upward from 700 plaza level of the Department of CFR 71.1. The Class E airspace feet above the surface of the earth bound by Transportation NASSIF Building at the designation listed in this document will a line beginning at lat. 38°12′24″N., long. above address. ° ′ ″ ° ′ ″ be published subsequently in this 103 27 42 W.; to lat. 38 10 24 N., long. An informal docket may also be Order. 103°22′24″W.; to lat. 37°54′12″N., long. 103°22′42″W.; to lat. 37°54′42″N., long. examined during normal business hours The FAA has determined that this 103°58′00″W.; thence to the point of origin; at the Office of the Regional Air Traffic proposed regulation only involves an excluding that airpsace within Federal Division, Northwest Mountain Region, established body of technical airways. Federal Aviation Administration, regulations for which frequent and * * * * * Airspace Branch ANM–520, 1601 Lind Avenue, SW., Renton, WA 98055. routine amendments are necessary to Issued in Seattle, Washington, on keep them operationally current. September 22, 2003. SUPPLEMENTARY INFORMATION: Therefore, this proposed regulation—(1) ViAnne Fowler, Comments Invited is not a ‘‘significant regulatory action’’ Acting Assistant Manager, Air Traffic under Executive Order 12866; (2) is not Division, Northwest Mountain Region. Interested parties are invited to a ‘‘significant rule’’ under DOT [FR Doc. 03–27909 Filed 11–5–03; 8:45 am] participate in this proposed rulemaking Regulatory Policies and Procedures (44 BILLING CODE 4910–13–M by submitting such written data, views, FR 11013; February 26, 1979); and (3) or arguments, as they may desire. does not warrant preparation of a Comments that provide the factual basis Regulatory Evaluation as the anticipated DEPARTMENT OF TRANSPORTATION supporting the views and suggestions impact is so minimal. Since this is a presented are particularly helpful in Federal Aviation Administration routine matter that will only affect air developing reasoned regulatory traffic procedures and air navigation, it decisions on the proposal. Comments 14 CFR Part 71 is certified that this rule would not have are specifically invited on the overall a significant economic impact on a [Docket No. FAA 2003–15996; Airspace regulatory, aeronautical, economic, substantial number of small entities Docket No. 03–ANM–04] environmental, and energy-related under the criteria of the Regulatory aspects of the proposal. Flexibility Act. Proposed Revision of Class E Communications should identify Docket Airspace; Trinidad, CO No. FAA 2003–15996, Airspace Docket List of Subjects in 14 CFR Part 71 AGENCY: Federal Aviation 03–ANM–04, and be submitted in Airspace, Incorporation by reference, Administration (FAA), DOT. triplicate to the address listed above, Navigation (air). ACTION: Notice of proposed rulemaking. Commenters wishing the FAA to acknowledge receipt of their comments The Proposed Amendment SUMMARY: This action proposes to revise on this action must submit, with those Class E airspace area at Perry Stokes comments, a self-addressed stamped Accordingly, pursuant to the Airport, Trinidad, CO. The postcard on which the following authority delegated to me, the Federal establishment of an Area Navigation statement is made: ‘‘Comments to Aviation Administration proposes to (RNAV) Global Positioning System Docket No. FAA 2003–15996; Airspace amend 14 CFR part 71 as follows: (GPS) Standard Instrument Approach Docket No. 03–ANM–04.’’ The postcard Procedure (SIAP); RNAV (GPS) Runway will be date/time stamped and returned (RWY) 3, and RNAV (GPS)–B SIAP at to the commenter.

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Availability of NPRM routine matter that will only affect air beginning at the northwest corner of the An electronic copy of this document traffic procedures and air navigation, it parallelogram; excluding that airsapce may be downloaded through the is certified that this proposed rule within Federal airways. Internet at http://dms.dot.gov. Recently would not have a significant economic * * * * * published rulemaking documents can impact on a substantial number of small entities under the criteria of the Issued in Seattle, Washington, on also be accessed through the FAA’s Web September 22, 2003. Regulatory Flexibility Act. page at http://www.faa.gov or the ViAnne Fowler, Superintendent of Document’s Web List of Subjects in 14 CFR Part 71 Acting Assistant Manager, Air Traffic page at http://www.access.gpo.gov/nara. Airspace, Incorporation by reference, Division, Northwest Mountain Region. Additionally, any person may obtain Navigation (air). [FR Doc. 03–27908 Filed 11–5–03; 8:45 am] a copy of this notice by submitting a BILLING CODE 4910–13–M request to the Federal Aviation The Proposed Amendment Administration, 1601 Lind Avenue, Accordingly, pursuant to the SW., Renton, WA, 98055. authority delegated to me, the Federal DEPARTMENT OF TRANSPORTATION Communications must identify both Aviation Administration proposes to document numbers for this notice. amend 14 CFR part 71 as follows: Federal Aviation Administration Persons interested in being placed on a mailing list for future NPRMs should PART 71—DESIGNATION OF CLASS A, 14 CFR Part 71 contact the FAA’s Office of Rulemaking, CLASS B, CLASS C, CLASS D, AND (202) 267–9677, to request a copy of CLASS E AIRSPACE AREAS; [Docket No. FAA–2003–16070; Airspace Advisory Circular No. 11–2A, Notice of AIRWAYS; ROUTES; AND REPORTING Docket No. 03–ANM–05] Proposed Rulemaking Distribution POINTS Proposed Establishment of Class E system, which describes the application 1. The authority citation for 14 CFR Airspace at Hamilton, MT procedures. part 71 continues to read as follows: The Proposal Authority: 49 U.S.C. 106(g), 40103, 40113, AGENCY: Federal Aviation This action amends Title 14 Code of 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959– Administration (FAA), DOT. Federal Regulations, part 71 (14 CFR 1963 Comp., p. 389. ACTION: Notice of proposed rulemaking. part 71) by revising Class E airspace area § 71.1 [Amended] SUMMARY: This proposal would establish at Perry Stokes Airport, Trinidad, CO. 2. The incorporation by reference in The establishment of RNAV (GPS) RWY Class E airspace at Ravalli County 14 CFR 71.1 of the Federal Aviation Airport, Hamilton, MT. The 3 and RNAV (GPS)–B SIAPs at Perry Administration Order 7400.9L, Airspace Stokes Airport has made this proposal establishment of two Area Navigation Designations and Reporting Points, (RNAV) Global Position System (GPS) necessary. Additional controlled dated September 16, 2003, and effective airspace extending upward from 700 Standard Instrument Approach September 15, 2004, is amended as Procedures (SIAP); hereafter referred to feet above the surface of the earth is follows: needed to contain aircraft executing the as RNAV (GPS)—A, and RNAV (GPS)— RNAV (GPS) RWY 3 and the RNAV Paragraph 6005 Class E airspace areas B SIAPs at Ravalli County Airport, (GPS)–B SIAPs at Perry Stokes Airport. extending upward from 700 feet or more Hamilton, MT, makes this proposal above the surface of the earth The intended effect of this proposal is necessary. Controlled airspace to provide adequate controlled airspace * * * * * extending upward from 700 feet or more above the surface of the earth is for aircraft executing the RNAV (GPS) ANM CO E5 Trinidad, CO (revised) RWY 3 and the RNAV (GPS)–B SIAPs at necessary to contain aircraft executing Perry Stokes Airport, Trinidad, UT the RNAV (GPS)—A and RNAV (GPS)— Perry Stokes Airport, Trinidad, CO. [Lat 37°15′36″N, long. 104°20′24″W] Class E airspace designations are Trinidad Non Directional Beacon (NDB) B SIAPs at Ravalli County Airport. published in paragraph 6005 of FAA [Lat 37°18′22″N, long. 104°20′00″W] DATES: Comments must be received by Order 7400.9L dated September 16, That airspace extending upward from December 22, 2003. 2003, and effective September 15, 2004, 700 feet above the surface of the earth ADDRESSES: Send comments on this which is incorporated by reference in 14 within an 8.0 mile radius of the Perry proposal to the Docket Management CFR 71.1. The Class E airspace Stokes Airport within 4.0 miles each System, U.S. Department of designation listed in this document will side of the 355° from the Trinidad NDB Transportation, Room Plaza 401, 400 be published subsequently in this extending from the 8.0 mile radius to 11 Seventh Street, SW., Washington, DC Order. miles north of the NBD and 4.0 miles 20590–0001. You must identify the The FAA has determined that this each side of the 225° bearing from the docket number, FAA 2003–16070; proposed regulation only involves an Trinidad Airport extending from the 8.0 Airspace Docket No. 03–ANM–05, at the established body of technical mile radius to 13 miles southwest of the beginning of your comments. You may regulations for which frequent and airport; that airspace extending upward also submit comments on the Internet at routine amendments are necessary to from 1,200 feet above the surface of the http://dms.dot.gov. You may review the keep them operationally current. earth within 10.4 miles west and 16.8 public docket containing the proposal, Therefore, this proposed regulation—(1) miles east of the 355° and 175° bearings any comments received, and any final is not a ‘‘significant regulatory action’’ from the Trinidad NDB extending from dispositions in person in the Docket under Executive Order 12866; (2) is not 19.7 miles south to 28 miles north of the Office between 9 a.m. and 5 p.m., a ‘‘significant rule’’ under DOT NDB; and bounded by a line beginning Monday through Friday, except Federal Regulatory Policies and Procedures (44 at the intersection of V–389 and Lat. holidays. The Docket Office (telephone FR 11034; February 26, 1979); and (3) 37°00′00″N, thence south along V–389, number 1 800 647–5527) is on the plaza does not warrant preparation of a thence southwest along V–263/389, level of the Department of regulatory evaluation as the anticipated thence north along V–611 until Lat. Transportation NASSIF Building at the impact is so minimal. Since this is a 37°00′00″N, and thence to the point of above address.

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An informal docket may also be RNAV (GPS)–A and RNAV (GPS)–B Paragraph 6005 Class E airspace areas examined during normal business hours SIAPs at Ravalli County Airport makes extending upward from 700-feet or more at the Office of the Regional Air Traffic this proposal necessary. Establishing above the surface of the earth Division, Northwest Mountain Region, Class E airspace is necessary to provide * * * * * Federal Aviation Administration, adequate controlled airspace for aircraft ANM UT E5 Hamilton, MT (New) Airspace Branch ANM–520, 1601 Lind executing the RNAV (GPS)–A and Avenue, SW., Renton, WA 98055. RNAV (GPS)–B SIAPs at Ravalli County Ravalli County Airport, MT [Lat 46°15′05″ N., long. 114°07′31″ W.] SUPPLEMENTARY INFORMATION: Airport, Hamilton, MT. Class E airspace designations are That airspace extending upward from 700 Comments Invited published in paragraph 6005 of FAA feet above the surface of the earth within an 8-mile radius of Ravalli County Airport; that Interested parties are invited to Order 7400.9L dated September 16, airspace extending upward from 1200 feet participate in this proposed rulemaking 2003, and effective September 15, 2004, above the surface of the earth bounded by a by submitting such written data, views, which is incorporated by reference in 14 line beginning at lat. 46°42′00″ N., long. or arguments, as they may desire. CFR 71.1. The Class E airspace 114°11′00″ W.; to lat. 46°42′00″ N., long. Comments that provide the factual basis designation listed in this document will 113°52′00″ W.; to lat. 46°19′30″ N., long. supporting the views and suggestions be published subsequently in this 113°52′00″ W.; to lat. 45°51′30″ N., long. presented are particularly helpful in Order. 114°01′00″ W.; to lat. 45°51′30″ N., long. The FAA has determined that this 114°11′00″ W.; to lat. 46°03′00″ N., long. developing reasoned regulatory ° ′ ″ decisions on the proposal. Comments proposed regulation only involves an 114 19 00 W.; thence to the beginning; are specifically invited on the overall established body of technical excluding that airspace within Federal Airways. regulatory, aeronautical, economic, regulations for which frequent and environmental, and energy-related routine amendments are necessary to * * * * * aspects of the proposal. keep them operationally current. Issued in Seattle, Washington, on Communications should identify Docket Therefore, this proposed regulation—(1) September 25, 2003. No. FAA–2003–16070; Airspace Docket is not a ‘‘significant regulatory action’’ ViAnne Fowler, No. 03–ANM–05, and be submitted in under Executive Order 12866; (2) is not Acting Assistant Manager, Air Traffic triplicate to the address listed above. a ‘‘significant rule’’ under DOT Division, Northwest Mountain Region. Commenters wishing the FAA to Regulatory Policies and Procedures (44 [FR Doc. 03–27907 Filed 11–5–03; 8:45 am] acknowledge receipt of their comments FR 11034; February 26, 1979); and (3) BILLING CODE 4910–13–M on this action must submit, with those does not warrant preparation of a comments, a self-addressed stamped regulatory evaluation as the anticipated postcard on which the following impact is so minimal. Since this is a DEPARTMENT OF COMMERCE statement is made: ‘‘Comments to routine matter that will only affect air Docket No. FAA–2003–16070; Airspace traffic procedures and air navigation, it National Oceanic and Atmospheric Docket No. 03–ANM–05.’’ The postcard is certified that this proposed rule Administration will be date/time stamped and returned would not have a significant economic to the commenter. impact on a substantial number of small 50 CFR Part 660 entities under the criteria of the Availability of NPRM Regulatory Flexibility Act. [I.D. 102903C] An electronic copy of this document RIN 0648–AP42 may be downloaded through the List of Subjects in 14 CFR Part 71 Internet at http://dms.dot.gov. Recently Airspace, Incorporation by reference, Fisheries Off West Coast States and in published rulemaking documents can Navigation (air). the Western Pacific; Highly Migratory also be accessed through the FAA’s Web The Proposed Amendment Species page at http://www.faa.gov or the Superintendent of Document’s Web Accordingly, pursuant to the AGENCY: National Marine Fisheries page at http://www.access.gpo.gov/nara. authority delegated to me, the Federal Service (NMFS), National Oceanic and Additionally, any person may obtain Aviation Administration proposes to Atmospheric Administration (NOAA), a copy of this notice by submitting a amend 14 CFR part 71 as follows: Commerce. request to the Federal Aviation ACTION: PART 71—DESIGNATION OF CLASS A, Notice of availability of a fishery Administration, 1601 Lind Avenue, CLASS B, CLASS C, CLASS D, AND management plan; request for SW., Renton, WA 98055. CLASS E AIRSPACE AREAS; comments. Communications must identify both AIRWAYS; ROUTES; AND REPORTING document numbers for this notice. SUMMARY: NMFS announces that the POINTS Persons interested in being placed on a Pacific Fishery Management Council mailing list for future NPRMs should 1. The authority citation for 14 CFR (Council) has submitted the Fishery contact the FAA’s Office of Rulemaking, part 71 continues to read as follows: Management Plan for U.S. West Coast Fisheries for Highly Migratory Species (202) 267–9677, to request a copy of Authority: 49 U.S.C. 106(g), 40103, 40113, Advisory Circular No. 11–2A, Notice of 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959– (FMP)for Secretarial review. The FMP is Proposed Rulemaking Distribution 1963 Comp., p. 389. a response to increasing concern about System, which describes the application the effect of fishing on highly migratory procedures. § 71.1 [Amended] species (HMS) and on ocean resources 2. The incorporation by reference in caught incidentally to fishing HMS. The Proposal 14 CFR 71.1 of the Federal Aviation Numerous species of tuna, billfish, The FAA proposes to amend Title 14 Administration Order 7400.9L, Airspace oceanic sharks and other species range Code of Federal Regulations, part 71 (14 Designations and Reporting Points, throughout the Pacific Ocean. A CFR part 71) by establishing Class E dated September 16, 2003, and effective significant amount of information exists airspace at Hamilton, MT. The September 15, 2004, is amended as on some of the commercially important establishment of two RNAV GPS SIAPs; follows: tunas, a moderate amount on other

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commercially important tunas, lesser the fishery management plan or plan currently issued under the Endangered amounts of information on swordfish amendment is available for public Species Act and state authorities to limit and other billfishes, and scant review and comment. NMFS will fishing by drift gillnet vessels, except for information on sharks and other highly consider the public comments received the State of California limited entry migratory fishes. Comprehensive stock during the comment period described program and Federal regulations that assessments are needed for many of above in determining whether to limit fishing to protect marine these species, which are harvested by approve, disapprove, or partially mammals. California would maintain its numerous coastal and distant-water approve the FMP. The FMP, if limited entry program under state fishing nations throughout the Pacific. approved, would implement regulations, and Federal regulations DATES: Comments on the FMP must be conservation and management measures governing marine mammals would received on or before January 5, 2004. necessary for management of highly remain in place under Marine Mammal migratory species fisheries off the States Protection Act authority; ADDRESSES: Comments on the FMP of California, Oregon, and Washington. 7. Prohibit longline fishing in the should be sent to Rodney R. McInnis, The FMP would provide a foundation Exclusive Economic Zone (EEZ) off the Acting Administrator, Southwest for future management actions that West Coast; Region, NMFS, 501 West Ocean might be necessary as the international Boulevard, Suite 4200, Long Beach, CA 8. Apply to West Coast-based longline and U.S. fisheries change. In summary, 90802. fishing vessels, when fishing outside the the FMP would: EEZ and west of 150° W. long., most of Copies of the FMP, which includes an 1. Include in the management unit the restrictions that are currently environmental impact statement/ striped marlin, swordfish, common applied to longline vessels fishing under regulatory impact review/initial thresher shark, pelagic thresher shark, the authority of longline limited entry regulatory flexibility analysis are bigeye thresher shark, shortfin mako or permits issued pursuant to the Fishery available from Donald O. McIssac, bonito shark, blue shark, north Pacific Management Plan for the Pelagic Executive Director, Pacific Fishery albacore, yellowfin tuna, bigeye tuna, Fisheries of the Western Pacific Region; Management Council, 7700 NE skipjack tuna, northern bluefin tuna, and Ambassador Place, Suite 200, Portland, and dorado or dolphinfish, commonly 9. Allow West Coast-based longline OR 97220. referred to as mahi mahi in Hawaii; fishing vessels to make shallow sets FOR FURTHER INFORMATION CONTACT: 2. Adopt harvest guidelines for targeting swordfish when fishing east of James Morgan, Sustainable Fisheries common thresher shark and shortfin 150° W. long. Division, NMFS, at 562–980–4036 or mako shark to reduce the possibility of Public comments on the FMP must be Daniel Waldeck, Pacific Fishery localized depletion; received by January 5, 2004, to be Management Council, at 503–326–6352. 3. Require all commercial fishing considered by NMFS in the decision to SUPPLEMENTARY INFORMATION: The vessels to have a permit to fish for HMS approve, disapprove or partially Magnuson-Stevens Fishery with an authorization for specific approve the FMP. NMFS expects to Conservation and Management Act fishing gear; publish and request public comment on (Magnuson-Stevens Act) requires each 4. Require all recreational charter the proposed regulations to implement Regional Fishery Management Council (including commercial passenger the FMP in the near future. to submit a fishery management plan or carrying fishing vessels or CPFV in Authority: 16 U.S.C. 1801 et. seq. plan amendment to NMFS for review California) vessels to have a permit to and approval, disapproval, or partial fish for HMS; Dated: October 31, 2003. approval. The Magnuson-Stevens Act 5. Require all commercial and Bruce C. Morehead, also requires that NMFS, upon receiving recreational charter vessels to maintain Acting Director, Office of Sustainable a fishery management plan or plan and submit logbooks to NMFS; Fisheries, National Marine Fisheries Service. amendment, immediately publish 6. Incorporate under Magnuson- [FR Doc. 03–27994 Filed 11–5–03; 8:45 am] notification in the Federal Register that Stevens Act authority regulations BILLING CODE 3510–22–S

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Notices Federal Register Vol. 68, No. 215

Thursday, November 6, 2003

This section of the FEDERAL REGISTER CQEs is Additional U.S. Note 5(b)(iv) to information technology. Copies of this contains documents other than rules or chapter 17 of the HTS. The regulation, information collection may be obtained proposed rules that are applicable to the promulgated by the United States Trade from Kimberly Chisley, the Agency public. Notices of hearings and investigations, Representative, provides for the Information Collection Coordinator, at committee meetings, agency decisions and issuance of CQEs by the Secretary of rulings, delegations of authority, filing of (202) 720–2568. Agriculture, and in general prohibits petitions and applications and agency Comments may be sent to Richard sugar subject to the TRQ from being statements of organization and functions are Blabey, the Import Policies and imported into the United States or examples of documents appearing in this Programs Division, Stop 1021, Foreign section. withdrawn from a warehouse for consumption at the TRQ duty rates Agricultural Service, U.S. Department of unless such sugar is accompanied by a Agriculture, 1400 Independence Ave., DEPARTMENT OF AGRICULTURE CQE. CQEs are issued to foreign SW., Washington, DC 20250–1021, or countries by the Director of the Import [email protected], or to the Foreign Agricultural Service Policies and Programs Division, Foreign Desk Officer for Agriculture, Office of Agricultural Service, or his or her Information and Regulatory Affairs, Notice of Request for Extension of a designee. The issuance of CQEs is in Office of Management and Budget, Currently Approved Information such amounts and at such times as the Washington, DC 20503. Persons with Collection Director determines are appropriates to disabilities who require an alternative AGENCY: Foreign Agricultural Service, enable the foreign country to fill its means of communication of information USDA. quota allocation for such quota period (Braille, large print, audiotape, etc.) ACTION: Notice and request for in a reasonable manner, taking into should contact USDA’s Target Center at comments. account traditional shipping patterns, (202) 720–2600 (voice and TDD). All harvesting period, U.S. import responses to this notice will be SUMMARY: In accordance with the requirements, and other relevant factors. summarized and included in the request Paperwork Reduction Act, this notice The information required to be for OMB approval. All comments will announces the Foreign Agricultural collected on the CQE is used to monitor become a matter of public record. Service’s intention to request an and control the imports of raw cane extension for a currently approved sugar. Proper completion of the CQE is FAS is committed to complying with information collection in support of the mandatory for those foreign the Government Paperwork Elimination regulations governing the entry of raw governments that are eligible and elect Act which requires Government cane sugar under the tariff-rate quota to export raw cane sugar to the United agencies, to the maximum extent (TRQ) into the United States. States under the TRQ. feasible, to provide the public with the DATES: Comments on this notice must be Estimate of burden: The public option of electronically submitting an received January 5, 2004 to be assured reporting burden for the collection information collection. CQEs permit on consideration. varies in direct relation to the number exporters to ship raw cane sugar to the FOR FURTHER INFORMATION CONTACT: of CQEs issued. United States at the U.S. price, which is Richard J. Blabey, Director, Import Respondents: Foreign governments. significantly higher than the world price Policies and Programs Division, Foreign Estimated number of respondents: 40 for raw cane sugar. Therefore, in Agricultural Service, AgStop 1021, (i.e., number of countries receiving a contrast to most information collection South Building, U.S. Department of TRQ allocation). documents, CQEs have a monetary Agriculture, Washington, DC 20250– Estimated number of responses per value equivalent to the substantial 1021 or telephone (202) 720–2916, fax respondent: 30 per fiscal year. profits to exporters who can fill their to (202) 720–0876, or e-mail Estimated total annual reporting raw cane sugar allocations under the [email protected]. burden: 200 hours. TRQ. CQEs have always been carefully SUPPLEMENTARY INFORMATION: Request for Comments: Send handled as secure documents, and Title: Certificate for Quota Eligibility. comments regarding: (a) Whether the issued only to foreign government- OMB Number: 0551–0014. information collection is necessary for approved certifying authorities. The Expiration Date of Approval: February the proper performance of the functions Department does not plan to make CQEs 29, 2004. of the agency, including whether the available electronically in order to Abstract: The Harmonized Tariff information will have practical utility; prevent a potential proliferation of Schedule of the United States (HTS) (b) the accuracy of the agency’s estimate invalid CQEs, which could undermine authorizes the Secretary of Agriculture of the burden of the collection of the integrity of the TRQ system. to establish the quantity of raw cane information including the validity of the sugar, which may be entered at the TRQ methodology and assumption used; (c) Signed at Washington, DC on October 27, duty rates. The terms under which ways to enhance the quality, utility, and 2003. Certificates for Quota Eligibility (CQEs) clarity of the information to be A. Ellen Terpstra, will be issued to foreign countries that collected; and (d) ways to minimize the Administrator, Foreign Agricultural Service. have been allocated a share of the TRQ burden of the collection of information [FR Doc. 03–27961 Filed 11–5–03; 8:45 am] are set forth in 15 CFR part 2011, on those who are to respond, including Subpart A, Allocation of Tariff-rate through use of automated, electronic, BILLING CODE 3410–10–M Quota on Imported Sugars, Syrups, and mechanical, or other technological Molasses. The authority for issuing collection techniques or other forms of

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DEPARTMENT OF AGRICULTURE DEPARTMENT OF AGRICULTURE SUMMARY: The Klamath Provincial Advisory Committee will meet on Foreign Agricultural Service Foreign Agricultural Service November 13–14, 2003, at the Northern California Service Center, 6101 Airport Trade Adjustment Assistance for Trade Adjustment Assistance for Road, Redding, California. The meeting Farmers Farmers will start at 1 p.m. and adjourn at 5 p.m. AGENCY: Foreign Agricultural Service, on November 13, and start at 8 a.m. and AGENCY: Foreign Agricultural Service, USDA. adjourn at 12 noon on November 14. USDA. ACTION: Notice. Agenda items for the meeting include: ACTION: Notice. (1) Discussion on topics of general The Administrator, Foreign interest to the PAC (recruitment of new Agricultural Service (FAS), has certified members, issue development process); The Administrator, Foreign a petition for trade adjustment (2) Vegetative Treatments in Late Agricultural Service (FAS), certified assistance (TAA) that was filed on Successional Reserves; (3) Salvage petitions for trade adjustment assistance September 15, 2003, by the Wild Harvest After Wildfire (TAA) that were filed on September 15, Blueberry Commission of Maine, Orono, Recommendations; and (4) Public 2003, by the United Fishermen of Maine. Producers of wild blueberries in Comment Periods. All Provincial Alaska, Juneau, Alaska, and the Puget the state of Maine are now eligible to Advisory Committee meetings are open Sound Salmon Commission, Seattle, apply for program benefits. to the public. Interested Citizens are Washington. Salmon fishermen holding SUPPLEMENTARY INFORMATION: Upon encouraged to attend. permits and licenses in the states of investigation, the Administrator FOR FURTHER INFORMATION CONTACT: Jan Alaska and Washington are now eligible determined that increasing imports of Ford, USDA, Klamath National Forest, to apply for program benefits. wild blueberries contributed 1312 Fairlane Road, Yreka, California SUPPLEMENTARY INFORMATION: Upon importantly to a decline in domestic 96097; telephone (530) 841—4483 investigation, the Administrator producer prices of 33 percent during (voice), TDD (530) 841–4573. determined that increased imports of July 2002 through June 2003, when Dated: October 21, 2003. frozen salmon fillets contributed compared with the previous 5-year Margaret J. Boland, importantly to a decline in the landed average. Producers certified as eligible for TAA Designated Federal Official, Klamath PAC. prices of salmon in Alaska and may apply to the Farm Service Agency [FR Doc. 03–27918 Filed 11–5–03; 8:45 am] Washington by 34.6 and 32.6 percent, county office for benefits anytime prior BILLING CODE 3410–11–M respectively, during January 2002 to the application deadline of January through December 2002, when 20, 2004. After submitting completed compared with the previous 5-year applications, producers shall receive DEPARTMENT OF AGRICULTURE average. technical assistance provided by the Sunshine Act Meeting Producers certified as eligible for TAA Extension Service at no cost and an may apply to the Farm Service Agency adjustment assistance payment, if AGENCY: Rural Telephone Bank, USDA. for benefits anytime prior to the certain program criteria are met. ACTION: Staff briefing for the Board of application deadline of January 20, Producers of raw agricultural Directors. 2004. After submitting completed commodities wishing to learn more applications, producers shall receive about TAA and how they may apply TIME AND DATE: 2 p.m., Thursday, technical assistance provided by the should contact the Department of November 13, 2003. Extension Service at no cost and an Agriculture at the addresses provided PLACE: Conference Room 104–A, Jamie below for General Information. adjustment assistance payment, if L. Whitten Federal Building, U.S. Producers Certified as Eligible for certain program criteria are met. Department of Agriculture, 12th & TAA Contact: Local Farm Service Jefferson Drive, SW., Washington, DC. Producers of raw agricultural Agency service center. STATUS: Open. commodities wishing to learn more For General Information About TAA about TAA and how they may apply Contact: Jean-Louis Pajot, Coordinator, MATTERS TO BE DISCUSSED: should contact the Department of Trade Adjustment Assistance for 1. Year-end report on fiscal year 2003 lending activity. Agriculture at the addresses provided Farmers, FAS, USDA, (202) 720–2916, e-mail: [email protected]. 2. Fiscal year 2004 Budget. below for General Information. 3. Update on fiscal year 2003 audit. Producers Certified as Eligible for Dated: October 27, 2003. 4. Privatization discussion. TAA, Contact: Local Farm Service A. Ellen Terpstra, 5. Administrative and other issues. Agency service center. Administrator, Foreign Agricultural Service. ACTION: Stockholders’ meeting. For General Information About TAA, [FR Doc. 03–27960 Filed 11–5–03; 8:45 am] TIME AND DATE: 9 a.m., Friday, Contact: Jean-Louis Pajot, Coordinator, BILLING CODE 3410–10–M November 14, 2003. Trade Adjustment Assistance for PLACE: Jefferson Auditorium, U.S. Farmers, FAS, USDA, (202) 720–2916. Department of Agriculture, South DEPARTMENT OF AGRICULTURE email: [email protected]. Building, 14th & Independence Avenue, Signed at Washington, DC, on October 28, Forest Service SW., Washington, DC. 2003. STATUS: Open. Klamath Provincial Advisory A. Ellen Terpstra, MATTERS TO BE DISCUSSED: The Committee (PAC); Meeting Administrator, Foreign Agricultural Service. following matters have been placed on the agenda for the Stockholders’ [FR Doc. 03–27959 Filed11–5–03; 8:45 am] AGENCY: Forest Service, USDA. meeting: ACTION: Notice of meeting. BILLING CODE 3410–10–M 1. Call to order.

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2. Establishment of a quorum. 158, on behalf of Nissan North America, has been designated examiner to 3. Action on Minutes of the August Inc. (NNA), operator of Subzone 158D at investigate the application and report to 17, 2001, Stockholders’ meeting. the NNA motor vehicle manufacturing the Board. 4. Secretary’s report on loans plant in Canton, Mississippi, requesting Public comment on the application is approved, FY 2003. an expansion of the scope of invited from interested parties. 5. Treasury’s report. manufacturing authority to include new Submissions (original and three copies) 6. Privatization update, discussion, manufacturing capacity under FTZ shall be addressed to the Board’s and presentations. procedures. The application was Executive Secretary at the following 7. Consideration of resolution to submitted pursuant to the provisions of addresses: conduct a Market Assessment. the Foreign-Trade Zones Act, as 1. Submissions via Express/Package 8. New business. amended (19 U.S.C. 81a–81u), and Delivery Services: Foreign-Trade 9. Adjournment. section 400.32(b)(1) of the Board’s Zones Board, U.S. Department of ACTION: Board of Directors meeting. regulations (15 CFR Part 400). It was Commerce, Franklin Court Building- TIME AND DATE: Immediately following formally filed on October 29, 2003. Suite 4100W, 1099 14th Street, NW., Stockholders’ meeting, Friday, Subzone 158D was approved in 2002 Washington, DC 20005; or, November 14, 2003. for the manufacture of up to 250,000 2. Submissions via the U.S. Postal light-duty passenger vehicles annually PLACE: Jefferson Auditorium, U.S. Service: Foreign-Trade Zones Board, at the NNA plant (up to 4,000 U.S. Department of Commerce, FCB– Department of Agriculture, South employees/1,350 acres/2.6 million sq.ft.) Building, 14th & Independence Avenue, 4100W, 1401 Constitution Ave., NW., in Canton (Madison County), Washington, DC 20230. SW., Washington, DC. Mississippi (Board Order 1212, 67 FR The closing period for their receipt is STATUS: Open. 11091, 3–12–2002). January 5, 2004. Rebuttal comments in MATTERS TO BE CONSIDERED: The applicant currently requests that The response to material submitted during following matters have been placed on the scope of FTZ manufacturing authority be extended to include an the foregoing period may be submitted the agenda for the Board of Directors during the subsequent 15-day period (to meeting (items 3 through 6 are only additional 1.1 million square feet of production area to accommodate January 20, 2004). necessary if a quorum is not established A copy of the application will be in the stockholders’ meeting and these additional passenger sedan production capacity (to a total of 400,000 vehicles available for public inspection at the items are not addressed previously): Office of the Foreign-Trade Zones 1. Call to order. annually), which will be added within the existing boundaries of Subzone Board’s Executive Secretary at address 2. Action on Minutes of the August No. 1 listed above. 19, 2003, board meeting. 158D. 3. Secretary’s Report on loans Parts and materials that are sourced Dated: October 29, 2003. approved, FY 2003. from abroad (approximately 44% of Dennis Puccinelli, 4. Treasurer’s Report. material value, as published in the Executive Secretary. 5. Privatization update, discussion, original Federal Register notice at 66 FR [FR Doc. 03–27966 Filed 11–5–03; 8:45 am] 35223, 7–3–2001) include: Gasoline and and presentations. BILLING CODE 3510–DS–P 6. Consideration of resolution to diesel engines and parts of such conduct a Market Assessment. engines, labels, body parts and trim, 7. Governor’s Remarks. fasteners, catalytic converters, parts of DEPARTMENT OF COMMERCE 8. Establishment of meeting dates for steering systems, brake fittings, half 2004. shafts, transmissions and parts of International Trade Administration transmissions, differentials, bearings 9. Adjournment. [A–570–852] CONTACT PERSON FOR MORE INFORMATION: and bearing housings, flywheels/ Roberta D. Purcell, Assistant Governor, pulleys, wiring harnesses, handles/ Creatine Monohydrate From the Rural Telephone Bank, (202) 720–9554. knobs, gaskets, fasteners, windshields People’s Republic of China: and windows, springs, relays, and Dated: November 4, 2003. Preliminary Results of Antidumping switches (duty rate range: free—8.6%). Duty Administrative Review Roberta D. Purcell, The foregoing list represents NNA’s Acting Governor, Rural Telephone Bank. preexisting scope of sourcing authority. AGENCY: Import Administration, [FR Doc. 03–28080 Filed 11–4–03; 11:58 am] Expanded zone procedures would International Trade Administration, BILLING CODE 3410–15–P continue to exempt NNA from Customs Department of Commerce. duty payments on the foreign SUMMARY: The Department of Commerce components used in production for is currently conducting an DEPARTMENT OF COMMERCE export. On its domestic sales and administrative review of the exports to NAFTA countries, the antidumping duty order on creatine Foreign-Trade Zones Board company can choose the lower duty rate monohydrate from the People’s that applies to finished passenger Republic of China. The period of review [Docket 56–2003] vehicles (2.5%) for the foreign inputs is February 1, 2002, through January 31, Foreign-Trade Zone 158—Jackson, MS, with higher duty rates noted above. 2003. This review covers imports of Application for Expansion of Duties on foreign-origin production subject merchandise from one producer/ Manufacturing Authority, Subzone equipment would also be deferred until exporter. 158D—Nissan North America, Inc., they become operational. The We preliminarily find that sales have Plant (Motor Vehicles); Canton, MS application indicates that the savings not been made at less than normal from FTZ procedures helps to improve value. If these preliminary results are An application has been submitted to the NNA plant’s international adopted in our final results of review, the Foreign-Trade Zones Board (the competitiveness. we will instruct the U.S. Customs and Board) by the Vicksburg-Jackson In accordance with the Board’s Border Protection Service (‘‘CBP’’) to Foreign-Trade Zone, Inc., grantee of FTZ regulations, a member of the FTZ Staff liquidate entries of creatine

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monohydrate produced and exported by pure form is a white, tasteless, odorless respondent: (1) Sets its own export Suzhou Sanjian Nutrient and Health powder, that is a naturally occurring prices independent of the government Products Co., Ltd., without regard to metabolite found in muscle tissue. and other exporters; (2) retains the antidumping duties. Creatine monohydrate is provided for in proceeds from its export sales and We invite interested parties to subheading 2925.20.90 of the makes independent decisions regarding comment on these preliminary results. Harmonized Tariff Schedule of the the disposition of profits or financing of We will issue the final results no later United States (‘‘HTSUS’’). Although the losses; (3) has the authority to negotiate than 120 days from the date of HTSUS subheading and the CAS and sign contracts and other publication of this notice. registry number are provided for agreements; and (4) has autonomy from EFFECTIVE DATE: November 6, 2003. convenience and customs purposes, the the government regarding the selection written description of the merchandise of management. See Silicon Carbide, 59 FOR FURTHER INFORMATION CONTACT: Blanche Ziv, Import Administration, under review is dispositive. FR at 22587; see also Notice of Final Determination of Sales at Less Than International Trade Administration, Separate Rates U.S. Department of Commerce, 14th Fair Value: Furfuryl Alcohol from the The Department has treated the PRC People’s Republic of China, 60 FR Street and Constitution Avenue, NW., as a nonmarket economy (‘‘NME’’) 22544, 22545 (May 8, 1995) (‘‘Furfuryl Washington, DC 20230; telephone: (202) country in all previous antidumping Alcohol’’). 482–4207. cases. See, e.g., Notice of Final In the Notice of Final Determination SUPPLEMENTARY INFORMATION: Determination of Sales at Less than Fair of Sales at Less Than Fair Value: Background Value: Refined Brown Aluminum Oxide Creatine Monohydrate from the People’s (Otherwise known as Refined Brown Republic of China, 64 FR 71104, 71105 On February 4, 2000, the Department Artificial Corundum or Brown Fused (December 20, 1999) (‘‘LTFV published an antidumping order on Alumina) from the People’s Republic of Investigation’’), we determined that creatine monohydrate from the People’s China, 68 FR 55589 (September 26, there was de jure and de facto absence Republic of China (‘‘PRC’’). See Notice 2003). It is the Department’s standard of government control of Suzhou of Antidumping Duty Order: Creatine policy to assign all exporters of the Sanjian Fine Chemical Co. Ltd.’’s Monohydrate from the People’s merchandise subject to review in NME (‘‘Suzhou Chemical’’) export activities Republic of China, 65 FR 5583 countries a single rate unless an and determined that Suzhou Chemical (February 4, 2000). On February 3, 2003, exporter can demonstrate an absence of warranted a company-specific dumping the Department published in the government control, both in law (de margin. On April 18, 2003, we Federal Register an Antidumping or jure) and in fact (de facto), with respect determined that Sanjian was the Countervailing Duty Order, Finding, or to exports. To establish whether an successor-in-interest to Suzhou Suspended Investigation; Opportunity exporter is sufficiently independent of Chemical. See Creatine Monohydrate to Request Administrative Review, 68 government control to be entitled to a from the People’s Republic of China: FR 5272 (February 3, 2003). separate rate, the Department analyzes Final Results of Changed Circumstances On February 28, 2003, in accordance the exporter in light of the criteria Review, 68 FR 19189 (April 18, 2003) with 19 CFR 351.213(b), a established in the Final Determination (‘‘Changed Circumstances Review’’). For manufacturer/exporter of the subject of Sales at Less Than Fair Value: the POR, Sanjian responded to the merchandise, Suzhou Sanjian Nutrient Sparklers from the People’s Republic of Department’s request for information & Health Products Co., Ltd. (‘‘Sanjian’’), China, 56 FR 20588 (May 6, 1991) regarding separate rates. We have found requested that the Department conduct (‘‘Sparklers’’), as amplified in the Final that the evidence on the record is an administrative review of this order. Determination of Sales at Less Than consistent with the final determination On March 25, 2003, we published a Fair Value: Silicon Carbide from the in the LTFV Investigation and the notice of initiation of this review. See People’s Republic of China, 59 FR 22585 Changed Circumstances Review, and Initiation of Antidumping and (May 2, 1994) (‘‘Silicon Carbide’’). In Sanjian continues to demonstrate an Countervailing Duty Administrative this review, the sole respondent, absence of government control, both in Reviews and Requests for Revocations in Sanjian, is a PRC company; therefore, a law and in fact, with respect to its Part, 68 FR 14394 (March 25, 2003). The separate rates analysis is necessary to exports, in accordance with the criteria period of this review (‘‘POR’’) is determine whether its export activities identified in Sparklers, Silicon Carbide, February 1, 2002, through January 31, are independent of government control. and Furfuryl Alcohol. 2003. On April 14, 2003, we issued an Absence of De Jure Control Export Price antidumping questionnaire to Sanjian. Evidence supporting, though not For U.S. sales made by Sanjian, we We issued a supplemental questionnaire requiring, a finding of de jure absence calculated export price (‘‘EP’’), in on July 18, 2003. We received responses of government control over export accordance with section 772(a) of the to the original and supplemental activities includes: (1) An absence of Tariff Act of 1930, as amended (‘‘the questionnaires on May 21 and August 1, restrictive stipulations associated with Act’’), because the subject merchandise 2003, respectively. an individual exporter’s business and was sold to unaffiliated purchasers in the United States prior to importation Scope of the Review export licenses; (2) any legislative enactments decentralizing control of into the United States and the facts did Imports covered by this review are companies; and (3) any other formal not otherwise warrant use of creatine monohydrate, which is measures by the government constructed export price. commonly referred to as ‘‘creatine.’’ The decentralizing control of companies. See We calculated EP based on the price chemical name for creatine Sparklers, 56 FR at 20589. to unaffiliated purchasers in the United monohydrate is N-(aminoiminomethyl)- States. In accordance with section N-methylgycine monohydrate. The Absence of De Facto Control 772(c) of the Act, as appropriate, we Chemical Abstracts Service (‘‘CAS’’) A de facto analysis of absence of deducted from the starting price foreign registry number for this product is government control over exports is inland freight, international freight, 6020–87–7. Creatine monohydrate in its based on four factors—whether the marine insurance, U.S. inland freight,

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U.S. customs duties, and other U.S. determined that India, Pakistan, International Monetary Fund’s transportation expenses. We valued the Indonesia, Sri Lanka, and the International Financial Statistics. deductions for foreign inland freight Philippines are countries comparable to Sanjian reported that it purchased a using surrogate data based on Indian the PRC in terms of overall economic portion of one its inputs, cyanamide, freight costs. We selected India as the development (see Memorandum from from a market economy supplier. surrogate country for the reasons Jeff May, Director, Office of Policy, to Because we found that the amount of explained in the ‘‘Normal Value’’ Blanche Ziv, Import Compliance cyanamide purchased was insignificant, section of this notice, below. Because Specialist, Group 1, April 10, 2003). we did not use the price paid by Sanjian the respondent used a market-economy Although we have no information to for this input, and instead used import shipper for more than an insignificant indicate that India produces creatine, it values from the MSFTI. For further portion of its sales and paid for the does produce other products within the information, see the FOP memo. shipping in a market-economy currency, same customs heading, and it produces Labor: We valued labor using the we used the average price paid by that other fine chemicals with nutritional method described in 19 CFR respondent to the market economy characteristics. We have therefore 351.408(c)(3). shipper to value international freight for determined that India is a significant Electricity and Coal: Consistent with all of its sales. See the ‘‘Factors of producer of comparable merchandise. our approach in Manganese Metal from Production Valuation Memorandum’’ Accordingly, we have calculated NV the People’s Republic of China; Final dated October 31, 2003 (‘‘FOP memo’’); using Indian values for the PRC Results of Antidumping Duty See also Tapered Roller Bearings and producer’s factors of production. Administrative Review, 66 FR 15076 Parts Thereof, Finished and Unfinished, We have obtained and relied upon (March 15, 2001) (‘‘Manganese Metal’’), from the People’s Republic of China; publicly available information, we calculated the surrogate value for Preliminary Results of 2000–2001 wherever possible. In many instances, electricity based on electricity rate data Administrative Review, Partial we used the Monthly Statistics of the reported by the International Energy Rescission of Review, and Notice of Foreign Trade of India; Volume II Agency (‘‘IEA’’), 4th quarter 2001. For Intent to Revoke Order, in Part, 67 FR Imports (‘‘MSFTI’’ ) to value factors of coal, we used import values from the 45451, 45453 (July 9, 2002). production, energy inputs and packing MSFTI. materials. Consistent with the Final Factory Overhead, Selling, General Normal Value Determination of Sales at Less than Fair and Administrative Expenses (‘‘SG&A’’), Section 773(c)(1) of the Act provides Value: Certain Automotive Replacement and Profit: We based our calculation of that the Department shall determine the Glass Windshields From the People’s factory overhead, SG&A, and profit on normal value (‘‘NV’’) using a factors-of- Republic of China, 67 FR 6482 the 2002 financial statements of a production methodology if: (1) The (February 12, 2002) and accompanying producer of comparable merchandise, merchandise is exported from an NME Issues and Decision Memorandum at Riddhi Siddhi Gluco Boils Ltd. country; and (2) the information does Comment 1, we excluded import data (‘‘RSGB’’), an Indian starch and dextrine not permit the calculation of NV using reported in the MSFTI for Korea, producer. home-market prices, third-country Thailand and Indonesia in our surrogate Inland Freight Rates: To value truck prices, or constructed value (‘‘CV’’) value calculations. In addition to the freight rates, we used an average of under section 773(a) of the Act. MSFTI data, we used Indian domestic trucking rates quoted in ICW. As discussed in the separate rates prices from Indian Chemical Weekly Packing Materials: For packing section, the Department considers the (‘‘ICW’’) to value certain chemical materials we used import values from PRC to be an NME country. The inputs. See the FOP memo. the MSFTI. For a complete analysis of Department has treated the PRC as an surrogate values, see the FOP memo. NME country in all previous Factors of Production antidumping proceedings. Furthermore, In accordance with section 773(c) of Preliminary Results of the Review available information does not permit the Act, we calculated NV based on We preliminarily find the weighted the calculation of NV using home- factors of production reported by average dumping margin for Sanjian for market prices, third-country prices, or Sanjian during the POR. To calculate the period February 1, 2002, through CV under section 773(a) of the Act. In NV, the reported unit factor quantities January 31, 2003, to be zero percent. accordance with section 771(18)(C)(i) of were multiplied by publicly available Any interested party may request a the Act, any determination that a foreign Indian surrogate values. hearing within 30 days of publication of country is an NME country shall remain In selecting the surrogate values, we this notice. See 19 CFR 351.310(c). Any in effect until revoked by the considered the quality, specificity, and hearing, if requested, will be held administering authority. We have no contemporaneity of the data. As approximately 44 days after the date of evidence suggesting that this appropriate, we adjusted input prices to publication of this notice, or the first determination should be changed. make them delivered prices. For the working day thereafter. Interested Therefore, we treated the PRC as an distances reported, we added to Indian parties may submit case briefs and/or NME country for purposes of this CIF surrogate values a surrogate freight written comments no later than 30 days review and calculated NV by valuing cost using the reported distances from after the date of publication of this the factors of production in a surrogate the PRC port to the PRC factory, or from notice. Rebuttal briefs and rebuttals to country. the domestic supplier to the factory. written comments, which must be Section 773(c)(4) of the Act requires This adjustment is in accordance with limited to issues raised in such briefs or the Department to value the NME the United States Court of Appeals for comments, may be filed not later than producer’s factors of production, to the the Federal Circuit’s (‘‘CAFC’’) decision 37 days after the date of publication. extent possible, in one or more market in Sigma Corp. v. United States, 117 F. Parties who submit arguments are economy countries that: (1) Are at a 3d 1401, 1407–1408 (Fed.Cir. 1997). For requested to submit with the argument level of economic development those values not contemporaneous with (1) a statement of the issue, (2) a brief comparable to that of the NME, and (2) the POR, we adjusted for inflation using summary of the argument, and (3) a are significant producers of comparable the appropriate wholesale or producer table of authorities. The Department merchandise. The Department has price index published in the will issue a notice of final results of this

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administrative review, including the reimbursement of antidumping duties SUPPLEMENTARY INFORMATION: results of its analysis of issues raised in occurred and the subsequent assessment Background any such written comments, within 120 of double antidumping duties. days of publication of these preliminary We are issuing and publishing this On February 10, 2000, the Department results. determination in accordance with published in the Federal Register the sections 751(a)(1) and 777(i)(1) of the Assessment Rates and Cash Deposit antidumping duty order on steel plate Act. Requirements from Korea. See Notice of Amendment Dated: October 31, 2003. of Final Determinations of Sales at Less Pursuant to 19 CFR 351.212(b), the Than Fair Value and Antidumping Duty Department calculates an assessment James J. Jochum, Assistant Secretary for Import Orders: Certain Cut-To-Length Carbon- rate for each importer of the subject Quality Steel Plate Products From merchandise. Upon issuance of the final Administration. [FR Doc. 03–27974 Filed 11–5–03; 8:45 am] France, India, Indonesia, Italy, Japan results of this administrative review, if and the Republic of Korea, 65 FR 6585 any importer-specific assessment rates BILLING CODE 3510–DS–P (February 10, 2000) (Amended Final calculated in the final results are above Determination and Order). On February de minimis (i.e., at or above 0.5 percent), DEPARTMENT OF COMMERCE 3, 2003, the Department published a the Department will issue appraisement notice of ‘‘Opportunity to Request instructions directly to the CBP to assess International Trade Administration Administrative Review’’ of the antidumping duties on appropriate antidumping duty order on steel plate entries by applying the assessment rate [A–580–836] from Korea. See Antidumping or to the entered value of the merchandise. Certain Cut-to-Length Carbon-Quality Countervailing Duty Order, Finding, or For assessment purposes, we calculate Suspended Investigation; Opportunity importer-specific assessment rates for Steel Plate Products From the Republic of Korea: Preliminary Results to Request Administrative Review, 68 the subject merchandise by aggregating FR 5272 (February 3, 2003). On the dumping duties due for all U.S. and Rescission in Part of Antidumping February 27, 2003, Nucor Corporation, a sales to each importer and dividing the Duty Administrative Review domestic producer, requested an amount by the total entered value of the AGENCY: Import Administration, administrative review of Dongkuk Steel sales to that importer. International Trade Administration, The following cash deposit Mill Co., Ltd. (DSM), Korea Iron & Steel Department of Commerce. requirements will be effective upon Co., Ltd. (KISCO), Pohang Iron & Steel publication of the final results of this ACTION: Notice of Preliminary Results of Co., Ltd. (Pohang) and Union Steel administrative review for all shipments Antidumping Duty Administrative Manufacturing Co., Ltd. (Union) for the of creatine entered, or withdrawn from Review. POR February 1, 2002, through January warehouse, for consumption on or after 31, 2003. Also, on February 27, 2003, SUMMARY: In response to requests from the publication date of the final results IPSCO Steel, one of the petitioning firms U.S. producers of the subject in the steel plate investigations, of this administrative review, as merchandise, the Department of provided for by section 751(a)(1) of the requested an administrative review of Commerce (the Department) is Act: (1) The cash deposit rate for DSM this review. On March 18, 2003, conducting an administrative review of Sanjian will be the rate established in the Department initiated an the antidumping duty order on certain the final results of this administrative administrative review of DSM, KISCO, cut-to-length carbon-quality steel plate review; (2) for a company previously and Union. See Initiation of products (steel plate) from the Republic found to be entitled to a separate rate Antidumping and Countervailing Duty of Korea (Korea). The review covers one and for which no review was requested, Administrative Reviews and Requests manufacturer/exporter of subject the cash deposit rate will be the rate for Revocation in Part, 68 FR 14394 merchandise during the period of established in the most recent review of (March 25, 2003). The Department did review (POR), February 1, 2002, through that company; (3) the cash deposit rate not initiate an administrative review of January 31, 2003. Based upon our for all other PRC exporters will be Pohang because Pohang is excluded analysis, the Department has 153.70 percent, the PRC-wide rate from the antidumping order on steel preliminarily determined that a established in the LTFV investigation; plate from Korea. See Amended Final dumping margin exists for the and (4) the cash deposit rate for a non- Determination and Order. manufacturer/exporter covered by this PRC exporter of subject merchandise On April 10, 2003, the Department review. If these preliminary results are from the PRC will be the rate applicable issued antidumping questionnaires to adopted in our final results of to the PRC exporter that supplied that DSM, KISCO and Union. The administrative review, we will instruct exporter. These cash requirements, Department received a letter from U.S. Customs and Border Protection when imposed, shall remain in effect KISCO on June 6, 2003, in which it (CBP) to assess antidumping duties as until publication of the final results of stated that it had shut down its steel appropriate. Interested parties are the next administrative review. plate mill in early 1998 and, thus, had invited to comment on these no shipments of subject merchandise Notification to Importers preliminary results. during the POR. In March and April This notice also serves as a EFFECTIVE DATE: November 6, 2003. 2003, Union reported that it did not preliminary reminder to importers of FOR FURTHER INFORMATION CONTACT: Jeff produce the subject merchandise and their responsibility under 19 CFR Pedersen or Drew Jackson, AD/CVD had no shipments of subject 351.402(f) to file a certificate regarding Enforcement, Office IV, Group II, Import merchandise during the POR. DSM the reimbursement of antidumping Administration, International Trade responded to the Department’s duties prior to liquidation of the Administration, U.S. Department of questionnaire responses in May and relevant entries during this review Commerce, 14th and Constitution June 2003. The Department issued period. Failure to comply with this Avenue, NW., Washington, DC 20230; supplemental questionnaires to DSM in requirement could result in the telephone: (202) 482–2769 or (202) 482– May, June, July, August, and September Secretary’s presumption that 4406, respectively. of 2003, and received responses from

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DSM in June, July, August, and products are specifically excluded from Department will not make a duty September of 2003. the order: (1) Products clad, plated, or absorption determination in this review. coated with metal, whether or not Scope of the Review Affiliation painted, varnished or coated with The products covered by the plastic or other non-metallic substances; During the POR, DSM sold subject antidumping duty order are certain hot- (2) SAE grades (formerly AISI grades) of merchandise to Dongkuk Industries Co., rolled carbon-quality steel: (1) Universal series 2300 and above; (3) products Ltd. (DKI), a Korean trading company, mill plates (i.e., flat-rolled products made to ASTM A710 and A736 or their which, in turn, resold the merchandise rolled on four faces or in a closed box proprietary equivalents; (4) abrasion- to Dongkuk International, Inc. (DKA), a pass, of a width exceeding 150 mm but resistant steels (i.e., USS AR 400, USS U.S. importer that is affiliated with not exceeding 1250 mm, and of a AR 500); (5) products made to ASTM DSM. The Department has preliminarily nominal or actual thickness of not less A202, A225, A514 grade S, A517 grade determined that DSM and DKI are under than 4 mm, which are cut-to-length (not S, or their proprietary equivalents; (6) the common control of a family in coils) and without patterns in relief), ball bearing steels; (7) tool steels; and (8) grouping. According to section { } of iron or non-alloy-quality steel; and (2) silicon manganese steel or silicon 771(33)(F) of the Act, ‘‘ t wo or more flat-rolled products, hot-rolled, of a electric steel. The merchandise subject persons directly or indirectly nominal or actual thickness of 4.75 mm to the order is classified in the HTSUS controlling, controlled by, or under or more and of a width which exceeds under subheadings: 7208.40.3030, common control with, any person’’ shall 150 mm and measures at least twice the 7208.40.3060, 7208.51.0030, be considered to be affiliated. Thus we thickness, and which are cut-to-length 7208.51.0045, 7208.51.0060, have preliminarily found DSM and DKI (not in coils). Steel products to be 7208.52.0000, 7208.53.0000, to be affiliated parties. For a complete included in the scope of the order are 7208.90.0000, 7210.70.3000, discussion of this issue see the of rectangular, square, circular or other 7210.90.9000, 7211.13.0000, memorandum from the Team to Thomas shape and of rectangular or non- 7211.14.0030, 7211.14.0045, F. Futtner, Acting Office Director, rectangular cross-section where such 7211.90.0000, 7212.40.1000, concerning Affiliation Analysis for non-rectangular cross-section is 7212.40.5000, 7212.50.0000, Dongkuk Steel Mill Company, Ltd., achieved subsequent to the rolling 7225.40.3050, 7225.40.7000, dated concurrently with this notice. process (i.e., products which have been 7225.50.6000, 7225.99.0090, Section 201 Duties ‘‘worked after rolling’’)—for example, 7226.91.5000, 7226.91.7000, products which have been beveled or The Department notes that 7226.91.8000, 7226.99.0000. Although rounded at the edges. Steel products merchandise subject to this review is the HTSUS subheadings are provided that meet the noted physical subject to duties imposed under section for convenience and CBP purposes, the characteristics that are painted, 201 of the Act (section 201 duties). written description of the merchandise varnished or coated with plastic or other Because the Department has not covered by the order is dispositive. non-metallic substances are included previously addressed the within this scope. Also, specifically Period of Review appropriateness of deducting section included in the scope of the order are 201 duties from export price and high strength, low alloy (HSLA) steels. The POR is February 1, 2002 through constructed export price (CEP), on HSLA steels are recognized as steels January 31, 2003. September 9, 2003, the Department with micro-alloying levels of elements Preliminary Partial Rescission of published a request for public such as chromium, copper, niobium, Review comments on this issue (68 FR 53104). titanium, vanadium, and molybdenum. All comments were due on October 9, Steel products to be included in this We are preliminarily rescinding this 2003. Rebuttal comments are due by scope, regardless of Harmonized Tariff review, in part, with respect to KISCO November 7, 2003. See 68 FR 60079 Schedule of the United States (HTSUS) and Union because they reported that (October 21, 2003). Since the definitions, are products in which: (1) they made no shipments of subject Department has not made a Iron predominates, by weight, over each merchandise during the POR. The determination on this issue at this time, of the other contained elements, (2) the Department reviewed CBP data, which for purposes of these preliminary carbon content is two percent or less, by supports the claims that these results, no adjustment has been made. weight, and (3) none of the elements companies did not export subject Normal Value Comparisons listed below is equal to or exceeds the merchandise during the POR. quantity, by weight, respectively Duty Absorption To determine whether the indicated: 1.80 percent of manganese, or respondent’s sales of steel plate from 1.50 percent of silicon, or 1.00 percent Section 751(a)(4) of the Tariff Act of Korea to the United States were made at of copper, or 0.50 percent of aluminum, 1930, as amended (the Act), provides for less than normal value (NV), we or 1.25 percent of chromium, or 0.30 the Department, if requested, to compared the CEP to the NV, as percent of cobalt, or 0.40 percent of determine during an administrative described in the ‘‘Constructed Export lead, or 1.25 percent of nickel, or 0.30 review initiated two or four years after Price’’ and ‘‘Normal Value’’ sections of percent of tungsten, or 0.10 percent of the publication of the order, whether this notice, below. We first attempted to molybdenum, or 0.10 percent of antidumping duties have been absorbed compare contemporaneous U.S. and niobium, or 0.41 percent of titanium, or by a foreign producer or exporter, if the comparison-market sales of products 0.15 percent of vanadium, or 0.15 subject merchandise is sold in the that are identical with respect to the percent zirconium. All products that United States through an affiliated following characteristics: paint, quality, meet the written physical description, importer. Nucor Corporation requested grade, heat treatment, thickness, width, and in which the chemistry quantities that the Department make a duty patterns in relief and descaling. Where do not equal or exceed any one of the absorption determination with respect we were unable to compare sales of levels listed above, are within the scope to each respondent. Because the instant identical merchandise, we compared of the order unless otherwise review was not initiated two or four U.S. sales to contemporaneous specifically excluded. The following years after publication of the order, the comparison-market sales of the most

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similar merchandise based on the above and the difference affects price Trade Analysis: Dongkuk Steel Mill Co., characteristics, which are listed in order comparability, as manifested in a Ltd., dated concurrently with this of importance for matching purposes. pattern of consistent price differences notice. between the sales on which NV is based Constructed Export Price Normal Value and comparison-market sales at the LOT In calculating U.S. price, the of the export transaction, we make an After testing home market viability Department used CEP, as defined in LOT adjustment under section and whether home market sales failed section 772(b) of the Act, because the 773(a)(7)(A) of the Act. For CEP sales, if the cost test, we calculated NV as noted merchandise was sold, after the NV LOT is more remote from the in subsection 5, ‘‘Calculation of NV,’’ importation, by DSM’s U.S. affiliate, factory than the CEP LOT and there is below. DKA, to unaffiliated purchasers in the no basis for determining whether the 1. Home Market Viability United States. We calculated CEP based difference in the levels between NV and on delivered prices to unaffiliated CEP affects price comparability, we In order to determine whether there is customers in the United States. We adjust NV under section 773(a)(7)(B) of a sufficient volume of sales in the home made deductions from the starting price, the Act (the CEP offset provision). See market to serve as a viable basis for where appropriate, for foreign and U.S. Notice of Final Determination of Sales calculating NV (i.e., whether the brokerage and handling, foreign and at Less Than Fair Value: Certain Cut-to aggregate volume of home market sales U.S. inland freight, international freight, Length Carbon Steel Plate from South of the foreign like product is equal to or marine insurance, U.S. duties, and Africa, 62 FR 61731 (November 19, greater than five percent of the aggregate direct and indirect selling expenses to 1997). volume of U.S. sales), we compared the the extent that they are associated with In determining whether separate respondent’s volume of home market economic activity in the United States LOTs exist, we obtained information sales of the foreign like product to the in accordance with sections 772(c)(2)(A) from DSM about the marketing stages volume of its U.S. sales of subject and 772(d)(1)(B) and (D) of the Act. The for the reported U.S. and comparison- merchandise, in accordance with direct selling expenses included credit market sales, including a description of section 773(a)(1) of the Act. Because the expenses. We added duty drawback the selling activities performed by DSM respondent’s aggregate volume of home received on imported materials for each channel of distribution. In market sales of the foreign like product pursuant to section 772(c)(1)(B) of the identifying LOTs for CEP sales, we is greater than five percent of its Act. In accordance with section considered the selling functions aggregate volume of U.S. sales of subject 772(d)(3) of the Act, we made a reflected in the starting price, as merchandise, we determined that the deduction for CEP profit. Finally, adjusted under section 772(d) of the home market is viable for the pursuant to section 772(c)(1)(C) of the Act. See section 351.412(c)(1)(ii) of the respondent, and have used the home Act, we increased U.S. price by the Department’s regulations. We expect market as the comparison-market. amount of the export subsidy found in that, if claimed LOTs are the same, the 2. Ordinary Course of Trade—Overrun the countervailing duty investigation on selling functions and activities of the Sales steel plate from Korea. See Final seller at each level should be similar. Affirmative Countervailing Duty Conversely, if a party claims that LOTs DSM reported home market sales of Determination: Certain Cut-to-Length are different for different groups of ‘‘overrun’’ merchandise (i.e., sales of a Carbon-Quality Steel Plate From the sales, the selling functions and activities greater quantity of steel plate than the Republic of Korea, 64 FR 73176 of the seller for each group of sales customer ordered due to (December 29, 1999). should be dissimilar. overproduction). Section 773(a)(1)(B) of In its questionnaire responses, DSM the Act provides that NV shall be based Level of Trade reported that it sold the foreign like on the price at which the foreign like In accordance with section product through one channel of product is first sold, inter alia, in the 773(a)(1)(B) of the Act, to the extent distribution in the comparison-market ordinary course of trade. Section practicable, we determined NV based on and subject merchandise through 771(15) of the Act defines ordinary sales in the comparison-market at the several channels of distribution in the course of trade as the conditions and same level of trade (LOT) as the CEP United States. We found that DSM practices which, for a reasonable time sales. The NV LOT is that of the engaged in similar selling activities for prior to the exportation of the subject starting-price sales in the comparison- almost all sales in the comparison- merchandise, have been normal in the market. For CEP sales, the U.S. LOT is market, and thus, we have preliminarily trade under consideration with respect the level of the constructed sale from determined that there is one LOT in the to merchandise of the same class or the exporter to the importer. The comparison-market. Moreover, we kind. In past cases, the Department has Department adjusts the CEP, pursuant to found that the sales activities performed examined a number of factors to section 772(d) of the Act, prior to in the U.S. channels of distribution are determine whether ‘‘overrun’’ sales are performing its LOT analysis, as substantially similar and, thus there is in the ordinary course of trade. These articulated by the Department’s one LOT in the U.S. market. Further, we factors include: (1) Whether the regulations at section 351.412(c)(1)(ii). compared the single LOT in the merchandise is ‘‘off-quality’’ or See Micron Technology, Inc. v. United comparison-market to the single LOT in produced according to unusual States, 243 F.3rd 1301, 1315 (Fed. Cir. the U.S. market, and have preliminarily specifications; (2) the comparative 2001). determined that they are substantially volume of sales and number of buyers To determine whether NV sales are at similar. Thus, we have determined that in the home market; (3) the average a different LOT than the CEP sales, we the LOTs in the comparison and U.S. quantity of an overrun sale compared to examined stages in the marketing markets are the same LOT. Because the the average quantity of a commercial process and selling activities along the LOT is the same in both markets, we sale; and (4) price and profit chain of distribution between the have denied DSM’s request for a CEP differentials in the home market. Based producer and the unaffiliated customer. offset, and not considered an LOT on our analysis of these factors and the If the comparison-market sales are at a adjustment. See memorandum to the terms of sale, we found all overrun sales different LOT than that of the U.S. sale, File from the Team concerning Level of to be outside the ordinary course of

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trade. See memorandum to the File from one year). Further, because we We will disclose the calculations used the Team concerning Overrun Sales compared prices to POR-average costs, in our analysis to parties to this Analysis: Dongkuk Steel Mill Co., Ltd., we determined that the below-cost proceeding within five days of the dated concurrently with this notice. prices would not permit recovery of all publication date of this notice. See costs within a reasonable time period, § 351.224(b) of the Department’s 3. Affiliated-Party Transactions and and thus, we disregarded the below-cost regulations. Any interested party may Arm’s-Length Test sales in accordance with sections request a hearing within 30 days of the DSM reported no home market sales 773(b)(1) and (2) of the Act. publication date of this notice. See to affiliates. We found that for certain products, § 351.310(c) of the Department’s 4. Cost of Production Analysis DSM made home market sales at prices regulations. If requested, a hearing will below the COP within an extended be held 44 days after the date of In the investigation of steel plate from period of time in substantial quantities. publication of this notice, or the first Korea, the Department disregarded Further, we found that these sales prices workday thereafter. Interested parties DSM’s sales that were found to have did not permit the recovery of costs may submit case briefs within 30 days failed the cost test. See Preliminary within a reasonable period of time. We of the date of publication of this notice. Determination of Sales at Less Than therefore excluded these sales from our Rebuttal briefs, limited to issues raised Fair Value: Certain Cut-to-Length analysis in accordance with section in the case briefs, may be filed not later Carbon-Quality Steel Plate Products 773(b)(1) of the Act. than 7 days after the deadline for filing From the Republic of Korea, 64 FR case briefs. Interested parties are invited 41224 (July 29, 1999); Amended Final 5. Calculation of NV to comment on the preliminary results. Determination and Order (no change We determined price-based NVs for Parties who submit arguments are from the preliminary results). DSM as follows: We calculated NV requested to submit with each Accordingly, the Department, pursuant based on packed, delivered and ex- argument: (1) A statement of the issue, to section 773(b) of the Act, initiated a factory prices to home market (2) a brief summary of the argument and cost of production (COP) investigation customers. Where appropriate, we (3) a table of authorities. Further, we of the respondent for purposes of this increased the starting price for interest would appreciate it if parties submitting administrative review. We conducted and duty drawback revenue received written comments would provide the the COP analysis as described below. from customers. We made deductions Department with a copy of the public from the starting price for foreign inland version of any such comments on a A. Calculation of COP freight, where appropriate, pursuant to diskette. The Department will issue the In accordance with section 773(b)(3) sections 773(a)(6)(B)(ii) of the Act. final results of this administrative of the Act, we calculated the weighted- Pursuant to section 773(a)(6)(C)(iii) of review, which will include the results of average COP, by model, for the POR, the Act and § 351.410(c) of the its analysis of issues raised in any based on the sum of materials and Department’s regulations, we made written comments, within 120 days fabrication costs, general and circumstance-of-sale adjustments to the from the publication date of this notice. administrative (G&A) expenses, and starting price, where appropriate, for Assessment Rate packing costs. differences in credit, warranty, and bank Upon completion of this B. Test of Home Market Sales Prices expenses. We deducted home market packing administrative review, the Department As required under section 773(b) of costs from, and added U.S. packing will determine, and CBP shall assess, the Act, we compared the weighted- costs to, the starting price, in antidumping duties on all appropriate average COPs to the home market sales accordance with section 773(a)(6)(A) entries. In accordance with of the foreign like product, in order to and (B) of the Act. Where appropriate, § 351.212(b)(1) of the Department’s determine whether these sales had been we made adjustments to NV to account regulations, we have calculated an made at prices below the COP within an for differences in the physical importer-specific assessment rate for extended period of time in substantial characteristics of the merchandise sold merchandise subject to this review. quantities, and whether such prices in the U.S. and home market, in Where the importer-specific assessment were sufficient to permit the recovery of accordance with section 773(a)(6)(C)(ii) rate is above de minimis, we will all costs within a reasonable period of of the Act and § 351.411 of the instruct the CBP to assess the importer- time. On a product-specific basis, we Department’s regulations. specific rate uniformly on all entries compared the COP to home market made during the POR. The Department prices, less any applicable movement Currency Conversion will issue appropriate assessment charges and direct and indirect selling Pursuant to section 773A(a) of the instructions directly to CBP within 15 expenses. Act, we made currency conversions into days of publication of the final results of review. If these preliminary results C. Results of the COP Test U.S. dollars based on the exchange rates in effect on the dates of the U.S. sales are adopted in the final results of Pursuant to section 773(b)(2)(C) of the as certified by the Federal Reserve Bank. review, we will direct CBP to assess the Act, where less than 20 percent of resulting assessment rates against the Preliminary Results of Review DSM’s sales of a given product were entered customs values for the subject made at prices below the COP, we did As a result of this review, we merchandise on each of the importers’ not disregard any below-cost sales of preliminarily determine that the entries during the review period. that product because the below-cost following weighted-average margin sales were not made in ‘‘substantial exists for the period February 1, 2002, Cash Deposit Requirements quantities.’’ Where 20 percent or more through January 31, 2003: The following cash deposit of DSM’s sales of a given product were requirements will be effective upon made at prices below the COP, we Manufacturer/Exporter Margin publication of these final results for all determined that such sales were made (percent) shipments of the subject merchandise in substantial quantities within an Dongkuk Steel Mill Co., Ltd...... 0.85 entered, or withdrawn from warehouse, extended period of time (i.e., a period of for consumption on or after the

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publication date of these final results of DEPARTMENT OF COMMERCE certifications required for the initiation administrative review, as provided by of this current new shipper review. section 751(a)(1) of the Act: (1) The cash International Trade Administration As required by 19 CFR 351.214(b)(2)(i), (ii), and (iii)(A), Siyang deposit rate for the reviewed company [A–570–848] will be the rate listed above (except that FTC and its producer Golden Bird, if the rate is de minimis, i.e., less than Freshwater Crawfish Tail Meat From along with Fuda, and Xiyuan have 0.5 percent, a cash deposit rate of zero the People’s Republic of China: certified that they did not export will be required); (2) for previously Initiation of Antidumping Duty New freshwater crawfish tail meat to the United States during the period of investigated or reviewed companies not Shipper Reviews investigation (POI), and that they have listed above, the cash deposit rate will AGENCY: Import Administration, never been affiliated with any exporter continue to be the company-specific rate International Trade Administration, or producer which exported freshwater published for the most recent period; (3) Department of Commerce. crawfish tail meat to the United States if the exporter is not a firm covered in SUMMARY: The Department of Commerce during the POI. Siyang FTC, Fuda and this review, a prior review, or the (the Department) has received timely Xiyuan have further certified that their original less than fair value (LTFV) requests from Siyang Foreign Trade Co., export activities are not controlled by investigation, but the manufacturer is, Ltd. (Siyang FTC) and its producer the central government of the PRC, the cash deposit rate will be the rate Anhui Golden Bird Agricultural & Side- pursuant to the requirements of 19 CFR established for the most recent period Line Products Development Co., Ltd. 351.214(b)(2)(iii)(B). Pursuant to the for the manufacturer of the (Golden Bird), Yancheng Fuda Foods Department’s regulations at section merchandise; and (4) the cash deposit Co., Ltd. (Fuda), and Qingdao Xiyuan 351.214(b)(2)(iv)(A), Siyang FTC, Fuda rate for all other manufacturers or Refrigerate Food Co., Ltd. (Xiyuan) to and Xiyuan each submitted exporters will continue to be the ‘‘all conduct new shipper reviews of the documentation establishing both the others’’ rate of 0.98 percent, which is antidumping duty order on freshwater date on which they first shipped the the ‘‘all others’’ rate established in the crawfish tail meat from the People’s subject merchandise to the United LTFV investigation, adjusted for the Republic of China (PRC). Fuda and States and the date of entry of that first export subsidy rate in the countervailing Xiyuan each produced and exported the shipment. Pursuant to the Department’s duty investigation. See Amended Final subject merchandise. In accordance regulations at sections Determination and Order. These deposit with section 751(a)(2)(B) of the Tariff 351.214(b)(2)(iv)(B) and (C), Siyang FTC, Fuda, and Xiyuan also provided requirements, when imposed, shall Act of 1930, as amended (the Act), and documentation which established the remain in effect until publication of the section 351.214(d) of the Department’s volume of that shipment and the date of final results of the next administrative regulations, we are initiating these new shipper reviews. the first sale to an unaffiliated customer review. in the United States. Also pursuant to EFFECTIVE DATE: November 6, 2003. Notification to Interested Parties the Department’s regulations at section FOR FURTHER INFORMATION CONTACT: 351.214(b)(2)(iv)(B), Siyang FTC This notice also serves as a Douglas Kirby or Matthew Renkey, reported the volume of subsequent preliminary reminder to importers of Office of AD/CVD Enforcement VII, shipments during the period of review their responsibility under § 351.402(f)(2) Import Administration, International (POR). Fuda and Xiyuan certified that of the Department’s regulations to file a Trade Administration, U.S. Department they had no subsequent shipments. certificate regarding the reimbursement of Commerce, 14th Street and After reviewing the submissions with of antidumping duties prior to Constitution Avenue, NW., Washington, respect to the new shipper review DC 20230; telephone: (202) 482–3782 or liquidation of the relevant entries requests filed on behalf of Siyang FTC, (202) 482–2312, respectively. during this review period. Failure to Fuda and Xiyuan, the Department found comply with this requirement could Background that they meet the threshhold for result in the Secretary’s presumption initiation in accordance with section On July 28, 2003, the Department 351.214(b) of the Department’s that reimbursement of the antidumping received a timely request from Siyang regulations. duties occurred and the subsequent FTC, in accordance with section assessment of double antidumping 751(a)(2)(B) of the Act and 19 CFR Initiation of Reviews duties. 351.214(c), for a new shipper review of In accordance with section This administrative review and this this antidumping duty order on 751(a)(2)(B)(ii) of the Act and 19 CFR notice are in accordance with sections freshwater crawfish tail meat from the 351.214(d)(1), we are initiating new 751(a)(1) and 777(i)(1) of the Act. PRC, which has a September shipper reviews of the antidumping anniversary date. On September 29, duty order on freshwater crawfish tail Dated: October 31, 2003. 2003, the Department also received meat from the PRC. James J. Jochum, timely requests from Fuda and Xiyuan In accordance with 19 CFR Assistant Secretary for Import filed in accordance with the statute and 351.214(g)(1)(i)(A) of the Department’s Administration. regulations. Siyang FTC had made a regulations, the POR for a new shipper [FR Doc. 03–27975 Filed 11–5–03; 8:45 am] previous request for a new shipper review, initiated in the month BILLING CODE 3510–DS–P review which the Department initiated, immediately following the anniversary but later rescinded based on Siyang’s month, will be the twelve-month period failure to provide the proper immediately preceding the anniversary certifications pursuant to 19 CFR month. Because of the timing of Siyang 351.214(b)(2). See Freshwater Crawfish FTC’s first shipment and the timing of Tail Meat for the People’s Republic of the request, the Department has China: Rescission of Antidumping Duty determined that it is appropriate in this New Shipper Review, 68 FR 37115 (June review to extend the POR backwards for 23, 2003). Siyang FTC has submitted the Siyang FTC to include its initial new

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shipper sale, which was made prior to The PORs for these new shipper the standard POR. reviews are:

Antidumping duty new shipper reviews Period to be reviewed

Siyang Foreign Trade Co., Ltd./Producer: Anhui Golden Bird Agricultural & Side-Line Products Development Co., Ltd...... 7/1/02–8/31/03 Yancheng Fuda Foods Co., Ltd...... 9/1/02–8/31/03 Qingdao Xiyuan Refrigerate Food Co., Ltd...... 9/1/02–8/31/03

We will instruct the U.S. Customs and International Trade Administration, in DEPARTMENT OF COMMERCE Border Protection (CBP) to allow, at the the matter of Gray Portland Cement and option of the importer, the posting, until Clinker from Mexico (5th National Oceanic and Atmospheric the completion of the review, of a single Administrative Review), Secretariat File Administration entry bond or security in lieu of a cash No. USA–97–1904–01. [I.D. 102703B] deposit for subject merchandise exported by and produced by the above SUMMARY: Pursuant to the Order of the Taking and Importing Marine listed companies. See 19 CFR Binational Panel dated February 10, Mammals; Taking Marine Mammals 351.214(e). Siyang FTC certified that it 2000, affirming the final remand Incidental to Power Plant Operations exported but did not produce the described above was completed on subject merchandise on which it based AGENCY: National Marine Fisheries October 30, 2003. With the decision of its new shipper review requests, and Service (NMFS), National Oceanic and the Extraordinary Challenge Committee Golden Bird certified that it produced Atmospheric Administration (NOAA), dated October 30, 2003, the above panel the subject merchandise exported by Commerce. Siyang FTC. Therefore, we will instruct review is completed. ACTION: Notice of issuance of a Letter of CBP to limit the bonding option to FOR FURTHER INFORMATION CONTACT: Authorization. entries of subject merchandise exported Caratina L. Alston, United States SUMMARY: In accordance with the by Siyang FTC and produced by Golden Secretary, NAFTA Secretariat, Suite Marine Mammal Protection Act Bird. Fuda and Xiyuan certified that 2061, 14th and Constitution Avenue, (MMPA), as amended, and they both produced and exported the Washington, DC 20230, (202) 482–5438. subject merchandise. Therefore, we will implementing regulations, notification instruct CBP to limit the bonding option SUPPLEMENTARY INFORMATION: On is hereby given that NMFS has issued a to entries of subject merchandise both February 10, 2000, the Binational Panel Letter of Authorization (LOA) to take produced and exported by Fuda and issued an order which affirmed the final marine mammals by harassment, injury Xiyuan. remand determination of the United and mortality, incidental to power plant Interested parties may submit States International Trade operations to Seabrook Station nuclear applications for disclosure of business Administration (‘‘ITA’’) concerning power plant, Seabrook, NH. proprietary information under Gray Portland Cement and Clinker from DATES: Effective from November 1, 2003, administrative protective order in Mexico. The Secretariat was instructed through June 30, 2004. accordance with 19 CFR 351.305 and to issue a Notice of Completion of Panel ADDRESSES: A copy of the October 3, 351.306. Review on the 31st day following the 2003, application is available by writing These initiations and notice are in issuance of the Notice of Final Panel to P. Michael Payne, Chief, Marine accordance with section 751(a)(2)(B) of Action, if no request for an Mammal Conservation Division, Office the Act and 19 CFR 351.214. Extraordinary Challenge was filed. A of Protected Resources, NMFS, 1315 Dated: October 31, 2003. request for an Extraordinary Challenge East-West Highway, Silver Spring, MD Joseph A. Spetrini, Committee was filed on March 23, 2000. 20910, or by telephoning the contact Deputy Assistant Secretary for Import On October 30, 2003 the Extraordinary listed here. Administration, Group III. Challenge Committee rendered a FOR FURTHER INFORMATION CONTACT: [FR Doc. 03–27967 Filed 11–5–03; 8:45 am] decision to affirm the February 10, 2000 Kimberly Skrupky, Office of Protected BILLING CODE 3510–DS–P panel decision. Based on Article 1904 Resources, NMFS, (301) 713–2322, ext Panel Rules, the Panel Review was 163. completed and the panelists discharged SUPPLEMENTARY INFORMATION: DEPARTMENT OF COMMERCE from their duties effective October 30, Background International Trade Administration 2003. Section 101(a)(5)(A) of the MMPA (16 Dated: October 31, 2003. U.S.C. 1361 et seq.) directs the Secretary North American Free-Trade Caratina L. Alston, Agreement, Article 1904 NAFTA Panel of Commerce to allow, upon request, the Reviews; Notice of Completion of United States Secretary, NAFTA Secretariat. incidental, but not intentional taking of Panel Review [FR Doc. 03–27963 Filed 11–5–03; 8:45 am] small numbers of marine mammals by BILLING CODE 3410–GT–P U.S. citizens who engage in a specified AGENCY: NAFTA Secretariat, United activity (other than commercial fishing) States Section, International Trade within a specified geographical region if Administration, Department of certain findings are made and Commerce. regulations are issued. ACTION: Notice of Completion of Panel Permission may be granted for periods Review of the final remand of 5 years or less if NMFS finds that the determination made by the U.S. taking will have no more than a

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negligible impact on the species or May 25, 1999) and in the LOA is applicable supporting documentation, stock(s), and will not have an undertaken. may be obtained by calling the unmitigable adverse impact on the Dated: October 31, 2003. Corporation for National and availability of the species or stock(s) for Laurie K. Allen, Community Service, William M. Ward, subsistence uses. In addition, NMFS (202) 606–5000, ext. 375. Individuals must prescribe regulations that include Acting Office Director, Office of Protected Resources, National Marine Fisheries Service. who use a telecommunications device permissible methods of taking and other for the deaf (TTY–TDD) may call (202) [FR Doc. 03–27995 Filed 11–5–03; 8:45 am] means effecting the least practicable 565–2799 between 8:30 a.m. and 5 p.m. adverse impact on the species and its BILLING CODE 3510–22–S Eastern time, Monday through Friday. habitat, and on the availability of the Comments should be sent to the species for subsistence uses, paying Office of Information and Regulatory particular attention to rookeries, mating COMMODITY FUTURES TRADING Affairs, Attn: Ms. Fumie Yokota, OMB grounds, and areas of similar COMMISSION Desk Officer for the Corporation for significance. The regulations must National and Community Service, Office Technology Advisory Committee include requirements pertaining to the of Management and Budget, Room Second Renewal monitoring and reporting of such taking. 10235, Washington, DC, 20503, (202) Regulations governing the taking of The Commodity Futures Trading 395–3147, within 30 days from the date marine mammals incidental to the Commission has determined to renew of this publication in the Federal power plant operations were published for a period of two years its Technology Register. on May 25, 1999 (64 FR 28114), and Advisory Committee. The Commission The OMB is particularly interested in remain in effect until June 30, 2004. For has determined that the renewal of the comments which: • detailed information on this action, advisory committee is in the public Evaluate whether the proposed please refer to that document. These interest in connection with duties collection of information is necessary regulations include mitigation, imposed on the Commission by the for the proper performance of the monitoring, and reporting requirements Commodity Exchange Act, 7 U.S.C. 1, et functions of the Corporation, including for the incidental taking of marine seq., as amended. whether the information will have mammals by power plant operations. practical utility; The purpose of the Technology • Summary of Request Advisory Committee is to advise the Evaluate the accuracy of the Commission on the impact and agency’s estimate of the burden of the On October 3, 2003, NMFS received proposed collection of information, an application from FPL Energy implications of technological innovation in the financial services and commodity including the validity of the Seabrook, LLC for an LOA under the methodology and assumptions used; regulations issued on May 25, 1999 (64 markets. Meetings of the Technology • Advisory Committee are public. Propose ways to enhance the FR 28114), and effective on July 1, 1999. quality, utility, and clarity of the This application requested Interested presons may obtain information or make comments by information to be collected; and authorization to take, by harassment, • Propose ways to minimize the under section 101(a)(5)(A) of the writing to the Commodity Futures Trading Commission, Three Lafayette burden of the collection of information MMPA, small numbers of marine on those who are to respond, including mammals incidental to routine Centre, 1155 21st Street, NW., Washington, DC 20581. through the use of appropriate operations of the Seabrook Station automated, electronic, mechanical, or nuclear power plant in Seabrook, New Issued in Washington, DC on October 31, other technological collection Hampshire for a period not to exceed 2003, by the Commission. techniques or other forms of information one year. Catherine D. Dixon, technology, e.g., permitting electronic Authorization Assistant Secretary of the Commission. submissions of responses. [FR Doc. 03–27910 Filed 11–5–03; 8:45 am] Type of Review: Renewal. Accordingly, NMFS issued an LOA to BILLING CODE 6351–01–M Agency: Corporation for National and FPL Energy Seabrook, LLC on October Community Service. 31, 2003, authorizing the taking of small Title: Americorps*NCCC Service numbers of marine mammals incidental CORPORATION FOR NATIONAL AND Project Application. to routine operations of the Seabrook COMMUNITY SERVICE OMB Number: 3045–0010. Station nuclear power plant. Issuance of Frequency: Annually. this LOA is based on findings, described Renewal of a Currently Approved Affected Public: Various small in the preamble to the final rule (64 FR Information Collection; Submission for community and faith-based 28114, May 25, 1999), that the total OMB Review; Comment Request organizations and non-profits/project takings by this activity will result in sponsors. small numbers of marine mammals AGENCY: Corporation for National and Number of Respondents: 1200. being taken, have no more than a Community Service. Estimated Time Per Respondent: 7.5 negligible impact on marine mammal ACTION: Notice. hours. stocks, and will not have an unmitigable Total Burden Hours: 9000 hours. adverse impact on the availability of the The Corporation for National and Total Burden Cost (capital/startup): affected marine mammal stocks for Community Service (hereinafter the N/A. subsistence uses. ‘‘Corporation’’), has submitted the Total Annual Cost (operating/ This LOA remains valid until June 30, following public information collection maintaining systems or purchasing 2004, provided that FPL Energy requests (ICRs) to the Office of services): $183,000. Seabrook, LLC is in conformance with Management and Budget (OMB) for Description: The Corporation the conditions of the regulations and the review and approval in accordance with proposes to renew the AmeriCorps LOA, and the mitigation, monitoring, the Paperwork Reduction Act of 1995 NCCC Service Project Application in a and reporting requirements described in (Pub. L. 104–13), (44 U.S.C. Chapter 35). revised form, which incorporates 50 CFR 216.130–216.137 (64 FR 28114, Copies of these individual ICRs, with lessons learned since the program

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inception. The Form is the means by Agreement, DD Form 2761; OMB DEPARTMENT OF DEFENSE which various organizations can request Number 0730–0005. Office of the Secretary NCCC members to assist in community Needs and Uses: The information service projects, and by which the collection requirement is necessary to Meeting of the Advisory Panel To NCCC evaluates such proposals for meet the Department of Defense’s (DoD) approval and selection. Assess the Capabilities for Domestic requirement for cashing personal checks Response to Terrorist Attacks Dated: October 30, 2003. overseas and afloat by DoD disbursing Involving Weapons of Mass Merlene Mazyck, activities, as provided in 31 U.S.C. 3342. Destruction National Director (Acting), The DoD Financial Management AmeriCorps*NCCC. Regulation, Volume 5, provides ACTION: Notice of meeting. [FR Doc. 03–27888 Filed 11–5–03; 8:45 am] guidance to DoD Disbursing Officers in SUMMARY: This notice sets forth the BILLING CODE 6050–$$–P the performance of this information schedule and summary agenda for the collection. This allows the DoD next meeting of the Panel to Assess the disbursing officer or authorized agent Capabilities for Domestic Response to the authority to offset the pay without DEPARTMENT OF DEFENSE Terrorist Attacks Involving Weapons of prior notification, in cases where this Mass Destruction. Notice of this meeting Office of the Secretary form has been signed subject to is required under the Federal Advisory conditions specified within the Committee Act. (Pub. L. 92–463). Proposed Collection; Comment approved procedures. DATES: November 17–18, 2003. Request Affected Public: Individuals or ADDRESSES: RAND, 1200 South Hayes AGENCY: Defense Finance and households. Street, Arlington, VA 22202. Accounting Service, DoD. Annual Burden Hours: 193,000 hours. FOR FURTHER INFORMATION CONTACT: ACTION: Notice. Number of Respondents: 386,000. RAND provides information about this Panel on its Web site at http:// SUMMARY: In compliance with Section Responses per Respondent: 1. www.rand.org/organization/nsrd/ 3506(c)(2)(A) of the Paperwork Average Burden per Response: 30 terrpanel; it can also be reached at (703) Reduction Act of 1995, the Defense minutes. 413–1100 extension 5683. Finance and Accounting Service Frequency: On occasion. SUPPLEMENTARY INFORMATION: announces the proposed public information collection and seeks public SUPPLEMENTARY INFORMATION: Proposed Schedule and Agenda comment on the provisions thereof. Panel to Assess the Capabilities for Summary of Information Collection Comments are invited on: (a) Whether Domestic Response to Terrorist Attacks the proposed collection of information The Personal check Cashing Involving Weapons of Mass Destruction is necessary for the proper performance Agreement Form is designed exclusively will meet from 8:30 a.m. until 5 p.m. on of the functions of the agency, including to help the DoD disbursing offices November 17, 2003 and from 8:30 a.m. whether the information shall have expedite the collection process of until 3 p.m. on November 18, 2003. practical utility; (b) the accuracy of the dishonored checks. The front of the Time will be allocated for public agency’s estimate of the burden of the form will be completed and signed by comments by individuals or proposed information collection; (c) organizations at the end of the meeting the authorized individual requesting ways to enhance the quality, utility and on November 18. Public comment check cashing privileges. By signing the clarity of the information to be presentations will be limited to two form, the individual is freely and collected; and (d) ways to minimize the minutes each and must be provided in burden of the information collection on voluntarily consenting to the immediate writing prior to the meeting. Mail respondents, including through the use collection from their current pay, written presentations and requests to of automated collection techniques or without prior notice, for the face value register to attend the open public other forms of information technology. of any check cased, plus any charges session to: Hillary Peck, RAND, 1200 assessed against the government by a DATES: Consideration will be given to all South Hayes Street, Arlington, VA comments received by January 5, 2004. financial institution, in the event the 22202–5050. Public seating for this check is dishonored. In the event the ADDRESSES: Written comments and meeting is limited, and is available on check is dishonored, the disbursing recommendations on the proposed a first-come, first-served basis. office will complete and certify the information collection should be sent to Dated: October 27, 2003. reverse side of the form and forward the the Financial Services and Disbursing Patricia L. Toppings, form to the applicable payroll office for Division, Defense Finance and Alternate OSD Federal Register Liaison Accounting Service Kansas City, DFAS– collection from the individual’s current Officer, Department of Defense. pay. DAD/KC, ATTN: Ms. Maggie Stiffler, [FR Doc. 03–27937 Filed 11–5–03; 8:45 am] 1500 E 95th Street, Kansas City, MO Dated: October 27, 2003. BILLING CODE 5001–06–M 64197–0030. Patricia L. Toppings, FOR FURTHER INFORMATION CONTACT: To Alternate OSD Federal Register Liaison request more information on this Officer, Department of Defense. DEPARTMENT OF DEFENSE proposed information collection or to [FR Doc. 03–27936 Filed 11–5–03; 8:45 am] obtain a copy of the proposal and Office of the Secretary BILLING CODE 5001–06–M associated collection instruments, Meeting of the Defense Policy Board please write to the above address, or Advisory Committee call, Ms. Maggie Stiffler (816) 926–3604. Title, Associated Form, and OMB AGENCY: Defense Policy Board Advisory Number: Personal Check Cashing Committee, Department of Defense.

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ACTION: Notice. accordingly, this meeting will be closed Dated: October 27, 2003. to the public. Patricia L. Toppings, SUMMARY: The Defense Policy Board Alternate OSD Federal Register, Liaison Advisory Committee will meet in closed Dated: October 27, 2003. Patricia L. Toppings, Officer, Department of Defense. session at the Pentagon on November [FR Doc. 03–27938 Filed 11–5–03; 8:45 am] 20, 2003 from 10 a.m. to 9 p.m. abd Alternate OSD Federal Register Liaison BILLING CODE 5001–06–M November 21, 2003 from 9 a.m. to 3 Officer, Department of Defense. p.m. [FR Doc. 03–27939 Filed 11–5–03; 8:45 am] The purpose of the meeting is to BILLING CODE 5001–06–M DEPARTMENT OF DEFENSE provide the Secretary of Defense, Deputy Secretary of Defense and Under Department of the Army; Corps of Secretary of Defense for Policy with DEPARTMENT OF DEFENSE Engineers independent, informed advice on major Office of the Secretary matters of defense policy. The Board Intent To Prepare an Environmental will hold classified discussions on Membership of the Defense Threat Impact Statement for the Proposed national security matters. Reduction Agency Performance Closure of the Al Black Recreation In accordance with Section 10(d) of Review Board Area at the Cochiti Dam Outlet Works the Federal Advisory Committee Act, in Sandoval County, NM Public Law 92–463, as amended [5 AGENCY: Defense Threat Reduction U.S.C. App II (1982)], it has been Agency, Department of Defense. AGENCY: Department of the Army, U.S. Army Corps of Engineers, DoD. determined that this meeting concerns ACTION: Notice. matters listed in 5 U.S.C. ACTION: Notice of intent. 552B(c)(1)(1982), and that accordingly SUMMARY: This notice announces the this meeting will be closed to the appointment of the Defense Threat SUMMARY: The U.S. Army Corps of public. Reduction Agency’s Performance Engineers, Albuquerque District (Corps) intends to prepare an Environmental Dated: October 27, 2003. Review Board (PRB) membership. The publication of the PRB membership is Impact Statement (EIS) for the proposed Patricia L. Toppings, closure of the Al Black Recreation area Alternate OSD Federal Register Liaison required by 5 U.S.C. 4314(c)(4). The PRB shall provide fair and impartial at the Cochiti Dam Outlet Works in Officer, Department of Defense. Sandoval County, NM. [FR Doc. 03–27940 Filed 11–5–03; 8:45 am] review of Senior Executive Service performance appraisals and make FOR FURTHER INFORMATION CONTACT: Mr. BILLING CODE 5001–06–M recommendations regarding Ernest Jahnke, U.S., Army Corps of performance ratings and performance Engineers, 4101 Jefferson Plaza, NE., DEPARTMENT OF DEFENSE awards to the Director, Defense Threat Albuquerque, NM 87109, (505) 342– Reduction Agency. 3416. Office of the Secretary EFFECTIVE DATES: The effective date of SUPPLEMENTARY INFORMATION: The service for the appointees of the Defense Corps, the Cochiti de Pueblo (Pueblo), U.S. Strategic Command Strategic Threat Reduction Agency (DTRA) PRB and the Bureau of Indian Affairs (BIA) Advisory Group is on or about October 1, 2003. are investigating modifying the AGENCY: U.S. Strategic Command, FOR FURTHER INFORMATION CONTACT: easement for the operation of the Department of Defense. Tana Farrell, Operations Division, Cochiti Dam Outlet Works/Al Black ACTION: Notice. Business Directorate, (703) 767–5759, Recreation Area. Specifically, the Defense Threat Reduction Agency, 8725 recreation easement would be rescinded SUMMARY: The Strategic Advisory Group John J. Kingman Road, Stop 6201, Ft. but the Corps would retain the original (SAG) will meet in closed session on Belvoir, VA 22060–6201. dam operation and maintenance November 6 and 7, 2003. SUPPLEMENTARY INFORMATION: In easement. Public access to the The mission of the SAG is to provide accordance with 5 U.S.C. 4314(c)(4), the recreation area would no longer be timely advice on scientific, technical, officials appointed to serve as members allowed. All public-oriented facilities intelligence, and policy-related issues to of the DTRA PRB are set forth below: and other amenities that have no the Commander, U.S. Strategic bearing on operation or maintenance of Command, during the development of PRB Chair: Mr. Robert L. Brittigan the Outlet Works would be removed and the Nation’s strategic war plans. Full Member: Maj Gen Trudy H. Clark, USAF surplused or disposed of following development of the topics will require Member: Mr. Myron K. Kunka Federal guidelines. The Corps would discussion of information classified in Member: Dr. Charles R. Gallaway restore the site as prescribed by the accordance with Executive Order 12958, The following DTRA officials will Pueblo. The Cochiti Dam Outlet Works dated April 17, 1995. Access to this serve as alternate members of the DTRA operation and maintenance easement information must be strictly limited to PRB, as appropriate. granted to the Corps would remain in personnel having requisite security Mr. Douglas Bruder effect. Corps, Middle Rio Grande clearances and specific need-to-know. Conservancy District, and U.S. Bureau Ms. Shari Durand Unauthorized disclosure of the of Reclamation (BOR) personnel would Mr. Douglas Englund information to be discussed at the SAG have access to the area for operation and meeting could have exceptionally grave Mr. Michael Evenson maintenance purposes. Members of the impact upon national defense. Dr. Joe Golden Pueblo would continue to access the In accordance with Section 10(d) of Mr. Richard Gullickson area for religious and cultural the Federal Advisory Committee Act (5 Dr. Arthur Hopkins ceremonies. This Federal action would U.S.C., App. 2), it has been determined Dr. Don Linger satisfy a November 8, 2001, that this SAG meeting concerns matters Mr. Vayl Oxford understanding between the Corps, listed in 5 U.S.C. 552b(c), and that, Ms. Joan Ma Pierre Pueblo and BIA.

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Construction of the Cochiti Dam and locations as deemed necessary. Specific of burden accurate; (4) how might the Lake (Project) was authorized for flood information regarding location and time Department enhance the quality, utility, and sediment control in the Upper Rio of the meetings will be published in and clarity of the information to be Grande Basin by the Flood Control Act local newspapers. It is anticipated that collected; and (5) how might the of 1960 (Pub. L. 86–645). Various the DEIS will be available for public Department minimize the burden of this Pueblo/Corps lease agreements defined review and comment by February 1, collection on the respondents, including the use and management of the Project 2004. through the use of information land owned by the Pueblo including technology. Corps construction of public use Luz D. Ortiz, recreation facilities at various locations Army Federal Register Liaison Officer. Dated: November 3, 2003. that the Pueblo would operate and [FR Doc. 03–27977 Filed 11–9–03; 8:45 am] Angela C. Arrington, maintain. In a lease amendment dated BILLING CODE 3710–KK–M Leader, Regulatory Information Management June 12, 1984, the Pueblo transferred the Group, Office of the Chief Information Officer. operation and maintenance of the Outlet Channel Area/Al Black Recreation Area DEPARTMENT OF EDUCATION Office of the Under Secretary to the Corps. Type of Review: New. All private interests and Federal, Notice of Proposed Information State, local agencies, and tribes having Collection Requests Title: Survey for the Study of the Ronald E. McNair Postbaccalaureate an interest in the project are hereby AGENCY: Department of Education. notified of the proposed action and are SUMMARY: The Leader, Regulatory Achievement Program Participants. invited to comment at this time. The Information Management Group, Office Frequency: One time. scoping process will consist of public of the Chief Information Officer, invites notification to explain and describe the Affected Public: Individuals or comments on the proposed information households. proposed action, early identification of collection requests as required by the resources that should be considered Paperwork Reduction Act of 1995. Reporting and Recordkeeping Hour during the study, and public review Burden: DATES: Interested persons are invited to periods. Coordination with the public submit comments on or before January Responses: 2,313. Burden Hours: and with other agencies will be carried 5, 2004. 3,000. out through public announcements, letters, report review periods telephone SUPPLEMENTARY INFORMATION: Section Abstract: Follow-up survey data from conversations, and meetings. 3506 of the Paperwork Reduction Act of current and former McNair program The Corps prepared a Draft 1995 (44 U.S.C. Chapter 35) requires participants to determine program Environmental Assessment on the that the Office of Management and completion, employment status. Budget (OMB) provide interested proposed action and held a public Requests for copies of the proposed Federal agencies and the public an early meeting on August 28, 2003 in Rio information collection request may be Rancho, NM. Additional information opportunity to comment on information collection requests. OMB may amend or accessed from http://edicsweb.ed.gov, and evidence gathered during that by selecting the ‘‘Browse Pending meeting and expressed public resistance waive the requirement for public Collections’’ link and by clicking on to establishing a recreation facility at consultation to the extent that public link number 2368. When you access the Pena Blanca, NM resulted in the participation in the approval process information collection, click on decision to prepare an EIS for the would defeat the purpose of the proposed action. All Federal, State and information collection, violate State or ‘‘Download Attachments’’ to view. local agencies, affected Indian tribes, Federal law, or substantially interfere Written requests for information should and other interested private with any agency’s ability to perform its be addressed to Vivian Reese, organizations and parties will be statutory obligations. The Leader, Department of Education, 400 Maryland notified of the meeting and will be Regulatory Information Management Avenue, SW., Room 4050, Regional provided copies of the Draft EIS (DEIS) Group, Office of the Chief Information Office Building 3, Washington, DC for comment. Officer, publishes that notice containing 20202–4651 or to the e-mail address Significant issues to be discussed in proposed information collection [email protected]. Requests may also the DEIS include the alternatives requests prior to submission of these be electronically mailed to the internet analysis for the possible relocation of requests to OMB. Each proposed address [email protected] or faxed to the Al Black Recreation Area and other information collection, grouped by 202–708–9346. Please specify the avenues for replacing lost recreation office, contains the following: (1) Type complete title of the information opportunities incurred as a result of the of review requested, e.g., new, revision, collection when making your request. proposed action. extension, existing or reinstatement; (2) Comments regarding burden and/or The lead agency for this project is the Title; (3) Summary of the collection; (4) U.S. Army Corps of Engineers, Description of the need for, and the collection activity requirements Albuquerque District. Cooperating proposed use of, the information; (5) should be directed to Sheila Carey at her agency status has not been assigned, nor Respondents and frequency of e-mail address requested, by any other agency. collection; and (6) Reporting and/or [email protected]. Individuals The EIS is being prepared in Recordkeeping burden. OMB invites who use a telecommunications device accordance with the requirements of the public comment. for the deaf (TDD) may call the Federal National Environmental Policy Act of The Department of Education is Information Relay Service (FIRS) at 1– 1969, as amended, and will address the especially interested in public comment 800–877–8339. project’s relationship to all other addressing the following issues: (1) Is [FR Doc. 03–27965 Filed 11–5–03; 8:45 am] applicable Federal and State laws and this collection necessary to the proper BILLING CODE 4000–01–P Executive Orders. functions of the Department; (2) will Scoping meetings will be held in Pen˜ a this information be processed and used Blanca, Albuquerque and other in a timely manner; (3) is the estimate

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ENVIRONMENTAL PROTECTION Address year reviews on Superfund and Landfill AGENCY Proposals must be mailed to: sites to obtain data on the components and condition of installed cap cover [FRL–7584–2] 1. Official Mailing Address systems for analysis; developing Office of Solid Waste and Emergency U.S. Environmental Protection protocols to aid first responders in Response (OSWER) Internship Agency (EPA), Office of Solid Waste and suspicious powder releases (counter Assistance Agreement Competition: Emergency Response (OSWER), Mail terrorism); and, researching nationwide Solicitation Notice Code 5103T, 1200 Pennsylvania innovative treatment technologies for Avenue, NW, Washington, DC 20460, input to a database. SUMMARY: This document solicits Attention: Nancy Allinson. Telephone II. Award Information cooperative agreement proposals from Number: 202–566–1915. Fax Number: educational institutions and non-profit 202–566–1943. 1. Depending on the availability of organizations that are interested in funds, it is anticipated that a total of obtaining EPA financial assistance to Agency Points of Contact: approximately $250,000 over five years, provide educational and training Nancy Allinson, Project Officer, 202– including direct and indirect costs, will opportunities, in the form of 566–1915 (tel), 202–566–1943 (fax), be awarded in FY04. Proposals may internships, for students in the [email protected], (Eligibility/ request funding with a total project cost hazardous waste management field. process issues). of up to $50,000 per year with a These cooperative agreements will be Loren Danforth, Alternate Contact, duration of up to five years. It is awarded under Section 311(b)3 and (9) 202–566–1921, anticipated that OSWER would provide of the Comprehensive Environmental [email protected]. funding for up to (5) interns per Response, Compensation and Liability Please submit all content-related summer, for a twelve-week summer Act and Section 8001 of the Solid Waste questions to http://clu-in.org/proposals/ internship, at a stipend of Disposal Act. This cooperative oswerintern. approximately $10,000 per intern, of agreement would enable students to (1) Environmental Protection Agency which some portion may be used for gain knowledge of alternative or round trip travel costs. The project innovative treatment technologies and Office of Solid Waste and Emergency period, however, would run April to real work experience in the hazardous Response (OSWER) Internship April of each year. Funding will only waste management field, and (2) earn Assistance Agreement Competition: cover stipends and student round-trip academic credit. Solicitation Notice travel costs. Stipends may be used to Depending on the availability of I. Funding Opportunity Description cover housing costs. funds, it is anticipated that a total of Based on CERCLA statute 311(b)(3), approximately $250,000 over five years, This document solicits cooperative EPA requires cost sharing at a minimum including direct and indirect costs, will agreement proposals from educational of 5%. The Catalogue of Federal be awarded in FY04. Proposals may institutions and non-profit organizations Domestic Assistance (CFDA) is 66.607. request funding with a total project cost that are interested in obtaining EPA 2. The resulting award will be a of up to $50,000 per year with a financial assistance to provide Cooperative Agreement. Cooperative duration of up to five years. It is educational and training opportunities Agreements involve substantial anticipated that OSWER would provide for students in the hazardous waste involvement between EPA Project funding for up to five (5) interns per management field. This cooperative Officer and the selected applicant. summer, for a twelve-week summer agreement will be awarded under Anticipated substantial Federal internship, at a stipend of Section 311(b)3 and (9) of the involvement for this project will approximately $10,000 per intern. The Comprehensive Environmental include: project period, however, would run Response, Compensation and Liability a. The Project Officer will be part of April to April of each year. Funding will Act and Section 8001 of the Solid Waste the final evaluation of the interns for only cover stipends and student round- Disposal Act. The cooperative placement. The final decision rests with trip travel costs. Stipends may be used agreement would enable students to (1) the recipient. to cover housing costs. gain knowledge of alternative or b. EPA’s project officer will closely Eligibility Information: Only innovative treatment technologies and monitor the recipient’s performance to accredited four (4)–year educational real work experience in the hazardous ensure that Agency funding for stipends institutions subject to OMB Circular A– waste management field, and (2) earn is used solely for that purpose. 21 and non-profit organizations, as academic credit. defined in OMB Circular A–122, are Since the inception of the summer III. Eligibility Information eligible to apply. However, non-profit internship program in the 1990’s, 1. Eligible Applicants: Only organizations described in Section OSWER has placed an average of accredited four (4)-year educational 501(c)(4) of the Internal Revenue code approximately 5–10 students in institutions subject to OMB Circular A– that engage in lobbying activities as internships at Headquarters and some 21 and non-profit organizations, as defined in Section 3 of the Lobbying Regional offices each year. Students defined in OMB Circular A–122, are Disclosure Act of 1995 are not eligible who participate as interns come from eligible to apply. However, non-profit to apply. For profit training schools are culturally diverse backgrounds and have organizations described in Section not eligible. majors including engineering (e.g., civil, 501(c)(4) of the Internal Revenue code Deadline to Submit Proposals: industrial, chemical and environmental) that engage in lobbying activities as Proposals must be submitted no later physics, information systems, general defined in Section 3 of the Lobbying than February 4, 2004. Please do not e- science, public policy, environmental Disclosure Act of 1995 are not eligible mail proposals. science, economics, and international to apply. For profit training schools are Proposal Format Requirements: studies. Examples of projects are: not eligible. Proposal length is limited to fifteen (15) Preparing an assessment of the 2. Cost-Sharing or Matching: Based on pages, with 1-inch margins, and no successes and failures of different CERCLA statute 311(b)(3), EPA requires attachments. remediation technologies; scanning five cost sharing at a minimum of 5%.

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3. Other: Only one proposal per twelve (12) week internship per summer V. Application Review Information applicant is permitted under this from May—August with approximately 1. Criteria/Scope announcement. five (5) interns per internship. Applicants should describe the Criteria: Points: IV. Application and Submission following in detail: —Effectiveness of overall work plan, Information • Cultural Diversity: Mechanisms in including evaluation plan and time- 1. Official Mailing Address place to enhance cultural diversity frame, that is detailed and reasonable. U.S. Environmental Protection within student population, and a strong Additionally, a clearly-stated detailed Agency (EPA), Office of Solid Waste and network of student organizations geared and appropriate budget should be Emergency Response (OSWER), Mail to providing career and employment included. 32 —Formal program in place or Code 5103T, 1200 Pennsylvania information and academic advice. experience in administering a student Avenue, NW., Washington, DC 20460, • U.S. Citizenship: According to internship program, especially with a Attention: Nancy Allinson, Telephone EPA’s training grant regulations cited in Federal agency or department, and Number: 202–566–1915. Fax Number: 40 CFR 45.135(a), interns, who are grant experience with Federally funded 202–566–1943. funded trainees, must be citizens of the U.S. or of its territories or possessions, grants programs. Successful applicant 2. Proposal Format or must be lawfully admitted to the U.S. should have an overall familiarity The proposal should conform to the for permanent residence. Applicants with Federal government operations following outline: must specify the percentage of their as well as have the ability to process 1. Title of Proposal. student population that meets that stipends, a system for reporting and 2. Applicant (Organization) and requirement. recordkeeping, and the capacity for processing and evaluating student contact name, phone number, fax and e- • Stipends: Ability to process student applications. Applicants must mail address. stipends. 3. Summary of funds requested by identify and explain any adverse • Reporting and record keeping: EPA. Federal audit findings or terminations 4. Project period: Beginning and Ability to maintain records of students of grants, or special terms and ending dates (for planning purposes, according to major, project summary, conditions imposed on grants within applicants should assume funds will be dates of internship, and any other the last five (5) years. 24 available in April 2004). pertinent information to be used in final —Cost effectiveness for Federal 5. Project work plan (including a reports. monitoring and mentoring to/from • description of all tasks, dates of Student Application Processing and Reagan National Airport or Dulles completion, products and deliverables, Evaluation: Recipients must have a International Airport (e.g., travel costs and proposed budget). system to process and evaluate per trip). In order to qualify for the 6. Evaluation plan. applications. At a minimum, the full 12 points, the round-trip costs 7. Student application processing and application process must evaluate must be $500 or less. Please note that evaluation plan. potential interns on the basis of their EPA travels on the Federal 8. Process plan for management/ computer skills, academic record, government contract program which training of students. awards and writing skills. Students can be found on http:// 9. Tracking plan. must have a grade point average of 2.5 www.fedtravel.com/gsa/. 12 10. Report schedule: or higher to meet eligibility —Formal curricula in civil, chemical, Acknowledgement of quarterly report requirements at EPA. electrical engineering and industrial requirement (schedule established by • Eligibility requirements for engineering as well as the natural and EPA) and planned final report internships: Students must be enrolled physical sciences, computer science, submission date. in a four year accredited college or business and public administration. 11. Budget (Please provide with a university. Students enrolled in a four Academic departments that are narrative explanation for the following year college or university must have developing new curricula with an categories): achieved at least second semester emphasis in environmental —Personnel sophomore standing, or have completed engineering with courses focusing on —Fringe Benefits 45 credit hours of academic study. hazardous waste management, —Contractual Costs • Student Application Process: hydrology and water resources, —Travel Applicants should describe remediation, and renewable natural —Equipment development of a tracking system for resources. 32 —Supplies —Other students, internship management, and Total points possible: 100 —Shared or matched costs how they foresee interaction with EPA. Note: points assigned to each criterion are —Total Direct Costs • Formal program in place or the maximum number of points applicant —Total Indirect Costs (must include experience in administering a student can receive). documentation of accepted indirect internship program, especially with a rate) Federal agency or department, and 2. Review and Selection Process —Total Cost experience with Federally funded grants Proposals submitted to EPA Costs proposed in the budget must be programs. headquarters will be evaluated using the linked directly to the proposal. Note: • Applicants should describe training defined criteria. Proposals will be Proposal length is limited to fifteen (15) for students (i.e., environmental, math, reviewed in two phases—the screening pages, with 1-inch margins, and no science courses). phase and the evaluation phase. During the screening phase, proposals will be attachments. 4. Proposal Submission Deadline reviewed for applicant eligibility and 3. Program Design Proposals must be submitted no later cost-sharing. Only those proposals that EPA anticipates student stipends to be than February 4, 2004. Please do not e- meet all these basic requirements will approximately $10,000 per student for a mail proposals. enter the full evaluation phase of the

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review process. During the evaluation any information that is not already provided 311(b)(3), EPA requires cost sharing at a phase, proposals will be evaluated on in the proposal solicitation. minimum of 5%. The Catalogue of the quality of their work plans. EPA Federal Domestic Assistance (CFDA) is Note: Receiving information and assistance officials, who will serve as reviewers, from EPA does not guarantee funding. 66.607. will conduct the screening and ELIGIBILITY INFORMATION: Only accredited evaluation phases of the review process. Agency Contacts: Nancy Allinson, four (4)-year educational institutions At the conclusion of the evaluation Project Officer, 202–566–1915 (tel), subject to OMB Circular A–21 and non- phase, the reviewers will score work 202–566–1943 (fax), profit organizations, as defined in OMB plans, on a one hundred point scale. [email protected], (Eligibility/ Circular A–122, are eligible to apply. EPA senior Agency management will process issues). However, non-profit organizations consider the reviewers’ recommended Loren Danforth, Alternate Contact, described in Section 501(c)(4) of the rankings, along with other special 202–566–1921, [email protected]. Internal Revenue code that engage in considerations, such as the number of Dated: October 24, 2003. lobbying activities as defined in Section eligible students in the school’s Laurie J. May, 3 of the Lobbying Disclosure Act of 1995 population. EPA will ask the applicant Director, Organizational Management and are not eligible to apply. For profit selected by senior management to select Integrity Staff (OMIS). training schools are not eligible. a complete application package by [FR Doc. 03–27950 Filed 11–5–03; 8:45 am] DEADLINE TO SUBMIT PROPOSALS: March 1, 2004. We reserve the right to BILLING CODE 6560–50–P Proposals must be submitted no later make no awards. than February 4, 2004. Please do not e- VI. Award Administration Information mail proposals. ENVIRONMENTAL PROTECTION PROPOSAL FORMAT REQUIREMENTS: Award Notices AGENCY Proposal length is limited to fifteen (15) The recipient of a selected proposal [FRL–7584–3] pages, with 1-inch margins, and no will be notified by a separate letter attachments. saying that the proposal has been Office of Solid Waste and Emergency ADDRESSES: Proposals must be mailed selected and that a completed Response (OSWER) Internship to: application must be submitted by the Assistance Agreement Competition: 1. Official Mailing Address: U.S. due date of March 1, 2004. After the Solicitation Notice application is received, it must be Environmental Protection Agency reviewed and approved by EPA. The SUMMARY: This document solicits (EPA), Office of Solid Waste and grant award signed by EPA’s Award cooperative agreement proposals from Emergency Response (OSWER), Mail Official is the legal document, which educational institutions and non-profit Code 5103T, 1200 Pennsylvania will be provided through postal mail or organizations that are interested in Avenue, NW., Washington, DC 20460, by electronic means. Unsuccessful obtaining EPA financial assistance to Attention: Nancy Allinson, Telephone applicants will be notified by letter. provide educational and training Number: 202–566–1915. Fax Number: opportunities, in the form of 202–566–1943. VII. Agency Contacts internships, for students in the AGENCY POINTS OF CONTACT: Pre-application assistance: EPA will hazardous waste management field. Nancy Allinson, Project Officer, 202– provide pre-application assistance by These cooperative agreements will be 566–1915 (tel), 202–566–1943 (fax), responding to all content-related awarded under Section 311(b)3 and (9) [email protected] (Eligibility/ questions (for example, technical of the Comprehensive Environmental process issues) questions pertaining to the EPA statutes Response, Compensation and Liability Loren Danforth, Alternate Contact, 202– (CERCLA and Solid Waste Disposal Act and Section 8001 of the Solid Waste 566–1921, [email protected]. Act), grants management issues, or Disposal Act. This cooperative Please submit all content-related information to the Agency’s approach to agreement would enable students to (1) questions to http://clu-in.org/proposals/ evaluating or ranking applications) gain knowledge of alternative or oswerintern which are submitted to the Web site innovative treatment technologies and I. Funding Opportunity Description http://clu-in.org/proposals/oswerintern. real work experience in the hazardous waste management field, and (2) earn This document solicits cooperative Note: Applicants are responsible for the content of their applications and pre- academic credit. agreement proposals from educational application assistance must not in any way Depending on the availability of institutions and non-profit organizations provide applicants with a competitive funds, it is anticipated that a total of that are interested in obtaining EPA advantage. It is for this reason that all approximately $750,000 over five years, financial assistance to provide questions and answers can be viewed by the including direct and indirect costs, will educational and training opportunities public on this Web site. be awarded in FY04. Proposals may for students in the hazardous waste EPA points of contact, listed on next request funding with a total project cost management field. These cooperative page, may provide pre-application of up to $150,000 per year with a agreements will be awarded under assistance on process-related questions, duration of up to five years. It is Section 311(b)3 and (9) of the via e-mail, (for example, eligibility anticipated that OSWER would provide Comprehensive Environmental requirements, deadlines, proposal funding for up to fifteen (15) interns per Response, Compensation and Liability format, etc.). summer, for a twelve-week summer Act and Section 8001 of the Solid Waste internship, at a stipend of Disposal Act. This cooperative Note: If applicants do not have e-mail approximately $10,000 per intern. The agreement would enable students to (1) capacity, it is permissible to call points of contact. Please note that EPA points of project period, however, would run gain knowledge of alternative or contact may not prepare applications, share April to April of each year. Funding will innovative treatment technologies and ideas with an applicant that are contained in only cover stipends and cannot be used real work experience in the hazardous a competing application, review and to cover housing or student round-trip waste management field, and (2) earn comment on draft applications, or provide travel costs. Based on CERCLA statute academic credit.

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Since the inception of the summer However, non-profit organizations Proposal length is limited to fifteen (15) internship program in 2000, OSWER has described in Section 501 (c)(4) of the pages, with 1-inch margins, and no placed an average of approximately 10– Internal Revenue code that engage in attachments. 15 students in internships at lobbying activities as defined in Section 3. Program Design: Headquarters and some Regional offices 3 of the Lobbying Disclosure Act of 1995 EPA anticipates student stipends to be each year. Students who participate as are not eligible to apply. For profit approximately $10,000 per intern for a interns come from culturally diverse training schools are not eligible. twelve (12) week internship per summer backgrounds and have majors including 2. Cost-Sharing or Matching: Based on from June to August with approximately engineering (e.g., civil, industrial, CERCLA statute 311 (b) (3), EPA fifteen (15) interns per internship. chemical and environmental) physics, requires cost sharing at a minimum of Applicants should describe the information systems, general science, 5%. following in detail in proposals: public policy, environmental science, 3. Other: Only one proposal per • Cultural Diversity: Mechanisms in economics, and international studies. applicant is permitted under this place to enhance cultural diversity Examples of projects are: preparing a announcement. within student population, and a strong technology assessment report about the IV. Proposal Submission Information network of student organizations geared current state of permeable reactive to providing career and employment barriers (PRB’s); collecting biennial 1. Official Mailing Address: information and academic advice. report data and setting up a data base to U.S. Environmental Protection Agency • U.S. Citizenship: According to store incoming queries; and, collecting (EPA), Office of Solid Waste and EPA’s training grant regulations cited in information on successful Emergency Response (OSWER), Mail 40 CFR 45.135(a), interns, who are grant Environmental Justice projects. Code 5103T, 1200 Pennsylvania funded trainees, must be citizens of the Avenue, NW., Washington, DC 20460, II. Award Information U.S. or of its territories or possessions, Attention: Nancy Allinson. Telephone or must be lawfully admitted to the U.S. 1. Depending on the availability of Number: 202–566–1915, Fax Number: for permanent residence. Applicants funds, it is anticipated that a total of 202–566–1943. must specify the percentage of their approximately $750,000 over five years, 2. Proposal Format: student population that meets that including direct and indirect costs, will The proposal must conform to the requirement. be awarded in FY04. Proposals may following outline: • Stipends: Ability to process student request funding with a total project cost 1. Title of Proposal stipends. of up to $150,000 per year with a 2. Applicant (Organization) and contact • Reporting and Recordkeeping: duration of up to five years. It is name, phone number, fax and e-mail Ability to maintain records of students anticipated that OSWER would provide address according to major, project summary, funding for up to fifteen (15) interns per 3. Summary of funds requested by EPA dates of internship, and any other summer, for a twelve-week summer 4. Project period: beginning and ending pertinent information to be used in final internship, at a stipend of dates (for planning purposes, reports. approximately $10,000 per intern. The applicants should assume funds will • Student Application Processing and project period, however, would run be available in April 2004) Evaluation: Recipients must have a from April to April of each year. 5. Project work plan (including a system to process and evaluate Funding will only cover stipends and description of all tasks, dates of applications. At a minimum, the cannot be used to cover housing or completion, products and application process must evaluate student round-trip travel costs. Based on deliverables, and proposed budget) potential interns on the basis of their CERCLA statute 311 (b) (3), EPA 6. Evaluation plan computer skills, academic record, requires cost sharing at a minimum of 7. Student application processing and awards and writing skills. Students 5%. The Catalogue of Federal Domestic evaluation plan must have a grade point average of 2.5 8. Process plan for management/training Assistance (CFDA) is 66.607. or higher to meet eligibility 2. The resulting award will be a of students requirements at EPA. Cooperative Agreement. Cooperative 9. Tracking plan • Eligibility Requirements for Agreements involve substantial 10. Report schedule: Acknowledgment Internships: Students must be enrolled involvement between EPA Project of quarterly report requirement in a four year accredited college or Officer and the selected applicant. (schedule established by EPA) and university. Students enrolled in a four Anticipated substantial Federal planned final report submission date year college or university must have involvement for this project will 11. Budget (Please provide with a achieved at least second semester include: narrative explanation for the a. The Project Officer will be part of following categories): sophomore standing, or have completed 45 credit hours of academic study. the final evaluation of the interns for —Personnel • placement. The final decision rests with —Fringe Benefits Student Application Process: the recipient. —Contractual Costs Applicants should describe b. EPA’s project officer will closely —Travel development of a tracking system for monitor the recipient’s performance to —Equipment students, internship management, and ensure that Agency funding for stipends —Supplies how they foresee interaction with EPA. • is used solely for that purpose. —Other Formal program in place or —Shared or Matched Costs experience in administering a student III. Eligibility Information —Total Direct Costs internship program, especially with a 1. Eligible Applicants: —Total Indirect Costs (must include Federal agency or department, and Only accredited four (4)-year documentation of accepted indirect experience with Federally funded grants educational institutions subject to OMB rate) programs. Circular A–21 and non-profit —Total Cost • Applicants should describe training organizations, as defined in OMB Costs proposed in the budget must be for students (i.e., environmental, math, Circular A–122, are eligible to apply. linked directly to the proposal. Note: science courses).

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4. Proposal Submission Deadline: than February 4, 2004. Please do not e- V. Proposal Review Information Proposals must be submitted no later mail proposals. 1. Criteria/Scope:

Criteria Points

—Effectiveness of overall work plan, including evaluation plan and time-frame, that is detailed and reasonable. Additionally, a clearly-stated detailed and appropriate budget should be included ...... 32 —Formal program in place or experience in administering a student internship program, especially with a Federal agency or de- partment, and experience with Federally funded grants programs. Successful applicant should have an overall familiarity with Federal government operations as well as have the ability to process stipends, a system for reporting and record keeping, and the capacity for processing and evaluating student applications. Applicants must identify and explain any adverse Federal audit findings or terminations of grants, or special terms and conditions imposed on grants within the last five (5) years ...... 24 —Proximity of 50–100 mile radius to the Washington-Metropolitan area ...... 12 —Formal curricula in civil, chemical, electrical engineering and industrial engineering as well as the natural and physical sciences, computer science, business and public administration. Academic departments that are developing new curricula with an empha- sis in environmental engineering with courses focusing on hazardous waste management, hydrology and water resources, re- mediation, and renewable natural resources ...... 32 Total points possible ...... 100 (Note: points assigned to each criterion are the maximum number of points applicant can receive).

2. Review and Selection Process: VII. Agency Contacts Dated: October 24, 2003. Proposals submitted to EPA Laurie J. May, headquarters will be evaluated using the Pre-application Assistance: Director, Organizational Management and defined criteria. Proposals will be EPA will provide pre-application Integrity Staff (OMIS). reviewed in two phases—the screening assistance by responding to all content- [FR Doc. 03–27951 Filed 11–5–03; 8:45 am] phase and the evaluation phase. During related questions (for example, technical BILLING CODE 6560–50–P the screening phase, proposals will be questions pertaining to the EPA statutes reviewed to be determined whether they (CERCLA and Solid Waste Disposal meet the basic requirements of this Act), grants management issues, or ENVIRONMENTAL PROTECTION document. Only those proposals that information to the Agency’s approach to AGENCY meet all of these basic requirements will evaluating or ranking applications) [FRL–7584–4] enter the full evaluation phase of the which are submitted to the website review process. During the evaluation http://clu-in.org/proposals/oswerintern. Border 2012 National Coordinators phase, proposals will be evaluated on Open Meeting the quality of their work plans. EPA Note: Applicants are responsible for the content of their applications and pre- AGENCY: officials, who will serve as reviewers, Environmental Protection application assistance must not in any way Agency. will conduct the screening and provide applicants with a competitive evaluation phases of the review process. ACTION: Notice of Border 2012 National advantage. It is for this reason that all Coordinators Meeting. At the conclusion of the evaluation questions and answers can be viewed by the phase, the reviewers will score work public on this website. SUMMARY: The U.S. Environmental plans, on a one hundred point scale. Protection Agency (EPA) and the EPA senior Agency management will EPA points of contact, listed on next Secretarı´a del Medio Ambiente y consider the reviewers’ recommended page, may provide pre-application Recursos Naturales (Mexico’s Secretariat rankings, along with other special assistance on process-related questions, of Environment and Natural Resources), considerations, such as the number of via e-mail, (for example, eligibility in conjunction with the U.S. eligible students in the school’s requirements, deadlines, proposal Department of Health and Human population. EPA will ask the applicant format, etc.). Note: if applicants do not Services, Secretarı´a de Salud (Mexico’s selected by senior management to select have e-mail capacity, it is permissible to Secretariat of Health), the U.S. border a complete application package by call points of contact. Please note that tribes, and the environmental agencies March 1, 2004. We reserve the right to EPA points of contact may not prepare from each of the ten U.S.-Mexico border make no awards. applications, share ideas with an states, will convene the Border 2012 applicant that are contained in a VI. Award Administration Information National Coordinator’s Meeting (NCM). competing application, review and This National Coordinators Meeting will Award Notices: comment on draft applications, or take place at the Holiday Inn Hotel, Av. The recipient of a selected proposal provide any information that is not Pedro Cardenas 5001 Carretera a Cd. will be notified by a separate letter already provided in the proposal Victoria, Matamoros, 87396, Mexico. saying that the proposal has been solicitation. Public meetings will be held on the selected and that a completed afternoon of Wednesday, December 3rd application must be submitted by the Note: Receiving information and assistance from EPA does not guarantee funding. and all day on Thursday, December 4th. due date of March 1, 2004. After the The mission of Border 2012 is to application is received, it must be Agency Contacts: protect public health and the reviewed and approved by EPA. The environment in the U.S.-Mexico border grant award signed by EPA’s Award Nancy Allinson, Project Officer, 202– region, consistent with the principles of Official is the legal document, which 566–1915 (tel), 202–566–1943 (fax), sustainable development. The Border will be provided through postal mail or [email protected] (Eligibility/ 2012 Program is the latest multi-year, by electronic means. process issues). binational planning effort to be Unsuccessful applicants will be Loren Danforth, Alternate Contact, 202– implemented under the 1983 U.S.- notified by letter. 566–1921, [email protected]. Mexico Agreement on Cooperation for

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the Protection and Improvement of the Programs (7504C), Environmental maintenance fee, due by January 15 of Environment in the Border Area (the La Protection Agency, 1200 Pennsylvania each year, to keep their registrations in Paz Agreement). Border 2012 succeeds Avenue NW, Washington, DC 20460; effect. This requirement applies to all Border XXI, a five-year program that telephone number: (703) 305–6426; e- registrations granted under section 3 as ended in 2000. mail address: [email protected]. well as those granted under section The National Coordinators Meeting is SUPPLEMENTARY INFORMATION: 24(c) to meet special local needs. an important aspect of the Border 2012 Registrations for which the fee is not Program. Federal-level National I. Important Information paid are subject to cancellation by order Coordinators from the United States and A. Does this Apply to Me? and without a hearing. Mexico manage overall Border 2012 The Food, Agriculture, Conservation, Program implementation and ensure You may be potentially affected by and Trade Act Amendments of 1991, cooperation and communication among this notice if you are an EPA registrant Public Law 102–237, amended FIFRA to all coordinating bodies. This meeting with any approved product allow the Administrator to reduce or will provide an opportunity for program registration(s). Although this action may waive maintenance fees for minor partners to report on their activities to be of particular interest to persons who agricultural use pesticides when she each other and to the public. The 3 produce or use pesticides, the Agency determines that the fee would be likely Policy Forums focus on Air, Water and has not attempted to describe all the to cause significant impact on the Hazardous Waste and Solid Waste, specific entities that may be affected by availability of the pesticide for use. The respectively. The 3 Border-wide this action. If you have any questions Agency has waived the fee for 141 Workgroups focus on Environmental regarding the information in this notice, minor agricultural use registrations at FOR Health, Emergency Preparedness and consult the person listed in the the request of the registrants. Response (Joint Response Team), and FURTHER INFORMATION CONTACT section. In fiscal year 2003, maintenance fees Cooperative Enforcement and B. How Can I Get Additional were collected in two billing cycles. Compliance. Information or Copies of Support During the first cycle, the Agency was For further information on Border Documents? operating under a continuing resolution 2012 or the National Coordinators which authorized the Agency to collect 1. Electronically. You may obtain Meeting, please contact: EPA El Paso $17 million. In late December 2002, all electronic copies of this document and Border Office at 915–533–7273 or 800– holders of either section 3 registrations various other related documents that 334–0741 or EPA San Diego Border or section 24(c) registrations were sent might be available from the EPA Office at 619–235–4765 or 800–334– lists of their active registrations, along Internet Home Page at http:// 0741. with forms and instructions for www.epa.gov/fedrgstr/. responding. They were asked to identify Joan Fidler, The Agency has established an official which of their registrations they wished Director, Office of Western Hemisphere and record record for this Action under to maintain in effect, and to calculate Bilateral Affairs, Office of International docket control number OPP–2003–0339. and remit the appropriate maintenance Affairs. The official record consists of the fees. Recipients of these initial bills [FR Doc. 03–27953 Filed 11–5–03; 8:45 am] documents specifically referenced in were also notified that a second final BILLING CODE 6560–50–P this action, any public comments bill would also be issued if the Agency’s received during an applicable comment Appropriations Bill authorized period, and other information related to collection of more than $17 million. ENVIRONMENTAL PROTECTION this action, including any information Most responses were received by the AGENCY claimed as Confidential Business statutory deadline of January 15. A [OPP–2003–0339: FRL– 7331–3] Information (CBI). The official record notice of intent to cancel was sent in includes the documents that are mid-February to companies who did not Cancellation of Pesticides for Non- physically located in the docket, as well respond and to companies who payment Of Year 2003 Registration as the documents that are referenced in responded, but paid for less than all of Maintenance Fees those documents. The public version of their registrations. the official record does not include any The Agency’s Appropriations Bill was AGENCY: Environmental Protection information that is claimed as CBI. The passed by Congress in March, 2003. Agency (EPA). public version of the official record, This Appropriations Bill authorized the ACTION: Notice. which includes printed paper versions Agency to collect $21.5 million in of any electronic comments submitted maintenance fees. To collect the SUMMARY: Since the amendments of during an applicable comment period, is additional $4.5 million, the Agency October, 1988, the Federal Insecticide, available for inspection in the Public initiated a second billing in early May. Fungicide, and Rodenticide Act (FIFRA) Information and Records Integrity Final payments were due on June 15, has required payment of an annual Branch (PIRIB), Room 119, Crystal Mall 2003. maintenance fee to keep pesticide #2, 1921 Jefferson Davis Highway, Since mailing the notices, EPA has registrations in effect. The fee due last Arlington, VA, from 8:30 a.m. to 4 p.m., maintained a toll-free inquiry number January 15 has gone unpaid for 864 Monday through Friday, excluding legal through which the questions of affected registrations. Section 4(i)(5)(G) of FIFRA holidays. The PIRIB telephone number registrants have been answered. provides that the Administrator may is (703) 305–5805. Maintenance fees have been paid for cancel these registrations by order and about 15,120 section 3 registrations, or without a hearing; orders to cancel all II. Introduction about 93 percent of the registrations on 864 of these registrations have been Section 4(i)(5) of FIFRA as amended file in December. Fees have been paid issued within the past few days. in October, 1988 (Public Law 100–532), for about 2,258 section 24(c) FOR FURTHER INFORMATION CONTACT: For December, 1991 (Public Law 102–237), registrations, or about 86 percent of the further information on the maintenance and again in August, 1996 (Public Law total on file in December. Cancellations fee program in general, contact by mail: 104–170), requires that all pesticide for non-payment of the maintenance fee John Jamula, Office of Pesticide registrants pay an annual registration affect about 599 section 3 registrations

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and about 265 section 24(c) shipment prior to the effective date of III. Listing of Registrations Canceled for registrations. the action. Non-payment The cancellation orders generally The exceptions to these general rules Table 1 lists all of the Section permit registrants to continue to sell and are cases where more stringent 24(c)registrations, and Table 2 Lists all distribute existing stocks of the canceled restrictions on sale, distribution, or use of the Section 3 registrations which products until January 15, 2004, 1 year of the products have already been were canceled for non-payment of the after the date on which the fee was due. imposed, through Special Reviews or 2003 maintenance fee. These Existing stocks already in the hands of other Agency actions. These general registrations have been canceled by dealers or users, however, can generally provisions for disposition of stocks order and without hearing. Cancellation be distributed, sold, or used legally until should serve in most cases to cushion orders were sent to affected registrants they are exhausted. Existing stocks are the impact of these cancellations while via certified mail in the past several defined as those stocks of a registered the market adjusts. days. The Agency is unlikely to rescind pesticide product which are currently in cancellation of any particular the United States and which have been registration unless the cancellation packaged, labeled and released for resulted from Agency error.

TABLE 1.—SECTION 24(C) REGISTRATIONS CANCELED FOR NON-PAYMENT OF MAINTENANCE FEE

SLN no. Product Name

001812 AL–00–0002 ...... Griffin Linuron 4L Flowable Weed Killer 010182 AL–83–0013 ...... Ambush Insecticide 010182 AL–94–0005 ...... Gramoxone Extra Herbicide 000279 AL–98–0002 ...... Command 3ME Microencapsulated Herbicide 050534 AL–99–0003 ...... Bravo 720 050534 AR–00–0001 ...... Bravo 720 001812 AR–00–0007 ...... Griffin Linuron 4L Flowable Weed Killer 000241 AR–01–0003 ...... Pursuit Herbicide 010163 AR–01–0006 ...... Sandea Herbicide 000279 AR–02–0002 ...... Command 3ME Microencapsulated Herbicide 010182 AR–95–0002 ...... Gramoxone Extra Herbicide 000279 AR–97–0003 ...... Command 3ME 073049 AZ–00–0002 ...... Pro-Gibb 4% Liquid Concentrate 047332 AZ–01–0005 ...... Bug Juice 010163 AZ–02–0001 ...... Sandea Herbicide 067379 AZ–90–0014 ...... Vinco Formaldehyde Solution 010182 AZ–93–0007 ...... Prelude Termiticide/insecticide 010182 AZ–93–0008 ...... Demon Tc Insecticide 000279 AZ–93–0009 ...... Ammo 2.5 EC Insecticide 019713 AZ–94–0005 ...... Drexel Dimethoate 4EC 019713 AZ–96–0004 ...... Drexel Dimethoate 2.67 000264 AZ–98–0007 ...... Carzol SP In Water Soluble Packaging 010707 AZ–98–0008 ...... Magnacide H Herbicide 010163 AZ–99–0007 ...... Supracide 25W 074064 CA–01–0006 ...... Pro-Gibb 4% Liquid Concentrate 059623 CA–76–0165 ...... Kelthane 35 Agricultural Miticide Wettable Powder 000264 CA–81–0016 ...... Temik(r) Aldicarb Pesticide 15% Granular 005905 CA–82–0013 ...... Supreme Spray Insecticide-Miticide Liquid 056984 CA–85–0041 ...... Dimilin W-25 for Mushrooms 011028 CA–85–0051 ...... Goal 1.6E Herbicide 063184 CA–86–0016 ...... Kocide 101 002935 CA–87–0021 ...... K M Harvest Aid 002935 CA–87–0022 ...... K M Harvest Aid 002935 CA–87–0023 ...... K M Harvest Aid 059623 CA–89–0025 ...... Rodent Bait Block Chlorophacinone Treated Grain/paraffin 065361 CA–89–0059 ...... Plantfume 103 Smoke Generator 063805 CA–90–0017 ...... Pro-Gibb Plus 20% Soluble Powder 010182 CA–91–0021 ...... Gramoxone Extra Herbicide 010182 CA–91–0023 ...... Gramoxone Extra Herbicide 010182 CA–91–0031 ...... Gramoxone Extra Herbicide 005905 CA–92–0003 ...... Helena Brand Cythion 8 Lb Emulsion 066233 CA–92–0009 ...... Eptam 7-E 003404 CA–92–0010 ...... Sunny Sol SDS 066276 CA–92–0011 ...... Comite Agricultural Miticide 064864 CA–92–0024 ...... Deadline Bullets 010182 CA–94–0012 ...... Reward Herbicide 066233 CA–94–0032 ...... Treflan TR-10 010182 CA–96–0007 ...... Gramoxone Extra Herbicide 072051 CA–98–0024 ...... Gibgro 4LS 005813 CA–98–0026 ...... Cloroxlbleach 073049 CA–99–0012 ...... Pro-Gibb 4% Liquid Concentrate 073049 CA–99–0029 ...... Pro-Gibb 4% Liquid Concentrate 000264 CO–00–0002 ...... Balance Herbicide 000264 CO–00–0007 ...... Sevin Xlr Plus Carbaryl Insecticide

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TABLE 1.—SECTION 24(C) REGISTRATIONS CANCELED FOR NON-PAYMENT OF MAINTENANCE FEE—Continued

SLN no. Product Name

000264 CO–01–0001 ...... Balance Herbicide 000264 CO–01–0002 ...... Balance 4SC Herbicide 007501 CO–99–0004 ...... MZ-Curzate 000241 CO–99–0007 ...... Raptor Herbicide 002393 CT–96–0002 ...... Ramik Brown 074529 DE–01–0003 ...... Tolcide PS200 010182 DE–94–0002 ...... Gramoxone Extra Herbicide 073049 FL–00–0001 ...... Pro-Gibb 4% Liquid Concentrate 010182 FL–01–0003 ...... Cyclone Concentrate/gramoxone Max 010163 FL–01–0007 ...... Sandea Herbicide 000148 FL–88–0023 ...... Sodium Hypochlorite Solution 010182 FL–90–0009 ...... Gramoxone Extra Herbicide 010182 FL–91–0004 ...... Gramoxone Extra Herbicide 010182 FL–91–0006 ...... Gramoxone Extra Herbicide 010182 FL–92–0011 ...... Gramoxone Extra Herbicide 010182 FL–96–0009 ...... Gramoxone Extra Herbicide 000400 GA–00–0004 ...... Terrazole 35% Wettable Powder 073342 GA–01–0005 ...... Amdro Fire Ant Bait Yard Treatment 010163 GA–02–0001 ...... Sandea Herbicide 010182 GA–83–0007 ...... Ambush Insecticide 010182 GA–94–0006 ...... Gramoxone Extra Herbicide 010182 GA–95–0008 ...... Gramoxone Extra Herbicide 000279 GA–98–0002 ...... Command 3me Microencapsulated Herbicide 045631 HI–90–0003 ...... Alcide Ld 10:1:1 - Base 010182 HI–91–0001 ...... Gramoxone Extra Herbicide 066459 HI–96–0002 ...... Mon-65005 Herbicide 010182 HI–96–0003 ...... Gramoxone Extra Herbicide 010182 HI–97–0004 ...... Ambush Insecticide 000264 ID–00–0014 ...... Sevin XLR Plus Carbaryl Insecticide 010182 ID–00–0015 ...... Gramoxone Extra Herbicide 000241 ID–01–0013 ...... Acrobat 50WP Fungicide 071711 ID–02–0005 ...... Moncut 70-DF 000352 ID–80–0009 ...... Du Pont Sinbar Terbacil Weed Killer 034704 ID–88–0009 ...... Clean Crop Cheat Stop 90 WDG 005905 ID–92–0004 ...... Setre Dimethoate 4ec Systemic Insecticide 010182 ID–92–0011 ...... Gramoxone Extra Herbicide 000352 ID–97–0001 ...... Dupont Oust Herbicide 000264 ID–98–0011 ...... Phaser 3ec Insecticide 000264 ID–98–0012 ...... Phaser 3ec Insecticide 010163 ID–99–0003 ...... Savey Ovicide/miticide 50-WP 000241 ID–99–0006 ...... Raptor Herbicide 000279 IL–00–0002 ...... Command 3ME Microencapsulated Herbicide 010163 IL–02–0001 ...... Sandea Herbicide 000400 IN–00–0001 ...... Terrazole 35% Wettable Powder 010163 IN–02–0002 ...... Sandea Herbicide 002393 IN–83–0003 ...... Hopkins Zinc Phosphide Mouse Bait for Control of Mice 000400 IN–99–0002 ...... Comite Agricultural Miticide 000400 KY–00–0001 ...... Terrazole 35% Wettable Powder 010182 LA–00–0003 ...... Gramoxone Extra Herbicide 001812 LA–01–0014 ...... Griffin Boa Herbicide 050534 LA–90–0008 ...... Bravo 720 010182 LA–95–0003 ...... Gramoxone Extra Herbicide 000279 LA–97–0001 ...... Command 4EC Herbicide 010182 LA–98–0009 ...... Gramoxone Extra Herbicide 010163 MA–02–0001 ...... Sandea Herbicide 010182 MD–94–0007 ...... Gramoxone Extra Herbicide 007501 ME–00–0001 ...... Tops - MZ - Gaucho 071711 ME–02–0001 ...... Moncut 70-DF 071711 ME–02–0002 ...... Moncut 70-DF 071711 ME–02–0003 ...... Moncut 70-DF 000352 ME–98–0002 ...... Velpar L Herbicide 000352 ME–98–0003 ...... Velpar DF Herbicide 007501 ME–99–0002 ...... MZ - Curzate 001278 MI–01–0002 ...... Triangle Brand Copper Sulfate Crystal 010163 MI–01–0003 ...... Sandea Herbicide 000100 MN–00–0005 ...... Discover Herbicide 001278 MN–01–0002 ...... Triangle Brand Copper Sulfate Crystal 004581 MN–02–0001 ...... Aquathol K Aquatic Herbicide 004581 MN–02–0002 ...... Aquathol Super K Granular Aquatic Herbicide 004581 MN–02–0003 ...... Hydrothol 191 004581 MN–02–0004 ...... Hydrothol 191 Granular Aquatic Algicide and Herbicide 010182 MN–94–0006 ...... Gramoxone Extra Herbicide

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TABLE 1.—SECTION 24(C) REGISTRATIONS CANCELED FOR NON-PAYMENT OF MAINTENANCE FEE—Continued

SLN no. Product Name

007501 MN–99–0004 ...... MZ - Curzate 007501 MN–99–0007 ...... Tops - MZ - Gaucho 000279 MN–99–0008 ...... Command 3ME Microencapsulated Herbicide 000400 MO–01–0001 ...... Terrazole 35% Wettable Powder 000241 MO–01–0002 ...... Pursuit Herbicide 010163 MO–01–0004 ...... Sandea Herbicide 001812 MS–01–0026 ...... Glyphosate Original Herbicide 001812 MS–01–0027 ...... Dupont Glyphosate Herbicide 001812 MS–01–0028 ...... Griffin Boa Herbicide 000241 MS–01–0033 ...... Pursuit Herbicide 010182 MS–83–0016 ...... Ambush Insecticide 050534 MS–90–0001 ...... Bravo 720 009779 MS–90–0030 ...... Riverside 120 Herbicide 010182 MS–95–0005 ...... Gramoxone Extra Herbicide 067760 MS–97–0005 ...... Cyren TC 000279 MS–97–0012 ...... Command 4EC Herbicide 007501 MT–00–0001 ...... Admire 2 Flowable 000100 MT–00–0011 ...... Discover Herbicide 000264 MT–00–0012 ...... Sevin XLR Plus Carbaryl Insecticide 034704 MT–95–0005 ...... Vine - DER Herbicide 000241 MT–99–0002 ...... Raptor Herbicide 007501 MT–99–0003 ...... Gaucho 75 ST Insecticide 007501 MT–99–0004 ...... Tops - MZ - CZ 000100 MT–99–0010 ...... Maxim MZ Potato Seed Protectant 000400 NC–00–0001 ...... Terrazole 35% Wettable Powder 010182 NC–01–0001 ...... Cyclone Concentrate/gramoxone Max 010163 NC–01–0004 ...... Sandea Herbicide 003510 NC–01–0005 ...... Pounce 3.2 EC Insecticide 010182 NC–83–0020 ...... Ambush Insecticide 010182 NC–95–0003 ...... Gramoxone Extra Herbicide 000279 NC–97–0005 ...... Command 3ME Microencapsulated Herbicide 050534 NC–99–0005 ...... Bravo 720 000100 ND–00–0005 ...... Discover Herbicide 000524 ND–01–0009 ...... Mon-65005 Herbicide 000524 ND–97–0001 ...... Mon-65005 Herbicide 000264 NE–00–0003 ...... Sevin XLR Plus Carbaryl Insecticide 000400 NE–02–0005 ...... Dimilin 2l 007501 NJ–00–0001 ...... Tops - MZ - Gaucho Potato Seed - Piece Treatment 007501 NJ–00–0002 ...... Admire 2 Flowable 010163 NJ–01–0003 ...... Sandea Herbicide 050534 NJ–96–0007 ...... Bravo 720 050534 NJ–96–0008 ...... Bravo 825 000279 NJ–99–0002 ...... Command 4EC Herbicide 000100 NJ–99–0011 ...... Dual Magnum Herbicide 010182 NM–84–0005 ...... Ambush Insecticide 000264 NV–00–0003 ...... Sevin XLR Plus Carbaryl Insecticide 071711 NV–02–0001 ...... Moncut 70-DF 010182 NV–91–0002 ...... Gramoxone Extra Herbicide 000241 NV–99–0004 ...... Raptor Herbicide 000264 NY–01–0004 ...... Previcur 000400 OH–00–0004 ...... Terrazole 35% Wettable Powder 073425 OH–00–0005 ...... Dupont Matrix Herbicide 010163 OH–02–0002 ...... Sandea Herbicide 010163 OK–01–0001 ...... Sandea Herbicide 010182 OK–83–0021 ...... Ambush Insecticide 000279 OK–95–0003 ...... Command 4EC Herbicide 045639 OR–00–0003 ...... Ignite 1SC Herbicide 010163 OR–01–0008 ...... Sandea Herbicide 071711 OR–01–0015 ...... Moncut 50WP 055260 OR–02–0005 ...... Syllit 65w Fruit Fungicide 071711 OR–02–0007 ...... Moncut 70-DF 000241 OR–02–0021 ...... Acrobat 50WP Fungicide 000352 OR–80–0021 ...... Du Pont Sinbar Terbacil Weed Killer 010182 OR–91–0023 ...... Gramoxone Extra Herbicide 034704 OR–94–0015 ...... Vine-DER Herbicide 000264 OR–96–0011 ...... Rovral Fungicide 000264 OR–96–0012 ...... Rovral 4 Flowable 000264 OR–96–0028 ...... Aliette WDG Fungicide 000264 OR–96–0032 ...... Rovral 4 Flowable 007501 OR–99–0002 ...... Tops - MZ - Gaucho 010163 OR–99–0003 ...... Savey Ovicide/miticide 50-WP 007501 OR–99–0012 ...... Tops-MZ-CZ

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TABLE 1.—SECTION 24(C) REGISTRATIONS CANCELED FOR NON-PAYMENT OF MAINTENANCE FEE—Continued

SLN no. Product Name

000352 OR–99–0044 ...... Dupont Oust Herbicide 059639 OR–99–0045 ...... Select 2EC Herbicide 073219 PA–00–0001 ...... Dupont Matrix Herbicide 007501 PA–01–0001 ...... Tops-MZ-Gaucho 010163 PA–02–0001 ...... Sandea Herbicide 000400 SC–00–0003 ...... Terrazole 35% Wettable Powder 001812 SC–01–0002 ...... Griffin Boa Herbicide 010182 SC–83–0010 ...... Ambush Insecticide 010182 SC–95–0007 ...... Gramoxone Extra Herbicide 000279 SC–97–0009 ...... Command 3ME Microencapsulated Herbicide 010182 SC–99–0003 ...... Bravo 720 000264 SD–00–0007 ...... Sevin XLR Plus Carbaryl Insecticide 000100 SD–00–0009 ...... Discover Herbicide 000352 SD–01–0001 ...... DPX-Mx670 MT 010182 SD–94–0005 ...... Gramoxone Extra Herbicide 000524 SD–97–0002 ...... Mon-65005 Herbicide 000400 TN–00–0002 ...... Terrazole 35% Wettable Powder 001812 TN–00–0005 ...... Griffin Linuron 4L Flowable Weed Killer 010182 TN–94–0003 ...... Gramoxone Extra Herbicide 010182 TN–94–0008 ...... Gramoxone Extra Herbicide 010182 TN–95–0002 ...... Gramoxone Extra Herbicide 000279 TN–98–0002 ...... Command 4EC Herbicide 005481 TN–98–0007 ...... Dibrom 8 Emulsive 001812 TX–00–0012 ...... Griffin Linuron 4L Flowable Weed Killer 007501 TX–01–0001 ...... Admire 2 Flowable 000241 TX–01–0003 ...... Pursuit Herbicide 010163 TX–01–0010 ...... Sandea Herbicide 010182 TX–83–0027 ...... Ambush Insecticide 000279 TX–97–0005 ...... Command 3ME Microencapsulated Herbicide 010182 TX–99–0007 ...... Bravo 720 010182 TX–99–0016 ...... Gramoxone Extra Herbicide 000264 UT–00–0007 ...... Sevin XLR Plus Carbaryl Insecticide 000352 UT–98–0004 ...... Dupont Oust Herbicide 000241 UT–99–0001 ...... Raptor Herbicide 000400 VA–00–0002 ...... Terrazole 35% Wettable Powder 010163 VA–01–0003 ...... Sandea Herbicide 050534 VA–93–0007 ...... Bravo 720 000100 VT–80–0008 ...... Aatrex Nine-O 010163 WA–01–0017 ...... Sandea Herbicide 071711 WA–02–0004 ...... Moncut 70-DF 000400 WA–02–0006 ...... Dimilin 2L 000352 WA–80–0010 ...... Du Pont Sinbar Terbacil Weed Killer 064428 WA–90–0024 ...... Vinco Formaldehyde Solution 010182 WA–91–0044 ...... Gramoxone Extra Herbicide 010182 WA–91–0048 ...... Gramoxone Extra Herbicide 010182 WA–91–0049 ...... Gramoxone Extra Herbicide 034704 WA–94–0027 ...... Vine-DER Herbicide 010163 WA–95–0002 ...... Metasystox-R Spray Concentrate 010163 WA–95–0003 ...... Metasystox-R Spray Concentrate 010163 WA–96–0008 ...... Metasystox-R Spray Concentrate 010163 WA–99–0010 ...... Savey Ovicide/miticide 50-WP 000241 WA–99–0017 ...... Raptor Herbicide 010163 WA–99–0018 ...... Savey Ovicide/miticide 50-WP 007501 WI–00–0002 ...... Admire 2 Flowable 004581 WI–02–0003 ...... Aquathol K Aquatic Herbicide 004581 WI–02–0004 ...... Aquathol Super K Granular Aquatic Herbicide 004581 WI–02–0005 ...... Hydrothol 191 004581 WI–02–0006 ...... Hydrothol 191 Granular Aquatic Algicide and Herbicide 007501 WI–99–0005 ...... Tops - MZ - CZ 007501 WI–99–0011 ...... Tops - MZ -Gaucho 000400 WI–99–0016 ...... Comite Agricultural Miticide 000264 WY–00–0005 ...... Sevin XLR Plus Carbaryl Insecticide 000400 WY–96–0001 ...... Comite Agricultural Miticide 000352 WY–98–0005 ...... Dupont Asana XL Insecticide 061282 WY–98–0008 ...... Zinc Phosphide Oat Bait 000241 WY–99–0001 ...... Raptor Herbicide 007501 WY–99–0002 ...... Tops - MZ - CZ

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Table 2 Lists all of the Section 3 non-payment of the 2003 maintenance registrations which were canceled for fee.

