[Federal Register: November 29, 2005 (Volume 70, Number 228)]
[Notices]
[Page 71592-71595]
[DOCID:fr29no05-117]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52811; File No. SR-PCX-2005-125]

Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of
Filing and Order Granting Accelerated Approval of Proposed Rule Change
To Extend Certain Exceptions From the Voting and Ownership Limitations
in the Certificate of Incorporation of PCX Holdings, Inc.

November 21, 2005.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 15, 2005, the Pacific Exchange, Inc. (``PCX'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by PCX. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons, and is approving the proposal on an
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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

    PCX hereby submits to the Commission a proposed rule change to
extend certain exceptions from the voting and ownership limitations in
the certificate of incorporation of PCX Holdings, Inc. (``PCXH''), a
Delaware corporation and the parent company of PCX, approved by the
Commission in an order issued on September 22, 2005,\3\ so as to allow
Archipelago Holdings, Inc. (``Archipelago''), a Delaware corporation
and the ultimate parent company of PCXH and PCX, to continue to (i) own
and operate the ATS OTC Function (as defined below) of its wholly-owned
subsidiary, Archipelago Trading Services, Inc. (``Arca Trading''), and
(ii) until the closing of the proposed business combination of
Archipelago and the New York Stock Exchange, Inc. (the ``NYSE''), a New
York not-for-profit corporation (the ``Proposed Archipelago NYSE
Merger''), own and operate the DOT Function (as defined below) of its
wholly-owned subsidiary, Archipelago Securities, L.L.C. (``Archipelago
Securities'').
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    \3\ See Securities Exchange Act Release No. 52497 (September 22,
2005), 70 FR 56949 (September 29, 2005) (``Order Approving SR-PCX-
2005-90'').
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

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

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

1. Purpose
a. PCXH Acquisition and the Amendment of the PCXH Certificate of
Incorporation
    On September 26, 2005, Archipelago completed its acquisition of
PCXH and all of its wholly-owned subsidiaries, including PCX and PCX
Equities, Inc. (``PCXE'') (the ``PCXH Acquisition''). The PCXH
Acquisition was accomplished by way of a merger of PCXH with a wholly-
owned subsidiary of Archipelago, with PCXH being the surviving
corporation in the merger and becoming a wholly-owned subsidiary of
Archipelago.
    The certificate of incorporation of PCXH (as amended to date, the
``PCXH Certificate of Incorporation'') contains various ownership and
voting restrictions on PCXH's capital stock, which are designed to
safeguard the independence of the self-regulatory functions of PCX and
to protect the Commission's oversight responsibilities. In order to
allow Archipelago to own 100% of the capital stock of PCXH, prior to
the completion of the PCXH Acquisition, PCX filed with the Commission a
proposed rule change which sought to, among other things, amend the
PCXH Certificate of Incorporation to create an exception from the
voting and ownership restrictions for Archipelago and certain of its
related persons (the ``Original Rule Filing'').\4\ The Original Rule
Filing, as amended by Amendment No. 1 and Amendment No. 2 thereto, was
approved by the Commission on September 22, 2005 \5\ and the amended
PCXH Certificate of Incorporation became effective on September 26,
2005, upon the closing of the PCXH Acquisition.
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    \4\ See Pacific Exchange, Inc., Proposed Rule Change Relating to
the Certificate of Incorporation of PCX Holdings, Inc., PCX Rules,
and Bylaws of Archipelago Holdings, Inc., File No. SR-PCX-2005-90
(August 1, 2005).
    \5\ See Order Approving SR-PCX-2005-90.
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    Article Nine of the PCXH Certificate of Incorporation provides that
no Person,\6\ either alone or together with its Related Persons,\7\ may
own, directly or indirectly, shares constituting more than 40% of the
outstanding shares of any class of PCXH capital stock,\8\ and that no
Person, either alone or together with its Related Persons who is a
trading permit holder of PCX or an equities trading permit holder of
PCXE, may own, directly or indirectly, shares

