[Federal Register Volume 83, Number 69 (Tuesday, April 10, 2018)]
[Rules and Regulations]
[Pages 15301-15304]
[FR Doc No: 2018-07277]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 25

[Docket No. FAA-2018-0293; Special Conditions No. 25-723-SC]

Special Conditions: Textron Aviation Inc. Model 700 Series
Airplanes; Interaction of Systems and Structures

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final special conditions; request for comments.

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SUMMARY: These special conditions are issued for the Textron Aviation
Inc. (Textron) Model 700 series airplanes. These airplanes will have
novel or unusual design features when compared to the state of
technology envisioned in the airworthiness standards for transport
category airplanes. These design features are systems that affect
structural performance, either directly or as a result of a failure or
malfunction. The influence of these systems and their failure
conditions must be taken into account when showing compliance with the
FAA's requirements. The applicable airworthiness regulations do not
contain adequate or appropriate safety standards for these design
features. These special conditions contain the additional safety
standards that the Administrator considers necessary to establish a
level of safety equivalent to that established by the existing
airworthiness standards.

DATES: This action is effective on Textron Aviation Inc. on April 10,
2018. Send comments on or before May 25, 2018.

ADDRESSES: Send comments identified by Docket No. FAA-2018-0293 using
any of the following methods:
     Federal eRegulations Portal: Go to http://www.regulations.gov/ and follow the online instructions for sending
your comments electronically.
     Mail: Send comments to Docket Operations, M-30, U.S.
Department of Transportation (DOT), 1200 New Jersey Avenue SE, Room
W12-140, West Building Ground Floor, Washington, DC, 20590-0001.
     Hand Delivery or Courier: Take comments to Docket
Operations in Room W12-140 of the West Building Ground Floor at 1200
New Jersey Avenue SE, Washington, DC, between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
     Fax: Fax comments to Docket Operations at<PHONE_NUMBER>.
    Privacy: The FAA will post all comments it receives, without
change, to http://www.regulations.gov/, including any personal
information the commenter provides. Using the search function of the
docket website, anyone can find and read the electronic form of all
comments received into any FAA docket, including the name of the
individual sending the comment (or signing the comment for an
association, business, labor union, etc.). DOT's complete Privacy Act
Statement can be found in the Federal Register published on April 11,
2000 (65 FR 19477-19478).
    Docket: Background documents or comments received may be read at
http://www.regulations.gov/ at any time. Follow the online instructions
for accessing the docket or go to Docket Operations in Room W12-140 of
the West Building Ground Floor at 1200 New Jersey Avenue SE,
Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Greg Schneider, Airframe and Cabin
Safety Section, AIR-675, Transport Standards Branch, Policy and
Innovation Division, Aircraft Certification Service, Federal Aviation
Administration, 2200 South 216th Street, Des Moines, Washington 98198;
telephone<PHONE_NUMBER>; email [email protected].

SUPPLEMENTARY INFORMATION: The substance of these special conditions
previously has been published in the Federal Register for public
comment. These special conditions have been derived without substantive
change from those previously issued. It is unlikely that prior public
comment would result in a significant change from the substance
contained herein. Therefore, the FAA has determined that prior public
notice and comment are unnecessary, and finds that, for the same
reason, good cause exists for adopting these special conditions upon
publication in the Federal Register.

Comments Invited

    We invite interested people to take part in this rulemaking by
sending written comments, data, or views. The most helpful comments
reference a specific portion of the special conditions, explain the
reason for any recommended change, and include supporting data.
    We will consider all comments we receive by the closing date for
comments. We may change these special conditions based on the comments
we receive.

Background

    On November 20, 2014, Textron applied for a type certificate for
their new Model 700 series airplanes. The Textron Model 700 series
airplanes are transport-category, twin turbofan-powered airplanes with
standard seating provisions for up to 12 passengers and 2 crewmembers,
and a maximum takeoff weight of 39,500 lbs.

Type Certification Basis

    Under the provisions of title 14, Code of Federal Regulations (14
CFR) 21.17, Textron must show that the Model 700 series airplanes meet
the applicable provisions of part 25, as amended by amendments 25-1
through 25-141.
    If the Administrator finds that the applicable airworthiness
regulations (i.e., 14 CFR part 25) do not contain adequate or
appropriate safety standards for the Textron Model 700 series airplanes
because of novel or unusual design features, special conditions are

prescribed under the provisions of Sec.  21.16.
    Special conditions are initially applicable to the model for which
they are issued. Should the type certificate for that model be amended
later to include any other model that incorporates the same novel or
unusual design features, these special conditions would also apply to
the other model under Sec.  21.101.
    In addition to the applicable airworthiness regulations and special
conditions, the Textron Model 700 series airplanes must comply with the
fuel vent and exhaust emission requirements of 14 CFR part 34 and the
noise certification requirements of 14 CFR part 36.
    The FAA issues special conditions, as defined in 14 CFR 11.19, in
accordance with Sec.  11.38, and they become part of the type
certification basis under Sec.  21.17.