TABLE 2.—SECTION 3 REGISTRATIONS CANCELED FOR NON-PAYMENT OF MAINTENANCE FEE

Registration no. Product Name

000003–20201 ...... Harris Roach Powder 000030–00027 ...... Kill Gophers Sweeney’s Gopher Bait 000052–00009 ...... Comax 000052–00040 ...... Showersan 000052–00161 ...... Westosan 000052–00235 ...... Prepodyne Whirlpool Additive 000056–00023 ...... Eaton’s ‘‘Semi-Permanent’’ Bait Blocks Rodenticide 000056–00071 ...... Jt Eaton A-C Formula 90 Bulk Rodenticide 000070–00236 ...... Rigo Insyst-D 000100–00972 ...... Expert NT Herbicide 000279–02875 ...... Niagara Furadan 75 Wettable Powder Insecticide 000335–00229 ...... Sodium Chlorate 000335–00230 ...... Sodium Chlorate Solution 000335–00231 ...... Sodium Chlorate Solution - 39.5% 000335–00232 ...... Sodium Chlorate Crystal 000358–00174 ...... Termite and Carpenter Ants Killer 000400–00473 ...... Dimilin - 2F 000464–00669 ...... Bronopol Preservative 000464–00677 ...... Myacide S-1 000464–00681 ...... Myacide Bt 000464–00695 ...... Ucarcide 145 LT Antimicrobial 000464–00710 ...... Ucarsan 4256 Sanitizer 000499–00220 ...... Whitmire Perma-Dust PT 240 000499–00223 ...... Whitmire Pt 230 Tri-Die 000499–00251 ...... Whitmire Fabric Insectproofer #1 000499–00252 ...... Whitmire Fabric Insectproofer #2 000499–00259 ...... Whitmire General Purpose Insect Killer with Sumithrin 000499–00289 ...... Whitmire PT 259 Baygon Residual Injection System 000499–00305 ...... Whitmire PT 576 000499–00354 ...... P/p Mothproofer Spray No. 2 000499–00403 ...... Whitmire TC 103 000499–00433 ...... Whitmire Avert TC 141 Insecticide 000499–00438 ...... Whitmire TC 168 000499–00451 ...... Uld 550 D Dairy and Livestock Flying Insect Concentrate 000499–00461 ...... Micro Gen Pro Control Fogger III 000499–00463 ...... Pro-Control Fogger V 000499–00464 ...... Pro-Control Inspector II 000499–00487 ...... TC-221 000507–00005 ...... Liquid Improved Timsen 40% Concentrate 000507–00009 ...... U-Chem-Co 3-D Detergent Disinfectant Deodorant 000507–00014 ...... Kleen-Quat 000507–00023 ...... Econo-San 000524–00453 ...... Hybrex 2lc Chemical Hybridizing Agent 000527–00095 ...... Germ-O-Solv ‘‘2’’ 000527–00117 ...... Bytech Ten-Fifty 000572–00251 ...... Crabgrass Preventer with Balan 000572–00292 ...... 5% Diazinon Granular Lawn Insecticide 000572–00324 ...... Turf Food 15-3-5 Plus Team 000572–00329 ...... Urban Insect Spray 000644–00103 ...... Orchex 796B 000655–00318 ...... Prentox Warfarin Technical 000655–00441 ...... Prentox Residual Concentrate Dv-One 000655–00557 ...... Prentox Diazinon 14G 000655–00644 ...... Prentox Pyronyl Oil Concentrate #1233-A 000655–00788 ...... Carbaryl 5D 000655–00789 ...... Prentox Carbaryl 10d 000773–00090 ...... Mnda Sch-51551 000779–00013 ...... F & B Tobacco Dust 000806–00010 ...... Skin So Soft Bug Guard 000806–00011 ...... Skin-So-Soft Bug Guard Towelettes 000829–00257 ...... Sa-50 Home & Garden Oftanol 1.5% Granular 000829–00290 ...... Sa-50 Dursban 1-E Insecticide 000869–00076 ...... Green Light Double Duty Rose Care 6-10-4 with Systemic 000869–00203 ...... Green Light Grubworm Killer 000869–00223 ...... Green Light Systemic Insecticide 000869–00226 ...... Green Light Grass & Weed Killer 001043–00116 ...... T.B.Q. RTU 001203–00014 ...... Foremost 1690 Quad-Dis 001203–00066 ...... Foremost 4519 Pine-Aire

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TABLE 2.—SECTION 3 REGISTRATIONS CANCELED FOR NON-PAYMENT OF MAINTENANCE FEE—Continued

Registration no. Product Name

001203–00067 ...... Foremost 4806 Hi-Power Food Plant Insecticide 001386–00352 ...... Methoxychlor Emulsifiable Concentrate 001440–00001 ...... Tomic Micro-Cide Dust 001440–00007 ...... Tomic Propoxur Residual Spray 001448–00033 ...... Bl Busan 77 001448–00129 ...... W-15-13 001448–00130 ...... W-15-7 001448–00131 ...... W-15-14 001448–00154 ...... T-5-3 001448–00209 ...... W-15-11 001448–00210 ...... W-15-12 001448–00213 ...... W-15-8 001448–00214 ...... W-15-9 001448–00215 ...... W-15-10 001448–00219 ...... B-7-4 001448–00220 ...... B-7-5 001448–00221 ...... B-7-6 001448–00222 ...... B-7-7 001448–00223 ...... B-7-8 001448–00224 ...... B-7-9 001448–00225 ...... B-7-10 001448–00226 ...... B-7-11 001448–00227 ...... B-7-12 001448–00228 ...... B-7-13 001448–00229 ...... B-7-14 001448–00230 ...... B-7-15 001448–00238 ...... W-30-7 001448–00239 ...... W-30-8 001448–00240 ...... W-30-9 001448–00241 ...... W-30-10 001448–00242 ...... W-30-11 001448–00251 ...... W-15-17 001448–00253 ...... W-15-18 001448–00254 ...... W-15-15 001448–00273 ...... W-30-17 001448–00294 ...... T-30-3 001448–00304 ...... W-60-11 001448–00306 ...... B-7-25 001448–00307 ...... B-7-24 001448–00308 ...... B-7-23 001448–00309 ...... B-7-22 001448–00310 ...... B-7-21 001448–00311 ...... B-7-20 001448–00312 ...... B-7-19 001448–00313 ...... B-7-18 001448–00314 ...... B-7-17 001459–00018 ...... Bullen Activated Pine Type Disinfectant 001459–00023 ...... Bullen Pine Odor Disinfectant Coef. 3 001459–00080 ...... Pine Quat 001459–00094 ...... Hi-Sept 400 001469–00026 ...... Citron Detergent Disinfectant 001475–00130 ...... Enoz Para Moth Balls Cedar Scented 001475–00135 ...... Excell Moth Balls 001624–00127 ...... Borax WP 001674–00016 ...... Stetco Maintainer - D.I.S. 001677–00063 ...... Bevro Klene 001677–00167 ...... Boot Wash #10 001677–00188 ...... CD-612 001706–00146 ...... Nalco 7328 001706–00184 ...... TX-10861 001706–00232 ...... Iocide 001706–00233 ...... Sanit C-16 Bactericide-Deodorizer 001706–00234 ...... Chemprocide 001757–00041 ...... Amerstat 233 001757–00043 ...... Biosperse 212 001757–00074 ...... Biosperse 4505 001759–00007 ...... Para-Dichlorobenzene 001760–00024 ...... Ampicide 5 001760–00027 ...... Ampicide-9 001839–00026 ...... B T C 100 Concentrate 001839–00031 ...... BTC-8358ALC 001839–00043 ...... So/San 66 Concentrated Softener Sanitizer for Manufactu

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TABLE 2.—SECTION 3 REGISTRATIONS CANCELED FOR NON-PAYMENT OF MAINTENANCE FEE—Continued

Registration no. Product Name

001839–00061 ...... BTC 927. 001839–00069 ...... BTC-E 2125m-80% 001839–00070 ...... BTC-E 2125-80% Concentrated Germicide 001839–00071 ...... BTC-E-8248 80% 001839–00074 ...... BTC 1326 001839–00075 ...... Lispar Algaecide 10% 001839–00076 ...... Soft-A-Cide #537 001839–00116 ...... Onyxide 200-Methanol Preservative 001839–00117 ...... Onyxide 450 001839–00125 ...... NP 9.0 (H.W.) Detergent/disinfectant 001839–00126 ...... NP 4.5 (H.W.) Detergent/disinfectant 001839–00127 ...... NP 12.5 (H.W.) Detergent/disinfectant 001839–00149 ...... DC-7550 Disinfectant 001839–00150 ...... DC-7128 Disinfectant Cleaner 001903–00021 ...... 8 In 1 14 Day Flea & Tick Spray 001903–00022 ...... 8 In 1 Non Residual Flea & Tick Spray 001903–00023 ...... 8 In 1 14 Day Flea & Tick Dip 001903–00024 ...... 8 In 1 Flea & Tick Dip 001903–00025 ...... 8 in 1 Lawn Spray 001903–00026 ...... 8 in 1 Carpet Spray 001903–00027 ...... 8 in 1 Flea & Tick Indoor Fogger 002011–00005 ...... Vigortone Bovotone FC ‘‘007’’lwith Rabon Oral Larvicide 002011–00010 ...... Vigortone Rabon 7.76 Oral Larvicide Premix 002205–00007 ...... Menthol 002290–00035 ...... Terre Dry Granular Ready To Use D-Crab with 2, 4-D 002296–00110 ...... Saniquat Disinfectant Sanitizer Deodorizer 002311–00011 ...... Qat 1000 002393–00385 ...... Hopkins ’diolice’ Animal Insecticide 002553–00037 ...... Hi-Kil 002568–00094 ...... Seamate HB 33 Anti-Fouling 65a2000 Red 002568–00095 ...... Seamate HB 33 Anti-Fouling 65a2002 Blue 002568–00096 ...... Sovaklor Coastal Super Service Anti-Fouling V59R27 Red 002630–00005 ...... Ocean Spray Pine Oil Disinfectant Deodorant Cleanser 002693–00123 ...... Interswift Copolymer Antifouling Red BKA 007 002724–00429 ...... Zoecon RF-348 Apistan Queen Tab 002724–00430 ...... Zoecon RF-349 Apistan Strip 002724–00477 ...... Altosid 5E-FZ-515 (diacon) 002792–00071 ...... FPZ 002792–00072 ...... FPP 002800–00006 ...... Humco Moth Balls 002935–00062 ...... Red-Top Py-Rin 505 Concentrate 002935–00208 ...... Terraclor 2 Spray 002935–00357 ...... PCNB 10 Granular 002935–00364 ...... Red-Top Py-Rin 40 Jet 002935–00404 ...... Chlorate Concentrate 002935–00436 ...... Tumbleaf Cotton Defoliant 002935–00437 ...... Tumbleleaf Cotton Defoliant Liquid Concentrate 4 002935–00438 ...... Harvest Aid 002935–00439 ...... Harvest Aid Liquid Concentrate 4 002935–00462 ...... Tide Chlorate Defoliant 002935–00463 ...... Tide Solo 6 002935–00505 ...... Alfa Brand Wettable Sulfur 002935–00510 ...... Crop Rider LV-4d Weed Killer 003181–00007 ...... Aero-Master Fogging Insecticide Mill Fogging Formula 003181–00014 ...... Aero-Master Super Fogging Insecticide W/.50% SBP 1382 003468–00047 ...... Bantrol 003546–00027 ...... Shoofly Hornet Jet-Bomb 003837–00005 ...... Krystal 003838–00053 ...... Nutra-Cide 256 003862–00137 ...... L-Tox Spray 003862–00138 ...... Combine 003862–00139 ...... Fogging Spray Concentrate 003862–00141 ...... P.D.Q. Non Selective Weed Killer 003862–00144 ...... Pine Oil Disinfectant (phenol Coefficient 5) 003862–00146 ...... Aqua-Clear 003862–00147 ...... Clean-Up 003862–00149 ...... Lemon Tree 6 (lemon Press) 003862–00150 ...... Dual-27 003862–00151 ...... Algaecide 1250 003862–00152 ...... W.T.C. Algaecide and Algal Slimicide 003862–00154 ...... Towercide 10 003862–00155 ...... Microbiocide LD-10

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TABLE 2.—SECTION 3 REGISTRATIONS CANCELED FOR NON-PAYMENT OF MAINTENANCE FEE—Continued

Registration no. Product Name

003862–00160 ...... Slo-Mowshun Concentrate 003862–00161 ...... Y.B.C. 003862–00163 ...... LF-20 003862–00165 ...... R.T.G. Herbicide 003862–00166 ...... L.W.K. 2.5% 003862–00167 ...... L.W.K. 3.75% 003862–00170 ...... Space Spray 2500 003862–00171 ...... TAM-24 003862–00172 ...... Cog-1 003862–00173 ...... General Purpose Liquid Insect Killer 003876–00074 ...... Betz Slimicide 364 003876–00090 ...... Slimicide C-38 003876–00127 ...... Betz Slimicide C-41 003876–00152 ...... Dearcide 717 003876–00153 ...... Dearcide 722 003876–00154 ...... Dearcide 723 003876–00155 ...... Dearcide 716 004170–00076 ...... Ph7Q 004313–00037 ...... Self-Sanitizing Flow Flex Floor Finish 004313–00074 ...... Carroll Non-Acid Ready-To-Use Restroom Disinfectant 004482–00017 ...... Rid A Hospital Cleaner-Disinfectant-Sanitizer 004582–00065 ...... Ajax Disinfecting Cleanser 004704–00002 ...... Magic Circle Rabbit Repellent 004822–00084 ...... Bolt Ant and Roach Killer 004822–00148 ...... Johnson Yard Master Foam Crabgrass Preventer 004822–00153 ...... Johnson Buggy Whip Dual Action Roach Bait 004822–00318 ...... Raid Ant & Roach Killer 004822–00335 ...... Raid Ant Controller 004822–00411 ...... Raid Roach Bait III 004875–00012 ...... Indco LG-11 Sanitizer 005036–00002 ...... Patty-O-Candle Insect Repellent 005136–00014 ...... Panther 607 NF Cooling Tower Algaecide-Slimicide 005602–00199 ...... A-50 20% DDVP Insecticide 005768–00010 ...... 804 - Lemon Disinfectant 006109–00010 ...... Fiberfresh-MBI 006218–00040 ...... Summit Dibrom ULV Insecticide 006658–00038 ...... Cleaner/Disinfectant 006658–00039 ...... Disinfectant Deodorant 006658–00040 ...... Double Action Insect Killer with Double Action Spray 006658–00046 ...... Room Service Total Release Fogger 006658–00047 ...... Pro-Magic Long Shot Wasp-A-Way 006658–00050 ...... MPC Waterbased Aerosol Flying/crawling Insect Killer 007056–00164 ...... Pet Spray Formula No. Three 007056–00169 ...... CSA Insect Spray Formula Number Six 007056–00181 ...... CSA 2% D-Phenothrin General Purpose Insect Killer 007124–00099 ...... NUCLO 4 Ounce Slow Dissolve Chlorinating Tablets 007152–00019 ...... Sea/Cure-Shock Treatment 007173–00072 ...... Rozol Rodenticide Mineral Oil Concentrate 007173–00216 ...... Maki Paraffin Blocks with Bitrex 007675–00004 ...... Lithium Hypochlorite 007675–00007 ...... Formula 2 Shock Treatment 007675–00008 ...... Formula 2 Spa Sanitizer 007675–00009 ...... Formula 2 Spa Shock 008020–00001 ...... Best Odorless Roach Killer 008033–00008 ...... Hi-Chlon 70 EU Tablet 008033–00009 ...... Hi Chlon 70 EU Granular 008177–00007 ...... Valspar Marine Bottom Anti-Fouling Paint 3589 008177–00011 ...... Valspar Marine Bottom Antifouling Paint 3594 Escolux 008254–00001 ...... ‘‘4 the Birds’’ Transparent Bird Repellent 008325–00020 ...... Concentrated Disinfectant - Detergent 128 008325–00021 ...... Hi Concentrated Disinfectant - Detergent 256 008325–00022 ...... Sani-512 Sanitizer-Disinfectant-Deodorant 008325–00025 ...... Hi-Con 64 Disinfectant and Detergent 008378–00027 ...... Dursban 114 + Fertilizer 008378–00028 ...... Dursban 50 Granular Insecticide 008378–00033 ...... Dursban 1.14 Granules 008378–00042 ...... Dursban 70 with Plant Food 008378–00043 ...... Shaw’s Dursban 50 with Plant Food 008378–00044 ...... Shaw’s Dursban 60 with Plant Food 008378–00046 ...... Shaw’s Dursban 100 Granules 008428–00002 ...... SC-745 Sanitizer 008576–20001 ...... Sodium Hypochlorite - 12.5%

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TABLE 2.—SECTION 3 REGISTRATIONS CANCELED FOR NON-PAYMENT OF MAINTENANCE FEE—Continued

Registration no. Product Name

008622–00051 ...... Super Bromide/Brom 5118 008637–00003 ...... Mitco CC-10-L Algicide 008637–00005 ...... Mitco CC-11-L Algicide 008668–00003 ...... North Insect Repellent Towelettes 008959–00006 ...... Swimtrine-50 009198–00039 ...... Turfcare Dursban 2.5G 009198–00068 ...... The Andersons 1% Dursban Brand Insecticide 009198–00076 ...... Andersons Tee Time 32-3-5 with Oftanol 009198–00082 ...... Tee Time Fertilizer with 0.52% Dursban 30-3-5 009198–00085 ...... Andersons Tee Time 30-3-5 with 0.71% Dursban 009198–00088 ...... Anderson’s Tee-Time with 1.5% Oftanol 009198–00098 ...... Anderson’s Tee Time with Team/dursban I 009198–00099 ...... Andersons Tee Time 19-5-9 with Team/dursban 009198–00137 ...... The Anderson 0.5% Dursban Brand Insecticide 009198–00166 ...... Proturf 30-5-3 Fertilizer Plus Insecticide III 009198–00168 ...... Proturf Fertilizer Plus Insecticide III 009198–00188 ...... Proturf Insecticide 4/insecticide IV 009198–00192 ...... Proturf Weedgrass Control 60 WDG 009404–00003 ...... Sunniland Flower Power 009601–00005 ...... Conquest 009861–00009 ...... TSC-911 Liquid Chlorinating Compound 010079–00003 ...... Nat-Chlor 010079–00004 ...... Top-Chlor 010147–00038 ...... Birkodyne 010163–00167 ...... Imidan 50-WP Garden & Home Insecticide 010250–00053 ...... Hempel’s Antifouling Combic 76990-51110 Red 010350–00024 ...... Sectrol Concentrate No. 1490-B 010350–00025 ...... Gossyplure 20 MEC 010350–00026 ...... Sectrol Plus Flea Foam 010350–00027 ...... Sectrol Plus Pet Spray 010350–00028 ...... Sectrol Pet and Premise Flea Spray 010404–00045 ...... Lesco 24-4-12 Fertilizer with 1.5% Oftanol 010404–00047 ...... Lesco Oftanol 1.5% Granular 010679–00011 ...... Sodium Hypochlorite 10% 010691–00002 ...... Wonder-Aire Cooler Aid 010693–00010 ...... Flo-Kem Triple-2 Germicidal Cleaner 010772–00014 ...... Victory Formula Flea & Tick Pump Spray for Dogs 010772–00015 ...... Shield Creme Rinse for Dogs 010772–00017 ...... Victory Formula Flea and Tick Pump Spray for Cats 010807–00029 ...... Misty Insect Repellent Spray 010810–00002 ...... Dacar Dacarcide L 2 010810–00007 ...... Dacarcide L-35 010867–00002 ...... BAF-TROL 010867–00012 ...... BAF-90 011345–00003 ...... Supergreen Weed and Feed 011515–00029 ...... No. 401 Water Plant Killer 011525–00075 ...... P/P Disinfectant, Degreaser & Cleaner #2 011529–00001 ...... BAF-15 011541–00007 ...... O’b-Alge-670 011623–00053 ...... Apollo Flying & Crawling Insect Killer 011659–00012 ...... A-261 011659–00013 ...... A-265 012192–00002 ...... Sani-Fluff 012477–00002 ...... CP-50 013648–00001 ...... Glidclean 80/150 80% Pine Oil Disinfectant 013648–00002 ...... Glidclean 60/150 60% Pine Oil Disinfectant 013648–00003 ...... Glidco Pine Oil 150 013648–00004 ...... Glidco Pine Oil-140 013648–00007 ...... Glidco Pine Oil-60 013648–00008 ...... Glidco Pine Oil-80 013648–00010 ...... Glidclean 30/60 013648–00011 ...... Glidclean 25/150 25% Pine Type Disinfectant 013648–00013 ...... Glidclean 20% Pine-Type Disinfectant W/P.O. 150 013648–00019 ...... Glidclean 20/60 20% Pine Type Disinfectant 015297–00003 ...... Bio-Groom Cattle Shampoo with Pyrethrins Concentrate 015297–00008 ...... Biogroom Flea & Tick II Residual Permethrin Dip Concent 017545–00011 ...... Pyroxide Home and Garden Spray 018031–00001 ...... Nat-Chlor 018533–00015 ...... Pine Oil 018533–20001 ...... Sodium Hypochlorite Solution (12.5%) 018533–20002 ...... Sodium Hypochlorite Solution (10%) 023566–00017 ...... 673 Black Co-Poly Crab Pot Paint

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TABLE 2.—SECTION 3 REGISTRATIONS CANCELED FOR NON-PAYMENT OF MAINTENANCE FEE—Continued

Registration no. Product Name

026883–00005 ...... Red Copp 97N 026883–00006 ...... Lolo Tint 97 026883–00018 ...... Chem Copp HP II 026883–00019 ...... Chem Copp HP III 028293–00015 ...... Unicorn Phosmet Insecticidal Dust for Dogs 028293–00186 ...... Unicorn (Vegetable and Ornamental) Spray #2 033006–00004 ...... Sodium Hypochlorite Solution 033458–00001 ...... Compressed Chlorine Gas 033593–00001 ...... Chlorine 033593–20001 ...... Sodium Hypochlorite Solution 033753–00006 ...... Myacide S1 033981–00001 ...... Sodium Hypochlorite Solution 033981–00002 ...... Compressed Chlorine Gas 034052–00001 ...... Bear-Cat Fly Spray 034052–00012 ...... Bear-Cat Plus 034571–00013 ...... Betz Entec 349 034891–00002 ...... CWB- 4150 034892–00018 ...... Al-Pine Pine Odor Disinfectant 035138–00082 ...... Aero House and Garden Insect Control 035900–00020 ...... General Ionics Model G.i.2 Bacteriostatic Post Filter 036866–00004 ...... Super Veta Flea & Tick Killer for Cats & Dogs 036866–00007 ...... Super Veta Dermatological Flea & Tick Killer for Cats 036866–00009 ...... Veta D-Flea 037327–00001 ...... Ak 100 Water Treatment Microbiocide 037429–00001 ...... Bold Flowable Sulfur 037435–20002 ...... C.f. 10 Pool Chlorinating Solution 037910–00004 ...... Hi-Lite 90 G Granular 037910–00005 ...... Hi-Lite 60g 037982–00017 ...... All Pure Sodium Hypochlorite 11% 037982–00034 ...... All Pure Chlorine Gas 99.5 038422–00001 ...... Destain Sanitizer 039183–00012 ...... Bio-Syn 170-10 039702–00002 ...... Muralo Marine Copper Antifouling Bottom Paint 1331 Blue 040810–00017 ...... Irgaguard B 8000 041014–00002 ...... Marlate 50 Methoxychlor Insecticide 041014–00005 ...... Marlate Methoxychlor Technical 041134–00001 ...... Oniachlor 60 041134–00002 ...... Oniachlor 90 041134–00003 ...... Oniachlor EC 041200–00002 ...... Rabon 350 Mineral 041211–00003 ...... Chlorine 041211–00004 ...... DX Sodium Hypochlorite 12.5% 041211–00005 ...... DX Sodium Hypochlorite 5.25% 041211–00006 ...... DX Sodium Hypochlorite 10% 041451–00004 ...... Natra Flea Shampoo 041451–00008 ...... Natra Pet Mite Mist 041835–00011 ...... Synerkyl Pet Dip 041835–00012 ...... Dvm Shampoo Concentrate 041835–00013 ...... AG Synerkyl Water-Based Pet Spray 043917–00003 ...... Spira Punks B Mosquito Repellent Coils 043917–00004 ...... Spira Open Air Mosquito Repellent 043922–00002 ...... Hercules Sanitizer (sta Bright) 044632–20205 ...... Roach Kill Powder 044919–00002 ...... Model S-3 Bacteriostatic Water Filter Cartridge 045631–00018 ...... Sd-3 Disinfectant 045631–00021 ...... Sanova 335 045983–00001 ...... Jet Chlor 046075–00001 ...... American Trail Insect Repellant 046193–00013 ...... Trifluralin Df 046379–00005 ...... Fine Spring Bacteriostatic Water Filter Over Sink Unit, 046763–00001 ...... MB-25 046781–00011 ...... Premidyne 046813–00049 ...... CCL House & Garden Insect Killer II 046813–00062 ...... CCL Flying Insect Killer Xi 047332–00004 ...... CPF-2D Insecticide 047893–00004 ...... Ban-Gas 048302–00010 ...... AF Seaflo Z-100 LE-HS 049620–00001 ...... EKA Nobel Sodium Chlorate Weed Killer 049620–00003 ...... SVP-Pure Sodium Chlorate Precursor 050600–00002 ...... Shepard Brothers Sano Rinse 050600–00003 ...... Iodafect 050654–00005 ...... Bio-Hautschutz Repellent

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TABLE 2.—SECTION 3 REGISTRATIONS CANCELED FOR NON-PAYMENT OF MAINTENANCE FEE—Continued

Registration no. Product Name

051708–00013 ...... Proteam Polyquat Algaecide 50 053219–00004 ...... Demoss Moss & Algicide 053219–00011 ...... Thinex Blossom Thinner 053219–00014 ...... M/C Bioinsecticide 053219–00015 ...... Mattch II Bioinsecticide 053575–00022 ...... Isomate-OBLR/PLR 053871–00006 ...... Larvo-Bt 053883–00048 ...... Martin’s Dursban Insecticide Granules 053883–00052 ...... Martin’s Dursban 2 1/2% Insecticide Granules 054679–00001 ...... Custom Chlor 054734–00001 ...... Protecto-Copp 054734–00002 ...... Protecto - Zin 055363–00006 ...... Classic Yacht: Clear Choice Aerosol Antifoulant Coating 055460–00007 ...... R. Carlson Co. Spud Bark 055467–00004 ...... Tenkoz Atrazine 90df Herbicide 055467–00005 ...... Tenkoz Atrazine 4L Herbicide 055638–00044 ...... M-Trak Bioinsecticide 055638–00045 ...... MVP Bioinsecticide 055638–00046 ...... M-Peril Bioinsecticide 056077–00080 ...... Cedar Chemical Corporation Fluometuron Technical 056175–00001 ...... Protack Mosquito Mats 056437–00001 ...... Yea! Poly-D-Glucosamine Solution 056630–00004 ...... Variquat 50 MC 056630–00005 ...... Variquat 50 ME 056630–00006 ...... Variquat 80 MC Germicidal Concentrate 056630–00007 ...... Variquat 80 ME 056984–00001 ...... Lagenidium Giganteum Mycelium & Oospores 056984–00003 ...... Lagenidium Giganteum Oospores 057227–00002 ...... Britewood Q Sapstain Control 057227–00004 ...... Britewood BQ, Sapstain Control 057227–00005 ...... Britewood BQ-80 Sapstain Control 057787–00026 ...... Blast It 058199–00009 ...... Cyto-Booster 058300–00010 ...... Sanicide AG-5 058300–00011 ...... Sanicide CD-2 058300–00012 ...... Sanicide AG-2 058300–00013 ...... Sanicide AH-5 058369–00002 ...... Fuzzie Buddie Spray for Pets with Pure Eucalyptus Oil 058639–00004 ...... Car Mac Insecticidal Ear Tag #3 059144–00023 ...... Rose and Flower Systemic Granules 059578–00001 ...... Get Off My Garden 059578–00002 ...... Get Off My Garden 059638–00001 ...... Formula 4635 059905–00007 ...... Guardian 062190–00015 ...... Hickson Tubor 062366–00002 ...... Bug Stuff 062550–00001 ...... Calcium Hypochlorite Idroklorel 062635–00001 ...... Bugmat 062637–00004 ...... Bmp 123 (32 LC) 062638–00001 ...... Citronella Candle Bucket 062719–00042 ...... Reldan F Insecticidal Chemical 062719–00043 ...... Reldan 4E 062719–00102 ...... Balan E.C. 19.4% 062719–00103 ...... Balan Milled Concentrate 50% 062719–00243 ...... Recruit 062719–00245 ...... Lorsban 4E-SG 063660–00001 ...... Egis Iris Borer Deterrent 063809–00001 ...... Pinetec Pine Oil 064864–00042 ...... Deadline Force Liquid 064898–00006 ...... Sewerout II 065020–00001 ...... Bio-Guard S-3 065020–00010 ...... Bioguard HTD-128 065233–00004 ...... Treo Spf 8 065233–00009 ...... Treo Mosquito Repellant Moisturizing Lotion 065233–00013 ...... Primavera Botanical Bug-Repelling Wipes 065584–00001 ...... Top Chlor 065584–00003 ...... Sani-Clor Low Temperature Liquid Sanitizer 065656–00002 ...... Rice-Nil DF 80 065743–00002 ...... Chempak 10% Sodium Hypochloride Solution 066196–00001 ...... Oxycop Dust No. 3 066222–00012 ...... Cotnion-Methyl Azinphos Methyl 2EC 066397–00003 ...... Fortnight Brominating Tablets

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TABLE 2.—SECTION 3 REGISTRATIONS CANCELED FOR NON-PAYMENT OF MAINTENANCE FEE—Continued

Registration no. Product Name

066544–00002 ...... Promac 2000PY 066544–00003 ...... Promac 2000PN 066674–00002 ...... Terminator Plus 066680–00001 ...... Care-Flea Home Treatment 066733–00009 ...... Tiempo 4 EC 066733–00010 ...... Tiempo 1% Granules 066733–00011 ...... Tiempo 2% Granular 067003–00001 ...... S. D. I. C. 62 Granular 067003–00004 ...... Granular S.D.I.C 067003–00015 ...... T.I.C.A. Skimmer Sticks 067003–00018 ...... S.D.I.C. Chlorinating Granules 067003–00019 ...... Granular S.D.I.C. 56 067003–00023 ...... T.I.C.A. Granular 067209–00001 ...... Liquid Chlorine 067262–00021 ...... Granular Stabilized Chlorinator 067262–00032 ...... 3‘‘Tablets 067360–00004 ...... Intercide 340-A 067360–00005 ...... Intercide FC 067471–00002 ...... Pacific Sailor Copper Bottom Antifouling Red Paint 067471–00004 ...... Pacific Sailor Triple A Antifouling Red Paint 067543–00008 ...... XL 48 067760–00006 ...... Cyren 2E 067760–00007 ...... Cyren 4E Insecticide 067760–00031 ...... Cyren 2 TC 067813–00001 ...... Dow Liquid Disinfectant Formulation 2A 068182–00008 ...... Bio-Save 100 Biological Fungicide 068186–00003 ...... E-Rase Refill 068338–00005 ...... Sodium Hypochlorite 12.5% 068340–00001 ...... Flea.B.Gone 068401–00001 ...... D & D Carpet Powder for Fleas 068438–00001 ...... Roach Caulk 068467–00001 ...... BAC. Thuringiensis (ssp. Kurstaki) European Corn Borer 068687–00005 ...... 3807 Hs Red Oxide Vinyl Anti-Fouling Paint 068825–00001 ...... Vasco Pool Protector 069251–00001 ...... Viodine 069261–00001 ...... Harper Valley Diatomaceous Earth 069431–00001 ...... No More Moles 069741–00001 ...... Golden Solution Humidifier Bacteria Water Treatment 070060–00010 ...... Aseptrol WTS-F7 Sachet 070060–00017 ...... Aseptrol Gtab-14 070060–00021 ...... Aseptrol CSR-7.02 070160–00001 ...... Insect Control 070160–00004 ...... Insect Control Concentrate 070261–00001 ...... Medipure 070271–20002 ...... Lass0 10% Sodium Hypochlorite Solution 070413–00001 ...... Germ-Stat 1 070571–00001 ...... Collego Selective Postemergent Herbicide 070591–00001 ...... Noseeum 070614–00001 ...... GHG Carbon Dioxide 070627–00017 ...... Primafresh 20 with Dowicide A 070627–00018 ...... Primafresh 21 Citrus Wax with ‘‘dowicide A’’ 070810–00003 ...... Auxigro Mfg Plant Metabolic Primer 070870–00002 ...... Agricure RTU 070907–00008 ...... Pilot 50W Chlorpyrifos Agriculturalinsecticide 070907–00013 ...... Navigator 4WT Chlorpyrifos Wood Treatment Concentrate 070907–00017 ...... Chlorpyrifos 6 Manufacturing Concentrate 070907–00018 ...... Chlorpyrifos 4 Manufacturing Concentrate 071581–00007 ...... X-Lance 2 071624–00001 ...... Sulfuric Acid/Potato Vine Desiccant 071645–00002 ...... Santochlor 20 071655–00002 ...... PVP-Iodine 30/60 071704–00001 ...... Bromine 40 071977–00003 ...... Sunbelt Flowable Sulfur 072140–00001 ...... Unicorn Thermal Marine Coating Anti-Fouling Plastic 072262–00001 ...... Oxylit 072304–00004 ...... Clortram F-54 Flowable Fungicide 072322–00001 ...... Plant Nog 072593–00002 ...... Termite Blocker 072638–00001 ...... Blue Frog Pine Oil 60 072643–00001 ...... Disorb Tube 072992–00004 ...... T535 072992–00005 ...... T345

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TABLE 2.—SECTION 3 REGISTRATIONS CANCELED FOR NON-PAYMENT OF MAINTENANCE FEE—Continued

Registration no. Product Name

072992–00006 ...... T430 Vase Solution 072992–00009 ...... T426 Hydrating Solution 073049–00021 ...... Gibberellic Acid, 10% 073049–00022 ...... Release Plus 073049–00044 ...... Gibrel 4% 073049–00053 ...... Gibrel Plus 2x Plant Growth Regulator Soluble Powder 073062–00001 ...... VP Paraformaldehyde 073134–00001 ...... Bugaway! TSP Formula 1 073368–00002 ...... LRS Gas Liquid Chlorine #140 073368–20007 ...... LRS Liquid Sodium Hypochlorite #10 073465–00001 ...... Shellshock Insecticide 073637–00001 ...... Tillam 6-E Selective Herbicide 073637–00002 ...... Tillam Technical Selective Herbicide 073727–00013 ...... Verox -7.5 073727–00017 ...... Verox-37 073727–00018 ...... Verox-15 073727–00020 ...... Verox-2 074210–00004 ...... Sanital II 074246–00001 ...... Zydox 25 074292–00001 ...... Southwest Select Diatomaceous Earth 074424–00001 ...... Zenkill 1 Flying Insect 074530–00002 ...... Pendimethalin Tech. 074655–00017 ...... Daracide 2302 074812–00001 ...... The Graden Guy Diatomaceous Earth 074812–00002 ...... Garden-Ville Diatomaceous Earth 075341–00007 ...... Osmoplastic SD Wood Preserving Compound

IV. Public Docket proposing the establishment of • Pesticide Manufacturing (NAICS Complete lists of registrations regulations for residues of a certain Code 32532) This listing is not intended to be canceled for non-payment of the pesticide chemical in or on various food exhaustive, but rather provides a guide maintenance fee will also be available commodities. for readers regarding entities likely to be for reference during normal business DATES: Comments, identified by docket affected by this action. Other types of hours in the OPP Public Docket, Room ID number OPP–2003–0208, must be entities not listed in this unit could also 119, Crystal Mall #2, 1921 Jefferson received on or before December 8, 2003. be affected. The North American Davis Highway South, Arlington VA, ADDRESSES: Comments may be Industrial Classification System and at each EPA Regional Office. submitted electronically, by mail, or (NAICS) codes have been provided to Product-specific status inquiries may be through hand delivery/courier. Follow assist you and others in determining made by telephone by calling toll-free the detailed instructions as provided in whether this action might apply to 1–800–444–7255. Unit I. of the SUPPLEMENTARY certain entities. If you have any List of Subjects INFORMATION. questions regarding the applicability of Environmental protection, pesticides FOR FURTHER INFORMATION CONTACT: this action to a particular entity, consult FOR FURTHER and pest. Cynthia Giles-Parker, Registration the person listed under Division (7505C), Office of Pesticide INFORMATION CONTACT. Dated: October 23, 2003. Programs, Environmental Protection James Jones, B. How Can I Get Copies of this Agency, 1200 Pennsylvania Ave., NW., Document and Other Related Director, Office of Pesticide Programs. Washington, DC 20460–0001; telephone Information? [FR Doc. 03–27954 Filed 11–5–03; 8:45 a.m.] number: (703) 305–7740; e-mail address: BILLING CODE 6560–50–S [email protected]. 1. Docket. EPA has established an official public docket for this action SUPPLEMENTARY INFORMATION: under docket identification (ID) number ENVIRONMENTAL PROTECTION I. General Information OPP–2003–0208. The official public docket consists of the documents AGENCY A. Does this Action Apply to Me? specifically referenced in this action, [OPP–2003–0208; FRL–7321–1] You may be potentially affected by any public comments received, and this action if you are an agricultural Boscalid; Notice of Filing a Pesticide other information related to this action. producer, food manufacturer, or Petition to Establish a Tolerance for a Although a part of the official docket, pesticide manufacturer. Potentially Certain Pesticide Chemical in or on the public docket does not include affected entities may include, but are Food Confidential Business Information (CBI) not limited to: or other information whose disclosure is AGENCY: Environmental Protection • Crop Production (NAICS Code restricted by statute. The official public Agency (EPA). 111) docket is the collection of materials that • ACTION: Notice. Animal Production (NAICS Code is available for public viewing at the 112) Public Information and Records SUMMARY: This notice announces the • Food Manufacturing (NAICS Code Integrity Branch (PIRIB), Rm. 119, initial filing of a pesticide petition 311) Crystal Mall #2, 1921 Jefferson Davis

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Hwy., Arlington, VA. This docket a reference to that material in the comments to EPA electronically is facility is open from 8:30 a.m. to 4 p.m., version of the comment that is placed in EPA’s preferred method for receiving Monday through Friday, excluding legal EPA’s electronic public docket. The comments. Go directly to EPA Dockets holidays. The docket telephone number entire printed comment, including the at http://www.epa.gov/edocket, and is (703) 305–5805. copyrighted material, will be available follow the online instructions for 2. Electronic access. You may access in the public docket. submitting comments. Once in the this Federal Register document Public comments submitted on system, select ‘‘search,’’ and then key in electronically through the EPA Internet computer disks that are mailed or docket ID number OPP–2003–0208. The under the ‘‘Federal Register’’ listings at delivered to the docket will be system is an‘‘anonymous access’’ http://www.epa.gov/fedrgstr/. transferred to EPA’s electronic public system, which means EPA will not An electronic version of the public docket. Public comments that are know your identity, e-mail address, or docket is available through EPA’s mailed or delivered to the docket will be other contact information unless you electronic public docket and comment scanned and placed in EPA’s electronic provide it in the body of your comment. system, EPA Dockets. You may use EPA public docket. Where practical, physical ii. E-mail. Comments may be sent by Dockets at http://www.epa.gov/edocket/ objects will be photographed, and the e-mail to [email protected], to submit or view public comments, photograph will be placed in EPA’s Attention: Docket ID Number OPP– access the index listing of the contents electronic public docket along with a 2003–0208. In contrast to EPA’s of the official public docket, and to brief description written by the docket electronic public docket, EPA’s e-mail access those documents in the public staff. system is not an ‘‘anonymous access’’ docket that are available electronically. system. If you send an e-mail comment C. How and To Whom Do I Submit Although not all docket materials may directly to the docket without going Comments? be available electronically, you may still through EPA’s electronic public docket, access any of the publicly available You may submit comments EPA’s e-mail system automatically docket materials through the docket electronically, by mail, or through hand captures your e-mail address. E-mail facility identified in Unit I.B.1. Once in delivery/courier. To ensure proper addresses that are automatically the system, select ‘‘search,’’ then key in receipt by EPA, identify the appropriate captured by EPA’s e-mail system are the appropriate docket ID number. docket ID number in the subject line on included as part of the comment that is Certain types of information will not the first page of your comment. Please placed in the official public docket, and be placed in the EPA Dockets. ensure that your comments are made available in EPA’s electronic Information claimed as CBI and other submitted within the specified comment public docket. information whose disclosure is period. Comments received after the iii. Disk or CD ROM. You may submit restricted by statute, which is not close of the comment period will be comments on a disk or CD ROM that included in the official public docket, marked ‘‘late.’’ EPA is not required to you mail to the mailing address will not be available for public viewing consider these late comments. If you identified in Unit I.C.2. These electronic in EPA’s electronic public docket. EPA’s wish to submit CBI or information that submissions will be accepted in policy is that copyrighted material will is otherwise protected by statute, please WordPerfect or ASCII file format. Avoid not be placed in EPA’s electronic public follow the instructions in Unit I.D. Do the use of special characters and any docket but will be available only in not use EPA Dockets or e-mail to submit form of encryption. printed, paper form in the official public CBI or information protected by statute. 2. By mail. Send your comments to: docket. To the extent feasible, publicly 1. Electronically. If you submit an Public Information and Records available docket materials will be made electronic comment as prescribed in this Integrity Branch (PIRIB) (7502C), Office available in EPA’s electronic public unit, EPA recommends that you include of Pesticide Programs (OPP), docket. When a document is selected your name, mailing address, and an e- Environmental Protection Agency, 1200 from the index list in EPA Dockets, the mail address or other contact Pennsylvania Ave., NW., Washington, system will identify whether the information in the body of your DC 20460–0001, Attention: Docket ID document is available for viewing in comment. Also include this contact Number OPP–2003–0208. EPA’s electronic public docket. information on the outside of any disk 3. By hand delivery or courier. Deliver Although not all docket materials may or CD ROM you submit, and in any your comments to: Public Information be available electronically, you may still cover letter accompanying the disk or and Records Integrity Branch (PIRIB), access any of the publicly available CD ROM. This ensures that you can be Office of Pesticide Programs (OPP), docket materials through the docket identified as the submitter of the Environmental Protection Agency, Rm. facility identified in Unit I.B. EPA comment and allows EPA to contact you 119, Crystal Mall #2, 1921 Jefferson intends to work towards providing in case EPA cannot read your comment Davis Hwy., Arlington, VA, Attention: electronic access to all of the publicly due to technical difficulties or needs Docket ID Number OPP–2003–0208. available docket materials through further information on the substance of Such deliveries are only accepted EPA’s electronic public docket. your comment. EPA’s policy is that EPA during the docket’s normal hours of For public commenters, it is will not edit your comment, and any operation as identified in Unit I.B.1. important to note that EPA’s policy is identifying or contact information that public comments, whether provided in the body of a comment will D. How Should I Submit CBI To the submitted electronically or in paper, be included as part of the comment that Agency? will be made available for public is placed in the official public docket, Do not submit information that you viewing in EPA’s electronic public and made available in EPA’s electronic consider to be CBI electronically docket as EPA receives them and public docket. If EPA cannot read your through EPA’s electronic public docket without change, unless the comment comment due to technical difficulties or by e-mail. You may claim contains copyrighted material, CBI, or and cannot contact you for clarification, information that you submit to EPA as other information whose disclosure is EPA may not be able to consider your CBI by marking any part or all of that restricted by statute. When EPA comment. information as CBI (if you submit CBI identifies a comment containing i. EPA Dockets. Your use of EPA’s on disk or CD ROM, mark the outside copyrighted material, EPA will provide electronic public docket to submit of the disk or CD ROM as CBI and then

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identify electronically within the disk or List of Subjects confined rotational crop study also CD ROM the specific information that is Environmental protection, determined that parent was the residue CBI). Information so marked will not be Agricultural commodities, Feed of concern in the representative crops of disclosed except in accordance with additives, Food additives, Pesticides radish, lettuce and wheat. procedures set forth in 40 CFR part 2. and pests, Reporting and recordkeeping 2. Analytical method. In plants the In addition to one complete version of requirements. parent residue is extracted using an the comment that includes any aqueous organic solvent mixture information claimed as CBI, a copy of Dated:October 23, 2003. followed by liquid/liquid partitioning the comment that does not contain the Debra Edwards, and a column clean up. Quantitation is information claimed as CBI must be Director, Registration Division, Office of by gas chromatography using mass submitted for inclusion in the public Pesticide Programs. spectrometry (GC/MS). In livestock the docket and EPA’s electronic public Summary of Petition residues are extracted with methanol. docket. If you submit the copy that does The extract is treated with enzymes in The petitioner summary of the not contain CBI on disk or CD ROM, order to release the conjugated pesticide petition is printed below as mark the outside of the disk or CD ROM glucuronic acid metabolite. The required by FFDCA section 408(d)(3). clearly that it does not contain CBI. residues are then isolated by liquid/ The summary of the petition was Information not marked as CBI will be liquid partition followed by column prepared by the petitioner and included in the public docket and EPA’s chromatography. The hydroxylated represents the view of the petitioner. electronic public docket without prior metabolite is acetylated followed by a The petition summary announces the notice. If you have any questions about column clean-up. The parent and availability of a description of the CBI or the procedures for claiming CBI, acetylated metabolite are quantitated by analytical methods available to EPA for please consult the person listed under gas chromatography with electron the detection and measurement of the FOR FURTHER INFORMATION CONTACT. capture detection. pesticide chemical residues or an E. What Should I Consider as I Prepare explanation of why no such method is 3. Magnitude of the residues. Field My Comments for EPA? needed. trials were carried out in order to determine the magnitude of the residue You may find the following BASF Corporation in the apples, pears and hops. Field suggestions helpful for preparing your PP 2F6434 and 3F6580 trials were conducted in the United comments: States in the required regions. Field 1. Explain your views as clearly as EPA has received pesticide petitions trials were carried out using the possible. (PP 2F6434 and 3F6580) from BASF maximum label rate, the maximum 2. Describe any assumptions that you Corporation, Research Triangle Park, number of applications, and the used. NC, proposing pursuant to section 3. Provide copies of any technical minimum preharvest interval for each 408(d) of the Federal Food, Drug and crop or crop group. In addition, a information and/or data you used that Cosmetic Act (FFDCA), 21 U.S.C support your views. processing study was conducted on 346a(d), to amend 40 CFR part 180 by apples to determine concentration 4. If you estimate potential burden or establishing tolerances for residues of costs, explain how you arrived at the factors during normal processing of the Boscalid (3-pyridinecarboxamide, 2- raw agricultural commodity into the estimate that you provide. ′ ′ chloro-N-(4 -chloro(1,1 -biphenyl)-2-yl) processed commodities. 5. Provide specific examples to in or on the following raw agricultural illustrate your concerns. and processed commodities: pome fruit B. Toxicological Profile 6. Make sure to submit your at 3.0 ppm; apple pomace at 20.0 ppm comments by the deadline in this 1. Acute toxicity. Based on available and hops at 35.0 ppm, and soybean notice. acute toxicity data BAS 510 F and its 7. To ensure proper receipt by EPA, aspirated grain fraction at 2.5 ppm. EPA formulated products do not pose acute be sure to identify the docket ID number has determined that the petitions toxicity risks. The acute toxicity studies assigned to this action in the subject contain data or information regarding place technical BAS 510 F in toxicity line on the first page of your response. the elements set forth in section category IV for acute oral; category III You may also provide the name, date, 408(d)(2) of the FFDCA; however, EPA for acute dermal and category IV for and Federal Register citation. has not fully evaluated the sufficiency acute inhalation. BAS 510 F is category of the submitted data at this time or IV for both eye and skin irritation, and II. What Action is the Agency Taking? whether the data support granting of the it is not a dermal sensitizer. Two EPA has received a pesticide petition petition. Additional data may be needed formulated end use products are as follows proposing the establishment before EPA rules on the petition. proposed, a wettable granule (WG) and/or amendment of regulations for These individual summaries are termed BAS 510 02 F containing 70% residues of a certain pesticide chemical printed below as they were received BAS 510 F and a wettable granule (WG) in or on various food commodities from the petitioner. termed BAS 516 02 F containing a 2:1 under section 408 of the Federal Food, PP 2F6434 mixture of BAS 510 F and BAS 500 F. Drug, and Cosmetic Act (FFDCA), 21 BAS 510 02 F has an acute oral toxicity U.S.C. 346a. EPA has determined that A. Residue Chemistry category of III, acute dermal of category this petition contains data or 1. Plant metabolism. Nature of the III, acute inhalation of category IV, eye information regarding the elements set residue studies (OPPTS Harmonized irritation of category III, skin irritation forth in FFDCA section 408(d)(2); Guidline 860.1300) were conducted in of category IV, and is not a dermal however, EPA has not fully evaluated grapes, lettuce and beans as sensitizer. BAS 516 02 F has an acute the sufficiency of the submitted data at representative crops in order to oral toxicity category of III, acute dermal this time or whether the data support characterize the fate of BAS 510 F in all of category III, acute inhalation of granting of the petition. Additional data crop matrices. In all three crops the BAS category IV, eye irritation of category III, may be needed before EPA rules on the 510 F Residues of Concern (ROC) were skin irritation of category IV, and is not petition. characterized as parent (BAS 510 F). A a dermal sensitizer.

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2. Genotoxicity. Ames Test (1 Study; abortion in one dam. This finding is not hypertrophy - a parameter which could point mutation): Negative; In Vitro necessarily indicative of a definitive test not have been detected in the CHO/HGPRT Locus Mammalian Cell substance related adverse effect. The developmental neurotoxicity (DNT) Mutation Assay (1 Study; point dam which displayed the fecal study as liver histopathology on mutation): Negative; In Vitro V79 Cell alterations and abortion also displayed parental animals was not performed in Cytogenetic Assay (1 Study; decreased body weight and body weight the DNT study. Chromosome Damage): Negative; In gain - compared to the group mean - 4. Subchronic toxicity. The Vivo Mouse Micronucleus (1 Study; during gestation. These decreases subchronic toxicity of BAS 510 F was Chromosome Damage): Negative; In occurred even prior to compound investigated in 90–day feeding studies Vitro Rat Hepatocyte (1 Study; DNA administration. Food consumption was with rats, mice and dogs, and in a 28– damage and repair): Negative. BAS 510 also dramatically decreased in this dam day dermal administration study in rats. F has been tested in a total of 5 genetic compared to the other animals in the A 90–day neurotoxicity study in rats toxicology assays consisting of in vitro group. Every day from gestation day was also performed. Generally, mild and in vivo studies. It can be stated that (GD) 1–12, this dam had food toxicity was observed. At high dose BAS 510 F did not show any mutagenic, consumption values which were less levels (doses above the LOAELs) in clastogenic or other genotoxic activity than half the mean for the group feeding studies, all three species when tested under the conditions of the (compound administration began on GD displayed alterations in various clinical studies mentioned above. Therefore, 7). From GD 13 to 26 (when the animal chemistry parameters. These clinical BAS 510 F does not pose a genotoxic aborted and was sacrificed) this dam ate chemistry alterations were likely hazard to humans. essentially nothing (food consumption secondary to general toxicity. 3. Reproductive and developmental during this time period was less than or Statistically significant increased toxicity. The reproductive and equal to 1.5 grams/day). These decreases absolute and relative thyroid weights developmental toxicity of BAS 510 F in body weight, body weight gain, and were observed in male rats only at doses was investigated in a two-generation rat food consumption, prior to compound at and above the LOAEL. Increased reproduction study as well as in rat and administration, all indicate an animal in absolute and relative liver weights were rabbit teratology studies. poor health and this poor state of health, observed in both sexes at doses above There were no adverse effects on rather than compound exposure, was the LOAEL in rats and dogs. Increased reproduction in the two-generation likely the reason for the fecal alterations absolute and relative liver weights were study at any dose tested. Pup effects and abortion. seen in both sexes of the mouse at lower were observed, with parental toxicity, at At the high dose of 1,000 mg/kg bw doses. However, the increases in liver the highest dose tested only. In both a maternal body weight gain decrease weights at these lower doses in the parental generations, reduced food compared to controls of 81% was mouse were not deemed to be consumption and reduced bodyweight observed during the treatment period. compound related due to the unusually gain were observed at 10,000 ppm. Both Reduced food consumption, reduced low concurrent control liver weight absolute and relative liver weights were body weight and abortions in three values. At doses above the LOAELs, increased 21% in F1 generation parental dams, were also seen at 1,000 mg/kg/ liver weight increases were supported females at the high dose of 10,000 ppm day. Evidence of developmental toxicity by histopathology alterations in the rat only. Hepatocellular centrilobular was not seen at any dose tested. hypertrophy (usually slight) was Developmental neurotoxicity was not and mouse, but not in the dog. Overall, observed in many animals of both sexes observed at any dose in the only mild toxicity was observed in oral subchronic testing. in both the F0 and F1 generations at developmental neurotoxicity study. No 1,000 ppm, and in all animals of both maternal toxic effects were noted at any In the 28–day repeat dose dermal sexes at 10,000 ppm. Additionally, some dose in this study. No developmental study, no systemic effects were noted up of the parental male rats at 10,000 ppm, toxicity was seen at the low dose of 12 to the highest dose tested of 1,000 mg/ in both generations, displayed mg/kg/day (100 ppm). Reduced body kg/day. centrilobular liver cell degeneration. weights and body weight gains were In a 90–day rat neurotoxicity study, Developmental toxicity was seen at seen at 118 mg/kg/day (1,000 ppm) there was no mortality, signs of clinical 1,000 ppm in the form of decreased pup during post natal day (PND) 1–4. toxicity, or adverse effects on food weights in the F2 males, and at 10,000 Reduced body weights and body weight consumption or body weight at any dose ppm in the form of decreased pup gains were seen at 1,183 mg/kg/day level in either sex. No signs of weight for both males and females of (10,000 ppm) as well as decreased neurotoxicity were observed during both the F1 and F2 generations. The absolute pup brain weight at day 11 post clinical observations, functional parental systemic and developmental partum (p.p.) (both sexes) and decreased observation batteries, motor activity toxicity NOAEL’s are both 100 ppm (12 brain length (males only) at day 11 p.p. measurements of neuropathology. mg/kg/day). The reduced pup brain weights and Therefore, there were no selective No teratogenic effects were noted in decreased brain length go hand-in-hand neurotoxic effects. Adverse effects were either the rat or rabbit developmental and both are due to the decreased pup not seen even at the highest dose level studies. In the rat study, evidence of weights seen at this dose. In this tested. A LOAEL was not found and the maternal or developmental toxicity were respect, it should be noted that pup NOAEL is the highest tested of 15,000 not observed at any dose (highest dose brain weights relative to body weight at ppm (1,050 mg/kg/day in males; 1,272 tested of 1,000 mg/kg/day). Neither a p.p. 11 were not significantly different mg/kg/day in females). maternal nor developmental LOAEL from controls at this dose. Though no 5. Chronic toxicity. Based on review were found since the highest dose tested maternal toxicity was seen in this study, of the available data, the Reference Dose was the NOAEL in both studies. In the other studies using similar doses of BAS (RfD) for BAS 510 F will be based on a rabbit teratology study, maternal 510 resulted in maternal toxicity. A 24–month feeding study in rats with a toxicity observed at the mid dose of 300 dose of 118 mg/kg/day in female rats of threshold no observed effect level milligrams/kilogram of body weight the same strain in the multigeneration (NOEL) of 5 mg/kg/day. Using an (mg/kg bw) consisted of discolored/ study, resulted in an increased uncertainty factor of 100, the RfD is reduced feces in one dam and an incidence of hepatic centrilobular calculated to be 0.05 mg/kg/day. The

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following are summaries of chronic the EPA publication ‘‘Assessment of generation reproductive studies) which toxicity studies submitted to EPA. Thyroid Follicular Cell Tumors’’ (EPA/ would suggest that BAS 510 F produces The chronic toxicity/oncogenicity 630/R–97/002, March, 1998), has been endocrine related effects. studies with BAS 510 F include a 12– proposed. BASF believes the data to C. Aggregate Exposure month feeding study with Beagle dogs, support this proposed mode of action an 18–month B63CF1 mouse feeding are strong, and that the thyroid tumors 1. Dietary exposure—i. Food. A study, a 24–month Wistar rat chronic seen in the rat following BAS 510 chronic dietary exposure analysis was feeding study and a 24–month Wistar exposure have a threshold. In addition, conducted for BAS 510 F to include the rat oncogenicity study. a battery of genotoxicity studies proposed uses of apples and hops. The At the highest dose tested in dogs, demonstrated that BAS 510 F has no dietary exposure included prior effects observed consisted primarily of genotoxic or clastogenic potential. tolerances for beet root, root vegetables, increased liver and thyroid weights and Therefore, BASF believes that the tuberous and corm vegetables, bulb some serum clinical chemistry changes. threshold approach to regulating BAS vegetables, leafy vegetables, head and The NOAEL was 800 ppm (21.8 mg/kg 510 F is appropriate. Also, it should be stem brassica, leafy brassica greens, bw males; 22.1 mg/kg bw females). noted that, while the Agency has in the legume vegetables, fruiting vegetables, Decreased body weights were seen in past considered tumors of this type to be cucurbit vegetables, stonefruit, berries, males in the mouse chronic study at potential human carcinogens, the tree nuts, pistachios, cereal grains, mint, doses of 400 ppm and above. Decreased European Union has published a policy grapes, raisins, strawberries, peanut, female body weight was seen at doses of which considers these tumor types, peanut meal, peanut oil, cotton seed, 2,000 ppm and above. The target organ when they occur at low incidence rates soybean seed, canola, flax seed and in this study was the liver. In both the in the rat, to not be relevant to man. sunflower seed in addition to the new rat chronic and oncogenicity studies, (The publication: European tolerances for apples and hops. The the highest dose tested of 15,000 ppm Commission, European Chemicals analysis assumed 100% of the crops exceeded a maximum tolerated dose Bureau, ECBI/49/99 – Add. 1 Rev. 2; were treated, default processing factors (MTD) and was discontinued after 17 ‘‘Draft Summary Record, Commission (even though much lower months. Effects observed at the next Group of Specialized Experts in the experimentally-derived processing highest dose of 2,500 ppm primarily fields of Carcinogenicity, Mutagenicity factors are available), and used the centered around the thyroid and liver. and Reprotoxicity’’ Meeting at Arona, 1 tolerance value for residues. The one Overall, mild toxicity was observed – 2 September 1999), Therefore, BASF exception to the use of defaults was for with chronic exposure to BAS 510 F. No believes that these tumors are not likely the apple processing, where an average evidence of treatment-induced relevant to humans and, if these tumors calculated processing factor of 0.09 was oncogenicity was observed in the mouse are to be considered relevant to humans, used for apple juice. For apple juice or dog studies. A slight increase in the threshold approach to cancer risk concentrate, the juice factor of 0.09 was thyroid follicular cell adenomas was assessment is appropriate. adjusted by the ratio of the default seen in both sexes at the high dose 7. Animal metabolism. In the rat, the concentrate (3.9) and default juice (1.3) when the data from both rat bioassays predominat route of excretion of BAS processing factors, which led to an are combined. 510 F is fecal with urinary excretion estimated processing factor of 0.27 for A mode of action (MOA) for the being minor. The half life of BAS 510 apple juice concentrate. Even with these thyroid follicular cell adenomas has F is less than 24 hours. Saturation of worst-case assumptions, it was been proposed. This MOA is based on absorption appears to be occurring at determined that the Theoretical the EPA publication ‘‘Assessment of the high dose level. BAS 510 F is Maximum Residue Contribution Thyroid Follicular Cell Tumors,’’ March rapidly and intensively metabolized to a (TMRC) was only 34.0% of the reference 1998, EPA/630/R–97/002. This large number of biotransformation dose for the U.S. population and 77.1% document describes the criteria which products. The hydroxylation of the for children 1–6 years (the highest must be met in order for a compound to diphenyl moiety was the quantitatively exposed age-related subpopulation). be considered under the MOA described most important pathway. Second most Based on the toxicology results, an in that publication. BASF Corporation important was the substitution of the Cl acute dietary risk assessment for BAS believes that BAS 510 F has met the of the 2-chloropyridine part against SH 510 F is most likely not required, but if cited criteria. by conjugation with glutathione. No so, only for non-nursing infants <1 year 6. Threshold effects. Based on a major differences were observed. In old. For dietary exposure estimation, review of the available chronic toxicity hens and goats the residues of concern 100% crop treated and tolerance values data, BASF believes EPA will establish were determined to be parent, the for residues were used. The resulting the RfD for BAS 510 F at 0.05 mg/kg/ hydroxylated metabolite M510 F01 (2- acute exposure prediction for non- day. This RfD for BAS 510 F is based on chloro-N-(4′chloro-5-hydroxy-biphenyl- nursing infants (the highest exposed the 2–year chronic and 2–year 2-yl)nicotinamide), and the glucuronic age-related subpopulation) resulted in oncogenicity studies in rats with a acid of the metabolite M510 F02. an acceptable 10.6% of the acute threshold average NOEL of 5 mg/kg/day 8. Metabolite toxicology. No reference dose at the 95th percentile. If for males and females. Using an additional studies were required for a more realistic scenario were used uncertainty factor of 100, the RfD is metabolite toxicology. assuming percent crop treated and the calculated to be 0.05 mg/kg/day. Based Endocrine disruption. No specific range of residues, a much lower on the acute toxicity data, BASF tests have been conducted with BAS exposure would be obtained. believes that 510 F does not pose any 510 F to determine whether the ii. Drinking water. Estimates of acute dietary risks. chemical may have an effect in humans ground and surface water levels were BAS 510 F was shown to be non- that is similar to an effect produced by determined using SCIGROW and FIRST carcinogenic in mice and dogs. There a naturally occurring estrogen or other models, respectively. The drinking was a slight increase in thyroid endocrine effects. However, there were water level of concerns (DWLOCs) for follicular cell ademonas at the high dose no significant findings in other relevant chronic exposure are obtained by in both sexes in the rat. A threshold- toxicity studies (i.e., subchronic and subtracting the chronic dietary food. based MOA for these tumors based on chronic toxicity, teratology and multi- This is outlined in the following table.

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PERCENTAGES OF REFERENCE DOSE FOR CHRONIC EXPOSURE TO BAS 510 F

U.S. Popu- Children 1– lation (% of 6 (% of RfD) RfD)

Chronic dietary exposure 34.0 77.1

Remainder of RfD available for water (%) (Drinking Water Level of Concern) 66.0 22.9

SCIGROW ground water estimation1 0.015 0.044

FIRST surface water estimation1 0.08 0.24

Total of RfD used by diet and water 34.1 77.4 1 Used highest values predicted from the model for all agricultural uses; assumes 2L/day and 60 kg for adult; 1L/day and 10 kg for child

Overall, using worst-case parameters utilize 34.1% of the RfD for the U.S. was conducted with dosages of 0, 12, the predicted aggregate exposure by all population. For the highest exposed age- 118, and 1,183 mg/kg bw/day. No potential routes for both adults and related subpopulation (children 1–6 impairment of reproductive function children is less than the chronic years), the maximum aggregate exposure was noted at any dose. The parental and reference dose. is predicted to be 77.4% of the reference developmental NOAEL are both 12 mg/ 2. Non-dietary exposure. BAS 510 F is dose. BASF concludes that there is a kg/day. Mild effects in both the parents not currently planned for residential reasonable certainty that no harm will and pups were noted at 118 mg/kg/day uses. Thus, residential exposure is not result from the aggregate exposure to and consisted of an increased incidence aggregated into the risk assessment. residues of BAS 510 F, including of hepatic centrilobular hypertrophy in anticipated dietary and drinking water parents and, in the pups, slightly D. Cumulative Effects exposures and non-occupational decreased body weight and body weight Section 408(b)(2)(D)(v) requires that, exposures. gain (7%) in F2 generation only, and when considering whether to establish, 2. Infants and children—i. only in males. At 1,183 mg/kg/day modify, or revoke a tolerance, the Developmental toxicity in the Rat. A paternal effects included decreased Agency consider ‘‘available developmental study was conducted via body weights and food consumption, information’’ concerning the cumulative oral gavage in rats with dosages of 0, increased liver weights and increased effects of a particular pesticide’s 100, 300 and 1,000 mg/kg bw/day with incidence of hepatic centrilobular residues and ‘‘other substances that a maternal and developmental No- hypertrophy and degeneration. Pup have a common mechanism of toxicity.’’ Adverse-Effect Level (NOAEL) of 1,000 effects at this dose were an increase in BAS 510 F is a foliar fungicide mg/kg. No evidence of developmental pup mortality in the F2 only and a chemically belonging to the carboxin toxicity was observed up to the highest decreased body weight in F1 and F2. class of fungicides. BAS 510 F acts in dose tested. iv. Reference dose. In all reproductive the fungal cell by inhibiting ii. Developmental toxicity in the studies, the NOAEL’s for developmental mitochondrial respiration through rabbit. A developmental study was effects were either equal to or higher inhibition of the succinate-ubiquinone conducted via oral gavage in rabbits than those for the parents. Therefore, oxidase reductase system in Complex II with dosages of 0, 100, 300 and 1,000 BAS 510 F shows no selective toxicity of the mitochondrial electron transport mg/kg bw/day. The NOAEL for maternal for the young. In addition, there were no chain. BAS 510 F shares this mode of toxicity was 100 mg/kg bw/day and was direct neurotoxicity effects noted in action with only one other currently 1,000 mg/kg/day for developmental either the acute or subchronic registered U.S. pesticide - carboxin. toxicity. As noted above in section B.3. neurotoxicity studies. The EPA is currently developing (Reproductive and developmental Based on these results, no additional methodology to perform cumulative risk toxicity), this NOAEL is based on fecal safety factors to protect children are assessments. At this time, there is no alterations and an abortion in a single warranted. Since the reproductive available data to determine whether dam at the next highest dose of 300 mg/ studies NOAEL’s are higher than the BAS 510 F has a common mechanism of kg/day. The dam which displayed the RfD calculated from the chronic rat toxicity with other substances or how to fecal alterations and abortion also study, BASF believes the Reference include this pesticide in a cumulative displayed decreased body weight, body Dose of 0.05 mg/kg/day is also risk assessment. Unlike other pesticides weight gain and food consumption, appropriate to measure safety for infants for which EPA has followed a compared to the group mean, during and children. Therefore, the chronic cumulative risk approach based on a gestation. These decreases occurred Population Adjusted Dose (cPAD) is common mechanism of toxicity, BAS even prior to compound administration. also 0.05 mg/kg bw/day. 510 F does not appear to produce a toxic These decreases in body weight, body F. International Tolerances metabolite produced by other weight gain, and food consumption, substances. prior to compound administration, all A maximum residue level (MRL) has indicate an animal in poor health and not been established for BAS 510 F in E. Safety Determination this poor state of health, rather than any crop by the Codex Alimentarius 1.U.S. population. Using the compound exposure, was likely the Commission. conservative exposure assumptions reason for the fecal alterations and PP 3F6580 described above and based on the abortion. No teratogenic effects were completeness and the reliability of the observed at any dose level. A. Residue Chemistry toxicity data, BASF has estimated that iii. Reproductive toxicity. A two- 1. Plant metabolism. Nature of the aggregate exposure to BAS 510 F will generation reproduction study in rats residue studies (OPPTS Harmonized

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Guideline 860.1300) were conducted in IV, eye irritation of III, skin irritation of discolored/reduced feces in one dam grapes, lettuce and beans as IV, and is not a dermal sensitizer. and an abortion in one dam. This representative crops in order to 2. Genotoxicity. Ames Test (1 Study; finding is not necessarily indicative of characterize the fate of Boscalid (BAS point mutation): Negative; In Vitro a definitive test substance related 510 F) in all crop matrices. In all three CHO/HGPRT Locus Mammalian Cell adverse effect. The dam which crops the BAS 510 F Residues of Mutation Assay (1 Study; point displayed the fecal alterations and Concern (ROC) were characterized as mutation): Negative; In Vitro V79 Cell abortion also displayed decreased body parent BAS 510 F. A confined rotational Cytogenetic Assay (1 Study; weight and body weight gain - crop study also determined that parent Chromosome Damage): Negative; In compared to the group mean - during was the residue of concern in the Vivo Mouse Micronucleus (1 Study; gestation. These decreases occurred representative crops of radish, lettuce Chromosome Damage): Negative; In even prior to compound administration. and wheat. Vitro Rat Hepatocyte (1 Study; DNA Food consumption was also 2. Analytical method. In plants the damage and repair): Negative. BAS 510 dramatically decreased in this dam parent residue is extracted using an F has been tested in a total of 5 genetic compared to the other animals in the aqueous organic solvent mixture toxicology assays consisting of in vitro group. Every day from gestation day 1 followed by liquid/liquid partitioning and in vivo studies. It can be stated that to 12, this dam had food consumption and a column clean up. Quantitation is BAS 510 F did not show any mutagenic, values, which were less than half the by GC/MS. The extract is treated with clastogenic or other genotoxic activity mean for the group (compound enzymes in order to release the when tested under the conditions of the administration began on day GD 7) conjugated glucuronic acid metabolite. studies mentioned above. Therefore, From gestation day 13 to 26 (when the The residues are then isolated by liquid/ BAS 510 F does not pose a genotoxic animal aborted and was sacrificed) this liquid partition followed by column hazard to humans. dam ate essentially nothing (food 3. Reproductive and developmental chromatography. The hydroxylated consumption during this time period toxicity. The reproductive and metabolite is acetylated followed by a was less than or equal to 1.5 grams/day). developmental toxicity of BAS 510 F column clean-up. The parent and These decreases in body weight, body was investigated in a two-generation rat acetylated metabolite are quantitated by weight gain, and food consumption, reproduction study as well as in rat and GC/ECD. prior to compound administration, all rabbit teratology studies. indicate an animal in poor health and 3. Magnitude of the residues. Field There were no adverse effects on this poor state of health, rather than trials were carried out in order to reproduction in the two-generation compound exposure, was likely the determine the magnitude of the residue study at any dose tested. Pup effects reason for the fecal alterations and in soybean and soybean aspirated grain were observed, with parental toxicity, at abortion. fraction. Field trials were conducted in the highest dose tested only. In both At the high dose of 1,000 mg/kg bw the United States and Canada in the parental generations, reduced food a maternal body weight gain decrease required regions. Field trials were consumption and reduced bodyweight compared to controls of 81% was carried out using the maximum label gain were observed at 10,000 ppm. Both observed during the treatment period. rate, the maximum number of absolute and relative liver weights were Reduced food consumption, reduced applications, and the minimum increased 21% in F1 generation parental body weight and abortions in three preharvest interval. In addition, a females at the high dose of 10,000 ppm dams, were also seen at 1,000 mg/kg/ processing study was conducted on the only. Hepatocellular centrilobular day. Evidence of developmental toxicity soybean to determine concentration hypertrophy (usually slight) was was not seen at any dose tested. factors. Tier III field rotational crop observed in many animals of both sexes Developmental neurotoxicity was not studies were conducted to support in both the F0 and F1 generations at observed at any dose in the rotational crop tolerances for soybean. 1,000 ppm, and in all animals of both developmental neurotoxicity study. No B. Toxicological Profile sexes at 10,000 ppm. Additionally, some maternal toxic effects were noted at any of the parental male rats at 10,000 ppm, dose in this study. No developmental 1. Acute toxicity. Based on available in both generations, displayed toxicity was seen at the low dose of 12 acute toxicity data BAS 510 F and its centrilobular liver cell degeneration. mg/kg/day (100 ppm). Reduced body formulated products do not pose acute Developmental toxicity was seen at weights and body weight gains were toxicity risks. The acute toxicity studies 1,000 ppm in the form of decreased pup seen at 118 mg/kg/day (1,000 ppm) place technical BAS 510 F in toxicity weights in the F2 males, and at 10,000 during PND 1–4. Reduced body weights category IV for acute oral; category III ppm in the form of decreased pup and body weight gains were seen at for acute dermal and category IV for weight for both males and females of 1,183 mg/kg/day (10,000 ppm) as well acute inhalation. BAS 510 F is category both the F1 and F2 generations. The as decreased absolute pup brain weight IV for both eye and skin irritation, and parental systemic and developmental at day 11 p.p. (both sexes) and it is not a dermal sensitizer. Two toxicity NOAEL’s are both 100 ppm (12 decreased brain length (males only) at formulated end use products are mg/kg/day). day 11 p.p. The reduced pup brain proposed, a Water Dispersible Granule No teratogenic effects were noted in weights and decreased brain length go (WG) termed BAS 510 02F containing either the rat or rabbit developmental hand-in-hand and both are due to the 70% BAS 510 F and a Water Dispersible studies. In the rat study, evidence of decreased pup weights seen at this dose. Granule (WG) termed BAS 516 02F maternal or developmental toxicity was In this respect, it should be noted that containing a 2:1 mixture of BAS 510 F not observed at any dose (highest dose pup brain weights relative to body and BAS 500F. BAS 510 02F has an tested of 1,000 mg/kg/day). Neither a weight at p.p. 11 were not significantly acute oral toxicity category of III, acute maternal nor developmental LOAEL different from controls at this dose. dermal of III, acute inhalation of IV, eye were found since the highest dose tested Though no maternal toxicity was seen irritation of III, skin irritation of IV, and was the NOAEL in both studies. in this study, other studies using similar is not a dermal sensitizer. BAS 516 02F In the rabbit teratology study, doses of BAS 510 F resulted in maternal has an acute oral toxicity category of III, maternal toxicity observed at the mid toxicity. A dose of 118 mg/kg/day in acute dermal of III, acute inhalation of dose of 300 mg/kg bw consisted of female rats of the same strain in the

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multigeneration study, resulted in an summaries of chronic toxicity studies based on the EPA publication increased incidence of hepatic submitted to EPA. ‘‘Assessment of Thyroid Follicular Cell centrilobular hypertrophy — a The chronic toxicity/oncogenicity Tumors’’ (EPA/630/R–97/002, March, parameter which could not have been studies with BAS 510 F include a 12– 1998) has been proposed. BASF believes detected in the DNT study as liver month feeding study with Beagle dogs, the data to support this proposed mode histopathology on parental animals was an 18–month B63CF1 mouse feeding of action are strong, and that the thyroid not performed in the DNT study. study, a 24–month Wistar rat chronic tumors seen in the rat following BAS 4. Subchronic toxicity. The feeding study and a 24–month Wistar 510 exposure have a threshold. In subchronic toxicity of BAS 510 F was rat oncogenicity study. addition, a battery of genotoxicity investigated in 90–day feeding studies At the highest dose tested in dogs, studies demonstrated that BAS 510 F with rats, mice and dogs, and in a 28– effects observed consisted primarily of has no genotoxic or clastogenic day dermal administration study in rats. increased liver and thyroid weights and potential. Therefore, BASF believes that A 90–day neurotoxicity study in rats some serum clinical chemistry changes. the threshold approach to regulating was also performed. Generally, mild The NOAEL was 800 ppm (21.8 mg/kg BAS 510 F is appropriate. Also, it toxicity was observed. At high dose bw males; 22.1 mg/kg bw females). should be noted that, while the Agency levels (doses above the LOAELs) in Decreased body weights were seen in has in the past considered tumors of this feeding studies, all three species males in the mouse chronic study at type to be potential human carcinogens, displayed alterations in various clinical doses of 400 ppm and above. Decreased the European Union has published a chemistry parameters. These clinical female body weight was seen at doses of policy which considers these tumor chemistry alterations were likely 2000 ppm and above. The target organ types, when they occur at low incidence secondary to general toxicity. in this study was the liver. In both the rates in the rat, to not be relevant to Statistically significant increased rat chronic and oncogenicity studies, man. (The publication: ‘‘European absolute and relative thyroid weights the highest dose tested of 15,000 ppm Commission, European Chemicals were observed in male rats only at doses exceeded a maximum tolerated dose Bureau, ECBI/49/99 — Add. 1 Rev. 2; at and above the LOAEL. Increased (MTD) and was discontinued after 17 Draft Summary Record, Commission absolute and relative liver weights were months. Effects observed at the next Group of Specialized Experts in the observed in both sexes at doses above highest dose of 2,500 ppm primarily fields of Carcinogenicity, Mutagenicity the LOAEL in rats and dogs. Increased centered around the thyroid and liver. and Reprotoxicity, Meeting at Arona, 1 absolute and relative liver weights were Overall, mild toxicity was observed – 2 September 1999).’’ Therefore, BASF seen in both sexes of the mouse at lower with chronic exposure to BAS 510 F. No believes that these tumors are not likely doses. However, the increases in liver evidence of treatment-induced relevant to humans and, if these tumors weights at these lower doses in the oncogenicity was observed in the mouse are to be considered relevant to humans, mouse were not deemed to be or dog studies. A slight increase in the threshold approach to cancer risk compound related due to the unusually thyroid follicular cell adenomas was assessment is appropriate. low concurrent control liver weight seen in both sexes at the high dose 7. Animal metabolism. In the rat, the values. At doses above the LOAELs, when the data from both rat bioassays predominant route of excretion of BAS liver weight increases were supported are combined. 510 F is fecal with urinary excretion by histopathology alterations in the rat A mode of action (MOA) for the being minor. The half-life of BAS 510 F and mouse, but not in the dog. Overall, thyroid follicular cell adenomas has is less than 24 hours. Saturation of only mild toxicity was observed in oral been proposed. This MOA is based on absorption appears to be occurring at subchronic testing. the EPA publication ‘‘Assessment of the high dose level. BAS 510 F is In the 28–day repeat dose dermal Thyroid Follicular Cell Tumors,’’ March rapidly and intensively metabolized to a study, no systemic effects were noted up 1998, EPA/630/R–97/002. This large number of biotransformation to the highest dose tested of 1,000 mg/ document describes the criteria, which products. The hydroxylation of the kg/day. must be met in order for a compound to diphenyl moiety was the quantitatively In a 90–day rat neurotoxicity study, be considered under the MOA described most important pathway. Second most there was no mortality, signs of clinical in that publication. BASF Corporation important was the substitution of the Cl toxicity, or adverse effects on food believes that BAS 510 F has met the of the 2-chloropyridine part against SH consumption or body weight at any dose cited criteria. by conjugation with glutathione. No level in either sex. No signs of 6. Threshold effects. Based on a major differences were observed with neurotoxicity were observed during review of the available chronic toxicity regard to label, sex, and dose level. clinical observations, functional data, BASF believes EPA will establish In hens and goats the residues of observation batteries, or motor activity the Reference Dose (RfD) for BAS 510 F concern were determined to be parent, measurements of neuropathology. at 0.05 mg/kg/day. This RfD for BAS 510 the hydroxylated metabolite M510 F01 Therefore, there were no selective F is based on the 2–year chronic and 2– (2-chloro-N-(4′chloro-5-hydroxy- neurotoxic effects. Adverse effects were year oncogenicity studies in rats with a biphenyl-2-yl)nicotinamide), and the not seen even at the highest dose level threshold average NOEL of 5 mg/kg/day glucuronic acid of the metabolite M510 tested. A LOAEL was not found and the for males and females. Using an F02. NOAEL is the highest tested of 15,000 uncertainty factor of 100, the RfD is 8. Metabolite toxicology. No ppm (1,050 mg/kg/day in males; 1,272 calculated to be 0.05 mg/kg/day. Based additional studies were required for mg/kg/day in females). on the acute toxicity data, BASF metabolite toxicology. 5. Chronic toxicity. Based on review believes that 510 F does not pose any 9. Endocrine disruption. No specific of the available data, the Reference Dose acute dietary risks. tests have been conducted with BAS (RfD) for BAS 510 F will be based on a BAS 510 F was shown to be non- 510 F to determine whether the 24–month feeding study in rats with a carcinogenic in mice and dogs. There chemical may have an effect in humans threshold No-Effect Level (NOEL) of 5 was a slight increase in thyroid that is similar to an effect produced by mg/kg/day. Using an uncertainty factor follicular cell adenomas at the high dose a naturally occurring estrogen or other of 100, the RfD is calculated to be 0.05 in both sexes in the rat. A threshold- endocrine effects. However, there were mg/kg/day. The following are based mode of action for these tumors no significant findings in other relevant

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toxicity studies (i.e., subchronic and tolerance value for residues. Even with highest exposed age-related chronic toxicity, teratology and multi- these worst-case assumptions, it was subpopulation) resulted in an generation reproductive studies) which determined that the Theoretical acceptable 8.8% of the acute reference would suggest that BAS 510 F produces Maximum Residue Contribution dose at the 95th percentile. If a more endocrine related effects. (TMRC) was only 30.1% of the reference realistic scenario were used assuming C. Aggregate Exposure dose for the U.S. population and 62.5% percent crop treated and the range of for children 1–6 years (the highest residues, a much lower exposure would 1. Dietary exposure—i. Food. A exposed age-related subpopulation). be obtained. chronic dietary exposure analysis was conducted for BAS 510 F including Based on the toxicology results, an ii. Drinking water. Estimates of crops which are target uses as well as acute dietary risk assessment for BAS ground and surface water levels were inadvertent residues in rotational crops. 510 F is most likely not required, but if determined using SCIGROW and FIRST The analysis assumed 100% of the crops so only for children 1–6 years. For models, respectively. The drinking were treated, default processing factors dietary exposure estimation, 100% crop water level of concerns (DWLOCs) for (even though much lower treated and tolerance values for residues chronic exposure is obtained by experimentally-derived processing were used. The resulting acute exposure subtracting the chronic dietary food. factors are available), and used the prediction for children 1–6 years (the This is outlined in the following table.

PERCENTAGES OF REFERENCE DOSE FOR CHRONIC EXPOSURE TO BAS 510 F

U.S. Population Children 1–6 (% K (% of RfD) of RfD)

Chronic dietary exposure 30.1 62.5

Remainder of RfD available for water (%) (Drinking Water Level of Concern) 69.9 37.5

SCIGROW ground water estimation1 0.015% 0.044%

FIRST surface water estimation1 0.08% 0.24%

Total of RfD used by diet and water 30.2% 62.8% 1 Used highest values predicted from the model for all agricultural uses; assumes 2L/day and 60 kg for adult; 1L/day and 10 kg for child

Overall, using worst-case parameters toxicity with other substances or how to Adverse-Effect Level (NOAEL) of 1,000 the predicted aggregate exposure by all include this pesticide in a cumulative mg/kg. No evidence of developmental potential routes for both adults and risk assessment. Unlike other pesticides toxicity was observed up to the highest children is less than the chronic for which EPA has followed a dose tested. reference dose. cumulative risk approach based on a 3. Developmental toxicity in the 2. Non-dietary exposure. BAS 510 F is common mechanism of toxicity, BAS rabbit. A developmental study was not currently planned for residential 510 F does not appear to produce a toxic conducted via oral gavage in rabbits uses. Thus, residential exposure is not metabolite produced by other with dosages of 0, 100, 300 and 1,000 aggregated into the risk assessment. substances. mg/kg bw/day. The NOAEL for maternal toxicity was 100 mg/kg bw/day and was D. Cumulative Effects E. Safety Determination. 1,000 mg/kg/day for developmental Section 408(b)(2)(D)(v) requires that, 1. U.S. population. Using the toxicity. As noted above in section 3.0, when considering whether to establish, conservative exposure assumptions this NOAEL is based on fecal alterations modify, or revoke a tolerance, the described above and based on the and an abortion in a single dam at the Agency consider ‘‘available completeness and the reliability of the next highest dose of 300 mg/kg/day. The information’’ concerning the cumulative toxicity data, BASF has estimated that dam which displayed the fecal effects of a particular pesticide’s aggregate exposure to BAS 510 F will alterations and abortion also displayed residues and ‘‘other substances that utilize 30.2% of the RfD for the U.S. decreased body weight, body weight have a common mechanism of toxicity.’’ population. For the highest exposed age- gain and food consumption, compared BAS 510 F is a foliar fungicide related subpopulation (children 1–6 to the group mean, during gestation. chemically belonging to the carboxin years), the maximum aggregate exposure These decreases occurred even prior to class of fungicides. BAS 510 F acts in is predicted to be 62.8% of the reference compound administration. These the fungal cell by inhibiting dose. BASF concludes that there is a decreases in body weight, body weight mitochondrial respiration through reasonable certainty that no harm will gain, and food consumption, prior to inhibition of the succinate-ubiquinone result from the aggregate exposure to compound administration, all indicate oxidase reductase system in Complex II residues of BAS 510 F, including an animal in poor health and this poor of the mitochondrial electron transport anticipated dietary and drinking water state of health, rather than compound chain. BAS 510 F shares this mode of exposures and non-occupational exposure, was likely the reason for the action with only one other currently exposures. fecal alterations and abortion. No registered U.S. pesticide — carboxin. 2. Infants and children—i. teratogenic effects were observed at any The EPA is currently developing developmental toxicity in the Rat. A dose level. methodology to perform cumulative risk developmental study was conducted via i. Reproductive toxicity. A two- assessments. At this time, there is no oral gavage in rats with dosages of 0, generation reproduction study in rats available data to determine whether 100, 300 and 1,000 mg/kg bw/day with was conducted with dosages of 0, 12, BAS 510 F has a common mechanism of a maternal and developmental No- 118, and 1,183 mg/kg bw/day. No

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impairment of reproductive function collaboratively by Buncombe County, new Project XL pilot projects. The was noted at any dose. The parental and the North Carolina Department of implementation of several of these developmental NOAEL are both 12 mg/ Environment and Natural Resources innovative pilots is on-going. Buncombe kg/day. Mild effects in both the parents (NCDENR), and EPA. The original FPA County is one of the many innovative and pups were noted at 118 mg/kg/day was agreed upon and signed by each pilots that is currently in the and consisted of an increased incidence participant on September 18, 2001. implementation phase. of hepatic centrilobular hypertrophy in Since that time, Buncombe County has In the Final Project Agreement, parents and, in the pups, slightly utilized the expertise of a couple of Buncombe County proposes to use decreased body weight and body weight widely-recognized experts in the certain bioreactor techniques (e.g., gain (7%) in F2 generation only, and bioreactor field—Dr. Morton Barlaz leachate recirculation) at its municipal only in males. At 1,183 mg/kg/day (North Carolina State University), and solid waste landfill (MSWLF), to paternal effects included decreased Dr. Debra Reinhart (University of accelerate the biodegradation of landfill body weights and food consumption, Central Florida). These technical experts waste and decrease the time it takes for increased liver weights and increased have made a few professional the waste to stabilize in the landfill. The incidence of hepatic centrilobular recommendations to Buncombe County principal objectives of this bioreactor hypertrophy and degeneration. Pup regarding the Buncombe County XL project are to evaluate performance effects at this dose were an increase in bioreactor landfill project. These of an alternative landfill liner and to pup mortality in the F2 only and recommendations have been assess waste decomposition when decreased body weight in F1 and F2. documented in a Preliminary Design recirculated leachate is added to the ii. Reference dose. In all reproductive Report (PDR) submitted to EPA and the landfill. To achieve the objectives of the studies, the NOAEL’s for developmental State in September 2002. The project, Buncombe County proposes to effects were either equal to or higher Preliminary Design Report contains a recirculate leachate in MSWLF cells to than those for the parents. Therefore, table that lays out seven specific be constructed with a liner that differs BAS 510 F shows no selective toxicity proposed FPA modifications. For each in certain respects from the liner design for the young. In addition, there were no of the proposed modifications, the table specified in the Subtitle D regulations. direct neurotoxicity effects noted in identifies: the FPA agreed-upon original In order to carry out this project, either the acute or subchronic criteria, proposed modification to FPA Buncombe County sought relief from neurotoxicity studies. language, and reason for the current Resource Conservation and Based on these results, no additional modification. The recommendations are Recovery Act (RCRA) Subtitle D safety factors to protect children are based upon the best professional regulations (40 CFR part 258), which set warranted. Since the reproductive judgement of the technical experts being forth design and operating criteria. studies NOAEL’s are higher than the utilized by Buncombe County. The FPA Buncombe County desires to construct RfD calculated from the chronic rat modifications will help to further clarify the remainder of its landfill cells with study, BASF believes the Reference the existing FPA. The FPA an approved alternative liner while Dose of 0.05 mg/kg/day is also modifications also identify what implementing this leachate appropriate to measure safety for infants parameters the recognized experts recirculation/gas recovery project. and children. Therefore, the chronic perceive to be necessary (e.g., where the Buncombe County also sought Population Adjusted Dose (cPAD) is original FPA language may have been regulatory flexibility from the also 0.05 mg/kg bw/day. silent), or unnecessary and not very prohibition in 40 CFR 258.28, Liquid F. International Tolerances useful. The proposed FPA modifications Restrictions, which precludes the contain suggestions for specific addition of useful bulk or non- A maximum residue level (MRL) has parameters that are directly applicable containerized liquid amendments. not been established for BAS 510 F in to the decomposition of wastes, thereby During periods of low leachate any crop by the Codex Alimentarius steering the State of North Carolina, generation, Buncombe County wanted Commission. EPA, and Buncombe County towards to be able to supplement the leachate [FR Doc. 03–27955 Filed 11–5–03; 8:45 am] more useful and consistent measuring of flow with water from the adjoining BILLING CODE 6560–50–P critical data. EPA has determined that French Broad River to maintain these FPA modifications would not moisture levels in the landfill. Some of warrant a change to the rule; however, the superior environmental benefits that ENVIRONMENTAL PROTECTION EPA is providing notice to the public AGENCY Buncombe County expects to achieve and stakeholders regarding these with this project include: Improved [FRL–7583–8] modifications to the FPA for Buncombe leachate quality; reduction in the County. potential for uncontrolled releases of Regulatory Innovation Pilot Projects The Project XL program, announced leachate to contaminate the (Project XL) in the Federal Register on May 23, 1995 groundwater, or gas to contaminate the AGENCY: Environmental Protection (60 FR 27282), gives regulated entities air during the post-closure phase Agency (EPA). the flexibility to develop alternative (should a containment system failure ACTION: Notice of availability of the final strategies that will replace or modify occur); increased gas yield and capture; project agreement modifications to specific regulatory or procedural rapid waste biodegradation and Buncombe County Leachate requirements on the condition that they stabilization; increased lifespan of the Recirculation/Gas Recovery (Bioreactor) produce greater environmental benefits. landfill resulting in less need for Project XL pilot. In 1995, EPA had set a goal of construction of additional landfills; implementing fifty XL projects reduced post-closure costs; and faster SUMMARY: EPA is requesting comments undertaken in full partnership with the reclamation of land for future use. The on modifications to the Project XL Final States. The Agency had achieved the Buncombe County proposal is one of Project Agreement (FPA) for Buncombe goal of implementing 50 innovative several bioreactor XL project proposals County. The FPA is a voluntary pilot projects, and as of January, 2003 that are currently being implemented agreement that was developed EPA is no longer accepting proposals for through the Project XL program. This

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project to allow recirculation of leachate be included on the Buncombe County Federal Deposit Insurance Corporation. using an alternative landfill liner design Project XL mailing list about future Valerie J. Best, will apply only to the Buncombe public meetings, XL progress reports Assistant Executive Secretary. County Landfill in Asheville, North and other mailings from Buncombe [FR Doc. 03–28147 Filed 11–4–03; 3:57 pm] Carolina and the specific landfill cells at County on the XL project, contact Bob that landfill. Modifications to the terms Hunter, Director, Buncombe County BILLING CODE 6714–01–M and conditions pertaining to this XL General Services Department, (828) pilot project are contained in the Final 250–5466. For information on all other Project Agreement (FPA), on which EPA aspects of the XL Program, contact FEDERAL RESERVE SYSTEM is requesting comment today. The FPA Donna Perla at the following address: sets forth the intentions of EPA, Office of Policy and Environmental Formations of, Acquisitions by, and Buncombe County, and the State of Innovation, U.S. EPA, Mail Code 1807, Mergers of Bank Holding Companies North Carolina with regard to the 1200 Pennsylvania Avenue, NW., implementation of the project and the Washington, DC 20460. Additional The companies listed in this notice expected benefits. After review of the information on Project XL, including have applied to the Board for approval, comments received during the public documents referenced in this notice, pursuant to the Bank Holding Company comment period and revision of the other EPA policy documents related to Act of 1956 (12 U.S.C. 1841 et seq.) FPA, as appropriate, the FPA Project XL, regional XL contacts, (BHC Act), Regulation Y (12 CFR Part modification will be signed by application information, and representatives from the EPA, the State descriptions of existing XL projects and 225), and all other applicable statutes of North Carolina, and Buncombe proposals, is available via the Internet at and regulations to become a bank County. http://www.epa.gov/projectxl. holding company and/or to acquire the The legal implementing mechanism assets or the ownership of, control of, or for this project is a site-specific rule. Dated: October 31, 2003. the power to vote shares of a bank or The proposed rule was made available Donna Perla, bank holding company and all of the for public comment on April 16, 2001 Acting Director, Office of Environmental banks and nonbanking companies (66 FR 19403). The final rule was Policy Innovation. owned by the bank holding company, promulgated on August 22, 2001 (66 FR [FR Doc. 03–27952 Filed 11–5–03; 8:45 am] including the companies listed below. 44061). Through the final rule, the BILLING CODE 6560–50–P design of the bioreactor landfill is The applications listed below, as well enforceable in the same way that current as other related filings required by the RCRA standards for landfills are Board, are available for immediate enforceable to ensure that management FEDERAL DEPOSIT INSURANCE inspection at the Federal Reserve Bank of nonhazardous solid waste is CORPORATION indicated. The application also will be performed in a manner that is protective available for inspection at the offices of of human health and the environment. Notice of Agency Meeting the Board of Governors. Interested The Final Project Agreement and the persons may express their views in site-specific rule do not in any way Pursuant to the provisions of the writing on the standards enumerated in affect the provisions or applicability of ‘‘Government in the Sunshine Act’’ (5 the BHC Act (12 U.S.C. 1842(c)). If the any other existing or future regulations. U.S.C. 552b), notice is hereby given that proposal also involves the acquisition of at 10:49 a.m. on Tuesday, November 4, DATES: The period for submission of a nonbanking company, the review also 2003, the Board of Directors of the comments ends on December 8, 2003. includes whether the acquisition of the Federal Deposit Insurance Corporation nonbanking company complies with the ADDRESSEES: All comments on the met in closed session to consider standards in section 4 of the BHC Act modification to the Final Project matters relating to the Corporation’s (12 U.S.C. 1843). Unless otherwise Agreement should be sent to: Sherri corporate activities. Walker, U.S. EPA, Ariel Rios Building, noted, nonbanking activities will be Mail Code 1807, 1200 Pennsylvania In calling the meeting, the Board conducted throughout the United States. Avenue, NW., Washington, DC 20460. determined, on motion of Director James Additional information on all bank Comments may also be received via E. Gilleran (Director, Office of Thrift holding companies may be obtained electronic mail sent to: Supervision), seconded by Vice from the National Information Center Chairman John M. Reich, concurred in [email protected]. website at www.ffiec.gov/nic/. by Director John D. Hawke, Jr. FOR FURTHER INFORMATION CONTACT: To (Comptroller of the Currency), and Unless otherwise noted, comments obtain a copy of the Project Fact Sheet Chairman Donald E. Powell, that regarding each of these applications or the Final Project Agreement, contact: Corporation business required its must be received at the Reserve Bank Sherri Walker, U.S. Environmental consideration of the matters on less than indicated or the offices of the Board of Protection Agency, Mail Code 1807, seven days’ notice to the public; that the Governors not later than December 1, 1200 Pennsylvania Avenue, NW., public interest did not require 2003. Washington, DC 20460. The FPA and consideration of the matters in a related documents are also available via A. Federal Reserve Bank of meeting open to public observation; and Richmond (A. Linwood Gill, III, Vice the Internet at the following location: that the matters could be considered in http://www.epa.gov/projectxl/ President) 701 East Byrd Street, a closed meeting by authority of Richmond, Virginia 23261-4528: buncombe/index.htm. In addition, the subsection (c)(2) of the ‘‘Government in original FPA and modified FPA are the Sunshine Act’’ (5 U.S.C. 552b(c)(2)). 1. New Century Bancorp, Inc., Dunn, available at the Buncombe County North Carolina; to acquire 100 percent The meeting was held in the Board General Services Department, 30 Valley of the voting shares of New Century Room of the FDIC Building located at Street, Asheville, NC. Questions to EPA Bank of Fayetteville, Fayetteville, North 550—17th Street, NW., Washington, DC. regarding the documents can be directed Carolina. to Sherri Walker at (202) 566–2186. To Dated: November 4, 2003.

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Board of Governors of the Federal Reserve GENERAL SERVICES EFFECTIVE DATE: November 6, 2003. System, October 31, 2003. ADMINISTRATION FOR FURTHER INFORMATION CONTACT: Dr. Jennifer J. Johnson, Art Liang, National Center for Infectious Secretary of the Board. Office of Governmentwide Policy; Diseases, Centers for Disease Control [FR Doc. 03–27915 Filed 11–5–03; 8:45 am] Cancellation of an Optional Form by and Prevention (CDC), 1600 Clifton BILLING CODE 6210–01–S the Department of State Road, NE., Mailstop G–24, Atlanta, AGENCY: Office of Governmentwide Georgia 30333, telephone (404) 639– Policy, GSA. 2213 FEDERAL RESERVE SYSTEM ACTION: Notice. SUPPLEMENTARY INFORMATION: Section Notice of Proposals to Engage in 103(d) of the Americans with SUMMARY: The Department of State is Permissible Nonbanking Activities or Disabilities Act of 1990, 42 U.S.C. cancelling the following Optional Form: to Acquire Companies that are 12113(d), requires the Secretary of OF 253, Diplomatic Pouch Engaged in Permissible Nonbanking Health and Human Services to: Certification and Receipt. Activities 1. Review all infectious and DATES: Effective November 6, 2003. communicable diseases which may be The companies listed in this notice FOR FURTHER INFORMATION CONTACT: Mr. transmitted through handling the food have given notice under section 4 of the Charles Cunningham, Department of supply; Bank Holding Company Act (12 U.S.C. State, 202–312–9605. 2. Publish a list of infectious and communicable diseases which are 1843) (BHC Act) and Regulation Y (12 Dated: October 27, 2003. CFR Part 225) to engage de novo, or to transmitted through handling the food Barbara M. Williams, supply; acquire or control voting securities or Deputy Standard and Optional Forms assets of a company, including the 3. Publish the methods by which such Management Officer, General Services diseases are transmitted; and companies listed below, that engages Administration. 4. Widely disseminate such either directly or through a subsidiary or [FR Doc. 03–27887 Filed 11–5–03; 8:45 am] other company, in a nonbanking activity information regarding the list of BILLING CODE 6820–34–M that is listed in § 225.28 of Regulation Y diseases and their modes of (12 CFR 225.28) or that the Board has transmissibility to the general public. determined by Order to be closely Additionally, the list is to be updated DEPARTMENT OF HEALTH AND related to banking and permissible for annually. HUMAN SERVICES bank holding companies. Unless Since the last publication of the list on September 27, 2002 (67 FR 61109), otherwise noted, these activities will be Centers for Disease Control and conducted throughout the United States. new information has been reviewed and Prevention added. Norwalk and Norwalk-like Each notice is available for inspection viruses, previously listed in Part l, are at the Federal Reserve Bank indicated. Diseases Transmitted Through the Food Supply now identified as Noroviruses so as to The notice also will be available for conform with current scientific inspection at the offices of the Board of AGENCY: Centers for Disease Control and nomenclature. Governors. Interested persons may Prevention (CDC), Department of Health I. Pathogens Often Transmitted by Food express their views in writing on the and Human Services (HHS). question whether the proposal complies Contaminated by Infected Persons Who ACTION: with the standards of section 4 of the Notice of annual update of list Handle Food, and Modes of BHC Act. Additional information on all of infectious and communicable Transmission of Such Pathogens bank holding companies may be diseases that are transmitted through handling the food supply and the The contamination of raw ingredients obtained from the National Information from infected food-producing animals Center website at www.ffiec.gov/nic/. methods by which such diseases are transmitted. and cross-contamination during Unless otherwise noted, comments processing are more prevalent causes of regarding the applications must be SUMMARY: Section 103(d) of the foodborne disease than is contamination received at the Reserve Bank indicated Americans with Disabilities Act of 1990, of foods by persons with infectious or or the offices of the Board of Governors Pub. L. 101–336, requires the Secretary contagious diseases. However, some not later than November 20, 2003. to publish a list of infectious and pathogens are frequently transmitted by A. Federal Reserve Bank of New communicable diseases that are food contaminated by infected persons. York (Jay Bernstein, Bank Supervision transmitted through handling the food The presence of any one of the Officer) 33 Liberty Street, New York, supply and to review and update the list following signs or symptoms in persons New York 10045-0001: annually. The Centers for Disease who handle food may indicate infection 1. United Overseas Bank Limited, Control and Prevention (CDC) published by a pathogen that could be transmitted Singapore; to engage de novo through a final list on August 16, 1991 (56 FR to others through handling the food UOB Kay Hian Inc., New York, New 40897) and updates on September 8, supply: Diarrhea, vomiting, open skin York, in private placement and 1992 (57 FR 40917); January 13, 1994 sores, boils, fever, dark urine, or securities brokerage services, pursuant (59 FR 1949); August 15, 1996 (61 FR jaundice. The failure of food-handlers to to section 225.28(b)(7)(i) and (iii) of 42426); September 22, 1997 (62 FR wash hands (in situations such as after Regulation Y. 49518–9); September 15, 1998 (63 FR using the toilet, handling raw meat, 49359), September 21, 1999 (64 FR cleaning spills, or carrying garbage, for Board of Governors of the Federal Reserve 51127); September 27, 2000 (65 FR example), wear clean gloves, or use System, October 31, 2003. 58088), September 10, 2001 (66 FR clean utensils is responsible for the Jennifer J. Johnson, 47030), and September 27, 2002 (67 FR foodborne transmission of these Secretary of the Board. 61109). The final list has been reviewed pathogens. Non-foodborne routes of [FR Doc.03–27916 Filed 11–5–03; 8:45 am] in light of new information and has transmission, such as from one person BILLING CODE 6210–01–S been revised as set forth below. to another, are also major contributors

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in the spread of these pathogens. Dated: October 31, 2003. DEPARTMENT OF HEALTH AND Pathogens that can cause diseases after Joseph R. Carter, HUMAN SERVICES an infected person handles food are the Deputy Chief Operating Officer, Centers for following: Disease Control and Prevention (CDC). Food and Drug Administration Noroviruses [FR Doc. 03–27923 Filed 11–5–03; 8:45 am] [Docket Nos. 2002P–0506 and 2003P–0021] Hepatitis A virus BILLING CODE 4163–18–P Salmonella Typhi* Determination That Hyaluronidase For Shigella species Injection Was Not Withdrawn From Staphylococcus aureus Sale for Reasons of Safety or Streptococcus pyogenes DEPARTMENT OF HEALTH AND HUMAN SERVICES Effectiveness II. Pathogens Occasionally Transmitted AGENCY: Food and Drug Administration, by Food Contaminated by Infected Food and Drug Administration HHS. Persons Who Handle Food, But Usually ACTION: Notice. Transmitted by Contamination at the [Docket No. 2003N–0017] Source or in Food Processing or by SUMMARY: The Food and Drug Non-foodborne Routes Agency Information Collection Administration (FDA) is announcing its Other pathogens are occasionally Activities; Announcement of Office of determination that hyaluronidase for transmitted by infected persons who Management and Budget Approval; injection (Wydase) was not withdrawn handle food, but usually cause disease Impact of Risk Management Programs from sale for reasons of safety or when food is intrinsically contaminated on the Practice of Pharmacy effectiveness. While this determination or cross-contaminated during processing will allow FDA to approve abbreviated or preparation. Bacterial pathogens in AGENCY: Food and Drug Administration, new drug applications (ANDAs) for this category often require a period of HHS. hyaluronidase for injection, in temperature abuse to permit their considering whether to file an ANDA for ACTION: Notice. multiplication to an infectious dose this product, future applicants are before they will cause disease in advised that such an application raises SUMMARY: consumers. Preventing food contact by The Food and Drug complex issues regarding the persons who have an acute diarrheal Administration (FDA) is announcing characterization of the active ingredient. that a collection of information entitled illness will decrease the risk of FOR FURTHER INFORMATION CONTACT: ‘‘Impact of Risk Management Programs transmitting the following pathogens: Carol E. Drew, Center for Drug on the Practice of Pharmacy ‘‘has been Campylobacter jejuni Evaluation and Research (HFD–7), Food Cryptosporidium parvum approved by the Office of Management and Drug Administration, 5600 Fishers Entamoeba histolytica and Budget (OMB) under the Paperwork Lane, Rockville, MD 20857, 301–594– Enterohemorrhagic Escherichia coli Reduction Act of 1995. 2041. Enterotoxigenic Escherichia coli Giardia lamblia FOR FURTHER INFORMATION CONTACT: SUPPLEMENTARY INFORMATION: In 1984, Nontyphoidal Salmonella Karen Nelson, Office of Management Congress enacted the Drug Price Taenia solium Programs (HFA–250), Food and Drug Competition and Patent Term Vibrio cholerae 01 Administration, 5600 Fishers Lane, Restoration Act of 1984 (Public Law 98– Yersinia enterocolitica Rockville, MD 20857, 301–827–1482. 417) (the 1984 amendments), which authorized the approval of duplicate References SUPPLEMENTARY INFORMATION: In the versions of drug products approved Federal Register of July 11, 2003, (68 FR 1. World Health Organization. Health under an ANDA procedure. ANDA surveillance and management procedures for 41384), the agency announced that the sponsors must, with certain exceptions, food-handling personnel: report of a WHO proposed information collection had show that the drug for which they are consultation. World Health Organization been submitted to OMB for review and technical report series; 785. Geneva: World seeking approval contains the same clearance under 44 U.S.C. 3507. An active ingredient in the same strength Health Organization, 1989. agency may not conduct or sponsor, and 2. Frank JF, Barnhart HM. Food and dairy and dosage form as the ‘‘listed drug,’’ sanitation. In: Last JM, ed. Maxcy-Rosenau a person is not required to respond to, which is a version of the drug that was public health and preventive medicine, 12th a collection of information unless it previously approved under a new drug edition. New York Appleton-Century-Crofts, displays a currently valid OMB control application (NDA). Sponsors of ANDAs 1986: 765–806. number. OMB has now approved the do not have to repeat the extensive 3. Bennett JV, Holmberg SD, Rogers MF, information collection and has assigned clinical testing otherwise necessary to Solomon SL. Infectious and parasitic OMB control number 0910–0516. The gain approval of an NDA. The only diseases. In: Amler RW, Dull HB, eds. Closing the gap: the burden of unnecessary approval expires on October 31, 2006. A clinical data required in an ANDA are illness. New York: Oxford University Press, copy of the supporting statement for this data to show that the drug that is the 1987: 102–114. information collection is available on subject of the ANDA is bioequivalent to 4. Centers for Disease Control and the Internet at http://www.fda.gov/ the listed drug. Prevention. Locally acquired ohrms/dockets. The 1984 amendments include what neurocysticercosis—North Carolina, is now section 505(j)(7) of the Federal Massachusetts, and South Carolina, 1989– Dated: October 29, 2003. Food, Drug, and Cosmetic Act (the act) 1991. MMWR 1992; 41: 1–4. Jeffrey Shuren, (21 U.S.C. 355(j)(7)), which requires 5. Centers for Disease Control and Assistant Commissioner for Policy. FDA to publish a list of all approved Prevention. Foodborne Outbreak of Cryptosporidiosis-Spokane, Washington, [FR Doc. 03–27881 Filed 11–5–03; 8:45 am] drugs. FDA publishes this list as part of 1997. MMWR 1998; 47:27. BILLING CODE 4160–01–S the ‘‘Approved Drug Products With Therapeutic Equivalence Evaluations,’’ * 1. Kauffmann-White scheme for designation of which is generally known as the Salmonella serotypes ‘‘Orange Book.’’ Under FDA regulations,

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drugs are withdrawn from the list if the product, future applicants be advised Section 201 of MDUFMA adds a agency withdraws or suspends approval that such an application is likely to raise paragraph ‘‘g’’ to section 704 of the of the drug’s NDA or ANDA for reasons complex issues regarding the Federal Food, Drug, and Cosmetic Act of safety or effectiveness, or if FDA characterization of the active ingredient (the act) (21 U.S.C. 374), directing FDA determines that the listed drug was under section 505(j) of the act (see to accredit third parties (accredited withdrawn from sale for reasons of docket on conjugated estrogen drug persons or APs) to conduct inspections safety or effectiveness (21 CFR 314.162). products, Docket No. 98P–0311). of eligible manufacturers of class II or Regulations also provide that the agency Dated: October 24, 2003. class III devices. Participation in the must make a determination as to Jeffrey Shuren, program is voluntary. Manufacturers whether a listed drug was withdrawn Assistant Commissioner for Policy. may continue to have FDA perform from sale for reasons of safety or inspections or, if eligible, they may [FR Doc. 03–27880 Filed 11–5–03; 8:45 am] effectiveness before an ANDA that refers utilize an accredited person. The new to that listed drug may be approved BILLING CODE 4160–01–S law requires FDA, within 180 days from (§ 314.161(a)(1) (21 CFR 314.161(a)(1))). the date MDUFMA was signed into law, FDA may not approve an ANDA that DEPARTMENT OF HEALTH AND to publish in the Federal Register, does not refer to a listed drug. HUMAN SERVICES criteria to accredit or deny accreditation Lachman Consultant Services, Inc., to persons who request to perform these submitted a citizen petition dated Food and Drug Administration inspections (section 704(g)(2) of the act). December 5, 2002 (Docket No. 02P– FDA published the criteria it used to 0506/CP1), under 21 CFR 10.30 to FDA List of Accredited Persons; Inspection accredit persons for the purpose of requesting that the agency determine by Accredited Persons Program Under conducting inspections of eligible whether hyaluronidase for injection was the Medical Device User Fee and manufacturers of class II and class III withdrawn from sale for reasons of Modernization Act of 2002 devices in the Federal Register of April safety or effectiveness. On January 8, 28, 2003 (68 FR 22400). 2003, Amphastar Pharmaceuticals, Inc., AGENCY: Food and Drug Administration, HHS. The new law also directed FDA to submitted a citizen petition (Docket No. accredit up to 15 third parties to ACTION: Notice of availability. 03P–0021/CP1) requesting the same conduct inspections by no later than 1 action. On July 15, 2003, Merchant- SUMMARY: The Food and Drug year after MDUFMA was enacted and to Taylor International, Inc. (MTI), on Administration (FDA) is announcing the publish on the FDA Internet site a list behalf of Hyalozyme Therapeutics, Inc., availability of the list of persons who of persons who are accredited (21 U.S.C. filed a comment to both citizen petitions are accredited under certain 374(g) (4)). Under the new provision, requesting that FDA determine that circumstances to inspect eligible FDA must update this list to ensure that hyaluronidase for injection was manufacturers of class II and class III the identity of each accredited person, withdrawn from sale for reasons of devices in lieu of an FDA inspection. and the particular activities for which safety and effectiveness. Hyaluronidase This list provides the identity of each the person is accredited, is known to the for injection is the subject of approved accredited person and the particular public. Under this new provision, FDA NDA 6–343, formerly held by Wyeth activities for which the person is must also update the list no later than Pharmaceuticals, Inc. (Wyeth), now held accredited. FDA is taking this action to 1 month after the accreditation of a by Baxter Healthcare Corp. implement provisions of the Medical Hyaluronidase for injection is a protein person, or the suspension or withdrawal Device User Fee and Modernization Act enzyme and is a preparation of highly of accreditation, or the modification of of 2002 (MDUFMA). purified bovine testicular hyaluronidase the particular activities for which the used to increase the absorption and ADDRESSES: This list is available on the person is accredited. dispersion of other injected drugs. Internet at http://www.fda.gov/cdrh/ap- FDA is currently developing guidance Wyeth ceased manufacture of inspection/. Submit a written request for to help establishments determine hyaluronidase for injection in December copies of the List of Accredited Persons whether they are qualified to participate 2001, and it was moved from the to the Division of Small Manufacturers, in the third party inspection program. prescription drug product list to the International, and Consumer Assistance Because all accredited persons will have ‘‘Discontinued Drug Product List’’ (HFZ–220), Center for Devices and to complete training before conducting section of the Orange Book. Radiological Health (CDRH), Food and independent inspections under the new FDA has reviewed its records and the Drug Administration, 1350 Piccard Dr., program, these APs will not be available comment filed by MTI and, under Rockville, MD 20850. Send two self- to companies for several months. FDA § 314.161, has determined that addressed adhesive labels to assist that plans to make the guidance available hyaluronidase for injection was not office in processing your request, or fax before the APs have completed the withdrawn from sale for reasons of your request to 301–443–8818. See the training. In the meantime, any company safety or effectiveness. Accordingly, the SUPPLEMENTARY INFORMATION section for that is interested in participating in the agency will continue to list information on electronic access to the third party inspection program may hyaluronidase for injection in the list of accredited persons. contact the contact person (see FOR ‘‘Discontinued Drug Product List’’ FOR FURTHER INFORMATION CONTACT: John FURTHER INFORMATION CONTACT) to get section of the Orange Book. The F. Stigi, Center for Devices and more information about eligibility. ‘‘Discontinued Drug Product List’’ Radiological Health (HFZ–220), Food II. Electronic Access delineates, among other items, drug and Drug Administration, 1350 Piccard products that have been discontinued Dr., Rockville, MD 20850, 301–443– Persons interested in obtaining a copy from marketing for reasons other than 6597, ext. 124. of the list of accredited persons may safety or effectiveness. ANDAs that refer SUPPLEMENTARY INFORMATION: also do so by using the Internet. The to hyaluronidase for injection may be CDRH Web site may be accessed at approved by the agency; however, FDA I. Background http://www.fda.gov/cdrh. The list of recommends that in considering MDUFMA (Public Law 107–250) was accredited persons is available at http:/ whether to file an ANDA for this drug signed into law on October 26, 2002. /www.fda.gov/cdrh/ap-inspection/.

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To receive the list of accredited list is intended to inform the public of Register, and FDA believes that the persons by fax machine, call the CDRH the availability of safety and Internet is accessible to more people Facts-On-Demand system at 800–899– effectiveness summaries of approved than the Federal Register. 0381 or 301–827–0111 from a touch- PMAs through the Internet and the In accordance with section 515(d)(4) tone telephone. Press 1 to enter the agency’s Division of Dockets and (e)(2) of the Federal Food, Drug, and system. At the second voice prompt, Management. Cosmetic Act (the act) (21 U.S.C. press 1 to order a document. Enter the ADDRESSES: Submit written requests for 360e(d)(4) and (e)(2)), notification of an document number (1500) followed by copies of summaries of safety and order approving, denying, or the pound sign (#). Follow the effectiveness to the Division of Dockets withdrawing approval of a PMA will remaining voice prompts to complete Management (HFA–305), Food and Drug continue to include a notice of your request. Administration, 5630 Fishers Lane, rm. opportunity to request review of the Dated: October 29, 2003. 1061, Rockville, MD 20852. Please cite order under section 515(g) of the act. Jeffrey Shuren, the appropriate docket number as listed The 30-day period for requesting Assistant Commissioner for Policy. in table 1 of this document when reconsideration of an FDA action under [FR Doc. 03–27879 Filed 11–5–03; 8:45 am] submitting a written request. See the § 10.33(b) (21 CFR 10.33(b)) for notices BILLING CODE 4160–01–S SUPPLEMENTARY INFORMATION section for announcing approval of a PMA begins electronic access to the summaries of on the day the notice is placed on the safety and effectiveness. Internet. Section 10.33(b) provides that DEPARTMENT OF HEALTH AND FOR FURTHER INFORMATION CONTACT: FDA may, for good cause, extend this HUMAN SERVICES Thinh Nguyen, Center for Devices and 30-day period. Reconsideration of a denial or withdrawal of approval of a Food and Drug Administration Radiological Health (HFZ–402), Food and Drug Administration, 9200 PMA may be sought only by the [Docket Nos. 2003M–0287, 2003M–0271, Corporate Blvd., Rockville, MD 20850, applicant; in these cases, the 30-day 2003M–0272, 2003M–0262, 2003M–0175, 301–594–2186. period will begin when the applicant is 2003M–0240, 2003M–0189, 2003M–0241, SUPPLEMENTARY INFORMATION: notified by FDA in writing of its 2003M–0332, 2003M–0337, 2003M–0174, decision. 2003M–0173, 2003M–0190, 2003M–0343, I. Background 2003M–0242, 2003M–0333, 2003M–0339, The regulations provide that FDA 2003M–0320, 2003M–0352, 2003M-0157] In the Federal Register January 30, publish a quarterly list of available 1998 (63 FR 4571), FDA revised 21 CFR safety and effectiveness summaries of Medical Devices; Availability of Safety 814.44(d) and 814.45(d) to discontinue PMA approvals and denials that were and Effectiveness Summaries for individual publication of PMA announced during that quarter. The Premarket Approval Applications approvals and denials in the Federal following is a list of approved PMAs for AGENCY: Food and Drug Administration, Register. Instead, the agency now posts which summaries of safety and HHS. this information to FDA’s home page at effectiveness were placed on the ACTION: Notice. http://www.fda.gov on the Internet. FDA Internet from April 1, 2003, through believes that this procedure expedites June 30, 2003. There were no denial SUMMARY: The Food and Drug public notification of these actions actions during this period. The list Administration (FDA) is publishing a because announcements can be placed provides the manufacturer’s name, the list of premarket approval applications on the Internet more quickly than they product’s generic name or the trade (PMAs) that have been approved. This can be published in the Federal name, and the approval date.

TABLE 1.—LIST OF SAFETY AND EFFECTIVENESS SUMMARIES FOR APPROVED PMAS MADE AVAILABLE APRIL 1, 2003, THROUGH JUNE 30, 2003

PMA No./Docket No. Applicant Trade Name Approval Date

P010052/2003M–0287 Diagnostic Products Corp. Immulite/Immulite 2000 Anti-HBS July 22, 2002

P010051/2003M–0271 Diagnostic Products Corp. Immulite/Immulite 2000 Anti-HBC July 24, 2002

P010053/2003M–0272 Diagnostic Products Corp. Immulite/Immulite 2000 Anti-HBC IGM July 26, 2002

P010050/2003M–0262 Diagnostic Products Corp. Immulite/Immulite 2000 HBSAF July 26, 2002 and Immulite HBSAF Confirmatory Kit

P020014/2003M–0175 Conceptus, Inc. Essure System November 4, 2002

P990069/2003M–0240 EpMed Systems, Inc. Alert System (Alert Catheter, Alert November 27, 2002 Interface Cable, and Alert Companion With Soft- ware Version 1.08)

P010055/2003M–0189 Prostalund Operations AB Prostalund Coretherm System Microwave Ther- December 23, 2002 motherapy for BPH

P020028/2003M–0241 Philips Medical System Series 50 XMO (Model M1350C) Fetal/Maternal January 3, 2003 Monitor System With Integrated Fetal Oxygen Saturation Monitoring

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TABLE 1.—LIST OF SAFETY AND EFFECTIVENESS SUMMARIES FOR APPROVED PMAS MADE AVAILABLE APRIL 1, 2003, THROUGH JUNE 30, 2003—Continued

PMA No./Docket No. Applicant Trade Name Approval Date

P990027(S004)/2003M– Bausch & Lomb Surgical, Inc. Technolas 217A Excimer Laser System February 25, 2003 0174

P990086(S003)/2003M– Health Tronics Surgical Services, Healthtronics Ossatron March 14, 2003 0173 Inc.

P980035(S013)/2003M– Medtronic, Inc. Medtronic AT500 DDDRP Pacing System March 27, 2003 0190 (Model A1501) and Model 9968 Software

H020007/2003M–0157 Medtronic Neurological Medtronic Activa Dystonia Therapy April 15, 2003

II. Electronic Access Lane, Room 16C–17, Rockville, MD Section 2112(b)(2) also provides that 20857; (301) 443–6593. the special master ‘‘shall afford all Persons with access to the Internet interested persons an opportunity to SUPPLEMENTARY INFORMATION: may obtain the documents at http:// The submit relevant, written information’’ www.fda.gov/cdrh/pmapage.html. Program provides a system of no-fault relating to the following: Dated: October 20, 2003. compensation for certain individuals 1. The existence of evidence ‘‘that who have been injured by specified Linda S. Kahan, there is not a preponderance of the childhood vaccines. Subtitle 2 of Title evidence that the illness, disability, Deputy Director, Center for Devices and XXI of the PHS Act, 42 U.S.C. 300aa– Radiological Health. injury, condition, or death described in 10 et seq., provides that those seeking the petition is due to factors unrelated [FR Doc. 03–27882 Filed 11–5–03; 8:45 am] compensation are to file a petition with BILLING CODE 4160–01–S to the administration of the vaccine the U.S. Court of Federal Claims and to described in the petition,’’ and serve a copy of the petition on the 2. Any allegation in a petition that the Secretary of Health and Human DEPARTMENT OF HEALTH AND petitioner either: Services, who is named as the HUMAN SERVICES (a) ‘‘Sustained, or had significantly respondent in each proceeding. The aggravated, any illness, disability, Health Resources and Services Secretary has delegated his injury, or condition not set forth in the Administration responsibility under the Program to Table but which was caused by’’ one of HRSA. The Court is directed by statute the vaccines referred to in the Table, or National Vaccine Injury Compensation to appoint special masters who take (b) ‘‘Sustained, or had significantly Program; List of Petitions Received evidence, conduct hearings as aggravated, any illness, disability, appropriate, and make initial decisions injury, or condition set forth in the AGENCY: Health Resources and Services as to eligibility for, and amount of, Table the first symptom or Administration, HHS. compensation. manifestation of the onset or significant ACTION: Notice. A petition may be filed with respect aggravation of which did not occur to injuries, disabilities, illnesses, within the time period set forth in the SUMMARY: The Health Resources and conditions, and deaths resulting from Table but which was caused by a Services Administration (HRSA) is vaccines described in the Vaccine Injury vaccine’’ referred to in the Table. This notice will also serve as the publishing this notice of petitions Table (the Table) set forth at section special master’s invitation to all received under the National Vaccine 2114 of the PHS Act or as set forth at interested persons to submit written Injury Compensation Program (‘‘the 42 CFR 100.3, as applicable. This Table information relevant to the issues Program’’), as required by section lists for each covered childhood vaccine described above in the case of the 2112(b)(2) of the Public Health Service the conditions which will lead to petitions listed below. Any person (PHS) Act, as amended. While the compensation and, for each condition, choosing to do so should file an original Secretary of Health and Human Services the time period for occurrence of the and three (3) copies of the information is named as the respondent in all first symptom or manifestation of onset with the Clerk of the U.S. Court of proceedings brought by the filing of or of significant aggravation after Federal Claims at the address listed petitions for compensation under the vaccine administration. Compensation above (under the heading ‘‘For Further Program, the United States Court of may also be awarded for conditions not Information Contact’’), with a copy to Federal Claims is charged by statute listed in the Table and for conditions HRSA addressed to Director, Division of with responsibility for considering and that are manifested after the time Vaccine Injury Compensation Program, acting upon the petitions. periods specified in the Table, but only Office of Special Programs, 5600 Fishers FOR FURTHER INFORMATION CONTACT: For if the petitioner shows that the Lane, Room 16C–17, Rockville, MD information about requirements for condition was caused by one of the 20857. The Court’s caption (Petitioner’s filing petitions, and the Program in listed vaccines. Name v. Secretary of Health and Human general, contact the Clerk, United States Section 2112(b)(2) of the PHS Act, 42 Services) and the docket number Court of Federal Claims, 717 Madison U.S.C. 300aa–12(b)(2), requires that the assigned to the petition should be used Place, NW., Washington, DC 20005, Secretary publish in the Federal as the caption for the written (202) 219–9657. For information on Register a notice of each petition filed. submission. HRSA’s role in the Program, contact the Set forth below is a list of petitions Chapter 35 of title 44, United States Director, National VaccineInjury received by HRSA on April 1, 2003, Code, related to paperwork reduction, Compensation Program, 5600 Fishers through June 30, 2003. does not apply to information required

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for purposes of carrying out the 24. Jacqueline Chin on behalf of Michael 49. Myrna and David McLane on behalf of Program. Chin, Boston, Massachusetts, Court of Kathryn McLane, Houston, Texas, Court of Federal Claims Number 03–0716V Federal Claims Number 03–0747V List of Petitions 25. Khara Vance on behalf of James Vance, 50. Teresa Hodge on behalf of Bobby D. Vienna, Virginia, Court of Federal Claims Hodge, II, Houston, Texas, Court of Federal 1. Mary Bell and John Intrater on behalf of Number 03–0717V Claims Number 03–0748V Dillon Intrater, Lake Success, New York, 26. Michelle Bodine on behalf of Sonora 51. Julie and Philip Holcomb on behalf of Court of Federal Claims Number 03–0668V Poulton, Vienna, Virginia, Court of Federal Philip A. Holcomb, Houston, Texas, Court 2. Claudette and James Bardwil, on behalf of Claims Number 03–0718V of Federal Claims Number 03–0749V Brianna Bardwil, Lake Success, New York, 27. Melinda Anderson on behalf of Zacary 52. Crystal and Michael Williams on behalf Court of Federal Claims Number 03–0669V Anderson, Vienna, Virginia, Court of of Colin Williams, Houston, Texas, Court 3. Patricia Munoz on behalf of Ronald Sosa, Federal Claims Number 03–0719V of Federal Claims Number 03–0750V Boston, Massachusetts, Court of Federal 28. Beverly Pina on behalf of Deryl Pina, 53. Theresa and Robert Winter on behalf of Claims Number 03–0687V Lake Success, New York, Court of Federal Alexis Winter, Houston, Texas, Court of 4. Patricia Munoz on behalf of Arturo Sosa, Claims Number 03–0720V Federal Claims Number 03–0751V Boston, Massachusetts, Court of Federal 29. Veronica and Joseph Greenaway on 54. Susan Finley on behalf of Ryan Finley, Claims Number 03–0688V behalf of Samantha Greenaway, Lake Houston, Texas, Court of Federal Claims 5. Michelle Tussey on behalf of Austin Success, New York, Court of Federal Number 03–0752V Tussey, Boston, Massachusetts, Court of Claims Number 03–0721V 55. Cheryl and Kevin Dass on behalf of Kyle Federal Claims Number 03–0689V 30. Candance A. Passino on behalf of Justine Dass, Houston, Texas, Court of Federal 6. Brian Halladay on behalf of Mason Carl Lasalle, New York, New York, Court Claims Number 03–0753V Halladay, Boston, Massachusetts, Court of of Federal Claims Number 03–0723V 56. Cheryl and Kevin Dass on behalf of Dillon Federal Claims Number 03–0690V 31. Tonya and Jonathon Mitchell on behalf of Dass, Houston, Texas, Court of Federal 7. Lynn Howard on behalf of Garrett Howard, Quinten Tyler Mitchell, Houston, Texas, Claims Number 03–0754V Boston, Massachusetts, Court of Federal Court of Federal Claims Number 03–0729V 57. Carla and John Pham on behalf of Jordan 32. Martina Schlacter and Hector Reyes on Claims Number 03–0691V Pham, Houston, Texas, Court of Federal behalf of Nicholas Reyes, Houston, Texas, 8. Van Arrington on behalf of Sophia Claims Number 03–0755V Court of Federal Claims Number 03–0730V Arrington, Boston, Massachusetts, Court of 58. Katharine Sweet and Paul Steffen on 33. Joe-Ann and Ronald Marler on behalf of behalf of Luke Anton Steffen, Houston, Federal Claims Number 03–0692V Ronnie Marler, Houston, Texas, Court of 9. Dalene Hart on behalf of Kaylie Hart, Texas, Court of Federal Claims Number Federal Claims Number 03–0731V 03–0756V Boston, Massachusetts, Court of Federal 34. Carol and Howard Cushnie on behalf of 59. Rhonda and Billy Ray King, Jr. on behalf Claims Number 03–0693V Ashley Cushnie, Houston, Texas, Court of of Billy Ray King III, New Orleans, 10. Lynette Klingman on behalf of Chloe Federal Claims Number 03–0732V Louisiana, Court of Federal Claims Number Klingman, Boston, Massachusetts, Court of 35. Holly and J. L. Masclans on behalf of 03–0757V Federal Claims Number 03–0694V Claudia Masclans, Houston, Texas, Court 60. Elizabeth and Alfred Fargione on behalf 11. Chiquita Clark on behalf of Azjanae of Federal Claims Number 03–0733V Fields, Boston, Massachusetts, Court of 36. Holly and J. L. Masclans on behalf of of Ryan A. Fargione, Selkirk, New York, Federal Claims Number 03–0695V Benjamin Masclans, Houston, Texas, Court Court of Federal Claims Number 03–0758V 12. Theresa Dimicco on behalf of Michael of Federal Claims Number 03–0734V 61. Jennifer and Scott Smith on behalf of Cameron S. Smith, Melbourne, Florida, Dimicco, Boston, Massachusetts, Court of 37. Susan and Raul Solanet on behalf of Court of Federal Claims Number 03–0759V Federal Claims Number 03–0699V Hailey Solanet, Houston, Texas, Court of 62. Tanya and Ronald Schneider on behalf of 13. Scott Moran on behalf of Brendan Moran, Federal Claims Number 03–0735V Savannah Schneider, Deceased, Beaumont, Boston, Massachusetts, Court of Federal 38. Paula and Dennis Houghton on behalf of Texas, Court of Federal Claims Number Claims Number 03–0700V Matthew Houghton, Houston, Texas, Court 03–0760V 14. Jody Wolf on behalf of Patrick Wolf, of Federal Claims Number 03–0736V 39. Tamara and Evan Fusco on behalf of 63. Chris Craig on behalf of Spencer Craig, Miami, Florida, Court of Federal Claims Houston, Texas, Court of Federal Claims Number 03–0701V Brendan Fusco, Houston, Texas, Court of Federal Claims Number 03–0737V Number 03–0762V 15. Amber and Raul Rodriguez on behalf of 64. Samantha Uwainat on behalf of Alexander Kiely Rodriguez, Dallas, Texas, 40. Keey and James Gillard on behalf of Gerrett R. Gillard, Houston, Texas, Court of Mohammad Uwainat, Houston, Texas, Court of Federal Claims Number 03–0702V Court of Federal Claims Number 03–0763V 16. Tammy and George Eliseo on behalf of Federal Claims Number 03–0738V 41. Jolene Hallam on behalf of Jensen Hallam, 65. Samantha Uwainat on behalf of Hasan Nicholas Eliseo, Temecula, California, Houston, Texas, Court of Federal Claims Uwainat, Houston, Texas, Court of Federal Court of Federal Claims Number 03–0703V Number 03–0739V Claims Number 03–0764V 17. Linda Bertch on behalf of Andrew C. 42. Harriet Gibbons and Charles Hoover on 66. Anna Press on behalf of Michael Press, Bertch, Temecula, California, Court of behalf of Lenny Hoover, Houston, Texas, Lake Success, New York, Court of Federal Federal Claims Number 03–0704V Court of Federal Claims Number 03–0740V Claims Number 03–0765V 18. Laura and Bart Schley on behalf of Jack 43. Janet and Burt Laws on behalf of Austin 67. Lara and Nate Kitts on behalf of Taylor Schley, Temecula, California, Court of Laws, Houston, Texas, Court of Federal M. Kitts, Grand Rapids, Michigan, Court of Federal Claims Number 03–0705V Claims Number 03–0741V Federal Claims Number 03–0769V 19. Virginia and Michael Downs on behalf of 44. Stephanie and Kit Cessna on behalf of 68. Andrea and Jim Cline on behalf of Jessie M. Downs, Jacksonville, Florida, Hunter T. Cessna, Houston, Texas, Court of Samantha Marie Cline, Tampa, Florida, Court of Federal Claims Number 03–0707V Federal Claims Number 03–0742V Court of Federal Claims Number 03–0770V 20. Sarah and Gary Levine on behalf of 45. Tammy and Douglas Shortridge on behalf 69. Lauren and Greg Sills on behalf of Daniel Trisha Levine, Vienna, Virginia, Court of of Clint Shortridge, Houston, Texas, Court Sills, Los Angeles, California, Court of Federal Claims Number 03–0710V of Federal Claims Number 03–0743V Federal Claims Number 03–0771V 21. Mary Jane and Gerard Primamore on 46. Joanne Pike on behalf of Hunter Pike, 70. Sharon Mondry on behalf of Zev Mondry, behalf of Joseph Primamore, Vienna, Houston, Texas, Court of Federal Claims Great Neck, New York, Court of Federal Virginia, Court of Federal Claims Number Number 03–0744V Claims Number 03–0772V 03–0711V 47. Christina and Dominick Ciardiello on 71. Daphne and Sam Russell, Jr. on behalf of 22. Gabriella Pierson on behalf of Aaron E. behalf of Christian Ciardiello, Houston, Sam Russell, III, Baton Rouge, Louisiana, Pierson, Jr., Phoenix, Arizona, Court of Texas, Court of Federal Claims Number Court of Federal Claims Number 03–0773V Federal Claims Number 03–0712V 03–0745V 72. Carol and Rodney Portier on behalf of 23. Beverly Walker on behalf of Marcus Lee, 48. Lisa and Alan Mayberry on behalf of Reed Alayna Claire Portier, Baton Rouge, Brunswick, Georgia, Court of Federal Alan Mayberry, Houston, Texas, Court of Louisiana, Court of Federal Claims Number Claims Number 03–0715V Federal Claims Number 03–0746V 03–0774V

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73. Angel and Dale Guillot on behalf of Jacob 97. Wendy Harnisher on behalf of Frank 123. Brenda Morehead on behalf of Chance Guillot, Baton Rouge, Louisiana, Court of Harnisher, Miami, Florida, Court of Federal Morehead, Cockeysville, Maryland, Court Federal Claims Number 03–0775V Claims Number 03–0810V of Federal Claims Number 03–0837V 74. Diane and William Green on behalf of 98. Cara and Todd James on behalf of Donte 124. Eileen and Mark Kassner on behalf of William Arthur Green, Baton Rouge, Ferencz, Miami, Florida, Court of Federal Mitchell D. Kassner, Niskayuna, New York, Louisiana, Court of Federal Claims Number Claims Number 03–0811V Court of Federal Claims Number 03–0838V 03–0776V 99. Tamara and Dennis Redman on behalf of 125. Kimberly Bolt on behalf of Gerlad R. 75. Janice and James Square on behalf of Nicholas Redman, Miami, Florida, Court of Reader, Springfield, Illinois, Court of Joseph Alexander Square, Baton Rouge, Federal Claims Number 03–0812V Federal Claims Number 03–0840V Louisiana, Court of Federal Claims Number 100. Rebecca and William Grove on behalf of 126. Gregory Seibt on behalf of Michael 03–0777V Noah Grove, Miami, Florida, Court of Seibt, Boston, Massachusetts, Court of 76. Joleen and Frank Smoorenburg on behalf Federal Claims Number 03–0813V Federal Claims Number 03–0841V of Nicole F. Smoorenburg, Baton Rouge, 101. Luvenia L. Robertson on behalf of Mark 127. Claudia and Thomas Quintana on behalf Louisiana, Court of Federal Claims Number J. Blakes-Robertson, Miami, Florida, Court of Cody Quintana, Greenfield Center, New 03–0778V of Federal Claims Number 03–0814V York, Court of Federal Claims Number 03– 77. Tammy and Rory Coan on behalf of 102. Hailey E. Smith on behalf of Kenny Leon 0843V Harley Free Coan, Dadeville, Alabama, Dwyer, Jr., Miami, Florida, Court of Federal 128. Kimberly Wente on behalf of Adam Court of Federal Claims Number 03–0779V Claims Number 03–0815V Wente, Boston, Massachusetts, Court of 78. Rhonda and J. Bryant Moss on behalf of 103. Sharnia Holyfield on behalf of Kahyll Federal Claims Number 03–0844V Jonathan Ryan Moss, Athens, Alabama, Holyfield, Miami, Florida, Court of Federal 129. Philomena Roche on behalf of John Court of Federal Claims Number 03–0780V Claims Number 03–0816V Roche, Boston, Massachusetts, Court of 79. Debra and Donald Barnard, Jr. on behalf 104. Cynthia and Ronald Hartman on behalf Federal Claims Number 03–0845V of Donald Alan Barnard, III, Dallas, Texas, of Trent Hartman, Jacksonville, Florida, 130. John Betz on behalf of Daniel Betz, Court of Federal Claims Number 03–0781V Court of Federal Claims Number 03–0817V Boston, Massachusetts, Court of Federal 80. Elizabeth Chatagnier on behalf of Michael 105. Leyda and John Cooksey on behalf of Claims Number 03–0846V Ragan, Boston, Massachusetts, Court of Kate Cooksey, Jacksonville, Florida, Court 131. Anna Giuffrida on behalf of Giovanna Federal Claims Number 03–0782V of Federal Claims Number 03–0818V Giuffrida, Boston, Massachusetts, Court of 81. Karen Fountaine on behalf of James 106. Janel and Kevin Lamb on behalf of Federal Claims Number 03–0847V Fountaine, Boston, Massachusetts, Court of Henry Lamb, Jacksonville, Florida, Court of 132. Nancy Lleras on behalf of Felix Federal Claims Number 03–0783V Federal Claims Number 03–0819V Caraballo, Boston, Massachusetts, Court of 82. Gwendolyn and George Staab on behalf 107. Robin and Roderick Pearson on behalf Federal Claims Number 03–0848V of Avery Pearson, Jacksonville, Florida, of Elijah Henry Staab, Peoria, Illinois, 133. William W. Short, III on behalf of Court of Federal Claims Number 03–0820V Court of Federal Claims Number 03–0784V William W. Short, IV, Boston, 108. Robin and Roderick Pearson on behalf 83. Jennifer and Ben Maglish on behalf of Massachusetts, Court of Federal Claims of Marshall Pearson, Jacksonville, Florida, Brendan Maglish, Valparaiso, Indiana, Number 03–0849V Court of Federal Claims Number 03–0821V Court of Federal Claims Number 03–0787V 134. Kathleen Burke on behalf of Emma 109. Jill Miranda on behalf of Isaac Luis 84. Laura and Herbert Rose on behalf of Jason Miranda, Great Neck, New York, Court of Burke, Boston, Massachusetts, Court of Michael Rose, Richmond, Virginia, Court Federal Claims Number 03–0822V Federal Claims Number 03–0850V of Federal Claims Number 03–0788V 110. Margaret and Andrew Fahey on behalf 135. Thomas Dzomba on behalf of Helena 85. Thomas K. Russo, Winchester, Virginia, of Zachary Thomas Fahey, Tampa, Florida, Dzomba, Boston, Massachusetts, Court of Court of Federal Claims Number 03–0790V Court of Federal Claims Number 03–0824V Federal Claims Number 03–0851V 86. Sara and Michael Difucci on behalf of 111. Margaret and Andrew Fahey on behalf 136. Catherine Starr on behalf of Julianne Amanda Difucci, Bala Cynwyd, of Joshua Patrick Fahey, Tampa, Florida, Starr, Boston, Massachusetts, Court of Pennsylvania, Court of Federal Claims Court of Federal Claims Number 03–0825V Federal Claims Number 03–0852V Number 03–0791V 112. Tianna Scott on behalf of Marcus Scott, 137. Julie Sullivan on behalf of Darren 87. Rosenila and Russell Hlavac on behalf of Boston, Massachusetts, Court of Federal Sullivan, Boston, Massachusetts, Court of Hannah Hlavac, Jacksonville, Florida, Claims Number 03–0826V Federal Claims Number 03–0853V Court of Federal Claims Number 03–0792V 113. Barbara Fritz on behalf of Logan Fritz, 138. Michelle and Edward Miller on behalf 88. Susan and Joel Kabala on behalf of Boston, Massachusetts, Court of Federal of Jackson Calhoun Miller, Dacula, Georgia, Camille Kabala, Omaha, Nebraska, Court of Claims Number 03–0827V Court of Federal Claims Number 03–0854V Federal Claims Number 03–0797V 114. Karen Foster on behalf of David Foster, 139. Aslinur and Ozcan Sirin on behalf of 89. Ernest Fischer, Washington, District of Boston, Massachusetts, Court of Federal Efecan Sirin, Bala Cynwyd, Pennsylvania, Columbia, Court of Federal Claims Number Claims Number 03–0828V Court of Federal Claims Number 03–0857V 03–0798V 115. Kimberly Towa on behalf of Felix Towa, 140. Amanda Lee on behalf of Jacob Lee, Bala 90. Janet and Thomas Baker on behalf of Jr., Boston, Massachusetts, Court of Federal Cynwyd, Pennsylvania, Court of Federal Debra Jean Baker, Pittsburgh, Claims Number 03–0829V Claims Number 03–0858V Pennsylvania, Court of Federal Claims 116. Oliver Thaxter Harvey on behalf of 141. Carolina and Marc Blouin on behalf of Number 03–0799V Marcus Oliver Harvey, Miami, Florida, Eric Blouin, Bala Cynwyd, Pennsylvania, 91. Kim and Cory Tenbrook on behalf of Court of Federal Claims Number 03–0830V Court of Federal Claims Number 03–0859V Tyler Tenbrook, Decatur, Texas, Court of 117. Angela Sexton on behalf of Jacob 142. Corinda Crowther on behalf of Max Federal Claims Number 03–0803V Sexton, Miami, Florida, Court of Federal Crowther, Bala Cynwyd, Pennsylvania, 92. Regina and Steve Davis on behalf of Tyler Claims Number 03–0831V Court of Federal Claims Number 03–0860V Davis, Decatur, Texas, Court of Federal 118. Rosemary Madison on behalf of Nizeal 143. Terre and Kevin Kroeger on behalf of Claims Number 03–0804V Madison, Miami, Florida, Court of Federal Christian Kroeger, Temecula, California, 93. Srena Petitt on behalf of Brennan Petitt, Claims Number 03–0832V Court of Federal Claims Number 03–0863V Miami, Florida, Court of Federal Claims 119. Kerri L. Meyer on behalf of Samuel D. 144. Jean Petani on behalf of Jonathan Tyler Number 03–0806V Meyer, Jr., Miami, Florida, Court of Federal Petani, Dover, New Hampshire, Court of 94. Kathy and Phil Boriskie on behalf of Claims Number 03–0833V Federal Claims Number 03–0864V Matthew Boriskie, Miami, Florida, Court of 120. Latonya Hargrave on behalf of Aaron 145. Matthew Neyens, Vienna, Virginia, Federal Claims Number 03–0807V Hargrave, Miami, Florida, Court of Federal Court of Federal Claims Number 03–0868V 95. Sharon Jackson on behalf of Isaiah Claims Number 03–0834V 146. Amy Becker on behalf of Samuel Becker, Jackson, Miami, Florida, Court of Federal 121. Sally and John Marino on behalf of Dallas, Texas, Court of Federal Claims Claims Number 03–0808V Benjamin J. Marino, New York, New York, Number 03–0869V 96. Laura C. O’Brien on behalf of Tyler Court of Federal Claims Number 03–0835V 147. Lori and David Gilmour on behalf of O’Brien Miami, Florida, Court of Federal 122. Diane Puzio, Tucson, Arizona, Court of Audrey Gilmour, Dallas, Texas, Court of Claims Number 03–0809V Federal Claims Number 03–0836V Federal Claims Number 03–0870V

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148. Teresa and Dennis Stuart on behalf of 172. Latonya Taylor on behalf of Kiara 197. Tracey Renfro on behalf of Antony Denise Stuart, Griffin, Georgia, Court of Taylor, Houston, Texas, Court of Federal Renfro, Houston, Texas, Court of Federal Federal Claims Number 03–0872V Claims Number 03–0898V Claims Number 03–0923V 149. Michele Soto and Jesus Rodriguez on 173. Tammy Stewart on behalf of Derron 198. Vicki Walsh on behalf of Riley Walsh, behalf of Alizaia Rodriguez, Deceased, Stewart, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Bethlehem, Pennsylvania, Court of Federal Claims Number 03–0899V Number 03–0924V Claims Number 03–0873V 174. Blondie Stewart on behalf of Joshua 199. Pamela Walker on behalf of Joshua 150. Michael Kamaka on behalf of Michael Stewart, Houston, Texas, Court of Federal Walker, Houston, Texas, Court of Federal Caleb Kamaka, Boston, Massachusetts, Claims Number 03–0900V Claims Number 03–0925V Court of Federal Claims Number 03–0875V 175. Dayna Stender on behalf of Cheyenne 200. Heather Vaughn on behalf of Zachary 151. Jackie Phillips on behalf of William Stender, Houston, Texas, Court of Federal Vaughn, Houston, Texas, Court of Federal Phillips, Boston, Massachusetts, Court of Claims Number 03–0901V Claims Number 03–0926V Federal Claims Number 03–0876V 176. Joyce Stamp-Garner on behalf of 201. Vicki Vanlandingham on behalf of 152. Sherry and Craig Benke on behalf of Matthew Stamp-Garner, Houston, Texas, Anderson Vanlandingham, Houston, Abigail Benke, Deceased, Boston, Court of Federal Claims Number 03–0902V Texas, Court of Federal Claims Number Massachusetts, Court of Federal Claims 177. Letria Spencer on behalf of Trevor 03–0927V Number 03–0877V Spencer, Houston, Texas, Court of Federal 202. Darlene Upson on behalf of Terreance 153. Kimberly and Bernardo Amenabar on Claims Number 03–0903V Upson, Houston, Texas, Court of Federal behalf of Alexander Amenabar, Vienna, 178. Debra Sowell on behalf of Jeremy Claims Number 03–0928V Virginia, Court of Federal Claims Number Sowell, Houston, Texas, Court of Federal 203. Teresa Tucker on behalf of Cameron 03–0879V Claims Number 03–0904V Tucker, Houston, Texas, Court of Federal 179. Stephanie Smith on behalf of Michael Claims Number 03–0929V 154. Dawn and Bill Taylor on behalf of Jarrod Smith, Houston, Texas, Court of 204. Amber Trimpe on behalf of Gabriel Brandon Taylor, Vienna, Virginia, Court of Federal Claims Number 03–0905V Trimpe, Houston, Texas, Court of Federal Federal Claims Number 03–0880V 180. Paul Smith on behalf of Sean Smith, Claims Number 03–0930V 155. Charity Teitsma, Grand Rapids, Houston, Texas, Court of Federal Claims 205. Renee Treadaway on behalf of Brandon Michigan, Court of Federal Claims Number Number 03–0906V Treadaway, Houston, Texas, Court of 03–0881V 181. Irma Slater on behalf of Shern Slater, Federal Claims Number 03–0931V 156. Joyce and Darrin Ninness on behalf of Houston, Texas, Court of Federal Claims 206. Dana Treadaway on behalf of Richard Emma Ninness, Concord, New Hampshire, Number 03–0907V Treadaway, Houston, Texas, Court of Court of Federal Claims Number 03–0882V 182. Michelle Simmons on behalf of Aaron Federal Claims Number 03–0932V 157. Gordon Hester on behalf of Phillip Simmons, Houston, Texas, Court of Federal 207. Kim Tizzard on behalf of Trevor Hester, Houston, Texas, Court of Federal Claims Number 03–0908V Tizzard, Houston, Texas, Court of Federal Claims Number 03–0883V 183. Vonda Sifford on behalf of K’Wamane Claims Number 03–0933V 158. Tracy Hill on behalf of Shaquella Hill, Sifford, Houston, Texas, Court of Federal 208. Tina Thompson on behalf of Ramisha Houston, Texas, Court of Federal Claims Claims Number 03–0909V Natay Thompson, Houston, Texas, Court of Number 03–0884V 184. Katrina Sherrod on behalf of Travon Federal Claims Number 03–0934V 159. Oralee Hollington on behalf of Cedric Sherrod, Houston, Texas, Court of Federal 209. Tina Thompson on behalf of Natisha Hollington, Houston, Texas, Court of Claims Number 03–0910V Thompson, Houston, Texas, Court of Federal Claims Number 03–0885V 185. Linda Young on behalf of Trayvon Federal Claims Number 03–0935V 160. Evelyn Hollis on behalf of Cordaro Young, Houston, Texas, Court of Federal 210. Tina Thompson on behalf of Edward Hollis, Houston, Texas, Court of Federal Claims Number 03–0911V Thompson, Houston, Texas, Court of Claims Number 03–0886V 186. Glaster Russell on behalf of Shaheem Federal Claims Number 03–0936V 161. Stephanie Hooper on behalf of Monique Russell, Houston, Texas, Court of Federal 211. Karen Thomas on behalf of Anthony Hooper, Houston, Texas, Court of Federal Claims Number 03–0912V Thomas, Houston, Texas, Court of Federal Claims Number 03–0887V 187. Glaster Russell on behalf of Demarcus Claims Number 03–0937V 162. Dana Henderson on behalf of Jonas Russell, Houston, Texas, Court of Federal 212. Diane Teasdell on behalf of Kalin Henderson, Houston, Texas, Court of Claims Number 03–0913V Teasdell, Houston, Texas, Court of Federal Federal Claims Number 03–0888V 188. Belinda Russell on behalf of Aikerra Claims Number 03–0938V 163. Cynthia Howie on behalf of Stephen Russell, Houston, Texas, Court of Federal 213. Rick Sexton on behalf of Christopher Howie, Houston, Texas, Court of Federal Claims Number 03–0914V Sexton, Houston, Texas, Court of Federal Claims Number 03–0889V 189. Georgette Rush on behalf of Tyrone Claims Number 03–0939V 164. Ada Hudson on behalf of Timothy Rush, Houston, Texas, Court of Federal 214. Donna Sawyer on behalf of Christopher Hudson, Houston, Texas, Court of Federal Claims Number 03–0915V Sawyer, Houston, Texas, Court of Federal Claims Number 03–0890V 190. Tommie Rosier on behalf of Tommie Claims Number 03–0940V 165. Angela Huggins on behalf of John Rosier, Houston, Texas, Court of Federal 215. Ranthai Sanders on behalf of Devin Huggins, Houston, Texas, Court of Federal Claims Number 03–0916V Sanders, Houston, Texas, Court of Federal Claims Number 03–0891V 191. Katherine Robinson on behalf of Joshua Claims Number 03–0941V 166. Cynthia Jackson on behalf of Dale Robinson, Houston, Texas, Court of Federal 216. Katherine Sanchez on behalf of Jawauin Jackson, Houston, Texas, Court of Claims Number 03–0917V Johnathan Sanchez, Houston, Texas, Court Federal Claims Number 03–0892V 192. Suzette and Anthony Robinson on of Federal Claims Number 03–0942V 167. Tanger Harris on behalf of Ivan Harris, behalf of Jonathan Collin Robinson, 217. Aileen Sampson on behalf of Houston, Texas, Court of Federal Claims Houston, Texas, Court of Federal Claims Beandescent Sampson, Houston, Texas, Number 03–0893V Number 03–0918V Court of Federal Claims Number 03–0943V 168. Sharon Hartwell on behalf of Darius 193. Latanya Robertson on behalf of 218. Carroll Bumgarner on behalf of Lacey Hartwell, Houston, Texas, Court of Federal Christopher Robertson, Houston, Texas, Bumgarner, Houston, Texas, Court of Claims Number 03–0894V Court of Federal Claims Number 03–0919V Federal Claims Number 03–0944V 169. Lawanda Teague on behalf of Marquies 194. Lyla Roberson on behalf of Arthur 219. Tamiqua Bryson on behalf of Eric Teague, Houston, Texas, Court of Federal Roberson, Houston, Texas, Court of Federal Bryson, Houston, Texas, Court of Federal Claims Number 03–0895 Claims Number 03–0920V Claims Number 03–0945V 170. Angela Street on behalf of Christopher 195. Nicole Richardson on behalf of Michael 220. Tammy Brown on behalf of Cedric Street, Houston, Texas, Court of Federal A. Richardson, Houston, Texas, Court of Brown, Houston, Texas, Court of Federal Claims Number 03–0896V Federal Claims Number 03–0921V Claims Number 03–0946V 171. Janet Strasser-King on behalf of Vontrey 196. Rivia Rhodes on behalf of Nelson 221. Sharmaine Brown on behalf of Raymond Strasser-King, Houston, Texas, Court of Rhodes, Houston, Texas, Court of Federal Brown, Houston, Texas, Court of Federal Federal Claims Number 03–0897V Claims Number 03–0922V Claims Number 03–0947V

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222. Pamela Brown on behalf of Dennis 247. Kristy Butler on behalf of Christopher 272. Cindy Miller on behalf of Alexander Brown, Houston, Texas, Court of Federal Butler, Houston, Texas, Court of Federal Miller, Houston, Texas, Court of Federal Claims Number 03–0948V Claims Number 03–0973V Claims Number 03–0998V 223. Felicia Brown on behalf of Terrell 248. Dana Butts on behalf of Christopher 273. Robin Middleton on behalf of Carl Brown, Houston, Texas, Court of Federal Butts, Houston, Texas, Court of Federal Middleton, Houston, Texas, Court of Claims Number 03–0949V Claims Number 03–0974V Federal Claims Number 03–0999V 224. Bernestine Brown on behalf of Charles 249. Leona Calkins on behalf of Cindy 274. Julia Michael on behalf of Tyrese Brown, Jr., Houston, Texas, Court of Calkins, Houston, Texas, Court of Federal Michael, Houston, Texas, Court of Federal Federal Claims Number 03–0950V Claims Number 03–0975V Claims Number 03–1000V 225. Donald Brooks on behalf of Chastity 250. Sarah Canipe on behalf of Timothy 275. Tradisha Reid on behalf of Tanisha Reid, Brooks, Houston, Texas, Court of Federal Canipe, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Claims Number 03–0951V Claims Number 03–0976V Number 03–1001V 226. Latricia Brisco on behalf of Jammie 251. Candace Capo on behalf of Ryan Capo, 276. Carolina Nogal on behalf of Jose Nogal, Brisco, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Houston, Texas, Court of Federal Claims Claims Number 03–0952V Number 03–0977V Number 03–1002V 227. Latricia Brisco on behalf of Atia Brisco, 252. Laura Carpenter on behalf of Tyler 277. Brenda Myers on behalf of Elijah Myers, Houston, Texas, Court of Federal Claims Carpenter, Houston, Texas, Court of Houston, Texas, Court of Federal Claims Number 03–0953V Federal Claims Number 03–0978V Number 03–1003V 228. Rimma Brandin on behalf of Ariel 253. Michelle Carr on behalf of Jacob Carr, 278. George Mullen on behalf of Morgan Brandin, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Mullen, Houston, Texas, Court of Federal Claims Number 03–0954V Number 03–0979V Claims Number 03–1004V 229. Cindy Bramblett on behalf of Tristan 254. Jeanne Carter on behalf of William 279. Gina Mull on behalf of Jovanny Mull, Bramblett, Houston, Texas, Court of Carter, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Federal Claims Number 03–0955V Claims Number 03–0980V Number 03–1005V 230. Patricia Boyette on behalf of Wade 255. Christie Barnes on behalf of Montay 280. Emily Comer on behalf of Nicholas Boyette, Houston, Texas, Court of Federal Barnes, Houston, Texas, Court of Federal Comer, Houston, Texas, Court of Federal Claims Number 03–0956V Claims Number 03–0981V Claims Number 03–1006V 231. Deborah Bowman on behalf of Antwan 256. Kim Barnes on behalf of Joseph Barnes, 281. Virginia Covington on behalf of Bowman, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Christopher Covington, Houston, Texas, Claims Number 03–0957V Number 03–0982V Court of Federal Claims Number 03–1007V 232. Mary Bowes on behalf of John Henry 257. Joe Cash, Jr. on behalf of Joshua Cash, 282. Beth Coward on behalf of Tyler K. Bowes, Houston, Texas, Court of Federal Jr., Houston, Texas, Court of Federal Coward, Houston, Texas, Court of Federal Claims Number 03–0958V Claims Number 03–0983V Claims Number 03–1008V 233. Rhonda Boucher on behalf of Jason 258. Rosalyn Catchings on behalf of 283. Paula Craig on behalf of Keisha Craig, Boucher, Houston, Texas, Court of Federal Christopher Catchings, Houston, Texas, Houston, Texas, Court of Federal Claims Claims Number 03–0959V Court of Federal Claims Number 03–0984V Number 03–1009V 234. Subrene Blow on behalf of Jordan Blow, 259. Norma Cates on behalf of Joshua Cates, 284. Jill Czysz on behalf of McKenzie Czysz, Houston, Texas, Court of Federal Claims Houston, Texas, Court of Federal Claims Houston, Texas, Court of Federal Claims Number 03–0960V Number 03–0985V Number 03–1010V 235. Tonya Blackman on behalf of Michael 260. Jane Chapman on behalf of Allan 285. Veronica Daniel on behalf of Devon Blackman, Houston, Texas, Court of Chapman, Houston, Texas, Court of Daniel, Houston, Texas, Court of Federal Federal Claims Number 03–0961V Federal Claims Number 03–0986V Claims Number 03–1011V 236. Charlotte Bess on behalf of Octravious 261. Barbara Chastain on behalf of William 286. Veronica Daniel on behalf of Jamone Bess, Houston, Texas, Court of Federal A. Chastain, Houston, Texas, Court of Daniel, Houston, Texas, Court of Federal Claims Number 03–0962V Federal Claims Number 03–0987V Claims Number 03–1012V 237. Tonya Atchison on behalf of Kenneth 262. Rosalind Cleveland on behalf of Tiara 287. Catina Davis on behalf of Jamar Davis, Atchison, Houston, Texas, Court of Federal Cleveland, Houston, Texas, Court of Houston, Texas, Court of Federal Claims Claims Number 03–0963V Federal Claims Number 03–0988V Number 03–1013V 238. Tara Anderson on behalf of Stephen 263. Mary Collier on behalf of Jalarryic 288. Moniques Davis on behalf of Corey Anderson, Houston, Texas, Court of Collier, Houston, Texas, Court of Federal Davis, Houston, Texas, Court of Federal Federal Claims Number 03–0964V Claims Number 03–0989V Claims Number 03–1014V 239. Linda Allen on behalf of Charles Allen, 264. Phillie Moye on behalf of Trevor Moye, 289. Shannel Davis on behalf of Gerald Davis, Houston, Texas, Court of Federal Claims Houston, Texas, Court of Federal Claims Houston, Texas, Court of Federal Claims Number 03–0965V Number 03–0990V Number 03–1015V 240. Susan Abruzzino on behalf of Conner 265. Courtney Morrison on behalf of Hunter 290. Teresa Delaughter on behalf of Michael Abruzzino, Houston, Texas, Court of Morrison, Houston, Texas, Court of Federal Delaughter, Houston, Texas, Court of Federal Claims Number 03–0966V Claims Number 03–0991V Federal Claims Number 03–1016V 241. Margaret Autry on behalf of Jonathan 266. Nakta Morgan on behalf of Markeise 291. Beverly Dexter on behalf of Janay Autry, Houston, Texas, Court of Federal Morgan, Houston, Texas, Court of Federal Dexter, Houston, Texas, Court of Federal Claims Number 03–0967V Claims Number 03–0992V Claims Number 03–1017V 242. Jessica Batts on behalf of Cody Batts, 267. Shannon Moore on behalf of Tevin 292. Denica Dickens on behalf of Devonte Houston, Texas, Court of Federal Claims Moore, Houston, Texas, Court of Federal Dickens, Houston, Texas, Court of Federal Number 03–0968V Claims Number 03–0993V Claims Number 03–1018V 243. Carolyn Bautista on behalf of Juan 268. Kimberly Moore on behalf of Aaron 293. Angela Douglas on behalf of Ralesha Bautista, Houston, Texas, Court of Federal Moore, Houston, Texas, Court of Federal Douglas, Houston, Texas, Court of Federal Claims Number 03–0969V Claims Number 03–0994V Claims Number 03–1019V 244. Amber Bennett on behalf of Brenden 269. Gloria Moore on behalf of Devin Moore, 294. Iona Drake on behalf of Sterling Drake, Bennett, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Houston, Texas, Court of Federal Claims Claims Number 03–0970V Number 03–0995V Number 03–1020V 245. Arleatrice Burroughs on behalf of 270. Christina Moore on behalf of Wayne A. 295. Julie Drayton on behalf of Janarvis Richards Burroughs, Houston, Texas, Court Moore, Houston, Texas, Court of Federal Drayton, Houston, Texas, Court of Federal of Federal Claims Number 03–0971V Claims Number 03–0996V Claims Number 03–1021V 246. Tonya Burnett on behalf of Taeyon 271. Steve Miller on behalf of Ryan Miller, 296. Elaine Duke on behalf of Charleigh Burnett, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Duke, Houston, Texas, Court of Federal Claims Number 03–0972V Number 03–0997V Claims Number 03–1022V

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297. Alexis Dunbar on behalf of Christian 322. Joe Phillips on behalf of Tori Phillips, 347. Melinda Harn on behalf of Lloyd Harn, Dunbar, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Houston, Texas, Court of Federal Claims Claims Number 03–1023V Number 03–1048V Number 03–1073V 298. Desiree Dupree on behalf of Dante 323. Sheila Perrigan on behalf of Jamel 348. Tanger Harris on behalf of Ethan Harris, Dupree, Houston, Texas, Court of Federal Perrigan, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Claims Number 03–1024V Claims Number 03–1049V Number 03–1074V 299. Shelley Dwyer on behalf of Gary Dean 324. Sheila Perrigan on behalf of James 349. Juanetha Young on behalf of Nicholas Dwyer, Houston, Texas, Court of Federal Perrigan, Houston, Texas, Court of Federal Young, Houston, Texas, Court of Federal Claims Number 03–1025V Claims Number 03–1050V Claims Number 03–1075V 300. Mary Eakes on behalf of Michael Eakes, 325. Brenda Payne on behalf of Kenneth 350. Terry Yates on behalf of Lamar Yates, Houston, Texas, Court of Federal Claims Brandon Payne, Houston, Texas, Court of Houston, Texas, Court of Federal Claims Number 03–1026V Federal Claims Number 03–1051V Number 03–1076V 301. Robert Eddington on behalf of Robert 326. Lolita Parker on behalf of Mychael 351. Joyce Reed on behalf of Matthew Reed, Eddington, Houston, Texas, Court of Parker, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Federal Claims Number 03–1027V Claims Number 03–1052V Number 03–1077V 302. Sherronda Edge on behalf of Victor 327. Terry Owenby on behalf of Alicia 352. Meredith Redmon on behalf of Gavin Edge, Houston, Texas, Court of Federal Owenby, Houston, Texas, Court of Federal Redmon, Houston, Texas, Court of Federal Claims Number 03–1028V Claims Number 03–1053V Claims Number 03–1078V 303. Mary Edwards on behalf of Annette 328. Michelle Okafor on behalf of Kareem 353. Clarinda Raysor on behalf of Justin Edwards, Houston, Texas, Court of Federal Okafor, Houston, Texas, Court of Federal Raysor, Houston, Texas, Court of Federal Claims Number 03–1029V Claims Number 03–1054V Claims Number 02–1079V 354. Nicole Rainey on behalf of Elinta 304. Jessica Evans on behalf of Wesley Evans, 329. Benita Odom on behalf of Jamie Odom, Rainey, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Houston, Texas, Court of Federal Claims Claims Number 03–1080V Number 03–1030V Number 03–1055V 355. Jacqueline Purcell on behalf of 305. Lori Ellis on behalf of Jeremy Ellis, 330. Stephanie Norwood on behalf of Cecily Zacheriah Purcell, Houston, Texas, Court Houston, Texas, Court of Federal Claims Norwood, Houston, Texas, Court of Federal of Federal Claims Number 03–1081V Number 03–1031V Claims Number 03–1056V 356. Teresa Pringle on behalf of Tyler 306. Mildred Flora on behalf of Ashley Flora, 331. Jeffrey Foster on behalf of Victoria Pringle, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Foster, Houston, Texas, Court of Federal Claims Number 03–1082V Number 03–1032V Claims Number 03–1057V 357. Sharron Pridgen on behalf of Kevin 307. Debra Fisher on behalf of Bo Fisher, 332. Jennifer Fox on behalf of Elizabeth Fox, Pridgen, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Houston, Texas, Court of Federal Claims Claims Number 03–1083V Number 03–1033V Number 03–1058V 358. Contressa Porter on behalf of Dedrick 308. Judy Findlay on behalf of Shaquan 333. Jennifer Fox on behalf of Morgan Fox, Porter, Houston, Texas, Court of Federal Findlay, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Claims Number 03–1084V Claims Number 03–1034V Number 03–1059V 359. Elouise Jackson-Montgomery on behalf 309. Francis Flynn on behalf of Casey Flynn, 334. Teresa Frix on behalf of Megan Frix, of Jeremy Jackson-Montgomery, Houston, Houston, Texas, Court of Federal Claims Houston, Texas, Court of Federal Claims Texas, Court of Federal Claims Number Number 03–1035V Number 03–1060V 03–1085V 310. Christy Michael on behalf of Conner 335. June and Ron Garnett on behalf of 360. Christy Jameson on behalf of Isaiah Michael, Houston, Texas, Court of Federal Pavi’elle Garnett, Houston, Texas, Court of Jameson, Houston, Texas, Court of Federal Claims Number 03–1036V Federal Claims Number 03–1061V Claims Number 03–1086V 311. Jeni Merritt on behalf of Coleman 336. Kima Garten on behalf of Aaron Garten, 361. Tanya Jefferson on behalf of Elle Merritt, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Jefferson, Houston, Texas, Court of Federal Claims Number 03–1037V Number 03–1062V Claims Number 03–1087V 312. Sharon Melvin on behalf of Ashlyn 337. Catherine Glenn on behalf of Marvetta 362. Harry Johnson on behalf of Terence A. Melvin, Houston, Texas, Court of Federal Glenn, Houston, Texas, Court of Federal Johnson, Houston, Texas, Court of Federal Claims Number 03–1038V Claims Number 03–1063V Claims Number 03–1088V 313. Queen Melvin on behalf of Braella 338. Willie Glenn on behalf of Joshua Glenn, 363. Cynthia Johnson on behalf of Kerrie Ann Melvin, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Lee Johnson, Houston, Texas, Court of Claims Number 03–1039V Number 03–1064V Federal Claims Number 03–1089V 314. Fannie Means on behalf of Kenneth C. 339. Sylvia Golden on behalf of Garfield 364. Cynthia Johnson on behalf of Katelyn Means, Houston, Texas, Court of Federal Golden, Houston, Texas, Court of Federal Joy Johnson, Houston, Texas, Court of Claims Number 03–1040V Claims Number 03–1065V Federal Claims Number 03–1090V 315. Dennis McMahan on behalf of Miles 340. Dwayne Gore on behalf of Joshua Gore, 365. Lula Joe on behalf of Shanita Joe, McMahan, Houston, Texas, Court of Houston, Texas, Court of Federal Claims Houston, Texas, Court of Federal Claims Federal Claims Number 03–1041V Number 03–1066V Number 03–1091V 316. Tracy McLeod on behalf of Jacqueline 341. James Gossett on behalf of Ryan Gossett, 366. Janet Martin on behalf of Justin Martin, McLeod, Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Houston, Texas, Court of Federal Claims Claims Number 03–1042V Number 03–1067V Number 03–1092V 317. Angela McKinstry on behalf of 342. Rebecca Graham on behalf of 367. James Martin on behalf of James Martin, Christpoher McKinstry, Houston, Texas, Christopher Graham, Houston, Texas, Houston, Texas, Court of Federal Claims Court of Federal Claims Number 03–1043V Court of Federal Claims Number 03–1068V Number 03–1093V 318. Sylvia Pope on behalf of Jonathan Pope, 343. Goldie Green on behalf of Rodney 368. Porsha Mason on behalf of Tre’von Houston, Texas, Court of Federal Claims Green, Houston, Texas, Court of Federal Mason, Houston, Texas, Court of Federal Number 03–1044V Claims Number 03–1069V Claims Number 03–1094V 319. Susan Pineda on behalf of Austin 344. Anastasia Greene on behalf of Tevin 369. Latoya Mason on behalf of Henry Pineda, Houston, Texas, Court of Federal Greene, Houston, Texas, Court of Federal Thomas Mason, Jr., Houston, Texas, Court Claims Number 03–1045V Claims Number 03–1070V of Federal Claims Number 03–1095V 320. Karen Pierwola on behalf of Korie 345. Crystal and Douglas Greer on behalf of 370. Kimberly Martin on behalf of Yahtavion Pierwola, Houston, Texas, Court of Federal Douglass Adam Greer, Houston, Texas, N. Martin, Houston, Texas, Court of Claims Number 03–1046V Court of Federal Claims Number 03–1071V Federal Claims Number 03–1096V 321. Rachelle Phillips on behalf of Terrica 346. Carol Griffin on behalf of Dia-Jah Griffin, 371. Paula Maye on behalf of Claudius Maye, Phillips Houston, Texas, Court of Federal Houston, Texas, Court of Federal Claims Houston, Texas, Court of Federal Claims Claims Number 03–1047V Number 03–1072V Number 03–1097V

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372. Lisae Matutina on behalf of Rebecca 397. Orlene Knotts on behalf of Wesley S. 422. Andrea and Robert Clark on behalf of Matutina, Houston, Texas, Court of Federal Knotts, Houston, Texas, Court of Federal Jathan Clark, Houston, Texas, Court of Claims Number 03–1098V Claims Number 03–1123V Federal Claims Number 03–1148V 373. Alaine Mathis on behalf of Bibbie 398. Charlene Kiser on behalf of Brandon 423. Angela Londy on behalf of Jarel Londy, Mathis, Houston, Texas, Court of Federal Kiser, Houston, Texas, Court of Federal Great Neck, New York, Court of Federal Claims Number 03–1099V Claims Number 03–1124V Claims Number 03–1149V 374. Monica McCracken on behalf of Austin 399. Melissa Littlejohn on behalf of Joshua 424. Michelle and Richard Steinweg on McCracken, Houston, Texas, Court of Littlejohn, Houston, Texas, Court of behalf of Mason Steinweg, Sarasota, Federal Claims Number 03–1100V Federal Claims Number 03–1125V Florida, Court of Federal Claims Number 375. Eva McCoy on behalf of Corwin McCoy, 400. Donna Jones on behalf of Chipper Jones, 03–1150V Houston, Texas, Court of Federal Claims Houston, Texas, Court of Federal Claims 425. Alice and Matthew King on behalf of Number 03–1101V Number 03–1126V Matthew King, Melbourne, Florida, Court 376. Russell McCollin on behalf of Kevin 401. Chastity Jones on behalf of Chestun of Federal Claims Number 03–1151V Ruddell McCollin, Houston, Texas, Court Jones, Houston, Texas, Court of Federal 426. Joanne and Dale Wood on behalf of Richard Wood, Dallas, Texas, Court of of Federal Claims Number 03–1102V Claims Number 03–1127V Federal Claims Number 03–1152V 377. Janice McClendon on behalf of Curtis 402. Wanda Johnson on behalf of Jakeima 427. Mary Ferguson on behalf of David McClendon, Houston, Texas, Court of Johnson, Houston, Texas, Court of Federal Patrick Bradford, Tyler, Texas, Court of Federal Claims Number 03–1103V Claims Number 03–1128V Federal Claims Number 03–1153V 378. Kathleen McKay on behalf of Ryan 403. Stephanie King on behalf of Damesha 428. Janice and Scott Moss on behalf of McKay, Houston, Texas, Court of Federal King, Houston, Texas, Court of Federal Amber Moss, New Orleans, Lousiana, Claims Number 03–1104V Claims Number 03–1129V Court of Federal Claims Number 03–1154V 379. Coretta McKenzie on behalf of Khalid 404. Jacquelina Jones on behalf of Jhamichael 429. Jessica Hernandez-King and Henry King McKenzie, Houston, Texas, Court of Jones, Houston, Texas, Court of Federal on behalf of Jesse Jeremiah King, Brooklyn, Federal Claims Number 03–1105V Claims Number 03–1130V New York, Court of Federal Claims 380. James McKenzie on behalf of Jahmezz 405. Florence Jones on behalf of Devron Number 03–1156V McKenzie, Houston, Texas, Court of Jones, Houston, Texas, Court of Federal 430. Dora Lucas on behalf of Amanda Lucas, Federal Claims Number 03–1106V Claims Number 03–1131V Jackson, Mississippi, Court of Federal 381. James McKenzie on behalf of Jahrell 406. Maher Yasin on behalf of Ibrahim Yasin, Claims Number 03–1159V McKenzie, Houston, Texas, Court of Houston, Texas, Court of Federal Claims 431. Debra and Steve Brow on behalf of Federal Claims Number 03–1107V Number 03–1132V Savannah Rose Brow, Worcester, 382. James McKenzie on behalf of Jahnia 407. Maher Yasin on behalf of Anas Yasin, Massachusetts, Court of Federal Claims McKenzie, Houston, Texas, Court of Houston, Texas, Court of Federal Claims Number 03–1160V Federal Claims Number 03–1108V Number 03–1133V 432. Lisa and James Watt on behalf of 383. James McKenzie on behalf of Tavaijah 408. Jackie Wood on behalf of Ja’Kennen Nicholas James Watt, Boston, McKenzie, Houston, Texas, Court of Wood, Houston, Texas, Court of Federal Massachusetts, Court of Federal Claims Federal Claims Number 03–1109V Claims Number 03–1134V Number 03–1161V 384. Karen Light on behalf of Derek Light, 409. Kelly Wingate on behalf of David 433. Sandy and Ben Rippetoe on behalf of Houston, Texas, Court of Federal Claims Wingate, Houston, Texas, Court of Federal Wade Rippetoe, Vienna, Virginia, Court of Number 03–1110V Claims Number 03–1135V Federal Claims Number 03–1162V 385. Louise Lettellier on behalf of Jacob 410. Veronica Wilson on behalf of Jamique 434. Alan Moses on behalf of Darryl Moses, Lettellier, Houston, Texas, Court of Federal Wilson, Houston, Texas, Court of Federal Vienna, Virginia, Court of Federal Claims Claims Number 03–1111V Claims Number 03–1136V Number 03–1163V 386. Virginia Leake on behalf of Luciano 411. Shirelyn Williams on behalf of Tyler 435. Christina Cline on behalf of Kyle D. Leake, Houston, Texas, Court of Federal Williams, Houston, Texas, Court of Federal Cline, Deceased, Vienna, Virginia, Court of Claims Number 03–1112V Claims Number 03–1137V Federal Claims Number 03–1164V 387. Geraldine Lawrence on behalf of Randy 412. Deborah Williams on behalf of Elizabeth 436. William Slusher on behalf of Cody Lawrence, Houston, Texas, Court of Williams, Houston, Texas, Court of Federal Slusher, Montgomery, Alabama, Court of Federal Claims Number 03–1113V Claims Number 03–1138V Federal Claims Number 03–1165V 437. Laura Hewiston and Dan Hollenbeck on 388. Janice Lowry on behalf of Tevin Lowry, 413. Cynthia Williams on behalf of Quindon behalf of Joshua Hollenbeck, Dallas, Texas, Houston, Texas, Court of Federal Claims Williams, Houston, Texas, Court of Federal Court of Federal Claims Number 03–1166V Number 03–1114V Claims Number 03–1139V 438. Thelma Reyes-Richard on behalf of 389. Margaret Lovick on behalf of Timothy 414. Cordell Williams on behalf of Rajuan Collin Richard, Dallas, Texas, Court of Lovick, Houston, Texas, Court of Federal Williams, Houston, Texas, Court of Federal Federal Claims Number 03–1167V Claims Number 03–1115V Claims Number 03–1140V 439. Pnina and Steve Batogower on behalf of 390. Bernadette Love on behalf of Scott 415. Martha White on behalf of Thomas David Paul Batogower, Houston, Texas, Brandon Love, Houston, Texas, Court of White, Houston, Texas, Court of Federal Court of Federal Claims Number 03–1168V Federal Claims Number 03–1116V Claims Number 03–1141V 440. Stephanie Christian on behalf of Dylan 391. Bernadette Love on behalf of Galvin 416. Dorine West on behalf of Alishaq West, Christian, Green Valley, Nevada, Court of Brian Love, Houston, Texas, Court of Houston, Texas, Court of Federal Claims Federal Claims Number 03–1169V Federal Claims Number 03–1117V Number 03–1142V 441. Robin and Glen Clark on behalf of 392. Dorothy Lott on behalf of Kimberly Lott, 417. Cosellars Weeks on behalf of Elizabeth George Marshall Clark, Alexandria, Houston, Texas, Court of Federal Claims Weeks, Houston, Texas, Court of Federal Virginia, Court of Federal Claims Number Number 03–1118V Claims Number 03–1143V 03–1173V 393. Carmen Lovsey on behalf of Erica 418. Jacqueline Weathersby on behalf of 442. Natalie Murphy on behalf of Connor D. Lovsey, Houston, Texas, Court of Federal Quinton Weathersby, Houston, Texas, Murphy, North Augusta, South Carolina, Claims Number 03–1119V Court of Federal Claims Number 03–1144V Court of Federal Claims Number 03–1174V 394. Rebecca Johnson on behalf of Mitchell 419. Tonya Washington on behalf of 443. Kathy and Greg Musik on behalf of Johnson, Houston, Texas, Court of Federal Demetrius Washington, Houston, Texas, Gregory Cade Musik, Dallas, Texas, Court Claims Number 03–1120V Court of Federal Claims Number 03–1145V of Federal Claims Number 03–1175V 395. Malaika Johnson on behalf of Brandon 420. Dawn Warncok on behalf of Grant 444. John Steven Richey on behalf of Johnson, Houston, Texas, Court of Federal Warncok, Houston, Texas Court of Federal Nicholas Richey, Boston, Massachusetts, Claims Number 03–1121V Claims Number 03–1146V Court of Federal Claims Number 03–1176V 396. Gwen Kirkpatrick on behalf of Cassidy 421. Miranda Walton on behalf of Reginald 445. Lauralee O’Brien on behalf of Christian Kirkpatrick, Houston, Texas, Court of Walton, Houston, Texas Court of Federal O’Brien, Boston, Massachusetts, Court of Federal Claims Number 03–1122V Claims Number 03–1147V Federal Claims Number 03–1177V

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446. Amy Springer on behalf of Chase Young, 471. Diane and Richard Brown on behalf of Portland, Oregon, Court of Federal Claims Boston, Massachusetts, Court of Federal Roman Brown, Houston, Texas, Court of Number 03–1233V Claims Number 03–1178V Federal Claims Number 03–1204V 496. Tina and Daron Swafford on behalf of 447. Kerry Kiloski on behalf of Evan Bacon, 472. Mika Bradford on behalf of Jeffrey T. Joey Swafford, Austin, Texas, Court of Boston, Massachusetts, Court of Federal Williams, Houston, Texas, Court of Federal Federal Claims Number 03–1234V Claims Number 03–1179V Claims Number 03–1205V 497. Mache and Kevin Liu on behalf of 448. Marcus McCoy on behalf of Matthew 473. Mika Bradford on behalf of Jacob R. Nicholas Liu, Austin, Texas, Court of McCoy, Boston, Massachusetts, Court of Williams, Houston, Texas, Court of Federal Federal Claims Number 03–1235V Federal Claims Number 03–1180V Claims Number 03–1206V 498. Heidi and Peter Carabine on behalf of 449. Dawn Gibson on behalf of Carissa 474. Cynthia and Mitchell Kelley on behalf Collin Carabine, Austin, Texas, Court of Gibson, Boston, Massachusetts, Court of of Phillip M. Kelley, Houston, Texas, Court Federal Claims Number 03–1236V Federal Claims Number 03–1181V of Federal Claims Number 03–1207V 499. Laurie and Leslie Young on behalf of 450. Laura Nealey on behalf of Phillip 475. Jennifer and Paul Greening on behalf of Leslie Martin Young, Austin, Texas, Court Nealey, Boston, Massachusetts, Court of Courtney S. Greening, Houston, Texas, of Federal Claims Number 03–1237V Federal Claims Number 03–1182V Court of Federal Claims Number 03–1208V 500. Darla and Ron Russak on behalf of 451. Nancy D’Erasmo on behalf of Alexander 476. Lisa and Gary Sostack on behalf of Scott Jordan Russak, Austin, Texas, Court of D’Erasmo, Boston, Massachusetts, Court of Sostack, Houston, Texas, Court of Federal Federal Claims Number 03–1238V Federal Claims Number 03–1183V Claims Number 03–1209V 501. Barbara Revis on behalf of Jerry D. Revis, 452. Roxanne Barnett on behalf of Brandon 477. Gerri and John McGaha on behalf of Alexandria, Virginia, Court of Federal Barnett, Boston, Massachusetts, Court of Zachary McGaha, Houston, Texas,Court of Claims Number 03–1241V Federal Claims Number 03–1184V Federal Claims Number 03–1210V 502. Jodi and Joseph Mercado on behalf of 453. Wayne Rogers on behalf of Rylan Rogers, 478. Joey Baker on behalf of David Baker, Anthony Mercado, Turnersville, New Boston, Massachusetts, Court of Federal Houston, Texas, Court of Federal Claims Jersey, Court of Federal Claims Number Claims Number 03–1185V Number 03–1211V 03–1243V 454. Scott Wiles on behalf of Rutger Wiles, 479. Lisa and Gary Sostack on behalf of Scott 503. Mary and Salim Hreish on behalf of Boston, Massachusetts, Court of Federal Sostack, Houston, Texas, Court of Federal Yousef Hreish, Macon, Georgia, Court of Claims Number 03–1186V Claims Number 03–1212V Federal Claims Number 03–1244V 455. Jennifer Damian on behalf of Liam Kai 480. Lyhn Tran on behalf of Zachary Hoang, 504. Kelly and Richard Kerns on behalf of Viruleg, Boston, Massachusetts, Court of Chicago, Illinois, Court of Federal Claims Kaylee A. Kerns, Lake Success, New York, Federal Claims Number 03–1187V Number 03–1213V Court of Federal Claims Number 03–1248V 456. Brenda Steele on behalf of Mason Steele, 481. Suzette and Christopher Parish on 505. Sue and Joe Elia on behalf of Rita behalf of Stefan Christopher Parish, Boston, Massachusetts, Court of Federal Emanuel Elia, Dallas, Texas, Court of Edmonds, Washington, Court of Federal Claims Number 03–1188V Federal Claims Number 03–1249V Claims Number 03–1217V 457. Eunice Aguwa on behalf of Chineyeze 506. Ellen and Steven Brandel on behalf of 482. Dana and Ryan Keen on behalf of, Aguwa, Boston, Massachusetts, Court of Michelle Brandel, Lake Success, New York, Austin Lee Miletich, Porter County, Federal Claims Number 03–1189V Court of Federal Claims Number 03–1250V Indiana, Court of Federal Claims Number 458. Evelyn Ain on behalf of Matthew Ain, 03–1218V 507. Maribel Ramos and Nelson Almanzar on Great Neck, New York,Court of Federal 483. Leslie and Donald Trone on behalf of behalf of Justin Almanzar, Lake Success, Claims Number 03–1190V Abigail Marie Trone, Saint Paul, New York, Court of Federal Claims 459. April and Bill Parcells on behalf of Minnesota, Court of Federal Claims Number 03–1251V MacKenzie Parcells, Wichita Falls, Texas Number 03–1219V 508. Stacy Miller on behalf of Argie Miller, Court of Federal Claims Number 03–1192V 484. Tammy and Charles Willard on behalf Boston, Massachusetts, Court of Federal 460. Leah and Andrew McCormack on behalf of Logan Michael Willard, Houston, Texas, Claims Number 03–1252V of Ian Z. McCormack, Houston, Texas, Court of Federal Claims Number 03–1220V 509. Elizabeth Carper on behalf of Samantha Court of Federal Claims Number 03–1193V 485. Linda Cox on behalf of Brett Cox, Carper, Boston, Massachusetts, Court of 461. Heather and Robert Hanson on behalf of Boston, Massachusetts, Court of Federal Federal Claims Number 03–1253V Brendan Hanson, Houston, Texas, Court of Claims Number 03–1221V 510. Sharon Berlin on behalf of Benjamin Federal Claims Number 03–1194V 486. Tonya Skuse on behalf of Joseph Skuse, Berlin, Boston, Massachusetts, Court of 462. Gayle McDaniel on behalf of Matthew Boston, Massachusetts, Court of Federal Federal Claims Number 03–1254V M. McDaniel, Houston, Texas, Court of Claims Number 03–1222V 511. Darla Anderson on behalf of Micaiah Federal Claims Number 03–1195V 487. Leeann Whiffen on behalf of Clay Anderson, Boston, Massachusetts, Court of 463. Charlita McPheeters and James Whiffen, Boston, Massachusetts Court of Federal Claims Number 03–1256V McCartney on behalf of Hugh J. McCartney, Federal Claims Number 03–1223V 512. Lisa Berrier on behalf of Nicholas Houston, Texas, Court of Federal Claims 488. Theresa Black on behalf of Angelica Berrier, Boston, Massachusetts, Court of Number 03–1196V Black, Vienna, Virginia Court of Federal Federal Claims Number 03–1257V 464. Sonya and Matt Maini on behalf of Claims Number 03–1224V 513. Aurora Smith on behalf of Jeffrey Alisha Maini, Houston, Texas, Court of 489. Robert Romines on behalf of Ethan Palmieri, Boston, Massachusetts, Court of Federal Claims Number 03–1197V Taylor Romines, Tyler, Texas Court of Federal Claims Number 03–1258V 465. Michelle Rice on behalf of Tyler Kinser, Federal Claims Number 03–1225V 514. Jennifer Long on behalf of Colin Long, Houston, Texas, Court of Federal Claims 490. Barry Grimes on behalf of Isaac Mitchell Boston, Massachusetts, Court of Federal Number 03–1198V Grimes, Tyler, Texas Court of Federal Claims Number 03–1259V 466. Julie and Philip Foster on behalf of Luke Claims Number 03–1226V 515. Minerva Reyes on behalf of Taylor W. Foster, Houston, Texas, Court of 491. Donna and John Gushue on behalf of Reyes, Boston, Massachusetts, Court of Federal Claims Number 03–1199V John Gushue, Abington, Pennsylvania Federal Claims Number 03–1260V 467. Kimberly and Theodore Stapinski behalf Court of Federal Claims Number 03–1228V 516. Wendy Parker on behalf of Ryen Hagen, of Matthew S. Stapinski, Houston, Texas, 492. Donna and Aaron Arndt on behalf of, Boston, Massachusetts, Court of Federal Court of Federal Claims Number 03–1200V Austin Arndt, Buford, Georgia Court of Claims Number 03–1261V 468. Darwin Shaw on behalf of Gena Shaw, Federal Claims Number 03–1230V 517. Carolyn Smith on behalf of Richard Houston, Texas, Court of Federal Claims 493. Kristen Ah Yek on behalf of Priscilla Ah Smith, Boston, Massachusetts, Court of Number 03–1201V Yek, Portland, Oregon Court of Federal Federal Claims Number 03–1262V 469. Maria and Timothy Dwyer on behalf of Claims Number 03–1231V 518. Kim Osbourne on behalf of Clinton Leon Colin R. Dwyer, Houston, Texas, Court of 494. Devang Vyas on behalf of Aditya Vyas Garrison, III, Houston, Texas, Court of Federal Claims Number 03–1202V Portland, Oregon, Court of Federal Claims Federal Claims Number 03–1263V 470. Lourdes and Eric Cravello on behalf of Number 03–1232V 519. Angelee and Patrick Murphy on behalf Tristan Cravello, Houston, Texas, Court of 495. Sarah Michelle Livingston-Adams on of Justin Ray Murphy, Houston, Texas, Federal Claims Number 03–1203V behalf of Julia Lyons Livingston-Adams Court of Federal Claims Number 03–1264V

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520. Nelly and Edgar Munoz on behalf of California, Court of Federal Claims Number 566. Amy and Mark Case on behalf of Krista Munoz, Oceanside, New York, Court 03–1294V Zachary Scott Case, Richmond, Virginia, of Federal Claims Number 03–1265V 544. Carrie Hendricks on behalf of Adam Court of Federal Claims Number 03–1319V 521. Patricia and Gregory desGroseilliers, on Hendricks, Portland, Oregon, Court of 567. Debra and Dean Hoffman on behalf of behalf of Robert Gregory desGroseilliers, Federal Claims Number 03–1295V Justin Michael Hoffman, Richmond, Christiana, Delaware, Court of Federal 545. Vicki Gale on behalf of Courtney Gale, Virginia, Court of Federal Claims Number Claims Number 03–1266V Portland, Oregon, Court of Federal Claims 03–1320V 522. Diana and Thomas Jacobs on behalf of Number 03–1296V 568. Cheryl Parker on behalf of Dexter James Steven Christopher Jacobs, Williamstown, 546. Leslee Child on behalf of Grace Child, Fitzpatrick, Jr., Houston, Texas, Court of New Jersey, Court of Federal Claims Portland, Oregon, Court of Federal Claims Federal Claims Number 03–1321V Number 03–1267V Number 03–1297V 569. Robert Delair on behalf of Cody Delair, 523. Darlene and Gardy Theodore on behalf 547. Tammy Silbaugh and Charles Jacovetty Houston, Texas, Court of Federal Claims, of Patrick Theodore, Middletown, on behalf of Jordan Jacovetty, Dallas, Number 03–1322V Connecticut, Court of Federal Claims Texas, Court of Federal Claims Number 570. Lilia and Luis Salazar on behalf of Number 03–1268V 03–1298V Miguel Aljandro Salazar, Houston, Texas, 524. Dawn and Michael Nardi on behalf of 548. Lisa and Grant Garrett on behalf of Court of Federal Claims Number 03–1323V Gia Stella Nardi, Haddonfield, New Jersey, Ethan Garrett, New York, New York, Court 571. Sheila and Don Perry on behalf of Cody Court of Federal Claims Number 03–1269V of Federal Claims Number 03–1299V Ryan Hultquist, Houston, Texas, Court of 525. Bertha Boswell on behalf of Shekirra 549. Amy Vitorino and Steven Bolte on Federal Claims Number 03–1324V Elousia Boswell, Selma, Alabama, Court of behalf of Jeremiah Bolte, New York, New 572. Linda and Paul Carter on behalf of Lacey Federal Claims Number 03–1270V York, Court of Federal Claims Number 03– Makayla Carter, Houston, Texas, Court of 526. Michelle Moore on behalf of Norfleet 1300V Federal Claims Number 03–1325V Caudle, Arlington, Virginia, Court of 550. Arkadivsz Zarzycki and Bozena 573. Layla Blackburn and Tim Schoolcraft on Federal Claims Number 03–1271V Zarzycka on behalf of Alan Zarzycki behalf of Michael David Schoolcraft, 527. Sheila and Herbert Smith on behalf of Garrett, New York, New York, Court of Houston, Texas, Court of Federal Claims Tyrese M. Johns, New York, New York, Federal Claims Number 03–1301V Number 03–1326V Court of Federal Claims Number 03–1272V 551. Victoria and Nicholas Peetros on behalf 574. Linda and Kevin Merritt on behalf of 528. Lisa Zehl on behalf of Matthew Zehl, of Alexander Peetros, New York, New Hasani Dontay Merritt, Houston, Texas, Cliffwood Beach, New Jersey, Court of York, Court of Federal Claims Number 03– Court of Federal Claims Number 03–1327V Federal Claims Number 03–1273V 1302V 575. Cherie Gouveia on behalf of Crystal 529. Shauna and Robert Gurley on behalf of 552. Angela De La Fe and Wayne Joseph Christina Saul, Houston, Texas, Court of Jeremiah Gurley, Alexandria, Virginia, Drake, Sr. on behalf of Wayne Joseph Federal Claims Number 03–1328V Court of Federal Claims Number 03–1275V Drake, Jr., Deceased, Crystal River, Florida, 576. Gina Koester on behalf of Markie 530. Rena Harris on behalf of Hakima Davis, Court of Federal Claims Number 03–1303V Koester, Houston, Texas, Court of Federal New York, New York, Court of Federal 553. Teressa Adkins on behalf of Adaizhia Claims Number 03–1329V Claims Number 03–1276V Imani Gorham, Houston, Texas, Court of 577. Irelsa Oliveras on behalf of Israel Adrian 531. Amanda and Michael Schwander, on behalf of Sabastian Tyler Schwander, Federal Claims Number 03–1304V Morla Oliveras, Houston, Texas, Court of Hamburg, New Jersey, Court of Federal 554. Brandi Brown on behalf of Dugan Scott Federal Claims Number 03–1330V Claims Number 03–1277V Brown, Houston, Texas, Court of Federal 578. Shirley Nelson on behalf of Jennifer 532. Jo-Ann and Walter Perez on behalf of Claims Number 03–1305V Ashley Ray, Houston, Texas, Court of Mary Kathleen Perez, Newburgh, New 555. Neyla and Carlos Barajas on behalf of Federal Claims Number 03–1331V York, Court of Federal Claims Number 03– Victor Ivan Barajas, Houston, Texas, Court 579. Raquel and James Hallm on behalf of 1278V of Federal Claims Number 03–1306V Joshua Lorezo Hallm Houston, Texas, 533. Denise and James Varney on behalf of 556. Melissa Basham on behalf of Andrew Court of Federal Claims Number 03–1332V James Tyler Varney, Pleasonton, California, Todd Basham, Houston, Texas, Court of 580. Kimberly Ashwell on behalf of Nicholas Court of Federal Claims Number 03–1279V Federal Claims Number 03–1307V Ashwell, Boston, Massachusetts, Court of 534. Laura Armstrong on behalf of Kelley 557. Kristine and Christopher Naffziger on Federal Claims Number 03–1333V Armstrong, Feasley, South Carolina, Court behalf of Zachary Robert Naffziger, 581. Nichole Laub on behalf of Joshua Laub, of Federal Claims Number 03–1280V Houston, Texas, Court of Federal Claims Boston, Massachusetts, Court of Federal 535. Mary and Albert Pavucek on behalf of Number 03–1308V Claims Number 03–1334V Jenna Pavucek, Philadelphia, 558. Martha and Jaime Briceno on behalf of 582. Alcinda Walters on behalf of Tyler Pennsylvania, Court of Federal Claims Christopher Briceno, Houston, Texas, Walters, Boston, Massachusetts, Court of Number 03–1285V Court of Federal Claims Number 03–1309V Federal Claims Number 03–1335V 536. Eric Bernstein, Teaneck, New Jersey, 559. Sonia and Edwin Asencio on behalf of 583. Reinaldo Zavala and Velez Carazo on Court of Federal Claims Number 03–1286V Matthew J. Lucas Asencio, Houston, Texas, behalf of Karina Nahomi Zavala Velez, 537. Linda Sipes-Ryland, Ambridge, Court of Federal Claims Number 03–1310V Hato Rey, Puerto Rico, Court of Federal Pennsylvania, Court of Federal Claims 560. Deanna Armstrong on behalf of Claims Number 03–1337V Number 03–1288V Christian Thomas Armstrong, Houston, 584. Myrtle Little on behalf of Keisha Little, 538. Julie Kimsala on behalf of Clover Yala, Texas, Court of Federal Claims Number Boston, Massachusetts, Court of Federal Charlotte, North Carolina, Court of Federal 03–1311V Claims Number 03–1338V Claims Number 03–1289V 561. Marsha Bach on behalf of Kyle Alan 585. Idania Torres on behalf of Isaiah Torres, 539. Regina and John Roach on behalf of Merkich, Houston, Texas, Court of Federal Boston, Massachusetts, Court of Federal Matthew-Isaac Ashanh Roach, Miami, Claims Number 03–1312V Claims Number 03–1339V Florida, Court of Federal Claims Number 562. Carol and Michael Barnes on behalf of 586. Steven Schwartz on behalf of Steven 03–1290V David Michael Barnes, Houston, Texas, Schwartz, II, Boston, Massachusetts, Court 540. Angela Johnson on behalf of Jeffrey W. Court of Federal Claims Number 03–1313V of Federal Claims Number 03–1340V Johnson, Jr., Miami, Florida, Court of 563. Carol Bittner on behalf of Matthew 587. Angeles Leal on behalf of Andres Leal, Federal Claims Number 03–1291V Aaron Bittner, Houston, Texas, Court of Boston, Massachusetts, Court of Federal 541. Suzanne Buerkett on behalf of Michael Federal Claims Number 03–1314V Claims Number 03–1341V Buerkett, Miami, Florida, Court of Federal 564. Lori Long on behalf of Preston Long, 588. Jessika Andrews on behalf of Wyatt Claims Number 03–1292V Houston, Texas, Court of Federal Claims Andrews, Boston, Massachusetts, Court of 542. Ashley Poyner on behalf of Colin Reed Number 03–1315V Federal Claims Number 03–1342V Poyner, Murray, Kentucky, Court of 565. Andrew Weis and Karen Kramer on 589. Bethanne and Scott Schrecengost on Federal Claims Number 03–1293V behalf of Grant Kramer-Weis, Chevy Chase, behalf of Anthony Schrecengost, 543. Valerie and Martin Grosso on behalf of Maryland, Court of Federal Claims Number Melbourne, Florida, Court of Federal Derrick Grosso, Huntington Beach, 03–1318V Claims Number 03–1343V

