[Federal Register Volume 81, Number 130 (Thursday, July 7, 2016)]
[Notices]
[Pages 44400-44404]
[FR Doc No: 2016-16123]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78223; File No. SR-NASDAQ-2016-013]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Amendment No. 2 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment No. 2, To
Require Listed Companies to Publicly Disclose Compensation or Other
Payments by Third Parties to Board of Director's Members or Nominees

July 1, 2016.

I. Introduction

    On March 15, 2016, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to require listed companies to
publicly disclose compensation or other payments by third parties to
board of director's members or nominees for director. The proposed rule
change was published for comment in the Federal Register on April 5,
2016.\3\ On May 18, 2016, Nasdaq filed Amendment No. 1 to the
proposal.\4\ On May 20, 2016, the Commission extended the time period
within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
disapprove the proposed rule change.\5\ On June 30, 2016, Nasdaq
withdrew Amendment No. 1 and filed Amendment No. 2 to the proposal,
which replaced and superseded the original proposal in its

entirety.\6\ The Commission received eight comments on the proposal by
seven commenters, as well as a response to the comment letters from
Nasdaq regarding the proposal \7\ This order grants approval of the
proposed rule change, as amended by Amendment No. 2.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 77481 (Mar. 30,
2016), 81 FR 19678 (``Notice'').
    \4\ See Letter to Brent J. Fields, Secretary, Commission, from
David Strandberg, Associate Vice President, Nasdaq dated May 18,
2016.
    \5\ See Securities Exchange Act Release No. 77879 (May 20,
2016), 81 FR 33571 (May 26, 2016).
    \6\ See Letter to Brent J. Fields, Secretary, Commission, from
David Strandberg, Associate Vice President, Nasdaq dated June 30,
2016. In Amendment No. 2, Nasdaq clarified, among other things,
that: The required disclosure must be made no later than the date on
which the relevant company files or furnishes a definitive proxy or
information statement (or, if the company does not file proxy or
information statements, no later than when the company files its
next Form 10-K or Form 20-F); the proposed rule does not separately
require the initial disclosure of newly entered into agreements or
arrangements, provided that disclosure is made pursuant to the rule
for the next shareholders' meeting at which directors are elected; a
company must make the required disclosure at least annually; the
disclosure requirement encompasses non-cash compensation and other
forms of payment obligation, such as indemnification; all references
in the proposed rule to proxy or information statements are to the
definitive versions thereof; remedial disclosure (when a company
newly discovers an agreement that should have been disclosed),
regardless of its timing, would not satisfy the annual disclosure
requirements; and a company that provides disclosure in the current
fiscal year pursuant to the requirement in Item 5.02(d)(2) of Form
8-K would not have to make separate disclosure under the proposed
rule, although disclosure under Commission rules would not relieve a
company of its ongoing obligation under the proposed rule to make
annual disclosure. The amendment also explicitly states that, if a
company provides disclosure in a definitive proxy or information
statement, including to satisfy the Commission's proxy disclosure
requirements, sufficient to comply with the proposed rule, the
company's obligation to satisfy the rule is fulfilled regardless of
the reason for which such disclosure was made.
    Amendment No. 2 also revised the proposal to explicitly permit
the required disclosure to be made in an information statement in
addition to other ways specified in the proposal; limit the required
disclosure to the material terms of agreements or arrangements
relating to compensation and payments in connection with a person's
board service or candidacy; and permit Web site disclosure through a
hyperlink to another Web site, provided that the other Web site is
continuously accessible. Amendment No. 2 also added that a foreign
private issuer would be permitted to follow home country practice in
lieu of the proposal's requirements provided that it complies with
the conditions set forth in Nasdaq Rule 5615. In addition, the
amendment revised the effective date of the disclosure requirements
to thirty days after Commission approval of the proposed rule and
included a statement from Nasdaq that it would notify listed
companies of the effective date.
    \7\ See Letters to Brent J. Fields, Secretary, Commission, from
Andrew A. Schwartz, Associate Professor of Law, University of
Colorado Law School, Boulder, Colorado, dated April 25 and 26, 2016
(``Schwartz Letters''); Bobby Franklin, President & CEO, National
Venture Capital Association, dated April 26, 2016 (``NVCA Letter'');
John Hayes, Chair, Corporate Governance Committee, Business
Roundtable, dated April 26, 2016 (``Business Roundtable Letter'');
John Endean, President, American Business Conference, dated April
28, 2016 (``American Business Conference Letter''); Marc M. Rossell,
Chair, Securities Regulation Committee, Bar of the City of New York,
dated May 20, 2016 (``New York City Bar Letter''); Heather C.
Briccette, President & CEO, The Business Council of New York State,
Inc., dated June 15, 2016 (``NYS Business Council Letter''); Darla
Stuckey, President & CEO, Society for Corporate Governance, dated
June 27, 2016 (``Society for Corporate Governance Letter''). See
also See Letter to Brent J. Fields, Secretary, Commission, from
David Strandberg, Associate Vice President, Nasdaq dated June 30,
2016 (``Response Letter'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change as Modified by Amendment
No. 2

    Nasdaq is proposing to adopt Rule 5250(b)(3) to require each listed
company to publicly disclose the material terms of all agreements or
arrangements between any director or nominee for director on the
company's board and any person or entity other than the company
relating to compensation or other payment in connection with that
person's candidacy or service as a director.\8\ The proposal would
require disclosure of all such agreements and arrangements by no later
than the date on which the company files or furnishes a definitive
proxy or information statement subject to Regulation 14A or 14C under
the Act in connection with the Company's next shareholders' meeting at
which directors are elected (or, if they do not file proxy or
information statements, no later than when the Company files its next
Form 10-K or Form 20-F).\9\
---------------------------------------------------------------------------

    \8\ See proposed Rule 5250(b)(3)(A).
    \9\ See proposed Rule 5250(b)(3). See also supra, note 6 for a
description of changes made in Amendment No 2 as compared to the
original filing.
---------------------------------------------------------------------------

    The proposal as modified by Amendment No. 2 would require a listed
company to disclose this information either on or through the company'
Web site or in the definitive proxy or information statement \10\ for
the next shareholders' meeting at which directors are elected (or, if
the company does not file proxy or information statements, in its Form
10-K or Form 20-F). The proposed rule provides that a company would not
need to make disclosure, however, of agreements and arrangements that:
(i) Relate only to reimbursement of expenses in connection with
candidacy as a director; (ii) existed prior to the nominee's candidacy
(including as an employee of the other person or entity) and the
nominees relationship with the third party has been publicly disclosed
in a definitive proxy or information statement or annual report (such
as in the director or nominee's biography); or (iii) have been
disclosed under Item 5(b) of Schedule 14A of the Act or Item 5.02(d)(2)
of Form 8-K in the current fiscal year.\11\ Such disclosure, however,
pursuant to these provisions under Schedule 14A and Form 8-K in (iii)
would not relieve a company of its disclosure obligations under the
proposed rule.\12\
---------------------------------------------------------------------------

    \10\ See supra note 6.
    \11\ See proposed Rule 5250(b)(3)(A).
    \12\ See id.
---------------------------------------------------------------------------