constituting more than 20% of any class of PCXH capital stock.\9\
Furthermore, the PCXH Certificate of Incorporation provides that, for
so long as PCXH controls, directly or indirectly, PCX, no Person,
either alone or with its Related Persons, may directly or indirectly
vote or cause the voting of shares of PCXH capital stock or give any
proxy or consent with respect to shares representing more than 20% of
the voting power of the issued and outstanding PCXH capital stock.\10\
The PCXH Certificate of Incorporation also places limitations on the
right of any Person, either alone or with its Related Persons, to enter
into any agreement with respect to the withholding of any vote or
proxy.\11\
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    \6\ ``Person'' is defined to mean an individual, partnership
(general or limited), joint stock company, corporation, limited
liability company, trust or unincorporated organization, or any
governmental entity or agency or political subdivision thereof. PCXH
Certificate of Incorporation, Article Nine, section 1(b)(iv).
    \7\ The term ``Related Person,'' as defined in the PCXH
Certificate of Incorporation, means (i) with respect to any person,
all ``affiliates'' and ``associates'' of such person (as such terms
are defined in Rule 12b-2 under the Act; (ii) with respect to any
person constituting a trading permit holder of PCX or an equities
trading permit holder of PCXE, any broker dealer with which such
holder is associated; and (iii) any two or more persons that have
any agreement, arrangement or understanding (whether or not in
writing) to act together for the purpose of acquiring, voting,
holding or disposing of shares of the capital stock of PCXH. PCXH
Certificate of Incorporation, Article Nine, section 1(b)(iv).
    \8\ PCXH Certificate of Incorporation, Article Nine, section
1(b)(i). However, such restriction may be waived by the Board of
Directors of PCXH pursuant to an amendment to the Bylaws of PCXH
adopted by the Board of Directors, if, in connection with the
adoption of such amendment, the Board of Directors adopts a
resolution stating that it is the determination of such Board that
such amendment will not impair the ability of PCX to carry out its
functions and responsibilities as an ``exchange'' under the Act and
is otherwise in the best interests of PCXH and its stockholders and
PCX, and will not impair the ability of the Commission to enforce
said Act, and such amendment shall not be effective until approved
by said Commission; provided that the Board of Directors of PCXH
shall have determined that such Person and its Related Persons are
not subject to any applicable ``statutory disqualification'' (within
the meaning of section 3(a)(39) of the Act). PCXH Certificate of
Incorporation, Article Nine, sections 1(b)(i)(B) and 1(b)(i)(C).
    \9\ PCXH Certificate of Incorporation, Article Nine, section
1(b)(ii).
    \10\ PCXH Certificate of Incorporation, Article Nine, section
1(c).
    \11\ Id.
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    PCX proposed (and the Commission approved) an exception from the
ownership and voting limitations described above by adding a new
paragraph at the end of Article Nine of the PCXH Certificate of
Incorporation, which provides that for so long as Archipelago directly
owns all of the outstanding capital stock of PCXH, these ownership and
voting limitations shall not be applicable to the ownership and voting
of shares of PCXH by (i) Archipelago, (ii) any Person that is a Related
Person of Archipelago, either alone or together with its Related
Persons, and (iii) any other Person to which Archipelago is a Related
Person, either alone or together with its Related Persons.\12\ These
exceptions to the ownership and voting limitations, however, shall not
apply to any ``Prohibited Persons,'' \13\ which is defined to mean any
Person that is, or that has a Related Person that is (i) an OTP Holder
or an OTP Firm (as defined in the rules of PCX) \14\ or (ii) an ETP
Holder (as defined in the rules of PCXE),\15\ unless such Person is
also a ``Permitted Person'' under the PCXH Certificate of
Incorporation.\16\ The PCXH Certificate of Incorporation further
provides that any Prohibited Person not covered by the definition of a
Permitted Person who is subject to and exceeds the voting and ownership
limitations imposed by Article Nine as of the date of the closing of
the PCXH Acquisition shall be permitted to exceed the voting and
ownership limitations imposed by Article Nine only to the extent and
for the time period approved by the Commission.\17\
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    \12\ PCXH Certificate of Incorporation, Article Nine, Section 4.
    \13\ Id.
    \14\ PCX rules define an ``OTP Holder'' to mean any natural
person, in good standing, who has been issued an Options Trading
Permit (``OTP'') by the Exchange for effecting approved securities
transactions on the Exchange's trading facilities, or has been named
as a Nominee. PCX Rule 1.1(q). The term ``Nominee'' means an
individual who is authorized by an ``OTP Firm'' (a sole
proprietorship, partnership, corporation, limited liability company
or other organization in good standing who holds an OTP or upon whom
an individual OTP Holder has conferred trading privileges on the
Exchange's trading facilities) to conduct business on the Exchange's
trading facilities and to represent such OTP Firm in all matters
relating to the Exchange. PCX Rule 1.1(n).
    \15\ PCXE rules define an ``ETP Holder'' to mean any sole
proprietorship, partnership, corporation, limited liability company
or other organization in good standing that has been issued an
Equity Trading Permit, a permit issued by the PCXE for effecting
approved securities transactions on the trading facilities of PCXE.
PCXE Rule 1.1(n).
    \16\ ``Permitted Person'' is defined to mean (A) any broker or
dealer approved by the Commission after June 20, 2005 to be a
facility (as defined in Section 3(a)(2) of the Act) of PCX; (B) any
Person that has been approved by the Commission prior to it becoming
subject to the provisions of Article Nine of the PCXH Certificate of
Incorporation with respect to the voting and ownership of shares of
PCXH capital stock by such Person; and (C) any Person that is a
Related Person of Archipelago solely by reason of beneficially
owning, either alone or together with its Related Persons, less than
20% of the outstanding shares of Archipelago capital stock. PCXH
Certificate of Incorporation, Article Nine, section 4.
    \17\ Id.
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b. ATS OTC Function
    Arca Trading is a broker-dealer and an ETP Holder of PCXE. The
business of Arca Trading includes, among other things, the operation of
an alternative trading system (``ATS'') (as defined in Regulation ATS
promulgated by the Commission under the Act) \18\ for trading of over-
the-counter bulletin board securities that are not traded on any
securities exchange or Nasdaq (including, for the avoidance of doubt,
The NASDAQ National Market and The NASDAQ SmallCap Market) (such
function was referred to as the ``ATS OTC Function'' in the Order
Approving SR-PCX-2005-90). Because Arca Trading is a broker-dealer and
an ETP Holder, and a wholly-owned subsidiary and, consequently, a
Related Person, of Archipelago, it falls within the definition of
``Prohibited Persons.'' Absent an exception, Archipelago's ownership of
PCXH would cause Arca Trading to exceed the voting and ownership
limitations imposed by Article Nine of the PCXH Certificate of
Incorporation. Therefore, in connection with the PCXH Acquisition, PCX
requested an exception on a pilot basis for Arca Trading from the
ownership and voting limitations in the PCX Certificate of
Incorporation for Archipelago's ownership and operation of the ATS OTC
Function of Arca Trading.\19\ The Commission approved PCX's proposal
and allowed Archipelago to continue to own and operate the ATS OTC
Function of Arca Trading for a period of 60 days following the closing
of the PCXH Acquisition.\20\ The pilot approval was designed to provide
the public and other interested parties the opportunity to comment on
the exception before the exception being made permanent. In the Order
Approving SR-PCX-2005-90, the Commission specifically noted that in its
adoption of Regulation ATS, it had stated that exchanges could form
subsidiaries that operate ATSs registered as broker-dealers and that
such subsidiaries would of course be required to become members of a
national securities association or another national securities
exchange.\21\
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    \18\ 17 CFR 242.300 through 17 CFR 242.303.
    \19\ See Amendment No. 2 to the Original Rule Filing (File
Number SR-PCX-2005-90), at 6 (September 16, 2005) (``Amendment No.
2'').
    \20\ See Order Approving SR-PCX-2005-90, at 56960.
    \21\ Id. at 56959. The Commission also noted in the Order
Approving SR-PCX-2005-90 that in adopting Regulation ATS, the
Commission stated that any subsidiary or affiliate ATS could not
integrate, or otherwise link the ATS with the exchange, including
using the premises or property of such exchange for effecting or
reporting a transaction, without being considered a facility of the
exchange. Id.
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c. DOT Function of Archipelago Securities
    Archipelago Securities is a registered broker-dealer, a member of
the National Association of Securities Dealers, Inc. and an ETP Holder
of PCXE. Among other things, Archipelago Securities engages in the
business of providing broker-dealer clients with direct connectivity,
through the NYSE Designated Order Turnaround System, to the NYSE (such
function was referred to as the ``DOT Function'' in the Order Approving
SR-PCX-2005-90). Because Archipelago Securities is a broker-dealer and
an ETP Holder, and a wholly-owned subsidiary and, consequently, a
Related Person, of Archipelago, it falls within the definition of
``Prohibited Persons.'' Absent an exception, Archipelago's ownership of
PCXH would cause Archipelago Securities to exceed the voting and
ownership limitations imposed by Article Nine of the PCXH Certificate
of Incorporation. Therefore, in connection with the PCXH Acquisition,
PCX requested an exception on a pilot basis for Archipelago Securities
from the ownership and voting limitations for Archipelago's ownership
and operation

of the DOT Function of Archipelago Securities, on the condition that in
no event would Archipelago or PCX request that this exception be
extended beyond the completion of the Proposed Archipelago NYSE
Merger.\22\ In the Order Approving SR-PCX-2005-90, the Commission
approved PCX's request for Archipelago to continue to own and operate
the DOT Function of Archipelago Securities until the earlier of a
period of 60 days following the closing of the PCXH Acquisition and the
closing of the Proposed Archipelago NYSE Merger.\23\
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    \22\ See Amendment No. 2, at 7.
    \23\ See Order Approving SR-PCX-2005-90, at 56960.
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d. Requests for Approval
    Because the PCXH Acquisition was consummated on September 26, 2005,
the temporary approvals with respect to the ATS OTC Function of Arca
Trading and the DOT Function of Archipelago Securities will expire on
November 25, 2005. The Exchange hereby submits to the Commission the
following requests:
    (i) The Exchange hereby requests that the Commission approve
Archipelago's ownership and operation of the ATS OTC function of Arca
Trading on a permanent basis. Without the Commission's approval sought
hereby, upon the expiration of the 60 day pilot approval, Archipelago's
ownership of PCXH would cause Arca Trading to exceed the voting and
ownership limitations imposed by Article Nine of the PCXH Certificate
of Incorporation because ATS, a broker-dealer and an ETP Holder of
PCXE, is a wholly owned subsidiary and, consequently, a Related Person,
of Archipelago.
    (ii) The Exchange hereby requests that the Commission approve an
extension of the pilot approval with respect to Archipelago's ownership
and operation of the DOT Function of Archipelago Securities until the
closing of the Proposed Archipelago NYSE Merger. Without the
Commission's approval sought hereby, upon the expiration of the 60 day
pilot approval, Archipelago's ownership of PCXH would cause Archipelago
Securities to exceed the voting and ownership limitations imposed by
Article Nine of the PCXH Certificate of Incorporation because
Archipelago Securities, a broker-dealer and an ETP Holder of PCXE, is a
wholly owned subsidiary and, consequently, a Related Person, of
Archipelago and the approval of the other functions of Archipelago
Securities granted by the Commission previously were limited in scope
and did not include its DOT Function.
2. Basis
    The Exchange believes that the proposed rule change in this filing
is consistent with section 6(b) of the Act,\24\ in general, and
furthers the objectives of section 6(b)(1),\25\ in particular, in that
it enables the Exchange to be so organized so as to have the capacity
to be able to carry out the purposes of the Act and to comply, and
(subject to any rule or order of the Commission pursuant to section
17(d) or 19(g)(2) of the Act) to enforce compliance by its exchange
members and Persons associated with its exchange members, with the
provisions of the Act, the rules and regulations thereunder, and the
rules of the Exchange. The Exchange also believes that this filing
furthers the objectives of section 6(b)(5),\26\ in particular, because
the rules summarized herein would create a governance and regulatory
structure with respect to the operation of the business of PCX \27\
that is designed to help prevent fraudulent and manipulative acts and
practices; to promote just and equitable principals of trade; to foster
cooperation and coordination with Persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities; and to remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest.
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    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(1).
    \26\ 15 U.S.C. 78f(b)(5).
    \27\ PCX clarified that the governance and regulatory structure
created by the proposal relates to the operation of PCX's business
generally, not only to its options business. Telephone conversation
between Janet Angstadt, Deputy General Counsel and Assistant
Corporate Secretary, PCX and Jennifer Dodd, Special Counsel,
Division of Market Regulation, Commission, on November 21, 2005.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.