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590. Sue and David Miller on behalf of Texas, Court of Federal Claims Number 640. Janet Rivera on behalf of Ashan Alias Alexander Miller, New Orleans, Louisiana, 03–1372V Ortiz, Houston, Texas, Court of Federal Court of Federal Claims Number 03–1344V 615. Lukman Latona on behalf of Oluwatoni Claims Number 03–1400V 591. Dawna and Eric Knight on behalf of Eric Dabi Latona, Houston, Texas, Court of 641. Joyce and Dean Scott on behalf of Daniel Knight, II, Houston, Texas, Court of Federal Claims Number 03–1373V Samuel Dean Scott, Houston, Texas, Court Federal Claims Number 03–1349V 616. Latisha Bethel on behalf of DeQuan of Federal Claims Number 03–1401V 592. Oswalda Pubill on behalf of Herminio Lamont Bethel, Houston, Texas, Court of 642. Edwina Sharp on behalf of Chandler Anthony Correa, Houston, Texas, Court of Federal Claims Number 03–1374V Brisbane Comer, Houston, Texas, Court of Federal Claims Number 03–1350V 617. Nicole Broda on behalf of Justin Broda, Federal Claims Number 03–1402V 593. Roxanne Myers on behalf of Dylan Houston, Texas, Court of Federal Claims 643. Janet Russum on behalf of Randi Maughton McDuffee, Houston, Texas, Number 03–1375V Russum, Boston, Massachusetts, Court of Court of Federal Claims Number 03–1351V 618. Laneika Curley on behalf of Juan Ye Federal Claims Number 03–1403V 594. Maricruz and Michael Levine on behalf Deshaun Jackson, Houston, Texas, Court of 644. Lisa Menne on behalf of Jake Menne, of Alec Keith Levine, Houston, Texas, Federal Claims Number 03–1376V Boston, Massachusetts, Court of Federal Court of Federal Claims Number 03–1352V 619. Andrea Castellano on behalf of Anthony Claims Number 03–1404V 595. Barbara McKenzie on behalf of Ethan J. Castellano, Houston, Texas, Court of 645. Barbara Fox on behalf of Sean Fox, Lee McKenzie, Houston, Texas, Court of Federal Claims Number 03–1377V Boston, Massachusetts, Court of Federal Federal Claims Number 03–1353V 620. Valerie Buckley on behalf of Vincent Claims Number 03–1405V 596. Michele and Byron King on behalf of Blaise Buckley, Houston, Texas, Court of 646. Marilyn Riley on behalf of William Kyndel Helen Rose King, Houston, Texas, Federal Claims Number 03–1378V Nicholas Riley, Boston, Massachusetts, Court of Federal Claims Number 03–1354V 621. Eileen and Michael Becker on behalf of Court of Federal Claims Number 03–1406V 597. Kelly and Ricky Goins on behalf of Trevor Scott Becker, Houston, Texas, Court 647. Dawn Meyers on behalf of Parker Dalton Bryce Goins, Houston, Texas, Court of Federal Claims Number 03–1379V Meyers, Boston, Massachusetts, Court of of Federal Claims Number 03–1355V 622. Pearl Cavazos on behalf of Paul M. Federal Claims Number 03–1407V 598. Alejandra and Miguel Orozco on behalf Cavazos, Houston, Texas, Court of Federal 648. Ellen Shanberg on behalf of Cameron of Miguel Alegjandro Orozco, Houston, Claims Number 03–1380V Shanberg, Boston, Massachusetts, Court of Texas, Court of Federal Claims Number 623. Sharon and Marvin Lipschitz on behalf Federal Claims Number 03–1408V 03–1356V of Fay Lipschitz, Houston, Texas, Court of 649. Wendy Aston on behalf of Timoteo 599. Bettina and Thomas Pickering on behalf Federal Claims Number 03–1381V Aston, Boston, Massachusetts, Court of of Thomas L. Pickering, Houston, Texas, 624. Melissa and Christopher Jones on behalf Federal Claims Number 03–1409V Court of Federal Claims Number 03–1357V of Ryan Creel Jones, Houston, Texas, Court 650. Katherine Chachere on behalf of Elise 600. Lisa Thomas on behalf of Christian of Federal Claims Number 03–1382V Chachere, Boston, Massachusetts, Court of Thomas, Houston, Texas, Court of Federal 625. Joseph Loughlin on behalf of Brandon Federal Claims Number 03–1410V Claims Number 03–1358V Zachery Loughlin, Houston, Texas, Court 651. Kristena Wilson on behalf of Tiana 601. Yadira Garcia on behalf of Marcos of Federal Claims Number 03–1383V Wilson, Boston, Massachusetts, Court of Cortez, Houston, Texas, Court of Federal 626. Felicia and Augustin Gonzalez on behalf Federal Claims Number 03–1411V Claims Number 03–1359V of Augustin Gonzalez, Jr., Houston, Texas, 602. Christina Bylsma on behalf of Shane Court of Federal Claims Number 03–1384V 652. Alcinda Walters on behalf of Tyler Conley, Houston, Texas, Court of Federal 627. Therese and Tim Bercyzk on behalf of Walters, Boston, Massachusetts, Court of Claims Number 03–1360V Nicholas Eugene Bercyzk, Houston, Texas, Federal Claims Number 03–1412V 603. April and Thomas Miller on behalf of Court of Federal Claims Number 03–1385V 653. Lori Fleming on behalf of Luke Fleming, Amanda Dawn Miller, Houston, Texas, 628. Francis Ruiz on behalf of Alexander Boston, Massachusetts, Court of Federal Court of Federal Claims Number 03–1361V Guerrero, Jr., Houston, Texas, Court of Claims Number 03–1413V 604. Rochelle and John McKinney on behalf Federal Claims Number 03–1386V 654. Amie Gibbons on behalf of Blaine Esser, of Faith Love Irwin, Houston, Texas, Court 629. Laura and JR Black on behalf of Dallas, Texas, Court of Federal Claims of Federal Claims Number 03–1362V Cameron A. Black, Houston, Texas, Court Number 03–1414V 605. Betty and Patrick Furphy on behalf of of Federal Claims Number 03–1387V 655. Holly and Henry Blackmon on behalf of Mark Joseph Furphy, Houston, Texas, 630. Kelly and Matthew Bowerman on behalf Adam Blackmon, Dallas, Texas, Court of Court of Federal Claims Number 03–1363V of Perrin W. Bowerman, Houston, Texas, Federal Claims Number 03–1415V 606. Kathy and Dave Morrison on behalf of Court of Federal Claims Number 03–1388V 656. Tiffany Sanders on behalf of Tyan Marie Kyle Alan Morrison, Houston, Texas, Court 631. Anissa Walker on behalf of Sean Green, Vienna, Virginia, Court of Federal of Federal Claims Number 03–1364V Christopher Walker, Houston, Texas, Court Claims Number 03–1419V 607. Kate and McMillan Ogbughi on behalf of Federal Claims Number 03–1391V 657. Satra Dee Zurita on behalf of Armani of Maximillan Chikanma Ogbughi, 632. Lashay Spencer on behalf of Jene Javon Taylor, Harbor City, California, Court of Houston, Texas, Court of Federal Claims Douglas Spencer, Houston, Texas, Court of Federal Claims Number 03–1421V Number 03–1365V Federal Claims Number 03–1392V 658. Karen and John Best on behalf of Samuel 608. Sherry and Dennis Riddell on behalf of 633. Valerie Stallworth on behalf of William Best, Concord, New Hampshire, Court of Nicholas Andrew Riddell, Houston, Texas, Michael Stallworth, Houston, Texas, Court Federal Claims Number 03–1422V Court of Federal Claims Number 03–1366V of Federal Claims Number 03–1393V 659. Lisa Hendry on behalf of Christopher 609. Marion and Kenneth Neal on behalf of 634. Rose Vicks on behalf of Laron Keith Gyorok, New York, New York, Court of Adrianne Nicole Neal, Houston, Texas, Huff, Houston, Texas, Court of Federal Federal Claims Number 03–1423V Court of Federal Claims Number 03–1367V Claims Number 03–1394V 660. Lainie and Jamyson Villa on behalf of 610. Shelly Donohue on behalf of Riley A. 635. Tina Woskobunik on behalf of Kyle Paul Elijah Matthew Villa, Houston, Texas, Donohue, Houston, Texas, Court of Federal Orozco, Houston, Texas, Court of Federal Court of Federal Claims Number 03–1425V Claims Number 03–1368V Claims Number 03–1395V 661. Meri and Shawn Kelly on behalf of 611. George McElroy on behalf of George 636. Emily Vie Brooks on behalf of Arrienne Daniel Laurence Kelly, Houston, Texas, William McElroy, V, Houston, Texas, Court Leigh Begley, Houston, Texas, Court of Court of Federal Claims Number 03–1426V of Federal Claims Number 03–1369V Federal Claims Number 03–1396V 662. Melanie Villa on behalf of Elise Marie 612. Michelle and Daniel Murray on behalf 637. Adrienne Wojcik on behalf of Michael Villa, Houston, Texas, Court of Federal of Courtney Joann Murray, Houston, Texas, Mojcik, Houston, Texas, Court of Federal Claims Number 03–1427V Court of Federal Claims Number 03–1370V Claims Number 03–1397V 663. Maria Gonzalez and Manuel Mendoza 613. Jennifer and Kevin Christian on behalf 638. Priscilla Quesada on behalf of Brandon on behalf of Alberto D. Mendoza, Houston, of Kevin Richard Christian, Jr., Houston, Anthony Quesada, Houston, Texas, Court Texas, Court of Federal Claims Number Texas, Court of Federal Claims Number of Federal Claims Number 03–1398V 03–1428V 03–1371V 639. Milya Gemal on behalf of Isaac Marshall 664. Deborah West on behalf of Corbin 614. Richard Robinson and Shaila McCleese Gemal, Houston, Texas, Court of Federal Andrew West, Houston, Texas, Court of on behalf of Clayton McCleese, Houston, Claims Number 03–1399V Federal Claims Number 03–1429V

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665. Julie and Leon Virnig on behalf of 688. Collett Tillett on behalf of Collett 713. Robin and Robert Delaney on behalf of Mariah Anne Virnig, Houston, Texas, Court Edward Tillett, Jr., Houston, Texas, Court Joshua Robert Delaney, Houston, Texas, of Federal Claims Number 03–1430V of Federal Claims Number 03–1457V Court of Federal Claims Number 03–1482V 666. John Thompson on behalf of Elijah J. 689. Raynite Corbin on behalf of Justin 714. Houria Hrieche on behalf of Brianna Thompson, Houston, Texas, Court of Durrell Corbin, Houston, Texas, Court of Lopez, Houston, Texas, Court of Federal Federal Claims Number 03–1431V Federal Claims Number 03–1458V Claims Number 03–1483V 667. Leanne Copertino and Michael Wands 690. Karla and Jose Martinez on behalf of 715. Robin and Gilbert Reynoso on behalf of on behalf of Michael William Wands, Jessica Leigh Martinez, Houston, Texas, Breanna Gail Reynoso, Houston, Texas, Houston, Texas, Court of Federal Claims Court of Federal Claims Number 03–1459V Court of Federal Claims Number 03–1484V Number 03–1432V 691. Wendy and Todd Fout on behalf of 716. Tamerria and Charles Fagan on behalf of 668. Stacey and Timothy Boger on behalf of Noah Matthew Fout, Houston, Texas, Court TailaChante Fagan, Houston, Texas, Court Ravyn Chante Boger, Olathe, Kansas, Court of Federal Claims Number 03–1460V of Federal Claims Number 03–1485V of Federal Claims Number 03–1434V 692. Constance and Scott Dunham on behalf 717. Laura and Alejandro Poli on behalf of 669. Stephany Dunn and Hughton Fuller on of Dale Dunham, Houston, Texas, Court of Alejandro Poli, III, Houston, Texas, Court Federal Claims Number 03–1461V behalf of Omar S. Fuller, Melbourne, of Federal Claims Number 03–1486V 693. Amber and Rick Schuster on behalf of Florida, Court of Federal Claims Number 718. Donna and Jeffrey Dodson on behalf Rickey Schuster, Houston, Texas, Court of 03–1435V Dianna Nicole Dodson, Houston, Texas, Federal Claims Number 03–1462V Court of Federal Claims Number 03–1487V 670. Catherine MacKrell on behalf of 694. Elliot Rubin on behalf of Zipporak Matthew MacKrell, Great Neck, New York, 719. Kelly and Anthony Mann on behalf of Teresa Rubin, Houston, Texas, Court of Daniel Christopher Mann, Houston, Texas, Court of Federal Claims Number 03–1436V Federal Claims Number 03–1463V 671. Alex Olsen and Lisa Worden on behalf Court of Federal Claims Number 03–1488V 695. Monica Vaughn on behalf of Jaicob 720. Frankie Story on behalf of Dominick of Nicholas Worden, Great Neck, New Elijah Lamont Ross, Houston, Texas, Court Juan Diego, Houston, Texas, Court of York, Court of Federal Claims Number 03– of Federal Claims Number 03–1464V Federal Claims Number 03–1489V 1437V 696. Cecilia and Geoffrey Hall on behalf of 721. Latasha Curry on behalf of Latonya 672. Karen Rea on behalf of Harrison Rea, Griffin Hall, Houston, Texas, Court of Tanasia Curry, Houston, Texas, Court of Great Neck, New York, Court of Federal Federal Claims Number 03–1465V Federal Claims Number 03–1490V Claims Number 03–1438V 697. Rachel and Paul Terry on behalf of 722. Bernice Johnson on behalf of Shaymear 673. Donna Marie and Robert Hintelmann on James Cooper Terry, Houston, Texas, Court Levourgiea Johnson, Houston, Texas, Court behalf of Erik Martin Hintelmann, Great of Federal Claims Number 03–1466V of Federal Claims Number 03–1491V Neck, New York, Court of Federal Claims 698. Tamara and Ronald Peterson on behalf 723. Judy Smitty on behalf of Catherine Lee of Taylor Nicole Peterson, Houston, Texas, Number 03–1439V Paige Smitty, Houston, Texas, Court of Court of Federal Claims Number 03–1467V 674. Sarah and H. Grady McElyea on behalf Federal Claims Number 03–1492V 699. Sally and Raymond Everhart on behalf of Seth McElyea, Dallas, Texas, Court of 724. Irene Miller on behalf of Robert Miller, of Halie Rae Everhart, Houston, Texas, Federal Claims Number 03–1440V Houston, Texas, Court of Federal Claims Court of Federal Claims Number 03–1468V 675. Sharon and Ron Salazar on behalf of Number 03–1493V Ronnie Salazar, Taos, New Mexico, Court 700. Michelle and Carlos Sanchez on behalf of Adrian Carlos Estranda, Houston, Texas, 725. Zeyda Bernabe on behalf of Anthony of Federal Claims Number 03–1441V Bernabe, Kissimmee, Florida, Court of 676. Katie and Richard Thomas on behalf of Court of Federal Claims Number 03–1469V 701. Ivonne Valez on behalf of Darien Federal Claims Number 03–1494V Connor Thomas, Jacksonville, Florida, 726. Melody and Jody Cannady on behalf of Court of Federal Claims Number 03–1442V Richard Crespo, Houston, Texas, Court of Federal Claims Number 03–1470V Joshua Cannady, Vienna, Virginia, Court of 677. Janice Lein on behalf of Kristopher Federal Claims Number 03–1495V Patterson, Sarasota, Florida, Court of 702. Reeva Worsley and Reeva Lacayo on behalf of Sergio Alexander Lacayo, 727. Ashley Martin on behalf of Michael Federal Claims Number 03–1443V Martin, Vienna, Virginia, Court of Federal 678. Lori Kay Masterson on behalf of Keith Houston, Texas, Court of Federal Claims Number 03–1471V Claims Number 03–1496V Patrick Masterson, Somers Point, New 728. Melody and Jody Cannady on behalf of Jersey, Court of Federal Claims Number 703. Martha Widner on behalf of Spencer D. Widner, Houston, Texas, Court of Federal Jacob Cannady, Vienna, Virginia, Court of 03–1445V Federal Claims Number 03–1497V 679. Kathy and William Gerhardt on behalf Claims Number 03–1472V 704. Lucia Olarerin on behalf of Olanlaoluwa 729. Joseph Van Goethem, Vienna, Virginia, of Jeffrey W. Gerhardt, Egg Harbor City, Mokiolu Olajuwon, Houston, Texas, Court Court of Federal Claims Number 03–1498V New Jersey, Court of Federal Claims of Federal Claims Number 03–1473V 730. Rhonda and Thomas Williams on behalf Number 03–1448V 705. Disa and Peter Orosz on behalf of Kyle of Thomas Meada Williams, VI, Cape 680. Tiffany Sanders on behalf of Tyan Marie David Orosz, Houston, Texas, Court of Girardeau, Missouri, Court of Federal Green, Vienna, Virginia, Court of Federal Federal Claims Number 03–1474V Claims Number 03–1504V Claims Number 03–1449V 706. Christina and Steven Mullins on behalf 731. Lisa and John DeSherlia on behalf of 681. Mary Dellavalle on behalf of Jacob of Austin Ray Mullins, Houston, Texas, Hannah Elizabeth DeSherlia, Cape Michael Dellavalle, Houston, Texas, Court Court of Federal Claims Number 03–1475V Girardeau, Missouri, Court of Federal of Federal Claims Number 03–1450V 707. Cynthia and Gary Merrill on behalf of Claims Number 03–1505V 682. Cheryl and Randy McCall on behalf of Ryan Charles Mashen, Houston, Texas, 732. Betty Jane Berry on behalf of Marvin T. Caroline Ann McCall, Houston, Texas, Court of Federal Claims Number 03–1476V Berry, Deceased, Cottonwood, Idaho, Court Court of Federal Claims Number 03–1451V 708. Jane Gathuo on behalf of Kagua Njenga, of Federal Claims Number 03–1506V 683. Christine and John Dunn on behalf of Houston, Texas, Court of Federal Claims 733. Anthony Esposito on behalf of Kelley Joseph Michael Dunn, Houston, Texas, Number 03–1477V (Cramer) Esposito, Alexandria, Virginia, Court of Federal Claims Number 03–1452V 709. Patricia and Conrad Silk on behalf of Court of Federal Claims Number 03–1507V 684. Yesenia and Juan Reyes on behalf of Lance Conrad Silk, Houston, Texas, Court 734. Holly and Carlton Fisher on behalf of Elieser I. Reyes, Houston, Texas, Court of of Federal Claims Number 03–1478V Emilee Fisher, Bartlett, Tennessee, Court of Federal Claims Number 03–1453V 710. Mary Anne and Jim Pelletier on behalf Federal Claims Number 03–1510V 685. Shelia and John Penrose on behalf of of Zachary Pelletier, Houston, Texas, Court 735. Dawn Wedemeyer on behalf of Jarod Ryan J. Penrose, Houston, Texas, Court of of Federal Claims Number 03–1479V Wedemeyer, Houston, Texas, Court of Federal Claims Number 03–1454V 711. Latoya and Christian Lowe on behalf of Federal Claims Number 03–1511V 686. Angela Schaffer on behalf of Kyra X-Zavion Ja’Quavious Lowe, Houston, 736. Diane Stott on behalf of Michael Stott, Denise Schaffer, Houston, Texas, Court of Texas, Court of Federal Claims Number Houston, Texas, Court of Federal Claims Federal Claims Number 03–1455V 03–1480V Number 03–1512V 687. Linda Puckett on behalf of Brittany L. 712. Connie Taylor on behalf of Ashley Dawn 737. Adrienne Roussean on behalf of Puckett, Houston, Texas, Court of Federal Strait, Houston, Texas, Court of Federal Alexander Roussean, Houston, Texas, Claims Number 03–1456V Claims Number 03–1481V Court of Federal Claims Number 03–1513V

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738. Sara Puffett on behalf of Shaylynn 763. Douglas Hillman on behalf of Sean 788. Tery and Adam Serafin on behalf of Puffett, Houston, Texas, Court of Federal Hillman, Somers Point, New Jersey, Court Jaboc Serafin, Scranton, Pennsylvania, Claims Number 03–1514V of Federal Claims Number 03–1541V Court of Federal Claims Number 03–1572V 739. Rafael and Bente Medina on behalf of 764. Bernadette and Salvatore Tagliaferro on 789. Judy and Joseph Manley on behalf of Paloma Medina, Houston, Texas, Court of behalf of Christopher Tagliaferro, Lake Brett Manley, Scranton, Pennsylvania, Federal Claims Number 03–1515V Success, New York, Court of Federal Court of Federal Claims Number 03–1573V 740. Jacqueline Moynihan on behalf of Ryan Claims Number 03–1542V 790. Leonardia and Edward Karpowicz on Moynihan, Houston, Texas, Court of 765. James Francis, Charleston, South behalf of Quentin Karpowicz, Scranton, Federal Claims Number 03–1516V Carolina, Court of Federal Claims Number Pennsylvania, Court of Federal Claims 741. Carolyn and Matthew Herc on behalf of 03–1543V Number 03–1574V Jonathan Herc, Houston, Texas, Court of 766. Michelle L. Prather on behalf of Brandon 791. William P. Sukus on behalf of William Federal Claims Number 03–1517V L. Begley, Alexandria, Virginia, Court of J. Sukus, Scranton, Pennsylvania, Court of 742. Heather Haggerty on behalf of Pedraic Federal Claims Number 03–1544V Federal Claims Number 03–1575V Haggerty, Houston, Texas, Court of Federal 767. Carmen Hutton on behalf of Joseph 792. Mary Ann and Mike Davis on behalf of Claims Number 03–1518V Hutton, Alexandria, Virginia, Court of Kimberly Davis, Scranton, Pennsylvania, 743. Janet Fabricius on behalf of Justin Jerry Federal Claims Number 03–1545V Court of Federal Claims Number 03–1576V Fabricius, Houston, Texas, Court of Federal 768. Earlesha N. Richardson on behalf of 793. Dolly and Gary Belles on behalf of Gary Claims Number 03–1519V Marquise T. Paige, Alexandria, Virginia, Belles, Jr., Scranton, Pennsylvania, Court of 744. Margaret and Sean Donoghue on behalf Court of Federal Claims Number 03–1546V Federal Claims Number 03–1577V of Kevin Michael Donoghue, Houston, 769. Christina Taylor on behalf of Noah N. 794. Cathy and Scott Fuller on behalf of Texas, Court of Federal Claims Number Taylor, Alexandria, Virginia, Court of Bradley Fuller, Scranton, Pennsylvania, 03–1520V Federal Claims Number 03–1547V Court of Federal Claims Number 03–1578V 745. Michele Coffey on behalf of Grace 770. Rebecca Harper on behalf of Dallin 795. Katrina and Mark Burdetsky on behalf Elizabeth Coffey, Houston, Texas, Court of Harper, Bowling Green, Ohio, Court of of Kayla Emily Burdetsky, Jacksonville, Federal Claims Number 03–1521V Federal Claims Number 03–1549V Florida, Court of Federal Claims Number 746. Grisel Gonzalez-Diaz on behalf of 771. Stacie Anderle on behalf Nolan Anderle, 03–1579V Jennifer Alvarez-Martinez, Houston, Texas, Boston, Massachusetts, Court of Federal 796. Elizabeth and Bradford Downes on Court of Federal Claims Number 03–1522V Claims Number 03–1550V behalf of Ryan A. Downes, Plantation, 747. Janet and Ronnie Boyer on behalf of 772. Andrea Hensley on behalf of Noah Florida, Court of Federal Claims Number Noah Boyer, Houston, Texas, Court of Hensley, Boston, Massachusetts, Court of 03–1580V Federal Claims Number 03–1523V Federal Claims Number 03–1551V 797. Barbara and William Labrecque on 748. Beth and Michael Lanier on behalf of 773. Arline Pettway on behalf of Jordan behalf of Sierra Labrecque, Vienna, William Lanier, Houston, Texas, Court of Pettway, Boston, Massachusetts, Court of Virginia, Court of Federal Claims Number Federal Claims Number 03–1524V Federal Claims Number 03–1552V 03–1581V 749. Elizabeth and Chris Rupp on behalf of 774. Mohammad Salehpour on behalf of Jafar 798. Barbara and William Labrecque on Isabella Rupp, Houston, Texas, Court of Salehpour, Boston, Massachusetts, Court of behalf of Jonathan Labrecque, Vienna, Federal Claims Number 03–1525V Federal Claims Number 03–1553V 750. Lisa and Rodney Calvert on behalf of 775. Theresa Pancari on behalf of James Virginia, Court of Federal Claims Number Rodney J. Calvert, Kansas City, Missouri, Pancari, Boston, Massachusetts, Court of 03–1582V Court of Federal Claims Number 03–1526V Federal Claims Number 03–1554V 799. Deannea and Steven Dagilis on behalf of 751. Alisa Peters on behalf of Brayden 776. Meredith Hess on behalf of Benjamin Colton Bryce Dagilis, Temecula, Florida, Rafferty, Boston, Massachusetts, Court of Hess, Boston, Massachusetts, Court of Court of Federal Claims Number 03–1583V Federal Claims Number 03–1527V Federal Claims Number 03–1555V 800. Trudy Ricks and Gary Leader on behalf 752. Gloria Martinez on behalf of William R. 777. Cilemba Loshi on behalf of Stephanie of Jeffrey Leader, Temecula, Florida, Court Wilson, III, Boston, Massachusetts, Court of Loshi Kimbambe, Charlotte, North of Federal Claims Number 03–1584V Federal Claims Number 03–1528V Carolina, Court of Federal Claims Number 801. Jillian Lowrie on behalf of Emily Paige 753. Brandi Plants on behalf of Griffen 03–1556V Lowrie, Sugarland, Texas, Court of Federal Plants, Boston, Massachusetts, Court of 778. Kimberly Hudson on behalf of Anthony Claims Number 03–1585V Federal Claims Number 03–1529V T. Jones, Jr., Alexandria, Virginia, Court of 802. Christina Weisensel on behalf of David 754. Lisa Jolly on behalf Matthew Jolly, Federal Claims Number 03–1560V Vanmeter, Houston, Texas, Court of Boston, Massachusetts, Court of Federal 779. Elizabeth M. Ivy on behalf of Christina Federal Claims Number 03–1586V Claims Number 03–1530V A. Blue, Alexandria, Virginia, Court of 803. Sharon Merrill on behalf of Matthew 755. Patricia Vaporis on behalf of Nomikos Federal Claims Number 03–1561V Merrill, Houston, Texas, Court of Federal Vaporis, Boston, Massachusetts, Court of 780. Karen Melf on behalf of Katherine Melf, Claims Number 03–1587V Federal Claims Number 03–1531V Scranton, Pennsylvania, Court of Federal 804. Shanika Bell on behalf of La’Shundra 756. Kristin Lebaron on behalf of Matthew Claims Number 03–1564V Shaute Bell, Moorhead, Mississippi, Court Lebaron, Boston, Massachusetts, Court of 781. Mary and Paul Hughes on behalf of Paul of Federal Claims Number 03–1588V Federal Claims Number 03–1532V Hughes, Jr., Scranton, Pennsylvania, Court 805. Bobbi and Edward Peery on behalf of 757. Luz Arevalo on behalf of Anna Zabin, of Federal Claims Number 03–1565V Kindra Peery, Houston, Texas, Court of Boston, Massachusetts, Court of Federal 782. Sheila and Stephen Haigh on behalf of Federal Claims Number 03–1589V Claims Number 03–1533V Kyle Haigh, Scranton, Pennsylvania, Court 806. Marlean Beach on behalf of Esteau 758. Rebecca Nelson on behalf of Sarah of Federal Claims Number 03–1566V Shamal Williams, Houston, Texas, Court of Nelson, Boston, Massachusetts, Court of 783. Debbie and James Fruehan on behalf of Federal Claims Number 03–1590V Federal Claims Number 03–1534V John L. Fruehan, Scranton, Pennsylvania, 807. Shelia and Johnny Bishop on behalf of 759. Rebecca Nelson on behalf of Matthew Court of Federal Claims Number 03–1567V Jesse Taylor Bishop, Houston, Texas, Court Nelson, Boston, Massachusetts, Court of 784. Kelly Kelly on behalf of Robert Kelly, of Federal Claims Number 03–1591V Federal Claims Number 03–1535V Scranton, Pennsylvania, Court of Federal 808. Nancy and Terry Couch on behalf of 760. John Humphrey on behalf of Travis Claims Number 03–1568V Anthony Jarell Couch, Houston, Texas, Humphrey, Boston, Massachusetts, Court 785. Mary Ann and Mike Davis on behalf of Court of Federal Claims Number 03–1592V of Federal Claims Number 03–1536V Corey Davis, Scranton, Pennsylvania, Court 809. Leanne and Lawrence Arena on behalf 761. Daijing and Yuan-Fang Wang on behalf of Federal Claims Number 03–1569V of Rocco Lawrence Arena, Bronx, New of Eric Wang, Temecula, California, Court 786. George Shadie on behalf of Alex Shadie, York, Court of Federal Claims Number 03– of Federal Claims Number 03–1539V Scranton, Pennsylvania, Court of Federal 1593V 762. Tiffany E. and Randy P. Bowen on Claims Number 03–1570V 810. Monika and David Nugent on behalf of behalf of Elizabeth Bowen, Richmond, 787. Sherry Mercer on behalf of Steven Daniel James Nugent, Danbury, Virginia, Court of Federal Claims Number Mercer, Scranton, Pennsylvania, Court of Connecticut, Court of Federal Claims 03–1540V Federal Claims Number 03–1571V Number 03–1594V

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811. Lori Schweiger on behalf of Sophia Rose DEPARTMENT OF HEALTH AND candidate nominations in the Report. Schweiger, Duluth, Minnesota, Court of HUMAN SERVICES The seven nominations along with their Federal Claims Number 03–1595V Chemical Abstract Services (CAS) 812. Gabriela Sweet on behalf of Leeroy Public Health Service Registry numbers (where available) and Sweet, Houston, Texas, Court of Federal the recommendations from the three Claims Number 03–1596V National Toxicology Program; Call for 813. Candace and Scott Neu on behalf of scientific peer reviews are provided in Public Comments on Seven the table below. The NTP will review Aaron Mathew Neu, Andover, Minnesota, Nominations Proposed for Listing in Court of Federal Claims Number 03–1597V the recommendations from each of the the Report on Carcinogens, Eleventh 814. Candace and Scott Neu on behalf of review committees and consider all Hunter Allen Neu, Andover, Minnesota, Edition public comments received throughout Court of Federal Claims Number 03–1598V Summary the review process. Based upon this 815. Christine and Terry Peters on behalf of information, the NTP Director will make Braden Scott Peters, Houston, Texas, Court The National Toxicology Program a recommendation to the Secretary, of Federal Claims Number 03–1599V (NTP) solicits final public comments on DHHS, regarding the listing of each 816. Diane and Richard Schmid on behalf of the nominations reviewed in 2003 for nominated substance in the Eleventh Jacob Allen Schmid, Houston, Texas, Court listing in the Report on Carcinogens, Report. of Federal Claims Number 03–1600V Eleventh Edition. Comments will be 817. Anabel and Abdi Priego on behalf of The criteria used in the review accepted for 60 days from the process and a detailed description of the Abdi Jared Priego, Houston, Texas, Court of publication date of this announcement Federal Claims Number 03–1601V review procedures, including the steps 818. Alicia Clayton on behalf of Aaron Maliq and should be directed to Dr. C. W. in the current formal review process, Clayton, Houston, Texas, Court of Federal Jameson (contact information below). can be obtained from the NTP Web site Claims Number 03–1602V Background at http://ntp-server.niehs.nih.gov/ 819. Sheri and Kevin Graham on behalf of (choose Report on Carcinogens) or by The Report on Carcinogens (‘‘the Preston Tyler Graham, Houston, Texas, contacting Dr. C. W. Jameson (contact Report’’) (previously known as the Court of Federal Claims Number 03–1603V information below). Background 820. Anna and Anthony Thompson on behalf Annual Report on Carcinogens) is a documents on the nominations are also of James Martin Thompson, Boston, Congressionally mandated listing of available on the NTP Report on Massachusetts, Court of Federal Claims known human carcinogens and Carcinogens Web site in PDF-format and Number 03–1604V reasonably anticipated human in hard copy or on CD upon request 821. Tammie and Thomas Anderson on carcinogens, and its preparation is behalf of Sion Anderson, Baltimore, from Dr. Jameson. delegated to the NTP by the Secretary, Maryland, Court of Federal Claims Number 03–1605V Department of Health and Human Public Comment Requested 822. Lisa Osterkamp on behalf of Joshua Services (DHHS). Section 301 (b) (4) of The NTP solicits final public Jacob Andberg, Houston, Texas, Court of the Public Health Service Act, as comments on the seven nominations Federal Claims Number 03–1606V amended, provides that the Secretary, reviewed in 2003 for listing in the 823. Bertha Boswell on behalf of Marquavis DHHS, shall publish a biennial report Eleventh Report. The public is invited Devonta Boswell, Houston, Texas, Court of which contains a list of all substances Federal Claims Number 03–1607V to submit comments that supplement (1) which either are known to be human any previously submitted comments or 824. Alvinese and Robert Henderson on carcinogens or may reasonably be behalf of Robert Lewis Henderson, to provide comments for the first time anticipated to be human carcinogens; on any nomination. Comments will be Houston, Texas, Court of Federal Claims and (2) to which a significant number of Number 03–1608V accepted for 60 days from the 825. Deena and Olando Rivera on behalf of persons residing in the United States publication date of this announcement Anthony Michael Rivera, Houston, Texas, (US) are exposed. The law also states and should be directed to Dr. C. W. Court of Federal Claims Number 03–1609V that the reports should provide available Jameson (National Toxicology Program, 826. Regina and Ricky King on behalf of information on the nature of exposures, Report on Carcinogens, MD EC–14, P.O. Joshua Lynn King, Paducah, Kentucky, the estimated number of persons Court of Federal Claims Number 03–1610V Box 12233, Research Triangle Park, NC exposed and the extent to which the 27709; phone: (919) 541–4096, fax: (919) 827. Nicole and Russell Rider on behalf of implementation of Federal regulations Logan Nicole Rider, Houston, Texas, Court 541–0144, e-mail: decreases the risk to public health from [email protected]). Individuals of Federal Claims Number 03–1611V exposure to these chemicals. 828. Barbara and Gregory Haines on behalf of submitting public comments are asked In 2003, seven nominations were Kevin J. Haines, Woodbury, New Jersey, to include relevant contact information reviewed by three scientific committees, Court of Federal Claims Number 03–1612V (name, affiliation (if any), address, two Federal and one non-government, telephone, fax, e-mail, and sponsoring Dated: October 27, 2003. for listing in the Eleventh Report. This organization (if any)). Elizabeth M. Duke, review included public comment and Administrator. review. The three scientific review Dated: October 28, 2003. [FR Doc. 03–27883 Filed 11–5–03; 8:45 am] committees evaluated all available data Kenneth Olden, BILLING CODE 4165–15–P relevant to the criteria for inclusion of Director, National Toxicology Program.

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SUMMARY OF RG1, 1 RG 2 AND NTP BOARD SUBCOMMITTEE 3 RECOMMENDATIONS FOR THE NOMINATIONS REVIEWED IN 2003 FOR LISTING IN THE REPORT ON CARCINOGENS, 11TH EDITION

NTP board subcommittee Nomination/CAS number Primary uses or exposures RG1 action RG2 action action

Diazoaminobenzene DAAB is used as an inter- Motion to list DAAB as Motion to list DAAB as Motion to list DAAB as (DAAB)/136–35–6. mediate in the produc- reasonably anticipated reasonably anticipated reasonably anticipated tion of dyes and to pro- to be a human car- to be a human car- to be a human car- mote adhesion of natural cinogen passed by cinogen passed by ma- cinogen passed by ma- rubber to steel. unanimous vote (5/0). jority vote (8/1). Nega- jority vote (6/4) with 1 tive vote cast because abstention. Negative member felt there was votes: 3 members felt not sufficient evidence nominations did not for DAAB to list in the meet criteria for listing Report on Carcinogens.. and 1 member felt that because DAAB is me- tabolized to benzene, it should be listed as known to be a human carcinogen. Absten- tion—member felt if DAAB is metabolized to benzene, it should be listed as known to be a human carcinogen; how- ever, not convinced chemical is metabolized to benzene in humans. Hepatitis B Virus (HBV) ..... HBV is a small DNA-envel- Motion to list HBV as Motion to list HBV as Motion to list HBV as oped virus that along known to be a human known to be a human known to be a human with Hepatitis C Virus carcinogen passed by carcinogen passed by carcinogen passed by causes most parentally unanimous vote (4/0). unanimous vote (8/0). unanimous vote (12/0). transmitted viral hepatitis. Hepatitis C Virus (HCV) .... HCV is an RNA-enveloped Motion to list HCV as Motion to list HCV as Motion to list HCV as virus that along with known to be a human known to be a human known to be a human Hepatitis B Virus causes carcinogen passed by carcinogen passed by carcinogen passed by most parenterally trans- unanimous vote (7/0). unanimous vote (8/0). unanimous vote (12/0). mitted viral hepatitis. Human Papillomaviruses HPVs are small, non-en- Motion to list HPVs as Motion to list HPVs as Motion to list HPVs as (HPVs), Genital-Mucosal veloped viruses that in- known to be a human known to be a human known to be a human Types. fect genital skin, and carcinogen passed by carcinogen passed by carcinogen passed by genital and non-genital unanimous vote (7/0). unanimous vote (8/0). unanimous vote (12/0). mucosa. HPV infections are common throughout the world. Lead and Lead Com- Major use of metal is in Motion to list Lead and Motion to list Lead and Motion to list Lead and pounds. making lead-acid stor- Lead Compounds as Lead Compounds as Lead Compounds as age batteries. Other known to be human car- reasonably anticipated reasonably anticipated common uses include cinogens passed by to be human carcino- to be human carcino- ammunition and cable unanimous vote (8/0). gens passed by majority gens passed by majority covering. Lead com- vote (4/3). Negative vote (11/0). pounds are used in votes cast because paint, glass, ceramics, members felt that fuel additives, and some human data were suffi- traditional cosmetics. cient to list lead and lead compounds as known to be human car- cinogens. Neutrons ...... Exposure to neutrons nor- Motion to list Neutrons as Motion to list Neutrons as Motion to list Neutrons as mally occurs from a known to be a human known to be a human known to be a human mixed irradiation field in carcinogen passed by carcinogen passed by carcinogen passed by which neutrons are a unanimous vote (7/0). unanimous vote (8/0). unanimous vote (11/0). minor component. The exceptions are exposure of patients to neutron ra- diotherapy beams and exposures of aircraft passengers and crew.

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SUMMARY OF RG1, 1 RG 2 AND NTP BOARD SUBCOMMITTEE 3 RECOMMENDATIONS FOR THE NOMINATIONS REVIEWED IN 2003 FOR LISTING IN THE REPORT ON CARCINOGENS, 11TH EDITION—Continued

NTP board subcommittee Nomination/CAS number Primary uses or exposures RG1 action RG2 action action

X-Radiation and Gamma Exposure to these forms of Motion to list X-Radiation Motion to list X-Radiation Motion to list X-Radiation (g)-Radiation. ionizing radiation comes and g-Radiation as and g-Radiation as and g-Radiation as from a variety of natural known to be human car- known to be human car- known to be human car- (environmental expo- cinogens passed by cinogens passed by cinogens passed by sure) and anthropogenic unanimous vote (7/0). unanimous vote (8/0). unanimous vote (11/0). sources, including expo- sure for military, med- ical, and occupational purposes. 1 —The NIEHS Review Committee for the Report on Carcinogens (RG1). 2 —The NTP Executive Committee* Interagency Working Group for the Report on Carcinogens (RG2). *Agencies from the NTP Executive Committee represented on RG2 include: Agency for Toxic Substances and Disease Registry (ATSDR), Consumer Product Safety Commission (CPSC), Environmental Protection Agency (EPA), National Center for Environmental Health of the Cen- ters for Disease Control and Prevention (NCEH/CDC), National Center for Toxicological Research of the Food and Drug Administration (NCTR/ FDA), National Institute for Occupational Safety and Health/CDC (NIOSH/CDC), Occupational Safety and Health Administration (OSHA), National Cancer Institute of the National Institutes of Health (NCI/NIH), and National Institute of Environmental Health Sciences/NIH (NIEHS/NIH). 3 —The NTP Board of Scientific Counselors Report on Carcinogens Subcommittee (a standing subcommittee of the NTP Board of Scientific Counselors that serves as an external peer review group).

[FR Doc. 03–27892 Filed 11–5–03; 8:45 am] Washington, DC 20503; Fax number This Notice also lists the following BILLING CODE 4140–01–P (202) 395–6974; e-mail information: _ Lauren [email protected]. Title of Proposal: Logic Model Grant Performance Reporting Standard. DEPARTMENT OF HOUSING AND FOR FURTHER INFORMATION CONTACT: OMB Approval Number: 2535–0114. URBAN DEVELOPMENT Wayne Eddins, Reports Management Officer, AYO, Department of Housing Form Numbers: HUD–96010. [Docket No. FR–4815–N–84] and Urban Development, 451 Seventh Description of the Need for the Street, Southwest, Washington, DC Notice of Submission of Proposed _ Information and Its Proposed Use: Information Collection to OMB: Logic 20410; e-mail Wayne [email protected]; Applicants of HUD Federal Financial Model Grant Performance Reporting telephone (202) 708–2374. This is not a Assistance are required to indicate Standard toll-free number. Copies of the proposed intended results and impacts. Grant forms and other available documents recipients report against their baseline AGENCY: Office of the Chief Information submitted to OMB may be obtained performance standards. This proves Officer, HUD. from Mr. Eddins. standardizes grants progress reporting ACTION: Notice. SUPPLEMENTARY INFORMATION: The requirements and promotes greater SUMMARY: The proposed information Department has submitted the proposal emphasis on performance and results in collection requirement described below for the collection of information, as grant programs. has been submitted to the Office of described below, to OMB for review, as Respondents: Individuals or Management and Budget (OMB) for required by the Paperwork Reduction households, business or other for-profit, review, as required by the Paperwork Act (44 U.S.C. Chapter 35). The Notice not-for-profit institutions, State, Local or Reduction Act. The Department is lists the following information: (1) The Tribal Government. soliciting public comments on the title of the information collection Frequency of Submission: Quarterly, subject proposal. proposal; (2) the office of the agency to Annually. Applications of HUD Federal collect the information; (3) the OMB Financial Assistance are required to approval number, if applicable; (4) the Reporting Burden: Number of indicate intended results and impacts. description of the need for the Respondents 11,000; Average response Grant recipients report against their information and its proposed use; (5) per Respondent 2.8; Total annual baseline performance standards. This the agency form number, if applicable; responses 30,800; Average burden per process standardizes grants progress (6) what members of the public will be response 18 hrs. reporting requirements and promotes affected by the proposal; (7) how Total Estimated Burden Hours: greater emphasis on performance and frequently information submissions will 554,400. results in grant programs. be required; (8) an estimate of the total Status: Extension of a currently DATES: Comments Due Date: December number of hours needed to prepare the approved collection. 8, 2003. information submission including number of respondents, frequency of Authority: Section 3507 of the Paperwork ADDRESSES: Interested persons are Reduction Act of 1995, 44 U.S.C. 35, as invited to submit comments regarding response, and hours of response; (9) amended. this proposal. Comments should refer to whether the proposal is new, an the proposal by name and/or OMB extension, reinstatement, or revision of Dated: October 30, 2003. approval number (2535–0114) and an information collection requirement; Wayne Eddins, should be sent to: Lauren Wittenberg, and (10) the name and telephone Departmental Reports Management Officer, OMB Desk Officer, Office of number of an agency official familiar Office of the Chief Information Officer. Management and Budget, Room 10235, with the proposal and of the OMB Desk [FR Doc. 03–27884 Filed 11–5–03; 8:45 am] New Executive Office Building, Officer for the Department. BILLING CODE 4210–72–P

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DEPARTMENT OF HOUSING AND information submission including copy from the U.S. Fish and Wildlife URBAN DEVELOPMENT number of respondents, frequency of Service, Corpus Christi Ecological response, and hours of response; (9) Services Field Office, c/o TAMUCC, Box [Docket No. FR–4815–N–85] whether the proposal is new, an 338, 6300 Ocean Drive, Corpus Christi, Notice of Submission of Proposed extension, reinstatement, or revision of Texas, 78412. The Final Recovery Plan Information Collection to OMB: Utility an information collection requirement; will also be available through the Fish Allowance Adjustments and (10) the name and telephone and Wildlife Region 2 Web site at: http: number of an agency official familiar //southwest.fws.gov. AGENCY: Office of the Chief Information with the proposal and of the OMB Desk FOR FURTHER INFORMATION CONTACT: Officer, HUD. Officer for the Department. Field Office Supervisor, Corpus Christi ACTION: Notice. This Notice also lists the following Ecological Services Field Office, at the information: SUMMARY: The proposed information Title of Proposal: Utility Allowance above address; telephone (361) 994– collection requirement described below Adjustments. 9005, facsimile (361) 994–8262. has been submitted to the Office of OMB Approval Number: 2502–0352. SUPPLEMENTARY INFORMATION: Management and Budget (OMB) for Form Numbers: None. review, as required by the Paperwork Description of the Need for the Background Reduction Act. The Department is Information and Its Proposed Use: The star cactus (Astrophytum soliciting public comments on the Multifamily project owners are required asterias) was listed as endangered on subject proposal. to advise the Secretary of the need for November 17, 1993, under authority of Multifamily project owners are and request approval of a new utility the Endangered Species Act of 1973, as required to advise the Secretary of the allowance for tenants. amended. The threats facing the need for and request approval of a new Respondents: Business or other for- survival and recovery of this species utility allowance for tenants. profit. include habitat destruction through Frequency of Submission: On DATES: Comments Due Date: December conversion of native habitat to occasion. 8, 2003. agricultural land and increasing Reporting Burden: Number of ADDRESSES: Interested persons are urbanization, competition with exotic Respondents 1,200; Average response invited to submit comments regarding invasive species, genetic vulnerability per respondent 1; Total annual response this proposal. Comments should refer to due to low population numbers, and 1,200; Average burden per response 0.5 the proposal by name and/or OMB collecting pressures for the cactus trade. approval number (2502–0352) and hrs. Total Estimated Burden Hours: 600. The Final Recovery Plan includes should be sent to: Lauren Wittenberg, information about the species and OMB Desk Officer, Office of Status: Extension of a currently approved collection. provides objectives and actions needed Management and Budget, Room 10235, to downlist the species. Recovery New Executive Office Building, Authority: Section 3507 of the Paperwork activities designed to achieve Washington, DC 20503; Fax number Reduction Act of 1995, 44 U.S.C. 35, as downlisting objectives include: amended. (202) 395–6974; E-mail Protecting known populations; [email protected]. Dated: October 30, 2003. searching for additional populations; FOR FURTHER INFORMATION CONTACT: Wayne Eddins, performing outreach activities to Wayne Eddins, Reports Management Departmental Reports Management Officer, educate the general public on the need Officer, AYO, Department of Housing Office of the Chief Information Officer. for protection; building partnerships and Urban Development, 451 Seventh [FR Doc. 03–27885 Filed 11–5–03; 8:45 am] with private landowners who are Street, Southwest, Washington, DC BILLING CODE 4210–72–P interested in voluntary conservation of 20410; e-mail [email protected]; the species on their land; establishing telephone (202) 708–2374. This is not a additional populations through toll-free number. Copies of the proposed DEPARTMENT OF THE INTERIOR reintroduction in the known range of forms and other available documents the plant; formalizing a conservation submitted to OMB may be obtained Fish and Wildlife Service strategy with Mexico; and filling from Mr. Eddins. information gaps to guide management Notice of Availability of the Final SUPPLEMENTARY INFORMATION: The decisions and provide a basis for Recovery Plan for the Star Cactus Department has submitted the proposal delisting criteria. The Recovery Plan (Astrophytum asterias) for the collection of information, as will be reviewed in five years to described below, to OMB for review, as AGENCY: Fish and Wildlife Service, evaluate management direction and required by the Paperwork Reduction Interior. reconsider delisting criteria. Act (44 U.S.C. Chapter 35). The Notice ACTION: Notice of document availability. Restoring an endangered or lists the following information: (1) The threatened animal or plant to the point title of the information collection SUMMARY: The U.S. Fish and Wildlife where it is again a secure, self- proposal; (2) the office of the agency to Service (Service) announces the sustaining member of its ecosystem is a collect the information; (3) the OMB availability of the Final Recovery Plan primary goal of the Service’s approval number, if applicable; (4) the for the star cactus (Astrophytum endangered species program. To help description of the need for the asterias). Star cactus has been guide the recovery effort, the Service is information and its proposed use; (5) documented on one private land site in working to prepare Recovery Plans for the agency form number, if applicable; Starr County, Texas. Additional most of the listed species native to the (6) what members of the public will be populations may be found in the United United States. Recovery Plans describe affected by the proposal; (7) how States in Texas, and in Tamaulipas and actions considered necessary for frequently information submissions will Nuevo Leon, Mexico. conservation of species, establish be required; (8) an estimate of the total ADDRESSES: Persons wishing to receive criteria for downlisting or delisting number of hours needed to prepare the the Final Recovery Plan can obtain a them, and estimate time and cost for

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implementing the recovery measures SUPPLEMENTARY INFORMATION: public comment period, the Consent needed. Reclamation and SMUD had proposed Decree also may be examined on the The Endangered Species Act of 1973 to amend the existing contract to change following Department of Justice Web (Act), as amended (16 U.S.C. 1531 et the point of diversion of 30,000 acre-feet site, http://www.usdoj.gov/enrd/ seq.) requires the development of annually of contract water for municipal open.html. A copy of the Consent Recovery Plans for listed species unless and industrial uses for Sacramento Decree may also be obtained by mail such a Plan would not promote the County Water Agency. from the Consent Decree Library, P.O. conservation of a particular species. Dated: October 24, 2003. Box 7611, U.S. Department of Justice, Washington, DC 20044–7611, or by Section 4(f) of the Act, as amended in Frank Michny, 1988, requires that public notice and an faxing or e-mailing a request to Tonia Regional Environmental Officer, Mid-Pacific Fleetwood ([email protected]), opportunity for public review and Region. comment be provided during Recovery fax no. (202) 514–0097, phone [FR Doc. 03–27920 Filed 11–5–03; 8:45 am] Plan development. The Service will confirmation number (202) 514–1547. In consider all information presented BILLING CODE 4310–MN–P requesting a copy from the Consent during a public comment period prior to Decree Library, please enclose a check approval of each new or revised in the amount of $32.25 (25 cents per Recovery Plan. The Service and other DEPARTMENT OF JUSTICE page reproduction cost) payable to U.S. Federal agencies will also take these Treasury. Notice of Lodging of Consent Decree comments into account in the course of Under Comprehensive Environmental Catherine R. McCabe, implementing Recovery Plans. Response, Compensation and Liability Deputy Section Chief, Environmental The Final Star Cactus Recovery Plan Act Enforcement Section, Environment and is cosigned by the Director of the Texas Natural Resources Division. Parks and Wildlife Department. Under 28 CFR 50.7, notice is hereby [FR Doc. 03–27886 Filed 11–5–03; 8:45 am] Authority given that on September 30, 2003, a BILLING CODE 4410–15–M proposed Consent Decree in United The authority for this action is States v. Alliant Techsystems, Inc., Civil Section 4(f) of the Endangered Species Action No. 03–4648, was lodged with DEPARTMENT OF JUSTICE Act, 16 U.S.C. 1533(f). the United States District Court for the Notice of Filing of Environmental Dated: September 9, 2003. District of New Jersey. In this action the United States seeks Bankruptcy Settlement in In re Bryan Arroyo, Fansteel, Inc. et al. Acting Regional Director, Region 2. the recovery of response costs incurred regarding the Radiation Technology [FR Doc. 03–27919 Filed 11–5–03; 8:45 am] Notice is hereby given that a proposed Superfund Site, in Rockaway Township, BILLING CODE 4310–55–P settlement entered into by the United New Jersey. The proposed consent States, on behalf of the Environmental decree embodies an agreement with Protection Agency (‘‘EPA’’), the DEPARTMENT OF THE INTERIOR Alliant Techsystems, Inc. (ATK) to Department of the Navy (‘‘Navy’’), the perform the groundwater remedy at the Department of the Interior (‘‘DOI’’) and Bureau of Reclamation Site and to reimburse the U.S. the National Oceanic and Atmospheric Environmental Protection Agency for up Administration (‘‘NOAA’’), and Environmental Impact Statement/ to $249,000 of its past response costs Fansteel, Inc. (‘‘Debtor’’) was filed on Environmental Impact Report on the and for all oversight costs in connection September 18, 2003, in In re Fansteel, Proposed Amendment of the Water with the performance of the remedy. Inc. et al., No. 02–10109 (Bank. D. Del.) Service Contract Between the United The decree provides ATK with a with the United States Bankruptcy States of America and the Sacramento covenant not to sue under Sections 106 Court for the District of Delaware. The Municipal Utility District, Sacramento, and 107(a) of the Comprehensive proposed settlement is contained in CA Environmental Response, Compensation Article XIII(C) of the Debtor’s proposed and Liability Act, 42 U.S.C. 9606 and Plan of Reorganization (‘‘Plan’’) and AGENCY: Bureau of Reclamation, 9607(a). would resolve certain claims of the Interior. The Department of Justice will receive United States against the settling party ACTION: Notice of cancellation. for a period of thirty (30) days from the under the Comprehensive date of this publication comments Environmental Response Compensation SUMMARY: The Bureau of Reclamation relating to the Consent Decree. and Liability Act (‘‘CERCLA’’) 42 U.S.C. and the Sacramento Municipal Utility Comments should be addressed to the 9601 et seq., relating to the following District (SMUD) are canceling plans to Assistant Attorney General, locations: (1) The Vulcan Louisville continue work on a joint environmental Environment and Natural Resources Smelter Site/Vacant Lot Site (‘‘Vacant impact statement/environmental impact Division, P.O. Box 7611, U.S. Lot Site’’); (2) Pettibone Creek; and (3) report (EIS/EIR) on a proposed Department of Justice, Washington, DC the Naval Station Great Lakes including amendment of the water service contract 20044–7611, and should refer to United the boat basin, inner harbor, and the between the United States and SMUD. States v. Alliant Techsystems, Inc., D.J. outer harbor (‘‘NAVSTA Great Lakes’’) The reason for canceling is that the No. 90–11–2–07691/1. all in North Chicago, Lake County, project will be addressed as part of the The Consent Decree may be examined Illinois. environmental review processes for both at the Office of the United States Under the settlement, Reorganized the Freeport Regional Water Project and Attorney, 970 Broad Street, Room 400, Fansteel will contribute $1,600,000 to the American River Division long-term Newark, NJ 07102, and at the Region II North Chicago, Inc. (‘‘NCI’’), a wholly- contract renewal. Office of the U.S. Environmental owned subsidiary of Fansteel created FOR FURTHER INFORMATION CONTACT: Mr. Protection Agency, Region II Records under the Plan, to perform the response Rob Schroeder, Reclamation, at (916) Center, 290 Broadway, 17th Floor, New action selected by the EPA (‘‘North 989–7274. York, NY 10007–1866. During the Chicago Response Action’’) at the real

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property owned by Fansteel, which is a at the Office of the United States Act (‘‘CERCLA’’), for response costs, the portion of the Vacant Lot Site (‘‘North Attorney for the District of Delaware, performance of response actions, and Chicago Facility’’). The Department of 1201 Market Street, Suite 1100, natural resource damages with respect Defense, the General Services Wilmington, DE and the Region V Office to the Allied/Portage Creek/Kalamazoo Administration, the Department of of the United States Environmental River Superfund Site in Plainwell, Commerce, and the Department of Protection Agency, 77 West Jackson Michigan (‘‘Site’’). The claims by the Treasury (‘‘Federal Settling Agencies’’) Street, Chicago, Illinois 60604. During United States addressed in the will contribute $425,000, which funds the public comment period, the Settlement Agreement include claims will be used, if necessary, by NCI, with settlement may be viewed on the on behalf of the United States EPA oversight, to clean up the North following Department of Justice Web Environmental Protection Agency Chicago Facility following NCI’s site, http://www.usdoj.gov/enrd/ (‘‘EPA’’), the United States Department expenditure of the $1,600,000. If the open.html. A copy of the settlement also of the Interior (‘‘DoI’’), and the National above is not sufficient, Reorganized may be obtained by mail from the Oceanic and Atmospheric Fansteel will contribute an amount of Consent Decree Library, P.O. Box 7611, Administration of the United States up to an additional $500,000 to U.S. Department of Justice, Washington, Department of Commerce (‘‘NOAA’’). complete the North Chicago Response DC 20044–7611, or by faxing or e- The State of Michigan (‘‘State’’) is also Action. In the event that the City of mailing a request to Tonia Fleetwood a signatory to the Agreement. North Chicago, Illinois (‘‘City’’) ([email protected]), fax no. Under the proposed Settlement exercises eminent domain with respect (202) 514–0097, phone confirmation Agreement, the non-debtor Plainwell to the North Chicago Facility before the number (202) 514–1547. In requesting a Parties will pay approximately (1) $6.2 cleanup is commenced, Reorganized copy from the Consent Decree Library, million towards EPA’s future response Fansteel and the City will contribute the please enclose a check in the amount of costs in connection with the Site; (2) requisite funds to perform the North $21.75 (25 cents per page reproduction $23,000 towards EPA’s past response Chicago Response Action. cost) payable to the U.S. Treasury. costs; (3) $900,000 for use jointly by In addition, the EPA, Navy, DOI, and DOI, NOAA, and the State, as trustees NOAA are granted an allowed Thomas A. Mariani, Jr., of natural resources injured at the Site, unsecured claim in the amount of Assistant Chief, Environmental Enforcement to restore, replace, or acquire the $10,000,000, on account of which they Section, Environment and Natural Resources equivalent of the injured resources; and Division. will receive a distribution of (1) (4) $16,000 towards the Federal and Available General Unsecured Cash in [FR Doc. 03–28018 Filed 11–4–03; 2:38 pm] State trustees’ natural resource damages the amount of $100,000 (to be allocated BILLING CODE 4410–15–M assessment costs. In addition, the among the Navy, NOAA, and the DOI Agreement requires Plainwell to execute only) and (2) 50% of certain insurance DEPARTMENT OF JUSTICE a restrictive covenant in favor of the proceeds received by Reorganized United States and the State on a landfill Fansteel. The proposed settlement Notice of Lodging of Consent Decree that it owns. would be implemented through a Under the Comprehensive The Department of Justice will receive Consent Decree in conformance with the Environmental Response, for a period of thirty (30) days from the settlement terms described in the Compensation, and Liability Act date of this publication comments proposed Plan. The Plan also grants the (‘‘CERCLA’’) relating to the proposed Settlement EPA allowed general unsecured claims Agreement. Comments should be related to the Old Southington Consistent with the policy of Section addressed to the Assistant Attorney Superfund Site in Southington, 122(d)(2) of CERCLA, 42 U.S.C. General, Environment and Natural Connecticut; the PCB Treatment Inc. 9622(d)(2), notice is hereby given that Resources Division, P.O. Box 7611, U.S. Superfund Site in Kansas City, Kansas on November 3, 2003, a Settlement Department of Justice, Washington, DC and Kansas City, Missouri; the Li Agreement with Plainwell, Inc. 20044–7611, and should refer to In re Tungsten Superfund Site in Glen Cove, (‘‘Plainwell’’) and five affiliated Plainwell, Inc. and Plainwell Holding New York; and the Operating Industries, companies was lodged with the Co., Case No. 99–4350 (JWV) (DOJ Ref. Inc. Superfund Site in Monterey Park, Bankruptcy Court for the District of No. 90–11–2–1306). California. Delaware, in In re Plainwell, Inc. and The Settlement Agreement may be The hearing on whether to confirm Plainwell Holding Co., Case No. 00– examined at the Office of the United the Plan is set for November 17, 2003. 4350 (JWV). States Attorney, District of Delaware, Comments relating to the proposed The proposed Settlement Agreement 1007 North Orange Street, Suite 700, settlement must be received by the is with: (1) Plainwell and its parent Wilmington, Delaware 19899–2046; and Department of Justice by close of company, Plainwell Holding Company at EPA Region 5, 77 W. Jackson Blvd., business November 14, 2003. Comments (collectively, the ‘‘Debtors’’), both of Chicago, Illinois 60604 (contact Eileen may be addressed to the Assistant which are in liquidation proceedings L. Furey, Esq. (312) 886–7950). During Attorney General of the Environment under Chapter 11 of the Bankruptcy the public comment period, the and Natural Resources Division, Code; and (2) the Debtors’ past parent Settlement Agreement may also be Department of Justice and sent by any companies, Colonial Heights Packaging, examined on the following Department of the following methods: (1) Telefax or Inc., Philip Morris USA Inc., of Justice Web site, http:// e-mail to Richard Gladstein Chesapeake Corporation, and Simpson www.usdoj.gov/enrd/open.html. A copy ([email protected]), fax no. Paper Company (collectively, the ‘‘non- of the Settlement Agreement may also (202) 514–8395, phone confirmation debtor Plainwell Parties’’), which are be obtained by mail from the Consent number (202) 514–1711; or (2) first class not in bankruptcy. The Settlement Decree Library, P.O. Box 7611, U.S. mail to P.O. Box 7611, Ben Franklin Agreement resolves claims of the United Department of Justice, Washington, DC Station, Washington, DC 20044, and States and the State of Michigan against 20044–7611 or by faxing or e-mailing a should refer to In re Fansteel, et al., D.J. those parties under Section 106 and 107 request to Tonia Fleetwood Ref. No. 90–10–07797/1. Copies of the of the Comprehensive Environmental ([email protected]), fax no. proposed settlement may be examined Response, Compensation, and Liability (202) 514–0097, phone confirmation

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number (202) 514–1547. In requesting a SUPPLEMENTARY INFORMATION: Please Signed at Washington, DC this 30th day of copy from the Consent Decree Library, refer to the notice published in the September 2003 please refer to In re Plainwell, Inc. and Federal Register on December 15, 1994 Elliott S. Kushner, Plainwell Holding Co., Case No. 00– (59 FR 64713) for SUPPLEMENTARY Certifying Officer, Division of Trade 4350 (JWV) (DOJ Ref. No. 90–11–2– INFORMATION. Adjustment Assistance. 1306), and enclose a check in the [FR Doc. 03–27928 Filed 11–5–03; 8:45 am] Signed at Washington, DC on October 31, amount of $11.50 (25 cents per page BILLING CODE 4510–30–P 2003. reproduction cost) payable to the U.S. Treasury. Lewis Karesh, Acting Director, U.S. National Administrative DEPARTMENT OF LABOR William D. Brighton, Office. Assistant Chief, Environmental Enforcement [FR Doc. 03–27925 Filed 11–5–03; 8:45 am] Employment and Training Section, Environment & Natural Resources Administration Division. BILLING CODE 4510–28–P [FR Doc. 03–27996 Filed 11–5–03; 8:45 am] Notice of Determinations Regarding BILLING CODE 4410–15–M Eligibility To Apply for Worker DEPARTMENT OF LABOR Adjustment Assistance Employment and Training In accordance with section 223 of the DEPARTMENT OF LABOR Administration Trade Act of 1974, as amended, (19 U.S.C. 2273), the Department of Labor Bureau of International Labor Affairs; herein presents summaries of U.S. National Administrative Office, [TA–W–52,691] determinations regarding eligibility to National Advisory Committee for the apply for trade adjustment assistance for North American Agreement on Labor American Bag Corp., Winfield, TN; workers (TA–W) number and alternative Cooperation; Notice of Open Meeting Notice of Termination of Investigation trade adjustment assistance (ATAA) by AGENCY: Office of the Secretary, Labor. Pursuant to section 221 of the Trade (TA–W) number issued during the ACTION: Notice of open meeting Act of 1974, as amended, an periods of September and October 2003. November 24, 2003. investigation was initiated on August In order for an affirmative 27, 2003 in response to a petition filed determination to be made and a SUMMARY: Pursuant to the Federal by a company official on behalf of certification of eligibility to apply for Advisory Committee Act (Pub. L. 94– workers of American Bag Corporation, directly-impacted (primary) worker 463), the U.S. National Administrative Winfield, Tennessee. adjustment assistance to be issued, each Office (NAO) gives notice of a meeting of the group eligibility requirements of of the National Advisory Committee for The petitioner has requested that the section 222(a) of the Act must be met. the North American Agreement on petition be withdrawn. Consequently, I. Section (a)(2)(A) all of the following Labor Cooperation (NAALC), which was the investigation has been terminated. must be satisfied: established by the Secretary of Labor. Signed at Washington, DC this 1st day of A. A significant number or proportion The Committee was established to October 2003. of the workers in such workers’ firm, or provide advice to the U.S. Department an appropriate subdivision of the firm, Richard Church, of Labor on matters pertaining to the have become totally or partially implementation and further elaboration Certifying Officer, Division of Trade separated, or are threatened to become of the NAALC, the labor side accord to Adjustment Assistance. totally or partially separated; the North American Free Trade [FR Doc. 03–27931 Filed 11–5–03; 8:45 am] B. The sales or production, or both, of Agreement (NAFTA). The Committee is BILLING CODE 4510–30–P such firm or subdivision have decreased authorized under Article 17 of the absolutely; and NAALC. C. Increased imports of articles like or The Committee consists of DEPARTMENT OF LABOR directly competitive with articles independent representatives drawn produced by such firm or subdivision from among labor organizations, Employment and Training have contributed importantly to such business and industry, educational Administration workers’ separation or threat of institutions, and the general public. separation and to the decline in sales or DATES: The Committee will meet on [TA–W–52,869] production of such firm or subdivision; November 24, 2003 from 9 a.m. to 1 or p.m. Clayson Knitting Company, Inc., Star, II. Section (a)(2)(B) both of the NC; Notice of Termination of following must be satisfied: ADDRESSES: U.S. Department of Labor, Investigation A. A significant number or proportion 200 Constitution Avenue, NW., of the workers in such workers’ firm, or Executive Conference Room at C–5515, Pursuant to section 221 of the Trade an appropriate subdivision of the firm, Washington, DC 20210. The meeting is Act of 1974, as amended, an have become totally or partially open to the public on a first-come, first separated, or are threatened to become served basis. investigation was initiated on September 17, 2003 in response to a totally or partially separated; FOR FURTHER INFORMATION CONTACT: worker petition filed a company official B. There has been a shift in Lewis Karesh, designated Federal production by such workers’ firm or on behalf of workers at Clayson Knitting Officer, U.S. NAO, Bureau of subdivision to a foreign county of Company, Inc., Star, North Carolina. International Labor Affairs, U.S. articles like or directly competitive with Department of Labor, 200 Constitution The petitioner has requested that the articles which are produced by such Avenue, NW., Room S–5205, petition be withdrawn. Consequently, firm or subdivision; and Washington, DC 20210. Telephone 202– the investigation has been terminated. C. One of the following must be 693–4900 (this is not a toll free number). satisfied:

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1. The country to which the workers’ TA–W–52,741; Etto Tool and Machine Inc., Kannapolis, NC firm has shifted production of the Company, Inc., York, PA TA–W–52,911; International Paper, U.S. articles is a party to a free trade TA–W–52,307; Ovalstrapping, Inc., Fort Container Div., Orange, TX agreement with the United States; Payne, AL TA–W–52,839; General Electric Engine Services, a div. of the General Electric 2. The country to which the workers’ TA–W–52,262; Sierra Pine, Ltd, Company, McAllen, TX firm has shifted production of the Springfield, OR TA–W–52,950; Alva Distributing, Inc., articles to a beneficiary country under TA–W–52,728; TRW Automotive, Body Albemarle, NC the Andean Trade Preference Act, Controls Systems, NA, Rushford, TA–W–53,020; Intercontinental Hotels African Growth and Opportunity Act, or MN Group, Reservation Center, Cary, NC the Caribbean Basin Economic Recovery TA–W–52,410; Radio Frequency TA–W–52,985; Canon USA, Inc., Act; or Services, Inc., Wilkesboro, NC Semiconductor Div., San Antonio, TX 3. There has been or is likely to be an TA–W–52,659; Connex Pipe Systems, a TA–W–52,828; AK Steel Corp., Rockport Works, Shipping, Receiving and increase in imports of articles that are subsidiary of The Shaw Group, Inc., Packaging Department, Rockport, IN like or directly competitive with articles Troutville, VA TA–W–52,850; Breed Safety Restraint which are or were produced by such TA–W–52,474; Kulicke and Soffa Systems, El Paso, TX firm or subdivision. Industries, Austin, TX TA–W–52,920; Sony Ericcson Mobile Also, in order for an affirmative TA–W–52,472; Arlee Home Fashions, Communications, CDMA Development determination to be made and a Inc., Mexico, MO Group, Research Triangle Park, NC certification of eligibility to apply for TA–W–52,627; Flextronics Logistics, TA–W–52,942; Innovative Marketing worker adjustment assistance as an including leased workers of Wood Strategies, Pittsburg, KS Personnel, Mount Juliet, TN TA–W–52,798; ADC Telecommunications, adversely affected secondary group to be Inc., Eden Prairie, MN issued, each of the group eligibility TA–W–52,541; Alabama Metals, Div. of TA–W–52,766; American Sussen Corp., a requirements of section 222(b) of the Amico Klemp, Liberty, MO subsidiary of Spindelfabrik Suessen, Act must be met. TA–W–52,980; Worcester Gear Works, Charlotte, NC (1) Significant number or proportion Inc., Worcester, MA TA–W–52,663; Stanley Services, Henderson, of the workers in the workers’ firm or TA–W–53,035; Supreme Bumper, Inc., NC an appropriate subdivision of the firm Toledo, OH TA–W–52,643; Matsushita Avionics Systems have become totally or partially TA–W–52,859; Prestige Products, Inc., Corp., Coppell, TX separated, or are threatened to become Minneapolis, MN TA–W–52,567; Agilent Technologies, Inc., TA–W–52,774; Weyerhauser Co., North Global Financial Accounting Div., totally or partially separated; Colorado Springs, CO (2) The workers’ firm (or subdivision) Bend, OR TA–W–52,642; Cyberware Laboratories, Inc., is a supplier or downstream producer to TA–W–52,814; Precision Tool and Engineering Department Monterey, CA a firm (or subdivision) that employed a Design, Erie, PA TA–W–52,958; Electronic Data Systems, GM/ group of workers who received a TA–W–52,913; Spectrulite Consortium, SPO, Flint, MI certification of eligibility to apply for Inc., Madison, IL TA–W–52,957; Stmicroelectronics, Inc., trade adjustment assistance benefits and TA–W–52,971; Goodyear Tire and Raleigh, NC such supply or production is related to Rubber Co., Engineered Products TA–W–52,837; Sykes Enterprises, Inc., the article that was the basis for such Div., Cartersville, GA Klamath Falls, OR TA–W–52,560; Minnesota Ore TA–W–52,716; Uniprise, Dayton, OH certification; and TA–W–53,079; Electronic Data Systems (3) Either— Operations, div. of U.S. Steel Corp., Corp., Troy, MI (A) The workers’ firm is a supplier Mt. Iron, MN TA–W–53,100; Computer Sciences Corp., and the component parts it supplied for TA–W–52,779; Avondale Mills, Inc., Bon Lehigh Valley Location, Bethlehem, PA the firm (or subdivision) described in Air Plant, Sylacauga, AL TA–W–53,162; Spherion Corp., Victoria, TX paragraph (2) accounted for at least 20 TA–W–52,734; Bendtec, Inc., Duluth, TA–W–52,875; Lucent Technologies, percent of the production or sales of the MN Naperville, IL workers’ firm; or TA–W–52,707; Parker Hannifin Corp., Hose TA–W–52,806; BMC Software, Inc., Houston, TX (B) A loss or business by the workers’ Products Div., Green Camp, OH TA–W–52,787; Western Technology Services TA–W–52,933; Ashland Specialty Chemical firm with the firm (or subdivision) International, Inc., a/k/a WOTCO, Inc., Co., a div. of Ashland, Inc., San Antonio, described in paragraph (2) contributed Casper, WY TX importantly to the workers’ separation TA–W–52,633; Highland Supply Corp., TA–W–53,088; L.B. Smith, Inc., a subsidiary or threat of separation. Highland, IL of Smith Land & Improvement Corp., TA–W–52,908; Coastal Apparel, LLC, Tabor Camp Hill, PA Negative Determinations for Worker City, NC TA–W–53,181; BIK Corp., d/b/a Nutec Adjustment Assistance TA–W–52,561; Benchmark Electronics, Inc., Bickley, Bensalem, PA In the following cases, the Winona, MN TA–W–53,182; RMH Teleservices, Inc., investigation revealed that the criteria TA–W–52,521; Novell, Inc., Provo, UT Wilkes-Barre, PA TA–W–52,965; Agri Beef Co., Boise, ID for eligibility have not been met for the The investigation revealed that criteria (a) (2) (A) (I.C) (increased imports) and (a) (2) (B) TA–W–53,016; Accenture, LLP, Anchorage, reasons specified. AK The investigation revealed that (II.C) (has shifted production to a foreign country) have not been met. TA–W–52,981; Oce Groupware Technology, criteria (a)(2)(A)(I.C.) (Increased Inc. (OGT), a subsidiary of Oce-USA imports) and (a)(2)(B)(II.B) (No shift in TA–W–53,041; Tecumseh Products Co., Holding, Inc., a member of The Oce Evergy Div., Paris, TN production to a foreign country) have Group, a subsidiary of Oce N.V., Boise, not been met. The workers firm does not produce an ID article as required for certification under TA–W–52,751; Cliffs Mining Services Co., TA–W–52,827; Dana Glacier Vandervell, section 222 of the Trade Act of 1974. Ishpeming, MI Bearings Div., Caldwell, OH TA–W–52,937; Zephyrhills Natural Spring TA–W–52,802; Sappi Cloquet LLC, TA–W–52,807; Brubaker Tool Corp., a Water, a subsidiary of Nestle Waters d/b/a Sappi Fine Paper North America, subsidiary of Talbott Holdings, North America, Inc., Tamarac, FL Cloquet, MN Millersburg, PA TA–W–52,960; Rosenbluth International, TA–W–52,842; Wal-Mart Distribution Center,

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Laurens, SC subdivision) is not a supplier or downstream MS: July 29, 2002. TA–W–52,975; Fall River Paper and Supply, producer to trade-affected companies TA–W–52,239; Titan Tire Corp., Des Moines, New Bedford, MA TA–W–52,810; Knernschield Manufacturing IA: June 24, 2002. TA–W–52,987; SACM Textiles, Inc., Lyman, Co, Columbia, MO TA–W–52,506; K and S Interconnect, Inc., SC TA–W–52,812; Metaldyne Sintered Dallas, TX: July 11, 2002. TA–W–52,865; Washington Logistics, Inc., Components, a Part of the Engine Group TA–W–52,516; The John S. Tilley Ladders Olympia, WA of Metaldyne Corp., St, Marys, PA Co., Inc., Watervliet, NY: July 30, 2002. TA–W–52,671; Siebel Systems, Emeryville, TA–W–53,008; Martins Manufacturing, LLC, TA–W–52,291; Sterling China Co., Wellsville, CA Kingsford, MI OH: June 19, 2002. TA–W–52,709; Kana Software, Inc., Research TA–W–52,499; Pennsylvania Electric Coil, TA–W–52,496; Mann Edge Tool Co., Forge and Development Department, Menlo Ltd, Glassport, PA Div., Lewistown, PA: April 6, 2003. Park, CA TA–W–52,782; Progressive Processing, Inc., TA–W–52,513; Del Monte Fresh Produce (HI), TA–W–52,772; Baltimore Marine Industries, Elyria, OH HCFO Div., Honolulu, HI: July 28, 2002. Inc., Baltimore, MD TA–W–52,705; Trojan Steel Co., Charleston, TA–W–52,829; New Bedford Plastic Bag Co., TA–W–52,745; Erie Power Technologies, Inc., WV New Bedford, MA: August 28, 2002. Erie, PA TA–W–52,563; Sheet Metal Specialties, Inc., TA–W–52,843; Lear Corp., Traverse City, MI: TA–W–52,743; Hewlett Packard, Boise, ID Waxhaw, NC September 5, 2002. TA–W–52,711; AT&T Wireless Service, Inc., TA–W–52,674; ADM Milli8ng Co., ‘‘A’’ Mill, TA–W–53,092; Jan-Sew Manufacturing, Livermore, Call Center, Livermore, CA a subsidiary of Archer Daniels Midland Crossville, TN: September 15, 2002. TA–W–52,918; Nationalwide Title Clearing, Co., Minneapolis, MN TA–W–53,082; Dekko Heating Technologies, Inc., Glendale, CA Inc., Plant 37, Appliance Div., Afton, IA: Affirmative Determinations for Worker September 25, 2002. TA–W–52,800; GE Betz Regional Business Adjustment Assistance Center, Grand Rapids, MI TA–W–52,939; TRTL Enterprises, LLC, TA–W–52,771; Central-PA Distribution & The following certifications have been Monmouth, OR: August 22, 2002. Warehouse, LLC, Reedsville, PA issued; the date following the company name TA–W–52,764; New Castle Industries, Bimex and location of each determination references Div., Wales, WI: August 3, 2002. The investigation revealed that criterion the impact date for all workers of such TA–W–52,799; Western Metal Specialty Co., (a)(2)(A)(I.A) (no employment decline) has determination. a div. of Western Industries, Inc., not been met. The following certifications have been Milwaukee, WI: September 5, 2002. TA–W–52,897; Alchemist, Inc., Bellingham, issued. The requirements of (a) (2) (A) TA–W–52,587; Ramtex, Inc., Ramseur, NC: WA (increased imports) of section 222 have been August 6, 2002. TA–W–52,932; Fishing Vessel (F/V) Erika, met. TA–W–52,738; Vermont Tubbs, Inc., a div. of Kodiak, AK TA–W–52,778; Titan Tire, Brownsville, TX: Carris Financial Corp., Brandon, VT: TA–W–52,884; Fishing Vessel (F/V) August 28, 2002. August 19, 2002. Confidence, Sitka, AK TA–W–52,811; RBX Industries, Inc., Conover, TA–W–52,868; Badorf Shoe Co., Inc., Lititz, TA–W–52,894; Fishing Vessel (F/V) NC: September 2, 2002. PA: September 9, 2002. Desperado, Wasilla, AK TA–W–52,836; A and A Consultants, Inc., El TA–W–52,788 & A, B; Springs Industries, TA–W–52,808; Maui Pineapple Co., Ltd, Paso, TX: September 5, 2002. Lancaster Plant, Lancaster, SC, White Honolua Plantation and Kahului TA–W–52,856; Starbase Technologies, Inc., Plant, Fort Mill, SC and Grace Cannery, Kahului, HI Pittsfield, MA: August 28, 2002. Fabrication Plant, Lancaster, SC: August TA–W–52,912; Boise Cascade Corp., Yakima, TA–W–52,909; Dolly, Inc., including leased 28, 2002. WA workers of CBS Personnel and Express TA–W–52,790; Hanes Dye and Finishing Co., TA–W–52,585; Oregon Woodworking Co., Personnel, Tipp City, OH: August 28, Winston-Salem, NC: September 4, 2002. Bend, OR 2002. TA–W–52,681; Reuther Mold and The investigation revealed that criteria (3) TA–W–52,930; Carolina Mills, Inc., Fiber Manufacturing Co., Inc., Cuyahoga Falls, has not been met. The subject firm did not Department, Maiden, NC: September 10, OH: August 15, 2002. supply component parts accounting for at 2002. TA–W–52,785; Gould Electronics, Inc., least 20 percent of production or sales to a TA–W–53,140; Grammerler U.S. Corp., Materials Div., a subsidiary of Japan firm (or subdivision) that employed a group Hanover Park, IL: September 29, 2002. Energy Corp. (JEC), McConnelsville, OH: of workers who received a certification of TA–W–52,938; Alliance Fiber Optic Products, August 18, 2002. eligibility to apply for trade adjustment Inc., Sunnyvale, CA: August 27, 2002. TA–W–52,564; Prewett Mills Distribution assistance. TA–W–53,046; Quality Home Fashions, Inc., Center, a div. of Prewett Hosiery Sales TA–W–52,835; Southeastern Adhesives Co., Richfield, NC: September 19, 2002. Corp., Fort Payne, AL, A; V.I. Prewett Lenoir, NC TA–W–52,732; Agere Systems, Inc., Reading, and Son, Inc., a div. of V.I. Prewett and PA: August 15, 2002. Son, Fort Payne, AL, B; McKeehan The investigation revealed that criteria (a) TA–W–52,838; Vitco, LLC, Nappanee, IN: Hosiery Mills, Inc., Fort Payne, AL, C; (2) (A) (I.B) (Sales or production, or both, did September 3, 2002. Johnson Hosiery Mills, Inc., Fort Payne, not decline) and (a) (2) (B) (II.B) (has shifted TA–W–52,852; Aurora Metals Division, LLC, AL, D; Johnco Hosiery, Inc., Fort Payne, production to a county not under the free Montgomery, IL: September 3, 2002. AL, E; Wee Socks, a div. of V.I. Prewett trade agreement with U.S.) have not been TA–W–53,024; Columbia Cable Co., a div. of and Son, Fort Payne, AL, F; Cherokee met. Hood Cable Co., Columbia, MS: Hosiery Mills, Inc., Fort Payne, AL and TA–W–52,824; Givaudan Flavors Corp., a September 12, 2002. G; Lala Ellen Knitting, Fort Payne, AL: wholly owned subsidiary of Givaudan TA–W–52,885; U.S. Tsubaki, Inc., Roller August 12, 2002. United States, Inc., Cincinnati, OH Chain Div., Holyoke, MA: September 18, TA–W–52,656; Agere Systems, Inc., TA–W–52,574; Waggoner/Parker Fisheries, 2002. Allentown, PA: August 15, 2002. Kenai, AK TA–W–52,953; Briggs Plumbing Products, TA–W–52,833; The Owenby Co., Blairsville, TA–W–52,847; Medsource Technologies, Inc., a div. of Sayco/Briggs, Flora, IN: GA: September 2, 2002. Newton, MA September 12, 2002. TA–W–52,970; Miller Casket Co., Jermyn, PA: TA–W–52,789; Alkahn Labels, Inc., Jac-Arts TA–W–52,441 & A; Conn-Selmer, Inc., September 23, 2002. Div., Cochran, GA Selmer Main Street Div., Elkhart, IN and TA–W–52,657; C and C Sportswear, Inc., TA–W–52,730; Berwick Weaving, Inc., Selmer Plant 2 Div., Elkhart, IN: July 14, Westmoreland, TN: August 21, 2002. Berwick, PA 2002. TA–W–52,667 & A; G.O. Carlson, Inc., Steel TA–W–52,677; Westinghouse Electric Co., TA–W–52,809; Janef, Inc. T/A Alperin Div., Downingtwon, PA and Coatesville, Nuclear Services Div., Monroeville, PA Mayflower, Old Forge, PA: August 14, PA: August 21, 2002. The investigation revealed that criteria (2) 2002. TATA–W–52,685; Mead Westvaco, has not been met. The workers firm (or TA–W–52,540; I.P.C. Acquisition, Corinth, Greenville, GA: August 21, 2002.

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TA–W–52,817; Spencer, Inc., Mt. Airy, NC: TA–W–52,731; Heraeus Quartztech, Inc., September 5, 2002. September 2, 2002. Fairfield, NJ: August 29, 2002. TA–W–52,522; Relax-R Corp., Milton, VT: TA–W–52,534; Advanced Cast Products, Inc., TA–W–51,753; Agilent Technologies, Inc., August 6, 2002. Meadville, PA: August 11, 2002. Network Systems Test Div. (NSTD), TA–W–52,753; Metal Powder Products Co., TA–W–52,832; Apparel Ventures, Inc., South Colorado Springs, CO., A; Englewood, Coldwater, MI: August 29, 2002. Gate, CA: September 8, 2002. CO, B; Loveland, CO, C; Boxborough, TA–W–52,668; Parker Hannifin Corp., TA–W–52,735; Guardian Industries Corp., MA, D; Portsmouth, NH, E; Andover, Techseal Div., Snow Hill, NC: August 18, including leased workers of Spherion, MA, F; Richardson, TX, G; Santa Rosa, 2002. Lewistown, PA: August 21, 2002. CA, H; Cypress, TX, I; Santa Clara, CA, TA–W–52,533; GECP Lighting, Mattoon Lamp TA–W–52,661; Gloves Cut and Sew, Inc., J; Arlington Heights, IL: May 12, 2002. Plant, Coiling Operations Div., Mattoon, Albemarle, NC: August 18, 2002. TA–W–52,545; Bose Corp., Framingham, MA: IL: August 4, 2002. TA–W–52,684; PSC Metals, Inc., July 25, 2002. TA–W–52,746; Plano Molding Co., Plano, IL: Headquarters, Cleveland, OH, A; TA–W–52,517; Solutia, In., including leased August 26, 2002. Ashland, VA, B; Beaver Falls, PA, C; workers from Kelly Services and Austin TA–W–52,658; Tally Printer Corp., Kent, WA: Burns Harbor, IN, D; Canton, OH, E; Industrial, Decatur, AL: August 5, 2002. August 19, 2002. Gallatin, TN, F; Granite City, IL, G; St. TA–W–53,004; Xerox Corp., Business Group The following certification has been Louis, MO, H; Nashville, TN, I; Operations (BGO), Webster, NY: issued. The requirement of upstream supplier Philadelphia Office, Fort Washington, September 15, 2002. to a trade certified primary firm has been PA, J; Chattanooga, TN, K; Chicago TA–W–53,053; F. Ziegler Enterprises, Ltd, met. Office, Arlington Heights, IL: August 19, Fond du Lac, WI: September 25, 2002. TA–W–52,860; Olympic Tool and 2002. TA–W–52,906; Radioshack Corp., TDP Engineering Co., Inc., Shelton, WA: The following certifications have been Electronics Div., an operating Entity of August 26, 2002. issued. The requirements of (a)(2)(B) (shift in North American Manufacturing, TA–W–52,888; Santoku Corp., Japan, production) of section 222 have been met. Swannanoa, NC: September 10, 2002. Santoku America, Inc., Tolleson, AZ: TA–W–52,795; Connector Service Corp., York TA–W–52,849 & A; Renaissance Mark, July 7, 2002. Operations, including leased workers of Baltimore, MD and Peoria, IL: September 4, 2002. The following certification has been Kelly Temps, JFC Temps, York, PA: issued. The requirement of downstream August 25, 2002. TA–W–53,060; G. Leblanc Corp., Case Co., Elkhorn, WI: September 23, 2002. producer to a trade certified primary firm has TA–W–52,803 & A; Mastercraft Fabrics LLC, been met. Norwood Yarn Sales, Norwood, NC and TA–W–52,775; Taylor Precision Products, TA–W–53,024; Columbia Cable Co., a div. of Troy, NC: August 11, 2002. Fletcher, NC: August 15, 2002. Hood Cable Co., Columbia, MS: TA–W–53,064; ATMI-Ecosys, Materials TA–W–52,989; Standard Textile Co., Inc., September 12, 2002. Lifecycle Solutions, Napa, CA: Pridecraft Div., Manual Sewing Unit, September 29, 2002. Enterprise, AL: September 23, 2002. Negative Determinations for Alternative TA–W–53,111; Liberty Cut and Sew, Stuart, TA–W–53,071; A & E Products Groups, LP, Trade Adjustment Assistance including leased workers of Manpower, VA: September 24, 2002. In order for the Division of Trade TA–W–53,119; Orrco, Inc., Killbuck, OH: Inc., American Personnelservice, One Source Staffing, Advanle Personnel, Adjustment Assistance to issued a October 1, 2002. certification of eligibility to apply for TA–W–53,029; American Electric Lighting, a Adecco, Ringtown, PA: September 15, 2002. Alternative Trade Adjustment Assistance div. of Acuity Lighting Group, a (ATAA) for older workers, the group subsidiary of Acuity Brands, Inc., TA–W–53,124; American Bag Corp., a div of Milliken & Co., Winfield, TN: September eligibility requirements of section Bainbridge, GA: September 15, 2002. 246(a)(3)(A)(ii) of the Trade Act must be met. TA–W–52,921; Federal Mogul Corp., 17, 2002. Powertrain Systems, including leased TA–W–52,903; Straits Steel and Wire, In the following cases, it has been workers of Kelly Services, Palmetto Ludington, MI: September 8, 2002. determined that the requirements of section Training and PDS Technical Services, TA–W–52,159; General Mills Operations, 246(a)(3)(ii) have not been met for the Sumter, SC: September 10, 2002. Inc., including leased workers of reasons specified. TA–W–52,936; Cook Communications Masterson Personnel, Inc., Eden Prairie, Since the workers are denied eligibility to Ministries, Elgin, IL: September 22, 2002. MN: September 16, 2002. apply for TAA, the workers cannot be TA–W–52,969 & A, B; Agilent Technologies, TA–W–53,070; Home Products International, certified eligible for ATAA. Inc., Computer Test Equipment Div. Inc., Eagan, MN: September 30, 2002. TA–W–52,912; Boise Cascade Corp., Yakima, (CTE), Arlington Heights, CO, Liberty TA–W–52,956; SEMCO, div. of Leggett and WA Lake, WA and Santa Rose, CA: Platt Components Co., Ocala, FL: TA–W–52,774; Weyerhauser Co., North Bend, September 16, 2002. September 12, 2002. OR TA–W–52,949; Pacific Scientific, a subsidiary TA–W–52,804; Garden State Tannin, TA–W–52,814; Precision Tool and Design, of Danaher Motion Group, including Williamsport, MD: August 26, 2002. Erie, PA leased workers of Dickey Staffing TA–W–52,867; Pittsfield Woolen Yarns Co., TA–W–52,847; Medsource Technologies, Solutions, Rockford, IL: September 8, Inc., Pittsfield, ME: September 4, 2002. Newton, MA 2002. TA–W–52,765; Mirco Motion, Inc., Boulder, TA–W–52,913; Spectrulite Consortium, Inc., TA–W–52,972; Exfo Gnubi Products Group, CO: September 3, 2002. Madison, IL Inc., Addison, TX: September 9, 2002. TA–W–52,696; Hilti North America, a div. of TA–W–52,933; Ashland Specialty Chemical TA–W–52,752; TRW Automotive, Jackson, Hilti Corp., Plant 5, Tulsa, OK: August Co., a div. of Ashland, Inc., San Antonio, MI: August 25, 2002. 26, 2002. TX TA–W–53,095; Collins and Aikman Corp., TA–W–52,747; Sligh Furniture Operating Co., TA–W–52,971; Goodyear Tire and Rubber North American Plastics, St. Joseph, MI: d/b/a Sligh Furniture, Holland, MI: Co., Engineered Products Div., September 20, 2002. August 26, 2002. Cartersville, GA TA–W–52,831; SPX Dock Products, TA–W–52,769; American Fiber and TA–W–53,088; L.B. Smith, Inc., a subsidiary Mechanical Dock Lever Div., Carrollton, Finishing, Inc., Newberry, SC: September of Smith Land & Improvement Corp., TX: September 3, 2002. 5, 2002. Camp Hill, PA TA–W–52,592; Cincinnati Advertising TA–W–52,977; Minnesota Rubber, TA–W–53,181; BIK Corp., d/b/a Nutec Products, LLC, Springdale, OH: August 5, Watertown, SD: September 11, 2002. Bickley, Bensalem, PA 2002. TA–W–52,916; Rite Industries, Inc., High TA–W–53,182; RMH Teleservices, Inc., TA–W–52,929; Kaydon Corp., Sumter, SC: Point, NC: September 4, 2002. Wilkes-Barre, PA September 15, 2002. TA–W–52,784; JLG Omniquip, Inc., formerly TA–W–52,560; Minnesota Ore Operations, TA–W–52,708; Carolina Pad and Paper, Omniquip Textron, Inc., a subsidiary of div. of U.S. Steel Corp., Mt. Iron, MN Charlotte, NC: August 25, 2002. JLG Industries, Port Washington, WI: TA–W–52,779; Avondale Mills, Inc., Bon Air

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Plant,Sylacauga, AL Affirmative Determinations for Alternative Masterson Personnel, Inc., Eden Prairie, TA–W–53,041; Tecumseh Products Co., Trade Adjustment Assistance MN: September 16, 2002. Evergy Div., Paris, TN In order for the Division of Trade TA–W–53,070; Home Products International, TA–W–52,965; Agri Beef Co., Boise, ID Adjustment Assistance to issue a certification Inc., Eagan, MN: September 30, 2002. TA–W–53,008; Martins Manufacturing, LLC, of eligibility to apply for Alternative Trade TA–W–52,956; SEMCO, div. of Leggett and Kingsford, MI Adjustment Assistance (ATAA) for older Platt Components Co., Ocala, FL: TA–W–53,016; Accenture, LLP, Anchorage, workers, the group eligibility requirements of September 12, 2002. AK section 246(a)(3)(A)(ii) of the Trade Act must TA–W–52,738; Vermont Tubbs, Inc., a div. of TA–W–52,981; Oce Groupware Technology, be met. Carris Financial Corp., Brandon, VT: Inc. (OGT), a subsidiary of Oce-USA The following certifications have been August 19, 2002. Holding, Inc., a member of The Oce issued; the date following the company name TA–W–52,804; Garden State Tanning, Group, a subsidiary of Oce N.V., Boise, and location of each determination references Williamsport, MD: August 26, 2002. ID the impact date for all workers of such TA–W–52,867; Pittsfield Woolen Yarns Co., TA–W–52,734; Bendtec, Inc., Duluth, MN determinations. Inc., Pittsfield, ME: September 4, 2002. TA–W–52,751; Cliffs Mining Services Co., In the following cases, it has been TA–W–52,868; Badorf Shoe Co., Inc., Lititz, Ishpeming, MI determined that the requirements of section PA: September 9, 2002. TA–W–52,707; Parker Hannifin Corp., Hose 246(a)(3)(ii) have been met. TA–W–52,765; Mirco Motion, Inc., Boulder, Products Div., Green Camp, OH I. Whether a significant number of workers CO: September 3, 2002. TA–W–52,802; Sappi Cloquet LLC, d/b/a in the workers’ firm are 50 years of age or TA–W–52,788, A, B; Springs Industries, Sappi Paper North America, Cloquet, older. Lancaster Plant, Lancaster, SC, White MN II. Whether the workers in the workers’ Plant, Fort Mill, SC and Grace TA–W–52,789; Alkahn Labels, Inc., Jac-Arts firm possess skills that are not easily Fabrication Plant, Lancaster, SC: August Div., Cochran, GA transferable. 28, 2002. TA–W–52,787; Western Technology Services III. The competitive conditions within the TA–W–52,790; Hanes Dye and Finishing Co, International, Inc., a/k/a WOTCO, Inc., workers’ industry (i.e., conditions within the Winston-Salem, NC: September 4, 2002. Casper, WY industry are adverse). TA–W–52,681; Reuther Mold and TA–W–52,730; Berwick Weaving, Inc., Manufacturing Co., Inc., Cuyahoga Falls, TA–W–53,004; Xerox Corp., Business Group Berwick, PA OH: August 15, 2002. Operations (BGO), Webster, NY: TA–W–52,499; Pennsylvania Electric Coil, TA–W–52,696; Hilti North America, a div. of September 15, 2002. Ltd, Glassport, PA Hilti Corp., Plant 5, Tulsa, OK: August TA–W–53,053; F. Ziegler Enterprises, Ltd, TA–W–52,633; Highland Supply Corp., 26, 2002. Fond du Lac, WI: September 25, 2002. TA–W–52,747; Sligh Furniture Operating Co., Highland, IL TA–W–52,906; Radioshack Corp., TDP TA–W–52,677; Westinghouse Electric Co., Electronics Div., and Operating Entity of d/b/a Sligh Furniture, Holland, MI: Nuclear Services Div., Monroeville, PA North American Manufacturing, August 26, 2002. TA–W–52,842; Wal-Mart Distribution Center, Swannanoa, NC: September 10, 2002. TA–W–52,769; American Fiber and Laurens, SC TA–W–52,849 & A; Renaissance Mark, Finishing, Inc., Newberry, SC: September TA–W–52,908; Coastal Apparel, LLC, Tabor Baltimore, MD and Peoria, IL: September 5, 2002. City, NC 4, 2002. TA–W–52,785; Gould Electronics, Inc., TA–W–52,975; Fall River Paper and Supply, TA–W–53,060; G. Leblanc Corp., Case Co., Materials Div., a subsidiary of Japan New Bedford, MA Elkhorn, WI: September 23, 2002. Energy Corp (JEC), McConnelsville, OH: TA–W–52,987; SACM Textiles, Inc., Lyman, TA–W–52,775; Taylor Precision Products, August 18, 2002. SC Fletcher, NC: August 15, 2002. TA–W–52,656; Agere Systems, Inc., TA–W–52,865; Washington Logistics, Inc., TA–W–52,829; New Bedford Plastic Bag Co., Allentown, PA: August 15, 2002. Olympia, WA New Bedford, MA: August 28, 2002 TA–W–52,833; The Owenby Co., Blairsville, TA–W–52,782; Progressive Processing, Inc., TA–W–52,843; Lear Corp., Traverse City, MI: GA: September 2, 2002. Elyria, OH September 5, 2002. TA–W–52,970; Miller Casket Co., Jermyn, PA: TA–W–52,705; Trojan Steel Co., Charleston, TA–W–53,092; Jan-Sew Manufacturing, September 23, 2002. WV Crossville, TN: September 15, 2002 TA–W–52,657; C & C Sportswear, Inc., TA–W–52,561; Benchmark Electronics, Inc., TA–W–52,989; Standard Textile Co., Inc., Westmoreland, TN: August 23, 2002. Winona, MN Pridecraft Div., Manual Sewing Unit, TA–W–52,667 & A; G.O. Carlson, Inc., Steel TA–W–52,521; Novell, Inc., Provo, UT Enterprise, AL: September 23, 2002. Div., Downingtown, PA and Coatesville, TA–W–52,671; Siebel Systems, Emeryville, TA–W–53,071; A & E Products Group, LP, PA: August 21, 2002. CA including leased workers of Manpower, TA–W–52,564; Prewett Mills Distribution TA–W–52,709; Kana Software, Inc., Research Inc., American Personnelservice, One Center, a div. of Prewett Hosiery Sales and Development Department, Menlo Source Staffing Advanle Personnel and Corp., Fort Payne, AL, A; V.I. Prewett & Park, CA Adecco, Ringtown, PA: September 15, Son, Inc., a div. of V.I. Prewett & Son, TA–W–52,772; Baltimore Marine Industries, 2002 Fort Payne, AL, B; McKeehan Hosiery Inc., Baltimore, MD TA–W–53,082; Dekko Heating Technologies, Mill, Inc., Fort Payne, AL, C; Johnson TA–W–52,585; Oregon Woodworking Co., Inc., Plant 37, Appliance Div., Afton, IA: Hosiery Mills, Inc., Fort Payne, AL, D; Bend, OR September 25, 2002. Johnco Hosiery, Inc., Fort Payne, AL, E; TA–W–52,563; Sheet Metal Specialties, Inc., TA–W–53,124; American Bag Corp., a div. of Wee Socks, a div. of V.I. Prewett & Son, Waxhaw, NC Milliken and Co., Winfield, TN: Fort Payne, AL, F; Cherokee Hosiery TA–W–52,745; Erie Power Technologies, Inc., September 17, 2002. Mills, Inc., Fort Payne, AL, G; Lala Ellen Erie, PA TA–W–52,903; Straits Steel and Wire, Knitting, Fort Payne, AL: August 12, TA–W–52,743; Hewlett Packard, Boise, ID Ludington, MI: September 8, 2002. 2002. TA–W–52,711; AT&T Wireless Services, Inc., TA–W–52,939; TRTL Enterprises, LLC, TA–W–52,685; Mead Westvaco, Greenville, Livermore Call Center, Livermore, CA Monmouth, OR: August 29, 2002. GA: August 21, 2002. TA–W–52,674; ADM Milling Co., ‘‘A’’ Mill, a TA–W–52,764; New Castle Industries, Bimex TA–W–52,817; Spencer, Inc., Mt. Airy, NC: subsidiary of Archer Daniels Midland Div., Wales, WI: August 3, 2002. September 2, 2002. Co., Minneapolis, MN TA–W–52,799; Western Metal Specialty Co., TA–W–52,977; Minnesota Rubber, TA–W–52,918; Nationwide Title Clearing, a div. of Western Industries, Inc., Watertown, SC: September 11, 2002. Inc., Glendale, CA Milwaukee, WI: September 5, 2002. TA–W–52,916; Rite Industries, Inc., High TA–W–52,800; GE Betz Regional Business TA–W–52,587; Ramtex, Inc., Ramseur, NC: Point, NC: September 4, 2002. Center, Grand Rapids, MI August 6, 2002. TA–W–52,784; JLG Omniquip, Inc., formerly TA–W–52,771; Central-PA Distribution and TA–W–53,159; General Mills Operations, Omniquip Textron, Inc., a subsidiary of Warehouse, LLC, Reedsville, PA Inc., including leased workers of JLG Industries, Port Washington, WI:

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September 5, 2002. to separate a significant number or The petitioner has requested that the TA–W–52,522; Relax-R-Corp., Milton, VT: proportion of workers as required by petition be withdrawn. Consequently, August 6, 2002. section 222 of the Trade Act of 1974. the investigation has been terminated. TA–W–52,753; Metal Powder Products Co., Significant number or proportion of the Coldwater, MI: August 29, 2002. Signed in Washington, DC, this 30th day of TA–W–52,684; PSC Metals, Inc., workers means that at least three September, 2003. Headquarters, Cleveland, OH, A; workers in a firm with a workforce of Richard Church, Ashland, VA, B; Beaver Falls, PA, C; fewer than 50 workers would have to be Certifying Officer, Division of Trade Burns Harbor, IN, D; Canton, OH, E; affected. Separations by the subject firm Adjustment Assistance. Gallatin, TN, F; Granite City, IL, G; St. did not meet this threshold level; [FR Doc. 03–27930 Filed 11–5–03; 8:45 am] Louis, MO, H; Nashville, TN, I; consequently the investigation has been BILLING CODE 4510–30–P Philadelphia Office, Fort Washington, terminated. PA, J; Chattanooga, TN, K; Chicago Office, Arlington Heights, IL: August 19, Signed at Washington, DC this 25th day of 2002. September 2003. DEPARTMENT OF LABOR TA–W–52,534; Advanced Cast Products, Inc., Linda G. Poole, Meadville,PA: August 11, 2002. Certifying Officer, Division of Trade Employment and Training TA–W–52,668; Parker Hannifin Corp., Adjustment Assistance. Administration Techseal Div., Snow Hill, NC: August 18, [FR Doc. 03–27927 Filed 11–5–03; 8:45 am] 2002. TA–W–52,533; GECP Lighting, Mattoon Lamp BILLING CODE 4510–30–P [TA–W–52,602] Plant, Coiling Operations Div., Mattoon, IL: August 4, 2002. Reed-Rico, Holden Facility, Holden TA–W–52,832; Apparel Ventures, Inc., South DEPARTMENT OF LABOR MA; Notice of Termination of Gate, CA: September 8, 2002. Investigation TA–W–52,735; Guardian Industries Corp., Employment and Training including leased workers of Spherion, Administration Pursuant to section 221 of the Trade Lewistown, PA: August 21, 2002. Act of 1974, as amended, an TA–W–52,746; Plano Molding Co., Plano, IL: [TA–W–52,591] investigation was initiated on August August 26, 2002. 18, 2003 in response to a petition filed TA–W–52,661; Gloves Cut and Sew, Inc., Kentucky Derby Hosiery, Lynne by a company official on behalf of Albemarle, NC: August 18, 2002. Finishing Plant 6, Mount Airy, NC; workers of Reed-Rico, Holden Facility, TA–W–52,658; Tally Printer Corp., Kent, WA: Holden, Massachusetts. August 19, 2002. Notice of Termination of Investigation The petitioner has requested that the I hereby certify that the aforementioned Pursuant to section 221 of the Trade determinations were issued during the petition be withdrawn. Consequently, months of September and October. Copies of Act of 1974, as amended, an the investigation has been terminated. these determinations are available for investigation was initiated on August 18, 2003 in response to a worker Signed at Washington, DC this 26th day of inspection in Room C–5311, U.S. Department September 2003. of Labor, 200 Constitution Avenue, NW., petition filed on behalf of workers at Washington, DC 20210 during normal Kentucky Derby Hosiery, Lynne Richard Church, business hours or will be mailed to persons Finishing Plant 6, Mount Airy, North Certifying Officer, Division of Trade who write to the above address. Carolina. Adjustment Assistance. Dated: October 29, 2003. The petitioner has requested that the [FR Doc. 03–27933 Filed 11–5–03; 8:45 am] Timothy Sullivan, petition be withdrawn. Consequently, BILLING CODE 4510–30–P Director, Division of Trade Adjustment the investigation has been terminated. Assistance. Signed at Washington, DC this 4th day of DEPARTMENT OF LABOR [FR Doc. 03–27929 Filed 11–5–03; 8:45 am] September 2003. BILLING CODE 4510–30–P Richard Church, Employment and Training Certifying Officer, Division of Trade Administration Adjustment Assistance. DEPARTMENT OF LABOR [FR Doc. 03–27935 Filed 11–5–03; 8:45 am] [TA–W–52,612] Employment and Training BILLING CODE 4510–30–P Solectron, Creedmoor, NC; Notice of Administration Termination of Investigation [TA–W–52,895 and TA–W–52,895A] DEPARTMENT OF LABOR Pursuant to section 221 of the Trade Fishing Vessel (F/V) Madam Ching, Employment and Training Act of 1974, as amended, an Fairbanks, AK, Fishing Vessel (F/V) Administration investigation was initiated on August Village Idiot, Fairbanks, AK; Notice of 19, 2003 in response to a petition filed Termination of Investigation [TA–W–52,703] on behalf of workers at Solectron, Creedmoor, North Carolina. Pursuant to section 221 of the Trade McMurray Fabrics, Inc., Jamesville, The petitioner has requested that the Act of 1974, as amended, an NC; Notice of Termination of petition be withdrawn. Consequently, investigation was initiated on Investigation the investigation has been terminated. September 23, 2003 in response to a petition filed by a company official on Pursuant to section 221 of the Trade Signed at Washington, DC this 29th day of behalf of workers F/V Madam Ching, Act of 1974, an investigation was September, 2003. Fairbanks, Alaska (TA–W–52,895) and initiated on August 29, 2003, in Richard Church, F/V Village Idiot, Fairbanks, Alaska response to a worker petition filed by a Certifying Officer, Division of Trade (TA–W–52,895A). company official on behalf of workers at Adjustment Assistance. The investigation revealed that the McMurray Fabrics Jamesville, Inc., [FR Doc. 03–27932 Filed 11–5–03; 8:45 am] subject firm did not separate or threaten Jamesville, North Carolina. BILLING CODE 4510–30–P

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DEPARTMENT OF LABOR ACTION: Notice of Re-Establishment of Dated: November 3, 2003. Drug Control Research, Data, and Daniel Petersen, Employment and Training Evaluation Committee. Assistant General Counsel. Administration [FR Doc. 03–27912 Filed 11–5–03; 8:45 am] SUMMARY: Pursuant to the Federal BILLING CODE 3180–02–P [TA–W–52,597] Advisory Committee Act, 5 U.S.C. App. Sure-Fit, Inc., Allentown, PA; Notice of 2 and 41 CFR part 101–6.1013, the Termination of Investigation Office of National Drug Control Policy NUCLEAR REGULATORY re-established the Charter of the Drug COMMISSION Pursuant to section 221 of the Trade Control Research, Data, and Evaluation [Docket No. 50–440] Act of 1974, as amended, an Committee on October 29, 2003. The re- investigation was initiated on August established charter is available for FirstEnergy Nuclear Operating Co., 18, 2003 in response to a worker viewing through the Library of Congress Perry Nuclear Power Plant; Exemption petition filed on behalf of workers at and the United States General Services Sure-Fit, Inc., Allentown, Pennsylvania. Administration. 1.0 Background The petitioners have requested that The FirstEnergy Nuclear Operating the petition be withdrawn. FOR FURTHER INFORMATION CONTACT: Please direct any questions to Daniel Company (FENOC/ the licensee) is the Consequently, the investigation has holder of Facility Operating License No. been terminated. Petersen, Assistant General Counsel, (202) 395–6622, Office of National Drug NPF–58 which authorize operation of Signed at Washington, DC this 25th day of Control Policy, Executive Office of the Perry Nuclear Power Plant (PNPP). The September, 2003. President, Washington, DC 20503. license provides, among other things, Richard Church, that the facility is subject to all rules, Certifying Officer, Division of Trade Daniel Petersen, regulations, and orders of the U.S. Adjustment Assistance. Assistant General Counsel. Nuclear Regulatory Commission (the [FR Doc. 03–27934 Filed 11–5–03; 8:45 am] [FR Doc. 03–27913 Filed 11–5–03; 8:45 am] Commission) now or hereafter in effect. The facility consists of a boiling water BILLING CODE 4510–30–P BILLING CODE 3180–02–P reactor located on FENOC’s Perry site, which is located in Lake County, Ohio. DEPARTMENT OF LABOR OFFICE OF NATIONAL DRUG 2.0 Request/Action CONTROL POLICY Employment and Training Title 10 of the Code of Federal Administration Meeting of the Advisory Commission Regulations (10 CFR) part 50, on Drug Free Communities § 50.71(e)(4) requires that licensees [TA–W–53,009] provide the Nuclear Regulatory Commission (NRC) with updates to the W.B. Place, Hartford, WI; Notice of AGENCY: Office of National Drug Control Policy. Final Safety Analysis Report (FSAR) Termination of Investigation annually or 6 months after each ACTION: Pursuant to section 221 of the Trade Notice of meeting. refueling outage provided the interval Act of 1974, as amended, an between successive updates does not investigation was initiated on SUMMARY: In accordance with the Drug- exceed 24 months. The revisions must September 26, 2003, in response to a Free Communities Act, a meeting of the reflect changes up to 6 months prior to petition filed on behalf of workers at Advisory Commission on Drug Free the date of filing. This regulation would W.B. Place, Hartford, Wisconsin. Communities will be held on December require the submittal of the PNPP FSAR The petition regarding the 11 & 12, 2003 at the Office of National update by September 10, 2003. investigation has been deemed invalid. Drug Control Policy in the 5th Floor The licensee has requested a one-time In order for employees to establish a Conference Room, 750 17th Street NW., schedular exemption from the valid petition, there must be at least Washington, DC. The meeting will requirements of 10 CFR 50.71(e)(4). The three valid petitioners. The petition in commence at 8:30 a.m. on Thursday, proposed exemption would extend the this case did not meet this threshold December 11, 2003 and adjourn for the PNPP submittal date up to 120 days number. Consequently, the investigation evening at 4:30 p.m. The meeting will beyond the required filing date of has been terminated. reconvene at 8:30 a.m. on Friday, September 10, 2003. The new filing date December 12, 2003 and adjourn at 1:30 would be January 8, 2004. The Signed at Washington, DC this 1st day of requirement to reflect changes up to 6 October 2003. p.m. The agenda will include: Remarks by ONDCP Director John P. Walters; months prior to the date of filing would Elliott S. Kushner, updates on the Drug Free Communities still apply. Certifying Officer, Division of Trade Program; the National Youth Anti-Drug Adjustment Assistance. 3.0 Discussion Media Campaign; and the National Anti- [FR Doc. 03–27926 Filed 11–5–03; 8:45 am] Drug Coalition Institute. There will be By letter dated August 8, 2003, the BILLING CODE 4510–30–P an opportunity for public comment from licensee requested a one-time schedular 11:30 a.m. until 12 noon on Thursday, exemption from the requirements of 10 December 11, 2003. Members of the CFR 50.71(e)(4). Specifically, the licensee requested that it be permitted OFFICE OF NATIONAL DRUG public who wish to attend the meeting to delay the required update from CONTROL POLICY and/or make public comment should contact Stella Price at (202) 395–3617 to September 10, 2003, to January 8, 2004, Notice of Re-Establishment arrange building access. which is a 120 day delay. Pursuant to 10 CFR 50.12, the AGENCY: Office of National Drug Control FOR FURTHER INFORMATION CONTACT: Commission may, upon application by Policy. Daniel Petersen, (202) 395–6622. any interested person or upon its own

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initiative, grant exemptions from the submittal. Therefore, the exemption and characterize uncertainty in seismic requirements of 10 CFR part 50, when would only provide temporary relief sources in the site region important for (1) the exemptions are authorized by from the applicable regulation and the the probabilistic seismic hazard law, will not present an undue risk to extension would allow the time analysis; (3) evaluating and public health or safety, and are necessary for corrective actions and characterizing uncertainty in the consistent with the common defense would result in an improved update to parameters of seismic sources; (4) and security; and (2) when special the FSAR. Thus, there are special conducting a probabilistic seismic circumstances are present. Section 50.12 circumstances present which would hazard analysis for the site; and (5) (a)(2)(v) of 10 CFR Part 50 indicates that satisfy the requirements of 10 CFR determining the design earthquake special circumstances exist when an 50.12(1)(2)(v). ground motion for the site to satisfy the exemption would provide only requirements of NRC’s regulations. 4.0 Conclusion temporary relief from the applicable Comments and suggestions in regulation and the licensee has made Accordingly, the Commission has connection with items for inclusion in good faith efforts to comply with the determined that, pursuant to 10 CFR guides currently being developed or regulation. 50.12(a), the exemption is authorized by improvements in all published guides The requested exemption is law, will not endanger life or property are encouraged at any time. Written administrative and would not affect the or common defense and security, and is, comments may be submitted to the plant equipment, operation, or otherwise, in the public interest. Rules and Directives Branch, Division of procedures. The FSAR contains the Therefore, the Commission hereby Administrative Services, Office of analysis, assumptions, and technical grants FirstEnergy Nuclear Operating Administration, U.S. Nuclear Regulatory details of the facility design and Company, exemption from the Commission, Washington DC 20555. operating parameters. Until the FSAR is requirements of 10 CFR part 50, Questions on the content of this guide updated, the recent changes are § 50.71(e)(4) for PPNP. may be directed to Mr. M. Shah, (301) documented in the licensee’s safety Pursuant to 10 CFR 51.32, the 415–8537; email [email protected]. analysis reports and in the Commission has determined that the Regulatory guides are available for Commission’s Safety Evaluations for granting of this exemption will not have inspection or downloading at the NRC’s actions requiring prior approval. a significant effect on the quality of the Web site at http://www.nrc.gov under Changes to a facility or its operation are human environment (68 FR 59824). Regulatory Guides and in NRC’s made through the use of processes This exemption is effective upon Electronic Reading Room (ADAMS which are defined in regulations other issuance. System) at the same site. Single copies than 10 CFR 50.71, such as, 10 CFR Dated at Rockville, Maryland, this 31st day of regulatory guides may be obtained 50.59 and 10 CFR 50.54. These of October 2003. free of charge by writing the regulations provide the basis for For the Nuclear Regulatory Commission. Reproduction and Distribution Services evaluating proposed changes and Ledyard B. Marsh, Section, U.S. Nuclear Regulatory ensuring that the changes will not Commission, Washington, DC 20555– present an undue risk to the public Director, Division of Licensing Project Management, Office of Nuclear Reactor 0001, or by fax to (301) 415–2289, or by health and safety and are consistent Regulation. e-mail to [email protected]. Issued with the common defense and security. [FR Doc. 03–27943 Filed 11–5–03; 8:45 am] guides may also be purchased from the Because the FSAR update reflects National Technical Information Service changes after they have been BILLING CODE 7590–01–P (NTIS) on a standing order basis. Details implemented, extending the due date on this service may be obtained by does not present an undue risk to the NUCLEAR REGULATORY writing NTIS at 5285 Port Royal Road, public health and safety. COMMISSION While preparing the scheduled Springfield, VA 22161; telephone 1– submittal, a computer failure occurred 800–553–6847; http://www.ntis.gov/. Regulatory Guide; Issuance, Regulatory guides are not copyrighted, affecting the PNPP electronic data Availability management system (EDMS) which and Commission approval is not resulted in the loss of over 11,000 The Nuclear Regulatory Commission required to reproduce them. (5 U.S.C. electronic documents. Updates to the (NRC) has issued a new guide in its 552(a)) FSAR that were being prepared were Regulatory Guide Series. This series has Dated at Rockville, MD this 22nd day of among the documents lost. Due to the been developed to describe and make October 2003. need to reconstruct the updated FSAR available to the public such information For the Nuclear Regulatory Commission. information that was lost, additional as methods acceptable to the NRC staff Ashok C. Thadani, time is needed to complete the for implementing specific parts of the Director, Office of Nuclear Regulatory submittal. The requirement to reflect NRC’s regulations, techniques used by Research. changes up to 6 months prior to the date the staff in its review of applications for [FR Doc. 03–27944 Filed 11–5–03; 8:45 am] permits and licenses, and data needed of filing would still apply. The BILLING CODE 7590–01–P exemption is requested to allow by the NRC staff in its review of adequate time to complete the applications for permits and licenses. submittal. Regulatory Guide 3.73, ‘‘Site The licensee has made a good faith Evaluations and Design Earthquake OFFICE OF PERSONNEL effort to comply with the regulations for Ground Motion for Dry Cask MANAGEMENT filing in September 2003, in that the Independent Spent Fuel Storage and Proposed Collection; Comment updated FSAR submittal was Monitored Retrievable Storage Request for Review of a Revised approximately 80 percent completed, Installations,’’ provides guidance Information Collection: SF 2802 and SF however, due to circumstances beyond acceptable to the NRC staff for (1) 2802A their control the computer supporting conducting a detailed evaluation of site the EDMS failed resulting in the loss of area geology and foundation stability, AGENCY: Office of Personnel the documents prepared for the (2) conducting investigations to identify Management.

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ACTION: Notice. Office of Personnel Management. date of a rejection of transfer. The Kay Coles James, recordkeeping requirement under the SUMMARY: In accordance with the Director. rule is mandatory to assist the Paperwork Reduction Act of 1995 [FR Doc. 03–27911 Filed 11–5–03; 8:45 am] Commission and other regulatory (Public Law 104–13, May 22, 1995), this BILLING CODE 6325–50–M agencies with monitoring transfer agents notice announces that the Office of and ensuring compliance with the rule. Personnel Management (OPM) will This rule does not involve the collection submit to the Office of Management and of confidential information. An agency Budget (OMB) a request for review of a SECURITIES AND EXCHANGE COMMISSION may not conduct or sponsor, and a revised information collection. SF 2802, person is not required to respond to, a Application for Refund of Retirement Submission for OMB Review; collection of information unless it Deductions (Civil Service Retirement Comment Request displays a currently valid control System) is used to support the payment number. of monies from the Retirement Fund. It Upon Written Request, Copies Available General comments regarding the identifies the applicant for refund of From: Securities and Exchange estimated burden hours should be retirement contributions. SF 2802A, Commission, Office of Filings and directed to the following persons: (i) Current/Former Spouse’s Notification of Information Services, Washington, DC Desk Officer for the Securities and Application for Refund of Retirement 20549. Exchange Commission, Office of Deductions, is used to comply with the Extension: Information and Regulatory Affairs, legal requirement that any spouse or Rule 17Ad–15, SEC File No. 270–360, Office of Management and Budget, former spouse of the applicant has been OMB Control No. 3235–0409. Room 10102, New Executive Office notified that the former employee is Notice is hereby given that pursuant Building, Washington, D.C. 20503; and applying for a refund. (ii) Kenneth A. Fogash, Associate Approximately 32,100 SF 2802 forms to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities Executive Director/Acting CIO, Office of are completed annually. We estimate it Information Technology, Securities and takes approximately 45 minutes to and Exchange Commission (‘‘Commission’’) has submitted to the Exchange Commission, 450 Fifth Street, complete the form. The annual burden NW., Washington, DC 20549. Comments if 24,075 hours. Approximately 28,890 Office of Management and Budget a request for extension of the previously must be submitted to OMB within 30 SF 2802A forms are processed annually. days of this notice. We estimate it takes approximately 15 approved collection of information minutes to complete this form. The discussed below. Dated: October 29, 2003. annual burden is 7,223 hours. The total Rule 17Ad–15 Signature Guarantees Margaret H. McFarland, annual burden is 31,298 hours. Deputy Secretary. Rule 17Ad–15 requires approximately Comments are particularly invited on: [FR Doc. 03–27978 Filed 11–5–03; 8:45 am] 1,093 transfer agents to establish written whether this collection of information is BILLING CODE 8010–01–P standards for accepting and rejecting necessary for the proper performance of guarantees of securities transfers from functions of the Office of Personnel eligible guarantor institutions. Transfer Management, and whether it will have SECURITIES AND EXCHANGE agents are also required to establish practical utility; whether our estimate of COMMISSION procedures to ensure that those the public burden of this collection is standards are used by the transfer agent accurate, and based on valid Submission for OMB Review; to determine whether to accept or reject assumptions and methodology; and Comment Request guarantees from eligible guarantor ways in which we can minimize the institutions. Transfer agents must Upon Written Request; Copies Available burden of the collection of information maintain, for a period of three years From: Securities and Exchange on those who are to respond, through following the date of a rejection of Commission, Office of Filings and use of the appropriate technological transfer, a record of all transfers Information Services, Washington, DC collection techniques or other forms of rejected, along with the reason for the 20549. information technology. For copies of this proposal, contact rejection, identification of the guarantor, Extension: and whether the guarantor failed to Rule 14f–1, OMB Control No. 3235–0108, Mary Beth Smith-Toomey on (202) 606– SEC File No. 270–127. 8358, FAX (202) 418–3251 or via e-mail meet the transfer agent’s guarantee standard. These recordkeeping Rule 12d1–3; OMB Control No. 3235–0109; to [email protected]. Please include a SEC File No. 270–116. mailing address with your request. requirements assist the Commission and other regulatory agencies with Notice is hereby given that pursuant DATES: Comments on this proposal monitoring transfer agents and ensuring to the Paperwork Reduction Act of 1995 should be received within 60 calendar compliance with the rule. (44 U.S.C. 3501 et seq.) the Securities days from the date of this publication. There are approximately 900 and Exchange Commission ADDRESSES: Send or deliver comments registered transfer agents. The average (‘‘Commission’’) has submitted to the to—Ronald W. Melton, Chief, number of hours necessary for every Office of Management and Budget Operations Support Group, Center for transfer agent to comply with the Rule requests for extension of the previously Retirement and Insurance Services, U.S. 17Ad–15 is about forty hours annually. approved collections of information Office of Personnel Management, 1900 E The total burden is 36,000 hours for all discussed below. Street, NW., Room 3425, Washington, transfer agents. The average cost per Rule 14f–1(OMB Control No. 3235– DC 20415–3660. hour is approximately $30. Therefore, 0108; SEC File No. 270–127) requires FOR INFORMATION REGARDING the total cost of compliance for all issuers to disclose a change in a ADMINISTRATIVE COORDINATION CONTACT: transfer agents is about $1,080,000. majority of the directors of the issuer. Cyrus S. Benson, Team Leader, The retention period for the The information filed under Rule 14f–1 Publications Team, RIS Support recordkeeping requirement under Rule must be filed with the Commission and Services, (202) 606–0623. 17Ad–15 is three years following the is publicly available. We estimate that it

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takes 18 burden hours to provide the and Exchange Commission be submitted to OMB within 30 days of information required under Rule 14f–1 (‘‘Commission’’) has submitted to the this notice. and that the information is filed by 44 Office of Management and Budget Dated: October 29, 2003. respondents for a total of 792 burden requests for extension of the previously Margaret H. McFarland, hours. approved collections of information Deputy Secretary. Rule 12d1–3(OMB Control No. 3235– discussed below. 0109; SEC File No. 270–116) requires a Schedule 13E–4F (OMB Control No. [FR Doc. 03–27980 Filed 11–5–03; 8:45 am] certification that a security has been 3235–0375; SEC File No. 270–340) may BILLING CODE 8010–01–P approved by an exchange for listing and be used by any foreign private issuer if: registration pursuant to section 12(d) of (1) The issuer is incorporated or the Securities Exchange Act of 1934 to SECURITIES AND EXCHANGE organized under the laws of Canada; (2) COMMISSION be filed with the Commission. The the issuer is making a cash tender or information required under Rule 12d1– exchange offer for the issuer’s own [Release No. IC–26237; 812–12967] 3 must be filed with the Commission securities; and (3) less than 40 percent and is publicly available. We estimate of the class of such issuer’s securities Bear, Stearns & Co. Inc., et al; Notice that it takes one-half hour to provide the outstanding that is the subject of the of Application and Temporary Order information required under Rule 12d1– tender offer is held by U.S. holders. The October 31, 2003. 3 and that the information is filed by information collected must be filed with AGENCY: 688 respondents for a total of 344 the Commission and is publicly Securities and Exchange burden hours. available. We estimate that it takes 2 Commission (‘‘Commission’’). An agency may not conduct or burden hours to prepare Schedule 13E– ACTION: Temporary order and notice of sponsor, and a person is not required to 4F and that the information is filed by application for a permanent order under respond to, a collection of information 3 respondents for a total of 6 burden section 9(c) of the Investment Company unless it displays a currently valid hours. Act of 1940 (‘‘Act’’). control number. Form F–X (OMB Control No. 3235– Written comments regarding the SUMMARY OF APPLICATION: Applicants 0379; SEC File No. 270–336) is used to above information should be directed to have received a temporary order appoint an agent for service of process the following persons: (i) Desk Officer exempting them from section 9(a) of the by Canadian issuers registering for the Securities and Exchange Act, with respect to an injunction securities on Form F–7, F–8, F–9 or Commission, Office of Information and entered against Bear, Stearns & Co. Inc. F–10 or filing periodic reports on Form Regulatory Affairs, Office of (‘‘BS&Co.’’) on October 31, 2003 by the 40–F under the Exchange Act. The Management and Budget, Room 10102, U.S. District Court for the Southern information collected must be filed with New Executive Office Building, District of New York (the ‘‘Federal the Commission and is publicly Washington, DC 20503; and (ii) Kenneth Injunction’’), until the earlier of the date available. We estimate that it takes 2 A. Fogash, Acting Associate Executive the Commission takes action on an hours to prepare and is filed 129 Director/CIO, Office of Information application for a permanent order, or respondents for a total of 258 burden Technology, Securities and Exchange two years from the date of the Federal hours. Commission, 450 Fifth Street, NW., Injunction. Applicants have requested a Form DF (OMB Control No. 3235– Washington, DC 20549. Comments must permanent order. 0482; SEC File No. 270–430) allows be submitted to OMB within 30 days of registrants to identify a filing that was APPLICANTS: BS&Co. and Bear Stearns this notice. filed late because of electronic filing Asset Management Inc. (‘‘BSAM’’ and 1 Dated: October 27, 2003. difficulties in order to preserve the together, the ‘‘Applicants’’). Margaret H. McFarland, timeliness of the filing. The information FILING DATES: The application was filed Deputy Secretary. collected must be filed with the on April 28, 2003. Applicants have [FR Doc. 03–27979 Filed 11–5–03; 8:45 am] Commission and is publicly available. agreed to file an amendment during the BILLING CODE 8010–01–P We estimate that it takes 12 minutes to notice period, the substance of which is prepare and is filed by an estimated 500 reflected in this notice. Applicants have respondents for a total annual burden of also agreed to file amendments to the SECURITIES AND EXCHANGE 100 hours. application reflecting the issuance of COMMISSION An agency may not conduct or each State Injunction (as defined sponsor, and a person is not required to below). Submission for OMB Review; respond to, a collection of information HEARING OR NOTIFICATION OF HEARING: An Comment Request unless it displays a currently valid order granting the application will be Upon Written Request; Copies Available control number. issued unless the Commission orders a From: Securities and Exchange Written comments regarding the hearing. Interested persons may request Commission, Office of Filings and above information should be directed to a hearing by writing to the Information Services, Washington, DC the following persons: (i) Desk Officer Commission’s Secretary and serving 20549. for the Securities and Exchange Applicants with a copy of the request, Commission, Office of Information and personally or by mail. Hearing requests Extension: should be received by the Commission Schedule 13E–4F; OMB Control No. 3235– Regulatory Affairs, Office of 0375; SEC File No. 270–340. Management and Budget, Room 10102, by 5:30 p.m. on November 25, 2003, and Form F–X; OMB Control No. 3235–0379; New Executive Office Building, should be accompanied by proof of SEC File No. 270–336. Washington, DC 20503; and (ii) Kenneth service on Applicants, in the form of an Form DF; OMB Control No. 3235–0482; A. Fogash, Acting Associate Executive SEC File No. 270–430. Director/CIO, Office of Information 1 Applicants request that any relief granted pursuant to the application also apply to any other Notice is hereby given that pursuant Technology, Securities and Exchange company of which BS&Co. is or hereafter becomes to the Paperwork Reduction Act of 1995 Commission, 450 Fifth Street, NW., an affiliated person (included in the term (44 U.S.C. 3501 et seq.) the Securities Washington, DC 20549. Comments must Applicants).

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affidavit, or for lawyers, a certificate of Department’’). The Federal Injunction grant the application. Applicants have service. Hearing requests should state enjoined BS&Co. directly or through its filed an application pursuant to section the nature of the writer’s interest, the officers, directors, agents and 9(c) seeking a temporary and permanent reason for the request, and the issues employees, from violating the specific order exempting them from the contested. Persons who wish to be rules cited in the Complaint. Without disqualification provisions of section notified of a hearing may request admitting or denying the allegations in 9(a) of the Act. notification by writing to the the Complaint, BS&Co. consented to the 3. Applicants believe they meet the Commission’s Secretary. entry of the Federal Injunction as well standard for exemption specified in as the payment of disgorgement and ADDRESSES: Secretary, Commission, 450 section 9(c). Applicants state that the penalties and other equitable relief, Fifth Street, NW., Washington, DC prohibitions of section 9(a) as applied to including undertakings by BS&Co. to 20549–0609. Applicants, c/o Stephen them would be unduly and adopt and implement policies and Bornstein, Bear Stearns Asset disproportionately severe and that the procedures relating to certain research Management Inc., 383 Madison Avenue, conduct of Applicants has been such as activities. Applicants state that BS&Co. New York, NY 10179. not to make it against the public interest expects to enter into settlement FOR FURTHER INFORMATION CONTACT: or the protection of investors to grant agreements relating to the activities Stacy L. Fuller, Senior Counsel, or Todd the exemption from section 9(a). F. Kuehl, Branch Chief, at 202–942– referred to in the Complaint with certain 0564 (Division of Investment state and territorial agencies which may 4. Applicants state that the conduct Management, Office of Investment result in an injunction by a court of giving rise to the Injunctions did not Company Regulation). competent jurisdiction that is based on involve any of the Applicants acting in the capacity of investment adviser, SUPPLEMENTARY INFORMATION: The the same conduct and the same facts as subadviser, depositor, or principal following is a temporary order and a the Complaint (each, a ‘‘State underwriter for a Fund. Applicants state summary of the application. The Injunction,’’ and, together with the that none of the current or former complete application may be obtained Federal Injunction, the ‘‘Injunctions’’). officers or employees of the Applicants, for a fee at the Commission’s Public Applicants request that this application Reference Branch, 450 Fifth Street, NW., cover any disqualifications of the who served or serves as adviser, Washington, DC 20549–0102 (telephone Applicants under section 9(a) resulting subadviser, principal underwriter or 202–942–8090). from the Injunctions. depositor to the Funds, was involved in the conduct that forms the basis of the Applicants’ Legal Analysis Applicants’ Representations Complaint. While the Applicants’ 1. BS&Co., a Delaware corporation, is 1. Section 9(a)(2) of the Act, in portfolio managers had access to a full service investment banking firm, relevant part, prohibits a person who research reports issued by the Research engaged in securities underwriting, has been enjoined from engaging in or Department, there is no indication that sales and trading, investment banking, continuing any conduct or practice in the portfolio managers relied on these financial advisory services, and connection with the purchase or sale of research reports more than any other investment research services. BSAM a security from acting, among other data that would have been considered serves as investment adviser or things, as an investment adviser or by the portfolio managers in making subadviser for one or more registered depositor of any registered investment investment decisions for the Funds, investment companies (‘‘Funds’’). company or a principal underwriter for except as noted in the application.4 BS&Co. acts as the depositor or any registered open-end investment Although some of the Funds held principal underwriter for Funds.2 company, registered UIT or registered securities in their portfolios at the time 2. On October 31, 2003, the U.S. face-amount certificate company. that BS&Co. issued research reports District Court for the Southern District Section 9(a)(3) of the Act makes the concerning the issuers of such of New York entered the Federal prohibition in section 9(a)(2) applicable securities, as far as Applicants are Injunction against BS&Co. in a matter to a company, any affiliated person of aware, none of the officers, portfolio brought by the Commission.3 The which has been disqualified under the managers, or any other investment Commission alleged in the complaint provisions of section 9(a)(2). Section personnel employed by the Applicants (‘‘Complaint’’) that BS&Co. violated 2(a)(3) of the Act defines ‘‘affiliated had any knowledge of any non-public certain Conduct Rules of the National person’’ to include any person directly information relating to, or had any Association of Securities Dealers or indirectly controlling, controlled by, involvement in, the conduct underlying (‘‘NASD’’) and Rules of the New York or under common control with, the the Final Judgment. In addition, each of Stock Exchange (‘‘NYSE’’) (the NASD other person. Applicants state that the Applicants that serve as an Conduct Rules and NYSE Rules BS&Co. is an affiliated person of BSAM investment adviser or sub-adviser to together, the ‘‘Exchange Rules’’) by within the meaning of section 2(a)(3) of Funds has adopted policies regarding engaging in acts and practices that the Act. Applicants further state that the information barriers (the ‘‘Policies’’) created or maintained inappropriate entry of the Injunctions would result in designed to protect the Funds from any influence by BS&Co.’s investment Applicants being subject to the conflict of interest that may arise banking business (the ‘‘Investment disqualification provisions of section between portfolio managers and other Banking Department’’) over the research 9(a) of the Act. employees of BS&Co. The Policies, 2. Section 9(c) of the Act provides that analysts in BS&Co.’s research which were in effect at the time of the the Commission shall grant an department (the ‘‘Research conduct described in the Complaint, application for exemption from the restrict communications between 2 disqualification provisions of section Any registered unit investment trusts (‘‘UIT’’) or portfolio managers and certain other 9(a) if it is established that these registered face amount certificate company for employees of BS&Co. which Applicants may serve as principal provisions, as applied to Applicants, are underwriter or depositor are also included in the unduly or disproportionately severe or defined term Funds. 4 Applicants state that they act as investment 3 Securities and Exchange Commission v. Bear, that the Applicants’ conduct has been adviser to one Fund whose portfolio securities were Stearns & Co. Inc., 03 CV 2937 (WHP) (S.D.N.Y., such as not to make it against the public selected based primarily on a list of recommended filed April 28, 2003). interest or the protection of investors to securities compiled by the Research Department.

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5. The Applicants will distribute the date the Commission takes final Travelers Distribution LLC (‘‘Travelers written materials, including an offer to action on their application for a Distribution’’), The Travelers Insurance meet in person to discuss the materials, permanent order or, if earlier, October Company (‘‘TIC’’), Travelers Investment to the board of directors or trustees of 31, 2005. Adviser, Inc. (‘‘TIMCO’’), The Travelers each Fund (each, a ‘‘Board’’), including By the Commission. Investment Management Company the directors who are not ‘‘interested Margaret H. McFarland, (‘‘Travelers’’), the Travelers Life and persons,’’ as defined in section 2(a)(19) Annuity Company (‘‘TLAC’’), and Deputy Secretary. of the Act, of the Fund, and their Winter Capital International LLC independent legal counsel, if any, [FR Doc. 03–27981 Filed 11–5–03; 8:45 am] (‘‘Winter’’), (together, the regarding the Federal Injunction, any BILLING CODE 8010–01–P ‘‘Applicants’’).1 impact on the Funds, and this FILING DATES: The application was filed application.5 The Applicants will SECURITIES AND EXCHANGE on April 29, 2003 and amended on June provide the Boards with all information COMMISSION 19, 2003. Applicants have agreed to file concerning the Injunctions and this an amendment to the application during application that is necessary for the [Release No. IC–26240; 812–12960] the notice period, the substance of Funds to fulfill their disclosure and which is reflected in this notice. other obligations under the federal Citigroup Global Markets Inc., f/k/a Applicants have also agreed to file securities laws. Salomon Smith Barney Inc., et al.; amendments to the application 6.Applicants state that the inability to Notice of Application and Temporary reflecting the issuance of each State continue providing advisory services to Order Injunction (as defined below). the Funds and the inability to continue October 31, 2003. HEARING OR NOTIFICATION OF HEARING: An serving as principal underwriter to the AGENCY: Securities and Exchange order granting the application will be Funds would result in potentially severe Commission (‘‘Commission’’). issued unless the Commission orders a hardships for the Funds and their ACTION: Temporary order and notice of hearing. Interested persons may request shareholders. Applicants also assert application for a permanent order under a hearing by writing to the that, if they were barred from providing section 9(c) of the Investment Company Commission’s Secretary and serving services to the Funds, the effect on their Act of 1940 (‘‘Act’’). Applicants with a copy of the request, businesses and employees would be personally or by mail. Hearing requests severe. The Applicants state that they SUMMARY OF APPLICATION: Applicants should be received by the Commission have committed substantial resources to have received a temporary order by 5:30 p.m. on November 25, 2003, and establish an expertise in advising and exempting them from section 9(a) of the should be accompanied by proof of distributing Funds. Applicants state that Act, with respect to an injunction service on Applicants, in the form of an no Applicant has previously applied for entered against Citigroup Global affidavit, or for lawyers, a certificate of an exemption pursuant to section 9(c) of Markets Inc., f/k/a Salomon Smith service. Hearing requests should state the Act. Barney Inc. (‘‘SSB’’) on October 31, the nature of the writer’s interest, the Applicants’ Condition 2003, by the U.S. District Court for the reason for the request, and the issues Southern District of New York (the contested. Persons who wish to be Applicants agree that any order ‘‘Federal Injunction’’), until the earlier notified of a hearing may request granting the requested relief will be of the date the Commission takes action notification by writing to the subject to the following condition: on an application for a permanent order, Commission’s Secretary. Any temporary exemption granted or two years from the date of the Federal ADDRESSES: Secretary, Commission, 450 pursuant to the application shall be without Injunction. Applicants have requested a Fifth Street, NW., Washington, DC prejudice to, and shall not limit the 20549–0609. Applicants, SSB and Commission’s rights in any manner with permanent order. respect to, any Commission investigation of, APPLICANTS: SSB, CEFOF GP I Corp. Salomon Brothers, 399 Park Avenue, or administrative proceedings involving or (‘‘CEFOF’’), CELFOF GP Corp. New York, New York 10022; CEFOF, against, Applicants, including without (‘‘CELFOF’’), Citi Fund Management CELFOF, Citi Fund and Travelers, 100 limitation, the consideration by the Inc. (‘‘Citi Fund’’), Citibank, N.A. First Stamford Place, Stamford, Commission of a permanent exemption from (‘‘Citibank’’), Citicorp Life Insurance Connecticut 06902–6729; Citibank, 153 section 9(a) of the Act requested pursuant to Company (‘‘Citicorp Life’’), Citigroup East 53rd Street, 5th Floor, New York, the application or the revocation or removal New York 10043; Citicorp Life, of any temporary exemptions granted under Alternative Investments LLC (‘‘Citigroup the Act in connection with the application. Alternative’’), Citigroup Asset Travelers Distribution, Travelers Management Limited (‘‘Citigroup Insurance and Travelers Life, One Temporary Order Asset’’), CitiStreet Equities LLC Cityplace, Hartford, Connecticut 06103– 3415; Citigroup Alternative, 399 Park The Commission has considered the (‘‘CitiStreet Equities’’), CitiStreet Funds Management LLC (‘‘CitiStreet’’), First Avenue, 7th Floor, New York, New York matter and finds that Applicants have 10043; Citigroup Asset, Salomon made the necessary showing to justify Citicorp Life Insurance Company (‘‘First Citicorp Life’’), PFS Distributors, Inc. Brothers Ltd. and Smith Barney Global, granting a temporary exemption. Citigroup Centre, Canada Square, Accordingly, (‘‘PFS Distributors’’), SSBCP GP I Corp. It is hereby ordered, pursuant to (‘‘SSBCP’’), SSBPIF GP Corp. Canary Wharf, London, England, E14 section 9(c) of the Act, that the (‘‘SSBPIF’’), Salomon Brothers Asset 5LB; CitiStreet Equities and CitiStreet, Applicants are granted a temporary Management Inc. (‘‘Salomon Brothers’’), Two Tower Center, East Brunswick, exemption from the provisions of Salomon Brothers Asset Management, New Jersey 08816; First Citicorp Life, section 9(a), effective forthwith, solely Ltd. (‘‘Salomon Brothers Ltd.’’), Smith 666 Fifth Avenue, 3rd Floor, New York, with respect to the Injunctions, subject Barney Fund Management LLC (‘‘Smith Barney’’), Smith Barney Global Capital 1 Applicants request that any relief granted to the condition in the application, until pursuant to the application also apply to any other Management Inc. (‘‘Smith Barney company of which SSB is or hereafter becomes an 5 Applicants will advise the Boards of any State Global’’), Travelers Asset Management affiliated person (together with the Applicants, the Injunctions that are issued. International Co., LLC (‘‘TAMIC’’), ‘‘Covered Persons’’).

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New York 10103; PFS Distributors, 3120 current or potential investment banking grant the application. Applicants have Breckinridge Boulevard, Building 200, clients and provided special treatment filed an application pursuant to section Duluth, Georgia 30099–0001; SSBCP for these executives. The Federal 9(c) seeking a temporary and permanent and SSBPIF, 338 Greenwich Street, New Injunction enjoined SSB directly or order exempting the Applicants and the York, New York 10013; Smith Barney through its officers, directors, agents other Covered Persons from the and TIMCO, 399 Park Avenue, 4th and employees, from violating the disqualification provisions of section Floor, New York, New York 10022; specific rules cited in the Complaint. 9(a) of the Act. TAMIC, 242 Trumbull Street—6TS, Without admitting or denying the 3. Applicants believe they meet the Hartford, Connecticut, 06115–0449; and allegations in the Complaint, SSB standard for exemption specified in Winter, 153 East 53rd Street, 3rd Floor, consented to the entry of the Federal section 9(c). Applicants state that the New York, New York 10043. Injunction as well as the payment of prohibitions of section 9(a) as applied to FOR FURTHER INFORMATION CONTACT: disgorgement and penalties and other them would be unduly and Marc R. Ponchione, Senior Counsel, or equitable relief. Applicants state that disproportionately severe and that the Todd F. Kuehl, Branch Chief, at (202) SSB has entered, and expects to enter conduct of Applicants has been such as 942–0564 (Division of Investment into settlement agreements relating to not to make it against the public interest Management, Office of Investment the activities referred to in the or the protection of investors to grant Company Regulation). Complaint with certain state and the exemption from section 9(a). SUPPLEMENTARY INFORMATION: The territorial agencies which may result in 4. Applicants state that the conduct following is a temporary order and a an injunction by a court of competent giving rise to the Injunctions did not summary of the application. The jurisdiction that is based on the same involve any of the Applicants acting in complete application may be obtained conduct and the same facts as the the capacity of investment adviser, sub- for a fee at the Commission’s Public Complaint (each, a ‘‘State Injunction,’’ adviser, depositor, or principal Reference Branch, 450 Fifth Street, NW., and, together with the Federal underwriter for a Fund. Applicants state Washington, DC 20549–0102 (telephone Injunction, the ‘‘Injunctions’’). that the Complaint did not expressly 202–942–8090). Applicants request that this application reference the conduct of any current or cover any disqualifications of the former officer or employee of any of the Applicants’ Representations Applicants under section 9(a) resulting Applicants who is or was involved in 1. SSB, a New York corporation, is a from the Injunctions. providing advisory, sub-advisory or underwriting services to the Funds full service investment banking firm Applicants’ Legal Analysis engaged in securities underwriting, advised or underwritten by Applicants.4 sales and trading, investment banking, 1. Section 9(a)(2) of the Act, in While the Applicants’ portfolio financial advisory services, and relevant part, prohibits a person who managers had access to research reports investment research services. Certain has been enjoined from engaging in or issued by the Research Department, Applicants serve as investment adviser continuing any conduct or practice in there is no indication that the portfolio or sub-adviser for one or more registered connection with the purchase or sale of managers relied on these research investment companies (‘‘Funds’’). a security from acting, among other reports more than any other data that Certain Applicants act as the depositor things, as an investment adviser or would have been considered by the or principal underwriter for Funds.2 depositor of any registered investment investment adviser or sub-adviser in 2. On October 31, 2003, the U.S. company or a principal underwriter for making investment decisions for the District Court for the Southern District any registered open-end investment Funds, except as noted in the of New York entered the Federal company, registered UIT or registered application.5 Although some of the Injunction against SSB in a matter face-amount certificate company. Funds held securities in their portfolios brought by the Commission.3 The Section 9(a)(3) of the Act makes the at the time that SSB issued research Commission alleged in the complaint prohibition in section 9(a)(2) applicable reports concerning the issuers of such (‘‘Complaint’’) that SSB violated certain to a company, any affiliated person of securities, none of the Applicants are Conduct Rules of the National which has been disqualified under the aware that any of their investment Association of Securities Dealers provisions of section 9(a)(2). Section personnel, including employees, (‘‘NASD’’) and Rules of the New York 2(a)(3) of the Act defines ‘‘affiliated officers, or portfolio managers, had any Stock Exchange (‘‘NYSE’’) (the NASD person’’ to include any person directly knowledge of any non-public Conduct Rules and NYSE Rules or indirectly controlling, controlled by, information relating to, or had any together, the ‘‘Exchange Rules’’). The or under common control with, the involvement in, the conduct underlying Complaint alleged that SSB’s research other person. Applicants state that SSB the Injunctions. In addition, each of the department (‘‘Research Department’’) is an affiliated person of each of the Applicants that is an investment adviser other Applicants within the meaning of and investment banking department or sub-adviser to Funds has adopted section 2(a)(3) of the Act. Applicants (‘‘Investment Banking Department’’) policies regarding information barriers state that the entry of the Injunctions issued research reports that were (the ‘‘Policies’’) designed to protect the would result in Applicants being subject fraudulent, violated SRO rules to the disqualification provisions of regulating their members’ 4 The Complaint also refers to general practices section 9(a) of the Act. regarding the relationship between SSB’s communications with the public, and 2. Section 9(c) of the Act provides that allocated hot IPO shares to executives of Investment Banking and Research Departments. It is the Commission shall grant an possible that one or more current or former officers application for exemption from the or employees of the Applicants who is or was 2 Any registered unit investment trust (‘‘UIT’’) or involved in providing advisory, sub-advisory or registered face amount certificate company for disqualification provisions of section underwriting services to the Funds was at some which Applicants may serve as principal 9(a) if it is established that these time an officer or employee of the Investment underwriter or depositor are also included in the provisions, as applied to Applicants, are Banking or Research Departments of SSB. defined term Funds. unduly or disproportionately severe or 5 Applicants state that they act as principal 3 Securities and Exchange Commission v. underwriter or depositor to certain UITs whose Citigroup Global Markets Inc., f/k/a Salomon Smith that the Applicants’ conduct has been portfolio selection process placed special emphasis Barney Inc., 03 Civ. 2945 (WHP) (S.D. N.Y., filed such as not to make it against the public on equity research issued by the Research April 28, 2003) (the ‘‘Action’’). interest or the protection of investors to Department.

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investment adviser’s or sub-adviser’s or administrative proceedings involving or organized under the laws of England clients, including Fund shareholders, against, Applicants, including without and Wales (‘‘CSAM London’’); Credit from any conflict of interest that may limitation, the consideration by the Suisse Asset Management (Australia) arise between the investment adviser’s Commission of a permanent exemption from Limited (‘‘CSAM Australia’’); Credit section 9(a) of the Act requested pursuant to Suisse Asset Management Limited, a or sub-adviser’s portfolio managers and the application or the revocation or removal SSB’s investment banking business as of any temporary exemptions granted under Japanese company (‘‘CSAM Japan’’); referenced in the Complaint. The the Act in connection with the application. Merchant Capital Inc. (‘‘Merchant’’); Policies, which were in effect at the Credit Suisse First Boston (Bermuda) time of the conduct described in the Temporary Order Limited (‘‘CSFB Bermuda’’); and DLJ Complaint, restrict communications The Commission has considered the LBO Plans Management Corporation between portfolio managers of the matter and finds that Applicants have (‘‘LBO Plans’’) (together, the investment adviser or sub-adviser and made the necessary showing to justify ‘‘Applicants’’).1 other employees of SSB. granting a temporary exemption. Filing Dates: The application was 5. The Applicants will distribute Accordingly, filed on April 29, 2003. Applicants have written materials, including an offer to It Is Hereby Ordered, pursuant to agreed to file an amendment to the meet in person to discuss the materials, section 9(c) of the Act, that the application during the notice period, the to the board of directors or trustees of Applicants and the other Covered substance of which is reflected in this each Fund (each, a ‘‘Board’’), including Persons are granted a temporary notice. Applicants also have agreed to the directors who are not ‘‘interested exemption from the provisions of file amendments to the application persons,’’ as defined in section 2(a)(19) section 9(a), effective forthwith, solely reflecting the issuance of each State of the Act, of the Fund, and their with respect to the Injunctions, subject Injunction (as defined below). independent legal counsel, if any, to the condition in the application, until Hearing or Notification of Hearing: An regarding the Federal Injunction,6 any the date the Commission takes final order granting the application will be impact on the Funds, and this action on their application for a issued unless the Commission orders a application.7 The Applicants will permanent order or, if earlier, October hearing. Interested persons may request provide the Boards with all information 31, 2005. a hearing by writing to the concerning the Injunctions and this Commission’s Secretary and serving By the Commission. Applicants with a copy of the request, application that is necessary for the Margaret H. McFarland, Funds to fulfill their disclosure and personally or by mail. Hearing requests Deputy Secretary. other obligations under the federal should be received by the Commission securities laws. [FR Doc. 03–27987 Filed 11–5–03; 8:45 am] by 5:30 p.m. on November 25, 2003, and 6. Applicants state that the inability to BILLING CODE 8010–01–P should be accompanied by proof of continue providing advisory services to service on Applicants, in the form of an the Funds and the inability to continue affidavit, or for lawyers, a certificate of SECURITIES AND EXCHANGE service. Hearing requests should state serving as principal underwriter to the COMMISSION Funds would result in potentially severe the nature of the writer’s interest, the hardships for the Funds and their [Release No. IC–26243; 812–12968] reason for the request, and the issues shareholders. Applicants also assert contested. Persons who wish to be that, if they were barred from providing Credit Suisse First Boston LLC, et al.; notified of a hearing may request services to the Funds, the effect on their Notice of Application and Temporary notification by writing to the businesses and employees would be Order Commission’s Secretary. ADDRESSES: Secretary, Commission, 450 severe. The Applicants state that they October 31, 2003. have committed substantial resources to Fifth Street, NW., Washington, DC AGENCY: Securities and Exchange 20549–0609. Applicants: CSFB, establish an expertise in advising and Commission (‘‘Commission’’). distributing Funds. Certain affiliated Merchant, CSFB Bermuda, and LBO ACTION: persons of SSB previously have received Temporary order and notice of Plans, Eleven Madison Avenue, New exemptions under section 9(c) as the application for a permanent order under York, NY 10010–3629; CSAM Americas result of conduct that triggered section section 9(c) of the Investment Company and Credit Suisse Asset Management 9(a) as described in greater detail in the Act of 1940 (‘‘Act’’). Securities, Inc., 466 Lexington Avenue, New York, NY 10017–3147; CSAM application. Summary of Application: Applicants London, Beaufort House, 15 St. Botolph have received a temporary order Applicants’ Condition Street, London (England), United exempting them from section 9(a) of the Kingdom EC3A 7JJ; CSAM Australia, Applicants agree that any order Act, with respect to an injunction Level 32 Gateway, 1 Macquarie Place, granting the requested relief will be entered against Credit Suisse First Sydney 2001, Australia; and CSAM subject to the following condition: Boston LLC (‘‘CSFB’’) on October 31, Japan, Shiroyama JT Trust Tower, 3–1, Any temporary exemption granted 2003 by the U.S. District Court for the Toranomon 4-Chome, Minato-Ku, Tokyo pursuant to the application shall be without Southern District of New York (the 105–6025 Japan. prejudice to, and shall not limit the ‘‘Federal Injunction’’), until the earlier Commission’s rights in any manner with of the date the Commission takes action FOR FURTHER INFORMATION CONTACT: Julia respect to, any Commission investigation of, on an application for a permanent order, Kim Gilmer, Senior Counsel, at (202) or two years from the date of the Federal 942–0528, or Annette Capretta, Branch 6 Applicants state that they will advise the Boards Injunction. Applicants have requested a Chief, at 202–942–0564 (Division of of any State Injunctions that are issued. Investment Management, Office of 7 With respect to the Funds discussed in footnote permanent order. 4 that are UITs, Applicants state that they will Applicants: CSFB; Credit Suisse Asset Investment Company Regulation). provide written notification to the trustee for each Management, LLC (‘‘CSAM Americas’’); of these UITs concerning the Injunctions, any 1 Applicants request that any relief granted impact on the UITs, and this application and will Credit Suisse Asset Management pursuant to the application also apply to any other provide any other related information as may be Securities, Inc.; Credit Suisse Asset company of which CSFB is or hereafter becomes an requested by a trustee. Management Limited, a corporation affiliated person (included in the term Applicants).

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SUPPLEMENTARY INFORMATION: The agencies which may result in an 4. Applicants state that the conduct following is a temporary order and a injunction by a court of competent giving rise to the Injunctions did not summary of the application. The jurisdiction that is based on the same involve any of the Applicants acting in complete application may be obtained conduct and the same facts as the the capacity of investment adviser, sub- for a fee at the Commission’s Public Complaint (each, a ‘‘State Injunction,’’ adviser, depositor, or principal Reference Branch, 450 Fifth Street, NW., and, together with the Federal underwriter for a Fund. Applicants state Washington, DC 20549–0102 (telephone Injunction, the ‘‘Injunctions’’). that the Complaint did not expressly 202–942–8090). Applicants request that this application reference the conduct of any current or cover any disqualifications of the former employee of any of the Applicants’ Representations Applicants under Section 9(a) resulting Applicants who is or was involved in 1. CSFB, a Delaware limited liability from the Injunctions. providing advisory, sub-advisory or company, is a full service investment underwriting services to the Funds banking firm, engaged in securities Applicants’ Legal Analysis advised or underwritten by Applicants.4 underwriting, sales and trading, 1. Section 9(a)(2) of the Act, in While the Applicants’ portfolio investment banking, financial advisory relevant part, prohibits a person who managers had access to research reports services, and investment research has been enjoined from engaging in or issued by CSFB’s research analysts, services. Certain Applicants serve as continuing any conduct or practice in there is no indication that the portfolio investment adviser or sub-adviser for connection with the purchase or sale of managers relied on these research one or more registered investment a security from acting, among other reports more than any other data that companies (‘‘Funds’’). Certain things, as an investment adviser or would have been considered by the Applicants act as the depositor or depositor of any registered investment portfolio managers in making principal underwriter for Funds.2 company or a principal underwriter for investment decisions for the Funds, 2. On October 31, 2003, the U.S. any registered open-end investment except as noted in the application.5 District Court for the Southern District company, registered UIT or registered Although some of the Funds held of New York entered the Federal face-amount certificate company. securities in their portfolios at the time Injunction against CSFB in a matter Section 9(a)(3) of the Act makes the that CSFB issued research reports brought by the Commission.3 The prohibition in section 9(a)(2) applicable concerning the issuers of such Commission alleged in the complaint to a company, any affiliated person of securities, as far as Applicants are (‘‘Complaint’’) that CSFB violated which has been disqualified under the aware, none of the officers, portfolio sections 15(c) and 17(a) of the Securities provisions of section 9(a)(2). Section managers, or any other investment Exchange Act of 1934 (‘‘Exchange Act’’) 2(a)(3) of the Act defines ‘‘affiliated personnel employed by the Applicants and rules 15c1–2 and 17a-3 under the person’’ to include any person directly made any investment decisions based Exchange Act, and certain Conduct or indirectly controlling, controlled by, on any non-public information relating Rules of the National Association of or under common control with, the to the conduct underlying the Judgment. Securities Dealers (‘‘NASD’’) and Rules other person. Applicants state that CSFB In addition, CSFB had policies of the New York Stock Exchange is an affiliated person of each of the regarding information barriers between (‘‘NYSE’’) by engaging in acts and other Applicants within the meaning of CSAM Americas and other employees of practices that created or maintained section 2(a)(3) of the Act. Applicants CSFB that were designed to restrict inappropriate influence by CSFB’s further state that the entry of the communications between CSAM investment banking business over the Injunctions would result in Applicants Americas and other employees of CSFB. research analysts in CSFB’s research being subject to the disqualification These information barriers, which were department. The Federal Injunction provisions of section 9(a) of the Act. in effect at the time of the complaint, enjoined CSFB directly or through its 2. Section 9(c) of the Act provides that together with other policies of the officers, directors, agents and the Commission shall grant an Applicants, are designed to protect the employees, from violating sections 15(c) application for exemption from the Funds from conflicts of interest between and 17(a) of the Exchange Act and the disqualification provisions of section portfolio managers and certain specific rules cited in the Complaint. 9(a) if it is established that these employees of CSFB. Without admitting or denying the provisions, as applied to Applicants, are 5. The Applicants will distribute allegations in the Complaint, CSFB unduly or disproportionately severe or written materials, including an offer to consented to the entry of the Federal that the Applicants’ conduct has been meet in person to discuss the materials, Injunction as well as the payment of such as not to make it against the public to the board of directors or trustees of disgorgement and penalties and other interest or the protection of investors to each Fund (each, a ‘‘Board’’), including equitable relief, including undertakings grant the application. Applicants have the directors who are not ‘‘interested by CSFB to adopt and implement filed an application pursuant to section persons,’’ as defined in section 2(a)(19) policies and procedures relating to 9(c) seeking a temporary and permanent of the Act, of the Fund, and their certain research activities. Applicants order exempting them from the independent legal counsel, if any, state that CSFB expects to enter into disqualification provisions of section settlement agreements relating to the 4 The Complaint also refers to general practices 9(a) of the Act. regarding the relationship between the investment activities referred to in the Complaint 3. Applicants believe they meet the with certain state and territorial banking and research departments of CSFB. It is standard for exemption specified in possible that one or more current or former officers section 9(c). Applicants state that the or employees of an Applicants who is or was 2 Any registered unit investment trusts (‘‘UIT’’) or involved in providing advisory, sub-advisory or registered face amount certificate company for prohibitions of section 9(a) as applied to underwriting services to the Funds was at some which Applicants may serve as principal them would be unduly and time an officer or employee of the investment underwriter or depositor are also included in the disproportionately severe and that the banking or research department of CSFB. defined term Funds. conduct of Applicants has been such as 5 Applicants state that they acted as investment 3 Securities and Exchange Commission v. Credit adviser, principal underwriter, or depositor to a Suisse First Boston LLC, f/k/a Credit Suisse First not to make it against the public interest Fund whose portfolio securities were selected based Boston Corporation, 03 CV 2946 (WHP) (S.D.N.Y., or the protection of investors to grant primarily on research conducted by equity research filed April 28, 2003). the exemption from section 9(a). analysts employed by CSFB, or its predecessor.

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regarding the Federal Injunction, any By the Commission. service on Applicants, in the form of an impact on the Funds, and this Margaret H. McFarland, affidavit, or for lawyers, a certificate of application.6 The Applicants will Deputy Secretary. service. Hearing requests should state provide the Boards with all information [FR Doc. 03–27982 Filed 11–5–03; 8:45 am] the nature of the writer’s interest, the concerning the Injunctions and this BILLING CODE 8010–01–P reason for the request, and the issues application that is necessary for the contested. Persons who wish to be Funds to fulfill their disclosure and notified of a hearing may request other obligations under the federal SECURITIES AND EXCHANGE notification by writing to the securities laws. COMMISSION Commission’s Secretary. ADDRESSES: Secretary, Commission, 450 6. Applicants state that the inability to [Release No. IC–26242; 812–12958] continue providing advisory services to Fifth Street NW., Washington, DC the Funds and the inability to continue Goldman Sachs & Co., et al.; Notice of 20549–0609. Applicants: Goldman serving as principal underwriter to the Application and Temporary Order Sachs, 85 Broad Street, New York, NY Funds would result in potentially severe 10004; Goldman Sachs Asset hardships for the Funds and their October 31, 2003. Management, L.P., 32 Old Slip, New shareholders. Applicants also assert AGENCY: Securities and Exchange York, NY 10005; Goldman Sachs Asset that, if they were barred from providing Commission (‘‘Commission’’). Management International, Christchurch services to the Funds, the effect on their ACTION: Temporary order and notice of Court, 10–15 Newgate Street, London, businesses and employees would be application for a permanent order under England, EC1A7HD. severe. The Applicants state that they section 9(c) of the Investment Company FOR FURTHER INFORMATION CONTACT: Julia have committed substantial resources to Act of 1940 (‘‘Act’’). Kim Gilmer, Senior Counsel, at (202) establish an expertise in advising and 942–0528, or Todd Kuehl, Branch Chief, SUMMARY OF APPLICATION: Applicants at (202) 942–0564 (Division of distributing Funds. Certain affiliated have received a temporary order persons of CSFB previously have Investment Management, Office of exempting them from section 9(a) of the Investment Company Regulation). received exemptions under section 9(c) Act, with respect to an injunction as the result of conduct that triggered SUPPLEMENTARY INFORMATION: The entered against Goldman, Sachs & Co. following is a temporary order and a section 9(a) as described in greater (‘‘Goldman Sachs’’) on October 31, 2003 detail in the application. summary of the application. The by the U.S. District Court for the complete application may be obtained Applicants’ Condition Southern District of New York (the for a fee at the Commission’s Public ‘‘Federal Injunction’’), until the earlier Reference Branch, 450 Fifth Street NW., Applicants agree that any order of the date the Commission takes action Washington, DC 20549–0102, telephone: granting the requested relief will be on an application for a permanent order, (202) 942–8090. subject to the following condition: or two years from the date of the Federal Any temporary exemption granted Injunction. Applicants have requested a Applicants’ Representations pursuant to the application shall be without permanent order. 1. Goldman Sachs, a New York prejudice to, and shall not limit the APPLICANTS: Goldman Sachs, Goldman limited partnership, is a full service Commission’s rights in any manner with Sachs Asset Management, L.P., and investment banking firm, engaged in respect to, any Commission investigation of, Goldman Sachs Asset Management securities underwriting, sales and or administrative proceedings involving or International (together, the trading, investment banking, financial against, Applicants, including without ‘‘Applicants’’).1 advisory services, and investment limitation, the consideration by the FILING DATES: The application was filed research services. The Applicants serve Commission of a permanent exemption from and amended on April 28, 2003. as investment adviser or sub-adviser for section 9(a) of the Act requested pursuant to Applicants have agreed to file an one or more registered investment the application or the revocation or removal amendment to the application during companies (‘‘Funds’’). Goldman Sachs of any temporary exemptions granted under the notice period, the substance of also acts as the principal underwriter for the Act in connection with the application. which is reflected in this notice. Funds. Temporary Order Applicants also have agreed to file 2. On October 31, 2003, the U.S. additional amendments to the District Court for the Southern District The Commission has considered the application reflecting the issuance of of New York entered the Federal matter and finds that Applicants have each State Injunction (as defined Injunction against Goldman Sachs in a made the necessary showing to justify below). matter brought by the Commission.2 The granting a temporary exemption. HEARING OR NOTIFICATION OF HEARING: An Commission alleged in the complaint Accordingly, order granting the application will be (‘‘Complaint’’) that Goldman Sachs issued unless the Commission orders a violated certain Conduct Rules of the It is hereby ordered, pursuant to National Association of Securities section 9(c) of the Act, that the hearing. Interested persons may request a hearing by writing to the Dealers (‘‘NASD’’) and Rules of the New Applicants are granted a temporary York Stock Exchange (‘‘NYSE’’) (the exemption from the provisions of Commission’s Secretary and serving Applicants with a copy of the request, NASD Conduct Rules and NYSE Rules section 9(a), effective forthwith, solely together, the ‘‘Exchange Rules’’) by with respect to the Injunctions, subject personally or by mail. Hearing requests should be received by the Commission engaging in acts and practices that to the condition in the application, until created or maintained inappropriate the date the Commission takes final by 5:30 p.m. on November 25, 2003, and should be accompanied by proof of influence by Goldman Sachs’ action on their application for a investment banking business (the permanent order or, if earlier, October ‘‘Investment Banking Department’’) over 31, 2005. 1 Applicants request that any relief granted pursuant to the application also apply to any other company of which Goldman Sachs is or hereafter 2 Securities and Exchange Commission v. 6 Applicants will notify the Boards of the becomes an affiliated person (included in the term Goldman, Sachs & Co., 03 Civ. 2944 (WHP) issuance of any State Injunctions. Applicants). (S.D.N.Y., filed April 28, 2003).

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the research analysts in Goldman Sachs’ provisions, as applied to Applicants, are Judgment. In addition, each of the research department (the ‘‘Research unduly or disproportionately severe or Applicants that serve as an investment Division’’). The Federal Injunction that the Applicants’ conduct has been adviser or sub-adviser to Funds has enjoined Goldman Sachs directly or such as not to make it against the public adopted policies regarding information through its officers, directors, agents interest or the protection of investors to barriers (the ‘‘Policies’’) designed to and employees, from violating the grant the application. Applicants have protect the Funds from certain conflicts Exchange Rules cited in the Complaint. filed an application pursuant to section of interest that may arise between Without admitting or denying the 9(c) seeking a temporary and permanent portfolio managers and other employees allegations in the Complaint, Goldman order exempting them from the of Goldman Sachs. The Policies, which Sachs consented to the entry of the disqualification provisions of section were in effect at the time of the conduct Federal Injunction as well as the 9(a) of the Act. described in the Complaint, restrict payment of disgorgement and penalties 3. Applicants believe they meet the communications between portfolio and other equitable relief, including standard for exemption specified in managers and certain other employees undertakings by Goldman Sachs to section 9(c). Applicants state that the of Goldman Sachs. adopt and implement policies and prohibitions of section 9(a) as applied to 5. The Applicants will distribute procedures relating to certain research them would be unduly and written materials, including an offer to activities. Applicants state that disproportionately severe and that the meet in person to discuss the materials, Goldman Sachs expects to enter into conduct of Applicants has been such as to the board of directors or trustees of settlement agreements relating to the not to make it against the public interest each Fund (each, a ‘‘Board’’), including activities referred to in the Complaint or the protection of investors to grant the directors who are not ‘‘interested with certain state and territorial the exemption from section 9(a). persons,’’ as defined in section 2(a)(19) agencies which may result in an 4. Applicants state that the conduct of the Act, of the Fund, and their injunction by a court of competent giving rise to the Injunctions did not independent legal counsel, if any, jurisdiction that is based on the same involve any of the Applicants acting in regarding the Injunctions, any impact on conduct and the same facts as the the capacity of investment adviser, sub- the Funds, and this application. The Complaint (each, a ‘‘State Injunction,’’ adviser, depositor, or principal Applicants will provide the Boards with and, together with the Federal underwriter for a Fund. Applicants state all information concerning the Injunction, the ‘‘Injunctions’’). that the Complaint did not expressly Injunctions and this application that is Applicants request that this application reference the conduct of any current or necessary for the Funds to fulfill their cover any disqualifications of the former personnel of any of the disclosure and other obligations under Applicants under Section 9(a) resulting Applicants who is or was involved in the Federal securities laws. from the Injunctions. providing advisory, sub-advisory or 6. Applicants state that the inability to Applicants’ Legal Analysis underwriting services to the Funds continue providing advisory services to advised or underwritten by Applicants.3 the Funds and the inability to continue 1. Section 9(a)(2) of the Act, in While the Applicants’ portfolio serving as principal underwriter to the relevant part, prohibits a person who managers had access to research reports Funds would result in potentially severe has been enjoined from engaging in or issued by the Research Division, there is hardships for the Funds and their continuing any conduct or practice in no indication that the portfolio shareholders. Applicants also assert connection with the purchase or sale of that, if they were barred from providing a security from acting, among other managers relied on these research reports more than any other data that services to the Funds, the effect on their things, as an investment adviser or businesses and employees would be depositor of any registered investment would have been considered by the portfolio managers in making severe. Goldman Sachs previously has company or a principal underwriter for received exemptions under section 9(c) any registered open-end investment investment decisions for the Funds, 4 as the result of conduct that triggered company, registered UIT or registered except as noted in the application. Although some of the Funds held section 9(a) as described in greater face-amount certificate company. detail in the application. Section 9(a)(3) of the Act makes the securities in their portfolios at the time prohibition in section 9(a)(2) applicable that Goldman Sachs issued research Applicants’ Condition reports concerning the issuers of such to a company, any affiliated person of Applicants agree that any order which has been disqualified under the securities, as far as Applicants are aware, none of the officers, portfolio granting the requested relief will be provisions of section 9(a)(2). Section subject to the following condition: 2(a)(3) of the Act defines ‘‘affiliated managers, or any other investment personnel employed by the Applicants Any temporary exemption granted person’’ to include any person directly pursuant to the application shall be without or indirectly controlling, controlled by, made any investment decisions based on any non-public information relating prejudice to, and shall not limit the or under common control with, the Commission’s rights in any manner with other person. Applicants state that to the conduct underlying the Final respect to, any Commission investigation of, Goldman Sachs is an affiliated person of or administrative proceedings involving or 3 each of the other Applicants within the The Complaint also refers to general practices against, Applicants, including without regarding the relationship between the Investment meaning of section 2(a)(3) of the Act. limitation, the consideration by the Banking Department and Research Division of Commission of a permanent exemption from Applicants further state that the entry of Goldman Sachs. It is possible that one or more current or former personnel of the Applicants who section 9(a) of the Act requested pursuant to the Injunctions would result in the application or the revocation or removal Applicants being subject to the is or was involved in providing advisory, subadvisory or underwriting services to the Funds of any temporary exemptions granted under disqualification provisions of section was at some time an officer or employee of the the Act in connection with the application. 9(a) of the Act. Investment Banking Department or Research 2. Section 9(c) of the Act provides that Division of Goldman Sachs. Temporary Order the Commission shall grant an 4 Applicants state that they act as investment The Commission has considered the adviser, principal underwriter, or depositor to a application for exemption from the Fund whose portfolio securities were formerly matter and finds that Applicants have disqualification provisions of section selected based primarily on a list of recommended made the necessary showing to justify 9(a) if it is established that these securities compiled by the Research Division. granting a temporary exemption.

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Accordingly, the substance of which is reflected in Injunction against JPMSI in a matter It is hereby ordered, pursuant to this notice. Applicants have also agreed brought by the Commission.3 The section 9(c) of the Act, that the to file additional amendments to the Commission alleged in the complaint Applicants are granted a temporary application reflecting the issuance of (‘‘Complaint’’) that JPMSI violated exemption from the provisions of each State Injunction (as defined certain Conduct Rules of the National section 9(a), effective forthwith, solely below). Association of Securities Dealers with respect to the Injunctions, subject HEARING OR NOTIFICATION OF HEARING: An (‘‘NASD’’) and Rules of the New York to the condition in the application, until order granting the application will be Stock Exchange (‘‘NYSE’’) (the NASD the date the Commission takes final issued unless the Commission orders a Conduct Rules and NYSE Rules action on their application for a hearing. Interested persons may request together, the ‘‘Exchange Rules’’) by permanent order or, if earlier, October a hearing by writing to the engaging in acts and practices that 31, 2005. Commission’s Secretary and serving created or maintained inappropriate By the Commission. Applicants with a copy of the request, influence by JPMSI’s investment Margaret H. McFarland, personally or by mail. Hearing requests banking business (the ‘‘Investment Deputy Secretary. should be received by the Commission Banking Department’’) over the research analysts in JPMSI’s research department [FR Doc. 03–27984 Filed 11–5–03; 8:45 am] by 5:30 p.m. on November 25, 2003, and should be accompanied by proof of (the ‘‘Research Department’’). The BILLING CODE 8010–01–P service on Applicants, in the form of an Federal Injunction enjoined JPMSI affidavit, or for lawyers, a certificate of directly or through its officers, directors, SECURITIES AND EXCHANGE service. Hearing requests should state agents and employees, from violating COMMISSION the nature of the writer’s interest, the the specific rules cited in the reason for the request, and the issues Complaint. Without admitting or [Release No. IC–26239; 812–12959] contested. Persons who wish to be denying the allegations in the Complaint, JPMSI consented to the J.P. Morgan Securities Inc., et al.; notified of a hearing may request notification by writing to the entry of the Federal Injunction as well Notice of Application and Temporary as the payment of disgorgement and Order Commission’s Secretary. ADDRESSES: Secretary, Commission, 450 penalties and other equitable relief, October 31, 2003. Fifth Street, NW., Washington, DC including undertakings by JPMSI to AGENCY: Securities and Exchange 20549–0609. Applicants, c/o Scott G. adopt and implement policies and Commission (‘‘Commission’’). Campbell, J.P. Morgan Chase & Co., One procedures relating to certain research ACTION: Temporary order and notice of Chase Manhattan Plaza, New York, NY activities. Applicants state that JPMSI application for a permanent order under 10081. expects to enter into settlement section 9(c) of the Investment Company FOR FURTHER INFORMATION CONTACT: agreements relating to the activities Act of 1940 (‘‘Act’’). Stacy L. Fuller, Senior Counsel, or Todd referred to in the Complaint with certain F. Kuehl, Branch Chief, at 202–942– state and territorial agencies which may SUMMARY OF APPLICATION: Applicants 0564 (Division of Investment result in an injunction by a court of have received a temporary order Management, Office of Investment competent jurisdiction that is based on exempting Covered Persons (as defined Company Regulation). the same conduct and the same facts as the Complaint (each, a ‘‘State below) from section 9(a) of the Act, with SUPPLEMENTARY INFORMATION: The Injunction,’’ and, together with the respect to an injunction entered against following is a temporary order and a Federal Injunction, the ‘‘Injunctions’’). J.P. Morgan Securities Inc. (‘‘JPMSI’’) on summary of the application. The Applicants request that this application October 31, 2003 by the U.S. District complete application may be obtained cover any disqualifications of Covered Court for the Southern District of New for a fee at the Commission’s Public Persons under section 9(a) resulting York (the ‘‘Federal Injunction’’), until Reference Branch, 450 Fifth Street, NW., from the Injunctions. the earlier of the date the Commission Washington, DC 20549–0102 (telephone takes action on an application for a 202–942–8090). Applicants’ Legal Analysis permanent order, or two years from the date of the Federal Injunction. Applicants’ Representations 1. Section 9(a)(2) of the Act, in relevant part, prohibits a person who Applicants have requested a permanent 1. JPMSI, a Delaware corporation, is a has been enjoined from engaging in or order. full service investment banking firm, continuing any conduct or practice in APPLICANTS: JPMSI, JF International engaged in securities underwriting, connection with the purchase or sale of Management Inc., J.P. Morgan sales and trading, investment banking, a security from acting, among other Alternative Asset Management, Inc., J.P. financial advisory services, and things, as an investment adviser or Morgan Fleming Asset Management investment research services. Certain depositor of any registered investment (London) Limited and J.P. Morgan Applicants serve as investment adviser company or a principal underwriter for Investment Management Inc. (together, or subadviser for one or more registered any registered open-end investment the ‘‘Applicants’’).1 investment companies (‘‘Funds’’). company, registered UIT or registered Certain Applicants may in the future act FILING DATES: The application was filed face-amount certificate company. as the depositor or principal on April 28, 2003, and amended on June Section 9(a)(3) of the Act makes the 12, 2003 and on August 26, 2003. underwriter for Funds.2 2. On October 31, 2003, the U.S. prohibition in section 9(a)(2) applicable Applicants have agreed to file an to a company, any affiliated person of amendment during the notice period, District Court for the Southern District of New York entered the Federal which has been disqualified under the provisions of section 9(a)(2). Section 1 Applicants request that any relief granted pursuant to the application also apply to any other 2 Any registered unit investment trusts (‘‘UIT’’) or 2(a)(3) of the Act defines ‘‘affiliated company of which JPMSI is, or hereafter becomes, registered face amount certificate company for an affiliated person within the meaning of section which Applicants may serve as principal 3 Securities and Exchange Commission v. J.P. 2(a)(3) of the Act (together with Applicants, underwriter or depositor are also included in the Morgan Securities Inc., 03 CV 2939 (WHP) ‘‘Covered Persons’’). defined term Funds. (S.D.N.Y., filed April 28, 2003).

