[Federal Register: August 31, 2006 (Volume 71, Number 169)]
[Notices]
[Page 51869-51876]
[DOCID:fr31au06-101]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27469; 812-13297]

Claymore Exchange-Traded Fund Trust, et al.; Notice of
Application

August 28, 2006.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') for an exemption from
sections 2(a)(32), 5(a)(1), 22(d), 22(e), and 24(d) of the Act and rule
22c-1 under the Act, under section 12(d)(1)(J) for an exemption from
sections 12(d)(1)(A) and (B) of the Act, and under sections 6(c) and
17(b) of the Act for an exemption from sections 17(a)(1) and (a)(2) of
the Act.

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Summary of Application: Applicants request an order that would permit
(a) series of open-end management investment companies, to issue shares
(``Fund Shares'') that can be redeemed only in large aggregations
(``Creation Unit Aggregations''); (b) secondary market transactions in
Fund Shares to occur at negotiated prices; (c) dealers to sell Fund
Shares to purchasers in the secondary market unaccompanied by a
prospectus when prospectus delivery is not required by the Securities
Act of 1933 (``Securities Act''); (d) certain series to pay redemption
proceeds, under certain circumstances, more than seven days after the
tender of a Creation Unit Aggregation for redemption; (e) certain
affiliated persons of the series to deposit securities into, and
receive securities from, the series in connection with the purchase and
redemption of Creation Unit Aggregations; and (f) certain registered
management investment companies and unit investment trusts outside of
the same group of investment companies as the series to acquire Fund
Shares.

Applicants: Claymore Exchange-Traded Fund Trust and Claymore Exchange-
Traded Fund Trust 2 (the ``Trusts''); Claymore Securities, Inc.
(``Claymore''); and Claymore Advisers, LLC (``Claymore Advisors'').

Filing Dates: The application was filed on May 27, 2006, and amended on
July 24, 2006. Applicants have agreed to file an amendment during the
notice period, the substance of which is reflected in the notice.

Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on September 15, 2006, and should be accompanied by proof of
service on applicants, in the form of an affidavit, or for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-1090; Applicants, 2455 Corporate West
Drive, Lisle, IL 60532.

FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Counsel
at<PHONE_NUMBER>, or Michael W. Mundt, Senior Special Counsel, at
(202) 551-6821 (Division of Investment Management, Office of Investment
Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Public Reference Desk, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington DC 20549-0102, telephone<PHONE_NUMBER>.

Applicants' Representations

    1. Each Trust is registered as an open-end management investment
company and is organized as a Delaware statutory trust that will offer
multiple series (each series, a ``Fund''). Claymore Exchange-Traded
Fund Trust will offer and sell Fund Shares of five Funds, each of which
will track an index of equity securities of domestic issuers and non-
domestic issuers meeting the requirements for trading in U.S. markets.
Claymore Exchange-Traded Fund Trust 2 will offer and sell Fund Shares
of two Funds (collectively with the Funds offered by Claymore Exchange-
Traded Fund Trust, the ``Initial Funds''), each of which will track an
index of foreign equity securities (``Foreign Funds'').
    2. Each of Claymore and Claymore Advisors is registered as an
``investment adviser'' under the Investment Advisers Act of 1940, as
amended (the ``Advisers Act''). Claymore Advisors will serve as the
investment adviser to each of the Initial Funds (the ``Adviser''). In
the future, the Adviser may enter into sub-advisory agreements with
other investment advisers to act as ``sub-advisers'' with respect to
particular Funds. Any sub-adviser will be registered under the Advisers
Act or exempt from registration. Claymore, a broker-dealer registered
under the Securities Exchange Act of 1934 (the ``Exchange Act''), will
serve as the principal underwriter and distributor for the Initial
Funds (the ``Distributor'').
    3. Each Fund will hold certain securities (``Portfolio
Securities'') selected to correspond generally to the price and yield
performance, before fees and expenses, of a specified equity securities
index (an ``Underlying Index''). No entity that creates, compiles,
sponsors or maintains an Underlying Index is or will be an affiliated
person, as defined in section 2(a)(3) of the Act, or an affiliated
person of an affiliated person, of the Trusts, the Adviser, the
Distributor, promoter or any sub-adviser to a Fund. The Trusts may
offer additional Funds in the future based on other Underlying Indices
(``Future Funds''). Any Future Funds will (a) comply with the terms and
conditions of any order granted pursuant to the application, and (b) be
advised by the Adviser.
    4. The investment objective of each Fund will be to provide
investment results that correspond generally to the price and yield
performance, before fees and expenses, of its Underlying Index. Intra-
day values of the Underlying Index will be disseminated every 15
seconds throughout the trading day. A Fund will utilize either a
``replication'' or

``representative sampling'' strategy.\1\ A Fund using a ``replication''
strategy will invest in substantially all of the Component Securities
in its Underlying Index in approximately the same weightings as in the
Underlying Index. In certain circumstances, such as when there are
practical difficulties or substantial costs involved in holding every
security in an Underlying Index or when a Component Security is
illiquid, a Fund may use a ``representative sampling'' strategy
pursuant to which it will invest in some, but not all of the relevant
Component Securities.\2\ Applicants anticipate that a Fund that
utilizes a ``representative sampling'' strategy will not track the
performance of its Underlying Index with the same degree of accuracy as
an investment vehicle that invests in every Component Security of the
Underlying Index in the same weighting as the Underlying Index.
Applicants expect that each Fund will have a tracking error relative to
the performance of its Underlying Index of less than 5 percent.
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    \1\ Applicants represent that a Fund will normally invest at
least 90% of its total assets in the component securities that
comprise its Underlying Index (``Component Securities'') or, in the
case of Foreign Funds, Component Securities and depositary receipts
representing such securities. Each Fund also may invest up to 10% of
its assets in certain futures, options and swap contracts, cash and
cash equivalents, as well as in stocks not included in its
Underlying Index, but which the Adviser believes will help the Fund
track its Underlying Index.
    \2\ Under the ``representative sampling'' strategy, the Adviser
will seek to construct a Fund's portfolio so that its market
capitalization, industry weightings, fundamental investment
characteristics (such as return variability, earnings valuation and
yield) and liquidity measures perform like those of the Underlying
Index.
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    5. Fund Shares will be sold at a price of between $20 and $60 per
Fund Share in Creation Unit Aggregations of 50,000 Fund Shares. All
orders to purchase Creation Unit Aggregations must be placed with the
Distributor by or through a party that has entered into an agreement
with the Trust and Distributor (``Authorized Participant''). An
Authorized Participant must be either: (a) A broker-dealer or other
participant in the continuous net settlement system of the National
Securities Clearing Corporation (``NSCC''), a clearing agency
registered with the Commission, or (b) a participant in the Depository
Trust Company (``DTC'', and such participant, ``DTC Participant'').
Shares of each Fund generally will be sold in Creation Unit
Aggregations in exchange for an in-kind deposit by the purchaser of a
portfolio of securities designated by the Adviser to correspond
generally to the price and yield performance, before fees and expenses,
of the relevant Underlying Index (the ``Deposit Securities''), together
with the deposit of a relatively small specified cash payment (``Cash
Component''). The Cash Component is generally an amount equal to the
difference between (a) the net asset value (``NAV'') (per Creation Unit
Aggregation) of the Fund and (b) the total aggregate market value (per
Creation Unit Aggregation) of the Deposit Securities.\3\ Applicants
state that in some circumstances it may not be practicable or
convenient for a Fund to operate exclusively on an ``in-kind'' basis.
The Trust reserves the right to permit, under certain circumstances, a
purchaser of Creation Unit Aggregations to substitute cash in lieu of
depositing some or all of the requisite Deposit Securities. An investor
purchasing a Creation Unit Aggregation from a Fund will be charged a
fee (``Transaction Fee'') to prevent the dilution of the interests of
the remaining shareholders resulting from costs in connection with the
purchase of Creation Unit Aggregations.\4\ The maximum Transaction Fees
relevant to each Fund (including the maximum Transaction Fees) will be
fully disclosed in the prospectus of such Fund (``Fund's Prospectus''),
and the method for calculating the Transaction Fees will be disclosed
in each Fund's Prospectus or statement of additional information
(``SAI''). All orders to purchase Creation Unit Aggregations will be
placed with the Distributor by or through an Authorized Participant,
and it will be the Distributor's responsibility to transmit such orders
to the Trust. The Distributor also will be responsible for delivering
the Fund's Prospectus to those persons purchasing Creation Unit
Aggregations, and for maintaining records of both the orders placed
with it and the confirmations of acceptance furnished by it. In
addition, the Distributor will maintain a record of the instructions
given to the Trust to implement the delivery of Fund Shares.
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    \3\ The Trust will sell Creation Unit Aggregations of each Fund
on any day that the New York Stock Exchange, the Exchange, a Fund,
and the Custodian are open for business, including as required by
section 22(e) of the Act (a ``Business Day''). In addition to the
list of names and amount of each security constituting the current
Deposit Securities, it is intended that, on each Business Day, the
Cash Component effective as of the previous Business Day, per
outstanding Fund Share, will be made available. Any Exchange on
which Fund Shares are listed will disseminate, every 15 seconds,
during its regular trading hours, through the facilities of the
Consolidated Tape Association, an approximate amount per Fund Share
representing the sum of the estimated Cash Component effective
through and including the previous Business Day, plus the current
value of the Deposit Securities, on a per Fund Share basis.
    \4\ Where a Fund permits a purchaser to substitute cash in lieu
of depositing a portion of the requisite Deposit Securities, the
purchaser may be assessed a higher Transaction Fee to cover the cost
of purchasing such Deposit Securities, including brokerage costs,
and part or all of the spread between the expected bid and the offer
side of the market relating to such Deposit Securities.
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    6. Purchasers of Fund Shares in Creation Unit Aggregations may hold
such Fund Shares or may sell such Fund Shares into the secondary
market. Fund Shares will be listed and traded on the American Stock
Exchange, LLC, (``Amex''); Fund Shares of Future Funds will be listed
and traded on a national securities exchange as defined in section
2(a)(26) of the Act or on the Nasdaq Stock Market (``Nasdaq'') (each,
an ``Exchange''). It is expected that one or more member firms of a
listing Exchange will be designated to act as a specialist and maintain
a market for Fund Shares on the Exchange (a ``Specialist''), or if
Nasdaq is the listing Exchange, one or more member firms of Nasdaq will
act as a market maker (``Market Maker'') and maintain a market for Fund
Shares.\5\ Prices of Fund Shares trading on an Exchange will be based
on the current bid/offer market. Fund Shares sold in the secondary
market will be subject to customary brokerage commissions and charges.
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    \5\ If Fund Shares are listed on the Nasdaq, no particular
Market Maker will be contractually obligated to make a market in
Fund Shares, although Nasdaq's listing requirements stipulate that
at least two Market Makers must be registered as Market Makers in
Fund Shares to maintain the listing. Registered Market Makers are
required to make a continuous, two-sided market at all times or be
subject to regulatory sanctions.
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    7. Applicants expect that purchasers of Creation Unit Aggregations
will include institutional investors and arbitrageurs (which could
include institutional investors). A Specialist, or Market Maker, in
providing a fair and orderly secondary market for the Fund Shares, also
may purchase Creation Unit Aggregations for use in its market-making
activities. Applicants expect that secondary market purchasers of Fund
Shares will include both institutional investors and retail
investors.\6\ Applicants expect that the price at which Fund Shares
trade will be disciplined by arbitrage opportunities created by the
ability to continually purchase or redeem Creation Unit Aggregations at
their NAV, which should ensure that Fund Shares will not trade at a
material discount or premium in relation to their NAV.
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    \6\ Fund Shares will be registered in book-entry form only. DTC
or its nominee will be the registered owner of all outstanding Fund
Shares. DTC or DTC Participants will maintain records reflecting
beneficial owners of Fund Shares.

