[Federal Register: October 19, 2007 (Volume 72, Number 202)]
[Notices]
[Page 59321-59329]
[DOCID:fr19oc07-93]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56661; File No. SR-NASD-2005-100]

Self-Regulatory Organizations; National Association of Securities
Dealers, Inc. (n/k/a Financial Industry Regulatory Authority, Inc.);
Notice of Filing of Proposed Rule Change and Amendment Nos. 1, 2, 3,
and 4 Thereto, To Require Members To Provide Customers in TRACE-
Eligible Debt Securities With Additional, Transaction-Specific
Disclosures and To Notify Customers of the Availability of a Disclosure
Document

October 15, 2007.
    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 August 19, 2005, the National Association of Securities Dealers,
Inc. (``NASD''), n/k/a Financial Industry Regulatory Authority, Inc.
(``FINRA''),\3\ filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by FINRA.\4\
On December 21, 2005, NASD filed Amendment No. 1 to the proposed rule
change. On January 26, 2007, NASD filed Amendment No. 2 to the proposed
rule change. On July 16, 2007, NASD

filed Amendment No. 3 to the proposed rule change. On August 21, 2007,
FINRA filed Amendment No. 4 to the proposed rule change. The Commission
is publishing this notice to solicit comments on the proposed rule
change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On July 26, 2007, the Commission approved a proposed rule
change filed by NASD to amend NASD's Certificate of Incorporation to
reflect its name change to FINRA, in connection with the
consolidation of the member firm regulatory functions of NASD and
NYSE Regulation, Inc. See Securities Exchange Act Release No. 56146
(July 26, 2007), 72 FR 42190 (August 1, 2007).
    \4\ Commission staff made certain changes to the description of
the proposed rule change with the consent of FINRA staff to further
clarify the description, to reflect the organization's name change,
and to make other changes incidental to the consolidation during a
telephone conversation between Sharon Zackula, Associate Vice
President and Associate General Counsel, and James Eastman,
Assistant General Counsel, FINRA, and Joshua Kans, Senior Special
Counsel, and Kristina Fausti, Special Counsel, Division of Market
Regulation, Commission, on March 20, 2007; telephone conversations
between Sharon Zackula and James Eastman, and Kristina Fausti, on
August 17, 2007, and August 20, 2007, respectively; and a telephone
conversation between Sharon Zackula, and Josh Kans and Kristina
Fausti, on September 21, 2007.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    FINRA is proposing to: (1) Adopt NASD Rule 2231, which would
require members, subject to specified exceptions, to provide customers
in transactions in debt securities that are TRACE-eligible securities,
as defined in NASD Rule 6210(a), with additional, transaction-specific
disclosures relating to applicable charges, credit ratings, the
availability of last-sale transaction information, and certain
interest, yield and call provisions; and (2) amend NASD Rule 2340
(customer account statements) to require members to notify certain
customers of the availability of a disclosure document discussing debt
securities authored by FINRA and deliver the document to customers upon
request. The text of the proposed rule change and the associated
disclosure document are set forth below. Proposed new language is in
italics; proposed deletions are in brackets.

2231. Confirmation of Transactions in Debt Securities

    (a) Confirmation of Transactions in Debt Securities.
    (1) Except as otherwise provided herein, any member that is
required to disclose to a customer information pursuant to Rule 10b-10
under the Act in connection with any transaction in a debt security
also shall, with respect to any TRACE-eligible security, disclose to
the customer, other than an institutional account, the information set
forth in paragraph (b). Except as otherwise provided herein, this
information shall be disclosed in the same manner and at the same time
in which the member discloses to the customer information in connection
with the transaction pursuant to Rule 10b-10 under the Act. A member
need not disclose to customers information required to be disclosed
under this Rule if the member discloses such information pursuant to
Rule 10b-10 under the Act.
    (2) For purposes of this Rule:
    (A) ``Institutional account'' shall have the same meaning it has in
Rule 3110 and means an account that, within the past twelve months, the
member has determined is an institutional account;
    (B) ``Debt security'' shall have the same meaning it has in Rule
10b-10 under the Act, except that any exempted security or asset-backed
security is excluded from this definition;
    (C) ``Exempted security'' shall have the same meaning it has in
Section 3(a)(12) of the Act;
    (D) ``Asset-backed security'' shall have the same meaning it has in
Rule 10b-10 under the Act;
    (E) ``Nationally recognized statistical rating organization''
(``NRSRO'') shall have the same meaning it has in Rule 15c3-1 under the
Act;
    (F) ``Clearing member'' shall have the same meaning it has in Rule
3230;
    (G) ``Service bureau'' shall have the same meaning it has in IM-
4632-1 under Rule 4632; and
    (H) ``TRACE-eligible security'' shall have the same meaning it has
in Rule 6210(a).
    (b) Information Required To Be Disclosed
    (1) Debt security information. A member must disclose the debt
security's CUSIP number and the TRACE symbol of the debt security if
one has been designated by NASD.
    (2) Broker-dealer charges. A member must disclose, if acting as
principal, the following: ``The broker-dealer's remuneration on this
transaction has been added to the price in the case of a purchase or
deducted from the price in the case of a sale.''
    (3) Credit rating. A member must disclose the lowest credit
rating(s) it has received at the time the transaction confirmation is
generated, the date of such credit rating(s), and the NRSRO(s)
assigning the credit rating(s) of the debt security the member
purchased for or from or sold to or for a customer, if:
    (A) The member has entered into a written agreement with the NRSRO
to receive such credit rating(s);
    (B) A service bureau that provides confirmation services to the
member for the transaction has entered into a written agreement with
the NRSRO to receive such credit rating(s) and provides them to the
member as part of the confirmation services at no additional cost; or
    (C) A member that acts as a clearing member for, and provides
confirmation services to, the member for the transaction has entered
into a written agreement with the NRSRO to receive such credit
rating(s) and provides them to the member as part of the confirmation
services at no additional cost.
    (4) Indicators of marketability and liquidity. A member must
disclose that transaction price information for the securities subject
to this Rule is publicly available on the Internet at http://www.bondinfo.com
 for the customer's non-commercial use at no charge, or

