[Federal Register: February 10, 2009 (Volume 74, Number 26)]
[Notices]
[Page 6680-6681]
[DOCID:fr10fe09-126]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59322; File No. SR-Phlx-2009-03]

Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Phlx Rule 1092, Obvious Errors and Catastrophic Errors

January 30, 2009.
    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 January 27, 2009, NASDAQ OMX PHLX, Inc. (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. Phlx has designated the proposed
rule change as constituting a non-controversial rule change under Rule
19b-4(f)(6) under the Act,\3\ which renders the proposal effective upon
filing with the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend Phlx Rule 1092, Obvious Errors and
Catastrophic Errors, to clarify when an options trade can be nullified
in a ``no bid'' option.
    The text of the proposed rule change is available on the Exchange's
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings,
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
    The purpose of the proposed rule change is to clarify how the
obvious error rule operates where an options is priced ``no bid.''
Currently, under the obvious error rule, the trade in question must
result from an execution price where that series was quoted no bid and
at least one strike price below (for calls) or above (for puts) in the
same class was also quoted no bid at the time of the erroneous
execution (in which case the trade shall be nullified). The Exchange
proposes to amend Rule 1092(c)(ii)(E) to state that: (i) For 5 seconds
prior to the execution the series must have remained no bid; (ii) the
quote in question that results in the erroneous trade is not
considered; and (iii) bids and offers of the parties to the subject
trade that are in any of the series in the same options class are not
be considered. Accordingly, the new rule makes clear, similar to the
rules of other exchanges, what is taken into consideration when dealing
with a potential obvious error in no bid options.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act \4\ in general, and furthers the objectives of Section
6(b)(5) of the Act \5\ in particular, in that it is designed 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,
by clarifying the situations where relief from an error may be sought.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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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.

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

    Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \6\ and Rule 19b-
4(f)(6) thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
Phlx has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \8\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6) \9\ permits the Commission to
designate a shorter time if such action is consistent with the
protection of investors and the public interest. Phlx requests that the
Commission waive the 30-day operative delay to immediately offer market
participants on Phlx the same potential for relief that is available at
other options exchanges for errors involving options series quoted no
bid. The Exchange argued that the proposed changes should serve to
clarify the situation where relief from such errors may be sought. The
Commission believes that waiving the 30-day

operative delay \10\ is consistent with the protection of investors and
the public interest. Given that the Exchange's proposed rule change is
substantially similar to the rules of other exchanges previously
approved by the Commission,\11\ the proposal does not appear to present
any novel regulatory issues. Therefore, the Commission designates the
proposal operative upon filing.
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    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
    \11\ See Nasdaq Options Market Rules, Chapter V, Section
6(b)(ii) and Chicago Board Options Exchange, Incorporated Rule
6.25(a)(2).
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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 e-mail to<EMAIL_ADDRESS>Please include
File Number SR-Phlx-2009-03 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2009-03. This file
number should be included on the subject line if e-mail 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 inspection and
copying in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such 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 publicly available. All
submissions should refer to File Number SR-Phlx-2009-03 and should be
submitted on or before March 3, 2009.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-2698 Filed 2-9-09; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register Volume 81, Number 181 (Monday, September 19, 2016)]
[Notices]
[Pages 64226-64230]
[FR Doc No: 2016-22426]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-32259; File No. 812-14602]

OFS Capital Corporation, et al.; Notice of Application

September 13, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under sections 17(d) and
57(i) of the Investment Company Act of 1940 (the ``Act'') and rule 17d-
1 under the Act permitting certain joint transactions otherwise
prohibited by sections 17(d) and 57(a)(4) of the Act and under rule
17d-1 under the Act.

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Summary of Application: Applicants request an order to permit certain
business development companies (each, a ``BDC'') and certain closed end
investment companies to co-invest in portfolio companies with each
other and with affiliated investment funds.

Applicants: OFS Capital Corporation (``OFS BDC''); Hancock Park
Corporate Income, Inc. (``Hancock BDC'' and together with OFS BDC, the
``Existing Regulated Funds''); OFS Capital Management, LLC (``OFS
Adviser''); OFSI Fund V, LTD., OFSI Fund VI, LTD., and OFSI Fund VII,
LTD. (each an ``Existing Affiliated Fund''); and OFS SBIC I LP (the
``Existing SBIC Subsidiary'').

Filing Dates: The application was filed on January 15, 2016, and
amended on June 8, 2016.

Hearing or Notification of Hearing: An order granting the requested
relief 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 October 11, 2016, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Pursuant to rule 0-5 under the Act, hearing
requests should state the nature of the writer's interest, any facts
bearing upon the desirability of a hearing on the matter, 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
St. NE., Washington, DC 20549-1090. Applicants: 10 S. Wacker Drive,
Suite 2500, Chicago, Illinois 60606, Attention: Jeffrey A. Cerny.

FOR FURTHER INFORMATION CONTACT: Kieran G. Brown, Senior Counsel, at
(202) 551-6773 or Daniele Marchesani, Branch Chief, at<PHONE_NUMBER>
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling<PHONE_NUMBER>.

Applicants' Representations

    1. OFS BDC, a Delaware corporation, is organized as a closed-end
management investment company that has elected to be regulated as a BDC
under section 54(a) of the Act.\1\ Applicants state that OFS BDC seeks
to generate both current income and capital appreciation primarily
through debt investments and, to a lesser extent, equity investments.
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    \1\ Section 2(a)(48) defines a BDC to be any closed-end
investment company that operates for the purpose of making
investments in securities described in sections 55(a)(1) through
55(a)(3) of the Act and makes available significant managerial
assistance with respect to the issuers of such securities.
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    2. Hancock BDC, a Maryland corporation, was organized on December
8, 2015, for the purpose of operating as an externally managed, closed-
end management investment company which will elect to be regulated as a
BDC under section 54(a) of the Act. Structured as a private BDC,
Hancock BDC seeks to generate current income and, to a lesser extent,
capital appreciation primarily through debt investments and, to a
lesser extent, equity investments.
    3. OFS Adviser, a Delaware limited liability company, is registered
with the Commission as an investment adviser under the Investment
Advisers Act of 1940 (the ``Advisers Act'') and serves as investment
adviser to the Existing Regulated Funds.
    4. Each of the Existing Affiliated Funds is a Cayman
``collateralized loan obligation'' fund for which OFS Adviser acts as
the adviser pursuant to a collateral management agreement between the
relevant Existing Affiliated Fund and OFS Adviser. The Existing
Affiliated Funds' portfolios are comprised predominantly of senior
secured ``club'' and syndicated loans made to U.S. companies (both
public and private). In reliance on the exclusion from the definition
of ``investment company'' provided by section 3(c)(1) or 3(c)(7) of the
1940 Act,