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    8. Fund Shares will not be individually redeemable, and owners of
Fund Shares may acquire those Fund Shares from the Fund, or tender such
Fund Shares for redemption to the Fund, in Creation Unit Aggregations
only. To redeem, an investor will have to accumulate enough Fund Shares
to constitute a Creation Unit Aggregation. Redemption orders must be
placed by or through an Authorized Participant. An investor redeeming a
Creation Unit Aggregation generally will receive (a) a portfolio of
securities designated to be delivered for Creation Unit Aggregation
redemptions on the date that the request for redemption is submitted
(``Fund Securities''), which may not be identical to the Deposit
Securities required to purchase Creation Unit Aggregations on that
date, and (b) a ``Cash Redemption Payment,'' consisting of an amount
calculated in the same manner as the Cash Component, although the
actual amount of the Cash Redemption Payment may differ from the Cash
Component if the Fund Securities are not identical to the Deposit
Securities on that day. An investor may receive the cash equivalent of
a Fund Security in certain circumstances, such as if the investor is
constrained from effecting transactions in the security by regulation
or policy. A redeeming investor may pay a Transaction Fee, calculated
in the same manner as a Transaction Fee payable in connection with
purchases of Creation Unit Aggregations.
    9. Neither the Trusts nor any individual Fund will be marketed or
otherwise held out as an ``open-end investment company'' or a ``mutual
fund.'' Instead, each Fund will be marketed as an ``exchange-traded
fund,'' an ``investment company,'' a ``fund,'' or a ``trust.'' All
marketing materials that describe the method of obtaining, buying or
selling Fund Shares, or refer to redeemability, will prominently
disclose that Fund Shares are not individually redeemable and that the
owners of Fund Shares may purchase or redeem Fund Shares from the Fund
in Creation Unit Aggregations only. The same approach will be followed
in the SAI, shareholder reports and investor educational materials
issued or circulated in connection with the Fund Shares. The Funds will
provide copies of their annual and semi-annual shareholder reports to
DTC Participants for distribution to beneficial owners of Fund Shares.

Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act for an
exemption from sections 2(a)(32), 5(a)(1), 22(d), 22(e), and 24(d) of
the Act and rule 22c-1 under the Act, under section 12(d)(1)(J) for an
exemption from sections 12(d)(1)(A) and (B) of the Act, and under
sections 6(c) and 17(b) of the Act for an exemption from sections
17(a)(1) and 17(a)(2) of the Act.
    2. Section 6(c) of the Act provides that the Commission may exempt
any person, security or transaction, or any class of persons,
securities or transactions, from any provision of the Act, if and to
the extent that such exemption is necessary or appropriate in the
public interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the Act.
Section 17(b) of the Act authorizes the Commission to exempt a proposed
transaction from section 17(a) of the Act if evidence establishes that
the terms of the transaction, including the consideration to be paid or
received, are reasonable and fair and do not involve overreaching on
the part of any person concerned, and the proposed transaction is
consistent with the policies of the registered investment company and
the general provisions of the Act. Section 12(d)(1)(J) of the Act
provides that the Commission may exempt any person, security, or
transaction, or any class or classes of persons, securities or
transactions, from any provisions of section 12(d)(1) if the exemption
is consistent with the public interest and the protection of investors.

Sections 5(a)(1) and 2(a)(32) of the Act

    3. Section 5(a)(1) of the Act defines an ``open-end company'' as a
management investment company that is offering for sale or has
outstanding any redeemable security of which it is the issuer. Section
2(a)(32) of the Act defines a redeemable security as any security,
other than short-term paper, under the terms of which the owner, upon
its presentation to the issuer, is entitled to receive approximately
his proportionate share of the issuer's current net assets, or the cash
equivalent. Because Fund Shares will not be individually redeemable,
applicants request an order that would permit the Trusts to register as
open-end management investment companies and issue Fund Shares that are
redeemable in Creation Units Aggregations only. Applicants state that
investors may purchase Fund Shares in Creation Unit Aggregations and
redeem Creation Unit Aggregations from each Fund. Applicants further
state that because the market price of Fund Shares will be disciplined
by arbitrage opportunities, investors should be able to sell Fund
Shares in the secondary market at prices that do not vary substantially
from their NAV.

Section 22(d) of the Act and Rule 22c-1 Under the Act

    4. Section 22(d) of the Act, among other things, prohibits a dealer
from selling a redeemable security, which is currently being offered to
the public by or through a principal underwriter, except at a current
public offering price described in the prospectus. Rule 22c-1 under the
Act generally requires that a dealer selling, redeeming or repurchasing
a redeemable security do so only at a price based on its NAV.
Applicants state that secondary market trading in Fund Shares will take
place at negotiated prices, not at a current offering price described
in a Fund's Prospectus, and not at a price based on NAV. Thus,
purchases and sales of Fund Shares in the secondary market will not
comply with section 22(d) of the Act and rule 22c-1 under the Act.
Applicants request an exemption under section 6(c) from these
provisions.
    5. Applicants assert that the concerns sought to be addressed by
section 22(d) of the Act and rule 22c-1 under the Act with respect to
pricing are equally satisfied by the proposed method of pricing Fund
Shares. Applicants maintain that while there is little legislative
history regarding section 22(d), its provisions, as well as those of
rule 22c-1, appear to have been designed to (a) prevent dilution caused
by certain riskless-trading schemes by principal underwriters and
contract dealers, (b) prevent unjust discrimination or preferential
treatment among buyers, and (c) ensure an orderly distribution of
investment company shares by eliminating price competition from dealers
offering shares at less than the published sales price and repurchasing
shares at more than the published redemption price.
    6. Applicants believe that none of these purposes will be thwarted
by permitting Fund Shares to trade in the secondary market at
negotiated prices. Applicants state that (a) secondary market trading
in Fund Shares does not involve the Funds as parties and cannot result
in dilution of an investment in Fund Shares, and (b) to the extent
different prices exist during a given trading day, or from day to day,
such variances occur as a result of third-party market forces, such as
supply and demand. Therefore, applicants assert that secondary market
transactions in Fund Shares will not lead to discrimination or
preferential treatment among purchasers. Finally, applicants contend
that the proposed distribution system will be orderly because arbitrage

activity will ensure that the difference between the market price of
Fund Shares and their NAV remains narrow.

