[Federal Register Volume 81, Number 233 (Monday, December 5, 2016)]
[Notices]
[Page 87637]
[FR Doc No: 2016-29086]

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SECURITIES AND EXCHANGE COMMISSION

Submission for OMB Review; Comment Request

Upon Written Request Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE., Washington, DC
20549-2736

Extension:
    Regulation 12B, SEC File No. 270-70, OMB Control No. 3235-0062

    Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (``Commission'') has submitted to the Office of Management
and Budget this request for extension of the previously approved
collection of information discussed below.
    Regulation 12B (17 CFR 240.12b-1 through 12b-37) under the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) (``Exchange
Act'') includes rules governing the registration and periodic reporting
under Sections 12(b), 12(g), 13, and 15(d) (15 U.S.C. 78l(b), 78l(g),
78m and 78o(d)) of the Exchange Act. The purpose of the regulation is
set forth guidelines for the uniform preparation of Exchange Act
registration statement and reports. All information is provided to the
public for review. The information required is filed on occasion and it
is mandatory. Regulation 12B is assigned one burden hour for
administrative convenience because the regulation simply prescribes the
disclosure that must appear in other filings under the federal
securities laws.
    An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid control number.
    The public may view the background documentation for this
information collection at the following Web site, www.reginfo.gov.
Comments should be directed to: (i) Desk Officer for the Securities and
Exchange Commission, Office of Information and Regulatory Affairs,
Office of Management and Budget, Room 10102, New Executive Office
Building, Washington, DC 20503, or by sending an email to:
<EMAIL_ADDRESS>and (ii) Pamela Dyson, Director/Chief
Information Officer, Securities and Exchange Commission, c/o Remi
Pavlik-Simon, 100 F Street NE., Washington, DC 20549 or send an email
to<EMAIL_ADDRESS>Comments must be submitted to OMB within 30
days of this notice.

    Dated: November 23, 2016.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-29086 Filed 12-2-16; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: December 26, 2006 (Volume 71, Number 247)]
[Proposed Rules]
[Page 77550-77556]
[DOCID:fr26de06-23]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

[Release No. 34-54947; File No. S7-23-06]
RIN 3235-AJ77

Exemptions for Banks Under Section 3(a)(5) of the Securities
Exchange Act of 1934 and Related Rules

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities and Exchange Commission is publishing for
comment proposed rules and rule amendments regarding exemptions from
the definitions of ``broker'' and ``dealer'' under the Securities
Exchange Act of 1934 (``Exchange Act'') for banks'' securities
activities. In particular, the Commission is re-proposing a conditional
exemption originally proposed in 2004 that would allow banks to effect
riskless principal transactions with non-U.S. persons pursuant to
Regulation S under the Securities Act of 1933 (``Securities Act''). The
Commission also is proposing to amend and redesignate an existing
exemption from the definition of ``dealer'' for banks' securities
lending activities as a conduit lender. In addition, the Commission is
proposing to amend a rule that grants a limited exemption from U.S.
broker-dealer registration for foreign broker-dealers, conforming the
rule to amended definitions of ``broker'' and ``dealer'' under the
Exchange Act. Finally, the Commission is requesting comment on its
intention to withdraw a rule defining the term ``bank'' for purposes of
Sections 3(a)(4) and 3(a)(5) of the Exchange Act, because of judicial
invalidation, a time-limited exemption for banks' securities
activities, because of the passage of time, and an exemption from the
definition of ``broker'' and ``dealer'' for savings associations and
savings banks, an exemption no longer necessary because of the passage
of the Regulatory Relief Act.

DATES: Comments should be received on or before March 26, 2007.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments:

     Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml.
); or     Send an e-mail to<EMAIL_ADDRESS>Please include

File Number S7-23-06 on the subject line.

Paper Comments

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

All submissions should refer to File Number S7-23-06. This file number
should be included on the subject line if e-mail is used. To help us
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/proposed.shtml). Comments

are also

available for public inspection and copying in the Commission's Public
Reference Room, 100 F Street, NE., Washington, DC 20549. All comments
received will be posted without change; we do not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Catherine McGuire, Chief Counsel;
Linda Stamp Sundberg, Senior Special Counsel, at<PHONE_NUMBER>, Office
of the Chief Counsel, Division of Market Regulation, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission is
requesting public comment on proposed Rules 3a5-2, 3a5-3, and 15a-6
under the Exchange Act.

Table of Contents

I. Introduction and Background
II. The Proposed Rules and Rule Amendments
    A. Regulation S Transactions with Non-U.S. Persons
    B. Amendment to Exchange Act Rule 15a-6
    C. Securities Lending by Bank Dealers
    D. Proposed Withdrawal of Exchange Act Rule 3b-9, Rule 15a-8,
and Rule 15a-9
III. Administrative Law Matters
    A. General Request for Comments
    B. Paperwork Reduction Act Analysis
    C. Consideration of Benefits and Costs
    D. Consideration of Burden on Competition, and on Promotion of
Efficiency, Competition, and Capital Formation
    E. Consideration of Impact on the Economy
    F. Regulatory Flexibility Analysis
IV. Statutory Authority
V. Text of Proposed Rules and Rule Amendments

I. Introduction and Background

    Today, the Commission and the Board of Governors of the Federal
Reserve System (``Board'') are requesting comment on jointly proposed
rules to implement the broker exceptions for banks relating to third-
party networking arrangements, trust and fiduciary activities, sweep
activities, and safekeeping and custody activities.\1\
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    \1\ Exchange Act Release No. 54946 (Dec. 18, 2006) (``Joint
Proposal'').
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    The proposals in this release are intended to complement the Joint
Proposal.\2\ In particular, we re-propose (and propose to redesignate
as Rule 3a5-2) a conditional exemption from the definition of dealer
for banks to purchase from and sell to non-U.S. persons offerings in
securities exempt under Regulation S.\3\ In addition, we propose a
clarifying amendment to Exchange Act Rule 15a-6,\4\ which provides a
conditional exemption from U.S. broker-dealer registration for certain
foreign broker-dealers. This amendment would conform the language of
Rule 15a-6 to more closely track the statutory changes made by the
GLBA. We also propose to redesignate as new Rule 3a5-3 existing Rule
15a-11 and to amend this exemption from the definition of dealer for
banks' conduit securities lending activities. Finally, we propose to
withdraw Exchange Act Rule 3b-9,\5\ in which the Commission defined the
term ``bank'' for purposes of Sections 3(a)(4) \6\ and 3(a)(5) \7\ of
the Exchange Act, due to judicial invalidation, Exchange Act Rule 15a-
8,\8\ a time-limited exemption for banks' securities activities,
because of the passage of time, and Exchange Act Rule 15a-9,\9\ an
exemption from the definitions of ``broker'' and ``dealer'' for savings
associations and savings banks, an exemption no longer necessary after
passage of the Regulatory Relief Act.
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    \2\ On May 11, 2001, the Commission adopted interim final rules
(``the Interim Rules'') regarding the Gramm-Leach-Bliley Act
(``GLBA'') definitions of broker and dealer. See Exchange Act
Release No. 44291 (May 11, 2001), 66 FR 27760 (May 18, 2001) (http://www.sec.gov/rules/final/34-44291.htm
). On June 17, 2004, the

Commission proposed Regulation B. See Exchange Act Release No. 49879
(June 17, 2004), 69 FR 39682 (June 30, 2004) (http://www.sec.gov/rules/proposed/34-49879.htm
). Both the Interim Rules as they apply

to the broker activities of banks and Regulation B are superseded by
the current joint rulemaking. The Regulatory Relief Act does not
directly affect the operation of the rules the Commission adopted
concerning banks' dealer activities. See Exchange Act Release No.
47364 (Feb.13, 2003), 68 FR 8686 (Feb. 24, 2003) (http://www.sec.gov/rules/final/34-47364.htm
). However, we are proposing

some limited amendments to separate and redesignate certain rules
that provide exemptions to the definitions of both broker and
dealer.
    \3\ The rule was proposed in 2004 but no further action on the
proposed rule was taken by the Commission.
    \4\ 17 CFR 240.15a-6.
    \5\ 17 CFR 240.3b-9.
    \6\ 15 U.S.C. 78c(a)(4).
    \7\ 15 U.S.C. 78c(a)(5).
    \8\ 17 CFR 240.15a-8.
    \9\ 17 CFR 240.15a-9.
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II. The Proposed Rules and Rule Amendments