none of the Affiliated Funds \2\ are, or will be, registered under the
1940 Act.
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    \2\ ``Affiliated Fund'' means the Existing Affiliated Funds and
any Future Affiliated Fund. ``Future Affiliated Fund'' means any
entity (a) whose investment adviser is an Adviser, (b) that would be
an investment company but for section 3(c)(1) or 3(c)(7) of the Act,
and (c) that intends to participate in the Co-Investment Program.
The term ``Adviser'' means (a) OFS Adviser and (b) any future
investment adviser that controls, is controlled by, or is under
common control with OFS Adviser and is registered as an investment
adviser under the Advisers Act.
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    5. Applicants seek an order (``Order'') to permit one or more
Regulated Funds \3\ and/or one or more Affiliated Funds to participate
in the same investment opportunities through a proposed co-investment
program (the ``Co-Investment Program'') where such participation would
otherwise be prohibited under section 57(a)(4) and rule 17d-1 by (a)
co-investing with each other in securities issued by issuers in private
placement transactions in which an Adviser negotiates terms in addition
to price; \4\ and (b) making additional investments in securities of
such issuers, including through the exercise of warrants, conversion
privileges, and other rights to purchase securities of the issuers
(``Follow-On Investments''). ``Co-Investment Transaction'' means any
transaction in which a Regulated Fund (or its Wholly-Owned Investment
Sub, as defined below) participated together with one or more other
Regulated Funds and/or one or more Affiliated Funds in reliance on the
requested Order. ``Potential Co-Investment Transaction'' means any
investment opportunity in which a Regulated Fund (or its Wholly-Owned
Investment Sub) could not participate together with one or more
Affiliated Funds and/or one or more other Regulated Funds without
obtaining and relying on the Order.\5\
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    \3\ ``Regulated Fund'' means any of the Existing Regulated Funds
and any Future Regulated Fund. ``Future Regulated Fund'' means any
closed-end management investment company (a) that is registered
under the Act or has elected to be regulated as BDC, (b) whose
investment adviser is an Adviser, and (c) that intends to
participate in the Co-Investment Program.
    \4\ The term ``private placement transactions'' means
transactions in which the offer and sale of securities by the issuer
are exempt from registration under the Securities Act of 1933 (the
``Securities Act'').
    \5\ All existing entities that currently intend to rely upon the
requested Order have been named as applicants. Any other existing or
future entity that subsequently relies on the Order will comply with
the terms and conditions of the application.
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    6. The Existing SBIC Subsidiary is a Delaware limited partnership
that is licensed by the Small Business Administration (the ``SBA'') to
operate under the Small Business Investment Act of 1958 (the ``SBA
Act'') as a small business investment company (an ``SBIC''). The
Existing SBIC Subsidiary is a Wholly-Owned Investment Sub of OFS
BDC.\6\ OFS BDC's investment strategy includes the Existing SBIC
Subsidiary. Applicants state any of the Regulated Funds may, from time
to time, form one or more Wholly-Owned Investment Subs.
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    \6\ The term ``Wholly-Owned Investment Sub'' means an entity (i)
that is wholly-owned by a Regulated Fund (with the Regulated Fund at
all times holding, beneficially and of record, 100% of the voting
and economic interests); (ii) whose sole business purpose is to hold
one or more investments on behalf of the Regulated Fund (and, in the
case of an SBIC Subsidiary, maintain a license under the SBA Act and
issue debentures guaranteed by the SBA); (iii) with respect to which
the board of directors of the Regulated Fund (the ``Board'') has the
sole authority to make all determinations with respect to the
entity's participation under the conditions of the application; and
(iv) that would be an investment company but for section 3(c)(1) or
3(c)(7) of the Act. The term ``SBIC Subsidiary'' means the Existing
SBIC Subsidiary and any Future SBIC Subsidiary. ``Future SBIC
Subsidiary'' means any Wholly-Owned Investment Sub that is licensed
by the SBA to operate under the SBA Act as an SBIC.
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    7. Applicants state that a Wholly-Owned Investment Sub would be
prohibited from investing in a Co-Investment Transaction with any
Affiliated Fund or Regulated Fund because it would be a company
controlled by its parent Regulated Fund for purposes of section
57(a)(4) and rule 17d-1. Applicants request that each Wholly-Owned
Investment Sub be permitted to participate in Co-Investment
Transactions in lieu of its parent Regulated Fund and that the Wholly-
Owned Investment Sub's participation in any such transaction be
treated, for purposes of the requested order, as though the parent
Regulated Fund were participating directly.\7\ Applicants represent
that this treatment is justified because a Wholly-Owned Investment Sub
would have no purpose other than serving as a holding vehicle for the
Regulated Fund's investments and, therefore, no conflicts of interest
could arise between the Regulated Fund and the Wholly-Owned Investment
Sub. The Regulated Fund's Board would make all relevant determinations
under the conditions with regard to a Wholly-Owned Investment Sub's
participation in a Co-Investment Transaction, and the Regulated Fund's
Board would be informed of, and take into consideration, any proposed
use of a Wholly-Owned Investment Sub in the Regulated Fund's place. If
the Regulated Fund proposes to participate in the same Co-Investment
Transaction with any of its Wholly-Owned Investment Subs, the Board
will also be informed of, and take into consideration, the relative
participation of the Regulated Fund and the Wholly-Owned Investment
Sub.
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    \7\ All subsidiaries of the Regulated Funds participating in Co-
Investment Transactions will be Wholly-Owned Investment Subs and
will have Objectives and Strategies (as defined below) that are
either the same as, or a subset of, the Regulated Fund's Objectives
and Strategies.
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    8. When considering Potential Co-Investment Transactions for any
Regulated Fund, the applicable Adviser will consider only the
Objectives and Strategies, investment policies, investment positions,
capital available for investment as described in the application
(``Available Capital''), and other pertinent factors applicable to that
Regulated Fund.\8\ The Board of each Regulated Fund, including the
directors that are not ``interested persons'' within the meaning of
section 2(a)(19) of the Act (the ``Non-Interested Directors''), has (or
will have prior to relying on the requested Order) determined that it
is in the best interests of the Regulated Fund to participate in Co-
Investment Transactions.\9\
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    \8\ ``Objectives and Strategies'' means a Regulated Fund's
investment objectives and strategies, as described in the Regulated
Fund's registration statement on Form N-2 or Form 10, as applicable,
other filings the Regulated Fund has made with the Commission under
the Securities Act, or under the Securities Exchange Act of 1934,
and the Regulated Fund's reports to shareholders.
    \9\ The Regulated Funds, however, will not be obligated to
invest, or co-invest, when investment opportunities are referred to
them.
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    9. Other than pro rata dispositions and Follow-On Investments as
provided in conditions 7 and 8, and after making the determinations
required in conditions 1 and 2(a), the Adviser will present each
Potential Co-Investment Transaction and the proposed allocation to the
directors of the Board eligible to vote under section 57(o) of the Act
(``Eligible Directors''), and the ``required majority,'' as defined in
section 57(o) of the Act (``Required Majority'') \10\ will approve each
Co-Investment Transaction prior to any investment by the participating
Regulated Fund.
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    \10\ In the case of a Regulated Fund that is a registered
closed-end fund, the Board members that make up the Required
Majority will be determined as if the Regulated Fund were a BDC
subject to section 57(o).
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    10. With respect to the pro rata dispositions and Follow-On
Investments provided in conditions 7 and 8, a Regulated Fund may
participate in a pro rata disposition or Follow-On Investment without
obtaining prior approval of the Required Majority if, among other
things: (i) The proposed participation of each Regulated Fund and
Affiliated Fund in such disposition is proportionate to its outstanding
investments in the issuer immediately preceding the disposition or
Follow-On Investment, as the case may be; and (ii) the Board of the
Regulated Fund has

approved that Regulated Fund's participation in pro rata dispositions
and Follow-On Investments as being in the best interests of the
Regulated Fund. If the Board does not so approve, any such disposition
or Follow-On Investment will be submitted to the Regulated Fund's
Eligible Directors. The Board of any Regulated Fund may at any time
rescind, suspend or qualify its approval of pro rata dispositions and
Follow-On Investments with the result that all dispositions and/or
Follow-On Investments must be submitted to the Eligible Directors.
    11. No Non-Interested Director of a Regulated Fund will have a
financial interest in any Co-Investment Transaction, other than through
share ownership in one of the Regulated Funds.
    12. If the Advisers, the principal owners of any of the Advisers
(the ``Principals''), or any person controlling, controlled by, or
under common control with the Advisers or the Principals, and the
Affiliated Funds (collectively, the ``Holders'') own in the aggregate
more than 25 percent of the outstanding voting shares of a Regulated
Fund (the ``Shares''), then the Holders will vote such Shares as
required under condition 14. Applicants believe that this condition
will ensure that the Non-Interested Directors will act independently in
evaluating the Co-Investment Program, because the ability of the
Advisers or the Principals to influence the Non-Interested Directors by
a suggestion, explicit or implied, that the Non-Interested Directors
can be removed will be limited significantly. The Non-Interested
Directors will evaluate and approve any such independent party, taking
into account its qualifications, reputation for independence, cost to
the shareholders, and other factors that they deem relevant.

Applicants' Legal Analysis

    1. Section 57(a)(4) of the Act prohibits certain affiliated persons
of a BDC from participating in joint transactions with the BDC or a
company controlled by a BDC in contravention of rules as prescribed by
the Commission. Under section 57(b)(2) of the Act, any person who is
directly or indirectly controlling, controlled by, or under common
control with a BDC is subject to section 57(a)(4). Applicants submit
that each of the Regulated Funds and Affiliated Funds could be deemed
to be a person related to each Regulated Fund in a manner described by
section 57(b) by virtue of being under common control. Section 57(i) of
the Act provides that, until the Commission prescribes rules under
section 57(a)(4), the Commission's rules under section 17(d) of the Act
applicable to registered closed-end investment companies will be deemed
to apply to transactions subject to section 57(a)(4). Because the
Commission has not adopted any rules under section 57(a)(4), rule 17d-1
also applies to joint transactions with Regulated Funds that are BDCs.
Section 17(d) of the Act and rule 17d-1 under the Act are applicable to
Regulated Funds that are registered closed-end investment companies.
    2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
affiliated persons of a registered investment company from
participating in joint transactions with the company unless the
Commission has granted an order permitting such transactions. In
passing upon applications under rule 17d-1, the Commission considers
whether the company's participation in the joint transaction is
consistent with the provisions, policies, and purposes of the Act and
the extent to which such participation is on a basis different from or
less advantageous than that of other participants.
    3. Applicants state that in the absence of the requested relief,
the Regulated Funds would be, in some circumstances, limited in their
ability to participate in attractive and appropriate investment
opportunities. Applicants believe that the proposed terms and
conditions will ensure that the Co-Investment Transactions are
consistent with the protection of each Regulated Fund's shareholders
and with the purposes intended by the policies and provisions of the
Act. Applicants state that the Regulated Funds' participation in the
Co-Investment Transactions will be consistent with the provisions,
policies, and purposes of the Act and on a basis that is not different
from or less advantageous than that of other participants.