Novel or Unusual Design Features

    The Textron Model 700 series airplanes will incorporate the
following novel or unusual design features:
    These airplanes are equipped with systems (i.e. with flight control
systems, autopilots, stability augmentation systems, load alleviation
systems, flutter control systems, fuel management systems, etc.) that,
directly or as a result of failure or malfunction, affect its
structural performance.

Discussion

    Current regulations do not take into account the effects of systems
on structural performance including normal operation and failure
conditions. Special conditions are needed to account for these
features. These special conditions define criteria to be used in the
assessment of the effects of these systems on structures. The general
approach of accounting for the effect of system failures on structural
performance is extended to include any system in which partial or
complete failure, alone or in combination with other system partial or
complete failures, would affect structural performance.
    These special conditions contain the additional safety standards
that the Administrator considers necessary to establish a level of
safety equivalent to that established by the existing airworthiness
standards.

Applicability

    As discussed above, these special conditions are applicable to the
Textron Model 700 series airplanes. Should Textron apply at a later
date for a change to the type certificate to include another model
incorporating the same novel or unusual design feature, these special
conditions would apply to that model as well.

Conclusion

    This action affects only certain novel or unusual design features
on one model series of airplanes. It is not a rule of general
applicability.

List of Subjects in 14 CFR Part 25

    Aircraft, Aviation safety, Reporting and recordkeeping
requirements.

Authority Citation

    The authority citation for these special conditions is as follows:

    Authority: 49 U.S.C. 106(f), 106(g), 40113, 44701, 44702, 44704.

The Special Conditions

    Accordingly, pursuant to the authority delegated to me by the
Administrator, the following special conditions are issued as part of
the type certification basis for Textron Aviation Inc. Model 700 series
airplanes.

Interaction of Systems and Structures

    For airplanes equipped with systems that affect structural
performance, either directly or as a result of a failure or
malfunction, the influence of these systems and their failure
conditions must be taken into account when showing compliance with the
requirements of title 14, Code of Federal Regulations (14 CFR) part 25,
subpart C and D.
    The following criteria must be used for showing compliance with
these special conditions for airplanes equipped with flight control
systems, autopilots, stability augmentation systems, load alleviation
systems, flutter control systems, fuel management systems, and other
systems that either directly, or as a result of failure or malfunction,
affect structural performance. If these special conditions are used for
other systems, it may be necessary to adapt the criteria to the
specific system.
    1. The criteria defined herein only addresses the direct structural
consequences of the system responses and performances and cannot be
considered in isolation but should be included in the overall safety
evaluation of the airplane. These criteria may, in some instances,
duplicate standards already established for this evaluation. These
criteria are only applicable to structures whose failure could prevent
continued safe flight and landing. Specific criteria that define
acceptable limits on handling characteristics or stability requirements
when operating in the system degraded or inoperative mode are not
provided in these special conditions.
    2. Depending upon the specific characteristics of the airplane,
additional studies may be required that go beyond the criteria provided
in these special conditions in order to demonstrate the capability of
the airplane to meet other realistic conditions, such as alternative
gust or maneuver descriptions for an airplane equipped with a load
alleviation system.
    3. The following definitions are applicable to these special
conditions:
    a. Structural performance: Capability of the airplane to meet the
structural requirements of 14 CFR part 25.
    b. Flight limitations: Limitations that can be applied to the
airplane flight conditions following an in-flight occurrence and that
are included in the flight manual (e.g., speed limitations, avoidance
of severe weather conditions, etc.).
    c. Operational limitations: Limitations, including flight
limitations that can be applied to the airplane operating conditions
before dispatch (e.g., fuel, payload and Master Minimum Equipment List
limitations).
    d. Probabilistic terms: The probabilistic terms (probable,
improbable, extremely improbable) used in these special conditions are
the same as those used in Sec.  25.1309.
    e. Failure condition: The term failure condition is the same as
that used in Sec.  25.1309, however these special conditions apply only
to system failure conditions that affect the structural performance of
the airplane (e.g., system failure conditions that induce loads, change
the response of the airplane to inputs such as gusts or pilot actions,
or lower flutter margins).
    4. General. The following criteria will be used in determining the
influence of a system and its failure conditions on the airplane
structure.
    5. System fully operative. With the system fully operative, the
following apply:
    a. Limit loads must be derived in all normal operating
configurations of the system from all the limit conditions specified in
14 CFR part 25, subpart C (or defined by special condition or
equivalent level of safety in lieu of those specified in part 25,
subpart C), taking into account any special behavior of such a system
or associated functions or any effect on the structural performance of
the airplane that may occur up to the limit loads. In particular, any
significant nonlinearity (rate of displacement of control surface,
thresholds or any other system nonlinearities) must be accounted for in
a realistic or