at other sources that provide such information.
    (5) Cash flow information. For purchases only, a member must
disclose on a per debt security basis the following:
    (A) The frequency of interest and/or principal payments as
applicable, if either are paid on a periodic, fixed schedule. If the
debt security does not pay interest or principal on a regular schedule,
a member must disclose the following: ``This security does not pay
interest or principal on a regular schedule. Information regarding the
frequency of interest or principal payments for this security will be
furnished to you upon written request.'' A member shall provide such
additional information in writing within three business days of
receiving a customer's written request, or within ten business days if
such a request is received more than six months after the transaction's
settlement date.
    (B) Yield to maturity, and, if the debt security is subject to call
prior to maturity through any means, a notation of ``callable'' shall
be included. The date and price of the next pricing call shall be
included and so designated. If the debt security is continuously
callable (i.e., callable on any date after the first call date), a
member must disclose the following: ``This security is continuously
callable.'' If there are any call features in addition to the next
pricing call, a member must disclose the following: ``Additional call
features exist that may affect yield; additional information will be
furnished to you upon written request.'' A member shall provide such
additional information in writing within three business days of
receiving a customer's written request, or within ten business days if
such a request is received more than six months after the transaction's
settlement date.
    (C) For debt securities carrying a variable coupon rate, a member
must disclose the following: ``The coupon rate may vary. Additional
information that describes the way in which the debt security's
interest and principal payments are calculated will be furnished to you
upon written request.'' A member shall provide such additional
information in writing within three business days of receiving a
customer's written request, or within ten business days if such a
request is received more than six months after the transaction's
settlement date. Any such additional information shall contain:
    (i) The amount of the next interest payment based on the current
coupon rate,

    (ii) A statement that this amount will change if the coupon rate
changes
    (iii) How often the coupon rate may be recalculated,
    (iv) An explanation of the event(s) that may trigger the
recalculation, and
    (v) The formula for recalculating such coupon rate.
    (D) For debt securities that are callable and, at issuance, are not
structured to include scheduled interest payments (e.g., ``zero coupon
bonds''), the dollar equivalent of the debt security's imputed interest
until the next occurring call date (assuming that the price at which
the debt security may be called is paid to the holder).
* * * * *
2340. Customer Account Statements
    (a)-(d) No change.
    (e) Notice of Availability of NASD Disclosure on Debt Securities
    (1) Except as otherwise provided in subparagraph (2) below, a
member that has provided a customer disclosure under Rule 2231 during
the period since the last account statement was sent to the customer
also must disclose the following: ``A disclosure document discussing
your rights as a bondholder and some of the risks related to buying and
holding bonds, titled `Important Information You Need to Know About
Investing in Corporate Bonds,' has been prepared by NASD and is
available online at http://www.finra.org. A paper version of this document is

available from your broker upon your written request.''
    (2) In lieu of disclosing the internet Web site address
``http://www.finra.org'' in the statement set forth in subparagraph (1), a

member may disclose the member's internet Web site address, provided
that the document, ``Important Information You Need to Know About
Investing in Corporate Bonds,'' or an internet hyperlink directly
thereto, is easily accessible from the internet address that is
disclosed.
    (3) A member shall provide the document, ``Important Information
You Need to Know About Investing in Corporate Bonds,'' to any customer
to whom a statement is provided pursuant to subparagraph (1) within
three business days of receiving a customer's written request, or
within ten business days if such a request is received more than six
months after the transaction's settlement date. This document provides
information that an investor should know immediately prior to buying or
selling a bond such as the basics of bond pricing, yield, and the
difference between yield to maturity and yield to call. It also
describes certain risks that bond investors assume in such transactions
(e.g., interest rate risk and liquidity risk). This document also
contains a short description of basic types of bonds (e.g., floating
rate bonds, zero coupon bonds and convertible bonds) as well as debt
structure (e.g., junior or subordinated debt). Finally it informs
investors that even if they are not charged a commission they are
nevertheless paying a fee to their broker-dealer when they buy or sell
bonds. [(e)](f) Exemptions
    Pursuant to the Rule 9600 Series, the Association may exempt any
member from the provisions of this Rule for good cause shown.
* * * * *