A. Regulation S Transactions With Non-U.S. Persons

    In response to an industry request,\10\ the Commission proposed
Exchange Act Rule 771 in 2004.\11\ We are re-proposing at this time the
exemption we proposed in 2004, as applied to banks' dealer activities,
substantially as proposed. As originally proposed, this rule would
provide banks with a conditional exemption from the definition of
``dealer'' to engage in transactions with non-U.S. persons pursuant to
Regulation S under the Securities Act of 1933.\12\ In particular, a
bank could purchase and sell ``eligible securities'' \13\ to offshore,
non-U.S. persons on a ``riskless principal'' basis.\14\ A bank could
also resell any eligible Regulation S security, after its purchase and
after its initial issuance, to a non-U.S. person as long as the bank
continues to comply with the requirements of Regulation S.\15\ After
the requirements of Regulation S cease to apply to an issuance, a bank
could resell such a security to another non-U.S. person or a broker-
dealer, as long as the transaction complies with another bank broker or
dealer exception or exemption.
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    \10\ See letter dated May 27, 2004, from Lawrence R. Uhlick,
Executive Director and General Counsel, Institute of International
Bankers to Catherine McGuire, Chief Counsel, Division of Market
Regulation, Securities and Exchange Commission (http://www.sec.gov/rules/proposed/s72604.shtml
). Regulation S [17 CFR 230.901, et seq.]

specifies the requirements for an offer or sale of securities to be
deemed to occur outside the United States and therefore not subject
to the registration requirements of Section 5 of the Securities Act.
Regulation S permits the sale of newly issued off-shore securities
and re-sales of off-shore securities from a non-U.S. person to a
non-U.S. person.
    \11\ See Exchange Act Release No. 49879, supra note 2. The
Commission originally proposed this exemption to cover both a banks'
broker and dealer securities activities. The Commission and the
Board are jointly are re-proposing this exemption for banks' broker
activities in response to passage of the Financial Services
Regulatory Relief Act of 2006, Pub. L. 109-351, 120 Stat. 1966
(2006) (``Regulatory Relief Act''), which requires a joint proposal
and provides that the final rules will supersede the existing bank
broker rules. See text at note 36 infra.
    \12\ Persons that conduct a broker or dealer business while
located in the United States must register as broker-dealers (absent
an exemption), even if they direct all of their selling efforts
offshore. Exchange Act Release No. 27017 (July 11, 1989), 54 FR
30013, 30016 (July 19, 1989). Nothing in proposed Rule 771 would
affect the necessity of complying with Regulation S (17 CFR 230.904)
or any other requirements of or exemptions from the Securities Act.
Since the original proposal covered both agency and riskless
principal transactions, an exemption for agency (brokerage)
transactions is being separately proposed as a part of the Joint
Proposal.
    \13\ Proposed Rule 771 would define an ``eligible security'' as
a security not being sold from the inventory of the bank or an
affiliate of the bank, and not being underwritten by the bank or an
affiliate of the bank on a firm-commitment basis unless the bank
acquired the security from an unaffiliated distributor that did not
purchase the security from the bank or a bank affiliate.
    \14\ Proposed Rule 771 would define a ``riskless principal
transaction'' as a transaction in which, after receiving an order to
buy from a customer, the bank purchased the security from another
person to offset a contemporaneous sale to such customer or, after
having received an order to sell from a customer, the bank sold the
security to another person to offset a contemporaneous purchase from
such customer.
    \15\ Rule 904 of Regulation S (17 CFR 230.904).
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    In explaining the need for an exemption, the industry group
expressed the view to the Commission

staff that non-U.S. persons expect to deal with one private banker, and
that these customers would not choose to deal with a registered broker-
dealer to conduct securities transactions in Regulation S securities,
but would instead look to foreign banks to effect these transactions.
    We are re-proposing this exemption for the same reasons we proposed
it in 2004. In proposing this exemption, we noted that the limited
conditions in the proposed rule reflected our belief that non-U.S.
persons generally will not be relying on the protections of the U.S.
securities laws when purchasing Regulation S securities from U.S.
banks.\16\ By their terms, these securities are not intended to be sold
within the U.S. We also expressed our understanding that non-U.S.
persons can purchase the same securities from banks located outside of
the U.S. We invited comment on whether U.S. broker-dealer registration
should be required with respect to transactions with these non-U.S.
persons who are purchasing new offering securities offshore, or may be
selling or purchasing seasoned securities.
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    \16\ Exchange Act Release No. 49879, supra note 2, 69 FR 39720.
We also explained that although we generally believe that U.S.
broker-dealers should be subject to the same standards of conduct
when dealing with non-U.S. persons, this principle is less
compelling when the foreign person has chosen to deal with a U.S.
bank with respect to Regulation S securities that are designed to be
sold to non-U.S. persons offshore.
    Moreover, while no rules have been adopted, the exemption
provided by Exchange Act Section 30(b), concerning foreign
securities, has been held unavailable if the United States is used
as a base for securities fraud perpetrated on foreigners, Arthur
Lipper Corp. v. SEC, 547 F.2d 171 (2d Cir. 1976), reh. denied, 551
F.2d 915 (2d Cir. 1977), cert. denied 434 U.S. 1009.
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    We received few comments on this proposed exemption.\17\ Commenters
generally supported proposed Rule 771, stating that it would allow
banks to compete with foreign banks not subject to Commission
regulation.\18\ However, several commenters urged the Commission to
broaden the proposed exemption. For example, one commenter suggested
that the Commission modify the proposed exemption to include
transactions for foreign investors in all securities sold in the United
States.\19\ Two commenters urged the Commission to amend the proposed
definition of ``eligible security'' to eliminate the restriction on
banks' selling securities from the inventory of affiliates or those
underwritten by affiliates.\20\ Two commenters suggested that the
Commission expand the exemption to cover all secondary market trading
with offshore persons in any ``foreign securities'' not effected on a
U.S. exchange or Nasdaq, stating that it is burdensome for a bank to
determine whether a security was initially sold in compliance with
Regulation S.\21\ One commenter also stated that to the extent the
proposed rule requires a bank to make any determination or conduct any
investigation of the way in which a security was initially offered, the
rule should only require the bank to have a ``reasonable belief'' that
the eligible security was initially sold in compliance with Regulation
S.\22\ In this commenter's view, a bank may not have direct access to
all of the information necessary to determine whether a security was
initially offered under Regulation S or part of a class that was
offered under Regulation S.\23\
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    \17\ See, e.g., letter dated September 1, 2004 from Jeffrey P.
Neubert, President and CEO, the Clearing House (``Clearing House
letter''); letter dated September 1, 2004 from Lawrence R. Uhlick,
Executive Director and Chief Counsel, Institute of International
Bankers (``IIB letter''); letter dated September 1, 2004 from
Agustin Abalo, President, Florida International Bankers Association,
Inc. (``FIBA letter''); letter dated September 1, 2004 from Sarah A.
Miller, Director, Center for Securities, Trust and Investment,
American Bankers Association and General Counsel, ABA Securities
Association (``ABA/ABASA letter''); and letter dated September 1,
2004 from Charles C. Cutrell, III, Executive Vice President and
General Counsel, State Street Bank and Trust Company (``State Street
letter'').
    \18\ See, e.g., Clearing House letter, IIB letter.
    \19\ State Street letter.
    \20\ See Clearing House letter; ABA/ABASA letter.
    \21\ IIB letter, FIBA letter.
    \22\ IIB letter.
    \23\ IIB letter. This commenter noted, however, that a bank may
be able to obtain certain information regarding the security from
third party information vendors or may need to rely on information
statements or offering memoranda, filings, or other third-party
sources to determine how the security was offered. This commenter
said that the bank's exemption should not be jeopardized if this
information is inaccurate or misleading as long as the bank had a
reasonable belief that the information upon which it was relying was
accurate and complete.
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    After carefully considering the comments, we are proposing the
exemption for banks' riskless principal transactions in Regulation S
securities, as new Rule 3a5-2, substantially as initially proposed.
This proposed rule, however, incorporates the reasonable belief
standard suggested by one of the commenters because we are persuaded
that a bank should not suffer the loss of the exemption when due care
is taken to identify the source of a security, even if an error in the
identification occurs.\24\ We request comment on all aspects of
Proposed Rule 3a5-2.
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    \24\ In addition to adding the reasonable belief standard, the
re-proposal includes some non-substantive clarifying changes to the
text of the rule as proposed in 2004.
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B. Amendment to Exchange Act Rule 15a-6