conservative way when deriving limit loads from limit conditions.
    b. The airplane must meet the strength requirements of 14 CFR part
25 (static strength, residual strength), using the specified factors to
derive ultimate loads from the limit loads defined above. The effect of
nonlinearities must be investigated beyond limit conditions to ensure
the behavior of the system presents no anomaly compared to the behavior
below limit conditions. However, conditions beyond limit conditions
need not be considered when it can be shown that the airplane has
design features that will not allow it to exceed those limit
conditions.
    c. The airplane must meet the aeroelastic stability requirements of
Sec.  25.629.
    6. System in the failure condition. For any system failure
condition not shown to be extremely improbable, the following apply:
    a. At the time of occurrence. Starting from 1-g level flight
conditions, a realistic scenario, including pilot corrective actions,
must be established to determine the loads occurring at the time of
failure and immediately after failure.
    i. For static strength substantiation, these loads, multiplied by
an appropriate factor of safety that is related to the probability of
occurrence of the failure, are ultimate loads to be considered for
design. The factor of safety (FS) is defined in Figure 1.
[GRAPHIC] [TIFF OMITTED] TR10AP18.000

    ii. For residual strength substantiation, the airplane must be able
to withstand two thirds of the ultimate loads defined in subparagraph
(6)(a)(i). For pressurized cabins, these loads must be combined with
the normal operating differential pressure.
    iii. Freedom from aeroelastic instability must be shown up to the
speeds defined in Sec.  25.629(b)(2). For failure conditions that
result in speeds beyond VC/MC, freedom from
aeroelastic instability must be shown to increased speeds, so that the
margins intended by Sec.  25.629(b)(2) are maintained.
    iv. Failures of the system that result in forced structural
vibrations (oscillatory failures) must not produce loads that could
result in detrimental deformation of primary structure.
    b. For the continuation of the flight. For the airplane, in the
system failed state and considering any appropriate reconfiguration and
flight limitations, the following apply:
    i. The loads derived from the following conditions (or defined by
special condition or equivalent level of safety in lieu of the
following conditions) at speeds up to VC/MC, or
the speed limitation prescribed for the remainder of the flight, must
be determined:
    (1) The limit symmetrical maneuvering conditions specified in Sec.
25.331 and in Sec.  25.345.
    (2) the limit gust and turbulence conditions specified in Sec.
25.341 and in Sec.  25.345.
    (3) the limit rolling conditions specified in Sec.  25.349 and the
limit unsymmetrical conditions specified in Sec.  25.367 and Sec.
25.427(b) and (c).
    (4) the limit yaw maneuvering conditions specified in Sec.  25.351.
    (5) the limit ground loading conditions specified in Sec. Sec.
25.473, 25.491, 25.493(d) and 25.503.
    ii. For static strength substantiation, each part of the structure
must be able to withstand the loads in paragraph (6)(b)(i) of the
special condition multiplied by a factor of safety depending on the
probability of being in this failure state. The factor of safety is
defined in Figure 2.
[GRAPHIC] [TIFF OMITTED] TR10AP18.001

Qj = (Tj)(Pj)

Where:

Tj = Average time spent in failure condition j (in hours)
Pj = Probability of occurrence of failure mode j (per
hour)

    Note: If Pj is greater than 10-3 per
flight hour then a 1.5 factor of safety must be applied to all limit
load conditions specified in Subpart C.

    iii. For residual strength substantiation, the airplane must be
able to withstand two thirds of the ultimate loads defined in paragraph
(6)(b)(ii) of the special condition. For pressurized cabins, these
loads must be combined with the normal operating differential pressure.
    iv. If the loads induced by the failure condition have a
significant effect on fatigue or damage tolerance then their effects
must be taken into account.
    v. Freedom from aeroelastic instability must be shown up to a speed
determined from Figure 3. Flutter clearance speeds V' and V'' may be
based on the speed limitation specified for the remainder of the flight
using the margins defined by Sec.  25.629(b).
[GRAPHIC] [TIFF OMITTED] TR10AP18.002