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

    Written comments on the proposed rule change were neither solicited
nor received.

III. Solicitation of Comments

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

Electronic Comments

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

File Number SR-PCX-2005-125 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-PCX-2005-125. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments,

all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Room. Copies of such
filing also will be available for inspection and copying at the
principal office of PCX. 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-PCX-2005-125 and should be submitted on or before December 20, 2005.

IV. Discussion of Commission Findings and Order Granting Accelerated
Approval of Proposed Rule Change

    After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national

securities exchange.\28\ In particular, the Commission finds that the
proposal is consistent with section 6(b)(1) of the Act,\29\ which
requires a national securities exchange to be so organized and have the
capacity to be able to carry out the purposes of the Act and to enforce
compliance by its members and persons associated with its members with
the provisions of the Act, the rules or regulations thereunder, and the
rules of the exchange. The Commission also finds that the proposal is
consistent with section 6(b)(5) of the Act,\30\ which requires, among
other things, that the rules of an exchange be designed to promote just
and equitable principles of trade, to facilitate transactions in
securities, to remove impediments to and perfect the mechanisms of a
free and open market and a national market system, and, in general, to
protect investors and the public interest.
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    \28\ In approving the proposed rule change, the Commission has
considered its impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
    \29\ 15 U.S.C. 78f(b)(1).
    \30\ 15 U.S.C. 78f(b)(5).
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    Pursuant to section 19(b)(2) of the Act,\31\ the Commission may not
approve any proposed rule change, or amendment thereto, prior to the
thirtieth day after the date of publication of the notice thereof,
unless the Commission find good cause for so doing. The Commission
hereby finds good cause for approving the proposed rule change prior to
the thirtieth day after publishing notice thereof in the Federal
Register pursuant to section 19(b)(2) of the Act.\32\ The Commission
believes that the requested extensions are consistent with the terms
and conditions set forth in the Order Approving SR-PCX-2005-90, and
notes that in its filing, PCX represented that accelerated
effectiveness of the proposed rule change before the expiration of the
pilot approvals would provide continuity of Archipelago's operation of
the ATS OTC Function and DOT Function. The Commission also notes that
the proposed changes are extensions of exceptions that the Commission
approved on a pilot basis in the Order Approving SR-PCX-2005-90 and, as
such, do not raise any new or novel issues. The pilots are both
currently set to expire on November 25, 2005. Permitting PCX to extend
the pilots will permit Archipelago to avoid disruption of its operation
of the ATS OTC Function and the DOT Function. Furthermore, the
Commission notes that after the publication of the pilot approvals in
the Federal Register, the Commission did not receive any comment with
respect to Archipelago's ownership and operation of the ATS OTC
Function of Arca Trading and the DOT Function of Archipelago
Securities.
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    \31\ 15 U.S.C. 78s(b)(2).
    \32\ Id.
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    For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with the requirements of the Act the rules
and regulations thereunder, and finds that good cause exists to
accelerate approval of the proposed rule change, pursuant to section
19(b)(2) of the Act.\33\
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    \33\ Id.
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V. Conclusion

    It Is Therefore Ordered, pursuant to section 19(b)(2) of the
Act,\34\ that the proposed rule change (SR-PCX-2005-125) is approved on
an accelerated basis. Specifically, a permanent exception for the ATS
OTC Function of Arca Trading is approved; and the exception for the DOT
Function of Archipelago Securities is approved on a pilot basis until
the closing date of the Proposed Archipelago NYSE Merger.
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    \34\ Id.

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E5-6624 Filed 11-28-05; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 87, Number 204 (Monday, October 24, 2022)]
[Notices]
[Page 64213]
[FR Doc No: 2022-23037]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. ER23-113-000]

AL Solar D, LLC; Supplemental Notice That Initial Market-Based
Rate Filing Includes Request for Blanket Section 204 Authorization

    This is a supplemental notice in the above-referenced proceeding of
AL Solar D, LLC's application for market-based rate authority, with an
accompanying rate tariff, noting that such application includes a
request for blanket authorization, under 18 CFR part 34, of future
issuances of securities and assumptions of liability.
    Any person desiring to intervene or to protest should file with the
Federal Energy Regulatory Commission, 888 First Street NE, Washington,
DC 20426, in accordance with Rules 211 and 214 of the Commission's
Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone
filing a motion to intervene or protest must serve a copy of that
document on the Applicant.
    Notice is hereby given that the deadline for filing protests with
regard to the applicant's request for blanket authorization, under 18
CFR part 34, of future issuances of securities and assumptions of
liability, is November 7, 2022.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper, using the FERC Online links at http://www.ferc.gov. To facilitate electronic service, persons with internet
access who will eFile a document and/or be listed as a contact for an
intervenor must create and validate an eRegistration account using the
eRegistration link. Select the eFiling link to log on and submit the
intervention or protests.
    Persons unable to file electronically may mail similar pleadings to
the Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC 20426. Hand delivered submissions in docketed
proceedings should be delivered to Health and Human Services, 12225
Wilkins Avenue, Rockville, Maryland 20852.
    In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
internet through the Commission's Home Page (http://www.ferc.gov) using
the ``eLibrary'' link. Enter the docket number excluding the last three
digits in the docket number field to access the document. At this time,
the Commission has suspended access to the Commission's Public
Reference Room, due to the proclamation declaring a National Emergency
concerning the Novel Coronavirus Disease (COVID-19), issued by the
President on March 13, 2020. For assistance, contact the Federal Energy
Regulatory Commission at[email protected] or call toll-free,
(886) 208-3676 or TYY,<PHONE_NUMBER>.

    Dated: October 18, 2022.
Debbie-Anne A. Reese,
Deputy Secretary.
[FR Doc. 2022-23037 Filed 10-21-22; 8:45 am]
BILLING CODE 6717-01-P


UNITED STATES ENVIRONMENTAL PROTECTION AGENCY                 NATIONAL VEHICLE AND FUEL EMISSIONS LABORATORY                              2000 TRAVERWOOD ROAD                            ANN ARBOR, MI  48105-2498

									          	OFFICE OF 										AIR AND RADIATION

December 16, 2010

MEMORANDUM

SUBJECT:	Meeting with China Automotive Technology and Research Center (CATARC)

FROM:	Angela Cullen, Mechanical Engineer

TO:		Docket EPA-HQ-OAR-2010-0162

This memorandum documents a meeting held on Monday, December 6, 2010 between CATARC, ICCT, and EPA and included the following individuals:

      CATARC:  JIN Yuefu, GAO Haiyang, WANG Zhao, ZHENG Tianlei, QIN Kongjian, and FU Tieqiang               ICCT: Freda Fung              EPA: Byron Bunker, Cle Jackson, Houshan Zhang, Chien Sze, Don Kopinski, and Angela Cullen

The discussion focused on sharing information regarding the U.S. proposal to control greenhouse gas emissions from heavy-duty trucks and China's development of heavy-duty test procedures and future standards.


[Federal Register Volume 84, Number 196 (Wednesday, October 9, 2019)]
[Proposed Rules]
[Pages 54062-54067]
[FR Doc No: 2019-21882]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

[Release No. 34-87204; File No. S7-16-19]

Proposed Exemptive Order Granting a Conditional Exemption From
the Broker Registration Requirements of Section 15(a) of the Securities
Exchange Act of 1934 for Certain Activities of Registered Municipal
Advisors

AGENCY: Securities and Exchange Commission.

ACTION: Notification of proposed exemptive order; request for comment.

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SUMMARY: Pursuant to Section 15(a)(2) of the Securities Exchange Act of
1934 (``Exchange Act'') and Section 36(a)(1) of the Exchange Act, the
Securities and Exchange Commission (``SEC'' or ``Commission'') is
proposing to grant exemptive relief, subject to certain conditions, to
permit municipal advisors registered with the Commission under Section
15B of the Exchange Act to engage in certain limited activities in
connection with the direct placement of municipal securities without
registering as a broker under Section 15 of the Exchange Act.

DATES: Comments should be received by December 9, 2019.

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/other.shtml); or
     Send an email to<EMAIL_ADDRESS>
Paper Comments

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

All submissions should refer to File Number S7-16-19. This file number
should be included on the subject line if email 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 website (http://www.sec.gov/rules/proposed.shtml). Comments
are also available for website viewing and printing in the Commission's
Public Reference Room, 100 F Street NE, Washington, DC 20549-1090 on
official business days between the hours of 10:00 a.m. and 3:00 p.m.
All comments received will be posted without change. Persons submitting
comments are cautioned that the Commission does not redact or edit
personal identifying information from comment submissions. Commenters
should submit only information that they wish to make available
publicly.