    The proposed rule states that a Company must make the disclosure
required by the rule at least annually until the earlier of the
resignation of the director or one year following the termination of
the agreement or arrangement.\13\ The proposed rule further states that
if a Company discovers an agreement or arrangement that should have
been disclosed pursuant to the proposed rule but was not disclosed,
then the Company must promptly make the required disclosure by filing a
Form 8-K or 6-K, where required by Commission rules, or by issuing a
press release.\14\ However, such remedial disclosure, regardless of its
timing, would not satisfy the annual disclosure requirements under the
proposed rule.\15\
---------------------------------------------------------------------------

    \13\ See proposed Rule 5250(b)(3)(B).
    \14\ See proposed Rule 5250(b)(3)(C).
    \15\ See id. See also supra note 6.
---------------------------------------------------------------------------

    The proposal further provides that if a company undertakes
reasonable efforts to identify all such agreements or arrangements,
including asking each director or nominee in a manner designed to allow
timely disclosure, and makes the required remedial disclosure promptly
if it discovers an agreement or arrangement that should have been
disclosed but was not, then the company will not be considered
deficient with respect to the rule.\16\
---------------------------------------------------------------------------

    \16\ See proposed Rule 5250(b)(3)(D). The proposed rule also
provides that in, all other cases, the Company must submit a plan
that satisfies Exchange staff that the Company has adopted processes
and procedures designed to identify and disclose relevant agreements
or arrangements.
---------------------------------------------------------------------------

    The Exchange also proposes to make a change to Nasdaq Listing Rule
5615, which permits foreign private issuers to follow their home
country practice in lieu of certain corporate governance requirements
of the Exchange, provided that the issuer fulfills the conditions set
forth in that rule. Under the proposal, the required disclosure of
third-party payments to directors will be included among the rule
provisions where a foreign private issuer would be permitted to follow
home country practice.\17\ To meet the conditions of Rule 5615, a
foreign private issuer would be required to submit to Nasdaq a written
statement from an independent counsel in its home country certifying
that the company's practices are not prohibited by the home country's
laws. The issuer would also be

required to disclose in its annual filings with the Commission (or, in
certain circumstances, on its Web site) that it does not follow the
proposed rule's requirements and briefly state the home country
practice it follows in lieu of these requirements.
---------------------------------------------------------------------------

    \17\ See supra note 6.
---------------------------------------------------------------------------

III. Comments on the Proposed Rule Change and Nasdaq's Response

    As previously stated, the Commission received a total of eight
comment letters from seven commenters.\18\ Four commenters expressed
general support for the proposal.\19\ One of these commenters stated
that third-party payment arrangements of the kind covered by the
proposal ``present numerous problems besides the obvious potential
conflict of interest that shareholders should consider in voting for
board members.'' \20\ In addition, the commenter believed that ``the
ability to keep both arrangement and the terms thereof secret provides
`raiders' and other types of activists an unfair tactical advantage
over the incumbent board members,'' and that ``if an insurgent
candidate is elected to the board, secrecy around that board member's
outside compensation can inhibit the effective functioning of the board
of directors.'' \21\ Echoing similar beliefs, another of these
commenters stated that full disclosure of the material terms of third
party arrangements with a director is ``a necessary element of
understanding and assessing the ability of directors and director
nominees to fulfill their fiduciary duties.'' \22\ Another commenter
stated its belief that ``investors need to know if there are
compensation arrangements for any director in which an entity other
than the listed company is paying for that particular director's
service.'' \23\
---------------------------------------------------------------------------

    \18\ See supra note 7.
    \19\ See Schwartz Letters, Business Roundtable Letter, American
Business Conference Letter, and Society for Corporate Governance
Letter, supra note 7.
    \20\ See American Business Conference Letter.
    \21\ Id.
    \22\ See Business Roundtable Letter.
    \23\ See Society for Corporate Governance Letter.
---------------------------------------------------------------------------

    One comment letter stated its aim as ensuring that Nasdaq was fully
informed as it considered whether to move forward with the proposed
rule change, in view of what it described as the somewhat complex
arrangements that can exist when a board member of an issuer is a
general partner of a venture capital fund partnership that owns a
substantial interest in the issuer and is also a member or an associate
of the venture capital firm that formed the venture capital fund.\24\
This commenter recommended that Nasdaq clarify the conditions of the
exemption in the rule for pre-existing relationships as well as the
degree of detail needed in disclosures required by the proposed
rule.\25\
---------------------------------------------------------------------------

    \24\ See NVCA Letter, supra note 7.
    \25\ Id. The NVCA Letter also noted that potential restrictions
on the ability of individuals who receive compensation to serve as a
director could adversely affect venture capital firms due to the
structure of venture capital funds. See id. The Commission knows
that this is not within the scope of the Nasdaq proposed rule
change.
---------------------------------------------------------------------------

    Finally, two commenters recommended that the proposed rule change
not be approved.\26\ One of these commenters indicated uncertainty as
to whether the issues addressed by the Exchange's proposal are not
adequately covered by existing Commission rules.\27\ This commenter
further believed that the Commission should ``promote desirable
uniformity in the nature of required disclosures to investors about
director compensation arrangements at public companies, without
differentiation based on the exchange on which a company's securities
are listed.'' \28\
---------------------------------------------------------------------------

    \26\ See New York City Bar Letter and NYS Business Council
Letter, supra note 7.
    \27\ See New York City Bar Letter id.
    \28\ Id. The commenter cited, in this regard, the Commission's
Disclosure Effectiveness Project.
---------------------------------------------------------------------------

    The other commenter opposing approval of the proposed rule change,
similarly, believed that proposal ``may be duplicative'' because the
Commission already has rules that ``may already address the disclosures
covered in the proposed rule change.'' \29\ This commenter argued that
``approving similar rules aimed at the same goal but from a different
regulator would make compliance unnecessarily difficult and would not
be an efficient use of resources,'' adding that if more disclosure was
required by the proposal than by the Commission's rules, ``investors in
Nasdaq-listed companies would be receiving different information on
these matters than investors in companies listed on other exchanges,
which could lead to confusion.'' \30\ The commenter further argued that
the Nasdaq proposal would require companies to ``unnecessarily incur
costs and expend energy without any meaningful benefit to
shareholders.'' \31\
---------------------------------------------------------------------------

    \29\ See NYS Business Council Letter, supra note 7.
    \30\ Id.
    \31\ Id.
---------------------------------------------------------------------------

    In its Response Letter, Nasdaq cited the letters that had been
received in support of its proposed rule change, noting that the
submitters of these letters shared the Exchange's view that the
proposed disclosures would be meaningful to shareholders and relevant
to their investment and voting decisions. In response to the view of
opposing commenters that existing Commission regulations may already
require the disclosure mandated by the proposed rule, Nasdaq noted that
the proposal would not require separate disclosure when disclosure
sufficient to satisfy the proposed rule has been made by a company
under existing Commission proxy rules. Acknowledging that there are
various Commission rules that may, in some circumstances, apply to
third party director payments, Nasdaq stated, nonetheless, that the
nature, scope and timing of these required disclosures may not in all
cases be the same as the disclosure mandated by its proposal.\32\
Nasdaq averred that it had considered the concerns raised in the
comment letters, but believes the proposal as amended adequately
addresses them.\33\
---------------------------------------------------------------------------