V' = Clearance speed as defined by Sec.  25.629(b)(2).
V'' = Clearance speed as defined by Sec.  25.629(b)(1).
Qj = (Tj)(Pj) where:
Tj = Average time spent in failure condition j (in hours)
Pj = Probability of occurrence of failure mode j (per hour)

    Note: If Pj is greater than 10-3 per flight hour,
then the flutter clearance speed must not be less than V''.

    vi. Freedom from aeroelastic instability must also be shown up to
V' in Figure 3 above, for any probable system failure condition
combined with any damage required or selected for investigation by
Sec.  25.571(b).
    c. Consideration of certain failure conditions may be required by
other sections of 14 CFR part 25 regardless of calculated system
reliability. Where analysis shows the probability of these failure
conditions to be less than 10-9 per flight hour, criteria
other than those specified in this paragraph may be used for structural
substantiation to show continued safe flight and landing.
    7. Failure indications. For system failure detection and
indication, the following apply:
    a. The system must be checked for failure conditions, not extremely
improbable, that degrade the structural capability below the level
required by part 25 or significantly reduce the reliability of the
remaining system. As far as reasonably practicable, the flight crew
must be made aware of these failures before flight. Certain elements of
the control system, such as mechanical and hydraulic components, may
use special periodic inspections, and electronic components may use
daily checks, in lieu of detection and indication systems to achieve
the objective of this requirement. These certification maintenance
requirements must be limited to components that are not readily
detectable by normal detection and indication systems and where service
history shows that inspections will provide an adequate level of
safety.
    b. The existence of any failure condition, not extremely
improbable, during flight that could significantly affect the
structural capability of the airplane and for which the associated
reduction in airworthiness can be minimized by suitable flight
limitations, must be signaled to the flight crew. For example, failure
conditions that result in a factor of safety between the airplane
strength and the loads of 14 CFR part 25, subpart C, below 1.25, or
flutter margins below V'', must be signaled to the crew during flight.
    8. Dispatch with known failure conditions. If the airplane is to be
dispatched in a known system failure condition that affects structural
performance, or affects the reliability of the remaining system to
maintain structural performance, then the provisions of this special
condition must be met, including the provisions of paragraph (5) for
the dispatched condition, and paragraph (6) for subsequent failures.
Expected operational limitations may be taken into account in
establishing Pj as the probability of failure occurrence for
determining the safety margin in Figure 1. Flight limitations and
expected operational limitations may be taken into account in
establishing Qj as the combined probability of being in the dispatched
failure condition and the subsequent failure condition for the safety
margins in Figures 2 and 3. These limitations must be such that the
probability of being in this combined failure state and then
subsequently encountering limit load conditions is extremely
improbable. No reduction in these safety margins is allowed if the
subsequent system failure rate is greater than 10-3 per
flight hour.

    Issued in Des Moines, Washington.
Victor Wicklund,
Manager, Transport Standards Branch, Policy and Innovation Division,
Aircraft Certification Service.
[FR Doc. 2018-07277 Filed 4-9-18; 8:45 am]
 BILLING CODE 4910-13-P


[Federal Register: September 23, 2008 (Volume 73, Number 185)]
[Notices]
[Page 54796]
[DOCID:fr23se08-55]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket Nos. RR06-1-017; RR07-1-004; RR07-2-004; RR07-3-005; RR07-4-
004; RR07-5-005; RR07-6-004; RR07-7-004; RR07-8-005]

North American Electric Reliability Corporation; Notice of Filing

September 16, 2008.
    Take notice that on September 15, 2008, North American Electric
Reliability Corporation filed supplemental information to its July 21,
2008, compliance filing.
    Any person desiring 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, 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 comment date.
Anyone filing a motion to intervene or protest must serve a copy of
that document on the Applicant and all the parties in this proceeding.
    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 on-line 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 October 5, 2008.

Kimberly D. Bose,
Secretary.
[FR Doc. E8-22157 Filed 9-22-08; 8:45 am]

BILLING CODE 6717-01-P


[Federal Register Volume 86, Number 96 (Thursday, May 20, 2021)]
[Notices]
[Pages 27487-27490]
[FR Doc No: 2021-10606]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91901; File No. SR-NYSEArca-2020-54]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 2 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 2, To Amend NYSE
Arca Rule 5.3-E To Exempt Registered Investment Companies That List
Certain Categories of the Securities Defined as Derivative and Special
Purpose Securities Under NYSE Arca Rules From Having To Obtain
Shareholder Approval Prior to the Issuance of Securities in Connection
With Certain Acquisitions of the Stock or Assets of an Affiliated
Registered Investment Company

May 14, 2021.