Important Information You Need to Know About Investing in Corporate
Bonds

    This document is intended to provide you with some basic facts
about the most common features of corporate bonds, and to alert you to
some of the risks associated with buying, selling, and holding
corporate bonds.
    As with any investment, before buying a corporate bond, you should
analyze the bond on its own merits, weighing its risks, costs, and
rewards. Consult with your firm about any questions you may have about
investing in a particular bond.

Corporate Bond Basics

What Is a Corporate Bond?

    Corporate bonds are, at their simplest, loans that investors make
to public and private corporations. Consequently, bonds are referred to
as debt securities. Corporations generally issue corporate bonds to
raise money for capital expenditures, operations, and acquisitions.
    Typically, bondholders receive interest payments during the term of
a bond (or, for as long as a bondholder owns a bond), at the stated
interest rate--also called the coupon rate. In addition, if bondholders
hold bonds until maturity, they also are repaid the principal amount,
called par value or face amount.

Bond Price and Yield

Price

    If you sell a bond before it matures, you may not receive the full
principal amount of the bond. This is because a bond's price is not
based on the par value of the bond. Rather, it is set in the secondary
market and is established by the current market values of such bonds,
which may be more or less than the amount of principal the issuer would
be required to pay the bondholder at maturity. Therefore, it is
impossible to predict in advance the price that a bondholder will
receive if the bondholder purchases a bond and later sells the bond
before maturity.
    The price of a bond is often above or below its par value because
the price is adjusted according to current interest rates in the whole
market for the same debt security and comparable debt securities. For
example, if the bond you desire to purchase has a coupon rate of 8
percent, and similar quality new bonds available for sale have a coupon
rate of 5 percent, you will have to pay more than the par amount of the
bond that you intend to purchase, because you will receive more
interest income than the current coupon rate (5 percent) being attached
to similar bonds. (A bond's coupon rate is the rate of interest paid
periodically on the face amount of the obligation.)

Yield

    Yield is the overall return on the capital you invest in the bond.
Yield is similar to, but different from, a bond's coupon rate. This
distinction is important, because as is explained above, while a bond's
face amount or par value is fixed, its market value almost always
changes over time. Because bond prices fluctuate continually in the
market, the yield your bond investment will provide if it is sold prior
to maturity also changes constantly. A bond's price is inversely
related to its yield. As a bond's price increases, its associated yield
decreases; as the price of a bond decreases, the associated yield
increases.
    For example, a bond that sells today for $1,000 and has a coupon
rate of 8 percent has a current yield of 8 percent. Because the
``price'' equals the face amount of the bond, the current yield of 8
percent equals the 8 percent coupon rate. However, usually after the
first sale of a bond, the price of a bond differs from the face amount.
For example, if the same bond sells tomorrow for $990, the current
yield would be slightly higher than 8 percent.

Yield to Maturity and Yield to Call: What's the Difference?

    Yield to maturity is calculated by taking into account the total
amount of interest you will receive over time, your purchase price (the
amount of capital you invested), the face amount (or other amount you
will be paid when the issuer ``redeems'' the bond), the time between
interest payments, and the time remaining until the bond matures.
    If you hold a callable bond, another type of yield calculation,
yield to call, also is important for you to understand. This
calculation takes into account the

impact on a bond's yield if it is called prior to maturity and is often
done using the first date on which the issuer could call the bond.
(Other call dates may be used in specified circumstances.) A bond's
yield to call may be lower than its yield to maturity.
    To get a more accurate picture of what a bond will cost you or what
you received for it, you should also ask your broker to calculate the
yield adjusting the purchase price up (when you purchase) or down (when
you sell) by the amount of the mark-up or commission (when you
purchase) or mark-down or commission (when you sell) and other fees or
charges that you are charged by your broker for its services. This is
called yield reflecting broker compensation.

Corporate Bond Risks

    Like virtually all investments, corporate bonds carry risk. It is
important that you fully understand the risks of investing in corporate
bonds. These risks include:

Interest Rate Risk

    When interest rates rise, bond prices fall, and when interest rates
fall, bond prices rise. Interest rate risk is the risk that changes in
interest rates generally in the U.S. or the world economy may reduce
(or increase) the market value of a bond you hold. Interest rate risk
increases the longer that you hold a bond. For example, if interest
rates rise throughout the economy, bond issuers, along with other
borrowers, will need to offer potential bondholders higher rates to
compete with the higher interest rates available elsewhere.
    Any bonds issued in a period of rising interest rates generally
will carry higher coupon rates, which will be more attractive to
potential bondholders than the coupon rate paid by bonds issued before
the rise in interest rates. This decreased appetite for older bonds
that pay lower interest depresses their price in the secondary market,
which would translate into your receiving a lower price for your bonds
if you chose to resell them in a period of rising interest rates. The
opposite holds true as well, and the market value of older bonds that
pay higher than current interest rates tends to rise in periods where
interest rates are generally declining.

