[Federal Register Volume 83, Number 88 (Monday, May 7, 2018)]
[Rules and Regulations]
[Pages 19928-19930]
[FR Doc No: 2018-09466]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2017-0838; Product Identifier 2017-NE-33-AD; Amendment
39-19275; AD 2018-10-01]
RIN 2120-AA64

Airworthiness Directives; Safran Helicopter Engines, S.A.,
Turboshaft Engines

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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SUMMARY: We are adopting a new airworthiness directive (AD) for all
Safran Helicopter Engines, S.A., Arriel 2E turboshaft engines. This AD
was prompted by reports of ruptured front support pins on the accessory
gearbox front support. This AD requires replacement of the accessory
gearbox front support. We are issuing this AD to address the unsafe
condition on these products.

DATES: This AD becomes effective June 11, 2018.

ADDRESSES: For service information identified in this final rule,
contact Safran Helicopter Engines, S.A., 40220 Tarnos, France; phone:
(33) 05 59 74 40 00; fax: (33) 05 59 74 45 15. You may view this
service information at the FAA, Engine and Propeller Standards Branch,
1200 District Avenue, Burlington, MA. For information on the
availability of this material at the FAA, call<PHONE_NUMBER>. It is also
available on the internet at http://www.regulations.gov by searching
for and locating Docket No. FAA-2017-0838.

Examining the AD Docket

    You may examine the AD docket on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2017-
0838; or in person at the Docket Management Facility between 9 a.m. and
5 p.m., Monday through Friday, except Federal holidays. The AD docket
contains this AD, the mandatory continuing airworthiness information
(MCAI), the regulatory evaluation, any comments received, and other
information. The address for Docket Operations (phone:<PHONE_NUMBER>) is
Docket Operations, U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: Robert Green, Aerospace Engineer, ECO
Branch, FAA, 1200 District Avenue; phone:<PHONE_NUMBER>; fax: 781-238-
7199; email: [email protected].

SUPPLEMENTARY INFORMATION:

Discussion

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR
part 39 by adding an AD that would apply to all Safran Helicopter
Engines, S.A., Arriel 2E turboshaft engines. The NPRM published in the
Federal Register on November 3, 2017 (82 FR 51170). The NPRM was
prompted by reports of ruptured front support pins on the accessory
gearbox front support. The NPRM proposed to require replacement of the
accessory gearbox front support. We are issuing this AD to address the
unsafe condition on these products.
    The European Aviation Safety Agency (EASA), which is the Technical
Agent for the Member States of the European Community, has issued EASA
AD 2016-0235, dated November 24, 2016 (referred to after this as the
MCAI), to

address the unsafe condition on these products. The MCAI states:

    Some cases were reported of ruptured front support pins on
ARRIEL 1E2 engines. That condition, if not detected and corrected,
could lead to the loss of the load path integrity of the engine
front support. Consequently, Turbom[eacute]ca issued Mandatory
Service Bulletin (MSB) 292 72 0842 to provide instructions for the
inspection of the pins and front support replacement, and EASA
issued AD 2015-0064 (later revised) to require those actions. Since
EASA AD 2015-0064R1 was issued, SAFRAN Helicopter Engines developed
a new pin design, in order to increase the mechanical strength of
the pin, through modification TU380, for ARRIEL 1E2 engines.
Although no cases of front support pin rupture have been reported on
ARRIEL 2E engines, since the ARRIEL 1E2 and 2E type designs have the
same front support, SAFRAN Helicopter Engines decided to also apply
this new pin design on ARRIEL 2E engines through modification TU197.
To address this potential unsafe condition, SAFRAN Helicopter
Engines decided, as precautionary measure, to replace the front
support on ARRIEL 2E engines, and published MSB 292 72 2197 to
provide instructions for in-service front support replacement. For
the reasons described above, this [EASA] AD requires modification of
the affected engines by replacement of each pre-mod TU197 front
support.

    You may obtain further information by examining the MCAI in the AD
docket on the internet at http://www.regulations.gov by searching for
and locating Docket No. FAA-2017-0838.

Comments

    We gave the public the opportunity to participate in developing
this final rule. We received no comments on the NPRM or on the
determination of the cost to the public.

Conclusion

    We reviewed the relevant data and determined that air safety and
the public interest require adopting this final rule as proposed.

Related Service Information

    We reviewed Safran Helicopter Engines, S.A., Mandatory Service
Bulletin (MSB) No. 292 72 2197, Version A, dated September 15, 2016.
The MSB describes procedures for replacement of the accessory gearbox
front support.