    \32\ Nasdaq cited its proposal's ongoing annual and remedial
disclosure requirements as examples. See supra note 7.
    \33\ In this regard, Nasdaq specifically mentioned the concerns
raised in the NVCA Letter around board service by venture capital
board members.
---------------------------------------------------------------------------

IV. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\34\ In particular, the Commission finds that the proposed
rule change is consistent with the requirements of Section 6(b)(5) of
the Act,\35\ which requires, among other things, that the Exchange's
rules be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, to protect investors and the
public interest; and not be designed to permit, among other things,
unfair discrimination between issuers.
---------------------------------------------------------------------------

    \34\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \35\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The development, implementation, and enforcement of standards
governing the initial and continued listing of securities on an
exchange are activities of critical importance to financial markets and
the investing public. Listing requirements, among other things, serve
as a means for an exchange to provide listed status only to companies
that meet certain initial and continued quantitative and qualitative

criteria that help to ensure that fair and orderly markets can be
maintained once the company is listed. The corporate governance
standards embodied in the listing standards of national securities
exchanges, in particular, play an important role in assuring that
exchange-listed companies observe good governance practices, including
that listed companies provide adequate disclosure to allow investors to
make informed investment and voting decisions. The Commission has long
encouraged exchanges to adopt and strengthen their corporate governance
listing standards in order to, among other things, provide greater
transparency into the governance processes of listed issuers and
enhance investor confidence in the securities markets.
    The majority of the commenters, as described above, were supportive
of the proposal and thought it was important to ensure that investors
have material information about third party payments to nominees and
existing directors. Two commenters, however, requested that the
Commission not approve the Nasdaq's proposal.\36\ The commenters were
concerned that the Exchange requirements may be duplicative of
Commission disclosure requirements and that disclosure of director
compensation is a matter more suited to uniform regulation by the
Commission.
---------------------------------------------------------------------------

    \36\ See New York City Bar Letter and Business Council Letter,
supra note 7.
---------------------------------------------------------------------------

    The Commission recognizes that there may be some overlap with
Commission disclosure requirements. Depending on the facts and
circumstances, various provisions under the federal securities laws,
such as Items 401(a) and 402(k) of Regulation S-K, Item 5(b) of
Schedule 14A, and Item 5.02(d) of Form 8-K, may require disclosure of
third party compensation arrangements with or payments to nominees and/
or board members.\37\ We note that it is not unusual for national
securities exchanges to adopt disclosure requirements in their listing
rules that supplement or overlap with disclosure requirements otherwise
imposed under the federal securities laws. For example, notwithstanding
the requirements imposed by the federal securities laws to report
certain material events shortly after they occur on Form 8-K, national
securities exchanges maintain separate, broader disclosure rules that
require prompt disclosure of material information.\38\ These and other
disclosure-related listing standards help to ensure that listed
companies maintain compliance with the disclosure requirements under
the federal securities laws and contribute to the maintenance of fair
and orderly markets by providing investors with material and current
information necessary for informed investment and voting decisions.
---------------------------------------------------------------------------

    \37\ In addition to these specific disclosure requirements,
information about third party compensation arrangements may be
required under other provisions of the federal securities laws which
require disclosure of any additional material information necessary
to make the statements included in the relevant filing, in light of
the circumstances under which they are made, not misleading. See,
e.g., Exchange Act Rules 10b-5, 14a-9, and 14c-6.
    \38\ See, e.g., NYSE Section 202.05; Nasdaq Rule 5250(b)(1).
---------------------------------------------------------------------------

    The proposal contains certain exceptions to address some of the
concerns raised by commenters about overlap with Commission rules. For
example, an exception is provided for disclosure of arrangements or
agreements that have been disclosed under Item 5(b) of Schedule 14A or
Item 5.02(d) of Form 8-K in the current fiscal year. In addition, in
Amendment No. 2, Nasdaq made clear that if, in response to a Commission
disclosure requirement, a company provides disclosure in a definitive
proxy or information statement sufficient to comply with the proposed
rule, such disclosure would also satisfy the company's disclosure
obligation under the Nasdaq rule. Further, the proposal permits listed
companies, to the extent the disclosure is not otherwise required in a
proxy or information statement, to disclose the information on a Web
site, either directly or through a hyperlink. This should help to
mitigate any disclosure burden on companies that have already provided
the required disclosure in a prior Commission filing because the rule
only would require the company to post a link to that filing on its Web
site.
    To the extent, there are certain factual scenarios that would
require disclosure not otherwise required under Commission rules, we
believe that it is within the purview of a national securities exchange
to impose heightened governance requirements, consistent with the Act,
that are designed to improve transparency and accountability into
corporate decision making and promote investor confidence in the
integrity of the securities markets.\39\
---------------------------------------------------------------------------

    \39\ For example, the Commission has previously determined that
exchange listing standards relating to audit committee independence
requirements that included heightened requirements beyond those
specifically mandated by Rule 10A-3 were consistent with the Act.
See Securities Exchange Act Release No. 48745 (Nov. 4, 2003), 68 FR
64154 (Nov. 12, 2003).
---------------------------------------------------------------------------

    Concerning the instant proposal, to the extent that it would, in
certain situations, provide investors and market participants
additional information to make informed investment and voting
decisions, we believe it is consistent with the requirements of Section
6(b)(5) of the Act.
    Finally, the Commission notes that certain changes and
clarifications were made to the proposal by Nasdaq in response to
comments. Amendment No. 2 clarified that non-cash compensation includes
indemnification and further clarified in the proposed rule language
that the material terms of the agreement or arrangement that need to be
disclosed are those relating to compensation and not limited to cash
payments. Further, Nasdaq amended the rule language concerning an
exception to disclosure relating to relationships that existed prior to
a nominee's candidacy. That proposed change states that no additional
disclosure is required if the prior relationship between the nominee
and the third party has been publicly disclosed in a definitive proxy
or annual report. The Exchange further clarified in the amended rule
language in proposed IM-5250-2 the timing of when the disclosure needs
to be made when the disclosure is posted on the Company's Web site.
These changes, among the others made in Amendment No. 2, help to
clarify the proposal and address some of the concerns expressed by the
commenters.

V. Solicitation of Comments on Amendment No. 2

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether Amendment No. 2
is consistent with the Act. Comments may be submitted by any of the
following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NASDAQ-2016-013 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2016-013. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/

rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for Web site
viewing and printing in the Commission's Public Reference Room, 100 F
Street NE., Washington, DC 20549, on official business days between the
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NASDAQ-2016-013 and should be submitted on or before July 28, 2016.