Call and Reinvestment Risk

    Bonds with a call provision can be redeemed or ``called'' by the
bond issuers, requiring bondholders to redeem their bonds at the call
price well before their maturity dates. Bonds often are called when
market interest rates are falling, because bond issuers want to
refinance their debt at lower interest rates (similar to when a home
owner seeks to refinance a mortgage at a lower rate when mortgage
interest rates decrease). This is known as call risk.
    With a callable bond, a bondholder might not receive the bond's
coupon rate for the entire term of the bond, and it might be difficult
or impossible to find an equivalent investment paying rates as high as
the called bond. This is known as reinvestment risk. Additionally, at
any given point in time, the period that a callable bond will generate
cash flow is uncertain. This risk will be reflected in a lower market
value for the bond because any appreciation in the value of the bond's
periodic interest payments may not be fully realized if it is ``called
away'' by its issuer.

Refunding Risk and Sinking Funds Provisions

    A sinking fund provision, which often is a term included in bonds
issued by industrial and utility companies, requires a bond's issuer to
retire a certain number of bonds periodically. This can be accomplished
in a variety of ways, including through purchases in the secondary
market or forced purchases directly from bondholders at a pre-
determined price.
    Holders of bonds subject to sinking fund redemptions should
understand that they risk having their bonds called (or redeemed) prior
to maturity. Unlike other bonds subject to call, depending on the
sinking fund provision, there may be a relatively high likelihood that
the issuer will redeem some or many of the bonds prior to maturity,
even if market-wide interest rates do not change.
    It is important to understand that there is no guarantee that an
issuer of these bonds will be able to comply strictly with any
redemption requirements. In certain cases, an issuer may need to borrow
funds or issue additional debt to refinance an outstanding bond issue
subject to a sinking fund provision when it matures. If the issuer is
unable to raise adequate funds to refinance the outstanding issue, the
issuer could default and the bondholder could lose all or most of his/
her investment.

Default and Credit Risk

    If you ever loaned money to someone, chances are you gave some
thought to the likelihood of being repaid. Some loans are riskier than
others. The same is true when you invest in bonds. You are taking a
risk that the issuer's promise to repay both principal and interest
will not be upheld. In the case of Treasuries and other government-
issued bonds backed by the ``full faith and credit of the U.S.
government,'' that risk is almost zero. However, there is some risk of
default with corporate bonds. This means the corporations issuing them
may either be late paying bondholders or--in worst-case scenarios--be
unable to pay at all.
    Bond ratings are a way of measuring default and credit risk. Bond
ratings are issued by private companies called credit rating agencies.
In issuing a credit rating, a credit rating agency reviews relevant
information supplied to it by the issuer or its agents, and from
sources the credit rating agency considers reliable, including
financial information such as the issuer's financial statements, and
assigns a rating (for example, AAA (or Aaa) to D).
    Generally, bonds are categorized in two broad categories--
investment grade and non-investment grade. Bonds that are rated BBB (or
Baa) or higher are considered investment grade. Bonds that are rated BB
(or Ba) or lower are non-investment grade. Non-investment grade bonds
are also referred to as high-yield or junk bonds, and in some cases,
distressed bonds. These bonds are considered riskier investments
because the issuer's general financial condition is less sound, and the
issuer may default--(may not be able to pay the interest and principal
to bondholders when they are due).
    Many bondholders heavily weigh the rating of a particular corporate
bond in determining if the corporate bond is an appropriate and
suitable investment for them. Although credit ratings are an important
indicator of creditworthiness, you should also consider that the value
of the bond might change depending on changes in the company's business
and profitability. The credit rating could be revised downward. In the
worst scenario, if you own a bond and the company that issues it
defaults you could lose all of your investment. Finally, some bonds are
not rated. In such cases, an individual bondholder may find it
difficult to assess the overall creditworthiness of the issuer of the
bond.

Liquidity Risk

    You should determine whether the bond in which you are interested
has traded frequently, infrequently, or not at all in recent months,
and if your broker regularly buys and sells the bond. While certain
bonds are very actively traded and are relatively ``liquid,'' other
bonds, including many high-yield bonds, are traded much less frequently
or not at all and may not be easy to sell. If you think you might need
to sell the bonds you are purchasing prior to their maturity, you

should carefully consider the likelihood of your being able to do so,
and whether your broker will be able and willing to assist you in
liquidating your investment at a fair price reasonably related to then
current market prices. It is possible that you may be able to re-sell a
bond only at a heavy discount to the price you paid (loss of some
principal) or not at all. Additionally, bonds that are less frequently
traded may be subject to wider ``spreads'' in the secondary market,
which means that you would receive less for your bond if selling, or
pay more if buying, than otherwise would be the case.