Applicants' Conditions

    Applicants agree that the Order will be subject to the following
conditions:
    1. Each time an Adviser considers a Potential Co-Investment
Transaction for an Affiliated Fund or another Regulated Fund that falls
within a Regulated Fund's then-current Objectives and Strategies, the
Regulated Fund's Adviser will make an independent determination of the
appropriateness of the investment for such Regulated Fund in light of
the Regulated Fund's then-current circumstances.
    2. (a) If the Adviser deems a Regulated Fund's participation in any
Potential Co-Investment Transaction to be appropriate for the Regulated
Fund, it will then determine an appropriate level of investment for the
Regulated Fund.
    (b) If the aggregate amount recommended by the applicable Adviser
to be invested by the applicable Regulated Fund in the Potential Co-
Investment Transaction, together with the amount proposed to be
invested by the other participating Regulated Funds and Affiliated
Funds, collectively, in the same transaction, exceeds the amount of the
investment opportunity, the investment opportunity will be allocated
among them pro rata based on each participant's Available Capital, up
to the amount proposed to be invested by each. The applicable Adviser
will provide the Eligible Directors of each participating Regulated
Fund with information concerning each participating party's Available
Capital to assist the Eligible Directors with their review of the
Regulated Fund's investments for compliance with these allocation
procedures.
    (c) After making the determinations required in conditions 1 and
2(a), the applicable Adviser will distribute written information
concerning the Potential Co-Investment Transaction (including the
amount proposed to be invested by each participating Regulated Fund and
Affiliated Fund) to the Eligible Directors of each participating
Regulated Fund for their consideration. A Regulated Fund will co-invest
with one or more other Regulated Funds and/or one or more Affiliated
Funds only if, prior to the Regulated Fund's participation in the
Potential Co-Investment Transaction, a Required Majority concludes
that:
    (i) The terms of the Potential Co-Investment Transaction, including
the consideration to be paid, are reasonable and fair to the Regulated
Fund and its shareholders and do not involve overreaching in respect of
the Regulated Fund or its shareholders on the part of any person
concerned;
    (ii) the Potential Co-Investment Transaction is consistent with:
    (A) The interests of the shareholders of the Regulated Fund; and
    (B) the Regulated Fund's then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Funds or Affiliated
Funds would not disadvantage the Regulated Fund, and participation by
the Regulated Fund would not be on a basis different from or less
advantageous than that of other Regulated Funds or Affiliated Funds;
provided that, if any other Regulated Fund or Affiliated Fund, but not
the Regulated Fund itself, gains the right to nominate a director for
election to a portfolio company's board of directors or the right to
have a board

observer or any similar right to participate in the governance or
management of the portfolio company, such event shall not be
interpreted to prohibit the Required Majority from reaching the
conclusions required by this condition (2)(c)(iii), if:
    (A) The Eligible Directors will have the right to ratify the
selection of such director or board observer, if any;
    (B) the applicable Adviser agrees to, and does, provide periodic
reports to the Regulated Fund's Board with respect to the actions of
such director or the information received by such board observer or
obtained through the exercise of any similar right to participate in
the governance or management of the portfolio company; and
    (C) any fees or other compensation that any Affiliated Fund or any
Regulated Fund or any affiliated person of any Affiliated Fund or any
Regulated Fund receives in connection with the right of the Affiliated
Fund or a Regulated Fund to nominate a director or appoint a board
observer or otherwise to participate in the governance or management of
the portfolio company will be shared proportionately among the
participating Affiliated Funds (who each may, in turn, share its
portion with its affiliated persons) and the participating Regulated
Funds in accordance with the amount of each party's investment; and
    (iv) the proposed investment by the Regulated Fund will not benefit
the Advisers, the Affiliated Funds or the other Regulated Funds or any
affiliated person of any of them (other than the parties to the Co-
Investment Transaction), except (A) to the extent permitted by
condition 13, (B) to the extent permitted by section 17(e) or 57(k) of
the Act, as applicable, (C) indirectly, as a result of an interest in
the securities issued by one of the parties to the Co-Investment
Transaction, or (D) in the case of fees or other compensation described
in condition 2(c)(iii)(C).
    3. Each Regulated Fund has the right to decline to participate in
any Potential Co-Investment Transaction or to invest less than the
amount proposed.
    4. The applicable Adviser will present to the Board of each
Regulated Fund, on a quarterly basis, a record of all investments in
Potential Co-Investment Transactions made by any of the other Regulated
Funds or Affiliated Funds during the preceding quarter that fell within
the Regulated Fund's then-current Objectives and Strategies that were
not made available to the Regulated Fund, and an explanation of why the
investment opportunities were not offered to the Regulated Fund. All
information presented to the Board pursuant to this condition will be
kept for the life of the Regulated Fund and at least two years
thereafter, and will be subject to examination by the Commission and
its staff.
    5. Except for Follow-On Investments made in accordance with
condition 8,\11\ a Regulated Fund will not invest in reliance on the
Order in any issuer in which another Regulated Fund, Affiliated Fund,
or any affiliated person of another Regulated Fund or Affiliated Fund
is an existing investor.
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    \11\ This exception applies only to Follow-On Investments by a
Regulated Fund in issuers in which that Regulated Fund already holds
investments.
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    6. A Regulated Fund will not participate in any Potential Co-
Investment Transaction unless the terms, conditions, price, class of
securities to be purchased, settlement date, and registration rights
will be the same for each participating Regulated Fund and Affiliated
Fund. The grant to an Affiliated Fund or another Regulated Fund, but
not the Regulated Fund, of the right to nominate a director for
election to a portfolio company's board of directors, the right to have
an observer on the board of directors or similar rights to participate
in the governance or management of the portfolio company will not be
interpreted so as to violate this condition 6, if conditions
2(c)(iii)(A), (B) and (C) are met.
    7. (a) If any Affiliated Fund or any Regulated Fund elects to sell,
exchange or otherwise dispose of an interest in a security that was
acquired in a Co-Investment Transaction, the applicable Advisers will:
    (i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed disposition at the earliest
practical time; and
    (ii) formulate a recommendation as to participation by each
Regulated Fund in the disposition.
    (b) Each Regulated Fund will have the right to participate in such
disposition on a proportionate basis, at the same price and on the same
terms and conditions as those applicable to the participating
Affiliated Funds and Regulated Funds.
    (c) A Regulated Fund may participate in such disposition without
obtaining prior approval of the Required Majority if: (i) The proposed
participation of each Regulated Fund and each Affiliated Fund in such
disposition is proportionate to its outstanding investments in the
issuer immediately preceding the disposition; (ii) the Board of the
Regulated Fund has approved as being in the best interests of the
Regulated Fund the ability to participate in such dispositions on a pro
rata basis (as described in greater detail in the application); and
(iii) the Board of the Regulated Fund is provided on a quarterly basis
with a list of all dispositions made in accordance with this condition.
In all other cases, the Adviser will provide its written recommendation
as to the Regulated Fund's participation to the Eligible Directors, and
the Regulated Fund will participate in such disposition solely to the
extent that a Required Majority determines that it is in the Regulated
Fund's best interests.
    (d) Each Affiliated Fund and each Regulated Fund will bear its own
expenses in connection with any such disposition.
    8. (a) If any Affiliated Fund or any Regulated Fund desires to make
a Follow-On Investment in a portfolio company whose securities were
acquired in a Co-Investment Transaction, the applicable Advisers will:
    (i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed transaction at the earliest
practical time; and
    (ii) formulate a recommendation as to the proposed participation,
including the amount of the proposed Follow-On Investment, by each
Regulated Fund.
    (b) A Regulated Fund may participate in such Follow-On Investment
without obtaining prior approval of the Required Majority if: (i) The
proposed participation of each Regulated Fund and each Affiliated Fund
in such investment is proportionate to its outstanding investments in
the issuer immediately preceding the Follow-On Investment; and (ii) the
Board of the Regulated Fund has approved as being in the best interests
of the Regulated Fund the ability to participate in Follow-On
Investments on a pro rata basis (as described in greater detail in the
application). In all other cases, the Adviser will provide its written
recommendation as to the Regulated Fund's participation to the Eligible
Directors, and the Regulated Fund will participate in such Follow-On
Investment solely to the extent that a Required Majority determines
that it is in the Regulated Fund's best interests.
    (c) If, with respect to any Follow-On Investment:
    (i) The amount of the opportunity is not based on the Regulated
Funds' and the Affiliated Funds' outstanding investments immediately
preceding the Follow-On Investment; and