VI. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 2

    The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 2, prior to the 30th day after the
date of publication of the notice of Amendment No. 2 in the Federal
Register. As noted above, in Amendment No. 2, the exchange clarified
various aspects of the proposed rule's applicability and included new
provisions that enhance the proposal.\40\ The Commission believes the
clarifications in Amendment No. 2 would provide market participants
with greater transparency regarding the requirements for listed
companies to disclose compensation or other payments by third parties
to board of director's members or nominees under Nasdaq's rules. In
addition, in Amendment No. 2, the Exchange revised the proposed date of
effectiveness of the proposed rule change.\41\ The Commission believes
this revision will allow listed companies appropriate time to comply
with the proposed rule change.
---------------------------------------------------------------------------

    \40\ See supra note 6.
    \41\ See id.
---------------------------------------------------------------------------

    Because Amendment No. 2 provided additional transparency to the
disclosure requirements imposed by the proposed rule change, enhanced
its provisions, and provided a revised date of effectiveness which will
allow listed companies time to comply with the new requirements, the
Commission finds good cause for approving the proposed rule change, as
modified by Amendment No. 2, on an accelerated basis, pursuant to
Section 19(b)(2) of the Act.\42\
---------------------------------------------------------------------------

    \42\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\43\ that the proposed rule change (SR-NASDAQ-2016-013), as
modified by Amendment No. 2, be, and it hereby is, approved on an
accelerated basis.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\44\
---------------------------------------------------------------------------

    \44\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-16123 Filed 7-6-16; 8:45 am]
 BILLING CODE 8011-01-P


Comment Info: =================

General Comment:Attached please find CASAA's request for an extension to the comment period.  For convenience, the text of the attachment is appended here:

To:  	U.S. Food and Drug Administration

From:  Carl V Phillips, PhD 	   Scientific Director 	   The Consumer Advocates for Smoke-free Alternatives Association (CASAA) <EMAIL_ADDRESS> 5 June 2014

VIA REGULATIONS.GOV AND COURIER

Request for extension of comment deadline

I am writing on behalf of The Consumer Advocates for Smoke-free Alternatives Association (CASAA) to request an extension of the comment period for the Food and Drug Administration's ("FDA") Proposed Rule Deeming Tobacco Products to be Subject to the Federal Food, Drug, and Cosmetic Act, as amended by the Family Smoking and Prevention and Tobacco Control Act (the "Proposed Rule") published at 79 Fed. Reg. 23,142 and Federal Register No. 2014-09491.  CASAA is a public health and education NGO, and is the leading representative of consumers who use or might choose to use low-risk smoke-free tobacco/nicotine products, including e-cigarettes which are a key component of the proposed regulation.   We are requesting that the comment period for the Proposed Rule be extended by the FDA for an additional 105 days, from its current 75-day period, to 180 days.

FDA spent years compiling the proposed regulations and associated documents, which total 300 to 500 pages (depending on what documents are considered associated).  It is unreasonable to expect the public to be able to comment on them in a mere 75 days.  That short time period ensures that only large corporations will have the resources to comment substantively on much of the content.

The proposed regulation and associated documents are dense with scientific claims.  We have found that it takes approximately half a person-day per relevant page to review and prepare comments on those claims.  This is over and above the analysis required by the core issues of impact on consumers (which we have already partially commented on in the context of the Paperwork Reduction Act) and other consequences of the proposed regulation.

By our count, FDA asks 99 separate questions (not counting duplications) for information relating to e-cigarettes and other smoke-free products.  We and our constituents (the primary stakeholders in this process) will be unable to respond to most of these under the current deadline.  We believe that we can provide useful and unique information in response to many of the questions if we have sufficient time to do so.  In particular, we are prepared to launch a survey of U.S. e-cigarette users designed specifically to answer many of FDA’s questions.  If we obtain the requested extension we will be able to provide detailed information from this and other research.


[Federal Register Volume 77, Number 89 (Tuesday, May 8, 2012)]
[Notices]
[Page 27108]
[FR Doc No: 2012-11153]

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

SECURITIES AND EXCHANGE COMMISSION

[File No. 500-1]

Order of Suspension of Trading; In the Matter of Anthracite
Capital, Inc., Auto Data Network Inc., Avenue Group, Inc., Ckrush,
Inc., Clickable Enterprises, Inc., and DCI USA, Inc.

 May 4, 2012
    It appears to the Securities and Exchange Commission that there is
a lack of current and accurate information concerning the securities of
Anthracite Capital, Inc. because it has not filed any periodic reports
since the period ended September 30, 2009.
    It appears to the Securities and Exchange Commission that there is
a lack of current and accurate information concerning the securities of
Auto Data Network Inc. because it has not filed any periodic reports
since the period ended November 30, 2004.
    It appears to the Securities and Exchange Commission that there is
a lack of current and accurate information concerning the securities of
Avenue Group, Inc. because it has not filed any periodic reports since
the period ended March 31, 2009.
    It appears to the Securities and Exchange Commission that there is
a lack of current and accurate information concerning the securities of
Ckrush, Inc. because it has not filed any periodic reports since the
period ended March 31, 2008.
    It appears to the Securities and Exchange Commission that there is
a lack of current and accurate information concerning the securities of
Clickable Enterprises, Inc. because it has not filed any periodic
reports since the period ended March 31, 2008.
    It appears to the Securities and Exchange Commission that there is
a lack of current and accurate information concerning the securities of
DCI USA, Inc. because it has not filed any periodic reports since the
period ended June 30, 2008.
    The Commission is of the opinion that the public interest and the
protection of investors require a suspension of trading in the
securities of the above-listed companies. Therefore, it is ordered,
pursuant to Section 12(k) of the Securities Exchange Act of 1934, that
trading in the securities of the above-listed companies is suspended
for the period from 9:30 a.m. EDT on May 4, 2012, through 11:59 p.m.
EDT on May 17, 2012.

    By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-11153 Filed 5-4-12; 4:15 pm]
BILLING CODE 8011-01-P


[Federal Register Volume 85, Number 114 (Friday, June 12, 2020)]
[Notices]
[Pages 35967-35969]
[FR Doc No: 2020-12686]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89028; File No. SR-NASDAQ-2020-026]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change To Adopt a New Requirement
Related to the Qualification of Management for Companies From
Restrictive Markets

June 8, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 29, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to adopt a new requirement related to the
qualification of management for certain companies.
    The text of the proposed rule change is available on the Exchange's
website at http://nasdaq.cchwallstreet.com, at the principal office of
the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Under federal securities laws, a company's management is
responsible for preparing financial statements and for establishing and
maintaining disclosure controls and procedures and internal control
over financial reporting.\3\ Nasdaq's listing requirements include
transparent quantitative criteria, which are based on the company's
financial statements and market information. They also impose
disclosure obligations (along with applicable federal securities laws)
and establish minimum corporate governance requirements, which are
designed to protect investors and the public interest. A company's
management is also responsible for ensuring compliance with these
listing requirements on an ongoing basis.\4\ For these reasons, Nasdaq
believes that it is critically important for companies to have
management that is familiar with these responsibilities, or an advisor
to guide the company in fulfilling these obligations, in order to
protect investors and the public interest.
---------------------------------------------------------------------------