Corporate Bonds with Special Features

    It also is important to understand any special features a bond may
have before you buy, since these features may affect risk.

Floating Rate Bonds

    Floating-rate bonds have a floating or variable interest rate that
is adjusted periodically, or floats, using an external value or measure
(for example, the prime rate or a stock index). Such bonds offer
protection against interest rate risk, but their coupon rate is usually
lower than those of fixed-rate bonds.

Zero-Coupon Bonds

    Zero-coupon bonds, unlike other bonds, don't make regular interest
payments. Instead, the bondholder buys the bond at a discount from the
face value of the bond, and, when the bond matures, the issuer repays
the bondholder the face amount. The difference between the discounted
amount the bondholder pays upon purchase and the face amount later
received is the imputed interest. Because zero-coupon bonds don't pay
any interest until maturity, their prices may be more volatile than
other bonds with similar maturities that pay interest periodically.

Secured Bonds

    Secured bonds are backed by collateral that the bond's issuer has
agreed to sell if it otherwise is unable to meet its obligation when
the bond matures. For example, a bond might be backed by a specific
factory or industrial equipment. However, any such backing is only as
good as the value of the asset being used as collateral, the value of
which can decrease during the term of the bond.
    Bonds that are not backed by any collateral are unsecured and are
sometimes called debentures. Debentures are backed solely by an
issuer's promise to repay you. Most corporate bonds are debentures.

Guaranteed and Insured Bonds

    Certain bonds may be referred to as guaranteed or insured. This
means that a third party has agreed to make the bond's interest and
principal payments if the issuer is unable to make these payments. You
should keep in mind that such guarantees only are as valuable as the
creditworthiness of the third party making the guarantee or providing
the insurance.

Convertible Bonds

    Convertible bonds may be converted into the stock of the bond's
issuer. A bondholder should be careful to understand the conditions
under which the bonds may be converted, as this right often is
contingent upon the issuer's stock reaching a certain price level,
among other things. Bond investors also should ask their broker or
financial adviser whether there is any charge or fee associated with
making a conversion.

Junior or Subordinated Bonds

    The more junior bonds issued by a company typically are referred to
as subordinated debt, because a junior bondholder's claim for repayment
of the principal of such bonds has a lower priority than the claims of
a bondholder holding an issuer's more senior debt. Therefore, in the
event of a bankruptcy, junior bondholders receive payment only after
senior debt claims are paid in full. Additionally, other types of
claims also may have priority on the issuer's remaining assets over the
claims of all bondholders (e.g., certain supplier or customer claims).
Therefore, although bondholders generally are paid prior to
stockholders in a bankruptcy proceeding, this doesn't mean the
bondholder will get any money back because the issuer's assets could be
reduced to zero by other creditors that have the right to be paid
before bondholders.

Broker Compensation for Selling Bonds

    No Commission does not Mean No Charge.
    You should understand that your broker is being compensated for
performing services for you, even if you are not charged a commission
when you buy or sell a bond. In most bond transactions, brokers are
compensated, even though a commission charge is not disclosed, because
the transaction is structured as a principal transaction (i.e., your
broker sells you a bond it already owns). This is because when a dealer
sells you a bond in a principal capacity, the dealer increases or marks
up the price you pay over the price the dealer paid to acquire the
bond. The mark-up is the dealer's compensation and is similar to a
commission. Similarly, if you sell a bond, a dealer will offer you a
price that includes a mark-down from the price that the dealer believes
he can sell the bond to another dealer or another buyer. You should
understand that the firm has charged you a fee for its services.

Would a Similar Bond Cost Less?

    Finally, it is important to consider the potential conflicts that
your broker might have when it sells you a bond. Bonds issued by
different issuers often have very similar risk profiles and carry
similar coupon rates. Before you buy a bond, you should shop around and
consider if there are other bonds that you could buy at a cheaper price
than the one recommended by your broker. You should consider whether
there are other bonds available with similar risk/return profiles that
might be available at lower cost. You also should try and understand
how your broker is being compensated for any bond transaction,
particularly those that are recommended to you where similar bonds may
be available.
* * * * *

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

    In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA 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