Section 24(d) of the Act

    7. Section 24(d) of the Act provides, in relevant part, that the
prospectus delivery exemption provided to dealer transactions by
section 4(3) of the Securities Act does not apply to any transaction in
a redeemable security issued by an open-end investment company.
Applicants seek relief from section 24(d) to permit dealers selling
Fund Shares to rely on the prospectus delivery exemption provided by
section 4(3) of the Securities Act.\7\
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    \7\ Applicants state that they are not seeking relief from the
prospectus delivery requirement for non-secondary market
transactions, such as transactions in which an investor purchases
Fund Shares from the Trusts or an underwriter. Applicants further
state that each Fund's Prospectus will caution broker-dealers and
others that some activities on their part, depending on the
circumstances, may result in their being deemed statutory
underwriters and subject them to the prospectus delivery and
liability provisions of the Securities Act. For example, a broker-
dealer firm and/or its client may be deemed a statutory underwriter
if it purchases Creation Unit Aggregations from a Fund, breaks them
down into the constituent Fund Shares, and sells those Fund Shares
directly to customers, or if it chooses to couple the creation of a
supply of new Fund Shares with an active selling effort involving
solicitation of secondary market demand for Fund Shares. Each Fund's
Prospectus will state that whether a person is an underwriter
depends upon all of the facts and circumstances pertaining to that
person's activities. Each Fund's Prospectus will caution dealers who
are not ``underwriters'' but are participating in a distribution (as
contrasted to ordinary secondary market trading transactions), and
thus dealing with Fund Shares that are part of an ``unsold
allotment'' within the meaning of section 4(3)(C) of the Securities
Act, that they would be unable to take advantage of the prospectus
delivery exemption provided by section 4(3) of the Securities Act.
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    8. Applicants state that Fund Shares are bought and sold in the
secondary market in the same manner as closed-end fund shares.
Applicants note that transactions in closed-end fund shares are not
subject to section 24(d), and thus closed-end fund shares are sold in
the secondary market without a prospectus. Applicants contend that Fund
Shares likewise merit a reduction in the unnecessary compliance costs
and regulatory burdens resulting from the imposition of the prospectus
delivery obligations in the secondary market. Because Fund Shares will
be listed on an Exchange, prospective investors will have access to
information about the product over and above what is normally available
about an open-end security. Applicants state that information regarding
market price and volume will be continually available on a real time
basis throughout the day on brokers' computer screens and other
electronic services. The previous day's price and volume information
will be published daily in the financial section of newspapers. In
addition, a website will be maintained that will include each Fund's
Prospectus and SAI, the relevant Underlying Index for each Fund, and
additional quantitative information that is updated on a daily basis,
including the mid-point of the bid-ask spread at the time of the
calculation of NAV (``Bid/Ask Price''),\8\ the NAV for each Fund, and
information about the premiums and discounts at which the Fund Shares
have traded.
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    \8\ The Bid-Ask Price per Fund Share of a Fund is determined
using the highest bid and the lowest offer on the Exchange on which
the Fund Shares are listed.
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    9. Applicants will arrange for broker-dealers selling Fund Shares
in the secondary market to provide purchasers with a product
description (``Product Description'') that describes, in plain English,
the relevant Fund and the Fund Shares it issues. Applicants state that
a Product Description is not intended to substitute for a full Fund's
Prospectus. Applicants state that the Product Description will be
tailored to meet the information needs of investors purchasing Fund
Shares in the secondary market.

Section 22(e)

    10. Section 22(e) generally prohibits a registered investment
company from suspending the right of redemption or postponing the date
of payment of redemption proceeds for more than seven days after the
tender of a security for redemption. The principal reason for the
requested exemption is that settlement of redemptions for the Foreign
Funds is contingent not only on the settlement cycle of the United
States market, but also on currently practicable delivery cycles in
local markets for underlying foreign securities held by the Foreign
Funds. Applicants state that local market delivery cycles for
transferring certain foreign securities to investors redeeming Creation
Unit Aggregations, together with local market holiday schedules, will
under certain circumstances require a delivery process in excess of
seven calendar days for the Foreign Funds. Applicants request relief
under section 6(c) of the Act from section 22(e) to allow the Foreign
Funds to pay redemption proceeds up to 14 calendar days (or, with
respect to future Foreign Funds, within not more than the number of
calendar days known to applicants as being the maximum number of
calendar days required for such payment or satisfaction in the
principal local foreign market(s) where transactions in Portfolio
Securities of each such Fund customarily clear and settle) after the
tender of a Creation Unit Aggregation for redemption. At all other
times and except as disclosed in the relevant Fund's Prospectus and/or
SAI, applicants expect that each Foreign Fund will be able to deliver
redemption proceeds within seven days.\9\ With respect to future
Foreign Funds, applicants seek the same relief from section 22(e) only
to the extent that circumstances similar to those described in the
application exist.
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    \9\ Rule 15c6-1 under the Exchange Act requires that most
securities transactions be settled within three business days of the
trade. Applicants acknowledge that no relief obtained from the
requirements of section 22(e) will affect any obligations applicants
may have under rule 15c6-1.
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    11. Applicants state that section 22(e) was designed to prevent
unreasonable, undisclosed and unforeseen delays in the payment of
redemption proceeds. Applicants assert that the requested relief will
not lead to the problems that section 22(e) was designed to prevent.
Applicants state that the SAI will disclose those local holidays (over
the period of at least one year following the date of the SAI), if any,
that are expected to prevent the delivery of redemption proceeds in
seven calendar days, and the maximum number of days needed to deliver
the proceeds for the relevant Foreign Fund.

Section 12(d)(1)

    12. Section 12(d)(1)(A) of the Act prohibits a registered
investment company from acquiring securities of an investment company
if such securities represent more than 3% of the total outstanding
voting stock of the acquired company, more than 5% of the total assets
of the acquiring company, or, together with the securities of any other
investment companies, more than 10% of the total assets of the
acquiring company. Section 12(d)(1)(B) of the Act prohibits a
registered open-end investment company, its principal underwriter and
any other broker-dealer from selling the investment company's shares to
another investment company if the sale will cause the acquiring company
to own more than 3% of the acquired company's voting stock, or if the
sale will cause more than 10% of the acquired company's voting stock to
be owned by investment companies generally.
    13. Applicants request an exemption to permit management investment
companies (``Purchasing Management Companies'') and unit investment
trusts (``Purchasing Trusts'') registered under the Act that are not
part of the same ``group of investment companies,'' as

defined in section 12(d)(1)(G)(ii) of the Act, as the Trusts
(Purchasing Management Companies and Purchasing Trusts collectively,
``Purchasing Funds'') to acquire shares of a Fund beyond the limits of
section 12(d)(1)(A).\10\ Purchasing Funds exclude registered investment
companies that are, or in the future may be, part of the same group of
investment companies within the meaning of section 12(d)(1)(G)(ii) of
the Act as the Funds. In addition, applicants seek relief to permit a
Fund and the Distributor or any broker or dealer (``Broker'') that is
registered under the Exchange Act to knowingly sell shares of a Fund to
a Purchasing Fund in excess of the limits of section 12(d)(1)(B).
Applicants request that the relief sought apply to (a) Funds that are
advised by the Adviser and in the same group of investment companies as
the Trusts, (b) each Purchasing Fund that enters into an agreement with
a Fund for the purchase of Fund Shares (``Purchasing Fund Agreement''),
and (c) any Broker.\11\
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    \10\ In addition to the Funds, applicants request that this
relief apply to other exchange-traded funds (``ETFs'') that are (1)
advised by the Adviser or an entity controlling, controlled by, or
under common control with the Adviser, and (2) part of the same
``group of investment companies'' as each Trust within the meaning
of section 12(d)(1)(G)(ii) of the Act. Such open-end ETFs,
collectively with the Funds, are referred to as ``Open-end Funds,''
and unit investment trust ETFs are referred to as ``UIT Funds.''
    \11\ All parties that currently intend to rely on the requested
relief from section 12(d)(1) are named as applicants. Any other
party that relies on this relief in the future will comply with the
terms and conditions of the application. A Purchasing Fund may rely
on the requested order only to invest in the Funds and not in any
other registered investment company.
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    14. Each Purchasing Management Company will be advised by an
investment adviser within the meaning of section 2(a)(20)(A) of the Act
(the ``Purchasing Fund Adviser'') and may be advised by one or more
investment advisers within the meaning of section 2(a)(20)(B) of the
Act (each a ``Sub-Adviser''). Any investment adviser to a Purchasing
Fund will be registered under the Advisers Act or exempt from
registration. Each Purchasing Trust will be sponsored by a sponsor
(``Sponsor'').
    15. Applicants submit that the proposed conditions to the relief
requested adequately address the concerns underlying the limits in
section 12(d)(1)(A) and (B), which include concerns about undue
influence, excessive layering of fees and overly complex structures.
Applicants believe that the requested exemption is consistent with the
public interest and the protection of investors.
    16. Applicants believe that neither the Purchasing Funds nor a
Purchasing Fund Affiliate would be able to exert undue influence over
the Funds.\12\ To limit the control that a Purchasing Fund may have
over a Fund, applicants propose a condition prohibiting a Purchasing
Fund Adviser or a Sponsor, any person controlling, controlled by, or
under common control with a Purchasing Fund Adviser or Sponsor, and any
investment company and any issuer that would be an investment company
but for sections 3(c)(1) or 3(c)(7) of the Act that is advised or
sponsored by a Purchasing Fund Adviser or Sponsor, or any person
controlling, controlled by, or under common control with a Purchasing
Fund Adviser or Sponsor (``Purchasing Fund Adviser/Sponsor Group'')
from controlling (individually or in the aggregate) a Fund within the
meaning of section 2(a)(9) of the Act. The same prohibition would apply
to any Sub-Adviser, any person controlling, controlled by or under
common control with the Sub-Adviser, and any investment company or
issuer that would be an investment company but for sections 3(c)(1) or
3(c)(7) of the Act (or portion of such investment company or issuer)
advised or sponsored by the Sub-Adviser or any person controlling,
controlled by or under common control with the Sub-Adviser (``Sub-
Adviser Group''). Applicants propose other conditions to limit the
potential for undue influence over the Funds, including that no
Purchasing Fund or Purchasing Fund Affiliate (except to the extent it
is acting in its capacity as an investment adviser to a Fund) will
cause a Fund to purchase a security in any offering of securities
during the existence of any underwriting or selling syndicate of which
a principal underwriter is an Underwriting Affiliate (``Affiliated
Underwriting''). An ``Underwriting Affiliate'' is a principal
underwriter in any underwriting or selling syndicate that is an
officer, director, member of an advisory board, Purchasing Fund
Adviser, Sub-Adviser, employee or Sponsor of a Purchasing Fund, or a
person of which any such officer, director, member of an advisory
board, Purchasing Fund Adviser, Sub-Adviser, employee, or Sponsor is an
affiliated person (except any person whose relationship to the Fund is
covered by section 10(f) of the Act is not an Underwriting Affiliate).
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    \12\ A ``Purchasing Fund Affiliate'' is a Purchasing Fund
Adviser, Sub-Adviser, Sponsor, promoter, and principal underwriter
of a Purchasing Fund, and any person controlling, controlled by, or
under common control with any of those entities.
---------------------------------------------------------------------------