    In 2004, the Commission also proposed a clarifying amendment to
Exchange Act Rule 15a-6, which provides a conditional exemption from
U.S. broker-dealer registration for certain foreign broker-dealers.\25\
Exchange Act Rule 15a-6(a)(4)(i) allows a foreign broker-dealer,
without registering in the United States, to effect transactions in
securities with or for a U.S.-registered broker-dealer or bank acting
``in a broker-dealer capacity as permitted by U.S. law.'' \26\ Thus, in
transactions between a U.S. bank and its foreign broker-dealer
affiliate, acting as principal, the U.S. bank could rely on the
affiliate transactions exception in the GLBA,\27\ and the foreign
affiliate could rely on Rule 15a-6(a)(4)(i). As the Commission
explained in 2001, however, Exchange Act Rule 15a-6(a)(4)(i) does not
permit a foreign broker-dealer or bank to have direct contact with
customers of the U.S. bank.\28\ Moreover, the GLBA affiliate
transactions exception from the definition of broker for banks would
not permit the U.S. bank to effect transactions with the bank's foreign
affiliate's customers.\29\ We received no comments on our 2001
discussion of the interplay between Exchange Act Rule 15a-6 and the
affiliate transactions exemption and we are taking the same approach in
the current proposal.
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    \25\ Even when the GLBA permits a bank to engage in securities-
related activities without itself registering as a broker-dealer, a
broker-dealer engaged in the business of effecting transactions for
such bank still must register--absent an exemption or other
exclusion from the broker-dealer registration requirements of the
Exchange Act. For instance, a foreign broker-dealer that executes
trades for a bank under Exchange Act Section 3(a)(4)(C) would need
to register as a U.S. broker-dealer if it does not meet the
conditions of Exchange Act Rule 15a-6, or it does not otherwise
qualify for an exemption from registration. Foreign banks cannot
rely on the GLBA bank exceptions because they do not meet the
definition of ``bank'' in Exchange Act Section 3(a)(6). However,
U.S. branches and agencies of foreign banks would meet the
definition of bank. See Exchange Act Release No. 27017, supra note
12, 54 FR 30015.
    \26\ 17 CFR 240.15a-6(a)(4)(i).
    \27\ 15 U.S.C. 78c(a)(4)(B)(vi).
    \28\ Exchange Act Release No. 44291, supra note 2.
    \29\ Id. If the Commission were to adopt the exemptions for
Regulation S securities, proposed supra, a bank would be permitted
to sell Regulation S securities to non-U.S. persons, including
customers of a foreign affiliate, as long as it met the conditions
of that exemption.
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    In light of the amended definitions of ``broker'' and ``dealer,''
the Commission proposed an amendment to Exchange Act Rule 15a-6 in
2004.\30\ Currently, Exchange Act Rule 15a-6(a)(4)(i) refers to ``a
bank acting in a broker or dealer

capacity as permitted by U.S. law.'' As amended, however, the
definitions of `broker' and `dealer' in Exchange Act Section 3(a)(4)
and 3(a)(5), respectively, provide that banks engaging in the
activities permitted under the conditional exceptions in those
definitions ``shall not be considered to be'' brokers or dealers. To
reflect this change, we proposed to amend Exchange Act Rule 15a-
6(a)(4)(i) by replacing the phrase ``in a broker or dealer capacity as
permitted by U.S. law'' with the phrase ``pursuant to an exception or
exemption from the definition of `broker' or `dealer' in Sections
3(a)(4)(B) or 3(a)(5)(C) of the Act.'' \31\ We are now proposing to
conform Rule 15a-6 to the changes made by the GLBA by incorporating the
rules applicable to banks' broker and dealer activities as well as the
statutory provisions with the addition of the phrase, ``or the rules
thereunder.'' We are therefore re-proposing this modified clarifying
amendment to Rule 15a-6. We request comment on all aspects of this
proposal.
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    \30\ Release No. 49879, supra note 2.
    \31\ Nothing in this release should be construed as modifying
the Exchange Act Section 3(a)(6) definition of ``bank'' as it
applies to foreign banks. Currently, foreign banks generally would
not meet this definition and would be considered broker-dealers
under the U.S. securities laws. As such, foreign banks generally
would be required to register as U.S. broker-dealers unless they
qualify for an exemption from registration under Exchange Act Rule
15a-6.
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C. Securities Lending by Bank Dealers

    In 2003, the Commission adopted Exchange Act Rule 15a-11, which
provides a conditional exemption from the definitions of both
``broker'' and ``dealer'' for banks engaging in securities lending
transactions.\32\ Rule 15a-11 provides that a bank is exempt from the
definition of ``broker'' and ``dealer'' under Sections 3(a)(4) and
3(a)(5) of the Exchange Act to the extent that, as a conduit
lender,\33\ it engages in securities lending transactions and any
securities lending services in connection with such transactions, with
or on behalf of a person the bank reasonably believes to be: (1) A
qualified investor as defined in Section 3(a)(54)(A) of the Exchange
Act; \34\ or (2) any employee benefit plan that owns and invests, on a
discretionary basis, not less than $25,000,000 in investments.\35\
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    \32\ See Exchange Act Release No. 47364, supra note 2.
    \33\ Under Rule 15a-11 as adopted, as well as under the proposed
amendment, ``conduit lender'' would mean a bank that borrows or
loans securities, as principal, for its own account, and
contemporaneously loans or borrows the same securities, as
principal, for its own account.
    \34\ 15 U.S.C. 78c(a)(54)(A).
    \35\ Under Rule 15a-11 as adopted, as well as under the proposed
amendment, ``securities lending transaction'' would mean a
transaction in which the owner of a security lends the security
temporarily to another party pursuant to a written securities
lending agreement under which the lender retains the economic
interests of an owner of such securities, and has the right to
terminate the transaction and to recall the loaned securities on
terms agreed by the parties. Under the proposal, ``securities
lending services'' would mean: (1) Selecting and negotiating with a
borrower and executing, or directing the execution of, the loan with
the borrower; (2) receiving, delivering, or directing the receipt or
delivery of loaned securities; (3) receiving, delivering, or
directing the receipt or delivery of collateral; (4) providing mark-
to-market, corporate action, recordkeeping or other services
incidental to the administration of the securities lending
transaction; (5) investing, or directing the investment of, cash
collateral; or (6) indemnifying the lender of securities with
respect to various matters.
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    As explained in the Joint Proposal, the exemption as applied to
banks' broker activities was voided by the Regulatory Relief Act. The
Commission and the Board are proposing to reinstate--as Rule 772--this
exemption with respect to the definition of ``broker'' in the Joint
Proposal.\36\ We are proposing in this release to redesignate what was
Rule 15a-11 as Rule 3a5-3 and to amend former Rule 15a-11 to eliminate
its applicability to a bank's ``broker'' activities, while proposing to
maintain its ongoing availability for a bank's ``dealer'' activities.
We request comment on all aspects of these changes.
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    \36\ As applicable to banks' broker activities, the Rule 15a-11
exemption was never operable because of the temporary exemption
applicable to all bank broker activities.
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D. Proposed Withdrawal of Exchange Act Rule 3b-9, Rule 15a-8, and Rule
15a-9