Background

    With the implementation of FINRA's Trade Reporting and Compliance
Engine (``TRACE'') in 2002 and the subsequent availability of a
consolidated view of transaction information in the U.S. corporate bond
market, a number of trends have emerged that have implications for the
regulatory framework of the corporate debt market. For example,
approximately 65% of TRACE transactions are for amounts of less than
$100,000, indicating significant individual investor participation in
the corporate bond

market.\5\ FINRA believes that helping investors to understand some of
the key characteristics of particular bonds that they are buying or
selling as well as the key risks associated with bond investing is an
important element of its efforts to enhance transparency in the
corporate debt market. FINRA also believes that the proposed rule
change will further efficiency, competition, and capital formation in
the market for corporate debt securities. In particular, FINRA
anticipates that the proposed rule change, by providing greater
transparency to debt securities transactions, will result in greater
efficiency in pricing and further competition in the market for
corporate debt securities. FINRA believes the proposed rule change also
will enhance capital formation to the extent that investors are better
able to assess the risks and benefits related to investing in corporate
debt securities.\6\
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    \5\ See NASD Notice to Members 05-21 (April 2005); see also
Report of the Corporate Debt Market Panel, September 2004, http://www.finra.org/web/groups/reg_systems/documents/regulatory_systems/p011445.pdf
 (``Panel Report''). The Corporate Debt Market Panel

(``Panel'') was a group of twelve experts in the fixed income area
appointed by the NASD Board of Governors to make recommendations to
NASD regarding how best to ensure market integrity and investor
protection in the corporate bond market. The Panel reviewed
information showing significant levels of participation by
individual investors in the corporate bond market. For example, the
Panel Report notes that information obtained from TRACE shows that
approximately ``two thirds of corporate bond transactions reported
to TRACE are in quantities of $100,000 or less in value, a size
widely viewed as representative of individual investor activity.''
Panel Report at 4. The Panel also reviewed NASD surveys showing that
individual investors often do not understand certain key structural
aspects of specific bonds or the market in which bonds are traded.
For example, 34% of individuals surveyed did not believe that they
were paying a fee for buying or selling a bond and approximately 60%
of investors surveyed did not understand that bond prices generally
fall as interest rates rise. Panel Report at 4. The Panel concluded
that individual investors would benefit from additional guidance and
information disclosure, and recommended, among other things, that
investors obtain improved access to information on bonds and receive
increased disclosures regarding their bond transactions. The
proposed rule change is based on the Panel's recommendations and
also reflects significant input from other NASD advisory committees,
such as NASD's Fixed Income Committee.
    \6\ See generally Panel Report.
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Proposed Disclosures

    Proposed NASD Rule 2231 would require members, subject to certain
exceptions,\7\ to provide customers in TRACE-eligible securities
transactions,\8\ with additional transaction-specific disclosures
relating to applicable charges, credit ratings, the availability of
last-sale transaction information, and certain interest, yield and call
provisions.\9\ These disclosures would have to be provided in the same
manner and at the same time in which a broker-dealer discloses
information under Rule 10b-10.\10\
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    \7\ Proposed NASD Rule 2231's disclosures would not be required
to be provided to institutional accounts, and proposed NASD Rule
2231 would not apply to transactions in asset-backed or exempted
securities. ``Institutional account'' would have the same meaning it
has in NASD Rule 3110(c)(4). ``Asset-backed security'' would have
the same meaning it has in Rule 10b-10(d)(10) under the Act. See 17
CFR 240.10b-10. ``Exempted security'' would have the same meaning it
has in Section 3(a)(12) of the Act (15 U.S.C. 78c(a)(12)). See
paragraphs (a)(2)(A), (a)(2)(D) and (a)(2)(C) of proposed NASD Rule
2231, respectively.
    \8\ Proposed NASD Rule 2231 only would apply to a transaction in
a ``debt security'' that also is a ``TRACE-eligible security,''
which would have the same meaning it has in NASD Rule 6210(a). See
proposed NASD Rule 2231(a)(2)(H). Debt security would have the same
meaning it has under Rule 10b-10 under the Act except that it would
not include any asset-backed security or exempted security. See
Proposed NASD Rule 2231(a)(2)(B).
    \9\ Under proposed NASD Rule 2231(a) members would not be
required to make any of the disclosures, which are specified in
proposed paragraph (b), that are duplicative of disclosures already
required under SEC Rule 10b-10 for that transaction. Proposed NASD
Rule 2231(a)(1). Also, under proposed NASD Rule 2231(a), unless
otherwise provided, the information would be required to be
disclosed in the same manner (e.g., frequency) and at the same time
in which the member discloses information to the customer about the
specific debt transaction pursuant to SEC Rule 10b-10. Id. For
example, the Commission has provided exemptive relief to broker-
dealer sponsors of ``wrap fee programs'' to permit those broker-
dealers to confirm transactions in their wrap fee programs through
periodic statements, not less often than quarterly (subject to
several conditions), in lieu of immediate trade confirmations that
otherwise would be required under SEC Rule 10b-10. Money Management
Institute, Securities Industry Association, SEC No-Action Letter,
1999 SEC No-Act Lexis 934 (August 23, 1999). FINRA would defer to
SEC and SEC staff interpretations of SEC Rule 10b-10 when
interpreting proposed NASD Rule 2231's delivery requirements, and
members properly relying upon such interpretations for purposes of
satisfying SEC Rule 10b-10's delivery requirements also would be
deemed to satisfy proposed NASD Rule 2231's delivery requirements.
If the SEC approves the proposed Rule, FINRA would provide guidance
in this area only in instances where the SEC or its staff has not
already addressed a particular issue.
    \10\ Proposed NASD Rule 2231(a)(1). However, FINRA would not
interpret proposed NASD Rule 2231 as requiring members to provide
the required supplemental disclosures on the same piece of paper or
in the same electronic document (if the confirmation is provided
electronically) as that containing the SEC Rule 10b-10 confirmation,
because FINRA believes such requirements could be unwieldy without
materially enhancing investor protection. Nevertheless, FINRA
anticipates that the supplemental disclosures of proposed NASD Rule
2231 and the confirmation disclosures required by SEC Rule 10b-10
would be delivered simultaneously.
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    FINRA believes that the information in the proposed disclosures
generally is of the type that currently is included in confirmations of
transactions in various types of securities (e.g., municipal
securities). While the disclosures proposed by FINRA are narrowly
tailored to the specific concerns that have been raised regarding
confirmation disclosure in TRACE-eligible securities transactions,
FINRA has identified where analogous disclosures are today required.
The specific additional disclosures would include the security's CUSIP
\11\ number and its TRACE symbol \12\ to assure that the transaction is
identified as clearly as possible. A member acting as principal would
be required to disclose, if applicable, a statement relating to
transaction charges.\13\ This standard disclosure is intended to
clarify for investors who are dealing with a member acting as a
principal, in the capacity of either a dealer or market maker, whether
the member has obtained any remuneration in connection with the
customer's debt securities transaction. FINRA is not proposing to
require that the amount of the member's mark-up or mark-down be