FOR FURTHER INFORMATION CONTACT: Emily Westerberg Russell, Chief
Counsel, Joanne Rutkowski, Assistant Chief Counsel, or Kelly Shoop,
Special Counsel, at<PHONE_NUMBER>, in the Division of Trading and
Markets; Rebecca Olsen, Director, or Adam Wendell, Senior Special
Counsel, at<PHONE_NUMBER>, in the Office of Municipal Securities;
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549.

SUPPLEMENTARY INFORMATION:

I. Background

A. Municipal Advisor Registration Framework

    Section 975 of Title IX of the Dodd-Frank Wall Street Reform and
Consumer Protection Act amended the Exchange Act to create a new class
of regulated persons, ``municipal advisors.'' \1\ The Commission
subsequently adopted registration rules for municipal advisors in
2013.\2\ Exchange Act Section 15B(e)(4)(A) defines the term ``municipal
advisor'' to include a person that provides advice to or on behalf of a
municipal entity \3\ or obligated person \4\ (together, ``Municipal
Issuers'')

with respect to municipal financial products or the issuance of
municipal securities, including advice with respect to the structure,
timing, terms, and other similar matters concerning such financial
products or issues.\5\
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    \1\ See 15 U.S.C. 78o-4(a)(1)(B).
    \2\ See Registration of Municipal Advisors, Exchange Act Rel.
No. 70462 (Sept. 30, 2013), 78 FR 67468, 67483 n.200 (Nov. 12, 2013)
(``Municipal Advisor Adopting Release'').
    \3\ Exchange Act Section 15B(e)(8) defines ``municipal entity''
as ``any State, political subdivision of a State, or municipal
corporate instrumentality of a State, including (A) any agency,
authority, or instrumentality of the State, political subdivision,
or municipal corporate instrumentality; (B) any plan, program, or
pool of assets sponsored or established by the State, political
subdivision, or municipal corporate instrumentality or any agency,
authority, or instrumentality thereof; and (C) any other issuer of
municipal securities.'' 15 U.S.C. 78o-4(e)(8); see also 17 CFR
240.15Ba1-1(g).
    \4\ Exchange Act Section 15B(e)(10) defines ``obligated person''
as ``any person, including an issuer of municipal securities, who is
either generally or through an enterprise, fund, or account of such
person, committed by contract or other arrangement to support the
payment of all or part of the obligations on the municipal
securities to be sold in an offering of municipal securities.'' 15
U.S.C. 78o-4(e)(10). Exchange Act Rule 15Ba1-1(k) generally provides
that obligated person has the same meaning as in Exchange Act
Section 15B(e)(10), ``provided, however, the term obligated person
shall not include: (1) A person who provides municipal bond
insurance, letters of credit, or other liquidity facilities; (2) a
person whose financial information or operating data is not material
to a municipal securities offering, without reference to any
municipal bond insurance, letter of credit, liquidity facility, or
other credit enhancement; or (3) the federal government.'' 17 CFR
240.15Ba1-1(k). Obligated persons can include entities acting as
conduit borrowers, such as private universities, non-profit
hospitals, and private corporations. See Municipal Advisor Adopting
Release, 78 FR at 67483 n.200.
    \5\ Exchange Act Section 15B(e)(4)(A)(i).
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    In adopting the municipal advisor registration rules, the
Commission stated that `` `advice with respect to the issuance of
municipal securities' should be construed broadly from a timing
perspective to include advice throughout the life of an issuance of
municipal securities, from the pre-issuance planning stage . . . to the
repayment stage for those municipal securities.'' \6\ The Commission
noted that, in connection with the issuance of municipal securities, a
municipal advisor ``may assist municipal entities in developing a
financing plan, assist municipal entities in evaluating different
financing options and structures, assist in the selection of other
parties to the financing (such as bond counsel and underwriters),
coordinate the rating process, ensure adequate disclosure, and/or
evaluate and negotiate the financing terms.'' \7\
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    \6\ Municipal Advisor Adopting Release, 78 FR at 67490.
    \7\ Id. at 67472.
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    Unless otherwise excluded or exempted, a person who engages in
municipal advisory activities is required to register with the
Commission as a municipal advisor \8\ and comply with the rules of the
Municipal Securities Rulemaking Board (``MSRB'').\9\ Exchange Act
Section 15B(b)(2) requires the MSRB to develop rules that, among other
things, prevent fraudulent and manipulative acts and practices, promote
just and equitable principles of trade, and protect investors,
municipal entities, obligated persons, and the public interest.\10\
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    \8\ Exchange Act Section 15B(a)(2).
    \9\ Exchange Act Section 15B(c)(1).
    \10\ See Exchange Act Section 15B(b)(2)(C). The MSRB has
developed a regulatory framework that imposes requirements
regarding, among other things, registration of municipal advisors
with the MSRB (MSRB Rule A-12); professional qualification
requirements (MSRB Rules G-2 and G-3); fair dealing obligations
(MSRB Rule G-17); supervisory and compliance obligations (MSRB Rule
G-44); restrictions on gifts, gratuities, and non-cash compensation
(MSRB Rule G-20); restrictions on political contributions (MSRB Rule
G-37); standards for advertising (MSRB Rule G-40); application for a
CUSIP number when advising on a competitive sale of new issue
municipal securities (MSRB Rule G-34); and books and records
requirements (MSRB Rules G-8 and G-9). In addition, MSRB Rule G-42
establishes certain standards of conduct consistent with the
fiduciary duty owed by a municipal advisor to its municipal entity
clients, including, without limitation, a duty of care and loyalty
as well as standards of conduct and duties owed by a municipal
advisor to its obligated person clients.
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    Exchange Act Section 15B includes certain statutory exclusions from
municipal advisor registration, which the Commission interpreted and
provided certain additional regulatory exemptions when it adopted the
municipal advisor registration rules.\11\ For example, Exchange Act
Section 15B(e)(4)(C) provides a statutory exclusion from the
requirement to register as a municipal advisor for brokers, dealers,
and municipal securities dealers serving as underwriters,\12\ which was
further interpreted by the Commission in adopting the municipal advisor
rules.\13\ The statute is otherwise silent with respect to whether, and
under what circumstances, municipal advisors would be required to
register as brokers.
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    \11\ See Municipal Advisor Adopting Release, 78 FR at 67503-37;
17 CFR 240.15Ba1-1(d)(2).
    \12\ The statutory definition of ``municipal advisor'' excludes
a broker, dealer, or municipal securities dealer serving as an
underwriter (as defined in Section 2(a)(11) of the Securities Act of
1933). 15 U.S.C. 78o-4(e)(4)(C).
    \13\ See Municipal Advisor Adopting Release, 78 FR at 67511-
67517. A broker cannot rely on the exclusion and provide advice to a
municipal entity on an issuance of municipal securities until it has
been engaged to serve as the underwriter for a particular issuance
of municipal securities. See id. at 67512-13.
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B. Direct Placements of Municipal Securities