    We intend to withdraw Exchange Act Rule 3b-9, in which the
Commission defined the term ``bank'' for purposes of Section 3(a)(4)
and 3(a)(5) of the Exchange Act. Rule 3b-9 was invalidated by the U.S.
Court of Appeals for the District of Columbia Circuit.\37\ We also
intend to withdraw Rule 15a-8, which provided a temporary exemption
from Exchange Act Section 29 liability for banks' securities
activities. This exemption expired. In addition, we intend to withdraw
Rule 15a-9, an exemption from the definition of ``broker'' and
``dealer'' for savings associations and savings banks. The Regulatory
Relief Act caused savings associations and savings banks to be treated
as ``banks,'' eliminating the need to differentiate between these
entities for the purposes of the Exchange Act. As a result, current
Rule 15a-9 is no longer necessary. We request comment on all aspects of
withdrawing Rule 3b-9, Rule 15a-8, and Rule 15a-9.
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    \37\ American Bankers Association v. SEC, 804 F.2d 739 (1986).
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III. Administrative Law Matters

A. General Request for Comments

    Interested persons are invited to submit written data, views and
arguments concerning this proposal. The Commission will consider the
comments we previously received. Commenters may reiterate or cross-
reference previously submitted comments.

B. Paperwork Reduction Act Analysis

    These proposed amendments to two rules and this re-proposal of a
new rule would not impose recordkeeping or information collection
requirements, or other collections of information that require approval
of the Office of Management and Budget under 44 U.S.C. 3501, et seq.
Accordingly, the Paperwork Reduction Act does not apply.\38\
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    \38\ We note that, as a practical matter, banks likely already
keep records that could be used to show they meet the terms of the
proposed exemption. We also note that Section 203 of the GLBA
specifically requires the bank regulators to promulgate
recordkeeping requirements.
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C. Consideration of Benefits and Costs

    We believe that these two proposed rule amendments and the re-
proposal of a new rule would be consistent with Congress's intent in
enacting the GLBA and would provide banks with greater legal certainty
regarding their conduct with respect to securities transactions. The
rule amendments and the re-proposal are very limited in scope. The
Commission is re-proposing an exemption that would permit banks to
purchase from and sell to non-U.S. persons securities exempt under
Regulation S. The proposed rule would facilitate banks' compliance with
the federal securities laws and provide banks greater legal certainty
regarding such conduct. The proposed addition of the reasonable belief
standard would prevent banks from losing the exemption due to
inadvertent errors in identifying the source of securities sold under
the exemption, so long as the other conditions of the rule were met. We
do not expect banks to incur any costs related to the re-proposal. The
proposed clarifying amendment to Exchange Act Rule 15a-6 would conform
the rule to the revised statutory definition of ``broker'' and
``dealer'' under the Exchange Act as well as to the rules adopted
thereunder. With regard to securities lending activities, the
Commission proposes to amend existing Exchange Act Rule 15a-11, and to
redesignate it as Rule 3a5-3, to

eliminate the rule's reference to banks' ``broker'' activities, and to
clarify the rule's continued availability for banks' ``dealer''
activities. We do not expect banks to incur any costs related to these
proposed amendments. The proposed withdrawal of Exchange Act Rules 3b-9
and 15a-8 reflects the invalidation of Rule 3b-9 by the U.S. Court of
Appeals for the District of Columbia Circuit,\39\ and the expiration of
the 15a-8 exemption, respectively. Similarly, the proposed withdrawal
of Exchange Act Rule 15a-9 is proposed because the exemption is no
longer necessary after passage of the Regulatory Relief Act.
Withdrawing these rules would provide administrative certainty and
clarity, as rules no longer in effect would be removed from the Code of
Federal Regulations. The withdrawals are administrative in effect, and
thus would impose no costs. We request comments generally on the costs
and benefits associated with the re-proposal, the proposed amendments,
and the proposed rule withdrawals.
---------------------------------------------------------------------------

    \39\ See text at note 37 supra.
---------------------------------------------------------------------------

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

    In accordance with our responsibilities under Section 3(f) of the
Exchange Act,\40\ we have considered both the protection of investors
and whether these rule amendments and the re-proposal would promote
efficiency, competition, and capital formation and have determined that
they are consistent with the public interest.\41\ In addition, Section
23(a)(2) of the Exchange Act requires us, in adopting rules under the
Exchange Act, to consider the anticompetitive effects of such rules, if
any, and to refrain from adopting a rule that will impose a burden on
competition not necessary or appropriate in furthering the purpose of
the Exchange Act.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78w(a)(2). ``Whenever pursuant to this title the
Commission is engaged in rulemaking * * * and is required to
consider or determine whether an action is necessary or appropriate
in the public interest, the Commission shall also consider, in
addition to the protection of investors, whether the action will
promote efficiency, competition, and capital formation.''
    \41\ 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    We do not believe that the amendments and the re-proposal, as well
as the elimination of Rules 3b-9, 15a-8, and 15a-9, would result in any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Exchange Act. The proposed
amendments and the re-proposal would provide guidance to banks
regarding the scope of exceptions added to the Exchange Act by Congress
in the GLBA. The rule amendments and re-proposal also would not impose
any additional competitive burdens on banks engaging in a securities
business, other than those imposed by Congress through functional
regulation in the GLBA. Further, the proposed elimination of Rules 3b-
9, 15a-8, and 15a-9 is administrative in nature.
    Because the types of activities that are the subject of these
amendments are not the types of activities in which small banks or
small broker-dealers directly participate, there should be no
competitive costs to small banks or small broker-dealers.
    We do not believe that those rules impose any adverse effects on
efficiency, competition, or capital formation that are not a
consequence of the GLBA statutory provisions. The exemptive rules would
make it easier for banks to conduct their securities lending and sales
of Regulation S securities after the GLBA changes to the federal
securities laws. These proposed rules also would give banks enhanced
legal certainty for these securities activities. We do not believe that
those rules impose any adverse effects on efficiency, competition, or
capital formation that are not a result of the GLBA statute. When
Congress passed the GLBA, it effectively determined that regulation of
banks conducting a securities operation outside of certain exceptions
was necessary, appropriate, and in the public interest. Further, we
believe that the proposed elimination of Rules 3b-9, 15a-8, and 15a-9
would not have any impact on efficiency, competition, or capital
formation.
    The Commission requests comment on whether the proposed amendments
would promote efficiency, competition, and capital formation. The
Commission is particularly interested in hearing whether the existence
of any of the proposed bank exemptions would have a negative impact on
competition. Please provide detailed information and data on exactly
how banks and broker-dealers compete and how the particular exemptions
would impact broker-dealers' business.

E. Consideration of Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996, or ``SBREFA,'' \42\ the Commission must advise the Office
of Management and Budget as to whether the proposed amendments and the
re-proposal constitute a ``major'' rule. Under SBREFA, a rule is
considered ``major'' where, if adopted, it results or is likely to
result in: An annual effect on the economy of $100 million or more
(either in the form of an increase or a decrease); a major increase in
costs or prices for consumers or individual industries; or a
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. We request comment on the
potential impact of the proposed amendments, the re-proposal, and the
rule withdrawals on the economy on an annual basis. Commenters are
requested to provide empirical data and other factual support for their
views to the extent possible.
---------------------------------------------------------------------------

    \42\ Pub. L. 104-121, Title II, 110 Stat. 857 (1996) (codified
in various sections of 5 U.S.C., 15 U.S.C. and as a note to 5 U.S.C.
601).
---------------------------------------------------------------------------

F. Regulatory Flexibility Analysis

    The Commission has prepared an Initial Regulatory Flexibility
Analysis (``IRFA''), in accordance with the provisions of the
Regulatory Flexibility Act (``RFA''),\43\ regarding the proposed
amendments and the re-proposal.
---------------------------------------------------------------------------

    \43\ 5 U.S.C. 603.
---------------------------------------------------------------------------

1. Reasons for the Proposed Action
    The Commission is proposing the amendments to address issues raised
by the passage of the GLBA and the Regulatory Relief Act. In addition,
the exemption in proposed Rule 3a5-2 is being re-proposed to permit
banks to purchase from and sell to non-U.S. persons securities exempt
under Regulation S. Finally, we are proposing the elimination of Rules
3b-9, 15a-8, and 15a-9 for administrative clarity and in conformance
with the Regulatory Relief Act.
2. Objectives
    The proposed amendments, the re-proposal, and the proposed rule
withdrawals are intended to provide legal certainty to the industry
with respect to the GLBA requirements. The Commission also seeks to
make the restrictions imposed by the GLBA more accommodating of current
securities activities carried out by banks while preserving investor
protection principles.
3. Legal Basis
    Pursuant to the Exchange Act and, particularly, Sections 3(a)(4),
3(b), 15, 17, 23(a), and 36 thereof, the Commission proposes to adopt
the amendments and the re-proposal and to eliminate the obsolete or
unnecessary rules.