disclosed because, under SEC Rule 10b-10, in debt securities
transactions, an agency commission is required to be disclosed, but a
principal's mark-up or mark-down is not. Under certain circumstances a
member would be required to disclose the credit rating of the security
and the Nationally Recognized Statistical Rating Organization
(``NRSRO'') assigning it the rating.\14\ A member that subscribes to
more than one NRSRO (or otherwise is provided credit ratings as
described previously) and has more than one credit rating for a
security, would be required to provide the lowest of such credit
ratings to the customer.\15\ A member would be required to disclose the
credit rating if it, or the clearing firm or service bureau providing
confirmation services to the member on the transaction, has entered
into a written agreement with a rating agency to receive such credit
ratings, and, in the case of a clearing firm or service bureau, those
ratings are made available to the member for inclusion on the
transaction confirmation at no additional cost.\16\ A member would be
required to disclose the credit rating it has received at the time the
transaction confirmation is generated \17\ as well as the date
applicable to the credit rating. A member also would be required to
disclose that transaction price information is publicly available for
the security, and that a customer may obtain such information at the
FINRA internet web site http://www.bondinfo.com for the customer's non-

commercial use at no charge, or at other sources that provide such
information, such as the Web site, investinginbonds.com.\18\
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    \11\ Proposed NASD Rule 2231(b)(1). ``CUSIP'' stands for
Committee on Uniform Securities Identification Procedures. According
to FINRA, CUSIP numbers belong to Standard and Poor's, a division of
the McGraw-Hill Companies, Inc. (``S&P''). S&P licenses to FINRA the
use of the terms ``Committee on Uniform Securities Identification
Procedures'' and ``CUSIP.'' See Municipal Securities Rulemaking
Board (``MSRB'') Rule G-15(a)(i)(B)(2) (requires disclosure of a
security's CUSIP number); cf. SEC Rule 10b-10(a)(1) (requires
disclosure of a security's ``identity'').
    \12\ Proposed NASD Rule 2231(b)(1). The TRACE symbol allows
retail investors tomore easily identify the TRACE-eligible security
as to the issuer. See SEC Rule 10b-10(a)(1) (requires disclosure of
a security's ``identity''); cf. MSRB Rule G-15(a)(i)(B)(1)(a) (for
stripped coupon securities, requires confirmation disclosure of a
security's ``trade name and series designation''); MSRB Rule G-
15(a)(i)(B)(1)(b) (for municipal fund securities, requires
confirmation disclosure of ``the name used by the issuer to identify
such securities and, to the extent necessary to differentiate the
securities from other municipal fund securities of the issuer, any
separate program series, portfolio or fund designation for such
securities must be shown.'').
    \13\ Proposed NASD Rule 2231(b)(2). The required disclosure for
principal transactions, if applicable, would be ``the broker-
dealer's remuneration on this transaction has been added to the
price in the case of a purchase or deducted from the price in the
case of a sale.'' Id.; cf. SEC Rule 10b-10(e)(1)(ii) (a broker or
dealer that effects ``any transaction'' for a customer in security
futures products in a futures account must disclose ``the source and
amount of any remuneration received or to be received * * *
including, but not limited to, markups, commissions, costs, fees,
and other charges incurred in connection with a transaction* * *
.''); SEC Rule 10b-10(a)(2)(ii) (in certain circumstances a non-
market maker acting as principal for its own account is required to
disclose the ``difference between the price to the customer and the
dealer's contemporaneous purchase (for customer purchases) or sale
price (for customer sales)''); SEC Rule 10b-10(a)(2)(i) (must
disclose capacity, and, when acting as agent for the customer, some
other person, or for both the customer and some other person, the
``amount of any remuneration received or to be received* * * .''
under SEC Rule 10b-10(a)(2)(i)(B)); MSRB Rule G-15(a)(i)(A)(1)(e)
(requires, in certain cases, certain disclosures regarding the
broker-dealer's remuneration in the transaction).
    \14\ Proposed NASD Rule 2231(b)(3); cf. SEC Rule 10b-10(a)(8)
(requires disclosure that a debt security is unrated by an NRSRO, if
applicable); MSRB Rule G-15(a)(i)(C)(3)(f) (requires disclosure that
a debt security is unrated by an NRSRO, if applicable). Pursuant to
the Credit Rating Agency Reform Act of 2006 and Commission rules