    (ii) the aggregate amount recommended by the applicable Adviser to
be invested by the applicable Regulated Fund in the Follow-On
Investment, together with the amount proposed to be invested by the
other participating Regulated Funds and Affiliated Funds, collectively,
in the same transaction, exceeds the amount of the investment
opportunity; then the investment opportunity will be allocated among
them pro rata based on each participant's Available Capital, up to the
maximum amount proposed to be invested by each.
    (d) The acquisition of Follow-On Investments as permitted by this
condition will be considered a Co-Investment Transaction for all
purposes and subject to the other conditions set forth in this
application.
    9. The Non-Interested Directors of each Regulated Fund will be
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including
investments made by other Regulated Funds or Affiliated Funds that the
Regulated Fund considered but declined to participate in, so that the
Non-Interested Directors may determine whether all investments made
during the preceding quarter, including those investments that the
Regulated Fund considered but declined to participate in, comply with
the conditions of the Order. In addition, the Non-Interested Directors
will consider at least annually the continued appropriateness for the
Regulated Fund of participating in new and existing Co-Investment
Transactions.
    10. Each Regulated Fund will maintain the records required by
section 57(f)(3) of the Act as if each of the Regulated Funds were a
BDC and each of the investments permitted under these conditions were
approved by the Required Majority under section 57(f) of the Act.
    11. No Non-Interested Director of a Regulated Fund will also be a
director, general partner, managing member or principal, or otherwise
an ``affiliated person'' (as defined in the Act) of an Affiliated Fund.
    12. The expenses, if any, associated with acquiring, holding or
disposing of any securities acquired in a Co-Investment Transaction
(including, without limitation, the expenses of the distribution of any
such securities registered for sale under the Securities Act) will, to
the extent not payable by the Advisers under their respective
investment advisory agreements with Affiliated Funds and the Regulated
Funds, be shared by the Regulated Funds and the Affiliated Funds in
proportion to the relative amounts of the securities held or to be
acquired or disposed of, as the case may be.
    13. Any transaction fee (including break-up or commitment fees but
excluding broker's fees contemplated by section 17(e) or 57(k) of the
Act, as applicable), received in connection with a Co-Investment
Transaction will be distributed to the participating Regulated Funds
and Affiliated Funds on a pro rata basis based on the amounts they
invested or committed, as the case may be, in such Co-Investment
Transaction. If any transaction fee is to be held by an Adviser pending
consummation of the transaction, the fee will be deposited into an
account maintained by such Adviser at a bank or banks having the
qualifications prescribed in section 26(a)(1) of the Act, and the
account will earn a competitive rate of interest that will also be
divided pro rata among the participating Regulated Funds and Affiliated
Funds based on the amounts they invest in such Co-Investment
Transaction. None of the Affiliated Funds, the Advisers, the other
Regulated Funds or any affiliated person of the Regulated Funds or
Affiliated Funds will receive additional compensation or remuneration
of any kind as a result of or in connection with a Co-Investment
Transaction (other than (a) in the case of the Regulated Funds and the
Affiliated Funds, the pro rata transaction fees described above and
fees or other compensation described in condition 2(c)(iii)(C); and (b)
in the case of an Adviser, investment advisory fees paid in accordance
with the agreement between the Adviser and the Regulated Fund or
Affiliated Fund.
    14. If the Holders own in the aggregate more than 25% of the Shares
of a Regulated Fund, then the Holders will vote such Shares as directed
by an independent third party when voting on (1) the election of
directors; (2) the removal of one or more directors; or (3) any other
matter under either the 1940 Act or applicable State law affecting the
Board's composition, size or manner of election.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-22426 Filed 9-16-16; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register: February 11, 2008 (Volume 73, Number 28)]
[Notices]
[Page 7739]
[DOCID:fr11fe08-57]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket Nos. ER08-284-000; ER08-284-001]

Argo Navis Fundamental Power Fund, L.P.; Notice of Issuance of
Order

February 1, 2008.
    Argo Navis Fundamental Power Fund, L.P. (Argo Navis) filed an
application for market-based rate authority, with accompanying rate
schedule. The proposed market-based rate schedule provides for the sale
of energy, capacity and ancillary services at market-based rates. Argo
Navis also requested waivers of various Commission regulations. In
particular, Argo Navis requested that the Commission grant blanket
approval under 18 CFR part 34 of all future issuances of securities and
assumptions of liability by Argo Navis.
    On February 1, 2008, pursuant to delegated authority, the Director,
Division of Tariffs and Market Development-West, granted the requests
for blanket approval under part 34 (Director's Order). The Director's
Order also stated that the Commission would publish a separate notice
in the Federal Register establishing a period of time for the filing of
protests. Accordingly, any person desiring to be heard concerning the
blanket approvals of issuances of securities or assumptions of
liability by Argo Navis, should file a protest with the Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426, in
accordance with Rules 211 and 214 of the Commission's Rules of Practice
and Procedure. 18 CFR 385.211, 385.214 (2007). The Commission
encourages the electronic submission of protests using the FERC Online
link at http://www.ferc.gov.

    Notice is hereby given that the deadline for filing protests is
March 3, 2008.
    Absent a request to be heard in opposition to such blanket
approvals by the deadline above, Argo Navis is authorized to issue
securities and assume obligations or liabilities as a guarantor,
indorser, surety, or otherwise in respect of any security of another
person; provided that such issuance or assumption is for some lawful
object within the corporate purposes of Argo Navis, compatible with the
public interest, and is reasonably necessary or appropriate for such
purposes.
    The Commission reserves the right to require a further showing that
neither public nor private interests will be adversely affected by
continued approvals of Argo Navis's issuance of securities or
assumptions of liability.
    Copies of the full text of the Director's Order are available from
the Commission's Public Reference Room, 888 First Street, NE.,
Washington, DC 20426. The Order may also be viewed on the Commission's
Web site at http://www.ferc.gov, using the eLibrary link. Enter the

docket number excluding the last three digits in the docket number
filed to access the document. Comments, protests, and interventions may
be filed electronically via the Internet in lieu of paper. See, 18 CFR
385.2001(a)(1)(iii) and the instructions on the Commission's Web site
under the ``e-Filing'' link. The Commission strongly encourages
electronic filings.

Kimberly D. Bose,
Secretary.
[FR Doc. E8-2411 Filed 2-8-08; 8:45 am]

BILLING CODE 6717-01-P


pledging collateral pursuant to a security arrangement not requiring
the transfer of collateral to the security-based swap counterparty;
(iii) receiving credit support from a third-party pursuant to a written
guarantee; (iv) solely relying on its available financial resources; or
(v) using other means.
a. Benefits
    Requiring end-users to provide the Commission with general
information regarding their arrangements to meet financial obligations
associated with non-cleared security-based swaps may confer benefits by
reducing concerns about the potential risks that these market
participants introduce into the financial markets in the absence of
central clearing. The notification will also allow the Commission to
understand how margining and other credit support practices may affect
the prices and liquidity of security-based swaps, including by
comparing and contrasting the trading costs of non-cleared security-
based swaps with different credit support characteristics to each other
and to security-based swaps that are cleared. Proposed Rule 3Cg-1(a)(5)
also establishes a reporting option for ``other means'' that may be
used to meet financial obligations associated with non-cleared
security-based swaps providing the Commission with insight on the
possible emergence of new and currently less common methods of
mitigating financial risks associated with non-cleared security-based
swaps that may arise as the market develops.
b. Costs
    The Commission preliminarily estimates the costs associated with
the notification required by Rule 3Cg-1(a)(5) will be limited, as the
methods used to meet financial obligations associated with non-cleared
security-based swaps are expected to be readily known to counterparties
invoking the end-user clearing exception and unlikely to vary from
transaction to transaction. The Commission preliminarily estimates
there are 6,200,000 transactions in security-based swaps annually,\95\
and that parties eligible to invoke the end-user clearing exception are
counterparties in approximately 1% of all security-based swap
transactions.\96\ The Commission preliminarily estimates that to gather
the information required for purposes of complying with proposed Rule
3Cg-1(a)(5) would impose an ongoing aggregate annual burden of
approximately 15,500 burden hours for all respondents, which
corresponds to a burden of four (4) burden hours for each
respondent.\97\ Accordingly, applying an estimated hourly cost of $316
for a compliance attorney to gather information about how the
counterparty is meeting its Financial Notice Obligation,\98\ the
Commission preliminarily estimates proposed Rule 3Cg-1(a)(5) would
result in an ongoing aggregate annual cost of $4,900,000 to the entire
end-user community, which corresponds to an average ongoing aggregate
annual cost of $1,225 per end-user.\99\
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    \95\ See supra note 72 and accompanying text.
    \96\ Based on the information presented in note 73 above and the
accompanying text, the Commission preliminarily estimates entities
qualifying for the end-user exception are involved in roughly 1% of
the estimated 6,200,000 annual security-based swap transactions, or
62,000 such transactions ((6,200,000 x 1%) = 62,000).
    \97\ See supra note 80 and accompanying text. The estimates that
follow are based on an assumption that the burden of complying with
proposed Rule 3Cg-1(a)(5) is equivalent to the burden of complying
with the other requirements of proposed Rule 3Cg-1, not including
proposed Rule 3Cg-1(a)(4).
    \98\ The hourly rate for the compliance attorney is from SIFMA's
Management & Professional Earnings in the Securities Industry 2009,
modified by the Commission's staff to account for an 1800-hour work-
year and multiplied by 5.35 to account for bonuses, firm size,
employee benefits and overhead. The remaining hourly rates for
professionals used in this cost benefit analysis section are also
derived from this source and modified in the same manner.
    \99\ These monetized costs are calculated as follows: (15
minutes/60 minutes per hour) x ($316 dollars per hour) x (62,000
security-based swap transactions annually) = $4,898,000 annually;
($4,898,000 annually)/4,000 respondents = $1,225 average annually
per respondent.
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2. Preventing Abuse of the End-User Clearing Exception
    To aid the Commission's efforts to prevent abuse of the end-user
clearing exception, proposed Rule 3Cg-1(a) requires notification of
which of the counterparties to the security-based swap is invoking the
end-user clearing exception, whether the counterparty invoking the
exception is or is not a financial entity, whether the counterparty
invoking the exception is a finance affiliate meeting the requirements
of Exchange Act 3C(g)(4), whether the counterparty invoking the
exception uses the security-based swap to hedge or mitigate commercial
risk, and whether the counterparty invoking the exception is an SEC
Filer. SEC Filers invoking the end-user clearing exception must provide
their SEC Central Index Key number and confirm that an appropriate
committee of the SEC Filer's board of directors or equivalent body has
reviewed and approved the decision to enter into the security-based
swap that is subject to the end-user clearing exception.
a. Benefits
    Requiring notification of the above-listed information would
provide regulators with information about the end-user that could help
verify that the end-user clearing exception is being invoked by market
participants appropriately. The requirement to identify which
counterparty is invoking the end-user clearing exception is critical in
making this determination. Similarly, since Exchange Act Section 3C(g)
limits the availability of the end-user clearing exception to non-
financial entities and counterparties hedging or the mitigating
commercial risk, an affirmative notification to the Commission that
these two factors are satisfied will help verify eligibility of the
counterparty to invoke the exception. Given the nature of the specific
provisions in the Exchange Act governing use of the end-user clearing
exception by finance affiliates,\100\ separately identifying
transactions involving finance affiliates will also help to ensure
these requirements are complied with over time.
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    \100\ See Public Law 111-203, sec. 763(a) (adding Exchange Act
Section 3C(g)(4)).
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    The Commission preliminarily expects counterparties to security-
based swaps invoking the end-user clearing exception would frequently
be entities that have raised capital in public financial markets and
are therefore regulated by the Commission.\101\ Entities registered
under the Exchange Act Section 12 or required to file reports pursuant
to the Exchange Act Section 15(d) are generally required to include a
discussion of qualitative and quantitative elements of market risk in
annual reports filed with the Commission, including a discussion of