4. Small Entities Subject to the Rule
    Congress did not exempt small entity banks from the application of
the GLBA. Moreover, because amendments and the re-proposal are intended
to provide guidance to all banks that are subject to the GBLA, the
Commission determined that it would not be appropriate to exempt small
entity banks from their operation. Therefore, the amendments and the
re-proposal generally apply to banks that would be considered small
entities. Nonetheless, as noted above, the types of activities that are
the subject of the amendments are not the types of activities in which
small banks or small broker-dealers generally directly participate.
5. Reporting, Recordkeeping and Other Compliance Requirements
    The proposed amendments would not impose any new reporting,
recordkeeping, or other compliance requirements on banks that are small
entities.
6. Duplicative, Overlapping, or Conflicting Federal Rules
    The Commission believes that there are no rules that duplicate,
overlap, or conflict with the proposed amendments.
7. Significant Alternatives
    Pursuant to Section 3(a) of the RFA,\44\ the Commission must
consider the following types of alternatives: (a) The establishment of
differing compliance or reporting requirements or timetables that take
into account the resources available to small entities; (b) the
clarification, consolidation, or simplification of compliance and
reporting requirements under the proposed rule for small entities; (c)
the use of performance rather than design standards; and (d) an
exemption from coverage of the proposed rule, or any part thereof, for
small entities.
---------------------------------------------------------------------------

    \44\ 5 U.S.C. 603(c).
---------------------------------------------------------------------------

    As discussed above, the GLBA does not exempt small banks from the
Exchange Act broker-dealer registration requirements, and the
Commission does not believe that an unconditional exemption would be
consistent with the investor protection principles of the GLBA.
Moreover, such an exemption could place broker-dealers at a competitive
disadvantage versus small banks.
    The proposed amendments, the re-proposal and the proposed rule
withdrawals are intended to clarify and simplify compliance with the
GLBA. As such, the proposals should ease compliance on banks of all
sizes, including smaller entities.
    The Commission does not believe that it is necessary to consider
whether small entities should be permitted to use performance rather
than design standards to comply with the proposed amendments because
they already propose performance standards and do not dictate for
entities of any size any particular design standards (e.g., technology)
that must be employed to achieve the objectives of the proposed
amendments.
8. Request for Comments
    The Commission encourages written comments on matters discussed in
the IRFA. In particular, the Commission requests comments on: (a) The
number of small entities that would be affected by the proposed
amendments; (b) the nature of any impact the proposed amendments would
have on small entities and empirical data supporting the extent of the
impact; and (c) how to quantify the number of small entities that would
be affected by and/or how to quantify the impact of the proposed
amendments. Such comments will be considered in the preparation of the
Final Regulatory Flexibility Analysis, if the proposed rule is adopted,
and will be placed in the same public file as comments on the proposed
rule itself. Persons wishing to submit written comments should refer to
the instructions for submitting comments in the front of this release.

IV. Statutory Authority

    Pursuant to authority set forth in the Exchange Act and
particularly Sections 3(a)(4), 3(b), 15, 17, 23(a), and 36 thereof (15
U.S.C. 78c(a)(4), 78c(b), 78o, 78q, 78w(a), and 78mm, respectively) the
Commission proposes to repeal current Rules 3b-9, 15a-8, and 15a-9
(Sec. Sec.  240.3b-9, 240.15a-8, and 240.15a-9, respectively). The
Commission also is re-proposing Exchange Act Rule 3a5-2 (Sec.  240.3a5-
2), proposing to amend Exchange Act Rule 15a-6 (Sec.  240.15a-6), and
proposing to amend and redesignate Exchange Act Rule 15a-11 as Rule
3a5-3 (Sec.  240.15a-11 and Sec.  240.3a5-3, respectively).

V. Text of Proposed Rules and Rule Amendments

List of Subjects in 17 CFR Part 240

    Broker-dealers, Reporting and recordkeeping requirements,
Securities.
    For the reasons set forth in the preamble, 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 continues to read, in part,
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, 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.; and 18 U.S.C. 1350, unless otherwise
noted.
* * * * *
    2. Sections 240.3a5-2 and 240.3a5-3 are added to read as follows:

Sec.  240.3a5-2  Exemption from the definition of ``dealer'' for banks
effecting transactions in securities issued pursuant to Regulation S.

    (a) A bank is exempt from the definition of the term ``dealer''
under section 3(a)(5) of the Act (15 U.S.C. 78c(a)(5)), to the extent
that, in a riskless principal transaction, the bank:
    (1) Sells an eligible security in compliance with the requirements
of 17 CFR 230.903 to a purchaser who is outside of the United States
within the meaning of 17 CFR 230.903 or to a registered broker or
dealer, provided that if the sale is made prior to the expiration of
the distribution compliance period specified in 17 CFR 230.903(b)(2) or
(b)(3), the sale is made in compliance with the requirements of 17 CFR
230.904.
    (2) Purchases from a person who is not a U.S. person under 17 CFR
230.902(k) an eligible security after its initial sale with a
reasonable belief that the eligible security was initially sold outside
of the United States within the meaning of and in compliance with the
requirements of 17 CFR 230.903.
    (3) Purchases from a registered broker or dealer an eligible
security after its initial sale outside of the United States within the
meaning of and in compliance with the requirements of 17 CFR 230.903,
and sells to a purchaser who is outside the United States within the
meaning of 17 CFR 230.903.
    (b) Definitions. For purposes of this section:
    (1) Distributor has the same meaning as in 17 CFR 230.902(d).
    (2) Eligible security means a security that:
    (i) Is not being sold from the inventory of the bank or an
affiliate of the bank; and
    (ii) Is not being underwritten by the bank or an affiliate of the
bank on a firm-commitment basis, unless the bank acquired the security
from an unaffiliated distributor that did not

purchase the security from the bank or an affiliate of the bank.
    (3) Purchaser means a person who purchases an eligible security and
who is not a U.S. person under 17 CFR 230.902(k).
    (4) Riskless principal transaction means a transaction in which,
after having received an order to buy from a customer, the bank
purchased the security from another person to offset a contemporaneous
sale to such customer or, after having received an order to sell from a
customer, the bank sold the security to another person to offset a
contemporaneous purchase from such customer.

Sec.  240.3a5-3  Exemptionfrom the definition of ``dealer'' for banks
engaging in securities lending transactions.