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person’’ to include any person directly of the Funds held securities in their respect to, any Commission investigation of, or indirectly controlling, controlled by, portfolios at the time that JPMSI issued or administrative proceedings involving or or under common control with, the research reports concerning the issuers against, Applicants, including without other person. Applicants state that of such securities, as far as Applicants limitation, the consideration by the are aware, none of the officers, portfolio Commission of a permanent exemption from JPMSI is an affiliated person of each of section 9(a) of the Act requested pursuant to the other Applicants within the managers, or any other investment the application or the revocation or removal meaning of section 2(a)(3) of the Act. personnel employed by the Applicants of any temporary exemptions granted under Applicants further state that the entry of made any investment decisions based the Act in connection with the application. the Injunctions would result in Covered on any non-public information relating Persons being subject to the to the conduct underlying the Final Temporary Order Judgment. In addition, each of the disqualification provisions of section The Commission has considered the Applicants that serves as an investment 9(a) of the Act. matter and finds that Applicants have adviser or subadviser to Funds has 2. Section 9(c) of the Act provides that made the necessary showing to justify adopted policies regarding information the Commission shall grant an granting a temporary exemption. application for exemption from the barriers (the ‘‘Policies’’) designed to protect the Funds from any conflict of Accordingly, disqualification provisions of section It Is Hereby Ordered, pursuant to 9(a) if it is established that these interest that may arise between portfolio managers and employees of the section 9(c) of the Act, that Covered provisions, as applied to Applicants, are Persons are granted a temporary unduly or disproportionately severe or Research and Investment Banking Departments. The Policies, which were exemption from the provisions of that the Applicants’ conduct has been section 9(a), effective forthwith, solely such as not to make it against the public in effect at the time of the conduct described in the Complaint, restrict with respect to the Injunctions, subject interest or the protection of investors to to the condition in the application, until grant the application. Applicants have communications between portfolio managers and certain other employees the date the Commission takes final filed an application pursuant to section action on their application for a 9(c) seeking temporary and permanent of JPMSI. 5. The Applicants have distributed, or permanent order or, if earlier, October orders exempting them from the 31, 2005. disqualification provisions of section will distribute, written materials, 9(a) of the Act. including an offer to meet in person to By the Commission. 3. Applicants believe they meet the discuss the materials, to the board of Margaret H. McFarland, standard for exemption specified in directors or trustees of each Fund (each, Deputy Secretary. section 9(c). Applicants state that the a ‘‘Board’’), including the directors who [FR Doc. 03–27988 Filed 11–5–03; 8:45 am] are not ‘‘interested persons,’’ as defined prohibitions of section 9(a) as applied to BILLING CODE 8010–01–P Covered Persons would be unduly and in section 2(a)(19) of the Act, of the disproportionately severe and that the Fund, and their independent legal conduct of Applicants has been such as counsel, if any, regarding the SECURITIES AND EXCHANGE not to make it against the public interest Injunctions, any impact on the Funds, COMMISSION or the protection of investors to grant and this application. The Applicants will provide the Boards with all the exemption from section 9(a). [Release No. IC–26241; 812–12966] 4. Applicants state that the conduct information concerning the Injunctions giving rise to the Injunctions did not and this application that is necessary for Lehman Brothers Inc., et al.; Notice of involve any of the Applicants acting in the Funds to fulfill their disclosure and Application and Temporary Order the capacity of investment adviser, other obligations under the federal subadviser, depositor, or principal securities laws. October 31, 2003. underwriter for a Fund. Applicants state 6. Applicants state that the inability to AGENCY: Securities and Exchange that the Complaint did not expressly continue providing advisory services to Commission (‘‘Commission’’). reference the conduct of any current or the Funds would result in potentially ACTION: Temporary order and notice of former officer or employee of any of the severe hardships for the Funds and their application for a permanent order under Applicants who is or was involved in shareholders. Applicants also assert section 9(c) of the Investment Company providing advisory or subadvisory that, if they were barred from providing Act of 1940 (‘‘Act’’). services to the Funds advised or services to the Funds, the effect on their subadvised by Applicants.4 While the businesses and employees would be SUMMARY OF APPLICATION: Applicants Applicants’ portfolio managers had severe. The Applicants state that they have received a temporary order access to research reports issued by the have committed substantial resources to exempting them from section 9(a) of the Research Department, there is no establish an expertise in advising and Act, with respect to an injunction indication that the portfolio managers subadvising Funds. As described in entered against Lehman Brothers Inc. on relied on these research reports more greater detail in the application, certain October 31, 2003, by the U.S. District than any other data that would have Applicants recently applied for, and Court for the Southern District of New been considered by the portfolio received, exemptions pursuant to York (the ‘‘Federal Injunction’’), until managers in making investment section 9(c) for conduct that triggered the earlier of the date the Commission decisions for the Funds. Although some section 9(a) of the Act. takes action on an application for a Applicants’ Condition permanent order, or two years from the 4 The Complaint refers to general practices date of the Federal Injunction. Applicants agree that any order regarding the relationship between the Investment Applicants have requested a permanent granting the requested relief will be Banking and Research Departments. It is possible order. that one or more current or former officers or subject to the following condition: employees of the Applicants who is or was APPLICANTS: Lehman Brothers Inc. involved in providing advisory or sub-advisory Any temporary exemption granted (‘‘Lehman’’), Lehman Brothers Asset services to the Funds was at some time an officer pursuant to the application shall be without or employer of the Investment Baning or Research prejudice to, and shall not limit the Management Inc. (‘‘LBAM’’), and Department. Commission’s rights in any manner with Lincoln Capital Fixed Income

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Management Company, LLC (‘‘Lincoln and debt financings, and provides a security from acting, among other Capital’’) (together, the ‘‘Applicants’’).1 merger and acquisition and other things, as an investment adviser or FILING DATES: The application was filed services. LBAM serves as investment depositor of any registered investment on April 28, 2003. Applicants have adviser to one registered investment company or a principal underwriter for agreed to file an amendment to the company (‘‘Fund’’) and Lincoln Capital any registered open-end investment application, the substance of which is serves as investment subadviser for company, registered UIT or registered reflected in this notice, during the eight Funds. Lehman acts as the face-amount certificate company. notice period. Applicants have also depositor or principal underwriter for Section 9(a)(3) of the Act makes the agreed to file amendments to the Funds.2 prohibition in section 9(a)(2) applicable application reflecting the issuance of 2. On October 31, 2003, the U.S. to a company, any affiliated person of each State Injunction (as defined District Court for the Southern District which has been disqualified under the below). of New York entered the Federal provisions of section 9(a)(2). Section Injunction against Lehman in a matter HEARING OR NOTIFICATION OF HEARING: 2(a)(3) of the Act defines ‘‘affiliated brought by the Commission.3 The An order granting the application will person’’ to include any person directly Commission alleged in the complaint be issued unless the Commission orders or indirectly controlling, controlled by, (‘‘Complaint’’) that Lehman violated a hearing. Interested persons may or under common control with, the certain Conduct Rules of the National request a hearing by writing to the other person. Lehman is an affiliated Association of Securities Dealers Commission’s Secretary and serving person of each of LBAM and Lincoln (‘‘NASD’’) and Rules of the New York Capital within the meaning of section Applicants with a copy of the request, Stock Exchange (‘‘NYSE’’) (the NASD personally or by mail. Hearing requests 2(a)(3) of the Act. Applicants further Conduct Rules and NYSE Rules state that the entry of the Injunctions should be received by the Commission together, the ‘‘Exchange Rules’’) by by 5:30 p.m. on November 25, 2003, and would result in Applicants being subject engaging in acts and practices that to the disqualification provisions of should be accompanied by proof of created or maintained inappropriate service on Applicants, in the form of an section 9(a) of the Act. influence by Lehman’s investment 2. Section 9(c) of the Act provides that affidavit, or for lawyers, a certificate of banking business (the ‘‘Investment service. Hearing requests should state the Commission shall grant an Banking Department’’) over the research application for exemption from the the nature of the writer’s interest, the analysts in Lehman’s research reason for the request, and the issues disqualification provisions of section department (the ‘‘Research 9(a) if it is established that these contested. Persons who wish to be Department’’). The Federal Injunction notified of a hearing may request provisions, as applied to Applicants, are enjoined Lehman directly or through its unduly or disproportionately severe or notification by writing to the officers, directors, agents and Commission’s Secretary. that the Applicants’ conduct has been employees, from violating the specific such as not to make it against the public ADDRESSES: Secretary, Commission, 450 rules cited in the Complaint. Without Fifth Street, NW., Washington, DC interest or the protection of investors to admitting or denying the allegations in grant the application. Applicants have 20549–0609. Applicants, Lehman, 745 the Complaint, Lehman consented to the Seventh Avenue, New York, NY 10019; filed an application pursuant to section entry of the Federal Injunction as well 9(c) seeking temporary and permanent LBAM, 399 Park Avenue, New York, NY as the payment of disgorgement and 10022; and Lincoln Capital, 200 S. orders exempting them from the penalties and other equitable relief. disqualification provisions of section Wacker Drive, Suite 2100, Chicago, IL Applicants state that Lehman expects to 60606. 9(a) of the Act. enter into settlement agreements 3. Applicants believe they meet the FOR FURTHER INFORMATION CONTACT: relating to the activities referred to in standard for exemption specified in Marc R. Ponchione, Senior Counsel, at the Complaint with certain state and section 9(c). Applicants state that the (202) 942–7927, or Todd F. Kuehl, territorial agencies which may result in prohibitions of section 9(a) as applied to Branch Chief, at 202–942–0564 an injunction by a court of competent them would be unduly and (Division of Investment Management, jurisdiction that is based on the same disproportionately severe and that the Office of Investment Company conduct and the same facts as the conduct of Applicants has been such as Regulation). Complaint (each, a ‘‘State Injunction,’’ not to make it against the public interest and, together with the Federal SUPPLEMENTARY INFORMATION: The or the protection of investors to grant following is a temporary order and a Injunction, the ‘‘Injunctions’’). the exemption from section 9(a). Applicants request that this application summary of the application. The 4. Applicants state that the conduct cover any disqualifications of the complete application may be obtained giving rise to the Injunctions did not Applicants under section 9(a) of the Act for a fee at the Commission’s Public involve any of the Applicants acting in resulting from the Injunctions. Reference Branch, 450 Fifth Street, NW., the capacity of investment adviser, Washington, DC 20549–0102 (telephone Applicants’ Legal Analysis subadviser, depositor, or principal 202–942–8090). 1. Section 9(a)(2) of the Act, in underwriter for a Fund.4 Applicants Applicants’ Representations relevant part, prohibits a person who state that the Complaint did not has been enjoined from engaging in or expressly reference the conduct of any 1. Lehman, a Delaware corporation, is continuing any conduct or practice in current or former officer or employee of a full service investment banking firm, connection with the purchase or sale of Lehman who is or was involved in which, among other activities, engages providing underwriting services to the in securities offerings, including initial 2 Any registered unit investment trusts (‘‘UIT’’) or public offerings, secondary offerings registered face amount certificate company for 4 Lincoln Capital was acquired by Lehman which Applicants may serve as principal Brothers Holdings Inc., the ultimate parent 1 Applicants request that any relief granted underwriter or depositor are also included in the company of the Applicants, on January 31, 2003, pursuant to the application also apply to any other defined term Funds. and the only Fund advised by LBAM was first company of which Lehman is or hereafter becomes 3 Securities and Exchange Commission v. Lehman registered on May 7, 2003. Both of these events an affiliated person (included in the term Brothers Inc., 03 Civ. 2940 (WHP) (S.D.N.Y., filed occurred after the conduct giving rise to the Applicants). April 28, 2003) (the ‘‘Action’’). Injunctions.

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Funds underwritten by Lehman.5 While provide the Boards with all information By the Commission. LBAM’s and Lincoln Capital’s portfolio concerning the Injunctions and this Margaret H. McFarland, managers may have had access to application that is necessary for the Deputy Secretary. research reports issued by the Research Funds to fulfill their disclosure and [FR Doc. 03–27986 Filed 11–5–03; 8:45 am] Department, there is no indication that other obligations under the federal BILLING CODE 8010–01–P the portfolio managers relied on these securities laws. research reports more than any other 6. Applicants state that the inability to data that would have been considered continue providing advisory services to SECURITIES AND EXCHANGE by the portfolio managers in making the Funds and the inability to continue COMMISSION investment decisions for the Funds.6 serving as principal underwriter to the Although some of the Funds held [Release No. IC–26244; 812–12961] Funds would result in potentially severe securities in their portfolios at the time hardships for the Funds and their Merrill Lynch Investment Managers, that Lehman issued research reports shareholders. Applicants also assert L.P., et al.; Notice of Application and concerning the issuers of such Temporary Order securities, Applicants state that LBAM that, if they were barred from providing services to the Funds, the effect on their began serving as investment adviser to October 31, 2003. businesses and employees would be a Fund and Lincoln Capital was AGENCY: Securities and Exchange severe. The Applicants state that they acquired by Lehman Brothers Holdings Commission (‘‘Commission’’). have committed substantial resources to Inc. after the time period covering the ACTION: Temporary order and notice of conduct that forms the basis for the establish an expertise in advising and distributing Funds. Lehman and certain application for a permanent order under Injunctions. As far as Lehman is aware, section 9(c) of the Investment Company affiliated persons of Lehman previously none of the current or former officers, Act of 1940 (‘‘Act’’). employees, portfolio managers, or any have received exemptions under section other investment personnel employed 9(c) as the result of conduct that SUMMARY OF APPLICATION: Applicants by Lehman, who is or was involved in triggered section 9(a) as described in have received a temporary order providing principal underwriting greater detail in the Application. exempting them from section 9(a) of the services to the Funds, acted in their Applicants’ Condition Act, with respect to an injunction capacity as such based on any non- entered against Merrill Lynch, Pierce, public information relating to the Applicants agree that any order Fenner & Smith Incorporated conduct underlying the Injunctions. In granting the requested relief will be (‘‘MLPF&S’) on October 31, 2003, by the addition, each of the Applicants that subject to the following condition: U.S. District Court for the Southern District of New York (the ‘‘Injunction’’), serve or may serve as an investment Any temporary exemption granted until the Commission takes action on an adviser or sub-adviser to Funds has pursuant to the application shall be without application for a permanent order. adopted policies regarding information prejudice to, and shall not limit the Applicants have requested a permanent barriers designed to protect the Funds Commission’s rights in any manner with order. from any conflict of interest that may respect to, any Commission investigation of, arise between portfolio managers and or administrative proceedings involving or APPLICANTS: Merrill Lynch Investment other employees of Lehman. against, Applicants, including without Managers, L.P. (‘‘MLIM’’), Fund Asset 5. Each of LBAM and Lincoln Capital limitation, the consideration by the Management, L.P. (‘‘FAM’’), Merrill has distributed or will distribute written Commission of a permanent exemption from Lynch Investment Managers materials, including an offer to meet in section 9(a) of the Act requested pursuant to International Limited (‘‘MLIMIL’’), person to discuss the materials, to the the application or the revocation or removal Merrill Lynch Asset Management U.K. board of directors or trustees of each of any temporary exemptions granted under Limited (‘‘MLAM UK’’), Roszel Fund that it advises or subadvises (each, the Act in connection with the application. Advisors, LLC (‘‘Roszel,’’ and with a ‘‘Board’’), including the directors or MLIM, FAM, MLIMIL and MLAM UK, trustees who are not ‘‘interested Temporary Order the ‘‘Advisers’’), MLPF&S and FAM persons,’’ as defined in section 2(a)(19) Distributors, Inc. (‘‘FAMD,’’ and with The Commission has considered the of the Act, of the Fund, and their MLPF&S, the ‘‘Underwriters’’), KECALP matter and finds that Applicants have independent legal counsel, if any, Inc. (‘‘KECALP’’), ML Taurus, Inc. made the necessary showing to justify regarding the Federal Injunction, any (‘‘Taurus’’) and Merrill Lynch Ventures, granting a temporary exemption. impact on the Funds, and this LLC (‘‘Ventures’’) (together, the application.7 The Applicants will Accordingly, ‘‘Applicants’’).1 It Is Hereby Ordered, pursuant to FILING DATES: The application was filed 5 The Complaint also refers to general practices section 9(c) of the Act, that the on April 28, 2003. regarding the relationship between the Investment Banking and Research Departments. It is possible Applicants are granted a temporary HEARING OR NOTIFICATION OF HEARING: An that one or more current or former officers or exemption from the provisions of order granting the application will be employees of the Applicants, who is or was section 9(a), effective forthwith, solely issued unless the Commission orders a involved in providing advisory, sub-advisory or with respect to the Injunctions, subject underwriting services to the Funds, was at some hearing. Interested persons may request time an officer or employee of the Investment to the condition in the application, until a hearing by writing to the Banking or Research Departments. the date the Commission takes final Commission’s Secretary and serving 6 Lehman states that it acts as principal action on their application for a Applicants with a copy of the request, underwriter to certain UITs whose portfolio permanent order or, if earlier, October personally or by mail. Hearing requests securities were selected by an unaffiliated third party depositor based on information published by 31, 2005. should be received by the Commission the Research Department. 7 LBAM and Lincoln Capital also will advise the UITs and their independent depositor concerning 1 Applicants request that any relief granted Boards of any State Injunctions that are issued. the Injunctions, any impact on the UITs, and this pursuant to the application also apply to any other With respect to the UITs discussed in footnote 6, Application, and will provide any other related company of which MLPF&S is or hereafter becomes Lehman states that it has provided or will provide information that may be requested by the trustees an affiliated person (included in the term written notification to the trustees for each of these or independent depositors. Applicants).

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by 5:30 p.m. on November 25, 2003, and Department’’). The Injunction enjoined 4. Applicants state that the conduct should be accompanied by proof of MLPF&S directly or through its officers, giving rise to the Injunction did not service on Applicants, in the form of an directors, agents and employees, from involve activities of any of the affidavit, or for lawyers, a certificate of violating the specific rules cited in the Applicants acting in the capacity of service. Hearing requests should state Complaint. Without admitting or investment adviser, depositor, or the nature of the writer’s interest, the denying the allegations in the principal underwriter for a Fund. reason for the request, and the issues Complaint, MLPF&S consented to the Applicants state that none of their contested. Persons who wish to be entry of the Injunction as well as the current or former officers or employees notified of a hearing may request payment of disgorgement and penalties who are engaged in the provision of notification by writing to the and other equitable relief. investment advisory or principal Commission’s Secretary. underwriting services was involved in Applicants’ Legal Analysis ADDRESSES: Secretary, Commission, 450 the conduct that forms the basis of the Fifth Street, NW., Washington, DC 1. Section 9(a)(2) of the Act, in Injunction. Applicants state that, while 20549–0609. Applicants, c/o Jerry relevant part, prohibits a person who the Advisers had access to research Weiss, Esq., Merrill Lynch Investment has been enjoined from engaging in or reports issued by the Research Managers, L.P., 800 Scudders Mill Road, continuing any conduct or practice in Department, the fact that the source of Princeton, NJ 08536. connection with the purchase or sale of a particular research report might be FOR FURTHER INFORMATION CONTACT: a security from acting, among other MLPF&S causes it to receive no more Marc R. Ponchione, Senior Counsel, or things, as an investment adviser or weight than research received from Todd F. Kuehl, Branch Chief, at (202) depositor of any registered investment other sources in their analysis of a 942–0564 (Division of Investment company or a principal underwriter for particular investment.4 Although some Management, Office of Investment any registered open-end investment of the Funds held securities in their Company Regulation). company, registered UIT or registered portfolios at the time that MLPF&S SUPPLEMENTARY INFORMATION: The face-amount certificate company. issued research reports concerning the following is a temporary order and a Section 9(a)(3) of the Act makes the issuers of such securities, as far as summary of the application. The prohibition in section 9(a)(2) applicable Applicants are aware, none of the complete application may be obtained to a company, any affiliated person of officers, portfolio managers, or any other for a fee at the Commission’s Public which has been disqualified under the investment personnel employed by the Reference Branch, 450 Fifth Street, NW., provisions of section 9(a)(2). Section Advisers has any knowledge of any non- Washington, DC 20549–0102 2(a)(3) of the Act defines ‘‘affiliated public information relating to, or had (telephone: 202–942–8090). person’’ to include any person directly any involvement in, the conduct or indirectly controlling, controlled by, underlying the Injunction. In addition, Applicants’ Representations or under common control with, the each of the Advisers has adopted 1. MLPF&S, a Delaware corporation, other person. Applicants state that policies regarding information barriers is a leading global investment banking MLPF&S is an affiliated person of each (the ‘‘Policies’’) designed to protect the firm. Certain Applicants serve as of the other Applicants within the Advisers’ clients, including Fund investment adviser or sub-adviser for meaning of section 2(a)(3) of the Act. shareholders, from any conflict of one or more registered investment Applicants further state that the entry of interest that may arise between the companies (‘‘Funds’’). Certain the Injunction would result in Advisers’ portfolio managers and other Applicants act as the depositor or employees of Merrill Lynch & Co., Inc. Applicants being subject to the 5 principal underwriter for Funds.2 disqualification provisions of section (‘‘ML&Co.’’). The Policies, which were 2. On October 31, 2003, the U.S. 9(a) of the Act. in effect at the time of the conduct described in the Complaint, restrict District Court for the Southern District 2. Section 9(c) of the Act provides that communications between portfolio of New York entered the Injunction the Commission shall grant an managers and certain other employees against MLPF&S in a matter brought by application for exemption from the the Commission.3 The Commission of ML&Co. disqualification provisions of section 5. The Applicants have distributed alleged in the complaint (‘‘Complaint’’) 9(a) if it is established that these that MLPF&S violated certain Conduct written materials, including an offer to provisions, as applied to Applicants, are meet in person to discuss the materials, Rules of the National Association of unduly or disproportionately severe or Securities Dealers (‘‘NASD’’) and Rules to the board of directors or trustees of that the Applicants’ conduct has been each Fund (each, a ‘‘Board’’), including of the New York Stock Exchange such as not to make it against the public (‘‘NYSE’’) (the NASD Conduct Rules the directors who are not ‘‘interested interest or the protection of investors to persons,’’ as defined in section 2(a)(19) and NYSE Rules together, the grant the application. Applicants have ‘‘Exchange Rules’’) by engaging in acts of the Act, of the Fund, and their filed an application pursuant to section independent legal counsel, if any, and practices that created or maintained 9(c) seeking a temporary and permanent inappropriate influence by MLPF&S’’ regarding the Injunction, any impact on order exempting them from the the Funds, and this application.6 The investment banking business (the disqualification provisions of section ‘‘Investment Banking Department’’) over 9(a) of the Act. 4 the research analysts in MLPF&S’ Applicants state that they formerly acted as 3. Applicants believe they meet the principal underwriter or depositor to one UIT research department (the ‘‘Research standard for exemption specified in whose portfolio selection process placed special section 9(c). Applicants state that the emphasis on equity research issued by the Research 2 Any registered unit investment trust (‘‘UIT’’) or Department. registered face amount certificate company for prohibitions of section 9(a) as applied to 5 ML&Co. is a holding company that, through its which Applicants may serve as principal them would be unduly and subsidiaries and affiliates, provides investment, underwriter or depositor are also included in the disproportionately severe and that the financing, advisory, insurance, banking and related defined term Funds. conduct of Applicants has been such as products and services on a global basis. Each of the 3 Securities and Exchange Commission v. Merrill Applicants is a direct or indirect wholly owned Lynch, Pierce, Fenner & Smith Incorporated, 03 Civ. not to make it against the public interest subsidiary of ML&Co. 2941 (WHP) (S.D.N.Y., filed April 28, 2003) (the or the protection of investors to grant 6 With respect to the UIT discussed in footnote 4, ‘‘Action’’). the exemption from section 9(a). Applicants state that they will provide written

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Applicants will provide the Boards with SECURITIES AND EXCHANGE reflected in this notice. Applicants also all information concerning the COMMISSION have agreed to file amendments to the Injunction and this application that is application reflecting the issuance of necessary for the Funds to fulfill their [Release No. IC–26236; 812–12964] each State Injunction (as defined disclosure and other obligations under Morgan Stanley Investment Advisors below). the federal securities laws. Inc., et al.; Notice of Application and Hearing or Notification of Hearing: An 6. Applicants state that the inability to Temporary Order order granting the application will be continue providing advisory services to issued unless the Commission orders a the Funds and the inability to continue October 31, 2003. hearing. Interested persons may request serving as principal underwriter to the AGENCY: Securities and Exchange a hearing by writing to the Funds would result in potentially severe Commission (‘‘Commission’’). Commission’s Secretary and serving hardships for the Funds and their ACTION: Temporary order and notice of Applicants with a copy of the request, shareholders. Applicants also assert application for a permanent order under personally or by mail. Hearing requests that, if they were barred from providing section 9(c) of the Investment Company should be received by the Commission services to the Funds, the effect on their Act of 1940 (‘‘Act’’). by 5:30 p.m. on November 25, 2003, and businesses and employees would be should be accompanied by proof of severe. The Applicants state that they Summary of Application: Applicants service on Applicants, in the form of an have committed substantial resources to have received a temporary order affidavit, or for lawyers, a certificate of establish an expertise in advising and exempting them from section 9(a) of the service. Hearing requests should state distributing Funds. Certain affiliated Act, with respect to an injunction the nature of the writer’s interest, the persons of MLPF&S previously have entered against Morgan Stanley & Co. reason for the request, and the issues received exemptions under section 9(c) Incorporated (‘‘MS&Co.’’) on October 31, contested. Persons who wish to be as the result of conduct that triggered 2003 by the U.S. District Court for the notified of a hearing may request section 9(a) as described in greater Southern District of New York (the notification by writing to the detail in the application. ‘‘Federal Injunction’’), until the earlier Commission’s Secretary. Applicants’ Condition of the date the Commission takes action ADDRESSES: Secretary, Commission, 450 on an application for a permanent order, Applicants agree that any order Fifth Street, NW., Washington, DC or two years from the date of the Federal 20549–0609. Applicants, c/o A. Thomas granting the requested relief will be Injunction. Applicants have requested a subject to the following condition: Smith, Esq., Morgan Stanley, 1585 permanent order. Broadway, New York, NY 10036. Any temporary exemption granted Applicants: Morgan Stanley FOR FURTHER INFORMATION CONTACT: pursuant to the application shall be without Investment Advisors Inc., Van Kampen prejudice to, and shall not limit the Asset Management Inc., Morgan Stanley Annette M. Capretta, Branch Chief, at Commission’s rights in any manner with Investment Management Inc., Morgan 202–942–0687 (Division of Investment respect to, any Commission investigation of, Stanley Investments LP, Van Kampen Management, Office of Investment or administrative proceedings involving or Company Regulation). against, Applicants, including without Investment Advisory Corp., Van limitation, the consideration by the Kampen Advisors Inc., Morgan Stanley SUPPLEMENTARY INFORMATION: The Commission of a permanent exemption from Alternative Investment Partners LP, following is a temporary order and a section 9(a) of the Act requested pursuant to Morgan Stanley AIP GP LP, Morgan summary of the application. The the application or the revocation or removal Stanley Capital Partners III, Inc., MSDW complete application may be obtained of any temporary exemptions granted under Capital Partners IV, Inc., Morgan for a fee at the Commission’s Public the Act in connection with the application. Stanley Global Emerging Markets, Inc., Reference Branch, 450 Fifth Street, NW., Temporary Order Morgan Stanley Venture Capital II, Inc., Washington, DC 20549–0102 (telephone 202–942–8090). The Commission has considered the Morgan Stanley Venture Capital III, Inc., matter and finds that Applicants have MSDW Venture Partners IV, Inc., MSVP Applicants’ Representations made the necessary showing to justify 2002, Inc., MSREF II, Inc., MSREF III, 1. Each Applicant is a direct or granting a temporary exemption. Inc., MSREF IV, L.L.C., MSDW Real Accordingly, Estate Special Situations II Manager, indirect subsidiary of Morgan Stanley, a It is hereby ordered, pursuant to L.L.C., Van Kampen Funds Inc., Morgan Delaware corporation. Morgan Stanley section 9(c) of the Act, that the Stanley Distributors Inc., MS&Co., is a publicly held global financial Applicants are granted a temporary Morgan Stanley Distribution, Inc., services company that provides exemption from the provisions of Morgan Stanley DW Inc., Morgan investment, financing, advisory, section 9(a), effective forthwith, solely Stanley Investment Management insurance, banking and related products with respect to the Injunction, subject to Limited; MSDW OIP Investors, Inc.; and services. Certain Applicants serve the condition in the application, until Morgan Stanley Investment as investment adviser or subadviser for the date the Commission takes final Management Company; and Morgan one or more registered investment action on their application for a Stanley Asset & Investment Trust companies (‘‘Funds’’). Certain permanent order. Management Co., Limited (together, the Applicants act as the depositor or ‘‘Applicants’’).1 principal underwriter for Funds.2 By the Commission. Filing Dates: The application was 2. On October 31, 2003, the U.S. Jill M. Peterson, filed on April 28, 2003. Applicants have District Court for the Southern District Assistant Secretary. agreed to file an amendment during the of New York entered the Federal [FR Doc. 03–27985 Filed 11–5–03; 8:45 am] notice period, the substance of which is Injunction against MS&Co. in a matter BILLING CODE 8010–01–P 1 Applicants request that any relief granted 2 Any registered unit investment trusts (‘‘UIT’’) or notification to the trustee of the UIT concerning the pursuant to the application also apply to any other registered face amount certificate company for Injunction, any impact on the UIT, and this company of which MS&Co. is or hereafter becomes which Applicants may serve as principal application, and will provide any other related an affiliated person (included in the term underwriter or depositor are also included in the information that may be requested by the trustee. Applicants). defined term Funds.

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brought by the Commission.3 The or under common control with, the Although some of the Funds held Commission alleged in the complaint other person. Applicants state that securities in their portfolios at the time (‘‘Complaint’’) that MS&Co. violated MS&Co. is an affiliated person of each that MS&Co. issued research reports certain Conduct Rules of the National of the other Applicants within the concerning the issuers of such Association of Securities Dealers meaning of section 2(a)(3) of the Act. securities, as far as Applicants are (‘‘NASD’’) and Rules of the New York Applicants further state that the entry of aware, none of the officers, portfolio Stock Exchange (‘‘NYSE’’) (the NASD the Injunctions would result in managers, or any other investment Conduct Rules and NYSE Rules Applicants being subject to the personnel employed by the Applicants together, the ‘‘Exchange Rules’’) by disqualification provisions of section made any investment decisions based engaging in conduct involving conflicts 9(a) of the Act. on any non-public information relating of interest between research analysts in 2. Section 9(c) of the Act provides that to the conduct underlying the Final MS&Co’s research department the Commission shall grant an Judgment. In addition, Morgan Stanley (‘‘Research Department’’) and MS&Co.’s application for exemption from the has adopted policies regarding investment banking business (the disqualification provisions of section information barriers (the ‘‘Policies’’). ‘‘Investment Banking Department’’). The 9(a) if it is established that these The Policies, which apply to each of the Federal Injunction enjoined MS&Co. provisions, as applied to Applicants, are Applicants and which were in effect at directly or through its officers, directors, unduly or disproportionately severe or the time of the conduct described in the agents and employees, from violating that the Applicants’ conduct has been Complaint, are designed to separate and the specific rules cited in the such as not to make it against the public maintain information barriers between Complaint. Without admitting or interest or the protection of investors to investment management operations and denying the allegations in the grant the application. Applicants have certain other Morgan Stanley Complaint, MS&Co. consented to the filed an application pursuant to section businesses, such as research analysts. entry of the Federal Injunction as well 9(c) seeking a temporary and permanent 5. The Applicants will distribute as the payment of disgorgement and order exempting them from the written materials, including an offer to penalties and other equitable relief, disqualification provisions of section meet in person to discuss the materials, including undertakings by MS&Co. to 9(a) of the Act. to the board of directors or trustees of adopt and implement policies and 3. Applicants believe they meet the each Fund (each, a ‘‘Board’’), including procedures relating to certain research standard for exemption specified in the directors who are not ‘‘interested activities. Applicants state that MS&Co. section 9(c). Applicants state that the persons,’’ as defined in section 2(a)(19) expects to enter into settlement prohibitions of section 9(a) as applied to of the Act, of the Fund, and their agreements relating to the activities them would be unduly and independent legal counsel, if any, referred to in the Complaint with certain disproportionately severe and that the regarding the Federal Injunction, any State and territorial agencies which may conduct of Applicants has been such as impact on the Funds, and this result in an injunction by a court of not to make it against the public interest application.6 The Applicants will competent jurisdiction that is based on or the protection of investors to grant provide the Boards with all information the same conduct and the same facts as the exemption from section 9(a). concerning the Injunctions and this the Complaint (each, a ‘‘State 4. Applicants state that the conduct application that is necessary for the Injunction,’’ and, together with the giving rise to the Injunctions did not Funds to fulfill their disclosure and Federal Injunction, the ‘‘Injunctions’’). involve any of the Applicants acting in other obligations under the Federal the capacity of investment adviser, Applicants request that this application securities laws. subadviser, depositor, or principal cover any disqualifications of the 6. Applicants state that the inability to underwriter for a Fund. Applicants state Applicants under Section 9(a) resulting continue providing advisory services to that the Complaint did not expressly from the Injunctions. the Funds and the inability to continue reference the conduct of any current or serving as principal underwriter to the Applicants’ Legal Analysis former employee of any of the Funds would result in potentially severe 1. Section 9(a)(2) of the Act, in Applicants who is or was involved in hardships for the Funds and their relevant part, prohibits a person who providing advisory, sub-advisory or shareholders. Applicants also assert has been enjoined from engaging in or underwriting services to the Funds that, if they were barred from providing 4 continuing any conduct or practice in advised or underwritten by Applicants. services to the Funds, the effect on their connection with the purchase or sale of While the Applicants’ portfolio businesses and employees would be a security from acting, among other managers had access to research severe. The Applicants state that they things, as an investment adviser or materials issued by the Research have committed substantial resources to depositor of any registered investment Department, there is no indication that establish an expertise in advising and company or a principal underwriter for the portfolio managers relied on such distributing Funds. Certain affiliated any registered open-end investment research more than any other data that persons of MS&Co. previously have company, registered UIT or registered would have been considered by the received exemptions under section 9(c) face-amount certificate company. portfolio managers in making as the result of conduct that triggered investment decisions for the Funds, Section 9(a)(3) of the Act makes the 5 prohibition in section 9(a)(2) applicable except as noted in the application. depositor to certain Funds whose portfolio to a company, any affiliated person of securities were selected based primarily on a list of 4 The Complaint refers to general practices recommended securities compiled by the Research which has been disqualified under the regarding the relationship between the research and Department. provisions of section 9(a)(2). Section investment banking departments of MS&Co. It is 6 Applicants state that they will advise the Boards 2(a)(3) of the Act defines ‘‘affiliated possible that one or more current or former officers of any State Injunctions that are issued. With person’’ to include any person directly or employees of Applicants, who is or was engaged respect to the Funds discussed in footnote 5 that are in the provision of investment advisory, principal UITs, Applicants state that they will provide or indirectly controlling, controlled by, underwriter or depositor services to the Funds was written notification to the trustee for each of these at some time involved in investment banking or UITs concerning the Final Judgment, any impact on 3 Securities and Exchange Commission v. Morgan research activities. the UITs, and this application, and will provide any Stanley & Co. Incorporated, 03 Civ. 2948 (WHP) 5 Applicants state that they have acted as other related information that may be requested by (S.D.N.Y., filed April 28, 2003). investment adviser, principal underwriter, or the trustee.

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section 9(a) as described in greater Jaffray Inc. (‘‘Piper’’) on October 31, Applicants’ Representations detail in the application. 2003 by the U.S. District Court for the Southern District of New York (the 1. Piper, a Delaware corporation, is a Applicants’ Condition ‘‘Federal Injunction’’), until the earlier full service investment banking firm, Applicants agree that any order of the date the Commission takes action engaged in securities underwriting, granting the requested relief will be on an application for a permanent order, sales and trading, investment banking, subject to the following condition: or two years from the date of the Federal financial advisory services, and Any temporary exemption granted Injunction. Applicants have requested a investment research services. Certain pursuant to the application shall be permanent order. Applicants serve as investment adviser without prejudice to, and shall not limit APPLICANTS: Piper, U.S. Bancorp Asset or subadviser for one or more registered the Commission’s rights in any manner Management, Inc. and Quasar investment companies (‘‘Funds’’). with respect to, any Commission Distributors, LLC (together, the Certain Applicants act as the depositor investigation of, or administrative ‘‘Applicants’’).1 or principal underwriter for Funds. proceedings involving or against, 2. On October 31, 2003, the U.S. Applicants, including without FILING DATES: The application was filed District Court for the Southern District limitation, the consideration by the on April 28, 2003. Applicants have Commission of a permanent exemption agreed to file an amendment during the of New York entered the Federal from section 9(a) of the Act requested notice period, the substance of which is Injunction against Piper in a matter 2 pursuant to the application or the reflected in this notice. Applicants have brought by the Commission. The revocation or removal of any temporary also agreed to file amendments to the Commission alleged in the complaint exemptions granted under the Act in application reflecting the issuance of (‘‘Complaint’’) that Piper violated connection with the application. each State Injunction (as defined section 17(b) of the Securities Act of below). 1933 (‘‘Securities Act’’), certain Conduct Temporary Order HEARING OR NOTIFICATION OF HEARING: An Rules of the National Association of The Commission has considered the order granting the application will be Securities Dealers (‘‘NASD’’) and Rules matter and finds that Applicants have issued unless the Commission orders a of the New York Stock Exchange made the necessary showing to justify hearing. Interested persons may request (‘‘NYSE’’) (the NASD Conduct Rules granting a temporary exemption. a hearing by writing to the and NYSE Rules together, the Accordingly, Commission’s Secretary and serving ‘‘Exchange Rules’’) by engaging in acts It Is Hereby Ordered, pursuant to Applicants with a copy of the request, and practices that created or maintained section 9(c) of the Act, that the personally or by mail. Hearing requests inappropriate influence by Piper’s Applicants are granted a temporary should be received by the Commission investment banking business (the exemption from the provisions of by 5:30 p.m. on November 25, 2003, and ‘‘Investment Banking Department’’) over section 9(a), effective forthwith, solely should be accompanied by proof of the research analysts in Piper’s research with respect to the Injunctions, subject service on Applicants, in the form of an department (the ‘‘Research to the condition in the application, until affidavit, or for lawyers, a certificate of Department’’). The Federal Injunction the date the Commission takes final service. Hearing requests should state enjoined Piper directly or through its action on their application for a the nature of the writer’s interest, the officers, directors, agents and permanent order or, if earlier, October reason for the request, and the issues employees, from violating section 17(b) 31, 2005. contested. Persons who wish to be of the Securities Act and the specific By the Commission. notified of a hearing may request rules cited in the Complaint. Without Margaret H. McFarland, notification by writing to the admitting or denying the allegations in Deputy Secretary. Commission’s Secretary. the Complaint, Piper consented to the [FR Doc. 03–27990 Filed 11–5–03; 8:45 am] ADDRESSES: Secretary, Commission, 450 entry of the Federal Injunction as well BILLING CODE 8010–01–P Fifth Street, NW., Washington, DC as the payment of disgorgement and 20549–0609. Applicants, c/o Joseph D. penalties and other equitable relief, Edmondson, Jr., Foley & Lardner, 3000 including undertakings by Piper to SECURITIES AND EXCHANGE K Street, NW, Suite 500, Washington, adopt and implement policies and COMMISSION DC 20007. procedures relating to certain research [Release No. IC–26238; 812–12965] FOR FURTHER INFORMATION CONTACT: activities. Applicants state that Piper Stacy L. Fuller, Senior Counsel, or expects to enter into settlement U.S. Bancorp Piper Jaffray Inc., et al.; Annette M. Capretta, Branch Chief, at agreements relating to the activities Notice of Application and Temporary 202–942–0564 (Division of Investment referred to in the Complaint with certain Order Management, Office of Investment state and territorial agencies which may Company Regulation). result in an injunction by a court of October 31, 2003. SUPPLEMENTARY INFORMATION: The competent jurisdiction that is based on AGENCY: Securities and Exchange the same conduct and the same facts as Commission (‘‘Commission’’). following is a temporary order and a summary of the application. The the Complaint (each, a ‘‘State ACTION: Temporary order and notice of complete application may be obtained Injunction,’’ and, together with the application for a permanent order under for a fee at the Commission’s Public Federal Injunction, the ‘‘Injunctions’’). section 9(c) of the Investment Company Reference Branch, 450 Fifth Street, NW., Applicants request that this application Act of 1940 (‘‘Act’’). Washington, DC 20549–0102 (telephone cover any disqualifications of the 202–942–8090). Applicants under section 9(a) resulting SUMMARY OF APPLICATION: Applicants from the Injunctions. have received a temporary order 1 Applicants request that any relief granted exempting them from section 9(a) of the pursuant to the application also apply to any other 2 Securities and Exchange Commission v. U.S. Act, with respect to an injunction company of which Piper is or hereafter becomes an Bancorp Piper Jaffray Inc., 03 CV 2942 (WHP) entered against U.S. Bancorp Piper affiliated person (included in the term Applicants). (S.D.N.Y., filed April 28, 2003).

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Applicants’ Legal Analysis who is or was involved in providing application.5 The Applicants will 1. Section 9(a)(2) of the Act, in advisory, sub-advisory or underwriting provide the Boards with all information relevant part, prohibits a person who services to the Funds advised or concerning the Injunctions and this has been enjoined from engaging in or underwritten by Applicants.4 While the application that is necessary for the continuing any conduct or practice in Applicants’ portfolio managers had Funds to fulfill their disclosure and connection with the purchase or sale of access to research reports issued by the other obligations under the federal a security from acting, among other Research Department, there is no securities laws. things, as an investment adviser or indication that the portfolio managers 6. Applicants state that the inability to depositor of any registered investment relied on these research reports more continue providing advisory services to company or a principal underwriter for than any other data that would have the Funds and the inability to continue any registered open-end investment been considered by the portfolio serving as principal underwriter to the company, registered unit investment managers in making investment Funds would result in potentially severe trust (‘‘UIT’’) or registered face-amount decisions for the Funds. Although some hardships for the Funds and their certificate company. Section 9(a)(3) of of the Funds held securities in their shareholders. Applicants also assert the Act makes the prohibition in section portfolios at the time that Piper issued that, if they were barred from providing 9(a)(2) applicable to a company, any research reports concerning the issuers services to the Funds, the effect on their affiliated person of which has been of such securities, as far as Applicants businesses and employees would be disqualified under the provisions of are aware, none of the officers, portfolio severe. The Applicants state that they section 9(a)(2). Section 2(a)(3) of the Act managers, or any other investment have committed substantial resources to defines ‘‘affiliated person’’ to include personnel employed by the Applicants establish an expertise in advising and any person directly or indirectly made any investment decisions based distributing Funds. Applicants state that controlling, controlled by, or under on any non-public information relating no Applicant has previously applied for common control with, the other person. to the conduct underlying the Final an exemption pursuant to section 9(c) of Applicants state that Piper is an Judgment. In addition, Piper and the Act. affiliated person of each of the other USBAM have policies and procedures, Applicants’ Condition Applicants within the meaning of which were in effect at the time of the section 2(a)(3) of the Act. Applicants conduct described in the Complaint, Applicants agree that any order further state that the entry of the which prohibit (a) prepublication granting the requested relief will be Injunctions would result in Applicants disclosure of research opinions, (b) subject to the following condition: being subject to the disqualification disclosure of certain information Any temporary exemption granted provisions of section 9(a) of the Act. concerning investment banking pursuant to the application shall be without 2. Section 9(c) of the Act provides that prejudice to, and shall not limit the the Commission shall grant an transactions prior to public announcement, and (c) trading based on Commission’s rights in any manner with application for exemption from the respect to, any Commission investigation of, disqualification provisions of section material non-public information. Each or administrative proceedings involving or 9(a) if it is established that these of the Applicants that serve as an against, Applicants, including without provisions, as applied to Applicants, are investment adviser or sub-adviser to the limitation, the consideration by the unduly or disproportionately severe or Funds also has adopted policies Commission of a permanent exemption from that the Applicants’ conduct has been regarding information barriers (the section 9(a) of the Act requested pursuant to such as not to make it against the public ‘‘Policies’’) designed to protect the the application or the revocation or removal Funds from any conflict of interest that of any temporary exemptions granted under interest or the protection of investors to the Act in connection with the application. grant the application. Applicants have may arise between portfolio managers filed an application pursuant to section and other employees of Piper. The Temporary Order 9(c) seeking a temporary and permanent Policies restrict communications The Commission has considered the order exempting them from the between portfolio managers and certain matter and finds that Applicants have disqualification provisions of section employees of Piper. made the necessary showing to justify 9(a) of the Act. 5. The Applicants will distribute 3. Applicants believe they meet the granting a temporary exemption. written materials, including an offer to Accordingly, standard for exemption specified in meet in person to discuss the materials, It Is Hereby Ordered, pursuant to section 9(c). Applicants state that the to the board of directors or trustees of section 9(c) of the Act, that the prohibitions of section 9(a) as applied to each Fund (each, a ‘‘Board’’), including them would be unduly and Applicants are granted a temporary the directors who are not ‘‘interested disproportionately severe and that the exemption from the provisions of persons,’’ as defined in section 2(a)(19) conduct of Applicants has been such as section 9(a), effective forthwith, solely of the Act, of the Fund, and their not to make it against the public interest with respect to the Injunctions, subject independent legal counsel, if any, or the protection of investors to grant to the condition in the application, until the exemption from section 9(a). regarding the Federal Injunction, any the date the Commission takes final 4. Applicants state that the conduct impact on the Funds, and this action on their application for a giving rise to the Injunctions did not permanent order or, if earlier October involve any of the Applicants acting in referred to in the Complaint is now the chief 31, 2005. the capacity of investment adviser, executive officer of USBAM. 4 The Complaint refers to general practices By the Commission. depositor or principal underwriter for a regarding the relationship between the Investment Margaret H. McFarland, Fund. Applicants state that the Banking and Research Departments. It is possible Complaint did not expressly reference that one or more current or former officers of Deputy Secretary. the conduct of any current or former USBAM or Quasar, other than the individual [FR Doc. 03–27989 Filed 11–5–03; 8:45 am] 3 discussed in footnote 3, who is or was involved in BILLING CODE 8010–01–P employee of any of the Applicants, providing advisory, subadvisory or underwriting services to the Funds was at some time an officer 3 Applicants state that the former head of the or employee of the Investment Banking or Research 5 Applicants will advise the Boards of any State Research Department whose activities are generally Department. Injunctions that are issued.

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SECURITIES AND EXCHANGE Commission’s Secretary and serving 2. On October 31, 2003, the U.S. COMMISSION Applicants with a copy of the request, District Court for the Southern District personally or by mail. Hearing requests of New York entered the Federal [Release No. IC–26245; 812–12963] should be received by the Commission Injunction against UBS Securities in a 3 UBS Securities L.L.C., et al.; Notice of by 5:30 p.m. on November 25, 2003, and matter brought by the Commission. The Application and Temporary Order should be accompanied by proof of Commission alleged in the complaint service on Applicants, in the form of an (‘‘Complaint’’) that UBS Securities October 31, 2003. affidavit, or for lawyers, a certificate of violated section 17(b) of the Securities AGENCY: Securities and Exchange service. Hearing requests should state Act of 1933 (the ‘‘Securities Act’’), and Commission (‘‘Commission’’). the nature of the writer’s interest, the certain Conduct Rules of the National ACTION: Temporary order and notice of reason for the request, and the issues Association of Securities Dealers application for a permanent order under contested. Persons who wish to be (‘‘NASD’’) and Rules of the New York section 9(c) of the Investment Company notified of a hearing may request Stock Exchange (‘‘NYSE’’) (the NASD Act of 1940 (‘‘Act’’). notification by writing to the Conduct Rules and NYSE Rules Commission’s Secretary. together, the ‘‘Exchange Rules’’) by SUMMARY OF APPLICATION: Applicants ADDRESSES: Secretary, Commission, 450 engaging in acts and practices that have received a temporary order Fifth Street, NW., Washington, DC created or maintained inappropriate exempting them from section 9(a) of the 20549–0609. Applicants: UBS influence by UBS Securities’ investment Act, with respect to an injunction Securities, 299 Park Avenue, New York, banking business over the research entered against UBS Securities L.L.C. (f/ NY 10171; UBS Financial Services Inc., analysts in UBS Securities’ research k/a UBS Warburg L.L.C.) (‘‘UBS 1285 Avenue of the Americas, New department. The Federal Injunction Securities’’) on October 31, 2003 by the York, NY 10019; UBSFS Entities, 1285 enjoined UBS Securities directly or U.S. District Court for the Southern Avenue of the Americas, New York, NY through its officers, directors, agents District of New York (the ‘‘Federal 10019; American Global AM Entities, 51 and employees, from violating section Injunction’’), until the earlier of the date West 52nd Street, New York, NY 10019; 17(b) of the Securities Act and the the Commission takes action on an DSI International, 3001 Merritt 7, Suite Exchange Rules cited in the Complaint. application for a permanent order, or 201, Norwalk, CT 06851; UBS Global Without admitting or denying the two years from the date of the Federal Asset Management International, Ltd., allegations in the Complaint, UBS Injunction. Applicants have requested a 21 Lombard Street, London EC3V 9AH, Securities consented to the entry of the permanent order. United Kingdom; GAM International Federal Injunction as well as the APPLICANTS: UBS Securities; UBS Management Ltd., 12 St. James’s Place, payment of disgorgement and penalties Financial Services Inc.; UBS Fund London SW1A INX, United Kingdom; and other equitable relief, including Advisor, L.L.C., UBS Aspen GAM (USA) Inc. and GAM Services, undertakings by UBS Securities to adopt Management, L.L.C., UBS Willow Inc., 135 East 57th Street, New York, NY and implement policies and procedures Management, L.L.C., UBS Eucalyptus 10022. relating to certain research activities. Management, L.L.C., UBS Tamarack FOR FURTHER INFORMATION CONTACT: Julia Applicants state that UBS Securities Management, L.L.C., UBS Juniper Kim Gilmer, Senior Counsel, at (202) expects to enter into settlement Management, L.L.C., UBS Redwood/ 942–0528, or Annette Capretta, Branch agreements relating to the activities Sequoia Management, L.L.C. (‘‘UBSFS Chief, at 202–942–0564 (Division of referred to in the Complaint with certain Entities’’); UBS Global Asset Investment Management, Office of state and territorial agencies which may Management (NY) Inc., UBS Global Investment Company Regulation). result in an injunction by a court of Asset Management (US) Inc., UBS SUPPLEMENTARY INFORMATION: The competent jurisdiction that is based on Global Asset Management (Americas) following is a temporary order and a the same conduct and the same facts as Inc. (‘‘American Global AM Entities’’); summary of the application. The the Complaint (each, a ‘‘State DSI International; UBS Global Asset complete application may be obtained Injunction,’’ and, together with the Management International Ltd.; GAM for a fee at the Commission’s Public Federal Injunction, the ‘‘Injunctions’’). International Management Ltd.; GAM Reference Branch, 450 Fifth Street, NW., Applicants request that this application (USA), Inc.; and GAM Services, Inc. cover any disqualifications of the 1 Washington, DC 20549–0102 (telephone (together, the ‘‘Applicants’’). 202–942–8090). Applicants under Section 9(a) resulting FILING DATES: The application was filed from the Injunctions. Applicants’ Representations on April 28, 2003. Applicants have Applicants’ Legal Analysis agreed to file an amendment to the 1. UBS Securities, a Delaware limited application during the notice period, the liability company, is a full service 1. Section 9(a)(2) of the Act, in substance of which is reflected in this investment banking firm, engaged in relevant part, prohibits a person who notice. Applicants also have agreed to securities underwriting, sales and has been enjoined from engaging in or file amendments to the application trading, investment banking, financial continuing any conduct or practice in reflecting the issuance of each State advisory services, and investment connection with the purchase or sale of Injunction (as defined below). research services. Certain Applicants a security from acting, among other HEARING OR NOTIFICATION OF HEARING: serve as investment adviser or sub- things, as an investment adviser or An order granting the application will adviser for one or more registered depositor of any registered investment be issued unless the Commission orders investment companies (‘‘Funds’’). company or a principal underwriter for a hearing. Interested persons may Certain Applicants act as the principal any registered open-end investment request a hearing by writing to the underwriter for Funds.2 company, registered UIT or registered face-amount certificate company. 1 Applicants request that any relief granted 2 Any registered unit investment trusts (‘‘UIT’’) or Section 9(a)(3) of the Act makes the pursuant to the application also apply to any other registered face amount certificate company for company of which UBS Securities is or hereafter which Applicants may serve as principal 3 Securities and Exchange Commission v. UBS becomes an affiliated person (included in the term underwriter or depositor are also included in the Warburg, L.L.C., 03 CV 2943 (WHP) (S.D.N.Y., filed Applicants). defined term Funds. April 28, 2003).

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prohibition in section 9(a)(2) applicable reports more than any other data that 9(a) as described in greater detail in the to a company, any affiliated person of would have been considered by the application. which has been disqualified under the portfolio managers in making Applicants’ Condition provisions of section 9(a)(2). Section investment decisions for the Funds, 2(a)(3) of the Act defines ‘‘affiliated except as noted in the application.5 Applicants agree that any order person’’ to include any person directly Although some of the Funds held granting the requested relief will be or indirectly controlling, controlled by, securities in their portfolios at the time subject to the following condition: or under common control with, the that UBS Securities (or its predecessor) Any temporary exemption granted other person. Applicants state that UBS issued research reports concerning the pursuant to the application shall be without Securities is an affiliated person of each issuers of such securities, as far as prejudice to, and shall not limit the of the other Applicants within the Applicants are aware, none of the Commission’s rights in any manner with meaning of section 2(a)(3) of the Act. officers, portfolio managers, or any other respect to, any Commission investigation of, Applicants further state that the entry of investment personnel employed by the or administrative proceedings involving or the Injunctions would result in Applicants made any investment against, Applicants, including without limitation, the consideration by the Applicants being subject to the decisions based on any non-public Commission of a permanent exemption from disqualification provisions of section information relating to the conduct section 9(a) of the Act requested pursuant to 9(a) of the Act. underlying the Final Judgment. In the application or the revocation or removal 2. Section 9(c) of the Act provides that addition, each of the Applicants that of any temporary exemptions granted under the Commission shall grant an serve as an investment adviser or sub- the Act in connection with the application. application for exemption from the adviser to Funds has adopted policies disqualification provisions of section regarding information barriers (the Temporary Order 9(a) if it is established that these ‘‘Policies’’) designed to protect the The Commission has considered the provisions, as applied to Applicants, are Funds from any conflict of interest that matter and finds that Applicants have unduly or disproportionately severe or may arise between portfolio managers made the necessary showing to justify that the Applicants’ conduct has been and other employees of UBS Securities. granting a temporary exemption. such as not to make it against the public The Policies, which were in effect at the Accordingly, interest or the protection of investors to time of the conduct described in the It is hereby ordered, pursuant to grant the application. Applicants have Complaint, restrict communications section 9(c) of the Act, that the filed an application pursuant to section between portfolio managers and certain Applicants are granted a temporary 9(c) seeking a temporary and permanent other employees of UBS Securities. exemption from the provisions of order exempting them from the 5. The Applicants will distribute section 9(a), effective forthwith, solely disqualification provisions of section written materials, including an offer to with respect to the Injunctions, subject 9(a) of the Act. meet in person to discuss the materials, to the condition in the application, until 3. Applicants believe they meet the to the board of directors or trustees of the date the Commission takes final standard for exemption specified in each Fund (each, a ‘‘Board’’), including action on their application for a section 9(c). Applicants state that the the directors or trustees who are not permanent order or, if earlier, October prohibitions of section 9(a) as applied to ‘‘interested persons,’’ as defined in 31, 2005. section 2(a)(19) of the Act, of the Fund, them would be unduly and By the Commission. disproportionately severe and that the and their independent legal counsel, if Jill Peterson, conduct of Applicants has been such as any, regarding the Federal Injunction, not to make it against the public interest any impact on the Funds, and this Assistant Secretary. or the protection of investors to grant application.6 The Applicants will [FR Doc. 03–27983 Filed 11–5–03; 8:45 am] the exemption from section 9(a). provide the Boards with all information BILLING CODE 8010–01–P 4. Applicants state that the conduct concerning the Injunctions and this giving rise to the Injunctions did not application that is necessary for the involve any of the Applicants acting in Funds to fulfill their disclosure and SECURITIES AND EXCHANGE the capacity of investment adviser, sub- other obligations under the federal COMMISSION adviser, depositor, or principal securities laws. [Release No. IC–26235] underwriter for a Fund. Applicants state 6. Applicants state that the inability to that the Complaint did not expressly continue providing advisory services to Notice of Applications for reference the conduct of any current or the Funds and the inability to continue Deregistration under Section 8(f) of the former or employee of any of the serving as principal underwriter to the Investment Company Act of 1940 Applicants who is or was involved in Funds would result in potentially severe providing advisory, sub-advisory or hardships for the Funds and their October 31, 2003. underwriting services to the Funds shareholders. Applicants also assert The following is a notice of applications for deregistration under advised or underwritten by Applicants.4 that, if they were barred from providing section 8(f) of the Investment Company While the Applicants’ portfolio services to the Funds, the effect on their Act of 1940 for the month of October, managers had access to research reports businesses and employees would be 2003. A copy of each application may be prepared by UBS Securities employees, severe. Certain affiliated persons of UBS obtained for a fee at the SEC’s Public there is no indication that the portfolio Securities previously have received Reference Branch, 450 Fifth St., NW., managers relied on these research exemptions under section 9(c) as the result of conduct that triggered section Washington, DC 20549–0102 (tel. 202– 4 The complaint also refers to general practices 942–8090). An order granting each regarding investment banking and research 5 Applicants state that they acted as investment application will be issued unless the activities. It is possible that one or more current or adviser, principal underwriter, or depositor to a SEC orders a hearing. Interested persons former officers or employees of an Applicant, who Fund whose portfolio securities were selected based may request a hearing on any is or was involved in providing advisory, sub- primarily on a list of recommended securities advisory or underwriting services to the Funds, was compiled by USB Securities. application by writing to the SEC’s at some time involved in investment banking or 6 Applicants will advise the Boards of any State Secretary at the address below and research activities. Injunctions that are entered. serving the relevant applicant with a

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copy of the request, personally or by Applicant’s Address: 25 South applicant made a liquidating mail. Hearing requests should be Charles St., Baltimore, MD 21201. distribution to its shareholders, based received by the SEC by 5:30 p.m. on Scioto Investment Company [File No. on net asset value. Expenses of $3,120 November 24, 2003, and should be 811–2670] incurred in connection with the accompanied by proof of service on the liquidation were paid by applicant. applicant, in the form of an affidavit or, Summary: Applicant, a closed-end Filing Dates: The application was for lawyers, a certificate of service. investment company, seeks an order filed on August 20, 2003, and amended Hearing requests should state the nature declaring that it has ceased to be an of the writer’s interest, the reason for the investment company. Applicant has on October 14, 2003. request, and the issues contested. never made a public offering of its Applicant’s Address: 2949 East Elvira Persons who wish to be notified of a securities and does not propose to make Rd., Suite 101, Tucson, AZ 85706. hearing may request notification by a public offering. Applicant will Pioneer Small Cap Growth Fund [File writing to the Secretary, SEC, 450 Fifth continue to operate as a management No. 811–21106] Street, NW., Washington, DC 20549– investment company in reliance on 0609. For Further Information Contact: section 3(c)(1) of the Act. Pioneer Aggressive Growth Fund [File Diane L. Titus at (202) 942–0564, SEC, Filing Dates: The application was No. 811–21107] Division of Investment Management, filed on October 2, 2003, and amended Office of Investment Company on October 23, 2003. Summary: Each applicant seeks an Regulation, 450 Fifth Street, NW., Applicant’s Address: 4561 Lanes End order declaring that it has ceased to be Washington, DC 20549–0504. St., Columbus, OH 43220–4254. an investment company. Applicants The Italy Fund Inc. [File No. 811–4517] have never made a public offering of Vega Capital Corporation [File No. 811– their securities and do not propose to 2508] Summary: Applicant, a closed-end make a public offering or engage in Summary: Applicant, a closed-end investment company, seeks an order business of any kind. investment company, seeks an order declaring that it has ceased to be an investment company. On February 24, Filing Date: The applications were declaring that it has ceased to be an filed on September 12, 2003. investment company. Pursuant to an 2003, applicant made a liquidating order of the United States District Court distribution to its shareholders, based Applicants’ Address: 60 State St., for the Southern District of New York on net asset value. Applicant has placed Boston, MA 02109. the unclaimed assets of its former (the ‘‘Court’’) dated February 24, 2000, Quintara Funds [File No. 811–10563] the Court appointed the U.S. Small shareholders who have not yet Business Administration as receiver of surrendered their share certificates with Summary: Applicant seeks an order applicant. The order instructed the PFPC Global Fund Services. Any declaring that it has ceased to be an unclaimed assets remaining at the end receiver to assume and control the investment company. On February 25, of three years will be presumed operation of applicant and wind-up 2003, applicant made a liquidating abandoned and will escheat to the applicant’s business. An order relating distribution to its shareholders based on to the winding-up of the receivership appropriate jurisdiction in accordance with relevant New York and Maryland net asset value. Expenses of $530 was entered by the Court on September incurred in connection with the 29, 2003. Applicant’s liabilities are state law. Expenses of $130,500 incurred in connection with the liquidation were paid by applicant’s greater than its assets, therefore no investment adviser. liquidating distribution was made to its liquidation were paid by applicant. shareholders. Expenses of $8,955 Filing Dates: The application was Filing Date: The application was filed incurred in connection with the filed on July 24, 2003, and amended on on October 8, 2003. liquidation were paid by applicant. October 21, 2003. Applicant’s Address: 615 E. Michigan Applicant’s Address: 125 Broad St., Filing Dates: The application was St., Milwaukee, WI 53202. New York, NY 10004. filed on August 26, 2003 and amended on October 24, 2003. Pioneer Large Cap Value Fund [File No. Trust for Investment Managers [File No. Applicant’s Address: U.S. Small 811–9875] 811–9393] Business Administration, Receiver for Summary: Applicant seeks an order Summary: Applicant seeks an order Vega Capital Corporation, 666 Eleventh declaring that it has ceased to be an declaring that it has ceased to be an St., NW., Suite 200, Washington, DC investment company. On September 24, investment company. On June 28, 2002, 20001. 2003, applicant made a liquidating applicant transferred its assets to Gilford ARK Funds [File No. 811–7310] distribution to its shareholders, based Oakwood Equity Fund, a series of on net asset value. Expenses of $4,000 Advisors Series Trust, based on net Summary: Applicant seeks an order incurred in connection with the asset value. Expenses of $96,047 declaring that it has ceased to be an liquidation were paid by Pioneer investment company. On August 15, incurred in connection with the Investment Management, Inc., reorganization were paid by U.S. 2003 and August 22, 2003, applicant applicant’s investment adviser. transferred its assets to corresponding Bancorp Fund Services, LLC, Filing Date: The application was filed applicant’s administrator. series of MTB Group of Funds (formerly on October 1, 2003. Vision Group of Funds), based on net Applicant’s Address: 60 State St., Filing Dates: The application was asset value. Expenses of $130,000 Boston, MA 02109. filed on July 10, 2003, and amended on incurred in connection with the October 2, 2003. Davis International Series, Inc. [File reorganization were paid by M&T Bank, Applicant’s Address: 615 East applicant’s custodian. No. 811–8870] Michigan St., Milwaukee, WI 53202. Filing Dates: The application was Summary: Applicant seeks an order filed on September 26, 2003, and declaring that it has ceased to be an amended on October 22, 2003. investment company. On July 18, 2003,

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Asset Allocation Portfolio [File No. The subject matter of the Closed scheduling of meeting items. For further 811–6646] Meeting to be held on Tuesday, information and to ascertain what, if Growth Stock Portfolio [File No. 811– November 4, 2003 will be: Regulatory any, matters have been added, deleted 6647] matter bearing enforcement or postponed, please contact: implications; and Report of The Office of the Secretary at (202) Bond Portfolio [File No. 811–6648] investigation. 942–7070. Utilities Portfolio [File No. 811–9028] At times, changes in Commission Dated: November 4, 2003. priorities require alterations in the The Growth Portfolio [File No. 811– Jonathan G. Katz, scheduling of meeting items. For further Secretary. 9829] information and to ascertain what, if [FR Doc. 03–28146 Filed 11–4–03; 3:57 pm] The Aggressive Growth Portfolio [File any, matters have been added, deleted No. 811–9831] or postponed, please contact the Office BILLING CODE 8010–01–P Summary: Each applicant seeks an of the Secretary at (202) 942–7070. order declaring that it has ceased to be Dated: November 3, 2003. SECURITIES AND EXCHANGE an investment company. On April 11, Jonathan G. Katz, COMMISSION 2003, each applicant made a liquidating Secretary. [Release No. 34–48730; File No. PCAOB– distribution to its shareholders, based [FR Doc. 03–28019 Filed 11–3–03; 4:37 pm] 2003–05] on net asset value. Expenses of less than BILLING CODE 8010–01–P $25 were incurred by each applicant in Public Company Accounting Oversight connection with the liquidations. Board; Order Approving Proposed Filing Date: The applications were SECURITIES AND EXCHANGE Rules Relating to Compliance With filed on September 22, 2003. COMMISSION Auditing and Related Professional Applicants’ Address: 6125 Memorial Practice Standards and Advisory Dr., Dublin, OH 43017. Sunshine Act Meeting Groups For the Commission, by the Division of Notice is hereby given, pursuant to October 31, 2003. Investment Management, pursuant to the provisions of the Government in the delegated authority. Sunshine Act, Public Law 94–409, that I. Introduction Jill M. Peterson, the Securities and Exchange On July 14, 2003, the Public Company Assistant Secretary. Commission will hold the following Accounting Oversight Board (the [FR Doc. 03–27991 Filed 11–5–03; 8:45 am] meeting during the week of November ‘‘Board’’ or the ‘‘PCAOB’’) filed with the BILLING CODE 8010–01–P 10, 2003: Securities and Exchange Commission A Closed Meeting will be held on (the ‘‘Commission’’) proposed rules Thursday, November 13, 2003 at 2:15 PCAOB–2003–05 pursuant to Sections SECURITIES AND EXCHANGE p.m. 101, 103 and 107 of the Sarbanes-Oxley COMMISSION 1 Commissioners, Counsel to the Act of 2002 (the ‘‘Act’’) , relating to compliance with auditing and related Sunshine Act Meeting Federal Register Commissioners, the Secretary to the Commission, and recording secretaries professional practice standards and to Citation of Previous Announcement: advisory groups. Notice of the proposed [68 FR 62333, November 3, 2003] will attend the Closed Meeting. Certain staff members who have an interest in rules was published in the Federal Register on September 26, 2003.2 The STATUS: Closed meeting. the matters may also be present. Commission received two comment PLACE: The General Counsel of the 450 Fifth Street, NW., letters. For the reasons discussed below, Washington, DC. Commission, or his designee, has certified that, in his opinion, one or the Commission is granting approval of ANNOUNCEMENT OF ADDITIONAL MEETING: the proposed rules. Additional Meeting. more of the exemptions set forth in 5 An additional Closed Meeting will be U.S.C. 552b(c)(5), (7), 9(B) and (10) and II. Description 17 CFR 200.402(a)(5), (7), (9)(ii) and held on Tuesday, November 4, 2003 at Section 103 of the Act directs the 11:30 a.m. (10), permit consideration of the scheduled matters at the Closed PCAOB to establish auditing and related Commissioners, Counsel to the attestation standards, quality control Commissioners, the Secretary to the Meeting. Commissioner Goldschmid, as duty standards, and ethics standards to be Commission, and recording secretaries used by registered public accounting will attend the Closed Meeting. Certain officer, voted to consider the items listed for the closed meeting in a closed firms in the preparation and issuance of staff members who have an interest in audit reports as required by the Act or the matters may also be present. session. The subject matter of the Closed the rules of the Commission. Section Commissioner Atkins, as duty officer, 103 also gives the PCAOB authority to determined that no earlier notice thereof Meeting scheduled for Thursday, November 13, 2003 will be: convene advisory groups to assist the was possible. Board in its establishment of auditing Formal orders of investigation; The General Counsel of the and related professional practice Institution and settlement of Commission, or his designee, has standards. certified that, in his opinion, one or administrative proceedings of an In furtherance of these provisions, the more of the exemptions set forth in 5 enforcement nature; and PCAOB proposed rules to define the Institution and settlement of injunctive U.S.C. 552b(c) (5), (7), and (8) and 17 term ‘‘auditing and related professional actions. CFR 200.402(a) (5), (7), and (8), permit practice standards’’ (‘‘Standards’’) to consideration of the scheduled matters For further information, please mean the standards established or at the Closed Meeting. contact the Office of the Secretary at Commissioner Atkins, as duty officer, (202) 942–7070. 1 15 U.S.C. 7201, et seq. voted to consider the items listed for the At times, changes in Commission 2 Release No. 34–48511 (September 22, 2003); 68 closed meeting in a closed session. priorities require alterations in the FR 55667 (September 26, 2003).

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adopted by the Board under Section Commission’s July 16, 2003 order 3 SECURITIES AND EXCHANGE 103(a) of the Act. Also, while implicit approving the PCAOB’s rules for COMMISSION in the Act, the Board’s proposed rules registration of public accounting firms, [Release No. 34–48722; File No. SR–PCX– codify the requirement that all we appreciate NASBA’s efforts to work 2003–31] registered public accounting firms must with the PCAOB on auditor regulation comply with the Board’s Standards. and oversight, and we believe that both Self-Regulatory Organizations; Order Pursuant to its authority to convene the PCAOB and state regulatory bodies Granting Approval to a Proposed Rule advisory groups and in order to obtain will benefit from continued close Change and Amendments No. 1 and 2 the advice of a broad range of experts, cooperation. The second comment Thereto by the Pacific Exchange, Inc. the Board’s proposed rules also provide letter, from the accounting firm of Making Housekeeping Changes to its general guidelines for the creation of Deloitte & Touche (October 17, 2003), Options Trading Rules advisory groups. contained suggestions for greater October 31, 2003. The PCAOB adopted the proposed openness in the activities of the On July 8, 2003, the Pacific Exchange, rules on June 30, 2003 and filed them PCAOB’s standing advisory group, and Inc. (‘‘PCX’’ or ‘‘Exchange’’) filed with with the Commission’s Office of the requested more notice of Board the Securities and Exchange Secretary on July 14, 2003. Pursuant to meetings, advisory group meetings and Commission (‘‘Commission’’), pursuant the requirements of Section 107(b) of public roundtables. The comments in to Section 19(b)(1) of the Securities the Act and Section 19(b) of the this letter also did not appear to warrant Exchange Act of 1934 (‘‘Act’’) 1 and Rule Securities Exchange Act of 1934 (the changes in the proposed rules. 19b–4 thereunder,2 a proposed rule ‘‘Exchange Act’’), the Commission Section 103 of the Act directs the change to amend its rules to clarify published the proposed rules for public PCAOB to establish auditing and related existing provisions, eliminate comment on September 26, 2003. professional practice standards and superfluous provisions, re-number rules where appropriate, and to otherwise The PCAOB’s proposed rules include empowers the PCAOB to convene update its rules. On September 10, 2003, two rules (PCAOB Rules 3100 and 3700) advisory groups to assist it in fulfilling and a definition that would appear in the PCX filed Amendment No. 1 to the its standards-setting responsibilities. 3 Rule 1001. Proposed PCAOB Rule proposed rule change. The proposed rules will facilitate the The proposed rule change and 1001(a)(viii) defines ‘‘auditing and Board’s exercise of its standards-setting Amendment No. 1 were published for related professional practice standards’’ authority and establish guidelines for comment in the Federal Register on as the auditing standards, related the Board’s use of advisory groups in September 29, 2003.4 The Commission attestation standards, quality control connection with its standards-setting received no comments on the proposal. standards, ethical standards, and activities. On September 24, 2003, the PCX filed independence standards (including any IV. Conclusion Amendment No. 2 to the proposed rule rules implementing Title II of the Act), change.5 and any other professional standards, On the basis of the foregoing, the The Commission finds that the that are established or adopted by the Commission finds that the proposed proposed rule change, as amended, is Board under Section 103 of the Act. rules are consistent with the consistent with the requirements of the Proposed Rule 3100 codifies the Act and the rules and regulations obligation of registered public requirements of the Act and the securities laws and are necessary and thereunder applicable to a national accounting firms to comply with the 6 appropriate in the public interest and securities exchange and, in particular, Standards. While this obligation is the requirements of Section 6 of the for the protection of investors. implicit in Section 103(a)(1) of the Act, Act 7 and the rules and regulations adoption of Rule 3100 would mean that It is therefore ordered, pursuant to thereunder. Specifically, the any registered public accounting firm or Section 107 of the Act and Section Commission finds that the proposed person associated with such a firm that 19(b)(2) of the Exchange Act, that the rule change, as amended, is consistent fails to adhere to applicable Standards proposed rules (File No. PCAOB–2003– with Section 6(b)(5) of the Act 8 because could be the subject of a Board 05) be and hereby are approved. it is designed to prevent fraudulent and disciplinary proceeding. Proposed Rule By the Commission. manipulative acts and practices, to 3700 establishes guidelines for the promote just and equitable principles of formation, composition, and other basic Margaret H. McFarland, matters concerning advisory groups that Deputy Secretary. 1 15 U.S.C. 78s(b)(1). will participate in the standards-setting [FR Doc. 03–27992 Filed 11–5–03; 8:45 am] 2 17 CFR 240.19b–4. 3 Amendment No. 1 replaced the PCX’s original process. Rule 3700 also provides that BILLING CODE 8010–01–P Rule 19b–4 filing in its entirety. the Board may establish ad hoc task 4 See Securities Exchange Act Release No. 48522 forces, the members of which do not (September 23, 2003), 68 FR 56029. necessarily have to be members of an 5 See letter from Tania J. Cho, Staff Attorney, established advisory group. Regulatory Policy, PCX, to Nancy J. Sanow, Assistant Director, Division of Market Regulation, III. Discussion Commission, dated September 23, 2003 (Amendment No. 2’’). In Amendment No. 2, PCX In a comment letter dated October 17, made a technical correction to its rule text. Because this is a technical amendment, it is not subject to 2003, the National Association of State notice and comment. Boards of Accountancy (‘‘NASBA’’) 6 In approving this proposed rule change, as urged that the PCAOB, in its future amended, the Commission notes that it has rulemaking and oversight of public considered the proposed rule’s impact on 3 accounting firms, emphasize the Release No. 34–48180 (July 10, 2003); 68 FR efficiency, competition, and capital formation. 15 43244 (July 21, 2003). Technical corrections in U.S.C. 78c(f). importance of compliance with state Release No. 34–48180A (July 22, 2003); 68 FR 7 15 U.S.C. 78f. regulatory requirements. As noted in the 44370 (July 28, 2003). 8 15 U.S.C. 78f(b)(5).

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trade, to foster cooperation and submit proposed reporting and years of the disbursement of the loan as coordination with persons engaged in recordkeeping requirements to OMB for a result of the project, or to meet other facilitating transactions in securities, to review and approval, and to publish a defined economic development remove impediments to and perfect the notice in the Federal Register notifying objectives (13 CFR 120.861–120.862). In mechanism of a free and open market the public that the agency has made the final rule published on October 7, and a national market system, and, in such a submission. 2003, effective November 6, 2003, 13 general, to protect investors and the DATES: Submit comments on or before CFR 120.861 states that ‘‘A Project must public interest. The Commission finds December 8, 2003. If you intend to create or retain one Job Opportunity per that the proposed rule change, as comment but cannot prepare comments an amount of 504 loan funding that will amended, is also consistent with promptly, please advise the OMB be specified by SBA from time to time Section 6(b)(6) of the Act,9 which Reviewer and the Agency Clearance in a Federal Register notice. Such Job requires that members and persons Officer before the deadline. Opportunity average remains in effect associated with members be Copies: Request for clearance (OMB until changed by subsequent Federal appropriately disciplined for violations 83–1), supporting statement, and other Register publication.’’ The current of Exchange rules.10 documents submitted to OMB for standard which was established in 1990 The Commission believes that the review may be obtained from the requires a 504 project to create or retain housekeeping changes proposed by the Agency Clearance Officer. one Job Opportunity for every $35,000 Exchange to PCX Rule 6 (‘‘Options ADDRESSES: Address all comments guaranteed by SBA. During the past Trading—Rules Principally Applicable concerning this notice to: Agency twelve years since the Job Opportunity to Trading of Options Contracts’’) and to Clearance Officer, Jacqueline White, requirement was last modified, the cost other PCX rules should help to correct, Small Business Administration, 409 3rd of acquiring real estate has increased clarify, and ensure consistency in and Street, SW., 5th Floor, Washington, DC substantially. For example, construction among the PCX’s current rules and in 20416 and [email protected], wages have increased more than 65 percent and the consumer price index the terminology used in those rules. The fax number 202–395–7285 Office of has increased 50 percent during the Commission notes that many of these Information and Regulatory Affairs, same period. Due to the substantial housekeeping changes are the result of Office of Management and Budget. the incorporation of new or amended increases in costs, SBA is modifying the FOR FURTHER INFORMATION CONTACT: Job Opportunity requirements by rules pursuant to the Commission’s Jacqueline White, Agency Clearance 11 approximately 43 percent effective approval of PCX Plus. Officer, (202) 205–7044. It is therefore ordered, pursuant to November 6, 2003, as follows: Section 19(b)(2) of the Act,12 that the SUPPLEMENTARY INFORMATION: Title: A Project must create or retain one Job proposed rule change (File No. SR– Statement of Personal History. Opportunity for every $50,000 PCX–2003–31), as amended, is hereby No.: 1081. guaranteed by SBA. Frequency: On Occasion. approved. Description of Respondents: Small James E. Rivera, For the Commission, by the Division Associate Administrator for Financial of Market Regulation, pursuant to Business Lending Companies. Responses: 200. Assistance. delegated authority.13 Annual Burden: 100. [FR Doc. 03–27946 Filed 11–5–03; 8:45 am] Margaret H. McFarland, BILLING CODE 8025–01–P Jacqueline White, Deputy Secretary. Chief, Administrative Information Branch. [FR Doc. 03–27993 Filed 11–5–03; 8:45 am] [FR Doc. 03–27872 Filed 11–5–03; 8:45 am] SMALL BUSINESS ADMINISTRATION BILLING CODE 8010–01–P BILLING CODE 8025–01–M Development Company Program Job Opportunity Requirement SMALL BUSINESS ADMINISTRATION SMALL BUSINESS ADMINISTRATION Title V of the Small Business Reporting and Recordkeeping Development Company Program Job Investment Act, section 501, defines the Requirements Under OMB Review Opportunity Requirement purpose of the Development Company Loan Program (504 Program) as fostering AGENCY: Small Business Administration Title V of the Small Business economic development and creating and ACTION: Notice of reporting requirements Investment Act, section 501, defines the preserving job opportunities in both submitted for OMB review. purpose of the Development Company urban and rural areas by providing long- Loan Program (504 Program) as fostering SUMMARY: Under the provisions of the term financing for small business economic development and creating and Paperwork Reduction Act (44 U.S.C. concerns through the development preserving job opportunities in both chapter 35), agencies are required to company program. 504 loans are urban and rural areas by providing long- principally used by small businesses to 9 15 U.S.C. 78f(b)(6). term financing for small business build or to purchase long-term fixed 10 The Commission believes that PCX’s concerns through the development assets (mostly acquiring land and amendment to PCX Rule 6.35 should help to clarify company program. 504 loans are constructing or renovating commercial that Market Makers must apply for primary principally used by small businesses to buildings) to assist in the growth of the appointments and that a Market Maker’s refusal to build or to purchase long-term fixed business. The 504 Program is required accept a primary appointment zone may be deemed a sufficient cause for termination or suspension of assets (mostly acquiring land and to create a certain minimum number of the Market Maker’s registration. constructing or renovating commercial jobs as a result of 504 loans. A 504 loan 11 See Securities Exchange Act Release No. 47838 buildings) to assist in the growth of the is required to either create or retain a (May 13, 2003), 68 FR 27129 (May 19, 2003) (File business. The 504 Program is required minimum number of jobs within two No. SR–PCX–2002–36) (order approving PCX Plus, the Exchange’s new electronic platform for options to create a certain minimum number of years of the disbursement of the loan as trading). jobs as a result of 504 loans. A 504 loan a result of the project, or to meet other 12 15 U.S.C. 78s(b)(2). is required to either create or retain a defined economic development 13 17 CFR 200.30–3(a)(12). minimum number of jobs within two objectives (13 CFR 120.861–120.862). In

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the final rule published on October 7, Norwegian Social Security agreement Type of Request: Extension of 2003, effective November 6, 2003, 13 that has been in effect since July 1, currently approved collection. CFR 120.829(a) states that ‘‘A CDC’s 1984. The new agreement, which was Originating Office: Bureau of Consular portfolio must maintain a minimum signed on November 30, 2001, was Affairs, Department of State (CA/VO). average of one Job Opportunity per an concluded pursuant to section 233 of Title of Information Collection: amount of 504 loan funding that will be the Social Security Act. Choice of Address and Agent for specified by SBA from time to time in The new agreement updates and Immigrant Visa Applicants. a Federal Register notice. Such Job clarifies several provisions in the Frequency: On occasion. Opportunity average remains in effect original U.S.-Norwegian Social Security Form Number: DS–3032. until changed by subsequent Federal agreement. Its primary purpose, Respondents: Aliens applying for Register publication.’’ The current however, is to permit U.S. citizens who Immigrant Visas whose petitions have standard which was established in 1990 have lived in Norway to receive full been approved in U.S. Estimated Number of Respondents: requires a CDC’s portfolio to reflect an credit for their periods of residence 330,000 per year. average of one Job Opportunity per under Norway’s Social Security system Average Hours Per Response: 10 $35,000 of 504 loan funding. The AA/ and to increase thereby the amount of minutes. FA may permit a CDC to average up to their Norwegian benefits. The new Total Estimated Burden: 55,000 hours one per $45,000 for good cause in agreement also improves disability and per year. Alaska; Hawaii; State-designated urban survivors benefit protection under the Public comments are being solicited or rural jobs and enterprise zones; Norwegian system for people who have to permit the agency to: Empowerment Zones and Enterprise worked in both countries. • Evaluate whether the proposed Communities; and Labor Surplus Areas. Individuals who wish to obtain copies information collection is necessary for During the past twelve years since the of the new agreement or want general the proper performance of the functions Job Opportunity requirement was last information about its provisions may of the agency, including whether the modified, the cost of acquiring real write to the Social Security information will have practical utility. estate has increased substantially. For Administration, Office of International • Evaluate the accuracy of the example, construction wages have Programs, Post Office Box 17741, agency’s estimate of the burden of the increased more than 65 percent and the Baltimore, Maryland 21235–7741. The proposed collection, including the consumer price index has increased 50 Social Security Web site at http:// validity of the methodology and percent during the same period. Due to www.socialsecurity.gov/international assumptions used. the substantial increases in costs, SBA also includes the text of the new • Enhance the quality, utility, and is modifying the requirements by agreement. Anyone who wants clarity of the information to be approximately 43 percent effective information about the Norwegian Social collected. November 6, 2003, as follows: Security programs may write to the • Minimize the reporting burden on A CDC’s portfolio must reflect an National Insurance Administration, those who are to respond, including average of one Job Opportunity per International Affairs Division, N–0241 through the use of automated collection $50,000 of 504 loan funding. The AA/ Oslo, Norway. techniques or other forms of technology. FA may permit a CDC to average up to Dated: October 29, 2003. FOR FURTHER INFORMATION CONTACT: one per $65,000 for good cause for all Jo Anne B. Barnhart, Copies of the proposed information 504 projects located in Commissioner of Social Security. collection and supporting documents (1) Alaska; may be obtained from Brendan [FR Doc. 03–27890 Filed 11–5–03; 8:45 am] (2) Hawaii; Mullarkey of the Office of Visa Services, (3) State-designated urban or rural BILLING CODE 4191–02–P U.S. Department of State, 2401 E St. jobs and enterprise zones; NW., RM L–703, Washington, DC 20520, (4) Empowerment Zones and who may be reached on (202) 663–1166. Enterprise Communities; and DEPARTMENT OF STATE Public comments and questions should (5) Labor Surplus Areas as listed by be directed to the State Department the Department of Labor. [Public Notice 4524] Desk Officer, Office of Information and Regulatory Affairs, Office of James E. Rivera, 30-Day Notice of Proposed Information Management and Budget (OMB), Associate Administrator for Financial Collection: Form DS–3032, Choice of Washington, DC 20530, who may be Assistance. Address and Agent for Immigrant Visa reached on (202) 395–3897. [FR Doc. 03–27947 Filed 11–5–03; 8:45 am] Applicants; OMB Control Number BILLING CODE 8025–01–P 1405–0126 Dated: October 22, 2003. Janice L. Jacobs, AGENCY: Department of State. Deputy Assistant Secretary of State for Visa SOCIAL SECURITY ADMINISTRATION ACTION: Notice. Services, Bureau of Consular Affairs, Department of State. SUMMARY: New Agreement To Replace the The Department of State has [FR Doc. 03–27973 Filed 11–5–03; 8:45 am] submitted the following information Agreement Between the United States BILLING CODE 4710–06–P and Norway on Social Security; Entry collection request to the Office of Into Force Management and Budget (OMB) for approval in accordance with the DEPARTMENT OF STATE AGENCY: Social Security Administration. Paperwork Reduction Act of 1995. [Public Notice No. 4414] ACTION: Notice. Comments should be submitted to OMB within 30 days of the publication of this Advisory Committee on International SUMMARY: The Commissioner of Social notice. Law; Notice of Committee Meeting Security gives notice that on September The following summarizes the 1, 2003, a new agreement entered into information collection proposal A meeting of the Advisory Committee force that replaces the original U.S.- submitted to OMB: on International Law will take place on

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Friday, November 21, 2003, from 10 Reform Act for the 21st Century (AIR Issued in Fort Worth, Texas on October 15, a.m. to approximately 4 p.m., as 21). 2003. necessary, in Room 1107 of the United Naomi L. Saunders, DATES: States Department of State, 2201 C Comments must be received on or before December 8, 2003. Manager, Airports Division. Street, NW., Washington, DC. The [FR Doc. 03–27895 Filed 11–5–03; 8:45 am] meeting will be chaired by the Legal ADDRESSES: Comments on this Adviser of the Department of State, application may be mailed or delivered BILLING CODE 4910–13–M William H. Taft, IV, and will be open to to the FAA at the following address: Mr. Lacey D. Spriggs, Manager, Federal the public up to the capacity of the DEPARTMENT OF TRANSPORTATION meeting room. The meeting will discuss Aviation Administration, Southwest issues relating to the use of force and Region, Airports Division, LA/NM Federal Aviation Administration the law of armed conflict, developments Airports Development Office, ASW– relating to the Alien Tort Statute, the 640, 2601 Meacham Boulevard, Fort Premium War Risk Insurance recent session of the International Law Worth, Texas 76193–0640. Commission, UN reform, the decision of In addition, one copy of any AGENCY: Federal Aviation the International Court of Justice in Case comments submitted to the FAA must Administration, DOT. Concerning Oil Platforms, and other be mailed or delivered to The Honorable ACTION: current legal topics. James Mayo, Mayor, City of Monroe, Notice of extension of Aviation Entry to the building is controlled and Louisiana at the following address: Insurance. will be facilitated by advance Mayor James Mayo, City of Monroe, P.O. arrangements. Members of the public Box 123, Monroe, Louisiana 71201– SUMMARY: This notice contains the text desiring access to the session should, by 0123. of a memo from the Secretary of Wednesday, November 19, 2003, notify Transportation to the President the Office of the Assistant Legal Adviser FOR FURTHER INFORMATION CONTACT: Mr. regarding the extension of the provision for United Nations Affairs (telephone John M. Dougherty, Program Manager, of a aviation insurance coverage for U.S. (202) 647–2767) of their name, Social Federal Aviation Administration, flag commercial air carrier service in Security number, date of birth, Southwest Region, Airports Division, domestic and international operations. professional affiliation, address and LA/NM Airports Development Office, ASW–640c, 2601 Meacham Boulevard, DATES: Dates of extension from October telephone number in order to arrange 12, 2003–December 10, 2003. admittance. This includes admittance Fort Worth, Texas 76193–0640. for government employees as well as The request to release property may FOR FURTHER INFORMATION CONTACT: others. All attendees must use the ‘‘C’’ be reviewed in person at this same Helen Kish, Program Analyst, APO–3, or Street entrance. One of the following location. Eric Nelson, Program Analyst, APO–3, valid IDs will be required for Federal Aviation Administration, 800 SUPPLEMENTARY INFORMATION: The FAA Independence Ave., SW., Washington, admittance: Any U.S. driver’s license invites public comment on the request with photo, a passport, or a U.S. DC 20591, telephone 202–267–9943 or to release property at the Monroe 202–267–3090. Or online at FAA Government agency ID. Because an Regional Airport under the provisions of escort is required at all times, attendees Insurance Web site: http:// the AIR 21. On October 9, 2003, the insurance.faa.gov. should expect to remain in the meeting FAA determined that the request to for the entire morning or afternoon release property at Monroe Regional session. SUPPLEMENTARY INFORMATION: On Airport submitted by the City of October 10, 2003, the Secretary of Dated: October 31, 2003. Monroe, Louisiana, met the procedural Transportation authorize a 60-day Judith L. Osborn, requirements of the Federal Aviation extension of aviation insurance Attorney-Adviser, Office of United Nations Regulations, Part 155. The FAA may provided by the Federal Aviation Affairs, Office of the Legal Adviser, Executive approve the request, in whole or in part, Administration as follows: Secretary, Advisory Committee on no later than January 9, 2004. International Law, Department of State. Memorandum to the President The following is a brief overview of [FR Doc. 03–27972 Filed 11–5–03; 8:45 am] the request: Pursuant to the authority delegated to me BILLING CODE 4710–08–P by the President in paragraph (3) of The City of Monroe, Louisiana, Presidential Determination No. 01–29 of requests the release of 5.091 acres of September 23, 2001, and the direction of DEPARTMENT OF TRANSPORTATION airport property. The release of property Section 1202 of the Homeland Security Act will allow for two industrial of 2002, I hereby extend that determination Federal Aviation Administration development projects to proceed. The to allow for the provision of aviation sale is estimated to provide $115,900.00 insurance and reinsurance coverage for U.S. Notice of Intent To Rule on Request To to allow improvements to Monroe Flag commercial air carrier service in Release Airport Property at Monroe Regional Airport’s Closed Circuit TV domestic and international operations for an Regional Airport, Monroe, LA System and Computerized Access additional 60 days. Control System in the terminal building. Pursuant to section 44306(b) of Chapter AGENCY: Federal Aviation Administration (FAA), DOT. Any person may inspect the request 443 of 49 U.S.C., Aviation Insurance, the in person at the FAA office listed above period for provision of insurance shall be ACTION: Notice of request to release under FOR FURTHER INFORMATION extended from October 12, 2003, through airport property. CONTACT. December 10, 2003. SUMMARY: The FAA proposes to rule and In addition, any person may, upon /s/ Norman Y. Mineta invites public comment on the release of request, inspect the application, notice Affected Public: Air Carriers who land at Monroe Regional Airport under and other documents germane to the currently have Premium War-Risk the provisions of Section 125 of the application in person at the Monroe Insurance with the Federal Aviation Wendell H. Ford Aviation Investment Regional Airport. Administration.

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Issued in Washington, DC on October 30, and other payloads 2 into suborbital operate a launch site at the Mojave 2003. trajectories. The issuance of a launch Airport for commercial use by providing Nan Shellabarger, site operator license to EKAD does not customers a site from which to launch Deputy Director, Office of Aviation Policy and permit EKAD to conduct launches, only suborbital missions using horizontally Plans. to offer the facility and infrastructure to launched vehicles, and therefore must [FR Doc. 03–27896 Filed 11–5–03; 8:45 am] launch operators. A launch site operator obtain a launch site operator license BILLING CODE 4910–13–M license remains in effect for five years from the FAA. from the date of issuance unless The successful completion of the surrendered, suspended, or revoked environmental review process does not DEPARTMENT OF TRANSPORTATION before the expiration of the term and is guarantee that the FAA would issue a renewable upon application by the launch site operator license to the EKAD Federal Aviation Administration licensee (14 Code of Federal Regulations for the Mojave Airport or a launch (CFR) 420.43). A license to operate a license to an individual launch Associate Administrator for launch site authorizes a licensee to offer operator. The project must also meet all Commercial Space Transportation; its launch site to a launch operator for FAA safety, risk, and indemnification Notice of Availability and Request for each launch point for the type and requirements. A license to operate a Comment on a Draft Environmental weight class of launch vehicle identified launch site does not guarantee that a Assessment (EA)/Initial Study for the in the license application and upon launch license would be granted for any East Kern Airport District (EKAD) which the licensing determination is particular launch proposed for the site. Launch Site Operator License for the based. Issuance of a license to operate All individual launch license applicants Mojave Airport, CA a launch site does not relieve a licensee would be subject to separate FAA licensing. AGENCY: of its obligation to comply with any Federal Aviation The EKAD has identified two types of Administration (FAA), Associate other laws or regulations, nor does it confer any proprietary, property, or launch vehicles, identified in this Administrator for Commercial Space analysis as Concept A and Concept B, Transportation (AST) is the lead Federal exclusive right in the use of airspace or outer space (14 CFR 420.41). The FAA which would be typical of the vehicles agency for NEPA. The U.S. Air Force is may use the analysis in this document that would operate from the Mojave a cooperating agency for NEPA. The as the basis for an environmental Airport. The proposed action/preferred EKAD is the lead agency for CEQA. determination of the impacts of these alternative would include launches of ACTION: Notice of availability and launches to support licensing decisions both Concept A and Concept B launch request for comment. for the launch of specific launch vehicles. The potential users of the vehicles from the Mojave Airport. launch site would be responsible for SUMMARY: In accordance with NEPA DATES: The public comment period for obtaining any necessary permits or regulations, the FAA is initiating a the NEPA process begins with the approvals including a launch license for public review and comment period for publication of this notice and request specific missions from the FAA. This a Draft EA/Initial Study. Under the for comment in the Federal Register. To document may be used as the basis for proposed action, the FAA would issue ensure that all comments can be the FAA to make a determination about a launch site operator license for the addressed in the Final EA, comments licensing the launches of some types of EKAD to operate a launch facility at the must be received by the FAA no later launch vehicles from the Mojave Mojave Airport. The FAA may also use than December 12, 2003. Airport. The FAA may also use this the analysis from this EA to issue a FOR FURTHER INFORMATION CONTACT: document as the basis for an launch license to individual operators environmental finding that would serve for launches from the Mojave Airport. If Written and oral comments regarding the Draft EA/Initial Study should be as part of the requirements of the FAA issued, the launch site operator license submitted to Ms. Michon Washington, launch licensing process for proposed would authorize the EKAD to operate a FAA Environmental Specialist, Mojave launch operators at the Mojave Airport. launch facility at the Mojave Airport. Airport EA, c/o ICF Consulting, 9300 Additional environmental analysis This launch site operator license would Lee Highway, Fairfax, VA 22031; e-mail would need to be conducted for any be for the purpose of operating a facility [email protected]; toll-free activity that is not addressed in this to launch horizontally launched, phone (800) 767–9956; toll-free fax (800) Draft EA/Initial Study or in previous suborbital rockets.1 In addition, the 380–1009; or through an online environmental analyses. EKAD may offer other services for Launch vehicles included in Concept comment form available at http:// commercial launch companies at the A consist of two components both of ast.faa.gov. Mojave Airport including static engine which would be piloted, a carrier firings, launch vehicle manufacturing, SUPPLEMENTARY INFORMATION: The aircraft and a mated suborbital launch and other testing and manufacturing proposed action is for the FAA to issue vehicle. The carrier aircraft would carry activities. The function of the launch a launch site operator license to the the launch vehicle to the designated facility would be to provide a location EKAD for the Mojave Airport. 14 CFR launch release altitude. The launch to launch manned suborbital rockets Chapter III, part 420 contains the vehicle would use only suborbital requirements for obtaining and trajectories and, therefore, would not 1 The FAA has proposed the following definition possessing a license to operate a launch reach Earth orbit. Concept A launch for suborbital rocket which is being considered for site. Under the regulations, an applicant vehicles would launch and land adoption but has not yet been approved: ‘‘a rocket is required to provide the FAA with horizontally at the Mojave Airport. They propelled vehicle intended for flight on a suborbital information sufficient to conduct would not require runway lengths in trajectory whose thrust is greater than its lift for the environmental and policy reviews and majority of the powered portion of its flight.’’ The excess of existing infrastructure at the following definition has been proposed but not determinations. The EKAD intends to Mojave Airport. approved for suborbital trajectory: ‘‘the intentional Launch vehicles included in Concept flight path of a launch vehicle, reentry vehicle, or 2 For purposes of this document, the payload is B would be a single piloted component. any portion thereof whose vacuum instantaneous the item that an aircraft or rocket carries over and impact point does not leave the surface of the above what is necessary for the operation of the The rocket motors would be ignited earth.’’ vehicle in flight. while the launch vehicle is on the

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runway at the Mojave Airport. Concept ADDRESS: The meeting will be held at DEPARTMENT OF TRANSPORTATION B launch vehicles would use suborbital Smiths Aerospace, Cheltenham, trajectories and, therefore, would not Gloucestershire, GL52 8SF, United Federal Aviation Administration reach Earth orbit. Concept B launch Kingdom. vehicles would launch and land RTCA Special Committee 201: horizontally at the Mojave Airport. They FOR FURTHER INFORMATION CONTACT: (1) Aeronautical Operational Control would not require runway lengths in RTCA Secretariat, 1828 L Street, NW., (AOC) Message Hazard Mitigation excess of existing infrastructure at the Suite 805, Washington, DC 20036–5133; (AMHM) Mojave Airport. telephone (202) 833–9339; fax (202) AGENCY: Two alternatives to the proposed 833–9434; Website http://www.rtca.org. Federal Aviation action were considered in the Draft EA/ (2) Smiths-Aerospace contact, Mr. Robin Administration (FAA), DOT. Initial Study. The first alternative would Perry; +44(0)1242 632661; e-mail ACTION: Notice of RTCA Special be to issue a launch site operator license [email protected]. Committee 201 meeting. to the EKAD for the Mojave Airport for SUPPLEMENTARY INFORMATION: Pursuant inclusion of launch vehicles specifically SUMMARY: The FAA is issuing this notice to section 10(a)(2) of the Federal fitting the description of Concept A. The to advise the public of a meeting of Advisory Committee Act (Pub. L. 92– second alternative would be to issue a RTCA Special Committee 201: 463, 5 U.S.C., Appendix 2), notice is launch site operator license to the EKAD Aeronautical Operational Control (AOC) for the Mojave Airport for inclusion of hereby given for a Special Committee Message Hazard Mitigation (AMHM). launch vehicles specifically fitting the 200 meeting. The agenda will include: DATES: The meeting will be held on description of Concept B. • November 18: Potential impacts of the proposed November 11–13, 2003, beginning at 10 • Subgroup 1–3 Meetings action and alternatives were analyzed in a.m. • the Draft EA/Initial Study. Potential November 19: ADDRESSES: The meeting will be held at environmental impacts of successful • Opening Session (Welcome, Boeing, Boeing Everett Bldg. 40–86, launches include impacts to air quality, Introductory and Administrative Everett, Washington. airspace, biological resources, cultural Remarks, Review Agenda, Review resources, health and safety, hazardous FOR FURTHER INFORMATION CONTACT: (1) Summary of Previous Meeting) RTCA Secretariat, 1828 L Street, NW., materials and hazardous waste, geology • and soils, land use, noise, Review Action Items Suite 805, Washington, DC, 20036– socioeconomics and environmental • Briefings on Related Committees 5133; telephone (202) 833–9339; fax (202) 833–9434; Web site http:// justice, transportation, visual and • Establish Editorial Working Group aesthetic resources, and water resources. www.rtca.org. (2) Mr. Rich Rawls, The impacts of the No Action November 20: telephone (425) 266–9873. • Alternative would be the same as those Subgroups 1–3 Meetings SUPPLEMENTARY INFORMATION: Pursuant described for the affected environment November 21: to section 10(a)(2) of the Federal in the Draft EA/Initial Study. • Report of Subgroup Meetings Advisory Committee Act (Pub. L. 92– Potential cumulative impacts of the 463, 5 U.S.C., Appendix 2), notice is • operation of the proposed launch site Review of Consolidated Draft hereby given for a Special Committee are also addressed in the Draft EA/ Document 201 meeting. The agenda will include: Initial Study. • Plans for Editorial Group Activities • November 11: • Date Issued: October 30, 2003. • Review of Action Items Opening Session (Welcome, Introductory Herbert Bachner, and Administrative Remarks, Review • Closing Session (Make Agenda, Background) Manager, Space Systems Development Assignments, Date and Place of • Review comments to Draft Document AOC Division. Next Meeting, Closing Remarks, Message Hazard Mitigation (AMHM) [FR Doc. 03–27894 Filed 11–5–03; 8:45 am] Adjourn) Version E1. BILLING CODE 4910–13–U • Drafting group work on other sections of Attendance is open to the interested the document public but limited to space availability. • Subgroup A Section 2 DEPARTMENT OF TRANSPORTATION With the approval of the chairmen, • Subgroup B Section 3 members of the public may present oral • Subgroup C Section 4 • Federal Aviation Administration statements at the meeting. Persons Closing Session (Other Business, Date and wishing to present statements or obtain Place of Next Meeting, Closing Remarks, RTCA Special Committee 200: Modular Adjourn) information should contact the person Avionics (MA)/EUROCAE WG–60 listed in the FOR FURTHER INFORMATION Note: This agenda will be followed as appropriate over the course of 3 days. AGENCY: Federal Aviation CONTACT section. Members of the public Administration (FAA), DOT. may present a written statement to the Attendance is open to the interested ACTION: Notice of RTCA Special committee at any time. public but limited to space availability. Committee 200 meeting. Issued in Washington, DC, on October 22, With the approval of the chairmen, 2003. members of the public may present oral SUMMARY: The FAA is issuing this notice Robert Zoldos, statements at the meeting. Persons to advise the public of a meeting of wishing to present statements or obtain RTCA Special Committee 200: Modular FAA Systems Engineer, RTCA Advisory Committee. information should contact the person Avionics. FOR FURTHER INFORMATION [FR Doc. 03–27897 Filed 11–5–03; 8:45 am] listed in the DATES: The meeting will be held on CONTACT section. Members of the public November 18–21, 2003 from 9 am to 5 BILLING CODE 4910–13–M may present a written statement to the pm. committee at any time.

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Issued in Washington, DC, on October 22, DEPARTMENT OF TRANSPORTATION is available on the World Wide Web at 2003. http://dms.dot.gov. Robert Zoldos, Maritime Administration FOR FURTHER INFORMATION CONTACT: FAA System Engineer, RTCA Advisory [Docket Number MARAD 2003 16455] Michael Hokana, U.S. Department of Committee. Transportation, Maritime [FR Doc. 03–27898 Filed 11–5–03; 8:45 am] Requested Administrative Waiver of Administration, MAR–830 Room 7201, BILLING CODE 4910–13–M the Coastwise Trade Laws 400 Seventh Street, SW., Washington, DC 20590. Telephone 202–366–0760. AGENCY: Maritime Administration, SUPPLEMENTARY INFORMATION: As DEPARTMENT OF TRANSPORTATION Department of Transportation. described by the applicant the intended ACTION: Invitation for public comments service of the vessel BRANDY is: Federal Highway Administration on a requested administrative waiver of Intended Use: Applicant will be doing the Coastwise Trade Laws for the vessel several multi-hour tours per day. Environmental Impact Statement: BRANDY. Geographic Region: ‘‘U.S. Gulf Coast, Bartow, Cherokee and Forsyth U.S. East Coast, U.S. West Coast except Counties, GA SUMMARY: As authorized by Public Law S.E. Alaska.’’ 105–383 and Public Law 107–295, the Dated: November 3, 2003. AGENCY: Federal Highway Secretary of Transportation, as Administration (FHWA), Georgia represented by the Maritime By order of the Maritime Administrator. Department of Transportation (GDOT). Administration (MARAD), is authorized Joel C. Richard, to grant waivers of the U.S.-build Secretary, Maritime Administration. ACTION: Notice of recision of the Notice requirement of the coastwise laws under [FR Doc. 03–27958 Filed 11–5–03; 8:45 am] of Intent. certain circumstances. A request for BILLING CODE 4910–81–P such a waiver has been received by SUMMARY: The FHWA is issuing this MARAD. The vessel, and a brief notice of recision to advise the public description of the proposed service, is DEPARTMENT OF TRANSPORTATION that preparation of an environmental listed below. The complete application impact statement for the Northern Arc, is given in DOT docket 2003–16455 at Maritime Administration a proposed west-east connector between http://dms.dot.gov. Interested parties [Docket Number MARAD 2003 16454] U.S. 411 in Bartow County, Georgia and may comment on the effect this action S.R. 400 in Forsyth County, Georgia has may have on U.S. vessel builders or Requested Administrative Waiver of been terminated. This is a formal businesses in the U.S. that use U.S.-flag the Coastwise Trade Laws recision of the Notice of Intent that was vessels. If MARAD determines, in AGENCY: published in the Federal Register on accordance with Public Law 105–383 Maritime Administration, September 18, 2000. and MARAD’s regulations at 46 CFR Department of Transportation. ACTION: Invitation for public comments FOR INFORMATION CONTACT: part 388 (68 FR 23084; April 30, 2003), Jennifer on a requested administrative waiver of Giersch, Environmental Coordinator, that the issuance of the waiver will have an unduly adverse effect on a U.S.- the Coastwise Trade Laws for the vessel Federal Highway Administration, 61 RUMBOW. Forsyth Street, SW., Suite 17T100, vessel builder or a business that uses Atlanta, GA 30303–3104, Telephone U.S.-flag vessels in that business, a SUMMARY: As authorized by Public Law (404) 562–3653 and/or Mr. Harvey waiver will not be granted. Comments 105–383 and Public Law 107–295, the Keepler, State Environmental/Location should refer to the docket number of Secretary of Transportation, as Engineer, Georgia Department of this notice and the vessel name in order represented by the Maritime Transportation, Office of for MARAD to properly consider the Administration (MARAD), is authorized Environmental/Location, 3993 Aviation comments. Comments should also state to grant waivers of the U.S.-build Circle, Atlanta, Georgia 30336, the commenter’s interest in the waiver requirement of the coastwise laws under Telephone (404) 699–4400. application, and address the waiver certain circumstances. A request for criteria given in § 388.4 of MARAD’s such a waiver has been received by SUPPLEMENTARY INFORMATION: The regulations at 46 CFR part 388. FHWA in cooperation with the GDOT, MARAD. The vessel, and a brief DATES: Submit comments on or before description of the proposed service, is will not prepare an EIS for a proposal December 8, 2003. to construct a four-lane, limited access listed below. The complete application ADDRESSES: highway located between U.S. 411 in Comments should refer to is given in DOT docket 2003 16454 at Bartow County and S.R. 400 in Forsyth docket number MARAD–2003 16455. http://dms.dot.gov. Interested parties County, Georgia. The State of Georgia Written comments may be submitted by may comment on the effect this action has withdrawn the proposal to construct hand or by mail to the Docket Clerk, may have on U.S. vessel builders or the 50-mile long project. U.S. DOT Dockets, Room PL–401, businesses in the U.S. that use U.S.-flag Department of Transportation, 400 7th vessels. If MARAD determines, in (Catalog of Federal Domestic Assistance St., SW., Washington, DC 20590–0001. accordance with Public Law 105–383 Program Number 20.205, Highway Research, You may also send comments and MARAD’s regulations at 46 CFR Planning and Construction. Georgia’s electronically via the Internet at http:// part 388 (68 FR 23084; April 30, 2003), approved clearinghouse review procedures dmses.dot.gov/submit/. All comments that the issuance of the waiver will have apply to this program.) will become part of this docket and will an unduly adverse effect on a U.S.- Issued on: September 25, 2003. be available for inspection and copying vessel builder or a business that uses at the above address between 10 a.m. U.S.-flag vessels in that business, a Jennifer Giersch, and 5 p.m., E.T., Monday through waiver will not be granted. Comments Environmental Coordinator, Atlanta, Georgia. Friday, except federal holidays. An should refer to the docket number of [FR Doc. 03–27964 Filed 11–5–03; 8:45 am] electronic version of this document and this notice and the vessel name in order BILLING CODE 4910–22–M all documents entered into this docket for MARAD to properly consider the

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comments. Comments should also state Administration, MAR–830 Room 7201, Cunningham on behalf of Canadian the commenter’s interest in the waiver 400 Seventh Street, SW., Washington, National Railway Company (WB525–10/ application, and address the waiver DC 20590. Telephone 202–366–0760. 28/2003), for permission to use certain criteria given in § 388.4 of MARAD’s SUPPLEMENTARY INFORMATION: As data from the Board’s Carload Waybill regulations at 46 CFR part 388. described by the applicant the intended Samples. A copy of the request may be DATES: Submit comments on or before service of the vessel RUMBOW is: obtained from the Office of Economics, December 8, 2003. Intended Use: Day and Overnight- Environmental Analysis, and ADDRESSES: Comments should refer to ‘‘Live Aboard While You Learn’’ sailing Administration. school with emphasis on teaching docket number MARAD–2003 16454. The waybill sample contains Written comments may be submitted by handicapped persons, both adults and children. An exemption is requested for confidential railroad and shipper data; hand or by mail to the Docket Clerk, therefore, if any parties object to these U.S. DOT Dockets, Room PL–401, 12 passengers. Geographic Region: Puerto Rico and requests, they should file their Department of Transportation, 400 7th objections with the Director of the St., SW., Washington, DC 20590–0001. Florida. Board’s Office of Economics, You may also send comments Dated: November 3, 2003. Environmental Analysis, and electronically via the Internet at http:// By order of the Maritime Administrator. Administration within 14 calendar days dmses.dot.gov/submit/. All comments Joel C. Richard, of the date of this notice. The rules for will become part of this docket and will Secretary, Maritime Administration. be available for inspection and copying release of waybill data are codified at 49 [FR Doc. 03–27957 Filed 11–5–03; 8:45 am] CFR 1244.9. at the above address between 10 a.m. BILLING CODE 4910–81–P and 5 p.m., E.T., Monday through Contact: Mac Frampton, (202) 565– Friday, except federal holidays. An 1541. electronic version of this document and Department of Transportation all documents entered into this docket Vernon A. Williams, is available on the World Wide Web at Surface Transportation Board Secretary. http://dms.dot.gov. [FR Doc. 03–27969 Filed 11–5–03; 8:45 am] Release of Waybill Data FOR FURTHER INFORMATION CONTACT: BILLING CODE 4915–00–P Michael Hokana, U.S. Department of The Surface Transportation Board has Transportation, Maritime received a request from Harkins

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Corrections Federal Register Vol. 68, No. 215

Thursday, November 6, 2003

This section of the FEDERAL REGISTER date,’’ ‘‘September 12, 2003’’ should 21 days from date of publication].’’ contains editorial corrections of previously read ‘‘September 17, 2003.’’ should read ‘‘November 18, 2003’’. published Presidential, Rule, Proposed Rule, and Notice documents. These corrections are [FR Doc. C3–23586 Filed 11–5–03; 8:45 am] [FR Doc. C3–27094 Filed 11–5–03; 8:45 am] prepared by the Office of the Federal BILLING CODE 1505–01–D BILLING CODE 1505–01–D Register. Agency prepared corrections are issued as signed documents and appear in the appropriate document categories SECURITIES AND EXCHANGE DEPARTMENT OF TRANSPORTATION elsewhere in the issue. COMMISSION Federal Aviation Administration [Release No. 34–48662; File No. SR–PCX– 2003–41] ENVIRONMENTAL PROTECTION Noise Exposure Map Notice for AGENCY Self–Regulatory Organizations; Notice Indianapolis International Airport, of Filing and Order Granting Indianapolis, IN 40 CFR Part 52 Accelerated Approval of Proposed Correction [MO 195–1195a; FRL–7559–9] Rule Change and Amendment No. 1 Thereto by the Pacific Exchange, Inc. In notice document 03–27275 Approval and Promulgation of To Trade, Either by Listing or Pursuant beginning on page 61713 in the issue of Implementation Plans and Operating to Unlisted Trading Privileges, Fixed Wednesday, October 29, 2003, make the Permits Program; State of Missouri Income Exchange Traded Funds following correction: Correction October 20, 2003. On page 61713, in the second column, under the heading SUPPLEMENTARY In rule document 03–23586 beginning Correction on page 54366 in the issue of INFORMATION, in the second paragraph, Wednesday, September 17, 2003, make In notice document 03–27094 in the seventh line, ‘‘depend’’ should the following correction: beginning on page 61535 in the issue of read, ‘‘depict’’. Tuesday, October 28, 2003 make the §52.1320 [Corrected] following correction: [FR Doc. C3–27275 Filed 11–5–03; 8:45 am] On page 54369, in §52.1320(c), in the On page 61541, in the second column, BILLING CODE 1505–01–D table, under the column ‘‘EPA approval in the 19th and 20th lines, ‘‘[Insert date

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Part II

Securities and Exchange Commission 17 CFR Part 240 Alternative Net Capital Requirements for Broker-Dealers That Are Part of Consolidated Supervised Entities; Proposed Rule

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SECURITIES AND EXCHANGE No. [S7–21–03] ; please include this file Commission’s rules pertaining to over- COMMISSION number in the subject line if you use the-counter (‘‘OTC’’) derivative dealers.4 electronic mail. We will make all Under the proposal, a broker-dealer that 17 CFR Part 240 comment letters available for public maintains tentative net capital 5 of at 6 [Release No. 34–48690; File No. S7–21–03] inspection and copying in our public least $1 billion and net capital of at reference room at the above address. We least $500 million 7 could apply to the RIN 3235–AI96 will post electronically submitted Commission for a conditional comment letters on the Commission’s exemption from the application of the Alternative Net Capital Requirements Web site (http://www.sec.gov).1 standard net capital rule calculation for Broker-Dealers That Are Part of FOR FURTHER INFORMATION CONTACT: and, upon Commission approval, elect Consolidated Supervised Entities With respect to general questions, to calculate certain of its market and AGENCY: Securities and Exchange contact Catherine McGuire, Chief credit risk capital charges using the Commission (‘‘Commission’’). Counsel, Lourdes Gonzalez, Assistant firm’s own internal mathematical ACTION: Proposed rule. Chief Counsel, or Linda Stamp models for risk measurement, including Sundberg, Attorney Fellow, at (202) internally developed value-at-risk SUMMARY: We are proposing for 942–0073, Division of Market (‘‘VaR’’) models and scenario analysis. comment rule amendments under the Regulation, Securities and Exchange The standard net capital rule Securities Exchange Act of 1934 that Commission, 450 Fifth Street, NW., calculation, however, would continue to would establish a voluntary alternative Washington, DC 20549–1001. apply to the broker-dealer’s positions method for computing net capital With respect to amendments to where the use of a VaR model or charges for certain broker-dealers. If the financial responsibility rules and books scenario analysis would not be broker-dealer is part of a holding and records requirements, contact appropriate. company, that holding company must Michael A. Macchiaroli, Associate Large broker-dealers typically are have a group-wide internal risk Director, at (202) 942–0132, Thomas K. owned by holding companies that may management control system and must McGowan, Assistant Director, at (202) also own many other entities. These consent to group-wide Commission 942–4886, Rose Russo Wells, Attorney, affiliated entities may engage in both supervision (the holding company and at (202) 942–0143, Bonnie L. Gauch, securities and non-securities activities its affiliates are referred to in this Attorney, at (202) 942–0765, or David worldwide. Broker-dealer holding proposal as a ‘‘consolidated supervised Lynch, Financial Economist, at (202) company structures vary, and may be entity,’’ or ‘‘CSE’’). The proposed 942–0059, Division of Market quite complex. Depending upon the alternative method of computing certain Regulation, Securities and Exchange nature of these structures, broker- market and credit risk net capital Commission, 450 Fifth Street, NW., dealers may incur risks due to their charges involves the use of internal Washington, DC 20549–1001. affiliation with unregistered entities, mathematical models that the broker- SUPPLEMENTARY INFORMATION: The including the increasingly common dealer uses to measure risk. Commission Securities and Exchange Commission is arrangement of using unregistered supervision would include examination publishing for comment amendments to affiliates to trade in derivatives and of unregulated holding companies, Rules 15c3–1, 15c3–4, 17a–5, 17a–11, other highly structured financial holding companies that are not 17h–1T, and 17h–2T under the products. primarily in the insured depository Securities Exchange Act of 1934 The principal purposes of the net institutions business, and affiliates that (‘‘Exchange Act’’). capital rule are to protect customers and are not functionally regulated. Among other market participants from broker- I. Introduction other things, the CSE would comply dealer failures and to enable those firms with stringent rules regarding its group- The Commission is proposing to that fall below the minimum net capital wide internal risk management control amend Rule 15c3–1 2 (‘‘net capital rule’’) requirements to liquidate in an orderly system and would make periodic under the Exchange Act to establish a fashion without the need for a formal reports to the Commission, which voluntary alternative method for proceeding or financial assistance from would include group-wide financial and computing net capital for certain broker- the Securities Investor Protection risk management information and a dealers. If the broker-dealer is part of a Corporation. The net capital rule capital computation consistent with the holding company, that holding requires different minimum levels of Basel Standards. We expect that this company must have a group-wide capital based upon the nature of the proposal, if adopted, would improve the internal risk management control firm’s business and whether the broker- Commission’s oversight of broker- system and must consent to group-wide dealer handles customer funds or dealers. Commission supervision (the holding securities. company and its affiliates are referred to A broker-dealer may incur many types DATES: Comments should be received on in this proposal as a ‘‘consolidated of risk through its affiliates. For or before February 4, 2004. supervised entity’’ or ‘‘CSE’’).3 We have example, a broker-dealer’s access to ADDRESSES: To help us process and modeled the proposal on the short-term funding may be affected by review your comments more efficiently, the insolvency of an affiliate. In comments should be sent by hard copy 1 We do not edit personal identifying information, addition, management at the holding or e-mail, but not by both methods. such as names or electronic-mail addresses, from company level may attempt to divert Comments sent by hard copy should be electronic submissions. You should submit only information that you wish to make publicly submitted in triplicate to Jonathan G. available. 4 See Exchange Act Release No. 40594, 63 FR Katz, Secretary, Securities and Exchange 2 17 CFR 240.15c3–1. 59362 (November 3, 1998), effective January 1999 Commission, 450 Fifth Street, NW., 3 If a broker-dealer is the ultimate parent (adopting rules relating to OTC derivatives dealers). Washington, DC 20549–0609. company of its affiliate group, it would be 5 See proposed Rule 15c3–1(c)(15). Comments also may be submitted considered the holding company for purposes of 6 See proposed Rule 15c3–1(a)(7). this proposal. The holding company may not be a 7 According to first quarter 2003 FOCUS reports, electronically at the following electronic natural person. Nothing in this proposal is intended 28 broker-dealers reported more than $1 billion in mail address: [email protected]. to create a preference for one organizational tentative net capital and more than $500 million in All comment letters should refer to File structure over another. net capital.

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capital from the broker-dealer, to the financial instruments, off balance sheet not have a principal regulator.11 As a extent permitted by the net capital rule, obligations, and the concentration of condition to the broker-dealer’s to support an affiliate experiencing credit risk. The DPG was formed in exemption from the standard net capital financial difficulty. While this shift of March 1995 by the industry and the rule, for a holding company that has a assets would not, in itself, place a firm Commission to provide a voluntary principal regulator, the holding in net capital violation, it could make it oversight framework for monitoring company would make available to the more likely that the firm would fail derivatives activities of broker-dealer Commission such information during volatile market conditions. affiliates. concerning the operations of the holding Under the proposed rules, a broker- The proposed alternative net capital company that is necessary for the dealer’s ability to calculate its net provisions would be conditioned on the Commission to evaluate the financial capital based on the alternative net broker-dealer and its holding company and operational risk within the affiliate capital rules would be conditioned on documenting a comprehensive risk group of the broker-dealer (including the Commission receiving additional management system for identifying, any risks that could affect the reputation information regarding the financial measuring, and managing risk, which of the holding company or broker- condition of the holding company and would be subject to Commission review. dealer) and to evaluate compliance with its affiliates, including a calculation of Risks that are managed on a the conditions of eligibility for allowable capital at the holding consolidated basis at the holding computing the broker-dealer capital company level. company level cannot be understood by charges in accordance with this The significance of a Commission reviewing risk management practices of proposal. The Commission would not assessment of group-wide risk was only one regulated entity—the broker- examine any holding company that is highlighted by the failure of the Drexel dealer. To have a full understanding of primarily in the insured depository Burnham Lambert Group (‘‘Drexel’’) and how risks, including risks to the broker- institutions business (excluding its its impact on its then-solvent broker- dealer, are identified, quantified, and insurance and commercial businesses) dealer subsidiary.8 In that case, Drexel managed, regulators need to review how and that arranges to provide the records had over $1 billion in commercial paper risk is managed across the organization, necessary to meet the Commission’s and other unsecured short-term including how risk at the affiliate may supervisory purposes. The Commission borrowings outstanding. As a result of affect other interrelated entities. also would not examine functionally significant losses and a decline in the Under this proposal, a broker-dealer regulated broker-dealer affiliates. We rating of its commercial paper, Drexel could use its proprietary mathematical request comment on the adequacy of the found it more difficult to renew its risk measurement models under Commission’s recordkeeping and short-term borrowings. Drexel was then prescribed circumstances to calculate its examination requirements with respect forced to look to its only liquid sources regulatory capital requirement. Because to the holding company and whether, of capital—the excess net capital of its many broker-dealers and their holding and to what extent, they should be broker-dealer and an affiliated companies already manage risk on a modified. With respect to any government securities dealer. group-wide basis using these models, recordkeeping or examination Significant amounts of the broker- the proposed supervisory structure also requirement that should be modified, dealer’s capital were transferred to other should be more closely aligned with the please specifically list the records that affiliates over several weeks. firms’ group-wide financial and risk a holding company provides to its Exchange Act section 17(h) was management. Broker-dealers wanting to holding company regulator that could enacted in part as a response to the take advantage of this alternative capital substitute for records that would be failure of Drexel and authorizes the calculation would need to provide the required under this proposal. Commission to obtain information Commission with access to group-wide We believe that broker-dealers that regarding certain activities of the information. may choose to apply to use the holding company and non-regulated In most instances, the Commission’s alternative net capital proposal could be affiliates of a broker-dealer. Pursuant to supervision on a group-wide basis affiliated with holding companies that the rules adopted under section 17(h), would consist of analyzing records and are primarily in the insured depository broker-dealers also submit consolidated reports provided by the holding institutions business. We request and consolidating financial statements, company (or ‘‘CSE’’) of the broker- comment on whether we should adopt 10 organizational charts of the holding dealer. Nevertheless, a CSE that is not a definition of ‘‘primarily in the insured company, descriptions of material legal an entity that has a principal regulator depository institutions business,’’ and, exposures, and risk management would permit the Commission to if so, what factors we should consider. policies and procedures to the examine its books and records. A CSE As a condition of the broker-dealer Commission.9 also would permit the Commission to using the alternative capital calculation, In addition, member firms of the examine the books and records of any the broker-dealer’s holding company Derivatives Policy Group (‘‘DPG’’) affiliate of the broker-dealer that does would also be required to comply with voluntarily supply us with additional stringent rules regarding its group-wide information regarding derivative 10 In some instances, another financial regulator may require reports and calculations that are 11 The rules would define affiliates with a similar to those we propose here. We intend to 8 principal regulator as banks or savings associations, See, e.g. Breeden, Richard C., ‘‘Statement Before make the proposal available to broker-dealers that entities registered with the Commodity Futures the Committee on Banking, Housing and Urban have regulated holding companies. We do not Trading Commission (other than broker-dealers), Affairs, United States Senate, Concerning the intend to examine holding companies that are and licensed or registered insurance companies. Bankruptcy of Drexel Burnham Lambert’’ (March 2, primarily in the insured depository institution Bank holding companies, savings and loan holding 1990) and Exchange Act Release No. 28347 (Aug. business (excluding their insurance and commercial companies, and foreign banks also would be 15, 1990), 55 FR 34027 (Aug. 21, 1990) (‘‘Recent businesses) when the Commission determines that considered to have a principal regulator if: (1) The events have indicated that the existing early the information the holding company provides is Commission determines that it has in place warning restrictions may not be sufficient to sufficient to meet the Commission’s supervisory appropriate arrangements so that information address the problems that have arisen in connection purposes as set forth in this proposal. We request provided to the Commission is sufficient; and (2) with the development by many broker-dealers of comment on how and to what extent the The holding companies or foreign banks are large, complex holding companies.’’). Commission’s recordkeeping and examination primarily in the insured depository business 9 17 CFR 240.17h–1T and 17 CFR 240.17h–2T requirements applicable to the holding company (excluding their insurance and commercial (the ‘‘risk assessment rules’’). should be modified. businesses).

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internal risk management control other jurisdictions that may have similar business purposes. We also expect it to system. Those rules are designed to laws. lower the market and credit risk ensure the integrity of the risk We note that the EU uses the deductions from net capital for eligible measurement, monitoring, and international regulatory standards broker-dealers. Despite this anticipated management process, and to clarify developed by the Basel Committee on reduction in required net capital, we accountability, at the appropriate Banking Supervision (‘‘Basel believe that the proposal’s safeguards, organizational level, for defining the Committee’’), which aim to align including the proposed minimum permitted scope of activity and level of economic capital calculations with tentative net capital and net capital risk. This would help to ensure that the regulatory capital requirements for large levels, should reduce systemic risk and control system would adequately internationally active banking not impair investor protection. address the risks posed by the CSE’s institutions (‘‘Basel Standards’’).14 Our proposal incorporates a capital II. Alternative Capital Computation for business and the environment in which Eligible Broker-Dealers it is being conducted. It is important computation for the CSE that is that the Commission be informed that designed to be consistent with the Basel Exchange Act section 15(c)(3) gives these risks are adequately addressed Standards. The Basel Standards have the Commission broad authority to because financial or operational been used by many other financial adopt rules and regulations regarding problems at the holding company or regulators for many years as a method the financial responsibility of broker- affiliate of a broker-dealer could impair to assess capital adequacy at the holding dealers that we find are necessary or the financial and operational stability of company level. Requiring that the CSE appropriate in the public interest or for 15 the broker-dealer. calculate its allowable capital based on the protection of investors. The Large broker-dealers have long the Basel Standards would provide the Commission has promulgated various expressed interest in having their Commission with a useful measure of rules under this provision, including the 16 supervisory risk assessment and the CSE’s financial position and allow net capital rule, the hypothecation 17 regulatory capital requirements more for greater comparability of the CSE’s rules, and the customer protection 18 closely aligned to the mathematical financial position to that of rule. Other rules, such as the modeling methods they already use to international securities firms and Commission’s books and records 19 20 manage their own business risk and banking institutions. rules, reporting requirements, and 21 capital. In response, the Commission Eliminating the need to maintain a the early warning rule, support our considered reformulating its net capital separate system to calculate regulatory financial responsibility framework. The rule to incorporate mathematical risk capital should reduce regulatory costs Commission receives additional management techniques into the for broker-dealers that have developed information, including information computation of regulatory capital mathematical risk measurement models about affiliates of broker-dealers, as part of a risk management system for charges.12 The proposed alternative financial and risk information about capital calculation responds to the holding companies and certain affiliates 14 The central bank governors of the Group of Ten firms’ requests while recognizing the of broker-dealers, and certain off- countries (‘‘G–10 countries’’) established the Basel balance sheet items of broker-dealers, complexities of modern financial Committee in 1974 to provide a forum for ongoing services conglomerates. cooperation among member countries on banking their holding companies, and their The proposal also responds to supervisory matters. Its basic consultative papers affiliates through the risk assessment are: the Basel Capital Accord (1988), the Core rules and meetings with and reports international developments. Firms that Principles for Effective Banking Supervision (1997), do business in the European Union and the Core Principles Methodology (1999). The from members of the Derivatives Policy (‘‘EU’’) have told us that they may need Basel Standards establish a common measurement Group. Since its adoption, we believe system, a framework for supervision, and a that the net capital rule and these other to demonstrate that they have minimum standard for capital adequacy for consolidated supervision at the holding international banks in the G–10 countries. In April 15 15 U.S.C. 78o(c)(3). company level that is ‘‘equivalent’’ to 2003, the Basel Committee released for public 16 17 CFR 240.15c3–1. In calculating its net EU consolidated supervision.13 We comment a document entitled ‘‘The New Basel Capital Accord.’’ Comments were accepted through capital, a broker-dealer is required to reduce the expect that the Commission supervision July 31, 2003. On October 11, 2003, the Basel value of its proprietary positions to provide a contemplated by this proposal would Committee announced that it had received over 200 capital cushion if the value of these positions meet this standard. As a result, we comment letters and that there is continued broad should decline. The rule also places restrictions on the withdrawal of equity capital from a broker- believe this proposal would minimize support for the structure of the proposed New Basel Capital Accord and agreement on the need to adopt dealer. duplicative regulatory burdens on firms a more risk-sensitive capital framework. The 17 17 CFR 240.15c2–1 and 240.8c–1. The that are active in the EU as well as in Committee requested comment by December 31, hypothecation rule restricts broker-dealers’ 2003 on an amendment to its proposed treatment handling and use of customer securities, including 12 In 1997, the Commission issued a concept of expected and unexpected losses. The Basel prohibiting commingling of customers’ securities release to solicit comment regarding whether to Committee expects to issue a final revision of the without their consent. consider reformulating its net capital rule to proposed New Basel Capital Accord by the middle 18 17 CFR 240.15c3–3. The customer protection incorporate mathematical risk management of 2004, with an effective date for implementation rule requires broker-dealers to have possession or techniques into the computation of regulatory of December 31, 2006. control of all fully paid and excess margin capital charges. See Securities Exchange Act The Basel Standards generally have been securities that they carry for their customers. In Release No. 39456 (December 30, 1997), 62 FR implemented for internationally active, large addition, the customer protection rule prohibits the 68011. banking institutions by U.S. bank regulators. See broker-dealer’s use of customer funds to finance the 13 EU ‘‘consolidated supervision’’ would take the Office of the Comptroller of the Currency, Federal broker-dealer’s proprietary business. The rule also form of a series of quantitative and qualitative rules, Reserve System, Federal Deposit Insurance requires broker-dealers that carry customer imposed at the level of the holding company, Corporation, ‘‘Risk Based Capital Standards; Market accounts to establish a special reserve bank account regarding firms’ internal controls, capital adequacy, Risk,’’ 61 FR 47358 (Sept. 6, 1996). Currently, U.S. for the exclusive benefit of customers. intra-group transactions, and risk concentration. banking regulators have released an Advanced 19 17 CFR 240.17a–3 and 240.17a–4. Without a demonstration of ‘‘equivalent’’ Notice of Proposed Rulemaking to seek comment on 20 17 CFR 240.17a–5. supervision, we understand that an affiliate their preliminary views regarding the 21 17 CFR 240.17a–11. The early warning rule institution located in the EU may either be subject implementation of the proposed New Basel Capital requires that if a broker-dealer’s net capital falls to additional capital charges or be required to form Accord (68 FR 45900 (August 4, 2003)). Comments below a certain specified level or if it discovers a a sub-holding company in the EU. See ‘‘Directive are due by November 3, 2003. material internal control inadequacy, the broker- 2002/87/EC of the European Parliament and of the Proposed Appendix G is designed to be dealer must file a notice with us and with the firm’s Council of 16 December 2002.’’ consistent with the Basel Standards. designated examining authority.

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supervisory tools generally have based on our experience and existing paragraph (c)(13)(ii), bank holding performed well by assisting the Commission rules and rules of other companies, savings and loan holding Commission and the self-regulatory regulatory agencies where there are companies, and foreign banks that do organizations (‘‘SROs’’) in identifying at similar risk factors in the regulated business in the U.S. would also be an early stage firms that are entities. We ask for comment on all considered to have a principal regulator experiencing financial problems. these parameters. if there are in place appropriate This proposal would expand the use Proposed paragraph (a)(7) of Rule arrangements so that information of mathematical model-based capital 15c3–1 provides that the Commission provided to the Commission is charge calculations, which the may grant, in whole or in part, an sufficiently reliable for the purposes of Commission has permitted for several application, or an amendment to an proposed Appendix E and proposed years in the context of OTC derivatives application, by a broker-dealer to use Appendix G and if the entity is dealers,22 to eligible broker-dealers that the voluntary alternative net capital primarily in the insured depository elect Commission supervision of their computation. 24 This proposed institutions business (excluding its holding company and affiliates, subject paragraph also provides that the broker- insurance and commercial businesses). to certain specified conditions.23 dealer must at all times maintain We request comment on this definition A broker-dealer’s use of this tentative net capital of not less than $1 of ‘‘entity that has a principal alternative net capital treatment would billion and net capital of not less than regulator.’’ be conditioned on the CSE complying $500 million. The proposed amendment to with a series of requirements. The CSE We expect that net capital charges paragraph (c)(15) of Rule 15c3–1 defines would be required on a monthly and will be reduced for broker-dealers that ‘‘tentative net capital’’ for a broker- quarterly basis to compute group-wide use the proposed alternative net capital dealer using the alternative net capital capital and allowances for market, computation. The present haircut computation. credit, and operational risk as if it were structure is designed so that firms will subject to the Basel Standards. The CSE A. Proposed Appendix E to Rule have a sufficient capital base to account 15c3–1 also would be required to provide the for, in addition to market and credit Commission with certain financial, risk, other types of risk, such as Proposed Appendix E to Exchange operational, and risk management operational risk, leverage risk, and Act Rule 15c3–1 would include information. The CSE would be required liquidity risk. Raising the minimum application requirements and the to implement and maintain a tentative net capital requirement to $1 proposed new alternative method of consolidated internal risk management billion and net capital requirement to calculating market and credit risk control system and procedures to $500 million is one way to ensure that capital charges for the broker-dealer as monitor and manage group-wide risk, firms that use the alternative capital well as additional supervisory including market, credit, funding, computation maintain sufficient capital conditions the Commission could operational, and legal risks. reserves to account for these other risks. impose on the broker-dealer in We are proposing what we believe are In addition, based on our experience, appropriate circumstances, such as prudent parameters for measuring a firms must have this scale of operations compliance failures. Many of these broker-dealer’s net capital charges and in order to have developed internal risk requirements are similar to the rules allowances for risk for its holding management control systems necessary applicable to OTC derivatives dealers. company, although in some cases these to support reliable VaR computations. The requirements are also based on our parameters may be more conservative We request comment on these experience with the risk assessment than some firms may believe are required minimum levels of tentative rules and meetings with and reports necessary to account for risk. For net capital and net capital. Should they from members of the DPG and other example, the proposal contains the be raised or lowered? broker-dealers. Once a broker-dealer has requirements that the VaR model used Proposed paragraph (c)(13) of Rule submitted an application, the to calculate market risk for the broker- 15c3–1 defines ‘‘entity that has a Commission will conduct an intensive dealer and for the holding company be principal regulator’’ as a person (other review of how the firm manages its based on a ten business-day movement than a natural person) that is not a market, credit, liquidity and funding, in rates and prices and that a 99% registered broker-dealer (other than a legal, and operational risks to determine confidence level be used, and that the broker-dealer registered under whether the broker-dealer has met the VaR measure be multiplied by a factor § 15(b)(11) of the Exchange Act) and that requirements of proposed Appendix E of at least three. These parameters are belongs to one of two categories. Under and is in compliance with other proposed paragraph (c)(13)(i), the applicable rules and whether the 22 The Commission permits broker-dealers that person could be an insured depository holding company of the broker-dealer is limit their business to OTC derivatives trading and in compliance with the terms of its ancillary cash and portfolio management activities institution, an entity registered with the (‘‘OTC derivatives dealers’’) to calculate capital Commodities Futures Trading undertaking. charges based on VaR models. Exchange Act Commission, or a licensed or regulated 1. Application Release No. 40594 (November 3, 1998), 63 FR insurance company. Under proposed 59362. This voluntary registration allows an OTC Pursuant to paragraph (a) of proposed derivatives dealer to use mathematical models to Appendix E, a broker-dealer may apply calculate its market and credit risk capital charges 24 The application and approval process for firms upon Commission approval of an application that that elect this capital treatment would be similar to to the Commission for an exemption is subject to an intensive Commission review of the one for firms using the alternative capital from the standard net capital rule to how the firm manages its market, credit, liquidity computation for OTC derivatives dealers. Among calculate certain market and credit risk and funding, legal, and operational risks. Because other things, the Commission would issue a firm- capital charges in accordance with the amounts at risk are calculated across the specific approval setting forth the terms of the 25 affiliate group of the OTC derivatives dealer, the alternative capital computation. We would expect Appendix E. Paragraph (a) describes Commission gains a group-wide perspective on how to revise the approval when circumstances change. the firm is managed and how it handles large group- Changes that might necessitate revising the 25 From time to time, the broker-dealer will wide exposures. approval would include a change in the firm’s submit amendments to its application. For example, 23 The affiliate group, i.e. the CSE, includes the internal risk management control systems or a the broker-dealer will be required to submit an broker-dealer and all affiliates of the broker-dealer, change in the firm’s eligibility to use models for amendment to its application if it materially including the holding company. certain categories of positions. Continued

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the various documents and information qualitative requirements of proposed • If the disclosure to the Commission which must be submitted as part of the Appendix E; of any information required as a application from the broker-dealer and • If the broker-dealer is applying to condition for the broker-dealer to use from the holding company of the broker- the Commission to use scenario analysis proposed Appendix E would be dealer that will allow the Commission to calculate capital charges for certain prohibited by law or otherwise, to determine whether an exemption positions, a list of the positions and a cooperate with the Commission as from the net capital rule is necessary or description of how the capital charges needed, including by describing any appropriate in the public interest and will be calculated; and secrecy laws or other impediments that consistent with the protection of • A description of the broker-dealer’s could restrict the ability of the broker- investors. internal risk management control dealer or its affiliates from providing The documents and information that system and how that system satisfies the information to the Commission and by must be submitted as part of the requirements set forth in Rule 15c3–4. discussing the manner in which the broker-dealer and the holding company application are similar to those we b. Holding Company Undertaking presently obtain under the OTC propose to provide the Commission derivatives dealer rules, under the risk As part of the application, and as a with adequate assurances of access to assessment rules, and voluntarily from condition of the broker-dealer’s use of information; the DPG firms and other broker-dealers. proposed Appendix E to calculate • For any non-U.S. holding company, We have found that they are useful in certain of its capital charges, the broker- consent to the jurisdiction of the gaining insight into the financial dealer would also be required, by Commission and agree to maintain a condition, internal risk management paragraph (a)(1)(viii) of proposed U.S. registered agent; • control system, and activities of the Appendix E, to file a written Submit to the Commission all broker-dealer and its holding company undertaking by the broker-dealer’s material changes to mathematical and affiliates and to understand and holding company, signed by a duly models used to calculate allowances for evaluate group-wide risk exposures. authorized person at the holding market and credit risk for Commission company, in which the holding approval; Adverse financial or operational • conditions at the holding company or an company would agree, among other Submit to the Commission all affiliate of the broker-dealer may expose things, to: material changes to the group-wide • the broker-dealer to additional risk. For Comply with proposed Appendix G internal risk management system; and • Acknowledge that the Commission example, the failure of an affiliate may to Rule 15c3–1, discussed in further may implement additional supervisory adversely affect the ability of the broker- detail below, which generally would conditions, described in detail below, if dealer to obtain short-term funding. require that the holding company make the holding company fails to comply Therefore, we would require receipt of certain capital calculations, make certain reports to the Commission, with any provision of its undertaking. these documents and information The proposed terms of the relating to the operational and financial maintain and keep certain records, and notify the Commission upon the undertaking are those that we have condition of the broker-dealer, and its determined are necessary for us to holding company and other affiliates, as occurrence of certain events; • Comply with all applicable understand the risks to the broker-dealer a condition for the broker-dealer’s use of that may result from activities of its proposed Appendix E to calculate provisions of proposed Appendix E; • Comply with the provisions of Rule affiliates and for us to have access to certain of its capital charges. We request 15c3–4 with respect to a group-wide information concerning the CSE. For comment on all aspects of the internal risk management control example, permitting the Commission to application requirements. system for the CSE as if it were a broker- examine the books and records of non- a. Documents and Information To Be dealer that computes its capital charges functionally regulated affiliates of the Submitted by the Broker-Dealer in accordance with proposed Appendix broker-dealer will provide the E; Commission with an understanding of Paragraph (a)(1) of proposed • Appendix E lists the documents and As part of the group-wide internal the group-wide risk exposures that may information to be submitted by the risk management control system, have a material effect on the financial or broker-dealer as part of its application to establish, document, and maintain operational condition of the broker- use the alternative capital computation. procedures for the detection and dealer. The requirement to establish a The documents and information would prevention of money laundering and group-wide internal risk management terrorist financing; control system in accordance with the include: • • An executive summary of the Permit the Commission to examine standards of Rule 15c3–4 will help documents and information submitted the books and records of any affiliate, provide assurance that the control to the Commission by the broker-dealer including the holding company, if the system that is implemented will and a description of the holding affiliate is not an entity that has a adequately address the risks posed by company of the broker-dealer (which principal regulator (as defined in the firm’s business and the environment may not be a natural person); proposed paragraph (c)(13) of Rule in which it is being conducted. We • 15c3–1) for the purposes of these rules; request comment on the documents that A list of types of positions the • broker-dealer holds in its proprietary For certain entities that have the broker-dealer must submit as part of account and a description of the method principal regulators (those entities listed its application to use proposed the broker-dealer would use to compute in proposed paragraph (c)(13)(ii) of Rule Appendix E to compute certain of its its capital charges on those positions; 15c3–1) for the purposes of these rules, capital charges. • A description of mathematical make available to the Commission such As noted above, use of the alternative models used to price positions and to information concerning the operations net capital treatment by a broker-dealer compute capital charges and how those of the entity that the Commission is conditioned on the broker-dealer’s models meet the quantitative and determines is necessary to evaluate risks holding company undertaking to that may affect the financial or comply with the above requirements. amends a VaR model that it uses to calculate a operational condition of the holding We request comment on all aspects of market or credit risk capital charge. company; the holding company undertaking.

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Should we consider any other necessary to adequately assess the risks significant impact on the firm’s net conditions? Are any of the proposed to the CSE and to the broker-dealer. capital or risk allowances and changes conditions problematic? Paragraph (a)(3) of proposed Appendix to the internal risk management control E provides that the application shall be systems could result in changes to the c. Documents and Information To Be supplemented by such other amount of risk assumed by the broker- Submitted by the Holding Company information or documents relating to the dealer or holding company, Commission Under paragraph (a)(2) of proposed internal risk management control review of those changes would be Appendix E, as a condition of the system, mathematical models, and appropriate to determine if the broker-dealer’s use of the alternative financial position of the broker-dealer or exemption continues to be consistent capital treatment, the holding company the holding company that the with the Exchange Act. Under of the broker-dealer must submit the Commission may request to complete its paragraph (a)(8) of proposed Appendix following documents and information to review of the application. E, the broker-dealer would be required the Commission as part of the Under paragraph (a)(4) of proposed to notify the Commission of any application of the broker or dealer: Appendix E, the application would be material change to the corporate • A narrative description of the considered filed when received at the structure of the broker-dealer or the business and organization of the holding Commission’s principal office in holding company as described in the company; Washington, DC. All information and application. • An organizational chart depicting documents submitted in connection Under paragraph (a)(9) of proposed the holding company and its with the application would be accorded Appendix E, as a condition of the subsidiaries and affiliates; confidential treatment under the • exemption to compute its capital An alphabetical list of the affiliates proposal. charges pursuant to Appendix E, a of the broker-dealer (‘‘affiliate group’’), We request comment on the broker-dealer would agree to provide 45 with an identification of the financial documents and information we propose days written notice to the Commission regulator, if any, with whom the affiliate to require that the broker-dealer and if it chose to end its reliance on the is registered and a designation of those holding company file as a condition for exemption. The broker-dealer would affiliates that are material to the holding the exemption. For example, are there also agree that the Commission could company (‘‘material affiliates’’); other documents or information we • determine that the notice would be Consolidated and consolidating should require? effective after a shorter or longer period financial statements; As part of its group-wide internal risk of time if the broker-dealer consents or • Certain sample capital calculations management control system, the holding if the Commission determines that the made according to proposed Appendix company would be required to shorter or longer period is necessary or G to Rule 15c3–1; establish, document, and maintain • A description of the categories of appropriate in the public interest and procedures for the detection and consistent with the protection of positions held by the holding company prevention of money laundering and and affiliates; investors. We request comment on this terrorist financing. These procedures notice provision. For example, is 45 • A description of the methods the would include appropriate safeguards at holding company intends to use for days an appropriate notification period? the holding company level to prevent Would a shorter or longer time period computing allowances for market risk, 26 money laundering through affiliates. be preferable? credit risk, and operational risk; Under paragraph (a)(6) of proposed Pursuant to paragraph (a)(10) of • A description of any differences Appendix E, the Commission would proposed Appendix E, the Commission between the models used by the holding grant an application by a broker-dealer may, by order, revoke the broker- company and those used by the broker- to use the alternative capital dealer’s exemption that allows it to use dealer to compute capital charges on the computation if it determines that the proposed Appendix E to calculate same instrument or counterparty; broker-dealer has met the requirements • certain capital charges if the A description of the internal risk of Appendix E and is in compliance Commission finds that the exemption is management control system used by the with other applicable Exchange Act no longer necessary or appropriate in holding company to manage group-wide rules and that the holding company is the public interest or is no longer risk and how that system satisfies the in compliance with the terms of its consistent with the protection of requirements of Rule 15c3–4; and undertaking, which are conditions for • investors. A broker-dealer that is no Sample risk reports that the holding the approval. company provides to its senior Under paragraph (a)(7) of proposed longer permitted to calculate its management. Appendix E, a broker-dealer would be regulatory capital requirements Because each firm manages its required to amend and resubmit its pursuant to Appendix E must compute internal risk differently, the application to use Appendix E to the its capital charges using the standard Commission, during the application Commission if the broker-dealer or its haircut method in the net capital rule. process, must assess each firm’s holding company desires to make a We request comment on the revocation business and internal risk management material change to a mathematical provisions. Should paragraph (a)(10) of control systems to determine whether model used to calculate market or credit proposed Appendix E specify certain an exemption is appropriate. The risk or its internal risk management circumstances where revocation of the documents and information we would control system as described in the exemption would be appropriate? require the holding company to file as application. Because material changes to 2. Risk Management Control System a condition for the exemption would the mathematical models may have a allow us to evaluate this risk. In certain Under paragraph (b) of proposed circumstances, depending on the 26 This parallels requirements in the proposed Appendix E, the broker-dealer would be relationship or the geographic location New Basel Capital Accord. See also Financial required to establish, document, and of the holding company and its Action Task Force on Money Laundering (FATF) maintain an internal risk management Recommendation 22 and see generally the FATF’s control system that meets the affiliates, the Commission may Special Recommendations on Terrorist Financing. condition its approval on obtaining (The FATF’s documents can be found at http:// requirements of § 240.15c3–4 (with additional information or documents www.FATF-GAFI.org). proposed amendments to apply the rule

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to broker-dealers using Appendix E).27 Commission may adjust the market risk factors applicable to the Rule 15c3–4 is designed to ensure the multiplication factor or take other firm’s positions.33 integrity of the risk measurement, action, as appropriate, after evaluating Under paragraph (c)(3) of proposed monitoring, and management process, the firm’s adherence to robust internal Appendix E, the Commission proposes and to clarify accountability, at the risk management procedures, including to phase in the use of VaR models to appropriate organizational level, for a review of its VaR models.30 calculate capital charges for three bands defining the permitted scope of activity Paragraph (e) of proposed Appendix E of positions over a period of at least 18 and level of risk. We request comment would set forth the qualitative and months beginning with positions with on this proposed requirement. quantitative requirements for VaR lower risk exposures and progressing to models used by the broker-dealer to those with higher levels of risk. During 3. Market Risk Capital Charge calculate capital charges.31 These the phase-in period, Commission Under paragraph (c) of proposed requirements are intended to make the approval of an application or Appendix E, the market risk capital capital charges based on the VaR amendment would be required before a charge on certain of the broker-dealer’s measures a more accurate measure of broker-dealer could begin to use VaR positions would be computed either losses that may occur during periods of models to calculate market risk capital using VaR mathematical models, market stress and are based on those in charges at each of the succeeding levels scenario analysis, or the standard the OTC derivatives dealer rules and our of risk exposures. The phase-in of the haircut method of paragraph (c)(2)(vi) of experience in implementing those rules. application of mathematical models to Rule 15c3–1. The computation of the The qualitative requirements, listed in calculate capital charges and the market risk capital charge under this paragraph (e)(1) of proposed Appendix requirement that the previous stage VaR proposal is based on the method for E, would require that the VaR models use must have been successful are computing market risk under the OTC used to calculate market and credit risk intended to allow the Commission to derivatives dealer rules. Generally, be the same models used to report determine whether an applicant has when a statistical model is used to market and credit risk to the firm’s management controls that can determine market risk charges, the VaR senior management and must be adequately assess increasing risk levels amount determined by using the model integrated into the internal risk and whether the models have flaws or must be multiplied by a multiplication management system of the firm; that the other defects. A broker-dealer would factor to take into account the risk that VaR model must be reviewed by the request Commission approval by filing the model does not measure the effects firm periodically and annually by a an amendment to its application. of unlikely but significant events. registered public accounting firm, as Upon Commission approval of its application to use proposed Appendix E a. Market Risk Capital Charge that term is defined in the Sarbanes- to calculate certain of its capital charges, Calculation Using a VaR Model Oxley Act of 2002; 32 and that for purposes of computing market risk, the the broker-dealer would be able to use For positions for which a market risk VaR models to calculate market risk capital charge may be computed using multiplication factor must be determined based on quarterly capital charges on the first level of a VaR model,28 the market risk capital eligible positions, which are generally charge would be the VaR of the backtesting of the VaR model used to calculate market risk and by reference to securities with lower risk exposures: (1) positions, which would be multiplied U.S. government securities and by the appropriate multiplication factor Table 1 of proposed Appendix E. The quantitative requirements would derivatives on those securities; (2) to provide an adequate measure of risk investment grade corporate debt and during periods of market stress.29 set forth basic standards for each model including, (i) it must use a 99 percent, derivatives on those securities; (3) In order for the Commission to highly rated foreign government monitor whether the broker-dealer’s one-tailed confidence level and with price changes equivalent to a ten securities and derivatives on those VaR models provide an adequate securities; (4) highly rated short-term measure of the broker-dealer’s risk business-day movement in rates and prices for purposes of determining asset-backed securities and derivatives exposures, an eligible broker-dealer on those securities; (5) highly rated would be required to obtain market risk, (ii) it must use an effective historical observation period that must municipal securities and derivatives on authorization from the Commission, those securities; and (6) derivatives on either in its original application or by be at least one year in length and include periods of market stress, and major market foreign currencies. submitting an amendment to its After at least nine months of (iii) it must take into account and application, before using a VaR model to successfully using VaR models to incorporate all significant identifiable calculate market risk capital charges on calculate market risk capital charges on particular categories of exposures. The the first level of eligible positions, a multiplication factor would be 30 The Commission may take such actions, for example, in considering an application or broker-dealer could amend its determined by reference to Table 1 of amendment to an application of a broker-dealer to exemptive application to request proposed Appendix E based on the calculate certain market and credit risk capital Commission approval to use VaR results of quarterly backtests of the VaR charges in accordance with proposed Appendix E models to calculate market risk capital or during its routine oversight of the broker-dealer. model, which compare the losses charges on the second level of eligible predicted by the model to actual losses 31 Proposed Rule 15c3–1e(e)(1)–(2). 32 ‘‘Registered public accounting firm’’ is defined positions, which include equities and incurred in the broker-dealer’s portfolio, in section 2(a)(12) of the Sarbanes-Oxley Act of derivatives on equities. except that the initial multiplication 2002 (Pub. L. 107–204) as ‘‘a public accounting firm After at least another nine months of factor would be three. In considering an registered with the [Public Company Accounting successfully using VaR models to application or amendment, the Oversight] Board in accordance with this Act.’’ We propose that a registered public accounting firm calculate market risk capital charges on conduct the review of the VaR models, prepare the second level of eligible positions as 27 See infra, discussion of proposed amendments supplemental reports concerning management well as continuing to successfully to Rule 15c3–4. controls and inventory pricing and modeling for the calculate market risk charges on the first 28 These positions include those that have a ready broker-dealer and its holding company, and prepare market and for which there is adequate historical the holding company’s annual audit report because level of eligible positions, a broker- data to support a VaR model. such firms would be subject to Board rules, 29 Proposed Rule 15c3–1e(c)(1). examination, and discipline. 33 Proposed Rule 15c3–1e(e)(2).

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dealer could amend its exemptive dealer’s use of scenario analysis 34 to 4. Credit Risk Capital Charge application to request Commission compute a market risk capital charge An eligible broker-dealer would be approval to use VaR models to calculate (for example, positions having no ready required to use paragraph (d) of market risk capital charges for other market) the market risk capital charge proposed Appendix E to compute its eligible positions, which would include would be three times the greatest credit risk capital charge on credit positions for which there is a ready adverse price movement resulting from exposures arising from the broker- market and for which there is adequate the scenario over any ten-day period on dealer’s positions in derivatives historical data to support a VaR model. a daily basis. The broker-dealer would instruments if the Commission The Commission seeks comment on be required to take a minimum market authorized the broker-dealer to use VaR all aspects of the phase-in timetable, risk capital charge of $25 per 100-share or scenario analysis to compute its including the appropriateness of the equivalent equity contract for equity market risk capital charge on those positions selected for each level of positions or 1⁄2 of one percent of the face positions. The credit risk capital charge eligibility and the 9-month time periods value of the contract for all other types computed pursuant to proposed between successive levels. Should these of contracts, even if the scenario model Appendix E would be similar to the time periods be shorter or longer? How indicates a lower amount. We believe credit risk capital charge calculated should the Commission evaluate the that it is appropriate to build in pursuant to Appendix F to Rule 15c3– success or adequacy of the models minimum charges to help assure that 1, which applies to electing OTC during these phase-in periods? Are there the firm has adequate capital in view of derivatives dealers. The credit risk any other additional criteria or methods risks that may not be captured by capital charge would be the sum of the Commission should consider using? scenario analysis. We request comment counterparty exposure charges for each The Commission seeks comment on on the proposed calculation of capital counterparty, concentration charges by all aspects of the proposed calculation charges using scenario analysis. counterparty, and a portfolio of market risk capital charges. In Specifically, is three the appropriate concentration charge across all particular, we request comment on the multiplier? Is $25 per 100-share counterparties. Each of these charges is use of mathematical models for equivalent equity contract the designed to address different regulatory capital purposes, including appropriate minimum charge for equity components of credit risk. First, for each counterparty, the the quantitative and qualitative positions? Is 1⁄2 of one percent of the requirements for VaR models, the face value of the contract the broker-dealer would compute a multiplication factors used to calculate appropriate minimum for all other types counterparty exposure charge equal to the ‘‘credit equivalent amount’’ (defined the capital charge for market risk, and of contracts? The Commission also below) of the broker-dealer’s exposures the use of backtesting to determine the could require a broker-dealer using to the counterparty, multiplied by 8%,35 multiplication factor. For example, scenario analysis to take additional and further multiplied by a credit risk should the multiplication factors be capital charges for specific risk based on weight for the counterparty (or, under higher or lower? How should the the liquidity or the perceived risks of paragraph (d)(1) of proposed Appendix multiplication factors be determined? the instruments. We request comment Are the backtesting procedures E, the counterparty exposure charge is on the appropriate capital charge for the net replacement value in the appropriate? Is the 99% one-tailed specific risk. confidence level appropriate? Is the account of a counterparty if that The Commission solicits comment on requirement that the price changes be counterparty is insolvent, in all aspects of the use of scenario equivalent to a ten business-day bankruptcy, or that has senior long-term analysis to determine capital charges movement in rates and prices debt in default). This method for including the proposed multipliers and appropriate? If not, what parameters computing credit risk capital charges is would be appropriate? minimum charges. We are also consistent with the computation of interested in receiving any comments on credit risk capital charges for OTC Because VaR models use historical other methodologies that may be derivatives dealers under Appendix F to price data to predict future price appropriate to more accurately measure Rule 15c3–1. movements, under paragraph (c)(4) of risk and correlate that risk to capital The credit equivalent amount to a proposed Appendix E, an eligible charges. counterparty would be defined in broker-dealer could not use VaR models paragraph (d)(2) of proposed Appendix to calculate capital charges on securities c. Market Risk Capital Charge E as the sum of: (1) the broker-dealer’s that do not have adequate historical data Calculation for Other Positions maximum potential exposure to the available to make the VaR models counterparty multiplied by the Under paragraph (c)(6) of proposed reliable. For example, a broker-dealer appropriate multiplication factor; and Appendix E, an eligible broker-dealer could not use VaR models to calculate (2) the broker-dealer’s current exposure that computes its market risk capital capital charges on securities recently to the counterparty. The multiplication charges pursuant to proposed Appendix sold in an initial public offering or for factor would generally be determined securities without a ready market. In E to Rule 15c3–1 would continue to based on backtesting results of the VaR those cases, the broker-dealer could compute market risk capital charges model used to calculate maximum apply to use scenario analysis or would using paragraph (c)(2)(vi) of Rule 15c3– potential exposure, except that the continue to use the standard haircut 1 (the ‘‘haircut method’’) for positions initial multiplication factor would be method to calculate the capital charges for which the Commission has not one. Current exposure would be defined on those positions. approved its use of a VaR model or in paragraph (d)(3) of proposed scenario analysis to compute those Appendix E as the replacement value of b. Market Risk Capital Charge capital charges. Calculation Using Scenario Analysis 35 The 8% multiplier is consistent with the Under paragraph (c)(5) of proposed 34 Scenario analysis is the identification of the calculation of credit risk in the OTC derivatives potential impact on the profit or loss on a position dealers rules and with the Basel Standards and is Appendix E, for positions for which the of various extreme events that affect the pricing of designed to dampen leverage to assure that the firm Commission has approved the broker- the position in the portfolio. maintains a safe level of capital.

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the counterparty’s positions with the weight of the counterparty. We request of credit risk weights for counterparties. broker-dealer, after applying specified comment on whether the broker-dealer The Commission requests comment on netting agreements 36 and taking into should also be able to apply to the whether an additional method of account the value of certain collateral 37 Commission for permission to calculating credit risk weights, based on received from the counterparty. determine the credit risk weight of a internal estimates of annual Maximum potential exposure would be counterparty using internal calculations. probabilities of default, should be defined in paragraph (d)(4) of proposed For exposures covered by guarantees, included in proposed Appendix E. If Appendix E as the increase in the where the guarantee is an unconditional such a method should be used, the replacement value of the counterparty’s and irrevocable guarantee of the due Commission requests comment on positions with the broker-dealer, after and punctual payment and performance whether the following table applying the effect of specified netting of the obligation and the broker-dealer appropriately matches credit risk agreements and taking into account the can demand immediate payment from weights to annual probabilities of value of certain collateral received from the guarantor after any payment is default: the counterparty, that will not be missed without having to make exceeded with 99% confidence over a collection efforts, a broker-dealer would CREDIT RISK WEIGHT OF time horizon of one year. The broker- be able to substitute the average of the COUNTERPARTY BASED ON ANNUAL dealer would have to calculate credit risk weights of the guarantor and PROBABILITY OF DEFAULT 39 maximum potential exposure using a the counterparty for the credit risk VaR model meeting the applicable weight of the counterparty. Credit risk quantitative and qualitative Concentration charges are appropriate Annual probability of default weight requirements of proposed Appendix when a lack of diversification exposes (in percent) E.38 The Commission requests comment the broker-dealer to additional risk. When evaluating the debt holdings of an Less than .003% ...... 2 on the proposed calculations of current 0.05% ...... 17 exposure and maximum potential entity, a lack of diversification would be 0.11% ...... 30 exposure, including the use of VaR evidenced by either a relatively (relative 3.80% ...... 200 models to measure maximum potential to the amount of the broker-dealer’s 5.30% or higher ...... 230 exposure as well as the impact of tentative net capital) large exposure to a Event of default has oc- netting agreements and collateral. single party (the credit rating of that curred ...... 1250 The credit risk weight of the counterparty would, of course, affect the counterparty would be calculated under amount of additional risk) or a relatively The Commission believes that paragraph (d)(7) of proposed Appendix large amount of unsecured debt calculating a credit risk capital charge E using methods that are consistent with holdings. on exposures arising from transactions the computation of credit risk capital The second part of the credit risk in derivatives instruments using a charges for OTC derivatives dealers capital charge, as provided in paragraph qualifying VaR model to calculate under Appendix F to Rule 15c3–1. If a (d)(8) of proposed Appendix E, would maximum potential exposure is a more counterparty is rated by a nationally take into account the additional risk of precise method than using a ‘‘notional recognized statistical rating organization a relatively large exposure to a single add-on’’ to approximate maximum (‘‘NRSRO’’), the credit risk weight party and would consist of potential exposure. In addition, would range from 20% to 150% concentration charges by counterparty Commission reviews of risk depending on the credit rating of the that would generally apply when the management systems of large U.S. counterparty, which provides a measure current exposure of the broker-dealer to broker-dealers indicate that these of credit risk. If a counterparty is not a single counterparty exceeds 5% of the broker-dealers use maximum potential rated by an NRSRO, the broker-dealer tentative net capital of the broker-dealer. exposure to measure and manage the could apply to the Commission, either The amount of the concentration charge credit risk of their portfolios. These in its original application or by would be larger for counterparties with broker-dealers would therefore incur amending its application, for permission lower credit ratings and would range small, if any, additional costs to from 5% to 50% of the amount of the to determine a credit rating for the calculate maximum potential exposure current exposure of the broker-dealer to counterparty using internal calculations as opposed to ‘‘notional add-ons.’’ the counterparty in excess of 5% of the and to use the internal credit rating in The Commission requests comment broker-dealer’s tentative net capital. The lieu of a rating by an NRSRO for on all aspects of this approach to the 5% is based on the OTC derivatives purposes of determining the credit risk calculation of credit risk capital charges dealers rules and Commission on derivatives instruments, including experience. 36 Only netting agreements that meet the the two concentration charges that are requirements of paragraph (d)(5) of proposed The third part of the credit risk capital applicable both to individual Appendix E could be used to derive current charge, as provided in paragraph (d)(9) counterparties and across all exposure and maximum potential exposure. For of proposed Appendix E, would counterparties. The Commission also example, the netting agreements would have to be recognize the additional risk of holding legally enforceable in each relevant jurisdiction, requests comment on the appropriate including in insolvency proceedings. These a relatively large amount of unsecured treatment of credit derivatives in this proposed requirements are designed to allow a debt and would consist of a portfolio broker-dealer to reduce its credit risk capital charge concentration charge across all 39 These credit risk weights are based on the only if the netting agreement reduces credit risk. counterparties that would be the formulas provided in the Advanced Internal 37 Only collateral that meets the requirements of amount, if any, that the broker-dealer’s Ratings-Based approach to credit risk proposed by paragraph (d)(6) of proposed Appendix E could be the Basel Committee. The New Basel Capital used to derive current exposure and maximum aggregate current exposure across all Accord, April 2003. The credit risk weights were potential exposure. For example, the collateral must counterparties for unsecured exposures derived using a loss given default (the percentage have a ready market or consist of certain major exceeds 15% of the broker-dealer’s of the amount owed by the counterparty the firm market foreign currency or U.S. currency. These tentative net capital. expects to lose if the counterparty defaults) of 75%. proposed requirements are designed to allow a We believe that 75% is a conservative number for broker-dealer to reduce its credit risk capital charge The Commission requests comment use in determining credit risk weights. We request only if the collateral reduces credit risk. on all aspects of the credit risk capital comment on whether 75% is appropriate, or 38 See proposed Rule 15c3–1e(e). charge; in particular, the determination whether it should be increased or decreased.

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context. Credit derivatives can enter business, to provide a plan for used to calculate the allowance for into the calculation of credit risk in two increasing its net capital or tentative net market risk be based on a ten business- ways. The first would be to substitute capital, or to calculate its capital charges day movement in rates and prices, and the credit risk weight of the writer of the using the haircut method of Rule that the VaR measure be multiplied by credit derivative for the credit risk 15c3–1. a factor of at least three. Requiring that weight of the counterparty. This is the This provision is intended to identify a CSE calculate its allowable capital treatment included in proposed situations where the broker-dealer may based on the Basel Standards would Appendix E. The second would be to be exposed to increased levels of risk. provide the Commission with a useful adjust the current exposure and the We could respond to that increased risk measure of the CSE’s financial position maximum potential exposure by the level by, for example, requiring and allow for greater comparability of value of the credit derivative. We increased capital charges or requiring an CSE’s financial condition to that of request comment on these methods of that we be provided more information other international securities firms and including credit derivatives in the concerning the operational or financial banking institutions. calculation of credit risk capital charges. condition of the broker-dealer, its 1. Calculation of Allowable Capital and We also request comment on whether holding company, and its affiliates. Allowances for Market, Credit, and any special treatment should be We seek comment on the additional Operational Risk by the CSE accorded guaranteed obligations or conditions that would be available to other obligations that may have double the Commission under paragraph (f) of Pursuant to proposed paragraph (a) of default effects. Appendix E. Are the events pursuant to Appendix G, the CSE would be required which the Commission may impose to calculate allowable capital and 5. Additional Regulatory Conditions for additional conditions appropriate? allowances for market, credit, and Noncompliance With Appendices E and Should any other events be added to operational risk on a consolidated basis G, Model Failures, or Control Failures this list? Should we specify in the rule for the affiliate group on a monthly Paragraph (f) of proposed Appendix E other conditions that could be imposed basis, which is designed to be consistent provides that as a condition for the if the broker-dealer or CSE did not with the Basel Standards, which will broker-dealer to be permitted to use comply with applicable requirements? allow for greater comparability of CSEs proposed Appendix E to calculate What should these conditions be? to international securities firms and banking institutions. This requirement certain of its capital charges, the B. Proposed Appendix G to Rule is necessary to monitor the financial Commission may impose additional 15c3–1 regulatory conditions on the broker- condition of the affiliate group, which dealer or may condition further use of As a condition of Commission may impact the financial stability of the the exemption on the holding company approval, the holding company of a broker-dealer. A CSE that makes a of the broker-dealer filing more frequent broker-dealer applying for authorization capital calculation consistent with the reports, modifying its internal risk to compute certain of its capital charges Basel Standards that it is required to management control procedures or on in accordance with proposed Appendix submit to another regulator can request imposing such other appropriate E would undertake to comply with the in the original exemption application or additional regulatory conditions that the requirements listed in proposed in an amendment to substitute that Commission finds are necessary or Appendix G to Rule 15c3–1, in addition calculation for the calculations required appropriate in the public interest and to those listed in paragraph (a)(1)(viii) of by paragraph (a) of proposed Appendix consistent with the protection of proposed Appendix E. Under Appendix G. If the Commission finds that the investors. The Commission may impose G, the CSE would be required to calculation gives the Commission these additional regulatory conditions compute allowable capital and sufficient information about the if: the broker-dealer or the CSE fails to allowances for market, credit, and financial health of the holding comply with reporting requirements operational risk on a consolidated basis company, it will approve that request. under the proposal; if there is a material for the CSE; provide the Commission e. Group-Wide Allowable Capital deficiency in the internal risk with certain monthly, quarterly, and Calculation management control system or certain annual reports; maintain certain books mathematical models of the broker- and records relating to the CSE’s Under proposed paragraph (a)(1) of dealer or the CSE; if the CSE fails to consolidated financial reports and Appendix G, the CSE would calculate comply with its undertakings; if the internal risk management controls; and ‘‘allowable capital’’ on a consolidated broker-dealer or the CSE notifies the notify the Commission upon the basis for the affiliate group. Consistent Commission of the occurrence of certain occurrence of certain events. These with the Basel Standards, allowable events; if there is a material change in conditions are designed to help the capital would include common a mathematical model, internal risk Commission assess the financial and shareholders’ equity (less goodwill, management control system, or operational health of the holding deferred tax assets, and certain other corporate structure as described in the company and the potential impact on intangible assets), certain cumulative application; or if the Commission finds the risk exposure of the broker-dealer. and non-cumulative preferred stock,40 that imposing an additional regulatory We are proposing what we believe are and certain properly subordinated debt. condition is necessary or appropriate in prudent parameters for measuring As set forth in detail in the rule, the the public interest, and is consistent allowable capital and risk allowances cumulative and non-cumulative with the protection of investors. The for the CSE and that are consistent with preferred stock and the subordinated events that require notification are the Basel Standards, which are used by specified in paragraph (e) of proposed many other financial regulators as a 40 To qualify, the cumulative and noncumulative preferred stock could not have a maturity date, Appendix G (for the CSE) and in the method to assess capital adequacy at the could not be redeemed at the option of the holder, proposed amendments to Rule 17a–11 holding company level. For example, and could not contain any other provisions that (for the broker-dealer), which are the proposal contains requirements would require future redemption of the issue. In described in detail below. The proposed placing limits on the amount of addition, the issuer would have to be able to defer or eliminate dividends. Preferred stock meeting additional regulatory conditions include subordinated debt that may be included these conditions would have characteristics requiring the broker-dealer to restrict its in allowable capital, that the VaR model consistent with capital, as opposed to debt.

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debt are subject to additional limitations subordinated lenders, would not be • Should there be a maximum based on comparisons of the individual entitled to any such protection. amount of subordinated debt that is components of allowable capital. Under the proposal, to be included in includible in allowable capital? If so, We request comment on whether allowable capital, subordinated debt what should be the amount? • goodwill should be included in must have characteristics that are What are the additional costs of allowable capital or whether it is consistent with capital. Therefore, the issuing subordinated debt versus long- appropriate to include goodwill subject subordinated debt must be unsecured term debt of the same maturity? to a phase-out. If so, we request and subordinated in right of payment to Some industry participants have comment on how the phase-out should all of the CSE’s senior debt. Debt that, suggested that certain long-term debt be structured and how long the phase- upon default, can be repaid by that cannot be accelerated should be out should last. conversion of collateral or before other included in allowable capital because, since at the holding company level there An entity’s debt is not ordinarily debt cannot be considered subordinated is no protected class of creditors, there regarded as capital. Because in right of repayment to all senior is no significant difference between that subordinated debt can provide a long- indebtedness of the CSE because the type of long-term debt and subordinated term source of working capital to the debt effectively would have priority debt. In addition, they assert that entity and may have many of the over at least some other debt. Subordinated debt instruments that subordinated debt is more costly to an characteristics of capital, however, the permit acceleration of payment upon entity than long-term debt that cannot Basel Standards permit unrestricted events other than bankruptcy or be accelerated because of the restrictive long-term subordinated debt 41 to count reorganization of the holding company provisions associated with subordinated as capital. Under paragraph (a)(1)(iii)(B) would not qualify for inclusion in debt and the lack of an active trading of proposed Appendix G, and consistent allowable capital under the proposed market for subordinated debt. They see with the Basel Standards, subordinated rules.42 Acceleration clauses raise no other legitimate purpose behind the debt can be included in allowable significant supervisory concerns requirement that the debt be capital if it meets four criteria, which because repayment of the debt could be subordinated in order to count as generally are designed to assure that the accelerated at a time when a CSE may capital. subordinated debt will provide a long- be experiencing financial difficulties. We solicit comment on whether long- term source of working capital to the Acceleration, therefore, could inhibit a term debt, subject to appropriate holding company and that it has many CSE’s ability to resolve its financial limitations, should be included in of the characteristics of capital. First, problems in the normal course of allowable capital. Specifically, we the original weighted average maturity business and force the company into request comment on the following of the CSE’s subordinated debt must be involuntary bankruptcy, thereby issues: at least five years. Second, the affecting the financial stability of the • If long-term debt is included in subordinated debt instrument must state broker-dealer. allowable capital, what restrictions clearly on its face that repayment of the We request comment on the inclusion should apply? debt is not protected by the Securities of subordinated debt in allowable • Does a holder of a CSE’s Investor Protection Corporation capital generally and on the following subordinated debt have a greater (‘‘SIPC’’) or any Federal agency. Third, questions in particular: incentive to monitor the financial the debt must be unsecured and • Is five years the appropriate condition of CSE than a holder of its subordinated in right of payment to all maturity for subordinated debt to be long-term debt because its claim is more senior indebtedness of the CSE. Fourth, included in allowable capital? Would junior? Would trading in its the terms of the subordinated debt another term, whether longer or shorter, subordinated debt provide a more agreement may permit acceleration only be more appropriate? reliable indication of the credit quality in the event of bankruptcy or • To be included in allowable capital, of the CSE than long-term debt and, if reorganization of the CSE under could subordinated debt be subject to so, why? Chapters 7 (liquidation) or 11 negative pledge provisions that, for • Are there debt instruments other (reorganization) of the U.S. Bankruptcy example, would restrict a CSE’s ability than subordinated debt that provide an Code. The intent of these four criteria is to pledge the equity securities of a equivalent market signal about the to provide for permanency of capital subsidiary to secure the debt or to sell credit quality of the issuer? • and to inform subordinated lenders of a subsidiary unless the buyer agreed to Is there a material difference the risks associated with being a assume liability for some portion of the between the depth of the market for the subordinated lender. debt? long-term debt of a CSE and the depth Funds lent under a subordinated debt • Should subordinated debt that is of the market for its subordinated debt agreement necessarily are subject to the subject to acceleration events other than and, if so, how would any such risks of the CSE’s business and must be bankruptcy or reorganization of the CSE difference impact the cost of financing available to pay other creditors if the under the Bankruptcy Code be included for the CSE? • holding company defaults on other in allowable capital? Would there be any other adverse obligations or fails. Although the effects if the CSE was permitted to customers of certain of the entities 42 The prohibition on acceleration of payment include long-term debt in allowable which are part of the CSE may be also would prohibit inclusion of credit sensitive capital? entitled to the protection of SIPC or a subordinated debt in allowable capital. Credit • If long-term debt could be included sensitive subordinated debt ties payments to the in allowable capital, what, if any, Federal agency under specific financial condition of a borrower/holding company circumstances, such as the failure of a or its affiliates. This feature of the debt forces a requirements should apply to the broker-dealer subsidiary, subordinated holding company to make increased payments as its maturity date of the long-term debt? lenders of the holding company, as financial condition deteriorates and, therefore, acts What should permissible events of as a de facto acceleration clause that may deplete acceleration be? the CSE’s resources and increase the likelihood of • 41 By contract, subordinated debt is debt that is default on debt. Furthermore, the clause potentially Should long-term debt be subject to subordinated in right of payment to all senior would allow a subordinated lender to obtain a negative pledge, that, for example, indebtedness of the company. payment before senior creditors. would restrict a holding company’s

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ability to pledge the equity securities of dealer’s request, using a calculation affiliate group, and subtracting the fair a subsidiary to secure the debt or to sell consistent with standards published by market value of any credit derivatives a subsidiary unless the pledgor or buyer the Basel Committee, as modified from that specifically change the CSE’s agreed to assume liability for some time to time. This choice would provide exposure to the counterparty (as long as portion of the debt? CSEs with some flexibility while the the credit derivatives are not used to • Would the inclusion of long-term Basel Standards are under review. change the credit risk weight of the debt in allowable capital affect the The methodology set forth in counterparty).47 liquidation priority of the customers of paragraph (a)(3)(i) of proposed Paragraph (a)(3)(i)(D) of proposed entities which are part of the CSE in the Appendix G would require that a CSE Appendix G would define the event of the holding company’s multiply the credit equivalent amount ‘‘maximum potential exposure’’ of a bankruptcy? of each asset or off-balance sheet item member of the affiliate group to a • What other provisions concerning by the appropriate credit risk weight of counterparty as the increase in the net the inclusion of long-term debt in that asset or off-balance sheet item, and replacement value of the counterparty’s allowable capital should be considered? then multiply the result by 8%.44 In positions with the member of the We request comment on all aspects of general, the assets and off-balance sheet affiliate group, after applying certain the calculation of allowable capital. items subject to this allowance are loans netting agreements,48 taking into and loan commitments receivable and account the value of certain collateral 49 b. Group-Wide Calculation of receivables arising from derivatives pledged to and held by the member of Allowance for Market Risk contracts, repurchase and reverse the affiliate group, and subtracting the Under proposed paragraph (a)(2) of repurchase agreements, stock lending fair market value of any credit Appendix G, a CSE would calculate a transactions, and similar collateralized derivatives that specifically change the group-wide allowance for market risk on transactions, and other extensions of CSE’s exposure to the counterparty (as all proprietary positions, using a VaR credit. long as the credit derivatives are not model or an alternative method Paragraph (a)(3)(i) of proposed used to change the credit risk weight of approved by the Commission, Appendix G would establish the manner the counterparty) 50 that is obtained multiplied by an appropriate in which the ‘‘credit equivalent daily using an approved VaR model multiplication factor to provide an amount’’ of a balance sheet item should meeting the applicable qualitative and adequate measure of risk during periods be calculated, which is consistent with quantitative requirements of paragraph of market stress. The calculation of the the proposed New Basel Capital Accord. (e) of proposed Appendix E.51 allowance for market risk is important The credit equivalent amounts for We request comment on whether the in determining what risk due to market receivables relating to (i) loans and loan proposed method of calculating the factors the broker-dealer may be commitments receivable; (ii) derivatives credit equivalent amount is appropriate, exposed to through its affiliates. The contracts, repurchase agreements, or whether it should be changed. In VaR model would have to meet the reverse repurchase agreements, stock addition, we request comment on qualitative and quantitative loans, stock borrows, and other similar whether the definitions of ‘‘current requirements of paragraph (e) of collateralized transactions; and (iii) exposure’’ and ‘‘maximum potential proposed Appendix E.43 The other assets would be calculated exposure’’ are appropriate, or if they computation of the allowance for market differently. These calculations are set should be changed. If the proposed risk under this proposal is consistent forth in paragraphs (a)(3)(i)(A), (B), and method for calculating credit equivalent with the calculation of the market risk (E) of proposed Appendix G, amount or the definitions of ‘‘current capital charge for the broker-dealer respectively. We request comment on exposure’’ or ‘‘maximum potential under proposed Appendix E. The the credit conversion factors set forth in exposure’’ should be changed, please Commission seeks comment on all paragraph (a)(3)(i)(A) of proposed specify how they should be changed. aspects of the proposed method of Appendix G. In particular, we request Paragraph (a)(3)(i)(F) of proposed calculating an allowance for market risk. comment on the credit conversion factor Appendix G provides that credit risk In particular, should other qualitative or for margin loans. weights would generally be determined quantitative requirements be included Paragraph (a)(3)(i)(C) of proposed Appendix G would define the ‘‘current 47 The fair market value of any credit derivatives in paragraph (e) of proposed Appendix that specifically change the CSE’s exposure to the E? exposure’’ of a member of the affiliate counterparty may be used to calculate ‘‘current group to a counterparty as the current exposure’’ and ‘‘maximum potential exposure’’ only c. Group-Wide Calculation of Allowance replacement value of the counterparty’s to the extent that the credit derivative is not used for Credit Risk to change the credit risk weight of the counterparty positions with the member of the as set forth in paragraph (a)(3)(i)(I) of proposed Paragraph (a)(3) of proposed affiliate group after applying certain Appendix G. Appendix G would require that a CSE netting agreements,45 taking into 48 See supra, note 36. calculate an allowance for credit risk account the value of certain collateral 46 49 See supra, note 37. daily for certain assets on the pledged to and held by a member of the 50 See supra, note 47. consolidated balance sheet and certain 51 The quantitative requirements for a VaR model 44 used to calculate maximum potential exposure off-balance sheet items. The allowance This is consistent with the calculation of credit would include that the model use a 99 percent, one- for credit risk would be computed using risk under the OTC derivatives dealers rules (See tailed confidence level with price changes 17 CFR 240.15c3–1f(d)(2)). In addition, use of the equivalent to a five-day movement in rates and the methodology set forth in paragraph 8% basic multiplier to calculate credit risk is (a)(3)(i) of proposed Appendix G, which prices for repurchase agreements, reverse consistent with the Basel Standards. repurchase agreements, stock lending and is consistent with the proposed New 45 Only netting agreements that meet the borrowing, and similar collateralized transactions Basel Accord, or, pursuant to paragraph requirements set forth in paragraph (d)(5) of (See paragraph (c)(1)(i)(E) of proposed Appendix G) (a)(3)(ii) of proposed Appendix G, if the proposed Rule 15c3–1e could be used to reduce and to a one-year movement in rates and prices for current or maximum potential exposures. See other positions (See proposed paragraph (e)(2(ii) of Commission approves the broker- supra, note 36. proposed Appendix E) (as opposed to a ten 46 Only collateral that meets the requirements set business-day movement in rates and prices for VaR 43 See supra, discussion of the broker-dealer’s forth in paragraph (d)(6) of proposed Rule 15c3–1e models used to calculate the allowance for market calculation of its market risk capital charge using could be used to reduce current or maximum risk. (See paragraph (e)(2)(i) of proposed Appendix a VaR model under proposed Appendix E. potential exposures. See supra, note 37. E).