how derivatives are used to manage risk.\102\ Notification by an end-
user that it is subject to this requirement would allow regulators to
review how frequently SEC Filers use the end-user clearing exception
and better understand how security-based swaps are used by SEC Filers
to hedge or mitigate commercial risk. The proposed requirement that SEC
Filers invoking the end-user clearing exception provide the relevant
Commission file number will allow the Commission to cross reference
information received in connection with the end-user clearing exception
with other Commission documents more easily. The additional proposed
requirement that SEC Filers indicate whether a committee of the board
of directors (or equivalent body) reviewed and approved the decision to
enter into the security-based swap that is the subject of the end-user
clearing exception would serve as confirmation that the requirements of
Exchange Act Section 3C(i) applicable to SEC Filers were completed.
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    \101\ See Coalition for Derivatives End-Users comment (September
20, 2010), pursuant to Definitions Contained in Title VII of Dodd-
Frank Wall Street Reform and Consumer Protection Act, Exchange Act
Rel. No. 34-62,717, 75 FR 51,429 (Aug. 20, 2010).
    \102\ See Item 305 of Regulation S-K, 17 CFR 229.305. The
Commission does not require companies with a public common equity
float of less than $75 million, or, if a company is unable to
calculate public equity float, less than $50 million in revenue in
the last fiscal year to provide quantitative and qualitative
disclosure about market risk as required of larger companies under
Regulation S-K. See Smaller Reporting Company Regulatory Relief and
Simplification, Securities Act Release No. 8876, Exchange Act
Release No. 56994, Trust Indenture Act No. 2451 (Dec. 19, 2007), 73
FR 934 (Jan. 4, 2008).
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b. Costs
    To qualify for the end-user clearing exception a non-financial
entity would be required to determine whether the terms of the proposed
security-based swap and the manner in which it will be used satisfy the
definition of hedging or mitigating commercial risk established by
proposed Exchange Act Rule 3a67-4. To meet the requirements of the
definition, subsection 3a67-4(a)(3) of proposed Rule 3a67-4 specifies
that the counterparty to the security-based swap must identify and
document one or more risks associated with the present or future
conduct and management of the enterprise and establish and document a
method of assessing the effectiveness of the security-based swap as a
hedge for such identified risks.
    The Commission preliminarily believes that non-financial entities
seeking to invoke the end-user clearing exception would need to
establish and maintain an appropriate compliance mechanism to meet the
hedge or mitigate standard in proposed Rule 3a67-4 including the
necessary professional, legal, technical and administrative support to
make and document the required assessment of hedging
effectiveness.\103\ The Commission also preliminarily believes that
counterparties transacting in security-based swaps to hedge commercial
risks ordinarily will have established risk management systems in place
for other reasons that can be adjusted to accommodate the requirements
of proposed Rule 3Cg-1(a)(4) and proposed Rule 3a67-4.\104\
Accordingly, the Commission preliminarily estimates that designing and
implementing an appropriate compliance and support program to identify
the risks being reduced and document the hedging effectiveness of
security-based swaps would impose an initial one time initial aggregate
cost of $13,200,000 to all end-users, which corresponds to an average
initial cost of $3300 per end-user.\105\
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    \103\ See supra note 76 and accompanying text.
    \104\ See supra note 77 and accompanying text.
    \105\ This figure is based on the following: (Senior Business
Analyst at 4 hours x $234 per hour) + (Compliance Manager at 4 hours
x $294 per hour) + (Director of Compliance at 2 hours x $426 per
hour) + (Compliance Attorney at 1 hour x $316 per hour) x (4000
respondents) = $13,120,000; ($13,120,000 initial aggregate cost)/
(4000 respondents) = $3,280 initial aggregate cost per respondent.
See also supra note 78.
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    The Commission expects there would also be ongoing costs associated
with determining whether the hedging or mitigating commercial risk
standard is met for each security-based swap transaction for which the
end-user clearing exception is invoked. The Commission preliminarily
estimates that to gather the information required for purposes of
complying with proposed Rule 3a67-4 and proposed Rule 3Cg-1(a)(4) would
impose an ongoing aggregate annual burden of approximately 62,000
burden hours for all respondents, which corresponds to a burden of 16
burden hours for each respondent.\106\ Assuming an hourly cost of $234
per hour for a senior business analyst and $294 per hour for a
compliance manager to meet this requirement, proposed Rule 3Cg-1 would
impose an annual cost of $16,400,000 to all end-users and an average
annual cost of $4,100 dollars per end-user.\107\
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    \106\ See supra note 79 and accompanying text. The estimates
that follow are based on an assumption that the burden of complying
with proposed Rule 3Cg-1(a)(5) is equivalent to the burden of
complying with the requirements of proposed Rule 3Cg-1, not
including proposed Rules 3Cg-1(a)(4), given the comparable nature of
the information required.
    \107\ This figure is based on the following: ((Senior Business
Analyst at 30 minutes x $234 per hour) + (Compliance Manager at 30
minutes x $294 per hour)) x ((6,200,000 security-based swap
transactions) x (1% transactions by parties eligible to invoke end-
user clearing exception)) = $16,368,000 aggregate ongoing costs per
year; ($16,368,000 aggregate ongoing costs per year)/(4,000
respondents) = $4,092 in aggregate ongoing costs per year per
respondent. These figures do not include the costs associated with
complying with proposed Rule 3Cg-1(a)(5), which are separately
accounted for in note 99 above and the accompanying text, or costs
associated with proposed Rule 3Cg-1 other than proposed Rules 3Cg-
1(a)(4) and (5), which are separately accounted for in note 112
below and the accompanying text. See also supra note 79.
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    It was estimated that to make an assessment required under proposed
Rules 3Cg-1(b) and (c) of the alternative proposed rule text, if
applicable, gather the information required by Rule 3Cg-1(a) besides
the information with respect to hedging or mitigating commercial risk,
would require the additional work of a compliance manager.\108\ That
information is factual information a party is likely to have as a
result of its existing compliance process and the information is
unlikely to vary between transactions.\109\ Costs associated with
collecting requisite Financial Obligation Notice information required
by proposed Rule 3Cg-1(a)(5) have already been discussed.\110\
Therefore, the information collection and reporting costs that remain
to be accounted for are those not associated with either proposed Rules
3Cg-1(a)(4) or (5). The Commission preliminarily estimates that to
gather the information required for purposes of complying with proposed
Rule 3Cg-1 other than proposed Rules 3Cg-1(a)(4) and (5) would impose
an ongoing aggregate annual burden of approximately 15,500 burden hours
for all respondents, which corresponds to a burden of four (4) burden
hours for each respondent.\111\ These remaining costs are estimated to
impose an annual cost of approximately $4,600,000 on all respondents
and an average annual cost of approximately $1,200 per respondent.\112\
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    \108\ See supra note 80 and accompanying text.
    \109\ See supra note 81.
    \110\ See supra note 99 and accompanying text.
    \111\ See supra note 80 and accompanying text. The estimates
that follow are based on an assumption that the burden of complying
with proposed Rule 3Cg-1(a)(5) is equivalent to the burden of
complying with the requirements of proposed Rule 3Cg-1, not
including proposed Rule 3Cg-1(a)(4), given the comparable nature of
the information required.
    \112\ These monetized costs are calculated as follows: (15
minutes/60 minutes per hour) x (Compliance Manager at $294 dollars
per hour) x (62,000 security-based swap transactions annually) =
$4,557,000 annually; ($4,557,000 dollars annually)/(4,000
respondents) = $1,139 average annually per respondent. These figures
do not include the costs associated with complying with proposed
Rule 3Cg-1(a)(5), which are separately accounted for in note 99
above and the accompanying text, and the costs associated with
complying with proposed Rule 3Cg-1(a)(4), which are separately
accounted for in note 107 above and the accompanying text.