    17. Applicants do not believe the proposed arrangement will involve
excessive layering of fees. The board of directors or trustees of any
Purchasing Management Company, including a majority of the
disinterested directors or trustees, will find that the advisory fees
charged to the Purchasing Management Company are based on services
provided that will be in addition to, rather than duplicative of,
services provided under the advisory contract(s) of any Fund in which
the Purchasing Management Company may invest. In addition, a Purchasing
Fund Adviser or a trustee (``Trustee'') or Sponsor of a Purchasing
Trust will waive fees otherwise payable to it by the Purchasing
Management Company or Purchasing Trust in an amount at least equal to
any compensation (including fees received pursuant to any plan adopted
by a Fund under rule 12b-1 under the Act) received by the Purchasing
Fund Adviser or Trustee or Sponsor to the Purchasing Trust or an
affiliated person of the Purchasing Fund Adviser, Trustee or Sponsor,
from the Funds in connection with the investment by the Purchasing
Management Company or Purchasing Trust in the Fund. Applicants state
that any sales loads or service fees charged with respect to shares of
a Purchasing Fund will not exceed the limits applicable to a fund of
funds set forth in Conduct Rule 2830 of the NASD.
    18. Applicants submit that the proposed arrangement will not create
an overly complex fund structure. Applicants note that no Fund may
acquire securities of any investment company or company relying on
sections 3(c)(1) or 3(c)(7) of the Act in excess of the limits
contained in section 12(d)(1)(A) of the Act. Applicants also represent
that to ensure that Purchasing Funds comply with the terms and
conditions of the requested relief from section 12(d)(1), any
Purchasing Fund that intends to invest in a Fund in reliance on the
requested order will be required to enter into a Purchasing Fund
Agreement between the Fund and the Purchasing Fund. The Purchasing Fund
Agreement will require the Purchasing Fund to adhere to the terms and
conditions of the requested order and participate in the proposed
transactions in a manner that addresses concerns regarding the
requested relief. The Purchasing Fund Agreement also will include an
acknowledgement from the Purchasing Fund that it may rely on the order
only to invest in the Funds and not in any other investment company.
The Purchasing Fund Agreement will further require any Purchasing Fund

that exceeds the 5% or 10% limitations in section 12(d)(1)(A)(ii) and
(iii) to disclose in its prospectus that it may invest in ETFs, and to
disclose, in ``plain English,'' in its prospectus the unique
characteristics of the Purchasing Funds investing in ETFs, including
but not limited to the expense structure and any additional expenses of
investing in ETFs.

Section 17(a)(1) and (2) of the Act

    19. Section 17(a) of the Act generally prohibits an affiliated
person of a registered investment company, or an affiliated person of
such a person, from selling any security to or purchasing any security
from the company. Section 2(a)(3) of the Act defines ``affiliated
person'' to include any person directly or indirectly owning,
controlling or holding with power to vote 5% or more of the outstanding
voting securities of the other person, any person 5% or more of whose
outstanding voting securities are directly or indirectly owned,
controlled or held with the power to vote by the other person, and any
person directly or indirectly controlling, controlled by or under
common control with the other person. Section 2(a)(9) of the Act
provides that a control relationship will be presumed where one person
owns more than 25% of another person's voting securities. Applicants
state that if Creation Unit Aggregations of all of the Funds or of one
or more particular Funds are held by twenty or fewer investors,
including a Specialist or Market Maker, some or all of such investors
will be 5% owners of the Fund, and one or more investors may hold in
excess of 25% of the Fund. Such investors would be deemed to be
affiliated persons of the Fund.
    20. Applicants request an exemption from section 17(a) of the Act
pursuant to sections 17(b) and 6(c) of the Act to permit persons that
are affiliated persons of the Funds solely by virtue of holding 5
percent or more, or in excess of 25 percent of the outstanding Fund
Shares of one or more Funds (or affiliated persons of such persons so
long as they are not otherwise affiliated with the Funds) to effectuate
purchases and redemptions ``in-kind.''
    21. Applicants assert that no useful purpose would be served by
prohibiting these types of affiliated persons from purchasing or
redeeming Creation Unit Aggregations through ``in-kind'' transactions.
The deposit procedures for both in-kind purchases and in-kind
redemptions of Creation Unit Aggregations will be the same for all
purchases and redemptions. Deposit Securities and Fund Securities will
be valued in the same manner as Portfolio Securities. Therefore,
applicants state that in-kind purchases and redemptions will afford no
opportunity for the affiliated persons of a Fund, or the affiliated
persons of such affiliated persons, to effect a transaction detrimental
to other holders of Fund Shares. Applicants also believe that in-kind
purchases and redemptions will not result in self-dealing or
overreaching of the Fund.
    22. Applicants also seek relief from section 17(a) to permit a Fund
that is an affiliated person of a Purchasing Fund because the
Purchasing Fund holds 5% or more of the Fund Shares of the Fund to sell
its Fund Shares to and redeem its Fund Shares from a Purchasing
Fund.\13\ Applicants believe that any proposed transactions directly
between the Funds and Purchasing Funds will be consistent with the
policies of each Purchasing Fund. The purchase of Creation Unit
Aggregations by a Purchasing Fund directly from a Fund will be
accomplished in accordance with the investment restrictions of any such
Purchasing Fund and will be consistent with the investment policies set
forth in the Purchasing Fund's registration statement. The Purchasing
Fund Agreement will require any Purchasing Fund that purchases Creation
Unit Aggregations directly from a Fund to represent that the purchase
of Creation Unit Aggregations from a Fund by a Purchasing Fund will be
accomplished in compliance with the investment restrictions of the
Purchasing Fund and will be consistent with the investment policies set
forth in the Purchasing Fund's registration statement.
---------------------------------------------------------------------------

    \13\ Applicants believe that a Purchasing Fund will purchase
Fund Shares in the secondary market and will not purchase or redeem
Creation Unit Aggregations directly from a Fund. Nonetheless, a
Purchasing Fund that owns 5% or more of a Fund could seek to
transact in Creation Unit Aggregations directly with a Fund pursuant
to the section 17(a) relief requested.
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Applicants' Conditions

    Applicants agree that any order granting the requested relief will
be subject to the following conditions:
    1. Applicants will not register a Future Fund of a Trust by means
of filing a post-effective amendment to a Trust's registration
statement or by any other means, unless either: (a) Applicants have
requested and received with respect to such Future Fund, either
exemptive relief from the Commission or a no-action letter from the
Division of Investment Management of the Commission; or (b) the Future
Fund will be listed on an Exchange without the need for a filing
pursuant to rule 19b-4 under the Exchange Act.
    2. As long as the Trusts operate in reliance on the requested
order, Fund Shares will be listed on an Exchange.
    3. Neither the Trusts nor any Fund will be advertised or marketed
as an open-end investment company or a mutual fund. Each Fund's
Prospectus will prominently disclose that Fund Shares are not
individually redeemable shares and will disclose that the owners of
Fund Shares may acquire those Fund Shares from the Fund and tender
those Fund Shares for redemption to the Fund in Creation Unit
Aggregations only. Any advertising material that describes the purchase
or sale of Creation Unit Aggregations or refers to redeemability will
prominently disclose that Fund Shares are not individually redeemable,
and that owners of Fund Shares may acquire those Fund Shares from the
Fund and tender those Fund Shares for redemption to the Fund in
Creation Unit Aggregations only.
    4. The Web site maintained for each Fund, which will be publicly
accessible at no charge, will contain the following information, on a
per Fund Share basis, for each Fund: (a) The prior Business Day's NAV
and the Bid/Ask Price, and a calculation of the premium or discount of
the Bid/Ask Price at the time of calculation of the NAV against such
NAV; and (b) data in chart format displaying the frequency distribution
of discounts and premiums of the daily Bid/Ask Price against the NAV,
within appropriate ranges, for each of the four previous calendar
quarters. In addition, the Product Description for each Fund will state
that the Web site for the Fund has information about the premiums and
discounts at which Fund Shares have traded.
    5. The Fund's Prospectus and annual report for each Fund also will
include: (a) the information listed in condition 4(b), (i) in the case
of the Fund's Prospectus, for the most recently completed year (and the
most recently completed quarter or quarters, as applicable) and (ii) in
the case of the annual report, for the immediately preceding five
years, as applicable; and (b) the following data, calculated on a per
Fund Share basis for one, five and ten year periods (or life of the
Fund): (i) The cumulative total return and the average annual total
return based on NAV and Bid/Ask Price, and (ii) the cumulative total
return of the relevant Underlying Index.
    6. Before a Fund may rely on the order, the Commission will have
approved, pursuant to rule 19b-4 under the Exchange Act, an Exchange
rule requiring Exchange members and member organizations effecting
transactions in Fund Shares to deliver a