Costs of Compliance

    We estimate that this AD affects 28 engines installed on aircraft
of U.S. registry.
    We estimate the following costs to comply with this AD:

                                                 Estimated Costs
----------------------------------------------------------------------------------------------------------------
                                                                                Cost per      Cost on U.S.
                Action                         Labor cost           Parts cost        product        operators
----------------------------------------------------------------------------------------------------------------
Front support replacement.............  2 work-hours x $85 per           $19,731         $19,901        $557,228
                                         hour = $170.
----------------------------------------------------------------------------------------------------------------

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. ``Subtitle VII: Aviation
Programs,'' describes in more detail the scope of the Agency's
authority.
    We are issuing this rulemaking under the authority described in
``Subtitle VII, Part A, Subpart III, Section 44701: General
requirements.'' Under that section, Congress charges the FAA with
promoting safe flight of civil aircraft in air commerce by prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce. This regulation is within
the scope of that authority because it addresses an unsafe condition
that is likely to exist or develop on products identified in this
rulemaking action.
    This AD is issued in accordance with authority delegated by the
Executive Director, Aircraft Certification Service, as authorized by
FAA Order 8000.51C. In accordance with that order, issuance of ADs is
normally a function of the Compliance and Airworthiness Division, but
during this transition period, the Executive Director has delegated the
authority to issue ADs applicable to engines, propellers, and
associated appliances to the Manager, Engine and Propeller Standards
Branch, Policy and Innovation Division.

Regulatory Findings

    We determined that this AD will not have federalism implications
under Executive Order 13132. This AD will not have a substantial direct
effect on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.
    For the reasons discussed above, I certify this AD:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866,
    (2) Is not a ``significant rule'' under the DOT Regulatory Policies
and Procedures (44 FR 11034, February 26, 1979),
    (3) Will not affect intrastate aviation in Alaska to the extent
that it justifies making a regulatory distinction, and
    (4) Will not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.

Adoption of the Amendment

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

PART 39--AIRWORTHINESS DIRECTIVES

0
1. The authority citation for part 39 continues to read as follows:

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

Sec.  39.13   [Amended]

0
2. The FAA amends Sec.  39.13 by adding the following new airworthiness
directive (AD):

2018-10-01 Safran Helicopter Engines, S.A.: Amendment 39-19275;
Docket No. FAA-2017-0838; Product Identifier 2017-NE-33-AD.

(a) Effective Date

    This AD is effective June 11, 2018.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to all Safran Helicopter Engines, S.A., Arriel
2E turboshaft engines with front support, part number 0 292 11 715
0, installed (pre-mod TU 197 configuration).

(d) Subject

    Joint Aircraft System Component (JASC) Code 8300, Accessory
Gearboxes.

(e) Unsafe Condition

    This AD was prompted by reports of ruptured front support pins
on the accessory gearbox front support. We are issuing this AD to
prevent failure of a front support, loss of

engine thrust control and reduced control of the helicopter.

(f) Compliance

    Comply with this AD within the compliance times specified,
unless already done.

(g) Required Actions

    Before the accessory gearbox and transmission shaft module
(Module 01) accumulates 1,600 engine operating hours since new, or
within 80 engine operating hours after the effective date of this
AD, whichever occurs later, replace the front support with a part
eligible for installation.

(h) Definition

    For the purpose of this AD, a part eligible for installation is
a Module 01 with a pre-mod TU 197 front support, that has not
accumulated more than 1,680 engine operating hours since new; or a
Module 01 with a post-mod TU 197 front support.

(i) Installation Prohibition

    As of the effective date of this AD, you may not install a pre-
mod TU 197 front support on any engine with a post-mod TU 197 front
support installed.

(j) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, FAA, ECO Branch, has the authority to approve
AMOCs for this AD, if requested using the procedures found in 14 CFR
39.19. In accordance with 14 CFR 39.19, send your request to your
principal inspector or local Flight Standards District Office, as
appropriate. If sending information directly to the manager of the
ECO Branch, send it to the attention of the person identified in
paragraph (k)(1) of this AD. You may email your request to: [email protected].
    (2) Before using any approved AMOC, notify your appropriate
principal inspector, or lacking a principal inspector, the manager
of the local flight standards district office/certificate holding
district office.

(k) Related Information

    (1) For more information about this AD, contact Robert Green,
Aerospace Engineer, ECO Branch, FAA, 1200 District Avenue,
Burlington, MA 01803; phone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>; email:
[email protected].
    (2) Refer to EASA AD 2016-0235, dated November 24, 2016, for
more information. You may examine the EASA AD in the AD docket on
the internet at http://www.regulations.gov by searching for and
locating it in Docket No. FAA-2017-0838.

(l) Material Incorporated by Reference

    None.