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3. Form of Notice to the Commission
    Exchange Act Section 3C(g)(1)(C) requires that a non-financial
entity invoking the end-user clearing exception notify the Commission
how it generally meets its financial obligations and gives the
Commission discretion to establish how to collect this information. To
satisfy this requirement, proposed Rule 3Cg-1(a) requires entities
invoking the end-user clearing exception to deliver specified
information to a registered SDR in the form and manner required for
delivery of information specified under proposed Rule 901(d) of
Regulation SBSR.\113\ Under this approach, rather than collecting
information through a separate process established by the Commission
for these purposes, the information delivered in compliance with the
requirements of proposed Rule 3Cg-1(a) and proposed Regulation SBSR
would serve as the notice to the Commission necessary to invoke the
end-user clearing exception.
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    \113\ See supra notes 16-20 and accompanying text.
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a. Benefits
    Since all market participants must already report security-based
swap transactions to a registered SDR, the Commission preliminarily
believes that requiring participants invoking the end-user clearing
exception to report the information required by proposed Rule 3Cg-1(a)
as part of the transaction record should be a reliable and cost-
effective method of collecting the information. Standardized reporting
through a registered SDR also should increase transparency of the
market to regulators by providing a full account of all transactions,
which benefits market participants through increased confidence in the
reliability and integrity of market transactions and activity.
Furthermore, standardized reports should allow periodic auditing, which
should be less costly to regulators than examining on a case-by-case
basis possibly unstructured financial data submitted by entities
invoking the exception to perform their regulatory duties.
b. Costs
    Because the form of notice required by proposed Rule 3Cg-1(a) would
use the existing reporting and recordkeeping mechanism for security-
based swap transactions that is required by proposed Rule 901 of
Regulation SBSR, the Commission preliminarily believes the form of
notice required by proposed Rule 3Cg-1(a) would impose no additional
burden on persons invoking the end-user clearing exception or SDRs
other than those described above. The information required to be
provided to the Commission pursuant to proposed Rule 3Cg-1(a) would be
transmitted and received electronically and would be stored as part of
the existing transaction materials that would be required to be
prepared by proposed Regulation SBSR. The Commission preliminarily
believes that information collected under proposed Rule 3Cg-1 will not
be required to be publicly disseminated by the SDR, therefore the
Commission preliminarily believes there will be no costs associated
with organizing and posting such information under the requirements for
public dissemination of information proposed to be met by SDRs.\114\
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    \114\ See Regulation SBSR Proposing Release, supra note 16,
proposed Rule 902; Regulation SDR Release, supra note 42, proposed
Rule 13n-4(b)(6).
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4. Total Costs
    In total, the Commission preliminarily estimates that proposed Rule
3Cg-1 would result in a one-time initial aggregate annualized cost of
$13,200,000, or $3400 per covered entity \115\ and an ongoing aggregate
annualized cost of $25,900,000 for all covered entities, or
approximately $6,500 per covered entity.\116\
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    \115\ See supra note 105 and accompanying text.
    \116\ These figures are based on the following: ($4,900,000
associated with proposed Rule 3Cg-1(a)(5)) + ($16,400,000 to comply
with proposed Rule 3Cg-1(a)(4)) + ($4,600,000 to comply with other
notification requirements established by Rule 3Cg-1) = $25,900,000;
($25,900,000 aggregate annual ongoing costs)/(4000 covered entities)
= $6,475 per covered entity.
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B. Request for Comments

    The Commission requests comment on the costs and benefits of
proposed Rule 3Cg-1 discussed above, as well as any costs and benefits
not already described that could result. The Commission also requests
data to quantify any potential costs and benefits. In addition, the
Commission requests comment on the following:
     What other factors, if any, should the Commission consider
to estimate the costs and benefits of proposed Rule 3Cg-1?
     Is there additional data the Commission should use to
estimate the costs and benefits of proposed Rule 3Cg-1?
     Would proposed Rule 3Cg-1 create additional costs and
benefits not discussed here?

VII. Consideration of Burden on Competition, and Promotion of
Efficiency, Competition, and Capital Formation

    Section 3(f) of the Exchange Act requires the Commission, whenever
it engages in rulemaking and is required to consider or determine
whether an action is necessary or appropriate in the public interest,
to consider whether the action would promote efficiency, competition,
and capital formation. In addition to the protection of investors,
Section 23(a)(2) of the Exchange Act requires the Commission, when
making rules under the Exchange Act, to consider the impact of such
rules on competition.\117\ Section 23(a)(2) also prohibits the
Commission from adopting any rule that would impose a burden on
competition not necessary or appropriate in furtherance of the purposes
of the Exchange Act.
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    \117\ See 15 U.S.C. 78w(a)(2).
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    The Commission preliminarily believes that the Rule 3Cg-1 would
impose limited competitive burdens on counterparties to security-based
swaps qualifying for the end-user clearing exception and the financial
markets generally because the overall costs associated with invoking
the end-user clearing exception are limited. Using the proposed
reporting structure of Regulation SBSR to satisfy the notice
requirement necessary to invoke the end-user clearing exception would
promote efficiency by allowing participants in the security-based swap
market to use an existing process to accomplish an additional
legislative requirement. Satisfaction of the notice requirement in this
way is preliminarily believed by the Commission to promote efficiency
by allowing participants to fully utilize the capabilities of SDRs
being established to serve the security-based swaps market specifically
rather than requiring them to use a separate filing process and data
repository created for other purposes, such as the Commission's EDGAR
system, or to establish new infrastructure or business processes to
meet the statutory notice obligation.
    The end-user clearing exception would be available to non-financial
entities \118\ that use security-based swaps to hedge or mitigate
commercial risk, but do not necessarily compete with each other. Such
counterparties by definition would not transact in

security-based swaps as their primary business, but rather as part of a
risk management program related to their other commercial operations.
Therefore, the Commission preliminarily expects the end-user clearing
exception to have a neutral effect on competition. In addition,
proposed Rule 3Cg-1 contains elements noted above intended to limit the
potential for the end-user clearing exception to be abused, as
contemplated by Exchange Act Section 3C(g)(6). Features of this kind
are preliminarily expected by the Commission to limit the potential for
counterparties that make use of the exception to avoid the mandatory
clearing requirements to gain an unfair competitive advantage over
their competitors.
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    \118\ For purposes of the discussion that follows, the term
``non-financial entities'' includes Identified Financial
Institutions that would be excluded from the definition of
``financial entity'' in Exchange Act Section 3C(g)(3) in the event
the proposed alternative language in Rules 3Cg-1(b) and (c) is
adopted by the Commission.
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    Proposed Rule 3Cg-1 allows certain non-financial entities who use
security-based swaps to hedge or mitigate commercial risk to bypass
mandatory clearing, and instead engage in non-cleared security-based
swap transactions even when equivalent products are available for
clearing by a central counterparty. To the extent that proposed Rule
3Cg-1 is successful in separating appropriate uses of the end-user
clearing exception from abusive ones, the proposed rule should help
economic efficiency and capital formation by not imposing additional
costs on end-users using security-based swaps to hedge or mitigate
commercial risk and therefore not contributing to systemic risk in the
financial system.
    The Commission requests comment on the possible effects of proposed
Rule 3Cg-1 on efficiency, competition, and capital formation. The
Commission requests that commenters provide views and supporting
information regarding any such effects. The Commission notes that such
effects are difficult to quantify. The Commission seeks comment on
possible anti-competitive effects of the proposed Rule not already
identified. The Commission also requests comment regarding the
competitive effects of pursuing alternative regulatory approaches such
as requiring notice to be provided through the Commission's EDGAR
system. In addition, the Commission requests comment on how the other
provisions of the Dodd-Frank Act, for which Commission rulemaking is
required, will interact with and influence the competitive effects of
the proposed Rule.