    \3\ See, e.g., SEC Chairman Jay Clayton, PCAOB Chairman William
D. Duhnke III, SEC Chief Accountant Sagar Teotia, SEC Division of
Corporation Finance Director William Hinman, SEC Division of
Investment Management Director Dalia Blass, Emerging Market
Investments Entail Significant Disclosure, Financial Reporting and
Other Risks; Remedies are Limited (April 21, 2020), available at
https://www.sec.gov/news/public-statement/emerging-market-investments-disclosure-reporting (``Emerging Market Risks
Statement'') (``Management is responsible for the preparation of the
financial statements, including responsibility for establishing and
maintaining disclosure controls and procedures (``DCP'') and
internal control over financial reporting (``ICFR''), and for
maintaining accountability for the company's assets, among other
things . . . Management . . . must determine that the financial
statements, and other financial information included in the report
filed with the SEC, fairly present in all material respects the
financial condition, results of operations and cash flows of the
company.'') See also Section 404(b) of the Sarbanes Oxley Act, 15
U.S.C. 7262(b).
    \4\ For example, Nasdaq Rules require prompt notification to
Nasdaq after an executive officer of the company, or a person
performing an equivalent role, becomes aware of any noncompliance
with Nasdaq's corporate governance requirements. Rule 5625.
Similarly, SEC rules and the Sarbanes-Oxley Act impose a heightened
obligation on the CEO and CFO of a public company, including the
requirement to certify the company's periodic financial statements.
See, e.g., Section 302 of the Sarbanes Oxley Act, Public Law 107-
204, 116 Stat. 745 (2002), and Rules 13a-14 and 15d-14 under the
Act, 17 CFR 240.13a-14 and 240.15d-14. See also Section 906 of the
Sarbanes Oxley Act.
---------------------------------------------------------------------------

    Accordingly, Nasdaq has observed instances where it appears that
management lacked familiarity with the requirements to be a Nasdaq-
listed public company in the U.S. or was otherwise unprepared for the
rigors of operating as a public company. The risks arising from these
situations are heightened when a company's business is principally
administered in a jurisdiction that has secrecy laws, blocking
statutes, national security laws or other laws or regulations
restricting access to information by regulators of U.S.-listed
companies in such jurisdiction (a ``Restrictive Market'').\5\
---------------------------------------------------------------------------

    \5\ See Emerging Market Risks Statement (``As a result, in many
emerging markets, including China, there is substantially greater
risk that disclosures will be incomplete or misleading and, in the
event of investor harm, substantially less access to recourse, in
comparison to U.S. domestic companies.'')
---------------------------------------------------------------------------

    Accordingly, Nasdaq proposes to adopt a new listing standard in
Rule 5210(c) to require that listing applicants from Restrictive Market
countries have, and certify to Nasdaq that they will continue to have,
a member of senior management or a director with relevant past
employment experience at a U.S.-listed public company or other
experience, training or background which results in the individual's
general familiarity with the regulatory and reporting requirements
applicable to a U.S.-listed public company under Nasdaq rules and
federal securities laws. Alternatively, in the absence of such an
individual, the company could retain on an ongoing basis an advisor or
advisors, acceptable to Nasdaq, that will provide such guidance to the
company.
    It is expected that the member of senior management, director or
advisor would be a resource to the company on matters such as the
Nasdaq corporate governance requirements, disclosure of material
information, SEC reporting obligations including financial reporting
obligations, internal controls over financial reporting, related party
transactions, insider trading restrictions, whistleblower protections
and investor communications. As such, Nasdaq expects this proposed
requirement will heighten compliance by companies from Restrictive
Markets and enhance investor protection. The proposed requirement is
similar to the requirements of other global markets, which also include
qualification requirements for management.\6\
---------------------------------------------------------------------------

    \6\ For example, the Toronto Stock Exchange requires management
to have ``adequate public company experience which demonstrates that
they are able to satisfy all of their reporting and public company
obligations.'' See Section 311 of the TSX Company Manual. The Hong
Kong Stock Exchange requires business experience and management
continuity, which can achieve similar objectives to the proposed
requirement. See Rule 8.05A of the Hong Kong Stock Exchange Main
Board Listing Rules. Nasdaq's main markets in the Nordics require
management to be familiar with the way the company has structured
its internal reporting lines, the management pertaining to financial
reporting, its investor relation management and its procedures for
disclosing ad hoc and regular information to the stock market. See
Section 2.15.2 of the Nordic Main Market Rulebook for Issuers of
Shares.

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

    In determining whether a company's business is principally
administered in a Restrictive Market, Nasdaq may consider the
geographic locations of the company's: (a) Principal business segments,
operations or assets; (b) board and shareholders' meetings; (c)
headquarters or principal executive offices; (d) senior management and
employees; and (e) books and records.\7\ For example, a company's
headquarters could be located in Country A, while the majority of its
senior management, employees, assets, operations and books and records
are located in Country B, which is a Restrictive Market. In this case,
Nasdaq would consider the company's business to be principally
administered in Country B, which is a Restrictive Market, and Nasdaq
would require the company to meet the criteria set forth in Rule
5210(c).
---------------------------------------------------------------------------

    \7\ This threshold would capture both foreign private issuers
based in Restrictive Markets and companies based in the U.S. or
another jurisdiction that principally administer their businesses in
Restrictive Markets. The factors that Nasdaq would consider when
determining whether a business is principally administered in a
Restrictive Market is supported by SEC guidance regarding foreign
private issuer status, which suggests that a foreign company may
consider certain factors including the locations of: The company's
principal business segments or operations; its board and
shareholders' meetings; its headquarters; and its most influential
key executives (potentially a subset of all executives). See
Division of Corporation Finance of the SEC, Accessing the U.S.
Capital Markets--A Brief Overview for Foreign Private Issuers
(February 13, 2013), available at https://www.sec.gov/divisions/corpfin/internatl/foreign-private-issuers-overview.shtml#IIA2c.
---------------------------------------------------------------------------

    Once listed, a company subject to proposed Rule 5210(c) will be
subject to proposed Rule 5250(g). This rule will contain the continuing
obligations for a Restricted Market Company listed on Nasdaq to have at
least one member of senior management or director who has relevant past
employment experience at a U.S.-listed public company or other
experience, training or background which results in the individual's
general familiarity with the regulatory and reporting requirements
applicable to a U.S.-listed public company under Nasdaq rules and
federal securities laws or, in the absence of such an individual, to
retain on an ongoing basis an advisor or advisors, acceptable to
Nasdaq, that will provide such guidance to the Company.
    Nasdaq proposes changes to Rule 5810 to allow a company from a
Restrictive Market that is subject to, but does not maintain compliance
with, this requirement to provide Nasdaq Staff with a plan to regain
compliance. Based on its review of the company's plan, Nasdaq Staff
generally would be able to allow the company up to 180 days to regain
compliance.\8\ Companies would be required under Rule 5810(b) to
disclose that they do not meet this requirement, which would alert
investors to the heightened risk during this time.
---------------------------------------------------------------------------

    \8\ See Rule 5810(c)(2)(B). Staff cannot grant additional time
if the company is currently under review by an Adjudicatory Body for
a Staff Delisting Determination.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\10\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to remove impediments to and perfect
the mechanism of a free and open market and a national market system,
and, in general to protect investors and the public interest. Further,
the Exchange believes that this proposal is not designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Nasdaq believes that requiring applicants from Restrictive Market
countries to satisfy the proposed requirement will help ensure that the
company has at least one member of senior management or director or an
advisor who serves as a resource for the company to assist in
compliance with the company's reporting and public company obligations
in the U.S. on an ongoing basis. This will better enable the company to
satisfy the regulatory and reporting requirements applicable to a U.S.-
listed public company under Nasdaq rules and federal securities laws,
which will enhance investor protection and the public interest.
    The proposed rule changes would apply to companies from Restrictive
Market countries that apply to list on Nasdaq after the date of
effectiveness, but would not apply to companies from other countries or
to companies already listed on Nasdaq. Notwithstanding, the Exchange
believes that the proposal does not unfairly discriminate among
companies. With respect to the discrimination between companies from
Restrictive Markets and other companies, Nasdaq believes that the
distinction is fair because Nasdaq and the SEC have identified
additional concerns around companies from Restrictive Markets,\11\
which the proposed rule change is designed to address. With respect to
the discrimination between newly listing companies from Restrictive
Markets and companies from Restrictive Markets that are already listed
before this rule is effective, Nasdaq believes that this is an
appropriate distinction because this requirement was not in place when
the later group of companies listed and these companies have structured
alternative mechanisms to comply with the requirements to be a U.S-
listed public company. To the extent there are future concerns about
such a listed company that arise from an apparent unfamiliarity with
the requirements to be a U.S.-listed public company, however, Nasdaq
would exercise its regulatory authority and could consider that lack of
familiarity when determining whether to allow the company to remain
listed.
---------------------------------------------------------------------------