Product Description to purchasers of Fund Shares.
    7. Each Fund's Prospectus and Product Description will clearly
disclose that, for purposes of the Act, Fund Shares are issued by the
Fund, which is a registered investment company, and that the
acquisition of Fund Shares by investment companies is subject to the
restrictions of section 12(d)(1) of the Act, except as permitted by an
exemptive order that permits registered investment companies to invest
in a Fund beyond the limits of section 12(d)(1), subject to certain
terms and conditions, including that the registered investment company
enter into a Purchasing Fund Agreement with the Fund regarding the
terms of the investment.
    8. The members of a Purchasing Fund's Advisory Group will not
control (individually or in the aggregate) a Fund within the meaning of
section 2(a)(9) of the Act. The members of a Purchasing Fund's Sub-
Advisory Group will not control (individually or in the aggregate) a
Fund within the meaning of section 2(a)(9) of the Act. If, as a result
of a decrease in the outstanding Fund Shares of a Fund, a Purchasing
Fund's Advisory Group or a Purchasing Fund's Sub-Advisory Group, each
in the aggregate, becomes a holder of more than 25% of the outstanding
Fund Shares of a Fund, it will vote its Fund Shares in the same
proportion as the vote of all other holders of the Fund Shares. This
condition does not apply to the Purchasing Fund's Sub-Advisory Group
with respect to a Fund for which the Purchasing Fund's Sub-Adviser or a
person controlling, controlled by, or under common control with the
Purchasing Fund Sub-Adviser acts as the investment adviser within the
meaning of section 2(a)(20)(A) of the Act (in the case of an Open-end
Fund) or as the sponsor (in the case of a UIT Fund).
    9. No Purchasing Fund or Purchasing Fund Affiliate will cause any
existing or potential investment by the Purchasing Fund in a Fund to
influence the terms of any services or transactions between the
Purchasing Fund or Purchasing Fund Affiliate and the Fund or a Fund
Affiliate.
    10. The board of directors or trustees of a Purchasing Management
Company, including a majority of the disinterested directors or
trustees, will adopt procedures reasonably designed to ensure that the
Purchasing Fund Adviser and Purchasing Fund Sub-Adviser are conducting
the investment program of the Purchasing Management Company without
taking into account any consideration received by the Purchasing
Management Company or a Purchasing Fund Affiliate from a Fund or a Fund
Affiliate in connection with any services or transactions.
    11. No Purchasing Fund or Purchasing Fund Affiliate (except to the
extent it is acting in its capacity as an investment adviser to an
Open-end Fund or sponsor to a UIT Fund) will cause a Fund to purchase a
security in any Affiliated Underwriting.
    12. Before investing in a Fund in excess of the limits in section
12(d)(1)(A), each Purchasing Fund and the Fund will execute a
Purchasing Fund Agreement stating, without limitation, that their
boards of directors or trustees and their investment advisers or
sponsors or trustees, as applicable, understand the terms and
conditions of the order, and agree to fulfill their responsibilities
under the order. At the time of its investment in shares of an Open-end
Fund in excess of the limit in section 12(d)(1)(A)(i), a Purchasing
Fund will notify the Open-end Fund of the investment. At such time, the
Purchasing Fund will also transmit to the Fund a list of names of each
Purchasing Fund Affiliate and Underwriting Affiliate. The Purchasing
Fund will notify the Fund of any changes to the list of names as soon
as reasonably practicable after a change occurs. The relevant Fund and
the Purchasing Fund will maintain and preserve a copy of the order, the
agreement, and the list with any updated information for the duration
of the investment and for a period of not less than six years
thereafter, the first two years in an easily accessible place.
    13. The Purchasing Fund Adviser, Trustee or Sponsor, as applicable,
will waive fees otherwise payable to it by the Purchasing Fund in an
amount at least equal to any compensation (including fees received
under any plan adopted by an Open-end Fund under rule 12b-1 under the
Act) received from a Fund by the Purchasing Fund Adviser, Trustee or
Sponsor, or an affiliated person of the Purchasing Fund Adviser,
Trustee or Sponsor, other than any advisory fees paid to the Purchasing
Fund Adviser, Trustee or Sponsor, or its affiliated person by an Open-
end Fund, in connection with the investment by the Purchasing Fund in
the Fund. Any Purchasing Fund Sub-Adviser will waive fees otherwise
payable to the Purchasing Fund Sub-Adviser, directly or indirectly, by
the Purchasing Management Company in an amount at least equal to any
compensation received from a Fund by the Purchasing Fund Sub-Adviser,
or an affiliated person of the Purchasing Fund Sub-Adviser, other than
any advisory fees paid to the Purchasing Fund Sub-Adviser or its
affiliated person by the Open-end Fund, in connection with the
investment by the Purchasing Management Company in a Fund made at the
direction of the Purchasing Fund Sub-Adviser. In the event that the
Purchasing Fund Sub-Adviser waives fees, the benefit of the waiver will
be passed through to the Purchasing Management Company.
    14. Any sales charges and/or service fees charged with respect to
shares of a Purchasing Fund will not exceed the limits applicable to a
fund of funds as set forth in Conduct Rule 2830 of the NASD.
    15. Once an investment by a Purchasing Fund in the securities of a
Fund exceeds the limit in section 12(d)(1)(A)(i) of the Act, the board
of directors/trustees of an Open-end Fund (``Board''), including a
majority of the disinterested Board members, will determine that any
consideration paid by the Open-end Fund to a Purchasing Fund or a
Purchasing Fund Affiliate in connection with any services or
transactions: (a) Is fair and reasonable in relation to the nature and
quality of the services and benefits received by the Fund; (b) is
within the range of consideration that the Open-end Fund would be
required to pay to another unaffiliated entity in connection with the
same services or transactions; and (c) does not involve overreaching on
the part of any person concerned. This condition does not apply with
respect to any services or transactions between an Open-end Fund and
its investment adviser(s), or any person controlling, controlled by, or
under common control with such investment adviser(s).
    16. The Board, including a majority of the disinterested Board
members, will adopt procedures reasonably designed to monitor any
purchases of securities by an Open-end Fund in an Affiliated
Underwriting once the investment by a Purchasing Fund in the securities
of the Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act,
including any purchases made directly from an Underwriting Affiliate.
The Board will review these purchases periodically, but no less
frequently than annually, to determine whether the purchases were
influenced by the investment by the Purchasing Fund in the Open-end
Fund. The Board will consider, among other things: (a) Whether the
purchases were consistent with the investment objectives and policies
of the Open-end Fund; (b) how the performance of securities purchased
in an Affiliated Underwriting compares to the performances of
comparable securities purchased during a comparable period of time in
underwritings other than

Affiliated Underwritings or to a benchmark such as a comparable market
index; and (c) whether the amount of securities purchased by the Fund
in Affiliated Underwritings and the amount purchased directly from an
Underwriting Affiliate have changed significantly from prior years. The
Board will take any appropriate actions based on its review, including,
if appropriate, the institution of procedures designed to assure that
purchases of securities in Affiliated Underwritings are in the best
interests of shareholders of the Open-end Fund.
    17. Each Open-end Fund will maintain and preserve permanently in an
easily accessible place a written copy of the procedures described in
the preceding condition, and any modifications to such procedures, and
will maintain and preserve for a period not less than six years from
the end of the fiscal year in which any purchase in an Affiliated
Underwriting occurred, the first two years in an easily accessible
place, a written record of each purchase of securities in Affiliated
Underwritings, once an investment by a Purchasing Fund in Fund Shares
of the Fund exceeds the limits of section 12(d)(1)(A)(i) of the Act,
setting forth from whom the securities were acquired, the identity of
the underwriting syndicate's members, the terms of the purchase, and
the information or materials upon which the Board's determinations were
made.
    18. Before approving any advisory contract under section 15 of the
Act, the board of directors or trustees of each Purchasing Management
Company, including a majority of the disinterested directors or
trustees, will find that the advisory fees charged under such contract
are based on services provided that will be in addition to, rather than
duplicative of, the services provided under the advisory contract(s) of
any Open-end Fund in which the Purchasing Management Company may
invest. These findings and their basis will be recorded fully in the
minute books of the appropriate Purchasing Management Company.
    19. No Fund will acquire securities of any other investment company
or companies relying on sections 3(c)(1) or 3(c)(7) of the Act in
excess of the limits contained in section 12(d)(1)(A) of the Act.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 06-7353 Filed 8-30-06; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 83, Number 100 (Wednesday, May 23, 2018)]
[Rules and Regulations]
[Pages 23804-23807]
[FR Doc No: 2018-10814]

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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Part 382

[Docket No. DOT-OST-2018-0067]

Nondiscrimination on the Basis of Disability in Air Travel

AGENCY: Office of the Secretary (OST), U.S. Department of
Transportation (DOT).

ACTION: Interim statement of enforcement priorities.

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SUMMARY: The U.S. Department of Transportation (DOT or the Department)
is issuing a statement of enforcement priorities to apprise the public
of its intended enforcement focus with respect to transportation of
service animals in the cabin of aircraft. The Department regulates the
transportation of service animals under the Air Carrier Access Act
(ACAA) and its implementing regulation. The Department seeks comment on
this interim statement, and intends to issue a final statement after
the close of the comment period.

DATES: The interim statement of enforcement proprieties is applicable
May 23, 2018. Comments should be filed by June 7, 2018. Late-filed
comments will be considered to the extent practicable.

ADDRESSES: You may file comments identified by the docket number DOT-
OST-2018-0067 by any of the following methods:
     Federal eRulemaking Portal: Go to https://www.regulations.gov and follow the online instructions for submitting
comments.
     Mail: Docket Management Facility, U.S. Department of
Transportation, 1200 New Jersey Ave. SE, West Building Ground Floor,
Room W12-140, Washington, DC 20590-0001.
     Hand Delivery or Courier: West Building Ground Floor, Room
W12-140, 1200 New Jersey Ave. SE, between 9:00 a.m. and 5:00 p.m. ET,
Monday through Friday, except Federal holidays.
     Fax:<PHONE_NUMBER>.
    Instructions: You must include the agency name and docket number
DOT-OST-2018-0067 at the beginning of your comment. All comments
received will be posted without change to https://www.regulations.gov,
including any personal information provided.
    Privacy Act: Anyone can search the electronic form of all comments
received in any of our dockets by the name of the individual submitting
the comment (or signing the comment, if submitted on behalf of an
association, business, labor union, etc.). You may review DOT's
complete Privacy Act statement in the Federal Register published on
April 11, 2000 (65 FR 19477-78), or you may visit https://www.transportation.gov/privacy.
    Docket: For access to the docket to read background documents and
comments received, go to https://www.regulations.gov or to the street
address listed above. Follow the online instructions for accessing the
docket.