VIII. Consideration of Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996 (``SBREFA'') the Commission must advise the OMB whether the
proposed regulation constitutes a ``major'' rule.\119\ Under SBREFA, a
rule is considered ``major'' where, if adopted, it results or is likely
to result in: (1) An annual effect on the economy of $100 million or
more (either in the form of an increase or a decrease); (2) a major
increase in costs or prices for consumers or individual industries; or
(3) significant adverse effect on competition, investment or
innovation. If a rule is ``major,'' its effectiveness will generally be
delayed for 60 days pending Congressional review.
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    \119\ See Public Law 104-121 (March 29, 1996), as amended by
Public Law 110-28 (May 25, 2007).
---------------------------------------------------------------------------

    The Commission requests comment on the potential impact of proposed
Rule 3Cg-1, on the economy on an annual basis, on the costs or prices
for consumers or individual industries, and on competition, investment,
or innovation. Commenters are requested to provide empirical data and
other factual support for their view to the extent possible.

IX. Initial Regulatory Flexibility Act Certification

    Section 603(a) of the Regulatory Flexibility Act \120\ (``RFA'')
requires federal agencies, in promulgating rules, to make available for
public comment an initial regulatory flexibility analysis that
describes the impact of the proposed rule on small entities.
Alternatively, section 605(b) of the RFA provides that this analysis
shall not apply to any proposed rule or proposed rule amendment, if the
head of the agency certifies that the rule if promulgated will not have
a significant economic impact on a substantial number of small
entities.
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    \120\ See Public Law 96-354, 94 Stat. 1164 (1980), as amended by
SBREFA.
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    For purposes of Commission rulemaking in connection with the RFA, a
small business includes an issuer or person, other than an investment
company, that on the last day of its most recent fiscal year had total
assets of $5 million or less.\121\ Based on input from security-based
swap market participants and its own information, the Commission
preliminarily believes that currently there is very little use of
security-based swaps by non-financial entities that would be eligible
to use the end-user clearing exception,\122\ and that the non-financial
entities eligible to invoke the end-user clearing exception and
transacting in security-based swaps would be corporations, partnerships
and trusts with assets in excess of $10 million.\123\ On this basis,
the Commission preliminarily believes that the number of security-based
swap transactions involving a small entity as that term is defined for
purposes of the RFA would be de minimis. Moreover, the Commission does
not believe that any aspect of proposed Rule 3Cg-1 would be likely to
alter the type of counterparties presently engaging in security-based
transactions. Therefore, the Commission preliminarily believes that
proposed Rule 3Cg-1 would have a de minimis impact on small entities.
---------------------------------------------------------------------------

    \121\ 17 CFR 230.157. See also 17 CFR 240.0-10(a).
    \122\ See supra note 73 and accompanying text.
    \123\ The Commodity Futures Modernization Act of 2000 introduced
the concept of ``eligible contract participant'' that the Commission
preliminarily believes is a standard frequently referenced by market
participants and which may act to limit the ability of non-financial
entities with assets less than $10 million to transact in security-
based swaps. See Public Law 106-554, 114 Stat. 2763 (Dec. 21, 2000).
See also Section 1(a)(18) of the Commodity Exchange Act (``CEA''), 7
U.S.C. 1a(18) as re-designated and amended by Section 721 of the
Dodd-Frank Act (defining ``eligible contract participant''). The
Dodd-Frank Act added a definition of eligible contract participant
to the Exchange Act which references the equivalent definition in
the CEA, and created new standards to limit the ability of persons
who are not eligible contract participants to transact in security-
based swaps. See Public Law 111-203, Sec.  761(a) (adding Exchange
Act Section 3(a)(65)). See also Public Law 111-203, Sec.  761(e)
(adding Exchange Act Section 6(l)) (making it unlawful for any
person to effect a transaction in a security-based swap for a person
that is not an eligible contract participant, unless such
transaction is conducted on a registered national securities
exchange).
---------------------------------------------------------------------------

    For the foregoing reasons, the Commission certifies that Rule 3Cg-1
would not have a significant economic impact on a substantial number of
small entities for purposes of the RFA. The Commission encourages
written comments regarding this certification. The Commission requests
that commenters describe the nature of any impact on small entities and
provide empirical data to support the extent of the impact.

X. Statutory Basis and Text of Proposed Rule

    Pursuant to the Exchange Act and particularly Section 3C thereof,
the Commission proposes new Rule 3Cg-1, as set forth below, governing
the exception to mandatory clearing of security-based swaps established
by Exchange Act Section 3C(g).

List of Subjects in 17 CFR Part 240

    Reporting and recordkeeping requirements, Securities.

Text of the Proposed Rule

    In accordance with the foregoing, Title 17, Chapter II of the Code
of Federal Regulations, is proposed to be amended as follows.

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

    1. The authority citation for part 240 is amended by adding the
following citation in numerical order to read as follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i,
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78o-4, 78p, 78q, 78s,
78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3,
80b-4, 80b-11, and 7201 et seq.; 18 U.S.C. 1350; and 12 U.S.C.
5221(e)(3), unless otherwise noted.

* * * * *
    Section 240.3Cg-1 is also issued under Public Law 111-203, Sec.
763, 124 Stat. 1841 (2010).
* * * * *

    2. Add Sec.  240.3Cg-1 to read as follows:

Sec.  240.3Cg-1  Notice to the Commission [and Financial Entity
Exemption].

    (a) A counterparty to a security-based swap that invokes the
clearing exception under Section 3C(g)(1) of the Act (15 U.S.C. 78c-
3(g)(1)) shall satisfy the requirements of Section 3C(g)(1)(C) of the
Act (15 U.S.C. 78c-3(g)(1)(C)) by delivering or causing to be delivered
the following additional information to a registered security-based
swap data repository (or, if none is available, to the Commission) in
the form and manner required for delivery of the information separately
specified under Sec.  242.901(d) of Regulation SBSR of this chapter:
    (1) The identity of the counterparty relying on the clearing
exception;
    (2) Whether the counterparty invoking the clearing exception is a
``financial entity'' as defined in Section 3C(g)(3) of the Act (15
U.S.C. 78c-3(g)(3));
    (3) Whether the counterparty invoking the clearing exception is a
finance affiliate meeting the requirements described in Section
3C(g)(4) of the Act (15 U.S.C. 78c-3(g)(4));
    (4) Whether the security-based swap is used by the counterparty
invoking the clearing exception to hedge or mitigate commercial risk as
defined in Sec.  240.3a67-4 of this chapter;
    (5) Whether the counterparty invoking the clearing exception
generally expects to meet its financial obligations associated with the
security-based swap by using any of the following:
    (i) A written credit support agreement;
    (ii) A written agreement to pledge or segregate assets;
    (iii) A written third-party guarantee;
    (iv) Solely the counterparty's available financial resources; or
    (v) Means other than those described in paragraphs (a)(5)(i), (ii),
(iii), and (iv) of this section;
    (6) Whether the counterparty invoking the clearing exception is an
issuer of securities registered under Section 12 (15 U.S.C. 78l) or
subject to reporting requirements pursuant to Section 15(d) (15 U.S.C.
78o(d)) of the Act, and if so:
    (i) The relevant Commission Central Index Key number for the
counterparty invoking the clearing exception; and
    (ii) Whether an appropriate committee of the board of directors (or
equivalent body) of the counterparty invoking the clearing exception
has reviewed and approved the decision to enter into a security-based
swap subject to the clearing exception.

Additional Rule Text Under Consideration by the Commission

    (b) For purposes of Section 3C(g)(1)(A) of the Act (15 U.S.C. 78c-
3(g)(1)(A)), any person specified in paragraph (c) of this section that
would be a financial entity within the meaning of the term in Section
3C(g)(3)(A) of the Act (15 U.S.C. 78c-3(g)(3)(A)) solely because of
Section 3C(g)(3)(A)(viii) of the Act (15 U.S.C. 78c-3(g)(3)(A)(viii))
shall be exempt from the definition of financial entity.
    (c) A person shall be eligible for the exemption in paragraph (b)
of this section if such person:
    (1) Is organized as a bank, as defined in Section 3(a)(6) of the
Act (15 U.S.C. 78c), the deposits of which are insured by the Federal
Deposit Insurance Corporation, a savings association, as defined in
section 3(b) of the Federal Deposit Insurance Act (12 U.S.C. 1831), the
deposits of which are insured by the Federal Deposit Insurance
Corporation, a farm credit system institution chartered under the Farm
Credit Act of 1971 (12 U.S.C. 2001), or an insured Federal credit union
or State-chartered credit union under the Federal Credit Union Act (12
U.S.C. 1752); and
    (2) Has total assets of $10,000,000,000 or less on the last day of
the most recent fiscal year.

    By the Commission.

    Dated: December 15, 2010.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-31973 Filed 12-20-10; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 78, Number 96 (Friday, May 17, 2013)]
[Notices]
[Pages 29145-29147]
[FR Doc No: 2013-11867]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

[Docket No. USCG-2013-0339]

Request for Public Comment on New Proposed Categorical Exclusion
for Real Property Disposal Under the National Environmental Policy Act

AGENCY: Coast Guard, DHS.