    \11\ See Emerging Market Risks Statement, supra note 3.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. While the proposed rule change
will apply only to companies from Restrictive Markets, Nasdaq and the
SEC have identified specific concerns with such companies that make the
imposition of a heightened requirement on such companies appropriate to
enhance investor protection, which is a central purpose of the Act. Any
impact on competition, either among listed companies or between
exchanges, is incidental to that purpose.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will: (a) By order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine

whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NASDAQ-2020-026 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2020-026. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2020-026 and should be submitted
on or before July 6, 2020.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-12686 Filed 6-11-20; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: October 17, 2007 (Volume 72, Number 200)]
[Proposed Rules]
[Page 58763-58766]
[DOCID:fr17oc07-11]

========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.

========================================================================

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2007-0047; Directorate Identifier 2007-NM-197-AD]
RIN 2120-AA64

Airworthiness Directives; Bombardier Model CL-600-2B19 (Regional
Jet Series 100 & 440) Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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

SUMMARY: We propose to adopt a new airworthiness directive (AD) for the
products listed above that would supersede an existing AD. This
proposed AD results from mandatory continuing airworthiness information
(MCAI) originated by an aviation authority of another country to
identify and correct an unsafe condition on an aviation product. The
MCAI describes the unsafe condition as:

* * * * *
    The Bombardier CL-600-2B19 airplanes have had a history of flap
failures at various positions for several years. Flap failure may
result in a significant increase in required landing distances and
higher fuel consumption than planned during a diversion. * * *

    The proposed AD would require actions that are intended to address
the unsafe condition described in the MCAI.

DATES: We must receive comments on this proposed AD by November 16,
2007.

ADDRESSES: You may send comments by any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov.
 Follow the instructions for submitting comments.

     Fax:<PHONE_NUMBER>.
     Mail: U.S. Department of Transportation, Docket
Operations, M-30, West Building, Ground Floor, Room W12-140, 1200 New
Jersey Avenue, SE., Washington, DC 20590.
     Hand Delivery: U.S. Department of Transportation, Docket
Operations, M-30, West Building, Ground Floor, Room W12-40, 1200 New
Jersey Avenue, SE., Washington, DC, between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.

Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov
; or in person at the Docket Operations office

between 9 a.m. and 5 p.m., Monday through Friday, except Federal
holidays. The AD docket contains this proposed AD, the regulatory
evaluation, any comments received, and other information. The street
address for the Docket Operations office (telephone<PHONE_NUMBER>) is
in the ADDRESSES section. Comments will be available in the AD docket
shortly after receipt.

FOR FURTHER INFORMATION CONTACT: Dan Parrillo, Aerospace Engineer,
Systems and Flight Test Branch, ANE-172, FAA, New York Aircraft
Certification Office, 1600 Stewart Avenue, Suite 410, Westbury, New
York 11590; telephone<PHONE_NUMBER>; fax<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Comments Invited

    We invite you to send any written relevant data, views, or
arguments about this proposed AD. Send your comments to an address
listed under the ADDRESSES section. Include ``Docket No. FAA-2007-0047;
Directorate Identifier 2007-NM-197-AD'' at the beginning of your
comments. We specifically invite comments on the overall regulatory,
economic, environmental, and energy aspects of this proposed AD. We
will consider all comments received by the closing date and may amend
this proposed AD based on those comments.
    We will post all comments we receive, without change, to http://www.regulations.gov
, including any personal information you provide. We

will also post a report summarizing each substantive verbal contact we
receive about this proposed AD.

Discussion

    On August 13, 2007, we issued AD 2007-17-07, Amendment 39-15165 (72
FR 46555, August 21, 2007). That AD required actions intended to
address an unsafe condition on certain Bombardier Model CL-600-2B19
(Regional Jet Series 100 & 440) airplanes. The actions required by AD
2007-17-07 correspond, in part, to Canadian airworthiness directive CF-
2007-10, dated July 18, 2007 (referred to after this as ``the MCAI''),
issued by Transport Canada Civil Aviation (TCCA), which is the
airworthiness authority for Canada.
    Paragraph (1) of Note 2 of AD 2007-17-07 specified that the planned
compliance times for certain actions required in the Canadian
airworthiness directive would allow enough time to provide notice and
opportunity for prior public comment on the merits of those actions and
that we were considering further rulemaking to address this issue. We
have determined that further rulemaking is indeed necessary, and this
proposed AD follows from that determination.
    Accordingly, this proposed AD would supersede AD 2007-17-07. This
proposed AD would retain the requirements of AD 2007-17-07, i.e.,
revising the airplane flight manual (AFM) by incorporating the
information in Canadair Regional Jet Temporary Revision (TR) RJ/165,
dated July 6, 2007, into the AFM and by adding operational procedures
to the Limitations section of the AFM; training flight crewmembers and
operational control/dispatch personnel on the operational procedures;
and doing corrective ``maintenance actions.'' The corrective
``maintenance actions'' include the cleaning and lubrication of the
flexible shafts, and applicable related investigative and corrective
actions (which include a detailed inspection of the actuator connector
sealant bead for signs of damage or delamination, repair of damaged
sealant, and if necessary, a low temperature torque check on the
actuator and, if torque test results are not satisfactory, an
installation of a serviceable actuator or, if no serviceable actuators
are available, contacting the FAA for corrective action). The
corrective ``maintenance actions'' also include installation of
metallic seals in the flexible drive-shafts, and applicable related
investigative and corrective actions (which include a detailed
inspection of the mating surfaces on the flexible drive-shaft for
damage (scratches or dents) and, if mating surfaces have damage,
cleaning the sealing washer and mating surfaces and applying sealant).

    This proposed AD would also require training flight crewmembers on
reduced or zero flap landing, and doing additional corrective
``maintenance actions'' that include a pressure test of the flexible
drive-shaft, and corrective actions if necessary. The corrective
actions include replacing any flexible drive-shaft which exhibits
leakage (any sign of bubbles within one minute during the pressure test
in water) with a serviceable flexible drive-shaft; and a low
temperature torque test of the flap actuators, and corrective actions
(including replacement with a serviceable actuator) if necessary. You
may obtain further information by examining the MCAI in the AD docket.

FAA's Determination and Requirements of This Proposed AD

    This product has been approved by the aviation authority of another
country, and is approved for operation in the United States. Pursuant
to our bilateral agreement with the State of Design Authority, we have
been notified of the unsafe condition described in the MCAI and service
information referenced above. We are proposing this AD because we
evaluated all pertinent information and determined an unsafe condition
exists and is likely to exist or develop on other products of the same
type design.