    Since 2009, municipal entities have increasingly relied on direct
placements, that is, direct purchases of municipal securities and
direct loans from banks and other lenders, as an alternative to public
offerings of municipal securities.\14\ The demand for these direct
placements has grown substantially over the past several years, as the
involvement of commercial banks in the municipal capital markets has
increased in terms of both purchases of municipal securities and
extensions of loans to state and local governments and their
instrumentalities.\15\
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    \14\ See Amendments to Municipal Securities Disclosure, Exchange
Act Rel. No. 83885 (Aug. 20, 2018), 83 FR 44700, 44702 (Aug. 31,
2018) (``Amendments to Municipal Securities Disclosure''). See also
MSRB Notice 2015-03, Bank Loan Disclosure Market Advisory (Jan. 29,
2015) (noting that ``[direct placements] as an alternative to a
public offering could provide potential advantages for issuers,
among other things, lower interest and transaction costs, reduced
exposure to bank regulatory capital requirements, simpler execution
process, greater structuring flexibility, no requirement for a
rating or offering document, and direct interaction with the lender
instead of multiple bondholders.''), available at http://msrb.org/~/
media/Files/Regulatory-Notices/Announcements/2015-03.ashx?n=1; and
Municipal Market Bank Loan Disclosure Task Force, Considerations
Regarding Voluntary Secondary Market Disclosure about Bank Loans
(May 1, 2013), available at http://www.nfma.org/assets/documents/position.stmt/wp.direct.bank.loan.5.13.pdf. The Task Force comprised
representatives of the American Bankers Association, Bond Dealers of
America, Government Finance Officers Association, Investment Company
Institute, National Association of Bond Lawyers, National
Association of Health and Educational Facilities Finance
Authorities, National Association of Independent Public Finance
Advisors, National Federation of Municipal Analysts, and Securities
Industry and Financial Markets Association. See also National
Association of Bond Lawyers, Direct Purchases of State or Local
Obligations by Commercial Banks and Other Financial Institutions
(July 2017), at 2, available at http://www.chapman.com/media/publication/783_Chapman_NABL_Direct_Purchases_State_Local-Obligations_Banks_Financial_Institutions_072617.pdf.
    \15\ See Amendments to Municipal Securities Disclosure, 83 FR at
44731. Direct placements may be structured as either loans or
municipal securities. See id. at 44702. The relief requested would
apply (and would be needed) only with respect to direct placements
structured as municipal securities.
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    As noted above, the Municipal Advisor Adopting Release identifies a
wide range of activities in which a registered municipal advisor may
engage on behalf of its Municipal Issuer clients. Since the issuance of
the Municipal Advisor Adopting Release, the Commission has received
questions and requests that it clarify the application of the broker
regulatory framework to registered municipal advisors with respect to
their activities in facilitating direct placements of municipal
securities.\16\
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    \16\ The Commission has received a number of letters on this
topic over the past few years. See Letter to Chair Mary Jo White,
Commission from Mike Nicholas, Chief Executive Officer, Bond Dealers
of America (``BDA'') (Oct. 17, 2014); Letter to Chair Mary Jo White,
Commission from Terri Heaton, President, National Association of
Municipal Advisors (``NAMA'') (Dec. 15, 2014); Letter to Chair Mary
Jo White, Commission from Leslie Norwood, Managing Director and
Associate General Counsel, Securities Industry and Financial Markets
Association (``SIFMA'') (Mar. 12, 2015). More recently, Commission
staff has received additional letters on this topic with more
specific requests for guidance, including a request from a
registered municipal advisor. See Letter to Brett Redfearn and
Joanne C. Rutkowski, Division of Trading and Markets and Rebecca
Olsen, Office of Municipal Securities, from Cheryl Maddox, General
Counsel, and Leo Karwejna, Chief Compliance Officer, Public
Financial Management, Inc. (Oct. 30, 2018) (``PFM Letter''); Letter
to Brett Redfearn and Joanne C. Rutkowski, Division of Trading and
Markets and Rebecca Olsen, Office of Municipal Securities, from
Leslie M. Norwood, Managing Director and Associate General Counsel,
SIFMA (June 12, 2019); Letter to Brett Redfearn and Joanne C.
Rutkowski, Division of Trading and Markets and Rebecca Olsen, Office
of Municipal Securities, from Mike Nicholas, Chief Executive
Officer, BDA (June 28, 2019); Letter to Brett Redfearn, Division of
Trading and Markets and Rebecca Olsen, Office of Municipal
Securities, from Susan Gaffney, Executive Director, NAMA (July 18,
2019); Letter to Brett Redfearn and Joanne C. Rutkowski, Division of
Trading and Markets and Rebecca Olsen, Office of Municipal
Securities, from Mike Nicholas, Chief Executive Officer, BDA (Sept.
9, 2019); Letter to Commissioner Robert J. Jackson Jr. from Mike
Nicholas, Chief Executive Officer, BDA (Sept. 25, 2019); Letter to
Brett Redfearn and Joanne C. Rutkowski, Division of Trading and
Markets and Rebecca Olsen, Office of Municipal Securities, from Mike
Nicholas, Chief Executive Officer, BDA (Sept. 25, 2019). All of the
letters are available on the Commission's Office of Municipal
Securities homepage.

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II. Discussion of Proposed Relief

    The Commission is proposing to grant exemptive relief pursuant to
Sections 15(a)(2) \17\ and 36(a)(1) \18\ of the Exchange Act to permit
a registered municipal advisor,\19\ acting on behalf of a Municipal
Issuer client, to solicit specified institutional investors in
connection with the direct placement of municipal securities without
registering as a broker under Section 15 of the Exchange Act, where
certain conditions are met.
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    \17\ Section 15(a)(2) of the Exchange Act authorizes the
Commission to conditionally or unconditionally exempt from the
registration requirements of Section 15(a)(1) any broker or class of
brokers, by rule or order, as it deems consistent with the public
interest and the protection of investors. See 15 U.S.C. 78o(a)(2).
    \18\ Section 36(a)(1) of the Exchange Act authorizes the
Commission to conditionally or unconditionally exempt any person,
security, or transaction, or any class or classes of persons,
securities, or transactions, from any provision or provisions of the
Exchange Act or any rule or regulation thereunder, by rule,
regulation, or order, to the extent that such exemption is necessary
or appropriate in the public interest, and is consistent with the
protection of investors. See 15 U.S.C. 78mm.
    \19\ For purposes of the proposed exemption, the term
``registered municipal advisor'' means a municipal advisor that is
registered in accordance with Section 15B(a) of the Exchange Act and
Rule 15Ba1-2 thereunder. See 17 CFR 240.15Ba1-2.
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    Congress, in enacting the municipal advisor provisions, established
a framework for comprehensive regulation of those entities in
connection with their business of providing advice to or on behalf of a
municipal entity or obligated person with respect to municipal
financial products or the issuance of municipal securities, including
advice with respect to the structure, timing, terms, and other similar
matters concerning such financial products or issues. Registered
municipal advisors are subject to a comprehensive regulatory framework,
including rules that, among other things, are designed to prevent
fraudulent and manipulative acts and practices as well as protect
investors, municipal entities, obligated persons, and the public
interest.\20\ The Commission, as noted above, has described the role of
a municipal advisor as assisting municipal entities in developing a
financing plan, assisting in evaluating different financing options and
structures, assisting in selecting other parties to the financing (such
as bond counsel and underwriters), coordinating the rating process,
ensuring adequate disclosure, and/or evaluating and negotiating the
financing terms. The Commission has not previously addressed, however,
whether and under what circumstances a registered municipal advisor may
interact or negotiate with potential investors on behalf of its
municipal entity client without being required to register as a broker,
with respect to direct placements or other issuances of municipal
securities.
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    \20\ See Exchange Act Sections 15B(a)(5) and (c)(1) and supra
note 10 for a description of the applicable MSRB rules.
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    Because the definition in the Exchange Act of the term ``broker''
and the registration requirements under Section 15(a) of the Exchange
Act were drawn by Congress to encompass a wide range of activities
involving investors and securities markets,\21\ a municipal advisor
that identifies and assesses potential providers for direct placements
by a Municipal Issuer client could be viewed as engaging in
solicitation, a factor relevant to a determination of broker
status.\22\ This is particularly true in light of the fact that service
providers in municipal securities transactions, including municipal
advisors, typically are paid from the proceeds of the securities
offering and thus routinely receive transaction-based compensation. The
receipt of transaction-based compensation has been considered by courts
as a factor indicating that registration as a broker may be
required.\23\ Absent an exception or exemption, a municipal advisor
engaging in this activity could be required to register under Section
15(a) of the Exchange Act.\24\ There is currently no exception or
exemption promulgated by the Commission applicable to these situations
and as noted above, the Commission has not previously addressed this
issue.
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    \21\ See, e.g., Registration Requirements for Foreign Broker-
Dealers, Exchange Act Release No. 27017 (Jul. 11, 1989), 54 FR
30013, at 30014-15 (Jul. 18, 1989). Section 15(a)(1) of the Exchange
Act prohibits any broker or dealer from making ``use of the mails or
any means or instrumentality of interstate commerce to effect any
transactions in, or to induce or attempt to induce the purchase or
sale of, any security [] unless such broker or dealer is registered
in accordance with'' Section 15(b) of the Exchange Act. 15 U.S.C.
78o(a)(1). Section 3(a)(4)(A) of the Exchange Act defines broker
generally as ``any person engaged in the business of effecting
transactions in securities for the account of others.'' 15 U.S.C.
78c(a)(4)(A).
    \22\ See, e.g., SEC v. Century Inv. Transfer Corp., et al., No.
71-cv-3384, 1971 WL 297, at *5 (S.D.N.Y. Oct. 5, 1971) (Century
``engaged in the brokerage business by soliciting customers through
ads in the Wall Street Journal, and engaging in sales activities
designed to bring about mergers between private corporations and
publically held shells controlled by'' a co-defendant); SEC v.
Hansen, No. 83-cv-3692, 1984 WL 2413, at *4 (Apr. 6, 1984)
(defendant engaged in unregistered broker activity when he ``sold or
attempted to sell interest in the five [securities] by use of the
mails, the telephone, advertisements in publications distributed
nationally and by other interstate means of communication''); SEC v.
National Executive Planners, Ltd., et al., 503 F. Supp. 1066, 1072-
73 (M.D.N.C. 1980) (defendant engaged in unregistered broker
activity by using the mails and telephone to ``solicit[] clients
actively'' in the offer and sale of securities); SEC v. Earthly
Mineral Solutions, Inc., No. 2:07-cv-1057, 2011 WL 1103349, at *2
(D. Nev. Mar. 23, 2011) (defendant engaged in unregistered broker
activity when, among other things, he ``conducted general
solicitations through newspaper advertisements''); SEC v. Deyon, 977
F. Supp. 510, 518 (D. Maine 1997) (defendants engaged in
unregistered broker activity when they ``solicited investors by
phone and in person,'' ``distributed documents and . . . prepared
and distributed sales circulars'').
    \23\ See, e.g., SEC v. Helms, No. 13-cv-01036, 2015 WL 5010298,
at *17 (W.D. Tex. Aug. 21, 2015) (``In determining whether a person
`effected transactions [for purposes of the Exchange Act
registration requirements],' courts consider several factors, such
as whether the person: (1) Solicited investors to purchase
securities, (2) was involved in negotiations between the issuer and
the investor, and (3) received transaction-related compensation.'')
(citing cases initiated by the Commission).
    \24\ Although Section 15(a) applies to both brokers and dealers,
the proposed exemption would apply only to activities that
historically have been associated with broker activity; that is,
effecting securities transactions for the account of others.
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    The Commission is mindful that the municipal advisor regulatory
scheme established a framework for comprehensive regulation of those
entities in connection with their business of providing advice to or on
behalf of a municipal entity or obligated person with respect to
municipal financial products or the issuance of municipal securities,
including advice with respect to the structure, timing, terms, and
other similar matters concerning such financial products or issues. The
Commission, as noted above, has described the role of a municipal
advisor as assisting municipal entities in developing a financing plan,
assisting in evaluating different financing options and structures,
assisting in selecting other parties to the financing (such as bond
counsel and underwriters), coordinating the rating process, ensuring
adequate disclosure, and/or evaluating and negotiating the financing
terms. The Commission has not previously addressed, however, whether
and under what circumstances a registered municipal advisor may
interact or negotiate with potential investors on behalf of its
municipal entity client without being required to register as a