    Issued in Burlington, Massachusetts, on May 1, 2018.
Karen M. Grant,
Acting Manager, Engine and Propeller Standards Branch, Aircraft
Certification Service.
[FR Doc. 2018-09466 Filed 5-4-18; 8:45 am]
 BILLING CODE 4910-13-P


[Federal Register: May 11, 2010 (Volume 75, Number 90)]
[Notices]
[Page 26223-26224]
[DOCID:fr11my10-72]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. PR10-17-000]

ETC Katy Pipeline, Ltd.; Notice of Petition for Rate Approval

May 3, 2010.
    Take notice that on April 28, 2010, ETC Katy Pipeline, Ltd. (ETC)
filed, pursuant to section 284.123(b)(1)(i)(A) of the Commission's
regulations, an election to continue to use rates contained in its
effective State of Texas transportation rate schedule for comparable
services under Subpart C of Part 284 of the Commission's Regulations.
ETC states that these rates will be applicable to the firm and
interruptible transportation of natural gas under section 311(a)(2) of
the Natural Gas Policy Act of 1978.
    Any person desiring to participate in this rate proceeding must
file a motion to intervene or to protest this filing must file in
accordance with Rules 211 and 214 of the Commission's Rules of Practice
and Procedure (18 CFR 385.211 and 385.214). Protests will be considered
by the Commission in determining the appropriate action to be taken,
but will not serve to make protestants parties to the proceeding. Any
person wishing to become a party must file a notice of intervention or
motion to intervene, as appropriate. Such notices, motions, or protests
must be filed on or before the date as indicated below. Anyone filing
an intervention or protest must serve a copy of that document on the
Applicant. Anyone filing an intervention or protest

on or before the intervention or protest date need not serve motions to
intervene or protests on persons other than the Applicant.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper using the ``eFiling'' link at http://
www.ferc.gov. Persons unable to file electronically should submit an
original and 14 copies of the protest or intervention to the Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426.
    This filing is accessible online at http://www.ferc.gov, using the
``eLibrary'' link and is available for review in the Commission's
Public Reference Room in Washington, DC. There is an ``eSubscription''
link on the Web site that enables subscribers to receive e-mail
notification when a document is added to a subscribed docket(s). For
assistance with any FERC Online service, please e-mail
<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For
TTY, call<PHONE_NUMBER>.
    Comment Date: 5 p.m. Eastern Time on May 17, 2010.

Kimberly D. Bose,
Secretary.
[FR Doc. 2010-11105 Filed 5-10-10; 8:45 am]
BILLING CODE 6717-01-P


board attention to independence questions when impartiality is not at
issue is likely to be reduced, thus allowing a fund board to focus on
its role as an independent check on fund management. An operating
company's board might focus on hiring the best management, choosing the
most value-enhancing investment projects, and monitoring management to
maximize shareholder value. This sharpened focus could potentially
benefit shareholders. Furthermore, we expect that improved
identification of threats to auditor independence would increase
investor confidence about the quality and accuracy of the information
reported. Reduced uncertainty about the quality and accuracy of
financial reporting should attract capital, and thus facilitate capital
formation.
    Under the proposed amendments, audit firms would potentially be
able to draw upon a larger set of lenders. This potentially could lead
to greater competition among the lending institutions, leading to lower
borrowing costs for audit firms. Again, this could result in lower
audit fees, lower fund fees, lower compliance expenses, and help
facilitate capital formation, to the extent that lower borrowing costs
for audit firms get passed on to their audit clients.
    The proposed amendments also may potentially lead to changes in the
competitive structure of the audit industry. We expect more accounting
firms to be eligible to provide auditing services and be in compliance
with auditor independence under the proposed amendments. If the larger
audit firms are the ones more likely to engage in significant financing
transactions and are more likely to not be in compliance with the
existing Loan Provision, then these firms are more likely to be
positively affected by the proposed amendments. In particular, these
firms may be able to compete for or retain a larger pool of audit
clients. At the same time, the larger firms' potentially increased
ability to compete for audit clients could potentially crowd out the
auditing business of smaller audit firms. However, we estimate that
four audit firms already perform 88 percent of audits in the registered
investment company space.\92\ As a result, we do not expect any
potential change in the competitive dynamics among auditors for
registered investment companies to be significant.
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    \92\ The market share of the four largest accounting firms in
other industries is significantly high as well. According to the
sample of 7,180 registrants covered by Audit Analytics in 2016, the
four largest accounting firms' mean (median) market share across
industries (based on two digit standard industry code) is 58% (57%).
The upper quartile is as high as 78% with low quartile of the
distribution being 45%.
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E. Alternatives

    The existing Loan Provision covers loans to and from the auditor by
``record or beneficial owners of more than 10 percent of the audit
client's equity securities.'' As discussed earlier, record owners are
relatively less likely to have incentives to take actions that would
threaten auditor independence than are beneficial owners. An
alternative approach to the proposed amendments would be to maintain
the 10 percent bright-line test, but to distinguish between types of
ownership under the 10 percent bright-line test and tailor the rule
accordingly. For example, record owners could be excluded from the 10
percent bright-line test, to which beneficial owners would remain
subject. The potential benefit of distinguishing