    (a) A bank is exempt from the definition of the term ``dealer''
under section 3(a)(5) of the Act (15 U.S.C. 78c(a)(5)), to the extent
that, as a conduit lender, it engages in or effects securities lending
transactions, and any securities lending services in connection with
such transactions, with or on behalf of a person the bank reasonably
believes to be:
    (1) A qualified investor as defined in section 3(a)(54)(A) of the
Act (15 U.S.C. 78c(a)(54)(A)); or
    (2) Any employee benefit plan that owns and invests, on a
discretionary basis, not less than $25,000,000 in investments.
    (b) Securities lending transaction means a transaction in which the
owner of a security lends the security temporarily to another party
pursuant to a written securities lending agreement under which the
lender retains the economic interests of an owner of such securities,
and has the right to terminate the transaction and to recall the loaned
securities on terms agreed by the parties.
    (c) Securities lending services means:
    (1) Selecting and negotiating with a borrower and executing, or
directing the execution of the loan with the borrower;
    (2) Receiving, delivering, or directing the receipt or delivery of
loaned securities;
    (3) Receiving, delivering, or directing the receipt or delivery of
collateral;
    (4) Providing mark-to-market, corporate action, recordkeeping or
other services incidental to the administration of the securities
lending transaction;
    (5) Investing, or directing the investment of, cash collateral; or
    (6) Indemnifying the lender of securities with respect to various
matters.
    (d) For the purposes of this section, the term conduit lender means
a bank that borrows or loans securities, as principal, for its own
account, and contemporaneously loans or borrows the same securities, as
principal, for its own account. A bank that qualifies under this
definition as a conduit lender at the commencement of a transaction
will continue to qualify, notwithstanding whether:
    (1) The lending or borrowing transaction terminates and so long as
the transaction is replaced within one business day by another lending
or borrowing transaction involving the same securities; and
    (2) Any substitutions of collateral occur.

Sec.  240.3b-9  [Removed and Reserved]

    3. Section 240.3b-9 is removed and reserved.
    4. Section 240.15a-6 is amended by revising paragraph (a)(4)(i) to
read as follows:

Sec.  240.15a-6  Exemption of certain foreign brokers or dealers.

    (a) * * *
    (4) * * *
    (i) A registered broker or dealer, whether the registered broker or
dealer is acting as principal for its own account or as agent for
others, or a bank acting pursuant to an exception or exemption from the
definition of ``broker'' or ``dealer'' in sections 3(a)(4)(B),
3(a)(4)(E), or 3(a)(5)(C) of the Act (15 U.S.C. 78c(a)(4)(B), 15 U.S.C.
78c(a)(4)(E), or 15 U.S.C. 78c(a)(5)(C)) or the rules thereunder;
* * * * *

Sec.  240.15a-8  [Removed and Reserved]

    5. Section 240.15a-8 is removed and reserved.

Sec.  240.15a-9  [Removed and Reserved]

    6. Section 240.15a-9 is removed and reserved.

Sec.  240.15a-11  [Removed and Reserved]

    7. Section 240.15a-11 is removed and reserved.

    Dated: December 18, 2006.
    By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 06-9842 Filed 12-22-06; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register Volume 80, Number 127 (Thursday, July 2, 2015)]
[Rules and Regulations]
[Pages 37971-37974]
[FR Doc No: 2015-16366]

=======================================================================
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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Parts 601, 610, and 680

[Docket No. FDA-2014-N-1110]

Revocation of General Safety Test Regulations That Are
Duplicative of Requirements in Biologics License Applications

AGENCY: Food and Drug Administration, HHS.

ACTION: Final rule.

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SUMMARY: The Food and Drug Administration (FDA) is amending the
biologics regulations by removing the general safety test (GST)
requirements for biological products. FDA is finalizing this action
because the existing codified GST regulations are duplicative of
requirements that are also specified in biologics license applications
(BLAs), or are no longer necessary or appropriate to help ensure the
safety, purity, and potency of licensed biological products. FDA is
taking this action as part of its retrospective review of its
regulations to promote improvement and innovation, in response to the
Executive order.

DATES: This rule is effective August 3, 2015.

FOR FURTHER INFORMATION CONTACT: Lori J. Churchyard, Center for
Biologics Evaluation and Research, Food and Drug Administration, 10903
New Hampshire Ave., Bldg. 71, Rm. 7301, Silver Spring, MD 20993-0002,
240-402-7911.

SUPPLEMENTARY INFORMATION:

Executive Summary

Purpose and Coverage of the Final Rule

    The final rule removes the codified GST \1\ regulations for
biological products which will update outdated requirements and
accommodate new and evolving technology and testing capabilities
without diminishing public health protections. FDA is finalizing

this action because the existing codified GST regulations are
duplicative of requirements that are also specified in BLAs, or are no
longer necessary or appropriate to help ensure the safety, purity, and
potency of licensed biological products. FDA is taking this action as
part of its retrospective review of its regulations to promote
improvement and innovation, in response to Executive Order (E.O.) 13563
of January 18, 2011.
---------------------------------------------------------------------------

    \1\ For purposes of this final rule, the terms ``general safety
test'' or ``GST'' refer to the requirements found under Title 21 of
the Code of Federal Regulations (CFR), subchapter F, parts 600
through 680 (21 CFR parts 600 through 680), specifically 21 CFR
610.11, 610.11a, and 680.3(b).
---------------------------------------------------------------------------

Summary of the Major Provisions of the Final Rule

    The final rule removes the requirements contained in Sec. Sec.
610.11, 610.11a, and 680.3(b) (21 CFR 610.11, 610.11a, and 680.3(b))
from the regulations. Section 610.11 requires a GST for the detection
of extraneous toxic contaminants in certain biological products
intended for administration to humans. Section 610.11a concerns the GST
requirements for inactivated influenza vaccine. Section 680.3(b)
concerns GST requirements for allergenic products. Removal of these
regulations, however, would not remove GST requirements specified in
individual BLAs. A biological product manufacturer would continue to be
required to follow the GST requirements specified in its BLA unless the
manufacturer advised FDA of its elimination or modification of the test
by a submission filed in accordance with Sec.  601.12 (21 CFR 601.12).
FDA would review proposed changes to a manufacturer's approved
biologics license on a case-by-case basis so that FDA can ensure that
any such action is appropriate.

Costs and Benefits

    FDA is finalizing this action because the existing codified GST
regulations are duplicative of requirements that are also specified in
BLAs, or are no longer necessary or appropriate to help ensure the
safety, purity, and potency of licensed biological products. Because
this final rule would impose no additional regulatory burdens, this
rule is not anticipated to result in any compliance costs and the
economic impact is expected to be minimal.

I. Background

    As part of FDA's retrospective review of its regulations to promote
improvement and innovation under Executive Order 13563, FDA is removing
the codified GST requirements as specified in this rule. We believe
this action is appropriate because in many instances, the GST
regulations duplicate requirements that are also specified in the BLA
requirements for biological products intended for human use under
section 351 of the Public Health Service Act (PHS Act) (42 U.S.C. 262),
or they are outmoded or otherwise unnecessary to help ensure the
continued safety, purity, and potency of biological products. FDA
published the proposed rule ``Revocation of General Safety Test
Regulations That Are Duplicative of Requirements in Biological License
Applications'' in the Federal Register of August 22, 2014 (79 FR
49727). FDA corrected the title of that proposed rule to ``Revocation
of General Safety Test Regulations That Are Duplicative of Requirements
in Biologics License Applications'' in the Federal Register of
September 10, 2014 (79 FR 53670).
    For a number of years, FDA has not codified specific test methods
as standards for licensed biological products, in part because
codifying specific test methods as standards can diminish the ability
of the Agency and industry to respond to technological developments.
Instead the Agency has required manufacturers to provide a full
description of manufacturing methods, including test methods, in
manufacturers' BLAs (Sec.  601.2(a) (21 CFR 601.2(a))). Since FDA
issued the March 2003 final rule ``Revision to the General Safety
Requirements for Biological Products'' in the Federal Register of March
4, 2003 (68 FR 10157), it has become increasingly clear that the
codified GST regulations are too restrictive for certain biological
products because alternatives may be available which provide the same
or greater level of assurance of safety as the GST. Thus, the Agency
believes that the GST regulations may not always reflect the scientific
community's assessment of the best current testing procedures, although
in certain circumstances the GST may still be appropriate. The Agency
believes that a more efficient way of prescribing testing requirements
for particular products would be to allow such requirements to be
specified in the BLA, which will enhance flexibility to make
appropriate changes to testing methods.