FOR FURTHER INFORMATION CONTACT: Robert Gorman, Senior Trial Attorney,
or Blane A. Workie, Assistant General Counsel, Office of Aviation
Enforcement and Proceedings, U.S. Department of Transportation, 1200
New Jersey Ave. SE, Washington, DC 20590,<PHONE_NUMBER>,<PHONE_NUMBER>
(fax), [email protected] or [email protected] (email).

SUPPLEMENTARY INFORMATION:

Background

    The Air Carrier Access Act (ACAA) prohibits discrimination in
airline service on the basis of disability. 49 U.S.C. 41705. DOT's rule
implementing the ACAA generally requires that airlines permit an
individual with a disability to travel with his or her service animal
in the cabin at no additional charge. 14 CFR 382.31(a). Service animals
play a vital role in the lives of many individuals with disabilities.
For example, service animals serve as guides for persons with visual
impairments, notify persons who are deaf or hard of hearing of public
announcements and/or possible hazards, warn persons with post-traumatic
stress disorder or other mental or emotional disabilities at the onset
of an emotional crisis, and retrieve items for passengers with mobility
impairments. At the same time, the Department recognizes that airlines
have a responsibility to ensure the health, safety, and welfare of all
of its passengers and employees. In enforcing the requirements of
Federal law, the Department is committed to ensuring that our air
transportation system is safe and accessible for everyone.
    DOT requires airlines to allow a wide variety of service animals in
the cabin of aircraft flying to, from, and within the United States.
Under the ACAA, the Department considers a service animal to be any
animal that is individually trained to assist a person with a
disability, or an animal that is necessary for the emotional well-being
of a passenger. 14 CFR 382.117(e) and Guidance Concerning Service
Animals in Air Transportation, 73 FR 27614, 27658 (May 13, 2008).
However, airlines are never required to accept snakes, reptiles,
ferrets, rodents, sugar gliders, and spiders. Airlines may also exclude
animals that are too large or heavy to be accommodated in the cabin,
pose a direct threat to the health or safety of others, cause a
significant disruption of cabin service, or are prohibited from
entering a foreign country. 14 CFR 382.117(f). In addition, airlines
may deny transport to a service animal that is not well-behaved,
suggesting a lack of proper training. 14 CFR 382.117(i) and Guidance
Concerning Service Animals in Air Transportation, 73 FR 27614, 27659
(May 13, 2008). Foreign air carriers are required to only transport
dogs. 14 CFR 382.117(f).
    Under DOT rules, airlines determine whether an animal is a service
animal or pet by the credible verbal assurance of an individual with a
disability using the animal, or by looking for physical indicators such
as the presence of a harness or tags. 14 CFR 382.117(d). If the animal
is a psychiatric service animal (PSA) or an emotional support animal
(ESA), airlines may also require documentation by a licensed mental
health professional stating that the passenger has a mental or
emotional disability recognized in the Diagnostic and Statistical
Manual of Mental Disorders IV (DSM-IV) and that the passenger needs the
animal for air travel or activity at the passenger's destination. 14
CFR 382.117(e). Airlines may also require 48 hours' advance notice and
check-in one hour before the check-in time for the general public as a
condition for travel with an ESA or

PSA. 14 CFR 382.27(c)(8). Airlines are prohibited from imposing such a
requirement for travel with other types of service animals, except for
travel with a service animal on a flight segment scheduled to take 8
hours or more. 14 CFR 382.27(a); 382.27(c)(9).
    In 2016, the Department attempted to change its service animal
requirements through a negotiated rulemaking because of widespread
dissatisfaction with the current rule. Some disability rights advocates
asserted that the Department's service animal requirements discriminate
against passengers with mental and emotional disabilities by allowing
airlines to require them to give advance notice and documentation that
other individuals with disabilities are not required to give. There was
also concern that a growing number of passengers are presenting
untrained animals that are essentially just pets, and demanding the
right to bring them onboard as service animals. Airlines reported to
the Department a proliferation of websites offering certificates of
psychological need for essentially any applicant who pays a small fee.
The use of unusual species such as turkeys and pigs as service animals
also caused unease not only with airlines but also with advocates. Some
advocates worried that the use of unusual service animals would create
distrust by flight crew and other passengers that could affect their
ability to bring legitimate service animals onboard. Unfortunately,
while the negotiated rulemaking process was highly informative and
productive, the Department's efforts to find full consensus on these
issues was not successful.
    Since that time, the need for the Department to address these
issues has only grown. Airlines have become increasingly concerned that
untrained service animals pose a risk to the health and safety of its
crewmembers and passengers. Carriers have reported increased incidents
of misbehavior including urination, defecation, and biting. A few have
established policies that they deem appropriate given their belief that
there has been a significant increase in passengers bringing animals
onboard that have not been properly trained as service animals. For
example, one airline declared its intention to require, effective March
1, 2018, that all passengers traveling with service animals provide
immunization records and/or veterinary health forms for their animal
signed by a veterinarian at least 48 hours before the flight's
scheduled departure time.\1\ In addition, this airline specified that
PSA and ESA users must also submit documentation that their animal has
been trained to behave in a public setting as a condition for travel,
and required that all passengers with service animals must check-in at
the airport counter. The airline further states that it will evaluate
on a case-by-case basis whether it will accept any animal that is not a
dog or a cat for travel. Another airline has indicated that, effective
March 1, 2018, it will require passengers who use PSAs or ESAs to
provide, no later than 48 hours prior to travel, two separate forms in
addition to the medical form already permitted under section
382.117(e). First, under the airline policy, the passenger must attest
that he or she is not aware of any reason that the animal would pose a
direct threat to the health or safety of others, and that the passenger
accepts full legal responsibility for any misbehavior by the animal.
Second, the passenger must provide a form, signed by a licensed
veterinarian, providing information about the medical history of the
animal.\2\ Other airlines have informally expressed to the Department
an interest in similarly amending their service animal policies.
---------------------------------------------------------------------------

    \1\ On February 22, 2018, that airline changed its policy so it
no longer required all service animal users to provide immunization
records/and or veterinary health forms.
    \2\ Among other data, the veterinarian form must include the
type/breed/weight of the animal, the date of the animal's last
rabies vaccine, and a statement that at the time of the animal's
last physical examination, the animal appeared to be free of
infectious or contagious diseases that would endanger other animals
or public health. The veterinarian must also relay information from
the animal's owner regarding whether the animal has injured or
attacked any person.
    An earlier version of this airline's policy would have required
the veterinarian to directly attest that the animal's behavior would
not pose a direct threat onboard the aircraft. The American
Veterinary Medical Association (AVMA) has raised concerns with the
Department about airlines' service animal forms, to the extent that
they would require veterinarians to predict or certify that an
animal will behave appropriately onboard an aircraft. The AVMA noted
that veterinarians generally rely on reports from the animal's owner
and on their direct observations of the animal during a physical
examination. The AVMA explained to the Department, however, that
veterinarians cannot guarantee the behavior of an animal,
particularly in a new environment like an aircraft. The AVMA
emphasized to the Department that expanding the scope of the
veterinary form beyond the health status of the animal and
behavioral information of the animal based on owner reports or the
veterinarian's observations could lead to refusals by veterinarians
to fill out these forms, which would result in more service animals
being denied air transportation.
---------------------------------------------------------------------------

    Many disability advocates oppose these new policies for various
reasons. They broadly contend that the Department should not tolerate
these restrictions because they impose burdens that go beyond what the
Department has indicated airlines may impose on passengers with
disabilities. More specifically, they contend that the inconvenience
and expense of providing veterinary forms outweigh their limited value.
They note that whether an animal poses a direct threat to the health or
safety of others should be assessed on an individualized, real-time
basis, rather than through a general requirement that applies to all
service animals. Advocates have also pointed out to the Department that
a 48 hours' advance notice requirement prevents passengers from
traveling in the event of an emergency. In addition, advocates assert
that requiring passengers to check-in at the ticket counter is
burdensome, particularly in an era where many passengers skip the
ticket counter and proceed directly to the gate because they have
checked in online. PSA users further contend that it is discriminatory
to apply greater restrictions to PSAs than are applied to other service
animals. More generally, advocates have expressed a concern that
passengers with disabilities may be subject to a shifting patchwork of
carrier policies.

Advance Notice of Proposed Rulemaking

    Today, the Department issued an advance notice of proposed
rulemaking (ANPRM) in response to concerns expressed by the
stakeholders about the need for a change in the Department's service
animal requirements. The ANPRM solicits comments on ways to ensure that
individuals with disabilities can continue using their service animals
while deterring the fraudulent use of other animals not qualified as
service animals and ensuring that animals that are not trained to
behave properly in the public are not accepted for transport. Because
the rulemaking process can be lengthy, the Department's Office of
Aviation Enforcement and Proceedings (Enforcement Office), within the
Office of the General Counsel, is issuing this statement to apprise the
public of its intended enforcement focus with respect to transportation
of service animals in the cabin until the service animal requirements
are revised.