between types of ownership while retaining the 10 percent bright-line
test is that applying a bright-line test would involve less judgment
than the proposed significant influence test. Excluding record holders
that may not have strong enough economic incentives or power to impair
auditor independence could partially overcome the over-inclusiveness of
the exiting rule. However, it still would not overcome the issues of
over- or under-inconclusiveness with respect to beneficial owners.
    A second alternative would be to use the materiality of a stock
holding to the lender in conjunction with the significant influence
test as a proxy for incentives that could threaten auditor
independence. Specifically, the significance of the holding to the
lender could be assessed based on the magnitude of the stock holding to
the lender (i.e., what percentage of the lender's assets are invested
in the audit client's equity securities), after determining whether the
lender has significant influence over the audit client. For example,
two institutions that hold 15 percent of a fund may be committing
materially different amounts of their capital to the specific
investment. The incentives to influence the auditor's report are likely
to be stronger for the lender that commits the relatively larger amount
of capital to a specific investment. As such, the materiality of the
investment to a lender with significant influence could be used as an
indicator of incentives by the lender to attempt to influence the
auditor's report. Materiality of a holding may better capture the
incentives that could pose a threat to auditor independence. The
potential cost to the auditors and audit clients could be that they
need additional information and an additional layer of judgment in
assessing their compliance with the Loan Provision. Also, given the
size of most lenders, a materiality component might effectively exclude
most, if not all, lending relationships that pose a threat to an
auditor's objectivity and impartiality.
    A third potential approach would be to assess the materiality of
the lending relationship between the auditor and the lending
institution. The materiality of the lending relationship between the
lender and the auditor, from both the lender's and the auditor's point
of views, could act as an indicator of the leverage that the lender may
have if it attempts to influence the auditor's report. However, again,
given the size of most impacted audit firms and lenders, a materiality
component might effectively exclude most, if not all, lending
relationships that pose a threat to an auditor's objectivity and
impartiality.

F. Request for Comment

    We request and encourage any interested person to submit comments
regarding the proposed amendments and all aspects of our analysis of
the potential effects of the amendments. Comments are particularly
helpful to us if accompanied by quantified estimates or other detailed
analysis and supporting data regarding the issues addressed in those
comments. We also are interested in comments on the alternatives
presented in this release as well as any additional alternatives to the
proposed amendments that should be considered. To assist in our
consideration of these costs and benefits, we specifically request
comment on the following:
     The costs and benefits of the proposed amendment to
eliminate the requirement that audit firms analyze record holders under
the Loan Provision.
     The costs and benefits of the proposed significant
influence test.
     The costs and benefits of the proposed addition of a
``known through reasonable inquiry'' standard in applying the
significant influence test.
     The costs and benefits of the proposed exclusion of the
funds (other than the fund under audit) from being considered an
affiliate of the audit client.
     The effect of the proposed amendments on the competitive
structure of the audit industry.
     The effect of the proposed amendments on the quality of
financial reporting.
     The effect of the proposed amendments on audit quality.
     The effect of the proposed amendments on capital
formation.
     The effect of the proposed amendments on audit firms and
their covered persons' financing.

VI. Initial Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (``RFA'') \93\ requires the
Commission, in promulgating rules under section 553 of the
Administrative Procedure Act,\94\ to consider the impact of those rules
on small entities. We have prepared this Initial Regulatory Flexibility
Act Analysis (``IRFA'') in accordance with 5 U.S.C. 603. This IRFA
relates to the proposed amendments to Rule 2-01 of Regulation S-X.
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    \93\ 5 U.S.C. 601 et seq.
    \94\ 5 U.S.C. 553.
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A. Reasons for and Objectives of the Proposed Action

    As discussed above, the primary reason for, and objective of, the
proposed amendments is to address certain significant compliance
challenges for audit firms and their clients resulting from application
of the Loan Provision that do not otherwise appear to affect the
impartiality or objectivity of the auditor. Specifically, the proposed
amendments would:
     Focus the analysis solely on beneficial ownership;
     replace the existing 10 percent bright-line shareholder
ownership test with a ``significant influence'' test;
     add a ``known through reasonable inquiry'' standard with
respect to identifying beneficial owners of the audit client's equity
securities; and
     amend the definition of ``audit client'' for a fund under
audit to exclude from the provision funds that otherwise would be
considered affiliates of the audit client.
    The reasons for, and objectives of, the proposed rules are
discussed in more detail in Sections I and II above.

B. Legal Basis

    We are proposing the amendments pursuant to Schedule A and Sections
7, 8, 10, and 19 of the Securities Act, Sections 3, 10A, 12, 13, 14,
17, and 23 of the Exchange Act, Sections 8, 30, 31, and 38 of the
Investment Company Act, and Sections 203 and 211 of the Investment
Advisers Act.