broker, with respect to direct placements or other issuances of
municipal securities.
    The Commission preliminarily believes that there are certain
limited circumstances in which a registered municipal advisor should be
permitted to solicit investors in connection with the direct placement
of municipal securities by its Municipal Issuer client, without
registering as a broker under Section 15 of the Exchange Act.
Accordingly, the Commission is proposing to grant exemptive relief
pursuant to Sections 15(a)(2) and 36(a)(1) of the Exchange Act \25\ to
permit such activity without registration as a broker, subject to
certain conditions described below. For purposes of this exemption,
``Municipal Issuer'' would be defined as either a municipal entity or
an obligated person, consistent with Exchange Act Sections 15B(e)(8)
and 15B(e)(10), respectively.\26\
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    \25\ See 15 U.S.C. 78o(a)(2); 15 U.S.C. 78mm.
    \26\ See supra n. 3 and 4.
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    The proposed exemption would apply only to a registered municipal
advisor's activities in connection with the ``direct placement'' by a
Municipal Issuer of an entire issuance of municipal securities with a
single ``Qualified Provider,'' which we propose to define as (i) a
bank, savings and loan association, insurance company, or registered
investment company; or (ii) an investment adviser registered with the
Commission or with a state; or (iii) any other institution with total
assets of at least $50 million.\27\ The proposed exemption thus would
not be available in transactions involving retail investors, including
public offerings of municipal securities.
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    \27\ The Commission's proposed definition of Qualified Provider
tracks the definition of Institutional Accounts under FINRA rules
and the definition of Sophisticated Municipal Market Professionals
under MSRB rules, with the exception that a Qualified Provider could
not be a natural person. This is consistent with the Commission's
preliminary view that for purposes of the exemption permitted
transaction participants should be limited to an institutional
investor purchasing the entire issuance for its own investment
purposes. See FINRA Rule 4512(c) and MSRB Rule D-15(a).
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    The Commission is proposing to limit the universe of Qualified
Providers to entities that otherwise would be ``institutional
investors'' for purposes of FINRA rules or ``sophisticated municipal
market professionals'' (other than natural persons) under MSRB rules, a
status that is equated with a certain level of investor
sophistication.\28\ The Commission recognizes that there may be an
inherent conflict between the interests of a municipal advisor on one
hand, acting on behalf of its Municipal Issuer client, and those of a
potential investor on the other. As discussed below, the proposed
exemption is subject to conditions, including the requirement that the
investor be a Qualified Provider, that are intended to mitigate
investor protection concerns.\29\ Further, nothing in the proposed
relief would preclude a Qualified Provider (or any other transaction
participant) from engaging a registered broker or other intermediary
for the transaction. The condition that the entire issuance be placed
with a single Qualified Provider also reflects the Commission's
understanding of how these transactions are structured currently.\30\
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    \28\ See FINRA Rule 2111(b), which provides an exemption to
customer-specific suitability for institutional investors if certain
conditions are met. MSRB Rule G-48(c) provides a similar exemption.
    \29\ See infra pp. 14-15 (describing required disclosures to the
Qualified Provider) and 16 (describing the municipal advisor's duty
of fair dealing and the Commission's antifraud protections). The
Commission is seeking comment on questions related to potential
investor protection concerns associated with this proposed
exemption. Among other things, it is the Commission's understanding
that in a direct placement the institutional investor--often a
bank--performs its own due diligence on the issuer subject to the
institution's own underwriting standards and generally does not rely
on a broker to perform that service.
    \30\ See MSRB Regulatory Notice 2016-12, Direct Purchases and
Bank Loans as Alternatives to Public Financing in the Municipal
Securities Market (April 4, 2016) (``The MSRB and FINRA are aware of
the increasing practice of privately placing municipal securities
directly with a single purchaser (sometimes referred to as ``direct
purchases'') and of the use of bank loans as alternatives to
traditional public offerings in the municipal securities market.'')
(emphasis added).
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    As noted above, the proposed exemption would permit registered
municipal advisors to solicit investors so long as (1) those investors
meet the definition of Qualified Provider and (2) the solicitation is
in connection only with a potential direct placement of an entire
issuance of municipal securities with a single Qualified Provider by
the registered municipal advisor's Municipal Issuer client. The
proposed exemption does not prescribe the means of solicitation.
Permitted solicitation could take a variety of forms. For example,
Qualified Providers could be identified and assessed in several ways:
Based upon the Municipal Issuer's or registered municipal advisor's
prior knowledge and experience, the use of publicly-available
information sources, or identification of Qualified Providers through
broader solicitation activities.\31\
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    \31\ The solicitation activities would be in addition to the
core advisory activities in which a registered municipal advisor
might otherwise engage, identified by the Commission in the
Municipal Advisor Adopting Release as typical of municipal advisory
activities with respect to the issuance of municipal securities,
namely assisting municipal entities and/or obligated person clients
in: (i) Developing a financing plan; (ii) assisting in evaluating
different financing options and structures; (iii) assisting in
selecting other parties to the financing, such as bond counsel; (iv)
coordinating the rating process, if applicable; (v) ensuring
adequate disclosure; and/or (vi) evaluating and negotiating the
financing terms with other parties to the financing, including the
provider of the direct placement. See Municipal Advisor Adopting
Release, 78 FR at 67472.
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    A registered municipal advisor wishing to rely on the proposed
exemption would be subject to certain conditions:
    First, the registered municipal advisor would be required to make
written disclosures to the Qualified Provider stating that the
registered municipal advisor represents solely the interests of the
Municipal Issuer and not the Qualified Provider. The registered
municipal advisor would also be required to obtain from the Qualified
Provider written acknowledgment of receipt of those disclosures.
    Second, the registered municipal advisor would also need to obtain
a written representation from the Qualified Provider that the Qualified
Provider is capable of independently evaluating the investment risks of
the transaction. This condition is consistent with the established
framework for the institutional investor exemption from a broker's
customer-specific suitability obligations under FINRA rules as well as
the analogous exemption under MSRB rules.\32\
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    \32\ See FINRA Rule 2111(b) and Supplementary Material .07
(deeming a broker's customer-specific suitability obligation
fulfilled in instances where the member or associated person has a
reasonable basis to believe that the institutional customer is
capable of evaluating investment risks independently, both in
general and with regard to particular transactions and investment
strategies involving a security or securities and the institutional
customer affirmatively indicates that it is exercising independent
judgment in evaluating the member's or associated person's
recommendations). See also MSRB Rule G-48(c) (eliminating the
broker, dealer, or municipal securities dealer's obligation to
perform a customer-specific suitability analysis if it reasonably
concludes the customer is a Sophisticated Municipal Market
Professional as defined in MSRB Rule D-15).
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    Finally, the proposed exemption would apply only with respect to
the limited activities, and subject to the conditions described above,
including that the entire issuance of municipal securities be placed
with a single Qualified Provider and that the municipal advisor comply
with all applicable Commission and MSRB rules. A registered municipal
advisor that complies with the conditions of the exemption would be
permitted to solicit Qualified Providers on behalf of its Municipal
Issuer client and receive transaction-based compensation for