Differences Between This AD and the MCAI or Service Information

    We have reviewed the MCAI and related service information and, in
general, agree with their substance. But we might have found it
necessary to use different words from those in the MCAI to ensure the
AD is clear for U.S. operators and is enforceable. In making these
changes, we do not intend to differ substantively from the information
provided in the MCAI and related service information.
    We might also have proposed different actions in this AD from those
in the MCAI in order to follow FAA policies. Any such differences are
highlighted in a NOTE within the proposed AD.

Costs of Compliance

    Based on the service information, we estimate that this proposed AD
would affect about 684 products of U.S. registry. We also estimate that
it would take about 27 work-hours per product to comply with the basic
requirements of this proposed AD. The average labor rate is $80 per
work-hour. Based on these figures, we estimate the cost of the proposed
AD on U.S. operators to be $1,477,440, or $2,160 per product.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. ``Subtitle VII: Aviation
Programs,'' describes in more detail the scope of the Agency's
authority.
    We are issuing this rulemaking under the authority described in
``Subtitle VII, Part A, Subpart III, Section 44701: General
requirements.'' Under that section, Congress charges the FAA with
promoting safe flight of civil aircraft in air commerce by prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce. This regulation is within
the scope of that authority because it addresses an unsafe condition
that is likely to exist or develop on products identified in this
rulemaking action.

Regulatory Findings

    We determined that this proposed AD would not have federalism
implications under Executive Order 13132. This proposed AD would not
have a substantial direct effect on the States, on the relationship
between the national Government and the States, or on the distribution
of power and responsibilities among the various levels of government.
    For the reasons discussed above, I certify this proposed
regulation:
    1. Is not a ``significant regulatory action'' under Executive Order
12866;
    2. Is not a ``significant rule'' under the DOT Regulatory Policies
and Procedures (44 FR 11034, February 26, 1979); and
    3. Will not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.
    We prepared a regulatory evaluation of the estimated costs to
comply with this proposed AD and placed it in the AD docket.

List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Safety.

The Proposed Amendment

    Accordingly, under the authority delegated to me by the
Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

PART 39--AIRWORTHINESS DIRECTIVES

    1. The authority citation for part 39 continues to read as follows:

    Authority: 49 U.S.C. 106(g), 40113, 44701.

Sec.  39.13  [Amended]

    2. The FAA amends Sec.  39.13 by removing Amendment 39-15165 (72 FR
46555, August 21, 2007) and adding the following new AD:

Bombardier, Inc. (Formerly Canadair): Docket No. FAA-2007-0047;
Directorate Identifier 2007-NM-197-AD.

Comments Due Date

    (a) We must receive comments by November 16, 2007.

Affected ADs

    (b) The proposed AD supersedes AD 2007-17-07, Amendment 39-
15165.

Applicability

    (c) This AD applies to Bombardier Model CL-600-2B19 (Regional
Jet Series 100 & 440) airplanes, certificated in any category,
serial numbers 7003 through 7990 and 8000 and subsequent.

Subject

    (d) Air Transport Association (ATA) of America Code 27: Flight
Controls.

Reason

    (e) The mandatory continuing airworthiness information (MCAI)
states:

* * * * *
    The Bombardier CL-600-2B19 airplanes have had a history of flap
failures at various positions for several years. Flap failure may
result in a significant increase in required landing distances and
higher fuel consumption than planned during a diversion. * * *
* * * * *
    This AD includes retaining the requirements of the existing AD:
Revising the airplane flight manual by incorporating a temporary
revision and by adding operational procedures to the Limitations
section; training flight crewmembers and operational control/
dispatch personnel on the operational procedures; and doing
corrective ``maintenance actions.'' The corrective ``maintenance
actions'' include the cleaning and lubrication of the flexible
shafts, and applicable related investigative and corrective actions
(which include a detailed inspection of the actuator connector
sealant bead for signs of damage or delamination, repair of damaged
sealant, and if necessary, a low temperature torque check on the
actuator and if torque test results are not satisfactory, an
installation of a serviceable actuator or, if no serviceable
actuators are available, contacting the FAA for corrective action),
and installing metallic seals in the flexible drive-shafts, and
applicable related investigative and corrective actions (which
include a detailed inspection of the mating surfaces on the flexible
drive-shaft for damage (scratches or dents), and if mating surfaces
have damage, cleaning the sealing washer and mating surfaces and
applying sealant). This AD also requires training flight crewmembers
on reduced or zero flap landing and doing additional corrective
``maintenance actions'' that include a pressure test of the flexible
drive-shaft and corrective actions (which

include replacing any flexible drive-shaft which exhibits leakage
(any sign of bubbles within one minute during the pressure test in
water) with a serviceable flexible drive-shaft) and a low
temperature torque test of the flap actuators and corrective actions
(which include installation of a serviceable actuator if torque test
results are not satisfactory).

Restatement of Requirements of AD 2007-17-07

    (f) Unless already done, do the following actions.
    (1) Part I. Airplane Flight Manual (AFM) Change: Within 30 days
after September 5, 2007 (the effective date of AD 2007-17-07),
revise the Canadair Regional Jet Airplane Flight Manual CSP A-012,
by incorporating the information in Canadair Regional Jet Temporary
Revision (TR) RJ/165, dated July 6, 2007, into the AFM.

    Note 1: The actions required by paragraph (f)(1) of this AD may
be done by inserting a copy of Canadair Regional Jet TR RJ/165,
dated July 6, 2007, into the Canadair Regional Jet Airplane Flight
Manual CSP A-012. When this TR has been included in general
revisions of the AFM, the general revisions may be inserted in the
AFM.

    (2) Part II. Operational Procedures: Within 30 days after
September 5, 2007, revise the Limitations Section of the Canadair
Regional Jet Airplane Flight Manual CSP A-012, to include the
following statement. This may be done by inserting a copy of
paragraph (f)(2) of this AD in the AFM.

``1. Flap Extended Diversion

    Upon arrival at the destination airport, an approach shall not
be commenced, nor shall the flaps be extended beyond the 0 degree
position, unless one of the following conditions exists:
    a. When conducting a precision approach, the reported visibility
(or RVR) is confirmed to be at or above the visibility associated
with the landing minima for the approach in use, and can be
reasonably expected to remain at or above this visibility until
after landing; or
    b. When conducting a non-precision approach, the reported
ceiling and visibility (or RVR) are confirmed to be at or above the
ceiling and visibility associated with the landing minima for the
approach in use, and can be reasonably expected to remain at or
above this ceiling and visibility until after landing; or
    c. An emergency or abnormal situation occurs that requires
landing at the nearest suitable airport; or
    d. The fuel remaining is sufficient to conduct the approach,
execute a missed approach, divert to a suitable airport with the
flaps extended to the landing position, conduct an approach at the
airport and land with 1000 lb (454 kg) of fuel remaining.

    Note 1: The fuel burn factor (as per AFM TR/165) shall be
applied to the normal fuel consumption for calculation of the flaps
extended missed approach, climb, diversion and approach fuel
consumption.