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according to standards published by the maximum potential exposure to d. Group-Wide Calculation of Basel Committee, as modified from time measure and manage the credit risk of Allowance for Operational Risk to time. If the Commission approves an their portfolios. These firms would application by the broker-dealer in its therefore incur little, if any, additional The calculation of an allowance for initial application or an amendment to cost to calculate credit risk using operational risk is intended to measure the application, the CSE may use maximum potential exposure as risks faced by the firm other than market internal credit ratings 52 or calculate opposed to ‘‘notional add-ons.’’ and credit risk; for example, operational credit risk weights using internal We request comment on this approach risk would include the risk that the calculations 53 when calculating its to the calculation of credit risk on prescribed procedures of the firm may allowance for credit risk. derivatives, repurchase agreements, not be followed in a particular In addition, paragraph (a)(3)(i)(J) of reverse repurchase agreements, stock transaction, causing the firm to incur proposed Appendix G would allow a lending and borrowing, and similar potentially significant losses. Such CSE to adjust credit risk weights of collateralized transactions. In addition, losses incurred by the holding company receivables covered by certain types of we request comment on the proposed or an affiliate of a broker-dealer could 54 guarantees, and paragraph (a)(3)(i)(I) requirements for guarantees used to have a significant adverse effect on the of proposed Appendix G would allow a reduce a CSE’s allowance for credit risk. broker-dealer. The proposed rule would, CSE to adjust credit risk weights of We also request comment on the therefore, require that the CSE calculate receivables covered by certain credit appropriate treatment of credit derivatives (such as credit default derivatives in this context. Credit an allowance for operational risk. swaps, total return swaps, and similar derivatives could enter into the Under proposed Rule 15c3–1g(a)(4), instruments used to manage credit calculation of credit risk in two ways. the calculation of the allowance for risk) 55 in recognition of the credit The first would be to substitute the operational risk must be consistent with protection these instruments provide. credit risk weight of the writer of the the proposed New Basel Capital Accord. The Commission requests comment credit derivative for the credit risk The Basel Committee has proposed on the determination of credit risk weight of the counterparty for the three methods for the calculation of an weights. In particular, the Commission portion of the exposure covered by the allowance for operational risk: the basic requests comment on whether an credit derivative. This is the method set approach, the standardized approach, additional method of calculating credit forth in paragraph (a)(3)(i)(I) of and the advanced measurement risk weights, based on internal estimates proposed Appendix G. Another method approach.57 The basic and standardized of annual probabilities of default, would be to adjust the current exposure approach calculations are based on should be included in proposed and the maximum potential exposure by fixed percentages. Under the basic Appendix G.56 the value of the credit derivative. We approach, the allowance is 15% of The Commission believes that using a request comment on these and other consolidated annual revenues net of VaR model that meets the applicable methods of treating credit derivatives. qualitative and quantitative Certain accounting differences interest expense averaged over the past requirements of paragraph (e) of between securities firms and banking three years. For the standardized proposed Appendix E to calculate firms may necessitate certain approach, the allowance for operational maximum potential exposure is a more modifications to the Basel Standards risk is a percentage of revenues net of precise method than using a ‘‘notional when they are applied to securities interest expense, ranging from 12% to add-on’’ to approximate maximum firms. For instance, broker-dealers must 18%, for each of eight business lines. potential exposure. In addition, mark all positions to market, while The advanced measurement approach Commission reviews of risk banks may use historical cost for requires a system for tracking and management systems of large U.S. securities held for investment purposes. controlling operational risk and broker-dealers and their affiliates The Commission solicits comment on provides that the allowance for indicate that these firms generally use how accounting differences might affect operational risk is the largest the computation of the allowance for operational loss that might be expected 52 See paragraph (a)(3)(i)(G) of proposed credit risk, and what modifications the over a one-year period with 99.9% Appendix G. Commission should make to the 53 confidence. See paragraph (a)(3)(i)(H) of proposed proposed rules to address those Appendix G. We solicit comment on all aspects of 54 The guarantee would be required to be an differences. The Commission seeks comment on the proposed allowance for operational unconditional and irrevocable guarantee of the due risk, including how to best measure and punctual payment and performance of the all aspects of the proposed method of obligation and the holding company or member of calculating the allowance for credit risk. operational risk and when a calculation the affiliate group can demand payment after any Because the Basel Standards have been of operational risk should be required. payment is missed without having to make We request comment on whether any of collection efforts. Further, the guarantee would be implemented by many financial required to be evidenced by a written obligation of regulators, we request comment on the methods is preferable and, if so, the guarantor that allows the holding company or whether the proposed method is why. Further, could any changes be member of the affiliate group to substitute the made to these methods or percentages guarantor for the counterparty upon default or consistent with the Basel Standards as nonpayment by the counterparty. These proposed they have been implemented. In used to calculate the charges that would requirements are designed to allow a CSE to reduce addition, we request comment on be more appropriate for the broker- its allowance for credit risk only if the guarantee whether the proposed rule is consistent dealer business? Finally, should we contains features that make it more reliable. with the proposed New Basel Capital allow a holding company to choose one 55 The credit derivative would be required to be one that (i) provides credit protection equivalent to Accord and whether it is consistent of the three methods, or should the a guarantee, (ii) is used for bona fide hedging with how various financial regulators proposal require holding companies to purposes to reduce the credit risk weight of a have proposed to implement the use the advanced measurement counterparty, (iii) is not incorporated into the VaR proposed New Basel Capital Accord. model used for deriving potential exposures, and approach? (iv) is not held for market-making purposes. Should a CSE have other alternative 56 See supra, discussion of proposed credit risk methods for calculating the allowance 57 See The New Basel Capital Accord (April capital charge calculation for the broker-dealer. for credit risk? 2003).

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e. Holding Companies Subject to The third pillar requires certain any events or trends that may adversely Supervision by a Financial Regulator disclosures which will allow market affect the broker-dealer. Failure to Other Than the Commission participants to assess key pieces of require the reports would undermine information concerning, for example, the Commission’s ability to monitor the Certain CSEs that own broker-dealers the capital, risk exposures, and risk financial condition of the CSEs and are subject to supervision at the holding assessment processes of the institution. could jeopardize the financial stability company level by a financial regulator The purpose of the third pillar is to of broker-dealers using Appendix E to or supervisor other than the complement the minimum capital calculate certain of their capital charges. Commission. These holding companies requirements and the supervisory Moreover, requiring timely financial may be required by that financial review process by encouraging market and other risk information that regulator to compute a capital discipline.59 identifies which business line or assessment similar to that required by The third pillar is discussed in the affiliated entity may have incurred paragraphs (a)(1) through (a)(4) of U.S. banking agencies’ Advanced Notice particular risks is necessary in order to proposed Appendix G. To reduce of Proposed Rulemaking on the identify areas for Commission regulatory burdens, and because we proposed New Basel Capital Accord.60 examination. think that such calculations will be As the banking agencies noted, an Pursuant to paragraph (b)(1) of sufficient to permit us to evaluate the integral part of the proposed New Basel proposed Appendix G, the CSE would risk to the broker-dealer, paragraph Capital Accord is enhanced public be required to file a monthly report with (a)(5) of proposed Appendix G provides disclosure practices. Specific disclosure the Commission within 17 business that, upon Commission approval of the requirements would be applicable to all days after the end of the month (the broker-dealer’s original application or institutions using the proposed New FOCUS reporting period) that includes amendments to the application, the CSE Basel Capital Accord and would certain consolidated financial and credit may compute a capital assessment encompass capital, credit risk, credit risk information, a graph for each consistent with the standards issued by risk mitigation, securitization, market business line reflecting the daily intra- the Basel Committee that it is required risk, operational risk, and interest rate month VaR calculations, and certain to submit to a financial regulator or risk. reports the CSE regularly provides to its supervisor in lieu of the computations We request comment on whether any senior management to assist it in required by paragraphs (a)(1) through additional disclosures by U.S. broker- monitoring and managing risk. We (a)(4) of proposed Appendix G, dealer firms, their holding companies, request comment on all aspects of this provided these computations are and affiliates should be required to meet requirement, including the timing of the consistent with the Basel Standards. We the requirements of the third pillar of reports. request comment on this provision. the proposed New Basel Capital Accord. Pursuant to paragraph (b)(2) of If additional, specific disclosure is proposed Appendix G, the CSE would f. General Discussion of Basel Pillars warranted, commenters are asked to be required to file a quarterly report address where that disclosure should be within 35 calendar days after the end of This proposal would apply a capital each quarter that includes, in addition reporting requirement consistent with made as well as whether disclosures should be made on a quarterly, annual, to the information required in the the Basel Standards to the CSE. The monthly filing, consolidating financial Basel Committee is currently developing or other periodic basis. In addition, we request comment on whether additional information, the results of backtesting of a new international agreement (the models used to compute its allowances ‘‘proposed New Basel Capital Accord’’). required disclosures should depend on whether a firm is privately held or is for market and credit risk, a description The proposed New Basel Capital Accord of all material pending legal or required to file information, documents, specifies three ‘‘pillars’’ for the group- arbitration proceedings required to be and reports pursuant to §§ 13(a) or 15(d) wide supervision of internationally reported pursuant to generally accepted of the Exchange Act. active banks and financial enterprises. accounting principles (‘‘GAAP’’), and The first pillar, ‘‘minimum regulatory 2. Reporting Requirements for the CSE certain short-term borrowings. capital’’ requirements, requires Requiring reports to be filed within 35 calculations for credit and operational As a condition of Commission approval, pursuant to proposed calendar days after the end of each risk and, for firms with significant quarter provides time frames similar to trading activity, market risk. The second paragraph (b) of Appendix G, the CSE would be required to file certain those for quarterly reports due from pillar, ‘‘supervisory review,’’ requires companies required to file information, that capital be assessed relative to monthly and quarterly reports, as well as annual audited statements, with the documents, and reports pursuant to overall risks and that supervisors review § 13(a) or 15(d) of the Exchange Act. We and take action in response to those Commission. The Commission would use the information filed by the CSE to request comment on all aspects of this assessments.58 We request comment on requirement, including the timing of the whether the regulatory regime outlined monitor the financial condition, internal risk management control system, and reports. in this proposal together with existing Paragraph (b)(3) of proposed activities of the CSE. This would give Commission regulation of broker-dealers Appendix G would require that the CSE the Commission important information would meet the requirements of the first provide the Commission upon request regarding activities of its affiliates that and second pillars of the proposed New with such other reports as may be could impair the financial and Basel Capital Accord or whether necessary to monitor the financial operational stability of the broker- changes or enhancements should be condition of the CSE and its risk dealer. These reports would also allow made. In addition, we request comment exposures, as they could affect the the Commission to monitor the on whether, if the proposed New Basel financial condition of the broker-dealer. condition of the affiliate group to detect Capital Accord is adopted, there should We request comment on this provision. be a transition period before the 59 Paragraph (b)(4) of proposed Commission requires its use by CSEs. Id. 60 See Risk-Based Capital GUidelines; Appendix G would require that the CSE Implementation of New Basel Capital Accord, 68 FR file an annual audit report with the 58 Id. 45900 beginning at 45943 (August 4, 2003). Commission concurrently with the

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annual audit report filed by the broker- a prudent firm that manages risk on a dealer affiliates and whether, and to dealer. The annual audit report must group-wide basis would make and what extent, they should be modified. include consolidated financial maintain these records in the ordinary With respect to any recordkeeping statements and must be audited by a course of its business. The Commission requirements that should be modified registered public accounting firm.61 would accept the records in the format because records are already provided to Paragraph (b)(5) of Appendix G would used by the firms. The records that are a financial regulator, please specifically require that the CSE file accountants’ made must include a record indicating list the records that a holding company reports prepared by a registered public that the CSE has conducted stress tests provides to its financial regulator that accounting firm, in accordance with of the affiliate group’s funding and are equivalent to records that would be agreed-upon procedures, regarding liquidity in response to certain events, required in this proposal. Are there management controls and inventory including a credit downgrade of the CSE reports that holding companies submit pricing and modeling. By performing an or an inability of the holding company to bank regulators that would provide independent review of the firm’s to obtain short-term financing, the the information required in this financial condition and risk results of those stress tests, a record proposal? We request comment on management practices, auditors have an showing that the CSE has a contingency whether we should amend Exchange important role in the Commission’s plan to respond to those events, and a Act Rule 17a-4 to require broker-dealers regulatory framework by helping to record of the basis for determining to retain certain of these records or assure that the broker-dealer and the credit risk weights in certain whether proposed Appendix E should holding company are in compliance circumstances. These events are be modified to impose these additional with the conditions of the exemption. intended to identify possible liquidity record preservation requirements. We request comment on these and funding stress scenarios that could Should certain of the record requirements. impose significant financial distress on preservation requirements of proposed The Commission seeks comment on the CSE and that could jeopardize the Appendix G be imposed on the broker- these reporting requirements, financial stability of the broker-dealer. dealer rather than on the holding particularly regarding the timing and The Commission believes that records of company? other aspects of the reporting the CSE’s contingency plans to respond 4. Notification Requirements for the CSE requirements. In particular, we request to those events would provide the comment on whether the audit report Commission with important information Paragraph (e) of proposed Appendix G and accountants’ reports should be during an examination that would be requires that the CSE promptly notify prepared by a registered public necessary to adequately assess the CSE’s the Commission upon the occurrence of accounting firm. We request comment financial condition and risk exposures. certain events, including: the on whether these reporting We request on whether there are any occurrence of any backtesting exception requirements should be modified for a other records that the CSE should be of VaR models that would require the CSE with an affiliate required to file required to create. We also request CSE to use a higher multiplication information, documents, and reports comment on whether it would be factor; a computation showing the pursuant to §§ 13(a) or 15(d) of the appropriate to expand the list of affiliate group’s allowable capital is less Exchange Act or that is subject to specified events described above. In than 110% of the total of its allowances supervision at the holding company addition, we request comment on for market, credit, and operational risk; level by a financial regulator or whether Exchange Act Rule 17a–3 a declaration of bankruptcy by an supervisor other than the Commission should be amended, or whether propose affiliate; the downgrading of the credit and, if so, how they should be modified. Appendix E should be modified, to rating of an affiliate or certain debt of an Should the reporting requirements impose additional recordkeeping affiliate; or the receipt of certain under paragraph (b) of proposed requirements on broker-dealers using regulatory notices regarding an affiliate. Appendix G include a requirement that proposed Appendix E to calculate The CSE would also be required to file an electronic filing be made with the certain of their capital charges. a report if there is a material change in Commission before a quarterly report Paragraph (d) of proposed Appendix the organization of the affiliate group, filed pursuant to reporting requirements G contains record maintenance the material affiliate status of any for companies required to file requirements for CSEs. The CSE would affiliate in the affiliate group, or the information, documents, and reports be required to maintain, for a period of major business functions of any material pursuant to §§ 13(a) or 15(d) of the not less than three years, the records it affiliate. The notification provisions of Exchange Act must be filed with the is required to make under paragraph (c) proposed Appendix G are designed to Commission? of proposed Appendix G, its application give the Commission advance warning and other documents, reports, and of situations that may pose material 3. Records To Be Made and Maintained notices it files with the Commission financial and operational risks to the by the CSE pursuant to proposed Appendix E or CSE and the broker-dealer. These The CSE of a broker-dealer that uses proposed Appendix G and any written provisions are integral to Commission proposed Appendix E to calculate its responses from the Commission, and supervision of broker-dealers that use capital charges would undertake to written policies and procedures Appendix E. make the records listed in paragraph (c) concerning its internal risk management The Commission seeks comment on of proposed Appendix G. The purpose system. Exchange Act Rule 17a–4 all aspects of the notice requirements for of this requirement is to require that the requires that broker-dealers maintain CSEs. Are the events for which CSEs CSE create records that would allow the certain records for this time period, and must report to the Commission Commission to determine whether the we believe that this time period is appropriate? Should the CSE notify the CSE is in compliance with the terms of sufficient for purposes of this proposal Commission regarding other events? We the exemption. Most or all of these to allow effective examinations of CSEs. request comment on whether these records already are generated for We request comment on the requirements should be modified for a internal management purposes because Commission’s proposed recordkeeping CSE that is subject to supervision at the requirements applicable to the holding holding company level by a financial 61 See supra, note 32. company and its regulated non-broker- regulator or supervisor other than the

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Commission and, if so, how they should Individual firms must have the reports that all broker-dealers must file be modified. flexibility to implement specific policies under the rule. These reports would and procedures unique to its provide current detailed information C. Proposed Amendments to Rule circumstances. As a result, Rule regarding the financial position of the 15c3–4 15c3–4 establishes only basic elements firm, which would assist us in The proposed amendments to for the design, implementation, and understanding the risk profile of the Exchange Act Rule 15c3–4 would review of a risk management control firm. The Commission would use the expand its coverage to include broker- system. We previously found these information collected under the dealers that use Appendix E to calculate elements to be the appropriate ones for proposed amendment to monitor the their capital charges, requiring them to an entity to use when developing such financial condition, internal risk establish a system of internal controls a system. management control system, and for monitoring and managing the risks Rule 15c3–4 requires a firm to activities of broker-dealers that elect the associated with their business consider a number of aspects of its alternative capital computation. activities.62 Rule 15c3–4 is designed to business when adopting its risk These additional reports would improve the integrity of the risk management control system. Although include a monthly report detailing, measurement, monitoring, and each firm must develop controls among other things, its derivatives management process, and to clarify appropriate to its specific revenues, certain market and credit risk accountability, at the appropriate circumstances, the rule requires certain information, backtesting results of its elements to be included in the firm’s organizational level, for defining the mathematical models, and regular risk internal risk management control permitted scope of activity and level of reports it supplies to its management, system. For example, the system must risk. quarterly reports on, among other include a risk control unit that reports In addition, as a condition for the things, how well its daily VaR and directly to senior management and is broker-dealer to use Appendix E to maximum potential exposure independent from business trading compute certain of its capital charges, correspond to the daily net trading loss, units. In addition, there must be the CSE would agree to establish such and certain supplemental reports separation of duties between personnel a system to manage group-wide risk for concerning management controls and who enter into transactions and the affiliate group of the broker-dealer. inventory pricing and modeling Participants in the securities markets personnel who record the transactions. Finally, the firm’s management must prepared by a registered public are exposed to various risks, including 63 periodically review the firm’s business accounting firm. We request comment market risk, credit risk, funding risk, activities for consistency with on the proposed additional reporting legal risk, and operational risk. These established risk management guidelines requirements for a broker-dealer that risks are due, in part, to the diverse to check whether firm personnel are uses Appendix E. In particular, we range of financial instruments now operating within the scope of request comment on whether the traded by broker-dealers. Risk permissible activity and whether the supplemental reports should be management controls within a broker- risk management system continues to be prepared by a registered public dealer promote the stability of the firm adequate. accounting firm. and, consequently, the stability of the We request comment on the proposed E. Proposed Amendments to Rule general marketplace. A firm that has amendments to Rule 15c3–4. We request adopted and follows appropriate risk 17a–11; Broker-Dealer Notification comment on whether the holding Requirements management controls reduces its risk of company undertakings should significant loss, which also reduces the incorporate Rule 15c3–4 or whether the Exchange Act Rule 17a–11 requires risk of spreading the losses to other requirement to establish a group-wide that a broker-dealer provide notification market participants or throughout the internal risk management control of certain net capital levels and certain financial markets as a whole. Further, as system should be a stand-alone rule. We operational problems to the Commission a general prudent business practice, request comment on whether any aspect and its designated examining authority most securities firms have developed of Rule 15c3–4 could be better tailored within specified time periods. risk management systems to manage risk to reflect unique aspects of group-wide Currently, Exchange Act Rule 17a–11 on a consolidated basis at the holding risk management or risk management of also imposes certain additional company level. To have a complete broker-dealers using proposed notification requirements on an OTC understanding of how risks are managed Appendix E to calculate certain capital derivatives dealer.64 The Commission at the broker-dealer, regulators need to charges. We request comment on proposes to amend Rule 17a–11 to understand how risks are managed at whether Rule 15c3–4 should be provide for additional notification the holding company. amended to require that results of requirements for a broker-dealer that The specific elements of a risk periodic reviews conducted by an uses proposed Appendix E to calculate management system will vary internal auditor or annual reviews certain of its capital charges. The events depending on the size, complexity, and conducted by a registered public that would require Commission organization of a firm. As a result, the accounting firm should be reported in notification would indicate that the design and implementation of a system writing to the Board of Directors. broker-dealer or its holding company of internal controls for a particular CSE Should we amend Rule 15c3–4 to may be experiencing financial or may differ from other firms. However, require all broker-dealers to do so? operational difficulty. well-developed risk management The proposed amendments would systems generally share certain core D. Proposed Amendments to Rule expand the additional notification principles such as establishing clear 17a–5; Broker-Dealer Reporting requirements that apply to an OTC responsibilities at each level of Requirements derivatives dealer to include a broker- management, separation of certain key The proposed amendments to dealer that uses Appendix E to calculate responsibilities, and effective Exchange Act Rule 17a-5 would require certain of its capital charges. For monitoring and reporting. a broker-dealer that uses proposed Appendix E to file certain reports with 63 See supra, note 32. 62 17 CFR 240.15c3–4. the Commission in addition to the 64 17 CFR 240.17a–11(b)(2).

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example, the broker-dealer would be required by Rule 17h–1T and to make dealer and, if so, whether there would required to provide notice if its tentative reports to the Commission that are be any resulting costs or benefits. net capital falls below the minimum substantially similar to those required We note that on September 12, 2003, amount required pursuant to proposed by Rule 17h–2T. We request comment the Federal Reserve, OCC, OTS, and Rule 15c3–1(a)(7)65 or if its total on these proposed amendments. FDIC requested public comment on an tentative net capital is less than 120% III. General Request for Comment interim final rule and a notice of of its required minimum tentative net proposed rulemaking to amend their capital.66 The Commission solicits comment on risk-based capital standards for the In addition, the proposed its proposal to permit certain broker- treatment of assets in asset-backed amendments would impose additional dealers to apply for approval to compute commercial paper programs reporting requirements on a broker- capital charges using proposed consolidated under the recently issued dealer that uses Appendix E to calculate Appendix E to Exchange Act Rule 15c3– Financial Accounting Standards Board certain of its capital charges. Such a 1. First, we solicit comment on whether Interpretation No. 46, Consolidation of broker-dealer would have to provide this proposed supervisory structure Variable Interest Entities.67 The rule notice upon the occurrence of any would result in adequate Commission would also modify the risk-based capital backtesting exception of its oversight on a group-wide basis of treatment of certain securitizations with mathematical models that requires the eligible broker-dealers that opt for this early amortization provisions. In broker-dealer to use a higher voluntary capital computation addition, the treatment of securitization multiplication factor in the calculation alternative. Second, we solicit comment exposures is discussed in the banking of its market or credit risk capital on whether proposed Appendix E to the agencies’ Advanced Notice of Proposed charges. The amendments would also net capital rule would provide Rulemaking on the New Basel Capital require that the broker-dealer provide appropriate capital levels for qualifying Accord.68 Should the Commission notice if it becomes aware that an broker-dealers and whether the consider any modifications to the NRSRO has determined to reduce the Commission should modify proposed proposed method for the group-wide credit rating of the broker-dealer, one of Appendix E in any way. Third, we calculation of allowances for market or its affiliates, or an outstanding solicit comment on whether the credit risk with respect to asset-backed obligation of the broker-dealer or an proposal would address any perceived securitization programs? If so, how and affiliate, if the broker-dealer or one of its competitive disadvantages that impact why should the Commission modify the broker-dealers that intend to conduct a affiliates receives a notice of calculations for asset-backed global securities business. Fourth, we noncompliance from a regulatory securitization programs? Should the solicit comment on whether the agency or SRO, or if the broker-dealer Commission consider any other issues Commission should consider a different becomes aware of a situation that may related to the capital treatment of approach to setting capital requirements have a material adverse effect on the securitization exposures? for the broker-dealer or to the financial or operational condition of the Finally, we invite commenters to calculation of allowances for market and holding company or an affiliate of the provide views and data as to the costs credit risk for CSEs, and, if so, what that holding company. These notices would and benefits associated with the approach should be. Fifth, we solicit not be required when the holding proposed changes discussed above in comment on the effects on competition company has provided notice to the from making these proposals available comparison to the costs and benefits of Commission pursuant to its to only certain broker-dealers. Are there the current regulatory framework. For undertakings. We request comment on firms below the proposed capital purposes of the Small Business all aspects of these notification thresholds that would benefit from Regulatory Enforcement Fairness Act of provisions. computing capital charges using 1996, the Commission also requests F. Proposed Amendments to Rules proposed Appendix E? Would information regarding the potential 17h–1T and 17h–2T permitting such firms to use proposed impact of the proposed amendments Appendix E provide sufficient net and rules on the economy on an annual Rule 17h–1T requires that a broker- basis. Commenters should provide dealer maintain and preserve records capital reserves for these firms? In addition, we solicit comment on empirical data to support their views. and other information concerning its whether we have adequately stated our Comments should be submitted by holding company and affiliates, if the approach to making this exemption February 4, 2004. affiliates are likely to have a material available to firms that are subject to impact on the financial or operational IV. Paperwork Reduction Act holding company supervision by condition of the broker-dealer. Rule another financial regulator. We request Certain provisions of the proposed 17h–2T requires broker-dealers to report comment on whether there are any other rule amendments contain ‘‘collection of to the Commission on the information approaches or issues that we should information’’ requirements within the required to be maintained and preserved consider with respect to firms affiliated meaning of the Paperwork Reduction under Rule 17h–1T. We propose to 69 with holding companies supervised by Act of 1995. The Commission has amend these rules to exempt broker- another financial regulator. submitted them to the Office of dealers that use Appendix E to calculate For holding companies that own more Management and Budget (‘‘OMB’’) for certain of their capital charges. We than one broker-dealer, the alternative review in accordance with 44 U.S.C. believe that this exemption is net capital computation under this appropriate because the holding 67 Risk-Based Capital Guidelines; Capital proposal would be available only to a Adequacy Guidelines; Capital Maintenance: Capital company of the broker-dealer would be broker-dealer that meets the minimum required to make and retain documents Treatment of Consolidated Asset-Backed capital requirements. We request Commercial Paper Program Assets, 68 FR 56568 substantially similar to the documents comment on whether this proposal (proposed rule), 68 FR 56530 (interim final rule) would create an incentive for such a (Oct. 1, 2003). 65 Pursuant to proposed Rule 15c3–1(a)(7), this 68 See Risk-Based Capital Guidelines; minimum tentative net capital amount is $1 billion. holding company to change its business Implementation of New Basel Capital Accord, 68 FR 66 In that case, under current rules, the broker- structure, such as combining its 45900 beginning at 45932 (August 4, 2003). dealer must immediately cease doing business. securities business into a single broker- 69 44 U.S.C. 3501 et seq.

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3507(d) and 5 CFR 1320.11. An agency companies and affiliates. In particular, and its holding company would submit may not conduct or sponsor, and a the proposed amendments would allow descriptions of internal risk person is not required to comply with, the Commission access to important management controls and methods to be a collection of information unless it information regarding activities of a used to measure risk, including displays a currently valid OMB control broker-dealer’s affiliates that could descriptions of all mathematical models number. The titles for the collections of impair the financial and operational used to price positions and compute information are: (1) Appendix E to Rule stability of the broker-dealer. market and credit risk and how those 15c3–1, Market and credit risk capital According to March 31, 2003 FOCUS models meet the requirements of charges for certain brokers or dealers; (2) filings, 28 registered broker-dealers proposed Appendix E. The application Appendix G to Rule 15c3–1, Conditions reported that they had tentative net would also include sample capital for holding companies of certain brokers capital of at least $1 billion and net assessments for the affiliate group and or dealers; (3) Rule 15c3–4, Internal risk capital of at least $500 million. Based on sample risk reports provided to the management control systems for certain discussions with industry firm’s management and a written representatives, the Commission brokers or dealers; (4) Rule 17a–5, undertaking by the holding company to believes, however, that only broker- Reports to be made by certain brokers comply with various requirements of dealers with at least $1 billion in and dealers; (5) Rule 17a–11, the proposal, including those listed in Notification procedures for brokers and deductions pursuant to (c)(2)(vi) of Rule proposed Appendix G. dealers; (6) Rule 17h–1T, Risk 15c3–1 (also know as ‘‘haircuts’’) will assessment recordkeeping requirements find it cost effective to use the Proposed Appendix E would also for associated persons of brokers and alternative capital computation. As of require that mathematical models used dealers; and (7) Rule 17h–2T, Risk March 2003, based on FOCUS filings, to compute market and credit risk be assessment reporting requirements for there were 12 such broker-dealers. reviewed periodically and backtested brokers and dealers. Therefore, the PRA estimates are based quarterly. For example, the The Commission proposes to on the assumption that 12 broker- mathematical model used to calculate implement a voluntary alternative dealers will apply for an exemption maximum potential exposure would be method for computing net capital under the proposal. required to be backtested quarterly for at charges under the Exchange Act for Many of the estimates are also based least 40 counterparties by comparing the certain broker-dealers that are part of a on information Commission staff daily change in the firm’s daily holding company that has a group-wide receives through the risk assessment exposure to the counterparty with the internal risk management system and rules and meetings with and reports maximum potential exposure generated that consents, as a condition of the net from member firms of the Derivatives by the model. capital treatment, to group-wide Policy Group (‘‘DPG’’) and other broker- Failure to require the current and Commission supervision. A broker- dealers and the Commission’s proposed collections of information dealer that maintains tentative net experience in implementing the OTC included in this proposal would capital of at least $1 billion and net derivatives dealer rules. capital of at least $500 million could A broker-dealer that applies to use undermine the Commission’s ability to apply to the Commission for a proposed Appendix E and its affiliates monitor the financial condition of these conditional exemption from the would have discretion in allocating the firms and could jeopardize the financial application of the standard net capital paperwork burden associated with the stability of broker-dealers using computation and, upon Commission proposal among the entities in the CSE Appendix E to compute certain of their approval, elect to calculate certain of its (‘‘consolidated supervised entity’’), capital charges. market and credit risk net capital including the broker-dealer. In We estimate that each broker-dealer charges using internally developed estimating the total burden associated that applies under the proposal would mathematical models that the firm uses with the proposal on the broker-dealer, spend approximately 1,000 hours to to measure risk. Commission we have included the burdens arising create and compile the various supervision would include reporting from each proposed new rule documents to be included with the and recordkeeping requirements and amendment. application and to work with the Commission examination of unregulated A. Proposed Appendix E to Rule Commission staff through the holding companies and affiliates that application process. This includes are not functionally regulated. 15c3–1, Market and Credit Risk Capital Charges for Certain Brokers or Dealers approximately 100 hours for an in- The collection of information house attorney to complete a review of obligations imposed by the proposal Exchange Act Rule 15c3–1 requires the application. Consequently, the would be mandatory. However, broker-dealers to maintain minimum Commission estimates the total burden applying for approval to use the levels of net capital computed in associated with the application process alternative capital calculation is accordance with the rule’s provisions. for the 12 broker-dealers we expect to voluntary. These net capital reserves are intended apply to be 12,000 hours. The information collected, retained, to ensure that broker-dealers have and/or filed pursuant to the proposed sufficient capital to protect the assets of These estimates are based on rule amendments would be accorded customers and to meet their estimates the Commission made for the confidential treatment. responsibilities to other broker-dealers. OTC derivatives dealer rules, which The Commission would use the The Commission is proposing to add include a similar application information collected under the Appendix E to the rule to provide an requirement.70 In that proposing release, proposed amendments to monitor the alternative method for determining we estimated that an OTC derivatives financial condition, internal risk certain net capital charges for certain dealer would spend approximately management control system, and broker-dealers that manage risk on a 1,000 hours developing and submitting activities of broker-dealers that elect to group-wide basis and that submit to its VaR model and description of its risk compute certain of their market and group-wide Commission supervision. management control system to the credit risk capital charges under the As part of the exemptive application alternative method and their holding to use Appendix E, the broker-dealer 70 See 17 CFR 240.15c3–1f(a).

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Commission.71 No comments were Based on Commission experience and hours spent preparing the annual audit). received in response to the estimates in discussions with industry participants, However, we believe that the burden the proposing release, and those burden we estimate that the calculation of under this proposal would be lower estimates were not changed in the final allowable capital and allowances for than the Rule 17a–12 burden estimates rule release.72 For purposes of this market, credit, and operational risk because CSEs already generate many of proposal, we note that firms applying to would require approximately 90 hours the required reports for internal use Appendix E will have already per month, or approximately 1080 hours management purposes. developed the VaR models that they per year. Thus, the aggregate annual We expect that any additional burden would use to calculate market and burden for the 12 broker-dealers we associated with the requirements of credit risk under the proposal and will expect to apply under the proposal proposed Appendix G relating to have already developed internal risk would be approximately 12,960 hours. making, keeping, and preserving records management control systems. This In addition, we estimate that it would would be minimal because a prudent conclusion is based on information require approximately 5,600 hours per firm that manages risk on a group-wide Commission staff has received through year to review and update the basis would make and preserve these the risk assessment rules and meetings mathematical models used to make records in the ordinary course of its with and reports from the DPG and these calculations. Thus, the aggregate business. We estimate that the average other broker-dealers and the annual burden to review and update the one-time burden of making and Commission’s experience in models for the 12 broker-dealers would preserving these records would be implementing the OTC derivatives be approximately 67,200 hours. Finally, approximately 40 hours and that the dealer rules. On the other hand, we note we estimate that it would require average annual burden would be that the proposal contains new approximately 160 hours each quarter, approximately 290 hours. Consequently, requirements. For example, the firm or approximately 640 hours each year, we estimate that the total burden for the must establish and document to backtest the models. Thus, the 12 broker-dealers we expect will apply procedures to detect and prevent money aggregate annual burden to backtest the under this proposal would be laundering and terrorist financing. We models for the 12 broker-dealers we approximately 480 hours on a one-time also note that the application under this expect to apply under the proposal basis and approximately 3,480 hours per rule may be more complicated than the would be approximately 7,680 hours. year. The reporting requirements of OTC derivatives dealer application and The notification provisions of may take more time to complete. proposed Appendix G are necessary to keep the Commission informed of, proposed Appendix G are designed to We estimate that a broker-dealer using among other things, the financial give the Commission advance warning Appendix E would spend condition, financial and operational risk of situations that may pose material, approximately 5,600 hours per year to exposures, backtesting results, and financial and operational risks to the review the models it uses to compute management controls of the CSE and broker-dealer and the CSE. These market and credit risk and whether the CSE is in compliance with provisions are integral to Commission approximately 160 hours each quarter, the conditions of the broker-dealer’s supervision of broker-dealers that use or approximately 640 hours per year, to exemption. These reports would help Appendix E. We estimate that it would backtest the models. Consequently, we the Commission to anticipate the effect require a total of approximately one estimate that the total burden under the on the CSE of significant economic hour per year for all 12 of the broker- proposal associated with reviewing and events and their related impact on the dealers to comply with the notification backtesting mathematical models for the broker-dealer. provisions of proposed Appendix G.73 12 broker-dealers we expect to apply We estimate that the average amount C. Proposed Amendments to Rule will be approximately 74,880 hours per of time necessary to prepare and file the 15c3–4, Internal Risk Management year ((5,600 + 640) * 12). monthly reports required by Appendix Control Systems G would be approximately 8 hours per B. Proposed Appendix G to Rule month, or approximately 96 hours per We propose to amend Rule 15c3–4, 15c3–1, Conditions for Holding year, that the average amount of time which currently applies to OTC Companies of Certain Brokers or Dealers necessary to prepare and file the derivatives dealers that use Appendix F Under proposed Appendix G to Rule quarterly reports would be about 16 to calculate certain of their capital 15c3–1, the CSE would be required to hours per quarter, or approximately 64 charges, to expand its coverage to calculate allowable capital and hours per year, and that the average broker-dealers that use Appendix E. allowances for market, credit, and amount of time necessary to prepare and Rule 15c3–4 is designed to ensure the operational risk monthly on a file the annual audit reports would be integrity of the risk measurement, consolidated basis, file certain monthly, approximately 200 hours per year. monitoring, and management process, quarterly, and annual reports with the Consequently, we estimate that the total and to clarify accountability, at the Commission, make, keep current, and annual reporting burden of proposed appropriate organizational level, for preserve certain records, and notify the Appendix G for the 12 broker-dealers defining the permitted scope of activity Commission of certain events. These we expect to apply under the proposal and level of risk. proposed conditions are needed to would be approximately 4,320 hours. allow the Commission to properly We based these estimates on the PRA 73 The Commission received approximately 1,067 burden estimates for Exchange Act Rule Rule17a–11 notifications during calendar year 2002, oversee a broker-dealer that uses when there were approximately 6,800 active broker- proposed Appendix E and to monitor 17a–12, Reports to be made by certain OTC derivatives dealers. The PRA dealers registered with the Commission. Thus, the financial and operational condition approximately 11% of registered broker-dealers of its affiliate group. burden estimate for Rule 17a–12 is 180 filed a Rule 17a–11 notice in 2002. We therefore hours per year to prepare and file the estimate that of the 12 broker-dealers we expect will information required by the rule (based apply under the proposal, one may be required to 71 Exchange Act Release No. 39454 (Dec. 17, file an Appendix G notice each year. We estimate 1997), 62 FR 67940 (December 30, 1997). on an average of four responses per year that, consistent with the Rule 17a–11 PRA burden 72 Exchange Act Release No. 40594 (Oct. 23, and an average of 20 hours preparing estimate, it will take approximately one hour to file 1998), 63 FR 59362 (November 3, 1998). each response with an additional 100 that notice.

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The proposed rule amendments implementation of Rule 15c3–4 for OTC proposed amendments would be an would require a broker-dealer that elects derivatives dealers. The present Rule integral part of our financial to use Appendix E to consider a number 15c3–4 burden estimate is an average of responsibility program for broker- of issues affecting its business 2,000 hours on a one-time basis to dealers electing to use Appendix E. The environment when creating its risk implement the risk management control information to be collected under the management control system. For system and an average of 200 hours per proposed amendments to Rule 17a–5 example, such a firm would need to year to review and update the system. would be essential to the regulation of consider, among other things, the This estimate was based on the these broker-dealers and would assist us sophistication and experience of implementation of a risk management and the examining authorities relevant trading, risk management, and control system for a single entity: the responsible for reviewing the activities internal audit personnel, as well as the OTC derivatives dealer. In this proposal, of these firms to monitor and enforce separation of duties among these the broker-dealer is required to compliance with applicable personnel, when designing and implement a risk management control Commission rules, including rules implementing its internal control system and the holding company is pertaining to financial responsibility. system’s guidelines, policies, and required to implement a group-wide risk These periodic reports would also aid procedures. This would help to ensure management control system. Although the Commission in evaluating the that the control system that is the 12 broker-dealers we expect to apply activities conducted by these broker- implemented would adequately address under this proposal have already dealers and in anticipating, where the risks posed by the firm’s business developed internal risk management possible, how these firms could be and the environment in which it is control systems, not all of them have affected by significant economic events. being conducted. In addition, this implemented and formally documented We estimate that the average amount would enable a broker-dealer electing to a group-wide system. We believe that it of time necessary to prepare and file the use Appendix E to implement specific would take more than 2,000 hours for additional monthly reports required by policies and procedures unique to its such a broker-dealer to implement a this amendment to Rule 17a–5 would be circumstances. formal, documented group-wide risk about 4 hours per month, or In implementing its policies and management control system. On the approximately 48 hours per year; that procedures, the broker-dealer would be other hand, if a firm already has a the average amount of time necessary to required to document and record its formally documented group-wide prepare and file the additional quarterly system of internal risk management internal risk management control reports would be about 8 hours per controls. In particular, such a firm system, we believe that it would take quarter, or approximately 32 hours per would be required to document its less than 2,000 hours to bring that year; and that the average amount of consideration of certain issues affecting system into compliance with amended time necessary to prepare and file the its business when designing its internal Rule 15c3–4. Of the 12 broker-dealers additional supplemental reports with controls. The broker-dealer also would we expect will apply under this the annual audit required would be be required to prepare and maintain proposal, we estimate that 6 have approximately 40 hours per year. written guidelines that discuss its formal, documented, group-wide Consequently, we estimate that the total internal control system. internal risk management control annual additional burden attributable to The proposed rule amendments systems, and that 6 have internal risk the proposed amendments to Rule 17a– would be an integral part of the management control systems that are 5 for the 12 broker-dealers we expect to Commission’s financial responsibility not formally documented for the apply under the proposal would be program for broker-dealers whose affiliate group. We estimate that a firm approximately 1,440 hours. applications under Appendix E are with a formal, documented group-wide These estimates are based on our approved by the Commission. The internal risk management control present PRA burden estimate for information to be collected under the system would spend approximately Rule17a–12. The PRA burden estimate proposed amendments to Exchange Act 1,000 hours on a one-time basis to for Rule 17a–12 is 180 hours per year to Rule 15c3–4 would be essential to the comply with the proposed amendments prepare and file the information regulation and oversight of major to Rule 15c3–4 and that a firm that does required by the rule (based on an securities firms that voluntarily elect to not have a formally documented group- average of four responses per year and use Appendix E and to the monitoring wide internal control system will spend an average of 20 hours preparing each of their compliance with the proposed up to approximately 3,600 hours on a response with an additional 100 hours financial responsibility requirements. one-time basis to comply with the spent on preparing the annual audit). More specifically, requiring a broker- proposed amendments to Rule 15c3–4. However, the estimated burden dealer that elects to use Appendix E to The total one-time burden for the twelve attributable to the proposed document the planning, firms would therefore be approximately amendments is less than those estimates implementation, and periodic review of 27,600 hours. In addition, we estimate because the broker-dealer is already its risk management controls are that each of the 12 broker-dealers would required to file monthly, quarterly, and designed to ensure that all pertinent risk spend approximately 250 hours per year annual reports with the Commission management issues are considered, that reviewing and updating its risk under Rule 17a–5. In addition, the the risk management controls are management control system, for an amendments are designed to allow a implemented properly, and that they aggregate annual burden of 3,000 hours. broker-dealer to provide the required continue to adequately address the risks information to the Commission in a D. Proposed Amendments to Rule faced by major securities firms. form that the firm already produces for 17a–5, Reports To Be Made by Certain The following estimates of the initial internal management purposes. and annual PRA burdens associated Brokers and Dealers with the amendments to Rule 15c3–4 The proposed amendments to E. Proposed Amendments to Rule are based on the present Rule 15c3–4 Exchange Act Rule 17a–5 would require 17a–11, Notification Procedures for PRA burden estimates, discussions with broker-dealers using Appendix E to Brokers and Dealers potential applicants, and the submit monthly, quarterly, and annual Under the proposed amendments to Commission’s experience with the reports with the Commission. The Rule 17a–11, a broker-dealer that uses

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proposed Appendix E would have to amendments for the 12 firms we expect requested to provide analysis and data give notice to the Commission of certain to apply under the proposal would be relating to the costs and benefits events beyond those the broker-dealer is approximately 120 hours per year. associated with the proposed currently required to give notice of. amendments. In particular, the G. Request for Comment These events include, for example, that Commission requests comments on the an NRSRO has determined to Under 44 U.S.C. 3506(c)(2)(B), the potential costs for any necessary downgrade the credit rating of the Commission seeks comment to evaluate: modifications to internal risk obligations of the broker-dealer or one of • Whether the proposed collection of management control, accounting, its affiliates, the broker-dealer receives information is necessary for the proper information management, and notice from a regulator that one of its performance of the functions of the recordkeeping systems required to affiliates is not in compliance with rules Commission, including whether the comply with the proposed amendments or agreements with the regulator, the information has practical utility; and the potential benefits arising from broker-dealer becomes aware of a • The accuracy of our estimates of the participation in the regulatory scheme. situation that may have a material burden of the proposed collection of The proposed amendments would adverse effect on a material affiliate, or information; establish a voluntary alternative method • the occurrence of certain backtesting Ways in which we might enhance for computing net capital charges for exceptions of the broker-dealer’s the quality, utility, and clarity of the certain broker-dealers that are part of a mathematical models. information to be collected; and holding company that has a group-wide • These events are expected to be rare. Ways in which we might minimize internal risk management control However, they are of supervisory the burden of the collection of system and that consents to group-wide concern. The Commission received information on those who respond, Commission supervision. We have approximately 1,067 Rule 17a–11 including through the use of automated identified certain costs and benefits that notices from 731 broker-dealers during collection techniques or other forms of would be associated with the proposal. calendar year 2002. At that time, there information technology. A broker-dealer that maintains were approximately 6,800 active broker- Persons wishing to submit comments tentative net capital of at least $1 billion dealers registered with the Commission. on the collection of information and net capital of at least $500 million Thus we estimate that approximately requirements should address them to could apply to the Commission for a 11% of active broker-dealers filed a Rule The Office of Management and Budget, conditional exemption from the 17a–11 notice during calendar year 2002 Room 3208, Attention: Desk Officer for application of the standard net capital (731/6,800 = .1075) and that it would the Securities and Exchange rule calculation and, upon Commission take approximately one hour to file such Commission, Office of Information and approval, calculate certain of its market a notice. Therefore, we estimate that of Regulatory Affairs, New Executive and credit risk capital charges using the the 12 broker-dealers we expect to apply Office Building, Washington, DC 20503; firm’s own internal mathematical under this proposal, approximately one and should also send a copy of their models for risk measurement, including may be required to file notice pursuant comments to Jonathan G. Katz, internally developed VaR models and to the proposed amendments to Rule Secretary, Securities and Exchange scenario analysis. According to March 17a–11 each year. Thus, we estimate Commission, 450 Fifth Street, NW., 31, 2003 FOCUS filings, 28 registered that the total annual burden of the Washington, DC 20549–0609. The broker-dealers reported tentative net proposed amendments to Rule 17a–11 submission should reference File No. capital and net capital that equaled or for the 12 broker-dealers we expect to S7–21–03. OMB is required to make a exceeded those amounts. Based on apply under the proposal would be decision concerning the collection of discussions with industry about one hour. information between 30 and 60 days representatives, we believe, however, after publication of this document in the that only broker-dealers with at least $1 F. Proposed Amendments to Rules Federal Register; therefore, comments billion in deductions pursuant to 17h–1T and 17h–2T, Risk Assessment to OMB are best assured of having full paragraph (c)(2)(vi) of Rule 15c3–1 (also Recordkeeping Requirements for effect if OMB receives them within 30 known as ‘‘haircuts’’) will find it cost Associated Persons of Brokers and days of this publication. effective to use the alternative capital Dealers and Risk Assessment Reporting The Commission has submitted the computation. As of March 2003, based Requirements for Brokers and Dealers proposed collections of information to on FOCUS filings, there were 12 such Rules 17h–1T and 17h–2T require OMB for approval. Requests for the broker-dealers. Therefore, our cost- that certain broker-dealers make records materials submitted to OMB by the benefit estimates are based on the of and file quarterly reports with the Commission with regard to these assumption that 12 broker-dealers will Commission regarding the financial collections of information should be in apply under the proposal. condition, organization, and risk writing, refer to File No. S7–21–03, and Many of the estimates are also based management practices of their affiliated be submitted to the Securities and on information Commission staff group. The amendments to Rules 17h– Exchange Commission, Records receives through the risk assessment 1T and 17h–2T would exempt a broker- Management, Office of Filings and rules and meetings with and reports dealer that uses Appendix E from the Information Services, 450 Fifth Street, from the DPG and other broker-dealers rules to the extent that the holding NW., Washington, DC 20549–0609. and the Commission’s experience in company of the broker or dealer implementing the OTC derivatives maintains the information pursuant to V. Costs and Benefits of the Proposed dealer rules. proposed Appendix G. Rule Amendments A broker-dealer that applies to use These amendments would reduce the To assist the Commission in its proposed Appendix E and its affiliates PRA burden for broker-dealers that use evaluation of the costs and benefits that have discretion in allocating the costs Appendix E. The current PRA burden may result from the proposed associated with the proposal among the estimate for Rules 17h–1T and 17h–2T amendments, which establish a entities in the CSE (‘‘consolidated is approximately 10 hours per year for voluntary alternative method for supervised entity’’), including the each respondent. We estimate that the computing net capital charges for broker-dealer. In estimating the total aggregate savings under the proposed certain broker-dealers, commenters are costs associated with the proposal on

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the broker-dealer, we have included the would realize an average reduction in cost savings for the 12 firms would be costs arising from each proposed new capital charges of approximately 40%, approximately $6,000 (120 * $50.63 = rule amendment. or a total reduction in capital charges for $6,076). The proposed alternative net capital the 12 firms of approximately $13 To the extent that firms electing the system is designed to increase a broker- billion. If the firms reallocate that proposed regulatory system improve dealer’s operational efficiency by having capital to fund business activities for their internal risk management control its supervisory risk assessment and the which the rate of return is 20 basis systems, we would expect that the firms computation of certain capital charges points (0.2%) higher, the 12 broker- would realize a benefit in the form of more closely aligned to the dealers could receive a total annual reduced borrowing costs. This benefit mathematical model-based methods the benefit of approximately $26 million. will vary widely depending on the risk firm already uses to manage its business Firms that do business in the EU have management practices the firms already risk and capital, while establishing net indicated that they may need to have in place. For some firms that capital requirements sufficient to demonstrate that they are subject to already have formally documented require maintenance of capital to consolidated supervision at the holding group-wide control systems, there may achieve the goals of the net capital rule company level that is ‘‘equivalent’’ to be no benefit. and Exchange Act § 15(c)(3). The EU consolidated supervision. Without a We believe that the proposed incorporation of mathematical risk demonstration of ‘‘equivalent’’ regulatory system would also result in management techniques into the supervision, we understand that the benefits to regulators and to financial calculation of net capital charges should affiliate institution located in the EU markets. The Commission would have enable such a broker-dealer to reallocate may either be subject to additional access to group-wide information capital from the broker-dealer to capital charges or be required to form a concerning the operation and financial affiliates that may receive a higher sub-holding company in the EU. We condition of the broker-dealer’s holding return than the broker-dealer. The expect the Commission supervision company and affiliates. This proposed rule amendments should also contemplated by this proposal would information would help the allow broker-dealers to increase meet this standard. As a result, we Commission to assess whether the operational efficiency by adopting risk believe this proposal would minimize activities or financial condition of the management practices which have duplicative regulatory burdens on firms holding company or affiliates may pose become industry best practice. that are active in the EU as well as in risks to the financial health of the We anticipate that cost savings would other jurisdictions that may have similar broker-dealer. Also, the broker-dealer result in several areas. Under the laws. and holding company would have to proposal, a broker-dealer would become Based on the responses of five firms comply with stringent requirements subject to specifically tailored capital to a survey conducted during the OTC concerning their internal risk and other requirements. The broker- derivatives dealer rulemaking process, management control systems. We expect dealer would be able to compute certain we estimate that it would cost that this requirement would promote of its net capital charges using internally approximately $8 million per year for a the financial responsibility of these developed mathematical models that the firm to form and maintain a sub-holding entities and reduce the risk of firm uses to manage risk and to report company in the EU.74 Consequently, for significant losses by the broker-dealer. risks to the Commission using internal the 12 broker-dealers we expect will By reducing the risk of significant losses reports that the firm already generates apply under this proposal, not being by a single firm, internal risk for risk management purposes. required to form and maintain a sub- management control systems would also The primary benefit for the broker- holding company in the EU would save reduce the risk that the problems of one dealer would be the reduction in net the firms a total of approximately $96 firm would spread, causing defaults by capital charges that we expect would million per year. other firms and undermining securities result from the use of the alternative These amendments would exempt markets as a whole. method. This benefit, however, is broker-dealers that use Appendix E from Firms electing the alternative capital difficult to quantify. While reductions Rules 17h–1T and 17h–2T. The current computation would incur various costs. in net capital requirements would likely PRA burden estimate for Rules 17h–1T These firms would incur the one-time result from the use of the alternative and 17h–2T is approximately 10 hours and ongoing costs of submitting an method, broker-dealers typically per year for each respondent. We application and amendments to the maintain higher levels of capital than estimate that the aggregate savings application to use the alternative the rules require. Also, the mix of under the proposed amendments for the computation. We estimate that each positions held by the broker-dealer may 12 firms we expect to apply under the broker-dealer that applies under the change if the regulatory cost of holding proposal would be approximately 120 proposal would spend approximately certain positions is reduced. Finally, the hours per year, and we expect that a 1,000 hours to create and compile the reduction in net capital charges would financial reporting manager would do various documents to be included with vary significantly among broker-dealers the work. The staff estimates that the the application and to work with the based on the size and risk of their hourly salary of a financial reporting Commission staff through the portfolios. manager is $50.63 per hour.75 The total application process. The staff The 12 firms we expect to apply anticipates that this would include under this proposal reported capital 74 The five firms estimated that their annual approximately 100 hours for an in- charges ranging from approximately $1 operating costs would increase by an average of house attorney and 900 hours for a billion to approximately $4 billion, for approximately $7 million to set up a separate company operating as an OTC derivatives dealer. senior compliance staff member. The a total of approximately $32 billion, on We multiplied by 1.12 to account for inflation since their first quarter of 2003 FOCUS 1998. the SIA’s Report for the position cited, divide that reports. We expect that firms with larger 75 Securities Industry Association’s (SIA) Report amount by 1,800 hours (in the average year), then capital charges would realize a larger on Management and Professional Earnings in the multiply the result by 135% to account for Securities Industry—2002 (‘‘SIA Report’’). employee overhead costs. (Financial Reporting percentage reduction in their capital Generally, to calculate an hourly cost using the Manager) + 35% overhead (based on end-of-year charges than firms with smaller capital SIA’s Report, the staff takes the median (or, if no 2002 figures) ($67,500 per year/1800 hours/year * charges. We estimate that the 12 firms median is provided, the mean) salary provided in 1.35 = $50.63 per hour).

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staff estimates that the hourly salary of dealers we expect to apply under the G would be approximately 8 hours per an attorney is $63.75 per hour,76 for a proposal, and that a financial reporting month, or approximately 96 hours per total cost of approximately $80,000 specialist would do the work. The staff year, that the average amount of time ($63.75 * 100 * 12 = $76,500). The staff estimates that the hourly salary of a necessary to prepare and file the estimates that the hourly salary of a financial reporting manager is $50.63 quarterly reports would be about 16 senior compliance staff person is $56.60 per hour,80 for a total cost of hours per quarter, or approximately 64 per hour,77 for a total cost of approximately $3.8 million per year hours per year, and that the average approximately $610,000 ($56.60 * 900 * ($50.63 * 74,880 = $3,791,174). amount of time necessary to prepare and 12 = $611,280). Based on Commission experience and file the annual audit reports would be These estimates are based on discussions with industry participants, approximately 200 hours per year. estimates the Commission made for the we estimate that the holding company’s Consequently, we estimate that the total OTC derivatives dealer rules, which calculation of allowable capital and for the 12 broker-dealers we expect to include a similar application allowances for market, credit, and apply under the proposal would be requirement.78 We estimated that an operational risk would require approximately 4,320 hours ((96 + 64 + OTC derivatives dealer would spend approximately 90 hours per month, or 200) * 12) per year, and we expect that approximately 1,000 hours developing approximately 1,080 hours per year, for a senior accountant would do the work. and submitting its VaR model and a total of approximately 12,960 hours The staff estimates that the hourly salary description of its risk management per year for the 12 broker-dealers, and of a senior accountant is $49.87 per control system to the Commission.79 No that a senior accountant would do the hour,84 for a total of approximately comments were received in response to work. The staff estimates that the hourly $215,000 ($49.87 * 4,320 = $215,438). the estimates in the proposing release, salary of a senior accountant is $49.87 We based these estimates on the PRA and those estimates were not changed in per hour.81 The total annual cost would burden estimates for Exchange Act Rule the final rule release. For purposes of be approximately $650,000 ($49.87 17a–12, Reports to be made by certain this proposal, we note that firms *12,960 = $646,315). In addition, we OTC derivatives dealers. The PRA applying to use Appendix E will have estimate that it would require burden estimate for Rule 17a–12 is 180 already developed the VaR models that approximately 5,600 hours per year to hours per year to prepare and file the they will use to calculate market and review and update the mathematical information required by the rule (based credit risk under the proposal and will models used to make these calculations, on an average of four responses per year have already developed internal risk or approximately 67,200 hours per year and an average of 20 hours preparing management control systems. This for the 12 broker-dealers, and we expect each response with an additional 100 conclusion is based on information that a financial reporting manager hours spent on preparing the annual Commission staff receives through the would do the work. The staff estimates audit). However, we believe that the risk assessment rules and meetings with that the hourly salary of a financial cost under this proposal would be lower and reports from the DPG and other reporting manager is $50.63 per hour.82 than the Rule 17a–12 estimates because broker-dealers and the Commission’s The total annual cost would be CSEs already generate many of the experience in implementing the OTC approximately $3.4 million ($50.63 * required reports for internal derivatives dealer rules. On the other 67,200 = $3,402,336). Finally, we management purposes. We expect that any additional costs hand, we note that the proposal estimate that it would require associated with the requirements of contains additional requirements. For approximately 160 hours each quarter, proposed Appendix G relating to example, the firm must establish and or approximately 640 hours each year, making, keeping, and preserving records document procedures to detect and to backtest the models. Thus, the would be minimal because a prudent prevent money laundering and terrorist aggregate annual burden to backtest the firm that manages risk on a group-wide financing. We also note that the models for the 12 broker-dealers we basis would make and preserve these application under this rule may be more expect to apply under the proposal records in the ordinary course of its complicated than the OTC derivatives would be approximately 7,680 hours, business. We estimate it would take dealer application and may take more and we expect that a junior research approximately 40 one-time hours and time to complete. analyst would do the work. The staff that the average annual time spent We estimate that a broker-dealer using estimates that the hourly salary of a would be approximately 290 hours. Appendix E would spend junior research analyst is $38.92 per Consequently, we estimate that the 12 approximately 5,600 hours per year to hour,83 for a total cost of approximately broker-dealers we expect will apply review the models it uses to compute $300,000 ($38.92 * 7,680 = $298,906). under this proposal would spend market and credit risk and We estimate that the average amount approximately 480 hours on a one-time approximately 160 hours each quarter, of time necessary to prepare and file the basis and approximately 3,480 hours per or approximately 640 hours per year, to monthly reports required by Appendix backtest the models. Consequently, we year, and we expect that a senior estimate that it will take approximately 80 SIA Report, (Financial Reporting Manager) + accountant would do the work. The staff 74,880 hours ((5,600 + 640) * 12) per 35% overhead (based on end-of-year 2002 figures) estimates that the hourly salary of a year to review and backtest ($67,500 per year/1800 hours/year * 1.35 = $50.63 senior accountant is $49.87 per hour,85 mathematical models for the 12 broker- per hour). for a total one-time cost of 81 SIA Report, (Senior Accountant) + 35% approximately $24,000 ($49.87 * 480 = overhead (based on end-of-year 2002 figures) 76 SIA Report, (Attorney) + 35% overhead (based ($66,500 per year/1800 hours/year * 1.35 = $49.87 $23,938) and a total annual cost of on end-of-year 2002 figures) ($85,00 per year/1800 per hour). hours/year * 1.35 = $63.75 per hour). 82 SIA Report, (Financial Reporting Manager) + 84 SIA Report, (Senior Accountant) + 35% 77 SIA Report, (Senior Compliance Staff) + 35% 35% overhead (based on end-of-year 2002 figures) overhead (based on end-of-year 2002 figures) overhead (based on end-of-year 2002 figures) ($67,500 per year/1800 hours/year * 1.35 = $50.63 ($66,500 per year/1800 hours/year * 1.35 = $49.87 ($75,464 per year/1800 hours/year * 1.35 = $56.60 per hour). per hour). per hour). 83 SIA Report, (Junior Research Analyst) + 35% 85 SIA Report, (Senior Accountant) + 35% 78 See 17 CFR 240.15c3–1f(a). overhead (based on end-of-year 2002 figures) overhead (based on end-of-year 2002 figures) 79 Exchange Act Release No. 39454 (Dec. 17, ($51,900 per year/1800 hours/year * 1.35 = $38.92 ($66,500 per year/1800 hours/year * 1.35 = $49.87 1997), 62 FR 67940 (December 30, 1997). per hour). per hour).

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approximately $170,000 ($49.87 * 3,480 internal risk management control the proposed amendment to Rule 17a– = $173,548). systems, and that 6 have internal risk 5 would be about 4 hours per month, or We estimate that it would require a management control systems that are approximately 48 hours per year; that total of approximately one hour per year not formally documented for the the average amount of time necessary to for all 12 of the broker-dealers to affiliate group. We estimate that a firm prepare and file the additional quarterly comply with the notification provisions with a formal, documented group-wide reports would be about 8 hours per of proposed Appendix G,86 and that a internal risk management control quarter, or approximately 32 hours per senior compliance staff person would system would spend approximately year; and that the average amount of do the work. The staff estimates that the 1,000 hours on a one-time basis to time necessary to prepare and file the hourly salary of a senior compliance comply with the proposed amendments additional supplemental reports with staff person is $56.60 per hour,87 for a to Rule 15c3–4 and that a firm that does the annual audit would be total cost for the 12 firms of not have a formally documented group- approximately 40 hours per year. approximately $60. wide internal control system will spend Consequently, the 12 broker-dealers The cost estimates regarding the up to approximately 3,600 hours on a would spend approximately 1,440 hours amendments to Rule 15c3–4 are based one-time basis to comply with the ((48 + 32 + 40) * 12) per year to comply, on the present Rule 15c3–4 PRA burden proposed amendments to Rule 15c3–4. and we expect that a senior accountant estimates, discussions with potential The total for the twelve firms would would do the work. The staff estimates applicants, and the Commission’s therefore be approximately 27,600 hours that the hourly salary of a senior experience with implementation of Rule ((6 * 1,000) + (6 * 3,600)) on a one-time accountant is $49.87 per hour,89 for a 15c3–4 for OTC derivatives dealers. The basis and, on the basis of an estimate of total annual cost of approximately present Rule 15c3–4 PRA burden approximately 250 hours per year to $72,000 ($49.87 * 1,440 = $71,813). estimate is an average of 2,000 hours on review and update its risk management We estimate that approximately 10% a one-time basis to implement the risk control system, a total of 3,000 hours of active broker-dealers filed a Rule management control system and an per year for the 12 firms. We expect that 17a–11 notice during calendar year 2001 average of 200 hours per year to review a senior compliance staff person would and that it would take approximately and update the system. This estimate do the work. The staff estimates that the one hour to file such a notice. Therefore, was based on the implementation of a hourly salary of a senior compliance we estimate that of the 12 broker-dealers 88 risk management control system for a staff person is $56.60 per hour, for a we expect to apply under this proposal, single entity: the OTC derivatives total one-time cost of approximately at most one may be required to file dealer. In this proposal, the broker- $1.6 million ($56.60 * 27,600 = notice pursuant to the proposed dealer is required to implement a risk $1,562,160) and a total annual cost of amendments to Rule 17a–11 each year. management control system and the approximately $170,000 ($56.60 * 3,000 Thus, we estimate that the total for the holding company is required to = $169,800). 12 broker-dealers we expect to apply implement a group-wide risk The information technology systems under the proposal would be about one management control system. Although used by CSEs to manage risk, make and hour. The staff estimates that the hourly the 12 broker-dealers we expect to apply retain records, and report and calculate salary of a senior compliance staff under this proposal have already capital differ widely depending on the person is $56.60 per hour,90 for a total developed internal risk management size of the CSE and the types of business cost of approximately $60. control systems, not all of them have it engages in. These information implemented and formally documented technology systems may be in varying VI. Burden on Competition and a group-wide system. We believe that it stages of readiness to enable the CSE to Promotion of Efficiency, Competition, would take more than 2,000 hours for meet the requirements of the proposal. and Capital Formation Based on Commission experience and such a broker-dealer to implement a 91 formal, documented group-wide risk informal discussions with potential Section 3(f) of the Exchange Act management control system. On the applicants, we estimate that it will cost requires us, when engaging in other hand, if a firm already has a a CSE that has well-developed rulemaking that requires us to consider formally documented group-wide information technology systems or determine whether an action is internal risk management control approximately $5 million to upgrade its necessary or appropriate in the public system, we believe that it would take systems, that it will cost a CSE that has interest, to consider whether the action less than 2,000 hours to bring that less well-developed systems will promote efficiency, competition, approximately $50 million to upgrade and capital formation. Section 23(a)(2) system into compliance with amended 92 Rule 15c3–4. Of the 12 broker-dealers its systems, and that, on average, it will of the Exchange Act requires us to we expect will apply under this cost a CSE approximately $27.5 million consider the anticompetitive effects of proposal, we estimate that 6 have to upgrade its systems. Consequently, any rules that we adopt under the formal, documented, group-wide we estimate that the 12 broker-dealers Exchange Act. Section 23(a)(2) prohibits we expect to apply under the proposal us from adopting any rule that would 86 The Commission received 692 Rule17a–11 would spend a total of approximately impose a burden on competition not notifications during calendar year 2001, when there $330 million to upgrade their necessary or appropriate in furtherance were approximately 7,217 broker-dealers registered of the purposes of the Exchange Act. with the Commission. Thus, approximately 10% of information technology systems. We registered broker-dealers filed a Rule 17a–11 notice believe that this would be a one-time in 2001. We therefore estimate that of the 12 broker- cost. 89 SIA Report, (Senior Accountant) + 35% dealers we expect will apply under the proposal, We estimate that the average amount overhead (based on end-of-year 2002 figures) ($66,500 per year/1800 hours/year * 1.35 = $49.87 one may be required to file an Appendix G notice of time necessary to prepare and file the each year. We estimate that, consistent with the per hour). Rule 17a–11 PRA burden estimate, it will take additional monthly reports required by 90 SIA, Management and Professional Earnings, approximately one hour to file that notice. (Senior Compliance Staff) + 35% overhead (based 87 SIA Report, (Senior Compliance Staff) + 35% 88 SIA Report, (Senior Compliance Staff) + 35% on end-of-year 2002 figures) ($75,464 per year/1800 overhead (based on end-of-year 2002 figures) overhead (based on end-of-year 2002 figures) hours/year * 1.35 = $56.60 per hour). ($75,464 per year/1800 hours/year 1.35 = $56.60 per ($75,464 per year/1800 hours/year * 1.35 = $56.60 91 15 U.S.C. 78c(f). hour). per hour). 92 15 U.S.C. 78w(a)(2).

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The Commission’s preliminary view for the alternative capital regime is Text of Proposed Rule Amendments is that the proposed rule amendments voluntary. The proposed rules and rule For the reasons set forth in the should promote efficiency, competition, amendments, therefore, should not have preamble, Title 17, Chapter II of the and capital formation. These a significant impact on a substantial Code of Federal Regulations is proposed amendments should provide eligible number of small entities. to be amended as follows: broker-dealers an opportunity to We encourage written comments increase operational efficiency by regarding this certification. We solicit PART 240—GENERAL RULES AND having their supervisory risk assessment comment on whether the proposed rule REGULATIONS, SECURITIES and the computation of certain capital amendments could have an effect that EXCHANGE ACT OF 1934 charges more closely aligned to the we have not considered. We request that sophisticated methods the firms already commenters describe the nature of any 1. The authority citation for Part 240 use to manage their business risk and impact on small entities and provide continues to read, in part, as follows: capital, while at the same time requiring empirical data to support the extent of Authority: 15 U.S.C. 77c, 77d, 77g, 77j, sufficient net capital. The incorporation the impact. 77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, of mathematical risk management 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, techniques into the calculation of net VIII. Consideration of Impact on the 78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p, capital charges should enable such a Economy 78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 79q, 79t, 80a–20, 80a–23, 80a–29, 80a–37, 80b–3, broker-dealer to reallocate capital from For purposes of the Small Business the broker-dealer to affiliates that may 80b–4, 80b–11, 7202, 7241, 7262, and 7263; Regulatory Enforcement Fairness Act of and 18 U.S.C. 1350, unless otherwise noted. receive a higher return than the broker- 1996, or ‘‘SBREFA,’’ 94 a rule is ‘‘major’’ * * * * * dealer. The proposed rule amendments if it has resulted, or is likely to result, 2. Remove the authority citations should also allow broker-dealers to in: increase operational efficiency by • following §§ 240.15c3–1 and 240.17a–5. An annual effect on the economy of 3. Section 240.15c3–1 is amended by: adopting risk management practices $100 million or more; which have become industry best a. Revising the undesignated section • A major increase in costs or prices practice. In addition, the proposed heading preceding paragraph (a)(7); for consumers or individual industries; amendments should enhance the ability b. Adding text to paragraph (a)(7); or c. Revising the undesignated section of U.S. securities firms to compete • effectively in global securities markets. Significant adverse effect on heading preceding paragraph (c)(13); We solicit comments on these matters competition, investment or innovation. d. Adding text to paragraph (c)(13); with respect to the proposed rule We request comment on the potential and amendments. Would the amendments impact of the proposed amendments on e. Adding a sentence to the end of have an adverse effect on competition the economy on an annual basis. We paragraph (c)(15). that is neither necessary nor appropriate request that commenters provide The additions and revisions read as in furtherance of the purposes of the empirical data and other factual support follows: Exchange Act? Would the proposed for their views. amendments, if adopted, promote § 240.15c3–1 Net capital requirements for IX. Statutory Authority brokers or dealers. efficiency, competition, and capital formation? Commenters are requested to The Commission proposes to amend (a) * * * provide empirical data and other factual Title 17, Chapter II of the Code of Alternative Net Capital Computation for support for their views, if possible. Federal Regulations pursuant to the Broker-Dealers That Elect to be Exchange Act (15 U.S.C. 78a et seq.) Supervised on a Consolidated Basis VII. Regulatory Flexibility Act (particularly sections 15(c), 17(a), 23, Certification 24(b), and 36 thereof (15 U.S.C. 78o(c), (7) In accordance with Appendix E to The Commission hereby certifies, 78q(a), 78w, 78x(b), and 78mm)). this section (§ 240.15c3–1e), the pursuant to 5 U.S.C. 605(b), that Commission may approve, in whole or List of Subjects in 17 CFR Part 240 proposed amendments to Rules 15c3–1, in part, an application or an amendment 15c3–4, 17a–5, 17a–11, 17h–1T, and Broker-dealers, Reporting and to an application by a broker or dealer, 17h–2T, if adopted, would not have a recordkeeping requirements, Securities. when calculating net capital, to use the significant economic impact on a market risk standards of Appendix E to substantial number of small entities. day of the preceding fiscal year (or in the time that calculate the market risk capital charge These provisions would be available it has been in business, if shorter); and (2) [i]s not on some or all of its positions instead only to broker-dealers that have affiliated with any person (other than a natural of the provisions of paragraph (c)(2)(vi) person) that is not a small business or small of this section, and to use the credit risk tentative net capital of at least $1 billion organization as defined in this section * * *’’ (17 and net capital of at least $500 million. CFR 240.0–10(c)). Further, pursuant to § 240.0– standards of Appendix E to calculate the According to March 2003 FOCUS 10(i), ‘‘[f]or purposes of paragraph (c) of this credit risk capital charge on certain reports, there are only 28 such firms, section, a broker or dealer is affiliated with another credit exposures arising from person if [* * *] [s]uch broker or dealer introduces transactions in derivatives instruments and, of these firms, none were small transactions in securities, other than registered 93 businesses. Further, election to apply investment company securities or interests or instead of the provisions of paragraph participations in insurance company separate (c)(2)(iv) of this section, subject to any 93 Pursuant to 17 CFR 240.0–10, ‘‘the term small accounts, to such other person or introduces conditions or limitations the business or small organization shall: [* * *] (c) accounts of customers or other brokers or dealers, Commission may require as necessary or [w]hen used with reference to a broker or dealer, other than accounts that hold only registered mean a broker or dealer that: (1) [h]ad total capital investment company securities or interests or appropriate in the public interest and (net worth plus subordinated liabilities) of less than participations in insurance company separate consistent with the protection of $500,000 on the date in the prior fiscal year as of accounts, to such other person that carries such investors. Such a broker or dealer must which its audited financial statements were accounts on a fully disclosed basis.’’ (17 CFR 240.0– at all times maintain tentative net prepared pursuant to § 240.17–5(d) or, if not 10(i)). required to file such statements, a broker or dealer 94 Pub. L. 104–121, Title II, 110 Stat. 857 (1996) capital of not less than $1 billion and that had total capital (net worth plus subordinated (codified in various sections of 5 U.S.C., 15 U.S.C. net capital of not less than $500 million. liabilities) of less than $500,000 on the last business and as a note to 5 U.S.C. 601). (c) * * *

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Entity That Has a Principal Regulator instruments which would otherwise be procedures the broker or dealer will use (13) For purposes of Appendix E deducted by virtue of paragraph to backtest the mathematical model (§ 240.15c3–1e) and Appendix G (c)(2)(iv) of this section. used to calculate maximum potential (§ 240.15c3–1g) of this section, the term * * * * * exposure; a description of how each entity that has a principal regulator 4. Section 240.15c3–1e is revised to mathematical model satisfies the shall mean a person (other than a read as follows: qualitative and quantitative requirements set forth in paragraph (e) natural person) that is not a registered § 240.15c3–1e Market and credit risk broker or dealer (other than a broker or of this Appendix E; and for each capital charges for certain brokers or mathematical model, a statement that dealer registered under section 15(b)(11) dealers (Appendix E to 17 CFR 240.15c3–1). of the Act (15 U.S.C. 78o(b)(11)), the model is used to analyze and report provided that: Application risk to senior management; (v) If the broker or dealer is applying (i) The person is: (a) A broker or dealer may apply to to the Commission for approval to use (A) An insured depository institution the Commission for authorization to scenario analysis to calculate market as defined in section 3(c)(2) of the compute market risk capital charges risk capital charges for certain positions, Federal Deposit Insurance Act (12 U.S.C pursuant to this Appendix E in lieu of a list of those positions, a description of 1813(c)(2)); computing haircuts pursuant to how those charges will be calculated (B) Registered with the Commodity § 240.15c3–1(c)(2)(vi) and to compute using scenario analysis, and an Futures Trading Commission; or credit risk capital charges pursuant to explanation of why scenario analysis is (C) Registered with or licensed by a this Appendix E on some or all of its appropriate to calculate market risk State insurance regulator and issues any credit exposures arising from capital charges on those positions; insurance, endowment, or annuity transactions in derivatives instruments policy or contract; or (vi) A description of how the broker (if this Appendix E is used to calculate or dealer will calculate current (ii) There are in place appropriate market risk capital charges on these arrangements so that information exposure; instruments) in lieu of computing credit (vii) A description of how the broker provided to the Commission is risk capital charges pursuant to sufficiently reliable for the purposes of or dealer will determine internal credit § 240.15c3–1(c)(2)(iv). ratings of counterparties, if applicable; Appendix E and Appendix G, the (1) The documents and information person is primarily in the insured and submitted to the Commission by the (viii) A written undertaking by the depository institutions business broker or dealer as part of its application holding company of the broker or (excluding its insurance and shall include the following: dealer, in a form acceptable to the commercial businesses), and the person (i) An executive summary of the Commission, signed by a duly is: documents and information provided to authorized person at the holding (A) A bank holding company as the Commission as part of the defined in section 2 of the Bank Holding company, to the effect that, as a application and a description of the condition of Commission approval of Company Act of 1956 (12 U.S.C. holding company of the broker or 1841(a)); the application of the broker or dealer dealer, which may not be a natural to compute certain market and credit (B) A savings and loan holding person; company as defined in Section risk capital charges pursuant to this (ii) A comprehensive description of Appendix E, the holding company 10(a)(1)(D) of the Home Owners’ Loan the internal risk management control Act (12 U.S.C. 1467a(1)(D)); or agrees to: system of the broker or dealer and how (A) Comply with the provisions of (C) A foreign bank as defined in that system satisfies the requirements section 1(b)(7) of the International § 240.15c3–1g; set forth in § 240.15c3–4; (B) Comply with all applicable Banking Act of 1978 (12 U.S.C. 3101(7)) (iii) A detailed list of the categories of provisions of this Appendix E; that is from a jurisdiction for which any positions that the broker or dealer holds (C) Comply with the provisions of foreign bank has been approved by the in its proprietary accounts and a brief § 240.15c3–4 with respect to an internal Board of Governors of the Federal description of the methods that the risk management control system for the Reserve System to conduct business broker or dealer will use to calculate affiliate group as though it were a under 12 CFR 211.24(c), provided such market and credit risk capital charges on broker-dealer that computes certain of foreign bank represents that it is subject those categories of positions; its capital charges in accordance with to the same supervisory regime as the (iv) A description of all mathematical this Appendix E; foreign bank previously approved by the models used to price positions and to (D) As part of the internal risk Board of Governors of the Federal compute market and credit risk capital management control system for the Reserve System. charges; a description of the creation, affiliate group, establish, document, and * * * * * use, and maintenance of the maintain procedures for the detection (15) * * * For a broker or dealer mathematical models; a description of and prevention of money laundering whose application for exemption under the broker’s or dealer’s internal risk and terrorist financing; paragraph (a)(7) of this section has been management controls over those (E) Permit the Commission to examine granted by the Commission, the term models, including a description of the books and records of any affiliate of tentative net capital means the net persons who may input data into the the broker or dealer, including the capital of the broker or dealer before model and persons who have access to holding company, if the affiliate is not deducting the market and credit risk any or all of the model’s outputs; a an entity that has a principal regulator, capital charges computed pursuant to statement regarding whether the firm as defined in § 240.15c3–1(c)(13); Appendix E to this section (§ 240.15c3– has developed its own mathematical (F) Make available to the Commission, 1e) or paragraph (c)(2)(vi) of this models; if a mathematical model for an entity that has a principal section, if applicable, and increased by incorporates empirical correlations regulator, as defined specifically in the balance sheet value (including across risk categories, a description of § 240.15c3–1(c)(13)(ii), such information counterparty net exposure) resulting the process for measuring correlations; a concerning the operations of the entity from transactions in derivative description of the backtesting that the Commission finds is necessary

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to evaluate the financial and operational whom the affiliate is registered, and a weights of counterparties and internal risk within the affiliate group of the designation of those affiliates that are credit ratings of counterparties, if broker or dealer (including any risks material to the holding company applicable; that may affect the reputation of the (‘‘material affiliates’’); (x) A description of how the holding holding company or the broker or (iii) An organizational chart that company will calculate its allowance for dealer) and to evaluate compliance with identifies the holding company, the operational risk; the conditions of eligibility for broker or dealer, and the material (xi) For each instance in which a computing certain capital charges affiliates of the broker or dealer; mathematical model used by the broker pursuant to this Appendix E; (iv) Consolidated and consolidating or dealer to calculate a market risk (G) If the disclosure to the financial statements of the affiliate capital charge or maximum potential Commission of any information group as of the end of the quarter exposure for a particular product or required as a condition for the broker or preceding the filing of the application; counterparty differs from the dealer to compute certain capital (v) The following sample mathematical model used by the charges pursuant to this Appendix E computations for the affiliate group: holding company to calculate an would be prohibited by law or (A) Allowable capital and allowances allowance for credit risk or maximum otherwise, cooperate with the for market risk, credit risk, and potential exposure for that same product Commission as needed, including by operational risk, determined pursuant to or counterparty, a description of the describing any secrecy laws or other § 240.15c3–1g(a)(1)—(4); or difference(s) between the mathematical impediments that could restrict the (B) A capital assessment calculated models; ability of the broker or dealer or any pursuant to § 240.15c3–1g(a)(5); (xii) A comprehensive description of affiliates from providing information on (vi) A detailed list of the categories of the risk management control system for their operations or activities and by positions that the affiliate group holds the affiliate group that the holding discussing the manner in which the in its proprietary accounts and a brief company has established to manage holding company and the broker or description of the method that the affiliate group-wide risk, including dealer propose to provide the holding company proposes to use to market, credit, liquidity and funding, Commission with adequate assurances calculate allowances for market and legal and compliance, and operational of access to information; credit risk, pursuant to § 240.15c3– risks, and how that system satisfies the (H) For any non-U.S. holding 1g(a)(2) and (3), on those positions; requirements of § 240.15c3–4; and company, consent to the jurisdiction of (vii) A description of all mathematical (xiii) Sample risk reports provided to the Commission and agree to maintain models used to price positions and to the persons who are responsible for a U.S. registered agent; compute market and credit risk capital managing group-wide risk that the (I) Submit to the Commission all charges; a description of the creation, holding company will provide to the material changes to mathematical use, and maintenance of the Commission pursuant to § 240.15c3– models and other methods used to mathematical models; a description of 1g(b)(1)(viii); calculate allowances for market, credit, the holding company’s internal risk (3) The application of the broker or and operational risk; management controls over those dealer shall be supplemented by such (J) Submit to the Commission all models, including a description of other information or documents relating material changes to the internal risk persons who may input data into the to the internal risk management control management control system for the model and persons who have access to system, mathematical models, and affiliate group; and any or all of the model’s outputs; a financial position of the broker or dealer (K) Acknowledge that, if the holding statement regarding whether the firm or the holding company of the broker or company fails to comply with any has developed its own mathematical dealer that the Commission may request provision of its undertaking, the models; if a mathematical model to complete its review of the Commission may, in addition to any incorporates empirical correlations application; other supervisory conditions necessary across risk categories, a description of (4) The application shall be or appropriate in the public interest and the process for measuring correlations; a considered filed when received at the consistent with the protection of description of the backtesting Commission’s principal office in investors, increase the multiplication procedures the holding company will Washington, DC. All information and factors the holding company uses to use to backtest the mathematical model documents submitted in connection calculate allowances for market and used to calculate maximum potential with the application will be accorded credit risk as defined in § 240.15c3– exposure; a description of how each confidential treatment; 1g(a)(2) and (a)(3) or impose any mathematical model satisfies the (5) If any of the information or regulatory condition with respect to the qualitative and quantitative documents filed with the Commission broker or dealer listed in paragraph (f) requirements set forth in paragraph (e) as part of the application of the broker of this Appendix E; of this Appendix E; for each or dealer is found to be or becomes (2) As a condition of Commission mathematical model, a statement that inaccurate before the Commission approval, the documents and the model is used to analyze and report approves the application, the broker or information submitted to the risk to senior management; and a dealer must promptly notify the Commission by the holding company of description of any positions for which Commission and provide the the broker or dealer as part of the the holding company proposes to use an Commission with a description of the application of the broker or dealer shall alternative method for computing an circumstances in which the information include the following: allowance for market risk and a or documents was found to be or has (i) A narrative description of the description of how that allowance become inaccurate along with updated, business and organization of the holding would be determined; accurate information and documents; company; (viii) A description of how the (6) The Commission may approve the (ii) An alphabetical list of the holding company will calculate current application, in whole or in part, subject affiliates of the broker or dealer (the exposure; to any conditions or limitations the ‘‘affiliate group’’), with an identification (ix) A description of how the holding Commission may require if the of the financial regulator, if any, with company will calculate the credit risk Commission finds it to be necessary or

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appropriate in the public interest and instead of the provisions of § 240.15c3– Appendix E, the broker or dealer may consistent with the protection of 1(c)(2)(iv), if the Commission finds that use approved VaR models to calculate investors after determining, among other such exemption is no longer necessary its market risk capital charge for the things, whether: The broker or dealer or appropriate in the public interest, or following positions: has met the requirements of this is no longer consistent with the (A) U.S. government securities and Appendix E; the broker or dealer is in protection of investors. derivatives on those securities; compliance with other applicable rules (B) Corporate debt securities rated in Compliance With § 240.15c3–4 promulgated under the Act and self- one of the four highest rating categories regulatory organization rules; and the (b) A broker or dealer that computes by two nationally recognized statistical holding company of the broker or dealer its market and credit risk capital charges rating organizations (‘‘NRSROs’’) and is in compliance with the terms of its under this Appendix E must comply in derivatives on those securities; undertaking, provided to the all material respects with § 240.15c3–4 (C) Foreign government securities Commission pursuant to paragraph regarding its internal risk management rated in one of the four highest rating (a)(1)(viii) of this Appendix E; control system in order to be in categories by two NRSROs and (7) The broker or dealer shall amend compliance with § 240.15c3–1. derivatives on those securities; (D) Derivatives on major market and resubmit to the Commission its Market Risk application to calculate certain market foreign currencies as defined in and credit risk capital charges in (c) A broker or dealer whose § 240.15c3–1a(b)(1)(i)(C); accordance with this Appendix E if the application has been approved under (E) Asset-backed securities with less broker or dealer or its holding company paragraph (a) of this Appendix E shall than 5 years to maturity that are rated desires to make any material change to compute a market risk capital charge in one of the four highest rating a mathematical model used to calculate daily in accordance with the following: categories by two NRSROs and market or credit risk or its internal risk (1) The broker or dealer shall compute derivatives on those securities; and management control system as a market risk capital charge on eligible (F) Municipal securities rated in one described in the application; positions, in accordance with the phase- of the four highest rating categories by (8) The broker or dealer shall notify in schedule of paragraph (c)(3) of this two NRSROs and derivatives on those the Commission of any material change Appendix E, equal to the VaR of those securities; to the corporate structure of the broker positions multiplied by the appropriate (ii) Nine months after Commission or dealer or the holding company as multiplication factor. The VaR of the approval of its application under described in the application; positions must be obtained using paragraph (a) of this Appendix E, the (9) As a condition for the broker or approved VaR models meeting the broker or dealer may amend its dealer to compute its capital charges applicable qualitative and quantitative application to request approval to use under this Appendix E, the broker or requirements of paragraph (e) of this one or more approved VaR models to dealer agrees that: Appendix E. The broker or dealer must calculate its market risk capital charge (i) The broker or dealer will provide use the multiplication factor determined for equities and derivatives on equities; 45 days written notice to the according to paragraph (e)(1)(iii) of this and Commission if it intends to cease to use Appendix E, except that the initial (iii) Nine months after the amendment the market risk standards of this multiplication factor shall be three, filed pursuant to paragraph (c)(3)(ii) of Appendix E to calculate its market risk unless the Commission determines, this Appendix E has been approved, a capital charge instead of the provisions based on a review of the broker’s or broker or dealer may amend its of § 240.15c3–1(c)(2)(vi) and the credit dealer’s internal risk management application to request approval to use risk standards of this Appendix E to control system and practices, including one or more approved VaR models to calculate its credit risk capital charge on a review of the VaR models, that another calculate its market risk capital charge certain credit exposures arising from multiplication factor is appropriate; for other eligible positions; transactions in derivatives instruments (2) The broker or dealer may not use (4) Notwithstanding any other instead of the provisions of § 240.15c3– a VaR model to determine a capital provision in this Appendix E, a broker 1(c)(2)(iv); and charge for positions having no ready or dealer that computes its capital (ii) The Commission may determine market or for debt securities which are charges under this Appendix E may use by order that such notice will become below investment grade or for any a VaR model to determine market risk effective after a shorter or longer period derivative instrument based on the capital charges only for positions for of time if the broker or dealer consents value of these positions, unless the which there is adequate historical data or if the Commission determines that Commission has granted, pursuant to to support a VaR model; the shorter or longer period of time is § 240.15c3–1(a)(7), its application to use (5) The broker or dealer must request, necessary or appropriate in the public its VaR model for any such positions. either in its initial application or an interest and consistent with the The broker or dealer may apply amendment, to use scenario analysis to protection of investors; and pursuant to paragraph (c)(5) of this compute its market risk capital charge (10) Notwithstanding paragraph (a)(9) Appendix E to calculate its market risk for a category of positions. For positions of this section, the Commission, by capital charge for any such positions for which the Commission has approved order, may revoke a broker’s or dealer’s using scenario analysis. If that the broker’s or dealer’s application to exemption that allows it to use the application is denied, the broker or use scenario analysis, the market risk market risk standards of this Appendix dealer must calculate the market risk capital charge shall be three times the E to calculate the market risk capital capital charge for such positions under greatest adverse movement resulting charge instead of the provisions of § 240.15c3–1(c)(2)(vi); from the scenario analysis over any ten- § 240.15c3–1(c)(2)(vi), and the (3) The broker or dealer shall use day period on a daily basis, except that exemption to use the credit risk approved VaR models to compute its the resulting market risk capital charge standards of this Appendix E to market risk capital charge in accordance must be at least $25 per 100 share calculate the credit risk capital charge with the following phase-in schedule: equivalent contract for equity positions, on certain credit exposures arising from (i) Upon Commission approval of its or one-half of one percent of the face transactions in derivatives instruments application under paragraph (a) of this value of the contract for all other types

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of contracts, even if the scenario counterparty, as defined in paragraph (ii) The collateral has a ready market analysis indicates a lower amount. A (d)(3) of this Appendix E. The broker or or consists of major market foreign scenario qualifying for use under this dealer must use the multiplication currency as defined in § 240.15c3– Appendix E must include: factor determined according to 1a(b)(1)(i)(C) or United States currency; (i) A set of pricing equations for the paragraph (e)(1)(iv) of this Appendix E, (iii) The collateral agreement is legally positions or derivatives based on, for except that the initial multiplication enforceable by the broker or dealer example, arbitrage relations, statistical factor shall be one, unless the against the counterparty and any other analysis, historic relationships, merger Commission determines, based on a parties to the agreement; evaluation, or fundamental valuation of review of the broker’s or dealer’s (iv) The collateral does not consist of an offering of securities; internal risk management control securities issued by the counterparty or (ii) A range of adverse movements of system and practices, including a a party related to the broker or dealer or risk factors, prices, or spreads that review of the VaR models, that another to the counterparty; moved by the greatest amounts over the multiplication factor is appropriate; (v) The Commission has approved the past 5 years or a 3 standard deviation (3) The current exposure of the broker broker’s or dealer’s use of a VaR model movement in those risk factors, prices, or dealer to a counterparty is the current to calculate market risk capital charges or spreads over a ten day period; replacement value of the counterparty’s for the type of security used as collateral (iii) Auxiliary relationships mapping positions with the broker or dealer, after in accordance with § 240.15c3–1(a)(7) risk factors to prices; and applying netting agreements with the and paragraphs (g)(2) and (g)(3) of this (iv) Data demonstrating the counterparty meeting the requirements Appendix E; and effectiveness of the scenario in of paragraph (d)(5) of this Appendix E (vi) The collateral is not used in capturing market risk; and and taking into account the value of determining the credit rating of the (6) For all other positions, the broker collateral from the counterparty held by counterparty; or dealer must compute a market risk the broker or dealer in accordance with (7) Credit risk weights of capital charge pursuant to § 240.15c3– paragraph (d)(6) of this Appendix E; counterparties. A broker or dealer that 1(c)(2)(vi) and applicable Appendices. (4) The maximum potential exposure computes its credit risk capital charges of the broker or dealer to a counterparty pursuant to this Appendix E shall Credit Risk is the increase in the replacement value determine the credit risk weight of a (d) A broker or dealer whose of the counterparty’s positions with the counterparty as follows: application, including amendments, has broker or dealer, after applying netting (i) 20% credit risk weight for been approved under paragraph (a) of agreements with the counterparty transactions with counterparties with this Appendix E shall compute its credit meeting the requirements of paragraph ratings for senior unsecured long-term risk capital charge daily on credit (d)(5) of this Appendix E and taking into debt or commercial paper in one of the exposures to all counterparties arising account the value of collateral from the two highest rating categories by an from the broker’s or dealer’s counterparty held by the broker or NRSRO or equivalent internal rating, if transactions in derivatives instruments dealer in accordance with paragraph applicable; (if this Appendix E is used to calculate (d)(6) of this Appendix E, that is (ii) 50% credit risk weight for the market risk capital charge on those computed daily using approved VaR transactions with counterparties with instruments) that is the sum of: A models meeting the applicable ratings for senior unsecured long-term counterparty exposure charge to each quantitative and qualitative debt or commercial paper in the third counterparty, concentration charges by requirements of paragraph (e) of this and fourth highest rating categories by counterparty, and a portfolio Appendix E; an NRSRO or equivalent internal rating, concentration charge across all (5) Netting agreements. When if applicable; counterparties, determined as follows: calculating current exposure or (iii) 150% credit risk weight for (1) For each counterparty, the maximum potential exposure, a broker transactions with counterparties with counterparty exposure charge is: or dealer may include the effect of ratings for senior unsecured long-term (i) The net replacement value in the netting agreements that allow a broker debt or commercial paper below the account of the counterparty that is or dealer to net gross receivables and fourth highest rating category by an insolvent, or in bankruptcy, or that has gross payables with a counterparty upon NRSRO or equivalent internal rating, if senior unsecured long-term debt in default of the counterparty if: applicable; default; or (i) The netting agreement is legally (iv) As part of its initial application or (ii) As to a counterparty not otherwise enforceable in each relevant in an amendment, the broker or dealer described in paragraph (d)(1)(i) of this jurisdiction, including in insolvency may request Commission approval to Appendix E, the credit equivalent proceedings; determine credit ratings using internal amount of the broker’s or dealer’s (ii) The gross receivables and gross calculations for counterparties that are exposure to the counterparty, as defined payables subject to the netting not rated by an NRSRO, and the broker in paragraph (d)(2) of this Appendix E, agreement with a counterparty can be or dealer may use these internal credit multiplied by the credit risk weight of determined at any time; and ratings in lieu of ratings issued by an the counterparty, as determined (iii) For internal risk management NRSRO for purposes of determining according to paragraph (d)(7) of this purposes, the broker or dealer monitors credit risk weights. Based on the Appendix E, multiplied by 8%; and controls its exposure to the strength of the broker’s or dealer’s (2) The credit equivalent amount of counterparty on a net basis; internal credit risk management system, the broker’s or dealer’s exposure to a (6) Collateral. When calculating the Commission may approve the counterparty is the sum of the broker’s current exposure and maximum application. The broker or dealer must or dealer’s maximum potential exposure potential exposure, the fair market value make and keep current a record of the to the counterparty, as defined in of collateral pledged and held may be basis for the credit rating for each paragraph (d)(4) of this Appendix E, taken into account provided: counterparty. The record must be multiplied by the appropriate (i) The collateral is marked to market preserved for a period of not less than multiplication factor, and the broker’s or each day and is subject to a daily margin three years, the first two years in an dealer’s current exposure to the maintenance requirement; easily accessible place; and

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(v) For the portion of a current annual review must be conducted by a types and sizes of positions with the exposure covered by a guarantee where registered public accounting firm, as firm, the daily change in its current that guarantee is an unconditional and that term is defined in section 2(a)(12) exposure to the counterparty based on irrevocable guarantee of the due and of the Sarbanes-Oxley Act of 2002 (Pub. the end of the previous day’s positions punctual payment and performance of L. 107–204); with the corresponding maximum the obligation and the broker or dealer (iii) For purposes of computing potential exposure for the counterparty can demand immediate payment from market risk, the firm must determine the generated by the VaR model; the guarantor after any payment is appropriate multiplication factor as (B) Once each quarter, on the last missed without having to make follows: business day of the quarter, the firm collection efforts, the broker or dealer (A) Beginning three months after the must identify the number of backtesting may substitute the credit risk weight of firm begins using the VaR model to exceptions of the VaR model, that is, the the guarantor for the credit risk weight calculate market risk, the firm must number of business days in the past 250 of the counterparty if the guarantee is conduct backtesting of the model by business days for which the change in evidenced by a written obligation of the comparing its actual daily net trading current exposure to a counterparty guarantor that allows the broker or profit or loss with the corresponding exceeds the corresponding maximum dealer to substitute the guarantor for the VaR measure generated by the VaR potential exposure; and counterparty upon default or model, using a 99 percent, one-tailed (C) Based on the number of nonpayment by the counterparty; confidence level with price changes backtesting exceptions of the VaR (8) Concentration charges by equivalent to a one business-day model, the firm will propose, as part of counterparty. The concentration charge, movement in rates and prices, for each its application, a schedule of where the current exposure of the of the past 250 business days; multiplication factors, which must be broker or dealer to a counterparty (B) On the last business day of each approved by the Commission. The firm exceeds 5% of the tentative net capital quarter, the firm must identify the must use the multiplication factor of the broker or dealer, is calculated as number of backtesting exceptions of the indicated in the approved schedule in follows: VaR model, that is, the number of determining the credit equivalent (i) For counterparties with credit risk business days in the past 250 business amount of the firm’s exposures to a weights of 20%, 5% of the amount of days for which the actual net trading counterparty until it obtains the next the current exposure to the counterparty loss, if any, exceeds the corresponding quarter’s backtesting results, unless the in excess of 5% of the tentative net VaR measure; and Commission determines, based, among capital of the broker or dealer; (C) The firm must use the other relevant factors, on a review of the (ii) For counterparties with credit risk multiplication factor indicated in Table firm’s internal risk management control weights of 50%, 20% of the amount of 1 of this Appendix E in determining its system, including a review of the VaR the current exposure to the counterparty market risk until it obtains the next model, that a different adjustment or in excess of 5% of the tentative net quarter’s backtesting results, unless the other action is appropriate; capital of the broker or dealer; and Commission determines, based, among (2) Quantitative requirements. (i) For (iii) For counterparties with credit other relevant factors, on a review of the purposes of determining market risk, the risk weights of 150%, 50% of the firm’s internal risk management control VaR model must use a 99 percent, one- amount of the current exposure to the system, including a review of its VaR tailed confidence level with price counterparty in excess of 5% of the model, that a different adjustment or changes equivalent to a ten business-day tentative net capital of the broker or other action is appropriate; and movement in rates and prices; dealer; and (ii) For purposes of determining maximum potential exposure, the VaR (9) Portfolio concentration charge TABLE 1.—MULTIPLICATION FACTOR across all counterparties. The model must use a 99 percent, one-tailed BASED ON THE NUMBER OF concentration charge across all confidence level with price changes counterparties for unsecured receivables BACKTESTING EXCEPTIONS OF THE equivalent to a one-year movement in is 100% of the amount of the broker’s VAR MODEL IN THE PAST 250 BUSI- rates and prices; or dealer’s aggregate current exposure NESS DAYS (iii) The VaR model must use an arising from the broker’s or dealer’s effective historical observation period of transactions in derivatives instruments Multiplication at least one year. The historical Number of exceptions factor across all counterparties in excess of observation period must include periods 15% of the tentative net capital of the 4 or fewer ...... 3.00 of market stress. Historical data sets broker or dealer. 5 ...... 3.40 must be updated at least monthly and 6 ...... 3.50 reassessed whenever market prices or VaR Models 7 ...... 3.65 volatilities change significantly; and (e) Each VaR model must meet the 8 ...... 3.75 (iv) The VaR model must take into following minimum qualitative and 9 ...... 3.85 account and incorporate all significant, quantitative requirements: 10 or more ...... 4.00 identifiable market risk factors (1) Qualitative requirements. (i) The applicable to positions in the accounts VaR model used to calculate market or (iv) For purposes of computing the of the firm, including: credit risk for a position must be the credit equivalent amount of the firm’s (A) Risks arising from the non-linear same model used to report the market or exposures to a counterparty, the firm price characteristics of derivatives and credit risk of that position to senior must determine the appropriate the sensitivity of the market value of the management and must be integrated multiplication factor as follows: positions to changes in the volatility of into the daily internal risk management (A) Beginning three months after the options positions due to different system of the firm; firm begins using the VaR model to maturities; (ii) The VaR model must be reviewed calculate maximum potential exposure, (B) Empirical correlations with and both periodically and annually. The the firm must conduct backtesting of the across risk factors or, alternatively, risk periodic review may be conducted by model by comparing, for at least 40 factors sufficient to cover all the market the firm’s internal audit staff, but the counterparties with widely varying risk inherent in the positions in the

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proprietary or other trading accounts of broker or dealer has submitted to the paragraph (a)(1)(ii) of this Appendix G; the firm, including interest rate risk, Commission under this Appendix E; or and equity price risk, foreign exchange risk, (6) The Commission finds that (B) Subordinated debt if the original and commodity price risk; imposing other regulatory conditions weighted average maturity of the (C) Spread risk, where applicable, and are necessary or appropriate in the subordinated debt is at least five years; segments of the yield curve sufficient to public interest, and for the protection of each subordinated debt instrument capture differences in volatility and investors. states clearly on its face that repayment imperfect correlation of rates along the 5. Section 240.15c3–1g is added to of the debt is not protected by any yield curve for securities and read as follows: Federal agency or the Securities Investor derivatives that are sensitive to different Protection Corporation; the interest rates; and § 240.15c3–1g Conditions for holding subordinated debt is unsecured and (D) Specific risk for individual companies of certain brokers or dealers subordinated in right of payment to all (Appendix G to 17 CFR 240.15c3–1). securities and derivatives. senior indebtedness of the holding As a condition for a broker or dealer company; and the subordinated debt Additional Regulatory Conditions to compute certain of its capital charges instrument permits acceleration only in (f) As a condition for the broker or in accordance with § 240.15c3–1e, the the event of bankruptcy or dealer to use this Appendix E to holding company of the broker or dealer reorganization of the holding company calculate certain of its capital charges, shall comply with the conditions set under Chapters 7 (liquidation) and 11 the Commission may impose additional forth below: (reorganization) of the U.S. Bankruptcy regulatory conditions on the broker or Conditions Regarding Computation of Code; dealer, which may include: Restricting Allowable Capital and Risk Allowances (2) Allowance for market risk. The its business (on a product-specific, holding company shall compute an category-specific, or general basis); (a) As a condition of the exemption, allowance for market risk daily for all submitting to the Commission a plan to the holding company of a broker or proprietary positions, including debt increase its net capital or tentative net dealer that computes certain of its instruments, equity instruments, capital; filing more frequent reports capital charges in accordance with commodity instruments, foreign with the Commission; Modifying its § 240.15c3–1e must calculate allowable exchange contracts, and derivative internal risk management control capital and allowances for market, contracts, as the aggregate of the procedures; or computing its market and credit, and operational risk on a following: credit risk capital charges in accordance consolidated basis as follows: (i) Value at risk. The VaR of its with § 240.15c3–1(c)(2)(vi) and (1) Allowable capital. The holding positions, multiplied by the appropriate (c)(2)(iv), as appropriate. The company must compute allowable multiplication factor. The VaR of the Commission may also require, as a capital monthly as the sum of: positions must be obtained using condition of continuation of the (i) Common shareholders’ equity on approved VaR models meeting the exemption, the holding company of the the consolidated balance sheet of the applicable qualitative and quantitative broker or dealer to file more frequent holding company less: requirements of § 240.15c3–1e(e). The reports or to modify its group-wide (A) Goodwill; holding company must use the internal risk management control (B) Deferred tax assets; multiplication factor determined procedures. The Commission may (C) Other intangible assets; and according to § 240.15c3–1e(e)(1)(iii), impose such additional regulatory (D) Other deductions from common except that the initial multiplication conditions if: stockholders’ equity as required by the factor shall be three, unless the (1) The broker or dealer or the holding Federal Reserve Board in calculating Commission determines, based on a company of the broker or dealer fails to Tier 1 capital (as defined in 12 CFR 225, review of the group-wide internal risk meet the reporting requirements set Appendix A); management control system and forth in § 240.17a–5 or 240.15c3–1g(b), (ii) Cumulative and non-cumulative practices, including a review of the VaR as applicable; preferred stock, provided that: models, that another multiplication (2) Any event specified in § 240.17a– (A) The stock does not have a factor is appropriate. The VaR model 11 or 240.15c3–1g(e) occurs; maturity date; must be one that can be disaggregated (3) There is a material deficiency in (B) The stock cannot be redeemed at by each line of business exposed to the internal risk management control the option of the holder of the market risk and by each legal entity system or in the mathematical models instrument; exposed to market risk. The holding used to price securities or to calculate (C) The stock has no other provisions company may use a VaR model to market and credit risk capital charges or that will require future redemption of determine an allowance for market risk allowances for market and credit risk, as the issue; and only for positions for which there is applicable, of the broker or dealer or the (D) The issuer of the stock can defer adequate historical data to support a holding company of the broker or or eliminate dividends, except that the VaR model; and dealer; amount of such cumulative preferred (ii) Alternative method. For positions (4) The holding company of the stock may not exceed 33% of the items for which there does not exist adequate broker or dealer fails to comply with its included in allowable capital pursuant historical data to support a VaR model, undertakings that the broker or dealer to paragraph (a)(1)(i) of this Appendix an allowance for market risk using a has filed with its application pursuant G; and method described in the broker’s or to paragraph (a)(1)(viii) of this (iii) The sum of the following items dealer’s application to use § 240.15c3– Appendix E; on the consolidated balance sheet, to the 1e to calculate certain of its capital (5) The broker or dealer or the holding extent that the sum does not exceed the charges that produces a suitable company of the broker or dealer sum of the items included in allowable allowance for market risk for those materially amends a mathematical capital pursuant to paragraphs (a)(1)(i) positions; model or its internal risk management and (ii) of this Appendix G: (3) Allowance for credit risk. The control system or its corporate structure (A) Cumulative preferred stock in holding company shall compute an as described in the application the excess of the 33% limit specified in allowance for credit risk daily for

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certain assets on the consolidated multiplication factor determined Supervision, as modified from time to balance sheet and certain off-balance according to § 240.15c3–1e(e)(1)(iv), time; sheet items, including loans and loan except that the initial multiplication (G) The holding company or other commitments, exposures due to factor shall be one, unless the member of the affiliate group may, upon derivatives contracts, structured Commission determines, based on a approval by the Commission of a financial products, and other extensions review of the group-wide internal risk request by the broker or dealer in its of credit, and credit substitutes as management control system and initial application or in an amendment, follows: practices, including a review of the VaR determine credit ratings using internal (i) The credit equivalent amount of models, that another multiplication calculations for counterparties that are the asset or off-balance sheet item factor is appropriate; not rated by an NRSRO, and the holding multiplied by the appropriate credit risk (C) The current exposure of a member company may use these internal credit weight of the asset or off-balance sheet of the affiliate group to a counterparty ratings in lieu of ratings issued by an item or counterparty, determined is the current replacement value of the NRSRO for purposes of determining according to paragraph (a)(3)(i)(F) of this counterparty’s positions with the credit risk weights; Appendix G, multiplied by 8%, in member of the affiliate group, after (H) The holding company or other accordance with the following: applying netting agreements with that member of the affiliate group may, upon (A) For certain loans and loan counterparty meeting the requirements approval by the Commission of a commitments made by members of the of § 240.15c3–1e(d)(5), taking into request by the broker or dealer in its affiliate group of the broker-dealer, the account the value of collateral from the initial application or in an amendment, credit equivalent amount is determined counterparty pledged to and held by any determine credit risk weights of by multiplying the nominal amount of member of the affiliate group in counterparties using internal the contract by the following credit accordance with § 240.15c3–1e(d)(6), calculations; (I) The holding company or member conversion factors: and subtracting the fair market value of of the affiliate group may reduce the (1) 0% credit conversion factor for any credit derivatives that specifically credit risk weight of a counterparty by loan commitments that: change the exposure to the counterparty using credit derivatives such as credit (i) May be unconditionally cancelled (as long as the credit derivatives are not default swaps, total return swaps, and by the lender; or used to change the credit risk weight of similar instruments used to manage (ii) May be cancelled by the lender the counterparty as provided in due to credit deterioration of the credit risk that provide credit protection paragraph (a)(3)(i)(I) of this Appendix equivalent to guarantees, that are used borrower; G); (2) 5% credit conversion factor for for bona fide hedging purposes to (D) The maximum potential exposure margin loans extended by members of reduce the credit risk weight of a of a member of the affiliate group to a the affiliate group of the broker or dealer counterparty, that are not incorporated counterparty is the increase in the net in compliance with applicable self- into the VaR model used for deriving replacement value of the counterparty’s regulatory organization regulations; potential exposures, and that are not (3) 20% credit conversion factor for: positions with the member of the held for market making purposes. The (i) Loan commitments of less than one affiliate group, after applying netting credit risk weight for the covered year; or agreements with that counterparty portion of the exposure shall be the (ii) Short term self-liquidating trade meeting the requirements of § 240.15c3– credit risk weight of the writer of the related contingencies, including letters 1e(d)(5), taking into account the value of derivative. The uncovered portion of the of credit; collateral from the counterparty held by exposure shall be assigned the credit (4) 50% credit conversion factor for any member of the affiliate group in risk weight of the counterparty; loan commitments with an original accordance with § 240.15c3–1e(d)(6), (J) For the portion of a current maturity of greater than one year that and subtracting the fair market value of exposure covered by a guarantee, where contain transaction contingencies, any credit derivatives that specifically that guarantee is an unconditional and including performance bonds, revolving change the exposure to the counterparty irrevocable guarantee of the due and underwriting facilities, note issuance (as long as the credit derivatives are not punctual payment and performance of facilities and bid bonds; and used to change the credit risk weight of the obligation and the holding company (5) 100% credit conversion factor for the counterparty as provided in or member of the affiliate group can bankers’ acceptances, stand-by letters of paragraph (a)(3)(i)(I) of this Appendix demand payment after any payment is credit, and forward purchases of assets, G), that is obtained daily using an missed without having to make and similar direct credit substitutes; approved VaR model meeting the collection efforts, the holding company (B) For derivatives contracts and for applicable qualitative and quantitative or member of the affiliate group may repurchase agreements, reverse requirements of § 240.15c3–1e(e), except substitute the credit risk weight of the repurchase agreements, stock lending that for repurchase agreements, reverse guarantor for the credit risk weight of and borrowing, and similar repurchase agreements, stock lending the counterparty if the guarantee is collateralized transactions, the credit and borrowing, and similar evidenced by a written obligation of the equivalent amount of the holding collateralized transactions, maximum guarantor that allows the holding company’s exposure to a counterparty is potential exposure must be calculated company or member of the affiliate the sum of the holding company’s using a time horizon of five days; group to substitute the guarantor for the maximum potential exposure to the (E) The credit equivalent amount for counterparty upon default or counterparty, as defined in paragraph other assets shall be the asset’s book nonpayment by the counterparty; (a)(3)(i)(D) of this Appendix G, value on the holding company’s (K) The holding company may multiplied by the appropriate consolidated balance sheet; recognize a cross-product netting multiplication factor, and the holding (F) The credit risk weights that shall agreement that meets the requirements company’s current exposure to the be applied to certain assets and set forth in § 240.15c3–1e(j); and counterparty, as defined in paragraph counterparties shall be determined (L) The fair market value of collateral (a)(3)(i)(C) of this Appendix G. The according to standards published by the may be used to offset the net holding company must use the Basel Committee on Banking replacement value of receivables from a

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counterparty provided the requirements (B) The 5 largest exposures to accounting firm, as that term is defined set forth in § 240.15c3–1e(k) are met; or regulated financial institutions; in Section 2(a)(12) of the Sarbanes- (ii) If the Commission approves the (vi) The aggregate maximum potential Oxley Act of 2002 (Pub. L. 107–204), in request of the broker or dealer, in its exposure; accordance with the following: initial application or in an amendment, (vii) A summary report reflecting the (i) The audited financial statements the holding company may use a geographic distribution of the holding must include a consolidated balance calculation consistent with standards company’s exposures on a consolidated sheet, income statement, and published by the Basel Committee on basis for each of the top ten countries to computations of allowable capital and Banking Supervision, as modified from which it is exposed (by residence of the allowances for market, credit, and time to time; main operating group of the operational risk computed pursuant to (4) Allowance for operational risk. counterparty); and paragraph (a) of this Appendix G; and The holding company shall compute an (viii) Certain regular risk reports (ii) The audited financial statements allowance for operational risk provided to the persons responsible for must meet the substantive and determined consistent with appropriate managing group-wide risk as the administrative requirements of standards published by the Basel Commission may request from time to § 240.17a–12(b)(5), (b)(6), (c)(1), (c)(3), Committee on Banking Supervision, as time; (d), (e)(1), (e)(2), (e)(3), (f), (g), (h), (i), (j), modified from time to time; and (2) A quarterly report as of the end of (n), and (o), as to the holding company (5) If the Commission approves the the quarter, which may be unaudited, and the audited financial statements it request of the broker or dealer, in its not later than 35 calendar days after the must file in accordance with this initial application or in an amendment, end of each calendar quarter, which paragraph; after reviewing the methodology of the shall include: (5) Concurrently with the audited computation, the holding company may (i) The information that the holding financial statements, supplemental compute a capital assessment consistent company files monthly pursuant to reports prepared by a registered public with standards promulgated by the paragraph (b)(1) of this Appendix G; accounting firm, as that term is defined (ii) A consolidating balance sheet and Basel Committee on Banking in Section 2(a)(12) of the Sarbanes- income statement (including notes to Supervision (as modified from time to Oxley Act of 2002 (Pub. L. 107–204), in the financial statements). The time) that it is required to submit to a accordance with the following: consolidating balance sheet must financial regulator or supervisor in lieu (i) The supplemental reports must provide information regarding each of the computations described in include: material affiliate of the holding paragraphs (a)(1) through (a)(4) of this (A) Accountant’s report on Appendix G. company in a separate column, but may aggregate information regarding management controls. A supplemental Conditions Regarding Reporting members of the affiliate group that are report by the registered public Requirements not material affiliates into one column; accounting firm indicating the results of the registered public accounting firm’s (b) As a condition of the exemption, (iii) The results of backtesting of all review of holding company’s the holding company of a broker or internal models used to compute compliance with § 240.15c3–4. The dealer that computes certain of its allowable capital and allowances for procedures are to be performed and the capital charges in accordance with market and credit risk indicating, for report is to be prepared in accordance § 240.15c3–1e must file the following each model, the number of backtesting with procedures agreed to by the reports with the Commission: exceptions; holding company and the registered (1) A monthly report as of the end of (iv) A description of all material public accounting firm conducting the the month, filed not later than 17 pending legal or arbitration proceedings, review; and business days after the end of each involving either the holding company or month that does not end a quarter, any of its affiliates, that are required to (B) Accountant’s report on inventory which shall include: be disclosed by the holding company pricing and modeling. A supplemental (i) A consolidated balance sheet and under generally accepted accounting report by the registered public income statement (including notes to principles; accounting firm indicating the results of the financial statements) for the holding (v) The aggregate amount of the registered public accounting firm’s company and computations of allowable commercial paper, secured and other review of the inventory pricing and capital and allowances for market, unsecured borrowing, bank loans, lines modeling procedures. This review must credit, and operational risk computed of credit, or any other borrowings, and be conducted in accordance with pursuant to paragraph (a) of this the principal installments of long-term procedures agreed to by the holding Appendix G; or medium-term debt, scheduled to company and the registered public (ii) A graph reflecting, for each mature within twelve months from the accounting firm conducting the review. business line, the daily intra-month most recent fiscal quarter by each The purpose of the review is to confirm VaR; subsidiary broker or dealer and each that the pricing and modeling (iii) Consolidated credit risk material affiliate; and procedures relied upon by the holding information, including aggregate current (vi) A capital assessment computed company conform to the procedures exposure and current exposures pursuant to paragraph (a) of this submitted to the Commission as part of (including commitments) listed by Appendix G; the application of the broker or dealer, counterparty for: (3) Upon receiving written notice comply with written guidelines (A) The 15 largest exposures; and from the Commission, such other pursuant to § 240.15c3–4, and comply (B) The 5 largest exposures to financial or operational information as with the qualitative and quantitative regulated financial institutions; the Commission may request in order to standards of § 240.15c3e(e); (iv) The 10 largest commitments listed monitor the holding company’s (ii) The agreed upon procedures are to by counterparty; financial condition or risk exposures; be performed and the report is to be (v) Maximum potential exposure (4) Annually, on a calendar or fiscal prepared in accordance with rules listed by counterparty for: year basis, financial statements which promulgated by the Public Company (A) The 15 largest exposures; and must be audited by a registered public Accounting Oversight Board; and

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(iii) The holding company must file, Conditions Regarding Preservation of capital charges in accordance with prior to the commencement of the initial Records § 240.15c3–1e shall notify the review, the procedures agreed to by the (d)(1) As a condition of the Commission of certain events as holding company and the registered exemption, the holding company of a follows: public accounting firm with the broker or dealer that computes certain of (1) The holding company shall send Commission’s principal office in its capital charges in accordance with notice promptly (but within 24 hours) Washington, DC. Prior to the § 240.15c3–1e must preserve the after the occurrence of the following commencement of each subsequent following information, documents, and events: review, the holding company must reports for a period of not less than (i) The occurrence of any backtesting notify the Commission of any changes three years in an easily accessible place exception under § 240.15c3–1e(e)(1)(iii) in the procedures; using any media acceptable under or (iv) that would require that the (6) The reports that the holding § 240.17a–4(f): holding company use a higher company must file pursuant to (i) The documents created in multiplication factor in the calculation paragraph (b) of this Appendix G shall accordance with paragraph (c)(1) of this of its allowances for market or credit be considered filed when two copies are Appendix G; risk; received at the Commission’s principal (ii) Any application or documents (ii) A computation shows that office in Washington, DC, and one copy filed with the Commission pursuant to allowable capital (as defined in is received at the regional or district § 240.15c3–1e and this Appendix G and § 240.15c3–1g(a)(1)) is less than 110% of office of the Commission for the region any written responses received from the the sum of the allowances for market, or district in which the broker or dealer Commission; credit, and operational risk (as defined has its principal place of business. The (iii) All reports and notices filed with in § 240.15c3–1g(a)(2)–(a)(4)); copies sent to the Commission’s the Commission pursuant to § 240.15c3– (iii) An affiliate declares bankruptcy principal office shall be addressed to the 1e and this Appendix G; and or otherwise goes into default; Division of Market Regulation, Risk (iv) All written policies and (iv) The holding company becomes Assessment Group; and procedures concerning the group-wide aware that an NRSRO has determined to (7) The statements filed by the internal risk management control materially reduce its assessment of the holding company with the Commission system established pursuant to creditworthiness of an affiliate or the pursuant to paragraph (b) of this § 240.15c3–1e(a)(1)(viii)(B); and credit rating(s) assigned to one or more Appendix G will be accorded (2) The holding company may outstanding short or long-term confidential treatment. maintain the records referred to in obligations of an affiliate; or Conditions Regarding Records To Be paragraph (d)(1) of this Appendix G (v) The holding company becomes Made either at the holding company, at an aware that any financial regulatory affiliate, or at a records storage facility, agency or self-regulatory organization (c) As a condition of the exemption, provided that the records are located has taken enforcement or regulatory the holding company of a broker or within the boundaries of the United action against an affiliate; dealer that computes certain of its States. If the records are maintained by (2) The holding company shall file a capital charges in accordance with an entity other than the holding report if there is a material change, § 240.15c3–1e must make and keep company, the holding company shall along with a description of the reason current the following records: obtain and file with the Commission a for the change, in: (1) A record of the results of stress written undertaking by the entity (i) Its corporate structure; tests the holding company has maintaining the records, in a form (ii) The material affiliate status of any conducted of the holding company’s acceptable to the Commission, signed by member of the affiliate group; or funding and liquidity in response to the a duly authorized person at the entity (iii) The major business functions of following events at least once each maintaining the records, to the effect any material affiliate; and quarter and a record of the contingency that the records will be treated as if the (3) Every notice or report given or plan to respond to these events: holding company were maintaining the transmitted by paragraph (e) of this (i) A credit rating downgrade of the records pursuant to this section and that Appendix G will be given or transmitted holding company; the entity maintaining the records will to the principal office of the (ii) An inability of the holding permit examination of such records at Commission in Washington, DC, and to company to access capital markets for any time or from time to time during the regional or district office of the short-term funding; business hours by representatives or Commission for the region or district in (iii) An inability of the holding designees of the Commission and will which the broker or dealer has its company to access liquid assets in promptly furnish the Commission or its principal place of business. For the regulated entities across international designee a true, correct, complete and purposes of this Appendix G, ‘‘notice’’ borders when the events described in current hard copy of any or all or any shall be given or transmitted by paragraphs (c)(1)(i) or (ii) of this part of such records. The election to telegraphic notice or facsimile Appendix G occur; and operate pursuant to the provisions of transmission. The report described by (iv) An inability of the holding this paragraph shall not relieve the paragraph (e)(2) of this Appendix G may company to access credit or assets held holding company that is required to be transmitted by overnight delivery. at a particular institution when the maintain and preserve such records Notices and reports filed pursuant to events described in paragraphs (c)(1)(i) from any of its reporting or this paragraph will be accorded or (ii) of this Appendix G occur; recordkeeping responsibilities under confidential treatment. (2) A record of the basis for the this section. (f) The holding company of a broker determination of credit risk weights for or dealer that computes certain of its each counterparty; and Conditions Regarding Notification capital charges in accordance with (3) A record of the basis for the (e) As a condition of the exemption, § 240.15c3–1e must comply with the determination of internal credit ratings the holding company of a broker or requirements listed in § 240.15c3– for each counterparty. dealer that computes certain of its 1e(a)(1)(viii)(B) through (K) and

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understands that failure to comply may § 240.15a–1(d), including the the product category and the market risk result in revocation of the exemption. procedures to determine whether a capital charge; 6. Section 240.15c3–4 is amended by: counterparty is acting in the capacity of (E) Credit risk information on a. Revising the section heading; principal or agent; and derivatives exposures, including: b. In paragraph (a) and the (xv) The procedures for reviewing the (1) Overall current exposure; introductory text of paragraph (b), pricing of positions independent of the (2) Current exposure (including revising the phrase ‘‘An OTC derivatives business unit. commitments) listed by counterparty dealer’’ to read ‘‘A broker or dealer that * * * * * for: computes certain of its capital charges (d) Management must periodically (i) The 15 largest exposures; and in accordance with § 240.15c3–1e or review, in accordance with written (ii) The 5 largest exposures to § 240.15c3–1f’’; procedures, the business activities of the regulated financial institutions; c. Revising the introductory text of broker or dealer that computes certain of (3) The 10 largest commitments listed paragraphs (c) and (d) and paragraphs its capital charges in accordance with by counterparty; (b)(5), (c)(5)(xiii) and (xiv), (d)(1), (d)(8), § 240.15c3–1e or 240.15c3–1f: (4) The broker or dealer’s maximum and (d)(9); (1) Risks arising from the broker’s or potential exposure listed by d. Adding paragraph (c)(5)(xv); dealer’s trading activities are consistent counterparty for: e. Revising the phrase ‘‘OTC with prescribed guidelines; (i) The 15 largest exposures; and derivatives dealer’’ to read ‘‘broker or * * * * * (ii) The 5 largest exposures to dealer’’ in paragraphs (b)(1), (b)(2), (8) For a broker or dealer that regulated financial institutions; (b)(3), (c)(2), (c)(5)(xii), and (d)(7); computes certain of its capital charges (5) The broker or dealer’s aggregate f. Revising the phrase ‘‘OTC in accordance with § 240.15c3–1e, maximum potential exposure; derivatives dealer’s’’ to read ‘‘broker’s or procedures are in place to prevent the (6) A summary report reflecting the dealer’s’’ in paragraph (c)(3), the broker or dealer from engaging in any broker or dealer’s current and maximum introductory text of paragraph (c)(5), securities transaction that is not potential exposures by credit rating paragraphs (c)(5)(i), (c)(5)(iii), and the permitted under § 240.15a–1; category; and introductory text of paragraph (d)(3); (9) For a broker or dealer that (7) A summary report reflecting the g. Revising the phrase ‘‘an OTC computes certain of its capital charges broker or dealer’s current exposure for derivatives transaction’’ to read ‘‘a in accordance with § 240.15c3–1e, each of the top ten countries to which securities transaction’’ in paragraph procedures are in place to prevent the the broker or dealer is exposed (by (d)(5); and broker or dealer from improperly relying residence of the main operating group of h. Revising the phrase ‘‘OTC on the exceptions to § 240.15a–1(c) and the counterparty); and derivatives’’ to read ‘‘securities’’ in § 240.15a–1(d), including the (F) Regular risk reports supplied to paragraphs (c)(5)(x), (c)(5)(xi), and procedures to determine whether a the broker’s or dealer’s senior (d)(10). counterparty is acting in the capacity of management in the format described in The revisions and additions read as principal or agent; the application; follows: * * * * * (ii) Within 17 business days after the § 240.15c3–4 Internal risk management 7. Section 240.17a–5 is amended by: end of each quarter: control systems for certain brokers or a. Redesignating paragraph (a)(5) as (A) Each of the reports required to be dealers. paragraph (a)(6), and adding new filed in paragraph (a)(5)(i) of this * * * * * paragraph (a)(5); and section; (b) * * * b. Redesignating paragraphs (k), (l), (B) A report identifying the number of (5) For a broker or dealer that (m), (n), and (o) as paragraphs (l), (m), business days for which the actual daily computes certain of its capital charges (n), (o), and (p) and adding new net trading loss exceeded the in accordance with § 240.15c3–1e, the paragraph (k). corresponding daily VaR; and scope and nature of the permissible The additions read as follows: (C) The results of backtesting of all OTC derivatives activities. internal models used to compute § 240.17a–5 Reports to be made by certain allowable capital, including VaR and * * * * * brokers and dealers. (c) The internal risk management credit risk models, indicating the (a) Filing of monthly and quarterly number of backtesting exceptions. control system of the broker or dealer reports.*** that computes certain of its capital (5) Each broker or dealer that * * * * * charges in accordance with § 240.15c3– computes certain of its capital charges (k) Supplemental reports. Each broker 1e or § 240.15c3–1f shall include the in accordance with § 240.15c3–1e must or dealer that computes certain of its following elements: file the following additional reports: capital charges in accordance with * * * * * (i) Within 17 business days after the § 240.15c3–1e shall file concurrently (5) * * * end of each month that is not a quarter, with the annual audit report (xiii) For a broker or dealer that as of month-end: supplemental reports, which shall be computes certain of its capital charges (A) For each product for which the prepared by a registered public in accordance with § 240.15c3–1e, the broker or dealer calculates a market risk accounting firm (as that term is defined procedures to prevent the broker or capital charge other than in accordance in section 2(a)(12) of the Sarbanes-Oxley dealer from engaging in any securities with § 240.15c3–1e(c)(1) or (c)(5), the Act of 2002 (Public Law 107–204)), in transaction that is not permitted under product category and the amount of the accordance with the following: § 240.15a–1; market risk capital charge; (1) Accountant’s report on (xiv) For a broker or dealer that (B) A graph reflecting, for each management controls. The broker or computes certain of its capital charges business line, the daily intramonth VaR; dealer shall file a supplemental report in accordance with § 240.15c3–1e, the (C) The aggregate value at risk for the indicating the results of the accountant’s procedures to prevent the broker or broker or dealer; review of the internal risk management dealer from improperly relying on the (D) For each product for which the control system established and exceptions to § 240.15a–1(c) and broker or dealer uses scenario analysis, documented by the broker or dealer in

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accordance with § 240.15c3–4. This there are no changes, the broker or company of the broker or dealer or an review shall be conducted in dealer should so indicate. affiliate of the holding company of the accordance with procedures agreed to * * * * * broker or dealer; or by the broker or dealer and the 8. Section § 240.17a–11 is amended (4) The occurrence of any backtesting registered public accounting firm by: exception under § 240.15c3–1e(e)(1)(iii) conducting the review. The purpose of a. Revising the phrase ‘‘an OTC or (iv) that would require that the broker the review is to confirm that the broker derivatives dealer’’ to read ‘‘a broker or or dealer use a higher multiplication or dealer has established, documented, dealer that computes certain of its factor in the calculation of its market or and is in compliance with the internal capital charges in accordance with credit risk capital charges. risk management controls established in § 240.15c3–1e or 240.15c3–1f’’ in 9. Section 240.17h–1T is amended by: accordance with § 240.15c3–4; paragraphs (b)(2) and (c)(3); and a. Redesignating paragraph (d)(4) as (2) Accountant’s report on inventory b. Adding paragraph (j); paragraph (d)(5); and pricing and modeling. The broker or The addition reads as follows: b. Adding new paragraph (d)(4). The addition reads as follows: dealer shall file a supplemental report § 240.17a–11 Notification procedures for indicating the results of the accountant’s brokers and dealers. § 240.17h–1T Risk assessment review of the procedures for pricing * * * * * recordkeeping requirements for associated financial instrument inventory (j) A broker or dealer that computes persons of brokers and dealers. (including modeling procedures) certain of its capital charges in * * * * * established by the broker or dealer and accordance with § 240.15c3–1e shall (d) Exemptions. *** approved for use by the Commission. also give notice that same day in (4) The provisions of this section shall This review shall be conducted in accordance with paragraph (g) of this not apply to a broker or dealer that accordance with procedures agreed to section whenever: computes certain of its capital charges by the broker or dealer and the (1) The broker or dealer is notified by in accordance with § 240.15c3–1e. registered public accounting firm an NRSRO or otherwise becomes aware 10. Section 240.17h–2T is amended conducting the review. The purpose of that an NRSRO has determined to by: the review is to confirm that the reduce its assessment of the a. Redesignating paragraph (b)(4) as financial instrument pricing procedures creditworthiness of the broker or dealer paragraph (b)(5); and relied upon by the broker or dealer or of an affiliate of the holding company b. Adding new paragraph (b)(4). conform to the procedures established of the broker or dealer, or has The addition reads as follows: by the broker or dealer pursuant to determined to reduce the credit rating(s) § 240.15c3–4 and comply with the assigned to one or more outstanding § 240.17h–2T Risk assessment reporting qualitative and quantitative standards short or long-term obligations of the requirements for brokers and dealers. set forth in § 240.15c3–1e(e); and broker or dealer or an affiliate of the * * * * * (3) The broker or dealer shall file, holding company of the broker or (b) Exemptions.*** prior to the commencement of the dealer; (4) The provisions of this section shall review and no later than December 10 (2) The broker or dealer becomes not apply to a broker or dealer that of each year, a statement with the subject to any supervisory agreement, computes certain of its capital charges Commission’s principal office in order, resolution, or other notice of non- in accordance with § 240.15c3–1e. Washington, DC that includes: compliance from, or report of an * * * * * (i) A description of the agreed-upon instance of non-compliance, issued by Dated: October 24, 2003. procedures agreed to by the broker or an appropriate regulatory agency or self- dealer and the registered public regulatory organization; By the Commission. accounting firm (pursuant to paragraphs (3) The broker or dealer becomes Margaret H. McFarland, (l)(1) and (l)(2) of this section); and aware of a situation that may have a Deputy Secretary. (ii) A notice describing changes in material adverse effect on the financial [FR Doc. 03–27306 Filed 11–5–03; 8:45 am] those agreed-upon procedures, if any. If or operational condition of the holding BILLING CODE 8010–01–P

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Part III

Securities and Exchange Commission 17 CFR Part 240 Supervised Investment Bank Holding Companies; Proposed Rules

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SECURITIES AND EXCHANGE 0609. Alternatively, comment letters D. Proposed Rule 17i–4: Internal Risk COMMISSION sent electronically should be submitted Management Control System to the following electronic-mail address: Requirements for SIBHCs 17 CFR Part 240 [email protected]. All comment E. Proposed Rule 17i–5: Record Creation, Maintenance, and Access Requirements [Release No. 34–48694; File No. S7–22–03] letters should refer to File No. S7–22– for SIBHCs 03. This file number should be included 1. Record Creation RIN 3235–AI97 in the subject line if you use electronic 2. Record Maintenance mail. We will make all comment letters 3. Access to Records Supervised Investment Bank Holding available for public inspection and F. Proposed Rule 17i–6: Reporting Companies copying in our public reference room at Requirements for SIBHCs 1. Monthly Reports AGENCY: Securities and Exchange the above address. We will post electronically submitted comment 2. Quarterly Reports Commission (the ‘‘Commission’’). 3. Additional Reports ACTION: Proposed rule. letters on the Commission’s Internet 4. Annual Audit Report 1 Web site (http://www.sec.gov). 5. Accountant’s Report on Management SUMMARY: The Commission is proposing FOR FURTHER INFORMATION CONTACT: Controls—Paragraph (i)(2) of Proposed rules to implement Section 17(i) of the With respect to general questions, Rule 17i–6 and Amendment to Paragraph Securities Exchange Act of 1934, which contact Catherine McGuire, Chief (l) of Existing Rule 17a–12 created a new framework for Counsel, Lourdes Gonzalez, Assistant G. Exemption from Risk Assessment Rules supervising an investment bank holding for Broker-Dealer Affiliates of SIBHCs Chief Counsel, or Linda Stamp H. Proposed Rule 17i–7: Calculations of company (‘‘IBHC’’). An IBHC that meets Sundberg, Attorney Fellow, at (202) certain, specified criteria may Allowable Capital and Risk Allowances 942–0073, Division of Market or Alternative Capital Assessment voluntarily file a notice of intention Regulation, Securities and Exchange 1. Calculation of Consolidated Allowable with the Commission to become a Commission, 450 Fifth Street, NW., Capital supervised investment bank holding Washington, DC 20549–1001. 2. Calculation of Consolidated Allowance company (‘‘SIBHC’’) and be subject to With respect to calculations of for Market Risk supervision on a group-wide basis. allowable capital and risk allowances, 3. Calculation of Consolidated Allowance Pursuant to the statute and proposed internal risk management control for Credit Risk rules, an IBHC would be eligible to be 4. Calculation of Consolidated Allowance systems, and books and records and for Operational Risk an SIBHC if it is not affiliated with reporting requirements, contact Michael certain types of banks and has a 5. Alternative Capital Assessment A. Macchiaroli, Associate Director, at 6. General Questions Regarding Proposed substantial presence in the securities (202) 942–0132, Thomas K. McGowan, Rule 17i–7 markets. The proposed rules would Assistant Director, at (202) 942–4886, 7. Other Questions Regarding Capital provide an IBHC with a process to Rose Russo Wells, Attorney, at (202) Calculation become supervised by the Commission 942–0143, Bonnie L. Gauch, Attorney, at I. Proposed Rule 17i–8: Notification as an SIBHC, and would establish (202) 942–0765, or David Lynch, Requirements for SIBHCs regulatory requirements for an SIBHC, Financial Economist, at (202) 942–0059, III. General Request for Comment Regarding including requirements regarding its Proposed Rules Division of Market Regulation, IV. Paperwork Reduction Act group-wide internal risk management Securities and Exchange Commission, control system, recordkeeping, and A. Collection of Information Under 450 Fifth Street, NW., Washington, DC Amendments to Rules 17h–1T and 17h– periodic reporting (including reporting 20549–1001. 2T and New Rules 17i–1 through 17i–8 of consolidated computations of SUPPLEMENTARY INFORMATION: The B. Proposed Use of Information allowable capital and risk allowances Securities and Exchange Commission is C. Respondents consistent with the Basel Standards). publishing for comment proposed D. Reporting and Recordkeeping Burdens The Commission is also proposing to 1. Amendments to Rules 17h–1T and 17h– amendments to Rule 17a–12 [17 CFR add an exemption to the Commission’s 2T 240.17a–12] and Rules 17h–1T and risk assessment rules to exempt a 2. Proposed Rule 17i–2 17h–2T [17 CFR 240.17h–1T and broker-dealer that is affiliated with an 3. Proposed Rule 17i–3 240.17h–2T], and proposed new Rules SIBHC because the SIBHC will be 4. Proposed Rule 17i–4 17i–1 through 17i–8 [17 CFR 240.17i–1 5. Proposed Rule 17i–5 maintaining records and reporting to the through 240.17i–8] under the Exchange 6. Proposed Rule 17i–6 Commission regarding the financial and Act [15 U.S.C. 78a et seq.] 7. Proposed Rule 17i–8 operational condition of members of the E. Collection of Information Is Mandatory affiliate group. Finally, the Commission Table of Contents F. Confidentiality is proposing to adjust the audit I. Introduction G. Record Retention Period requirements for OTC derivative dealers II. Description of the Proposed Rules H. Request for Comments Regarding to allow accountants to use agreed-upon A. Proposed Rule 17i–1: Definitions Paperwork Burden Estimates procedures when conducting audits of B. Proposed Rule 17i–2: Notice of Intention V. Costs and Benefits of the Proposed Rules risk management control systems. to be Supervised by the Commission as and Rule Amendments an SIBHC A. Benefits DATES: Comments must be received on 1. Election Criteria B. Costs or before February 4, 2004. 2. Notice of Intention to Become an SIBHC 1. Ongoing Costs ADDRESSES: To help us process and 3. Process for Review of Notices of 2. One-time Costs review your comments more efficiently, Intention C. Request for Comment Regarding comments should be sent by hard copy C. Proposed Rule 17i–3: Withdrawal from Analysis of Costs and Benefits or by email, but not by both methods. Supervision as an SIBHC VI. Consideration of Burden on Competition, and Promotion of Efficiency, Comment letters sent by hard copy Competition and Capital Formation should be submitted in triplicate to 1 We do not edit personal identifying information, such as names or electronic-mail addresses, from VII. Regulatory Flexibility Act Certification Jonathan G. Katz, Secretary, Securities electronic submissions. You should submit only VIII. Consideration of Impact on the and Exchange Commission, 450 Fifth information that you wish to make publicly Economy Street, NW., Washington, DC 20549– available. IX. Statutory Authority

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I. Introduction Commission as an SIBHC.5 Pursuant to any broker-dealer affiliated with the Section 231 of the Gramm-Leach- Section 17(i)(1)(A) of the Exchange Act, SIBHC and any of the company’s other Bliley Act of 1999 2 (the ‘‘GLBA’’) an IBHC that is not: (i) An affiliate of an affiliates, as well as applicable amended Section 17 of the Securities insured bank (with certain exceptions) provisions of the Bank Secrecy Act [31 6 Exchange Act of 1934 (the ‘‘Exchange or a savings association; (ii) a foreign U.S.C. 53, subchapter II].14 While Act’’ or the ‘‘Act’’) to create a regulatory bank, foreign company, foreign bank Section 17(i) of the Exchange Act framework under which a holding branch agency, or a state-chartered authorizes the Commission to inspect 7 company of a broker-dealer may commercial lending company; or (iii) a any affiliate of an SIBHC, it also limits voluntarily be supervised by the foreign bank that controls an Edge Act the focus and scope of any examination 8 Commission as an SIBHC. The rules we Corporation may elect to become an to the SIBHC and any affiliate of the 9 are proposing today would create a SIBHC. SIBHC that, because of its size, framework for the Commission to This regulatory framework for SIBHCs condition, or activities, the nature or supervise SIBHCs. These rules also is intended to provide a basis for non- size of the transactions between such would enhance the Commission’s U.S. financial regulators to treat the affiliate and any affiliated broker-dealer, supervision of the SIBHC’s subsidiary Commission as the principal U.S. or the centralization of functions within consolidated, home-country the holding company system, could, in broker-dealers through collection of 10 additional information and supervisor for SIBHCs and their the discretion of the Commission, have examinations of affiliates of those affiliated broker-dealers. This would a materially adverse effect on the broker-dealers. This framework would minimize duplicative regulatory operational or financial condition of the include qualification criteria for IBHCs burdens on broker-dealers that are broker-dealer.15 that file notices of intention to be active in the EU and in other The rules proposed under Section supervised by the Commission, as well jurisdictions that may have similar laws. 17(i) are not intended to duplicate Under Section 17(i) of the Exchange as recordkeeping and reporting regulation of banks, insurance Act, the Commission may adopt rules requirements for SIBHCs. An IBHC that companies, or futures commission regarding, among other things: (i) The meets the criteria set forth in the merchants by other regulatory agencies. form of an IBHC’s notice of intention to proposed rules would not be required to Section 17(i) of the Exchange Act directs become an SIBHC and the information become an SIBHC; supervision as an the Commission to: (i) Accept, to the and documents to be included with that SIBHC is voluntary. Taken as a whole, fullest extent possible, reports that an notice;11 and (ii) creation and the proposed framework would permit SIBHC or an affiliate thereof may have maintenance of records and reports, and the Commission to better monitor the been required to provide to another submission of those reports to the financial condition, risk management, appropriate regulatory agency or self- Commission.12 Further, Section and activities of a broker-dealer’s parent 16 17(i)(3)(C) of the Exchange Act regulatory organization; (ii) use, to the and affiliates on a group-wide basis. In authorizes the Commission to examine fullest extent possible, reports of particular, it would create a formal an SIBHC (including any affiliate) in examination made by the appropriate process through which the Commission order to (i) inform the Commission regulatory agency or state insurance could access important information 17 regarding the nature of the operations regulator; and (iii) defer to the regarding activities of a broker-dealer’s and financial condition of the SIBHC appropriate regulatory agency or state affiliates that could impair the financial and its affiliates, the financial and insurance regulator with regard to and operational stability of the broker- operational risks within the SIBHC that interpretation and enforcement of dealer or the SIBHC. 18 may affect any broker-dealer controlled banking or insurance regulations. In addition, securities firms that do by the SIBHC, and the systems of the business in the European Union (‘‘EU’’) II. Description of the Proposed Rules SIBHC and its affiliates for monitoring have indicated that they may need to and controlling those risks; and (ii) A. Proposed Rule 17i–1: Definitions demonstrate that they have consolidated monitor compliance with the provisions supervision at the holding company Proposed Rule 17i–1 would of Section 17(i) of the Exchange Act.13 level that is ‘‘equivalent’’ to EU incorporate the definitions set forth in Section 17(i)(3)(C) also provides that the 19 consolidated supervision.3 Generally, Section 17(i)(5) of the Exchange Act Commission may examine the SIBHC EU ‘‘consolidated supervision’’ would into the rules promulgated under and any affiliate to monitor compliance Section 17(i). Although these definitions take the form of a series of rules, with the provisions of Exchange Act imposed at the holding company level, apply regardless of whether they are Section 17(i), provisions governing incorporated into these rules, regarding firms’ internal controls, transactions and relationships between capital adequacy, intra-group incorporating them lets individuals transactions, and risk concentration. reading the proposed rules know that 5 Exchange Act Section 17(i) [15 U.S.C. 78q(i)]. the terms are defined, and directs them Without a demonstration of 6 Exchange Act Section 17(i)(1)(A)(i) [15 U.S.C. ‘‘equivalent’’ supervision, securities 78q(i)(1)(A)(i)]. to those definitions. In addition, the firms located in the EU have stated that 7 Exchange Act Section 17(i)(1)(A)(ii) (State- proposed rule includes definitions of they may either be subject to additional chartered commercial lending companies described the terms ‘‘affiliate group’’ and in Section 8(a) of the International Banking Act of ‘‘material affiliate,’’ which are used capital charges or required to form a 1978 [12 U.S.C. 3106(a)]) [15 U.S.C. 78q(i)(1)(A)(ii)]. sub-holding company in the EU. 8 Exchange Act Section 17(i)(1)(A)(iii) (12 U.S.C. Congress addressed these concerns by 611 (‘‘Federal Reserve Act’’), and Section 25A 14 Exchange Act Section 17(i)(3)(C)(i) [15 U.S.C. enacting Section 17(i) of the Exchange thereunder [12 U.S.C. 611]) [15 U.S.C. 78q(i)(3)(C)(i)]. 15 Act,4 which authorizes an IBHC to 78q(i)(1)(A)(iii)]. Exchange Act Section 17(i)(3)(C)(ii) [15 U.S.C. 9 Exchange Act Section 17(i)(1)(A) [15 U.S.C. 78q(i)(3)(C)(ii)]. voluntarily elect to be supervised by the 78q(i)(1)(A)]. 16 Exchange Act Section 17(i)(3)(B)(i) [15 U.S.C. 10 See supra note 4. 78q(i)(3)(B)(i)]. 2 Pub. L. 106–102, 113 Stat. 1338 (1999). 11 Exchange Act Section 17(i)(1)(B) [15 U.S.C. 17 Exchange Act Section 17(i)(3)(C)(iii) [15 U.S.C. 3 See ‘‘Directive 2002/87/EC of the European 78q(i)(1)(B)]. 78q(i)(3)(C)(iii)]. Parliament and of the Council of 16 December 12 Exchange Act Section 17(i)(3)(A) [15 U.S.C. 18 Exchange Act Section 17(i)(4) [15 U.S.C. 2002.’’ 78q(i)(3)(A)]. 78q(i)(4)]. 4 See H.R. Conf. Rep. No. 106–434, 165 (1999). 13 15 U.S.C. 78q(i)(3)(C). 19 15 U.S.C. 78q(i)(5).

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throughout proposed Rules 17i–1 because, based on the Commission’s is not (i) an affiliate of an insured bank through 17i–8. experience in reviewing holding (with certain exceptions) or a savings Pursuant to the definitions in the Act, company documentation, receiving association; 35 (ii) a foreign bank, foreign the term ‘‘investment bank holding information specific to affiliates company, or a company that is company’’ means any person, other than material to a holding company provides described in section 8(a) of the a natural person, that owns or controls us with a better understanding of the International Banking Act of 1978; 36 or one or more broker-dealers and the holding company, including how risk is (iii) a foreign bank that controls, directly associated persons of the investment managed on a consolidated level. or indirectly, a corporation chartered bank holding company.20 The term We request comment on whether the under section 25A of the Federal ‘‘associated person of an investment proposed definitions of affiliate group Reserve Act 37 would be eligible to file bank holding company’’ means any and material affiliate are appropriate, a Notice of Intention. Paragraph (a) of person directly or indirectly controlling, whether it would be helpful to proposed Rule 17i–2 would incorporate controlled by, or under common control reproduce the statutory definitions these statutory exclusions. with the IBHC.21 Thus, an IBHC within the rules, and whether any 2. Notice of Intention To Become an includes the holding company and all additional terms need to be defined in SIBHC other entities within the holding these rules. company structure that meet the B. Proposed Rule 17i–2: Notice of Proposed Rule 17i–2(b) would require ‘‘control’’ test. A ‘‘supervised Intention To Be Supervised by the that an IBHC that elects to become an investment bank holding company’’ is Commission as an SIBHC SIBHC file a written Notice of Intention any IBHC that is supervised by the with the Commission that includes (i) a Commission pursuant to Section 17(i) of Section 17(i)(1)(B) of the Exchange request to become an SIBHC; (ii) a Act states that in order to elect to the Exchange Act.22 statement certifying that it is not become an SIBHC, an IBHC must file Sections 17(i)(5)(C), (D), and (E) of the affiliated with an entity listed in Section with the Commission a written notice of Exchange Act state that, for purposes of 17(i)(1)(A) of the Exchange Act; 38 (iii) intention to become supervised by the Section 17(i) of the Exchange Act, the documentation demonstrating that it Commission in such form and terms ‘‘affiliate,’’ 23 ‘‘bank,’’ 24 ‘‘bank owns or controls at least one broker- containing such information and holding company,’’ 25 ‘‘company,’’ 26 dealer that maintains a substantial documents concerning the IBHC as the ‘‘control,’’ 27 and ‘‘savings presence in the securities business as Commission, by rule, may prescribe as association’’ 28 have the same meaning evidenced either by its holding tentative necessary and appropriate in as given in Section 2 of the Bank net capital of $100 million or more or furtherance of the purposes of Section Holding Company Act of 1956 29 (the otherwise; and (iv) other supplemental 17 of the Act (a ‘‘Notice of Intention’’).32 documents described below. ‘‘Bank Holding Company Act’’); the Proposed Rule 17i–2 would provide the term ‘‘insured bank’’ has the same method by which an IBHC could elect To assist the Commission in meaning as given in Section 3 of the evaluating the IBHC’s activities, 30 to become an SIBHC. In addition, Federal Deposit Insurance Act; and consistent with Section 17(i)(1)(B) of the financial condition, risk management the term ‘‘foreign bank’’ has the same Exchange Act, proposed Rule 17i–2 control systems, and the relationships meaning as given in Section 1(b)(7) of indicates that the IBHC will among its associated persons in order to 31 the International Banking Act. automatically become an SIBHC 45 days determine whether Commission Proposed Rule 17i–1 also includes after the Commission receives its supervision of the IBHC is necessary definitions of the terms ‘‘affiliate group’’ completed Notice of Intention unless and appropriate in furtherance of the and ‘‘material affiliate.’’ The term the Commission issues an order purposes of Section 17 of the Exchange ‘‘affiliate group’’ is defined to include indicating either that it will begin its Act, an IBHC also would be required to the SIBHC and every affiliate of the supervision sooner or that it does not file the following supplemental SIBHC because we believe that we believe it to be necessary or appropriate documents with its Notice of Intention would need to obtain information in furtherance of Section 17 of the Act pursuant to proposed Rule 17i–2: • related to all affiliates to provide for the IBHC to be so supervised. A narrative describing the business effective supervision of an SIBHC. We Finally, proposed Rule 17i–2 sets forth and organization of the IBHC; define the term ‘‘material affiliate’’ to the criteria the Commission would use • An alphabetical list of the members include any member of the affiliate to make this determination.33 of the affiliate group, a designation of group that is material to the SIBHC If an IBHC becomes an SIBHC, those affiliates it considers to be supervision of its affiliated broker- ‘‘material affiliates’’ and the financial 20 Exchange Act Section 17(i)(5)(A) [15 U.S.C. dealer and related associated persons regulator(s), if any, with which the 78q(i)(5)(A)]. generally would not be affected, except affiliate is registered; 21 Exchange Act Section 17(i)(5)(F) [15 U.S.C. • 78q(i)(5)(F)]. that a broker-dealer affiliated with an An organizational chart identifying 22 15 U.S.C. 78q(i)(5)(B). SIBHC would be exempted from the the IBHC and its material affiliates; 23 Bank Holding Company Act Section 2(k) [12 requirements of Rules 17h–1T and 17h– • Consolidated and consolidating U.S.C. 1841(k)]. 2T. financial statements; 24 Bank Holding Company Act Section 2(c) [12 • Certain sample calculations of U.S.C. 1841(c)]. 1. Election Criteria allowable capital and allowances for 25 Bank Holding Company Act Section 2(a) [12 Section 17(i)(1)(A) of the Exchange U.S.C. 1841(a)]. market, credit, and operational risk or 26 Bank Holding Company Act Section 2(b) [12 Act sets forth certain limitations on U.S.C. 1841(b)]. whether an IBHC is eligible to become 35 Exchange Act Section 17(i)(1)(A)(i) [15 U.S.C. 34 27 Bank Holding Company Act Section 2(a)(2) et an SIBHC. Specifically, an IBHC that 78q(i)(1)(A)(i)]. seq. [12 U.S.C. 1841(a)(2) et seq]. 36 Exchange Act Section 17(i)(1)(A)(ii) [15 U.S.C. 28 Bank Holding Company Act Section 2(j) [12 32 Exchange Act Section 17(i)(1)(B) [15 U.S.C. 78q(i)(1)(A)(ii)]. U.S.C. 1841(j)]. 78q(i)(1)(B)]. 37 See Exchange Act Section 17(i)(1)(A)(iii) 29 12 U.S.C. 1841. 33 Id. (Federal Reserve Act § 25A [12 U.S.C. 611]) [15 30 12 U.S.C. 1813(h). 34 Exchange Act Section 17(i)(1)(A) [15 U.S.C. U.S.C. 78q(i)(1)(A)(iii)]. 31 12 U.S.C. 3101(7). 78q(i)(1)(A)]. 38 15 U.S.C. 78q(i)(1)(A).

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alternative capital assessments made in of the SIBHC and its affiliates, the the Commission in evaluating the accordance with proposed Rule 17i–7; Commission could require that an financial and operational position of an • A list of the positions held by the SIBHC obtain additional agreements IBHC. affiliate group in its proprietary that may be necessary for the 3. Process for Review of Notice of accounts and the methods the IBHC Commission to adequately assess any Intention intends to use for computing allowances risks that affiliate may pose to the for market risk and credit risk on those SIBHC and its subsidiary broker-dealers. Pursuant to paragraph (d)(2) of positions; For example, the Commission may have proposed Rule 17i–2, an IBHC would • A detailed description of the a greater concern regarding access to become an SIBHC subject to mathematical models the IBHC intends information if a broker-dealer’s affiliate Commission supervision pursuant to to use to calculate market and credit operates in a jurisdiction that limits the Section 17(i) of the Exchange Act 45 risk; exchange of information through bank calendar days after the Commission • A description of how the IBHC secrecy laws or other impediments. receives a completed Notice of proposes to calculate current exposure; Paragraph (b)(xiv) of proposed Rule 17i– Intention,39 unless the Commission • A description of how the IBHC 2 would address this issue by requiring issues an order determining either that proposes to determine credit risk that an SIBHC provide the Commission (i) the Commission will begin to weights; with an undertaking indicating that it supervise the IBHC as an SIBHC prior to • A description of the method the agrees to cooperate with the 45 calendar days after the Commission IBHC proposes to use to calculate its Commission as needed, including by received the completed Notice of allowance for operational risk; describing any secrecy laws or other Intention to become supervised; or (ii) • A description of the internal risk impediments that could restrict the the Commission will not supervise the management control system established ability of the SIBHC to provide IBHC because supervision of the entity by the IBHC to manage the risks of the information on the operations or as an SIBHC is not necessary or affiliate group and how that system activities of the SIBHC. If any material appropriate in furtherance of the satisfies the requirements of proposed impediments exist, we would require purposes of Section 17 of the Exchange Rule 17i–4; the SIBHC to describe the manner in Act.40 • Sample risk reports that the holding which it proposes to provide the The Commission may begin company provides to the persons Commission with adequate assurances supervising the IBHC as an SIBHC responsible for managing the risks of the of access to information. ‘‘[u]nless the Commission finds that affiliate group; and Pursuant to paragraph (c) of proposed such supervision is not necessary or • An undertaking providing that the Rule 17i–2, IBHCs and SIBHCs would appropriate in furtherance of the SIBHC will cooperate with the have a continuing requirement to amend purposes’’ of Section 17.41 The purposes Commission as necessary if the their Notices of Intention. If any of the of Section 17 are quite broad. Section 17 disclosure of any information with information or documentation filed with generally permits the Commission to regard to Rules 17i–1 through 17i–8 the Commission as part of the Notice of carry out its regulatory oversight would be prohibited by law or Intention is found to be or becomes responsibilities regarding broker-dealers otherwise and that the SIBHC will inaccurate prior to a Commission by establishing rules related to obtain, for any non-U.S. affiliate, determination, the IBHC would be recordkeeping, reporting, and consent to the jurisdiction of the required to notify the Commission and examination. In addition, Section 17(h) Commission and an agreement to provide the Commission with a provides the Commission authority to maintain a U.S. registered agent. description of the circumstances in require that a broker-dealer obtain Because each firm manages its which the information or information and make and keep such internal risks differently, the documentation was found to be or records and reports regarding the Commission, in its review of the Notice became inaccurate along with updated, broker-dealer’s affiliates and the of Intention, would use the information accurate information and documents. financial and securities activities, and documents provided with the Whereas after a Commission capital and funding of certain of those Notice of Intention to assess each firm’s determination, if an SIBHC materially affiliates 42 as the Commission business, financial condition, and changes a mathematical model or other prescribes to assess the financial and internal risk management control method used to compute allowable operational risks to a broker-dealer from systems. We have successfully used capital or allowance for market, credit, those affiliates. similar information in the past to or operational risk, or its internal risk We believe that, consistent with the evaluate and monitor risks to broker- management control systems as purposes of Section 17, the dealers. In addition to the information described in its Notice of Intention, Commission’s supervision of an IBHC as and documentation described in the prior to making the changes the SIBHC an SIBHC may be necessary and proposed rules, the IBHC would be would be required to file an amended appropriate only when the IBHC is required to furnish such other Notice of Intention describing the affiliated with a broker-dealer that has a information and documents, including changes. documents relating to its financial We request comment as to whether 39 Pursuant to paragraph (d)(1) of proposed Rule position, internal controls, and the information and documents required 17i–2, a Notice of Intention to be supervised by the mathematical models, as the to be included in the Notice of Intention Commission as an SIBHC would not be complete Commission may request to complete its pursuant to paragraph (b) of proposed until the IBHC had filed all the documentation and information required pursuant to paragraphs (a) review of the Notice of Intention. A Rule 17i–2 are appropriate, or whether through (c) of that proposed Rule with the Notice of Intention would not be the Commission should receive other Commission. complete until the IBHC has provided to financial, operational, or other types of 40 Exchange Act § 17(i)(1)(B) [15 U.S.C. the Commission all the information and information. If so, please indicate what 78q(i)(1)(B)]. 41 documentation specified in the Rule additional information or 15 U.S.C. 17(i)(1)(B). 42 Those affiliates would include affiliates whose and requested by the Commission. documentation the Commission should business activities are reasonably likely to have a Further, depending on the require, and how the additional ‘‘material impact’’ on the financial or operational relationship or the geographic location information and documents may assist condition of the broker-dealer.

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‘‘substantial presence’’ in the securities would also require that an SIBHC (i) market risk; 45 (ii) credit risk; 46 (iii) business.43 Supervision of an SIBHC include in its notice of withdrawal a operational risk; 47 (iv) funding risk ;48 that owns or controls a broker-dealer statement that it is in compliance with and (v) legal risk.49 Large broker-dealers with a substantial presence in the proposed Rule 17i–2(c) regarding and IBHCs generally are more exposed securities business would permit the amendments to its Notice of Intention to to high levels of these types of risk due, Commission to be better informed help to assure that the Commission has in part, to their intricate corporate regarding the financial and operational updated information when considering structures, the complexity of business conditions of broker-dealers and their the SIBHC’s withdrawal request. activities in which they engage, and the holding companies whose failure could diverse range of financial instruments have a materially adverse impact on Paragraph (c) of proposed Rule 17i–3 they trade. Due to the level of risk other securities market participants, states that the Commission may exposures created by these types of thus reducing systemic risk and discontinue supervising an SIBHC if the business activities and products, it is furthering the purposes of Section 17. Commission finds that the SIBHC no important for firms to implement robust Evidence that an IBHC owns or controls longer exists or is no longer an IBHC, or risk management control systems. A a broker-dealer that maintains $100 that continued supervision of the SIBHC firm that has adopted and follows million in tentative net capital would be is not necessary or appropriate in appropriate risk management controls sufficient to demonstrate a substantial furtherance of the purposes of Section reduces its risk of significant loss, presence in the securities business. 17. Among other things, if an SIBHC which also reduces the risk that those Paragraph (d)(1) of proposed Rule makes a material amendment to a losses will be spread to other market 17i–2 states that all Notices of Intention, mathematical model, its internal risk participants or throughout the financial amendments, and other documentation management control systems, or its markets as a whole.50 and information filed pursuant to corporate structure as described in its The specific elements of a risk proposed Rule 17i–2 will be accorded Notice of Intention (and as modified management control system will vary depending on the size, complexity, and confidential treatment. We believe it is from time to time), the Commission organization of a firm. Accordingly, the important to accord confidential would review whether the change design and implementation of a system treatment to the information and would cause continued supervision of documents an SIBHC would be required of internal controls for a particular firm the SIBHC to no longer be necessary or provide to the Commission as part of its or affiliate group may differ from other appropriate in furtherance of the Notice of Intention because the firms. An individual firm must have the purposes of Section 17 of the Act. information and documents would flexibility to implement specific policies generally be highly sensitive, non- In order to determine whether and procedures unique to its public business information. continued supervision of an SIBHC is circumstances. However, as we have The Commission seeks comment on necessary or appropriate in furtherance found before, well-developed risk the requirement that an SIBHC own or of the purposes of Section 17 of the Act, management systems generally share control a broker-dealer that has a the Commission would consider the certain core principles such as substantial presence in the securities same criteria it initially considered to establishing clear responsibilities at business. In addition, we request determine whether an IBHC will be each level of management, separation of comment as to whether maintenance by supervised by the Commission as an certain key responsibilities, and a broker-dealer of a specified dollar SIBHC. effective monitoring and reporting. amount of tentative net capital (e.g., Proposed Rule 17i–4 would require an $100 million) is an appropriate method We request comment on all aspects of SIBHC to establish, document and to demonstrate whether a broker-dealer the withdrawal provisions included in maintain a system of internal risk has a substantial presence in the proposed Rule 17i–3. Specifically, we management controls to assist it in securities business. If so, is $100 million request comment on whether the in tentative net capital appropriate, or information the Commission intends to 45 Market risk involves the risk that prices or rates use to determine whether continued will adversely change due to economic forces. Such should the dollar amount be higher or risks include adverse effects of movements in lower? supervision of an SIBHC is necessary or equity and interest rate markets, currency exchange appropriate in furtherance of the rates, and commodity prices. Market risk can also C. Proposed Rule 17i–3: Withdrawal purposes of Section 17 of the Act is include the risks associated with the cost of From Supervision as an SIBHC appropriate, and whether the borrowing securities, dividend risk, and correlation Proposed Rule 17i–3 would permit an risk. Commission should consider any 46 Credit risk comprises risk of loss resulting from SIBHC to withdraw from Commission additional factors. In addition, we counterparty default on loans, swaps, options, and supervision by filing a notice of request comment as to whether the time during settlement. withdrawal with the Commission. frames for withdrawal included in the 47 Operational risk encompasses the risk of loss Pursuant to the proposed Rule, a notice due to the breakdown of controls within the firm proposed Rule are appropriate, or including, but not limited to, unidentified limit of withdrawal from supervision would whether they should be longer or excesses, unauthorized trading, fraud in trading or take effect one year after it is filed with shorter. If the time periods should be in back office functions, inexperienced personnel, the Commission (or a shorter or longer and unstable and easily accessed computer systems. longer or shorter, under what period that the Commission deems 48 Funding risk includes the risk that a firm will circumstances? necessary or appropriate to ensure not be able to raise sufficient cash to meet all its obligations that are due, which may occur even if effective supervision of the material D. Proposed Rule 17i–4: Internal Risk the firm has positive net worth if some assets are risks to the SIBHC and any affiliated Management Control System not readily marketable. broker-dealer or to prevent evasion of Requirements for SIBHCs 49 Legal risk arises from possible risk of loss due the purposes of Section 17 of the to an unenforceable contract or an ultra vires act of Exchange Act).44 The proposed Rule Participants in the securities markets a counterparty. 50 This is commonly referred to as systemic risk. are exposed to various risks, including Systemic risk includes the risk that the failure of 43 As set forth in paragraph (d)(2)(i)(B) of one firm or within one market segment would proposed Rule 17i–2. trigger failures in other market segments or 44 See paragraph (b) of proposed Rule 17i–3. throughout the financial markets as a whole.

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managing the risks associated with its reviews of the internal risk management plans to respond to those events would business activities, including market, control system conducted by an provide the Commission with important credit, operational, funding, and legal accountant should be reported in information during an examination that risks. writing to the SIBHC’s Board of would be necessary to adequately assess Proposed Rule 17i–4 would require an Directors. In addition, we request the SIBHC’s financial condition and SIBHC to comply with present Exchange comment on whether results of these financial and operational risks. Act Rule 15c3–4 as though it were a periodic reviews should be reported in We request comment as to whether broker-dealer.51 Currently, Rule 15c3–4 writing to the Commission. there are any other records that an SIBHC should be required to create. We applies to over-the-counter derivatives E. Proposed Rule 17i–5: Record dealers 52 (‘‘OTC derivatives dealers’’). also request comment as to whether it Creation, Maintenance, and Access would be appropriate to expand the list Based on the Commission’s experience Requirements for SIBHCs with OTC derivatives dealers, we of specified events described above. Pursuant to Section 17(i)(3)(A) of the believe this rule would require an 2. Record Maintenance SIBHC to develop strong internal Exchange Act, an SIBHC would be controls that would reduce risk at the required to make and keep records, Pursuant to paragraph (b) of proposed SIBHC and would require an SIBHC to furnish copies thereof, and make such Rule 17i–5, the SIBHC would be adequately document those controls so reports as the Commission may require required to preserve (i) the records 55 the controls can be examined. by rule. Proposed Rule 17i–5 would required to be created pursuant to 17i– Paragraph (b) of proposed Rule 17i–4 require that an SIBHC make and keep 5(a); (ii) all Notices of Intention, would require that an SIBHC establish, current certain records relating to its amendments thereto, and other document, and maintain procedures for business. In addition, it would require documentation and information filed with the Commission in accordance the detection and prevention of money that an SIBHC preserve those and other with proposed Rule 17i–2 and any laundering and terrorist financing as records for certain prescribed time responses thereto; (iii) reports and part of its internal risk management periods. The purpose of this rule is to notices filed with the Commission in control system. These procedures require an SIBHC to create and maintain accordance with proposed Rules 17i–6 should include appropriate safeguards records that would allow the and 17i–8; and (iv) records documenting at the holding company level to prevent Commission to remain informed as to the internal risk management control money laundering through affiliates.53 the SIBHC’s activities, financial system established in accordance with This proposed requirement would allow condition, policies, systems for monitoring and controlling financial proposed Rule 17i–4 to manage the risks us to adequately inspect members of the and operational risks, and transaction of the affiliate group. affiliate group as required by the among members of the affiliate group, as Proposed Rule 17i–5 would require statute.54 We request comment on all well as determine whether the SIBHC is that an SIBHC maintain the specified aspects of the internal risk management in compliance with the Exchange Act records for a period of three years in an control system requirements included in and rules to which it is subject. easily accessible place. Exchange Act proposed Rule 17i–4. We also request Rule 17a–4 presently requires that comment on whether Rule 17i–4 should 1. Record Creation broker-dealers maintain certain records incorporate Rule 15c3–4 or should be Paragraph (a) of proposed Rule 17i–5 for this time period, and we believe this fashioned as a stand-alone rule. In would require that the SIBHC make and time period is sufficient with relation to addition, we request comment as to keep current (i) a record reflecting the the records required pursuant to whether any aspect of Rule 15c3–4 results of quarterly stress testing of the proposed Rule 17i–5 to allow effective could be better tailored to reflect unique affiliate group’s funding and liquidity examinations of SIBHCs. The proposed aspects of group risk management with respect to certain specified events; Rule would allow an SIBHC to maintain practices (as opposed to internal firm (ii) a record of the SIBHC’s contingency these records in any manner permitted risk management practices). plans to respond to certain specified pursuant to Rule 17a–4(f).56 Finally, we request comment on events affecting the affiliate group’s Paragraph (c) of proposed Rule 17i–5 whether Rule 15c3–4 should be funding and liquidity; and (iii) a record would allow an SIBHC to maintain the amended to require that results of the of the basis for credit risk weights for records required under the rule either at periodic reviews of the internal risk each counterparty. the SIBHC, at an affiliate, or at a records management control system conducted The specified events concerning storage facility, provided that the by an internal auditor and annual which an SIBHC would need to conduct records are located within the stress tests and create a contingency boundaries of the United States. If these 51 In a separate release, we also proposed rules plan would include, (i) a credit rating and rule amendments that would, among other records are maintained by an entity things, establish optional alternative net capital downgrade of the SIBHC; (ii) an other than the SIBHC, the SIBHC would requirements for certain broker-dealers. See inability of the SIBHC to access capital be required to file a written undertaking Exchange Act Release No. 48690 (October 24, 2003). markets for short-term funding; (iii) an from the entity with the Commission. In connection with that proposal, we proposed inability of the SIBHC to move liquid amendments to Rule 15c3–4 that would apply to a This is intended to allow the SIBHC the broker or dealer that elects to compute its net assets across international borders when flexibility to maintain records, while capital under proposed Appendix E of Rule 15c3– (i) or (ii) occur; or (iv) an inability of the permitting the Commission to obtain 1. SIBHC to access credit or assets held at those records. 52 See Exchange Act Release No. 40594 (Oct 23, a particular institution when (i) or (ii) Proposed Rule 17i–5 would not 1998), 63 FR 59362 (Nov 3, 1998). occur. These events are intended to require an SIBHC to maintain its 53 This parallels requirements in the New Basel Capital Accord (See infra, note 67). See also identify possible liquidity and funding required records in a prescribed Financial Action Task Force on Money Laundering stress scenarios that would impose standard form. To reduce the (‘‘FATF’’) Recommendation 22 and see generally significant financial distress on the recordkeeping burden on SIBHCs, the FATF’s Special Recommendations on Terrorist SIBHC. The Commission believes that proposed Rule 17i–5 would instead Financing. (The FATF’s documents can be found at: www.FATF–GAFI.org). records of the SIBHC’s contingency allow the SIBHC to meet its 54 See generally, Exchange Act § 17(i)(3)(C)(i)(I) [15 U.S.C. 78q(i)(3)(C)(i)(I)]. 55 See supra, note 12. 56 17 CFR 240.17a–4(f).

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recordkeeping requirements through regulations prescribed and orders issued examining authority 60 to evaluate the records created for its own use so long under the Act. broker-dealer’s financial and operational as those records include the information We request comment as to whether condition. required in the proposed rules. the Commission should accord We request comment on the timing of We request comment on the record confidential treatment to the documents the monthly reporting requirements. maintenance provisions of paragraph (b) an SIBHC is required to create, Further, we request comment on to proposed Rule 17a–5. Specifically, maintain, and grant the Commission whether any additional information are there other records that an SIBHC access to pursuant to proposed Rule should be included in the monthly should preserve in order to provide the 17i–5. reports to be filed with the Commission. Commission with adequate information We also request comment on whether in reviewing the SIBHC’s financial or F. Proposed Rule 17i–6: Reporting the monthly reporting requirement operational condition or compliance Requirements for SIBHCs should be modified for an SIBHC (or a with applicable rules? In addition, we member of the affiliate group) required request comment as to what reports an Proposed Rule 17i–6 would require an to file information, documents, and SIBHC should maintain with respect to SIBHC to file certain monthly and reports pursuant to §§ 13(a) or 15(d) of its affiliates that may be regulated by quarterly reports with the Commission, the Exchange Act and, if so, how and another financial regulator (for each as well as an annual audit report. These why they should be modified. such report, please delineate the reporting requirements are designed to information contained in that report, as inform the Commission about the 2. Quarterly Reports well as any information an SIBHC activities of the SIBHC, as well as the Paragraph (a)(2) of proposed Rule 17i– would be required to maintain pursuant financial condition, policies, systems for 6 would require that an SIBHC file a to proposed Rule 17i–6 that may not be monitoring and controlling financial quarterly risk report with the included in that report). and operational risks, and transactions Commission within 35 calendar days and relationships involving the affiliate after the end of each quarter. This report 3. Access to Records group. In addition, these requirements would include, in addition to all the The Commission has authority to are designed to keep the Commission information required to be filed on a examine an SIBHC and its affiliates informed of the extent to which the monthly basis, (i) consolidating pursuant to Section 17(i)(3)(C) of the SIBHC or its affiliates have complied financial statements (that break out data Exchange Act.57 However, the Act limits with the provisions of the Exchange Act, regarding each material affiliate into the focus and scope of such and regulations prescribed and orders separate columns); (ii) the results of examinations. The statutory provisions issued under the Exchange Act. backtesting of each of the models used also require that the Commission use, to to compute allowable capital and 1. Monthly Reports the fullest extent possible, examination allowances for market and credit risk; reports regarding an examination of the Paragraph (a) of proposed Rule 17i–6 (iii) a description of all material pending SIBHC or certain regulated affiliates would require that the SIBHC file a legal or arbitration proceedings 58 made by an appropriate regulator. monthly risk report with the involving any member of the affiliate Paragraph (d) of proposed Rule 17i–5 Commission, within 17 business days group that are required to be disclosed would specify that all information after the end of each month that is not under generally accepted accounting obtained by the Commission pursuant to also the end of a quarter. This report principles; and (iv) the aggregate debt this section from the SIBHC will be would include consolidated financial scheduled to mature within twelve accorded confidential treatment statements for the affiliate group, months from the most recent quarter by pursuant to Section 24(b) of the computations of consolidated allowable each affiliate that is a broker-dealer and Exchange Act. Section 17(j) of the capital and allowances for market, any other material affiliate, together Exchange Act 59 also provides for credit, and operational risk, a graph with the allowance for losses for such confidentiality of SIBHC documents. We reflecting daily intra-month Value at transactions. The information an SIBHC believe it is important to accord Risk (‘‘VaR’’) for each business line, would be required to file on a quarterly confidential treatment to these consolidated credit risk information, a basis would provide the Commission documents because the information an summary report of the SIBHC’s with valuable insight as to the financial SIBHC would be required to create, exposures on a consolidated basis for and operational condition of the SIBHC. maintain, and grant the Commission each of the top ten countries to which Requiring reports to be filed within 35 access to pursuant to the proposed it is exposed, and certain regular risk calendar days after the end of each Rules would generally be highly reports the SIBHC generally provides to quarter provides time frames similar to sensitive, non-public business the persons responsible for managing those for quarterly reports due from information. risk for the affiliate group. These reports companies required to file information, We believe the requirements set forth would be due within the same time documents, and reports pursuant to in proposed Rule 17i–5 are necessary to 61 frames as the monthly FOCUS reports §§ 13(a) or 15(d) of the Exchange Act. keep the Commission informed as to the broker-dealers are required to file SIBHC’s activities, financial condition, 60 pursuant to Rule 17a–5(a). These reports Pursuant to Exchange Act Rule 17d–1 [17 CFR policies, systems for monitoring and 240.17d–1], where a broker-dealer is a member of would allow the Commission to review controlling financial and operational more than one self-regulatory organization (as and monitor the risk profile for the risks, transactions and relationships defined in Exchange Act § 3(a)(26) [15 U.S.C. affiliate group. Further, they would alert 78c(a)(26)]), the Commission shall ‘‘designate’’ one between any broker or dealer affiliate of the Commission to any deterioration in self-regulatory organization as responsible for the SIBHC, and the extent to which the examining the broker-dealer for compliance with the affiliate group’s financial or SIBHC has complied with the applicable financial responsibility rules. The self- operational position and risk profile. provisions of the Act and the regulatory organization of a broker-dealer that has Broker-dealers currently are required to been so designated is commonly referred to as the file detailed financial information, broker-dealer’s designated examining authority (or 57 15 U.S.C. 78q(i)(3)(C). ‘‘DEA’’). 58 See supra, note 17. which is used by the Commission and 61 See Release No. 33–8128 (Sep. 5, 2002), 67 FR 59 15 U.S.C. 78q(j). the broker-dealer’s designated 179 (Sep. 16, 2002).