Interim Statement of Enforcement Office Priorities

    The Enforcement Office has the authority to pursue or not to pursue
enforcement action against airlines for not complying with the ACAA and
the Department's implementing regulation. Given that the service animal
issue is currently the subject of an open rulemaking, the Enforcement
Office will

focus its enforcement on clear violations of the current rule that have
the potential to adversely impact the largest number of persons.\3\
---------------------------------------------------------------------------

    \3\ To the extent that this interim statement of enforcement
priorities conflicts with the Enforcement Office's 2009 Frequently
Asked Questions guidance document (https://www.transportation.gov/airconsumer/frequently-asked-questions-may-13-2009), this more
recent document will control.
---------------------------------------------------------------------------

Service Animals--Species and Number

    The Enforcement Office intends to exercise its enforcement
discretion by focusing its resources on ensuring that U.S. carriers
continue to accept the most commonly used service animals (i.e., dogs,
cats, and miniature horses) for travel. While the Enforcement Office
will focus on ensuring the transport of commonly used service animals
such as dogs, cats and miniature horses by U.S. carriers, it may take
enforcement action against U.S. carriers for failing to transport other
service animals on a case-by-case basis. Airlines are expected to
continue to comply with the existing service animal requirement which
allows U.S. airlines to deny transport only to certain unusual service
animals such as snakes, other reptiles, ferrets, rodents and spiders.
The Enforcement Office believes that the public interest will be better
served by this exercise of its enforcement discretion because dogs,
cats, and miniature horses are the most commonly used service animals.
    The Department's service animal regulation does not indicate
whether airlines must allow passengers to travel with more than one
service animal. In the past, the Enforcement Office has informed
airlines that they will not be subject to enforcement action if they
limit passengers to transporting three service animals. The Enforcement
Office continues to recognize that a passenger may require more than
one task trained service animal. Multiple task trained service animals
may be needed to the extent that they are trained to perform different
tasks, or in cases where an individual trained service animal must rest
and cannot perform tasks for the passenger for extended periods. On the
other hand, it is less clear that passengers require more than one ESA
for travel or at the passenger's destination. Accordingly, as a matter
of discretion, the Enforcement Office does not intend to take action if
airlines limit passengers to transporting one ESA. Additionally, the
Enforcement Office does not intend to take action if airlines limit
passengers to transporting a total of three service animals.

Advance Notice

    The Enforcement Office plans to use its resources to ensure that
airlines are not improperly requiring passengers with service animals
to provide advance notice prior to travel. Under existing DOT rules,
carriers generally may not require advance notice for passengers with
disabilities, unless the rule specifically permits advance notice. 14
CFR 382.27(a). Carriers may require advance notice for passengers
traveling with PSAs or ESAs, or for any service animal where the flight
segment is scheduled to take 8 hours or more, but only with regard to
the animal's need to relieve itself during the flight. 14 CFR
382.27(c). Thus, under existing rules, carriers may not otherwise
require advance notice for passengers traveling with service animals
(e.g., seeing eye dogs) other than ESAs or PSAs unless the flight
segment is 8 hours or more. Requiring advance notice for service
animals outside of these specific circumstances violates the
Department's regulation and may significantly harm passengers with
disabilities as it prevents them from making last minute travel plans
that may be necessary for work or family emergencies.

Proof That an Animal is a Service Animal

    The Department's service animal regulation requires airlines to
accept the following as proof of a service animal's status:
Identification cards, other written documentation, presence of
harnesses, tags, or the credible verbal assurances of a qualified
individual with a disability using the animal. 14 CFR 382.117(d).
Airlines have pointed out to the Department that accepting
identification cards, harnesses, or tags as the sole evidence that an
animal is a service animal is problematic because service animal
paraphernalia are sold online and may be obtained by unscrupulous
individuals so their pets can fly in the aircraft cabin as service
animals. However, the Department's disability regulation makes clear
that these protections are for individuals with disabilities. See 14
CFR 382.1 and 382.3. When deciding to accept an animal as a service
animal, airlines must determine both that the passenger is an
individual with a disability and that the animal is a service animal.
See 73 FR 27614, 27658. If a passenger's status as an individual with a
disability is unclear (for example, if the disability is not clearly
visible), then the airline personnel may ask questions about the
passenger's need for a service animal. For example, airlines may ask
``how does your animal assist you with your disability?'' See 73 FR
27614, 27660. A credible response to this question would establish both
that the passenger is an individual with a disability and that the
animal is a service animal. While airlines are required to accept items
such as vests and harnesses as evidence of a service animal's status,
it would be reasonable for airlines to also request the passenger's
credible verbal assurance to ensure the passenger is an individual with
a disability who has a need for that service animal.

Check-In Requirements

    Airlines generally allow passengers to check-in electronically
before arriving at the airport. DOT prohibits airlines from denying an
individual with a disability the benefit of any air transportation or
related services that are available to other persons. 14 CFR 382.11.
Among the many benefits of electronic check-in is the ability to skip
the ticket counter and proceed directly to the gate. One of the reasons
that the Department requires airlines to make its websites accessible
is to enable individuals with disabilities to check-in electronically
like other travelers. See 14 CFR 382.43. For these reasons, and
considering the prohibition against discrimination in the ACAA, the
Enforcement Office intends to act should an airline require that a
passenger with a service animal check-in at the ticket counter, thereby
denying those passengers the same benefits that are available to other
passengers.

Documentation

    As noted above, carriers may refuse transportation to any service
animal that displays behavior evidencing a lack of training in a public
space. For example, an untrained animal may bark or growl at other
persons on the aircraft, bite or jump on people, or urinate or defecate
in the cabin. The Department's disability rule does not clearly
indicate how carriers determine whether a service animal poses a direct
threat to the health or safety of others. The provision in the current
regulation that allows airlines to deny boarding to an animal that
poses a direct threat to the health or safety of others will be further
clarified through the rulemaking process. As described previously,
certain carriers have indicated that they need veterinary forms or
behavioral attestations to determine whether a service animal,
particularly a PSA and/or an ESA poses a direct threat. At the same
time, we understand the disability advocates' view that these policies
violate the Department's disability regulation because they impose new
requirements on passengers with disabilities.

    The Enforcement Office does not intend to use its limited resources
to pursue enforcement action against airlines for requiring proof of a
service animal's vaccination, training, or behavior so long as the
documentation is not required for passengers seeking to travel with a
service animal that is not an ESA or PSA. Under section 382.27,
carriers may not require advance notice to obtain services or
accommodations, except under circumstances specifically permitted by
rule. As noted above, however, under DOT's rule, airlines are permitted
to ask for up to 48 hours' advance notice for passengers using PSAs and
ESAs. 14 CFR 382.27(c)(8). The Department permits airlines to require
48 hours' advance notice of a passenger wishing to travel with an ESA
or PSA in order to provide the carrier the necessary time to assess the
passenger's documentation.\4\ As such, the Enforcement Office does not
intend to use its limited resources to pursue enforcement action
against airlines for requiring proof of a service animal's vaccination,
training, or behavior for passengers seeking to travel with an ESA or
PSA. At present, the Enforcement Office is not aware of any airline
requesting information from ESA or PSA users that would make travel
with those animals unduly burdensome or effectively impossible (e.g.,
requiring veterinarians to directly guarantee or certify that an animal
will behave appropriately onboard an aircraft). The Enforcement Office
will continue to monitor the types of information sought by ESA and PSA
users, however.
---------------------------------------------------------------------------

    \4\ See 73 FR 27614, 27636 (May 13, 2008).
---------------------------------------------------------------------------

Containing Emotional Support Animals in the Cabin

    Part 382 does not clearly specify whether or how airlines may
restrict the movement of service animals in the cabin. The FAA
determined as a matter of aircraft safety that passengers may carry
service animals in their lap during all stages of flight, so long as
the animal does not weigh more than a lap child (i.e., a child that has
not reached his or her second birthday).\5\ The Enforcement Office then
interpreted section 382.117 as prohibiting an airline from requiring
service animals to be harnessed in the cabin, and requiring airlines to
transport service animals in the cabin free of restraining devices
while accompanying users at their seats in accordance with applicable
safety requirements since there appeared to be no safety reason to do
so.\6\
---------------------------------------------------------------------------

    \5\ FAA Order 8400.10, FSAT 04-01A (2004) at http://fsims.faa.gov/WDocs/Bulletins/Information%20Bulletins/Air%20Transportation%20Info%20Bulletins%20(FSAT)/FSAT0401A.htm.
    \6\ See letter dated March 22, 2010 from the Department's Office
of Aviation Enforcement and Proceedings stating that the office
``has long interpreted this provision to mean that, in general,
service animals should be transported in the cabin free of
restraining devices while accompanying users at their seats in
accordance with applicable safety requirements, and prohibits
carriers from otherwise mandating conditions or restrictions not
stated in section 382.117.'' DOT-OST-2008-0272-0091 at https://www.regulations.gov/document?D=DOT-OST-2008-0272-0091.
---------------------------------------------------------------------------

    However, because the regulatory text is not explicitly clear on
this topic and the FAA order does not address the behavior of service
animals, the Enforcement Office now intends to exercise its enforcement
discretion with respect to carriers that restrict the movement of ESAs
in the cabin. We recognize the possibility that ESAs may pose greater
in-cabin safety risks because they may not have undergone the same
level of training as other service animals (including PSAs).
Accordingly, at this time, the Enforcement Office will not take action
against carriers that impose reasonable restrictions on the movement of
ESAs in the cabin so long as the reason for the restriction is concern
for the safety of other passengers and crew. Such restrictions may
include requiring, where appropriate for the animal's size, that the
animal be placed in a pet carrier, the animal stay on the floor at the
passenger's feet, or requiring the animal to be on a leash or tether.

Request for Comments

    This interim statement of enforcement priorities reflects the
Department's current view of where to focus its limited resources with
respect to service animal issues, given airlines recently announced
service animal policies. In appropriate cases, the Enforcement Office
may take enforcement action against carriers for violations that are
not described in this interim statement. The Department solicits
comment on the effects and implications of adopting these enforcement
priorities. The comment period will remain open for 15 days after
publication in the Federal Register. Late-received comments will be
considered to the extent practicable. After the close of the comment
period, the Department will issue a final statement of enforcement
priorities. Comments relating to amending the Department's disability
regulation should be directed to the ANPRM docket: DOT-OST-2018-0067.