C. Small Entities Subject to the Proposed Rules

    The proposed amendments would affect small entities that file
registration statements under the Securities Act, the Exchange Act, and
the Investment Company Act and periodic reports, proxy and information
statements, or other reports under the Exchange Act or the Investment
Company Act, as well as smaller registered investment advisers and
smaller accounting firms. The RFA defines ``small entity'' to mean
``small business,'' ``small organization,'' or ``small governmental
jurisdiction.'' \95\ The Commission's rules define ``small business''
and ``small organization'' for purposes of the Regulatory Flexibility
Act for each of the types of entities regulated by the Commission.
Securities Act Rule 157 \96\ and Exchange Act Rule 0-10(a) \97\ defines
an issuer, other than

an investment company, to be a ``small business'' or ``small
organization'' if it had total assets of $5 million or less on the last
day of its most recent fiscal year. We estimate that there are
approximately 1,163 issuers, other than registered investment
companies, that may be subject to the proposed amendments.\98\ The
proposed amendments would affect small entities that have a class of
securities that are registered under Section 12 of the Exchange Act or
that are required to file reports under Section 15(d) of the Exchange
Act. In addition, the proposed amendments would affect small entities
that file, or have filed, a registration statement that has not yet
become effective under the Securities Act and that has not been
withdrawn.
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    \95\ 5 U.S.C. 601(6).
    \96\ 17 CFR 230.157.
    \97\ 17 CFR 240.0-10(a).
    \98\ This estimate is based on staff analysis of XBRL data
submitted with EDGAR filings of Forms 10-K, 20-F and 40-F and
amendments filed during the calendar year of January 1, 2017 to
December 31, 2017.
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    An investment company is considered to be a ``small business'' for
purposes of the RFA, if it, together with other investment companies in
the same group of related investment companies, has net assets of $50
million or less at the end of the most recent fiscal year.\99\ We
believe that the proposed amendments would affect small entities that
are investment companies. Commission staff estimates that, as of
December 31, 2017, there were 54 open-end investment companies (within
52 fund complexes) that would be considered small entities. This number
includes open-end ETFs.\100\
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    \99\ 17 CFR 270.0-10(a).
    \100\ This estimate is derived from an analysis of data obtained
from Morningstar Direct as well as data reported on Form N-SAR filed
with the Commission for the period ending June 30, 2017.
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    For purposes of the RFA, an investment adviser is a small entity if
it:
    (1) Has assets under management having a total value of less than
$25 million;
    (2) did not have total assets of $5 million or more on the last day
of the most recent fiscal year; and
    (3) does not control, is not controlled by, and is not under common
control with another investment adviser that has assets under
management of $25 million or more, or any person (other than a natural
person) that had total assets of $5 million or more on the last day of
its most recent fiscal year.\101\ We estimate that there are
approximately 557 investment advisers that would be subject to the
proposed amendments that may be considered small entities.\102\
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    \101\ 17 CFR 275.0-7.
    \102\ This estimate is based on Commission-registered investment
adviser responses to Form ADV, Part 1A, Items 5.F and 12.
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    For purposes of the RFA, a broker-dealer is considered to be a
``small business'' if its total capital (net worth plus subordinated
liabilities) is less than $500,000 on the date in the prior fiscal year
as of which its audited financial statements were prepared pursuant to
Rule 17a-5(d) under the Exchange Act,\103\ or, if not required to file
such statements, a broker-dealer with total capital (net worth plus
subordinated liabilities) of less than $500,000 on the last day of the
preceding fiscal year (or in the time that it has been in business, if
shorter); and that is not affiliated with any person (other than a
natural person) that is not a small business or small
organization.\104\ As of the year end of 2017, there are approximately
1,042 small entity broker-dealers that may be subject to the proposed
amendments.\105\
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    \103\ 17 CFR 240.17a-5(d).
    \104\ 17 CFR 240.0-10(c).
    \105\ This estimate is based on the most recent information
available, as provided in Form X-17A-5 Financial and Operational
Combined Uniform Single Reports filed pursuant to Section 17 of the
Exchange Act and Rule 17a-5 thereunder.
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    Our rules do not define ``small business'' or ``small
organization'' for purposes of accounting firms. The Small Business
Administration (SBA) defines ``small business,'' for purposes of
accounting firms, as those with under $20.5 million in annual
revenues.\106\ We have limited data indicating revenues for accounting
firms, and we cannot estimate the number of firms with less than $20.5
million in annual revenue. We request comment on the number of
accounting firms with revenue under $20.5 million.
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    \106\ 13 CFR 121.201 and North American Industry Classification
System (NAICS) code 541211. The SBA calculates ``annual receipts''
as all revenue. See 13 CFR 121.104.
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D. Projected Reporting, Recordkeeping and Other Compliance Requirements

    The proposed amendments would not impose any reporting,
recordkeeping, or disclosure requirements. The proposed amendments
would impose new compliance requirements with respect to the Loan
Provision.
    Although we are proposing to replace the 10 percent bright-line
test with a ``significant influence'' test that requires the
application of more judgment, we believe that the proposed amendments
would not significantly increase costs for smaller entities, including
smaller accounting firms. The concept of ``significant influence''
already exists in the auditor independence rules and in U.S. GAAP,\107\
and accounting firms, issuers and their audit committees are already
required to apply the concept in these contexts and may have developed
practices, processes or controls for complying with these
provisions.\108\ We believe that these entities likely would be able to
leverage any existing practices, processes or controls to comply with
the proposed amendments.
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    \107\ See supra footnote 48; see also ASC 323, supra footnote
49.
    \108\ Although the concept of ``significant influence'' is not
as routinely applied today in the funds context for financial
reporting purposes, nevertheless, the concept of significant
influence is applicable to funds under existing auditor independence
rules. See supra Section II.C.
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    We also believe that the proposed ``known through reasonable
inquiry'' standard would not significantly increase costs for smaller
entities, including smaller accounting firms. The ``known through
reasonable inquiry'' standard is generally consistent with regulations
implementing the Investment Company Act, the Securities Act and the
Exchange Act.\109\ Smaller entities, including smaller accounting
firms, should therefore already be familiar with the concept.
---------------------------------------------------------------------------