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We request comment as to whether this or reports, (ii) accountants, (iii) audit registered public accounting firm to time period is appropriate for SIBHCs. objectives, (iv) the extent and timing of perform its annual audit. We request comment as to whether audit procedures, (v) the accountant’s 5. Accountant’s Report on Management any additional information should be report, (vi) supplemental reports, (vii) Controls—Paragraph (i)(2) of Proposed included in the quarterly reports to be notification of a change in fiscal year, filed with the Commission. We also Rule 17i–6 and Amendment to (viii) extensions and exemptions, (ix) Paragraph (l) of Existing Rule 17a–12 request comment on whether the how the reports should be filed, and (x) quarterly reporting requirement should confidentiality. Paragraph (i)(2) of proposed Rule 17i– be modified for an SIBHC (or member of Paragraph (e) would require that the 6 would require that the SIBHC submit the affiliate group) required to file audit and supplemental reports be a supplemental report, prepared by the information, documents, and reports prepared by an accountant that is a accountant, regarding the accountant’s pursuant to §§ 13(a) or 15(d) of the ‘‘registered public accounting firm’’ as review of the internal risk management Exchange Act and, if so, how they that term is defined in the Sarbanes- control system established and should be modified. Oxley Act of 2002.62 We are proposing documented in accordance with proposed Rule 17i–4. This review 3. Additional Reports that the review be conducted by a registered public accounting firm would have to be accomplished using Paragraph (b) of proposed Rule 17i–6 because such firms would be subject to procedures agreed-upon by the would provide that, in addition to the PCAOB rules, examination, and accountant and the SIBHC. The Rule monthly and quarterly reports specified discipline. also specifies that the agreed-upon in the proposed Rule, an SIBHC may be We believe the requirements set forth procedures would be required to be required, upon receiving written notice in proposed Rule 17i–6 are necessary to performed and the report to be prepared from the Commission, to provide the keep the Commission informed as to the in accordance with the rules Commission with additional financial or SIBHC’s activities, financial condition, promulgated by the PCAOB. Pursuant to operational information. As specified in policies, systems for monitoring and paragraph (i)(4) of proposed Rule 17i–6, the proposed Rule, the Commission may controlling financial and operational the SIBHC would be required to submit request additional reports in order to risks, and transactions and relationships the agreed-upon procedures to the monitor the SIBHC’s financial or between any broker or dealer affiliate of Commission prior to the review. Paragraph (i)(4) of proposed Rule 17i– operational condition, risk management the SIBHC and the extent to which the 6 differs from present Rule 17a–12(l), system, any transactions and SIBHC has complied with the which requires that an accountant relationships among members of the provisions of the Act and the affiliate group, and the extent to which provide an opinion regarding an OTC regulations prescribed and orders issued derivatives dealer’s compliance with its the SIBHC has complied with the under the Act. In addition, paragraph (k) provisions of the Exchange Act and internal risk management control of proposed Rule 17i–6 regarding system. Auditors of OTC derivatives regulations and orders issued under the extensions and exemptions would Exchange Act. This will allow the dealers have stated that the lack of provide the Commission with flexibility standards for evaluating compliance Commission the flexibility to obtain to address firm-specific issues as they information, for instance, to more with internal risk management control arise. Finally, we believe it is important systems prevents them from issuing an closely monitor the financial and to accord confidential treatment to the operational condition of an SIBHC opinion. For this reason, the reports and statements filed pursuant to Commission is proposing to amend during periods of market stress. proposed Rule 17i–6, as specified in In addition, if a broker-dealer present Rule 17a–12(l) so that, similar to paragraph (m), because these reports the requirements of paragraph (i)(2) of affiliated with the SIBHC or the SIBHC would include information that were to file notice (pursuant to Rule proposed Rule 17i–6, an OTC generally would be non-public and derivatives dealer would be required to 17a–11 or proposed Rule 17i–8, highly sensitive. respectively), the Commission would be submit a supplemental report, prepared We request comment on the proposed by the accountant using agreed-upon able to request additional reports from timing of the annual audit reports and the SIBHC to fully assess the situation procedures, regarding the accountant’s whether any additional information review of the internal risk management giving rise to the filing of the notice. should be included in that report. We We request comment on our proposal control system established and also request comment on whether the to require that an SIBHC file such documented in accordance with Rule annual audit requirements should be additional reports as the Commission 15c3–4. modified for an SIBHC (or member of may request. Paragraph (i)(2) of proposed Rule 17i– the affiliate group) required to file 6 and this proposed amendment to Rule 4. Annual Audit Report information, documents, and reports 17a–12(l) would allow an accountant to Pursuant to paragraph (c)(1) of pursuant to sections 13(a) or 15(d) of the review an SIBHC’s or OTC derivatives proposed paragraph 17i–6, the SIBHC Exchange Act and, if so, how they dealer’s internal risk management would be required to file an annual should be modified. In addition, we control systems and provide a report audit report containing consolidated request comment as to whether the regarding whether the risk management financial statements. Paragraphs (c)(2) Commission should accord confidential control systems comply with the and (c)(3) of proposed Rule 17i–6 would treatment to the reports filed with the requirements of proposed Rule 17i–4 or require that the annual audit report be Commission by the SIBHC pursuant to Rule 15c3–4, respectively, and that the ‘‘as of’’ the same date as, and filed with proposed Rule 17i–6. SIBHC or OTC derivatives dealer is, in the Commission concurrently with, the We also request comment on our fact, following its risk management annual audit report of the SIBHC’s proposal to require that an SIBHC use a system. subsidiary broker-dealers. We request comment as to whether Paragraphs (d), (e), (f), (g), (h), (i), (j), 62 15 U.S.C. 7201(a)(12). The term ‘‘registered the proposed amendment to Rule 17a– public accounting firm’’ means a public accounting (k), (l), and (m) of proposed Rule 17i– firm registered with the Public Company 12(l) would adequately resolve the lack 6 are based on existing Rules 17a–5 and Accounting Oversight Board (‘‘PCAOB’’) in of standards for conducting an audit of 17a–12 regarding (i) the nature and form accordance with the Sarbanes-Oxley Act of 2002. a firm’s internal risk management

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control systems and its compliance with from Rules 17h–1T and 17h–2T for consistent with the Basel Standards. those systems. broker-dealers affiliated with an SIBHC. The Basel Standards have been used by many other financial regulators for H. Proposed Rule 17i–7: Calculations of G. Exemption From Risk Assessment many years as a method to assess capital Rules for Broker-Dealer Affiliates of Allowable Capital and Risk Allowances or Alternative Capital Assessment adequacy at the holding company level. SIBHCs We are proposing what we believe are Proposed Rule 17i–7 would require an The Commission presently receives prudent parameters for measuring SIBHC to calculate the affiliate group’s allowable capital and allowances for financial and risk information about allowable capital and allowances for risk for the SIBHC that are consistent holding companies and certain affiliates certain types of risk. Proposed Rule 17i– with the Basel Standards. In some cases of broker-dealers, and certain off- 7 would not set minimum group-wide these parameters may be more balance sheet items of broker-dealers, capital levels for SIBHCs; rather, it conservative than some firms believe are their holding companies, and their would require the SIBHC to perform necessary to account for risk. For affiliates pursuant to the risk assessment certain calculations that the example, the proposal would place rules (Rules 17h–1T and 17h–2T) and Commission could review to gain an limits on the amount of subordinated through meetings with and reports from understanding of the financial position debt that may be included in allowable members of the Derivatives Policy of the affiliate group and identify any capital, require that the VaR model used 63 Group. These supervisory tools risks it poses to the broker-dealer. to calculate the allowance market risk generally have performed well by The Basel Committee on Banking be based on a ten business-day 65 assisting the Commission in identifying, Supervision (‘‘Basel Committee’’) has movement in rates and prices and that at an early stage, firms that are developed international regulatory a 99% confidence level be used, and experiencing financial problems. standards that aim to align economic require that the VaR measure be As part of this rulemaking, the capital calculations with regulatory multiplied by a factor of at least three. Commission is proposing to amend capital requirements for large Requiring that an SIBHC calculate its 64 internationally active banking Rules 17h–1T and 17h–2T to exempt 66 allowable capital and allowances for broker-dealers that are affiliated with an institutions (‘‘Basel Standards’’). The market, credit and operational risk SIBHC from those rules. Rule 17h–1T Basel Committee has proposed to based on the Basel Standards would modify the Basel Standards.67 Our requires that a broker-dealer maintain provide the Commission with a useful proposal incorporates a capital and preserve records and other measure of the SIBHC’s financial computation for the SIBHC that is information concerning the broker- position and allow for greater dealer’s holding companies, affiliates, or comparability of an SIBHC’s financial 65 The central bank governors of the Group of Ten subsidiaries that are likely to have a countries (‘‘G–10 countries’’) established the Basel condition to that of other international material impact on the financial or Committee in 1974 to provide a forum for ongoing securities firms and banking operational condition of the broker- cooperation among member countries on banking institutions. dealer. Rule 17h–2T requires that supervisory matters. 66 The basic consultative papers developed by the 1. Calculation of Consolidated broker-dealers file quarterly reports with Basel Committee are: the Basel Capital Accord Allowable Capital the Commission concerning the (1988), the Core Principles for Effective Banking information required to be maintained Supervision (1997), and the Core Principles Consistent with the Basel 68 and preserved under Rule 17h–1T. We Methodology (1999). The Basel Standards establish Standards, proposed Rule 17i–7 a common measurement system, a framework for would require that an SIBHC calculate believe that exempting a broker-dealer supervision, and a minimum standard for capital that is affiliated with an SIBHC is adequacy for international banks in the G–10 ‘‘allowable capital’’ for the affiliate appropriate because, pursuant to countries. It is intended to increase the group that would include common transparency and consistency of the supervision of proposed Rule 17i–5, the SIBHC would shareholders’ equity (less goodwill, financial companies across borders. The Basel deferred tax assets, other intangible be required to make and retain Standards generally have been implemented for documents substantially similar to those internationally active, large banking institutions by assets, and certain other deductions), the broker-dealer is required to make U.S. bank regulators. See Office of the Comptroller certain cumulative and non-cumulative of the Currency, Federal Reserve System, Federal preferred stock,69 and certain properly and retain pursuant to Rule 17h–1T. Deposit Insurance Corporation, ‘‘Risk Based Capital Further, pursuant to proposed Rule 17i– Standards; Market Risk,’’ 61 FR 47358 (Sept. 6, subordinated debt. As set forth in 6, the SIBHC would be required to make 1996). 67 68 reports that are substantially similar to In April 2003, the Basel Committee released for Proposed Rule 17i–7 is generally consistent public comment a document entitled ‘‘The New with U.S. banking regulators’ interpretations of the those the broker-dealer is required to Basel Capital Accord’’ (the ‘‘New Basel Capital Basel Standards and incorporates the quantitative make pursuant to 17h–2T. We request Accord’’) to modify the Basel Standards. This paper and qualitative conditions imposed on banking comment on the proposed exemptions can presently be found at: http://www.bis.org/bcbs/ institutions. However, one difference is our cp3full.pdf. Comments were accepted through July proposal to use maximum potential exposure as 31, 2003. On October 11, 2003, the Committee opposed to notional add-ons to calculate credit risk 63 Pursuant to the ‘‘risk-assessment rules,’’ announced that it had received over 200 comment for OTC derivatives instruments, and our adopted under Exchange Act Section 17(h), broker- letters, that there is continued broad support for the interpretation as to what instruments should be dealers also submit consolidated and consolidating structure of the new accord and agreement on the subject to market risk, as opposed to credit risk, financial statements, organizational charts of the need to adopt a more risk-sensitive capital treatment. These differences, and the reasons for holding company, descriptions of material legal framework. The Committee requested comment by them, are described more specifically in the exposures, and risk management policies and December 31, 2003, on an amendment to its sections relating to the calculations of allowance for procedures to the Commission. [17 CFR 240.17h– proposed treatment of expected and unexpected market and credit risk. 1T and 17 CFR 240.17h–2T]. Member firms of the losses. The Basel Committee expects to issue a final 69 The cumulative and non-cumulative preferred Derivatives Policy Group (‘‘DPG’’) also voluntarily revision of the proposed New Basel Capital Accord stock could not (i) have a maturity date, (ii) be supply us with additional information regarding by the middle of 2004, with an effective date for redeemed at the option of the holder, or (iii) contain derivative financial instruments, off balance sheet implementation of December 31, 2006. Currently, any other provisions that would require future obligations, and the concentration of credit risk. U.S. banking regulators have released an Advanced redemption of the issue. In addition, the issuer The DPG was formed in March 1995 by the industry Notice of Proposed Rulemaking to seek comment on would have to be able to defer or eliminate and the Commission to provide a voluntary their preliminary views regarding the dividends. Finally, the cumulative and non- oversight framework for monitoring derivatives implementation of the proposed New Basel Capital cumulative preferred stock would be subject to activities of broker-dealer affiliates. Accord (68 FR 45900 (August 4, 2003)). Comments certain limits (see paragraphs (a)(2) and (a)(3)(i) of 64 17 CFR 240.17h–1T and 240.17h–2T. are due by November 3, 2003. proposed Rule 17i–7).

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further detail in the proposed rule, the Under the proposal, to be included in Some industry participants have cumulative and non-cumulative allowable capital, subordinated debt suggested that certain long-term debt preferred stock and the subordinated would be required to be unsecured and that cannot be accelerated should be debt would be subject to additional subordinated in right of payment to all included in allowable capital because at limitations based on comparisons of the of the SIBHC’s senior debt. Debt that, the SIBHC level there is no protected individual components of allowable upon default, can be repaid by class of creditors, and therefore there is capital. conversion of collateral or before other no significant difference between that When first implemented, the Basel debt could not be considered type of long-term debt and subordinated Standards allowed national bank subordinated in right of repayment to all debt. In addition, they assert that supervisors discretion in counting senior indebtedness of the SIBHC subordinated debt is more costly to an goodwill as capital during a transition because the debt effectively would have entity than long-term debt that cannot period. Thus, we solicit comment on priority over at least some other debt. be accelerated because of the restrictive whether goodwill should be included in Subordinated debt instruments that provisions associated with, and the lack allowable capital for a particular permit acceleration of payment upon of an active trading market for, transition period and, if so, the length events other than bankruptcy or subordinated debt. of the transition period. reorganization of the SIBHC would not qualify for inclusion in allowable We solicit comment on whether long- An entity’s debt is not ordinarily capital under the proposed rules.71 term debt, subject to appropriate includible in its regulatory capital. Acceleration clauses raise significant limitations, should be included in However, because debt can provide a supervisory concerns because allowable capital. Specifically, we long-term source of working capital to repayment of the debt could be request comment on the following the entity and may have many of the accelerated at a time when an SIBHC is issues: characteristics of capital, the Basel experiencing financial difficulties. • If long-term debt is included in Standards permit unrestricted long-term Acceleration, therefore, could inhibit an allowable capital, what restrictions 70 subordinated debt to count as SIBHC’s ability to resolve its financial should apply? regulatory capital. Under paragraph problems in the normal course of • (a)(3)(ii) of proposed Rule 17i–7, Would trading in its long-term debt business and force the company into provide a more reliable indication of the consistent with the Basel Standards, involuntary bankruptcy. subordinated debt could be included in credit quality of the SIBHC than We request comment on the inclusion subordinated debt and, if so, why? allowable capital if it meets four criteria. of subordinated debt in allowable • First, the original weighted average capital generally and on the following Does a holder of its subordinated maturity of the SIBHC’s subordinated questions in particular: debt have a greater incentive to monitor debt must be at least five years. Second, • Is five years the appropriate the financial condition of the SIBHC the subordinated debt instrument must maturity for subordinated debt to be than a holder of its long-term debt state clearly on its face that repayment included in allowable capital? Would because its claim is more junior? of the debt is not protected by the another term, whether longer or shorter, • Are there debt instruments other Securities Investor Protection be more appropriate? than subordinated debt that provide an • Corporation (‘‘SIPC’’) or any Federal To be included in allowable capital, equivalent market signal about the agency. Third, the debt must be should subordinated debt be subject to credit quality of the issuer? unsecured and subordinated in right of negative pledge provisions that, for • payment to all senior indebtedness of example, would restrict an SIBHC’s Is there a material difference the SIBHC. Fourth, the terms of the ability to pledge the equity securities of between the depth of the market for the subordinated debt agreement may a subsidiary to secure the debt or to sell long-term debt of an SIBHC and the permit acceleration only in the event of a subsidiary unless the buyer agreed to depth of the market for its subordinated bankruptcy or reorganization of the assume liability for some portion of the debt and, if so, how would any such SIBHC under Chapters 7 (liquidation) or debt? difference impact the cost of financing 11 (reorganization) of the U.S. • Should subordinated debt that is for the SIBHC? Bankruptcy Code. subject to acceleration events other than • Would there be any other adverse The four criteria subordinated debt bankruptcy or reorganization of the effects if the SIBHC were permitted to would have to satisfy to be included in SIBHC under the Bankruptcy Code be include long-term debt in allowable allowable capital are necessary to help included in allowable capital? capital? • What should be the maximum assure permanency of capital and to • If long-term debt could be included amount of subordinated debt that is inform subordinated lenders of the risks in allowable capital, what, if any, associated with being a subordinated includible in allowable capital? • What are the additional costs of requirements should apply to the lender. Funds lent under a subordinated issuing subordinated debt versus long- maturity date of the long-term debt? debt agreement necessarily are subject term debt of the same maturity? What events of acceleration should be to the risks of the SIBHC’s business and permissible? must be available to pay other creditors 71 The prohibition on acceleration of payment • Should long-term debt be subject to if the SIBHC defaults on other also would prohibit inclusion of credit sensitive a negative pledge, that, for example, obligations. Although the customers of subordinated debt in allowable capital. Credit would restrict an SIBHC’s ability to certain of the SIBHC’s affiliates may be sensitive subordinated debt ties payments to the financial condition of a borrower/holding company pledge the equity securities of a entitled to the protection of SIPC under or its affiliates. This feature of the debt forces a subsidiary to secure the debt or to sell specific circumstances, subordinated holding company to make increased payments as its a subsidiary unless the pledgor or buyer lenders of the SIBHC would not be financial condition deteriorates and, therefore, acts agreed to assume liability for some entitled to that protection. as a de facto acceleration clause that may deplete the holding company’s resources and increase the portion of the debt? likelihood of default on debt. Furthermore, a credit • 70 By contract, subordinated debt is debt that is requirement clause potentially would allow a What other provisions concerning subordinated in right of payment to all senior subordinated lender to obtain payment before the inclusion of long-term debt in indebtedness of the company. senior creditors. allowable capital should be considered?

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2. Calculation of Consolidated factors to be used when calculating subject to this allowance are loans and Allowance for Market Risk market and credit risk).75 The loan commitments receivable, Paragraph (b) of proposed Rule 17i–7 quantitative requirements would set receivables arising from derivatives would require that an SIBHC calculate forth basic standards for each model contracts, repurchase and reverse a consolidated allowance for market risk including, (i) it must use a 99 percent, repurchase agreements, structured daily for all proprietary positions. The one-tailed confidence level and with financial products, credit substitutes, SIBHC would calculate an allowance for price changes equivalent to a ten and other extensions of credit. market risk for each position using business-day movement in rates and Consistent with the proposed New either a VaR model or, if there is not prices for purposes of determining Basel Capital Accord, Paragraph (c)(1)(i) adequate historical data to support a market risk, (ii) it must use an effective of proposed Rule 17i–7 would establish VaR model, an alternative method. historical observation period that must the manner in which the ‘‘credit Generally, the allowance for market risk be at least one year in length and equivalent amount’’ of a balance sheet would constitute three times 72 the include periods of market stress, and item should be calculated. The credit largest amount the SIBHC could lose (iii) it must take into account and equivalent amounts for receivables over a ten-day period with a 99% incorporate all significant identifiable relating to (i) derivatives contracts, confidence level (as determined using market risk factors applicable to the repurchase agreements, reverse the VaR model or alternative method).73 affiliate group’s positions. repurchase agreements, stock loans, An SIBHC would need to provide the Consistent with the Basel Standards, stock borrows, and other similar Commission with information regarding paragraph (b)(1) of proposed Rule 17i– collateralized transactions; (ii) loans and any alternative method for computing 7 would require that each VaR model loan commitments receivable; and (iii) allowance for market risk for particular used to calculate allowance for market other assets would be calculated positions during the Commission’s risk also must be one that can be differently, and are set forth in review of its Notice of Intention so that disaggregated by each line of business paragraphs (c)(1)(i)(A), (B), and (C) of the Commission could evaluate the exposed to market risk and by each legal proposed Rule 17i–7, respectively. method to determine whether it entity. Paragraph (c)(1)(i)(D) of proposed Rule We request comment on all aspects of adequately measured the risks of those 17i–7 would define the term ‘‘current the proposed methods for calculating positions. exposure’’ to be the current replacement market risk, including whether any Paragraph (b)(1) of proposed Rule value of the counterparty’s positions other quantitative or qualitative 17i–7 would require that each VaR with the member of the affiliate group requirements should be applied to VaR model used to calculate allowance for including the effect of netting models. In addition, we request that market risk must meet the qualitative agreements with that counterparty,77 commenters address any perceived and quantitative requirements set forth and taking into account the value of differences between the proposed in rules the Commission is also collateral from that counterparty 78 methodology for calculating market risk proposing today in a separate release, pledged to and held by any member of and the Basel Standards. Further, we proposed Rule 15c3–1e(e).74 The the affiliate group and the fair market request comment on alternative qualitative and quantitative standards value of any credit derivatives that methods for computing allowance for set forth in proposed Rule 15c3–1e(e) specifically change the exposure to the market risk, and the appropriateness of are similar to the requirements for counterparty (as long as the credit those methods. models used by OTC derivatives dealers derivatives are not used to change the and are consistent with the Basel 3. Calculation of Consolidated Standards. The qualitative requirements Allowance for Credit Risk 77 Only netting agreements that meet the would address three aspects of an requirements set forth in paragraph (d)(5) of Paragraph (c) of proposed Rule 17i–7 proposed Rule 15c3–1e could be used to reduce SIBHC’s risk management system: (i) would require that an SIBHC calculate current or maximum potential exposures. See supra The model would have to be integrated a consolidated allowance for credit risk note 51. Generally, the SIBHC could use a netting into, and thus relied upon, in the daily using either a calculation agreement that allows the SIBHC to net gross SIBHC’s daily risk management process; receivables and gross payables with a counterparty consistent with the Basel Standards or upon default of the counterparty if (i) the netting (ii) the model would be required to the methodology set forth in paragraph agreement is legally enforceable in each relevant undergo periodic reviews by the (c)(1) of proposed Rule 17i–7, which is jurisdiction, including in insolvency proceedings; SIBHC’s internal audit staff and annual similar to the proposed New Basel (ii) the gross receivables and gross payables subject reviews by an accountant; and (iii) the to the netting agreement with a counterparty can be Capital Accord. This choice would determined at any time; and (iii) for internal risk SIBHC would need to conduct provide SIBHCs with some flexibility management purposes, the SIBHC monitors and backtesting of the model (the results of while the Basel Standards are under controls its exposure to the counterparty on a net the backtests would be used by the review. The methodology set forth in basis. SIBHC to determine the multiplication 78 Only collateral that meets the requirements set paragraph (c)(1) of proposed Rule 17i– forth in paragraph (d)(6) of proposed Rule 15c3–1e 7 would require that an SIBHC multiply could be used to reduce current or maximum 72 Paragraph (b)(1) of proposed Rule 17i–7 would the credit equivalent amount of certain potential exposures. See supra note 51. Generally, establish the initial multiplication factor (three); asset and off-balance sheet items by the the SIBHC could take the fair market value of however the multiplication factor would collateral pledged to and held by the SIBHC into subsequently be set based on the number of appropriate credit risk weight of the account, provided (i) the collateral is marked to backtesting errors generated through use of the asset or off-balance sheet item, and then market each day and is subject to a daily margin model. The initial multiplication factor was derived multiply the result by 8%.76 In general, maintenance requirement; (ii) the collateral has a from the minimum requirement set forth in 17 CFR the asset and off-balance sheet items ready market or consists of major market foreign 240.15c3–1f(e)(1)(iv)(C) (the rule used by OTC currency as defined in § 240.15c3–1a(b)(1)(i)(C) or derivatives dealers to calculate market risk capital U.S. currency; (iii) the collateral agreement is charges). This initial multiplication factor would be 75 See supra, note 51. Specifically, see proposed legally enforceable by the SIBHC against the used until sufficient backtesting results has been 17 CFR 240.15c3–1e(e)(1). counterparty and any other parties to the collected to use the Table set forth in 17 CFR 76 This is consistent with the calculation of credit agreement; (iv) the collateral does not consist of 240.15c3–1e(e)(1)(iii)(C). risk used by OTC derivatives dealers (See 17 CFR securities issued by the counterparty or a party 73 See supra, note 51. Specifically, see proposed 240.15c3–1f(d)(2)). In addition, the 8% basic related to the SIBHC or to the counterparty; and (v) 17 CFR 240.15c3–1e(e)(2)(i). multiplier to calculate credit risk capital charges is the collateral is not used in determining the credit 74 See supra, note 51. consistent with the Basel Standards. rating of the counterparty.

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credit risk weight of the counterparty as the Basel Committee, as modified from CREDIT RISK WEIGHT OF provided in paragraph (c)(1)(ii)(E)).79 time to time.84 An SIBHC may also use COUNTERPARTY BASED ON ANNUAL 85 Finally, paragraph (c)(1)(i)(E) of internal credit ratings or calculate PROBABILITY OF DEFAULT—Contin- proposed Rule 17i–7 defines the term credit risk weights using internal ued ‘‘maximum potential exposure’’ to be calculations 86 when calculating its the increase in the net replacement allowance for credit risk. Credit risk value of the counterparty’s positions In addition, paragraph (c)(1)(ii)(D) of Annual probability of default weight with the member of the affiliate group, proposed Rule 17i–7 would allow (in percent) including the effect of netting SIBHCs to adjust credit risk weights of agreements with that counterparty,80 receivables covered by certain types of 5.30% or higher ...... 230 and taking into account the value of guarantees,87 and paragraph (c)(1)(ii)(E) Event of default has oc- curred ...... 1250 collateral from that counterparty 81 of proposed Rule 17i–7 would allow pledged to and held by any member of SIBHCs to adjust credit risk weights of These credit risk weights are based on the affiliate group and the fair market receivables covered by certain credit the formulas provided in the Advanced value of any credit derivatives that derivatives (such as credit default Internal Ratings-based Approach to specifically change the exposure to the swaps, total return swaps, and similar credit risk proposed by the Basel instruments used to manage credit counterparty (as long as the credit Committee.89 We have derived the risk)88 in recognition of the benefits derivatives are not used to change the credit risk weights using a loss given these instruments provide. credit risk weight of the counterparty as default (the percentage of the amount 82 The Commission requests comment provided in paragraph (c)(1)(ii)(E)). owed by the counterparty the firm on the determination of credit risk Paragraph (c)(1)(i)(E) of proposed Rule expects to lose if the counterparty weights. In particular, the Commission 17i–7 also states that maximum defaults) of 75%. We believe 75% to be requests comment on whether an potential exposure would be required to a conservative number for use in additional method of calculating credit be calculated daily using a VaR model determining credit risk weights. We risk weights, based on internal estimates that meets the same qualitative and request comment as to whether 75% is of annual probabilities of default, quantitative standards as required for appropriate, or whether it should be should be included in proposed Rule models used to compute the allowance increased or decreased. 83 17i–7. If such a method should be used, for market risk. The Commission believes that the Commission requests comment on We request comment on whether the calculating a credit risk capital charge whether the following table proposed method of calculating the on exposures arising from transactions appropriately matches credit risk credit equivalent amount is appropriate, in OTC derivatives instruments using a weights to annual probabilities of or whether it should be changed. In VaR model that meets that qualitative default: addition we request comment on and quantitative requirements set forth whether the definitions of ‘‘current in proposed § 240.15c3–1e(e)90 to CREDIT RISK WEIGHT OF exposure’’ and ‘‘maximum potential calculate maximum potential exposure exposure’’ are appropriate, or if they COUNTERPARTY BASED ON ANNUAL is a more precise method than using a should be changed. If the proposed PROBABILITY OF DEFAULT ‘‘notional add-on’’ to approximate method for calculating credit equivalent maximum potential exposure. In amount or the definitions of ‘‘current Credit risk Annual probability of default weight addition, Commission reviews of risk exposure’’ or ‘‘maximum potential (in percent) management systems of large U.S. exposure’’ should be changed, please broker-dealers indicate that these elaborate as to how they should be Less than .003% ...... 2 broker-dealers generally use maximum changed. 0.05% ...... 17 potential exposure to measure and Paragraph (c)(1)(ii) of proposed Rule 0.11% ...... 30 manage the credit risk of their 17i–7 provides that credit risk weights 3.80% ...... 200 portfolios. These broker-dealers would would generally be determined therefore incur little, if any, additional according to the standards published by 84 See paragraph (c)(1)(ii)(A) of proposed Rule cost to calculate credit risk using 17i–7. 85 See paragraph (c)(1)(ii)(B) of proposed Rule maximum potential exposure as 79 The fair market value of any credit derivatives 17i–7. opposed to ‘‘notional add-ons.’’ that specifically change the SIBHC’s exposure to the 86 See paragraph (c)(1)(ii)(C) of proposed Rule We request comment on this approach counterparty may be used to calculate ‘‘current 17i–7. exposure’’ and ‘‘maximum potential exposure’’ only to the calculation of credit risk on OTC 87 to the extent that the credit derivative is not used The guarantee would be required to be an derivatives, repurchase agreements, to change the credit risk weight of the counterparty unconditional and irrevocable guarantee of the due reverse repurchase agreements, stock as set forth in paragraph (c)(1)(ii)(E). and punctual payment and performance of the obligation and the SIBHC or member of the affiliate lending and borrowing, and similar 80 See supra, note 77. group can demand payment after any payment is collateralized transactions. In addition, 81 See supra, note 78. missed without having to make collection efforts. we request comment on the proposed 82 See supra, note 79. Further, the guarantee would be required to be 83 However, the quantitative requirements for a evidenced by a written obligation of the guarantor requirements for guarantees used to VaR model intended to calculate maximum that allows the SIBHC or member of the affiliate reduce an SIBHC’s allowance for credit potential exposure would be required to use a 99 group to substitute the guarantor for the risk. We also request comment on the percent, one-tailed confidence level and with price counterparty upon default or nonpayment by the appropriate treatment of credit changes equivalent to a five-day movement in rates counterparty. These proposed requirements are and prices for repurchase agreements, reverse designed to allow an SIBHC to reduce its allowance derivatives in this context. Credit repurchase agreements, stock lending and for credit risk only if the guarantee contains features derivatives could enter into the borrowing, and similar collateralized transactions that make it more reliable. calculation of credit risk in two ways. (See paragraph (c)(1)(i)(E) of proposed Rule 17i–7) 88 The credit derivative would be required to be The first would be to substitute the and to a one-year movement in rates and prices for one that (i) provides credit protection equivalent to credit risk weight of the writer of the other positions (See proposed 17 CFR 240.15c3– a guarantee, (ii) is used for bona fide hedging 1e(e)(2)(ii)) (as opposed to a ten business-day purposes to reduce the credit risk weight of a movement for VaR models used to calculate the counterparty, (iii) is not incorporated into the VaR 89 See the New Basel Capital Accord (April, allowance for market risk (See proposed § 17 CFR model used for deriving potential exposures, and 2003). 240.15c3–1e(e)(2)(i)). (iv) is not held for market-making purposes. 90 See supra, note .

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credit derivative for the credit risk averaged over the past three years. The a 99% confidence level be used, and weight of the counterparty. The second standardized approach maps these that the VaR measure be multiplied by would be to adjust the current exposure revenues to eight business lines. The a factor of at least three. These and the maximum potential exposure by allowance for operational risk is then a parameters are based on our experience the value of the credit derivative. percentage of revenues net of interest and existing Commission rules (e.g., Certain accounting differences may expense, ranging from 12% to 18%, Appendix F of Rule 15c3–1) and rules cause differences in application of the attributed to each business line. The of other regulatory agencies where there Basel Committee’s recommendations advanced measurement approach are similar risk factors in the regulated when applied to securities firms rather requires a system for tracking and entities. We ask for comment on all than banking firms. For instance, the controlling operational risk and these parameters. broker-dealers must mark all positions provides that the allowance for to market, whereas banks may use cost operational risk is the largest 7. Other Questions Regarding Capital as a basis to value securities held for operational loss that might be expected Calculation investment purposes. These differences over a one-year period with 99.9% Proposed Rules 17i–6 and 17i–7 may require the Commission to apply confidence. would apply a capital reporting adjustments to the Basel Committee’s We solicit comment on all aspects of requirement consistent with the Basel recommendations, or not to apply these three methods for calculating Standards to the SIBHC. The Basel adjustments that are in the Basel consolidated allowance for operational Committee is currently developing a Committee’s recommendations. The risk. In addition, we request that new international agreement, the Commission solicits comments on how commenters address whether any of the proposed New Basel Capital Accord. the differences in accounting standards three methods is preferable and, if so, The proposed New Basel Capital Accord might affect the allowance for credit explain why. Further, could any specifies three ‘‘pillars’’ for the group- risk, and what modifications the changes be made to these methods that wide supervision of internationally Commission should make to the would better accommodate the broker- active banks and financial enterprises. proposed rules to address those dealer business? Finally, should we The first pillar, ‘‘minimum regulatory differences. allow an SIBHC to choose one of the capital’’ requirements, requires The Commission seeks comment on three methods, or should the proposed calculations for credit and operational all aspects of the proposed method of Rule require that SIBHCs use the risk and, for firms with significant calculating the allowance for credit risk. advanced measurement approach? trading activity, market risk. The second Because the Basel Standards have been 5. Alternative Capital Assessment pillar, ‘‘supervisory review,’’ requires implemented by many financial that capital be assessed relative to regulators, we request comment as to Under paragraph (e) of proposed Rule overall risks and that supervisors review whether the proposed rule is consistent 17i–7, an SIBHC would be permitted to and take action in response to those with the Basel Standards as they have compute a capital assessment using the assessments. been implemented. In addition, we Basel Standards that the SIBHC already The third pillar requires certain request comment as to whether the is required to submit to a financial disclosures which will allow market proposed rule is consistent with the regulator or supervisor in lieu of the participants to assess key pieces of present version of the proposed New computations described in paragraphs information concerning, for example, Basel Capital Accord and how various (a) through (d). This proposed Rule is the capital, risk exposures, and risk financial regulators have proposed to intended to allow an entity that may assessment processes of the institution. implement the proposed New Basel already be subject to certain The purpose of the third pillar is to Capital Accord. Should an SIBHC have consolidated supervision requirements complement the minimum capital other alternative methods for calculating to continue to use its present systems requirements and the supervisory the allowance for credit risk? and methodologies to compute a capital review process by encouraging market assessment for reporting purposes for discipline. 4. Calculation of Consolidated the affiliate group so long as that Allowance for Operational Risk The third pillar is discussed in the computation is consistent with the Basel U.S. banking agencies’ Advanced Notice Under proposed Rule 17i–7, an SIBHC Standards. of Proposed Rulemaking on the would be required to calculate an proposed New Basel Capital Accord.92 allowance for operational risk consistent 6. General Questions Regarding Proposed Rule 17i–7 As the banking agencies noted, an with the appropriate standards integral part of the advanced approaches published by the Basel Committee. The We believe the requirements set forth is enhanced public disclosure practices. Basel Committee has proposed three in proposed Rule 17i–7 are necessary to Specific disclosure requirements would methods for the calculation of an keep the Commission informed as to the be applicable to all institutions using allowance for operational risk (i) the SIBHC’s financial condition. the advanced approaches and would basic approach; (ii) the standardized We request comment on whether we encompass capital, credit risk, credit approach; and (iv) the advanced should allow this alternative standard or risk mitigation, securitization, market measurement approach. For a complete whether some other approach may be risk, operational risk, and interest rate discussion of the proposed operational warranted. risk. We are proposing what we believe are risk calculation, please refer to the We request comment on whether any 91 prudent parameters for computing an proposed New Basel Capital Accord. additional disclosures by U.S. broker- SIBHC’s risk allowances, although in The basic and standardized approach dealer firms, their holding companies, some cases these parameters may be calculations are based on fixed and affiliates should be required to meet more conservative than some firms may percentages. Under the basic approach, the requirements of the third pillar of believe are necessary to account for risk. the allowance is 15% of consolidated the proposed New Basel Capital Accord. annual revenues net of interest expense For example, the proposal requires that the VaR model used to calculate market 92 See Risk-Based Capital Guidelines; 91 See the New Basel Capital Accord (April, risk be based on a ten business-day Implementation of New Basel Capital Accord, 68 FR 2003). movement in rates and prices and that 45900 (August 4, 2003), beginning at 45943.

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If additional, specific disclosure is broker-dealer’s tentative net capital falls IBHCs that file a Notice of Intent to warranted, commenters are asked to below $100 million).93 We believe that become supervised by the Commission address where that disclosure should be these events would indicate a decline in as an SIBHCs. made as well as whether disclosures the financial and operational well-being We note that on September 12, 2003, should be made on a quarterly, annual, of the firm. Were an SIBHC to file a the Federal Reserve Board, the Office of or other periodic basis. In addition, we notification as required by proposed the Comptroller of the Currency, the request comment on whether additional Rule 17i–8, the Commission may be Office of Thrift Supervision, and the required disclosures should depend on prompted to request additional reports, Federal Deposit Insurance Commission whether a firm is privately held or is a as contemplated by proposed Rule 17i– requested public comment on an public reporting company. 6(b), and otherwise begin to monitor the interim final rule and a notice of We also request comment on whether firm’s condition more closely. proposed rulemaking to amend their the regulatory regime outlined in this In addition, proposed Rule 17i–8 risk-based capital standards for the proposal together with existing would require that an SIBHC notify the treatment of assets in asset-backed Commission regulation of broker-dealers Commission if there were a material commercial paper programs would meet the requirements of the first change (along with a description of that consolidated under the recently issued and second pillars of the proposed New change) in the ownership or Financial Accounting Standards Board Basel Capital Accord or whether organization of the affiliate group, the Interpretation No. 46, Consolidation of changes or enhancements should be status of any affiliate that is material, or Variable Interest Entities.95 The rule made. the major business functions of any would also modify the risk-based capital We request comment on whether, if material affiliate.94 treatment of certain securitizations with the proposed New Basel Capital Accord Paragraph (c) of proposed Rule 17i–8 early amortization provisions. In is adopted, there should be a transition would specify the manner in which addition, the treatment of securitization period before the Commission requires these notices and reports should be exposures is discussed in the banking its use by SIBHCs. provided to the Commission. In agencies Advanced Notice of Proposed I. Proposed Rule 17i–8: Notification addition, paragraph (c) of proposed Rule Rulemaking on the proposed New Basel Requirements for SIBHCs 17i–8 would specify that the notices and Capital Accord.96 reports filed with the Commission Should the Commission consider any A broker-dealer that is part of a large pursuant to Rule 17i–8 would be modifications to the calculations of holding company structure may be accorded confidential treatment. We allowances for market and credit risk for vulnerable to increased risks from the believe it is important to accord asset-backed securitization programs as activities of its affiliates and may face confidential treatment to the notices and contemplated by proposed Rule 17i–7? difficulty in continuing its operations if reports an SIBHC would be required If so, how and why should the a major affiliate ceased operations or provide pursuant to proposed Rule 17i– Commission modify these calculations encountered financial difficulties. 8 because the information contained in for asset-backed securitization Proposed Rule 17i–8 would require the those notices and reports would programs? Should the Commission SIBHC to notify the Commission upon generally be highly sensitive, non- the occurrence of certain events. The consider any other issues related to the public business information. capital treatment of securitization proposed early warning system is We believe the requirements set forth designed to provide the Commission exposures? in proposed Rule 17i–8 are necessary to Commenters may also wish to discuss with information so that it can identify keep the Commission informed as to the whether the Commission should these potential risks to the broker-dealer SIBHC’s activities, financial condition, and its customers. consider a different approach, and if so, policies, systems for monitoring and what that approach should be. Paragraph (a) of proposed Rule 17i–8 controlling financial and operational would require the SIBHC to Commenters should provide risks, and transactions and relationships empirical data to support their views. immediately notify the Commission between any broker or dealer affiliate of upon the occurrence of certain events. Comments should be submitted by the SIBHC and the extent to which the February 4, 2004. These events include (i) the occurrence SIBHC has complied with the of certain backtesting exceptions; (ii) the provisions of the Act and the IV. Paperwork Reduction Act SIBHC’s computation reflects that regulations prescribed and orders issued Certain provisions of proposed new consolidated allowable capital is less under the Act. Rules 17i–1 through 17i–8 and the than 110% of the sum of consolidated We request comment on all aspects of amendments to Rules 17h1–T and 17h– allowances for market, credit and these notification requirements. In 2T contain ‘‘collection of information’’ operational risk; (iii) an affiliate declares addition, we request comment as to requirements within the meaning of the bankruptcy or otherwise becomes whether the events that would trigger Paperwork Reduction Act of 1995.97 insolvent; (iv) the SIBHC becomes aware the notification requirement are The Commission has submitted them to that a credit rating agency intends to appropriate, and whether other the Office of Management and Budget decrease its evaluation of the triggering events should be included. (‘‘OMB’’) for review in accordance with creditworthiness of an affiliate or the 44 U.S.C. 3507(d) and 5 C.F.R. 1320.11. credit rating assigned to one or more III. General Request for Comment The titles for the collections of outstanding short or long-term Regarding Proposed Rules information are (i) Rules 17h–1T and obligations of an affiliate; (v) the SIBHC The Commission solicits comment on becomes aware that a financial its proposal to supervise IBHCs as 95 See Risk-Based Capital Guidelines; Capital regulatory agency or self-regulatory SIBHCs. The Commission solicits Adequacy Guidelines; Capital Maintenance: Asset- organization has taken certain comments on whether this proposal Backed Commercial Paper Programs and Early regulatory actions against an affiliate; or would provide adequate Commission Amortization Provisions, 68 FR 56568 (Oct. 1, (vi) the SIBHC becomes ineligible to be 2003). oversight on a group-wide basis of 96 See Risk-Based Capital Guidelines; supervised by the Commission as a Implementation of New Basel Capital Accord, 68 FR SIBHC (e.g., the SIBHC purchases an 93 See paragraph (a) of proposed Rule 17i–8. 45900 (August 4, 2003), beginning at 45932. insured bank, or the SIBHC’s affiliated 94 See paragraph (b) of proposed Rule 17i–8. 97 44 U.S.C. 3501, et seq.

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17h–2T Risk Assessment Rules; (ii) Rule B. Proposed Use of Information Approximately 35 could not be 17i–2 Notice of Intention to be The Commission would use the supervised by the Commission as an Supervised by the Commission as a information collected under the SIBHC due to the fact that each is either: Supervised Investment Bank Holding proposed new Rules to determine (i) affiliated with an insured bank (with Company; (iii) Rule 17i–3 Withdrawal whether SIBHC supervision is necessary certain exceptions) or a savings 101 from Supervision as an Supervised or appropriate in furtherance of the association, (ii) a foreign bank, Investment Bank Holding Company; (iv) purposes of § 17 of the Act and to foreign company, or a company that is Rule 17i–4 Internal Risk Management monitor the financial condition, risk described in section 8(a) of the Control Systems Requirements for management, and activities of SIBHCs International Banking Act of 1978, or Supervised Investment Bank Holding on a group-wide basis. In particular, it (iii) a foreign bank that controls a would allow the Commission access to corporation chartered under section 25A Companies; (v) Rule 17i–5 Record 102 Creation, Maintenance, and Access important information regarding of the Federal Reserve Act. In addition, some broker-dealers may not Requirements for Supervised activities of a broker-dealer’s affiliates be active in jurisdictions that require Investment Bank Holding Companies; that could impair the financial and securities firms to demonstrate that they (vi) Rule 17i–6 Reporting Requirements operational stability of the broker-dealer or the SIBHC. have consolidated supervision at the for Supervised Investment Bank holding company level that is Holding Companies; and (vii) Rule 17i– C. Respondents equivalent to EU consolidated 8 Notification Requirements for An IBHC can file a Notice of Intention supervision, or may not find it to be Supervised Investment Bank Holding to be supervised by the Commission as cost-effective to register as an SIBHC for Companies. An agency may not conduct an SIBHC only if it: (1) Has a subsidiary other reasons. Thus, the Commission or sponsor, and a person is not required broker or dealer that can evidence that estimates that six IBHCs will file notices to comply with, a collection of it has a substantial presence in the of intent to be supervised by the information unless it displays a securities business; and (2) is not (i) Commission as SIBHCs. currently valid OMB control number. affiliated with an insured bank (with D. Reporting and Recordkeeping A. Collection of Information Under the certain exceptions) or a savings Burdens association, (ii) a foreign bank, foreign Amendments to Rules 17h–1T and 17h– 1. Amendments to Rules 17h–1T and 2T and New Rules 17i–1 Through company, or a company that is described in section 8(a) of the 17h–2T 17i–8 International Banking Act of 1978, or The amendments to Rules 17h–1T Proposed Rule 17i–1 through 17i–8 (iii) a foreign bank that controls a and 17h–2T 103 would exempt broker- would create a framework for corporation chartered under section 25A dealers that are affiliated with an SIBHC 99 Commission supervision of SIBHCs. The of the Federal Reserve Act. Paragraph from those rules and thus reduce their collections of information included in (d)(2)(i)(B) of proposed Rule 17i–2 ‘‘collection of information’’ these proposed rules are necessary to would indicate that the Commission requirements. Rule 17h–1T requires that allow the Commission to effectively would not consider it to be necessary or a broker-dealer maintain and preserve determine whether SIBHC supervision appropriate to supervise an IBHC unless records and other information is necessary or appropriate in it can demonstrate that it owns or concerning the broker-dealer’s holding furtherance of the purposes of § 17 of controls a broker-dealer that has a companies, affiliates, or subsidiaries substantial presence in the securities the Act and allow the Commission to that are likely to have a material impact business (which may be demonstrated supervise the activities of these SIBHCs. on the financial or operational condition by a showing that the broker-dealer These rules also would enhance the of the broker-dealer. Rule 17h–2T maintains tentative net capital of at least Commission’s supervision of the requires broker-dealers to file with the $100 million). SIBHCs’ subsidiary broker-dealers Commission quarterly reports As of March 31, 2003, approximately concerning the information required to through collection of additional 100 registered broker-dealers reported information and inspections of affiliates be maintained and preserved under their tentative net capital as being Rule 17h–1T. The present PRA burden of those broker-dealers. Regulatory between $100 million and $1 billion.100 oversight pursuant to this system is for broker-dealers that are presently Many of these broker-dealers are reporting pursuant to Rules 17h–1T and voluntary, and eligible IBHCs would not affiliated with another broker-dealer be required to be supervised in this 17h–2T is 24 hours per year for each that reported its tentative net capital as broker-dealer respondent. The estimated manner. This framework would include being more than $100 million. six firms therefore would have their procedures through which an IBHC annual burden reduced by an aggregate could file a Notice of Intention to 99 Federal Reserve Act section 25A [12 U.S.C. of 144 hours per year. become supervised by the Commission 611]. as an SIBHC, as well as recordkeeping 100 Per March 31, 2003, FOCUS Report filings. 2. Proposed Rule 17i–2 Broker-dealers are required to file monthly and/or and reporting requirements for SIBHCs. quarterly reports on Form X–17A–5 pursuant to Proposed Rule 17i–2 would require The amendments to Rules 17h–1T Rule 17a–5(a) (17 CFR 240.17a–5(a)), commonly that an IBHC file a Notice of Intention and 17h–2T 98 would exempt broker- referred to as FOCUS Reports. In addition, see to become supervised by the supra, note, wherein we propose rules and rule dealers that are affiliated with an SIBHC amendments that would allow a holding company Commission as an SIBHC. The Notice of from those rules and thus reduce their that owns or controls a broker-dealer that maintains Intention would have to set forth certain ‘‘collection of information’’ more than $1 billion in tentative net capital. The information and include a number of supervisory framework provided by those proposed documents. The SIBHC would also have requirements. This exemption is rules and rule amendments would allow the broker- designed to eliminate duplicative dealers of those entities to calculate market and recordkeeping and reporting credit risk capital charges using mathematical 101 See Exchange Act section 17(i)(1)(A)(i) [15 U.S.C. 78q(i)(1)(A)(i)]. requirements. modeling techniques, thus we believe those firms will elect that supervisory framework and will not 102 Federal Reserve Act section 25A [12 U.S.C. elect to be supervised pursuant to these proposed 611]. 98 See supra, note 64. new rules. 103 See supra, note 64.

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to submit amendments to its Notice of Rule 17i–2 also requires that an IBHC/ well as the separation of duties among Intention if certain information became SIBHC 106 update its Notice of Intention these personnel, when designing and incorrect or if it made certain material on an ongoing basis. We estimate, based implementing its internal control changes. The Commission designed on the staff’s experience, that an IBHC/ system’s guidelines, policies, and Rule 17i–2 so an IBHC could compile SIBHC will take approximately 2 hours procedures. These requirements are and submit existing documents with its each month to update its Notice of designed to result in control systems Notice of Intention (as opposed to Intention, as necessary. Thus, we that would adequately address the risks requiring that an IBHC create additional estimate that it will take the six IBHC/ posed by the firm’s business and the documents) in order to decrease any SIBHCs, in the aggregate, about 144 environment in which it is being costs or burdens involved with this hours each year 107 to update their conducted. In addition, this would proposed rule. Notices of Intention. enable an SIBHC to implement specific As stated previously in section IV.C., 3. Proposed Rule 17i–3 policies and procedures unique to its we estimate that approximately six circumstances. Proposed Rule 17i–3 would provide a IBHCs will file Notices of Intention to method by which an SIBHC could Proposed Rule 17i–4 also would become SIBHCs. We estimate that each withdraw from Commission supervision require that an SIBHC periodically IBHC that files a Notice of Intention to as an SIBHC. The proposed rule would review its internal risk management become supervised by the Commission require that an SIBHC file a notice of control system for integrity of the risk would take approximately 900 hours to withdrawal with the Commission measurement, monitoring, and draft a Notice of Intention, compile the stating that the SIBHC wished to management process, and various documents to be included with withdraw from Commission accountability, at the appropriate the Notice of Intention, and work with supervision. organizational level, for defining the the Commission staff. Further, we Due to the benefits and costs permitted scope of activity and level of believe that an IBHC would have an associated with becoming supervised by risk. attorney review its Notice of Intention, the Commission as an SIBHC, we In implementing its policies and and we estimate that it would take the believe that an IBHC would carefully attorney approximately 100 hours to procedures, an SIBHC would be consider filing a Notice of Intention. For required to document and record its complete such a review. Consequently, PRA purposes only, we estimate that system of internal risk management we estimate the total burden for all six one SIBHC may wish to withdraw from controls. In particular, an SIBHC would firms to be approximately 6,000 Commission supervision as an SIBHC 104 be required to document its hours. We believe this would be a over a ten-year period. one-time burden. We estimate, based on the staff’s consideration of certain issues affecting The estimates of the initial burden for experience, that an SIBHC that its business when designing its internal proposed Rule 17i–2 are based on the withdraws from Commission controls. An SIBHC would also be estimates the Commission made in supervision as an SIBHC would take one required to prepare and maintain adopting Rule 17c3–1f, which contained attorney approximately 24 hours to draft written guidelines that discuss its similar requirements.105 Our burden a withdrawal notice and submit it to the internal control system. estimates for proposed Rule 17i–2 are Commission. Further, we believe the The information to be collected under lower than our burden estimates relating SIBHC would have a senior attorney or proposed Rule 17i–4 would be essential to the application provisions of Rule executive officer review the notice of to the supervision of SIBHCs and their 15c3–1f because our estimates relating withdrawal before submitting it to the compliance with the Commission’s to the creation of mathematical models Commission, and that it would take proposed rules. More specifically, the have been removed from the estimate. such person 8 hours to conduct such a requirement that an SIBHC document Proposed Rule 17i–2 does not require review. Thus, we estimate that the the planning, implementation, and that mathematical models be created. In annual, aggregate burden of periodic review of its risk management addition, the requirement to create a withdrawing from Commission controls is designed to assure that all model is not a paperwork burden. supervision as an SIBHC would be pertinent issues are considered, that the Accordingly, the costs associated with approximately 3.2 hours each year.108 risk management controls are creation of mathematical models are 4. Proposed Rule 17i–4 implemented properly, and that they included in the Cost-Benefit discussion continue to adequately address the risks regarding proposed Rule 17i–7 (which Proposed Rule 17i–4 would require an faced by SIBHCs. would require that an SIBHC calculate SIBHC to have in place a risk management control system appropriate As stated previously in section IV.C., allowances for market and credit risk we estimate that approximately six using mathematical models). The for its business and organization. An IBHCs will file Notices of Intention to be estimates we used here were also SIBHC would need to consider, among supervised by the Commission as adjusted based on the staff’s experience other things, the sophistication and SIBHCs. We further estimate that the in implementing the OTC derivatives experience of its operations, risk average amount of time an SIBHC would dealer rules. We based our burden management, and audit personnel, as spend assessing its present structure, estimates for proposed Rule 17i–2 on 106 businesses, and controls, and our burden estimates for Rule 15c3–1f An IBHC would be required to review and establishing and documenting its risk because the application provisions of update its Notice of Intention to the extent it becomes inaccurate prior to a Commission management control system would be Rule 15c3–1f and proposed Rule 17i–2 determination, and an SIBHC would be required to about 3,600 hours, and that this would are substantially similar and because no update its Notice of Intention if it changes a be a one-time burden. In addition, we comments were received regarding the mathematical model used to calculate its risk burden estimates for Rule 15c3–1f. allowances pursuant to proposed Rule 17i–7 after estimate that an SIBHC would spend a Commission determination was made. approximately 250 hours each year 107 (2 hours × 12 months each year) × 6 SIBHCs maintaining its risk management control 104 × (900 hours + 100 hours) 6 IBHCs/SIBHCs = = 144. system. Thus, we estimate that the total 6,000 hours. 108 (1 SIBHC / every 10 years) × (24 hours to draft 105 See 17 CFR 240.15c3–1f(a). + 8 hours to review) = 3.2 hours. initial burden for all SIBHCs would be

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approximately 21,600 hours 109 and the respond to certain possible funding and 6. Proposed Rule 17i–6 continuing annual burden would be liquidity difficulties; and (iii) the basis Proposed Rule 17i–6 would require an 110 about 1,500 hours. for credit risk weights. We estimate that SIBHC to file certain monthly and The estimates of the initial and the average amount of time an SIBHC quarterly reports with the Commission, annual burdens for proposed Rule 17i– would spend to create a record as well as an annual audit report. These 4 are based on the estimates the regarding stress tests is about 64 hours reporting requirements are necessary to Commission made in adopting Rule each quarter, or approximately 256 keep the Commission informed as to the 15c3–4. Proposed Rule 17i–4 makes hours each year. This estimate is based activities of the SIBHC, as well as the Rule 15c3–4 applicable to SIBHCs. Our on the staff’s experience working with financial condition, transactions and burden estimates for proposed Rule 17i– models and dealing with firms that use relationships involving the affiliate 4 are higher than our burden estimates models through implementation of the group, and policies, systems for for Rule 15c3–4 because an SIBHC OTC derivatives dealers rules, as well as monitoring and controlling financial would be establishing, documenting, informal discussions with potential and operational risks. In addition, these and maintaining a system of internal respondents. We further estimate that requirements are essential to keeping risk management controls for the the average amount of time an SIBHC the Commission informed of the extent affiliate group, and not just for one firm. would spend to create and document a to which the SIBHC or its affiliates have We based our burden estimates for contingency plan regarding funding and complied with Section 17(i) of the proposed Rule 17i–4 on our burden liquidity of the affiliate group (which Exchange Act and the rules promulgated estimates for Rule 15c3–4 because Rule we believe an SIBHC would do only thereunder. Finally, these reports could 15c3–4 and proposed Rule 17i–4 are once, not on an ongoing basis) would be also be used to evaluate the activities substantially similar and because no about 40 hours. This estimate is based conducted by these SIBHCs and to comments were received regarding the on the staff’s experience. In addition, we anticipate, where possible, how they burden estimates for Rule 15c3–4. estimate that the average amount of time might be affected by significant Internationally active firms generally an SIBHC would spend to create a economic events. already have in place risk management record regarding the basis for credit risk As stated previously in section IV.C., practices, and will generally review and weights would be about 30 minutes for we anticipate that the proposed rule improve their risk management each counterparty, and that on average, would affect approximately six SIBHCs. practices in the near future despite these an SIBHC will establish approximately We estimate that, on average, it would rules. However, we recognize that, to 20 new counterparty arrangements each take an SIBHC about 8 hours each the extent an IBHC presently has a year.111 This estimate is based on month to prepare and file the monthly group-wide internal risk management informal discussions the staff has had reports required by this rule (or control system, those systems may not with potential respondents. approximately 96 hours per year).114 We take into account all of the elements and Pursuant to proposed Rule 17i–5, an estimate that, on average, it would take issues required by proposed Rule 17i–4. SIBHC would be required to maintain an SIBHC about 16 hours each quarter In addition, these firms may not have these and other records for at least three (or 64 hours each year) 115 to prepare documented their consideration of these years in an easily accessible place. We and file the quarterly reports required elements and issues, or other aspects of estimate that the average amount of time by this rule. We estimate that, on their internal risk management control an SIBHC would spend to maintain average, it would take an SIBHC about systems. these and other, specified records for 200 hours to prepare and file the annual 5. Proposed Rule 17i–5 three years would be about 24 hours per audit reports required by this rule. year per SIBHC. This estimate is based Thus, we estimate that the total annual Pursuant to proposed Rule 17i–5, an on our present estimates for Rule 17a– burden of proposed Rule 17i–6 on all SIBHC would be required to make and 4, which previously have been subject SIBHCs would be approximately 2,160 keep current certain records relating to to notice and comment and have been hours.116 its business. In addition, it would be approved by OMB. These estimates are based on our required to preserve those and other As stated previously in section IV.C., present estimates for 17a–12, which records for certain prescribed time we estimate that approximately six were previously subject to notice and periods. The purpose of this rule is to IBHCs will file Notices of Intention to be comment and have been approved by require that the SIBHC create and supervised by the Commission as OMB. However the estimates for the maintain records that would allow the SIBHCs. Thus, the total initial burden monthly and quarterly reports were Commission to evaluate SIBHC relating to proposed new Rule 17i–5 for reduced somewhat due to the fact that compliance with the rules to which it is all SIBHCs would be approximately 240 an SIBHC would not be required to subject. We expect that any additional hours 112 and the continuing annual complete specified forms, but instead burden under the proposed rule would burden would be approximately 1,740 could provide the required information be minimal because the information that hours.113 to the Commission in its existing format. would be called for under the proposed We believe that our use of existing rule is information a prudent IBHC that 111 We estimate that, on average, each firm internal reports will decrease the manages risk on a group-wide basis presently maintains relationships with burden on SIBHCs because an SIBHC would maintain in the ordinary course approximately 1,000 counterparties. Further, it is may compile existing documents and our understanding that firms generally already of its business. maintain documentation regarding their credit submit them to the Commission. Pursuant to proposed Rule 17i–5, an decisions, including their determination of credit SIBHC would be required to make and risk weights, for those counterparties. 114 (8 hours × 12 months in a year) = 96 hours/ keep records reflecting (i) the results of 112 (40 hours to create and document a year. contingency plan regarding funding and liquidity of 115 (16 hours × 4 quarters in a year) = 64 hours/ quarterly stress tests; (ii) that the firm × had created a contingency plan to the affiliate group) 6 SIBHCs. year. 113 ((256 hours to create a record regarding stress 116 (96 hours per year to prepare and file monthly tests) + ((30 minutes × 20 counterparties) to create reports + 64 hours each year to prepare and file 109 (3,600 hours × 6 SIBHCs) = 21,600 hours. a record regarding the basis for credit risk weights) quarterly reports + 200 hours each year to prepare 110 (250 hours per year × 6 SIBHCs) = 1,500 hours + (24 hours per year to maintain records)) × 6 and file annual audit reports) × 6 SIBHCs = 2,160 per year. SIBHCs. hours.

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Further, the time burden relating to the annual burden of proposed Rule 17i–8 Secretary, Securities and Exchange annual audit was increased in for all SIBHCs would be about 30 Commission, 450 Fifth Street, NW., recognition of the fact that the audit of minutes. Washington, DC 20549–0609. The a holding company is generally more submission should reference File No. E. Collection of Information Is time consuming than the audit of one S7–22–03. OMB is required to make a Mandatory entity (for both the accountants and the decision concerning the collection of firm employees working with them). The collections of information information between 30 and 60 days However, many of these holding requirements in proposed new Rules after publication of this document in the companies are already audited at the 17i–1 through 17i–8 would be Federal Register; therefore, comments holding company level, so, aside from mandatory for every IBHC that files a to OMB are best assured of having full the special supplemental reports, no Notice of Intention to be supervised by effect if OMB receives them within 30 additional burden should be imposed by the Commission as an SIBHC and every days of this publication. proposed Rule 17i–6. We believe that SIBHC that is supervised by the The Commission has submitted the most well-managed SIBHCs already Commission. proposed collections of information to report to their senior management much OMB for approval. Requests for the F. Confidentiality of the information required to be materials submitted to OMB by the provided to the Commission pursuant to The information and documents Commission with regard to these proposed Rule 17i–6. collected, retained, and/or filed collections of information should be in 7. Proposed Rule 17i–8 pursuant to Proposed new Rules 17i–1 writing, refer to File No. S7–22–03, and Proposed Rule 17i–8 would require through 17i–8 would be accorded be submitted to the Securities and SIBHCs to report on the occurrence of confidential treatment. Exchange Commission, Records certain events that may have a material Management, Office of Filings and G. Record Retention Period adverse affect on the SIBHC. The Information Services, 450 Fifth Street, proposed early warning system is Proposed Rule 17i–5(b) would require NW., Washington, DC 20549–0609. modeled after the early warning system that an IBHC preserve for three years in used with respect to broker-dealers in an easily accessible place information V. Costs and Benefits of the Proposed Exchange Act Rule 17a–11. Like relating to (i) its Notice of Intention; (ii) Rules and Rule Amendments Exchange Act Rule 17a–11, proposed its group-wide system of internal risk The Commission has identified Rule 17i–8 is designed to give the management controls; (iii) the records it certain costs and benefits that would be Commission advance warning of is required to make and keep current; associated with the proposed framework problems that may pose material risks to (iv) the reports it is required to make; for supervising SIBHCs. Supervision the financial and operational capability and (v) its calculations of allowable pursuant to this system is voluntary, of an SIBHC and its affiliated broker- capital and allowances for market, and eligible IBHCs would not be dealers. The proposed rule would be credit, and operational risk. required to be supervised in this integral to the supervision of SIBHCs manner. This framework would include H. Request for Comments Regarding and their affiliated broker-dealers. requirements for IBHCs that file Notices We estimate that it would take an Paperwork Burden Estimates of Intention to be supervised by the SIBHC approximately one hour to create Under 44 U.S.C. 3506(c)(2)(B), the Commission as SIBHCs, as well as a notice required to be submitted to the Commission solicits comments to recordkeeping and reporting Commission pursuant to proposed Rule evaluate: requirements for SIBHCs, including a 17i–8. This estimate is based on our • Whether the proposed collection of requirement that an SIBHC calculate present estimates for Rule 17a–11, information is necessary for the proper and report a calculation of allowable which were previously subject to notice performance of the functions of the capital and allowances for market, and comment and have been approved Commission, including whether the credit and operational risk. by OMB. The Commission received 692 information would have practical Rule 17a–11 Notices from 627 broker- utility; A. Benefits dealers during the year ending • The accuracy of the Commission’s There are many quantifiable and non- December 2001. At that time, there were estimate of the burden of the proposed quantifiable benefits that would be approximately 7,217 active broker- collection of information; created by these rules. We have dealers registered with the • Ways in which we might enhance attempted to delineate those costs Commission.117 Thus, 9% of active, the quality, utility, and clarity of the below. registered broker-dealers had a situation information to be collected; and U.S. securities firms that do business arise which caused them to file a notice • Ways in which we might minimize in the EU have indicated that they may pursuant to Rule 17a–11. Using this 9% the burden of the collection of need to demonstrate that they are figure, we estimate that of the information on those required to subject to consolidated supervision at approximately six IBHCs that we believe respond, including through the use of the holding company level that is will register to be supervised as SIBHCs, automated collection techniques or ‘‘equivalent’’ to EU consolidated one may be required to file notice other forms of information technology. supervision. Generally, EU pursuant to proposed Rule every other Persons wishing to submit comments ‘‘consolidated supervision’’ would take year.118 Thus, we estimate that the on the collection of information the form of a series of rules, imposed at requirements should address them to the holding company level, regarding 117 Of approximately 7,739 broker-dealers The Office of Management and Budget, firms’ internal controls, capital registered with the Commission in 2001, Room 3208, Attention: Desk Officer for adequacy, intra-group transactions, and approximately 341 were not yet active because their registration was pending SRO approval and the Securities and Exchange risk concentration. Without a approximately 181 were inactive because they had Commission, Office of Information and demonstration of ‘‘equivalent’’ ceased doing a securities business and had filed a Regulatory Affairs, New Executive supervision, securities firms located in Form BDW with the Commission. Of those, 7217 active, registered broker-dealers, three were Office Building, Washington, DC 20503; the EU have stated that they may either registered OTC derivatives dealers. and should also send a copy of their be subject to additional capital charges 118 (6 SIBHCs × 9%) = 0.54. comments to Jonathan G. Katz, or required to form a sub-holding

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company in the EU.119 The regulatory cost savings associated with these costs relating to: (i) Drafting and framework for SIBHCs set forth in the amendments would be approximately reviewing a Notice of Intention; (ii) proposed rules is intended to provide a $7,291.124 drafting and reviewing a notice of basis for non-U.S. financial regulators to In addition, proposed Rules 17i–1 withdrawal; (iii) updating its internal treat the Commission as the principal through 17i–8 would not only create a risk management control system; (iv) U.S. consolidated, home-country regulatory framework for the creating a record regarding stress tests; supervisor 120 for SIBHCs and their Commission to supervise SIBHCs, but (v) creating a record regarding the basis affiliated broker-dealers. In response to they would improve the Commission’s for credit risk weights; (vi) maintaining a survey conducted during the ability to supervise the financial its records in accordance with proposed rulemaking process to promulgate the condition and securities activities of Rule 17i–5; (vii) preparing and filing OTC derivatives dealers rules, firms SIBHCs’ affiliated broker-dealers. The monthly and quarterly reports; (viii) suggested that they would incur proposed requirement that an SIBHC preparing and filing its annual audit; significant costs in creating a new, non- establish, document and maintain an (ix) calculating allowable capital and U.S. regulated affiliate. Based on that internal risk management control allowances for market, credit, and information, we estimate that it would system reduces the risk of significant operational risk; (x) maintaining its cost an IBHC approximately $8 million losses by the SIBHC’s affiliated broker- models; (xi) conducting stress tests on to with create a new, non-U.S., dealers. The proposed internal risk its models; and (xii) filing notices regulated affiliate,121 or about $48 management control system pursuant to proposed Rule 17i–8. million in the aggregate for the six requirement would also reduce systemic Proposed Rule 17i–2 would require IBHCs we believe will file Notices of risk. We have no way to quantify this that an SIBHC update its Notice of Intention to become supervised by the benefit. Intention on an ongoing basis. We Commission as SIBHCs. We do not have An additional benefit arises from the estimate, that each SIBHC will incur a sufficient information to estimate what reduced borrowing costs, or increased cost of approximately $1,358 each year additional capital charges may be stock price that would result from better to make any necessary updates to its 125 imposed on securities firms that do risk management practices. Credit rating Notice of Intention. Thus, we business in the EU if they are not agencies analyze risk management estimate that the total annual cost to subject to equivalent supervision. practices, among many factors, in make any updates to the notice would Certain broker dealers must create determining credit ratings. A firm that be, in aggregate, about $8,150 each year 126 records and file quarterly reports with has better risk management systems may for all SIBHCs. the Commission regarding the financial be rated better, and would therefore pay Proposed Rule 17i–3 would require condition, organization, and risk lower interest rates to borrow and that an SIBHC file a notice of management practices of the affiliated realize higher stock prices. However it withdrawal with the Commission if it wished to withdraw from Commission group pursuant to Exchange Act Rules is unclear to what extent risk supervision. We estimate that each 17h–1T and 17h–2T.122 Broker-dealers management factors into credit ratings. SIBHC that withdraws from affiliated with IBHCs that meet the In addition, present internal risk Commission supervision would incur a criteria set forth in proposed Rules 17i– management control systems vary cost of about $2,130 to draft and review 1 through 17i–8 generally would be widely from firm to firm. Therefore it is a notice or withdrawal to submit to the subject to Rules 17h–1T and 17h–2T. To difficult to quantify this benefit. Commission.127 However, we further the extent that the information collected However, evolving industry best estimate that one SIBHC may withdraw or made and maintained pursuant to practice for internationally active firms from Commission supervision only once proposed Rule 17i–5 reports are made suggests that some of the firms already and filed pursuant to proposed Rule every ten years. Thus, the annual cost of have group-wide internal risk this rule would be approximately 17i–6 by the SIBHC of a broker-dealer management control systems in place, $213.128 that is subject to Rules 17h–1T and 17h– and some firms will implement the risk Proposed Rule 17i–4 would require an 2T, that broker-dealer will be exempted management practices in the near SIBHC to maintain an internal risk from the provisions of Rules 17h–1T future. management control system. We and 17h–2T. We estimate that, on estimate that an SIBHC would incur a average, a broker-dealer affiliated with B. Costs cost of approximately $14,150 one of the six SIBHCs would save about IBHCs that file Notices of Intention to 123 $1,215.12. In the aggregate, the total become supervised by the Commission 125 We estimate that an SIBHC will take about 24 as SIBHCs would incur various on-going hours each year to assure that its Notice of Intention 119 See supra note 3. costs and one-time costs. is accurate and make any necessary updates. We 120 See supra note 4. believe an SIBHC will have a senior compliance 121 Five firms responded to the survey and 1. Ongoing Costs person perform this task. According to the SIA’s estimated that their annual operating costs would Report on Management and Professional Earnings increase by at least $36 million in the aggregate to Proposed Rules 17i–1 through 17i–8 in the Securities Industry—2002, the hourly cost of conduct business as an OTC derivatives dealer. ($36 would cause an SIBHC to incur ongoing a senior compliance person is $56.60. (24 hours × million / 5 firms) = $7.2 million each. ($7.2 million $56.60) = $1,358.40. × an inflation factor of 1.12 (to account for inflation Management and Professional Earnings in the 126 ($1,358.40 × 6 SIBHCs) = $8,150. from 1998 to the present)) = approximately $8 Securities Industry—2002, the hourly cost of a 127 We estimate, based on the staff’s experience, million. financial reporting manager is $50.63. (($50.63 × 24 that it would take one attorney approximately 24 122 See supra, note 64. hours) = $1,215.12. Generally, to achieve an hourly hours to draft a withdrawal notice and that it would 123 We estimate, based on the present burden for cost using the SIA’s Report on Management and take a senior attorney or executive officer 8 hours 17h–1T and 17h–2T (which has been subject to Professional Earnings in the Securities Industry— to review the notice of withdrawal before notice and comment and has been approved by 2002, the staff will take the median (or, if no submitting it to the Commission. According to the OMB), that each broker-dealer affiliated with an median is provided, the mean) salary provided in SIA’s Report on Management and Professional SIBHC that will no longer have to maintain records that Report for the position cited, divide that Earnings in the Securities Industry—2002, the or file reports will spend 24 hours less each year amount by 1,800 hours (in the average year), and hourly cost of an attorney is $63.75, and the average to perform these tasks. The staff believes that a then multiply the result by 135% (to account for hourly cost of a senior attorney and executive broker-dealer would have a financial reporting employee overhead costs). officer is $75.00. ((24 hours × $63.75) + (8 hours × manager perform these tasks. According to the 124 ($1,215.12 × six affected broker-dealers) = $75.00)) = $2,130. Securities Industry Association’s (‘‘SIA’’) Report on $7,291. 128 ($2,130.00 × 10 years) = $213.

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associated with maintaining its risk 5.133 Thus, the aggregate annual cost Proposed Rule 17i–7 would require an management control system each relating to proposed new Rule 17i–5 for SIBHC to calculate the affiliate group’s year.129 Thus, the continuing annual all SIBHCs would be approximately allowable capital and allowances for burden would be, in aggregate, $114,382.134 certain types of risk. Once the approximately $84,897 for all six Proposed Rule 17i–6 would require an appropriate systems and models are in SIBHCs.130 SIBHC to file certain monthly and place, we estimate that each SIBHC Pursuant to proposed Rule 17i–5, an quarterly reports with the Commission, would incur a cost of about $52,374 to SIBHC would be required to create as well as an annual audit report. We calculate its group-wide allowances for records regarding stress tests and the estimate that the average cost for an market, credit, and operational risk.139 basis for credit risk weights, and SIBHC to prepare and file the monthly In addition, we estimate that each preserve those and other records reports would be about $399 per month, SIBHC will incur a cost of about relating to its business for certain and thus approximately $4,788 per $378,000 to maintain its models.140 prescribed time periods. We estimate year.135 We estimate that, on average, an Finally, we estimate that each SIBHC that an SIBHC would incur an annual SIBHC would incur a quarterly cost of will incur an annual cost of cost of about $17,280 to create a record $798 to prepare and file the required approximately $24,915 to perform stress regarding stress tests as required by quarterly reports, and thus would incur tests on its models at least once each proposed Rule 17i–5.131 Further, we an annual cost of $3,192 to file these quarter.141 Thus, we estimate that the estimate that, on average, an SIBHC reports.136 Finally, we estimate that, on annual cost that SIBHCs will incur, in would incur an annual cost of average, an SIBHC would incur an aggregate, will be approximately $2.7 approximately $371 to create a record annual cost of $9,750 to prepare and file million.142 regarding the basis for credit risk an annual audit.137 Thus, we estimate Proposed Rule 17i–8 would require weights.132 These estimates are based on that the total cost that, in aggregate, SIBHCs to report to the Commission the informal discussions with potential SIBHCs would incur that are associated occurrence of certain material risks. We respondents. Further, we estimate that, with proposed Rule 17i–6 would be estimate that it would cost an SIBHC on average, an SIBHC would incur an approximately $106,385.138 approximately $64 to create a notice annual cost of $1,413 to maintain required to be submitted to the records pursuant to proposed Rule 17i– 133 We estimate, based on our present estimates Commission pursuant to Proposed Rule for Rule 17a–4, which previously have been subject 17i–8.143 However, we estimate that 129 We estimate that it would take each SIBHC to notice and comment and have been approved by 250 hours each year to maintain its internal risk OMB, that an SIBHC will spend about 24 hours per 139 We estimate, based on staff experience and management control system, and that an SIBHC year to maintain records as required pursuant to discussions with industry participants, that, on would have a senior compliance person perform proposed Rule 17i–5. The staff believes that an average, each SIBHC will take approximately 1,050 that task. According to the SIA’s Report on SIBHC would have a programmer analyst perform hours per year to calculate allowable capital and Management and Professional Earnings in the this task. According to the SIA’s Report on allowances for market, credit, and operational risk Securities Industry—2002, the hourly cost of a Management and Professional Earnings in the and to verify and review that data. We believe that senior compliance person is $56.60. (250 hours × Securities Industry—2002, the hourly cost of a an SIBHC would have a senior accountant perform × $56.60) = $14,149.50. programmer analyst is $58.88. ($58.88 24) = these calculations and verifications. According to The hourly burden estimates are roughly based $1,413.12. the SIA’s Report on Management and Professional on the estimates made in the Commission’s OTC 134 (($17,280 + $370.50 + $1,413.12) × 6 SIBHCs) Earnings in the Securities Industry—2002, the derivatives dealer releases, through which Rule = $114,381.72. hourly cost of a senior accountant is $49.88. ($49.88 15c3–4 was promulgated. Proposed Rule 17i–4 135 We estimate that an SIBHC would spend about × 1,050 hours) = $52,374. states that an SIBHC must comply with Rule 15c3– 8 hours per month and 96 hours per year to prepare 140 We estimate, based on staff experience and 4 as if it were a broker-dealer. No comments were and file these monthly reports. We believe that an discussions with industry participants, that each received in response to the estimates proposed in SIBHC would have a senior accountant prepare and SIBHC will spend an average of approximately the OTC derivatives dealers proposing release, and file these reports. According to the SIA’s Report on 5,600 hours per year maintaining its models. We those burden estimates were not changed in the Management and Professional Earnings in the believe that an SIBHC would have a senior final rule release. Those estimates were increased Securities Industry—2002, the hourly cost of a programmer and a senior research analyst spend to account for the fact that an SIBHC would be senior accountant is $49.88. ($49.88 × 8 hours) = approximately 2,800 hours each maintaining its designing and implementing a system of internal $399.04. ($399.04 × 12 months) = $4,788.48. models. According to the SIA’s Report on risk management controls for the affiliate group, 136 We estimate that an SIBHC would spend about Management and Professional Earnings in the and not just for one firm. 16 hours per quarter and 64 hours per year to Securities Industry—2002, the hourly cost of a 130 ($14,149.50 × 6 SIBHCs) = $84,897. prepare and file these quarterly reports. We believe senior programmer is $63.75 and the hourly cost of × 131 Based on the staff’s experience working with that an SIBHC would have a senior accountant a senior research analyst is $71.25. (($63.75 2,800 × models and dealing with firms that use models prepare and file these reports. According to the hours) + ($71.25 2,800 hours) = $378,000. through implementation of the OTC derivatives SIA’s Report on Management and Professional 141 We estimate, based on staff experience and dealers rules, as well as informal discussions with Earnings in the Securities Industry—2002, the discussions with industry participants, that each potential respondents, we estimate that an SIBHC hourly cost of a senior accountant is $49.88. ($49.88 SIBHC will spend about 640 hours each year to would spend approximately 256 hours each year to × 16 hours) = $798.08. ($798.08 × 4 quarters) = conduct stress tests on its models. We believe that create a record regarding stress tests. We believe $3,192.32. an SIBHC would have a junior research analyst that an SIBHC would have a trading floor 137 We estimate that an SIBHC would spend about conduct stress tests on its models. According to the supervisor or equivalent create this record. 200 hours per year to prepare and file an annual SIA’s Report on Management and Professional According to the SIA’s Report on Management and audit. We believe that an SIBHC would have a Earnings in the Securities Industry—2002, the Professional Earnings in the Securities Industry— senior internal auditor work with accountants to hourly cost of a junior research analyst is $38.93. 2002, the hourly cost of a trading floor supervisor prepare and file these reports. According to the ($38.93 × 640 hours) = $24,915.20. is $67.50. ($67.50 × 256) = $17,280. SIA’s Report on Management and Professional 142 (($52,374 + $378,000 + $24,915.20) × 6 SIBHCs 132 Based on the staff’s informal discussions with Earnings in the Securities Industry—2002, the = $2,731,735.20. potential respondents, we estimate that an SIBHC hourly cost of a senior internal auditor is $48.75. 143 We estimate that it would take an SIBHC would spend 30 minutes per counterparty to create ($48.75 × 200 hours) = $9,750. approximately one hour to create a notice required a record regarding credit risk weights, and that, on 138 (($4,788.48 + $3,192.32 + $9750) × 6 SIBHCs) to be submitted to the Commission pursuant to average, each SIBHC would initiate relationships = $106,385. The hourly burden estimates relating to proposed Rule 17i–8. However, we further estimate with 20 new counterparties each year. We believe proposed Rule 17i–6 are based on the present that only one SIBHC may be required to submit that an SIBHC would have an intermediate estimates for Rule 17a–12, which were previously such notice every other year. We believe that an accountant create this record. According to the subject to notice and comment and have been SIBHC would have an attorney create a notice SIA’s Report on Management and Professional approved by OMB. However, those estimates were required to be submitted to the Commission Earnings in the Securities Industry—2002, the reduced somewhat due to the fact that SIBHCs pursuant to proposed Rule 17i–8. According to the hourly cost of an intermediate accountant is $37.05. would not be required to create any special report, SIA’s Report on Management and Professional ($37.05 × (30 minutes × 20 counterparties)) = but instead could provide the required information Earnings in the Securities Industry—2002, the $370.50. to the Commission in its existing format. Continued

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only one SIBHC may be required to send that an IBHC would have an attorney and liquidity of the affiliate group. We a notice as required by proposed Rule review the Notice of Intention, and that estimate that it would cost each SIBHC 17i–8 every other year. Thus, we it would incur a cost of approximately about $1,958 to document such a estimate that the annual cost of $6,375 relating to this review.146 contingency plan.150 Consequently, it proposed Rule 17i–8 for all SIBHCs Consequently, we estimate that the total would cost the six SIBHCs we expect to would be about $32.144 costs that would be incurred by the six file Notices of Intention to be supervised IBHCs we believe will file Notices of by the Commission, in aggregate, 2. One-time Costs Intention to become supervised by the approximately $11,746.151 We believe that an SIBHC would Commission as SIBHCs is about The IT systems used by IBHCs to incur five types of one-time costs $343,890.147 manage risk, make and retain records associated with becoming an SIBHC: (i) Each SIBHC would incur a one-time and reports, and calculate capital differ Costs associated with drafting a Notice cost to assess its present structure, widely based on the types of business of Intention to submit to the businesses, and controls, and establish, and the size of the IBHC. In addition, Commission; (ii) costs associated with document and maintain a risk these IT systems may be in varying assessing its present structure, management control system in order to stages of readiness to meet the businesses, and controls, and designing comply with proposed Rule 17i–4. We requirements of the proposed rules. We and implementing a risk management estimate that the one-time cost for an estimate that it will cost an IBHC that control system in order to comply with SIBHC to assess its present structure, has well-developed IT systems to proposed Rule 17i–4; (iii) costs businesses, and controls, and establish, manage group-wide risk, make and associated with creating and document and maintain a risk retain their records, provide reports, and documenting a contingency plan management control system will cost calculate group-wide capital about $1 regarding funding and liquidity of the approximately $203,760.148 Thus, we million to upgrade its IT systems. We affiliate group; (iv) costs associated with anticipate the total aggregate cost for all estimate that it will cost an IBHC that upgrading the information technology SIBHCs would be about $1.2 million.149 has less well-developed IT systems (‘‘IT’’) systems it uses to manage group- Pursuant to proposed Rule 17i–5, an approximately $10 million to upgrade wide risk, make and retain records and SIBHC would be required to document its IT systems. Thus, we estimate that, reports, and calculate group-wide a contingency plan regarding funding on average, it will cost each of the six capital; and (v) costs associated with SIBHCs about $5.5 million to upgrade developing mathematical models to 146 We believe that an SIBHC will have an their IT systems, or approximately $33 calculate its group-wide allowances for attorney review the Notice of Intention and that it million in total. We believe that the market and credit risk as required by would take an attorney 100 hours to complete this costs for an SIBHC to update review. According to SIA’s Report on Management proposed Rule 17i–7. and Professional Earnings in the Securities information technology systems in order Proposed Rule 17i–2 would require Industry—2002, the hourly cost of an attorney is to comply with proposed Rules 17i–1 that an IBHC file a Notice of Intention $63.75. ($63.75 × 100 hours) = $6,375. through 17i–8 would be an initial, one- to become supervised by the 147 ($50,940 + $6,375) × 6 SIBHCs = $343,890. time cost. These estimates are based on Commission that includes certain The hourly burden estimates used to derive these the experience of Commission staff, as cost estimates are based on the estimates made in information and documents. We the Commission’s OTC derivatives dealer releases, well as informal discussions with estimate that each IBHC that files a which contained a similar requirement. No potential respondents. Notice of Intention to become comments were received in response to the Pursuant to proposed Rule 17i–7 an supervised by the Commission as an estimates proposed in the OTC derivatives dealers SIBHC would be required to calculate SIBHC would incur a cost of proposing release, and those burden estimates were not changed in the final rule release. We adjusted its group-wide allowances for market, approximately $50,940 to draft a Notice those estimates such that the burden hours credit, and operational risk on a of Intention, compile the various associated with creation of VaR models was moved monthly basis. SIBHCs would generally documents to be included with the to the burden estimates for proposed Rule 17i–7. use mathematical models to calculate Notice of Intention, and work with the We also adjusted the estimates based on the staff’s market and credit risk. The SIBHC’s 145 experience in implementing the OTC derivatives Commission staff. Further, we believe dealer rules. size, the types of business in which it 148 We estimate that the average amount of time engages, and the complexity of its hourly cost of an attorney is $63.75. ($63.75 × 1 an SIBHC would spend assessing its present portfolio will all factor into the cost of hour) = $63.75. The hourly burden estimate for structure, businesses, and controls, and designing model development. We estimate, based proposed Rule 17i–8 is based on our present and implementing a risk management control estimates for Rule 17a–11, which were previously system would be about 3,600 hours. We believe that on staff experience, our experience with subject to notice and comment and have been an SIBHC would have a senior compliance person OTC derivatives dealers, and approved by OMB. The Commission received 692 performing this task. According to the SIA’s Report discussions with industry participants, Rule 17a–11 Notices from 627 broker-dealers during on Management and Professional Earnings in the that it will cost an SIBHC between the year ending December 2001. At that time, there Securities Industry—2002, the hourly cost of a were approximately 7,217 active broker-dealers that senior compliance person is $56.60. ($56.60 × 3,600 $6,750 (if the firm already manages risks are registered with the Commission. Thus, 9% (692/ hours) = $203,760. using mathematical models and simply 7,217) of active, registered broker-dealers had a 149 ($203,760.00 per SIBHC × 6 SIBHCs expected needs to adjust those models to assure situation arise which caused them to file a notice to apply) = $1,222,560. The estimates of the initial they comply with the qualitative and pursuant to Rule 17a–11. Using this 9% figure, we and annual burdens for proposed Rule 17i–4 are quantitative requirements set forth in estimate that of the approximately 6 IBHCs that we based on the estimates the Commission made in believe will register to be supervised as SIBHCs, adopting Rule 15c3–4. Proposed Rule 17i–4 makes one may be required to file notice pursuant to Rule 15c3–4 applicable to SIBHCs. Our burden 150 We estimate that, on average, an SIBHC would × proposed Rule 17i–8 every other year ((6 SIBHCs estimates for proposed Rule 17i–4 are higher than spend about 40 hours to create and document a 9%) = 0.54). our burden estimates for Rule 15c3–4 because an contingency plan regarding funding and liquidity of 144 ($63.75 × (30 minutes/one hour)) = $31.88. SIBHC would be establishing, documenting, and the affiliate group. This estimate is based on the 145 We estimate that an SIBHC will spend 900 maintaining a system of internal risk management staff’s experience. Further, we believe that an hours to perform this task. Further, we believe that controls for the affiliate group, and not just for one SIBHC would have a senior treasury manager an SIBHC would have a senior compliance person firm. We based our burden estimates for proposed perform this task. According to the SIA’s Report on perform this task. According to the SIA’s Report on Rule 17i–4 on our burden estimates for Rule 15c3– Management and Professional Earnings in the Management and Professional Earnings in the 4 because Rule 15c3–4 and proposed Rule 17i–4 are Securities Industry—2002, the hourly cost of a Securities Industry—2002, the hourly cost of a substantially similar and because no comments senior treasury manager is $48.94. ($48.94 × 40 senior compliance person is $56.60. ($56.60 × 900 were received regarding the burden estimates for hours) = $1,957.60. hours) = $50,940. Rule 15c3–4. 151 ($1,957.60 × 6 SIBHCs) = $11,746.

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the proposed rules) and $675,000 (if the rules, and some IBHCs have plans to Exchange Act 155 requires the firm is complex and does not presently make those investments in the near Commission, in adopting rules under use mathematical models to manage future. As stated previously in section the Exchange Act, to consider the risk) to update or create mathematical IV.C., we believe that the six IBHCs that impact that any such rule would have models.152 Thus, we estimate that the qualify will file a Notice of Intention to on competition. Exchange Act Section additional cost to create new models become supervised by the Commission 23(a)(2) prohibits the Commission from would be, in aggregate, between about as SIBHCs because it is cost effective adopting any rule that would impose a $40,500 and about $4.1 million for all and because they have made or plan to burden on competition not necessary or six firms.153 make the necessary investments appropriate in furtherance of the The Commission notes that broker- regardless of Commission rule making. purposes of the Exchange Act. dealers with tentative net capital of To the extent that a firm that becomes The Commission’s preliminary view between $100 million and $1 billion subject to this rule will not incur is that proposed Rules 17i–1 through that are not affiliated with banks additional costs to establish, document 17i–8 would promote both efficiency generally do not report a VaR figure in and maintain a risk management control and capital formation. The proposed their market risk disclosure of their system, upgrade its IT, or create rules should provide qualifying IBHCs holding companies’ annual reports. mathematical models, our estimates an opportunity to increase operational However, some firms of this size do with regard to the proposed rules may efficiency by continuing to compete report a VaR figure in their market risk be reduced. We seek specific comment effectively outside of the United States disclosure of their holding companies’ on the degree to which potential in countries that require consolidated annual reports. IBHCs that do not applicants under this rule have already supervision as a condition of doing presently use VaR to manage group- made, or are making, the necessary business. Although the proposed rules wide risk may not find it to be cost investments in risk management control would impose new costs relating to: (i) effective to file a Notice of Intention to systems, IT, and mathematical Creation and implementation of a be supervised by the Commission as an modeling. group-wide system of internal SIBHC. However, this regulatory management controls; (ii) framework is available to a wide range C. Request for Comment Regarding recordkeeping; and (iii) reporting, an of firms as an alternative, and may allow Analysis of Costs and Benefits IBHC filing a Notice of Intention to be some of them to compete more To assist the Commission in supervised by the Commission as an effectively. evaluating the costs and benefits that SIBHC would not be subject to As stated previously, there are may result from the proposed consolidated supervision in non-U.S. approximately one hundred applicants supervisory framework for SIBHCs, the marketplaces. Further, as this who qualify based on the minimum Commission requests comments on the framework for oversight is voluntary, we tentative net capital requirements. In potential costs and benefits identified in do not believe IBHCs will file Notices of addition, it is unclear to what extent this release, as well as any other costs Intention to be supervised by the IBHCs have made these investments or benefits that may result from the Commission as an SIBHC unless the already in the ordinary course of proposed rules and rule amendments. In benefits of such an election outweigh business. Evolving industry best addition, we invite commenters to the costs with respect to the applying practice for internationally active firms provide views and data comparing the firm. suggests that some IBHCs will have costs and benefits discussed above with The Commission notes that broker- already made some or all the the costs and benefits of the current dealers with tentative net capital of investments required by the proposed regulatory framework. Commenters between $100 million and $1 billion should provide analysis and data that are not affiliated with banks 152 We estimate that an SIBHC that already generally do not report a VaR figure in manages risk using mathematical models may need relating to the costs and benefits to spend 100 hours to review its models and adjust associated with each of the proposed their market risk disclosure of their them to assure they comply with the qualitative and Rules. In particular, we solicit holding companies’ annual reports. quantitative requirements set forth in the proposed comments on the potential costs for any However, some firms of this size do rules. We believe that an SIBHC would have a report a VaR figure in their market risk senior programmer and a senior research analyst necessary modifications to accounting, spend approximately 50 hours each to perform this information and recordkeeping systems, disclosure of their holding companies’ task. According to the SIA’s Report on Management and risk management control systems annual reports. IBHCs that do not and Professional Earnings in the Securities required to implement the proposed presently use VaR to manage group- Industry—2002, the hourly cost of a senior wide risk may not find it to be cost programmer is $63.75 and the hourly cost of a rules, and the potential benefits arising senior research analyst is $71.25. (($63.75 × 50 from participation in this optional effective to file a Notice of Intention to hours) + ($71.25 × 50 hours) = $6,750. Further, we regulatory framework. be supervised by the Commission as an estimate that a complex SIBHC that does not SIBHC. However, this regulatory presently use mathematical models to manage risk VI. Consideration on Burden on framework is available to a wide range would spend approximately 10,000 hours to create Competition, and Promotion of mathematical models to use in calculating market of firms as an alternative, and may allow and credit risk as required by the proposed rules. Efficiency, Competition and Capital some of them to compete more We believe that an SIBHC would have a senior Formation effectively. programmer and a senior research analyst spend 154 The Commission’s preliminary view approximately 5,000 hours each to perform this Section 3(f) of the Exchange Act task. According to the SIA’s Report on Management requires the Commission, whenever it is that the proposed rules would not and Professional Earnings in the Securities engages in rulemaking and is required to have anti-competitive effects on smaller Industry—2002, the hourly cost of a senior broker-dealers because smaller broker- programmer is $63.75 and the hourly cost of a consider or determine if an action is × necessary or appropriate in the public dealers are generally not interested in senior research analyst is $71.25. (($63.75 5,000 156 hours) + ($71.25 × 5,000 hours) = $675,000. These interest, to consider if the action will consolidated supervision. These rules hourly burden estimates are based on staff promote efficiency, competition, and 155 experience and discussions with industry capital formation. Section 23(a)(2) of the 15 U.S.C. 78w(a)(2). participants. 156 Generally, smaller broker-dealers are 153 ($6,750 × 6 SIBHCs) = $40,500. ($675,000 × 6 organized in a simpler manner, and they do not SIBHCs) = $4,050,000. 154 15 U.S.C. 78c(f). Continued

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implement Section 17(i) of the Exchange assessment rules to exempt a broker- year as of which its audited financial Act. These rules are intended, in part, dealer that is affiliated with an SIBHC statements were prepared pursuant to to allow U.S. broker-dealers to compete because the SIBHC will be maintaining Rule 17a–5(d) or, if not required to file more effectively in the global securities records and reporting to the such statements, a broker-dealer that markets. Commission regarding the financial and had total capital (net worth plus • We solicit comment on whether the operational condition of members of the subordinated liabilities) of less than proposal would promote both efficiency affiliate group. Finally, the Commission $500,000 on the last day of the and capital formation. is proposing to adjust the audit preceding fiscal year (or in the time that • We request comment on the requirements for OTC derivative dealers it has been in business, if shorter); and competitive benefits to broker-dealers to allow accountants to use agreed-upon (ii) it is not affiliated with any person that may result under the proposed procedures when conducting audits of (other than a natural person) that is not rules. risk management control systems. a small business or small • We also request comment on any An IBHC can apply to become an organization.160 An OTC derivatives anticompetitive effects that may result SIBHC only if it is not affiliated with an dealer is a ‘‘dealer’’ under the Exchange under the proposed rules. insured bank (with certain exceptions) Act.161 The minimum capital or a savings association,157 (ii) a foreign requirements for an OTC derivatives VII. Regulatory Flexibility Act bank, foreign company, or a company dealer are tentative net capital of at least Certification that is described in section 8(a) of the $100 million and net capital of at least The Commission hereby certifies, International Banking Act of 1978, or $20 million. Thus, no small broker- pursuant to 5 U.S.C. 605(b), that (iii) a foreign bank that controls a dealers are subject to Rule 17a–12. proposed new Rules 17i–1 through 17i– corporation chartered under section 25A Accordingly, proposed new Rules 8, and proposed amendments to Rules of the Federal Reserve Act.158 In 17i–1 through 17i–8, and the proposed 17h–1T, 17h–2T, and 17a–12(l) under addition, pursuant to paragraph amendments to Rules 17h–1T, 17h–2T, the Exchange Act, if adopted, would not (d)(2)(i)(B) of proposed Rule 17i–2, the and 17a–12(l), if adopted, would not have a significant economic impact on Commission would not consider such have a significant economic impact on a substantial number of small entities. supervision necessary or appropriate a substantial number of small entities. Proposed new Rules 17i–1 through unless the investment bank holding We encourage written comments 17i–8 would create a framework for the company demonstrates that it owns or regarding this certification. We solicit Commission to supervise SIBHCs. These controls a broker or dealer that has a comment as to whether the proposed rules also would enhance the substantial presence in the securities rules and rule amendments could have Commission’s supervision of the business, which may be demonstrated an effect that we have not considered. SIBHC’s subsidiary broker-dealers by a showing that the broker or dealer We request that commenter describe the through collection of additional maintains tentative net capital of $100 nature of any effect on small entities information and examinations of million or more. Accordingly, an IBHC and provide empirical data to support affiliates of those broker-dealers. This could not be a small entity.159 the extent of the effect. The proposed changes to Rules 17h– framework would include qualification VIII. Consideration of Impact on the 1T and 17h–2T would apply only to criteria for IBHCs that file Notices of Economy Intention to be supervised by the broker-dealers that are affiliated with an Commission, as well as recordkeeping IBHC that becomes supervised by the For purposes of the Small Business and reporting requirements for SIBHCs. Commission as an SIBHC. In addition, Regulatory Enforcement Fairness Act of An IBHC that meets the criteria set forth Rules 17h–1T and 17h–2T only require 1996, or ‘‘SBREFA,’’ 162 we must advise in the proposed rules would not be that one broker-dealer within a holding OMB as to whether the proposed required to become an SIBHC; company structure obtain and maintain regulation constitutes a ‘‘major’’ rule. supervision as an SIBHC is voluntary. the required records and file the Under SBREFA, a rule is considered Taken as a whole, the proposed required reports. Generally, a broker- ‘‘major’’ where, if adopted, it results or dealer would be exempt from Rules is likely to result in: framework would permit the • Commission to better monitor the 17h–1T and 17h–2T if it (i) maintains An annual effect on the economy of financial condition, risk management, less than $250,000 in net capital, (ii) is $100 million or more (either in the form exempt from Rule 15c3–3 pursuant to of an increase or a decrease); and activities of a broker-dealer’s parent • and affiliates on a group-wide basis. In § 240.15c3–3(k)(1), (iii) maintains less A major increase in costs or prices particular, it would create a formal than $20 million in net capital and is for consumers or individual industries; process through which the Commission either exempt from Rule 15c3–3 or • Significant adverse effect on could access important information pursuant to § 240.15c3–3(k)(2) or is not exempt from Rule 15c3–3 but does not competition, investment or innovation. regarding activities of a broker-dealer’s If a rule is ‘‘major,’’ its effectiveness hold funds or securities for, nor owe affiliates that could impair the financial will generally be delayed for 60 days money or securities to customers. Thus, and operational stability of the broker- pending Congressional review. We no small broker-dealers are subject to dealer or the SIBHC. Further, as this request comment on the potential Rules 17h–1T and 17h–2T. framework for oversight is voluntary, we impact of the proposed regulation on do not believe IBHCs will file Notices of Rule 17a–12 is only applicable to OTC derivatives dealers. As stated the economy on an annual basis. Intention to be supervised by the Commenters are requested to provide Commission as SIBHCs unless the previously, a broker-dealer generally would be considered a small entity if (i) empirical data and other factual support benefits of such supervision outweigh for their view to the extent possible. the costs with respect to the applying it has total capital (net worth plus subordinated liabilities) of less than firm. The Commission is also proposing 160 $500,000 on the date in the prior fiscal Exchange Act Rule 0–10 [17 CFR 240.0–10]. to add an exemption to the risk 161 See Section 3(a)(5) of the Exchange Act [15 U.S.C. 78c(a)(5)]. engage in international transactions that could 157 See supra, note 6. 162 Pub. L. No. 104–121, Title II, 110 Stat. 857 cause them to be subject to regulation by 158 Federal Reserve Act § 25A [12 U.S.C. 611]. (1996) (codified in various sections of 5 U.S.C., 15 international securities regulatory agencies. 159 See 17 CFR 240.0–10(c). U.S.C., and as a note to 5 U.S.C. 601).

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IX. Statutory Authority Generally Accepted Attestation (b) For purposes of §§ 240.17i–2 The amendments are proposed Standards. through 240.17i–8, the term affiliate pursuant to the authority conferred on (3) Prior to the commencement of the group shall include the supervised the Securities and Exchange review, every OTC derivatives dealer investment bank holding company and Commission by the Exchange Act (15 shall file the procedures to be performed every affiliate of the supervised U.S.C. 78a, et seq.) (particularly sections pursuant to paragraph (l)(1) of this investment bank holding company. 17, 23, and 24(b) thereof (15 U.S.C. 78q, section with the Commission’s principal (c) For purposes of §§ 240.17i–1 78w, and 78x(b))). office in Washington, DC. Prior to the through 240.17i–8, the term material commencement of any subsequent affiliate shall mean any member of the List of Subjects in 17 CFR Part 240 review, every OTC derivatives dealer affiliate group that is material to the Brokers, OTC derivatives dealers, shall file with the Commission’s supervised investment bank holding Reporting and recordkeeping principal office in Washington, DC a company. requirements, Securities, Supervised notice of changes in the agreed-upon procedures. If there are no changes, the § 240.17i–2. Notice of intention to be investment bank holding companies. supervised by the Commission as a OTC derivatives dealer should indicate Text of Proposed Rules and Rule supervised investment bank holding in the notice that no changes have been company. Amendments made to those procedures. (a) An investment bank holding In accordance with the foregoing, the * * * * * Securities and Exchange Commission company that owns or controls a broker 5. Section 240.17h–1T is amended by: or dealer may file with the Commission hereby proposes to amend Title 17 a. Redesignating paragraph (d)(5) as a written notice of intention to become Chapter II of the Code of Federal paragraph (d)(6); and supervised by the Commission pursuant Regulations as follows: b. Adding new paragraph (d)(5). The addition reads as follows: to section 17(i) of the Act (15 U.S.C. PART 240—GENERAL RULES AND 78q(i)), provided that the investment REGULATIONS, SECURITIES § 240.17h–1T Risk assessment bank holding company is not: EXCHANGE ACT OF 1934 recordkeeping requirements for associated (1) An affiliate of an insured bank persons of brokers and dealers. (other than an institution described in 3. The authority citation for Part 240 * * * * * paragraph (D), (F), or (G) of section continues to read, in part, as follows: (d) * * * 2(c)(2), or held under section 4(f), of the Authority: 15 U.S.C. 77c, 77d, 77g, 77j, (5) The provisions of this section shall Bank Holding Company Act of 1956) (12 77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, not apply to a broker or dealer affiliated U.S.C. 1841(c)(2)(D), (F), or (G) and 12 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, with a supervised investment bank U.S.C. 1843(f)) or a savings association; 78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p, holding company, as defined in (2) A foreign bank, foreign company, 78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 79q, § 240.17i–1(a). or company that is described in section 79t, 80a–20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4, 80b–11, 7202, 7241, 7262, and 7263; * * * * * 8(a) of the International Banking Act of and 18 U.S.C. 1350, unless otherwise noted. 6. Section 240.17h–2T is amended by: 1978 (12 U.S.C. 3106(a)); or * * * * * a. Redesignating paragraph (b)(5) as (3) A foreign bank that controls, 4. Section 240.17a–12, paragraph (l) is paragraph (b)(6); and directly or indirectly, a corporation revised to read as follows: b. Adding new paragraph (b)(5). chartered under section 25A of the The addition reads as follows: Federal Reserve Act (12 U.S.C. 611). § 240.17a–12 Reports to be made by (b) To become supervised as a certain OTC derivatives dealers. § 240.17h–2T Risk assessment reporting requirements for brokers and dealers. supervised investment bank holding * * * * * company an investment bank holding (l) Accountant’s report on * * * * * company shall file a notice of intention management controls. (1) The OTC (b) * * * that includes the following: (5) The provisions of this section shall derivatives dealer shall file concurrently (1) A request to become supervised as not apply to a broker or dealer affiliated with the annual audit report a a supervised investment bank holding with a supervised investment bank supplemental report by the certified company; holding company, as defined in public accountant indicating the results (2) A statement certifying that the § 240.17i–1(a). of the certified public accountant’s investment bank holding company is review of the OTC derivatives dealer’s * * * * * not an entity described in section internal risk management control 7. Sections 240.17i–1 through 17(i)(1)(A)(i)—(iii) of the Act (15 U.S.C. system with respect to the requirements 240.17i–8 are added to read as follows: 78q(i)(1)(A)(i)—(iii)); of § 240.15c3–4. This review shall be Supervised Investment Bank Holding (3) Documentation demonstrating that conducted in accordance with Company Rules the investment bank holding company procedures agreed to by the OTC owns or controls a broker or dealer that derivatives dealer and the certified § 240.17i–1. Definitions. maintains a substantial presence in the public accountant conducting the (a) For purposes of §§ 240.17i–1 securities business as evidenced either review. The purpose of the review is to through 240.17i–8, the terms investment by its holding $100 million or more in confirm that the OTC derivatives dealer bank holding company, supervised tentative net capital as calculated has established, documented, and investment bank holding company, pursuant to § 240.15c3–1 or by any maintained an internal risk management affiliate, bank, bank holding company, other information and documentation as control system in accordance with company, control, savings association, the Commission determines is § 240.15c3–4, and is in compliance with insured bank, foreign bank, person appropriate; and that internal risk management control associated with an investment bank (4) Supplemental documents system. holding company and associated person including: (2) The agreed-upon procedures are to of an investment bank holding company (i) A narrative describing the business be performed, and the report is to be shall be defined as set forth in section and organization of the investment bank prepared, in accordance with U.S. 17(i)(5) of the Act. holding company;

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(ii) An alphabetical list of each access to any or all of the model’s bank holding company’s activities, member of the affiliate group, an outputs, and what outputs are accessible financial condition, policies, systems for indication of which affiliates the to whom; and monitoring and controlling financial investment bank holding company (F) A statement that the model is used and operational risks, and transactions regards as material to the holding to analyze and report risk to senior and relationships among members of the company, and the financial regulator(s), management; affiliate group that the Commission may if any, with which the affiliate is (viii) A description of any positions request to complete its review of the registered; for which the investment bank holding notice of intention. (iii) An organizational chart that company proposes to use an alternative (c) Amendments to the notice of identifies the investment bank holding method for computing an allowance for intention. (1) Prior to Commission company, each broker or dealer owned market risk and a description of how determination. If any of the information or controlled by the investment bank that allowance would be determined; or documentation filed with the holding company, and each material (ix) A description of how the Commission as part of the notice of affiliate; investment bank holding company intention to become a supervised (iv) Consolidated and consolidating proposes to calculate current exposure investment bank holding company financial statements of the affiliate (as defined in § 240.17i–7(c)(1)(i)(E)); described in paragraph (b) of this group as of the end of the quarter (x) A description of how the section is found to be or becomes preceding the filing of the notice of investment bank holding company inaccurate prior to the Commission intention; proposes to determine or calculate determination, the investment bank (v) The following computations for credit risk weights and internal credit holding company shall promptly notify the affiliate group: ratings; the Commission and provide the (A) Allowable capital and allowances (xi) A description of the method the Commission with a description of the for market risk, credit risk, and investment bank holding company circumstances in which the information operational risk; or proposes to use to calculate its or documentation was found to be or (B) A computation made pursuant to allowance for operational risk pursuant has become inaccurate along with § 240.17i–7(e); to § 240.17i–7(e); updated, accurate information and (vi) A list of the positions that the (xii) A comprehensive description of documents. affiliate group holds in any proprietary the internal risk management control (2) Subsequent to Commission accounts and a brief description of the system of the investment bank holding determination. If, subsequent to the method that the investment bank company established to manage the Commission determination of a notice holding company will use to calculate risks of the affiliate group, including of intention to become a supervised allowances for market and credit risk on market, credit, liquidity and funding, investment bank holding company, the those positions pursuant to § 240.17i– legal and compliance, and operational supervised investment bank holding 7(b) and (c); risks, and how that system satisfies the company materially changes a (vii) A description of each requirements set forth in § 240.17i–4; mathematical model or other method mathematical model that the investment (xiii) Sample risk reports provided to used to compute allowable capital or bank holding company intends to use to the persons responsible for managing allowance for market, credit, or price positions and to calculate the risks of the affiliate group that the operational risk, or its internal risk allowances for market and credit risk (as investment bank holding company management control systems as specified in § 240.17i–7(b) and (c)), proposes to provide to the Commission described in its notice of intention (and including: pursuant to § 240.17i–6(a)(1)(v); as modified from time to time), prior to (A) A statement of whether the model (xiv) An undertaking that provides: making the changes the supervised was developed by the investment bank (A) If the disclosure of any investment bank holding company shall holding company, one of its affiliates or information with regard to §§ 240.17i–1 file an amended notice of intention subsidiaries, or another person; through 240.17i–8 would be prohibited describing the changes. (B) If the mathematical model by law or otherwise, the supervised (d) Process for review of notice of incorporates correlations across risk investment bank holding company will intention. (1) When filed. A notice of factors, a description of the process used cooperate with the Commission as intention to be supervised by the to measure these correlations; needed, including by describing any Commission as a supervised investment (C) A description of the tests secrecy laws or other impediments that bank holding company shall not be performed on the mathematical model could restrict the ability of the complete until the investment bank and the results of those tests, including supervised investment bank holding holding company has filed with the a description of back tests and company or any material affiliate from Commission all the documentation and alternative tests to estimate risk, such as providing information on its operations information specified in this section. stress tests and scenario tests, and or activities and by discussing the Any documentation and information procedures instituted to respond to test manner in which the supervised submitted, and any amendments results (including a schedule of investment bank holding company thereto, shall be considered filed when multiplication factors to apply to the proposes to provide the Commission received at the Office of the Secretary at credit equivalent amount based on with adequate assurances of access to the Commission’s principal office in backtesting results); information; and Washington DC. All notices, (D) A description of how the (B) For any non-U.S. affiliate of the amendments thereto, and other mathematical model satisfies the supervised investment bank holding documentation and information filed qualitative and quantitative company, the supervised investment pursuant to this section shall be requirements listed in § 240.15c3–1e(e); bank holding company will obtain accorded confidential treatment. (E) A description of the internal consent to the jurisdiction of the (2) Commission determination. (i) An controls relating to the creation, use and Commission and an agreement to investment bank holding company shall maintenance of the mathematical maintain a U.S. registered agent; and become a supervised investment bank model, including a description of who (xv) Any other information and holding company pursuant to section may input data into the model, who has documents relating to the investment 17(i) of the Act (15 U.S.C. 78q(i)) 45

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calendar days after the Commission (b) A notice of withdrawal from move liquid assets across international receives a completed notice of intention supervision as a supervised investment borders when the events described in to register as a supervised investment bank holding company shall become paragraphs (a)(1)(i) or (ii) of this section bank holding company pursuant to effective one year after it is filed with occur; or paragraph (a) of this section, unless the the Commission, or within such shorter (iv) An inability of the supervised Commission issues an order or longer period as the Commission investment bank holding company to determining either that: determines to be necessary or access credit or assets held at a (A) The Commission will begin to appropriate to ensure effective particular institution when the events supervise the investment bank holding supervision of the material risks to the described in paragraphs (a)(1)(i) or (ii) of company prior to 45 calendar days after supervised investment bank holding this section occur; the Commission receives the completed company and to any associated person (2) The supervised investment bank notice of intention; or of the supervised investment bank holding company’s contingency plans to (B) The Commission will not holding company that is a broker or respond to the events outlined in supervise the investment bank holding dealer, or to prevent evasion of the paragraphs (a)(1)(i) through (iv) of this company because supervision of the purposes of section 17 of the Act (15 section; and investment bank holding company as a U.S.C. 78q). (3) A record of the basis for the supervised investment bank holding (c) Notwithstanding paragraphs (a) determination of the credit risk weight company is not necessary or appropriate and (b) of this section, the Commission, for each counterparty. in furtherance of the purposes of section by order, may discontinue supervision (b) Except as provided in paragraphs 17 of the Act (15 U.S.C. 78q). The of any supervised investment bank (c) of this section, the supervised Commission will not consider such holding company if the Commission investment bank holding company shall supervision necessary or appropriate finds that: preserve for a period of not less than unless the investment bank holding (1) The supervised investment bank three years in an easily accessible place company demonstrates that it owns or holding company is no longer in using any storage media acceptable controls a broker or dealer that has a existence; under § 240.17a–4(f): substantial presence in the securities (2) The supervised investment bank (1) The documents created in business, which may be demonstrated holding company has ceased to be an accordance with paragraph (a) of this by a showing that the broker or dealer investment bank holding company; or section; maintains tentative net capital of $100 (3) Continued supervision by the (2) All notices of intention, million or more. Commission of the supervised amendments thereto, and other (ii) The Commission will, upon the investment bank holding company is documentation and information filed filing of an amendment to the notice of not necessary or appropriate in with the Commission pursuant to intention submitted by a supervised furtherance of the purposes of section § 240.17i–2, and any responses thereto; investment bank holding company 17 of the Act (15 U.S.C. 78q). (3) All reports and notices the pursuant to paragraph (c) of this section, supervised investment bank holding § 240.17i–4. Internal risk management determine whether continued company shall file pursuant to control system requirements for supervised § 240.17i–6; supervision of the investment bank investment bank holding companies. holding company is necessary or (4) All notices the supervised (a) A supervised investment bank investment bank holding company shall appropriate in furtherance of the holding company shall comply with purposes of section 17 of the Act (15 file pursuant to § 240.17i–8; and § 240.15c3–4 as though it were a broker (5) Records documenting the system U.S.C. 78q) after reviewing the amended or dealer. notice of intention to determine whether of internal risk management controls for (b) As part of its internal risk market, credit, leverage, funding, legal the supervised investment bank holding management control system, a company and its subsidiary brokers or and operational risks required to be supervised investment bank holding established pursuant to § 240.17i–4 to dealers are in compliance with the company shall establish, document, and requirements of §§ 240.17i–1, 240.17i–2, manage the risks of the affiliate group, maintain procedures for the detection including written guidelines, policies, 240.17i–3, 240.17i–4, 240.17i–5, and prevention of money laundering 240.17i–6, 240.17i–7, and 240.17i–8 and and procedures. and terrorist financing. (c) A supervised investment bank other applicable rules promulgated holding company may maintain the under section 17 of the Act (15 U.S.C. § 240.17i–5. Record creation, maintenance, records specified in paragraph (b) of this 78q). and access requirements for supervised investment bank holding companies. section either at the supervised § 240.17i–3. Withdrawal from supervision (a) A supervised investment bank investment bank holding company, at by the Commission as a supervised holding company shall make and keep an affiliate, or at a records storage investment bank holding company. current the following records: facility, provided that the records are (a) A supervised investment bank (1) A record reflecting the results of located within the boundaries of the holding company may withdraw from stress tests, conducted at least once each United States. If the records are supervision by the Commission as a quarter, of the affiliate group’s funding maintained by an entity other than the supervised investment bank holding and liquidity with respect to the supervised investment bank holding company by filing a notice of following events: company, the supervised investment withdrawal with the Commission. The (i) A credit rating downgrade of the bank holding company shall file with notice of withdrawal shall include a supervised investment bank holding the Commission a written undertaking statement that the supervised company; in a form acceptable to the Commission investment bank holding company is in (ii) An inability of the supervised from the entity, signed by a duly compliance with § 240.17i–2(c) investment bank holding company to authorized person at the entity regarding amendments to its notice of access capital markets for short-term maintaining the records, to the effect intention to be supervised by the funding; that the records will be treated as if the Commission as a supervised investment (iii) An inability of the supervised supervised investment bank holding bank holding company. investment bank holding company to company were maintaining the records

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pursuant to this section and that the (v) Certain regular risk reports audit report containing a consolidated entity maintaining the records provided to the persons responsible for balance sheet, income statement, and undertakes to permit examination of managing risk for the affiliate group as computations of allowable capital and those records at any time or from time the Commission may request from time allowances for market, credit and to time during business hours by to time. operational risk computed in representatives or designees of the (2) A quarterly risk report, which may accordance with § 240.17i–7 (including Commission and to promptly furnish be unaudited, not later than 35 calendar notes to the financial statements). the Commission or its designee a true, days after the end of each quarter, (2) Annual audit reports prepared correct, complete and current copy of including: pursuant to this paragraph (c) shall be any or all or any part of those records (i) The information described in prepared as of the same date as the in either paper, or electronically if the paragraph (a)(1) of this section; annual audit of the supervised records are stored electronically. The (ii) A consolidating balance sheet and investment bank holding company’s election to store records pursuant to the income statement (including notes to subsidiary broker or dealer. provisions of this paragraph (c) shall not the financial statements) for the affiliate (3) Annual audit reports prepared relieve the supervised investment bank group. The consolidating balance sheet pursuant to this paragraph (c) shall be holding company from any of its shall break out information regarding filed concurrently with the annual audit responsibilities under this section or each material affiliate into separate of its affiliated broker or dealer (as § 240.17i–6. columns, but may consolidate required pursuant to § 240.17a–5(d)) as (d) All information obtained by the information regarding affiliate group follows: Commission pursuant to this section entities that are not material affiliates (i) Two copies shall be filed at the from the supervised investment bank into one column; Commission’s principal office in holding company shall be accorded (iii) The results of backtesting of all Washington, DC; and confidential treatment. models used to compute allowable (ii) One copy shall be filed at the capital and allowances for market and regional office of the Commission for § 240.17i–6. Reporting requirements for credit risk indicating, for each model, supervised investment bank holding the region in which the supervised companies. the number of backtesting exceptions; investment bank holding company’s (iv) A description of all material subsidiary broker or dealer is located. (a) Filing of monthly reports. The pending legal or arbitration proceedings (d) Nature and form of reports. A supervised investment bank holding involving any member of the affiliate supervised investment bank holding company shall file: group that are required to be disclosed (1) A monthly risk report not later company shall file the financial by the supervised investment bank than 17 business days after the end of statements pursuant to paragraph (c) of holding company under generally each month that does not end a quarter, this section in accordance with the accepted accounting principles; and which shall include: (v) The aggregate amount of following requirements: (i) A consolidated balance sheet, commercial paper, secured and other (1) An accountant that meets the income statement, and computations of unsecured borrowing, bank loans, lines requirements of paragraph (e) of this allowable capital and allowances for of credit, or any other borrowings, and section shall conduct an audit and give market, credit, and operational risk the principal installments of long-term an opinion covering the statements filed pursuant to § 240.17i–7 (including notes or medium-term debt, scheduled to pursuant to paragraph (c) of this section. to the financial statements) for the mature within twelve months from the (2) The supervised investment bank affiliate group; and most recent quarter by each affiliated holding company shall attach to the (ii) A graph reflecting, for each broker or dealer and any other material report required by paragraph (c)(1) of business line, the daily intra-month affiliate, together with the allowance for this section an oath or affirmation that VaR; losses for those transactions. to the best knowledge and belief of the (iii) Consolidated credit risk individual making the oath or information, including: (b) Additional reports. In addition to the reports required by paragraph (a) of affirmation the information contained in (A) Aggregate current exposure and the report is true and correct. The oath current exposures (including this section, upon receiving written notice from the Commission, the or affirmation shall be made before a commitments) listed by counterparty person duly authorized to administer for: supervised investment bank holding company shall file other information as the oath or affirmation. If the supervised (1) The 15 largest exposures; and investment bank holding company is a (2) The 5 largest exposures to the Commission may request in order to partnership, the oath or affirmation regulated financial institutions; monitor: (B) The 10 largest commitments by (1) The supervised investment bank shall be made by a general partner; if a counterparty; holding company’s financial or corporation, the oath or affirmation (C) Maximum potential exposure operational condition, risk management shall be made by the chief executive listed by counterparty for: system, and transactions and officer, or, in the absence of a chief (1) The 15 largest exposures; and relationships among members of the executive officer, by the person (2) The 5 largest exposures to affiliate group; or authorized to act in that officer’s place. regulated financial institutions; (2) The extent to which the (e) Accountants. (1) The provisions of (D) The aggregate maximum potential supervised investment bank holding § 240.17a–5(f) shall apply to a exposure; company has complied with the supervised investment bank holding (iv) A summary report reflecting the provisions of the Act and regulations company as though the supervised geographic distribution of the prescribed and orders issued under the investment bank holding company were supervised investment bank holding Act. a broker or dealer, except that, a company’s exposures on a consolidated (c) Annual filing of audited financial supervised investment bank holding basis for each of the top ten countries to statements. company shall not be required to send which it is exposed (by residence of the (1) A supervised investment bank notice to any designated examining main operating group of the holding company shall file annually, on authority as indicated in § 240.17a– counterparty); and a calendar or fiscal year basis, an annual 5(d)(2)(i) and (d)(4).

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(2) In addition to the qualification and not disclose any reportable conditions, to paragraphs (i)(2) and (i)(3) of this independence requirements set forth in the supplemental report shall so state. section); and § 240.17a–5(f), an accountant shall be a (2) A supplemental report entitled (ii) A notice describing any changes in registered public accounting firm as that ‘‘Accountant’s Report on Internal Risk those agreed-upon procedures, if any. If term is defined in the Sarbanes-Oxley Management Control System’’ there are no changes, the supervised Act of 2002 (15 U.S.C. 7201(a)(12)). indicating the results of the accountant’s investment bank holding company (f) Audit objectives. The audit shall be review of the internal risk management should indicate that no changes have conducted in accordance with the rules control system established and been made to those procedures. promulgated by the Public Company documented by the supervised (j) Notification of change of fiscal Accounting Oversight Board and shall investment bank holding company in year. If a supervised investment bank include a review of the accounting accordance with § 240.17i–4 and holding company changes its fiscal year, system and the internal accounting utilized by the affiliate group. This it must file a notice of the change controls (including appropriate tests review shall be conducted by the (including a detailed explanation of the thereof) for the period since the date of accountant in accordance with reason for the change) with the the prior audited financial statements. procedures agreed to by the supervised Commission. The audit shall include all procedures investment bank holding company and (k) Extensions and exemptions. Upon necessary under the circumstances to the accountant conducting the review. the written request of the supervised enable the accountant to express an The agreed-upon procedures are to be investment bank holding company, or opinion on the statement of financial performed in accordance with the rules on its own motion, the Commission may condition, results of operations, cash promulgated by the Public Company grant an extension of time or an flows, and the computations of Accounting Oversight Board. The exemption from any of the requirements allowable capital and allowances for purpose of the review is to confirm that of paragraphs (a) through (j) of this market, credit, and operational risk the internal risk management control section either unconditionally or on under § 240.17i–7. The scope of the system complies with the requirements specified terms and conditions. audit and review of the accounting of § 240.17i–4 and that the supervised (l) When filed. The reports provided system and the internal accounting investment bank holding company and for in this section shall be considered controls shall be sufficient to provide its affiliate group are adhering to the filed when two copies are received at reasonable assurance that any material requirements of that internal risk the Commission’s principal office in inadequacies that exist at the date of the management control system. Washington, DC, and one copy is examination in the accounting system or (3) A supplemental report entitled received at the regional or district office internal accounting controls would be ‘‘Accountant’s Report on Inventory of the Commission for the region or disclosed. Pricing and Modeling’’ indicating the district in which the broker or dealer (g) Extent and timing of audit results of the accountant’s review of the has its principal place of business. The procedures. The extent and timing of procedures for pricing financial copies sent to the Commission’s audit procedures are matters for the instrument inventory (including principal office shall be addressed to the accountant to determine on the basis of modeling procedures) established by the Division of Market Regulation. its review and evaluation of existing supervised investment bank holding (m) Confidentiality. All reports and internal controls and other audit company and utilized by the affiliate statements filed by the supervised procedures performed in accordance group. This review shall be conducted investment bank holding company with with the rules promulgated by the by the accountant in accordance with the Commission pursuant to this section Public Company Accounting Oversight procedures agreed to by the supervised shall be accorded confidential Board and the audit objectives listed in investment bank holding company and treatment. paragraph (f) of this section. the accountant conducting the review. § 240.17i–7. Calculations of allowable (h) Accountant’s report, general The agreed-upon procedures are to be capital and risk allowances or alternative provisions. The provisions of § 240.17a– performed in accordance with the rules capital assessment. 5(i) shall apply to a supervised promulgated by the Public Company (a) Computation of allowable capital. investment bank holding company and Accounting Oversight Board. The The supervised investment bank its audit. purpose of the review is to confirm that holding company shall calculate (i) Supplemental reports. The the financial instrument pricing allowable capital on a consolidated supervised investment bank holding procedures relied upon by the affiliate basis, which shall be the sum of: company shall file, concurrently with group conform to the procedures (1) Common shareholders’ equity on the annual audit report, the following established by the supervised the consolidated balance sheet of the supplemental reports prepared by the investment bank holding company supervised investment bank holding accountant in accordance with the rules pursuant to § 240.17i–4 and comply company less: promulgated by the Public Company with the qualitative and quantitative (i) Goodwill; Accounting Oversight Board: standards set forth in § 240.15c3–1e(e) (ii) Deferred tax assets; (1) A supplemental report entitled (as required pursuant to § 240.17i– (iii) Other intangible assets; and ‘‘Accountant’s Report on Reportable 7(b)(1)). (iv) Other deductions from common Conditions’’ describing any matter that (4) The supervised investment bank stockholders’ equity as required by the would be deemed to be a reportable holding company shall file, prior to the Federal Reserve Board in calculating condition under the rules promulgated commencement of the review and no Tier 1 capital (as defined in 12 CFR 225, by the Public Company Accounting later than December 10 of each year, a Appendix A). Oversight Board that is unresolved as of statement with the Commission’s (2) Cumulative and non-cumulative the date of the accountant’s report. The principal office in Washington, DC that preferred stock, except that the amount supplemental report shall indicate any includes: of the cumulative preferred stock may corrective action taken or proposed by (i) A description of the procedures for not exceed 33% of the items included the supervised investment bank holding conducting the audit agreed to by the in allowable capital pursuant to company with regard to any identified supervised investment bank holding paragraph (a)(1) of this section, reportable conditions. If the audit did company and the accountant (pursuant provided that:

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(i) The stock does not have a maturity supervised investment bank holding (ii) May be cancelled by the lender date; company may use a VaR model to due to credit deterioration of the (ii) The stock cannot be redeemed at determine its allowance for market risk borrower; the option of the holder of the only for positions for which there is (2) 5% credit conversion factor for instrument; adequate historical data to support a margin loans extended by members of (iii) The stock has no other provisions VaR model; and the affiliate group in compliance with that will require future redemption of (2) Alternative method. If there is not applicable self-regulatory organization the issue; and adequate historical data to support a rules and Federal regulations; (iv) The issuer of the stock can defer VaR model for certain positions, the (3) 20% credit conversion factor for: or eliminate dividends; and supervised investment bank holding (i) Loan commitments of less than one (3) The sum of the following items on company shall use the method year; or the consolidated balance sheet, to the described in its notice of intention to (ii) Short term self-liquidating trade extent that sum does not exceed the sum calculate the allowance for market risk. related contingencies, including letters of the items included in allowable (c) Allowance for credit risk. The of credit; capital pursuant to paragraphs (a)(1) and supervised investment bank holding (4) 50% credit conversion factor for (a)(2) of this section: company shall compute an allowance loan commitments with an original (i) Cumulative preferred stock in for credit risk daily for certain assets on maturity of greater than one year that excess of the 33% limit specified in the consolidated balance sheet and contain transaction contingencies, paragraph (a)(2) of this section; and certain off-balance sheet items, including performance bonds, revolving (ii) Subordinated debt if: including loans and loan commitments, underwriting facilities, note issuance (A) The original weighted average exposures due to derivatives contracts, facilities and bid bonds; and maturity of the subordinated debt is at structured financial products, other (5) 100% credit conversion factor for least five years; extensions of credit, and credit bankers’ acceptances, standby letters of (B) Each subordinated debt substitutes as follows: credit, and forward purchases of assets, instrument states clearly on its face that (1) Multiplying the credit equivalent and similar direct credit substitutes; repayment of the debt is not protected amount of the asset or off-balance sheet (C) Credit equivalent amount for other by any Federal agency or the Securities item by the appropriate credit risk assets. The credit equivalent amount for Investor Protection Corporation; weight of the asset or off-balance sheet other assets shall be the asset’s book (C) The subordinated debt is item or counterparty as determined value on the supervised investment unsecured and subordinated in right of according to paragraph (c)(1)(ii) of this bank holding company’s consolidated payment to all senior indebtedness of section, then multiplying the product by balance sheet; (D) The current exposure of a member the holding company; and 8%, in accordance with the following: (D) The subordinated debt instrument (i) Credit equivalent amount: of the affiliate group to a counterparty permits acceleration only in the event of (A) The credit equivalent amount for is the current replacement value of the bankruptcy or reorganization of the receivables relating to derivative counterparty’s positions with the holding company under Chapters 7 contracts, repurchase agreements, member of the affiliate group, including (liquidation) and 11 (reorganization) of reverse repurchase agreements, stock the effect of netting agreements with the U.S. Bankruptcy Code (11 U.S.C 7 loans, stock borrows, and other similar that counterparty meeting the and 11 U.S.C. 11, respectively). collateralized transactions is the sum of; requirements of § 240.15c3–1e(d)(5) and (b) Allowance for market risk. The (1) The supervised investment bank taking into account the value of supervised investment bank holding holding company’s current exposure to collateral from the counterparty pledged company shall calculate its allowance the counterparty (as defined in to and held by any member of the for market risk on a consolidated basis paragraph (c)(1)(i)(E) of this section); affiliate group meeting the requirements daily for all proprietary positions, and of § 240.15c3–1e(d)(6), and the fair including debt instruments, equity (2) The supervised investment bank market value of any credit derivatives instruments, commodity instruments, holding company’s maximum potential that specifically change the exposure to foreign exchange contracts, and exposure to the counterparty (as defined the counterparty (as long as the credit derivative contracts, which shall be the in paragraph (c)(1)(i)(F) of this section) derivatives are not used to change the sum of: multiplied by the appropriate credit risk weight of the counterparty as (1) Value at risk. The value at risk multiplication factor. The initial provided in paragraph (c)(1)(ii)(E) of (‘‘VaR’’) measure obtained by applying multiplication factor shall be one, this section); one or more approved VaR models to unless the Commission determines (E) The maximum potential exposure each position and multiplying the result pursuant to § 240.17i–2(a) or (c), based of a member of the affiliate group to a by the appropriate multiplication factor. on a review of the group-wide internal counterparty is the increase in the net Each VaR model shall meet the risk management control system, replacement value of the counterparty’s applicable qualitative and quantitative including a review of the VaR model positions with the member of the requirements set forth in § 240.15c3– used to determine maximum potential affiliate group, including the effect of 1e(e). In addition, the model shall be exposure, that another multiplication netting agreements with that one that can be disaggregated by each factor is appropriate; counterparty meeting the requirements line of business and by each legal entity (B) The credit equivalent amount for of § 240.15c3–1e(d)(5) and taking into exposed to market risk. The initial certain loans and loan commitments account the value of collateral from the multiplication factor shall be three, receivable shall be determined by counterparty pledged to and held by any unless the Commission determines multiplying the nominal amount of the member of the affiliate group meeting pursuant to § 240.17i–2(a) or (c), based contract by the following credit the requirements of § 240.15c3–1e(d)(6), on a review of the supervised conversion factors: and the fair market value of any credit investment bank holding company’s (1) 0% credit conversion factor for derivatives that specifically change the internal risk management and control loan commitments that: exposure to the counterparty (as long as system and the VaR model, that another (i) May be unconditionally cancelled the credit derivatives are not used to multiplication factor is appropriate. A by the lender; or change the credit risk weight of the

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counterparty as provided in paragraph using credit derivatives (such as credit group’s allowances for market, credit, (c)(1)(ii)(E) of this section) calculated default swaps, total return swaps, and and operational risk (calculated in daily using a VaR model that meets the similar instruments used to manage accordance with § 240.17i–7(b), (c), and requirements of § 240.15c3–1e(e), except credit risk) that provide credit (d)); that for repurchase agreements, reverse protection equivalent to guarantees, if (3) An affiliate declares bankruptcy or repurchase agreements, stock lending the credit derivative is used for bona otherwise becomes insolvent; and borrowing, and similar fide hedging purposes to reduce the (4) The supervised investment bank collateralized transactions, maximum credit risk weight of a counterparty, is holding company becomes aware that a potential exposure shall be calculated not incorporated into the VaR model nationally recognized statistical rating using a time horizon of five days; used for deriving potential exposures, organization has determined to reduce (ii) Credit risk weights. (A) General and is not held for market-making its assessment of the creditworthiness of standard. The credit risk weights that purposes. The credit risk weight for the an affiliate or the credit rating(s) shall be applied to certain assets and covered portion of the exposure shall be assigned to one or more outstanding counterparties shall be determined the credit risk weight of the writer of the short or long-term obligations of an according to standards published by the derivative. The uncovered portion of the affiliate; Basel Committee on Banking exposure shall be assigned the credit (5) The supervised investment bank Supervision, as modified from time to risk weight of the counterparty; or holding company becomes aware that time; (2) Upon a determination by the any financial regulatory agency or self- (B) Internal credit ratings. The Commission pursuant to § 240.17i–2(a) regulatory organization has taken supervised investment bank holding or (c), using a calculation consistent enforcement action or some other, company may, upon a determination by with standards published by the Basel similar formal regulatory action against the Commission pursuant to § 240.17i– Committee on Banking Supervision, as an affiliate; or 2(a) or (c), determine credit ratings for modified from time to time. (6) The supervised investment bank counterparties that are not rated using (d) Allowance for operational risk. A internal calculations, and the holding company becomes ineligible to supervised investment bank holding be supervised by the Commission as a supervised investment bank holding company shall compute an allowance company may use these internal credit supervised investment bank holding for operational risk on a consolidated company. ratings in lieu of ratings issued by a basis consistent with the appropriate nationally recognized statistical rating (b) The supervised investment bank standards published by the Basel holding company shall file a written organization for purposes of Committee on Banking Supervision, as determining credit risk weights; report if there is a material change, modified from time to time. along with a description of the reason (C) Internal calculations. The (e) Alternative capital assessment. If for the change, in: supervised investment bank holding the Commission determines pursuant to (1) The ownership or organization of company may, upon a determination by § 240.17i–2(a) or (c), the supervised the affiliate group; the Commission pursuant to § 240.17i– investment bank holding company may 2(a) or (c), determine credit risk weights compute a capital assessment using the (2) The material affiliate status of any of counterparties based on internal standards promulgated by the Basel affiliate group entity; or calculations; Committee on Banking Supervision (as (3) The major business functions of (D) Receivables covered by modified from time to time) that it is any material affiliate. guarantees. For the portion of a current required to submit to a financial (c) Every notice or report required to exposure covered by a guarantee, where regulator or supervisor in lieu of the be given or transmitted pursuant to this that guarantee is an unconditional and computations described in paragraphs section shall be given or transmitted to irrevocable guarantee of the due and (a) through (d) of this section. the principal office of the Commission punctual payment and performance of in Washington, DC, and the regional or the obligation and the supervised § 240.17i–8. Notification provisions for district office of the Commission for the investment bank holding company or supervised investment bank holding region or district in which the member of the affiliate group can companies. supervised investment bank holding demand payment after any payment is (a) A supervised investment bank company’s subsidiary broker or dealer missed without having to make holding company shall send written has its principal place of business. For collection efforts, the supervised notice promptly (but within 24 hours), the purposes of this section, ‘‘notice’’ investment bank holding company or in accordance with paragraph (c) of this shall be given or transmitted by member of the affiliate group may section, after the occurrence of the telegraphic notice or facsimile substitute the credit risk weight of the following events: transmission. The reports required by guarantor for the credit risk weight of (1) Any backtesting exception paragraph (b) of this section may be the counterparty if the guarantee is determined in accordance with transmitted by overnight delivery. The evidenced by a written obligation of the § 240.15c3–1e(e)(1)(iii) and (iv) that notices and reports filed under this guarantor that allows the holding would require that the supervised section shall be accorded confidential company or member of the affiliate investment bank holding company use a treatment. higher multiplication factor in the group to substitute the guarantor for the Dated: October 24, 2003. counterparty upon default or calculation of its allowances for market By the Commission. nonpayment by the counterparty; or credit risk; (E) Receivables covered by credit (2) If a computation shows that Margaret H. McFarland, derivatives. The supervised investment allowable capital (calculated in Deputy Secretary. bank holding company may reduce the accordance with § 240.17i–7(a)) is less [FR Doc. 03–27307 Filed 11–5–03; 8:45 am] credit risk weight of a counterparty by than 110% of the sum of the affiliate BILLING CODE 8010–01–P

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Part IV

Department of Transportation Federal Railroad Administration

49 CFR Part 224 Reflectorization of Rail Freight Rolling Stock; Proposed Rule

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DEPARTMENT OF TRANSPORTATION • Hand Delivery: Room PL–401 on collisions between motor vehicles and the plaza level of the Nassif Building, trains at highway-rail grade crossings Federal Railroad Administration 400 Seventh Street, SW., Washington, throughout the United States. DC, between 9 a.m. and 5 p.m., Monday Approximately 4,000 times each year, a 49 CFR Part 224 through Friday, except Federal train and a highway vehicle collide at [Docket No. FRA–1999–6689, Notice No. 3] Holidays. one of this country’s 262,000 public and • Federal e-Rulemaking Portal: Go to private highway-rail grade crossings. RIN 2130–AB41 http://www.regulations.gov. Follow the Approximately 23% of all highway-rail online instructions for submitting grade crossing accidents involve motor Reflectorization of Rail Freight Rolling comments. vehicles running into trains occupying Stock Instructions: All submissions must grade crossings (‘‘RIT’’ accidents).1 AGENCY: Federal Railroad include the agency name and docket Almost 80% of these RIT accidents Administration (FRA), Department of name and docket number or Regulatory occur during nighttime conditions Transportation (DOT). Identification Number (RIN) for this (dawn, dusk, and darkness) and involve a highway vehicle striking a train after ACTION: Notice of proposed rulemaking. rulemaking. For detailed instructions on submitting comments and additional the first two units of the consist. These SUMMARY: FRA is proposing to require information on the rulemaking process, statistics suggest that a contributing retroreflective material on the sides of see the Public Participation heading of factor to many RIT accidents is the freight rolling stock (freight cars and the Supplementary Information section difficulty motorists have in seeing a locomotives) to enhance the visibility of of this document. Note that all train consist at a crossing in time to stop trains in order to reduce the number of comments received will be posted their vehicles before reaching the accidents at highway-rail grade without change to http://dms.dot.gov, crossing, particularly during periods of crossings in which train visibility is a including any personal information limited visibility, such as dawn, dusk, contributing factor. This document provided. Please see the Privacy Act darkness, or during adverse weather proposes a rule establishing a schedule heading under Regulatory Notices. conditions. for the application of retroreflective Docket: For access to the docket to The physical characteristics of trains, material and prescribing standards for read background documents or in combination with the characteristics the application, inspection, and comments received, go to http:// of grade crossings (e.g., grade crossing maintenance of the material. dms.dot.gov at any time or to Room PL– configuration, type of warning devices at a crossing, rural background DATES: Written Comments: Comments 401 on the plaza level of the Nassif environment with low level ambient must be received by March 5, 2004. Building, 400 Seventh Street, SW., light, or visually complex urban Comments received after that date will Washington, DC, between 9 am and 5 background environment, etc.), and the be considered to the extent possible pm, Monday through Friday, except inherent limitations of human eyesight, without incurring additional expense or Federal Holidays. Public Hearing: The public hearing make it difficult for motorists to detect delay. a train’s presence on highway-rail grade Public Hearing: FRA is planning to will be held at the Washington Plaza crossings, particularly during periods of conduct a public hearing in Hotel, 10 Thomas Circle, NW., Massachusetts Avenue at Fourteenth limited visibility. Freight trains lack Washington, DC, on Tuesday, January conspicuity (i.e., the ability to be seen) 27, 2004, at 9:30 a.m., in order to Street, Washington, DC 20005 (202– 842–1300). Written notification of a in some of their different environmental provide all interested parties the settings. For example, trains are opportunity to comment on the party’s intended participation should identify the docket number and must be typically painted a dark color and are provisions contained in this notice. Any covered with dirt and grime which are person wishing to participate in the submitted to Ms. Ivornette Lynch, Docket Clerk, Office of Chief Counsel, inherent in the rail environment. With public hearing should notify the Docket the exception of locomotives, trains are Clerk by telephone (202–493–6030) or Federal Railroad Administration, RCC– 10, 1120 Vermont Ave., NW., Stop 10, usually unlighted and are not equipped by mail at the address provided below with reflective devices. Similarly, a Washington, DC 20590. at least five working days prior to the large percentage of crossings are not date of the hearing. The notification FOR FURTHER INFORMATION CONTACT: Dr. lighted. Consequently, much of the light should identify the party the person Tom Blankenship, Mechanical Engineer, from a motor vehicle’s headlights is represents, and the particular subject(s) Office of Safety, FRA, 1120 Vermont absorbed by the freight cars, instead of the person plans to address. FRA Ave., NW., Mailstop 25, Washington, being reflected back toward the reserves the right to limit participation DC 20590 (telephone: 202–493–6446); motorist. The large size of freight cars, in the hearing of persons who fail to Mary Plache, Industry Economist, Office which are out of scale relative to a provide such notification. of Safety, FRA, 1120 Vermont Ave., motorist’s expectations, also make them ADDRESSES: You may submit comments NW., Mailstop 21.1, Washington, DC difficult to detect. For instance, even if identified by DOT DMS Docket Number 20590 (telephone: 202–493–6297); or a motorist is looking for a train, if the FRA–1999–6689 by any of the following Lucinda Henriksen, Trial Attorney, locomotive has already passed, it is methods: Office of Chief Counsel, FRA, 1120 difficult to detect the freight cars • Web site: http://dms.dot.gov. Vermont Ave., NW., Mailstop 10, because the cars often encompass the Follow the instructions for submitted Washington, DC 20590 (telephone: 202– motorist’s entire field of view and have comments on the DOT electronic docket 493–6038). the tendency to ‘‘blend’’ into the site. SUPPLEMENTARY INFORMATION: background environment, especially at • Fax: 1–202–493–2251. night. In addition, because most drivers Background • Mail: Docket Management Facility; involved in grade crossing accidents are U.S. Department of Transportation, 400 This proposed rule represents a familiar with the crossings and with Seventh Street, SW., Nassif Building, partial solution to a safety problem that roadway features at the crossings, the Room PL–401, Washington, DC 20590– has long concerned FRA—the need to 001. reduce the incidence and severity of 1 Based on available data from 1992 through 2001.

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drivers become habituated (or pre- locomotives to enhance the visibility of measurements on the Canadian cars conditioned) to the crossings. In other trains in order to reduce the number of after six months, one year, and two words, based on previous driving accidents at highway-rail grade years of service indicated rapid experiences and conditioning, a driver crossings where train visibility is a deterioration of the retroreflective may not expect a train to be occupying contributing factor. material. Only 23% of the material’s a crossing, and without a clear auditory original reflectivity remained at the end A. History of Railroad Car Conspicuity signal (because the locomotive has of six months. This declined to 14% Issue and Congressional Mandate already cleared the crossing) or visual after one year and to 5% at the end of stimuli alerting the driver to a train As applied to rail car visibility, the two years of service. Tests of similar traveling through the crossing, the term ‘‘conspicuity’’ refers to the high intensity retroreflective sheeting driver may fail to perceive the train in characteristic of a rail car in its roadway conducted by the Boston and Maine time to stop. This condition is further setting to command the attention of Railroad in 1981 yielded substantially exacerbated when a train is stopped on approaching motorists and be the same results as the earlier Canadian a crossing. recognizable to reasonably prudent tests. There is currently no requirement for motorists at sufficient distance to allow FRA first evaluated the use of lighting or reflective markings on freight the motorists to reduce their vehicles’ reflective material on rail rolling stock rolling stock. However, in recognition speed and take action to avoid in the early 1980s, and supported a that the transportation of people and collisions. Research relating to the study completed in 1982 on the goods is not restricted to daytime hours conspicuity of rail cars is not a new potential use of reflectorization to and pristine weather conditions, concept. Research dating back to the reduce nighttime accidents at highway- reflectorization has become an early 1950s has noted the potential rail intersections. The study concluded indispensable tool for enhancing viability of rail car conspicuity materials that although the use of reflective visibility in virtually all other modes of such as luminous sources (lights on rail material enhanced the visibility of transportation, including air, highway, cars), self-luminous sources trains, the reflective material was not maritime, and pedestrian travel. For (phosphorescent), and reflective durable enough to withstand the harsh example, airplanes and motor vehicles sources. In the mid 1950’s, researchers railroad environment. It was decided are equipped with high brightness concluded that reflective material along that rulemaking action was not retroreflective material at key locations the side sill of boxcars increased the warranted at that time. on the exterior surfaces to increase their visibility of the cars and aided in the Since 1982, however, improvements conspicuity. Mircoprismatic corner cube perception of the cars’ motion. The in the brightness, durability, and retroreflectors (which have the ability to same study also found that the amount adhesive properties of reflective direct light rays back to the light source) and distribution of reflectorized materials have been achieved and a new are typically used on roadway signs that material proportionally affected the material, microprismatic retroreflective warn of construction or other hazardous level of visibility and accuracy of material, is now available. Because of conditions. Federal regulations require perception of rail cars’ motion. In other the technological advances in reflective retroreflective materials on the sides words, by using material with high materials and the creation of and rear of large trucks to increase their coefficients of reflectivity (i.e., high microprismatic retroreflective material, conspicuity and to aid motorists in levels of reflected light) against a high beginning in the early 1990’s FRA judging their proximity to these contrast background (e.g., dark and dirty funded renewed research through the vehicles. Even regulations addressing rail cars), the amount of illumination John A. Volpe National Transportation bicycle safety have specific was increased, and the motorists’ ability Systems Center in Cambridge, requirements on the use of reflective to discriminate the movement of the rail Massachusetts (‘‘Volpe’’) to reexamine materials. Lifesaving marine equipment, cars across their line of vision was the issue of using reflective material to such as life vests and rafts, require enhanced. In the early 1970’s, a study enhance railcar conspicuity. reflectorization; and to enhance the concentrating on the conspicuity of In July 1999, FRA announced the conspicuity of pedestrians, especially at trains at night found that although results of its renewed research efforts night, retroreflective material has been luminous and reflective sources both with the release of the report Safety of incorporated into clothing and similar proved effective in enhancing the Highway-Railroad Grade Crossings: items. visibility of trains, reflectors provided Freight Car Reflectorization (DOT/FRA/ The everyday use of reflectors conspicuity at a greater distance and ORD–98/11) (‘‘1999 Volpe Report’’). The indicates their acceptance to delineate field of vision than the other sources 1999 Volpe Report provided significant potential hazards and obstructions to a which were studied. information, including cost estimates vehicle’s path of travel. Research The general consensus of historical and data on the performance of specific to the railroad industry has research was that reflective materials equipped rail car fleets in an actual demonstrated that reflective materials can increase the conspicuity of objects service environment. Similar to earlier can increase the conspicuity of freight to which they are attached, but previous research, the 1999 Volpe Report cars, thereby enhancing motorists’ generations of reflective materials did concluded that reflective materials ability to detect the presence of trains in not reflect enough light to be effective enhanced motorists’ ability to detect the highway-rail grade crossings. This in the railroad environment and lacked presence of a train in a highway-rail greater visibility can help drivers avoid the durability to survive the harsh grade crossing and could therefore some accidents and reduce the severity railroad operating environment. For prevent collisions involving highway of other accidents that are unavoidable. example, in 1959 a Canadian freight car vehicles. Unlike earlier studies which Accordingly, FRA, as the Federal agency reflectorization program was begun. In utilized previous generations of responsible for ensuring that America’s this program, high-intensity reflective material, the 1999 Volpe railroads are safe for the traveling retroreflective sheeting in the shapes of Report concluded that the durability public, and in direct response to a circular discs and squares were applied and adhesive properties of the new Congressional mandate, proposes to to the sides of rail cars for the purpose microprismatic retroreflective material require use of reflective material on the of assessing their long term durability could provide adequate luminance sides of certain rail cars and and performance. Reflective intensity intensity levels which can be sustained

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for up to 10 years with minimum visibility would likely improve safety in share their views, concerns, and maintenance. A copy of the complete a cost-effective manner, the Secretary of experiences with regard to rail car 1999 Volpe Report is in the docket of Transportation (‘‘Secretary’’) must reflectorization. Discussion during the this proceeding (Document No. FRA– initiate a rulemaking proceeding to workshop focused on the potential 1999–6689–17). prescribe regulations requiring effectiveness of rail car reflectorization Building upon the research detailed enhanced visibility standards for under a variety of circumstances (e.g., at in the 1999 Volpe Report, and railroad cars. Section 20148 specifically nighttime versus daytime, at passively recognizing that the study’s human directs the Secretary to examine the use protected crossings versus actively factors tests did not provide a realistic of reflectors. Section 20148 of title 49 of protected crossings, or when drivers are environment in which to evaluate the the United States Code states as follows: under the influence of alcohol or detectability and recognition of freight (a) REVIEW OF RULES.—The Secretary of otherwise impaired), as well as more cars equipped with microprismatic Transportation shall conduct a review of the practical aspects of any rail car retroreflective material in a real-world Department of Transportation’s rules with reflectorization program (e.g., environment, FRA subsequently respect to railroad car visibility. As part of maintenance and cleaning requirements, investigated whether motorists, under this review, the Secretary shall collect when and where reflector installation real world driving conditions, would relevant data from operational experience by would occur, and the costs involved in likely confuse reflectorized trains with railroads having enhanced visibility installing and maintaining the other roadway hazards, particularly measures in service. reflectors). Throughout the workshop trucks which were already required by (b) REGULATIONS.—If the review conducted under subsection (a) establishes FRA representatives acknowledged federal regulations to be equipped with that enhanced railroad car visibility would participants’ concerns regarding retroreflective material. It is important likely improve safety in a cost-effective reflectorization and invited interested for motorists to be able to distinguish manner, the Secretary shall initiate a parties to share further comments and rail cars from trucks because motorists’ rulemaking proceeding to prescribe relevant data as FRA continued its interaction with trains is different from regulations requiring enhanced visibility investigation into whether a rulemaking trucks. Because trucks are shorter in standards for newly manufactured and mandating reflectorization of rail cars length and pass through an intersection remanufactured railroad cars. In such was warranted. A copy of the transcript more quickly than the average train, a proceeding the Secretary shall consider, at a minimum— of this workshop is included in the motorist approaching a truck in an (1) visibility of railroad cars from the docket of this proceeding. (Document intersection may only need to slow his perspective of nonrailroad traffic; No. FRA–1999–6689–7). or her vehicle to avoid a collision, while (2) whether certain railroad car paint colors Recognizing that part of the review a motorist approaching a grade crossing should be prohibited or required; mandated by Congress included occupied by a train more likely will (3) the use of reflective materials; collecting relevant data from operational need to stop at the crossing to avoid a (4) the visibility of lettering on railroad experience by railroads having collision. In July 2001, FRA released the cars; enhanced visibility measures in service, results of this research in the report (5) the effect of any enhanced visibility on January 14, 2000, FRA established a measures on the health and safety of train Safety of Highway-Railroad Grade crew members; and public docket (Docket No. FRA–1999– Crossings: Recognition of Rail Car (6) the cost/benefit ratio of any new 6689) to provide all interested parties Retroreflective Patterns for Improving regulations. with a central location to both send and Nighttime Conspicuity (DOT/FRA/ORD– (c) EXCLUSIONS.—In prescribing review relevant information concerning 00/07) (‘‘2001 Volpe Report’’). The 2001 regulations under subsection (b), the railroad car conspicuity and to provide Volpe Report concluded that motorists Secretary may exclude from any specific a venue to gather and disseminate had difficulty discriminating visibility requirement any category of trains information and views on the issues. unreflectorized rail cars from trucks as or railroad operations if the Secretary The docket contains several illuminance levels declined, but determines that such an exclusion is in the submissions from FRA (e.g., transcript public interest and is consistent with railroad motorists could discriminate between safety. of the July 28, 1999 workshop, an reflectorized freight cars and truck analysis of signal detection theory, trailers for each of the four reflective On July 28, 1999, FRA hosted a FRA’s preliminary cost-benefit analysis patterns tested. In addition, the report workshop on reflectorization of rail on railcar reflectorization, and technical concluded that vertically oriented rolling stock. Attendees included reports from the NHTSA and Volpe), as patterns, as opposed to outline or representatives from the railroad well as comments from numerous horizontally oriented patterns, were industry, reflector manufacturing and members of the public and the regulated preferable because they were less likely supply companies, as well as community, which will be discussed in to be confused with the horizontally representatives from the National more detail below. oriented truck reflectorization patterns. Transportation Safety Board and the FRA regards the 1999 and 2001 Volpe A copy of the complete 2001 Volpe National Highway Traffic Safety Reports, as well as the 1999 workshop Report is in the docket of this Administration (NHTSA) and other and establishment of the public docket proceeding (Document No. FRA–1999– interested parties. The workshop as responsive to section 20148’s 6689–48). provided an opportunity for FRA and all directive to review the Department’s Meanwhile, in 1994 Congress passed interested parties to review and discuss rules with respect to rail car visibility. the Federal Railroad Safety the issue of rail car conspicuity and Further, because the 1999 and 2001 Authorization Act of 1994, Pub. L. 103– specifically, rail car reflectorization. Volpe Reports concluded that 440 (‘‘Act’’). The Act added § 20148 to During the workshop, representatives reflectorization could enhance rail car title 49 of the United States Code. from Volpe provided a briefing on the visibility, FRA conducted a preliminary Section 20148 required FRA to conduct 1999 Volpe Report and a representative cost-benefit analysis (‘‘Preliminary a review of the Department of of NHTSA provided a briefing on that Analysis’’) to determine whether Transportation’s (‘‘Department’’) rules agency’s rule requiring the reflectorization would provide a cost with respect to the visibility of railroad reflectorization of large truck trailers. effective method of reducing the cars and mandated that if the review The workshop also provided an number of collisions at highway-rail established that enhanced railroad car opportunity for all interested parties to grade crossings and the casualties and

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property damages which result from estimated the ten-year discounted light source. As applied to motorists those collisions. FRA’s Preliminary benefits of a reflectorization program, in approaching grade crossings, Analysis concluded that the benefits of terms of avoided casualties and property retroreflective material on the sides of a uniform, nationwide freight car damage, to be in the range of $57 rail cars will reflect light from an reflectorization program would far million, $70 million, $100 million, or approaching vehicle’s headlights back to outweigh the costs of such a program. $105 million, depending on the the motorist in a concentrated beam. If In the Preliminary Analysis, FRA methodology employed. either a direct or diffuse reflective identified the primary source of benefits Taking into consideration material, material was applied to the sides of rail to be gained from freight car installation and maintenance costs, cars, light from an approaching vehicle’s reflectorization as the avoidance of a FRA’s Preliminary Analysis concluded headlights would be reflected in several portion of the fatalities, injuries, and that over a ten-year period (the different directions, thereby lessening property damage that result from estimated useful life of the the amount of light reflected back to the collisions between motor vehicles and retroreflective material), the discounted motorist. freight trains at grade crossings. cost to reflectorize the entire freight Retroreflective material is rated in Statistics show that collisions between railroad fleet would be approximately terms of the reflected light per unit area trains and motor vehicles often result in $40 million. Accordingly, FRA as contrasted with the light striking it fatal or very serious injuries to the concluded that the reflectorization of (‘‘specific intensity per unit area’’ or occupants of the motor vehicle railroad freight equipment is a viable SIA). The amount of reflected light involved, and the vehicle may be and cost-effective method of reducing reaching the driver’s eyes will completely destroyed. In addition, the number of collisions at highway-rail determine how bright that object collisions between trains and motor grade crossings and the casualties and appears to the driver. Therefore, vehicles often result in damage to the property damages which result from retroreflective materials that are rail equipment and significant delays those collisions. FRA published the efficient in returning light to a driver’s and disruptions to rail operations. For results of its Preliminary Analysis on eyes may appear brighter to the driver example, FRA’s Railroad Safety October 26, 2001. See 66 FR 54326. A than materials that are not as efficient. Advisory Committee estimates that copy of the Preliminary Analysis is in The newest, most durable, and most collisions cause an average of a two- the docket of this proceeding. efficient retroreflective material hour train delay at $250 per hour for (Document No. FRA–1999–6689–25). available today, the prismatic type Because of the rail industry’s freight trains. This estimate does not retroreflector, is made of microscopic continued interest in the issue of rail car include the ripple effect of delays prisms or corner cubes. Each of these reflectorization, FRA met with members incurred by other trains, including prisms or corner cubes contains three of the regulated community on March passenger trains, awaiting use of the surfaces oriented at 90 degrees to each 24, 2003, to again listen to their track where service has been other. The entering rays of light are comments and concerns regarding interrupted. reflected from each of the surfaces and FRA calculated the expected safety reflectorization. During this meeting, the are returned to the observer in a more benefits of reflectorization in terms of participating railroads and car owners concentrated and focused beam than the decline in the probability of RIT reiterated their concerns regarding a accidents. Recognizing that the potential rail car reflectorization direct or diffuse reflectors or even other effectiveness of retroreflectors (and rulemaking. Specifically, participants types of retroreflective material. therefore the benefits to be gained from expressed concern that a federal The amount of light received by an their use) will vary by circumstance rulemaking mandating reflectorization observer from a retroreflector is affected (e.g., nighttime versus daytime could have the effect of increasing their by six factors: (1) Reflective intensity of conditions, clear versus cloudy weather liability for grade crossing accidents. the material (the SIA), (2) size of the conditions, presence of other warning Participating railroads and car owners retroreflector, (3) intensity of the light devices at a crossing, train speed and also raised important considerations source (in the case of grade crossings, length, etc.), FRA’s Preliminary regarding many practical aspects of a the intensity of approaching motor Analysis recognized that forecasting the potential reflectorization program (e.g., vehicles’ headlights and the efficiency benefits which would likely result from a feasible schedule for the application of of those headlights), (4) atmospheric reflectorization necessitated a certain reflectors to rail cars, what types of transmissivity (e.g., clear, foggy, or hazy amount of subjective analysis and the reflective material would be required, weather conditions), (5) windshield exercise of judgment. Accordingly, reflector cleaning and maintenance transmittance, and (6) the distance of based on the manufacturers’ 10-year responsibilities, and when and where the observer from the retroreflector. The guaranteed useful life of retroreflective reflectors would be applied to cars). relationship among these factors and the sheeting, FRA employed four different illuminance received by an observer is approaches to the estimation of benefits. B. Fundamentals of Reflectivity and based on Allard’s Law and is Benefit estimates were based on varying Human Eyesight represented by the following equation: Materials that have reflective effectiveness rates derived from (1) two 2d properties can be classified into three IABt∗∗∗ ∗ WH ∗ previous studies analyzing the E = s effectiveness of reflective material on general categories: direct reflectors, e d 4 large trucks, (2) subjective estimates of diffuse reflectors, and retroreflectors. reflector effectiveness by internal FRA Direct reflectors, such as mirrors, in which grade crossing experts, and (3) a signal bounce light off the reflective material at Ee = Illuminance received by the detection model consisting of an an angle equal and opposite to the observer (measured in footcandles analysis of the statistical probability of direction of the light source. Diffuse (fc)) different potential severities of hazard reflectors, such as license plates, bounce Is = Intensity of the light beamed toward or injury, based on laboratory light off the reflective material at an the reflector (measured in candela experiments and accident/incident data angular spread of up to 180 degrees. (cd)) from FRA’s Rail Accident/Incident Retroreflectors, however, direct the A = Area of the reflector (measured in Reporting System database. FRA reflected light in the direction of the square feet)

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B = Reflective intensity of reflector (i.e., inversely proportional to the square of detail discrimination relative to SIA, measured in candela/ the distance, however, as a motorist gets photopic vision. footcandle/square foot (cd/fc/ft 2)) closer, less performance is needed. In During normal daylight conditions, t = Transmissivity of the atmosphere addition, the reduction in the material’s the human visual system operates at its (per foot) reflectivity as a vehicle approaches a highest level of visual acuity and has d = Distance between the observer and train can be partly compensated for by the greatest capability of distinguishing the reflector (measured in feet) using reflective materials with the differences between objects in the visual W = Windshield transmittance highest level of performance (e.g., field (good detail discrimination). At (percentage) microprismatic retroreflective material). night, and in other conditions of low H = Headlight efficiency (percentage) In evaluating the performance of ambient light, contrast sensitivity is The above relationship assumes that reflective materials in the railroad greatly diminished, colors cannot be the incident light from the light source operating environment, the inherent discriminated, and details are not easily is normal to (i.e., perpendicular to) the limitations of human eyesight must also discernible. Thus, in order to be seen at surface of the retroreflector. At highway- be taken into account. In general, an night, objects must be sufficiently rail crossings, however, light will often individual’s visual attention orients brighter (or darker) than their strike retroreflectors on rail cars at an toward areas that contain a great deal of backgrounds. The perceived brightness angle other than 90 degrees, and as a information (such as concentrations of of an object, including an object with result, the reflected light received by an signs, lights, people, etc.) and toward reflective properties, is, at least in part, objects that differ greatly from their dependent on its color. approaching motorist will be reduced. background (such as contrasting color or The visible spectrum of light, which This reduction is a function of three brightness, or moving objects against a lies between the nonvisible ultraviolet factors: the incidence (or entrance) still background). Accordingly, although and infra-red radiation, contains all angle, the divergence (or observation) reflectorization will increase the colors. Color is the property of an object angle, and the properties of the visibility of trains in normal daytime reflecting the light of a particular retroreflective material. The incidence conditions, it is expected that wavelength. The colors range from the angle is the angle formed between a line reflectorization will be most effective in longest wavelength, red, to the shortest from the light source (e.g., headlights of reducing RIT accidents at nighttime or wavelength, violet. The various cones approaching motor vehicle) to the during other times of limited visibility (red, green, and blue) of the human reflective surface and a line when the reflective material contrasts visual system are selectively sensitive to perpendicular to the reflective surface. the most with the background different wavelengths of light, resulting The divergence angle is the angle environment. in the perception of color. The unaided between the line of sight of the observer For human beings to see in darkness human eye is able to detect light (visible to the reflective surface and the path of and other low-light conditions, radiation) within a narrow band of the the light from the source to the sufficient light must illuminate their electronmagnetic spectrum between reflective surface. A retroreflector’s retinas. Two types of light sources affect approximately 400 nanometers (nm) effectiveness is affected primarily by the a human’s ability to see. The primary (violet end) and 780 nm (red end). The divergence angle and secondarily by the light source is one that is self-luminous eye is most sensitive, however, to light incidence angle. The divergence angle is (e.g., a vehicle’s headlights or crossing in the wavelengths that stimulate both a function of the distance between the illumination). Secondary light sources the red and green cones (approximately driver’s eyes and the light source and (e.g., reflective material) are not self- 500 nm to 650 nm, with peak sensitivity the distance between the reflector and luminous and can be detected in at approximately 550 nm, the the light source. In the scenario of a darkness only if light is reflected from wavelength corresponding to the color motor vehicle approaching a highway- their surface. Non-luminous and non- yellow-green). The eye is least sensitive rail grade crossing, since the distance reflecting objects are also visible under to red or violet light at either extreme between the light source (i.e., vehicle’s low light conditions based on available of the spectrum. Wavelengths between headlights) and the motorist’s eyes is a contrast with a lighter background 500 nm and 650 nm, and particularly at constant, the divergence angle decreases against which they stand out. As about 550 nm (yellow-green), contribute as the distance between the vehicle and applied to railroad crossings during most to the perception of color, as well the reflector increases. The retroreflector periods of darkness or otherwise limited as the definition of visual detail. As will produce maximum reflectivity for visibility, a motor vehicle’s headlights such, reflective materials with a color the motorist when both the incidence and retroreflection can be used to falling within the range of yellow-green and divergence angles equal zero. This partially compensate for the daylight peak sensitivity would provide the most maximum reflectivity will not be that is not present. visible contrast with the normally dark achieved for highway-rail grade The light that illuminates the retina and dirty background of freight cars. crossings, however, due to the fact that stimulates two types of photoreceptor the divergence angle increases as the cells—cones and rods. The cones are C. FRA’s Studies of Freight Car vehicle approaches the reflective sensitive to normal daylight conditions Reflectorization material on the train. In other words, the (photopic vision). Photopic vision FRA’s study resulting in the 1999 reflective intensity of retroreflectors on requires higher levels of illumination Volpe Report consisted of a four-phase the sides of rail cars will increase with and allows color perception and high research program to determine the distance since both the observation and visual acuity. The rods are sensitive to feasibility of reflectorization as a train entrance angles vary inversely with the lower levels of illumination, do not conspicuity device. Specifically, the distance between the reflector and the allow color perception, and do not goals of the research were to: (1) vehicle. Similarly, as a vehicle gets provide as high a level of visual acuity Determine whether the new generation closer to a rail car, the entrance and as the cones. This is called scotopic of reflective material (microprismatic observation angles get larger, and the vision. At dusk and dawn both types of retroreflective material) would provide retroreflective material’s performance receptors are activated (mesopic vision). adequate brightness in the railroad drops (i.e., the intensity of the reflected Mesopic vision is characterized by environment; (2) determine whether the light drops). Because illuminance is diminished color vision and reduced new material could withstand the harsh

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environmental conditions of railroad be sufficiently bright to attract the approaching motorists to detect and operations; (3) establish the minimum attention of approaching motorists early recognize a train’s presence in a intensity level required to attract a enough in the approach path of the crossing from a distance of 500 feet. motorist’s attention; and (4) assess the vehicles so that the drivers have time to These assumptions include: effectiveness of pattern placement on react to avoid collisions. Accordingly, Ee= Required level of illuminance to be freight car detectability. After reviewing Volpe defined the minimum threshold received by an observer sufficient past and current transportation of intensity as the lowest luminous for detectability & recognition—2.3 experiences with the use of reflectors, value that allows a motorist to detect the × 10¥6 fc Volpe conducted a demonstration test to presence of a retroreflector (and W = Windshield Transmittance—0.70 establish the durability of the newly therefore a freight car equipped with a H = Headlight Efficiency—0.85 developed microprismatic material, and retroreflector) in a crossing, even if the Is= Headlight Intensity—3,000 cd (per to create a test pattern. Next, a motorist is not actively looking for a headlight) nationwide in-service test was train. In developing this minimum t2d = Atmospheric Transmittance— conducted to measure the threshold, Volpe took into account the 0.945 microprismatic retroreflectors’ effects of the harsh railroad operating Using these known assumptions and performance, accident reduction environment, including the inherent rearranging Allard’s Law to solve for A, potential, and costs. Finally, a human dirt and grime that accumulates on rail the area of the reflector, and B, the 4 factors test was conducted to evaluate cars and the effects of often severe reflector’s SIA (i.e., A*B = Ee*d / 2d the detectability and recognition of weather conditions, as well as the aging Is*t *W*H), a range of values was several retroreflective designs. of the retroreflective material and the determined. Specifically, assuming a First, Volpe reviewed past and current orientation and configuration of rail vehicle is traveling 50 miles per hour on reflectorization experiences in the cars. Utilizing visibility assumptions wet pavement, a 4x8 inch reflector (0.22 railroad environment. Specifically, established by previous reflectorization ft2) must have a minimum reflector Volpe surveyed the rail industry and studies (i.e., a level approach grade, a brightness (SIA) of 200 cd/fc/ft2 for identified several railroads and other 2.5 second driver reaction time, wet detection to occur in time for motorists industry participants, including the pavement, and a vehicle speed of 50 to stop before entering the highway-rail Burlington Northern Santa Fe (‘‘BNSF’’), miles per hour), Volpe first concluded grade crossing. A 4x36 inch (one square the Soo Line, the Georgia Power that a motorist must become aware of a foot) reflector, however, must have an Company, and Southern Company, that train’s presence when the vehicle is 500 SIA of only approximately 45 cd/fc/ft2 had already begun using retroreflective feet from the crossing so that the vehicle for detection to occur in time for markings on at least some portion of can be brought to a safe stop. motorists to stop before entering the their fleets. BNSF reported using a rail Next, using the ‘‘point source crossing. These results demonstrate that car marking system having method’’ upon which many guidelines for the same amount of illumination to retroreflective material on each end of for reflector intensity are built, Volpe attract the driver’s attention, the smaller freight cars and eleven 5x8 inch determined that the minimum threshold the area of the reflector (e.g., 0.22 ft2) the rectangular white diamond grade illuminance level of 2.3 × 10¥6 larger the required SIA of the reflector markings along the side sill of each side footcandles would be sufficient to make (e.g., 200 cf/fc/ft2). The same holds true of its freight cars. Smaller 3x8 inch a reflector detectable to most drivers. for the opposite scenario, the larger the markings were reportedly used on car The ‘‘point source method’’ is based on reflector area (e.g., one square foot), the sides where surface space is limited, the fact that astronomical observations smaller the required SIA of the refector such as under boxcar doors. The Soo have determined that a star producing (e.g., 45 cd/fc/ft2). Line reported applying retroreflective an luminance of 2.3 × 10¥9 footcandles The demonstration test was designed material to its cars for advertisement at the eye of an observer against an to evaluate the degradation in purposes and to improve the safety of overcast moon sky illuminance, equal to reflectivity of different reflective nighttime yard operations. The Georgia 9.9 × 10¥4 footlamberts, can be detected materials applied to freight cars under Power Company reported using twelve with a 98% probability when the controlled conditions and to develop a 3x12 inch yellow prismatic observer is actively looking for the light test pattern. Three types of reflective retroreflectors located at 42 inches and knows precisely where to look for materials (enclosed lens, bonded, and above the top of the rail (‘‘TOR’’) on its it. This level must be increased five to microprismatic retroreflective material) coal hoppers since 1981, while the ten times if the light is to be easily were tested. For the tests, nine open top Southern Company reported using high found. (The FAA detection level for hopper cars were treated with groups of intensity yellow retroreflective material pilots is almost eight times this three 4x4 inch diamond shaped on its open top hopper cars. Although minimum threshold). If the light signal markings placed near the side sill (at none of railroads which responded to is to attract the attention of an observer approximately 42 inches TOR). Each Volpe’s survey conducted any formal who is not actively looking for it, then group of markings was comprised of the evaluations of their marking systems, increases of 100 to 1,000 times the three types of materials being evaluated. the Soo Line reported satisfaction with threshold level are needed—which is Five more hopper cars had groups of their program and that some of the equivalent to 2.3 × 10¥6 footcandles. two or three 4x2 inch rectangular retroreflective materials applied to cars Accordingly, Volpe determined that an markings attached to the wheels at 90, in the mid 1960s still performed illumination level of 2.3 × 10¥6 120, or 180 degrees of separation. Only adequately. footcandles should be sufficient to make microprismatic material was used on Using information gleaned from the reflector detectable to all but the few the wheel application. One car had a previous studies of reflectorization, drivers who are completely oblivious to 4x96 inch vertical strip applied to the Volpe next established a minimum their driving environment. corner post at each end of the car. All threshhold for reflector brightness Finally, using several additional of the marking systems evaluated were (minimum SIA) to be used as a basis for visibility assumptions established by either all white, all red, or a evaluating reflector performance. For previous research, Volpe used Allard’s combination pattern of red and white. reflectorization to be effective in Law to determine the minimum reflector Results of the demonstration test reducing RIT accidents, reflectors must intensity (SIA) required to enable indicated that the white microprismatic

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material performed satisfactorily, while curvature of the tank body, the markings human factors evaluation, was to the enclosed lens and bonded materials were placed at 72 inches TOR. In develop a retroreflective pattern that is did not. The microprismatic material January 1992, the markings were detectable in time for the motorist to had a much higher initial SIA value applied to 149 Norfolk Southern double- recognize a train in the grade crossing than the other two materials and was stack intermodal flat cars. Because of and respond in time to avoid an found to be ten times brighter than the the limited surface area of these flat accident. Specifically, the test was material tested in 1982. In addition, cars, the 4x8 inch markings were placed designed to determine the detection after one year of service, the at 42 inches TOR, while the 4x36 inch characteristics of the new microprismatic retroreflective material markings were placed at 30 inches TOR. microprismatic retroreflective material maintained an SIA value that was 87% This was followed in March and April in various color and mounting of the original measurement, which was 1992 with 336 captive Norfolk Southern configurations. Several potential well above the established minimum open top hopper cars and 74 boxcars in placement patterns and color conspicuity threshold. The enclosed clay service, respectively, receiving the combinations were developed and lens material lost approximately the marking system. analyzed to determine the most effective same percentage of reflectivity as the Although the results of the in-service reflectorization configuration. Based on microprismatic material, but due to its test showed that the harsh railroad the outcome of both subjective and lower original SIA value, this loss was operating environment could have a objective evaluation techniques, sufficient for it to fall below the severe effect on the performance of the reflectorized freight cars were found to minimum reflectivity required. The red retroreflectors, Volpe identified a be significantly more detectable than microprismatic material degraded general correlation between reflector non-reflectorized cars. Even the worst approximately the same as the white. performance and height above TOR. performing pattern and color However, none of the all red markings Specifically, reflectors mounted highest configuration tested was several orders evaluated in the study met the on test cars performed the best, while of magnitude better than an minimum reflectivity requirements after reflectors mounted lower, and unreflectorized car. Generally, the one year. In addition, all of the materials particularly below the side sill, did not results indicated that a uniform pattern placed on the wheels degraded very perform as well. Finding little change in of reflectorized material would facilitate quickly and became ineffective in only reflector performance due to dirt and motorists’ detection of a hazard in his or a few months. Of the markings that were grime accumulation above the side sill her path and recognition of that hazard comprised of both red and white level (approximately 42 inches TOR), as a freight car. The results specifically materials, only the performance of the Volpe identified a minimum placement indicated that a uniform vertical vertical 4x96 inch strips of height as 42 inches TOR to allow reflector pattern yielded the highest microprismatic material (applied to the maximum efficiency of reflector levels of detection and recognition and corner posts of one car) was reported. performance. The average performance that a red/white color combination was The reflectivity of these markings of the vertical 4x36 inch reflective strips preferable in order to facilitate decreased to about 67% of their initial at the ends of the cars remained above motorists’ recognition of a train as a value after one year. Because of the the minimum threshold level for all car hazard in the motorists’ path and relatively large size of the markings, types for the entire testing period. The convey a sense of danger. In addition, however, this amount of reflectivity was average performance of all 4x8 inch distribution patterns that outlined the reflectors degraded more quickly, well above the conspicuity threshold shape or that spaced the retroreflective especially when mounted under the level. material over a relatively large area of side sill or in mid-car locations where the rail car side were found to be Based on the preliminary results of loading operations occur. Accordingly, superior to a distribution that the demonstration test, larger scale Volpe concluded that any concentrated the material along the trials, spanning approximately two reflectorization pattern should minimize bottom of the car. Accordingly, Volpe years, were initiated in collaboration reflectors’ location under the side sill recommended the development of a with Norfolk Southern Corporation and and at loading points, and should utilize standard pattern that: (1) Either outlined the Alaska Railroad Corporation. This larger reflectors. Larger-size reflectors the shape of the freight car, or otherwise in-service test allowed data collection of would lower the acceptable SIA level spaced the material over a large area of the retroreflective material’s durability, and would also degrade at a slower rate performance, and accident reduction than the 4x8 inch reflectors. the rail car side; (2) could fit on all types potential under in-service conditions. Although the in-service test did not of rail cars; and (3) would not likely be For these trials, two color combinations provide statistically valid results confused with other roadway hazards, of microprismatic retroreflective regarding the reflectors’ accident particularly reflectorized trucks and material were selected based on the reduction potential, the test did show a trailers. demonstration test and input from the reduction in RIT accidents. During the FRA addressed the issue of motorist railroads: A pattern of all white material three year period before the installation confusion with the issuance of the 2001 and a pattern of alternating red and of the reflectors on the captive Norfolk Volpe Report. This study recognized white material. The marking Southern hopper cars, there were six that the previous study did not provide configuration selected consisted of three accidents in which the motorist hit the a realistic environment in which to 4x8 inch white rectangular markings side of the train after the first unit had evaluate the detectability and applied horizontally every nine feet just passed through the crossing (i.e., recognition of freight cars reflectorized above the side sill (at approximately 42 referred to as Category 1 RIT accidents). with microprismatic retroreflective inches TOR in most instances), and a These accidents occurred during the material. For example, in the 1999 4x36 inch strip of red/white material hours of dawn, dusk, and darkness. study, observers did not see anything applied vertically at the side sill on both During the three year period after the else in the scene that might be ends of the cars. In 1991, the markings cars were reflectorized, no RIT accidents encountered in an actual driving were applied to 29 tank cars carrying occurred. environment (e.g., signs, other vehicles, various petroleum products on the The primary concern of the fourth lights, foliage, buildings, etc.). In the Alaska Railroad. Because of the phase of the research program, the real world, foliage, buildings, or other