I. Introduction

    On August 28, 2020, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
amend NYSE Arca Rule 5.3-E (Corporate Governance and Disclosure
Policies) to exempt issuers of certain investment companies, including
Exchange Traded Funds (``ETFs''), from the requirement to obtain
shareholder approval prior to the issuance of securities in connection
with certain acquisitions of the stock or assets of an affiliated
registered investment company. The proposed rule change was published
for comment in the Federal Register on September 17, 2020.\3\ On
October 30, 2020, pursuant to Section 19(b)(2) of the Act,\4\ the
Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\5\ On December 1, 2020, the Exchange filed Amendment No. 1 to
the proposed rule change, which superseded the proposed rule change as
originally filed.\6\ On December 15, 2020, the Commission published
notice of Amendment No. 1

and instituted proceedings under Section 19(b)(2)(B) of the Act \7\ to
determine whether to approve or disapprove the proposed rule change, as
modified by Amendment No. 1.\8\ On March 12, 2021, the Commission
extended the period for consideration of the proposed rule change to
May 15, 2021.\9\ On March 25, 2021, the Exchange submitted Amendment
No. 2 to the proposed rule change, which superseded the proposed rule
change, as amended by Amendment No. 1.\10\ The Commission has received
no comments on the proposed rule change. The Commission is publishing
this notice to solicit comments on Amendment No. 2 from interested
persons, and is approving the proposed rule change, as modified by
Amendment No. 2, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 89834 (September 11,
2020), 85 FR 58090.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 90297, 85 FR 70701
(November 5, 2020). The Commission designated December 16, 2020, as
the date by which the Commission shall approve or disapprove, or
institute proceedings to determine whether to disapprove, the
proposed rule change.
    \6\ Amendment No. 1 is available on the Commission's website at
https://www.sec.gov/comments/sr-nysearca-2020-54/srnysearca202054.htm.
    \7\ 15 U.S.C. 78s(b)(2)(B).
    \8\ See Securities Exchange Act Release No. 90675, 85 FR 83121
(December 21, 2020).
    \9\ See Securities Exchange Act Release No. 91309, 86 FR 14778
(March 18, 2021).
    \10\ In Amendment No. 2, the Exchange: (1) Revised the proposed
rule text to state that the proposed exemption would apply in
connection with the acquisition of the stock or assets of an
affiliated registered investment company; (2) revised the proposed
rule text to state that the proposed exemption would apply if the
transaction does not otherwise require shareholder approval under
the Investment Company Act of 1940 (``1940 Act'') and the rules
thereunder; (3) added a statement that Rule 17a-8 under the 1940 Act
does not relieve a fund of its obligation to obtain shareholder
approval as may be required by state law or a fund's organizational
documents; (4) clarified the description of Rule 17a-8 and its
requirements throughout the discussion; (5) added an explanation for
why the proposal would not present concerns regarding voting
dilution; and (6) made other clarifications, corrections, and
technical changes. Amendment No. 2 is available on the Commission's
website at https://www.sec.gov/comments/sr-nysearca-2020-54/srnysearca202054.htm.
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II. Description of the Proposal, as Modified by Amendment No. 2