    Note 2: Terrain and weather must allow a minimum flight altitude
not exceeding 15,000 feet along the diversion route.

    Note 3: For the purpose of this AD, a ``suitable airport'' is an
airport that has at least one useable runway, served by an
instrument approach if operating under Instrument Flight Rules
(IFR), and the airport is equipped as per the applicable regulations
and standards for marking and lighting. The existing and forecast
weather for this airport shall be at or above landing minima for the
approach in use.

2. Flap Failure After Takeoff

    When a takeoff alternate is filed, terrain and weather must
allow a minimum flight altitude not exceeding 15,000 feet along the
diversion route to that alternate, or other suitable airport. The
fuel at departure shall be sufficient to divert to the takeoff
alternate or other suitable airport with the flaps extended to the
takeoff position, conduct and approach and land with 1000 lb (454
kg) of fuel remaining.

    Note: The fuel burn factor (as per AFM TR/165) shall be applied
to the normal fuel consumption for calculation of the flaps
extended, climb, diversion and approach fuel consumption.

3. Flap Zero Landing

    Operations where all useable runways at the destination and
alternate airports are forecast to be wet or contaminated (as
defined in the AFM) are prohibited during the cold weather season
(December to March inclusive in the northern hemisphere) unless one
of the following conditions exists:
    a. The flap actuators have been verified serviceable in
accordance with Part C (Low Temperature Torque Test of the Flap
Actuators) of SB 601R-27-150, July 12, 2007, or
    b. The flight is conducted at a cruise altitude where the SAT is
-60 deg C or warmer. If the SAT in flight is colder than -60 deg C,
descent to warmer air shall be initiated within 10 minutes, or
    c. The Landing Distance Available on a useable runway at the
destination airport is at least equal to the actual landing distance
required for flaps zero. This distance shall be based on Bombardier
performance data, and shall take into account forecast weather and
anticipated runway conditions, or
    d. The Landing Distance Available on a useable runway at the
filed alternate airport, or other suitable airport is at least equal
to the actual landing distance for flaps zero. This distance shall
be based on Bombardier performance data, and shall take into account
forecast weather and anticipated runway conditions.

    Note 1: If the forecast destination weather is less than 200
feet above DH or MDA, or less than 1 mile (1500 meters) above the
authorized landing visibility (or equivalent RVR), as applied to the
useable runway at the destination airport, condition 3.a., 3.b., or
3.d. above must be satisfied.

    Note 2: When conducting No Alternate IFR (NAIFR) operations,
condition 3.a., 3.b., or 3.c. above must be satisfied.''

    (3) Part III. Training: As of 30 days after September 5, 2007,
no affected airplane may be operated unless the flight crewmembers
of that airplane and the operational control/dispatch personnel for
that airplane have received training that is acceptable to the
Principal Operations Inspector (POI) on the operational procedures
required by paragraph (f)(2) of this AD.
    (4) Part IV. Maintenance Actions: Within 120 days after
September 5, 2007, do the cleaning and lubrication of the flexible
shafts, installation of metallic seals in the flexible drive-shafts,
and all applicable related investigative and corrective actions by
doing all the applicable actions specified in ``PART A'' of the
Accomplishment Instructions of Bombardier Service Bulletin 601R-27-
150, dated July 12, 2007; except if torque test results are not
satisfactory, before further flight, install a serviceable actuator
in accordance with the service bulletin or, if no serviceable
actuators are available, contact the Manager, New York Aircraft
Certification Office, FAA, for corrective action. Do all applicable
related investigative and corrective actions before further flight.

New Requirements of This AD: Actions and Compliance

    (g) Unless already done, do the following actions.
    (1) As of November 30, 2008, no affected airplane may be
operated unless the flight crewmembers of that airplane have
received simulator training on reduced or zero flap landing that is
acceptable to the Principal Operations Inspector (POI). Thereafter,
this training must be done during the normal simulator training
cycle, at intervals not to exceed 12 months.
    (2) Within 24 months or 4,000 flight hours after the effective
date of this AD, whichever occurs first: Do a pressure test of the
flexible drive-shaft, and do all applicable corrective actions, by
doing all the applicable actions specified in ``PART B'' of the
Accomplishment Instructions of Bombardier Service Bulletin 601R-27-
150, dated July 12, 2007. Do all applicable corrective actions
before further flight.
    (3) Within 24 months after the effective date of this AD: Do a
low temperature torque test of the flap actuators, and do all
applicable corrective actions, by doing all the applicable actions
specified in ``PART C'' of the Accomplishment Instructions of
Bombardier Service Bulletin 601R-27-150, dated July 12, 2007. Do all
applicable corrective actions before further flight.

FAA AD Differences

    Note 2: This AD differs from the MCAI and/or service information
as follows:
    (1) The maintenance tasks specified in the first row of the
table in ``Part IV. Maintenance Actions'' of the MCAI do not specify
a corrective action if an actuator is not serviceable (i.e., torque
test results are not satisfactory). However, this AD requires
contacting the FAA or installing a serviceable actuator before
further flight if torque test results are not satisfactory.
(Reference paragraph (f)(4) of this AD.)
    (2) Although paragraph 2. of ``Part III. Training'' of the MCAI
recommends accomplishing the initial training within 1 year, this AD
requires accomplishing the training before November 30, 2008, in
order to ensure that the actions are completed prior to the onset of
cold weather operations.

Other FAA AD Provisions

    (h) The following provisions also apply to this AD:
    (1) Alternative Methods of Compliance (AMOCs): The Manager, New
York Aircraft Certification Office, FAA, has the authority to
approve AMOCs for this AD, if requested using the procedures found
in 14 CFR 39.19. Send information to ATTN: Dan Parrillo, Aerospace
Engineer, Systems and Flight Test Branch, ANE-172, FAA, New York
Aircraft Certification Office, 1600 Stewart Avenue, Suite 410,
Westbury, New York 11590; telephone<PHONE_NUMBER>; fax (516) 794-
5531. Before using any approved AMOC on any airplane to which the
AMOC applies, notify your appropriate principal inspector (PI) in
the FAA Flight Standards District Office (FSDO), or lacking a PI,
your local FSDO.
    (2) Airworthy Product: For any requirement in this AD to obtain
corrective actions from a manufacturer or other source, use these
actions if they are FAA-approved. Corrective actions are considered
FAA-approved if they are approved by the State of Design Authority
(or their delegated agent). You are required to assure the product
is airworthy before it is returned to service.
    (3) Reporting Requirements: For any reporting requirement in
this AD, under the provisions of the Paperwork Reduction Act, the
Office of Management and Budget (OMB) has approved the information
collection requirements and has assigned OMB Control Number 2120-
0056.

Related Information

    (i) Refer to MCAI Canadian Airworthiness Directive CF-2007-10,
dated July 18, 2007; Bombardier Service Bulletin 601R-27-150, dated
July 12, 2007; and Canadair Regional Jet Temporary Revision RJ/165,
dated July 6, 2007, to the Canadair Regional Jet Airplane Flight
Manual CSP A-012; for related information.

    Issued in Renton, Washington, on October 9, 2007.
Ali Bahrami,
Manager, Transport Airplane Directorate, Aircraft Certification
Service.
 [FR Doc. E7-20465 Filed 10-16-07; 8:45 am]

BILLING CODE 4910-13-P