services provided in connection with a direct placement as described
above without being required to register as a broker under Section
15(a) of the Exchange Act.\33\ These functions are some of the most
relevant to a determination of broker status, which may therefore
require registration.\34\ Accordingly, if any of the conditions are not
met--for example, the municipal advisor fails to comply with the
disclosure conditions described above--the municipal advisor could not
rely on the exemption and would need to consider whether it is required
to register with the Commission as a broker under Section 15(a) of the
Exchange Act. The exemption would apply only with respect to the
defined activities. A registered municipal advisor could not rely on
this proposed exemption to engage in broker activity relating to
municipal securities offerings beyond the scope of the proposed
exemption, such as facilitating a public offering or the sale of
securities to a retail investor. Further, a registered municipal
advisor seeking to rely on the exemption would need to make and keep
the records required by Exchange Act Rule 15Ba1-8(a)(1). Finally,
consistent with the narrow scope of activities contemplated by the
proposed exemption, a registered municipal advisor seeking to rely on
this proposed exemption could not bind the Municipal Issuer client, or
handle funds or securities in connection with the direct placement. The
Commission preliminarily believes that these types of activities would
implicate the policies underlying the broker regulatory framework.
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    \33\ The Commission preliminarily believes that this exemption
will also benefit firms that are dually registered as municipal
advisors and brokers. A dually-registered firm that is acting in a
municipal advisory capacity advising a Municipal Issuer client on a
direct placement of municipal securities would be permitted as well
to engage in limited solicitation activities in accordance with the
terms and conditions of the proposed exemption without being
required to comply with broker requirements, such as books and
records requirements, with respect to those activities. Instead, so
long as the terms and conditions of the exemption are met, the
municipal advisor will be acting in the municipal advisory capacity
through the completion of the transaction. The Commission believes
disclosure clarifying the role of the municipal advisor is
particularly critical for dual registrants to avoid confusion on the
part of potential Qualified Providers as to the capacity in which
the firm is acting with respect to a direct placement.
    \34\ See, e.g., Definition of Terms in and Specific Exemptions
for Banks, Savings Associations, and Savings Banks Under Section
3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934, Exchange
Act Rel. No. 44291, 66 FR 27760, 27772-73 at n.124 (May 18, 2001)
(``Solicitation is one of the most relevant factors in determining
whether a person is effecting transactions.''), cited in
Registration Process for Security-Based Swap Dealers and Major
Security-Based Swap Participants, Exchange Act Rel. No. 75611 (Aug.
5, 2015), 80 FR 48964, 48976 (Aug. 14, 2015) (``The Commission has
previously interpreted the term `effecting transactions' in the
context of securities transactions to include a number of
activities, ranging from identifying potential purchasers to
settlement and confirmation of a transaction.''); Cornhusker Energy
Lexington, LLC v. Prospect Street Ventures, No. 8:04CV586, 2006 WL
2620985, at *6 (D. Neb. Sept. 12, 2006) (``Transaction-based
compensation, or commissions are one of the hallmarks of being a
broker-dealer.'').
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    The Commission preliminarily believes that the proposed conditions
with respect to transaction participants, disclosure requirements, and
transaction type--in combination with applicable regulatory
protections--should sufficiently restrict the scope of the proposed
exemption such that permitting solicitation activities in this limited
context would not implicate the need for additional regulation of these
activities under the broker regulatory framework. For example, like
brokers, registered municipal advisors have an obligation to deal
fairly with all persons--which, as relevant here, includes any
potential Qualified Providers.\35\ Also, the antifraud provisions of
the Exchange Act as well as the Securities Act of 1933 apply equally to
any person, including registered municipal advisors and brokers.\36\
The Commission preliminarily believes these are important safeguards
that operate as a constraint on the conduct of registered municipal
advisors, independent of whether they are registered as a broker.
Additionally, as stated above, the proposed exemption would be limited
to dealings with Qualified Providers, which are entities that meet an
established threshold of investor sophistication, and the required
disclosures include an affirmative representation by the Qualified
Provider that it is capable of independently evaluating the risks,
which is consistent with the institutional suitability exemption under
existing FINRA rules.\37\ Finally, the Commission notes that the
proposed conditional exemption would not preclude any transaction
participant in a direct placement from engaging a registered broker or
other intermediary for the transaction.
---------------------------------------------------------------------------

    \35\ See, e.g., MSRB Rule G-17 (requiring municipal advisors to
``deal fairly with all persons and . . . not engage in any
deceptive, dishonest, or unfair practice''); FINRA Rule 2010
(prohibiting brokers from effecting transactions in, or inducing the
purchase or sale of, securities ``by means of any manipulative,
deceptive or other fraudulent device or contrivance''); FINRA Rule
2111 Supplementary Material .01 (``Implicit in all member and
associated person relationships with customers and others is the
fundamental responsibility for fair dealing.'')
    \36\ See 15 U.S.C. 78j and 17 CFR 240.10b-5; see also 15 U.S.C.
77q.
    \37\ See FINRA Rule 2111(b) and Supplementary Material .07.
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    Accordingly, for the reasons discussed above, the Commission
preliminarily believes that the proposed conditional exemption would be
consistent with the public interest and the protection of investors and
would be necessary or appropriate in the public interest.

III. Request for Comments

    The Commission is seeking comment on all aspects of the proposed
exemption. In particular, the Commission requests comment on the
following questions. When responding to the request for comment, please
explain your reasoning.
    1. Has the Commission appropriately identified the activities in
which a registered municipal advisor would be able to engage when
representing a municipal entity or obligated person in connection with
direct placements pursuant to the exemption? Please explain.
    2. Should any of the identified activities proposed to be included
be eliminated or modified? Please explain.
    3. Has the Commission appropriately defined Qualified Provider? If
not, what would be a more appropriate definition and why?
    4. Should the definition of Qualified Provider be edited to add
``credit unions''? If so, please explain.
    5. Does the definition of Qualified Provider, together with the
required conditions, provide adequate assurance that the potential
investors included in such definition will be sufficiently able to
evaluate the creditworthiness of the Municipal Issuer and the relevant
terms of the direct placement offering, among other things? If not,
please explain.
    6. Should the Commission limit the exemption to direct placements
of a specific size threshold--e.g., limited by aggregate principal
amount or by Municipal Issuers with a limited aggregate amount of
municipal securities outstanding? If so, why and how should the
Commission define such thresholds?
    7. Should the exemption for municipal advisors with respect to
direct placements be conditioned on municipal advisors being precluded
from engaging in solicitation activities on behalf of their Municipal
Issuer clients? If so, which activities and why? Please explain.
    8. Has the Commission appropriately defined the conditions that
should apply to the proposed exemption? Please explain.