    \109\ See supra footnote 64.
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    In addition, we believe that the proposed amendments to exclude
record owners and certain fund affiliates for purposes of the Loan
Provision would reduce costs for smaller entities, including smaller
accounting firms.
    Compliance with the proposed amendments would require the use of
professional skills, including accounting and legal skills. The
proposed amendments are discussed in detail in Section II above. We
discuss the economic impact, including the estimated costs, of the
proposed amendments in Section V (Economic Analysis) above.

E. Duplicative, Overlapping, or Conflicting Federal Rules

    We believe that the proposed amendment would not duplicate, overlap
or conflict with other federal rules.

F. Significant Alternatives

    The RFA directs us to consider alternatives that would accomplish
our stated objectives while minimizing any significant adverse impacts
on small entities. In connection with the proposed amendments, we
considered certain types of alternatives, including:
    (1) The establishment of differing compliance or reporting
requirements or timetables that take into account the resources
available to small entities;
    (2) The clarification, consolidation or simplification of
compliance and reporting requirements under the rule for small
entities;
    (3) The use of performance rather than design standards; and

    (4) An exemption from coverage of the rule, or any part of the
rule, for small entities.
    In connection with our proposed amendments to Rule 2-01 of
Regulation S-X, we do not think it feasible or appropriate to establish
different compliance or reporting requirements or timetables for small
entities. The proposed amendments are designed to address compliance
challenges for both large and small issuers and audit firms. With
respect to clarification, consolidation or simplification of compliance
and reporting requirements for small entities, the proposed amendments
do not contain any new reporting requirements. While the proposed
amendments would create a new compliance requirement that focuses on
``significant influence'' over the audit client to better identify
those lending relationships that could impair an auditor's objectivity
and impartiality, that standard is more qualitative in nature and its
application would vary according to the circumstances. This more
flexible standard would be applicable to all issuers, regardless of
size.
    With respect to using performance rather than design standards, we
note that our proposed amendments establishing a ``significant
influence'' test and adding a ``known through reasonable inquiry''
standard are more akin to performance standards. Rather than prescribe
the specific steps necessary to apply such standards, the proposed
amendments recognize that ``significant influence'' and ``known through
reasonable inquiry'' can be implemented in a variety of ways. We
believe that the use of these standards would accommodate entities of
various sizes while potentially avoiding overly burdensome methods that
may be ill-suited or unnecessary, given the facts and circumstances.
    The proposed amendments are intended to address significant
compliance challenges for audit firms and their clients, including
those that are small entities. In this respect, exempting small
entities from the proposed amendments would increase, rather than
decrease, their regulatory burden relative to larger entities.

G. Solicitation of Comment

    We encourage the submission of comments with respect to any aspect
of this Initial Regulatory Flexibility Analysis. In particular, we
request comments regarding:
     The number of small entities that may be subject to the
proposed amendments;
     The existence or nature of the potential impact of the
proposed amendments on small entities discussed in the analysis;
     How to quantify the impact of the proposed amendments; and
     Alternatives that would accomplish our stated objectives
while minimizing any significant adverse impact on small entities.
    Respondents are asked to describe the nature of any impact and
provide empirical data supporting the extent of the impact. Such
comments will be considered in the preparation of the Final Regulatory
Flexibility Analysis, if the proposed amendments are adopted, and will
be placed in the same public file as comments on the proposed
amendments.

VII. Small Business Regulatory Enforcement Fairness Act

    For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996 (``SBREFA''),\110\ the Commission must advise the Office of
Management and Budget as to whether a proposed regulation constitutes a
``major'' rule. Under SBREFA, a rule is considered ``major'' when, if
adopted, it results or is likely to result in:
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    \110\ Public Law 104-121, Tit. II, 110 Stat. 857 (1996).
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     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
     Significant adverse effects 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 whether our proposed amendments would be a
``major rule'' for purposes of SBREFA. We solicit comment and empirical
data on:
     The potential effect on the U.S. economy on an annual
basis;
     Any potential increase in costs or prices for consumers or
individual industries; and
     Any potential effect on competition, investment or
innovation.
    We request those submitting comments to provide empirical data and
other factual support for their views to the extent possible.