II. Summary of the Final Rule

    FDA is adopting as final, without material change, the proposed
revocation of general safety test requirements that are duplicative of
requirements in BLAs.
     The final rule is removing Sec. Sec.  610.11, 610.11a, and
680.3(b), the regulations that require that manufacturers of biological
products perform a specified test for general safety of biological
products. FDA is taking this action because the existing codified GST
regulations are duplicative, outmoded, or are otherwise unnecessary to
help ensure the continued safety, purity, and potency of licensed
biological products.
     As set forth in an approved BLA or BLA supplement, for
products that present specific safety concerns, manufacturers will be
required to perform appropriate safety test(s) to address those
concerns. For example, the BLA may require testing for a specific
toxicity.
     The appropriate tests will be specified in the
manufacturer's BLA or BLA supplement rather than codified as
regulations.
     Elimination of the codified GST regulations would
encourage the implementation of the principles of the ``3Rs,'' to
reduce, refine, and replace animal use in testing. This addresses the
need to minimize the use of animals in such testing and promotes more
humane, appropriate and specific test methods for assuring the safety
of biological products.\2\
---------------------------------------------------------------------------

    \2\ Interagency Coordinating Committee on the Validation of
Alternative Methods (ICCVAM) Authorization Act of 2000 (42 U.S.C.
285l-3). Additional information on the Federal Government's
implementation of the principles of the 3Rs may be found at the
ICCVAM Web site at http://ntp.niehs.nih.gov/go/iccvam.
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     The finalization of this rule does not automatically
revise a manufacturer's BLA or BLA supplement.
     Manufacturers would continue to be required to perform the
GST unless the manufacturer's BLA were revised through a supplement to
eliminate or modify the test in accordance with Sec.  601.12.
     The requirements for a licensed biological product
manufacturer to report changes in its product, product labeling,
production process, quality controls, equipment, facilities or
responsible personnel, as established in its approved BLA, are detailed
in Sec.  601.12.
     Under Sec.  601.12, manufacturers must report each change
to the Agency in one of several different types of submissions. The
applicable submission category depends on the potential for the
change(s) at issue to have an adverse effect on the identity, strength,
quality, purity, or potency of the particular biological product as it
may relate to the safety or effectiveness of the product.
     FDA anticipates that changes involving the discontinuance
of the GST or the reliance on a test other than the GST would have a
moderate potential to have an adverse effect on the identity, strength,
quality, purity, or potency of the product as it may relate to the
safety

or effectiveness of the product. Such changes must be identified in a
supplement submitted under Sec.  601.12(c) (changes requiring
supplement submission at least 30 days prior to distribution of the
product made using the change).

III. Legal Authority

    FDA is issuing this regulation under the biological products and
communicable disease provisions of the PHS Act (42 U.S.C. 262 and 264),
and the provisions of the Federal Food, Drug, and Cosmetic Act (the
FD&C Act) (21 U.S.C. 321 et seq.) applicable to drugs. Under these
provisions of the PHS Act and the FD&C Act, we have the authority to
issue and enforce regulations designed to ensure, among other things,
that biological products are safe, pure, and potent and manufactured in
accordance with current Good Manufacturing Practice, and to prevent the
introduction, transmission, or spread of communicable disease.

IV. Comments on the Proposed Rule and FDA Response

    The Agency received two letters of comments on the proposed rule.
Comments were received from a trade association, and an animal welfare
organization.
    To make it easier to identify the comments and our responses, the
word ``Comment'' and a comment number appear in parentheses before each
comment's description, and the word ``Response'' in parentheses
precedes each response. We have also numbered each comment to help
distinguish between different comments. The number assigned to each
comment is purely for organizational purposes and does not signify the
comment's value or importance or the order in which it was received.
Certain comments were grouped together because the subject matter of
the comments was similar.

A. General Comments

    (Comment 1) Both letters of comments support the proposed rule.
    (Response) FDA acknowledges and appreciates that the comments we
received agree with the need for this rulemaking. As stated previously,
the rule removes the requirements contained in Sec. Sec.  610.11,
610.11a, and 680.3(b) from the regulations because the existing
codified GST regulations are duplicative of requirements that are also
specified in BLAs, or are no longer necessary or appropriate to help
ensure the safety, purity, and potency of licensed biological products.
Removal of these regulations provides a more efficient way of
prescribing testing requirements and enhances flexibility to make
appropriate changes to testing methods.

B. Comments on Specific Topics

    (Comment 2) One comment requests that FDA encourage manufacturers
who have a GST described in their BLAs for their licensed products to
submit supplements to their BLAs to eliminate or modify the test and
that FDA take additional steps to ensure that the final rule will have
the intended effect of eliminating the use of animals in safety
testing.
    (Response) As stated in the preamble of the proposed rule (79 FR
49727 at 49729), we anticipate that the elimination of the codified GST
regulations will encourage the implementation of the principles of the
``3Rs,'' to reduce, refine, and replace animal use in testing.
Moreover, on our own initiative, as discussed elsewhere in this
document, we have determined that the effective date of the final rule
will be 30 days after the date of its publication in the Federal
Register to give manufacturers the flexibility to submit supplements to
their BLAs for their licensed products as soon as possible.
    (Comment 3) One comment requests that we add language to Sec.
601.2 or other relevant biologics regulation to clarify our intent to
encourage the implementation of the principles of the 3Rs.
    (Response) FDA declines to adopt this recommended change because
the request to add language to Sec.  601.2 or other relevant biologics
regulations is outside the scope of this rulemaking.
    (Comment 4) One comment requests that FDA establish user fees with
respect to the continued use of the GST after the effective date of
this final rule, or that FDA establish other clear policies that will
provide economic incentives to discontinue the use of the GST. Further,
the comment refers to Executive Order 13563, which encourages Federal
Agencies to ``. . . assess available alternatives to direct regulation,
including providing economic incentives to encourage the desired
behavior, such as user fees . . . .''
    (Response) We decline to adopt these suggested changes because they
are beyond the scope of this rule. The proposed rule did not address
user fees or economic incentives. This rule allows, but does not
require, current BLA holders to submit to FDA supplements to their BLAs
to eliminate or modify the GST.
    (Comment 5) One comment states that a manufacturer who submits a
supplement to eliminate or modify a GST in its BLA will not be able to
stop conducting the GST until FDA determines that the manufacturer has
appropriately reported this change.
    (Response) We disagree in part. As stated in the preamble to the
proposed rule (79 FR 49727 at 49730), a manufacturer who desires to
discontinue the GST in its approved BLA or utilize an alternative
method other than the GST approved in its BLA must submit a BLA
supplement reporting the change in accordance with Sec.  601.12. Should
a manufacturer wish to discontinue the GST described in the approved
BLA, or to utilize an alternative method other than the GST approved in
its BLA, FDA anticipates that the change would have a moderate
potential to have an adverse effect on the identity, strength, quality,
purity, or potency of the product as it may relate to the safety or
effectiveness of the product. Accordingly, a manufacturer who desires
to make such a change must submit a BLA supplement reporting the change
in accordance with Sec.  601.12(c). Within 30 days of the date FDA
receives the submission, FDA will determine if the change has been
reported in the proper category and if any of the required information
is missing, and will inform the applicant accordingly. If FDA does not
so notify the applicant, distribution of the product made using the
change may begin not less than 30 days after receipt of the supplement
by FDA.

V. Conforming Amendments

    As part of this final rule, we need to make conforming changes when
the removed provisions are referenced elsewhere in the CFR. The final
rule removes ``Sec.  610.11'' from Sec.  601.2(c)(1) and 21 CFR 601.22.

VI. Effective Date

    We are making this rule effective 30 days after the date of
publication in the Federal Register. We are making this change in the
interest of reducing unnecessary regulatory burden to give
manufacturers the flexibility to submit supplements right away, should
they wish to do so.