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obstructions may block a motorist’s reflectorized truck trailers for all of the devices warn motorists that tracks are view, or lights, signs, and other visual patterns tested. The most effective present; these devices do not indicate if clutter may compete for a motorist’s patterns, in terms of detectability a train is actually approaching or in the attention. In addition, with reflective distance and recognition of the object as crossing. Reflectorization of rail cars materials in comon use on the nation’s a freight car, however, were the fence improves the visual detection of the highways, the opportunity exists for pattern and the variable height vertical train by making its distance and relative motorists to confuse freight cars with strip patterns. The report also state of motion more quickly and other roadway hazards, particularly concluded that using a vertically accurately gauged by drivers of other reflectorized truck trailers and respond oriented pattern clearly distinguishable vehicles. inappropriately. NHTSA regulations from the horizontally oriented patterns Crossings with active warning devices require trucks more than 80 inches wide founds on truck trailers will minimize (e.g., flashing lights, gates, etc.) will also and weighing more than 10,000 pounds the likelihood that motorists will receive some benefit from to be reflectorized (49 CFR 571.108). confuse a train in a grade crossing with reflectorization. Each year over 200 Specifically, the regulation requires the a truck trailer. accidents occur when motorists drive use of a strip (two to four inches wide) around lowered gates or past flashing D. Accident Reduction Potential of in alternating colors (red and white) and lights and strike trains at highway-rail Reflective Markings and Alternative covering at least 50% of the length of grade crossings. Under conditions of Approaches to Reducing Grade Crossing the trailer. Because trucks are shorter in limited visibility, such as darkness or Accidents length and pass through an intersection inclement weather, the added, unique more quickly than the average train, an FRA recognizes that the effectiveness visual signal offered by reflectors will approaching motorist may only need to of rail car reflectorization will, to a augment the visual warning of flashing slow the vehicle to avoid a collision certain extent, vary by circumstance. As lights. The same rationale, although to instead of stopping prior to reaching the discussed earlier, various factors will a lesser extent, applies to crossings with intersection. Conversely, because the influence the degree of effectiveness of gates. In many instances, a train average train is longer than the average reflectors and in turn, the resulting standing in or passing through a truck, it spends a greater amount of time accident reduction and mitigation crossing encompasses the motorist’s in the intersection. For motorists achieved. While all RIT accidents are entire field of view because of its size approaching a grade crossing, the potentially affected by reflectorization, and proximity. The motorist may not greater amount of time the train spends those RIT accidents that result from a see the train in the crossing because in the intersection means it is more highway vehicle striking the train after there is no contrast between the train likely that the motorists will need to the lead unit has entered the crossing and the surrounding environment. The stop at the intersection. Accordingly, (Category 1 RIT accidents) are the motorist can look both ways, but the 2001 study was designed to accidents most likely preventable by because there is no detectable train determine whether, at night when reflectorization. In particular, movement, may still attempt to cross the relying upon retroreflective patterns for reflectorization is expected to be most track. Crossing warning devices, active identification, motorists are likely to effective in reducing nighttime Category or passive, only provide a warning to confuse reflectorized trains with 1 RIT accidents, which currently make the motorist. The signal delivered by reflectorized trucks. up almost 70% of all Category 1 RIT reflective material on the sides of rail In the 2001 study, four patterns, each accidents, despite the generally lower cars is clear and indicates to utilizing 144 square inches of reflective volume of highway traffic at night as approaching motorists the actual material, were evaluated: An outline, a compared to the daytime. presence and current movement of a horizontal strip, a vertical strip, and a Although reflectorization of rail cars train in or through a crossing. variable height vertical strip. The is expected to be most effective at FRA also recognizes the existence of outline pattern outlined the shape of the nighttime, some daytime RIT accidents numerous other methods for reducing freight car. The horizontal strip pattern are also expected to be prevented, or at the occurrences of RIT accidents (e.g., concentrated the retroreflective material least mitigated, by reflectorization. the elimination of highway-rail grade along the side sill of the car. The Under conditions of reduced daytime crossings, installation and upgrading of vertical strip pattern (also known as the visibility (e.g., inclement weather), crossing warning devices, crossing ‘‘fence’’ pattern), distributed the reflectors enhance the visibility of illumination, etc.). FRA believes that a material in six equally-sized vertical freight cars by providing an increased number of these alternatives used alone strips over a relatively large area of the visible contrast with the freight car side and in combination, are viable methods car sides. The variable height vertical wall, especially when an approaching for mitigating collision risk at highway- strip pattern distributed the material in motor vehicle’s headlights are turned rail grade crossings. However, FRA also six varying-sized vertical strips over a on. During the day, other light sources believes that reflectorization of freight relatively large area of the freight car (e.g., the sun), may be at an appropriate rolling stock is a feasible and cost- sides. The patterns were placed on two orientation to cause reflected light to be effective method of reducing and types of freight cars, hopper cars and seen by the motorist. mitigating grade crossing accidents that flat cars. The study measured the degree The type of warning device at the provides unique safety benefits not to which drivers recognized crossing can also influence the obtainable with the other grade crossing reflectorized freight cars in the grade effectiveness of reflectorization. warning devices and safety measures. crossing when both the motor vehicle Crossings with only passive devices, Obviously, the most effective way to and the train were in motion, and the where almost 50% of all Category 1 RIT reduce highway-rail grade crossing driver’s ability to discriminate accidents occur, will benefit the most accidents, RIT accidents or otherwise, is reflectorized freight cars from other from reflectorization. Passive warning to eliminate highway-rail grade objects in the intersection. devices include signs (e.g., crossbucks, crossings. Closing access to highway-rail The 2001 Volpe Report concluded stop signs, etc.) and other statically crossings where redundant or that motorists could, at least to a certain displayed information (e.g., pavement unnecessary crossings exist or extent, discriminate between markings) that warn motorists of the constructing grade separating reflectorized freight cars and potential of a train at a crossing. Passive overpasses where necessary is an

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effective safety improvement. However, implementation of a nationwide rail car (e.g., reduced property damage and local opposition to closing crossings and reflectorization program. reductions in injuries and deaths the associated expenses with Several individual members of the associated with RIT accidents). The constructing grade separations or other public and organizations of concerned BMWE also expressed its agreement alternatives to the crossings, often citizens (including the Angels on the with FRA’s conclusion that render these methods impractical, if not Track Foundation and Active People reflectorization represents a cost- impossible. Efforts have also been Against Railroad Tragedies), voiced effective approach to mitigating the underway in recent years to illuminate strong support for a nationwide rail car problem of RIT accidents. Another crossings with street lamps. It is reflectorization program. These commenter, although acknowledging generally believed that crossing commenters related stories of personal some of the inherent difficulties in illumination reduces the likelihood of tragedy in which friends or loved ones implementing a nationwide RIT accidents (by enabling motorists to were injured or killed as a result of reflectorization program (e.g., catching recognize a train in a crossing earlier), grade crossing accidents—specifically, up with specific rail cars to apply at a lower cost than that required to grade crossing collisions in which the reflective material, reflector install active warning systems. To date, motor-vehicle drivers apparently did maintenance and cleanliness issues), however, limited cost information is not see a train in the path of their expressed support for rail car available and no specific effectiveness vehicles in time to react to avoid reflectorization and suggested that FRA or accident reduction statistics have collisions. FRA has the greatest adopt NHTSA’s standards for reflective been developed. In addition, an obvious sympathy for the losses suffered by material on commercial vehicles. limit to crossing illumination is the these commenters. The goal of this Railroad industry participants, such unavailability of commercial power rulemaking is to reduce the number of as the AAR, Great Lakes Transportation sources at some crossings, particularly RIT accidents, but rules must be based LLC (which submitted comments on rural, passively protected crossings. on consideration of evidence and data. behalf of two class II carriers, Bessemer Without a commercial power source, a Accordingly, this preamble focuses on and Lake Erie Railroad Company and crossing illumination system may the technical and economic aspects of the Duluth, Missabe and Iron Range require its own energy generating and rail car reflectorization. FRA, however, Railway Company), RSI, the ASLRRA, storage device and train detection has not ignored the advice of those as well as NAFCA, raised important equipment, often making it a cost- whose tragic personal experiences has considerations related to prohibitive measure. led them to support this proposal implementation of a nationwide rail car addressing rail car conspicuity. reflectorization program (e.g., a feasible E. Discussion of Comments Other commenters expressing support schedule for the application of reflectors for a nationwide freight car to rail cars, reflector cleaning and The public docket in this proceeding reflectorization program include maintenance requirements, the contains approximately 55 comments municipalities, trade organizations such treatment of rail cars already equipped from interested parties, including as the ATA and the Texas Motor with reflective material pursuant to one members of the railroad industry, trade Transportation Association, and other of the many voluntary reflectorization organizations, local governments, public organizations concerned with safe and programs already underway throughout interest organizations, reflective efficient highway transportation the industry). These commenters also material manufacturing and supply (including AAA and the American expressed the opinion that a federal companies, as well as members of the Highway Users Alliance). These regulation mandating reflectorization general public. Specifically, comments commenters expressed the view that the would not be a cost-effective safety were received from the following issue of highway-rail grade crossing measure given the costs railroads and organizations: The American Trucking safety is an issue that affects not only car owners would incur implementing Association (ATA), the Texas Motor the railroad industry, but the entire such a program (e.g., the costs of Transportation Association, Niagara motoring public as well, including initially installing the material, Bulk Service Limited, the Port of individual motorists and commercial periodically inspecting, cleaning, and Woodland, the Conway Scenic Railroad, motor carriers which traverse grade maintaining the material, and the the Brotherhood of Maintenance of Way crossings on a daily basis. Specifically, potential for increased litigation Employees (BMWE), the American the ATA expressed support for the exposure). Automobile Association (AAA), the City December 1999 petition for rulemaking The ASLRRA and Great Lakes of Hudsonville in Michigan, Reidler filed by the South Dakota Trucking Transportation LLC (which submitted Decal Corporation, 3M, Reflexite, the Association, the Wyoming Farm Bureau comments on behalf of two class II American Highway Users Alliance, the Federation, the Wyoming Trucking carriers, Bessemer and Lake Erie Tourist Railroad Association, the Association, and the Mississippi Railroad Company and the Duluth, Association of American Railroads Trucking Association which sought to Missabe and Iron Range Railway (AAR), Avery Dennison, Great Lakes require railcars to bear retroreflective Company), additionally expressed the Transportation LLC, the Railway sheeting. These commenters also opinion that a Federal regulation Progress Institute (now known as the pointed out the prevalence of unlighted, mandating rail car reflectorization Railway Supply Institute (RSI)), the passively protected highway-rail grade would be unduly burdensome and American Short Line and Regional crossings in rural communities and the costly on small railroads. One Railroad Association (ASLRRA), the particular vulnerability of these types of commenting railroad, however, North American Freight Car Association crossings to RIT accidents. recognized that adopting a high (NAFCA), the National Industrial The BMWE, a rail labor organization, visibility, common color scheme on rail Transportation League, as well as TTX. also submitted comments in support of equipment could reduce accidents at Although the majority of comments rail car reflectorization. The BMWE highway-rail grade crossings. A submitted were in favor of cited the federal highway rule requiring representative of another small railroad, reflectorization, some members of the reflectorization of large trucks as the Conway Scenic Railroad in New railroad industry raised important evidence of the benefits which could be Hampshire, suggested that railroads considerations related to the derived from rail car reflectorization should make their locomotives and cars

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more visible and that reflectorization FRA has chosen to impose color, type, rail freight rolling stock and prescribes could be a practical method of doing so. size, and placement requirements that standards for the application, This commenter, however, recognized ensure sufficient reflectivity will be inspection, and maintenance of the limits of any program designed to retained over time, despite the harsh retroreflective material to rail freight enhance the visibility of trains, railroad operating environment. The rolling stock for the purpose of including reflectorization, and amount and placement of retroreflective enhancing its detectability at highway- explained that ‘‘[t]he most visible train sheeting required to be applied to rail grade crossings. This rule will not is only as safe as the motor vehicle freight rolling stock pursuant to this part restrict freight rolling stock owners from operator who encounters it.’’ FRA depends on the size of the freight car or applying retroreflective material to strongly agrees with this statement and locomotive, as well as the car type. freight rolling stock on an accelerated recognizes that reflectorization will Generally, however, this rule proposes a schedule, nor will this rule restrict provide only a partial solution to the vertical pattern of retroreflective freight rolling stock owners from safety issues surrounding highway-rail material along the entire side of freight applying additional reflective material grade crossings. FRA recognizes, and rolling stock, as the physical as long as any such additional material feels it worthy of emphasis, that nothing configuration of various equipment does not interfere with the recognizable in this rule relieves motorists from the types allows. pattern contemplated in proposed responsibility to be alert at highway-rail In drafting this rule, FRA has § 224.105. Freight rolling stock owners, crossings and use due diligence in carefully considered the comments however, are under no duty to install, operating motor vehicles safely, even submitted to the docket of this maintain, or repair reflective material during times of limited visibility. proceeding and has attempted to devise except as specified in this rule. F. The Proposed Rule a rule which will ensure the most Section 224.3 Applicability efficient and cost-effective Based upon the information currently implementation of a nationwide This section proposes that this rule available, FRA believes that reflectorization program which will apply to all freight cars and locomotives reflectorization of rail freight rolling provide valuable safety benefits to both used for revenue or work train service stock is a feasible method of enhancing the railroad industry and the motoring that operate over a public or private rail car visibility that would likely public. FRA anticipates that many highway-rail grade crossing and are improve safety in a cost-effective constructive comments will result from used for revenue or work train service. manner. Accordingly, as the Federal public analysis of this proposal and that FRA is aware that cars with Canadian agency responsible for ensuring that the proposed rule may be changed as a reporting marks are used extensively America’s railroads are safe for the result of the public input. As such, FRA within the United States. Transport traveling public and in direct response invites public comments on all aspects Canada has previously administered a to the Congressional directive of 49 of this proposed rule. reflectorization program for Canadian U.S.C. 20148, FRA is proposing to cars, and FRA expects that Transport require the use of reflective material on Section-by-Section Analysis Canada will take actions in parallel with this proposal to handle the North the sides of certain rail cars and Section 224.1 Purpose and Scope locomotives. American fleet. Generally, this rule proposes that all This section contains a formal This part will not apply to (1) freight freight cars and locomotives that operate statement of the proposed rule’s railroads that operate only on track over a public or private highway-rail purpose and scope. FRA intends that inside an installation that is not part of grade crossing in the United States in the rule cover all aspects of the general railroad system of revenue or work train service be reflectorization of freight rolling stock, transportation, (2) rapid transit equipped with retroreflective sheeting including but not limited to, the size, operations within an urban area that are on both sides. This rule contemplates color, placement, and performance not connected to the general system of that conforming retroreflective sheeting standards of the reflective material, as transportation, or (3) locomotives or will be applied to freight cars on a fleet well as the schedule for the application, passenger cars used exclusively in basis so that each segment of the freight inspection, and maintenance of the passenger service. Although FRA car fleet is brought into compliance material. recognizes that both public and private within ten years, and each segment of Paragraph (a) states that the proposed grade crossings may be found on plant the locomotive fleet is brought into rule is intended to reduce highway-rail railroads and freight railroads that are compliance within five years. To ensure grade crossing accidents, deaths, not part of the general railroad system the most efficient and cost-effective injuries, and property damage resulting of transportation, these operations implementation of the rule, FRA from those accidents by enhancing the typically involve low speed vehicular proposes that retroreflective sheeting be conspicuity of rail freight rolling stock traffic and FRA has not determined that applied to new freight rolling stock at as to increase its detectability by motor reflectorization would be helpful in the time of construction, and to existing vehicle operators at night and under these areas. These reasons, together with stock when such stock is being conditions of poor visibility. Paragraph the historical basis for not asserting repainted, rebuilt, or is undergoing (b) explains that the proposed rule jurisdiction over insular rail operations, other periodic maintenance. establishes the duties of freight rolling leads FRA to propose not to exercise This rule proposes specific color, stock owners and railroads to jurisdiction over public and private construction, placement, and progressively apply retroreflective crossings at such plant and private performance requirements for the material to freight rolling stock, and to railroads. FRA does, of course, retain required retroreflective sheeting and periodically inspect and maintain that the statutory right to assert jurisdiction also sets forth a schedule for the material in order to achieve cost- in this area and will do so if application, inspection, and effective mitigation of collision risk at circumstances warrant. maintenance of the sheeting. The highway-rail grade crossings. Paragraph Paragraph (c) provides that this rule performance requirements set forth in (c) explains that the proposed rule will not apply to locomotives and this proposal are based on the material establishes a schedule for the passenger cars used exclusively in as it is initially applied. In other words, application of retroreflective material to passenger service. FRA proposes to

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exclude locomotives and passenger cars CFR part 214 (e.g., how often is this reflectivity throughout the used exclusively in passenger service equipment involved in grade crossing manufacturers’ stated useful life despite from this rule because the conspicuity accidents, what, if any, conspicuity inevitable accumulations of dirt. If, issues attendant to passenger service are devices are already utilized on this however, retroreflective material is significantly different from those of equipment, would it be practicable to covered with paint (e.g., graffiti), a freight service. For example, equip these vehicles with retroreflective dense chemical residue (e.g., product particularly in commuter service, the material, etc.). spilled from a tank car), or any other highway-rail grade crossings through ‘‘Freight rolling stock owner’’ is foreign substance, other than dirt or which passenger trains operate are defined to include any person who grime, which effectively blocks all typically better protected than crossings owns freight rolling stock, leases freight incoming light, that material would be used exclusively in freight service. Also, rolling stock, manages the maintenance considered ‘‘obscured’’ under this part. many passenger cars have bright or use of freight rolling stock on behalf In order to ensure that the stainless steel exteriors or are painted of an owner or one or more lessors or requirements of this part would be contrasting light colors and are lessees, or who otherwise controls the practicable for each type of freight car maintained in a much cleaner condition maintenance or use of freight rolling to which they apply, FRA has included than freight cars. Passenger cars stock. This definition recognizes the definitions for railroad freight car, flat typically have inside lights which are practicalities of freight car ownership in car, and tank car. The proposed visible through side windows that run the industry today. It is estimated that requirements for each type of car differ the entire length of the cars. Although over one-half of all freight cars are based on configurational differences FRA does not at this time propose to privately owned. This number between the vehicles in those groups. require the application of reflective continues to increase. Because private FRA believes that almost 99% of the material to locomotives and passenger freight car owners often contract with freight car fleet that would be subject to cars used exclusively in passenger others to maintain their cars and may this rule falls within one of these three service, FRA may do so in a future not even see their cars on a regular definitions. The remaining 1% of the rulemaking if it proves a cost-effective basis, this definition contemplates that fleet that does not fall within one of method of mitigating collision risk at those who control the maintenance or these definitions is provided for in highway-rail grade crossings. use of freight cars by contractual § 224.105(a)(4) addressing ‘‘cars of As in all aspects of this proposed rule, agreements or otherwise, will also be special construction.’’ FRA requests FRA invites comments on the responsible for compliance with this comments on the use of these jurisdictional determinations proposed part in conjunction with the actual definitions, specifically, whether these in this notice. owners of the cars. definitions are adequate to identify car ‘‘Obscured’’ means, for purposes of Section 224.5 Definitions types for purposes of this rule or this part, concealed or hidden. whether commenters have other This proposed rule uses various Specifically excluded from this definitions that they would prefer. terms, which for purposes of this definition are ordinary accumulations of rulemaking, have very specific dirt, grime, or ice resulting from the Section 224.7 Waivers meanings. FRA intends these definitions normal railroad operating environment. This section explains the process for to clarify the meaning of important FRA recognizes that the harsh railroad requesting a waiver from a provision of terms as they are used in the text of the operating environment inevitably this rule. FRA has historically proposed rule and several of these results in dirt accumulating on the sides entertained waiver petitions from definitions warrant further discussion. of freight rolling stock. The standards parties affected by an FRA regulation. In ‘‘Freight rolling stock’’ includes any for retroreflective material set forth in reviewing such requests, FRA conducts locomotive subject to 49 CFR part 229 this part take into account this ordinary investigations to determine if a used to haul or switch freight cars in accumulation. The term ‘‘obscured,’’ deviation from the general regulatory revenue or work train service and any however, is intended to refer to criteria can be made without railroad freight car subject to 49 CFR situations where reflective material is compromising or diminishing safety. part 215, including a car stenciled MW covered by paint, a dense chemical The rules governing the FRA waiver pursuant to § 215.305. Although FRA residue, or any other foreign substance, process are found in 49 CFR part 211. proposes to limit the definition of such that the material no longer reflects In summary, after a petition for a waiver ‘‘freight rolling stock’’ to locomotives light. For example, FRA understands is received by FRA, a notice of the and freight cars, FRA requests that the sides of coal cars will waiver request is published in the comments on the potential utility and accumulate coal dust and other dirt over Federal Register, an opportunity for practicability of reflectorizing other rail time due to the nature of normal public comment is provided, and an equipment, such as specialized railroad operations. An accumulation of opportunity for a hearing is afforded the maintenance of way vehicles coal dust or other dirt, even if it petitioning or other interested party. (particularly maintenance of way significantly darkens and dirties the FRA, after reviewing information from vehicles not falling within the purview retroreflective material, will not cause the petitioning party and others, will of subpart D to 49 CFR part 214) or any the material to be ‘‘obscured’’ for grant or deny the petition. In certain other rail equipment used to haul freight purposes of this rule. The standards circumstances, conditions may be cars. FRA specifically requests data proposed in this rule account for the imposed on the grant of a waiver if FRA demonstrating what, if any, other types effects of accumulations of dirt and concludes that the conditions are of rail equipment (other than grime inherent in the railroad operating necessary to assure safety or if they are locomotives subject to 49 CFR part 229) environment, the aging of the reflective in the public interest. are used to haul freight cars and the material, and other adverse effects of the potential feasibility of reflectorizing operating environment (e.g., harsh Section 224.9 Responsibility for such equipment and any data and/or weather conditions). FRA believes that Compliance relevant comments related to the reflective material meeting the General compliance requirements are conspicuity of maintenance of way requirements of this rule when initially proposed in this section. Paragraph (a) equipment which is not subject to 49 applied will still provide adequate states that freight rolling stock owners

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(as defined in § 224.5), railroads, and any person that violates any The Supreme Court has consistently (with respect to certification of material) requirement of this part. These penalties interpreted section 20106 to confer on manufacturers of retroreflective are authorized by 49 U.S.C. 21301, the Secretary the power to preempt not material, are primarily responsible for 21302, and 21304. The penalty only State statutes, but State common compliance with the rule. The provision parallels penalty provisions law as well. See CSX Transp. v. responsibility of manufacturers is included in numerous other safety Easterwood, 507 U.S. 658, 664 (1993) discussed in more detail in the analysis regulations issued by FRA. Essentially, (‘‘(L)egal duties imposed on railroads by of proposed § 224.103(a) below. any person who violates any the common law fall within the scope Paragraph (a) also clarifies FRA’s requirement of this part or causes the of (the) broad phrases’ of section position that the requirements violation of any such requirement will 20106.). See also Norfolk Southern Ry. contained in the rule are applicable to be subject to a civil penalty of at least Co. v. Shanklin, 529 U.S. 344 (2000). any ‘‘person’’ (as defined in the rule) $500 and not more than $11,000 per The Court has further held that Federal that performs any function or task violation. Civil penalties may be regulations under the Federal Railroad required by the proposed rule. Although assessed against individuals only for Safety Act will preempt common law various sections of the rule address the willful violations, and where a grossly where the regulations ‘‘substantially duties of freight rolling stock owners, negligent violation or a pattern of subsume’’ the subject matter of the railroads, and manufacturers of repeated violations creates an imminent relevant State law. Easterwood, 507 U.S. retroreflective material, FRA intends hazard of death or injury to persons, or at 664. that any person who performs any causes death or injury, a penalty not to As is evident in the language of action on behalf of any of these parties exceed $22,000 per violation may be proposed § 224.1, FRA intends to cover or any person who performs any action assessed. In addition, each day a the subject matter of standards for the covered by the rule is required to violation continues will constitute a use of retroreflective materials on freight perform that action in the same manner separate offense. Maximum penalties of rolling stock and the specific duties of as required of the freight rolling stock $11,000 and $22,000 are required by the freight rolling stock owners in this owner, railroad, or manufacturer, or be Federal Civil Penalties Inflation regard. FRA intends this part to preempt subject to FRA enforcement action. For Adjustment Act of 1990 (Pub. L. 101– any State law, rule, or regulation, or example, employees or agents of freight 410) (28 U.S.C. 2461 note), as amended common law theory of liability that rolling stock owners, or railroad by the Debt Collection Improvement Act might attempt to impose a duty on contractors that perform duties covered of 1996 (Pub. L. 104–134, 110 Stat. freight rolling stock owners pertaining by these regulations would be required 1321–373) which requires each agency to the reflectorization of freight rolling to perform those duties in the same to regularly adjust certain civil stock that is not specifically set forth in manner as required of a freight rolling monetary penalties in an effort to this part. For example, FRA intends to stock owner or railroad. Likewise, maintain their remedial impact and preempt any State law or common law employees or agents of manufacturers of promote compliance with the law. theory of liability which might attempt retroreflective sheeting being to impose a duty on freight rolling stock manufactured pursuant to this part, Section 224.13 Preemptive Effect owners to apply additional would be required to perform those This section informs the public as to retroreflective material other than that duties in the same manner as the FRA’s intention regarding the specified in this part, to apply manufacturer. preemptive effect of the final rule. retroreflective material on a different Paragraph (b) states that any person While the presence or absence of such schedule than that specified in this part, performing any function or task a section does not conclusively establish or to inspect, or maintain retroreflective required by this part will be deemed to the preemptive effect of a final rule, it material on a more frequent basis than have consented to FRA inspection of the informs the public concerning the that specified in this part. Inference of person’s facilities and records to the statutory provisions which govern the any duties not specifically set forth in extent necessary to ensure that the preemptive effect of the rule. this part may cause the costs of the function or task is being performed in This section points out that the proposed rule to outweigh the safety accordance with the requirements of preemptive effect of this rule is benefits of the rule in direct conflict this part. This provision is intended to governed by 49 U.S.C. 20106 (‘‘section with the Congressional mandate of 49 put freight rolling stock owners, 20106’’). Section 20106 provides that all U.S.C. 20148 (requiring that FRA railroads, manufacturers, and regulations prescribed by the Secretary initiate a rulemaking proceeding contractors performing functions or relating to railroad safety preempt any prescribing regulations requiring tasks required by this part on notice that State law, regulation, or order covering enhanced visibility standards for they are consenting to FRA’s inspection the same subject matter, except a railroad cars if such regulations would for rail safety purposes of that portion provision necessary to eliminate or likely improve safety in a cost-effective of their facilities and records relevant to reduce an essentially local safety hazard manner). the function or task required by this that is not incompatible with a Federal Section 224.15 Special Approval part. Pursuant to 49 U.S.C. 20107, FRA law, regulation, or order, and that does Procedures has the statutory authority to inspect not unreasonably burden interstate any facilities and relevant records commerce. With the exception of a This section contains the procedures pertaining to the performance of provision directed at an essentially local to be followed when seeking to obtain functions or tasks required under this safety hazard that is not inconsistent FRA approval of alternative standards part, and this provision is merely with a Federal law, regulation, or order, under proposed § 224.103(e). FRA intended to make that authority clear to and that does not unreasonably burden anticipates continued technological all persons performing such tasks or interstate commerce, section 20106 will improvements and product advances in functions. preempt any State or local law or the field of reflective materials. regulatory agency rule covering the Accordingly, this section is intended to Section 224.11 Civil Penalties same subject matter as the regulation provide a relatively quick approval This section identifies the civil proposed today when issued as a final process to allow the incorporation of penalties that FRA may impose upon rule. new technology into the standards of

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this part, thereby making the technology path, (4) aid the motorist in estimating ASTM standard is required. It is less available to all car owners and railroads, the distance he or she is from the train, costly to install durable material than it while maintaining the same level of and (5) aid the motorist in estimating would be to install less durable material safety originally contemplated. FRA the speed and direction of the train’s but be required to regularly test its believes this proposed procedure will motion. FRA believes that the performance relative to a performance speed the process for taking advantage retroreflective sheeting contemplated in standard. of new technologies over that which is this subpart B, applied and inspected in Specifically, paragraph (b) requires currently available through the waiver conformance with this part, effectively that the retroreflective sheeting be process. However, in order to provide achieves these objectives. yellow as specified by the chromaticity an opportunity for all interested parties coordinates of ASTM D 4956–01. As Section 224.103 Characteristics of explained above, the human eye is more to provide input for use by FRA in its Retroreflective Sheeting decision making process, as required by sensitive to some colors than others. the Administrative Procedure Act, 5 This section sets forth the proposed This color sensitivity can vary in U.S.C. 553 et seq., (APA), FRA believes construction, color, and performance different lighting situations, making that any special approval provision standards for the retroreflective sheeting some colors more noticeable at different must, at a minimum, provide proper required by § 224.101. Paragraph (a) times of the day. Although the 1999 notice to the public of any significant states that retroreflective sheeting must Volpe Report concluded that a pattern change or action being considered by be constructed of a smooth, flat, of red-and-white reflectors was the agency with regard to the existing transparent exterior film with preferred to facilitate motorists’ regulations. microprismatic elements embedded or recognition of a hazard as a train and Paragraph (b) sets forth the suspended beneath the film so as to convey a sense of danger, FRA proposes substantive and procedural form a non-exposed retroreflective to require yellow retroreflective material requirements for petitions for special optical system. Paragraph (a) also as specified by the chromaticity approval of alternative standards. For provides that air encapsulated sheeting coordinates of ASTM D 4956–01. FRA example, paragraph (b) states that each must be sealed around all edges. FRA proposes to require yellow petition must contain (1) relevant understands that air encapsulated retroreflective material because the identification and contact information sheeting that is not sealed on all edges spectral measurement of the color of the primary person to be contacted will allow water to seep between the (approximately 550 nm) is within the with regard to the petition, (2) a detailed layers of the product. Over time, due to peak sensitivity range of the human description of the alternative proposed, the normal railroad operating visual system and accordingly, it is one and (3) sufficient data and analysis environment, this water will freeze and of the most easily detectable colors establishing that the alternative will expand, causing layers of the sheeting to under varying ambient light and other provide at least an equivalent level of peel. environmental conditions (e.g., Paragraphs (b) and (c) propose to safety and meet the requirements of darkness, fog, haze, etc.). In addition, require that the retroreflective sheeting § 224.103(e). Paragraphs (c) and (d) the color yellow minimizes the risk of meet the color and performance provide opportunity for notice and motorist confusion with the colors of requirements, except for the public comment on any petition for other roadway hazards (e.g., red and photometric requirements, of the special approval of an alternative white reflectors on trucks) and is not a American Society of Testing and color prevalent in most background standard received by FRA, and Measurements’ (ASTM) standard D paragraph (e) describes the process FRA environments. 4956–01, Standard Specification for In comments submitted to the docket, will follow in acting on any such Retroreflective Sheeting for Traffic 3M, a manufacturer of retroreflective petitions. Control. ASTM D 4956–01 has been materials, recommended the use of a Subpart B—Application, Inspection, chosen as the basis for the FRA high contrast colored corner cube and Maintenance of Retroreflective specification because FRA understands retroreflective material with a spectral Material it to be the specification that measurement within the peak sensitivty manufacturers of retroreflective sheeting range of the human visual system (e.g., Section 224.101 General Requirements are following in their current yellow/green) and fluorescent This section contains the general manufacturing process. NHTSA’s rule properties. 3M explained that the requirement that all rail freight rolling requiring reflectorization of large truck efficient corner cube retroreflective stock subject to this part be equipped trailers (49 CFR 571.108) is also based material would aid nighttime visibility with retroreflective sheeting conforming on this ASTM standard. Information and the fluorescent properties would to the requirements of this rule and that provided by several retroreflective provide additional daytime luminance. the sheeting be applied, inspected, and sheeting manufacturers indicates that Although FRA’s own research found maintained in accordance with subpart the products of most manufacturers that fluorescent yellow retroreflective B or in accordance with an alternative currently meet the performance material had the highest SIA value of all standard approved under § 224.15. This requirements of this proposed rule, and materials tested and could be detected general requirement reflects FRA’s FRA has no reason to believe that other from a further distance than any of the understanding that motorists need to be manufacturers could not meet the other materials, because the duration of given as much visual information as performance standards if there was a fluorescent pigments is substantially possible to correctly decide whether a market for the product. In addition, less than the ten-year reflector product roadway hazard (e.g., a train) exists in because FRA is requiring that guarantee, FRA is not proposing to a vehicle’s path. Specifically, devices retroreflective sheeting meet the require the use of fluorescent-colored intended to make a train conspicuous requirements of ASTM D 4956–01 only retroreflective material at this time. should: (1) Tell the motorist that as initially applied and does not However, if a fluorescent retroreflective something is there, (2) tell the motorist propose to require specific minimum material meets all of the requirements of that what he or she sees is a train, (3) reflectivity for vehicles in service, FRA this part, its use is acceptable. tell the motorist if the train is on or believes that highly durable sheeting Paragraph (c) requires that about to cross a road in the vehicle’s meeting the performance tests of the retroreflective sheeting applied in

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accordance with the rule meet all the 1 ensures that the retroreflectors will Section 224.105 Size and Location performance requirements, except for perform above the minimum detection This section proposes to make the the minimum photometric performance threshold for the average motor vehicle amount and placement of retroreflective requirements, of ASTM D 4956–01. The at approximately 97% of all crossings. sheeting required to be applied to minimum photometric performance Although the minimum photometric freight rolling stock pursuant to this part requirements (i.e., minimum SIA) of the performance requirements set forth in dependent on the size of the car or FRA standard are set forth in Table 1 of the proposal are specific to yellow locomotive, as well as the car type. A the proposed rule. The proposed values microprismatic retroreflective material, primary concern in developing the were developed to perform above the FRA recognizes that many car owners proposed standards of this part was minimum detection threshold of 45 cd/ who currently reflectorize their cars developing a retroreflective pattern that 2 fc/ft identified in the 1999 Volpe have used white microprismatic is detectable in time for an approaching Report as necessary to enable most retroreflective material. If FRA motorist to recognize a train in the grade motorists to detect a train in time to alternatively required the use of white crossing and respond appropriately in avoid a collision. Recognizing that in retroreflective material, the minimum time to avoid an accident. Another the real world railroad operating photometric performance requirements concern was the potential for motorist environment, the effective SIA of (based on a required detection distance confusion as more potential roadway retroreflective materials depends on of 500 feet) for the retroreflective hazards (particularly truck trailers) various factors (e.g., grade crossing material would be as follows: benefit from the addition of configurations and angles, ambient light reflectorization. Accordingly, conditions, vehicle headlight type and Observation angle Entrance angle recognizing that a unique, uniform lens cleanliness, weather, and the 0.2° 0.53° pattern of application is necessary to presence and working condition of facilitate recognition of rail cars and that illumination and other warning devices) ¥4° ...... 600 160 the placement of retroreflectors affects and may be reduced because of 30° ...... 350 75 their performance, this section proposes accumulated dirt and grime, the Minimum Photometric Performance (Coeffi- a specific pattern of application, striving proposed minimum photometric cient of Retroreflection (RA) in Candela/Lux/ to achieve as uniform a pattern as performance requirements take into Meter2) Requirement for White Retroreflective possible throughout the relevant fleet, account these varying factors. Sheeting. while taking into consideration the Specifically, extrapolating the test data FRA requests commenters’ views as to configurational differences between detailed in the Volpe Report out ten the desirability of using white versus various types of freight rolling stock. years, the manufacturers’ stated useful yellow retroreflective material and Although a vertical pattern of life of the material, FRA found that the further solicits comments and retroreflective material along the entire forecasted SIA levels remained well alternative suggestions to the proposed side of freight cars is proposed, FRA above the minimum detection level construction, color, and performance recognizes that the physical established in the 1999 Volpe Report. In requirements of this section. configuration of locomotives and the addition, although the primary The responsibility for compliance conspicuity issues surrounding degradation in the SIA of the material with the construction, color, and locomotives are different. Accordingly, occurs during the first two years as a performance requirements of the in paragraph (b) of this section, FRA result of ultraviolet light exposure, after retroreflective sheeting used to comply proposes a more flexible approach to the which the material maintains a with this rule would rest upon the reflectorization of locomotives. relatively consistent intensity manufacturers of the sheeting. Thus, As discussed earlier in the preamble, throughout its useful life, FRA manufacturers who are providing the general consensus of research forecasted SIA degradation of the retroreflective sheeting to the railroad pertaining to retroreflective materials is material due to dirt and grime industry would have to certify that retroreflective materials can accumulation exponentially. As a result, compliance with § 224.103. Paragraph increase the conspicuity of objects to FRA’s analysis substantially (d) sets forth this certification which they are attached. FRA, however, overestimates the degradation rate of the requirement and would require that the found little existing research that material and even with this characters ‘‘FRA–224’’ be permanently suggested how retroreflective materials overestimation, the expected SIA values stamped, etched, molded, or printed, in should be displayed on rail cars to remain well above the minimum characters at least 3 mm high, with each maximize the conspicuity of the cars for detection level identified in the 1999 set of characters spaced no more than approaching motorists. Early studies Volpe Report. four inches apart, on each piece of suggested that massed applications Table 1 specifies the minimum retroreflective sheeting manufactured. (concentrating retroreflective material in photometric performance requirement Although, the proposed rule generally one or two locations) were more (i.e., minimum required SIA) for yellow requires application of retroreflective effective than those applications that retroreflective material at observation sheeting meeting the specific were distributed over a wider area. More angles of 0.2° and 0.5° and light construction, color, and performance recent studies assessing the entrance angles of ¥4° and 30° based on requirements of § 224.103(a) through (c), effectiveness of retroreflective markings ASTM D 4956–01. FRA’s Grade paragraph (e) of this section recognizes on trucks used the newer prismatic Crossing Inventory identifies crossings that under § 224.15, freight rolling stock materials and concluded that providing into three categories of crossing angles: owners and railroads may request FRA a design that outlined the shape of the 60–90°, 30–59°, and 0–29°. approval to use alternative standards. vehicle increases conspicuity. Approximately 80% of all crossings As discussed in the analysis of § 224.15 The recommendation to use an have crossing angles between 60 and above, any alternative standard utilized outline shape was based in part on the 90°, almost 17% have crossing angles must result in an equivalent level of need of a motorist to estimate closing between 30 and 59°, and only 4% have safety as the sheeting described in distance when following behind a truck. crossing angles less than 30°. 224.103(a) through (c) applied in However, motorists’ interaction with Accordingly, the requirements of Table accordance with the rule. trains is different from trucks. Because

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trucks are shorter in length and pass strips of sheeting to be located as close retroreflective material, this through an intersection more quickly to each end of the car as practicable and configuration assumed that the material than the average train, the motorist may at equidistant intervals of not more than would be periodically washed. Volpe only need to slow his or her vehicle to 10 feet. This pattern is intended to alert found that periodic washing of the avoid a collision instead of stopping an approaching motorist to the retroreflectors could recover the prior to reaching the intersection. approximate dimensions of the hazard intensity of the prismatic material to Conversely, because the average train is (the freight car) in his or her path. In nearly original levels. However, because longer than the average truck, it spends addition, because roadway lanes in the of practical concerns expressed by many a greater amount of time in the United States are typically 10 to 12 feet members of the railroad industry (e.g., intersection. For a motorist approaching wide, applying strips of retroreflective increased labor costs, environmental a grade crossing, the greater amount of sheeting at least every ten feet along the wastewater and water usage issues), time the train spends in the intersection sides of freight cars, increases the FRA does not propose to require the means the more likely the motorist will likelihood of at least one reflector being periodic cleaning of the retroreflective need to stop at the intersection in order in the sight path of an approaching sheeting. Instead, in order to to avoid a collision. motorist. compensate for the lack of cleaning, FRA’s own research concluded that A vertically oriented pattern, as FRA is proposing to require either a pattern that outlined the shape opposed to an outline pattern, is approximately one additional square of the railroad equipment, or a proposed because it contrasts with the foot of material on each side of freight vertically-oriented pattern that spaced horizontally oriented pattern of the rolling stock, thereby lowering the level retroreflective material uniformly over a retroreflective pattern required for truck of luminance needed. large area of the equipments’ side, was trailers, thereby reducing the likelihood most effective. Based on the results of that motorists will confuse a train in a Paragraph (a) of this section generally studies investigating truck grade crossing with a truck trailer. In explains that the amount of reflectorization, the specific findings of addition, because not all approaches to retroreflective sheeting required to be FRA’s targeted research, as well as input grade crossings are level, to the extent applied to freight cars under this part is from the railroad industry and that a motor vehicle’s headlights are dependent on the length of the car, manufacturers of retroreflective aimed away from the retroreflective measured from endsill to endsill, material, FRA is proposing in this material, less light will reach the exclusive of the draft gear. Paragraph section what it believes to be the retroreflective material if it is applied (a)(1) proposes to require that on freight optimum placement patterns of horizontally and therefore less light will cars other than tank cars and flat cars, retroreflective material on freight rolling be returned to the driver and a train in retroreflective sheeting be applied stock. The proposed placement patterns a crossing will be more difficult to vertically in 4x36 inch and 4x18 inch in this section are designed to maximize detect. Orienting the retroreflective strips along the car sides, with the the effectiveness of the material, allow material vertically increases the bottom edge of each strip no lower than retroreflectorization of a variety of likelihood that the maximum available 42 inches above the top of the rail. freight car types with the same generally light from vehicle headlights will enter Further, this paragraph proposes to recognizable pattern, and also minimize the retroreflective material and be require that either a minimum of one the degradation rate of the material. In returned to the motorist when the road 4x36 inch (one square foot) strip of addition, other practical advantages to a grade is not level. retroreflective material or two 4x18 inch standardized reflectorization pattern This section also proposes to require strips, directly above each other, be include the potential for volume four square feet of retroreflective applied vertically as close to each end discounts on the costs of materials and material on each side of the typical 50- of the car as practicable and that a minimizing labor costs by standardizing foot freight car and provides that freight minimum of one 4x18 inch strip be the repair and installation of the cars longer than 50 feet would require applied vertically at intervals of no material. one additional foot of material for each more than every 10 feet between each This section proposes a vertical additional ten feet in length. Although end (i.e., for a typical 60 foot freight car, pattern of retroreflective sheeting on the the optimum configuration of at 10 feet, 20 feet, 30 feet, 40 feet, and sides of freight cars, where the physical retroreflectors identified in the 1999 50 feet). See Figure 1. configuration of the car allows, with Volpe Report, required slightly less BILLING CODE 4910–06–P

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BILLING CODE 4910–06–C centered on the horizontal centerline of end of the tank. The intent of this Although paragraphs (a)(2) and (3) the tank, the sheeting may be applied configuration is that the retroreflective follow this same basic pattern, FRA has vertically with its top edge no lower sheeting will be centered, as practicable, attempted to account for the than 70″ above the top of the rail. See on the outermost curved area of the configurational differences between Figure 2(a). Similar to the pattern tank, thereby reflecting the most light. various types of freight cars. Paragraph proposed in paragraph (a)(1), paragraph FRA recognizes that the material (a)(2) addresses tank cars specifically, (a)(2) requires a minimum of one 4x36 applied underneath the centerline of the while paragraph (a)(3) addresses flat inch (one square foot) strip of tank may reflect a certain amount of cars. Paragraph (a)(2) proposes to retroreflective material or two 4x18 inch light downward and not directly back to require that on tank cars, retroreflective strips, directly above each other, be the motorist and that illumination from sheeting be applied vertically along the applied vertically as close to each end a vehicle’s headlights may not even car sides and centered on the horizontal of the tank as practicable and that a reach some of the material applied centerline of the tank, or as near as minimum of one 4x18 inch strip be practicable. See Figure 2. If it is not applied vertically at intervals of no above the centerline. practicable to safely apply the sheeting more than every 10 feet between each BILLING CODE 4910–06–P

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BILLING CODE 4910–06–C

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Recognizing the limited surface area for other freight cars, paragraph (a)(3) between 4 and 18 inches in height, if of the sides of a typical flat car, requires that a minimum of one 4x18 vertical application of 4x18 inch strips paragraph (a)(3) proposes to require a inch strip be applied to the sides of flat is not feasible, paragraph (a)(3) allows minimum of two 4x18 inch strips, one cars vertically at intervals of no more retroreflective sheeting on flat cars to be next to the other, be applied vertically than every ten feet (i.e., at 10 feet, 20 applied vertically in three 4x6 inch as close to each end of the car as feet, 30 feet, 40 feet, etc.), with the strips placed directly next to each other, practicable, with the bottom edge of bottom edges of each strip no lower than or placed horizontally along the side each strip no lower than 30 inches 42 inches above the top of the rail, as sills of the cars. above the top of the rail, as practicable. practicable. See Figure 3. Because the BILLING CODE 4910–06–P Consistent with the application pattern surface area of a typical flat car is

BILLING CODE 4910–06–C some cases, locomotives are painted • A locomotive is embedded in the Paragraph (a)(4) recognizes that not all brighter colors than freight cars; and consist providing ‘‘distributed power’’ freight cars will fit the standard locomotives owned by major railroads or is in ‘‘helper service’’ pushing from configuration contemplated in and used in road service are cleaned on the rear. paragraphs (a)(1) through (a)(3). FRA a more frequent basis. Often, company • During switching operations, the estimates that the patterns proposed for logos are displayed on the sides of locomotive is pushing the train. typical freight cars, tank cars, and flat locomotives in fluorescent or reflective Inclusion of locomotives in this cars would be impractical to apply to materials and locomotives have a light program is further warranted by their approximately 1% of the fleet (e.g., source attached at the front and sides. high utilization. While many freight cars schnabel cars, etc.) due to their unique However, in other cases, locomotives sit idle for days or weeks at a time, physical configurations. Accordingly, are painted in dark colors or are not locomotives are generally used on a this paragraph proposes a more flexible repainted for several years, resulting in daily basis. Investments in improved application pattern for these ‘‘cars of a very dark appearance. conspicuity of locomotives should be special construction.’’ Specifically, FRA believes that some pattern of amortized through safety benefits even based on the length of a ‘‘car of special retroreflective material recognizable to more quickly than would be the case construction,’’ this paragraph specifies motorists is necessary to facilitate with freight cars. the required amount of retroreflective Although requiring the same amount motorists’ recognition of locomotives in material and requires that the pattern of of retroreflective material on grade crossings. Most major railroads application for these cars conform as locomotives as comparably sized freight have already instituted programs to close as practicable to the standard cars, paragraph (b) does not propose to accomplish this. Application of patterns proposed in paragraphs (a)(1) mandate a specific pattern. Instead, this retroreflective material to locomotives through (a)(3). paragraph proposes to allow any pattern will enhance conspicuity under the Paragraph (b) contains the proposed that divides the amount of following scenarios: requirements for the reflectorization of retroreflective sheeting equally between • locomotives. The conspicuity issues Several locomotives are coupled in both sides of a locomotive and is surrounding locomotives differ from the a multiple-unit consist pulling a train applied in a ‘‘pattern recognizable to issues surrounding freight cars in many and the motorists’ first view of the motorists,’’ even a horizontal pattern respects. First, the physical crossing occurs when the first along the sill or side walkway of a configuration of locomotives is locomotive is already on the crossing. locomotive. obviously quite different from the • The train is stopped with one or Although FRA believes that the configuration of most freight cars. In more locomotives on the crossing. patterns of application proposed in this

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§ 224.105 represent the optimum Paragraph (a)(2)(i)(B) also provides that Implementation Plan anticipated by this configuration of retroreflective material the application of retroreflective section. on freight rolling stock, FRA solicits sheeting to a freight car may be deferred If a freight car owner elects the comments as to the feasibility and until the second single car air brake test, procedures of paragraph (a)(2)(ii) and efficiency of these patterns and any if it is more practicable to apply the submits a Fleet Reflectorization recommendations for alternative sheeting at that time. By allowing the Implementation Plan to FRA, the owner patterns of application. flexibilty to defer application of the is thereafter responsible for compliance sheeting until the second single car air with the plan. In keeping with the Section 224.107 Application of requirements of the Paperwork Retroreflective Sheeting brake test, FRA recognizes that conditions at the time of the first single Reduction Act and the Government This section proposes to require that car air brake test may make it Paperwork Elimination Act, FRA all freight cars subject to this part be impractical to apply retroreflective anticipates providing car owners with equipped with retroreflective sheeting sheeting at that time. the option of submitting this plan (and conforming to this part within ten years FRA understands that most rail cars any required updates) to FRA of the effective date of the final rule, and are repainted, on average, every seven electronically. If upon completion of the similarly, that all locomotives subject to years and undergo a major overhaul or initial 24-month period an owner fails this part be equipped within five years. rebuild every ten years, depending upon to reflectorize at least 20% of the freight Recognizing the voluntary efforts by mileage and condition. Similarly, the car fleet, or if after any subsequent 12- many freight rolling stock owners who single car air brake test is required every month period an owner fails to have already begun reflectorizing their eight years for new cars and every five reflectorize at least an additional 10% of fleets and the practical differences years for other cars. See 49 CFR the total fleet, the owner must notify involved in applying reflective materials 232.305(c), (d). Accordingly, FRA FRA’s Associate Administrator of such to freight rolling stock already in use believes that the schedule set forth in a failure. Thereafter, the owner will be versus newly manufactured stock, FRA paragraph (a)(2)(i), providing for required to comply with the schedule has attempted to devise a schedule for application of the retroreflective set forth in paragraph (a)(2)(i), the the application of retroreflective sheeting when cars are out of service for percentage requirements of paragraph material which assures the most regularly scheduled maintenance, will (a)(2)(ii) will continue to apply, and the efficient and cost-effective allow the entire U.S. fleet of freight cars fleet owner must take any additional implementation of the rule. Generally, action necessary to bring cars under his to be reflectorized well within the ten FRA proposes that retroreflective ownership or control into compliance. year implementation period and will sheeting be applied to new freight Existing cars already equipped with rolling stock at the time of construction not require cars to incur any additional retroreflective sheeting as of publication and to existing stock when such stock downtime outside of the normal date of final rule: Recognizing the is being repainted, rebuilt, or maintenance cycle for the purpose of voluntary efforts already underway by undergoing other periodic maintenance. reflectorization. many railroads and car owners to As an alternative to this schedule, FRA Although FRA believes the schedule reflectorize their freight car fleets, is also proposing the more flexible set forth in § 224.107(a)(2)(i) is the most paragraph (a)(3) of this section approach of allowing freight car owners cost-effective and efficient method of addresses existing freight cars that, as of to designate, in individualized reflectorizing freight cars, paragraph the publication date of the final rule, are reflectorization implementation plans, a (a)(2)(ii) recognizes that some freight car already equipped with retroreflective schedule for the reflectorization of their owners may prefer to develop their own material. FRA understands that freight car fleets. schedule for reflectorization. Paragraph approximately 25% of the domestically- (a)(2)(ii) provides that a freight car owned freight car fleet is already Railroad Freight Cars owner may elect not to follow paragraph equipped with some type of reflective Newly constructed cars: Paragraph (a)(2)(i)’s schedule, if within 60 days of material. However, many of the color (a)(1) requires that retroreflective the effective date of the final rule, the schemes, the levels of reflectivity of the sheeting conforming to the rule be owner submits to FRA a Fleet material, and the per car amount of applied to cars manufactured after the Reflectorization Implementation Plan. material in use, differ from the effective date of the final rule at the time This plan must set forth the car numbers standards proposed in this rule. If car of construction. constituting the fleet subject to this part owners are required to replace the Existing cars without retroreflective and indicate when the identified cars retroreflective materials that they sheeting: As applied to cars that, as of will be reflectorized. The plan must also voluntarily installed to improve safety, the date of publication of the final rule, contain an affirmation that at least 20% it would have the effect of penalizing are not equipped with at least one of the total fleet will be equipped with owners that demonstrated an extra level square foot of retroreflective sheeting on retroreflective sheeting conforming to of safety consciousness. This would each side, paragraph (a)(2) generally this part within 24 months after the have the unintended effect of requires the application of effective date of the final rule and that discouraging car owners from exploring retroreflective sheeting to the cars as not less than an additional ten percent innovative approaches to improving they are repainted, rebuilt, or taken out of the total fleet will be completed each safety. With this in mind, FRA is of service for other scheduled 12-month period thereafter for the proposing that freight cars equipped maintenance and/or inspections. duration of the 10-year implementation with at least one square foot of Specifically, paragraph (a)(2)(i) requires period. Absent identification of a car in retroreflective material, uniformly that conforming retroreflective sheeting a Fleet Reflectorization Implementation distributed over the length of each car be applied to existing freight cars when, Plan, retroreflective sheeting side, will be considered in compliance after the effective date of the final rule, conforming to this part will be applied with this part for ten years from the either (1) the car is repainted or rebuilt, to that car at the time of its first single effective date of the final rule, provided or (2) the car first undergoes a single car car air brake test after the effective date that the sheeting is not engineering air brake test required under 49 CFR of the final rule. See Appendix B for the grade, super engineering grade 232.305, whichever occurs first. standard form Fleet Reflectorization (enclosed lens), or glass bead

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encapsulated type sheeting. FRA retroreflective sheeting conforming to this part for a period of 5 years from the intends to exclude all engineering grade the rule be applied to locomotives effective date of the final rule, provided and glass bead encapsulated type manufactured after the effective date of that the sheeting is not engineering retroreflective sheeting because such the final rule at the time of construction. grade, super engineering grade sheeting does not meet the minimum Existing locomotives without (enclosed lens), or glass bead photometric performance requirements retroreflective sheeting: As applied to encapsulated type sheeting. Again, FRA of § 224.103. Accordingly, freight cars locomotives that, as of the date of proposes to exclude all engineering already equipped with engineering publication of the final rule, are not grade and glass bead encapsulated type grade, super engineering grade, or glass equipped with at least one square foot retroreflective sheeting because such bead encapsulated type retroreflective of retroreflective sheeting on each side, materials do not meet the minimum sheeting, or any other reflective material paragraph (b)(2) generally requires the photometric requirements of the rule. that is not retroreflective, must be application of retroreflective sheeting to Locomotives already equipped with brought into compliance with this part the locomotives not later than the first engineering grade, super engineering in accordance with § 224.107(a)(2). FRA biennial inspection performed pursuant grade, or glass bead encapsulated type proposes a minimum requirement of to 49 CFR 229.29 occurring after the retroreflective sheeting, or any other one square foot of retroreflective effective date of the final rule. Again, reflective material that is not sheeting per car side under this section FRA’s proposal to install the retroreflective, must be brought into because based on the information retroreflective sheeting on a locomotive compliance with this part in accordance provided to FRA to date, it appears that while the locomotive is already out of with § 224.107(b)(2). Similar to one square foot per side is the minimum service for the required biennial § 224.107(a)(3) addressing freight cars, amount currently utilized in existing inspection ensures that reflectorization in order for previously equipped voluntary reflectorization programs. of the entire locomotive fleet can be locomotives to be considered in In order for previously equipped cars completed well within the 5 years compliance pursuant to this part, the to be considered in compliance contemplated by this proposal without locomotive owner must, within 60 days pursuant to this section, a car owner incurring any additional out of service of the effective date of the final rule, file must, within 60 days of the effective time for the locomotives. with FRA a Fleet Reflectorization date of the final rule, file a Fleet Existing locomotives already Implementation Plan identifying by Reflectorization Implementation Plan equipped with retroreflective sheeting as locomotive reporting marks the with FRA identifying by car numbers of publication date of final rule: Again, locomotives in the fleet already the freight cars in the fleet already recognizing the voluntary equipped with complying retroreflective equipped with complying retroreflective reflectorization efforts already sheeting and providing a description of sheeting and providing a description of underway by many freight rolling stock the technical specifications of the the technical specifications of the owners, paragraph (b)(3) addresses retroreflective material already applied retroreflective material already applied existing locomotives that, as of the (e.g., color of material, type of material, (e.g., color of material, type of material, publication date of the final rule, are amount and placement pattern of amount and placement pattern of already equipped with retroreflective material on each side of locomotives). material on each side of car). See material. Specifically, paragraph (b)(3) See Appendix B. Appendix B. provides that locomotives equipped For ease in understanding the with at least one square foot of requirements of this section, the Locomotives retroreflective sheeting, uniformly following table summarizes the Newly constructed locomotives: distributed over the length of each side, schedules of application proposed in Paragraph (b)(1) requires that will be considered in compliance with this section.

New Freight Cars: At time of construction Locomotives: At time of construction

Existing stock without retroreflective sheeting. Earliest of: (a) when car is repainted, or re- No later than first biennial inspection per- built, or (b) when car first undergoes single formed per 49 CFR 229.29. car air brake test under 49 CFR 232.305, OR In accordance with Individual Reflectorization Plan filed with FRA per § 224.107(a)(2)(ii). Existing stock with retroreflective sheeting (not 10 years from date of final rule’s publication. 5 years from date of final rule’s publication. ASTM D 4956–01 Types I, II, or III).

Section 224.109 Inspection and required under 49 CFR 232.305. end strip (or two 4x18 inch strips) of Replacement Likewise, paragraph (b) requires that retroreflective sheeting is missing from retroreflective sheeting on locomotives one side of a typical 50 or 60 foot freight This section sets forth the proposed subject to this part be visually inspected car, that sheeting must be replaced. requirements for the periodic inspection for presence and condition whenever Section 224.111 Renewal and replacement of damaged the locomotive receives the annual retroreflective material on freight rolling inspection required under 49 CFR This section proposes to require that stock. Although FRA is not proposing 229.27. Upon inspection, if more than all retroreflective sheeting required any specific maintenance requirements, 20 percent of the amount of sheeting under this part be replaced with new paragraph (a) requires that required on either side of the car or conforming sheeting, regardless of its retroreflective sheeting on freight cars locomotive under § 224.105 is damaged, condition, no later than ten years after subject to this part be visually inspected obscured, or missing, that damaged, the date of initial installation. This for presence and condition whenever a obscured, or missing sheeting must be section is based on the manufacturers’ car undergoes a single car air brake test replaced. In other words, if a 4x36 inch stated useful life of retroreflective

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material. FRA, however, will monitor Regulatory Impact and Notices number of accidents expected absent reflectorization. The FRA employed the retroreflective qualities of various A. Executive Order 12866 and DOT three completely separate approaches to fleet segments over time and may Regulatory Policies and Procedures extend the ten year interval if the estimation of benefits utilizing data warranted. This proposed rule has been from FRA’s highway-rail grade crossing evaluated in accordance with existing accident/incident reports (Form F Appendix A—Schedule of Civil policies and procedures, and 6180.57) from 1998–2001. In each Penalties determined to be non-significant under method of benefits estimation, in order both Executive Order 12866 and DOT to ensure a realistic estimate, FRA took This appendix is being reserved until policies and procedures (44 FR 11034; into account various factors that could the final rule. At that time it will Feb. 26, 1979). FRA has prepared and influence the effectiveness of the include a schedule of civil penalties to placed in the docket a regulatory retroreflective material (e.g., active be used in connection with this part. evaluation addressing the economic versus passive grade crossings, clear Because such penalty schedules are impact of this rule. Document versus cloudy weather conditions, dark statements of policy, notice and inspection and copying facilities are versus illuminated crossings). FRA comment are not required prior to their available at 1120 Vermont Avenue, accounted for these factors by issuance. See 5 U.S.C. 553(b)(3)(A). NW., 7th Floor, Washington, DC 20590. developing ‘‘effectiveness rates’’ which Nevertheless, commenters are invited to Photocopies may also be obtained by varied depending on the circumstances submit suggestions to FRA describing submitting a written request to the FRA of reported Category 1 RIT accidents. the types of actions or omissions under Docket Clerk at the Office of Chief For example, the highest effectiveness each regulatory section that would Counsel, Federal Railroad rate employed was 60% for accidents subject a person to the assessment of a Administration, 1120 Vermont Avenue, where motor vehicles ran into the sides civil penalty. Commenters are also NW., Washington, DC 20590. Access to of trains at night at unlighted, passive the docket may also be obtained invited to recommend what penalties crossings, while the lowest effectiveness electronically through the Web site for may be appropriate, based upon the rate employed was 15% for accidents the DOT Docket Management System at where motor vehicles ran into the sides relative seriousness of each type of http://dms.dot.gov. FRA invites violation. of trains at night at lighted crossings comments on this regulatory evaluation. equipped with active warning devices The life expectancy of the proposed G. Public Participation (i.e., flashing lights or gates). reflective material is 10 years, therefore, When conducting a rulemaking, FRA the potential costs and benefits are Each approach appears to be must follow the APA. The APA calculated for a ten-year period. Because reasonable, and the FRA suggests that generally requires that FRA allow all most of the costs of the rule for a single together they provide a good idea of the interested parties to review and car occur in the year material is applied order of magnitude of benefits likely to result from a rule requiring the comment on any proposed rule. Thus, while benefits are spread over reflectorization of rail freight by this notice, FRA is providing the subsequent years, and because the equipment. The first approach public an opportunity to study the benefits are discounted to present value, use of this limitation on the study employed the Delphi methodology proposed rule and comment on it. Based based on the opinions of FRA’s grade on comments provided in response to period is a very conservative approach. If a twenty-year period were used, the crossing experts. The discounted total this notice, FRA will, after the close of benefits would substantially increase ten-year benefit equals $87,517,527.50. the comment period, determine what relative to the costs. The total cost of Using the signal detection model, which action to take. reflectorizing locomotives, $194,512.08 is based on signal detection theory, the The Docket Management Facility (NPV), added to the cost of accident reduction potential of placing maintains the public docket for this reflectorizing rail cars, $48,671,710.63 reflectors on rail cars is estimated, once rulemaking. Comments and documents (NPV) equals the total costs of discounted, to equal a total ten-year as indicated in this preamble will $48,866,222.71 (NPV). benefit of $69,304,986.61. Using results become a part of this docket and will be Benefits of increased rail car visibility from a NHTSA report evaluating truck available for inspection or copying at are measured in terms of grade crossing reflector effectiveness, the average Room PL–401 on the Plaza Level of the accidents averted. Safety benefits were benefit estimates are approximately Nassif Building at the same address calculated in terms of the decline in the $101 million. The following chart during regular business hours. You may probability of accidents. The magnitude summarizes the three different benefit also obtain access to this docket on the of the reduction in the probability of estimation techniques, unique subsets of accidents as a result of rail car the accident pool utilized, resulting Internet at http://dms.dot.gov. reflectorization depends on the values of collisions, and the resulting effectiveness of reflectors and the net present value of estimated benefits.

REFLECTORIZATION BENEFIT ESTIMATION TECHNIQUES

Alternative Approaches ...... Grade Crossing Experts ...... Signal Detection Model ...... NHTSA Technical Report.2 Methodology ...... Delphi Method ...... Risk and Uncertainty Analysis ...... Truck Reflector Effectiveness Rates. Subset of RIT accident pool 67.89 accidents (271.55 acci- 53.76 accidents (768 accidents/4 93.68, 76, 47.72 accidents (707 (1998–2001 data: 768 accidents, dents/4 years × various sce- years × effectiveness rate of accidents/4 years. (176.75) × 84 fatalities, 347 injuries). nario effectiveness rates). 28%). various effectiveness rates of 53%, 43%, and 27%). Value of accident ...... $412,829 ...... $412,829 ...... $442,738.

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REFLECTORIZATION BENEFIT ESTIMATION TECHNIQUES—Continued Total Benefits (NPV) ...... $87,517,527.50 ...... $69,304,986.61 ...... $101,411,947.44 (AVG). 2 ‘‘The Effectiveness of Retroreflective Tape on Heavy Trailers,’’ National Highway Traffic Safety Administration (NHTSA) Technical Report, DOT HS 809 22, March 2001.

Estimated ten-year discounted of complying with the proposed will be affected disproportionately. The benefits range from a low of $69 million requirements. level of costs incurred by each based on the Signal Detection Model, to organization should vary in proportion B. Regulatory Flexibility Act of 1980 and a high of more than $101 million to car ownership. Executive Order 13272 (NHTSA’s truck reflectorization follow- Passenger railroads are excepted from up study), with FRA subjective analysis The Regulatory Flexibility Act of 1980 the proposed rule. Visibility conditions coming in between at $87 million. (5 U.S.C. 601–612) requires an for passenger rail cars are different than While there is certainly a broad range in assessment of the impacts of proposed freight rail cars. FRA solicits comments these estimates, the fact that they are as rules on small entities. FRA has to identify the impacts of these close as they are, given the vastly conducted a regulatory flexibility provisions to the extent that those different approaches taken, gives FRA assessment of this rule’s impact on affected by such provisions are small confidence that together they represent small entities, and the assessment has entities. a reasonable indicator of the magnitude been placed in the public docket for this C. Paperwork Reduction Act of 1995 of benefits achievable for the rulemaking. This proposed rule affects reflectorization of railroad freight railroad freight car and locomotive The information collection equipment. FRA believes that owners and may affect other entities as requirements in this proposed rule have reflectorization of rail freight rolling well. been submitted for approval to the stock is a feasible method of enhancing Entities impacted by the proposed Office of Management and Budget rail car visibility, that will likely rule are companies and railroads that (OMB) under the Paperwork Reduction improve safety in a cost effective own freight cars and locomotives. Many Act of 1995, 44 U.S.C. 3501 et seq. The manner. FRA expects that the measures companies that own freight cars are sections that contain the new called for in this proposal would subsidiaries of larger companies that are information collection requirements and prevent or mitigate the severity of not considered small businesses. FRA the estimated time to fulfill each casualties greater in value than the costs does not expect that smaller railroads requirement are as follows:

Respondent uni- Total annual re- Average time per Total annual burden Total annual burden CFR section—49 CFR verse sponses response hours cost

224.7—Waivers ...... 289 Car Owners .... 20 petitions ...... 1 hour ...... 20 hours ...... $700 224.15—Special Approval Pro- cedures: —Petitions For Special Ap- 289 Car Owners .... 10 petitions ...... 40 hours ...... 400 hours ...... $19,040 proval. —Public Comments ...... Public/Railroads ..... None ...... NA ...... NA ...... NA —Written Request For Interested Parties .. None ...... N/A ...... N/A ...... N/A Hearing. 224.103—Characteristics of Retroreflective Sheeting: —Certification ...... 4 Manufacturer ...... NA ...... NA ...... NA ...... NA —Alternative Standards ...... 289 Car Owners .... Cov. Under 224.15 Cov. Under 224.15 Cov. Under 224.15 Cov. Under 224.15 224.107—Application of 289 Car Owners .... 140 plans/forms ..... 28 hours ...... 3,920 hours ...... $137,200 Retroreflective Sheeting: —Reports of Failure Meet 289 Car Owners .... 15 reports ...... 16 Hours ...... 240 hours ...... $8,400 Percentage requirements. —Existing Cars with 289 Car Owners .... Cov. Above ...... Cov. Above ...... Cov. Above ...... Cov. Above. Retroreflective Sheet- ing—Forms. 224.109—Inspection and Re- 289 Car Owners .... 2 records ...... 3 minutes ...... 10 hour ...... $5 placements: Locomotives— Records of Restriction.

All estimates include the time for accuracy of FRA’s estimates of the package submitted to OMB, contact Mr. reviewing instructions; searching burden of the information collection Robert Brogan, Information Clearance existing data sources; gathering or requirements; the quality, utility, and Officer, at 202–493–6292. maintaining the needed data; and clarity of the information to be Organizations and individuals reviewing the information. Pursuant to collected; and whether the burden of desiring to submit comments on the 44 U.S.C. 3506(c)(2)(B), FRA solicits collection of information on those who collection of information requirements comments concerning: whether these are to respond, including through the should direct them to Mr. Robert information collection requirements are use of automated collection techniques Brogan, Federal Railroad Administration, 1120 Vermont Avenue, necessary for the proper performance of or other forms of information NW, Mail Stop 17, Washington, DC the functions of FRA, including whether technology, may be minimized. For 20590. Comments may also be the information has practical utility; the information or a copy of the paperwork submitted via e-mail to Mr. Brogan at

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the following address: (c) Actions categorically excluded. Certain promulgation of a final rule or [email protected]. classes of FRA actions have been determined regulation, including notices of inquiry, OMB is required to make a decision to be categorically excluded from the advance notices of proposed concerning the collection of information requirements of these Procedures as they do not individually or cumulatively have a rulemaking, and notices of proposed requirements contained in this proposed significant effect on the human environment. rulemaking: (1)(i) That is a significant rule between 30 and 60 days after * * * The following classes of FRA actions regulatory action under Executive Order publication of this document in the are categorically excluded: 12866 or any successor order, and (ii) Federal Register. Therefore, a comment * * * * * that is likely to have a significant to OMB is best assured of having its full (20) Promulgation of railroad safety rules adverse effect on the supply, effect if OMB receives it within 30 days and policy statements that do not result in distribution, or use of energy; or (2) that of publication. The final rule will significantly increased emissions of air or is designated by the Administrator of respond to any OMB or public water pollutants or noise or increased traffic the Office of Information and Regulatory comments on the information collection congestion in any mode of transportation. Affairs as a significant energy action. requirements contained in this proposal. In accordance with section 4(c) and FRA has evaluated this NPRM in FRA is not authorized to impose a (e) of FRA’s Procedures, the agency has accordance with Executive Order 13211. penalty on persons for violating further concluded that no extraordinary FRA has determined that this NPRM is information collection requirements circumstances exist with respect to this not likely to have a significant adverse which do not display a current OMB regulation that might trigger the need for effect on the supply, distribution, or use control number, if required. FRA a more detailed environmental review. of energy. Consequently, FRA has intends to obtain current OMB control As a result, FRA finds that this determined that this regulatory action is numbers for any new information regulation is not a major Federal action not a ‘‘significant energy action’’ within collection requirements resulting from significantly affecting the quality of the the meaning of Executive Order 13211. this rulemaking action prior to the human environment. effective date of a final rule. The OMB H. Privacy Act F. Unfunded Mandates Reform Act of control number, when assigned, will be Anyone is able to search the 1995 announced by separate notice in the electronic form of all comments Federal Register. Pursuant to Section 201 of the received into any of our dockets by the D. Federalism Implications Unfunded Mandates Reform Act of 1995 name of the individual submitting the (Pub. L. 104–4, 2 U.S.C. 1531), each comment (or signing the comment, if Executive Order 13132, entitled Federal agency ‘‘shall, unless otherwise submitted on behalf of an association, ‘‘Federalism,’’ issued on August 4, 1999, prohibited by law, assess the effects of business, labor union, etc.). You may requires that each agency ‘‘in a Federal regulatory actions on State, review DOT’s complete Privacy Act separately identified portion of the local, and tribal governments, and the Statement in the Federal Register preamble to the regulation as it is to be private sector (other than to the extent published on April 11, 2000 (Volume issued in the Federal Register, provide that such regulations incorporate 65, Number 70; Pages 19477–78) or you to the Director of the Office of requirements specifically set forth in may visit http://dms.dot.gov. Management and Budget a federalism law).’’ Section 202 of the Act (2 U.S.C. summary impact statement, which 1532) further requires that ‘‘before List of Subjects consists of a description of the extent of promulgating any general notice of Incorporation by reference, Penalties, the agency’s prior consultation with proposed rulemaking that is likely to Railroad locomotive safety, Railroad State and local officials, a summary of result in the promulgation of any rule safety, and Reporting and recordkeeping the nature of their concerns and the that includes any Federal mandate that requirements. agency’s position supporting the need to may result in the expenditure by State, issue the regulation, and a statement of local, and tribal governments, in the The Proposed Rule the extent to which the concerns of aggregate, or by the private sector, of In consideration of the foregoing, FRA State and local officials have been met.’’ $100,000,000 or more (adjusted proposes to amend chapter II, Subtitle FRA will adhere to Executive Order annually for inflation) in any 1 year, and B, of title 49, Code of Federal 13132 when issuing a final rule in this before promulgating any final rule for Regulations to add part 224 as follows: proceeding. which a general notice of proposed PART 224—REFLECTORIZATION OF E. Environmental Impact rulemaking was published, the agency shall prepare a written statement’’ RAIL FREIGHT ROLLING STOCK FRA has evaluated this rule in detailing the effect on State, local, and Subpart A—General accordance with its ‘‘Procedures for tribal governments and the private Considering Environmental Impacts’’ sector. This proposed rule will not Sec. 224.1 Purpose and scope. (FRA’s Procedures) (64 FR 28545, May result in the expenditure, in the 26, 1999) as required by the National 222.3 Applicability. aggregate, of $100,000,000 or more in 224.5 Definitions. Environmental Policy Act (42 U.S.C. any one year, and thus preparation of 224.7 Waivers. 4321 et seq.), other environmental such a statement is not required. 224.9 Responsibility for compliance. statutes, Executive Orders, and related 224.11 Civil penalties. regulatory requirements. FRA has G. Energy Impact 224.13 Preemptive effect. determined that this regulation is not a Executive Order 13211 requires 224.15 Special approval procedures. major FRA action (requiring the Federal agencies to prepare a Statement Subpart B—Application, Inspection, and preparation of an environmental impact of Energy Effects for any ‘‘significant Maintenance of Retroreflective Material statement or environmental assessment) energy action.’’ 66 FR 28355, May 22, 224.101 General requirements. because it is categorically excluded from 2001. Under the Executive Order, a 224.103 Characteristics of retroreflective detailed environmental review pursuant ‘‘significant energy action’’ is defined as sheeting. to section 4(c)(20) of FRA’s Procedures. any action by an agency (normally 224.105 Size and location. 64 FR 28547, May 26, 1999. Section published in the Federal Register) that 224.107 Application of retroreflective 4(c)(20) reads as follows: promulgates or is expected to lead to the sheeting.

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224.109 Inspection and replacement. § 224.5 Definitions. § 224.7 Waivers. 224.111 Renewal. As used in this part— (a) Any person subject to a Appendix A to Part 224—Schedule of Civil Administrator means the requirement of this part may petition Penalties [Reserved] Administrator of the Federal Railroad Appendix B to Part 224—Form Fleet the Administrator for a waiver of Reflectorization Implementation Plan Administration or the Administrator’s compliance with such requirement. The delegate. filing of such a petition does not affect Authority: 49 U.S.C. 20103, 20107 and Associate Administrator means the 20148; 28 U.S.C. 2461; and 49 CFR 1.49. that person’s responsibility for Associate Administrator for Safety, compliance with that requirement while Subpart A—General Federal Railroad Administration, or the the petition is being considered. Associate Administrator’s delegate. (b) Each petition for waiver under this § 224.1 Purpose and scope. Flat car means a car having a flat floor section shall be filed in the manner and (a) The purpose of this part is to or deck on the underframe with no contain the information required by part reduce highway-rail grade crossing sides, ends or roof. 211 of this chapter. accidents and deaths, injuries, and Freight rolling stock means: (1) Any locomotive subject to part 229 (c) If the Administrator finds that a property damage resulting from those of this chapter used to haul or switch waiver of compliance is in the public accidents, by enhancing the conspicuity freight cars (whether in revenue or work interest and is consistent with railroad of rail freight rolling stock so as to train service), and safety, the Administrator may grant the increase its detectability by motor (2) Any railroad freight car subject to waiver subject to any conditions that the vehicle operators at night and under part 215 of this chapter (including a car Administrator deems necessary. conditions of poor visibility. stenciled MW pursuant to § 215.305). § 224.9 Responsibility for compliance. (b) In order to achieve cost-effective Freight rolling stock owner means any mitigation of collision risk at highway- person who owns freight rolling stock, (a) Freight rolling stock owners, rail grade crossings, this part establishes leases freight rolling stock, manages the railroads, and (with respect to the duties of freight rolling stock owners maintenance or use of freight rolling certification of material) manufacturers (including those who manage stock on behalf of an owner or one or of retroreflective material, are primarily maintenance of freight rolling stock, more lessors or lessees, or otherwise responsible for compliance with this supply freight rolling stock for controls the maintenance or use of part. However, any person that performs transportation, or offer freight rolling freight rolling stock. any function or task required by this stock in transportation) and railroads to Locomotive has the meaning assigned part (including any employee, agent, or progressively apply retroreflective by § 229.5 of this chapter, but for contractor of the aforementioned), must material to freight rolling stock, and to purposes of this part applies only to a perform that function in accordance periodically inspect and maintain that locomotive used in the transportation of with this part. material. Freight rolling stock owners, freight or the operation of a work train. (b) Any person performing any however, are under no duty to install, Obscured means concealed or hidden function or task required by this part maintain, or repair reflective material (i.e., covered up, as where a layer of shall be deemed to have consented to except as specified in this part. paint or dense chemical residue blocks FRA inspection of the person’s facilities (c) This part establishes a schedule for incoming light); this term does not refer and records to the extent necessary to the application of retroreflective to ordinary accumulations of dirt, grime, determine whether the function or task material to rail freight rolling stock and or ice resulting from the normal railroad is being performed in accordance with prescribes standards for the application, operating environment. the requirements of this part. inspection, and maintenance of Person means an entity of any type § 224.11 Civil penalties. retroreflective material to rail freight covered under 1 U.S.C. 1, including but rolling stock for the purpose of not limited to the following: a railroad; Any person (including but not limited enhancing its detectability at highway- a manager, supervisor, official, or other to a railroad; any manager, supervisor, rail grade crossings. This part does not employee or agent of a railroad; any official, or other employee or agent of a restrict a freight rolling stock owner or owner, manufacturer, lessor, or lessee of railroad; any owner, manufacturer, railroad from applying retroreflective railroad equipment, track or facilities; lessor, or lessee of railroad equipment, material to freight rolling stock for other any independent contractor providing track, or facilities; any employee of such purposes if not inconsistent with the goods or services to a railroad; and any owner, manufacturer, lessor, lessee, or recognizable pattern required by this employee of such an owner, independent contractor) who violates part. manufacturer, lessor, lessee, or any requirement of this part or causes the violation of any such requirement is § 224.3 Applicability. independent contractor. Railroad means all forms of non- subject to a civil penalty of at least $500, This part applies to all railroad freight highway ground transportation that run but not more than $11,000 per violation, cars and locomotives that operate over on rails or electromagnetic guideways, except that: Penalties may be assessed a public or private highway-rail grade including high speed ground against individuals only for willful crossing and are used for revenue or transportation systems that connect violations, and, where a grossly work train service, except: metropolitan areas, without regard to negligent violation or a pattern of (a) Freight rolling stock that operates whether they use new technologies not repeated violations has created an only on track inside an installation that associated with traditional railroads. imminent hazard of death or injury to is not part of the general railroad system Railroad freight car has the meaning persons, or has caused death or injury, of transportation; assigned by § 215.5 of this chapter. a penalty not to exceed $22,000 per (b) Rapid transit operations in an Tank car means a rail car, the body violation may be assessed. Each day a urban area that are not connected to the of which consists of a tank for violation continues shall constitute a general railroad system of transporting liquids. separate offense. Appendix A to this transportation; or Work train means a non-revenue part contains a schedule of civil penalty (c) Locomotives and passenger cars service train used for the administration amounts used in connection with this used exclusively in passenger service. and upkeep service of the railroad. part.

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§ 224.13 Preemptive effect. System and posted on its Web site at film so as to form a non-exposed Under 49 U.S.C. 20106, issuance of http://dms.dot.gov. retroreflective optical system. this part preempts any State law, rule, (3) Upon written request of an Retroreflective sheeting construction regulation, or order covering the same interested party, or in the event FRA that entraps air between laminations subject matter, except an additional or requires additional information to shall be sealed around all edges in the more stringent law, rule, regulation, or appropriately consider the petition, FRA final application sufficiently to prevent order that is necessary to eliminate or will conduct a hearing on the petition water from penetrating the sheeting. reduce an essentially local safety in accordance with the procedures (b) Color. Retroreflective sheeting hazard; that is not incompatible with a provided in § 211.25 of this chapter. applied under this part must be yellow law, rule, regulation, or order of the (e) Disposition of petitions. as specified by the chromaticity United States Government; and that (1) If FRA finds that the petition coordinates of the American Society for does not unreasonably burden interstate complies with the requirements of this Testing and Materials’ (ASTM) Standard commerce. section and that the proposed D 4956–01, ‘‘Standard Specification for alternative standard is acceptable or Retroreflective Sheeting for Traffic § 224.15 Special approval procedures. changes are justified, or both, the Control.’’ (a) General. The following procedures petition will be granted, normally (c) Performance. Retroreflective govern consideration and action upon within 90 days of its receipt. The sheeting applied pursuant to this part requests for special approval of Associate Administrator may determine shall meet the requirements of ASTM D alternative standards under § 224.103(e). the applicability of other technical 4956–01, except for the photometric (b) Petitions. requirements of this part when requirements, and shall, as initially (1) Each petition for special approval rendering a decision on the petition. If applied, meet the minimum of an alternative standard shall the petition is neither granted nor photometric performance requirements contain— denied within 90 days, the petition specified in Table 1 of this section. (i) The name, title, address, and remains pending for decision. FRA may telephone number of the primary person attach special conditions to the approval TABLE 1.—MINIMUM PHOTOMETRIC of the petition. Following the approval to be contacted with regard to the PERFORMANCE (COEFFICIENT OF petition; of a petition, FRA may reopen RETROREFLECTION (R ) IN CAN- (ii) The alternative proposed, in consideration of the petition for cause A DELA/LUX/METER 2) REQUIREMENT detail, to be substituted for the stated. particular requirements of this part; and (2) If FRA finds that the petition does FOR YELLOW RETROREFLECTIVE (iii) Appropriate data and analysis not comply with the requirements of SHEETING. establishing that the alternative will this section, or that the proposed alternative standard is not acceptable or Observation angle provide at least an equivalent level of Entrance angle safety and meet the requirements of that the proposed changes are not 0.2° 0.5° § 224.103(e). justified, or both, the petition will be (2) Three copies of each petition for denied, normally within 90 days of its –4° ...... 400 100 special approval of an alternative receipt. 30° ...... 220 45 standard shall be submitted to the (3) When FRA grants or denies a Associate Administrator for Safety, petition, or reopens consideration of a (d) Certification. The characters Federal Railroad Administration, 1120 petition, written notice is sent to the ‘‘FRA–224’’, constituting the Vermont Ave., NW., Mail Stop 25, petitioner and other interested parties manufacturer’s certification that the Washington, DC 20590. and a copy of the notice is placed in the retroreflective sheeting conforms to the (c) Notice. FRA will publish a notice electronic docket of the proceeding. requirements of paragraphs (a) through in the Federal Register concerning each (c) of this section, shall appear at least Subpart B—Application, Inspection, petition under paragraph (b) of this once on the exposed surface of each and Maintenance of Retroreflective section. sheeting in the final application. The Material (d) Public comment. FRA will provide characters shall be a minimum of 3 mm a period of not less than 30 days from § 224.101 General requirements. high, and shall be permanently stamped, etched, molded, or printed the date of publication of the notice in All rail freight rolling stock shall be within the product and each the Federal Register during which any equipped with retroreflective sheeting certification shall be spaced no more person may comment on the petition. that conforms to the requirements of than four inches apart. (1) Each comment shall set forth this part. Notwithstanding any other specifically the basis upon which it is provision of this chapter, the (e) Alternative standards. Upon made, and contain a concise statement application, inspection, and petition by a freight rolling stock owner of the interest of the commenter in the maintenance of that sheeting shall be or railroad under § 224.15, the Associate proceeding. conducted in accordance with this Administrator may qualify an (2) Each comment shall be submitted subpart or in accordance with an alternative technology as providing to the DOT Central Docket Management alternative standard providing at least equivalent safety. Any such petition System, Nassif Building, Room Pl-401, an equivalent level of safety after special shall provide data and analysis 400 Seventh Street, SW., Washington, approval of FRA under § 224.15. sufficient to establish that the DC 20590, and shall contain the technology will result in conspicuity assigned docket number which appears § 224.103 Characteristics of retroreflective and durability at least equal to sheeting in the Federal Register for that sheeting. described in paragraphs (a) through (c) proceeding. The form of such (a) Construction. Retroreflective of this section applied in accordance submission may be in written or sheeting shall consist of a smooth, flat, with this part and will present a electronic form consistent with the transparent exterior film with recognizable visual target that is standards and requirements established microprismatic retroreflective elements suitably consistent with freight rolling by the Central Docket Management embedded in or suspended beneath the stock equipped with retroreflective

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sheeting meeting the technical of which is not compatible with the (B) When the car first undergoes a requirements of this part. patterns of application otherwise single car air brake test as prescribed by provided in this section. Retroreflective 49 CFR 232.305. Application may be § 224.105 Size and location. sheeting shall conform as close as deferred until the second such test if it (a) Railroad freight cars. The amount practicable to the requirements of is more practicable to do so and the test of retroreflective sheeting to be applied paragraphs (a)(1) through (a)(3) of this will be made before 10 years after the to each car is dependent on the length section and shall have the following effective date of the final rule. of the car. For purposes of this part, the amount of sheeting equally distributed (ii) A freight rolling stock owner may length of a car is measured from endsill between both sides of the car: elect not to follow the schedule in to endsill, exclusive of the draft gear. (i) For cars less than 50 feet long, a paragraph (a)(2)(i) of this section if, not (1) General rule. On railroad freight minimum of seven square feet of later than 60 days after the effective date cars other than tank cars, flat cars, and sheeting; of the final rule, the freight rolling stock cars of special construction (as defined (ii) For cars that are 50 to 60 feet long, owner submits to FRA a Fleet in paragraph (a)(4) of this section), a minimum of eight square feet of Reflectorization Implementation Plan retroreflective sheeting shall be applied sheeting; and designating the car numbers vertically to each car side, with its (iii) For cars greater than 60 feet long, constituting the fleet subject to this part bottom edge as close as practicable to 42 one additional square foot of sheeting and affirming that the cars will be inches above the top of the rail. Either for every additional 10 feet of length. equipped with retroreflective sheeting a minimum of one 4x36 inch strip or a (b) Locomotives: as required by this part such that not (1) For locomotives that are less than minimum of two 4x18 inch strips, one less than 20 percent of the total fleet above the other, shall be applied as 50 feet long, a minimum of seven square subject to this part shall be equipped close to each end of the car as feet of sheeting must be equally within 24 months following the practicable. Between the ends of the car, distributed between both sides of the effective date of the final rule and not a minimum of one 4x18 inch strip shall locomotive in a pattern recognizable to less than an additional 10 percent of the be applied at equal intervals that shall motorists. total fleet shall be completed each 12- not exceed 10 feet. (2) For locomotives 50 feet long or (2) Tank cars. On tank cars, greater, an additional square foot of month period thereafter for the duration retroreflective sheeting shall be applied sheeting must be equally distributed of the 10-year period. See Appendix B vertically to each car side and centered between both sides of the locomotive for of this part. Thereafter, (A) The designated fleet shall be on the horizontal centerline of the tank, every additional 10 feet of length. The equipped with retroreflective sheeting or as near as practicable. If it is not sheeting must be distributed in a pattern according to the requirements of this practicable to safely apply the sheeting recognizable to motorists. (3) For any locomotive, application of paragraph (a)(2)(ii); and centered on the horizontal centerline of (B) If, following the conclusion of the the tank, the sheeting may be applied material horizontally along the sill or side walkway of the locomotive shall be initial 24-month period or any 12-month vertically with its top edge no lower period thereafter, the percentage than 70 inches above the top of the rail, considered a pattern recognizable to motorists. requirements of this section have not as practicable. A minimum of either one been met— 4x36 inch strip or two 4x18 inch strips, § 224.107 Application of retroreflective (1) The freight rolling stock owner one above the other, shall be applied as sheeting. shall be considered in violation of this close to each end of the car as (a) Railroad freight cars. All railroad part; practicable. Between the ends of the car freight cars subject to this part must be (2) The freight rolling stock owner a minimum of one 4x18 inch strip shall equipped with retroreflective sheeting shall, within 60 days of the close of the be applied at equal intervals that shall conforming to this part by 10 years after period, report the failure to the not exceed 10 feet. the effective date of the final rule. If a Associate Administrator; (3) Flat cars. On flat cars, a minimum car already has reflective material (3) The requirements of paragraph of two 4x18 inch strips, one next to the applied that does not meet the standards (a)(2)(i) of this section shall apply to all other, shall be applied vertically to each of this part, it is not necessary to remove railroad freight cars subject to this part car side as close to each end of the car the material unless its placement in the fleet; as practicable. The bottom edges of interferes with the placement of the (4) The percentage requirements of these 4x18 inch strips shall be no lower sheeting required by this part. this paragraph (a)(2)(ii) shall continue to than 30 inches above the top of the rail, (1) New cars. Retroreflective sheeting apply; and as practicable. A minimum of one 4x18 conforming to this part must be applied (5) The fleet owner shall take such inch strip shall be applied vertically as to all new cars at the time of additional action as may be necessary to can be best fit at equidistant intervals construction. achieve future compliance. between each end, with the bottom edge (2) Existing cars without (C) Cars to be retired shall be included of each strip no lower than 42 inches retroreflective sheeting. in the fleet total until they are retired. from the top of the rail, as practicable. (i) If as of the date of publication of (3) Existing cars with retroreflective Between the ends of the car, a minimum the final rule a car subject to this part sheeting. If as of the date of publication of one 4x18 inch strip shall be applied is not equipped on each side with at of the final rule a car is equipped on at equal intervals that shall not exceed least one square foot of retroreflective each side with at least one square foot 10 feet. When vertical application of a sheeting as specified in paragraph (a)(3) of retroreflective sheeting, uniformly 4x18 inch strip is not feasible, the of this section, retroreflective sheeting distributed over the length of each side, sheeting may be applied vertically in conforming to this part must be applied that car shall be considered in three 4x6 inch strips placed directly to the car at the earliest of the following compliance with this part for a period next to each other or as close as occasions occurring after the effective of 10 years from the effective date of the practicable, or placed horizontally along date of the rule or in accordance with final rule, provided the sheeting is not the sill of the car. paragraph (a)(2)(ii) of this section: engineering grade, super engineering (4) Cars of special construction. This (A) When the car is repainted or grade (enclosed lens), or glass bead paragraph applies to any car the design rebuilt; or encapsulated type sheeting, and

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provided the freight rolling stock owner retrofitted pursuant to § 224.105(b) follow the reflectorization schedule of files a Fleet Reflectorization within 10 years of the effective date of § 224.107(a)(2)(i) and freight rolling stock Implementation Plan with FRA no later this part. If a railroad with fewer than owners seeking compliance with this part than 60 days after the effective date of 400,000 annual employee work hours under § 224.107(a)(3) must file this form no later than 60 days after the effective date of the final rule identifying the cars shares locomotive power with a railroad the final rule. already so equipped. See Appendix B of with 400,000 or more annual employee this part. work hours, the smaller railroad must Fleet Reflectorization Implementation Plan (b) Locomotives. All locomotives comply with the requirements of Railroad or Car Owner Name subject to this part must be equipped paragraphs (b)(2) and (3) of this section. Prepared and Submitted By: with conforming retroreflective sheeting § 224.109 Inspection and replacement. Name: by five years after the effective date of Title: the final rule. If a locomotive already (a) Railroad freight cars. Address: has reflective material applied that does Retroreflective sheeting on railroad Phone: not meet the standards of this part, it is freight cars subject to this part must be Fax: not necessary to remove the material visually inspected for presence and E-mail: unless its placement interferes with the condition whenever a car undergoes a Instructions for completing form: placement of the sheeting required by single car air brake test required under Report in this plan only the freight cars in this part. 49 CFR 232.305. If at the time of your fleet subject to 49 CFR part 224 that will (1) New locomotives. Retroreflective inspection more than 20 percent of the be reflectorized on a schedule other than that sheeting conforming to this part must be amount of sheeting required under specified in 49 CFR 224.107(a)(2(i), and those applied to all new locomotives at the § 224.105 on either side of a car is cars that are already equipped with time of construction. damaged, obscured, or missing, that retroreflective material meeting the (2) Existing locomotives without damaged, obscured, or missing sheeting requirements of 49 CFR 224.107(a)(3). I. Column (a): Insert the car number(s) retroreflective sheeting. If as of the date must be replaced. If conditions at the of publication of the final rule a identifying each freight car in fleet subject to time of inspection are such that 49 CFR part 224. A range(s) of car numbers locomotive subject to this part is not replacement material can not be may be inserted. Note: exclusions from equipped on each side with at least one applied, such application may be range(s) may be listed in column (b). square foot of retroreflective sheeting as completed not later than the earliest of II. Column (b): List the car number of each specified in paragraph (b)(3) of this the following events: when the car next car subject to 49 CFR part 224 not included section, retroreflective sheeting receives a required single car air brake in range (a). (Such as cars sold, retired, or conforming to this part must be applied test or when the car is taken out of permanently removed from fleet as of the to the locomotive not later than the first service for repairs or other maintenance. date of filing.) biennial inspection performed pursuant (b) Locomotives. Retroreflective III. Column (c): Indicate the status of each to 49 CFR 229.29 occurring after the car identified in column (a) as follows: sheeting must be visually inspected for 1. Enter REFL 20XX (year) if the car(s) is effective date of the final rule. presence and condition when the (3) Existing locomotives with scheduled to be reflectorized by owner or locomotive receives the annual other authorized party at a time other than retroreflective sheeting. If as of the date inspection required under 49 CFR that specified in 49 CFR 224.107(a)(2)(i). of publication of the final rule a 229.27. If more than 20 percent of the REFL indicates that reflective material locomotive is equipped on each side amount of sheeting required under meeting the requirements of 49 CFR part 224 with at least one square foot of § 224.105 on either side of a locomotive will be installed on the car specified in retroreflective sheeting, uniformly is damaged, obscured, or missing, that column (a) at a time other than when that car distributed over the length of the damaged, obscured, or missing sheeting is being repainted, rebuilt, or undergoing the locomotive side, that locomotive shall first single car air brake test pursuant to 49 must be replaced. If conditions at the CFR 232.305 after the effective date of the be considered in compliance with this time of inspection are such that part for a period of 5 years from the final rule. 20XX indicates the year that replacement material can not be applied reflective material will be applied to that car. effective date of the final rule, provided or if sufficient replacement material is Example: REFL 2005 indicates that the car the existing material is not engineering not available, such application can be owner will reflectorize the car specified in grade, super engineering grade completed at the next forward location column (a) by the end of the 2005 calendar (enclosed lens), or glass bead where conditions permit, provided a year. encapsulated type sheeting, and record of the restriction is maintained in 2. Enter RET XXXX (year) if the car provided the freight rolling stock owner the locomotive cab or in a secure and indentified in column(a) is scheduled to be files a Fleet Reflectorization retired from service during the initial 10-year accessible electronic database to which implementation period. RET indicates that Implementation Plan with FRA no later FRA is provided access on request. than 60 days after the effective date of the car will be retired, and 20XX indicates § 224.111 Renewal. the year that the car is scheduled to be the final rule identifying the cars retired. Example: RET 2006 indicates that the already so equipped. See Appendix B of Regardless of condition, car owner will retire the car specified in this part. retroreflective sheeting required under column (a) by the end of the 2006 calendar (4) Each railroad that has fewer than this part must be replaced with new year. 400,000 annual employee work hours, sheeting no later than 10 years after the 3. Enter COM if the car indentified in and does not share locomotive power date of initial installation. column (a) is, as of the date of publication with a railroad with 400,000 or more of the final rule, already equipped with annual employee work hours, may bring Appendix A to Part 224—Schedule of Civil retroreflective material meeting the its locomotive fleet into compliance Penalties [Reserved] requirements of 49 CFR 224.107(a)(3). according to the following schedule: 4. Enter REPT XXXX (year) if the car Appendix B to Part 224—Form Fleet identified in column (a) is to be repainted or fifty percent of the railroad’s Reflectorization Implementation Plan rebuilt during the initial 10-year locomotives must be retrofitted This appendix contains the standard form implementation period of 49 CFR part 224, pursuant to § 224.105(b) within five Fleet Reflectorization Implementation Plan and not to be reflectorized during the first years of the effective date of this part referenced in §§ 224.107(a)(2) and (a)(3). single car air-brake test (49 CFR 232.305) and one hundred percent must be Freight rolling stock owners electing not to after the effective date of the final rule. 20XX

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indicates the year that the car will be rebuilt IV. If for any car listed in column (a), COM material, amount and placement pattern of or repainted. Example: REPT 2008 indicates is entered in column (c), please describe the material on each side of car). that the car owner will repaint the car technical specifications of the retroreflective specified in column (a) by the end of the material with which the cars are presently 2006 calendar year. equipped (e.g., color of material, type of

(c) Status (a) Car no. and identification no. (or range) (b) Subtractions from range (REFL XXXX, RET XXXX, COM, REPT XXXX)

By filing this FLEET REFLECTORIZATION status of each freight car in its fleet subject lllllllllllllllllllll IMPLEMENTATION PLAN and any to Part 224. If the Railroad or Car Owner is Date accompanying documents or electronic files not able, or chooses not to update UMLER at with FRA, the Railroad or Car Owner agrees least annually, the Railroad or Car Owner Issued in Washington, DC on October 29, to equip the cars identified in column (a) shall annually file an updated FLEET 2003. with retroreflective material conforming to 49 REFLECTORIZATION IMPLEMENTATION Allan Rutter, CFR part 224 in accordance with this plan. PLAN with FRA. Federal Railroad Administrator. By filing this plan, the Railroad or Car Owner (signature of Corporate Officer/Car Owner) [FR Doc. 03–27649 Filed 11–5–03; 8:45 am] also agrees to update, at least annually, the Name: BILLING CODE 4910–06–P American Association of Railroad’s UMLER Title: file to reflect the current reflectorization

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Part V

Securities and Exchange Commission 17 CFR Parts 240 and 242 Short Sales; Proposed Rule

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SECURITIES AND EXCHANGE inspection and copying in the B. Short Sales Executed at the Closing Price COMMISSION Commission’s Public Reference Room, VIII. Market Maker Exception from Proposed 450 Fifth Street, NW., Washington, DC Uniform Bid Test 17 CFR Parts 240 and 242 20549. Electronically submitted IX. Proposed Changes to the Order Marking Requirement [Release No. 34–48709; File No. S7–23–03] comment letters will be posted on the Commission’s Internet Web site (http:// A. Marking Orders RIN 3235–AJ00 www.sec.gov).1 B. Marking Requirements for Riskless Principal Transactions Short Sales FOR FURTHER INFORMATION CONTACT: Any X. Rule 3b–3 of the following attorneys in the Office A. Unconditional Contracts to Purchase AGENCY: Securities and Exchange of Trading Practices, Division of Market Securities B. Ownership of Securities Underlying Commission. Regulation, Securities and Exchange ACTION: Proposed rule. Securities Futures Products Commission, 450 Fifth Street, NW., C. Aggregation Units SUMMARY: The Securities and Exchange Washington, DC 20549–1001, at (202) D. Block-Positioner Exception Commission (Commission) is publishing 942–0772: James Brigagliano, Assistant E. Liquidation of Index Arbitrage Positions for public comment new Regulation Director, or Gregory Dumark, Kevin XI. Hedging Transactions Campion, Lillian Hagen, Elizabeth XII. Elimination of Current Subparagraphs SHO, under the Securities Exchange Act 10a–1(a)(2) and (a)(3) of 1934 (Exchange Act), which would Sandoe and Marla Chidsey, Special Counsels. XIII. Exclusion of Bonds replace Rules 3b–3, 10a–1, and 10a–2. XIV. After Hours Trading/Foreign Markets The Commission is also proposing SUPPLEMENTARY INFORMATION: The Issues amendments to Rule 105 of Regulation Commission is publishing for comment A. After-Hours Trading M. Proposed Regulation SHO would, B. Off-Shore Trading proposed Regulation SHO and a XV. Limitations on Short Selling During among other things, require short sellers proposed temporary rule, Rule 202 2, in all equity securities to locate Significant Market Declines and proposed amendments to XVI. Rule 105 of Regulation M—Short Sales securities to borrow before selling, and Regulation M, Rule 105 3 under the in Connection with a Public Offering would also impose strict delivery Exchange Act. A. Scope of Rule 105 of Regulation M requirements on securities where many B. Shelf Offerings sellers have failed to deliver the Table of Contents C. Sham Transactions Designed to Give the securities. In part, this action is I. Introduction Appearance of Covering with Open designed to address the problem of A. Background and Current Short Sale Market Securities ‘‘naked’’ short selling. Proposed Regulation XVII. General Request for Comment Regulation SHO would also institute a B. Market Effects of Short Selling XVIII. Paperwork Reduction Act new uniform bid test allowing short C. Market Developments XIX. Consideration of Proposed Regulation II. Naked Short Selling SHO’s Costs and Benefits sales to be effected at a price one cent XX. Consideration on Burden and Promotion above the consolidated best bid. This A. Background B. Current Regulatory Requirements of Efficiency, Competition, and Capital test would apply to all exchange-listed C. Proposed Amendments Formation securities and Nasdaq National Market 1. Short Sales XXI. Consideration of Impact on the System Securities (NMS Securities), 2. Long Sales Economy wherever traded. III. Current Market Structure and the Tick XXII. Initial Regulatory Flexibility Analysis We are also seeking comment on a Test XXIII. Statutory Authority Text of Proposed temporary rule that would suspend the IV. Proposed Bid Test Regulation SHO, Amendments and operation of the proposed bid test for A. Operation of the Uniform Bid Test Temporary Rule specified liquid securities during a two- B. Scope of the Uniform Bid Test I. Introduction year pilot period. The temporary 1. Securities Subject to the Price Test Congress, in 1934, directed the suspension would allow the 2. Securities Not Subject to the Price Test Commission to ‘‘purge the market’’ of Commission to study the effects of C. Bid Test Flexibility in a Decimals short selling abuses, and in response, relatively unrestricted short selling on Environment D. Bid Test Flexibility for Passive Pricing the Commission adopted restrictions market volatility, price efficiency, and Systems that have remained essentially liquidity. V. Pilot Program unchanged for over 60 years. Originally DATES: Comments must be received on VI. Rule 10a–1 Exceptions adopted in 1938, the Commission’s or before January 5, 2004. A. Exceptions Proposed to be Retained short sale rule, Rule 10a–1, is designed ADDRESSES: To help us process and 1. Long Seller’s Delay in Delivery to restrict short sellers from effecting review your comments more efficiently, 2. Error in Marking a Short Sale short sales in an exchange-traded 3. Odd Lot Transactions comments should be sent by hard copy 4. Domestic Arbitrage security when the price of that security 4 or e-mail, but not by both methods. 5. International Arbitrage is declining. Comments sent by hard copy should be 6. Distribution Over-Allotment Since its adoption, the Commission submitted in triplicate to Jonathan G. 7. Equalizing Short Sales and Trade- has engaged in studies, investigations, Katz, Secretary, Securities and Exchange Throughs and reviews of the efficacy of the Rule.5 Commission, 450 Fifth Street, NW., B. Exception Proposed to Be Eliminated Washington, DC 20549–0609. VII. Prior Exemption Letters under Rule 10a– 4 17 CFR 240.10a–1. Comments also may be submitted 1 5 See 2 Securities and Exchange Commission, A. Exchange Traded Funds Report of Special Study of Securities Markets, H.R. electronically at the following E-mail Doc. No. 95, 88th Cong., 1st Sess. 247 (1963) (study address: [email protected]. All to determine the relationships between changes in comment letters should refer to File No. 1 Personal identifying information, such as names short positions and subsequent price trends); see S7–23–03. Comments submitted by E- or e-mail addresses, will not be edited from also Short-Selling Activity in the Stock Market: electronic submission. Submit only information Market Effects and the Need for Regulation (Part mail should include this file number in that you wish to make publicly available. I)(House Report), H.R., Rep. No. 102–414 (1991), the subject line. Comment letters 2 17 CFR 242.202. reprinted in CCH Federal Securities Law Reports received will be available for public 3 17 CFR 242.105. Number 1483 Part II (1992).

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Most recently, in 1999, the Commission short seller will borrow the security, exchange (listed securities), as necessary issued a release requesting public typically from a broker-dealer or an to protect investors. After conducting an comment on the regulation of short sales institutional investor. The short seller inquiry into the effects of concentrated of securities (Concept Release).6 The later closes out the position by short selling during the market break of Concept Release examined ways to purchasing equivalent securities on the 1937, the Commission adopted Rule modernize our approach to short sale open market, or by using an equivalent 10a–1 in 1938 in order to restrict short regulation. We received 2778 comment security it already owned, and returning selling in a declining market.13 The core letters in response to the Release.7 the security to the lender. In general, provisions of the Rule are largely the Since the Concept Release was short selling is used to profit from an same today as when they were adopted. published, we have reviewed the expected downward price movement, to Paragraph (a) of Rule 10a–1 generally comment letters and reexamined the provide liquidity in response to covers short sales in listed securities if structure and operation of Rule 10a–1, unanticipated demand, or to hedge the trades of the security are reported and related Rules 10a–2 8 and 3b–3.9 We risk of a long position in the same pursuant to an ‘‘effective transaction also considered the status of short sale security or in a related security. reporting plan’’ and information as to regulation in the context of requests for The following example illustrates a such trades is made available in relief from Rule 10a–1 submitted to the typical short sale transaction: accordance with such plan on a real- Commission for a wide range of short XYZ stock is currently selling at $50 per time basis to vendors of market selling activities. Finally, we considered share. An investor anticipates that the price transaction information.14 Paragraph (b) recent market changes, including of XYZ stock will decline and wants to sell applies to short sales on national increased instances of ‘‘naked’’ short short 100 shares. The investor’s broker exchanges in securities that are not selling, i.e., selling short without borrows 100 shares for the investor and covered by paragraph (a). borrowing the necessary securities to executes the short sale. The $5,000 proceeds from the sale (plus, usually, an additional Rule 10a–1(a)(1) provides that, subject make delivery; decimalization; the 2%) are posted as collateral with the lender advent of security futures trading; and and the investor must also post margin equal to certain exceptions, a listed security an increasing amount of Nasdaq to 50% of the purchase price with his may be sold short (A) at a price above securities being traded away from the broker.11 At some point in the future the the price at which the immediately Nasdaq market, and thus not subject to investor must purchase 100 shares to return preceding sale was effected (plus tick), any short sale price test. As a result of to the lender. If the investor can purchase the or (B) at the last sale price if it is higher this assessment, we are seeking XYZ shares at a price below $50, the investor than the last different price (zero-plus comment on proposed Regulation SHO, can cover the short position at a profit. If the tick).15 Short sales are not permitted on price of XYZ shares rises above $50, the minus ticks or zero-minus ticks, subject which would replace Rules 3b–3, 10a– investor may have to cover the short position 1, and 10a–2, and that would at a loss.12 to narrow exceptions. The operation of temporarily suspend the short sale price these provisions, commonly described Section 10(a) of the Exchange Act test for specified liquid stocks. We also as the ‘‘tick test,’’ determines the gives the Commission plenary authority propose to amend Rule 105 of minimum shortable price (MSP) 16 at to regulate short sales of securities Regulation M to eliminate the shelf which a security can be sold short. The registered on a national securities offering exception. The comments we following transactions illustrate the receive will assist us in determining operation of the tick test: 17 11 See, e.g., 12 CFR 220.12(c)(1) of Regulation T whether to adopt the proposed changes of the Board of Governors of the Federal Reserve 13 to these rules and the nature and scope System, which requires margin for a short sale of Securities Exchange Act Release No. 1548 of such changes. a nonexempted equity security of 150 percent of the (January 24, 1938), 3 FR 213 (January 26, 1938). current market value of the security. An investor 14 Rule 10a–1 uses the term ‘‘effective transaction A. Background and Current Short Sale may be required to deposit additional ‘‘maintenance reporting plan’’ as defined in Rule 11Aa3–1 (17 CFR Regulation margin’’ for transactions in short sales under margin 240.11Aa3–1) under the Exchange Act. See 17 CFR requirements imposed by self regulatory 240.10a–1(a)(1)(i). A short sale is the sale of a security organizations (SROs). See, e.g., NASD Rule 2520(c) 15 The last sale price is the price reported that the seller does not own or any sale and NYSE Rule 431(c). Further, broker-dealers may pursuant to an effective transaction reporting plan, that is consummated by the delivery of institute higher short sale margin requirements than i.e., the Consolidated Tape Association, also those imposed by self-regulatory organization rules. a security borrowed by, or for the generally referred to as the ‘‘Tape.’’ See, e.g., NASD Rule 2520(d) and NYSE Rule 16 10 The MSP is the lowest price that a stock can account of, the seller. In order to 431(d). be sold short under current short sale regulation. If 12 deliver the security to the purchaser, the This simple example does not include a stock is trading on a minus or zero-minus tick, transaction and carrying costs. For a more complete a short sell order must be executed at a price higher discussion of equity lending and costs of borrowing 6 Securities Exchange Act Release No. 42037 than the last trade. equity see Securities Lending Transactions: Market (October 20, 1999), 64 FR 57996 (October 28,1999). 17 Developments and Implications, Technical The first execution at 47.04 is a plus tick since 7 The comment letters and a comprehensive Committee of the International Organization of it is higher than the previous last trade price of summary of the comments are available for Securities Commissions (IOSCO) Committee on 47.00. The next transaction at 47.04 is a zero-plus inspection in the Commission’s Public Reference Payment and Settlement Systems (CPSS) (July, tick since there is no change in trade price but the Room in File No. S7–24–99. 1999). This paper can be accessed at www.iosco.org/ last change was a plus tick. Short sales could be 8 17 CFR 240.10a–2. pubdocs/pdf/IOSCOPD96.pdf. See also Geczy, executed at 47.04 or above. The final two 9 17 CFR 240.3b–3. Musto, and Reed, 2002, Stocks Are Special Too: An transactions at 47.00 are minus and zero-minus 10 See Rule 3b–3 under the Exchange Act, 17 CFR Analysis of the Equity Lending Market, Journal of transactions, respectively. Short sales would have 240.3b–3. Financial Economics, 66, 241–269. to be effected at the next higher increment above 47.00 in order to comply with Rule 10a–1.

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In adopting the tick test, the (iii) preventing short sellers from NMS securities.19 NASD Rule 3350 Commission sought to achieve three accelerating a declining market by prohibits short sales by NASD members objectives: exhausting all remaining bids at one in Nasdaq NMS Securities 20 at or below (i) allowing relatively unrestricted price level, causing successively lower the current best (inside) bid when that short selling in an advancing market; prices to be established by long bid is lower than the previous best (ii) preventing short selling at sellers.18 (inside) bid (commonly referred to as successively lower prices, thus In 1994, the Commission granted the bid test). eliminating short selling as a tool for temporary approval to the NASD to The operation of the bid test in NASD driving the market down; and apply its own short sale rule to Nasdaq Rule 3350 is illustrated as follows:

Bid Sequence ...... 47 47.04 ...... 47.04 ...... 47 ...... 47 Current Bid Compared to the ...... plus bid (compared to zero-plus bid (com- minus bid (compared to zero-minus bid (com- previous bid. last bid at 47). pared to last bid at last bid at 47.04). pared to last bid at 47.04). 47) MSP ...... any price ...... any price ...... 47.01 ...... 47.01

B. Market Effects of Short Selling movement in a security, his transaction example is the ‘‘bear raid’’ where an Short selling provides the market with is a mirror image of the person who equity security is sold short in an effort at least two important benefits: market purchases the security based upon to drive down the price of the security liquidity and pricing efficiency.21 speculation that the security’s price will by creating an imbalance of sell-side 24 Market liquidity is generally provided rise or to hedge against such an interest. Further, unrestricted short through short selling by market increase. Both the purchaser and the selling can exacerbate a declining professionals, such as market makers short seller hope to profit, or hedge market in a security by increasing (including specialists) and block against loss, by buying the security at pressure from the sell-side, eliminating positioners, who offset temporary one price and selling at a higher price. bids, and causing a further reduction in imbalances in the buying and selling The strategies primarily differ in the the price of a security by creating an interest for securities. Short sales sequence of transactions. Market appearance that the security price is effected in the market add to the selling participants who believe a stock is falling for fundamental reasons. interest of stock available to purchasers overvalued may engage in short sales in Short selling was one of the central and reduce the risk that the price paid an attempt to profit from a perceived issues studied by Congress before by investors is artificially high because divergence of prices from true economic enacting the Exchange Act, but Congress of a temporary contraction of selling values. Such short sellers add to stock did not directly prohibit short selling.25 interest. Short sellers covering their pricing efficiency because their Instead, Congress gave the Commission sales also may add to the buying interest transactions inform the market of their broad authority to regulate short sales in of stock available to sellers. evaluation of future stock price order to stop short selling abuses.26 performance. This evaluation is Short selling also can contribute to C. Market Developments the pricing efficiency of the equities reflected in the resulting market price of 22 markets. Efficient markets require that the security. Several significant developments in prices fully reflect all buy and sell Although short selling serves useful the securities markets, including, but interest. When a short seller speculates market purposes, it also may be used to not limited to, instances of abusive or hedges against a downward illegally manipulate stock prices.23 One naked short selling, the increasing

18 See Securities Exchange Act Release No. 13091 22 Arbitrageurs also contribute to pricing 1383, 1392 (2nd Cir. 1996) (short sales were (December 21, 1976), 41 FR 56530 (December 28, efficiency by utilizing short sales to profit from sufficiently connected to the manipulation scheme 1976). price disparities between a stock and a derivative as to constitute a violation of Exchange Act Section 19 See Securities Exchange Act Release No. 34277 security, such as a convertible security or an option 10(b) and Rule 10b–5). 24 (June 29, 1994), 59 FR 34885 (July 7, 1994). on that stock. For example, an arbitrageur may Many people blamed ‘‘bear raids’’ for the 1929 purchase a convertible security and sell the stock market crash and the market’s prolonged 20 Rule 11Aa2–1 under the Act sets forth the underlying stock short to profit from a current price inability to recover from the crash. See 7 Louis Loss criteria and procedures by which certain over-the- differential between two economically similar and Joel Seligman, Securities Regulation 3203–04, counter (OTC) securities are designated as NMS positions. note 213 (3d ed. 1989). Securities. 17 CFR 240.11Aa2–1. 23 See, e.g., S.E.C. v. Gardiner, 48 S.E.C. Docket 25 See 2 Securities and Exchange Commission, 21 See Lamont, Owen A. and Thaler, Richard H, 811, No. 91 Civ. 2091 (S.D.N.Y. March 27, 1991) Report of Special Study of Securities Markets, H.R. 2003, Can the Market Add and Subtract? Mispricing (alleged manipulation by sales representative by Doc. No. 95, 88th Cong., 1st Sess. 247 (1963) in Tech Stocks Carve-outs, University of Chicago directing or inducing customers to sell stock short (Special Study). and NBER. in order to depress its price); U.S. v. Russo, 74 F.3d 26 Id.

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number of Nasdaq securities trading termed as a ‘‘death spiral.’’ These depository.33 Withdrawing securities away from the Nasdaq market (and thus schemes generally involve parties from DTC or requiring custody-only not subject to any price test), the advent arranging financings in public transfers undermine the goal of a of security futures trading, and companies that are unable to obtain national clearance and settlement decimalization have caused the more conventional financing in the system, designed to reduce the physical Commission to reexamine short sale capital markets due to their precarious movement of certificates in the trading regulation. At a minimum, the financial condition. The party providing markets.34 Commission believes that adjustments financing receives from a public B. Current Regulatory Requirements to short sale regulation are required to company debentures that are later keep pace with these market convertible into the stock of the issuer. The SROs have adopted rules developments. The terms typically provide that the generally requiring that, prior to II. Naked Short Selling conversion ratio will be tied to a fixed effecting short sales, members must value of the aggregate underlying shares ‘‘locate’’ stock available for borrowing.35 A. Background (typically a discount from the market For example, NYSE Rule 440C.10 states Many issuers and investors have price of the security at the time of the that no NYSE member or member complained about alleged ‘‘naked short conversion rather than a conversion organization should ‘‘fail to deliver’’ selling,’’ especially in thinly-capitalized price per share).30 In some cases the against a short sale of a security on a securities trading over-the-counter.27 parties providing financing have national securities exchange until a Naked short selling is selling short engaged in extensive naked short selling diligent effort has been made by such without borrowing the necessary designed to lower the price of the member or member organization to securities to make delivery, thus issuer’s stock, thus realizing profits borrow the necessary securities to make potentially resulting in a ‘‘fail to when the debentures are converted to delivery.36 An NYSE interpretation to deliver’’ securities to the buyer. cover the short sales.31 the rule further states that member Naked short selling can have a Naked short selling has sparked organizations effecting short sales for number of negative effects on the defensive actions by some issuers their own account or the accounts of market, particularly when the fails to designed to combat the potentially customers must be in a position to deliver persist for an extended period of negative effects on shareholders, broker- complete the transaction. The time and result in a significantly large dealers, and the clearance and interpretation states that no orders to unfulfilled delivery obligation at the settlement system.32 Some issuers have sell short should be accepted or entered clearing agency where trades are taken actions to attempt to make transfer unless prior arrangements to borrow the 28 settled. At times, the amount of fails of their securities ‘‘custody only,’’ thus stock have been made or other to deliver may be greater than the total preventing transfer of their stock to or acceptable assurances that delivery can public float. In effect the naked short from securities intermediaries such as seller unilaterally converts a securities the Depository Trust Company (DTC) or 33 The Commission recently approved a DTC rule contract (which should settle in three broker-dealers. A number of issuers change clarifying that its rules provide that only its days after the trade date) into an participants may withdraw securities from their have attempted to withdraw their issued accounts at DTC, and establishing a procedure to undated futures-type contract, which securities on deposit at DTC, which process issuer withdrawal requests. See Securities the buyer might not have agreed to or makes the securities ineligible for book- Exchange Act Release No. 47978 (June 4, 2003), 68 that would have been priced differently. entry transfer at a securities FR 35037 (June 11, 2003) (File No. SR–DTC–2003– The seller’s failure to deliver securities 02). may also adversely affect certain rights 34 See Section 17A(e) of the Exchange Act. 15 30 For more information, see ‘‘Convertible U.S.C. 78q–1(e). The Commission noted in the order of the buyer, such as the right to vote. Securities’’ on the Commission’s Web site at approving the DTC rule change that the use of More significantly, naked short sellers www.sec.gov/answers/convertibles.htm certificates can result in significant delays and enjoy greater leverage than if they were 31 The Commission recently settled a case against expenses in processing securities transactions and required to borrow securities and parties relating to allegations of manipulative short can raise safety concerns associated with lost, selling in the stock of Sedona Corporation, a Nasdaq stolen, and forged certificates. See, supra n. 33. deliver within a reasonable time period, Small Cap company. The action alleged that the 35 In 1976 the Commission proposed the adoption and they may use this additional defendants engaged in massive naked short selling of Rule 10b–11. Rule 10b–11 would have prohibited leverage to engage in trading activities that flooded the market with Sedona stock, and thus any person from effecting a short sale in any equity that deliberately depress the price of a depressed its price. The defendants thereby profited security (i.e., not just exchange-traded securities) 29 by subsequently exercising the conversion rights for his own account or the account of any other security. under the debenture. See Rhino Advisors, Inc. and person unless he, or the person for whose account The Commission recently brought an Thomas Badian, Lit. Rel. No. 18003 (February 27, the short sale is effected (i) borrowed the security, enforcement action against certain 2003); see also SEC v. Rhino Advisors, Inc. and or entered into an arrangement for the borrowing of parties, alleging manipulative naked Thomas Badian, Civ. Action No. 03 civ 1310 (RO) the security, or (ii) had reasonable grounds to short selling, in a scheme sometimes (Southern District of New York). believe that he could borrow the security so that, 32 There have been press reports concerning the in either event, he would be capable of delivering actions of some issuers, and questioning whether the securities on the date delivery is due. Securities 27 For example, see comment letters from John the cause of declines in their stock prices can be Exchange Act Release No. 13091 (December 21, Henry Austin (2675), Bridget Thomas (2297), James attributed to naked short selling, or to fundamental 1976), 41 FR 56530 (December 28, 1976). In 1988, McCaffery (492), Richard Ballard (507), and Ken problems with the company. See, e.g., Carol S. the Commission withdrew proposed Rule 10b–11, Klaser (596). Remond, Universal Blames Shorts, But What of noting that since the time the rule was proposed, 28 ‘‘Clearing agency’’ is defined in Section Dilution?, Dow Jones Newswires (October 6, 2003); the NYSE and the NASD had adopted 3(a)(23)(A) of the Exchange Act, 15 U.S.C. Rob Wherry, Wall Street’s Next Nightmare?, interpretations specifying that members should not 78c(a)(23)(a). Forbes.com (October 6, 2003); see also Gretchen accept or enter a short sale order unless prior 29 The Commission issued a prior statement Morgenson, If Short Sellers Take Heat, Maybe It’s arrangements to borrow the stock have been made, cautioning broker-dealers that where the broker- Time to Bail Out, NY Times (January 26, 2003) or other acceptable assurances that delivery can be dealer has sold short, but did not, for a substantial (citing a study by Professor Owen A. Lamont that made on settlement date have been obtained. The period of time, effect the offsetting purchase analyzed returns at companies that waged public Commission also stated that it believed the general transactions for purpose of delivery, this could battles with short sellers, and found that their antifraud provisions of the federal securities laws generally involve violations of the anti-fraud stocks lagged the market by 2.34 percent in each of were applicable to activity addressed by proposed provisions of the Federal securities laws. See the twelve months after the battles began). As a Rule 10b–11. Securities Exchange Act Release No. Securities Exchange Act Release No. 6778 (April 16, matter of practice, the Commission does not opine 26182 (October 14, 1988), 53 FR 41206. 1962). on the content or accuracy of such reports. 36 See NYSE Rule 440C.10.

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be made on settlement date.37 These received, e.g., by the telephone, an by the broker-dealer representing the provisions apply to all NYSE member electronic transmission, the Internet, or seller by purchasing for cash or organizations, whether effecting otherwise.41 This requirement does not guaranteed delivery of securities of like transactions in exchange-listed apply to transactions in corporate debt kind and quality. This mandatory close- securities on the NYSE, another national securities, to bona fide market making out requirement does not apply to bona- securities exchange, or in the over-the- transactions by Nasdaq market fide market making transactions and counter market. Exceptions from the makers,42 or to transactions that result transactions that result in fully hedged rule are provided for short sales by in fully hedged or arbitraged or arbitraged positions. specialists, market makers, and odd lot positions.43 C. Proposed Amendments dealers in fulfilling their market The NASD has also adopted several responsibilities.38 rules addressing failures to deliver. 1. Short Sales The comparable NASD Rule 3370 NASD Rule 3210 prevents a member, or The Commission believes that these generally provides that no member, or person associated with a member, from SRO requirements have not fully person associated with a member, shall selling a security for his own account, addressed the problems of naked short effect a short sale for a customer or for or buying a security as a broker for a selling and extended fails to deliver. We its own account unless the member customer if, with respect to domestic believe it would be beneficial to makes an ‘‘affirmative determination’’ securities,44 he has a fail to deliver in establish a uniform standard specifying that the member can borrow the that security that is 60 days or older. the procedures for all short sellers to securities or otherwise provide for NASD Rule 11830 imposes a mandatory locate securities for borrowing.45 This delivery of the securities by settlement close-out requirement for Nasdaq would further the goals of regulatory date.39 The affirmative determination securities that have a clearing short simplification and avoidance of must be annotated in writing, position of 10,000 shares or more per regulatory arbitrage, as well as address evidencing that the member firm will security and that are equal to at least some areas not currently covered. We receive delivery of the security from the one-half of one percent of the issue’s customer or, if the member firm locates total shares outstanding. NASD Rule are therefore proposing to incorporate in the stock, the identity of the individual 11830 generally requires that a contract proposed Regulation SHO a uniform ‘‘locate’’ rule applicable to all equity and firm contacted who offered involving a short sale in these securities, 46 assurance that the shares would be for the account of a customer or for an securities, wherever they are traded. delivered or were available for NASD member’s own account, which Proposed Rule 203 would prohibit a borrowing.40 This requirement applies has not resulted in delivery by the broker-dealer from executing a short regardless of how a short sale order is broker-dealer representing the seller sale order for its own account or the within 10 business days after the normal account of another person, unless the 37 Such assurances include knowledge that the settlement date (currently transaction broker-dealer, or the person for whose security is available for borrowing, conversion date + 3 business days), must be closed account the short sale is executed (1) privileges, rights exercise, and the like. One test of borrowed the security, or entered into reasonableness in short sales against convertible 41 an arrangement for the borrowing of the securities, rights and merger securities is whether See NASD Notice to Members 99–98. the security needed for delivery can be exchanged 42 NASD IM–3350 contains language specifying security, or (2) had reasonable grounds in normal transfer time. A firm that normally relies what type of activity does not constitute bona fide to believe that it could borrow the on the stock loan market without advance market making: ‘‘Bona fide market making activity security so that it would be capable of borrowing can demonstrate compliance by does not include activity that is unrelated to market switching to prior borrowing whenever the stock making functions, such as index arbitrage and risk delivering the securities on the date borrowing market in a particular security becomes arbitrage that is independent from a member’s delivery is due.47 Consistent with the tight.’’ NYSE Rule 440C.10 Interp. /01. See also market making functions. * * *’’ IM–3350(a)(2). current SRO requirements, the proposed NYSE Information Memo 91–41 (providing further ‘‘Similarly, bona fide market making would exclude rule would require that the locate be information regarding compliance with Rule activity that is related to speculative selling 440C.10). strategies of the member or investment decisions of made and annotated in writing prior to 38 Id. the firm and is disproportionate to the usual market effecting any short sale, regardless of the 39 See NASD Rule 3370. making patterns or practices of the member in that fact that the seller’s short position may security. The Association does not anticipate that 40 According to the rule, the manner by which a member or person associated with a member a firm could properly take advantage of its market maker exemption to effectuate such speculative or 45 Some commenters to the Concept Release annotates compliance with the affirmative supported a single, workable approach to locating determination requirement is to be decided by each investment short selling decisions. Disproportionate short selling in a market making account to securities for borrowing before effecting short sales. member. Members may rely on ‘‘blanket’’ or See letter from Wilkie, Farr & Gallagher (488) standing assurances (i.e., ‘‘Easy to Borrow’’ lists) effectuate such strategies will be viewed by the (writing on behalf of Bear, Stearns & Co., Inc.; that securities will be available for borrowing on Association as inappropriate activity that does not Credit Suisse First Boston Corp.; Deutsche Bank settlement date. For any short sales executed in represent bona fide market making and would Securities, Inc.; JP Morgan Securities Inc.; Nasdaq National Market (‘‘NNM’’) or exchange- therefore be in violation of Rule 3350.’’ IM– PaineWebber Inc.; Prudential Securities Inc.; and listed securities, members also may rely on ‘‘Hard 3350(a)(3). Warburg Dillon Read LLC.). to Borrow’’ lists indicating NNM or listed securities The NASD has instituted disciplinary actions 46 that are difficult to borrow or unavailable for against broker-dealers that the NASD found were See paragraph (b), Rule 203 of proposed borrowing on settlement date provided that: (i) Any abusing the exemption provided for bona-fide Regulation SHO. securities restricted pursuant to NASD Rule 11830 market making transactions. See, e.g., Hearing Panel 47 We are interested in receiving comment on the must be included on such a list; and (ii) the creator Decision as to Respondents John Fiero and Fiero manner in which persons could satisfy the of the list attests in writing on the document or Brothers, Inc. (December 6, 2000) (decision affirmed ‘‘reasonable grounds’’ determination in the otherwise that any NNM or listed securities not by the National Adjudicatory Council on October proposed rule. As noted above, the current SRO included on the list are easy to borrow or are 28, 2002); see also John Emshwiller, NASD Moves rules generally defer to members to decide the available for borrowing. Members are permitted to to Bar Short Seller Fiero, Citing Alleged manner of compliance, and permit members to rely use Easy to Borrow or Hard to Borrow lists Manipulation of Stocks, WSJ (January 9, 2001). on blanket assurances that stock is available for provided: (i) The information used to generate the 43 NASD Rule 3370(b)(5) provides guidelines in borrowing, i.e., ‘‘hard to borrow’’ or ‘‘easy to list is no less than 24 hours old; and (ii) the member determining the availability of the exemption for borrow’’ lists. See, supra n. 40. We specifically delivers the security on settlement date. Should a ‘‘bona-fide fully hedged’’ and ‘‘bona-fide fully request comment on whether this present method member relying on an Easy to Borrow or Hard to arbitraged’’ positions. of compliance provides an accurate assessment of Borrow fail to deliver the security on settlement 44 With respect to foreign securities, if the the current lending market in a manner that would date, the NASD deems such conduct inconsistent member has a fail to deliver in that security 90 days not impede liquidity and the ability of market with the terms of Rule 3370, absent mitigating or older (except American Depositary Receipt and participants to establish short positions, while at circumstances adequately documented by the Canadian securities, which shall be subject to the the same time guarding against the noted problems member. See NASD Rule 3370(b)(4)(C). 60 day provision). inherent with large extended settlement failures.

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be closed out by purchasing securities remedial action designed to address appropriate action, including assessing the same day.48 The Commission is potential negative effects. The proposed appropriate charges against the party proposing an exception from these rule would specify that for short sales of failing to deliver. Both of these requirements for short sales executed by any security meeting this threshold, the requirements should assist the specialists or market makers but only in selling broker-dealer must deliver the Commission in preventing abuses and connection with bona-fide market security no later than two days after the promote the prompt and accurate making activities.49 We believe a narrow settlement date.52 We believe a two-day clearance and settlement of securities exception for market makers and grace period is appropriate to allow for transactions. specialists engaged in bona fide market transfer delays or delays due to a variety These proposed requirements in Rule making activities is necessary because of circumstances that prevent timely 203 would differ from the current SRO they may need to facilitate customer delivery.53 If for any reason such rules in several respects. First, the orders in a fast moving market without security was not delivered within two proposals require action two days after possible delays associated with days after the settlement date, the rule settlement, as opposed to the current ten complying with the proposed ‘‘locate’’ would restrict the broker-dealer, days after settlement provided in Rule rule. Moreover, we believe that most including market makers, from 11830.57 Further, the mandatory close- specialists and market makers seek a net executing future short sales in such out provision in NASD Rule 11830 ‘‘flat’’ position in a security at the end security for the person for whose currently only applies to Nasdaq of each day and often ‘‘offset’’ short account the failure to deliver occurred securities. We believe that securities sales with purchases such that they are unless the broker-dealer or the person with lower market capitalization may be not required to make delivery under the for whose account the short sale is more susceptible to abuse, and therefore security settlement system. executed borrowed the security, or believe that these additional delivery As an additional safeguard against entered into a bona fide arrangement to requirements should be extended to all some of the problems associated with borrow the security, prior to executing equity securities registered under naked short selling, we are proposing a the short sale and delivered on Section 12 of the Exchange Act. Finally, delivery requirement targeted at settlement date. This restriction would although market makers engaged in securities where there is evidence of be in effect for a period of 90 calendar bona fide market making are currently significant settlement failures. We are days.54 In addition, the rule would exempted from NASD Rule 11830, we incorporating the same threshold require the rules of the registered believe that extended failures to deliver 50 currently used in NASD Rule 11830, clearing agency that processed the appear characteristic of an investment i.e., any security where there are fails to transaction to include the following or trading strategy, rather than being deliver at a clearing agency registered provisions: (A) A broker or dealer failing related to market making. We believe it with the Commission of 10,000 shares to deliver such securities shall be is questionable whether a market maker or more per security, and that is equal referred to the NASD and the designated carrying a short position in a heavily to at least one-half of one percent of the examining authority for such broker- shorted security for an extended period 51 55 issue’s total shares outstanding. We dealer for appropriate action; and (B) of time is in fact engaged in providing are incorporating this standard into The registered clearing agency shall liquidity for customers, or rather is proposed Rule 203 because we believe withhold a benefit of any mark-to- engaged in a speculative trading that the levels set in NASD Rule 11830 market amounts or payments that strategy. Therefore, we are not characterize situations where the ratio otherwise would be made to the party proposing an exception from these 56 of unfulfilled delivery obligations at the failing to deliver, and take other additional delivery requirements for clearing agency where trades are settled short sales in connection with market represents a significant number of 52 When the trade fails to settle on normal settlement date (i.e., T+3), the broker-dealer would making. shares relative to the company’s total In our view, these delivery shares outstanding, thus requiring have to take actions, such as borrowing the security or effecting a purchase in the cash market, so that requirements would protect and actual delivery is made by T+5. enhance the operation, integrity and 48 See, e.g., Ko Securities, Inc. and Terrance Y. 53 Unlike NASD Rule 11830, which provides for Yoshikawa, Securities Exchange Act Release No. delivery of securities meeting this threshold to be stability of the markets and the 48550 (September 26, 2003) (holding that an delivered within 10 business days after the normal clearance and settlement system. In affirmative determination must be made before the settlement date, we propose a two-day period securities are sold short regardless of whether the because we believe it is reasonable period to allow delivery. In situations where the value of a security short seller repurchases securities on the same day). for transfer delays or delays due to some other that is the subject of a failure to deliver is 49 The exemption for bona-fide market making characteristic of the security while preventing increasing, NSCC collects the mark from the party activities would exclude activity that is related to unfulfilled delivery obligations from extending for that failed to deliver and passes it on to the party speculative selling strategies or investment a period that we believe is characteristic of a more that failed to receive the securities. Conversely, in decisions of the broker-dealer or associated person significant problem. a situation where the value of the security is and is disproportionate to the usual market making 54 In this context, we believe that a 90-day decreasing, NSCC collects the mark from the party patterns or practices of the broker-dealer in that restricted period is an appropriate consequence for that failed to receive the securities and passes it on security. a failure to deliver and a deterrent to prevent to the party that failed to deliver. Under the CNS 50 The National Securities Clearing Corporation failures to deliver in the future. The Federal Reserve system, a participant does not receive the actual (NSCC) currently tracks this information on fails to Board has taken this approach with respect to contract value of the securities (i.e., the proceeds deliver and provides it to Nasdaq for purposes of transactions in cash accounts where the securities from their sale) until actual delivery of securities is administering NASD Rule 11830. Thus, we do not are sold before they have been fully paid for. See, made. See National Securities Clearing Corporation believe that the threshold proposed here would 12 CFR 220.8(c), Regulation T. Rules of Procedures Rule 11. Nevertheless, we impose unduly burdensome data collection 55 Referral to the designated examining authority believe that withholding the benefit of mark-to- requirements. would allow for monitoring of broker or dealers not market amounts from the party failing to deliver in 51 For example, if an issuer had 1,000,000 shares complying with proposed Rule 203 and allow for a security meeting the specified threshold would outstanding, one-half of one percent (.005) would possible disciplinary action. In the case of any fail serve as a financial incentive to comply with the be 5,000 shares. An aggregate fail to deliver position to deliver occurring at the Canadian Depository for borrow and delivery requirements during the 90- at a clearing agency of 10,000 shares or more would Securities (CDS), the registered clearing agency day restricted period. thus meet the threshold. If an issuer had 10,000,000 would refer CDS to the Ontario Securities 57 We solicit comment on any legitimate reasons shares outstanding, one-half of one percent would Commission for appropriate action. why a short seller may be unable to deliver be 50,000 shares. An aggregate fail to deliver 56 As part of its Continuous Net Settlement securities by at least T+5. We may then choose to position at a clearing agency of 50,000 shares or system (CNS) NSCC marks-to-market each day except particular types of transactions, or add a greater would meet the threshold. positions for which participants failed to make specified grace period.

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particular, we believe that they will making might need to maintain a fail to deliver is permitted if the seller has protect buyers of securities by deliver on a short sale longer than two days informed the broker-dealer that the substantially curtailing naked short past settlement? If so, can such positions be seller owns the security and will deliver selling. We request comment on the identified? Should they be excepted from the it to the broker-dealer prior to proposed borrow and delivery requirements, settlement of the transaction, but fails to extent to which the proposed rules will and if so, why, and for how long? achieve these objectives. do so. The proposed modification tracks Q. What harms result from naked short 2. Long Sales the proposed amendments to the order selling? Conversely, what benefits accrue Current Rule 10a–2 covers delivery marking requirements, which would from naked short selling? requirements applicable to long sales of permit an order to be marked long if the Q. Are there negative tax consequences securities registered or admitted to seller owns the securities and the associated with naked short selling, in terms unlisted trading privileges on a national seller’s broker-dealer will have physical of dividends paid or otherwise? securities exchange. We are proposing possession or control of the security Q. What is the appropriate manner by 58 to adopt subparagraph (a) of Rule 203 in prior to settlement. The proposed rule which short sellers can comply with the would permit a broker-dealer to fail to requirement to have ‘‘reasonable grounds’’ to proposed Regulation SHO, which would believe that securities sold short could be replace and modify Rule 10a–2 to make deliver, or to deliver borrowed borrowed? Should short sellers be permitted it consistent with the new delivery securities, if an exchange or national to rely on blanket assurances that stock is requirements in the proposed short sale securities association found that the available for borrowing, i.e., ‘‘hard to rule. broker-dealer used due diligence in borrow’’ or ‘‘easy to borrow’’ lists? Is the Generally, Rule 10a–2 provides that if obtaining the seller’s confirmation that equity lending market transparent enough to the security would be in the broker- allow an efficient means of creating these a broker-dealer knows or should know that a sale is marked long, the broker- dealer’s possession prior to settlement, lists? and that either compelling a buy-in Q. Should short sales effected by a market dealer must make delivery when due maker in connection with bona fide market and cannot lend securities to do so. If would result in undue hardship, or that making be excepted from the proposed the broker-dealer does not have the the mistake was made by the seller’s ‘‘locate’’ requirements? Should the exception securities, it must make delivery with broker-dealer and the sale was at a be tied to certain qualifications or securities purchased for cash, i.e., effect permissible price under Proposed Rule 59 conditions? If so, what should these a ‘‘buy in,’’ unless it knows that the 201(b) of Regulation SHO. We believe qualifications or conditions be? seller either is in the process of that this change would facilitate the Q. Should the proposed additional delivery process of clearance and settlement, requirements be limited to securities in forwarding the securities to the broker- dealer or will do so as soon as possible while still achieving the goals of short which there are significant failures to sale regulation. deliver? If so, is the proposed threshold an without undue inconvenience or accurate indication of securities with expense. Broker-dealers are excused Q. Are the delivery requirements in excessive fails to deliver? Should it be higher from the buy-in requirement in two proposed Rule 203(a) appropriate? or lower? Should additional criteria be used? cases. In sales between broker-dealers, Q. Are the proposed consequences for III. Current Market Structure and the loans are permitted in lieu of a buy-in. Tick Test failing to deliver securities appropriate and The rule also allows a broker-dealer to effective measures to address the abuses in fail to deliver, or to borrow securities in The tick test was part of short sale naked short selling? If not, why not? What regulation implemented in 1938. The other measures would be effective? Should lieu of buying-in, if, despite the broker- dealer’s efforts to ensure that the sale tick test has provided the markets with broker-dealers buying on behalf of customers a generally effective means of regulating be obligated to effect a buy-in for aged fails? was long, it was in fact short. This Q. Is the restriction preventing a broker- exemption is available only if the short sales for more than 60 years. dealer, for a period of 90 calendar days, from exchange or national securities Nonetheless, arguments have been made executing short sales in the particular association in whose market the sale to allow greater flexibility in short security for his own account or the account was effected finds that the sale resulted selling. Indeed, substantial economic of the person for whose account the failure from a good-faith mistake, the broker- arguments have been made that short to deliver occurred without having pre- dealer exercised due diligence, and selling should be deregulated, at least in borrowed the securities an appropriate and the case of the tick test.60 Some effective measure to address the abuses in either that requiring a buy-in would naked short selling? Should this restriction result in undue hardship or that the sale 58 See, infra part IX for a further discussion of the apply to all short sales by the broker-dealer had been effected at a permissible price. proposed order marking requirements. in this particular security? Should the Subparagraph (a) of Rule 203 of 59 This exception shall not apply where a broker- restriction also apply to all further short sales proposed Regulation SHO preserves the dealer knows or has reason to know that an order by the person for whose account the failure substance of current Rule 10a–2 is incorrectly marked long. Knowledge may be to deliver occurred, effected by any broker- regarding delivery of securities sold inferred where a broker-dealer repeatedly accepts orders marked long from the same customer that dealer? pursuant to orders marked ‘‘long.’’ Only Q. Should short sales effected by a market requires borrowed shares for delivery or results in maker in connection with bona-fide market two substantive changes have been a ‘‘fail to deliver’’ on several occasions. 60 making be exempted from the proposed made. First, Regulation SHO would See, e.g., Albert, Smaby, and Robison, 1997, delivery requirements targeted at securities extend the delivery requirements of Short Selling and Trading Abuses on Nasdaq, Financial Services Review, 6(1), 27–39; Alexander in which there are significant failures to Rule 10a–2 to all securities, including and Peterson, 1999, Short Selling and the New York deliver? If so, what reasons support such an those traded over-the-counter. As with Stock Exchange and the Effects of the Uptick Rule, exemption, and how should bona-fide market our proposal to apply borrow and Journal of Financial Intermediation, 8, 90–116; making be identified? delivery requirements for short sales in Alexander and Peterson, 2002, Implications of a Q. Under what circumstances might a Reduction in Tick Size on Short-Sale Order all equity securities, we believe it is Execution, Journal of Financial Intermediation, 11, market maker need to maintain a fail to equally important to apply long delivery deliver on a short sale longer than two days 37–60; Angel, 1997, Short Selling on the NYSE, past settlement date in the course of bona requirements to securities with lower working paper, Georgetown University; Jones, 2002, market capitalization that may be more Shorting Restrictions, Liquidity, and Returns, fide market making? Is two days the working paper, Columbia University; Lamont, appropriate time period to use? susceptible to abuse. Owen A., 2003, Go Down Fighting: Short Sellers vs. Q. Are there any circumstances in which Second, proposed Regulation SHO Firms, working paper, University of Chicago and a party not engaging in bona-fide market would provide that a loan or failure to NBER.

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commenters to the Concept Release took Nasdaq securities because they would using different means of reporting. that position.61 A substantial number of be exchange-listed securities reported Although trades are required to be other commenters disagreed and pursuant to an ‘‘effective transaction reported within 90 seconds after expressed support for a price test.62 We reporting plan.’’ Nasdaq has applied for execution, they are published in do not believe that proposing complete relief from Rule 10a–1 in conjuction reporting sequence, not trade rescission of the short sale price test with the exchange registration.66 The sequence.69 This reporting may create would be appropriate at this time, Commission has not yet acted upon the upticks and downticks that may not although we request comment about application. If the Commission were to accurately reflect price movements in that approach. Instead, we propose a grant an exemption from Rule 10a–1 to the security for the purposes of the tick new, uniform price test that would allow Nasdaq to apply Rule 3350 to test. To a lesser degree, this apply to today’s markets, and a pilot Nasdaq exchange-listed securities, the phenomenon occurs in exchange-listed that would permit us to gather data same securities quoted and traded on securities that are traded in multiple about trading activity in the absence of Nasdaq and other exchanges would be venues. a short sale price restriction. subject to two different short sale rules. We are proposing Rule 201 of IV. Proposed Bid Test This has the potential for confusion and Regulation SHO, which would replace compliance difficulties. We believe that Current short sale regulation applies Rule 10a–1’s tick test with a test using these considerations, along with the the consolidated best bid as the different price tests to securities trading other market developments discussed in different markets. Rule 10a–1 applies reference point for permissible short previously, make this an appropriate sales. Specifically, subparagraph (b) of only to short sale transactions in time to propose amendments that would securities listed on a national securities proposed Rule 201 would require that provide for a more consistent approach all short sales in exchange-listed and exchange, whether the transaction is to short sale regulation. effected on an exchange or otherwise. Nasdaq NMS securities, wherever The NASD’s bid test applies to short A. Operation of the Uniform Bid Test traded, be effected at a price at least one sale transactions in Nasdaq NMS The current tick test uses the last cent above the consolidated best bid at 70 securities effected on either trade price in a security as a reference the time of execution. A bid test SuperMontage or the NASD’s point for determining permissible short would apply a uniform rule to trades in Alternative Display Facility (ADF), but sale prices under Rule 10a–1. The the same securities that occur in not to Nasdaq SmallCap, OTCBB, and effectiveness of this test for exchange- multiple, dispersed, and diverse other securities traded over-the-counter. listed securities depends on the markets. Moreover, a bid test would Moreover, no short sale price test centralized auction nature of most provide greater flexibility in effecting applies to short sales of Nasdaq NMS exchanges and the historical short sales in a decimals environment, securities executed away from concentration on exchanges of as discussed below. Finally, a bid test SuperMontage and the ADF, unless the transactions in exchange-listed would better accommodate increasingly market on which the securities are being securities, which helps produce a popular automated trading systems that traded has adopted its own price test.63 consistent sequence of trade reports. In utilize passive pricing and trading The end result is disparate short sale 2002, for example, the NYSE accounted systems that offer price improvement regulation of Nasdaq securities, for 87.9% of share volume in NYSE based on the consolidated best bid and 71 depending on the market where the listed equities.67 offer. securities are trading. This situation The tick test, however, may not be as The proposed bid test in Rule 201 may lend itself to regulatory arbitrage.64 effective a means of regulating dealer would require that a short sale be We note that Nasdaq has also applied markets. Nasdaq, in contrast to the effected at a price at least one cent to become a national securities auction markets, has no single market above the best consolidated bid at the 65 exchange. If Nasdaq becomes an center that concentrates trading in exchange, Rule 10a–1 would apply to Nasdaq securities. During regular 69 NASD Rule 4632, Transaction Reporting, trading hours, order flow in Nasdaq requires market makers to transmit through the 61 See, e.g., letters from The Chicago Board securities is divided among many Automated Confirmation Transaction Service or Options Exchange (32), Cornerstone Securities ‘‘ACT’’ all last sale reports of transactions in Corporation (324), Electronic Traders Association different market makers, ECNs, and designated securities executed during normal (ETA) (327), Interactive Brokers; The Timber Hill regional exchanges.68 Trade reporting market hours within 90 seconds after execution. See Group (329), Island ECN (Island) (431), Managed for Nasdaq securities involves multiple NASD Rule 4632 (NMS securities) and Rule 4642 Funds Association (MFA) (427), Charles Schwab (Nasdaq SmallCap securities), and Rule 6420 (Schwab) (310), Sierra Trading Group, L.P. (39), market makers reporting trades in the same stock from different locations (exchange-listed securities). Trimark Securities (330). 70 To address the problem of locked and crossed 62 See, e.g., letters from the NASD (480), NYSE markets, we have proposed an exception from the (467), Sherman and Sterling (424), North American 66 See Letter to Jonathan G. Katz, Secretary, proposed bid test allowing a responsible broker or Securities Administrators Association Commission, from Edward S. Knight, Executive dealer, as defined in 17 CFR 240.11Ac1–1(a)(21), to (NASAA)(321), Specialist Association (426). Vice President and Chief Legal Officer, NASD effect a short sale at a price equal to the 63 Transactions in these securities are not subject (August 7, 2000). consolidated best offer when the market for the to short sale regulation under Rule 10a–1. See 67 See 2002 NYSE Annual Report. covered security is locked or crossed, provided Securities Exchange Act Release No. 22975 (March 68 For example, in May 2003, there were an however, that the exception shall not apply to any 6, 1986), 51 FR 8801 (March 14, 1986) (the average of 73 market makers per issue in the top broker or dealer who initiated the locked or crossed Commission adopted amendments to Exchange Act 1% of Nasdaq stocks by trading volume, 40.5 market. See, infra Part VI.A.7 for a further Rule 10a–1 to exclude from application of the rule market makers per issue in the next 9% of stocks, discussion of this exception. transactions in NMS securities that are traded on an and an overall average of 15.4 market makers per 71 Passive pricing systems often effect trades at an exchange on a listed or unlisted trading privileges issue. The majority of Nasdaq trading occurs independently-derived price, such as the midpoint basis). primarily at dealer market centers. The agency of the bid-offer spread. Such pricing would often 64 The Commission recently issued a Concept markets operated by the seven ECNs in May 2003 not satisfy the current tick test. However, midpoint Release seeking comment on this and other issues accounted for 23.3% of Nasdaq share volume. In pricing would generally satisfy a test requiring a presented in a petition submitted by Nasdaq. addition, the Archipelago Exchange and the short sale to be priced above the current best bid. Securities Exchange Act Release No. 47849 (May Cincinnati Stock Exchange each account for 12.8% We generally do not believe that such passive 14, 2003), 68 FR 27722 (May 20, 2003). of the Nasdaq Share Volume for a total of 25.6% pricing systems present significant opportunities for 65 See Securities Exchange Act Release No. 44396 of Nasdaq Share Volume. See short selling abuse. See infra, part IV.D, for a further (June 7, 2001), 66 FR 31952 (June 13, 2001). www.marketdata.nasdaq.com. discussion of passive pricing.

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time of execution.72 This would be a The proposed bid test also is designed bid (i.e., a downbid).78 This alternative significant change from the current tick to achieve the second and third test would apply to the same securities test, which is based on last sale prices. objectives of the short sale rule, as our uniform bid test.79 While we are The bid test also would operate preventing short selling at successively not proposing this alternative test as differently from the current rule for lower prices and preventing short part of Regulation SHO, we seek Nasdaq securities. NASD’s Rule 3350 sellers from accelerating a decline in the comment on this test as another possible prohibits NASD members from effecting market by exhausting all remaining bids approach to regulating short sales. short sales in NMS securities at or at one price level. One of the negative We are aware that these proposals below the best bid when the best bid uses of short selling is attempting to represent significant changes in the displayed is below the preceding best establish lower transaction prices in a operation of Rule 10a–1. We request bid in a security. However, if there is an security, hoping to induce others to comment about the appropriateness of ‘‘upbid’’ in a security, i.e., the best bid liquidate their positions and lower the proposed bid test and the alternative displayed is above the preceding best prices further.75 A short seller may bid test. bid, there is no restriction on the price attempt to accomplish this by Q. Should short sales continue to be that a NASD member can sell an NMS exhausting higher priced bids in a limited by a price test? If the Commission did security short.73 security, thus creating the appearance of not adopt a price test under Regulation SHO, Under the proposed uniform bid test, 76 should it also preclude the ability of the a declining market. Barring short sales SROs to have price tests? the price at which a short sale could be at prices equal to or below the effected would move Q. Would there be any benefits in consolidated best bid would prevent eliminating a short sale price test? Would the contemporaneously with the movement short sellers from exhausting the bids in 74 elimination of a price test benefit the markets of the consolidated best bid. In a security and thus prevent short sellers by allowing investors to more freely short sell contrast, compliance with the current from inducing a price decline. Since potentially overvalued securities so that their short sale price tests require a only long sellers could sell at the price more accurately reflects their comparison of the previous last sale in consolidated best bid, it is unlikely that fundamental value? Are there other benefits relation to the most recent last sale in to the removal of a price test, such as short sellers could directly cause short listed securities or a comparison of the elimination of systems and surveillance selling at successively lower prices.77 current bid with the previous bid for costs? Nasdaq securities. While we believe the uniform bid test Q. Would the proposed ‘‘bid test’’ in Rule 201, allowing short sales above the best We recognize that a quotation only is the most flexible approach to modernizing the short sale rule while consolidated bid, effectively prevent short proposes a transaction, whereas the last selling being used as a tool for driving the trade price reflects an actual trade. continuing to promote the goals of short market down? However, pursuant to Commission and sale regulation, we understand that Q. Would short sale regulation using the SRO rules, quotations for all covered some market participants may desire an proposed bid test operate effectively in an securities must be firm. Further, we even greater range of prices at which to auction market? If not, why not? believe that bids generally are a more effect short sales. One alternative would Q. Would short sale regulation using the accurate reflection of current prices for be a bid test allowing short selling at a proposed bid test operate effectively in a price equal to or above the consolidated dealer market? If not, why not? a security because last trade prices can Q. Would there ever be a circumstance be reported out-of-sequence within a 90 best bid if the current best bid is above where there would not be a consolidated bid second window. the previous bid (i.e., an upbid). in an exchange-listed or Nasdaq NMS We believe the proposed bid test However, in this alternative, short security? If so, please describe. would promote the fundamental goals of selling would be restricted to a price at Q. The proposed bid test likely would short sale regulation. First, the proposed least one cent above the consolidated inhibit short sales in a declining market bid test would facilitate relatively best bid (not equal to the best bid) if the because there would be few execution current best bid is below the previous opportunities above the best bid. Is this unrestricted short selling in an appropriate? advancing market, because the short Q. Is a one-cent increment an appropriate 75 selling reference price would move with See Securities Exchange Act Release No. 10668 standard for allowing short sales above the the current interest of the market. (March 6, 1974), 39 FR 10604 (March 21, 1974). 76 best consolidated bid? If not, what is an Id. appropriate increment? 77 The Commission would view activity by 72 Q. Would short sale regulation using the As stated in the Commission’s approval of market participants to alter the consolidated best Nasdaq’s penny short sale pilot, a $0.01 increment bid solely for the purpose of facilitating short sales proposed bid test present any automated for a short sale price test is a reasonable increment as a violation of proposed Regulation SHO, as well systems problems for market participants? in a decimals environment. See Securities Exchange as potentially the anti-fraud and anti-manipulation Q. Would the proposed bid test operate Act Release No. 44030 (March 2, 2001), 66 FR provisions of the federal securities laws, including effectively in the current decimal 14235 (March 8, 2001). However, the Commission Sections 9(a), 10(b), and 15(c) of the Exchange Act, environment, i.e., would bid flickering may revisit this requirement upon the completion and Rules 10b–5 and 15c1–2 thereunder. For inhibit the operation of the test? of its analysis of statistical data relating to quoting example, a broker-dealer may attempt to circumvent and trading activity in a decimals environment. the rule by entering into an arrangement with a 73 Should the Commission adopt changes to customer in which the customer would sell short 78 The following example demonstrates the existing short sale regulations, the SROs would to the dealer one cent above the bid, and the dealer operation of this alternative uniform short sale rule: need to update their rules to reflect our would charge a higher commission to cover the If the consolidated best bid in a security is $47.00, modifications. price. The dealer would then sell ‘‘long’’ at the bid. and the immediately preceding bid was $46.99, 74 Under the proposed bid test, if the best bid in An example of this is as follows: Assume that the short selling would be allowed at $47.00 or higher. a security is $47.00, short selling would be allowed best bid is $20.35. A broker-dealer could arrange If the consolidated best bid in a security is $47.00, at $47.01 or higher, regardless of whether the with a customer to execute a short sale at $20.36, and the immediately preceding bid was $47.01, immediately preceding bid was $46.99 or $47.01 and include a mark-up or commission of 6 cents. short selling would only be allowed at $47.01 or (i.e., it does not matter whether the current bid is The net to the customer would thus be $20.30. The higher. an upbid or downbid from the immediately broker-dealer could then sell long into the bid at 79 We note that, unlike the proposed bid test, this preceding bid). Also, if the best bid in a security $20.35, thus earning a profit on the transaction. Not alternative test would incorporate the preceding bid is $47.00, and the last trade price in the security only may such activity violate reporting rules (see into the calculation of the price at which a short was $47.05, short selling would be allowed at NASD Rule 6130(d)(3)), such activity could be sale could be executed. This would add a layer of $47.01 or higher (i.e., the last sale price is viewed as fraudulent and/or manipulative by the complexity to the rule and could impose additional irrelevant). Commission. programming costs.

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Q. Would the proposed bid test fulfill the These networks are designed to increase in price flickering, i.e., an fundamental goals of short sale regulation? ensure that consolidated bids from the increase in the number of times the last Q. Would the alternative test allowing various market centers that trade trade price in a security changes short selling at a price equal to or above the consolidated best bid if it is an upbid better exchange-listed and Nasdaq NMS rapidly. fulfill the goals of short sale regulation? securities are continually collected and As a result market participants have disseminated on a real-time basis, in a sought relief from the tick test B. Scope of the Uniform Bid Test single stream of information. Thus, all provisions of Rule 10a–1. For example, market participants would have access some third market makers in exchange- 1. Securities Subject to the Price Test to the consolidated bids for all the listed securities offer trade execution for The proposed bid test would apply to securities that would be subject to the eligible customer orders at a price equal all securities currently subject to short proposed uniform bid test. to or better than the consolidated best sale price tests, i.e., exchange-listed and 2. Securities Not Subject to the Price offer. However, if the consolidated best Nasdaq NMS securities, wherever they Test offer is below the previous last reported are traded. Specifically, the proposed sale in a security and the third market bid test would apply to all national We are not proposing at this time to maker or specialist has a short position, market system securities as defined in extend the uniform bid test to securities sales at the consolidated best offer § 240.11Aa2–1 of this chapter, but shall not currently covered by a short sale would violate the tick test of Rule 10a– exclude Nasdaq Small Cap securities, as price test (i.e., Nasdaq SmallCap, 1. The Commission has granted an determined by NASD rules. OTCBB, and Pink Sheet securities) in exemption from Rule 10a–1 to permit Market information for securities, part because these markets have not registered market makers and exchange including quotes, is disseminated been subject to the rule in the past. specialists publishing two-sided quotes pursuant to a variety of different More significantly, we believe that the in a security to sell short to facilitate national market system plans. proposed locate and deliver customer market and marketable limit Generally, the SROs have developed requirements may address many of the orders at the consolidated best offer, networks or systems that disseminate concerns regarding abusive short selling regardless of the last trade price.84 The 80 market information. The NYSE, Amex, in thinly-capitalized securities trading exemption provided relief in a decimals Nasdaq, and the regional exchanges are over-the-counter. In particular, these environment to market makers and all required to make available to proposals should significantly specialists in instances where they vendors the best bids in any common discourage efforts to deliberately would be providing liquidity in stock, long-term warrant, or preferred depress the price of these securities by response to customer buy orders. Such 81 stock. This information is removing the leverage abusive short relief would not be necessary with a bid disseminated as a part of an effective sellers enjoy through short selling test, since such sales (by any market transaction reporting plan pursuant to without incurring the costs of borrowing participant) would always be the Consolidated Tape Association Plan and delivering. We recognize, however, effectuated above the best bid, (CTA Plan) and the Consolidated that issuers of less actively traded specifically at the consolidated best Quotation Plan (CQ Plan). The NYSE, securities believe that they are offer or better. Amex, Nasdaq, and the regional particularly vulnerable to ‘‘abusive’’ Permitting short sales above the best exchanges all participate in the CTA short selling, and we seek specific 82 bid should alleviate other difficulties Plan and CQ Plan. Finally, Nasdaq comment on whether the proposed bid complying with the tick test in a disseminates market information for test or other price test should be decimals environment. The securities in the two tiers of the Nasdaq extended to these securities. Commission’s Office of Economic market, i.e., NMS and SmallCap stocks, Q. Should the proposed uniform bid test be Analysis (OEA) conducted a study that as well as certain other securities traded extended to Nasdaq SmallCap and OTCBB found that the proposed bid test is OTC. Information for NMS securities is Securities? Do these securities need the considerably less restrictive than the protection of the proposed uniform bid test? collected and disseminated pursuant to current tick test.85 Specifically, OEA NASD’s rules and the Nasdaq/UTP Q. Should the proposed uniform bid test be plan.83 extended to other OTC securities, e.g., those quoted in the Pink Sheets? If so, are quotes 84 See Letter re: Bernard L. Madoff Investment in these securities disseminated in a manner Securities LLC (February 9, 2001) (exemption from 80 In relevant part, these networks can be that would allow for the use of the proposed Rule 10a–1 to allowing registered market makers categorized as follows: (1) Network A—securities and specialists to sell short to facilitate customer listed on the NYSE; (2) Network B—securities listed uniform bid test? In addition, would the proposed bid test be workable due to the fact market and marketable limit orders at the on Amex or the regional exchanges; and (3) Nasdaq consolidated best offer regardless of the last trade system—securities qualified for inclusion in the that the best bid in these securities could be price). All such short sales effected pursuant to the Nasdaq system and certain other securities traded outstanding for long periods of time? If not, exemption are required to be reported as ‘‘sell short in the OTC market. could a last sale test or some other test be exempt.’’ This relief is strictly limited to the 81 See Exchange Act Rule 11Ac1–1, 17 CFR applied to these securities? facilitation of customer market and marketable limit 240.11Ac1–1; Exchange Act Rule 11Ac1–4, 17 CFR orders and is not available as a means of soliciting 240.11Ac1–4. C. Bid Test Flexibility in a Decimals customer orders. Moreover, the exemption letter 82 CTA Plan, Sections I(q) and VII(a)(i) for NYSE notes that whether an execution at the consolidated securities (Network A), CTA Plan, Sections I(q) and Environment best offer constitutes best execution of a customer’s VII(a) for Amex and the regional exchanges The Commission is aware of concerns trade will depend on all the facts and (Network B). These plans were adopted pursuant to about the ability to effect short sales circumstances. Rule 11Aa3–1, 17 CFR 240.11Aa3–1, which governs 85 The study was conducted using stocks listed on the dissemination of transaction reports and last using the tick test in a decimals the NYSE during the month of July, 2003. The study trade price information in national market system environment. In particular, with the did not examine the proposed bid test relative to securities (equity securities listed on national increase in the number of price points the current Nasdaq bid test. The study is available securities exchanges or included in the national from 16 to 100 per dollar as a result of in the Commission’s Public Reference Room. See market tier of Nasdaq). In general, this rule requires also Alexander and Peterson, 1999, Short Selling on an SRO to file a transaction reporting plan for such pricing in decimals, there has been an the New York Stock Exchange and the Effects of the securities, and it requires SRO members to transmit Uptick Rule, Journal of Financial Intermediation (a information required by the plans to the SROs. 1999) (concept release requesting comment on the study of, among other things, short selling 83 See Securities Exchange Act Release No. 42208 regulation of market information fees and opportunities under the current tick test in a (December 9, 1999) 64 FR 70613 (December 17, revenues). declining market).

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compared the minimum shortable price Commission stated that all trades used before the regular trading session opens (MSP) using the proposed bid test and to calculate the day’s VWAP would and the execution price of VWAP the current tick test. Under the proposed continue to be subject to Rule 10a–1.89 matched trades will be determined after bid test, the MSP is always a minimum There are also electronic trading the close of the regular trading session; increment above the bid. Under the tick systems that match and execute trades (2) the VWAP for the covered security test, if the last transaction was on an at other independently-derived prices, is calculated by: calculating the values uptick or zero-plus uptick, the MSP is such as the midpoint of the for every regular way trade reported in equal to the latest transaction price. If consolidated best bid and offer. Limited the consolidated system, or on a the latest transaction price was on a short sale relief has been granted to primary market that accounts for 75% or minus tick or a zero-minus tick, the certain systems that match customer more of the covered security’s average MSP is equal to the latest transaction orders at random times within specific daily trading volume for the security 86 90 price plus one tick. OEA found that time intervals. These systems had during the regular trading session, by the tick test was more restrictive (the requested relief from Rule 10a–1 multiplying each such price by the total because matches could potentially occur MSP was higher for the tick test than it number of shares traded at that price; at a price below the last reported sale was for the proposed bid test) 60.4% of compiling an aggregate sum of all price. Due to the passive nature of the time, the proposed bid test and tick values; and dividing the aggregate sum test were equally restrictive (the MSP pricing and the lack of price discovery, by the total number of reported shares for the tick test and the proposed bid trades executed through the systems for that day in the security; (3) the test were the same) 15.5% of the time, generally do not appear to involve the transactions are reported using a special and the proposed bid test was more types of abuses that 10a–1 was designed VWAP trade modifier; (4) short sales restrictive (the MSP was at or below the to prevent.91 used to calculate the VWAP will bid) 24.1% of the time. As this study We believe that the proposed bid test indicates, the proposed bid test should would accommodate the recent growth themselves be subject to the bid test; (5) offer more short selling opportunities of matching systems that execute trades the VWAP matched security qualifies as than the current tick test. at an independently derived price above an ‘‘actively-traded security’’ (as defined the consolidated best bid. Such under Rules 101(c)(1) and 102(d)(1) of D. Bid Test Flexibility for Passive executions would generally comply Regulation M).93 Where the subject Pricing Systems with the proposed bid test, while also listed security is not an ‘‘actively-traded We have granted limited exemptive enabling customer orders to seek security’’ or a S&P 500 Index security, relief from the tick test provisions of executions that would provide price, the proposed short sale transaction Rule 10a–1 in connection with short and possibly size, improvement. would be permitted only if it is sale transactions executed on a volume- We note, however, that there may be conducted as part of a basket transaction weighted average price (VWAP) basis.87 instances where the final execution of 20 or more securities in which the The relief is limited to VWAP price of VWAP short sale transactions subject security does not comprise more transactions that are arranged or could be at or below the closing best bid than 5% of the value of the basket ‘‘matched’’ before the market opens at for that security, and thus would violate traded; (6) the transaction is not effected 9:30 a.m. but are not assigned a price the proposed bid test. Nevertheless, we for the purpose of creating actual, or until after the close of trading when the propose codifying an exception to the apparent, active trading in or otherwise VWAP value is calculated.88 We granted bid test provisions of proposed Rule 201 affecting the price of any security; (7) a the exemption based, in part, on the fact to permit short sales at the VWAP, broker or dealer shall be permitted to act that these VWAP short sale transactions subject to the same conditions included as principal on the contra-side to fill appear to pose little risk of facilitating in the above exemptions.92 These would customer short sale orders only if the the type of market effects that Rule 10a– be the following: (1) All short sale broker or dealer’s position in the subject 1 was designed to prevent. In particular, orders will be received and matched security, as committed by the broker- the pre-opening VWAP short sale dealer during the pre-opening period of transactions do not participate in or 89 The relief is subject to a number of conditions, a trading day and aggregated across all affect the determination of the VWAP including: limiting it to only those securities which would qualify as ‘‘actively-traded securities’’ as of its customers who propose to sell for a particular security. Moreover, the defined in Regulation M (unless the security is part short the same security on a VWAP of a ‘‘basket’’) 17 CFR 242.100; that there be no pre- basis, does not exceed 10% of the 86 In OEA’s analysis, if the tick test MSP was arranged matching sale and purchase orders; a 10% subject security’s relevant average daily greater than the MSP from the proposed bid test, average daily volume limitation when acting as then the tick test was more restrictive than the principal on the contra-side of a VWAP short sale trading volume, as defined in proposed bid test because the bid test allows lower transaction; and that no transactions are made for Regulation M.94 Any VWAP short sale execution prices, and, of course, the converse the purpose of creating actual, or apparent, active transaction that does not meet these conclusion would be reached if the opposite was trading in or otherwise affecting the price of any conditions would need to comply with true. security. See, supra n. 87. 87 See e.g. Letter re: VWAP Trading System 90 See e.g. Letter re: POSIT (April 23, 2003). the bid test. In addition, all other (March 24, 1999); Letter re: Jeffries and Company, 91 The relief was also conditioned on the fact that provisions of Regulation SHO, including Inc. (Jeffco) (December 7, 2000); Letter re: POSIT none of the persons relying on the exemption the marking requirements in Rule 201 (March 30, 2001); Letter re: Morgan, Stanley & Co., would be represented in, or otherwise influence the and the locate and deliver requirements Inc. (May 11, 2001); Letter re: Vie Institutional primary market bid or offer, and that none of the Services (February 12, 2003). transactions effected on the electronic system in Rule 203, would apply. We request 88 The VWAP for each security is generally would be made for the purpose of depressing or comment on whether the proposed determined by: (1) Calculating raw values for manipulating the price of the security. Id. exception for VWAP executions, subject regular session trades reported by the Consolidated 92 We believe that these conditions have worked to these conditions, is appropriate. Tape during the regular trading day by multiplying well in restricting the exemptive relief to situations each such price by the total number of shares traded that do not appear to raise the abuses that the short at that price; (2) compiling an aggregate sum by sale price test is designed to prevent, and should 93 At this time, securities that qualify as ‘‘actively adding each calculated raw value from step one be incorporated in the proposed exception. We also traded securities’’ under Rule 101 of Regulation M above; and (3) dividing the aggregate sum by the note that market participants that have been granted and securities that comprise the S&P 500 index total number of reported shares for that day in the these exceptions have designed their programming would qualify as ‘‘actively traded securities’’ for security. See, e.g., Letter re: POSIT (March 30, and surveillance systems in accordance with these purposes of this exception. 2001). conditions. 94 17 CFR 242.100(b).

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Q. Do VWAP transactions create perverse have been significant developments in we intend to include liquid securities incentives for broker-dealers, such that they market surveillance since 1976 that now subject to futures trading in our should not be granted an exception? If an make a pilot more appropriate. Further, proposed pilot. exception is included, are there ways to the Commission and SROs now have detect and limit the effects of these perverse As a result, we believe it is incentives? access to a wide range of trading data on appropriate to propose a rule that would Q. Are the proposed conditions for the potentially manipulative trading 97 establish procedures for a temporary VWAP exception appropriate? If not, why behavior. Access to this information suspension of the trading restrictions of not? Should there be any additional greatly enhances the ability of the the price test of the Commission’s short conditions? Commission and the SROs to monitor sale rule, and any short sale price test trading behavior during the proposed of any exchange or national securities V. Pilot Program suspension of the bid test and surveil association, for a limited number of As a part of the Commission’s review for manipulative short selling. We also believe that a pilot may be securities. The securities that could be of short sale regulation, we are also included in the pilot could be proposing temporary Rule 202 of appropriate in light of the Commodity Futures Modernization Act of 2000 comprised of a subset of the Russell Regulation SHO that would suspend, on 1000 index, or such other securities as a pilot basis, the operation of the (CFMA) lifting the ban on security futures.98 Among other things, investors the Commission designates by order as proposed bid test of proposed Rule 201 necessary or appropriate in the public for specified liquid securities. We are now allowed to enter into futures contracts for the sale of individual interest and consistent with the believe that the pilot is appropriate for protection of investors after giving due several reasons. The pilot would enable securities at a fixed point in the future and at a set price. In authorizing single consideration to the security’s liquidity, us to study the effects of relatively volatility, market depth and trading unrestricted short selling on, among stock futures trading, Congress exempted transactions in security market. The relative weight given to other things, market volatility, price these factors would vary. In particular, efficiency, and liquidity. This would futures products from short sale regulation. Short security futures, i.e., the Commission would consider thus allow us to obtain empirical data including in the pilot one-third of the to assess whether short sale regulation obligating a person to make a future delivery of the underlying securities, securities in the Russell 1000 Index.100 should be removed, in part or in whole, To select the stocks for the pilot if we for actively traded securities. The pilot may function as a substitute for short 99 were to use the Russell 1000, we would would also allow the Commission to selling the underlying stock. We believe that to the extent possible, sort the Russell 1000 by average daily determine the extent to which the dollar volume over the calendar year proposed bid test achieves the three consistent with investor protection, one market should not benefit over another prior to the start of the pilot and use an objectives of short sale regulation because of regulatory differences. Thus, objective method that would create two through the comparison of trading samples that should be approximately activity of similar stocks subject to the (March 17, 1977). Another commenter stated that similar in average market value and test and those not subject to the test. the tick test should be retained to prevent average volume.101 Of course, as noted In 1976 the Commission proposed a manipulative short selling even though some above, the Commission might include suspension of the tick test as a part of arguments could be made that short selling helps different stocks in the pilot or base the a comprehensive review of short sale adjust markets to their proper levels more quickly. The commenter stated that it was beneficial to pilot on a different broad-based index if regulation that was designed to obtain retain Rule 10a–1 until such time a rule could be it were necessary or appropriate in the statistical data regarding short selling.95 devised that distinguished between manipulative public interest and consistent with the The pilot was never implemented due to and non-manipulative short sales. See Letter from protection of investors. concerns expressed by trading markets Frank A. Hutson, Jr., Chairman, Securities Law Committee, American Society of Corporate 96 While we recognize that the price of and listed companies. However, there Secretaries, Inc., to George A. Fitzsimmons, Secretary, SEC (May 3, 1977). any security can be manipulated, we 95 See Securities Exchange Act Release No. 13091 97 For example, the NYSE has since implemented believe that as trading volume increases, (December 21, 1976), 41 FR 56530. We proposed both on-line and off-line automated surveillance it becomes less likely that a trader three alternative temporary rules that would have capability, and monitors trading on both a real-time would be able to cost-effectively suspended the tick test to varying degrees in order and next day basis. Further, the NYSE also utilizes for critical data to be collected. The three an audit trail through its Intermarket Surveillance alternative temporary rules would have: (1) Information System (ISIS) data base. Securities 100 The Russell 1000 Index comprises the 1,000 Suspended the operation of the short sale rule for Exchange Act Release No. 22183 (June 28, 1985) 50 largest companies in the Russell 3000 Index all securities registered, or admitted to unlisted FR 27875 (July 8, 1985). Further, NYSE adopted a (approximately 92% of the total market trading privileges on a national securities exchange; rule requiring all transactions in NYSE-listed stocks capitalization of the Russell 3000 Index). Inclusion (2) suspended the operation of the tick test only for that are not reported to the Consolidated Tape to in the Russell 1000 index is based completely on equity securities (other than warrants, rights, or be reported to the Exchange in order to provide an objective criteria, i.e., market capitalization. A pilot options) that are registered, or admitted to unlisted accurate record of overall trading activity. In its containing stocks from the Russell 1000 index trading privileges, on more than one national filing with the Commission, NYSE stated that the would allow us to analyze the effects of removing securities exchange and for which transactions were information obtained pursuant to the rule will price restrictions on a broad range of liquid reported in the consolidated system; and (3) ‘‘augment and enhance its ability to surveil for and securities. A narrower index of liquid securities suspended the operation of the tick test only for the investigate, among other matters, insider trading, might not provide the breadth of information fifty most active equity securities (other than frontrunning, and manipulative activities, * * *’’ necessary to make an accurate determination of warrants, rights, or options) during the 12 calendar Securities Exchange Act Release No. 31358 (October these effects. Conversely, broader indexes may months preceding the effective date of the rule. 26, 1992) 57 FR 49736 (November 3, 1992) (order contain certain securities that could be considered However, the Commission withdrew this and other approving NYSE Rule 410B). less liquid, which may not be appropriate for a pilot short sale rule proposals largely because 98 Pub. L. 106–554, 114 Stat. 2763 (2000). Futures that focuses on short selling in liquid securities. commenters did not support the changes. Securities involving single stocks are generally defined as 101 In addition, both samples should also contain Exchange Act Release No. 17347 (December 1, futures contracts (or options thereon) on single non- Nasdaq and NYSE stocks, optionable stocks, stocks 1980), 45 FR 80834 (December 8, 1980). exempt securities and narrow based groups or with associated security futures, and both value and 96 One commenter expressed concern that indices of non-exempt securities. growth stocks. We hope that both samples would removal of the tick test might accelerate market 99 We note that the CFMA exception was a have similar average short interest and similar declines and increase volatility as well as create departure from traditional short sale regulation, expected volatility. Even if the two samples differ distortions in the market for secondary or tertiary which is security-based rather than market-based slightly along these dimensions, researchers can stocks. See Letter from James E. Buck, Secretary, (i.e., the tick test applies to a security irrespective control for the variations using regression NYSE, to George A. Fitzsimmons, Secretary, SEC of the market in which the short sale occurs.) techniques.