    NYSE Arca Rule 5.3-E(d)(9) requires listed issuers to obtain
shareholder approval in connection with the acquisition of the stock or
assets of another company if: (i) Any director, officer, or substantial
shareholder of the listed company has a 5% or greater interest (or such
persons collectively have a 10% or greater interest), directly or
indirectly, in the company or assets to be acquired or in the
consideration to be paid in the transaction (or series of related
transactions) and the present or potential issuance of common stock, or
securities convertible into or exercisable for common stock, could
result in an increase in outstanding common shares or voting power of
5% or more; or (ii) the present or potential issuance of common stock,
or securities convertible into or exercisable for common stock (other
than in a public offering for cash), could result in an increase in
outstanding common shares of 20% or more or could represent 20% or more
of the voting power outstanding before the issuance of such stock or
securities.
    The Exchange proposes to exempt issuers of certain investment
companies registered under the 1940 Act,\11\ that are listed on the
Exchange as Unit Investment Trusts, Investment Company Units, Exchange-
Traded Fund Shares, Portfolio Depositary Receipts, Managed Fund Shares,
Active Proxy Portfolio Shares and Managed Portfolio Shares \12\
(collectively, ``1940 Act Securities''), from having to comply with the
shareholder approval requirement in NYSE Arca Rule 5.3-E(d)(9) in
connection with the acquisition of the stock or assets of an affiliated
registered investment company in a transaction that complies with Rule
17a-8 under the 1940 Act (Mergers of affiliated companies) (``Rule 17a-
8'') \13\ and does not otherwise require shareholder approval under the
1940 Act or the rules thereunder or any other Exchange rule.\14\
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    \11\ The Exchange states that approximately 88% of securities
listed on the Exchange are issued by investment companies registered
under the 1940 Act. See Amendment No. 2, supra note 10, at n.6.
    \12\ See NYSE Arca Rules 5.2-E(h) (Unit Investment Trusts), 5.2-
E(j)(3) (Investment Company Units), 5.2-E(j)(8) (Exchange-Traded
Fund Shares), 8.100-E (Portfolio Depositary Receipts), 8.600-E
(Managed Fund Shares), 8.601-E (Active Proxy Portfolio Shares) and
8.900-E (Managed Portfolio Shares) for a description of, and listing
requirements applicable to, each category of security proposed to be
exempted.
    \13\ 17 CFR 270.17a-8.
    \14\ See proposed Rule 5.3-E.
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    Sections 17(a)(1) and (2) of the 1940 Act prohibit, among other
things, certain transactions between registered investment companies
and affiliated persons.\15\ Rule 17a-8 provides an exemption from
Sections 17(a)(1) and (2) of the 1940 Act for certain mergers of
affiliated companies, provided, among other things, that the board of
directors of each investment company, including a majority of the
directors that are not interested persons of the respective investment
company or of any other company or series participating in the
transaction, must determine that (i) participation in the merger is in
the best interests of its respective investment company, and (ii) the
interests of the company's existing shareholders will not be diluted as
a result of the transaction.\16\ In addition, under Rule 17a-8, an
affiliated merger must be approved by a majority of the outstanding
voting securities of the merging company that is not the surviving
company unless certain conditions are met.\17\
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    \15\ See 15 U.S.C. 80a-17(a)(1)-(2). See also the definition of
``affiliated person'' in the 1940 Act, 15 U.S.C 80a-2(a)(3).
    \16\ See Amendment No. 2, supra note 10; 17 CFR 270.17a-8(a)(2).
    \17\ 17 CFR 270.17a-8(a)(3).
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    Because the board of each merging company must make an affirmative
decision that the transaction is in the best interest of its respective
company and that the transaction will not result in dilution for
existing shareholders, the Exchange states that it believes the
provisions of Rule 17a-8 protect against dilution and also provide
safeguards for existing shareholders when the transaction involves a
director, officer, or substantial shareholder of the listed company
that has a significant interest in the company or assets to be acquired
or the consideration to be paid and therefore may benefit from the
transaction.\18\ In addition, the Exchange explains that Rule 17a-8
does not require the surviving company to obtain shareholder approval
in connection with the merger of an affiliated company. The Exchange
states that it therefore believes that it is appropriate to exempt
issuers of 1940 Act Securities from having to comply with the
shareholder approval requirement in NYSE Arca Rule 5.3-E(d)(9) in
connection with the acquisition of the stock or assets of an affiliated
registered investment company in a transaction that complies with Rule
17a-8, which the Exchange states can be both time consuming and
expensive.\19\
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    \18\ See Amendment No. 2, supra note 10, at 6. With respect to
voting dilution, the Exchange cited to a prior filing in which it
stated that holders of derivative and special purpose securities
either do not have the right to elect directors at annual meetings
or have the right to elect directors only in very limited
circumstances. See id. at n. 11 (citing Securities Exchange Act
Release No. 83324 (May 24, 2018), 83 FR 25076 (May 31, 2018) (SR-
NYSEArca-2018-31)).
    \19\ See Amendment No. 2, supra note 10, at 5-6.
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    Notwithstanding the proposed exemption, the Exchange states that
other provisions of Exchange rules or the 1940 Act and the rules
thereunder may require shareholder approval and will still apply.\20\
The Exchange also states that the adopting release for Rule 17a-8
specifically noted that nothing in Rule 17a-8 relieves a fund of its
obligation to obtain shareholder approval as may be required by state
law or a fund's organizational documents.\21\
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    \20\ See id. at 8.
    \21\ See id. at n. 5 (citing Investment Company Act Release No.
25666, 67 FR 48511 (July 24, 2002) at n. 18).
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule
change, as