    9. Should any of the proposed conditions be eliminated or modified?
Please explain.
    10. Are there other or different conditions that should apply to
the proposed exemption? Please explain.
    11. Are there any specific written disclosures to Qualified
Providers that should be required, beyond those that are a condition of
the proposed exemption? For example, should the municipal advisor be
required to provide a written disclosure to the Qualified Provider that
it may elect to engage a registered broker or other intermediary for
the transaction? Please explain.
    12. Should the exemption be expanded to include transactions in
which multiple Qualified Providers purchase portions of the entire
municipal securities offering directly from the Municipal Issuer? What
are the relevant issues for the Commission to consider in determining
whether such an expansion is necessary or appropriate in the public
interest, and consistent with the protection of investors? For example,
would the participation of multiple purchasers necessitate additional
or different conditions or present heightened investor protection
concerns? Please explain.
    13. Is the type of direct placement contemplated by this proposed
exemptive order typically resold into the secondary market? If so, how
often and to what type of investor? Does the possibility of such a
resale raise any investor protection concerns? If so, please explain.
How should the Commission address those concerns?
    14. Under the proposed definition of ``Municipal Issuers,'' the
exemption would apply to conduit transactions involving obligated
persons--i.e., the issuance of municipal securities by a municipal
entity to finance a project to be used primarily by a third-party
obligated person, such as a non-profit hospital or private university.
Are there reasons the exemption should not apply with respect to
obligated persons? If so, why not? If the exemption should apply,
should the Commission impose additional or different conditions
concerning those transactions? Should the exemption be conditioned on
additional or different disclosure requirements for transactions
involving obligated persons? Please explain.
    15. Should the Commission, instead of granting the conditional
exemption, require municipal advisors wishing to solicit Qualified
Providers for direct placements on behalf of their Municipal Issuer
clients to also register as brokers? For example, would a broker
registration requirement provide necessary protections for investors,
and if so, what specific protections would result from broker
registration with respect to direct placement transactions? What would
be the impact of such a requirement on municipal advisors operating in
this space, in terms of both cost and competitive considerations?
Please explain.
    16. With respect only to direct placement transactions described
above, what are the practical implications of the requirements
resulting from broker registration, for example those related to any
due diligence or other investor protection obligations, that are not
applicable to municipal advisors? What are the practical implications
of the differences between broker obligations and municipal advisors'
fair dealing obligations? Please be specific and limit the context of
the response to direct placements in which a single institutional
investor purchases the entire issuance.
    17. Would the proposed exemption have a competitive impact--either
positive or negative--on municipal advisors and/or brokers? For
example, would this proposed exemption facilitate capital formation for
smaller Municipal Issuers? Are the costs of engaging a broker for
direct placements burdensome for smaller Municipal Issuers? Please
explain.

    By the Commission.

    Dated: October 2, 2019.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-21882 Filed 10-8-19; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 80, Number 247 (Thursday, December 24, 2015)]
[Notices]
[Pages 80452-80453]
[FR Doc No: 2015-32449]

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DEPARTMENT OF TRANSPORTATION

Federal Railroad Administration

[Docket Number FRA-2000-7275]

Petition for Waiver of Compliance

    In accordance with part 211 of Title 49 Code of Federal Regulations
(CFR), this document provides the public notice that by a document
dated September 17, 2014, Pennsylvania Northeast Regional Railroad
Authority (PNRRA) and Delaware-Lackawanna Railroad (DL) have jointly
petitioned the Federal Railroad Administration (FRA) for a waiver of
compliance from certain provisions of the Federal railroad safety
regulations. FRA assigned the petition Docket Number FRA-2000-7275.
    PNRRA provides an historic trolley excursion in conjunction with
the Lackawanna County Electric City Trolley Station and Museum (Trolley
Museum). DL has operated and dispatched this historic trolley since the
start of service in April 2001. The purpose of this historic trolley
excursion is to expand the historical interpretation provided by the
Trolley Museum by offering a tourist excursion using vintage trolley
cars, and is not in any way an urban transit operation. Beginning at
the Steamtown Passenger Depot, this trolley car excursion operates via
PNRRA's Brady Line within the National Park Service's Steamtown Yard,
and thence along the historic Laurel Line past the Scranton Iron
Furnaces and Roaring Brook, to a station stop at the Historic Trolley
Maintenance Building, a distance of just under 5 miles. Because of the
connection to the general railroad system over the shared track
portion, current trolley operations will continue to use the successful
FRA-approved temporal separation procedure that guarantees exclusive
use of this shared trackage during its exclusive excursion/passenger
period.
    The route of the historic trolley excursion has undergone several
extensions since its original 1-mile run in 2001. One mile was added in
2002 and 3 miles were added in May 2004. In June 2006, a 1,870-foot
extension brought the route into its new terminus at the station
platform on Track 1 outside the Historic Trolley Maintenance Building.
    PNRRA seeks an extension of its waiver of compliance from several
parts of 49 CFR (first granted by FRA in 2001, extended in 2006 and
2011) for continued operation of its historic trolley car excursion
that shares trackage with the general railroad system. This request is
consistent with the requirements set forth in the ``Statement of Agency
Policy Concerning Jurisdiction Over the Safety of Railroad Passenger
Operations and Waivers Related to Shared Use of the Tracks of the
General Railroad System by Light Rail and Conventional Equipment,'' 65
FR 42529 (July 10, 2000); see also the ``Joint Statement of Agency
Policy Concerning Shared Use of the Tracks of the General Railroad
System by Conventional Railroads and Light Rail Transit Systems.'' 65
FR 42626 (July 10, 2000).
    Based on the foregoing, PNRRA is again seeking an extension of the
terms and conditions of its current waiver of compliance from several
regulatory sections. Specifically, PNRRA seeks relief from the
following: 49 CFR part 221--Rear-End Marking Device--Passenger,
Commuter and Freight Trains; 49 CFR part 223--Safety Glazing
Standards--Locomotives, Passenger Cars and Cabooses; 49 CFR 229.129--
Locomotive horn; 49 CFR part 231--Railroad Safety Appliance Standards;
49 CFR part 239--Passenger Train Emergency Preparedness; and 49 CFR
part 240--Qualification and Certification of Locomotive Engineers.
    A copy of the petition, as well as any written communications
concerning the petition, is available for review online at
www.regulations.gov and in person at the U.S. Department of
Transportation's (DOT) Docket Operations Facility, 1200 New Jersey
Avenue SE., W12-140, Washington, DC 20590. The Docket Operations
Facility is open from 9 a.m. to 5 p.m., Monday through Friday, except
Federal Holidays.
    Interested parties are invited to participate in these proceedings
by submitting written views, data, or comments. FRA does not anticipate
scheduling a public hearing in connection with these proceedings since
the facts do not appear to warrant a hearing. If any interested party
desires an opportunity for oral comment, they should notify FRA, in
writing, before the end of the comment period and specify the basis for
their request.
    All communications concerning these proceedings should identify the
appropriate Docket Number (e.g., Waiver Petition Docket Number FRA-
2000-7275) and may be submitted by any of the following methods:
     Web site: http://www.regulations.gov. Follow the online
instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: Docket Operations Facility, U.S. Department of
Transportation, 1200 New Jersey Avenue SE., W12-140, Washington, DC
20590.
     Hand Delivery: 1200 New Jersey Avenue SE., Room W12-140,

Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal Holidays.
    Communications received by February 8, 2016 will be considered by
FRA before final action is taken. Comments received after that date
will be considered as far as practicable.
    Anyone is able to search the electronic form of any written
communications and comments received into any of our dockets by the
name of the individual submitting the comment (or signing the document,
if submitted on behalf of an association, business, labor union, etc.).
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the
public to better inform its processes. DOT posts these comments,
without edit, including any personal information the commenter
provides, to www.regulations.gov, as described in the system of records
notice (DOT/ALL-14 FDMS), which can be reviewed at www.dot.gov/privacy.
See also http://www.regulations.gov/#!privacyNotice for the privacy
notice of regulations.gov.

    Issued in Washington, DC.
Robert C. Lauby,
Associate Administrator for Railroad Safety, Chief Safety Officer.
[FR Doc. 2015-32449 Filed 12-23-15; 8:45 am]
 BILLING CODE 4910-06-P