    Issued this 9th day of May, 2018, in Washington, DC.
Blane A. Workie,
Assistant General Counsel for Aviation Enforcement and Proceedings,
U.S. Department of Transportation.
[FR Doc. 2018-10814 Filed 5-22-18; 8:45 am]
 BILLING CODE 4910-9X-P


[Federal Register Volume 76, Number 134 (Wednesday, July 13, 2011)]
[Proposed Rules]
[Pages 41147-41148]
[FR Doc No: 2011-17544]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 71

[Docket No. FAA-2011-0517; Airspace Docket No. 11-AWP-7]

Proposed Establishment of Class E Airspace; Chinle, AZ

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

-----------------------------------------------------------------------

SUMMARY: This action proposes to establish Class E airspace at Chinle
Municipal Airport, Chinle, AZ to accommodate aircraft using new Area
Navigation (RNAV) Global Positioning System (GPS) standard instrument
approach procedures at Chinle Municipal Airport. The FAA is proposing
this action to enhance the safety and management of aircraft operations
at Chinle Municipal Airport.

DATES: Comments must be received on or before August 29, 2011.

ADDRESSES: Send comments on this proposal to the U.S. Department of
Transportation, Docket Operations, M-30, West Building Ground Floor,
Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590;
telephone<PHONE_NUMBER>. You must identify FAA Docket No. FAA-2011-
0517; Airspace Docket No. 11-AWP-7, at the beginning of your comments.
You may also submit comments through the Internet at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Eldon Taylor, Federal Aviation
Administration, Operations Support Group, Western Service Center, 1601
Lind Avenue, SW., Renton, WA 98057; telephone<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Comments Invited

    Interested parties are invited to participate in this proposed
rulemaking by submitting such written data, views, or arguments, as
they may desire. Comments that provide the factual basis supporting the
views and suggestions presented are particularly helpful in developing
reasoned regulatory decisions on the proposal. Comments are
specifically invited on the overall regulatory, aeronautical, economic,
environmental, and energy-related aspects of the proposal.
    Communications should identify both docket numbers (FAA Docket No.
FAA 2011-0517 and Airspace Docket No. 11-AWP-7) and be submitted in
triplicate to the Docket Management System (see ADDRESSES section for
address and phone number). You may also submit comments through the
Internet at http://www.regulations.gov.
    Commenters wishing the FAA to acknowledge receipt of their comments
on this action must submit with those comments a self-addressed stamped
postcard on which the following statement is made: ``Comments to FAA
Docket No. FAA-2011-0517 and Airspace Docket No. 11-AWP-7''. The
postcard will be date/time stamped and returned to the commenter.
    All communications received on or before the specified closing date
for comments will be considered before taking action on the proposed
rule. The proposal contained in this action may be changed in light of
comments received. All comments submitted will be available for
examination in the public docket both before and after the closing date
for comments. A report summarizing each substantive public contact with
FAA personnel concerned with this rulemaking will be filed in the
docket.

Availability of NPRMs

    An electronic copy of this document may be downloaded through the
Internet at http://www.regulations.gov. Recently published rulemaking
documents can also be accessed through the FAA's Web page at http://www.faa.gov/airports_airtraffic/air_traffic/publications/airspace_amendments/.
    You may review the public docket containing the proposal, any
comments received, and any final disposition in person in the Dockets
Office (see the ADDRESSES section for the address and phone number)
between 9 a.m. and 5 p.m., Monday through Friday, except Federal
holidays. An informal docket may also be examined during normal
business hours at the Northwest Mountain Regional Office of the Federal
Aviation Administration, Air Traffic Organization, Western Service
Center, Operations Support Group, 1601 Lind Avenue, SW., Renton, WA
98057.
    Persons interested in being placed on a mailing list for future
NPRMs should contact the FAA's Office of Rulemaking,<PHONE_NUMBER>,
for a copy of Advisory Circular No. 11-2A, Notice of Proposed
Rulemaking Distribution System, which describes the application
procedure.

The Proposal

    The FAA is proposing an amendment to Title 14 Code of Federal
Regulations (14 CFR) part 71 by establishing Class E airspace extending
upward from 700 feet above the surface at Chinle Municipal Airport,
Chinle, AZ. Controlled airspace is necessary to accommodate aircraft
using new RNAV (GPS) standard instrument approach procedures at Chinle
Municipal Airport. This action would enhance the safety and management
of IFR operations at the airport.
    Class E airspace designations are published in paragraph 6005, of
FAA Order 7400.9U, dated August 18, 2010, and effective September 15,
2010, which is incorporated by reference in 14 CFR 71.1. The Class E
airspace designation listed in this document will be published
subsequently in this Order.
    The FAA has determined this proposed regulation only involves an
established body of technical regulations for which frequent and
routine amendments are necessary to keep them operationally current.
Therefore, this proposed regulation; (1) is not a ``significant
regulatory action'' under Executive Order 12866; (2) is not a
``significant rule'' under DOT Regulatory Policies and Procedures (44
FR 11034; February 26, 1979); and (3) does not warrant preparation of a
regulatory evaluation as the anticipated impact is so minimal. Since
this is a routine matter that will only affect air traffic procedures
and air navigation, it is certified this proposed rule, when
promulgated, would not have a

significant economic impact on a substantial number of small entities
under the criteria of the Regulatory Flexibility Act.
    The FAA's authority to issue rules regarding aviation safety is
found in Title 49 of the U.S. Code. Subtitle 1, Section 106, describes
the authority for the FAA Administrator. Subtitle VII, Aviation
Programs, describes in more detail the scope of the agency's authority.
This rulemaking is promulgated under the authority described in
Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the
FAA is charged with prescribing regulations to assign the use of the
airspace necessary to ensure the safety of aircraft and the efficient
use of airspace. This regulation is within the scope of that authority
as it would establish controlled airspace at Chinle Municipal Airport,
Chinle, AZ.

List of Subjects in 14 CFR Part 71

    Airspace, Incorporation by reference, Navigation (air).

The Proposed Amendment

    Accordingly, pursuant to the authority delegated to me, the Federal
Aviation Administration proposes to amend 14 CFR part 71 as follows:

PART 71--DESIGNATION OF CLASS A, B, C, D AND E AIRSPACE AREAS; AIR
TRAFFIC SERVICE ROUTES; AND REPORTING POINTS

    1. The authority citation for 14 CFR part 71 continues to read as
follows:

    Authority: 49 U.S.C. 106(g), 40103, 40113, 40120; E.O. 10854, 24
FR 9565, 3 CFR, 1959-1963 Comp., p. 389.

Sec.  71.1  [Amended]

    2. The incorporation by reference in 14 CFR 71.1 of the Federal
Aviation Administration Order 7400.9U, Airspace Designations and
Reporting Points, dated August 18, 2010, and effective September 15,
2010 is amended as follows:

Paragraph 6005 Class E airspace areas extending upward from 700
feet or more above the surface of the earth.

* * * * *

AWP AZ E5 Chinle, AZ [New]

Chinle Municipal Airport, AZ
    (Lat. 36[deg]06'34'' N., long. 109[deg]34'32'' W.)

    That airspace extending upward from 700 feet above the surface
within a 7.2-mile radius of Chinle Municipal Airport; that airspace
extending upward from 1,200 feet above the surface within an area
bounded by lat. 36[deg]34'00'' N., long. 110[deg]00'00'' W.; to lat.
36[deg]38'00'' N., long. 109[deg]35'00'' W.; to lat. 36[deg]16'00''
N., long. 109[deg]02'00'' W.; to lat. 36[deg]04'00'' N., long.
109[deg]25'00'' W.; to lat. 35[deg]38'00'' N., long. 110[deg]01'00''
W.; to lat. 36[deg]19'00'' N., long. 110[deg]21'00'' W., thence to
the point of beginning.

    Issued in Seattle, Washington, on July 6, 2011.
John Warner,
Manager, Operations Support Group, Western Service Center.
[FR Doc. 2011-17544 Filed 7-12-11; 8:45 am]
BILLING CODE 4910-13-P


[Federal Register Volume 78, Number 116 (Monday, June 17, 2013)]
[Notices]
[Page 36290]
[FR Doc No: 2013-14242]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69733; File No. SR-NYSEMKT-2013-25]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of
Designation of a Longer Period for Commission Action on Proposed Rule
Change Amending NYSE MKT Rule 104--Equities To Codify Certain
Traditional Trading Floor Functions That May Be Performed by Designated
Market Makers, To Make Exchange Systems Available to DMMs That Would
Provide DMMs With Certain Market Information, To Amend the Exchange's
Rules Governing the Ability of DMMs To Provide Market Information to
Floor Brokers, and To Make Conforming Amendments to Other Rules

June 11, 2013.
    On April 9, 2013, NYSE MKT LLC (the ``Exchange'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to amend NYSE MKT
Rule 104--Equities. The proposed rule change was published for comment
in the Federal Register on April 29, 2013.\3\ The Commission received
no comment letters on the proposal.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 69428 (April 23,
2013), 78 FR 25012. On April 18, 2013, the Exchange filed Partial
Amendment No. 1 to the proposal. In Partial Amendment No. 1, the
Exchange filed the Exhibit 3 which was not included in the April 9,
2013 filing.
---------------------------------------------------------------------------

    Section 19(b)(2) of the Act \4\ provides that within 45 days of the
publication of notice of the filing of a proposed rule change, or
within such longer period up to 90 days as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or as to which the self-regulatory organization
consents, the Commission shall either approve the proposed rule change,
disapprove the proposed rule change, or institute proceedings to
determine whether the proposed rule change should be disapproved. The
45th day for this filing is June 13, 2013. The Commission is extending
this 45-day time period.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    The Commission finds it appropriate to designate a longer period
within which to take action on the proposed rule change so that it has
sufficient time to consider this proposed rule change, which would
amend NYSE MKT Rule 104--Equities, and the potential issues raised by
this proposal.
    Accordingly, the Commission, pursuant to Section 19(b)(2) of the
Act,\5\ designates July 26, 2013 as the date by which the Commission
should either approve or disapprove, or institute proceedings to
determine whether to disapprove, the proposed rule change (File No. SR-
NYSEMKT-2013-25).
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(31).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-14242 Filed 6-14-13; 8:45 am]
BILLING CODE 8011-01-P