modified by Amendment No. 2, is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to a national
securities exchange.\22\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Act,\23\
which requires, among other things, that the rules of a national
securities exchange be designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest, and are not designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
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    \22\ 15 U.S.C. 78f(b). In approving this proposed rule change,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
    \23\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the Exchange's proposal to exempt issuers
of 1940 Act Securities from the obligation to obtain shareholder
approval pursuant to NYSE Arca Rule 5.3-E(d)(9) when they issue
securities in connection with the acquisition of the stock or assets of
an affiliated registered investment company in a transaction that
complies with Rule 17a-8 is consistent with the Act. The corporate
governance standards embodied in the listing standards of national
securities exchanges, in particular, play an important role in ensuring
that exchange-listed companies observe good governance practices,
including safeguarding the interests of shareholders with respect to
certain potentially dilutive transactions.\24\ The Commission believes
the right of shareholders to vote in connection with the acquisition of
the stock or assets of another company in circumstances that may give
rise to dilution or where there may be conflicts of interests is an
essential and important one.\25\ The Commission, however, believes
that, because of the requirements set forth in Rule 17a-8, the
requirement to obtain shareholder approval under the Exchange's rules
may not be necessary for issuers of 1940 Act Securities in connection
with a transaction that complies with Rule 17a-8 and does not otherwise
require shareholder approval under the 1940 Act and the rules
thereunder or any other Exchange rule.\26\
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    \24\ See, e.g., Securities Exchange Act Release No. 48108 (June
30, 2003), 68 FR 39995 (July 3, 2003) (approving equity compensation
shareholder approval rules of both the NYSE and the National
Association of Securities Dealers, Inc. n/k/a NASDAQ); Securities
Exchange Act Release No. 76814 (December 31, 2015), 81 FR 820
(January 7, 2016) (NYSE-2015-02) (approving amendments to the NYSE
Listed Company Manual to exempt early stage companies from
requirements to obtain shareholder approval in certain
circumstances); Securities Exchange Act Release No. 84287 (September
26, 2018) 83 FR 49599 (October 2, 2018) (NASDAQ-2018-008) (approving
a Nasdaq proposal to change to the definition of market value for
purposes of the shareholder approval rule and eliminate the
requirement for shareholder approval of issuances at less than book
value but greater than market value). See also Securities Exchange
Act Release No. 58375 (August 18, 2008), 73 FR 49498 (August 21,
2008) (approving registration of BATS Exchange, Inc. noting that
qualitative listing requirements including shareholder approval
rules are designed to ensure that companies trading on a national
securities exchange will adequately protect the interest of public
shareholders).
    \25\ See, e.g., Securities Exchange Act Release Nos. 86406 (July
18, 2019), 84 FR 35431, 35432 (July 23, 2019) (NYSE-2019-20); 57268
(February 4, 2008), 84 FR 7614, 7616 (February 8, 2008) (AMEX-2006-
31).
    \26\ While Rule 17a-8 requires an affiliated merger to be
approved by a majority of the outstanding voting securities of the
merging company that is not the surviving company unless certain
conditions are met, Rule 17a-8 does not include a requirement for a
registered investment company that is the surviving company to
obtain shareholder approval in connection with the merger of an
affiliated company. See 17 CFR 270.17a-8(a)(3).
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    Specifically, as discussed above, in the case of a merger of
affiliated registered investment companies, Rule 17a-8 requires with
respect to each registered investment company participating in the
merger that the board of directors, including a majority of the
directors who are not interested persons of the registered investment
company or any other company or series participating in the merger,
determines that (i) participation in the merger is in the best interest
of the registered investment company, and (ii) the interests of the
registered investment company's existing shareholders will not be
diluted as a result of the merger.\27\ The Commission believes these
requirements, including the requirement that a majority of directors
who are not interested persons of the registered investment company or
any other company or series participating in the merger make such
determinations, should act as a safeguard for shareholders against
dilution and conflicts of interest.\28\ As a result of the requirements
of Rule 17a-8, the risk of dilution to existing shareholders as a
result of an issuance of shares by an issuer of 1940 Act Securities in
connection with the acquisition of the stock or assets of an affiliated
registered investment company that complies with Rule 17a-8 is
sufficiently mitigated. For the same reasons, the Commission believes
that the requirements of Rule 17a-8 should help to ensure that
conflicts of interests are carefully considered by the board of
directors and a majority of the directors who are not interested
persons that are required to approve the acquisition, including in
cases where shareholder approval would normally be required under the
Exchange's rules if such transaction involves a director, officer, or
substantial shareholder of the listed company that has an interest in
the company or assets to be acquired or the consideration to be
paid.\29\
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    \27\ 17 CFR 270.17a-8(a)(2).
    \28\ The Commission previously stated when approving amendments
to Rule 17a-8 that ``[t]he rule will continue to require that each
fund's board (including a majority of disinterested directors)
determine that the merger is in the best interests of the fund and
will not dilute the interests of shareholders. These are critical
determinations boards must carefully consider, particularly when the
merger involves significant conflicts of interest.'' See Investment
Company Act Release No. 25666, July 18, 2002, 67 FR 48511 at 48513
(July 24, 2002). The Commission also stated that directors must
request and evaluate any information reasonably necessary to their
determinations, and consider and give appropriate weight to all
pertinent factors in making their findings under the rule, and in
fulfilling the overall duty of care. Id. See also Rule 17a-
8(a)(2)(ii).
    \29\ The Commission notes that it also previously approved an
NYSE rule proposal that exempted registered investment companies
under the 1940 Act from a broker vote prohibition for election of
directors. In approving the proposal the Commission concluded that
the different regulatory regime for registered investment companies
supports the exemption. See Securities Exchange Act Release No.
60215 (July 1, 2009), 74 FR 33293 (July 10, 2009) (SR-NYSE-2006-92),
at 33303.
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    The proposed exemption from the shareholder approval requirements
in NYSE Arca Rule 5.3-E(d)(9) is limited in scope. In particular, the
proposed exemption from NYSE Arca Rule 5.3-E(d)(9) is limited to
issuers of 1940 Act Securities only in connection with the acquisition
of the stock or assets of an affiliated registered investment company
if such transaction complies with Rule 17a-8. Furthermore,
notwithstanding the proposed exemption from the shareholder approval
requirement in NYSE Arca Rule 5.3-E(d)(9), other provisions of the
Exchange rules, or the 1940 Act and the rules thereunder will still
apply and may require shareholder approval.\30\ Further, the adopting
release for Rule 17a-8 specifically stated that nothing in Rule 17a-8
relieves a fund of its obligation to obtain shareholder approval as may
be required by state law or a fund's organizational documents.\31\
Thus, an issuer of a 1940