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manipulate the price of a security.102 Q. Is the proposed selection method for the In the event that the seller’s shares are Further, the high levels of transparency pilot, including our contemplated use of the not delivered to the broker-dealer prior and surveillance for actively-traded Russell 1000, appropriate? If not, what other to settlement, borrowed shares may be securities on exchanges and other selection method should be considered? Is it used to consummate the sale. By possible that one market could benefit over regulated markets make it more likely another market depending on the selection of definition, when borrowed shares are that any manipulation would be stocks for the pilot? delivered, the sale is a short sale. We detected and pursued.103 Q. Should the short sale price test be believe that this exception continues to The proposed temporary Rule 202 automatically reinstituted in extraordinary be necessary to facilitate those limited would remain in effect for two years. market conditions, for instance, if, on an circumstances where the seller owned We anticipate that a partial, two-year intraday basis, the price of a security falls the securities at the time of sale, suspension of the short sale rule would more than a certain percentage based on the however delivery may be briefly allow the Commission to gather and day’s opening price (e.g., if the price of a delayed, as when an option, right or analyze the data necessary to reach security falls 10% from the day’s opening warrant has been exercised but the price short sale restrictions would be conclusions regarding trading behavior reinstituted)? underlying security has not yet been in the absence of short sale price Q. The pilot, in part, would allow the received by the seller. We propose to restrictions. The sample period should Commission to obtain data to assess whether retain this exception from the proposed provide data on advancing and the price test should be removed for some bid test substantially unchanged.106 declining markets, high volume and low types of securities and to study trading Q. Should this exception be retained in its volume, and different stages of volatility behavior in the absence of the proposed bid current form? so that the suspension can be studied test. After analyzing the results of the pilot, Q. Is this exception outdated? 104 the Commission may propose that the bid fully. 2. Error in Marking a Short Sale The Commission notes that the test be removed for certain exchange-listed and NMS securities. Should the Commission general anti-fraud and anti- Subsection (e)(2) of Rule 10a–1 has await the results of the pilot before applying also existed since the inception of the manipulation provisions of the federal the uniform bid test to exchange-listed and securities laws would continue to apply Nasdaq NMS securities that may later have Rule. This exception protects brokers in to trading activity in these securities, the bid test removed? the event they execute a sale already thus prohibiting trading activity Q. Should the pilot apply to existing short marked long by another broker-dealer, designed to improperly influence the sale rules even if we do not adopt the new but the sale turns out to be a short sale. price of a security.105 Further, the pilot uniform bid test? The broker-dealer that marks the order would only suspend the operation of the Q. The securities included in the pilot long must abide by the provisions of the proposed bid test. All other provisions would still be marked and specialists and marking requirement that dictates when market makers can observe this mark prior to an order may be marked long and the of proposed Regulation SHO, including executing the short sale. How would this the marking requirements of Rule 201 executing broker-dealer may rely on this affect the outcome and reliability of the pilot, marking when executing the sell order. and the locate and deliver requirements if at all? of Rule 203, would continue in effect. This exemption was created to avoid Finally, the Commission could VI. Rule 10a–1 Exceptions implicating a broker that has terminate the operation of the pilot, in Paragraph (e) of Rule 10a–1 currently unknowingly participated in a violation whole or in part, prior to the end of the contains 13 exceptions to the tick test of the Rule, and we believe the basis for proposed two-year period as it designed to permit certain types of including the exception still makes 107 determines necessary or appropriate in trading activities that were intended to sense in the current environment. We the public interest or to protect benefit the markets or that were propose to retain this exception 108 investors by removing all securities believed to carry little risk of the kind substantially unchanged. selected for inclusion in the pilot. of manipulative or destabilizing trading Q. Should this exception be retained in its Q. Is the proposed rule temporarily that the Rule was designed to address. current form? suspending the short sale price test for liquid We have reviewed these exceptions in 3. Odd Lot Transactions stocks appropriate? Are liquid stocks more light of proposed Rule 201, and we difficult to manipulate through short selling? propose modifying some exceptions for An exception for certain odd-lot Q. Is a two-year temporary suspension of transactions was created in an effort to the short sale price test a sufficient period to inclusion in Rule 201 and excluding other exceptions from the Rule. reduce the burden and inconvenience fully study the impact? If not, what time that short sale restrictions would place period should be selected? Commenters A. Exceptions Proposed To Be Retained on odd-lot transactions. In 1938, the should provide specific reasons to support Commission found that odd-lot their view in favor of establishing another 1. Long Seller’s Delay in Delivery time period. transactions played a very minor role in Subsection (e)(1) of Rule 10a–1 has potential manipulation by short selling. existed since the inception of the short 102 See Securities Exchange Act Release No. Initially, sales of odd-lots were not 37094 (April 11, 1996), 61 FR 17108 (April 18, sale rule in 1938. This exception allows subject to the restrictions of Rule 10a– 1996) (proposing anti-manipulation rules including short sales to be effected without regard 1.109 However, the Commission became an exception to the rules for trading activity in high to the current tick test if the seller owns ADTV securities). the security sold and intends to deliver 106 See subparagraph (d)(1) of proposed Rule 201 103 Id. such security as soon as is possible of Regulation SHO. 104 The Commission would study data from the without undue inconvenience or 107 This exception does not apply where a broker- pilot to determine the effect that the removal of the dealer knows or has reason to know that an order proposed bid test has on trading in the pilot expense. It was created so that sellers is incorrectly marked long. Knowledge may be securities. By the end of the two year period, we who actually own a security will not be inferred where a broker-dealer repeatedly accepts would consider extending the pilot in light of penalized in the event they are unable orders marked long from the same counterparty but trading data and whether to pursue rulemaking to to deliver the security to their broker requires borrowed shares for delivery or results in permanently remove the proposed bid test for a a ‘‘fail to deliver’’ on several occasions. segment of securities. prior to settlement, despite every 108 See subparagraph (d)(2) of proposed Rule 201 105 See, e.g., Securities Act Section 17(a), intention of doing so, or in the event the of Regulation SHO. Exchange Act Sections 9(a), 10(b), and 15(c) and certificate turned in by the seller is not 109 The Commission initially adopted three Rules 10b–5 and 15c1–2 thereunder. in a form appropriate for transferring. exceptions for odd-lot transactions. While the first

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concerned over the volume of odd-lot an exception for all odd-lot transactions pose person sells short securities to profit transactions, which possibly indicated a risk of increased short sale manipulation, from a current price differential based that the exception was being used to e.g., would traders break up trades into 99 upon a convertible security that entitles circumvent the Rule. As a result, the share odd-lots in order to avoid the price him to acquire an equivalent number of test? exception was changed to the present securities of the securities sold short, he two exceptions.110 4. Domestic Arbitrage must subsequently tender the Subparagraph (e)(3) is limited to odd- Current subsection (e)(7) of Rule 10a- instrument for conversion to obtain the lot dealers registered in the security and 1 was adopted in 1938 to allow short underlying securities and complete the third-market makers. The exception selling associated with certain bona fide arbitrage in order to satisfy the terms of allows short sales by odd-lot dealers domestic arbitrage transactions.112 In the exception. We have also proposed registered in the security and by third adopting this exception, we stated that minor amendments to the language of market-makers (of covered securities) to it ‘‘applies only to bona fide arbitrage the exception to make it more fill customer odd-lot orders. transactions in a security effected, under understandable. Subparagraph (e)(4) provides relief for certain circumstances described in the Q. Should the exception be retained for any sale to liquidate an odd-lot position purposes of the proposed Rule 201? If not, exception, by persons who own rights or by a single round lot sell order that state specific reasons why the exception privileges entitling them to acquire that changes such broker-dealer’s position by should be removed from the Rule. security.’’ 113 The exception has no more than a unit of trading. We Q. Minor changes have been made to the remained unchanged since its adoption. understand the odd lot exception to still text of existing exception (e)(7) in the The term ‘‘bona fide arbitrage’’ proposed rule to simplify its language. Are be of utility and not in conflict with the generally describes an activity goals of the proposed bid test. We these changes helpful? Does the proposed undertaken by market professionals in amendment to the exception alter its propose combining the two exceptions which essentially contemporaneous into one odd-lot exception under meaning in a way that would affect its purchases and sales are effected in order substance? subparagraph (d)(3) of Rule 201 of to lock in a gross profit or spread Q. Is the proposed amended exception too proposed Regulation SHO. resulting from a current differential in narrow or too broad? If so, state specifically In addition, we propose extending pricing of two related securities.114 The why, and how it should be restructured in these exceptions to all market makers Commission continues to believe that relation to the purposes of Regulation SHO. acting in the capacity of an odd-lot bona fide arbitrage activities are Q. Should the requirement that the dealer. When the Rule was adopted, beneficial to the markets because they transactions be made in a separate domestic odd-lot dealers dealt exclusively with tend to reduce pricing disparities arbitrage account be eliminated? If so, should odd-lot transactions, and were so between securities.115 These activities the exception permit domestic arbitrage to be registered. Today, specialists assigned to effected in an arbitrage account in which also carry limited risk of the kind of a security are typically the odd-lot international arbitrage could also be effected? manipulative or destabilizing trading dealer in that security. We propose to Q. Should exception (e)(7) be combined that Rule 10a–1 was designed to broaden the use of this exception to all with (e)(8), the international arbitrage address. brokers or dealers acting as ‘‘market exception? Would such a combination create We therefore propose that proposed makers’’ in odd-lots.111 compliance problems or other issues? Odd-lot transactions by market Rule 201 of Regulation SHO would Recently, Commission staff has makers to facilitate customer trades are retain the general exception contained received inquiries regarding the generally not of a size that could in (e)(7). Subparagraph (d)(5) of Rule operation of (e)(7) in the context of a facilitate a downward movement in the 201 would continue to except short corporate merger. In particular, market market. Therefore, those acting in the sales effected in bona fide arbitrage participants have sought advice whether capacity of a ‘‘market maker’’ should be transactions involving convertible, upon finalization of a merger agreement, able to off-set customer odd-lot orders exchangeable, and other rights to wherein a date certain is determined for and liquidate an odd-lot position by a acquire the securities sold short, where the merger, a party who is entitled to single round lot sell order that changes such rights of acquisition were receive stock of the acquiring company such broker-dealer’s position by no originally attached to or represented by under the terms of the merger agreement more than a unit of trading without another security, or were issued to all is entitled to sell short this stock regard to the restrictions of the current the holders of any such class of without regard to the tick test pursuant tick test or proposed bid test. securities of the issuer. In addition, we have proposed adding language to the to the domestic arbitrage exception. Q. Are these exceptions relating to odd-lots exception to require a person relying on Unlike the arbitrage contemplated in appropriate in today’s markets? the exception to subsequently acquire or (e)(7), the right to acquire another Q. Should these exceptions apply to all market makers in odd-lots or should the purchase the security upon which the security in a merger scenario arises only 116 exception be more limited? arbitrage is based. For example, if a by the terms of the merger agreement Q. Are these odd-lot exceptions susceptible and not through a right vested in the to abuse? 112 Securities Exchange Act Release No. 1645 security itself. We believe that this type Q. Should all odd-lot transactions have an (April 8, 1938). of arbitrage is not within the scope of exception from the Rule? Would providing 113 Id. paragraph (e)(7), and therefore we are 114 See Securities Exchange Act Release No. 15533 (January 29, 1979), 44 FR 6084 (January 31, not proposing to include it. one, excepting all odd-lot transactions, seemed to 1979) (interpretation concerning the application of make other odd-lot exceptions unnecessary, the Q. Should short sales effected in Section 11(a)(1) to bona fide arbitrage). 1938 adopting release included all three exceptions connection with a merger be excepted from 115 without discussion. Securities Exchange Act Id. the provisions of Rule 201? If so, at what Release No. 1548 (January 24, 1938), 3 FR 213 116 As discussed, the Commission has interpreted point in the merger process should a party be (January 26, 1938). the term ‘‘bona fide arbitrage’’ to involve the deemed entitled to acquire the acquiring 110 See Securities Exchange Act Release No. contemporaneous purchase and sale of securities company’s stock? 11030 (September 27, 1974), 39 FR 35570. effected to ‘‘lock in’’ a gross profit or spread from 111 The definition of a ‘‘market maker’’ is found a current differential in pricing. Id. We believe in Section 3(a)(38) of the Exchange Act, and requiring a person relying on the exception to which the arbitrage is based is consistent with this includes specialists. 15 U.S.C. 78c(a)(38). subsequently acquire or purchase the security upon interpretation.

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5. International Arbitrage Q. Should the requirement that the exception, as discussed in further detail transactions be made in a separate The international arbitrage exception below, permits market makers to effect international arbitrage account be short sales on a zero-minus tick (i.e., at in Rule 10a–1 (e)(8) has also remained eliminated? If so, should the exception unchanged since its adoption in the same price as the last trade price), permit international arbitrage to be effected but does not permit short sales, either as 1939.117 The international arbitrage in an arbitrage account in which domestic exception was added following an arbitrage could also be effected, rather than a dealer or agent, at a price lower than extended study of international in a separate international arbitrage account? the last trade price reported in the arbitrage operations in their relation to Q. Should exception (e)(8) be combined consolidated system (i.e., on a minus short selling.118 The Commission with (e)(7), the domestic arbitrage exception? tick). As a result, there arose a potential concluded that the exception was Would such a combination create compliance conflict between the operation of Rule problems or other issues? necessary to facilitate ‘‘transactions 10a–1 and the ‘‘firmness requirement’’ 123 of the Quote Rule in which are of a true arbitrage nature, 6. Distribution Over-Allotment namely, transactions in which a situations where execution of an offer position is taken on one exchange Subsection (e)(10) generally excepts quotation by a broker or dealer would be from Rule 10a–1 sales of securities by rendered unlawful because of a trade- which is to be immediately covered on 124 a foreign market.’’ 119 underwriters or syndicate members through even though the offer had The Commission proposes to retain participating in a distribution in been at a price permitted under Rule the international arbitrage exception connection with an over-allotment, and 10a–1 at the time that broker or dealer because we understand that the any lay-off sales by such a person in had communicated it to its exchange or exception is still being used and does connection with a distribution of association for inclusion in the 125 not conflict with the goals of the securities through rights or a standby consolidated quotation system. proposed bid test. As with the domestic underwriting commitment.120 Proposed In order to resolve this potential arbitrage exception, we have proposed Rule 201 would retain the over- conflict, the Commission adopted amendments to the language in the allotment exception in substance, (e)(5)(ii) to permit market makers to exception in order to make it more although minor changes have been execute transactions at their offer understandable. In addition, we have made to simplify its language.121 Under following a trade-through, and (e)(11) to incorporated language from current the proposed bid test, the exception permit non-market makers to effect a exception (e)(12) of Rule 10a–1 that would permit short sales in connection short sale at a price equal to the price provides that, for the operation of the with an over-allotment at or below the associated with their most recently bid, thus enabling an underwriter to communicated offer up to the size of international arbitrage exception, a 126 depositary receipt for a security shall be price an offering at or below the last bid. that offer so long as the offer was at deemed to be the same as the security We propose including this exception in Rule 201 of Regulation SHO because 123 17 CFR 240.11Ac1–1(c)(1). The Quote Rule represented by the receipt. This requires that, subject to certain exceptions, the language was originally included in the these sales are all at the offering price broker or dealer responsible for communicating a Commission’s 1939 release adopting the and, therefore, do not implicate one of quotation shall be obligated to execute any order to international arbitrage exception, but the goals of short sale regulation, i.e., buy or sell presented to him, other than an odd lot preventing short sellers from order, at a price comprising the responsible broker was incorporated separately in or dealer’s published bid or offer in any amount up subparagraph (e)(12). We believe this accelerating a declining market by to his published quotation size. provision should be moved from its exhausting all remaining bids at one 124 A trade-through generally occurs when an current location to the international price level. Intermarket Trading System (ITS) participant purchases an ITS security at a price that is higher arbitrage exception because it directly Q. Is this exception necessary? Under what than the displayed price at which the security is pertains to the operation of that circumstances would an underwriter or being offered at another ITS participating market, or exception. syndicate member price an offering below the sells an ITS security at a price that is lower than best bid? Would extending the exception to the displayed price at which the security is being Q. Should the international arbitrage short sales below the bid have any negative bid at another ITS participant. exception be retained for purposes of the market impact? 125 The following example from the release proposed Rule 201? If not, state specific adopting the exception illustrates the potential reasons why the exception should be conflict: A market maker who currently has a short removed from the Rule. 7. Equalizing Short Sales and Trade- position in XYZ stock communicates an offer Q. Minor changes have been made to the Throughs which, if executed against at that time, would be proposed rule to simplify the language of the Exceptions (e)(5)(ii) and (e)(11) were in compliance with Rule 10a–1, e.g., at a price of existing exception. Are these changes 201⁄8 when the last trade price reported in the adopted in order to eliminate a potential 1 helpful? Do they alter the meaning of the consolidated system is also 20 ⁄8. There is a ‘‘trade exception in a way that diminishes its value conflict between Rule 10a–1 and Rule through’’ of the market maker’s offer on another market center that causes an up-tick to be reported or prohibits bona fide international arbitrage 11Ac1–1 under the Exchange Act (Quote Rule).122 The (e)(5) equalizing in the consolidated system at 201⁄4. Finally, a buy activity in relation to Rule 201? order is sent to the market maker after the trade Q. Is the proposed amended exception too through at 201⁄4 has been reported. In order to narrow? If so, state specifically why it is too 120 See Securities Exchange Act Release No. ensure compliance with 10a–1, the market maker narrow and how it should be restructured to 11030 (September 27, 1974), 39 FR 35570 (October must refuse to execute the order at his offer of 201⁄8 allow beneficial international arbitrage 2, 1974). Although the exception was not adopted because doing so would result in a short sale being activity that does not carry the kind of until 1974, the Commission’s approval of the effected on an impermissible minus tick, however, manipulative or destabilizing trading that concept of excepting over-allotments from the short in refusing to effect the trade, he would arguably sale rule is long-standing. See, e.g., Securities proposed Rule 201 is designed to address. violate the ‘‘firmness requirement’’ of the Quote Exchange Act Release No. 3454 (July 6, 1946), in Rule. In addition, when a market maker ‘‘backs which the Commission approved the NYSE’s away’’ from an order, he may, in effect be revealing 117 Securities Exchange Act Release No. 2039 special offering plan, which permitted short sales that he had a short position in the security, thus (March 10, 1939). in the form of over-allotments to facilitate market making it more difficult to liquidate that position 118 Id. stabilization. at favorable prices. See, supra n. 122. 119 Id. We believe that the provision necessitating 121 See subparagraph (d)(7) of proposed Rule 201 126 The Commission explained in the release that that the transaction be ‘‘immediately’’ covered on of Regulation SHO. the scope of the exception in Rule 10a–1(e)(11) was a foreign market requires the foreign market to be 122 See Securities Exchange Act Release No. limited to the size of the broker or dealer’s open for trading at the time of the transaction in 17314 (November 20, 1980), 45 FR 231 (November displayed offer because the need for the exception order to qualify for this exception. 28, 1980). only arises to the extent that the broker or dealer’s

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a price, when communicated, that was prior releases that continued locking equal to its posted offer when the permissible under Rule 10a–1. The and crossing of the market can market is locked or crossed, when (e)(11) exception was added in response negatively impact market quality, and consistent with best execution to several comments that, in addition to have approved SRO rules aimed at obligations, provided however, that the orders for their own account, specialists reducing the frequency of locked and exception would not apply to any and other floor members also often crossed markets and providing more broker-dealer who initiated the locked represent as part of their displayed informative quotation information, or crossed market. quotation orders of other market facilitating price discovery, and Q. Would an exception from the proposed participants (e.g., public agency orders contributing to the maintenance of a fair bid test permitting a short sale to be effected or proprietary orders of non-market and orderly market.130 at the consolidated best offer if the market is makers) that also might be ineligible for However, we recognize that locked locked or crossed be useful or necessary to execution under Rule 10a–1 following a and crossed markets have not been remedy problems associated with locked and trade-through in another market.127 eliminated entirely, and thus the same crossed markets? If so, describe such We believe that the rationale for conflict between the firm quote rule and circumstances and the market participants to adopting exceptions (e)(5)(ii) and the short sale rule could arise under the whom the exception should apply. proposed bid test. We believe that this Q. Would such an exception be used (e)(11), namely resolving a conflict appropriately to remedy the problem of between the short sale rule and the situation would exist where a market locked and crossed markets, or could such an quote rule arising from a trade-through, participant posts an offer to sell short at exception be susceptible to abuse? Is there would not exist under the proposed bid a valid price, i.e., above the best bid, but another way to design an exception for test. Under the proposed rule, the the bid subsequently moves up and locked and crossed markets? reference point for a market participant either locks or crosses the market Q. Some market participants that provide seeking to execute a short sale would participant’s posted offer. A market their customers with guaranteed executions not be the last trade price, which could participant in this situation could still of their buy orders at a price equal to the be a down tick created by a trade be required to execute buy orders consolidated best offer would be prevented from selling short to fill customer buy orders through, but rather the current directed to its posted offer, which would be at or below the best bid.131 in a locked or crossed market, due to the fact consolidated best bid. that the short sale would be executed at a It appears that under the proposed bid The Commission thus proposes to price equal to or below the best bid. Should test, a comparable situation as that include an exception to Rule 201 of there be an exception to allow these market envisioned under (e)(5)(ii) and (e)(11) Regulation SHO permitting a participants to execute short sales at their would result in a locked or crossed responsible broker-dealer, as defined in offer to facilitate customer buy orders in market.128 Locking or crossing a quote Rule 11Ac1–1 under the Exchange locked or crossed markets? Act 132 to effect a short sale at a price temporarily frustrates trading in a B. Exception Proposed To Be Eliminated particular security, and there are various rules and regulations that guard against locked and crossed market by executing Exception (e)(6) of Rule 10a–1, the such practices.129 We have stated in transactions with all market makers whose original ‘‘equalizing exception,’’ was quotations would be locked or crossed. Pursuant to adopted by the Commission in 1938 to the provisions of paragraph (b) of this Rule 4613, obligations under the Quote Rule may conflict with a market maker whose quotations are causing a allow a short sale of a security on a Rule 10a–1. Because the firmness requirement of locked or crossed market is required to execute regional exchange at the same price as the Quote Rule only applies to a broker or dealer’s transactions at its quotations as displayed through the then current price for the same displayed offer, it was deemed appropriate to limit Nasdaq at the time of receipt of any order.’’ security on the principal exchange, even the exception to the size of the displayed offer. See, 130 See Securities Exchange Act Release No. supra n. 122 at n.20. 43863 (January 19, 2001), 66 FR 8020, 8046 (January though the short sale on the regional 127 This concern was illustrated with the 26, 2001); Securities Exchange Act Release No. exchange would constitute a zero-minus following example: A specialist who is short XYZ 46410 (August 23, 2002), 67 FR 55897 (August 30, or minus tick in relation to the last stock quotes an offer for 1,000 shares at 201⁄8 at a 2002) (File No. SR–NASD–2002–56). See also preceding trade price on the principal time when the last sale reported in the consolidated Securities Exchange Act Release No. 47735 (April 133 system was such that the offer, if executed at that 24, 2003), 68 FR 23787 (May 5, 2003) (File No. exchange. The exception, limited to time, would be in compliance with Rule 10a–1. NASD–2003–38). short sales effected on an exchange, This offer for 1,000 shares consists of 300 shares 131 See 17 CFR 240.11Ac1–1; see also supra n. permitted regional specialists to offered by the specialist, a 400-share limit order in 129. Paragraph (b) of Rule 4613 is the NASD Firm guarantee execution at a price at least as the specialist’s book, and an offer from the crowd Quote Rule. favorable to the customer as he would at the specialist’s post for 300 shares, all at 201⁄8. 132 Rule 11Ac1–1(a)(21) defines the term A trade through of this offer occurs on another responsible broker or dealer to mean: (i) When used have obtained had his order been exchange and an up-tick is reported in the with respect to bids or offers communicated on an exposed to the principal exchange consolidated system at 201⁄4. A buy order for 1,000 exchange, any member of such exchange who market.134 The Commission believed 1 shares at 20 ⁄8 is then sent to the exchange—after communicates to another member on such that unless the regional exchanges were the trade through at 201⁄4 is reported. Without exchange, at the location (or locations) designated (e)(11), filling the complete order for 1,000 shares by such exchange for trading in a covered security, would not be permissible, since (e)(5)(ii), by its a bid or offer for such covered security, as either dealer or to a customer otherwise than on an terms, applies only to a sale by a market maker for principal or agent; provided, however, That, in the exchange, the member communicating the bid or its own account. Id at n.18. event two or more members of an exchange have offer (regardless of whether such bid or offer is for 128 In a locked market, the best bid price equals communicated on such exchange bids or offers for its own account or on behalf of another person). the best ask price; in a crossed market, the best bid a covered security at the same price, each such 133 Securities Exchange Act Release No. 1579 price exceeds the best ask price. For example, member shall be considered a ‘‘responsible broker (February 10, 1938), 3 FR 382 (1938). At the time assume that the current consolidated best bid for a or dealer’’ for that bid or offer, subject to the rules the exception was adopted (and until April 30, security is 10.00. A market participant who has a of priority and precedence then in effect on that 1976) the permissibility of short sales under Rule short position in a security posts an offer to sell at exchange; and further provided, That for a bid or 10a–1 was determined for each particular exchange 10.05. The market participant would be able to offer which is transmitted from one member of an by comparing the price of the proposed short sale execute its short sale so long as it was above the exchange to another member who undertakes to to the immediately preceding last trade price in the consolidated best bid. Any bid that was posted at represent such bid or offer on such exchange as security to be sold short on that exchange. 10.05 would lock the market, and any bid posted agent, only the last such member who undertakes 134 Pursuant to the Rule, such sales are excepted above 10.05 would cross the market. to represent such bid or offer as agent shall be only with the approval of the exchange, and only 129 See, e.g. NASD Rule 4613(e). NASD Rule considered the ‘‘responsible broker or dealer’’ with if (1) trades in the security are not reported 4613(e)(2) states that ‘‘A market maker shall, prior respect to that bid or offer; and (2) when used with pursuant to an effective transaction reporting plan to entering a quotation that locks or crosses another respect to bids and offers communicated by a and (2) information as to such trades is not made quotation, make reasonable efforts to avoid such member of an association to another broker or available on a real-time basis.

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allowed to fill purchase orders at prices ‘‘zero-minus tick’’).139 Concurrent with Commission found that ETFs should that would have been obtained on the the adoption of subsection (e)(5)(i), rise or fall based on changes in the net principal exchanges, regional exchanges exception (e)(6) was amended to apply asset value of the component stocks of would be unable to attract sufficient only to short sales of securities covered the particular index and supply and order flow to remain viable.135 by Rule 10a–1(b), i.e., to short sales of demand.143 In 1975 the Commission adopted exchange-listed securities that are not The relief is subject to a number of amendments to Rule 10a–1 in reported to the consolidated system or specified conditions. In particular, the conjunction with the full made available on a real-time basis.140 corresponding index or portfolio implementation of the consolidated We do not believe that the equalizing represented by the ETF must consist of transaction reporting system exceptions should be retained as part of a ‘‘basket’’ of twenty or more different (‘‘consolidated system’’).136 As proposed Regulation SHO. The rationale component stocks, in which the most amended, Rule 10a–1 applies a tick test for exceptions (e)(6) and (e)(5)(i), i.e., heavily weighted component stock referencing the last trade price reported allowing short selling at a price that cannot exceed 25% of the weight of the in the consolidated system, however matches a given security’s last trade index or portfolio. Moreover, the permits an exchange to make an election price on another market center, would component stocks that in the aggregate to use a tick test that references the last not exist under our proposed short sale account for a least 85% of the weight of trade price reported in that exchange rule. The proposed rule would reference the underlying index or portfolio must market.137 the real-time consolidated best bid have a minimum public float value of at In addition to altering the reference rather than the last trade price, and least $150 million and, with certain would not depend on prices in exceptions, a minimum ADTV with a point for determining the permissibility 141 of short sales, the amendments also individual markets. We therefore do value of at least $1 million during each altered the reference point for the not believe that a registered specialist or of the previous 2 months of trading permissibility of equalizing short sales. exchange market maker would need to prior to the formation of the ETF series. Subsection (e)(5)(i) was added to ‘‘equalize’’ their price with a price on We believe that these conditions provide an exception for short sales of another market center. continue to be necessary to ensure the composition of the ETFs is such that certain securities effected by a registered Q. Is there any reason why exception (e)(6) short selling in the ETFs does not specialist, exchange market maker, or should be retained? implicate the type of trading activity third market maker at a price equal to Q. Is there any reason why exception (e)(5)(i) should be retained? For example, that short sale regulation was designed the last price reported in the would broker-dealers that provide customers 138 to prevent. consolidated system. The exception with executions at a price equal to The relief previously granted under applies to short sales of securities transaction prices on a primary exchange Rule 10a–1 would continue to apply to registered or admitted to unlisted require an exception to facilitate customer cover exemptions from the price test buy orders? trading privileges on an exchange, provisions of Rule 201 of Regulation whether effected on an exchange or SHO. over-the-counter, if transactions in the VII. Prior Exemption Letters Under security are reported pursuant to an Rule 10a–1 Q. Should the Commission provide relief from proposed Rule 201 of Regulation SHO effective transaction reporting plan and A. Exchange Traded Funds for transactions in ETFs? If so, are the made available on a real time basis to Exchange Traded Funds (ETFs) are conditions for relief appropriate? If not, vendors of market transaction designed to provide investment results please explain why. information. that correspond generally to price and Q. Should the relief be codified as an The exception is intended to permit exception to proposed Rule 201 of Regulation yield performance of securities included SHO? market professionals to protect customer in a particular index or securities orders against transactions in other portfolio. In light of the composite and markets in the consolidated system by B. Short Sales Executed at the Closing derivative nature of ETFs, the Price allowing them to sell short at a price Commission found that trading in ETFs equal to the last trade price reported in would not be susceptible to the The Commission has granted the consolidated system, even if that practices that Rule 10a–1 is designed to conditional relief from the price test sale was on a minus tick (a so-called prevent and granted an exemption from provisions of Rule 10a–1 to allow requesting exchanges 144 and broker- Rule 10a–1 for transactions in these 145 135 See Securities Exchange Act Release No. securities.142 In particular, the dealers to execute short sales in after- 11468 (June 12, 1975), 40 FR 25442 (June 16, 1975) hours crossing sessions at a price equal (adopting amendments to Rule 10a–1 and discussing the operation of Rule 10a–1(e)(6) as in 139 Securities Exchange Act Release No. 11030 Select Sector SPDRs (December 14, 1998); Letter re: effect prior to and after amendment). (September 27, 1974), 39 FR 35570. 140 Units of the Nasdaq-100 Trust (March 3, 1999); 136 Paragraph (b) of Rule 10a–1 applies to any Id. Letter re: ETFs (August 17, 2001) (class letter). 137 short sale effected on a national exchange of any 17 CFR 240.10a–1(a)(2). This aspect of the 143 The Commission, however, did not provide short sale rule, as amended, was designed to security not covered by paragraph (a) of Rule 10a– 1. Paragraph (a), in turn, covers any short sale any relief from the tick test for short selling of the ameliorate potential regulatory and operational effected on a national exchange of any security individual component stocks underlying an ETF. problems perceived by certain exchanges with a registered or admitted to unlisted trading privileges uniform short sale rule employing a tick test 144 See, e.g., Letter re: Off-Hours Trading by the on a national exchange, if trades in the security are referenced to the consolidated system. Id. Amex, [1991] Fed. Sec. L. Rep. (CCH) ¶ 79,802 reported pursuant to an ‘‘effective transaction 138 (August 5, 1991); Letter re: Operation of Off-Hours Rule 10a–1(e)(5)(i) exempts: Any sale of a reporting plan’’ and if information as to such trades Trading by the NYSE, [1991] Fed. Sec. L. Rep. security covered by paragraph (a) of this section is made available on a real-time basis to vendors of (CCH) ¶ 79,736 (June 13, 1991). (except a sale to a stabilizing bid complying with market transaction information. § 242.104 of this chapter) by a registered specialist 145 See, e.g., Letter re: Burlington Capital Markets or registered exchange market maker for its own 141 We have proposed eliminating Rule 10a– (July 1, 2003); Letter re: Bear, Stearns & Co., Inc. account on any exchange with which it is registered 1(a)(2), and thus any market center would be (January 19, 1996); Letter re: AZX, Inc. (November for such security, or by a third market maker for its prevented from relying on its own bid as a reference 15, 1995); Letter re: Instinet Corporation Crossing own account over-the-counter, (i) Effected at a price point for compliance with the rule. See, infra part Network, [1992] Fed. Sec. L. Rep. (CCH) ¶ 76,290 equal to or above the last sale, regular way, reported XII. (July 1, 1992); Letter re: Portfolio System for for such security pursuant to an effective 142 See, e.g., Letter re: SPDRs (January 27, 1993); Institutional Trading, [1991–1992] Fed. Sec. L. Rep. transaction reporting plan. Letter re: MidCap SPDRs (April 21. 1995); Letter re: (CCH) ¶ 76,097 (December 31, 1991).

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to the closing price of the security.146 The chief reason advanced in support We are also concerned that the Absent relief, such short sales could of the NASD market maker exception is exception may be being used by entities violate Rule 10a–1, in that the matching that it enhances liquidity by permitting that are not actually engaged in bona- price (the closing price) of a security market makers to adjust inventory fide market making.155 For example, could be on a minus or zero-minus tick positions quickly.149 If market makers some issuers and investors have argued with respect to the last sale in the were required to wait for an upbid to that some market makers are relying on consolidated transaction reporting make a short sale, it is asserted that their the exception to continuously sell short system. In granting this conditional ability to satisfy their market making into the bid—an activity that, as relief, we have noted that short sale functions would be impaired. The mentioned above, we find inconsistent transactions executed at the closing NASD has also argued that market with bona fide market making. The price generally do not represent the type makers perform an important market Commission believes that for the rule to of abusive practices that Rule 10a–1 is stabilizing function. According to a have its intended positive effect on the designed to prevent. In particular, short 1997 study by NASD Economic market, all market participants, sale orders entered in the after-hours Research, market makers provide including market makers, should be crossing sessions cannot influence the immediate, stabilizing liquidity.150 If subject to the rule.156 matching price, but rather are priced by there is heavy selling pressure by A market maker that is positioning unrelated order flow and transactions investors and the market is moving inventory to profit from market moves occurring during the primary trading down, market makers provide stability would find it advantageous to be able to session, which are subject to the tick by standing ready to buy stock. short into the bid, like any speculator. test. The relief previously granted under According to the study, application of a One of the historical goals of short sale 10a–1 would continue to apply to cover short sale rule to market makers could regulation is to prevent short sellers exemptions from the price test reduce a market maker’s ability to adjust from accelerating a declining market by provisions of Rule 201 of Regulation inventory positions quickly, thereby exhausting all remaining bids at one SHO. reducing its supply of immediate price level, and causing successively 151 Q. Do closing price transactions create liquidity to the marketplace. The lower prices to be established by long perverse incentives for broker-dealers, such NASD study also states that application sellers.157 If such a seller is able to that they should not be granted an exception? of the short sale rule to market makers exhaust the existing bids in a security Q. Should the relief be codified as an could increase market makers’ costs, with short sales, and is able to attract exception to proposed Rule 201 of Regulation which would be passed on to investors long sellers to the market, the goal of 152 SHO? in the form of wider spreads. accelerating the price decline of a We do not find these arguments particular security would be VIII. Market Maker Exception From persuasive in the context of the accomplished. Another goal of short Proposed Uniform Bid Test proposed uniform bid test. In providing sale regulation is that long sellers liquidity to customers, a market maker It has been argued that short selling should have the right to sell first in a primarily buys at the bid and sells at the by market makers helps offset declining market. offer, or in between the bid and offer. imbalances in the supply and demand We believe that a market maker should Nevertheless, we believe that the or gaps in the flow of buy and sell rarely need to sell short at or below the proposed exception that would allow orders.147 NASD Rule 3350 exempts bid in its market making capacity.153 broker-dealers to execute customer sales from operation of the NASD’s bid test The proposed rule permits unrestricted on a riskless principal basis by looking short sales executed by qualified market short sales at the offer or at any other to the customer’s position would makers in connection with bona fide price that is one cent or more above the provide broker-dealers with additional market making.148 There is currently no bid, and thus the need for an exception flexibility to facilitate customer similar exception in Rule 10a–1, to allow market makers to sell at or however, for the bona fide market below the best bid seems limited.154 Commission amend Rule 10a–1 in such a manner making activities of specialists and third as to deem the extension unnecessary or in conflict with any adopted amendments. market makers in exchange-listed 149 See Securities Exchange Act Release No. securities. 155 As initially approved, only market makers that 34277 (July 7, 1994), 59 FR 34885 (July 29, 1994) met the Primary Market Maker (PMM) standards set (order granting temporary approval of Rule 3350 for forth in NASD Rule 4612 were eligible for an 146 The relief is generally subject to the conditions an eighteen-month period (Temporary Approval exception from the short sale rule. These PMM that: (1) short sales of a security in the after-hours Order)). standards were subsequently suspended for all matching session shall not be effected a prices 150 See D. Timothy McCormick and Bram Zeigler, National Market Securities due to the potential lower than the closing price of the security on its The Nasdaq Short Sale Rule: Analysis of Market impact of the Order Handling Rules. See Securities primary exchange; (2) persons relying on these Quality Effects and The Market Maker Exemption, Exchange Act Release No. 38294 (February 14, exemptions shall not directly or indirectly effect NASD Economic Research, (August 7, 1997) at 22– 1997), 62 FR 8289 (February 24, 1997). As such, all any transactions designed to affect the closing price 23. market makers are currently eligible to rely on the on the primary exchange for any security traded in 151 Id. at 20. exception. the after-hours matching session; and (3) 152 Id. 156 When we first approved the NASD’s bid test transactions effected in the after-hours matching 153 The NASD’s 1997 study indicates that during and market maker exception in 1994, we recognized session shall not be made for the purpose of a sample month in 1997, market maker short sales that the exception could result in problems of the creating actual, or apparent, active trading in or at or below the inside bid accounted for only 2.41% type that have been reported by commenters. The otherwise affecting the price of any security. of their total share volume. Id. at 27. Commission stressed the importance of monitoring 147 See, e.g., Irving M. Pollack, Short Sale 154 In approving the market maker exception, the the need for and effect of the exception on an Regulation of NASDAQ Securities (1986), at 12. Commission noted that we would review the ongoing basis, stating that experience with the test 148 Rule 3350 (c) provides further that exception to determine whether the bid-test and ‘‘may raise issues that require reconsideration of ‘‘transactions unrelated to normal market making exceptions are practicable and necessary on an some or all elements of the proposal.’’ See activity, such as index arbitrage and risk arbitrage ongoing basis. See Temporary Approval Order, Temporary Approval Order, supra, note 149. In that are independent from a member’s market supra, n. 149. Most recently, we extended the Rule particular, the Commission noted concerns that the making functions, will not be considered bona fide 3350 pilot, including the market maker exemption, market maker exception could create opportunities market-making activity.’’ See NASD Rule 3350. until December 15, 2003. See Securities Exchange for abusive short selling. Id. NASD IM–3350 also contains language specifying Act Release No. 48035 (June 16, 2003), 68 FR 37183 157 Securities and Exchange Commission, Special what type of activity does not constitute bona fide (June 23, 2003). We noted that the extension was Study of Securities Markets, H.R. Doc. No. 95, 88th market making. See, supra n. 42. subject to modification or revocation should the Cong., 1st Sess., at 251 (1963).

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orders.158 In addition, we are proposing Q. If inclusion of a bona-fide market 3, the seller would not be subject to the an exception from Rule 201 to allow making exception is necessary, would there current tick test if at the time of the broker-dealers to sell short at a price be any circumstances where a market maker trade the seller owns the security and equal to the consolidated best bid, when acting in his market making capacity would intends to deliver such security ‘‘as need to sell short below the bid? consistent with best execution Q. How often do market makers or other soon as possible without undue 162 obligations, in order to fill customer broker-dealers sell short at the bid in inconvenience or expense.’’ This sale orders it is required to execute pursuant response to customer buy orders? Would it be would be marked ‘‘long’’ under the to federal securities laws or SRO rules, feasible to allow market makers or other current marking provisions of Rule 10a– such as NASD IM–2110–2 and the broker-dealers to sell short at the bid to 1(d). facilitate customer buy orders without related interpretation of IM–2110–2 Under our proposed amendment, the (Manning Interpretation). According to undermining the purposes of the price test? If so, should there be limits on such short sell order described above would not be Nasdaq, the Manning Interpretation is marked ‘‘long’’ because, while the above designed to ensure that customer limit sales, for example to prevent a dominant market maker from filling customer orders at seller may own the security, the security orders are executed in a fair manner and the bid in order to place downward pressure is neither in the physical possession or at similar prices at which a firm has on the security’s price? control of the broker-dealer nor is it traded for its own account.159 If a Q. What other type of transactions should reasonably expected to be prior to the broker-dealer executed an incoming qualify for a bona fide market making settlement of the transaction. The seller market sell order at the consolidated exception? would thus have to borrow the stock in best bid, it would then be obligated to IX. Proposed Changes to the Order order to effectuate delivery to the buyer. fill other customer limit orders it held Marking Requirement Instead the seller, availing themselves of at that price.160 However, if the broker- exception (d)(1) of Rule 201, would dealer had a net short position, it would A. Marking Orders mark the order ‘‘short exempt.’’ be prohibited by proposed Rule 201 We propose combining current Requiring the order to be marked ‘‘short from filling the customer buy order at a marking requirements in subsections (c) exempt’’ promotes consistency among price equal to the bid. We believe the and (d) of Rule 10a–1 into new related rules and uniformity among proposed exception would remedy this subsection (c) of Rule 201. New conflict. markets and market participants in the subsection (c) generally would manner in which short sales are marked. We seek comment on the importance differentiate between ‘‘long,’’ ‘‘short,’’ of a market maker exception in the and ‘‘short exempt’’ orders. The marking We believe that the proposed context of a market maker’s role in requirement would apply to all amendments would provide several providing liquidity. We also seek exchange-listed securities and over-the- benefits. The current marking comment on the extent to which market counter securities. An order could only requirements can lead to undetected makers might need to be able to short be marked ‘‘long’’ when the seller owns violations of Rule 10a–1 because once at the bid in order to facilitate a the security being sold and the security the order is marked ‘‘long,’’ it is customer buy order, and inquire either is in the physical possession or processed and executed as such, even whether an exception limited to those control of the broker-dealer or will be though borrowed shares consummate situations would be necessary or prior to the settlement of the the delivery on the sale. This appropriate. transaction. A sell order would be complicates surveillance for violations of Rule 10a–1, as short sales executed Q. Should the proposed uniform bid test required to be marked ‘‘short exempt’’ if it were a short sale effected pursuant to under an exception from the rule can be include a bona-fide market making masked as ‘‘long’’ sales. Further, under exception? If so, why? How important is it for an exception in Rule 201. a market maker to be able to profit from We believe that the proposed change the current marking requirements there position trading? Could there potentially be would eliminate the current is no record of how short sellers are negative consequences to the market if there discrepancy between how Rule 3b–3 availing themselves of the various is not an exception for bona-fide market defines a short sale and the marking exceptions to Rule 10a–1. We believe making transactions? Please describe. provisions found in Rule 10a–1. There that surveillance for compliance with Q. If a market making exception from the are circumstances where an order can be proposed Rule 201 would be facilitated bid test is necessary, what should be done to marked ‘‘long,’’ but is a short sale with accurate indications of when and limit its use to those engaged in bona-fide under what circumstances the market making? Should the exception be tied executed without regard to the current to certain qualifications or conditions? If so, tick test. For example, a person placing exceptions are utilized. what should these qualifications or a sell order may be deemed to own a The practice of designating an order conditions be? security under current Rule 3b–3(b)– as ‘‘short exempt,’’ as proposed, has (e),161 but must borrow securities to already developed. Many broker-dealers 158 See, infra part IX.B for a further discussion of consummate the delivery (e.g., because are already required to mark short sales the proposal regarding riskless principal trades. the securities due upon a conversion of as short exempt if they are effected 159 See, e.g., Securities Exchange Act Release No. a security have not been received). under one of the exceptions from Rule 44030 (March 2, 2001), 66 FR 14235 (March 9, While borrowing to settle a sale 163 2001) (order granting approval of proposed rule 10a–1. For example, ITS participants change by the NASD regarding trading ahead of constitutes a short sale under Rule 3b– are required to designate commitment customer limit orders pursuant to decimal pricing orders as ‘‘short exempt’’ when the short in the Nasdaq market). See also NASD Rule 6440(f) 161 As discussed infra, Part X, Rule 3b–3 provides sale falls under an exception to the (applying limit order protection rules to NASD that a person is deemed to own a security if he or members in exchange-listed securities). she: has entered into a binding, unconditional 160 For example, a market maker receives an order contract to purchase a security; own a security 162 17 CFR 240.10a–1(e)(1). to buy 1,000 shares of XYZ stock at $20 from a convertible into or exchangeable for it and has 163 Current signatories to the ITS Plan include the customer and represents the order in its Nasdaq tendered such security for conversion or exchange; American Stock Exchange LLC (Amex), Boston quote. Market maker buys 1,000 shares of XYZ at have an option to purchase or acquire it and has Stock Exchange, Inc. (BSE), Chicago Board Options $20 for its own account. Pursuant to the Manning exercised such option; or have rights or warrants to Exchange, Inc. (CBOE), Chicago Stock Exchange, Interpretation, the market maker would be obligated subscribe to it and have exercised such rights. A (CHX), Cincinnati Stock Exchange (CSE), NASD, to sell to the customer to fill the customer’s 1,000 person who is deemed to own a security may mark NYSE, Pacific Exchange, Inc. (PCX), and share order. orders to sell such securities long. Philadelphia Stock Exchange, Inc. (Phlx).

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application of Rule 10a–1.164 The NYSE B. Marking Requirements for Riskless an exception to the proposed bid test of has advised its members that it is Principal Transactions Regulation SHO that would allow ‘‘appropriate’’ to mark those short sale Recently, some market makers have broker-dealers to mark such sell orders 171 orders covered under exceptions to the indicated that they would like ‘‘short exempt.’’ Allowing a broker- 165 rule as ‘‘short exempt.’’ In addition, exemptive relief from Rule 10a–1 to dealer to mark an order in this manner NASD Rule 4991(i) requires all orders mark sell orders based on a customer’s does not implicate the stated concerns executed on Nasdaq be designated as net position when a broker-dealer or raised by short selling, i.e., where a ‘‘buy,’’ ‘‘sell long,’’ ‘‘sell short,’’ or ‘‘sell market maker is effecting the execution customer is long, specialist or market 166 short exempt.’’ The proposed of the customer’s order on a riskless maker principal transactions should not amendment would require orders to be principal basis.169 For example, a be restricted in the same manner as marked as either ‘‘long,’’ ‘‘short,’’ or customer who is net long 1,000 shares short sales.172 ‘‘short exempt,’’ providing greater of XYZ security enters an order to sell We are concerned, however, that this uniformity. those securities with a market maker, exception from proposed Rule 201 not Further, we believe that requiring a the market maker then seeks to sell be used in an abusive or manipulative broker dealer to have physical 1,000 shares of XYZ from his manner. Towards that goal, we would possession or control of the security at proprietary account to facilitate the restrict this provision to riskless execution, or, in the alternative, that the trade prior to obtaining the securities principal transactions as follows: broker dealer obtain physical possession from the customer. In this situation, • A transaction in which a broker or or control of the security prior to market makers acting as riskless dealer, after having received an order to settlement, before marking the order principal have sought an exemption sell a security, sells the security as ‘‘long’’ should facilitate the process of from Rule 10a–1 to mark the market principal at the same price to satisfy the clearance and settlement in the current maker’s sale from its proprietary order to sell; T + 3 environment. Disturbances in account as ‘‘long’’ based on the • The sell order must be given the settlement processes can affect the customer’s long position, regardless of same per-share price at which the stability and integrity of the financial the market maker’s proprietary position broker or dealer sold shares to satisfy system in general. Clearance and in the security. the facilitated order, exclusive of any settlement systems are designed to We believe that for the purposes of explicitly disclosed markup or preserve financial integrity and short sale regulation, the position of a markdown, commission equivalent or minimize the likelihood of systematic broker-dealer should be deemed to be other fee; disturbances by instituting risk- the same as a customer’s position, • The broker or dealer must have 167 management systems. Requiring a regardless of whether the broker-dealer written policies and procedures in place broker-dealer to have possession or has a proprietary net ‘‘long’’ or ‘‘short’’ to assure that, at a minimum: the control of the securities before the position, when the broker-dealer acts in customer order was received prior to the broker-dealer can mark an order long a riskless principal capacity.170 We offsetting transaction; the offsetting should help to reduce failures to believe that in this context, the broker- transaction is allocated to a riskless deliver. We anticipate that this dealer effects the sale in a manner principal account or customer account proposed amendment would not be analogous to an agency execution. A within 60 seconds of execution; the burdensome to market participants short sale effected on an agency basis is broker or dealer has supervisory systems because most customer securities are marked according to the customer’s net in place to produce records that enable not held by investors in physical form, position. We therefore propose adding the broker or dealer to accurately and but rather are held indirectly through readily reconstruct, in a time-sequenced their broker-dealer, i.e., in ‘‘street 169 Riskless principal transactions are generally manner, all orders effected pursuant to name.’’ 168 described as trades in which, after receiving an this exception. order to sell (or buy) from a customer, the broker- Q. What type of additional costs and We believe that these conditions burdens, if any, would be associated with dealer sells (or purchases) the security to (or from) requiring orders to be marked ‘‘short another person in a contemporaneous offsetting would allow for the surveillance of the exempt?’’ transaction. See Securities Exchange Act Release exception by linking the exception to No. 44291 (May 18, 2001), 66 FR 27760 (order specific incoming orders and Q. Does the requirement that a broker has adopting a de minimis exception to the definition physical possession or control of the security of the term ‘‘dealer’’ solely for banks engaging in executions, and by requiring the brokers or will have physical possession or control riskless principal transactions under 240.17 CFR and dealers to establish procedures for prior to settlement place undue or 3a5–1); see also Securities Exchange Act Release handling such transactions. Moreover, unreasonable hardship on long sellers? No. 33743 (March 9, 1994), 59 FR 12767–01 (March 17, 1994). More recently, the Commission modified requiring the orders to be received prior Q. Should proposed Rule 200 require a to the offsetting transaction and the broker or dealer marking a sell order ‘‘short its interpretation of Exchange Act Section 28(e), the exempt’’ to identify the specific exception ‘‘safe harbor’’ provision for money managers who allocation of the offsetting transaction to that the broker or dealer is relying on in use commission dollars of their advised accounts to the customer within 60 seconds would obtain research and brokerage, so that it marking it ‘‘short exempt?’’ If not, state why encompasses certain riskless principal transactions help avoid the exception from being not. as defined by Nasdaq trade reporting rules. See abused by brokers or dealers who may Securities Exchange Act Release No. 45194 attempt to retroactively claim the 164 See Restated Intermarket Trading Plan, 33 (December 17, 2001), 67 FR 6 (January 2, 2002) exception for transactions that were not (May 30, 1997). (NASD’s rules define a riskless principal trade as done on a riskless principal basis.173 165 See NYSE Rule 440B.20. a transaction in which a member after having a 166 See NASD Rule 4991(i)(2). received an order to buy a security, purchases the security as principal at the same price to satisfy the 171 See subparagraph (d)(9) of proposed Rule 201 167 See Exchange Act Section 17A, 15 U.S.C 78q– order to sell. See NASD Rules 4632(d)(3)(B), of Regulation SHO. 1. 4642(d)(3)(B), and 6420(d)(3)(B)). 172 See Securities Exchange Act Release No. 168 DTC holds approximately 83% of all NYSE- 170 For example, if the customer seeking to sell 46994 (December 13, 2002), 67 FR 78033 (December traded shares outstanding and 72% of all Nasdaq- 1,000 shares of XYZ and the customer was net short 20, 2002) (order approving NASD amendment to the traded shares outstanding for the benefit of its in XYZ, a market maker engaging in a riskless Manning Interpretation establishing a riskless participants (i.e., broker-dealers and banks). See principal transaction on behalf of the customer principal customer facilitation exemption). Securities Dematerialization White Paper, would have to mark the sell order from his 173 The requirement that an offsetting transaction Securities Industry Association, at 17 (June 5, principal account short regardless of his own net be allocated to either a riskless principal or 2000). position. Continued

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In order to assess whether this transactions qualify as an create a long position that would proposed exception properly addresses ‘‘unconditional contract’’ for the facilitate avoidance of the tick test. It the needs of specialists or market purposes of short sale regulation. In appears to us that a fixed price and makers, we ask the following questions: particular these inquiries focus on quantity of a contract to purchase Q. Does the proposed riskless principal whether it is necessary for a contract to securities, as well as present delivery of exception allow brokers and dealers to specify the price and amount of the securities, are essential elements in facilitate customer orders handled on a securities to be purchased in order to be determining whether such a contract riskless principal basis regardless of their considered an unconditional contract. conveys ownership for purposes of short proprietary net position? Are the conditions In 1992 the Commission proposed to sale regulation,177 and requiring these appropriate? In particular, is the requirement clarify that an ‘‘unconditional contract’’ elements would restrict certain to allocate the offsetting transaction to the must specify a fixed, currently activities designed to manipulate the customer within 60 seconds appropriate? ascertainable price, and the exact Q. Is there any concern that this provision market. Therefore, we are proposing that is not consistent with the goals of short sale amount of securities to be obtained in Rule 200, subparagraph (b)(2) require regulation? If so, how? order for a person to be deemed to own that the unconditional contract specify a security under subparagraph (b) of the price and amount of securities to be X. Rule 3b–3 Rule 3b–3.175 The proposed purchased in order for a person to claim amendments were intended to address Rule 3b–3 defines the term ‘‘short ownership of the securities underlying potentially abusive trading practices sale’’ as any sale of a security that the the contract under proposed Regulation associated with contracts for future seller does not own or any sale that is SHO. purchases of securities where the price consummated by the delivery of a Q. Should proposed Rule 200 provide that or volume was based on a formula or security borrowed by, or for the account in order for a person to be deemed to own other contingent event. We were of, the seller. Rule 3b–3 also defines a security by virtue of the fact that he has concerned about the potential for abuse specific instances when a person shall entered into an unconditional contract to associated with securities contracts purchase the security, the contract must be deemed to own a security, i.e., a long where the purchase price is based on specify the price and amount of the security position, for the purposes of Rule 10a– the next following closing price in the to be purchased? If not, state why not. 1. We are proposing new Rule 200 to primary market for the stock or stocks. In addition, questions have arisen replace Rule 3b–3 and include several The concern was that a purchaser under about whether an unconditional amendments to Rule 3b–3. As discussed such a contract may have incentive to contract must contemplate present in further detail below, we seek sell the securities (long) that are subject delivery of securities in order for comment on including a modified to the contract prior to the close of persons to claim ownership of securities version of current subparagraph (b) of trading on the primary market in a under Rule 3b–3. In order for a person Rule 3b–3 in Rule 200 that would manner that would depress the closing to claim ownership of a security, she require that a person not only have price. Similarly, we expressed concern should have title to the security or some entered into an unconditional contract, regarding shares expected to be received other type of present or near-term binding on both parties thereto, to from dividend reinvestment plan ownership right to obtain the security. purchase the security, but also that the purchases being considered in In the case of options, convertibles, contract specify the irrevocable price calculating a long position pursuant to rights, or warrants, the rule requires that and amount of securities purchased and Rule 3b–3 where the number of shares a person exercise or convert the provides for present delivery. We also received under a plan was not known instrument in order to claim ownership propose amending the Rule to allow but only estimated based on a formula. of the underlying security. However, broker-dealers to calculate net positions The proposed amendments were never there is currently no express in a particular security within defined adopted or withdrawn. requirement that a person who has As stated, the language of trading units. Additionally, we propose subparagraph (b) of Rule 3b–3 may be 177 that the definition of a short sale The Commission notes that in a typical subject to abuse by individuals seeking ‘‘equity line’’ financing arrangement, an investor include the block-positioner exception to claim a long position only to avoid and the company enter into a written agreement from the current Rule 10a–1(e)(13). We under which the company has the right to ‘‘put’’ its application of the tick test provisions in also propose codifying in Rule 200 prior securities to the investor. Under this ‘‘put,’’ the Rule 10a–1. Further, it is possible that company has the right to tell the investor when to interpretations related to security where a contract mandates that buy securities from the company over a set period futures products, and the unwinding of securities will be purchased at the of time and the investor has no right to decline to certain index arbitrage positions. purchase the securities. The dollar value of the closing price, there may be incentive to equity line is set in the written agreement, but the A. Unconditional Contracts To Purchase depress the market price of the security number of shares that the company will actually Securities to obtain the security at a lower price.176 issue may be determined by a formula tied to the market price of the securities at the time the Under Rule 3b–3, a person owns a Moreover, there is the potential that company exercises its ‘‘put.’’ See Division of security if the person has ‘‘purchased, or contracts in which the amount of Corporation Finance, Current Issues Outline has entered into an unconditional securities owned is not known until Quarterly Update (March 31, 2001). As such, equity some later period may be designed to line financing arrangements and convertible contract, binding on both parties financing arrangements would generally not meet thereto, to purchase it but has not yet the requirements for an unconditional contract, due received it.’’ 174 The staff has recently 175 See Securities Exchange Act Release No. to the fact that such arrangements may not specify received inquiries about whether certain 30772 (June 3, 1992), 57 FR 24415 (June 9, 1992). a fixed price and quantity of the securities to be Three commenters supported the price provision purchased, nor would they contemplate present while four opposed it. Those who opposed it delivery of the securities upon conversion or customer account within 60 seconds is a condition believed that a fixed-price requirement would exercise of the put. All sales executed by the that is consistent with previously stated Nasdaq prevent large transactions from being effected in an investor prior to the company exercising its ‘‘put,’’ policy regarding the handling of mixed capacity orderly manner and would place an undue burden or the investor exercising its conversion right, trades and compliance with the Manning on market participants who enter into contracts to would thus be short sales subject to all applicable Interpretation. See NASD Notice to Members 01–85, buy and sell securities at a price to be determined regulations, including the borrow and delivery at Question 7 and Notice to Members 95–67, at in the future. Five commenters favored the fixed requirements in proposed Rule 203, and, if the Question 5. quantity provision and one commenter opposed it. security sold is a ‘‘covered security,’’ the bid test 174 17 CFR 240.3b–3(b). 176 Id. provisions of proposed Rule 201.

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entered into an unconditional, binding 3b–3 requires the option, right, warrant, In 1998, the staff issued a letter stating contract be expected to receive the or convertible to be exercised, tendered, that the Division would not recommend securities imminently in order to claim or converted before the person can be that the Commission take enforcement ownership. considered as having a long position in action if a multi-service broker-dealer We are concerned that, without an the underlying security. These calculated its net position in a particular express requirement that the contract provisions also implicitly contemplate security within defined trading units contemplate present delivery, there is a that the person will shortly acquire the independently from the positions held danger that contracts would be formed security being sold. For a physically- by the other aggregation units within the solely for the purposes of creating a long settled security future, the holder will firm (‘‘aggregation unit letter’’).182 We position to evade the short sale rule, obtain the underlying security only after propose to incorporate aggregation unit although there is no real intention to the security future terminates trading. A netting into proposed Rule 200 because actually acquire the securities pursuant security future settled by receipt of cash we believe that such netting allows to the contract. As a result, we are has no effect on a person’s long aggregation units at multi-service seeking comment on whether buyers of position. broker-dealers to pursue different securities pursuant to a contract should We are proposing subparagraph (b)(6) trading strategies, as well as provide be required to have a reasonable of Rule 200 that provides that a person liquidity to the market, without the expectation of imminent receipt of the holding a long security futures position restrictions of firm-wide netting. securities prior to considering is not considered to own the underlying Specifically, we propose to allow themselves to own the securities security for the purposes of Rule 3b–3 trading unit aggregation if: (1) The pursuant to proposed Rule 200. We are until the security terminates trading. broker or dealer has a written plan of not proposing a present or imminent Q. Should proposed Rule 200 require organization that identifies each delivery requirement in proposed Rule delivery of the securities underlying a futures aggregation unit, specifies the trading 200 but instead we are seeking comment contract before a person can consider himself objective of each, and supports its on such a provision. long for the purposes of short sale regulation? independent identity;183 (2) each Q. Should proposed Rule 200 require a C. Aggregation Units aggregation unit within the firm definite time frame that limits when the continuously determines, on a real-time Rule 3b–3 requires a seller of an buyer can consider themselves long, i.e., a basis, its net position for every security equity security subject to Rule 10a–1 to buyer would be deemed to own the securities that it trades that is subject to proposed only if the contract contemplates the buyer aggregate all of its positions in that 184 will receive the securities within 30 days? security in order to determine whether Rule 201 of Regulation SHO; (3) each Q. If so, what should the time frame be? the seller has a ‘‘net long position’’ in trader pursuing a particular trading Does industry practice provide some the security.180 Broker-dealer firms have objective or strategy is included in only objective standard that is reasonable? represented that firm-wide netting is one aggregation unit; and (4) individual costly, burdensome, and potentially traders are assigned to only one B. Ownership of Securities Underlying counterproductive for large, multi- aggregation unit at a time. We believe Securities Futures Products service brokerage firms. Firm-wide that these conditions would help We propose that new Rule 200 netting is currently required at least prevent potential coordinated include language consistent with once a day.181 manipulative activity amongst the existing Commission guidance defining Many large broker-dealers are divided aggregation units by ensuring they are when a person shall be deemed to own into ‘‘desks’’ that pursue separate separate and independent.185 a security underlying a security futures trading strategies. At times, the firm We seek comment on our proposal to contract.178 Specifically, we have stated may have a net short position in a include the aggregation unit netting into that a person who holds a security security, but a particular desk may have Rule 200 of proposed Regulation SHO as future obligating him to take delivery of a net long position in that security. This well as firm-wide netting in general. the underlying securities by physical situation may result in a desk not being Q. Is this relief necessary for multi-service settlement would not be considered able to pursue an investment strategy firms? How easily can these firms estimate long in these securities for the purposes that calls for the desk to sell its long of proposed Rule 100 until the security position. This result appears to be 182 See Letter regarding Bear, Stearns & Co. Inc.; future terminates trading.179 This unwarranted where the sale is not made Credit Suisse First Boston Corporation; Deutsche interpretation is consistent with the way Bank Securities Inc.; Donaldson, Lufkin & Jenrette to benefit the positions of other firm Securities Corporation; Goldman, Sachs & Co.; J.P. current Rule 3b–3 addresses several trading units. While the firm could form Morgan Securities Inc.; Lehman Brothers Inc.; instances where a person owns a separate broker-dealers for each trading Merrill Lynch, Pierce, Fenner & Smith; Morgan security that entitles a person to acquire unit’s strategy to support the Stanley & Co. Inc.; PaineWebber Inc.; Prudential securities underlying the instrument, Securities Inc.; Salomon Smith Barney Inc.; SG independence of each trading unit, this Cowen Securities Corporation; and Warburg Dillon e.g., options, rights, warrants, and approach would be costly and elevate Read LLC. (November 23, 1998), 1998 SEC No-Act convertibles. In those instances, Rule form over substance. LEXIS 1038. 183 The independence of the units would be 178 Commission Guidance on the Application of 180 See 17 CFR 240.3b–3. See also Securities evidenced by a variety of factors, such as separate Certain Provisions of the Securities Act of 1933, the Exchange Act Release No. 20230 (September 27, management structures, location, business purpose, Securities Exchange Act of 1934, and Rules 1983), 48 FR 45119, 45120 (October 3, 1983) (to and profit and loss treatment. Thereunder to Trading in Security Futures determine whether a person has a ‘‘net long 184 This condition holds firms accountable for Products, Securities Exchange Act Release No. position’’ in a security, all accounts must be knowing the activities and positions of each 46101 (June 21, 2002), 67 FR 43234 (June 27, 2002). aggregated). aggregation unit. 179 Termination of trading is the moment at which 181 See Securities Exchange Act Release No. 185 We believe that these conditions have worked an open position in a security future, either a long 27938 (April 23, 1990), 55 FR 17949, 17950 well in restricting the exemptive relief to situations or short position, can no longer be closed or (aggregation must be based on a listing of securities that do not appear to raise the abuses that the short liquidated either by buying or selling an opposite positions in all proprietary accounts as determined sale price test is designed to prevent, and should position. A person obligated to deliver would be at least once each trading day). Allowing be incorporated in the proposed exception. We also considered short at the termination of trading, and aggregation to be determined once per day was note that market participants that rely on the a person entitled to receive securities at the largely due to practical considerations arising from aggregation unit exception have designed their termination of trading would be considered long. technological limitations at the time the programming and surveillance systems in Id. interpretation was issued. accordance with these conditions.

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their real time positions for individual The block-positioner exception was long position’’ in the security. trading units? What about for the entire firm? created in order to facilitate the Therefore, if a person does not have a Q. Are the conditions included in activities of broker-dealers who engage net long position in a security, any sale proposed Rule 200 appropriate? Should there in both block positioning and of that security must be designated as a be additional conditions? 188 Q. Can the utility of the aggregation unit arbitrage. The Commission has short sale and must comply with the provision to multi-service firms be recognized the important role block- tick test provisions of current Rule 10a– improved? If so, how? 186 Are the designated positioners play in providing liquidity 1. A person liquidating an index conditions appropriate? for large securities and in maintaining a arbitrage position involving a long Q. Should the aggregation unit provision fair and orderly market. When adopting basket of stocks may be unable to sell be available to non-broker-dealers, for this exception, the Commission noted all the securities contemporaneously example, to hedge funds? that when a block-positioning firm’s with closing out the derivative Q. On its face, Rule 3b–3 contemplates that other short positions are fully offsetting instrument position because of the a sale must be marked based on positions in all proprietary accounts in that security at the other instruments, the result is an requirement to net short security time of the sale. In light of the advances in economically neutral position. The positions in other proprietary accounts, technology since 1990, is it possible for firms Commission noted that these other and as a consequence may not realize or other entities to be able to determine their positions provide no incentive to effect the expected arbitrage profit. aggregate position in all proprietary accounts sales from the block-positioning trading In 1992 the Commission proposed contemporaneously throughout the day? If account in a manner that would cause codifying prior no-action relief from the not, why not? or accelerate a decline in the market tick test provisions of paragraphs (a) and Q. If firms or other entities are unable to because gains in the short position (b) of Rule 10a–1 relating to liquidations determine their aggregate position in all 189 proprietary accounts contemporaneously would be offset by losses in the short of certain index arbitrage positions. throughout the day, is there a means of position. The exception is limited in Specifically, we proposed a new allocating a daily aggregate position within that it is available only to broker-dealers exception from the tick test provisions the firm that would be capable of acting in the capacity of a block- of Rule 10a–1(a) and (b) for any sale by surveillance? positioner, and only if the short position a person effected in connection with the is created in the course of bona fide liquidation of an index arbitrage D. Block-Positioner Exception arbitrage, risk arbitrage, or bona fide position relating to a securities index The block-positioner exception is hedging activities. We are proposing to that is the subject of a financial futures currently in subsection (e)(13) of Rule include in proposed Regulation SHO the (or options on such futures) contract 10a–1.187 Because this exception block positioner exception as it traded on a contract market designated directly relates to a broker-dealer’s currently exists. by the Commodity Futures Trading calculation of its net position under Q. Does the block-positioner exception Commission, or a standardized options current Rule 3b–3, we propose to continue to be needed? contract as defined in Rule 9b–1(a)(4) incorporate the block-positioner Q. Does the block-positioner exception under the Exchange Act,190 exception without modification into require any amendments? If so, what are notwithstanding that such person may Rule 200 of Regulation SHO. alternatives to the way the rule currently not have a net long position in that Rule 3b–3 considers broker-dealers to operates? security. The proposed exception was have a short position in a security even limited, however, to contexts where: (1) though that position is fully offset by E. Liquidation of Index Arbitrage such person’s net short position is equivalent convertible securities, rights, Positions solely the result of one or more short warrants, or call options. Therefore, Index arbitrage generally involves the positions created and maintained in the arbitrage activities may result in the purchase or sale of a ‘‘basket’’ of all course of bona fide arbitrage, risk block-positioner having a net short stocks comprising a securities index or arbitrage, or bona fide hedge activities; position. This short position would a smaller number of stocks designed to and (2) the sale does not occur during require compliance with the ‘‘tick’’ track day-to-day price movement of an a period commencing at the time that restrictions of the Rule and may inhibit index, and a contemporaneous offsetting the Dow Jones Industrial Average (DJIA) the efforts of broker-dealers who engage sale or purchase of one or more had declined by 50 points or more from in both block-positioning and offset commodity futures or options on a its closing value on the previous day activities. If a broker-dealer seeks to future or standardized option contracts and terminating upon the establishment dispose of a block of securities it bought on that index in an attempt to profit as a principal while acting in the from price discrepancies between the 189 Securities Exchange Act Release No. 30772 capacity of a block-positioner, it may be stocks and the derivative index (June 3, 1992), 57 FR 24415 (June 9, 1992). The products. Index arbitrage often involves release proposed codifying as Rule 10a–1(g)(2) unnecessarily hindered in doing so if it limited relief permitting the liquidation of certain simultaneously has an equal or larger a liquidation (or ‘‘unwinding’’) existing index arbitrage positions involving long short position in the same security, even transaction in order to realize arbitrage baskets of stock and short index futures or options though that short position is fully offset profits. Liquidation may consist of without aggregating short stock positions in other either simple elimination of each long proprietary accounts if those short stock positions as a result of arbitrage or hedging are fully hedged. See Letter re: Merrill Lynch, activity. or short stock position at expiration of Pierce, Fenner & Smith, Inc. (December 17, 1986); the futures or option contract, or earlier Securities Exchange Act Release No. 27938 (April 186 One commenter to the Concept Release said termination of both the stock positions 23, 1990), 55 FR 17949 (April 30, 1990) (release that while the Aggregation Letter is sensible in and the futures or option contract clarifying and emphasizing certain aspects of the concept, firms have expressed difficulty devising position. limited relief granted in the Merrill Lynch letter). procedures to meet its requirements. See Letter 190 Rule 9b–1(a)(4) states: ‘‘Standardized options from Willkie, Farr & Gallagher (WFG). Pursuant to Rule 3b–3, a seller of an are option contracts trading on a national securities 187 See Securities Exchange Act Release No. equity security subject to Rule 10a–1 exchange, an automated quotation system of a 20715 (March 6, 1984), 49 FR 9414 (March 13, must aggregate all of the seller’s registered securities association, or a foreign 1984). Block positioning is the facilitation of a large positions in that security in order to securities exchange which relates to option classes purchase or sale of securities for a customer by the terms of which are limited to specific expiration buying or selling as principal the amount of determine whether the seller has a ‘‘net dates and exercise prices, or such other securities securities that cannot be immediately placed or as the Commission may, by order, designate.’’ 17 obtained from third parties. 188 Id. CFR 240.9b–1(a)(4).

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of the closing value of the DJIA on the recent years,194 and some have argued As discussed above, while the next succeeding trading day. If the that this may be related to market exceptions in the block-positioner and market decline restriction were in effect, volatility.195 It should be noted that index arbitrage contexts do allow each individual security would be index arbitrage is not the only type of offsetting derivative positions to be required to be aggregated in the usual program trading.196 The Commission considered, those exceptions provide way with all of the seller’s other requests comment on the usefulness and limited aggregation relief for existing positions in that security to determine scope of the proposed amendment, offsetting positions. They do not apply whether the seller has a net long including whether market participants to short sales effected to establish an position.191 The amendments proposed believe that providing an exception offsetting position. We have not in the 1992 Release were never from the proposed uniform bid test for included an exception for hedging short adopted.192 some index arbitrage activity poses sales in our proposed Regulation SHO. We propose to include in Rule 200 of dangers for the markets. We believe that a hedging exception is Regulation SHO the relief for certain Q. Is the relief for certain index arbitrage not necessary because the proposed bid index arbitrage activities because we activities proposed to be incorporated in Rule test and pilot would provide market understand the relief is still being used 200 necessary under proposed Regulation participants with additional flexibility and because codifying it would provide SHO? Are the conditions appropriate? in effecting short sales in order to hedge for ease of reference. We propose long exposure. XI. Hedging Transactions including it in Rule 200 with a minor Q. Should a hedging exception be added to change from the 1992 proposal. Namely In the Concept Release, the proposed Rule 201? If so, how should such Rule 200(f) would alter the second Commission requested comment on, an exception be designed so that it can be condition to specify that the relief among other things, exempting hedging monitored and is not subject to abuse? would not be available during a period transactions from short sale regulation. Q. Does the advent of trading in security commencing at the time that the DJIA Currently, short sales related to hedges futures absent short sale regulation, when has declined below its closing value on are treated the same under Rule 10a–1 combined with the proposed bid test and the previous trading day by at least two as any other short sales. This is because short sale pilot, address the concerns expressed by participants requesting an percent and terminating upon the Rule 3b–3 only takes equity positions exception from Rule 201 for hedging? If not, establishment of the closing value of the into account, and it does not consider why not? DJIA on the next succeeding trading day derivative positions related to these Q. Should a hedging exception be included during which the DJIA has not declined equity positions.197 Some have in Rule 201 that only applies to a particular by two percent or more from its closing suggested that bona fide hedging group of market participants, i.e., OTC value on the previous day. This change activity should be exempted from short market makers, option market makers, or would keep the language in proposed sale regulation because such activity specialists, that would allow short selling Rule 200 consistent with the current presents little threat of manipulation as without regard to either a tick or bid test to language in NYSE Rule 80A.193 gains from short hedging positions are offset the risk associated with their role in offset by losses in a related security, i.e., maintaining fair and orderly markets? Who The Commission notes that levels of should qualify for such an exception, what program trading have increased in they are economically neutral criteria would be used for determining 198 positions. whether short selling was part of maintaining 191 This proposed market decline restriction fair and orderly markets, and how could the substantially paralleled, and would be invoked 194 The NYSE publishes weekly program trading SROs and Commission surveil for simultaneously with, the operation of NYSE Rule data on its website at www.nyse.com. The data compliance with such an exception? 80A, which at the time of the proposal applied shows that program trading over the past few years has increased as a percentage of the overall NYSE when the DJIA index moved 50 points or more from XII. Elimination of Current the previous day’s close. Rule 80A was more average daily volume. For example, during July 28 restrictive, in that it required all NYSE index through August 1, 2003, program trading amounted Subparagraphs 10a–1(a)(2) and (a)(3) arbitrage stock transactions, whether undertaken by to 45.5% of the NYSE’s average daily volume of a short or long seller, to be effected on a plus or 1,474.7 million shares, or 671.4 million shares a One of the more significant changes in zero-plus tick. The proposed exception, however, day. our proposal is the use of a bid test 195 would have operated for a longer period of time See David Henry, Whipsawed by Wall Street, based on the consolidated best bid, than 80A, which at that time terminated once the Bus. Wk., (March 10, 2003); Karen Talley, Program DJIA recovers 25 points from the 80A trigger level. Trading Grows as a Force in Stock Market, WSJ, which we believe would provide Instead, the exception would terminate upon the (June 17, 2002). uniformity in short sale regulation for establishment of the closing value of the DJIA on 196 Program trading encompasses a wide range of all markets in securities covered by the next succeeding trading day, in order to allow portfolio-trading strategies involving the purchase proposed Rule 201. As a result, we are the markets to avoid incremental selling pressure at or sale of a basket of at least 15 stocks with a total the close of trading on a volatile trading day and value of $1million or more. Program trading is also proposing to eliminate the at the opening of trading on the following day, since calculated as the sum of the shares bought, sold and provision that markets currently have to trading activity at these times may have a sold short in program trades. The total of these use their own markets as a reference substantial effect on the market’s short-term shares is divided by total reported volume. The point for measuring the permissibility of direction. NYSE reported on its website that during July 28 192 Commenters were generally in favor of through August 1, 2003, 13.3% of program volume short sales. codifying the exemption. However, the proposal executed by NYSE member firms related to index was never acted upon. arbitrage. For the period from June 30 through July pilot program under which options market-makers 193 Under Rule 80A, when the DJIA index moves 3, 2003, when the program trading percentage and specialists would be exempt from the tick test two percent or more from the previous day’s close, reached 52% of NYSE average daily volume, the provisions of the short sale rule when selling select index arbitrage orders in component stocks of the highest levels reported for the year to date, 8.5% listed stocks short to hedge positions in options that S&P 500 stock price index are subject to a tick test. of program volume executed by NYSE member result from market-making obligations. Under the In down markets sell orders may be executed only firms related to index arbitrage. proposal, market makers and specialists would be on a plus or zero-plus tick (and be marked ‘‘sell 197 Under Rule 3b–3, holdings in convertible able to sell CBOE pilot program stocks short on a plus’’); in up markets buy orders may be executed securities, options, rights and warrants are only minus or zero minus tick to hedge, on a delta only on a minus or zero-minus tick (and be marked considered to be long positions if they have been equivalent basis only, pre-existing long exposure ‘‘buy minus’’). The test remains in effect for the converted or exercised. See Rule 3b–3(d). (stocks and options combined) or contemporaneous remainder of the trading day once it has been 198 The CBOE submitted to the Commission a option transactions, subject to several provisions activated, but shall be removed if the DJIA letter suggesting parameters of a possible hedging enumerated in their letter. The letter is available for subsequently moves within one percent of the exception to Rule 10a–1. See Letter from CBOE review in the Commission’s Public Reference Room previous day’s closing value. (August 20, 2001). In particular, CBOE proposed a (File No. S7–24–99).

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This provision, currently Under the proposed bid test, we do not might impose an unnecessary regulatory subparagraph (a)(2) of Rule 10a–1, was believe (a)(3) is necessary because the burden on the exchange market because added in response to operational last trade price would not be a factor in exchange trading of such bonds is not difficulties associated with the tick test determining when a short sale can be susceptible to the types of market abuse based on the last trade price reported in effected, and the bid would immediately that the short sale rule is designed to a security in the consolidated reflect the impact of the corporate prevent. Moreover, given the limited transaction reporting system.199 At the action. amount of bond trading effected on time the provision was added, certain Q. Are there any regulatory or operational exchanges, there would appear to be SROs asserted that the last trade price reasons to allow markets to use their own bid little reason for concern over the effect in the consolidated system should not information in regulating short sales under of short selling of bonds on an be the reference point for the tick test the proposed rule? exchange. Accordingly, the Commission because last trade price data was not Q. Would allowing markets to use their proposed to exclude transactions in available in a timely manner and own bid information affect the operation or bonds from Rule 10a–1 by amending because the principal exchanges did not effectiveness of the proposed rule? If so, paragraph (b) to add the phrase ‘‘except have adequate information retrieval how? a bond or debenture.’’206 It was also systems on their floors to ensure Q. Is there any reason to retain the determined that up until the time that 200 requirements of existing subparagraph (a)(3) adherence with the short sale rule. of Rule 10a–1, which allows for the final action was taken on this proposed We believe that this provision would adjustment to the sale price of a security after amendment, no-action relief would be no longer be needed in light of advances a security goes ex-dividend, ex-right, or ex provided under Rule 10a–1 with regard in the dissemination of market any other distribution, under the proposed to short sales in exchange-listed information and the proposed use of the bid test? For example, do exchanges that bonds.207 consolidated bid for the price test. match opening trades prior to the opening Commenters were generally in favor Currently, all participants in the quotes require such a provision? of this proposed amendment and some markets have access to a consolidated, also recommended that convertible real-time stream of quotations for all the XIII. Exclusion of Bonds bonds be excluded from Rule 10a–1 as exchange and Nasdaq equity securities In 1992 the Commission proposed well.208 The amendments proposed in that would be subject to the bid test.201 excluding from the application of Rule the 1992 release were never adopted or Further, unlike the tick test, where the 10a–1 transactions in nonconvertible withdrawn. We believe that the same sequence of trade prices plays a crucial corporate bonds listed and effected on rationales that were cited in 1992 role in determining when short sales an exchange.203 This action was in generally continue to apply today. In can be effected, the sequence of the bids response to a petition for rulemaking by addition, as there is not currently a under the proposed bid test is not a the Amex that paragraph (b) of the Rule source for consolidated quote factor in determining the price at which be amended to exclude corporate bonds information on corporate bonds similar a short sale can be effected; rather, the from short sale regulation.204 Amex had to what exists for equity securities, it is reference is the best bid at the time of noted that while paragraph 10a–1(a) of evident that our proposed bid test could the short sale transaction. We thus the Rule is not applied to bonds because not be applicable in the bond market.209 believe that the concerns that gave rise transactions in corporate bonds are not We have thus proposed that the uniform to the (a)(2) provision are no longer required to be reported on a bid test in Regulation SHO would not present.202 As a result, we propose to consolidated basis with other markets, apply to bonds.210 eliminate the ability of a market to use bonds are covered under paragraph (b) Q. Should corporate bonds be excluded its own market information for purposes regulating short sales of other securities from proposed Rule 201? of the bid test of Regulation SHO. on an exchange. According to the Amex, XIV. After Hours Trading/Foreign We also propose to eliminate current a competitive inequity was thus created Markets Issues subparagraph (a)(3) of Rule 10a–1. This between the exchanges and the over-the- subparagraph allows for an adjustment counter market, where short selling is A. After-Hours Trading to the sale price of a security after a not regulated at all.205 Moreover, it was security goes ex-dividend, ex-right, or Trading in U.S. stocks outside of argued that, because the majority of regular market hours is not a new ex any other distribution when corporate bond transactions occur in the determining the price at which a short OTC market, it would be difficult for a 206 sale may be effected. Specifically, this Convertible bonds were not proposed to be market participant to effect a excluded from the Rule. The Commission noted provision allows for the reduction of all manipulation of the primary bond that convertible bonds are defined as ‘‘equity sale prices by the value of the market through short sales on an securities’’ in the Exchange Act (Section 3(a)(11), 15 distribution prior to the ‘‘ex’’ date. U.S.C. 78c(a)(11)). Further, it was argued that short exchange. selling of convertible bonds (at least in the much The Commission preliminarily larger OTC market) might have an impact on the 199 See Securities Exchange Act Release No. concluded in the release that the price of related exchange-traded equity securities. 11276 (March 5, 1975), 54 FR 12522 (March 19, Id at n. 43. 1975) (release proposing subparagraph (a)(2) in application of Rule 10a–1 to bonds 207 Id. response to stated operational and other difficulties associated with complying with Rule 10a–1) 203 See Securities Exchange Act Release No. 208 See Letters from American Bar Association, (Proposing Release); see also Securities Exchange 30772 (June 3, 1992), 57 FR 24415 (June 9, 1992). Bear Stearns & Co., Inc., New York Stock Exchange, Act Release No. 11468 (June 12, 1975), 40 FR 25442 204 See Letters from Carrie E. Dwyer, Vice Securities Industry Association, and Sullivan & (June 16, 1975) (adoption of proposed changes President and General Counsel, Amex, to John Cromwell. adding subparagraph (a)(2)) (Adopting Release). Wheeler, Secretary, SEC (December 30, 1985 and 209 In 2001, the Commission approved a proposal 200 Id. January 22, 1986); and Letter from Scott L. Noah, by the NASD to establish a corporate bond reporting 201 See, supra part IV.B. Assistant Vice President and General Counsel, and transaction dissemination facility, TRACE. See 202 In adopting subparagraph (a)(2) the Amex, to Jonathan G. Katz, Secretary, SEC Securities Exchange Act Release No. 43873 (January Commission noted that the ‘‘modernization of (November 22, 1989) (Amex Letters). 23, 2001), 66 FR 8131 (January 29, 2001) (SR– exchange facilities may eliminate the need to 205 The Commission noted the fact that the NASD NASD–1999–65) (order approving TRACE). structure short sale regulation in this manner and had filed in April of 1992 a proposed rule change 210 Should there in the future be a source for that it should be possible ultimately to utilize the to implement its own short sale regulation, however consolidated quote information on corporate bonds, kind of uniform rule’’ originally proposed. See, this ‘‘bid test’’ would not relate to OTC transactions we may decide to revisit the application of the bid supra n. 199. in bonds. See, supra n. 203 at n. 34. test to bonds.

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phenomenon.211 For years, institutional the short sale rule to after-hours multiple reference points, be a feasible investors and market professionals have trading.216 We believe that the proposed alternative? sent after-hours orders to broker-dealers uniform short sale rule should apply to B. Off-Shore Trading for execution as principal on alternative after hours trades in all covered broker-dealer trading systems, such as securities, requiring all short sales in In July 1992, the Commission ECNs. However, technological advances covered securities to be effected at a announced that it was undertaking a have changed the securities markets, price above the current best bid study of the U.S. equity markets and of and trading has expanded beyond the displayed as part of the consolidated the regulatory environment in which those markets operate.218 As part of the regular trading hours of 9:30 a.m. to 4 best bid and offer. After the time the study, the Commission addressed and p.m. Eastern Time (ET). consolidated best bid ceases to be sought comment on the practice of U.S. We have supported investor choice in calculated and disseminated, the broker-dealers ‘‘booking’’ trades through trading hours provided that essential proposed rule would prevent short their foreign desks or foreign affiliates to protections for investors and the selling at a price at or below the last avoid U.S. transparency requirements, markets are not compromised. We have published consolidated best bid. We off-board trading restrictions, approved several SRO programs believe that applying the proposed bid transaction fees, or limits on short sales. designed to further these goals, test to after hours trades in all covered In what is commonly referred to as the including extending consolidated last securities would extend the goals of trade price and quotation information. ‘‘fax market,’’ a U.S. broker-dealer acting short sale regulation to the after hours as principal for its customer negotiates We have also approved after hours and markets. pre-opening trading sessions for the and agrees to the terms of a trade in the Archipelago Exchange (ArcaEx).212 In We solicit comment on this proposed U.S., but transmits or faxes the terms addition, we have approved on a pilot operation of the rule, including, but not overseas to be ‘‘printed’’ on the books of 219 basis a Nasdaq program to extend the limited to, the following issues: a foreign office. operation of key trade and price Q. Does the consolidated quote information Consistent with prior Commission reporting systems until 6:30 p.m. ET.213 that is collected and published after hours action, we view short sale regulation as However, the NASD has not extended provide sufficient information to allow short applying to trades in reported securities its short sale bid test, Rule 3350, to the selling after hours at a price above the when the trade is agreed to in the after-hours market.214 Nonetheless, consolidated best bid, or should the rule United States, even if the trades are 220 NASD members are still required to impose a fixed reference point above which ‘‘booked’’ overseas. For example, a make affirmative determinations that all short sales must be effected, such as the consolidated best bid at the close of the 218 See Securities Exchange Act Release No. they will receive delivery of a security 30920 (July 14, 1992), 57 FR 32587 (July 22, 1992). regular session? from their customers or that the member 219 This practice of ‘‘booking’’ trades overseas was can borrow the security on behalf of the Q. Should the proposed short sale rule analyzed and dealt with in further depth in the customer for delivery by settlement date allow short selling above the best bid after Division of Market Regulation’s Market 2000 before accepting short sale orders.215 the time that the consolidated best bid ceases Report. In the Report, the Division estimated that We currently interpret the tick test to to be collected and disseminated, if reliable approximately 7 million shares a day in NYSE quotes are still published? 217 Would this stocks are faxed overseas, and many of these trades apply to all trades in listed securities, are nominally ‘‘executed’’ in the London over-the- whenever they occur. By its terms, Rule approach, which would most likely have counter market. The Report further stated that off- 10a–1 uses as a reference point the last shore trades generally are not reported publicly. 216 The NYSE and the NASD were among those Rather, they are reported for regulatory purposes trade price reported to the tape. Thus, only to the NYSE and NASD pursuant to NYSE after the tape ceases to operate, the rule commentators who recommended extending the short sale rule to cover after hours trading. The Rule 410 or to the NASD on Form T. See Division prevents any person from effecting a NYSE stated that, ‘‘With respect to after-hours of Market Regulation, SEC, Market 2000: An short sale at a price that is lower than trading, the Exchange believes that the Rule should Examination of Current Equity Market the last sale reported to the tape. Most apply given the potential for trading abuses in a Developments (January 1994), Study VII, p. 2. of the comments received in response to market environment with lesser trading volume and 220 See, e.g., Securities Exchange Act Release No. greater volatility.’’ See Letter from James E. Buck, the Concept Release supported applying 27938 (April 23, 1990), 55 FR 17949 (April 30, Senior Vice President and Secretary, NYSE 1990) (stating that the no-action position exempting (February 3, 2000). The NASD recommended that certain index arbitrage sales from the tick test 211 See Division of Market Regulation, SEC, short sale regulation be extended to all securities provisions of Rule 10a–1 will not apply to an index Market 2000: An Examination of Current Equity being traded in extended hours sessions, including arbitrage position that was established in an Market Developments (January 1994), at II–13 and National Market and SmallCap securities. ‘‘The offshore transaction unless the holder acquired the II–14. justifications for regulating short-sales—the threats securities from a seller that acted in compliance 212 See Securities Exchange Act Release No. of abusive short-selling, extreme volatility, and with Rule 10a–1 or other comparable provision of 44983 (October 25, 2001), 66 FR 55225 (November reduced liquidity due to the high risk to market- foreign law); see also Securities Exchange Act 1, 2001). ArcaEx entered into an agreement with makers—apply with equal, if not greater, force Release No. 21958 (April 18, 1985), 50 FR 16302 SIAC to extend the operation of the consolidated during extended hours trading.’’ See Letter from (April 25, 1985) at n. 48 (stating that, ‘‘Rule 10a– tape for exchange-listed stocks and Nasdaq NMS Richard G. Ketchum, President, NASD, Inc. 1 does not contain any exemption for short sales stocks from 8 a.m. to 8 p.m. ET. (February 15, 2000). However, as noted, the NASD effected in international markets.’’). The question of 213 See Securities Exchange Act Release No. subsequently determined not to apply Rule 3350 whether a particular transaction negotiated in the 42003 (October 13, 1999), 64 FR 56554 (October 20, after-hours, due to the belief that the volume of U.S. but nominally executed abroad by a foreign 1999). Under the pilot, any Nasdaq market maker trading after hours was not sufficient to justify affiliate is a domestic trade for U.S. regulatory that chooses to post quotations and trade during imposing short sale regulation. purposes was also addressed in the Commission’s these extended hours is obligated to post firm two- 217 For example, in its comment letter in response Order concerning Wunsch Auction Systems, Inc. sided quotations when opening and making its to the Concept Release, one commenter urged the (WASI). The Commission stated its belief that market, but may enter or leave the market on the Commission to allow short sales to be effected on ‘‘trades negotiated in the U.S. on a U.S. exchange hour or half-hour up to 6:30 p.m. Regardless of an ATSs based on their respective systems’ last trade are domestic, not foreign trades. The fact that the NASD’s member’s quotation activity, all price when the tape is not operating. It was noted trade may be time-stamped in London for purposes transactions in Nasdaq National Market, Small Cap, that this option could only be extended to such of avoiding an SRO rule does not in our view affect Convertible Debt and OTC transactions in ATSs that meet certain thresholds relative to the the obligation of WASI and BT Brokerage to exchange-listed securities executed between the overall trading volume in the after-hours market. maintain a complete record of such trades and hours of 8 a.m. and 6:30 p.m. must be reported See Letter from Orrick, Herrington & Sutcliffe, report them as U.S. trades to U.S. regulatory and within 90 seconds. counsel for MarketXT (December 30, 1999). Island self-regulatory authorities and, where applicable, to 214 See NASD Head Trader Alert #2000–55 also suggested allowing ATSs operating after-hours U.S. reporting systems.’’ See Securities Exchange (August 7, 2000). to rely on their own bid as a reference point. See Act Release No. 28899 (February 20, 1991), 56 FR 215 See NASD Rule 3370. Letter from The Island ECN, Inc. (January 21, 2000). 8377 (February 28, 1991).

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U.S. money manager decides to sell a halts.223 The options markets also have artificially distorted securities markets block of 500,000 shares in a NYSE rules applying circuit breakers.224 The are prevented from functioning as security. The money manager negotiates futures exchanges that trade futures on independent pricing mechanisms and a price with a U.S. broker-dealer, who indexes have adopted circuit breaker offering price integrity is eroded. Short sends the order ticket to its foreign halt procedures in conjunction with sales of securities that depress the trading desk for execution. In our view, their price limit rules for index market price shortly before an offering this trade occurred in the United States products.225 Finally, security futures is priced can cause (i) the postponement as much as if the trade had been products are required to have cross- or abandonment of an offering, and (ii) executed by the broker-dealer at a U.S. market circuit breaker regulatory halt the offering price to be lower than 226 trading desk. Under the proposed rule, procedures in place. anticipated because artificial forces We note that current short sale if the sale agreed to is a short sale in an distort it.227 The pre-pricing short sales regulation focuses on the prices of exchange-listed or Nasdaq NMS may exert downward pressure on a security, unless otherwise excepted, it individual securities rather than market segments or market indexes. security’s market price causing the must be effected at a price one cent market price to decline. Consequently, above the current best bid displayed as Nevertheless, we seek comment on whether short selling should be the offering price is set lower than part of the consolidated best bid and anticipated because it is now based off offer regardless of where it is executed. restricted in the future in response to a severe market decline. an artificially depressed market price. Q. What factors should be used to Short sellers who anticipate and receive Q. Should short selling be restricted or determine whether a trade in a covered an offering allocation cover their short security is agreed to in the U.S.? If a trade prevented during a period of significant is agreed to by a broker-dealer located market decline, such as after circuit breakers sales at the lower, fixed offering price outside the U.S., should the trade be viewed have been lifted? If so, at what level should generating a profit. Rule 105 of as agreed to outside the U.S., regardless of the restrictions take place, i.e., if the market Regulation M addresses this market the location of the seller? Would the declines 10%, 20% etc.? How long a period abuse. requirement that trades agreed to in the U.S. of time should the restrictions remain in be effected at a price above the current best effect? A. Scope of Rule 105 of Regulation M bid disadvantage U.S. broker-dealers in favor Q. Should short selling be restricted or of foreign broker-dealers? If so, please prevented for any particular security if the Rule 105 of Regulation M prohibits a explain. price of that security declines significantly short seller from covering short sales Q. For trades agreed to in the United States during the course of a trading day? If so, at with offered securities purchased from and executed overseas, is the time of what level should the restrictions take place, an underwriter, broker or dealer i.e., if the price of the security declines 10%, agreement a sufficient determinative event participating in the offering if the short for the triggering of the rule? 20% etc.? How long a period of time should the restrictions remain in effect? sale occurred within the period of five XV. Limitations on Short Selling During days prior to pricing of the offering Significant Market Declines XVI. Rule 105 of Regulation M—Short securities. The Rule promotes offering Sales in Connection With a Public prices that are based upon market prices To protect investors and the markets, Offering the Commission has approved proposals determined by natural market forces to restrict trading if key market indexes The price of securities in an offering instead of prices distorted by artificial fall by specified amounts. In response to is generally based on a security’s closing forces. Rule 105 of Regulation M applies the October, 1987 market break, the market price. When market prices are to offerings of securities for cash Commission approved various pursuant to a registration statement or a 223 See Securities Exchange Act Release No. exchanges’ circuit breaker proposals to 39846 (April 9, 1998), 63 FR 18477 (April 15, 1998) notification on Form 1–A filed under permit these brief, coordinated cross- (order approving proposals by Amex, BSE, CHX, the Securities Act of 1933. The Rule market halts to provide opportunities NASD, NYSE, and Phlx). See also e.g., NYSE Rule prohibits covering a short sale with during a severe market decline to 80B. The current circuit breaker procedures call for offering securities purchased from an cross-market trading halts when the Dow Jones reestablish an equilibrium between Industrial Average (DJIA) declines by 10 percent, 20 underwriter or broker or dealer buying and selling interests in an percent, and 30 percent from the previous day’s participating in the offering if the short orderly fashion, and help to ensure that closing value. sale occurred during the Rule 105 of market participants have a reasonable 224 See Amex Rule 950 (applying Amex Rule 117, Trading Halts Due to Extraordinary Market Regulation M restricted period, which is opportunity to become aware of, and Volatility, to options transactions); CBOE Rule 6.3B; the shorter of the period beginning (i) respond to, significant price ISE Rule 703; PCX Rule 4.22 (which applies to five business days before pricing of the 221 movements. The coordinated cross- options contracts through Rules 6.1(a) and (e)); and offered securities and ending with such market trading halts provided by circuit Phlx Rule 133. 225 pricing, or (ii) with the initial filing of breaker procedures are designed to See, e.g., CME Rule 4002.I. The CME will implement a circuit breaker trading halt in SPX such registration statement or operate only during significant market Futures if the 10% circuit breaker halt has been notification on Form 1-A and ending declines and to substitute orderly, pre- imposed in the securities markets and the futures are ‘‘locked’’ at their 10% price limit. Trading will with the pricing. The Rule excepts shelf planned halts for the ad hoc and offerings filed under Rule 415 and destabilizing halts which can occur not reopen in SPX Futures until the circuit breaker halt has been lifted in the securities markets and offerings not conducted on a firm when market liquidity is exhausted.222 trading has resumed in stocks comprising at least commitment basis as well as providing Currently, all stock exchanges and the 50% of the index capitalization. The CME will for exemptive relief. The Rule is NASD have rules or policies to implement another circuit breaker trading halt in SPX Futures if the 20% circuit breaker halt has prophylactic, and prohibits the conduct implement coordinated circuit breaker been imposed in the securities markets and the irrespective of the short seller’s intent in futures are locked at their 20% price limit. Once 221 See Securities Exchange Act Release No. again, trading will not reopen in SPX Futures until effecting the short sale. 26198 (October 19, 1988), 53 FR 41637 (October 24, the circuit breaker halt has been lifted in the 1988) (approving rules of the Amex, CBOE, NASD, securities markets and trading has resumed in 227 Concerned about losses in ‘‘cold’’ issues, NYSE). stocks comprising at least 50% of the index investors may engage in schemes to guarantee 222 See Circuit Breaker Report by the Staff of the capitalization. ‘‘cold’’ issue profits by effecting short sales prior to President’s Working Group on Financial Markets 226 See Securities Exchange Act Release No. the pricing of an offering (pre-pricing short sales) (August 18, 1998) (Circuit Breaker Report), n. 33. 45956 (May 17, 2002), 67 FR 36740 (May 24, 2002). and covering the short sales with offering securities.

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B. Shelf Offerings compliance with Rule 105 of Regulation M, driving the market down, and (3) both manually and with computer systems? preventing short sellers from We believe that the use of shelf Q. Should Rule 105 apply to acquisitions accelerating a declining market by offerings (offerings filed under § 230.415 from an issuer in a shelf takedown, such as exhausting all remaining bids at one of the Securities Act of 1933) is common a public equity line from an issuer or other price level, causing successively lower direct purchase arrangement with an issuer? today. If an individual with notice of a prices to be established by long sellers. shelf offering takedown effects short C. Sham Transactions Designed To Give Commenters are requested to provide sales during the five days prior to empirical data to support their views pricing and covers his short sale with the Appearance of Covering With Open Market Securities and arguments related to the proposals shelf offering securities, his conduct herein. In addition to the questions may cause the same downward price Recently, the Commission has become posed above, commenters are welcome pressure that occurs with pre-pricing aware of, and taken action, with respect to offer their views on any other matter short sales in connection with non-shelf to conduct designed to evade, but which raised by the proposed Regulation SHO offerings. The trading has the same violates Rule 105 of Regulation M.228 and Rule 105. manipulative potential, the same effect This conduct may involve short sales on offering price, and causes the same within the restricted period of Rule 105, XVIII. Paperwork Reduction Act abuse that Rule 105 of Regulation M is the purchase of offering shares, and the Proposed Regulation SHO would designed to prevent. Accordingly, we contemporaneous sale and purchase of impose a new ‘‘collection of propose eliminating the current shelf the same class of shares as the offering information’’ within the meaning of the offering exception in Rule 105 of shares. For example, an individual may Paperwork Reduction Act of 1995,229 Regulation M. We solicit comment sell the shares in the market and and the Commission has submitted concerning the proposed elimination of immediately purchase an equivalent them to the Office of Management and the shelf offering exception. We also number of shares. Where the transaction Budget (‘‘OMB’’) for review in seek comments concerning other areas is structured such that there is no accordance with 44 U.S.C. 3507(d) and of the Rule. legitimate economic purpose or 5 CFR 1320.11. An agency may not Q. In what manner are shelf offerings of substance to the contemporaneous conduct or sponsor, and a person is not equity securities marketed to potential purchase and sale, no genuine change in required to respond to, a collection of investors? Include a discussion of the beneficial ownership, and/or little or no information unless it displays a similarities and/or differences with respect to market risk, that transaction may be a currently valid OMB control number. the marketing efforts of shelf and non-shelf sham transaction. OMB has not yet assigned a control offerings. Discuss the types of marketing The Commission would continue to number to the new collection of efforts used and whether potential investors consider enforcement action against information imposed by Regulation have notice of a shelf takedown before it those participating in sham transactions SHO. occurs. Q. Should Rule 105 of Regulation M be structured in a manner to give the A. Summary of Collections of applicable to only equity offerings? What is appearance of compliance with Rule Information the Rule’s relevance with respect to debt 105, but in fact, violate the rule. We are offerings and the potential for manipulation not proposing revisions to Rule 105 Proposed Regulation SHO, Rule 201 with debt offerings or other offering types? with respect to activities that violate the contains a requirement that all sell Q. Should the prohibitions of Rule 105 of current rule. We seek comment, orders of securities registered under Regulation M extend to derivative securities, however, on criteria in addition to Section 12(g) of the Exchange Act be i.e., should a person be prohibited from economic purpose or substance, change marked ‘‘long,’’ ‘‘short,’’ and ‘‘short covering put options entered into within the in beneficial ownership, and market exempt.’’ Currently, Rule 10a–1 period five days prior to pricing with prohibits the execution of a sell order securities purchased from an underwriter, risk, that may distinguish sham transactions from legitimate trading. for a security covered by Rule 10a–1 broker or dealer participating in the offering? unless the order is marked either ‘‘long’’ Q. Should the prohibitions of Rule 105 of The Commission also solicits comment Regulation M extend to short sales effected regarding whether there should be or ‘‘short.’’ Proposed Regulation SHO prior to the exercise of conversion rights additional language in the rule text of would be a new collection of under a debenture, or other security, and Rule 105 to address other transactions information because the collection covering the short sales with securities that cause the harm the Rule 105 is would cover a much larger number of issued in the conversion when the designed to prevent. securities. Proposed Regulation SHO, conversion consideration is based upon the Rule 201 would add two elements to security’s market price during a certain time XVII. General Request for Comment this marking requirement. First, a new period prior to the conversion? The Commission seeks comment category for ‘‘short exempt’’ orders Q. Should a person who executes short would be added. Second, the marking sales during the five day business period generally on all aspects of proposed prior to the pricing of an offering be Regulation SHO and the proposed requirement would be extended to permitted to cover preexisting short positions amendment to Rule 105 of Regulation M apply to all equity securities, including held prior to that five day period with under the Exchange Act. In addition to exchange-listed securities, Nasdaq NMS, offering securities? Please provide a detailed the specific requests for comment found Nasdaq SmallCap, OTCBB, and Pink analysis, including a discussion regarding the throughout this release, the Commission Sheet securities. If the Commission fungibility of securities. Can you trace asks commenters to address whether adopts Proposed Regulation SHO, Rule offering shares in a person’s account to show proposed Regulation SHO furthers the 10a–1 would be repealed and any that they are used to cover the preexisting Commission’s objectives to (1) allow collection of information under Rule short position as opposed to the short sales relatively unrestricted short selling in 10a–1 would be eliminated. executed five days prior to pricing? Sell orders of exchange-listed and Q. Does the language ‘‘cover a short sale’’ an advancing market, (2) prevent short provide the proper scope of prohibited selling at successively lower prices, thus Nasdaq securities are already marked activity? Is there additional or alternative eliminating short selling as a tool for ‘‘long,’’ ‘‘short,’’ or ‘‘short exempt’’ language we should consider? pursuant to Rule 10a–1, NYSE Rule Q. What is the manner in which firms, 228 See, Ascend Capital, LLC, Securities Exchange including prime brokerage firms, monitor Act Release No. 48188 (July 17, 2003). 229 44 U.S.C. 3501 et seq.

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440B.20, and the ITS Plan.230 Nasdaq all securities registered under Section 03. Requests for materials submitted to NMS and Nasdaq SmallCap securities 12(g) of the Exchange Act. We assume OMB by the Commission with regard to are also currently subject to marking that all of the approximately 6,752 this collection of information should be requirement pursuant to NASD Rule registered broker-dealers effect sell in writing, refer to File No. S7–23–03, 4991. Proposed Regulation SHO, Rule orders in securities covered by proposed and be submitted to the Securities and 201 would simply codify current Regulation SHO. For purposes of the Exchange Commission, Records industry practice for exchange-listed Paperwork Reduction Act, the Management, Office of Filings and and Nasdaq securities into a uniform Commission staff has estimated that a Information Services, 450 Fifth Street, marking requirement. total of 1,164,755,007 trades are NW., Washington, DC 20549–0609. As Proposed Regulation SHO, Rule 201 executed annually.231 OMB is required to make a decision would also apply to securities not This is an average of approximately concerning the collections of currently covered under Rule 10a–1. 172,505 annual responses by each information between 30 and 60 days Proposed Regulation SHO’s marking respondent. Each response of marking after publication, a comment to OMB is requirement would apply to all sell orders ‘‘long,’’ ‘‘short,’’ or ‘‘short best assured of having its full effect if orders of equity securities registered exempt’’ takes approximately .000139 OMB receives it within 30 days of under Section 12(g) of the Exchnage hours (.5 seconds) to complete.232 Thus, publication. the total approximate estimated annual Act, including, exchange-listed, Nasdaq XIX. Consideration of Proposed hour burden per year is 161,900 burden NMS and SmallCap, OTCBB, Pink Regulation SHO’s Costs and Benefits Sheets, and any other securities hours (1,164,755,007 responses @ registered under 12(g). 0.000139 hours/response). A reasonable The Commission is considering the As a result, the collection of estimate for the paperwork compliance costs and the benefits of proposed information under proposed Regulation for the proposed rules for each broker- Regulation SHO, which would replace SHO is the requirements that all sell dealer is approximately 24 burden hours Rules 3b-3, 10a-1, and 10a-2, as well as orders of equity securities registered (172,505 responses @ .000139 hours/ proposed amendments to Rule 105 of under the Exchange Act be marked response) or (a total of 161,900 burden Regulation M. The Commission is ‘‘long,’’ ‘‘short,’’ or ‘‘short exempt.’’ hours / 6,752 respondents). sensitive to these costs and benefits, and encourages commenters to discuss any B. Proposed Use of Information E. Request for Comment additional costs or benefits beyond The information required by proposed Pursuant to 44 U.S.C. 3506(c)(2)(B), those discussed here. In particular, the Regulation SHO is necessary for the the Commission solicits comments to: Commission requests comment on the execution of the Commission’s mandate (i) Evaluate whether the proposed potential costs for any modification to under the Exchange Act to prevent collection of information is necessary both computer systems and surveillance fraudulent, manipulative and deceptive for the proper performance of the mechanisms and for information acts and practices by broker-dealers. functions of the agency, including gathering, management, and The purpose of the information whether the information shall have recordkeeping systems or procedures, as collected is to enable a national practical utility; (ii) evaluate the well as any potential benefits resulting securities exchange or national accuracy of the Commission’s estimate from the proposals for registrants, securities association to monitor of the burden of the proposed collection issuers, investors, brokers or dealers, whether a person effecting a short sale of information; (iii) determine whether other securities industry professionals, covered by proposed Regulation SHO is there are ways to enhance the quality, regulators, and others. Commenters acting in accordance with Regulation utility, and clarity of the information to should provide analysis and data to SHO. In particular, requiring each order be collected; and (iv) evaluate whether support their views on the costs and be marked either ‘‘long,’’ ‘‘short,’’ or there are ways to minimize the burden benefits associated with proposed ‘‘short exempt’’ would aid in ensuring of the collection of information on those Regulation SHO and proposed compliance with proposed Rules 201 who are to respond, including through amendments to Rule 105 of Regulation and 203. Moreover, the ‘‘short exempt’’ the use of automated collection M. category would aid is surveillance for techniques or other forms of information A. Proposed Rule 201: Price Test and compliance with the proposed limited technology. Marking Requirements exception from the bid test for riskless Persons submitting comments on the principal transactions. collection of information requirements 1. The Proposed Uniform Bid Test should direct them to the Office of a. Benefits C. Respondents Management and Budget, Attention: The marking provision in Rule 201 Desk Officer for the Securities and We believe that the proposed bid test would apply to all 6,752 active brokers Exchange Commission, Office of would simplify the application of the or dealers that are registered with the Information and Regulatory Affairs, price test and provide flexibility to Commission. The Commission has Washington, DC 20503, and should also those seeking to sell short, especially in considered each of these respondents send a copy of their comments to the current decimals environment. This for the purposes of calculating the Jonathan G. Katz, Secretary, Securities increased ability to execute short sales reporting burden under proposed and Exchange Commission, 450 Fifth in securities currently subject to Rule Regulation SHO. Street, NW., Washington, DC 20549– 10a-1 may lead to a reduction in 0609, with reference to File No. S7–23– transaction costs. Moreover, we believe D. Total Annual Reporting and that a uniform rule is preferable to Recordkeeping Burdens 231 In calendar year 2002 there were applying different tests in different Proposed Rule 201 of Regulation SHO approximately 545,556,000 trades on the NYSE, and markets, which can require market would require all brokers or dealers to 607,824,500 on Nasdaq NMS and Nasdaq SmallCap, participants to apply different rules to mark all sell orders appropriately as and 11,374,507 in OTCBB, Pink Sheet, and other different securities, and thus may also (gray market) securities. ‘‘long,’’ ‘‘short,’’ or ‘‘short exempt’’ for 232 We believe it is reasonable that it would only reduce transaction costs. Also, there take 0.5 seconds or .00039 hours to mark an order would be benefits associated with 230 See Section IX.A regarding Marking Orders. ‘‘long,’’ ‘‘short,’’ or ‘‘short exempt.’’ systems and surveillance mechanisms

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that would only have to be programmed Commission believes that the proposed market makers in connection with bona to consider a single test based on the uniform bid test requiring short sales in fide market making.233 We do not consolidated best bid instead of two exchange-listed and Nasdaq NMS propose a market maker exception to tests based on last sale and last bid securities to be effected at a price one Rule 201. We believe this would benefit information. cent above the consolidated best bid at the markets by subjecting all In addition, the degree of the time of execution would impose participants to the same regulation. We restrictiveness of a price test may affect costs on brokers or dealers, specialists, believe that the proposal would allow how well the stock price represents market makers, ECNs, Alternative all market participants to establish short fundamental values. For example, a Trading Systems (ATSs), and SROs. positions without being disadvantaged flexible price test may allow a trader to Adoption of the proposed uniform bid by an exception to the rule only more freely sell short a stock that he or test in the various markets would available to certain participants. For she believes is overvalued. The require modifications to trading systems example, there may be benefits in Commission seeks comments on and surveillance systems. Under the limiting the ability of a market maker to whether the proposed bid test would proposal, systems trading exchange- profit from position trading in affect stock prices and whether listed securities and Nasdaq NMS anticipation of a market decline. The proposed Rule 201would result in securities would have to shift from Rule Commission also requests comment on prices that are a better reflection of the 10a-1’s tick test and NASD Rule 3350’s any benefits that may result from issuer’s fundamental values. bid test, respectively, to the proposed adopting a price test absent a market The Commission seeks estimates and uniform bid test. The Commission maker exception. The Commission also views regarding the benefits to anticipates that these changes would seeks comments on the benefits of not particular types of market participants result in immediate implementation allowing anyone to sell short at or below as well as any other costs or benefits costs associated with reprogramming the best bid in a declining market. that may result from the adoption of trading and surveillance systems. One b. Costs proposed Regulation SHO. Please exchange informed us that provide any specific data. reprogramming systems would take one The absence of a market maker Another potential benefit of the month at a cost of approximately exception from Rule 201 may have proposed bid test is that it should $100,000. A broker-dealer stated that it implications for market makers’ ability simplify surveillance systems in that would take two months to reconfigure to supply liquidity. Some may argue proposed Rule 201 would look to the its systems to account for a new bid test that investors are harmed when market consolidated best bid at the time of makers incur an increase in costs but was unable to provide a cost execution as the reference price for because market makers would pass the estimate. These estimates do not include short sales. This should be less increased costs to investors. The costs associated with training staff that complicated than comparing the Commission requests detailed would be effected by these systems immediately preceding sale or bid as the comments on these, or any other, costs modifications. reference point for short sale to market makers, investors or others The Commission seeks examples of compliance. In addition, we note that associated with not adopting an all types of entities that would be having only one short sale rule instead exception from the proposed bid test for affected by this proposal. The of two would mean that new staff market makers. Commission seeks specific comments (compliance personnel, traders, etc.) The Commission also recognizes that on the costs associated with system would only need to be trained regarding proposed Rule 201 may result in lost changes, including the type of system one rule. Over the long run, we believe trading or business opportunities in the changes necessary and quantification of this would likely lead to decreased costs various markets. For example, there may costs associated with changing the for training and compliance. be a cost in lost trading or business systems, including both start-up costs The Commission received opportunities for those who trade and maintenance. Comments are also approximately 35 formal requests for Nasdaq NMS securities, in that the requested on the types of jobs and staff relief from Rule 10a-1 in 2002 in proposed bid test is more restrictive that would be affected by systems addition to approximately 340 phone than the current Nasdaq bid test, and modifications and training about the calls. The Commission anticipates that a the market maker exemption has been new rule, the number of labor hours that large percentage of the relief requested eliminated. Please quantify, if possible, would be required to accomplish these would no longer be necessary under the whether there would be any lost trading matters, and the compensation rates of proposed uniform bid test. We expect or business opportunity costs. these staff members. The Commission that each request for relief requires a also requests data to quantify the 4. Use of the Consolidated Best Bid number of labor hours from traders and benefits of this proposal relating to lawyers, both in-house and outside a. Benefits ongoing compliance and surveillance of counsel, of a broker-dealer or exchange, Proposed Regulation SHO would use a uniform bid test. In addition, there when making informal (phone calls) or the consolidated best bid as a reference may be costs associated with changing formal (letters) requests for exemptions point for all short sales of exchange- surveillance systems to monitor for from Rule 10a-1. The Commission listed or Nasdaq NMS securities compliance with the proposed bid test. requests empirical data to quantify this wherever traded. The Commission We request specific comment on the benefit. believes that the use of the consolidated costs for reprogramming systems to best bid is a benefit because it reflects b. Costs accommodate the proposed bid test in the consolidated bids from the various As an aid in evaluating costs and Rule 201. market centers that trade exchange- reductions in costs associated with the 2. Market Makers listed and Nasdaq NMS securities and is proposed Rule 201, the Commission continuously collected and a. Benefits requests the public’s views and any disseminated on a real-time basis, in a supporting information regarding the NASD Rule 3350 currently exempts single steam of information and would costs associated with implementing the from operation of the NASD’s short sale proposed uniform bid test. The rule short sales executed by qualified 233 See supra part VIII for a further discussion.

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be a more accurate depiction of the security, either when the order is placed however we seek any data supporting market’s valuation of a security. or prior to settlement, is a benefit any additional costs not mentioned. because it would facilitate the process of b. Costs 6. Exceptions to the Rule clearance and settlement. Disturbances The Commission is aware that this in settlement processes can affect the a. Benefits change may result in increased costs to stability and integrity of the financial Proposed Regulation SHO would traders, specialists, broker-dealers, and system in general. Clearance and eliminate or alter exceptions to Rule floor brokers on the NYSE or Amex who settlement systems are designed to 10a–1’s tick test and create certain have heretofore used the last sale preserve financial integrity and exceptions to the proposed bid test, occurring in their own market as a minimize the likelihood of systematic which we believe would result in reference point for short sales. For disturbances by instituting risk- benefits. Proposed Regulation SHO example, there would be a cost to management systems. Requiring a proposes eliminating the equalizing market participants in gaining access to broker-dealer to have possession or exception, which is based on the last the consolidated best bid by subscribing control of the securities before it can sale concept and would have no utility to a vendor. We believe, however, that mark an order long would assist in under the proposed bid test. This would most, if not all, market participants reducing settlement and credit risks. further the goal of regulatory already have access to this information. simplification. The Commission seeks information The Commission proposes extending the marking requirements to all equity In addition, the Commission believes quantifying the cost of gaining access to that extension of the odd-lot exception the consolidated best bid. securities, including OTCBB and Pink Sheet securities. This proposal is to all market makers may reduce market In addition, it is possible that the makers’ costs, since they would no consolidated best bid may flicker more designed to assist in surveillance for violations of the locate and delivery longer need to register as odd-lot dealers than an exchange’s own best bid. Bid or third market makers to avail flickering may impede on the ability to requirements proposed in Rule 203 of Regulation SHO. themselves of the exception. Moreover execute short sales, which may result in permitting market makers to offset increased costs. Please provide data to b. Costs customer odd-lot orders and liquidate assist the Commission quantify these odd-lot positions without regard to the costs, if any. The Commission does not currently proposed uniform bid test would believe any costs would arise from the 5. Marking Orders enhance market makers’ ability to proposed requirement that sell orders be provide liquidity. To the extent that the a. Benefits marked long only if the securities to be benefits flowing from this increased Proposed Rule 201 would permit sold are owned by the customer and liquidity can be quantified, we seek data broker-dealers to mark orders long only either presently, or prior to settlement, and analysis on how to represent them if the customer owns the securities and in the customer’s account. Most accurately. they are in the customer’s account, or customer securities are not held by Moreover, the benefit of the proposal would be prior to settlement. Proposed investors in physical form, but rather to alter Rule 10a–1’s domestic arbitrage Rule 201 also would require broker- are held indirectly through their broker- exception to require that a person dealers to differentiate between ‘‘long,’’ dealer, i.e., in ‘‘street name.’’ relying on the exception must ‘‘short,’’ and ‘‘short exempt’’ sell orders. The Commission anticipates that any subsequently acquire or purchase the We believe these provisions would costs arising from the proposed security upon which the arbitrage is provide several benefits. The requirement that certain sell orders be based is that it would help reduce Commission notes that the current marked ‘‘short exempt’’ would be pricing disparities between securities. In marking requirements can lead to minimal because some self-regulatory addition, the proposed language change undetected violations of proposed Rule organizations already either require or would help with surveillance for 201 because once the order is marked advise members to utilize the ‘‘short compliance with the exception. ‘‘long,’’ others handling the order exempt’’ designation. We believe that In addition, the proposed limited execute the order as if it were a long the Commission’s proposed amendment exception to the bid test when the sale, even though settlement on the sale codifies current practice and provides market is locked or crossed is beneficial may be effected by the delivery of the markets with a uniform practice. because it increases liquidity by giving borrowed securities. This can The Commission proposes extending responsible broker-dealers flexibility to complicate surveillance for violations of the marking requirements to all equity execute short sales in such situations. the price test, as short sales executed securities, including OTCBB and Pink Moreover, the proposed exception under an exception from the price test Sheet securities. The Commission permitting broker-dealers to sell short at can be masked as long sales. A benefit recognizes that there is a paperwork the consolidated best bid to satisfy any of this proposal is that surveillance for burden cost associated with adding the obligations of a broker-dealer to violations of proposed Rule 201 would ‘‘short exempt’’ category and extending customer limit orders, as determined by be aided through accurate indications of the marking requirement to all equity federal securities laws or rules of a self- when and under what circumstances securities. As discussed above in regulatory organization, is a benefit these exceptions are utilized. An Section XVIII, the paperwork burden is because it ensures that customer limit additional benefit is that the ‘‘short estimated at approximately 24 burden orders are executed in a fair manner and exempt’’ category would aid in hours for each broker-dealer registered at prices similar to the price at which a surveillance for compliance with the with the Commission.234 The firm has traded for its own account. proposed riskless principle exception to Commission does not believe there are Finally, the proposed exception relating the bid test. any additional costs to this proposal, to pre-opening VWAP short sales would Further, we believe the proposed codify existing exemptive relief, thus requirement that a broker-dealer cannot 234 For a full discussion of the paperwork burden providing the benefit of regulatory mark a sale ‘‘long’’ unless it has associated with the marking requirements see simplification, and may also promote a physical possession or control of the Section XVIII. more liquid market for large traders.

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b. Costs required to enter into a contract to intermediaries in implementing and The Commission does not believe borrow the security, or effect a buy in complying with this proposal. there would be any costs associated so that, in either event, the security Proposed Rule 203 would also make with altering the odd-lot and domestic would be delivered within two days two changes to existing long sale arbitrage exceptions, eliminating the after the settlement date. If the securities delivery rules. First, the rule would equalizing exception, creating new are not delivered within two days after extend current delivery requirements for exceptions relating to locked or crossed the settlement date, for a period of long sales of listed securities to all markets and facilitating customer ninety calendar days the broker or equity securities, including Nasdaq orders, and codifying existing VWAP dealer shall not execute a short sale in NMS, Nasdaq SmallCap, OTCBB, and exemptive relief. The Commission seeks such security for his own account or the Pink Sheet securities. The intended comment, however, on whether any account of the person for whose account benefits of this change are uniformity such costs exist, and if so, data to the failure to deliver occurred unless the across markets and a reduction in the support such costs. broker or dealer or the person for whose number of fails to deliver on long sales. account the short sale is executed has Moreover, the Commission believes that B. Proposed Rule 203: Locate and borrowed the security, or entered into a this modification would facilitate the Delivery Requirements bona fide arrangement to borrow the process of clearance and settlement. The 1. Benefits security, and will deliver the security on amended rule would also permit a the date delivery is due. The proposed broker-dealer effecting a long sale to fail Proposed Rule 203 would enhance Rule would also require the rules of the to deliver, or to deliver borrowed locate and delivery requirements for registered clearing agency to include the securities, if prior to the sale, the seller short sales in all equity securities. These following provisions: (A) A broker or told the broker-dealer he owned the changes are proposed in response to security and would deliver it to the complaints from many issuers and dealer failing to deliver securities as specified in subparagraph (3) above broker-dealer prior to settlement. This investors concerning allegations of change is necessary to conform the abusive ‘‘naked short selling.’’ The shall be referred to the NASD and the Examining Authority (as defined in proposed rule with proposed Rule Commission proposes to adopt 201(c), which would require an order to safeguards to address the problems 15c3–1(c)(12)) for such broker or dealer for appropriate action; and (B) The be marked long only if the seller informs associated with large persistent failures- his broker-dealer that he owns the to-deliver. The Commission believes registered clearing agency shall withhold a benefit equal to any mark to security and the broker-dealer will have that this requirement would help curtail physical possession or control of the manipulative naked short selling. market amounts or payments that otherwise would be made to the security prior to settlement. It is The Commission believes that it intended that this change would both would be beneficial to establish uniform participant failing to deliver, and assess appropriate charges. reduce the number of over-the-counter procedures to be utilized by short sellers fails, and facilitate the process of The Commission believes that these to locate securities for borrowing, which clearance and settlement. The additional delivery requirements would could help promote and enhance the Commission requests data to quantify protect and enhance the operation, national clearance and settlement the value of the benefits identified. system. The Commission is proposing to integrity, and stability of the markets. In prohibit a broker-dealer from executing particular, this requirement is targeted 2. Costs a short sale order for its own account or at securities with lower market The Commission recognizes that the the account of another person, unless capitalization that may be more proposed locate and delivery the broker-dealer, or the person for susceptible to abuse. We also believe requirement may increase costs for whose account the short sale rule is that clearly articulated rules restricting market participants who engage in short executed: (1) Borrowed the security, or naked short selling would assist the selling. However, we believe that these entered into an arrangement for the Commission in its enforcement efforts. costs would be minimal, because the borrowing of the security, or (2) had The Commission believes that a large proposed rules largely incorporate reasonable grounds to believe that it amount of fails at the clearing level may existing SRO locate rules, such as NYSE could borrow the security so that it impose costs on the clearing agency. For Rule 440C.10 and NASD Rule 3370. The would be capable of delivering the example, certain issuers have taken Commission is, however, proposing an securities on the delivery date it is due. steps to make themselves either exception from these requirements for This uniform rule would further the ‘‘certificate only,’’ which require short sales executed by specialists or goals of regulatory simplification and physical certification of company market makers in connection with bona- avoidance of regulatory arbitrage. Please ownership for all share transfers, or fide market making activities. In describe any additional benefits ‘‘custody only,’’ which restricts addition, any costs that may be initially resulting from the proposed uniform ownership of their securities by incurred would be mitigated over time locate requirements. depositories or financial intermediaries. because the uniform rule should lead to The Commission is also proposing The Commission believes these custody regulatory simplification with regard to additional delivery requirements arrangements are highly costly to the training and surveillance. Please targeted at securities where there is clearing agencies, depositories and describe any additional costs resulting evidence of large settlement failures. financial intermediaries. The from the proposed uniform borrow The proposal would specify that a short Commission believes this proposed requirements to market participants sale in any security that meets the additional delivery requirement would already subject to locate requirements threshold, i.e., any security where there provide a benefit because it would by SROs. The Commission requests data are fails to deliver at a clearing agency mitigate some of these costs. Please to quantify the costs identified. registered with the Commission of provide data supporting this, and any This proposal would apply to all 10,000 shares or more, and that is equal other, benefit that the proposal would equity securities, including securities to one-half of one percent of the issue’s provide in mitigating such costs, that have quotations published on the total shares outstanding, must be including benefits to clearing agencies, OTCBB and Pink Sheets. Issuers and delivered, or the broker-dealer would be depositories and financial investors have complained about

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‘‘naked short selling’’ in these thinly- bring about new costs for market proposed bid test would enhance capitalized securities trading over-the- participants. The Commission requests competition among equities and counter. The proposed locate and data to quantify the costs identified. securities futures in the most liquid delivery requirements would address Broker-dealers, market makers, SROs, securities. The Commission requests some of these concerns. There may be and clearance and settlement firms may data to quantify the costs and the value costs associated with implementing incur costs in making initial system of the benefits relating to security these borrowing requirements for changes necessary to implement these futures products and this proposal. OTCBB and Pink Sheets securities. The new requirements, as well as maintain The Commission anticipates that Commission requests comment on the ongoing compliance and surveillance broker-dealers, including market costs of implementing these mechanisms. We request specific makers, may be able to provide greater requirements, as well as costs associated comment on the system changes to liquidity in securities included in the with ongoing compliance and computer hardware and software, or proposed pilot program, because the surveillance associated with this surveillance costs necessary to absence of the proposed bid test would proposal. The Commission is also implement this rule. If this rule requires make it easier to fill buy orders. The concerned with the impact this proposal additional labor, please indicate what Commission believes that this could may have on small issuers. Please type of jobs are affected, how many benefit investors, however, the provide data to quantify the costs to additional hours are required and the Commission seeks comment on how to small issuers and potential investors in approximate costs of these additional assess the potential benefits of short these small issuers, including whether hours. selling without a bid test restriction in reduced short selling opportunities may these selected securities. In addition, make the securities in these markets C. Proposed Rule 202(T): Temporary the Commission seeks comment on the more susceptible to having overvalued Short Sale Rule Suspension benefits of acquiring the potential stock prices. In addition, we request 1. Benefits empirical data gathered from the comment on the extent to which the proposed pilot program. Would the The proposed pilot program would recommended proposals may affect the proposed pilot program effectively suspend the operation of the proposed ability of small issuers to secure allow the Commission to better bid test provision for selected stocks financing through the issuance of understand short sales and short sale that the Commission believes are less convertible debentures. Please describe restrictions? Please provide estimates susceptible to manipulation because and analyze any other costs associated and views on these potential benefits. with this proposal. they are more liquid and have a high The Commission also recognizes that market capitalization. The proposed 2. Costs there would be costs to market pilot program is intended to provide the The Commission anticipates that the participants in implementing and Commission with empirical data to proposed pilot program may cause complying with the proposed additional assess whether the proposed bid test additional costs to brokers, dealers, delivery requirements targeted at should be removed for liquid securities. SROs, and potentially issuers and securities with substantial settlement The empirical data collected would investors. While we anticipate that failures. The Commission seeks enable the Commission to study the SROs and broker-dealers would need to estimates and views regarding these effects of deregulated short selling on, make system changes in order to costs for particular types of market among other things, market volatility, exclude the selected securities from the participants, as well as any other costs price efficiency, and liquidity. The proposed bid test, we do not know what or benefits that may result from proposed pilot program would assist the these changes would cost. The adoption of the proposal. Commission in determining if, and to Commission seeks detailed comment on The Commission is not proposing any what extent, a price test inhibits the the extent of required system changes exception from the proposed additional markets. The data would also be used to and costs associated with delivery requirements for shorts sales in study the extent to which the proposed implementation of the pilot program, connection with bona-fide market bid test achieves the stated objectives of and on any potential cost to investors making because we believe that the short sale rule by comparing trading due to the absence of a price test extended fails to deliver appear activity in liquid securities that are applied to these securities. In particular, characteristic of an investment or subject to a price test with liquid the Commission seeks comment on trading strategy, rather than one related securities that are not subject to a price whether the pricing of such securities is to market making. The Commission test. The markets would benefit in the going to be more or less efficient, and believes that there may be costs to long run from the possibility of whether manipulation of market prices market makers that have open extended removing a rule that may weaken (either upward or downward) is apt to fail positions. We have requested markets or, alternatively, by retaining a be more or less prevalent. comment on the need for market makers rule that may strengthen markets. The Commission believes issuers may engaging in bona-fide market making to In addition, the Commission incur some costs associated with maintain extended fail positions. Please recognizes that, in the presence of short inclusion in the pilot program and seeks provide information detailing any costs sale restrictions in equity securities, the estimates and views on potential costs that may be associated with not absence of short sale regulation for to those issuers selected for the pilot providing a market maker exception to securities futures may make trading program. the proposed additional delivery security futures an attractive hedging requirements. In particular, we request alternative to equities. The pilot is D. Proposed Rule 200: Definition of a comment on any lost trading or business designed to remedy potentially unfair Short Sale opportunity costs to market makers, any competition caused by disparate 1. Unconditional Contracts potential impact on investors, and a regulation between equities and security detailed description of any such costs. futures products. We believe that the a. Benefits In general, the Commission proposed pilot program would give the Proposed Rule 200 requires that acknowledges that the proposed Commission an opportunity to unconditional contracts provide for additional delivery requirements may determine whether suspension of the present delivery, and specify the price

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and number of securities to be sold. In This proposal would allow multi- transaction by restricting the source of addition, the proposal would require service broker-dealers to calculate net securities from which he may cover. that persons who claim to be long positions in a particular security within Such costs are difficult to quantify and actually receive a specified number of defined trading units independently we solicit detailed description of the securities at a specified price and at a from the positions held by the other type and amount of any such costs from specified time. The benefit of this aggregation units within the firm, commenters. We believe, however, that proposal is that it would prevent abuse subject to certain conditions. This any costs associated with restricting a by individuals seeking to claim a long proposal is intended to allow multi- short sellers’ ability to cover with position merely to avoid application of service firms to pursue different trading offering shares is balanced by the the price test provisions in proposed strategies under certain circumstances benefits derived from preventing the Rule 201. Specifically, if the price must without being inhibited by the manipulative activity of effecting pre- be in the contract, there would be no requirements of a price test when pricing short sales and covering with incentive to attempt to depress the effecting short sales, which should offering shares. Additionally, we solicit market price of security, such as increase efficiency and flexibility at comment concerning the costs to depressing the price prior to closing large firms. issuers, shareholders, and others of pre- where a contract mandates that the pricing short sales prior to a shelf b. Costs security be purchased at the closing offering takedown and covering with price. The Commission does not believe shelf offering shares. Such costs may there are any costs associated with this include costs associated with b. Costs proposal because firms are not required postponement or abandonment of an The Commission does not anticipate to use aggregation units. offering or a lower than anticipated any costs for this proposal. However, offering price. E. Proposed Amendments to Regulation the Commission notes that some broker- M, Rule 105 XX. Consideration on Burden and dealers may claim that such a proposal Promotion of Efficiency, Competition, would inhibit their trading strategy and 1. Benefits and Capital Formation increase the cost of doing business. The The proposed amendment to Rule 105 Commission seeks comment on how Section 3(f) of the Exchange Act of Regulation M would eliminate the requires the Commission, whenever it such a proposal would affect the trading exception for offerings filed under of retail and institutional investors and engages in rulemaking and must § 230.415, commonly referred to as the consider or determine if an action is the potential costs, if any, of limitations shelf offering exception. We believe the to the trading strategies of investors. necessary or appropriate in the public elimination of the shelf offering interest, to consider whether the action 2. Securities Futures exception would update Rule 105 of would promote efficiency, competition, Regulation M and provide a uniform 236 a. Benefits and capital formation. In addition, treatment of shelf offerings and non- Section 23(a)(2) of the Exchange Act Proposed Rule 200 would codify shelf offerings in light of our belief that requires the Commission, when making existing guidance issued by the both shelf offerings and non-shelf rules under the Exchange Act, to Commission as to when a person is offerings are susceptible to the consider the impact such rules would deemed to own a security underlying a manipulative abuse that Rule 105 of have on competition.237 Exchange Act 235 security futures contract. Codifying Regulation M is intended to prevent. Section 23(a)(2) prohibits the this guidance would provide ease of We believe that the proposed Commission from adopting any rule that reference for compliance with the short amendment to Rule 105 of Regulation M would impose a burden on competition sale rule for those trading in security would benefit issuers and investors by not necessary or appropriate in futures. promoting shelf-offering prices that are furtherance of the purposes of the b. Costs based upon market prices that are not Exchange Act. artificially influenced. We believe this Proposed Regulation SHO is intended The Commission acknowledges, should safeguard the integrity of the to promote regulatory simplification by however, that the existing interpretation capital raising process with respect to applying a uniform bid test to short may present costs associated with lost shelf offerings and enhance investor sales in exchange-listed and Nasdaq business opportunities for individuals confidence in our market. The proposal NMS securities that occur in various who intended to use securities futures would also protect issuers conducting markets and enhanced locate and for trading strategies. In light of this, shelf offerings from receiving reduced delivery requirements to all equity and in recognition that some offering proceeds as a result of securities. The Commission participants may not have commented manipulative conduct. These benefits preliminarily believes that proposed on the guidance when it was issued, the are difficult to quantify. The Regulation SHO would promote Commission requests data to quantify Commission encourages commenters to efficiency because market participants the costs and the value of the benefits provide data or other facts to support would have to apply only one price test identified. their views concerning these and any to exchange-listed and Nasdaq NMS 3. Aggregation Units other benefits not mentioned here. securities, and the pilot program would give the Commission the opportunity to a. Benefits 2. Costs study how the new price test affects a We have also proposed to incorporate We request comment as to whether broad range of securities in different aggregation unit netting into Rule 200. the proposed elimination of the shelf markets. We also preliminarily believe offering exception would impose greater that the locate and delivery 235 Commission Guidance on the Application of costs on market participants than the requirements would promote efficiency Certain Provisions of the Securities Act of 1933, the current rule. We recognize that the by addressing large failures to deliver Securities Exchange Act of 1934, and Rules thereunder to Trading in Security Futures Products, proposed elimination of the shelf Securities Exchange Act Release No. 46101 (June offering exception would diminish a 236 15 U.S.C. 78c(f). 21, 2002), 67 FR 43234 (June 27, 2002). short seller’s ability to effect a covering 237 15 U.S.C. 78w(a)(2).

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securities that have the potential to pending Congressional review. We regulation. Third, the proposed disrupt market operations and pricing request comment on the potential amendments extend locate and delivery systems. impact of the proposed regulation on requirements to all equity securities, The Commission preliminarily the economy on an annual basis. including the SmallCap, OTCBB, and believes that Regulation SHO’s uniform Commenters are requested to provide Pink Sheet securities that have low price test and enhanced locate and empirical data and other factual support market capitalization and may be more delivery requirements would promote for their view to the extent possible. susceptible to manipulation. These capital formation because the proposed locate and delivery requirements are rules would reduce market volatility XXII. Initial Regulatory Flexibility Analysis designed to help prevent large fail and the opportunities for market positions, which may help facilitate manipulation, thereby strengthening The Commission has prepared an some manipulative strategies. issuer and investor confidence in the Initial Regulatory Flexibility Analysis markets. Applying the locate and (IRFA), in accordance with the C. Legal Basis delivery requirements to all equity provisions of the Regulatory Flexibility Pursuant to the Exchange Act and, 239 securities would promote capital Act (RFA), regarding the proposed particularly, Sections 2, 3(b), 9(h), 10, formation and especially help smaller Regulation SHO, Rules 200, 201, 202(T), 11A, 15, 17(a), 19, 23(a) thereof, 15 issuers, whose securities may be more and 203, replacing Rule 10a–1, Rule U.S.C. 78b, 78c, 78i, 78j, 78k–1, 78o, susceptible to the effects of naked short 10a–2, and Rule 3b–3, and proposed 78q, 78s, 78w(a), the Commission selling, enter into and remain in the amendments to Rule 105 under the proposed to adopt Regulation SHO, marketplace and would promote capital Exchange Act. Rules § 240.200, 240.201, 240.202(T), efficiency in smaller, thinly capitalized A. Reasons for the Proposed Action and 240.203, replacing § 240.3b–3, securities that are more susceptible to 240.10a–1, and 240.10a–2. manipulation. Based on recent developments, As discussed above, proposed including but not limited to, increased D. Small Entities Subject to the Rule Regulation SHO would apply a uniform instances of ‘‘naked’’ short selling, i.e., Paragraph (c)(1) of Rule 0–10 240 states bid test to covered securities and the selling short without borrowing the that the term ‘‘small business’’ or ‘‘small locate and delivery requirements to all necessary securities to make delivery; organization,’’ when referring to a equity securities. The Commission decimalization; the advent of security broker-dealer, means a broker or dealer preliminarily believes that Regulation futures trading; and an increasing that had total capital (net worth plus SHO would promote competition among amount of Nasdaq securities being subordinated liabilities) of less than exchanges or other market centers in traded away from the Nasdaq market, $500,000 on the date in the prior fiscal attracting issuers to list on a particular and thus not subject to any short sale year as of which its audited financial market, in that market participants price test, the Commission is proposing statements were prepared pursuant to would no longer be able to select a Regulation SHO, Rules 200, 201, 202(T), § 240.17a–5(d); and is not affiliated with market on which to execute a short sale and 203, replacing Rules 10a–1, 10a–2, based on disparate regulation. In and 3b–3, along with amendments to any person (other than a natural person) addition, the Commission preliminarily Rule 105. The proposed rules, including that is not a small business or small believes proposed Regulation SHO a proposed uniform bid test Rule 201 organization. As of 2002, the would level the playing field by that would apply to all exchange-listed Commission estimates that there were applying uniform regulation. and Nasdaq NMS securities wherever approximately 880 broker dealers that The Commission requests comment they are traded, enhanced locate and qualified as small entities as defined on whether the proposed amendments delivery requirements under proposed above.The Commission’s proposed are expected to promote efficiency, Rule 203, clarification of ownership amendments would require all small competition, and capital formation. under proposed Rule 200, as well as a entities to modify, and in some cases temporary Rule 202(T) suspending the install, systems and surveillance XXI. Consideration of Impact on the mechanisms to ensure compliance with Economy proposed bid test for certain securities during a two-year pilot, are designed to the uniform bid test, marking, and For purposes of the Small Business modernize short sale regulation in light locate and delivery requirements. Regulatory Enforcement Fairness Act of of recent developments while providing 238 E. Reporting, Recordkeeping, and Other 1996, or ‘‘SBREFA,’’ we must advise simplification and uniformity to Compliance Requirements the Office of Management and Budget as participants. to whether the proposed regulation The proposed amendments may constitutes a ‘‘major’’ rule. Under B. Objectives impose some new compliance and SBREFA, a rule is considered ‘‘major’’ The proposed amendments are marking requirements on broker-dealers where, if adopted, it results or is likely designed to fulfill several objectives. that are small entities. Small broker to result in: First, one of the prime objectives of the dealers that only trade SmallCap, • An annual effect on the economy of proposed amendments is to provide OTCBB, or Pink Sheet securities were $100 million or more (either in the form uniform short sale regulation applicable not previously subject to marking and of an increase or a decrease); borrow and delivery requirements. • to trades in exchange-listed and Nasdaq A major increase in costs or prices NMS securities occurring in multiple, Under the proposed amendments these for consumers or individual industries; dispersed, and diverse markets. Second, broker-dealers would have an obligation or the proposed amendments provide to comply with the marking • Significant adverse effect on greater flexibility in effecting short sales requirements and the borrow and competition, investment or innovation. in a decimal environment as well as delivery requirements imposed upon If a rule is ‘‘major,’’ its effectiveness them by the proposals. Moreover, some will generally be delayed for 60 days accommodating trading systems that utilize price improvement models that small entities that trade securities that are subject to the pilot program may 238 Pub. L. No. 104–121, Title II, 110 Stat. 857 often conflict with existing short sale (1996) (codified in various sections of 5 U.S.C., 15 U.S.C. and as a note to 5 U.S.C. 601). 239 5 U.S.C. 603. 240 17 CFR 240.0–10(c)(1).

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have to make changes to exclude these 78q, 78q–1, 78w(a), the Commission security borrowed by, or for the account securities from the uniform bid test. proposed to adopt § 240.200, 240.201, of, the seller. 240.202(T), 203, along with (b) A person shall be deemed to own F. Duplicative, Overlapping or amendments to Regulation M, Rule 105. a security if: Conflicting Federal Rules (1) He or his agent has title to it; or The Commission believes that there Text of Proposed Regulation SHO, (2) He has purchased, or has entered are no federal rules that duplicate, Amendments and Temporary Rule into an unconditional contract, binding overlap or conflict with the proposed List of Subjects in 17 CFR Parts 240 and on both parties thereto, to purchase it, rules and the proposed temporary rule. 242 but has not yet received it, and the contract specifies the price and amount G. Significant Alternatives Brokers, Fraud, Reporting and recordkeeping requirements, Securities. of the securities to be purchased; or Pursuant to Section 3(a) of the (3) He owns a security convertible RFA,241 the Commission must consider For the reasons set out in the into or exchangeable for it and has the following types of alternatives: (a) preamble, Title 17, Chapter II, of the tendered such security for conversion or The establishment of differing Code of Federal Regulations is proposed exchange; or compliance or reporting requirements or to be amended as follows. (4) He has an option to purchase or timetables that take into account the PART 240—GENERAL RULES AND acquire it and has exercised such resources available to small entities; (b) REGULATIONS, SECURITIES option; or the clarification, consolidation, or (5) He has rights or warrants to EXCHANGE ACT OF 1934 simplification of compliance and subscribe to it and has exercised such reporting requirements under the Rule 1. The authority citation for part 240 rights or warrants; or for small entities; (c) the use of continues to read in part as follows: (6) He holds a security futures performance rather than design Authority: 15 U.S.C. 77c, 77d, 77g, 77j, contract to purchase it and has received standards; and (d) an exemption from 77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, notice that his position will be coverage of the Rule, or any part thereof, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, physically settled and is irrevocably for small entities. 78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p, bound to receive the underlying The primary goal of the proposed 78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 79q, security. amendments and the temporary rule is 79t, 80a–20, 80a–23, 80a–29, 80a–37, 80b–3, (c) A person shall be deemed to own to promote uniformity in short sale 80b–4, 80b–11, 7202, 7241, 7262, and 7263; securities only to the extent that he has regulation wherever trades in certain and 18 U.S.C. 1350, unless otherwise noted. a net long position in such securities. securities occur. As such, we believe * * * * * (d) A broker or dealer shall be deemed that imposing different compliance or 2. Sections 240.3b–3, 240.10a–1, and to own a security, even if it is not net reporting requirements, and possibly a 240.10a–3 are removed and reserved. long, if: different timetable for implementing (1) It acquired that security while PART 242—REGULATIONS M, SHO, compliance or reporting requirements, acting in the capacity of a block ATS, AND AC AND CUSTOMER for small entities would undermine the positioner; and MARGIN REQUIREMENTS FOR goal of uniformity. In addition, we have (2) To the extent that the broker or SECURITY FUTURES concluded similarly that it would not be dealer’s short position in the security is consistent with the primary goal of the 3. The authority citation for part 242 the subject of offsetting positions proposals to further clarify, consolidate continues to be read as follows: created in the course of bona fide arbitrage, risk arbitrage, or bona fide or simplify the proposed amendments Authority: 15 U.S.C. 77g, 77q(a), 77s(a), for small entities. The Commission also 78b, 78c, 78g(c)(2), 78i(a), 78j, 78k–1(c), 78l, hedge activities. preliminarily believes that it would be 78m, 78mm, 78n, 78o(b), 78o(c), 78o(g), (e) In order to determine its net inconsistent with the purposes of the 78q(a), 78q(b), 78g(h), 78w(a), 78dd–1, 80a– position, a broker or dealer shall Exchange Act to use performance 23, 80a–29, and 80a–37. aggregate all of its positions in a security unless it qualifies for independent standards to specify different 4. The part heading for part 242 is trading unit aggregation, in which case requirements for small entities or to revised as set forth above. exempt broker-dealer entities from 5. Part 242 is amended by adding each independent trading unit shall having to comply with the proposed §§ 242.200 through 242.203 to read as aggregate all of its positions in a security rules and temporary rule. follows: to determine its net position. Independent trading unit aggregation is H. Request for Comments Regulation SHO—Regulation of Short available only if: The Commission encourages the Sales (1) The broker or dealer has a written submission of written comments with Sec. plan of organization that identifies each respect to any aspect of the IRFA. Those 242.200 Definition of ‘‘short sale.’’ aggregation unit, specifies its trading comments should specify costs of 242.201 Price test and marking objective, and supports its independent compliance with the proposed requirements. identity; temporary rule, and suggest alternatives 242.202(T) Temporary short sale rule (2) Each aggregation unit within the that would accomplish the objective of suspension. firm must continuously determine its proposed amendments and temporary 242.203 Borrowing and delivery net position for every security that it rule. requirements. trades that is subject to § 242.201; (3) Each trader pursuing a particular XXIII. Statutory Authority Regulation SHO—Regulation of Short Sales trading objective or strategy must be Pursuant to the Exchange Act and, included in one aggregation unit; and particularly, Sections 2, 3(b), 9(h), 10, § 242.200 Definition of ‘‘short sale.’’ (4) Individual traders must be 11A, 15, 17(a), 17A, 23(a) thereof, 15 (a) The term short sale shall mean any assigned to only one aggregation unit at U.S.C. 78b, 78c, 78i, 78j, 78k–1, 78o, sale of a security which the seller does a time. not own or any sale which is (f) When unwinding index arbitrage 241 5 U.S.C. 603 (c). consummated by the delivery of a positions involving long baskets of stock

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and one or more short index futures seconds of execution; the broker or security he is entitled to acquire, and traded on a board of trade or one or dealer has supervisory systems in place the person subsequently acquires or more standardized options contracts as to produce records that enable the purchases the security upon which the defined in § 240.9b–1(a)(4) of this broker or dealer to accurately and short sale was based. A person shall be chapter, persons need not aggregate the readily reconstruct, in a time-sequenced deemed entitled to acquire a security if: long stock position with short stock manner, all orders which a broker or (i) He has an unconditional right or positions in other proprietary accounts dealer relies pursuant to this exception. option to acquire or purchase the provided that: (b) All short sales of any covered security at a specific price and in a (1) The short stock positions have security must be effected at a price at specific amount when the short sale is been created and maintained in the least one cent above the current best bid effected; and course of bona fide arbitrage, risk displayed as part of the consolidated (ii) The right of acquisition was arbitrage, or bona fide hedge activities; best bid and offer at the time of originally attached to or represented by and execution. another security, or was issued to all (2) The sale does not occur during a (c) A broker or dealer must mark all holders of the securities; period commencing at the time that the sell orders of any security as either (6) Any sale of a covered security for Dow Jones Industrial Average has ‘‘long,’’ ‘‘short,’’ or ‘‘short exempt.’’ A a special international arbitrage account declined by two percent or more from broker or dealer shall mark an order to effected to profit from a current price its closing value on the previous day sell a security ‘‘long’’ only if the seller difference between a security on a and terminating upon the establishment owns the security being sold and either: foreign securities market and a security of the closing value of the Dow Jones (1) The security to be delivered is in on a securities market subject to the Industrial Average on the next the physical possession or control of the jurisdiction of the United States, succeeding trading day. broker or dealer; or provided that the short seller has an (2) The security will be in the offer to buy on a foreign market that § 242.201 Price test and marking physical possession or control of the allows him to immediately cover the requirements broker or dealer no later than the short sale at the time it was made. For (a) Definitions. For the purposes of settlement of the transaction. An order the purposes of this section, a this section: shall be marked ‘‘short exempt’’ if the depositary receipt of a security shall be (1) The term actively traded security sale is effected pursuant to one of the deemed to be the same security as the shall have the same meaning as in § 242. exceptions in paragraph (d) of this security represented by such receipt; 101(c)(1). section. (7)(i) Any sale of a covered security by (2) The term average daily trading (d) The provisions of paragraph (b) of an underwriter or member of a volume shall have the same meaning as this section shall not apply to: syndicate or group participating in the in § 242.100(b). (1) Any sale by any person of a distribution of a security in connection (3) The term consolidated best bid covered security, for an account in with an over-allotment of securities; or and offer shall have the same meaning which he has an interest, if such person (ii) Any lay-off sale by an underwriter as in § 240.11Ac1–5(a)(7) of this owns the security and intends to deliver or member of a syndicate or group in chapter. such security as soon as is possible connection with a distribution of (4) The term covered security shall without undue inconvenience or securities through rights or a standby mean all national market system expense; underwriting commitment; securities as defined in § 240.11Aa2–1 (2) Any sale by a broker or dealer of (8) Any sale of a covered security at of this chapter, but shall exclude a covered security for an account in the volume weighted average price Nasdaq Small Cap securities, as which it has no interest, pursuant to an (VWAP) that meets the following determined by NASD rules. order marked long; criteria: (5) The term odd lot shall mean an (3) Any sale of a covered security by (i) The sale is entered into and order for the purchase or sale of a a market maker to off-set customer odd- matched before the regular trading covered security in an amount less than lot orders or to liquidate an odd-lot session opens and the execution price of a round lot. position by a single round lot sell order the VWAP matched trade will be (6) The term responsible broker or which changes such broker or dealer’s determined after the close of the regular dealer shall have the same meaning as position by no more than a unit of trading session; and in § 240.11Ac1–1(a)(21) of this chapter. trading; (ii) The VWAP for the covered (7) The term riskless principal shall (4) Any sale of a covered security by security is calculated by: mean a transaction in which a broker or a responsible broker or dealer effected at (A) Calculating the values for every dealer after having received an order to a price equal to the consolidated best regular way trade reported in the sell a security, sells the security as offer when the market for the covered consolidated system, or on a primary principal at the same price to satisfy the security is locked or crossed, provided market that accounts for seventy-five order to sell. The sell order must be however, that the exception shall not percent or more of the covered given the same per-share price at which apply to any broker or dealer who security’s average daily trading volume the broker or dealer sold shares to initiated the locked or crossed market; for the security during the regular satisfy the facilitated order, exclusive of (5) Any sale of a covered security for trading session, by multiplying each any explicitly disclosed markup or a special arbitrage account by a person such price by the total number of shares markdown, commission equivalent or who is presently entitled to acquire traded at that price; other fee. In addition, for purposes of another security, provided that the (B) Compiling an aggregate sum of all this section, a broker or dealer must security sold short is in the same class values; and have written policies and procedures in as the security he is entitled to acquire, (C) Dividing the aggregate sum by the place to assure that, at a minimum: the the short sale is in an amount equivalent total number of reported shares for that customer order was received prior to the to the number of the securities that he day in the security; and offsetting transaction; the offsetting is entitled to acquire, the sale is effected (iii) The transactions are reported transaction is allocated to a riskless to profit from a current price difference using a special VWAP trade modifier; principal or customer account within 60 between the security sold short and the and

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(iv) Short sales used to calculate the provisions of paragraph (b) of § 242.201. market making activities shall not VWAP will themselves be subject to the All other provisions of § 242.201 shall include activity that is related to provisions of paragraph (b) this section, remain in effect. speculative selling strategies or unless excepted or exempted, and investment purposes of the broker or § 240.203 of this chapter; and § 242.203 Borrowing and delivery dealer or is disproportionate to the requirements. (v) The VWAP matched security: usual market making patterns or (A) Qualifies as an ‘‘actively-traded (a) Long sales. (1) If a broker or dealer practices of the broker or dealer in that security’’; or knows or has reasonable grounds to security. (B) The proposed short sale believe that the sale of a security was or (3) For any security where there are transaction is being conducted as part of will be effected pursuant to an order fails to deliver at a clearing agency a basket transaction of twenty or more marked ‘‘long,’’ such broker or dealer registered with the Commission of securities in which the subject security shall not lend or arrange for the loan of 10,000 shares or more, and that is equal does not comprise more than five any security for delivery to the broker to at least one-half of one percent of the percent of the value of the basket traded; for the purchaser after sale, or fail to (vi) The transaction is not effected for deliver a security on the date delivery issue’s total shares outstanding, if a the purpose of creating actual, or is due, unless the broker or dealer broker or dealer executes a short sale for apparent, active trading in or otherwise knows or has been informed by the its own account or the account of affecting the price of any security; seller that the seller owns the security another person, and if for any reason (vii) A broker or dealer shall be and will deliver it to the clearing broker whatever securities have not been permitted to act as principal on the or dealer prior to the scheduled delivered within two days after the contra-side to fill customer short sale settlement of the transaction. settlement date: orders only if the broker or dealer’s (2) The provisions of paragraph (a)(1) (i) For a period of ninety calendar position in the covered security, as of this section shall not apply to: days the broker or dealer shall not committed by the broker-dealer during (i) The loan of any security by a execute a short sale in such security for the pre-opening period of a trading day broker or dealer through the medium of his own account or the account of the and aggregated across all of its a loan to another broker or dealer; or person for whose account the failure to customers who propose to sell short the (ii) Any loan of, arrangement for the deliver occurred unless the broker or same security on a VWAP basis, does loan of, or failure to deliver any dealer or the person for whose account not exceed 10% of the covered security, if, prior to such loan, the short sale is executed has borrowed security’s relevant average daily trading arrangement or failure to deliver, a the security, or entered into a bona fide volume; national securities exchange, in the case arrangement to borrow the security, and (9) A sale of any covered security of a sale effected thereon, or a national will deliver the security on the date when the broker or dealer is effecting securities association, in the case of a delivery is due; and the execution of a customer ‘‘long’’ sale sale not effected on an exchange, finds: (ii) The rules of a clearing agency on a riskless principal basis, regardless (A) That such sale resulted from a registered pursuant to Section 17A (15 of the broker or dealer’s proprietary net mistake made in good faith; U.S.C. 78q–1) of the Act shall include position; and (B) That due diligence was used to the following provisions: (10) A sale of any covered security at ascertain that the circumstances (A) A broker or dealer failing to a price equal to the consolidated best specified in § 242.201(c) existed; and deliver securities as specified in bid by a broker or dealer to satisfy any (C) Either that the condition of the subparagraph (3) above shall be referred obligations of the broker or dealer to a market at the time the mistake was to the NASD and the Examining customer limit order, as determined by discovered was such that undue Authority (as defined in 15c3–1(c)(12)) federal securities laws or the rules of a hardship would result from covering the for such broker or dealer for appropriate self-regulatory organization. transaction by a ‘‘purchase for cash’’ or (e) Upon written application or upon that the mistake was made by the action; and its own motion, the Commission may seller’s broker and the sale was at a (B) The registered clearing agency grant an exemption from the provisions price permissible for a short sale under shall withhold a benefit equal to any of this section, either unconditionally or § 242.201(b). mark to market amounts or payments on specified terms and conditions, to (b) Short sales. that otherwise would be made to the any transaction or class of transactions, (1) A broker or dealer may not execute participant failing to deliver, and assess or to any security or class of securities, a short sale order for its own account or appropriate charges. or to any person or class of persons. the account of another person unless the (c) Upon written application or upon broker or dealer, or the person for whose its own motion, the Commission may § 242.202(T) Temporary short sale rule account the short sale is executed: grant an exemption from the provisions suspension. (i) Borrowed the security, or entered of this section, either unconditionally or General rule. Short sales in specified into a bona-fide arrangement to borrow on specified terms and conditions, to securities constituting a subset of the the security; or any transaction or class of transactions, Russell 1000 index, or such other (ii) Had reasonable grounds to believe or to any security or class of securities, securities as the Commission designates that it could borrow the security so that or to any person or class of persons. as permissible by order as necessary or it would be capable of delivering the appropriate in the public interest and securities on the date delivery is due. Dated: October 28, 2003. consistent with the protection of (2) The provisions of paragraph (b)(1) By the Commission. investors after giving due consideration of this section shall not apply to short Margaret H. McFarland, to the security’s liquidity, volatility, sales executed by specialists or market Deputy Secretary. market depth and trading market, may makers in connection with bona-fide [FR Doc. 03–27660 Filed 11–5–03; 8:45 am] be effected without regard to the market making activities. Bona-fide BILLING CODE 8010–01–P

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Reader Aids Federal Register Vol. 68, No. 215 Thursday, November 6, 2003

CUSTOMER SERVICE AND INFORMATION CFR PARTS AFFECTED DURING NOVEMBER

Federal Register/Code of Federal Regulations At the end of each month, the Office of the Federal Register General Information, indexes and other finding 202–741–6000 publishes separately a List of CFR Sections Affected (LSA), which aids lists parts and sections affected by documents published since Laws 741–6000 the revision date of each title. 408...... 62670 Presidential Documents 3 CFR 416...... 62670 Executive orders and proclamations 741–6000 Proclamations: The United States Government Manual 741–6000 7727...... 62351 21 CFR 7728...... 62503 Other Services 16...... 62353 7729...... 62505 1240...... 62353 Electronic and on-line services (voice) 741–6020 7730...... 62507 1310...... 62735 Privacy Act Compilation 741–6064 Proposed Rules: 741–6043 5 CFR Public Laws Update Service (numbers, dates, etc.) 1300...... 62255 TTY for the deaf-and-hard-of-hearing 741–6086 2600...... 62213 1301...... 62255 1304...... 62255 7 CFR ELECTRONIC RESEARCH 1307...... 62255 20...... 62213 World Wide Web 205...... 62215 26 CFR Full text of the daily Federal Register, CFR and other publications 331...... 62218 1...... 62516 is located at: http://www.access.gpo.gov/nara 762...... 62221 Proposed Rules: 764...... 62221 Federal Register information and research tools, including Public 1...... 62549, 62553 1580...... 62731 301...... 62553 Inspection List, indexes, and links to GPO Access are located at: 1910...... 62221 http://www.archives.gov/federallregister/ 1924...... 62221 27 CFR E-mail 1941...... 62221 Proposed Rules: 1943...... 62221 9...... 62259 FEDREGTOC-L (Federal Register Table of Contents LISTSERV) is 1955...... 62221 an open e-mail service that provides subscribers with a digital 28 CFR form of the Federal Register Table of Contents. The digital form 9 CFR of the Federal Register Table of Contents includes HTML and 14...... 62516 71...... 62225 81...... 62370 PDF links to the full text of each document. 121...... 62218 To join or leave, go to http://listserv.access.gpo.gov and select 130...... 62226 30 CFR Online mailing list archives, FEDREGTOC-L, Join or leave the list 319...... 62228 943...... 62517 (or change settings); then follow the instructions. 381...... 62228 950...... 62519 PENS (Public Law Electronic Notification Service) is an e-mail Proposed Rules: service that notifies subscribers of recently enacted laws. 93...... 62386 33 CFR 94...... 62386 100...... 62524 To subscribe, go to http://listserv.gsa.gov/archives/publaws-l.html 95...... 62386 and select Join or leave the list (or change settings); then follow 101...... 62502 the instructions. 10 CFR 104...... 62501 117...... 62524, 62528 FEDREGTOC-L and PENS are mailing lists only. We cannot 11...... 62509 160...... 62501 respond to specific inquiries. 25...... 62509 165...... 62501, 62524 Reference questions. Send questions and comments about the Federal Register system to: [email protected] 14 CFR 40 CFR 39 ...... 62228, 62231, 62233, The Federal Register staff cannot interpret specific documents or 52 ...... 62236, 62239, 62501, 62513 regulations. 62529, 62738, 62869 71 ...... 62514, 62515, 62732, 60...... 62529 62733, 62734, 62735 81...... 62239 FEDERAL REGISTER PAGES AND DATE, NOVEMBER 97...... 62234 131...... 62740, 62744 Proposed Rules: 300...... 62747 62213–62350...... 3 39 ...... 62405, 62408, 62409, 62351–62502...... 4 Proposed Rules: 62415, 62544, 62545 52 ...... 62263, 62264, 62553 62503–62730...... 5 71 ...... 62548, 62758, 62759, 60...... 62553 62731–63010...... 6 62760, 62761, 62762 81...... 62264 93...... 62690 15 CFR 271...... 62264 902...... 62501 42 CFR 17 CFR 71...... 62353 Proposed Rules: 73...... 62245 240 ...... 62872, 62910, 62972 242...... 62972 44 CFR 64...... 62748 20 CFR Proposed Rules: 45 CFR 404...... 62670 5b...... 62250

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46 CFR 287...... 62535 73 ...... 62539, 62540, 62541 50 CFR 2...... 62501 295...... 62535 Proposed Rules: 622...... 62373, 62542 298...... 62535 31...... 62501 73...... 62554 648...... 62250 310...... 62535 71...... 62501 355...... 62535 49 CFR 660...... 62374 91...... 62501 380...... 62535 Proposed Rules: Proposed Rules: 115...... 62501 390...... 62535 192...... 62555 600...... 62267 126...... 62501 195...... 62555 622...... 62267, 62422 47 CFR 176...... 62501 224...... 62942 660...... 62763 232...... 62535 25...... 62247 571...... 62417 679...... 62423 281...... 62535 64...... 62249, 62751 587...... 62421

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REMINDERS Systems of records; Critical habitat Federal Acquisition Regulation The items in this list were published 11-6-03 designations— (FAR): editorially compiled as an aid JUSTICE DEPARTMENT Washington, Oregon, Unique item identification to Federal Register users. Drug Enforcement Idaho, and California; and valuation; Inclusion or exclusion from Administration salmon and steelhead; supplement; comments this list has no legal evolutionarily significant due by 11-10-03; Methamphetamine Anti- significance. units; comments due by published 10-10-03 [FR Proliferation Act; 11-13-03; published 9- 03-25827] implementation: 29-03 [FR 03-24568] ENERGY DEPARTMENT Retailers and distributors; RULES GOING INTO Endangered Species Act; Federal Energy Regulatory threshold and mail order EFFECT NOVEMBER 6, interagency cooperation: Commission 2003 reporting requirements; published 10-7-03 National Fire Plan; Electric rate and corporate implementation; comments regulation filings: AGRICULTURE SMALL BUSINESS due by 11-10-03; Virginia Electric & Power DEPARTMENT ADMINISTRATION published 10-9-03 [FR 03- Co. et al.; Open for Agricultural Marketing Business loans: 25621] comments until further Service Certified Development Fishery conservation and notice; published 10-1-03 Prunes (dried) produced in— Company Loan Program; management: [FR 03-24818] California; published 10-7-03 published 10-7-03 Caribbean, Gulf, and South ENVIRONMENTAL AGRICULTURE TRANSPORTATION Atlantic fisheries— PROTECTION AGENCY DEPARTMENT DEPARTMENT Gulf of Mexico king Air quality implementation Foreign Agricultural Service Federal Aviation mackerel, Spanish plans; approval and Farmers Trade Adjustment Administration mackerel, and cobia; promulgation; various Assistance Program Class E5 airspace; published comments due by 11- States: Technical corrections; 11-6-03 13-03; published 10-14- California; comments due by 03 [FR 03-25924] 11-13-03; published 10- published 11-6-03 TREASURY DEPARTMENT Gulf of Mexico red 14-03 [FR 03-25800] ENVIRONMENTAL Thrift Supervision Office PROTECTION AGENCY snapper; comments due Kentucky; comments due by Savings associations: 11-13-03; published 10- Air quality planning purposes; by 11-12-03; published Transactions with affiliates; 14-03 [FR 03-25798] designation of areas: 10-27-03 [FR 03-27035] published 10-7-03 Nevada; comments due by California; published 10-7-03 Gulf of Mexico shrimp; Correction; published 10- comments due by 11- 11-10-03; published 10- California; correction; 20-03 14-03; published 9-30- 10-03 [FR 03-25802] published 10-20-03 03 [FR 03-24737] New Mexico; comments due Superfund program: West Coast States and by 11-10-03; published National oil and hazardous COMMENTS DUE NEXT Western Pacific 10-9-03 [FR 03-25543] substances contingency WEEK fisheries— Pennsylvania; comments plan— Pacific Coast Groundfish due by 11-10-03; National priorities list AGRICULTURE Fishery Management published 10-10-03 [FR update; published 11-6- DEPARTMENT Plan; comments due by 03-25634] 03 Agricultural Marketing 11-14-03; published 10- Environmental statements; Water programs: Service 15-03 [FR 03-26075] availability, etc.: Water quality standards— Oranges, grapefruit, Pacific whiting; comments Coastal nonpoint pollution South San Francisco Bay, tangerines, and tangelos due by 11-13-03; control program— CA; Federal aquatic life grown in Florida, and published 10-29-03 [FR Minnesota and Texas; water quality criteria for imported; comments due by 03-27248] Open for comments copper and nickel; 11-10-03; published 9-9-03 International fisheries until further notice; withdrawn; published [FR 03-22948] regulations: published 10-16-03 [FR 11-6-03 03-26087] AGRICULTURE Fraser River sockeye and FEDERAL DEPARTMENT pink salmon; inseason Pesticides; tolerances in food, COMMUNICATIONS Animal and Plant Health orders; comments due by animal feeds, and raw COMMISSION Inspection Service 11-10-03; published 10- agricultural commodities: Common carrier services: Plant related quarantine; 24-03 [FR 03-26928] Trifloxystrobin; comments Telecommunications Act of due by 11-10-03; foreign: COMMERCE DEPARTMENT 1996; implementation— published 9-10-03 [FR 03- Eucalyptus logs, lumber and Patent and Trademark Office 23054] Pay telephone wood chips from South Practice and procedure: Water programs: reclassification and America; comments due 21st Century Strategic Plan; compensation by 11-14-03; published 9- Water quality standards— implementation; comments provisions; published 15-03 [FR 03-23432] Oregon; comments due 11-6-03 due by 11-12-03; by 11-10-03; published AGRICULTURE FEDERAL RESERVE published 9-12-03 [FR 03- 10-10-03 [FR 03-25525] DEPARTMENT SYSTEM 23010] Water supply: Forest Service Depository institutions; reserve DEFENSE DEPARTMENT National primary drinking requirements (Regulation D): National Forest System land Acquisition regulations: water regulations— and resource management Low reserve tranche, Fish, shellfish, and seafood Long Term 2 Enhanced planning; comments due by reserve requirement products; comments due Surface Water 11-10-03; published 9-10-03 exemption, and deposit by 11-14-03; published 9- Treatment Rule; [FR 03-22977] reporting cutoff level; 15-03 [FR 03-23342] comments due by 11- annual indexing; published COMMERCE DEPARTMENT Government source 10-03; published 8-11- 10-7-03 National Oceanic and inspection requirements; 03 [FR 03-18295] HEALTH AND HUMAN Atmospheric Administration elimination; comments due FARM CREDIT SERVICES DEPARTMENT Endangered and threatened by 11-14-03; published 9- ADMINISTRATION Privacy Act: species: 15-03 [FR 03-23341] Farm credit system:

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Funding and fiscal affairs, exclusion authority; 03; published 9-10-03 [FR Extended assignment loan policies and comments due by 11-14- 03-22777] incentives; comments due operations, and funding 03; published 9-15-03 [FR Safe harbor agreements and by 11-12-03; published 9- operations— 03-23351] candidate conservation 12-03 [FR 03-23132] Systemwide and HOMELAND SECURITY agreements with STATE DEPARTMENT consolidated bank debt DEPARTMENT assurances; survival Intercountry Adoption Act of permits enhancement; obligations; investors Coast Guard 2000: comments due by 11-10- and shareholders Hague Convention; record Drawbridge operations: 03; published 9-10-03 [FR disclosure; comments preservation; comments Connecticut; comments due 03-22776] due by 11-14-03; due by 11-14-03; published 9-15-03 [FR by 11-15-03; published 6- Endangered Species Act; 2-03 [FR 03-13698] published 9-15-03 [FR 03- 03-23421] interagency cooperation: 22651] Florida; comments due by National Fire Plan; FEDERAL Intercountry Adoption Act of 11-10-03; published 10- implementation; comments COMMUNICATIONS 2000: COMMISSION 10-03 [FR 03-25682] due by 11-10-03; published 10-9-03 [FR 03- Hague Convention; agency Common carrier services: Minnesota and Wisconsin; comments due by 11-10- 25621] accreditation and person Antenna structures; 03; published 9-9-03 [FR Importation, exportation, and approval; comments due construction, marking, and 03-22793] transportation of wildlife: by 11-14-03; published 9- lighting— 15-03 [FR 03-22650] Ports and waterways safety: Injurious wildlife— Communications towers; TRANSPORTATION Limerick Generating Station Boiga snakes; comments effects on migratory due by 11-12-03; DEPARTMENT birds; comments due by and Schuylkill River, Montgomery County, PA; published 9-12-03 [FR Federal Aviation 11-12-03; published 9- 03-23286] Administration 12-03 [FR 03-23311] security zone; comments due by 11-14-03; INTERIOR DEPARTMENT Airworthiness directives: GENERAL SERVICES published 9-15-03 [FR 03- Minerals Management Airbus; comments due by ADMINISTRATION 23504] Service 11-14-03; published 10- Acquisition regulations: Oyster Creek Generation Royalty Management: 15-03 [FR 03-25978] Defense Priorities and Station and Forked River, Crude oil produced from Anjou Aeronautique; Allocations System; Ocean City, NJ; security Federal leases; valuation comments due by 11-10- comments due by 11-14- zone; comments due by and reporting provisions; 03; published 9-2-03 [FR 03; published 10-15-03 11-14-03; published 9-15- comments due by 11-10- 03-22257] [FR 03-26024] 03 [FR 03-23503] 03; published 9-26-03 [FR Bombardier; comments due HEALTH AND HUMAN Peach Bottom Atomic Power 03-24420] by 11-10-03; published SERVICES DEPARTMENT station, Susquehanna INTERIOR DEPARTMENT 10-9-03 [FR 03-25590] Food and Drug River, NY and PA; Surface Mining Reclamation Dassault; comments due by Administration security zone; comments and Enforcement Office 11-10-03; published 10-9- due by 11-14-03; Food for human consumption: Permanent program and 03 [FR 03-25589] published 9-15-03 [FR 03- abandoned mine land Fokker; comments due by Food labeling—- 23501] reclamation plan 11-13-03; published 10- Dietary supplements that Salem and Hope Creek submissions: 14-03 [FR 03-25866] contain botanicals; Generation Stations, Indiana; comments due by Gulfstream; comments due ingredient labeling; Delaware River, Salem 11-14-03; published 10- by 11-10-03; published 9- comments due by 11- County, NJ; security zone; 15-03 [FR 03-26081] 11-03 [FR 03-22991] 12-03; published 8-28- comments due by 11-14- JUSTICE DEPARTMENT 03 [FR 03-21980] McDonnell Douglas; 03; published 9-15-03 [FR Drug Enforcement comments due by 11-14- Dietary supplements that 03-23502] Administration 03; published 9-30-03 [FR contain botanicals; Regattas and marine parades: Controlled substances; 03-24680] ingredient labeling; International Tug-of-War, manufacturers, distributors, comments due by 11- Rolls-Royce plc; comments MD; comments due by and dispensors; registration: 12-03; published 8-28- due by 11-10-03; 11-10-03; published 10- 03 [FR 03-21981] Personal medical use; published 9-9-03 [FR 03- 10-03 [FR 03-25680] exemption from import or 22888] Reports and guidance export requirements; documents; availability, etc.: HOMELAND SECURITY Class E airspace; comments DEPARTMENT comments due by 11-10- due by 11-13-03; published Evaluating safety of 03; published 9-11-03 [FR Federal Emergency 9-29-03 [FR 03-24601] antimicrobial new animal 03-23169] Management Agency TRANSPORTATION drugs with regard to their JUSTICE DEPARTMENT National Flood Insurance DEPARTMENT microbiological effects on Parole Commission bacteria of human health Program: Federal Highway Federal prisoners; paroling concern; Open for Private sector property Administration and releasing, etc.: comments until further insurers; assistance; Engineering and traffic notice; published 10-27-03 comments due by 11-13- District of Columbia and operations: United States codes; [FR 03-27113] 03; published 10-14-03 National bridge inspection [FR 03-25905] prisoners serving HEALTH AND HUMAN sentences— standards; comments due by 11-10-03; published 9- SERVICES DEPARTMENT INTERIOR DEPARTMENT Supervision of released 9-03 [FR 03-22807] Inspector General Office, Fish and Wildlife Service prisoners serving Health and Human Services Endangered and threatened supervised release TRANSPORTATION Department species: terms; comments due DEPARTMENT Medicare and Federal health Enhancement survival by 11-12-03; published Federal Motor Carrier Safety care programs; fraud and permits; application 7-15-03 [FR 03-17176] Administration abuse: requirements and PERSONNEL MANAGEMENT Motor carrier safety standards: Clarification of terms and issuance criteria; OFFICE Small passenger-carrying application of program comments due by 11-10- Pay administration: commercial motor vehicles

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used in interstate denominated in or may be used in conjunction purposes. (Oct. 31, 2003; 117 commerce; operator safety determined by reference with ‘‘PLUS’’ (Public Laws Stat. 1200) requirements; comments to nonfunctional currency; Update Service) on 202–741– due by 11-10-03; treatment; comments due 6043. This list is also Last List October 31, 2003 published 8-12-03 [FR 03- by 11-12-03; published 8- available online at http:// 20369] 29-03 [FR 03-21827] www.nara.gov/fedreg/ TRANSPORTATION Partnerships with foreign plawcurr.html. DEPARTMENT partners; obligation to pay The text of laws is not Public Laws Electronic Research and Special withholding tax on taxable published in the Federal Notification Service Programs Administration income; comments due by Register but may be ordered (PENS) Hazardous materials: 11-13-03; published 9-3- in ‘‘slip law’’ (individual Aluminum cylinders 03 [FR 03-22175] pamphlet) form from the VETERANS AFFAIRS Superintendent of Documents, manufactured of 6351-T6 PENS is a free electronic mail DEPARTMENT U.S. Government Printing aluminum alloy used in notification service of newly Loan guaranty: Office, Washington, DC 20402 SCUBA, SCBA, and enacted public laws. To Hybrid adjustable rate (phone, 202–512–1808). The oxygen services; subscribe, go to http:// mortgages; comments due text will also be made requalification and use listserv.gsa.gov/archives/ by 11-10-03; published available on the Internet from criteria; comments due by publaws-l.html 11-10-03; published 9-10- 10-9-03 [FR 03-25560] GPO Access at http:// 03 [FR 03-22808] www.access.gpo.gov/nara/ Note: This service is strictly TREASURY DEPARTMENT nara005.html. Some laws may LIST OF PUBLIC LAWS not yet be available. for E-mail notification of new Internal Revenue Service laws. The text of laws is not Income taxes: This is a continuing list of H.J. Res. 75/P.L. 108–104 available through this service. Contingent payment debt public bills from the current Making further continuing PENS cannot respond to instruments for one or session of Congress which appropriations for the fiscal specific inquiries sent to this more payments have become Federal laws. It year 2004, and for other address.

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