VIII. Statutory Basis

    The amendment described in this release is being adopted under the
authority set forth in Schedule A and Sections 7, 8, 10, and 19 of the
Securities Act, Sections 3, 10A, 12, 13, 14, 17, and 23 of the Exchange
Act, Sections 8, 30, 31, and 38 of the Investment Company Act, and
Sections 203 and 211 of the Investment Advisers Act.

List of Subjects in 17 CFR Parts 210

    Accountants, Accounting, Banks, Banking, Employee benefit plans,
Holding companies, Insurance companies, Investment companies, Oil and
gas exploration, Reporting and recordkeeping requirements, Securities,
Utilities.

    In accordance with the foregoing, the Commission proposes to amend
title 17, chapter II of the Code of Federal Regulations as follows:

PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL
STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF
1934, INVESTMENT COMPANY ACT OF 1940, INVESTMENT ADVISERS ACT OF
1940, AND ENERGY POLICY AND CONSERVATION ACT OF 1975

0
1. The authority citation for part 210 continues to read as follows:

    Authority:  15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3,
77aa(25), 77aa(26), 77nn(25), 77nn(26), 78c, 78j-1, 78l, 78m, 78n,
78o(d), 78q, 78u-5, 78w, 78ll, 78mm, 80a-8, 80a-20, 80a-29, 80a-30,
80a-31, 80a-37(a), 80b-3, 80b-11, 7202 and 7262, and sec. 102(c),
Public Law 112-106, 126 Stat. 310 (2012), unless otherwise noted.

0
2. Amend Sec.  210.2-01 by revising paragraph (c)(1)(ii)(A) to read as
follows:

Sec.  210.2-01   Qualifications of accountants.

* * * * *
    (c) * * *
    (1) * * *
    (ii) * * *
    (A) Loans/debtor-creditor relationship. (1) Any loan (including any
margin loan) to or from an audit client, or an audit client's officers,
directors, or beneficial owners (known through reasonable inquiry) of
the audit client's equity securities where such beneficial owner has
significant influence over the audit client, except for the following
loans obtained from a financial institution under its normal lending
procedures, terms, and requirements:
    (i) Automobile loans and leases collateralized by the automobile;
    (ii) Loans fully collateralized by the cash surrender value of an
insurance policy;
    (iii) Loans fully collateralized by cash deposits at the same
financial institution; and
    (iv) A mortgage loan collateralized by the borrower's primary
residence

provided the loan was not obtained while the covered person in the firm
was a covered person.
    (2) For purposes of paragraph (c)(1)(ii)(A) of this section:
    (i) The term audit client for a fund under audit excludes any other
fund that otherwise would be considered an affiliate of the audit
client;
    (ii) The term fund means an investment company or an entity that
would be an investment company but for the exclusions provided by
Section 3(c) of the Investment Company Act of 1940 (15 U.S.C. 80a-
3(c)).
* * * * *

    By the Commission.

    Dated: May 2, 2018.
Brent J. Fields,
Secretary.
[FR Doc. 2018-09721 Filed 5-7-18; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 79, Number 70 (Friday, April 11, 2014)]
[Notices]
[Pages 20281-20283]
[FR Doc No: 2014-08124]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71889; File No. SR-NYSEMKT-2014-29]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Amending Its Price List
for Certain Executions at the Opening

April 7, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on March 26, 2014, NYSE MKT LLC (``Exchange'' or ``NYSE MKT'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the self-regulatory organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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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 its Price List for certain
executions at the opening. The Exchange proposes to implement the fee
change effective April 1, 2014. The text of the proposed rule change is
available on the Exchange's Web site at www.nyse.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization
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 those 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 parts of such statements.

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

1. Purpose
    The Exchange proposes to amend its Price List for certain
executions at the opening.\4\ The Exchange proposes to implement the
fee change effective April 1, 2014.
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    \4\ The proposed pricing would only apply to securities priced
$1.00 or greater. The existing pricing for executions at the opening
in securities priced below $1.00 would remain unchanged (i.e., 0.3%
of the total dollar value of the transaction). Designated Market
Maker (``DMM'') executions at the opening would continue to not be
charged.
---------------------------------------------------------------------------