VII. Economic Analysis of Impacts

    FDA has examined the impacts of the final rule under Executive
Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5
U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4). Executive Orders 12866 and 13563 direct Agencies to assess all
costs and benefits of available regulatory alternatives and, when
regulation is necessary, to select

regulatory approaches that maximize net benefits (including potential
economic, environmental, public health and safety, and other
advantages; distributive impacts; and equity). The Agency believes that
this final rule is not a significant regulatory action as defined under
Executive Order 12866.
    The Regulatory Flexibility Act requires Agencies to analyze
regulatory options that would minimize any significant impact of a rule
on small entities. Because this final rule generally increases
flexibility for safety testing and would result in the reduction of
certain regulatory burdens and does not add any new regulatory
responsibilities, the Agency certifies that the final rule will not
have a significant economic impact on a substantial number of small
entities.
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires
that Agencies prepare a written statement, which includes an assessment
of anticipated costs and benefits, before proposing ``any rule that
includes any Federal mandate that may result in the expenditure by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100,000,000 or more (adjusted annually for
inflation) in any one year.'' The current threshold after adjustment
for inflation is $144 million, using the most current (2014) Implicit
Price Deflator for the Gross Domestic Product. FDA does not expect this
final rule to result in any 1-year expenditure that would meet or
exceed this amount.
    This final rule amends the biologics regulations by removing the
GST requirements for biological products found in Sec. Sec.  610.11,
610.11a and 680.3(b). FDA is finalizing this action because the current
codified GST regulations are duplicative of requirements that are also
specified in biologics licenses, or are no longer necessary or
appropriate to help ensure the safety, purity, and potency of licensed
biological products. The removal of the GST regulations for biological
products, however, would not remove GST requirements specified in
individual BLAs. All manufacturers that currently conduct a GST are
already required, as part of the standards specified in their BLAs, to
perform the GST and would thus continue to be required to perform the
GST unless the BLA were revised to eliminate or modify the test through
a supplement in accordance with Sec.  601.12. Because this rule would
impose no additional regulatory burdens, this regulation is not
anticipated to result in any compliance costs and the economic impact
is expected to be minimal.

VIII. The Paperwork Reduction Act of 1995

    This final rule refers to previously approved collections of
information that are subject to review by the Office of Management and
Budget (OMB) under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C.
3501-3520). The collections of information in Sec.  601.12 have been
approved under OMB control number 0910-0338. Therefore, FDA tentatively
concludes that the requirements in this document are not subject to
review by OMB because they do not constitute a ``new collection of
information'' under the PRA.

IX. Environmental Impact

    The Agency has determined under 21 CFR 25.30(h) that this action is
of a type that does not individually or cumulatively have a significant
effect on the human environment. Therefore, neither an environmental
assessment nor an environmental impact statement is required.

X. Federalism

    FDA has analyzed this final rule in accordance with the principles
set forth in Executive Order 13132. FDA has determined that the rule
does not contain policies that would have substantial direct effects on
the States, on the relationship between the National Government and the
States, or on the distribution of power and responsibilities among the
various levels of government. Accordingly, the Agency has concluded
that the rule does not contain policies that have federalism
implications as defined in the Executive order and, consequently, a
federalism summary impact statement is not required.

List of Subjects

21 CFR Part 601

    Administrative practice and procedure, Biologics, Confidential
business information.

21 CFR Part 610

    Biologics, Labeling, Reporting and recordkeeping requirements.

21 CFR Part 680

    Biologics, Blood, Reporting and recordkeeping requirements.

    Therefore under the Federal Food, Drug, and Cosmetic Act, the
Public Health Service Act, and under authority delegated to the
Commissioner of Food and Drugs, 21 CFR parts 601, 610, and 680 are
amended as follows:

PART 601--LICENSING

0
1. The authority citation for 21 CFR part 601 continues to read as
follows:

    Authority:  15 U.S.C. 1451-1561; 21 U.S.C. 321, 351, 352, 353,
355, 356b, 360, 360c-360f, 360h-360j, 371, 374, 379e, 381; 42 U.S.C.
216, 241, 262, 263, 264; sec 122, Pub. L. 105-115, 111 Stat. 2322
(21 U.S.C. 355 note).

Sec.  601.2  [Amended]

0
2. Section 601.2 is amended in paragraph (c)(1) by removing
``610.11,''.

Sec.  601.22  [Amended]

0
3. Section 601.22 is amended in the third sentence by removing
``610.11,''.

PART 610--GENERAL BIOLOGICAL PRODUCTS STANDARDS

0
4. The authority citation for 21 CFR part 610 continues to read as
follows:

    Authority:  21 U.S.C. 321, 331, 351, 352, 353, 355, 360, 360c,
360d, 360h, 360i, 371, 372, 374, 381; 42 U.S.C. 216, 262, 263, 263a,
264.

Sec.  610.11  [Removed and Reserved]

0
5. Remove and reserve Sec.  610.11.

Sec.  610.11a  [Removed and Reserved]

0
6. Remove and reserve Sec.  610.11a.

PART 680--ADDITIONAL STANDARDS FOR MISCELLANEOUS PRODUCTS

0
7. The authority citation for 21 CFR part 680 continues to read as
follows:

    Authority: 21 U.S.C. 321, 351, 352, 353, 355, 360, 371; 42
U.S.C. 216, 262, 263, 263a, 264.

Sec.  680.3  [Amended]

0
8. In Sec.  680.3, remove and reserve paragraph (b).

    Dated: June 26, 2015.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2015-16366 Filed 7-1-15; 8:45 am]
BILLING CODE 4164-01-P


[Federal Register Volume 78, Number 83 (Tuesday, April 30, 2013)]
[Notices]
[Page 25260]
[FR Doc No: 2013-10089]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Combined Notice of Filings 1

    Take notice that the Commission received the following electric
rate filings:

    Docket Numbers: ER10-3063-001.
    Applicants: Green Country Energy, LLC.
    Description: Green Country Energy, LLC submits second supplement to
December 21, 2012 Triennial Market Power Update for the Southwest Power
Pool, Inc. Region.
    Filed Date: 4/19/13.
    Accession Number: 20130419-5225.
    Comments Due: 5 p.m. ET 5/10/13.

    Docket Numbers: ER12-1179-005.
    Applicants: Southwest Power Pool, Inc.
    Description: Integrated Marketplace Compliance Filing--Docket ER12-
1179-002 to be effective 3/1/2014.
    Filed Date: 4/19/13.
    Accession Number: 20130419-5189.
    Comments Due: 5 p.m. ET 5/10/13.

    Docket Numbers: ER13-1315-000.
    Applicants: Massachusetts Electric Company.
    Description: Interconnection Agreement Between Massachusetts
Electric Co. and Pepperell Hydro to be effective 6/19/2013.
    Filed Date: 4/19/13.
    Accession Number: 20130419-5220.
    Comments Due: 5 p.m. ET 5/10/13.

    Take notice that the Commission received the following open access
transmission tariff filings:

    Docket Numbers: OA07-44-007.
    Applicants: El Paso Electric Company.
    Description: El Paso Electric Company submits Report on Operational
Penalty Distributions.
    Filed Date: 4/18/13.
    Accession Number: 20130418-5238.
    Comments Due: 5 p.m. ET 5/9/13.

    Take notice that the Commission received the following electric
reliability filings:

    Docket Numbers: RD13-8-000.
    Applicants: North American Electric Reliability Corporation.
    Description: Petition of the North American Electric Reliability
Corporation for Approval of an Interpretation to Reliability Standards
TPL-003-0a and TPL-004-0.
    Filed Date: 4/12/13.
    Accession Number: 20130412-5227.
    Comments Due: 5 p.m. ET 5/13/13.

    The filings are accessible in the Commission's eLibrary system by
clicking on the links or querying the docket number.
    Any person desiring to intervene or protest in any of the above
proceedings must file in accordance with Rules 211 and 214 of the
Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00
p.m. Eastern time on the specified comment date. Protests may be
considered, but intervention is necessary to become a party to the
proceeding.
    eFiling is encouraged. More detailed information relating to filing
requirements, interventions, protests, service, and qualifying
facilities filings can be found at: http://www.ferc.gov/docs-filing/efiling/filing-req.pdf. For other information, call<PHONE_NUMBER>
(toll free). For TTY, call<PHONE_NUMBER>.

    Dated: April 22, 2013.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2013-10089 Filed 4-29-13; 8:45 am]
BILLING CODE 6717-01-P