ACTION: Notice of availability and request for comments.

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SUMMARY: This is a notice and request for comments on a Proposed New
Categorical Exclusion for Real Property Disposal. This proposal would
amend the Coast Guard Commandant Instruction and Department of Homeland
Security Directive used to comply with the National Environmental
Policy Act by establishing a new categorical exclusion (CATEX) for real
property disposal undertaken by the United States Coast Guard. The
Coast Guard seeks comments on this proposed CATEX.

DATES: Comments and related material must either be submitted to our
online docket via http://www.regulations.gov on or before June 17, 2013
or reach the Docket Management Facility by that date.

ADDRESSES: You may submit comments identified by docket number USCG-
2013-0339 using any one of the following methods:
    (1) Federal eRulemaking Portal: http://www.regulations.gov.
    (2) Fax:<PHONE_NUMBER>.
    (3) Mail: Docket Management Facility (M-30), U.S. Department of
Transportation, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC 20590-0001.
    (4) Hand delivery: Same as mail address above, between 9 a.m. and 5
p.m., Monday through Friday, except Federal holidays. The telephone
number is<PHONE_NUMBER>.
    To avoid duplication, please use only one of these four methods.
See the ``Public Participation and Request for Comments'' portion of
the SUPPLEMENTARY INFORMATION section below for instructions on
submitting comments.

FOR FURTHER INFORMATION CONTACT: If you have questions on this notice,
call or email Ms. Kebby Kelly, United States Coast Guard Office of
Environmental Management; telephone<PHONE_NUMBER>, email
<EMAIL_ADDRESS>If you have questions on viewing or submitting
material to the docket, call Barbara Hairston, Program Manager, Docket
Operations, telephone<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Public Participation and Request for Comments

    We encourage you to submit comments and related material on the
proposed new Coast Guard Categorical Exclusion (CATEX) for real
property disposal. All comments received will be posted without change
to http://www.regulations.gov and will include any personal information
you have provided.
    Submitting comments: If you submit a comment, please include the
docket number for this notice (USCG-2013-0339) and provide a reason for
each suggestion or recommendation. You may submit your comments and
material online, or by fax, mail or hand delivery, but please use only
one of these means. We recommend that you include your name and a
mailing address, an email address, or a telephone number in the body of
your document so that we can contact you if we have questions regarding
your submission.
    To submit your comment online, go to http://www.regulations.gov,
insert (USCG-2013-0339) in the Search box, look for this notice in the
docket and click the comment button next to it. If

you submit your comments by mail or hand delivery, submit them in an
unbound format, no larger than 8\1/2\ by 11 inches, suitable for
copying and electronic filing. If you submit them by mail and would
like to know that they reached the Facility, please enclose a stamped,
self-addressed postcard or envelope. We will consider all comments and
material received during the comment period.
    Viewing comments and supporting material: To view comments, go to
http://www.regulations.gov, insert (USCG-2013-0339) in the Search box,
then click on the ``Open Docket Folder'' option. If you do not have
access to the internet, you may view the docket by visiting the Docket
Management Facility in Room W12-140 on the ground floor of the
Department of Transportation West Building, 1200 New Jersey Avenue SE.,
Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays. We have an agreement with the Department of
Transportation to use the Docket Management Facility.

Privacy Act

    Anyone can search the electronic form of comments received into 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 a Privacy Act notice
regarding our public dockets in the January 17, 2008, issue of the
Federal Register (73 FR 3316).

Background

    The Coast Guard has determined that a new CATEX is needed to cover
two new real property disposal authorities specific to the Coast Guard.
In the past, the Coast Guard exclusively used the process established
by the General Services Administration (GSA) to dispose of excess real
property, unless specifically directed otherwise by Congress. Because
the Coast Guard previously worked through the GSA for property
disposal, the GSA was able to use its CATEX to fulfill obligations
under the National Environmental Policy Act (NEPA). Recently, Congress
passed two pieces of legislation that directly authorize DHS and the
Coast Guard to dispose of real property through sale and keep the
proceeds for use in specific Coast Guard programs.
    Specifically, the Coast Guard has been granted authority to dispose
of property previously used for Long Range Navigation (Loran-C)
equipment. The Coast Guard has also been granted the authority to
dispose of real property in order to pay for military family and
military unaccompanied housing projects. The Coast Guard seeks to add a
CATEX that contains the same language as the GSA's CATEX that will
allow the Coast Guard to satisfy its NEPA obligations when disposing of
excess real property.
    The Department of Homeland Security Appropriations Act, 2010 (Pub.
L. 111-83), authorizes the Coast Guard to sell any real and personal
property under the administrative control of the Coast Guard and used
for the Loran-C system, by directing the Administrator of GSA to sell
such real and personal property. This is allowed, provided that the
proceeds, less the costs of sale incurred by the GSA, shall be
deposited as offsetting collections into the ``Coast Guard
Environmental Compliance and Restoration'' account and, subject to
appropriation, shall be available until expended for environmental
compliance and restoration purposes associated with the Loran-C system.
    Additionally, Congress passed 14 U.S.C. 685, Conveyance of Real
Property (January 7, 2011), which states that notwithstanding any other
provision of law, the Secretary of the respective department in which
the Coast Guard is operating (Secretary) may convey, at fair market
value, real property, owned or under the administrative control of the
Coast Guard, for the purpose of expending the proceeds from such
conveyance to acquire and construct military family housing and
military unaccompanied housing. The conveyance of real property under
this section shall be by sale, for cash. The Secretary shall deposit
the proceeds from the sale in the Coast Guard Housing Fund.
    This proposal is to add the following Coast Guard-specific CATEX to
the existing list of CATEXs published in Coast Guard Commandant
Instruction 16475.1D, National Environmental Policy Act Implementing
Procedures and Policy for Considering Environmental Impacts, and to the
DHS Environmental Planning Program Directive 023-01 (71 FR 16790):

*[L64] Disposal of real property (including facilities) by the Coast
Guard where the reasonably foreseeable use will not change
significantly or where the reasonably foreseeable use is similar to
existing surrounding properties (e.g. commercial store in a
commercial strip, warehouse in an urban complex, office building in
downtown area, row house or vacant lot in an urban area).

    The asterisk (*) indicates application of this CATEX requires the
completion of an environmental review of the proposed disposal action
documented in a Record of Environmental Consideration to ensure
extraordinary circumstances have been appropriately considered. The
availability of this CATEX does not exempt the applicability of other
environmental requirements such as, but not limited to, section 7 of
the Endangered Species Act, section 106 of the National Historic
Preservation Act, and the Migratory Bird Treaty Act. These requirements
must be met regardless of the applicability of this CATEX under NEPA.
    The Council on Environmental Quality (CEQ) guidance entitled,
``Establishing, Applying, and Revising Categorical Exclusions under the
National Environmental Policy Act'' (February 18, 2010) encourages
agencies to establish new CATEXs and revise existing CATEXs to
eliminate unnecessary paperwork and effort reviewing the environmental
effects of categories of actions that, absent extraordinary
circumstances, do not have significant environmental effects. Without a
CATEX for real property disposal, DHS and the Coast Guard would have to
prepare an Environmental Assessment for every action of this type,
including those that experience has shown do not typically have the
potential for significant environmental impacts. Therefore, DHS and the
Coast Guard need a CATEX for these types of actions that experience has
shown do not have significant environmental impacts in order to carry
out its new legislative authorities in a timely and efficient manner.
    The CEQ guidance also states that when substantiating a new or
revised CATEX, agencies can draw on several sources of supporting
information. These sources include professional staff and expert
opinion and benchmarking other agencies' experiences. Through a review
of other agencies' NEPA procedures, the Coast Guard and DHS found that
numerous other Federal agencies have CATEXs for real property disposal
activities that are sufficiently descriptive of the activity as to
establish that those activities were similar in nature, scope, and
impact on the human environment as those real property disposals that
would be performed by the Coast Guard. In addition, all Federal
agencies, with very few exceptions, must meet the same requirements to
protect the environment.
    Particular agency CATEXs examined by the Coast Guard include those
used by the GSA and the Department of the Army. DHS also received
expert opinions from NEPA practitioners at GSA and the Department of
the Army that supports this proposed new CATEX for the disposal of real
property (including facilities) by the Coast Guard. Descriptions of the
other agency

CATEXs (with hyperlinks) and expert opinions obtained are provided in
the administrative record available at http://www.regulations.gov by
searching docket number USCG-2013-0339.
    This notice is issued under authority of: 5 U.S.C. 552(a); 42
U.S.C. 4321 et seq.; 40 CFR parts 1500-1508; Department of Homeland
Security Management Directive 023-01 Environmental Planning Program;
and United States Coast Guard Commandant Instruction M16475.1D,
National Environmental Policy Act Implementing Procedures and Policy
for Considering Environmental Impacts.

    Dated: May 13, 2013.
J. Smith,
Chief, Office of Environmental Management, U.S. Coast Guard.
[FR Doc. 2013-11867 Filed 5-16-13; 8:45 am]
BILLING CODE 9110-04-P