    The Exchange currently charges a fee of $0.0005 per share for
executions of at the opening or at the opening only orders, subject to
a monthly fee cap of $15,000 per member organization for such
executions. The Exchange proposes to raise the fee to $0.0010 per share
and decrease the monthly fee cap to $10,000 per member organization.
    The proposed change is not otherwise intended to address any other
issues, and the Exchange is not aware of any problems that members and
member organizations would have in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\5\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\6\ in
particular, because it provides for the equitable allocation of
reasonable dues, fees, and other charges among its members, issuers and
other persons using its facilities and does not unfairly discriminate
between customers, issuers, brokers or dealers.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable to increase the fee for
executions at the opening because members and member organizations
benefit from the substantial amounts of liquidity that are present on
the Exchange during such time. The proposed new rate of $0.0010 for the
fee is reasonable because it will strike a more appropriate balance
between encouraging liquidity at the opening and generating adequate
revenues for the Exchange. The Exchange notes that it has not increased
the fee in nearly two years.\7\ The proposed new rate for the fee is
also reasonable because it is comparable to the rate for executions at
the opening on other markets.\8\
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    \7\ See Securities Exchange Act Release No. 66959 (May 10,
2012), 77 FR 28912 (May 16, 2012) (SR-NYSEAmex-2012-28).
    \8\ For example, the Nasdaq Stock Market, LLC (``NASDAQ'')
similarly charges $0.0010 per share for certain orders executed in
the NASDAQ Opening Cross. See NASDAQ Rule 7018(e). The Exchange's
affiliate, New York Stock Exchange LLC (``NYSE'') has also proposed
an increase for its fee at the opening from $0.0005 to $0.0010 per
share. See SR-NYSE-2014-18.
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    The pricing at the opening is only applicable to NYSE MKT-listed
securities, and the fee cap was implemented on the Exchange nearly two
years ago.\9\ Based on a review of such time period the Exchange has
determined that the current fee cap level of $15,000 may be too high
for certain member organizations to reach. A decreased fee cap is
therefore reasonable because it would be set at a level that is more
representative of the volume during the opening on the Exchange, which
is significantly lower than, for example, the opening on the Exchange's
affiliate NYSE.\10\ The decrease to the fee cap is also reasonable
because it would incentivize member organizations to submit additional
liquidity at the open so that they may reach the fee cap as quickly as
possible. In this regard, a member organization that reaches the fee
cap would continue to be charged a marginal [sic] rate for its
transactions at the opening that is lower than the $0.0010 rate that
would be applicable without the cap (i.e., once a member organization
reaches the cap, its per-transaction rate thereafter will be zero and
its marginal [sic] rate will decrease for each additional transaction
at the open thereafter). It is also reasonable to increase the fee and
decrease the fee cap because member organizations would pay a higher
per-transaction fee for opening executions than they currently do, but
could benefit over the course of the month by potentially reaching the
lower fee cap quicker.
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    \9\ See supra note 7.
    \10\ The Exchange notes that, while NYSE has similarly proposed
to increase its fee for executions at the opening from $0.0005 to
$0.0010 per share, NYSE has proposed to increase the corresponding
fee cap from $15,000 to $20,000 rather than the decrease that is
proposed herein. See SR-NYSE-2014-18, supra note 8.
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    The proposed new rate of $0.0010 for the fee and the decreased fee
cap of $10,000 are equitable and not unfairly discriminatory because
this pricing would continue to encourage robust levels of liquidity at
the opening, which benefits all market participants. This pricing is
also equitable and not unfairly discriminatory because it would apply
equally to all similarly situated member organizations.\11\
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    \11\ As noted in note 4 above, DMM executions at the opening
would continue to not be charged. The Exchange believes that this is
reasonable because of the liquidity-providing function that DMMs
serve. This is also equitable and not unfairly discriminatory
because DMMs are subject to certain obligations to which other
members and member organizations are not.
---------------------------------------------------------------------------

    Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
    For these reasons, the Exchange believes that the proposal is
consistent with the Act.

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

    In accordance with Section 6(b)(8) of the Act,\12\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, the Exchange believes that the proposed
change would contribute to the Exchange's market quality and ultimately
competition. The proposed change would also lead to increased
competition among execution venues, including by permitting the
Exchange to compete with other markets that apply comparable pricing
for executions at the opening.\13\ The proposed change also would not
impose any burden on competition among market participants. Instead,
the pricing for executions at the opening would remain at relatively
low levels and would continue to reflect the benefit that market
participants receive through the ability to have their orders interact
with other liquidity at the opening. The decreased fee cap would also
be set at a level that would make it easier to reach for all member
organizations and could therefore contribute to competition between
member organizations with varying levels of liquidity and executions at
the opening.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b)(8).
    \13\ See supra note 8.
---------------------------------------------------------------------------

    Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive or rebate opportunities available at other venues to be more
favorable. In such an environment, the Exchange must continually adjust
its fees and rebates to remain competitive with other exchanges and
with alternative trading systems that have been exempted from
compliance with the statutory standards applicable to

exchanges. Because competitors are free to modify their own fees and
credits in response, and because market participants may readily adjust
their order routing practices, the Exchange believes that the degree to
which fee changes in this market may impose any burden on competition
is extremely limited. As a result of all of these considerations, the
Exchange does not believe that the proposed changes will impair the
ability of member organizations or competing order execution venues to
maintain their competitive standing in the financial markets.

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

    No written comments were solicited or received with respect to the
proposed rule change.

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

    The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \14\ of the Act and subparagraph (f)(2) of Rule
19b-4 \15\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend 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. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NYSEMKT-2014-29 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEMKT-2014-29. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of 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 available publicly. All
submissions should refer to File Number SR-NYSEMKT-2014-29 and should
be submitted on or before May 2, 2014.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-08124 Filed 4-10-14; 8:45 am]
BILLING CODE 8011-01-P