Act Security may still be required to obtain shareholder approval in
connection with the acquisition of the stock or assets of an affiliated
company even if such transaction complies with Rule 17a-8 if such
transaction would require shareholder approval under other applicable
Exchange rules, another provision of the 1940 Act or the rules and
regulations thereunder, state law, or a fund's organizational
documents.
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    \30\ See NYSEArca Rule 5.3-E(d), which sets forth the Exchange's
shareholder approval requirements, including, among others, for
issuances involving a change of control and equity compensation. If
shareholder approval is not required under one provision of the
Exchange's rule, it may still be required under another provision of
the rule.
    \31\ See supra note 21.
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IV. Solicitation of Comments on Amendment No. 2 to the Proposed Rule
Change

    Interested persons are invited to submit written data, views, and
arguments concerning whether Amendment No. 2 to 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-NYSEArca-2020-54 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-NYSEArca-2020-54.
This file number should be included on the subject line if email is
used. To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's internet website (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for website
viewing and printing in the Commission's Public Reference Room, 100 F
Street NE, Washington, DC 20549, on official business days between the
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2020-54, and should
be submitted on or before June 10, 2021.

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

    The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 2, prior to the thirtieth day
after the date of publication of notice of the filing of Amendment No.
2 in the Federal Register. In Amendment No. 2, the Exchange: (1)
Revised the proposed rule text to state that the proposed exemption
would apply in connection with the acquisition of the stock or assets
of an affiliated registered investment company; (2) revised the
proposed rule text to state that the proposed exemption would apply if
the transaction does not otherwise require shareholder approval under
the 1940 Act and the rules thereunder; (3) added a statement that Rule
17a-8 does not relieve a fund of its obligation to obtain shareholder
approval as may be required by state law or a fund's organizational
documents; (4) clarified the description of Rule 17a-8 and its
requirements throughout the discussion; (5) added an explanation for
why the proposal would not present concerns regarding voting dilution;
and (6) made other clarifications, corrections, and technical
changes.\32\ Amendment No. 2 provided greater clarity to the proposal.
The changes and additional clarifying information in Amendment No. 2
strengthen the proposal and assist the Commission in evaluating the
Exchange's proposal and in determining that it is consistent with the
Act. Accordingly, the Commission finds good cause, pursuant to Section
19(b)(2) of the Act,\33\ to approve the proposed rule change, as
modified by Amendment No. 2, on an accelerated basis.
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    \32\ See supra note 10.
    \33\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is Therefore Ordered, pursuant to Section 19(b)(2) of the
Act,\34\ that the proposed rule change (SR-NYSEArca-2020-54), as
modified by Amendment No. 2, be, and it hereby is, approved on an
accelerated basis.
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    \34\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-10606 Filed 5-19-21; 8:45 am]
BILLING CODE 8011-01-P