thereunder, on June 28, 2007, the Commission announced that seven
credit rating agencies applied to be registered with the Commission
as NRSROs and could continue to represent themselves or act as
NRSROs during Commission consideration of their applications. See
SEC Press Release 2007-124 (June 28, 2007). The seven credit
agencies are: A.M. Best Company, Inc., Dominion Bond Rating Service
Limited, Fitch, Inc., Japan Credit Rating Agency, Ltd., Moody's
Investors Service, Rating and Investment Information, Inc., and
Standard and Poor's Rating Services. In issuing a credit rating,
these organizations review relevant information supplied to them by
the issuer or its agents, and from sources they consider reliable,
including financial information such as the issuer's financial
statements, and assign a rating, for example AAA (Aaa) to D.
    \15\ Proposed NASD Rule 2231(b)(3).
    \16\ It is FINRA's understanding that certain large clearing
firms offer to disclose on a correspondent firm's transaction
confirmation a ``menu'' of items for a fixed fee and that credit
rating information typically is included as one of these menu items.
FINRA noted in NASD Notice to Members 05-21 that, if the current
proposal were adopted, FINRA would monitor the percentage of firms
that subscribe to and disclose NRSRO ratings and would consider the
advisability of mandating at least one subscription to an NRSRO if a
uniform practice of disclosing NRSRO ratings did not arise. For
example, FINRA might consider such an approach if the proposed Rule
were adopted and FINRA became aware that member firms were seeking
to avoid disclosing NRSRO ratings by paying their clearing firms or
service bureaus a separate, nominal charge to receive such ratings
to circumvent the requirement in proposed NASD Rule 2231(b)(3)(B)
and (C) that requires a member to make such disclosures only if the
member receives NRSRO ratings from its clearing firm ``at no
additional cost.'' Finally, a member that receives credit rating
information and whose clearing firm also receives credit rating
information would be permitted to choose which credit ratings to
disclose so long as the credit rating was the lowest of the ratings
it receives.
    \17\ Proposed NASD Rule 2231(b)(3). This provision has been
revised in response to SEC staff comments and industry feedback and
is intended to minimize the costs and operational burdens faced by
members complying with this requirement. Members now would be
permitted to use the lowest credit rating they have received or may
receive as part of the confirmation preparation process. Members
would not be required to disclose the credit rating available at the
time a transaction is executed, which was initially proposed by
FINRA in SR-NASD-2005-100.
    \18\ Proposed NASD Rule 2231(b)(4). Most transactions in TRACE-
eligible securities, as well as other debt securities, are executed
in the over-the-counter market; the proposed disclosure is intended
to direct investors to a primary source of market data for TRACE-
eligible securities transactions. In NYSE Rule 409(f), FINRA
requires that broker-dealers disclose on confirmations the name of
the securities market on which the confirmed transaction was made.
The New York Stock Exchange granted temporary relief from this
requirement in conjunction with the implementation of Regulation
NMS. See NYSE Information Memorandum 07-28 (March 20, 2007). In
Regulatory Notice 07-35 (August 2007) FINRA extended this relief
until January 1, 2008.
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    For customer purchases only, members would be required to provide
the frequency of interest and/or principal payments as applicable, if
either are paid on a periodic, fixed schedule.\19\ If the debt security
does not pay interest or principal on a regular schedule, the member
must disclose the following: ``This security does not pay interest or
principal on a regular schedule. Information regarding the frequency of
interest or principal payments for this security will be furnished to
you upon written request.'' \20\ Yield to maturity would be required to
be disclosed and, if the debt security is subject to call prior to
maturity through any means, a notation of ``callable'' also would be
required to be included.\21\ The date and price of the next pricing
call would be required to be included and so designated.\22\ If the
debt security is continuously callable (i.e., callable on any date
after the first call date) a member would be required to disclose,
``This security is continuously callable.'' \23\ If there are any call
features in addition to the next pricing call, disclosure must be made
that: ``Additional call features exist that may affect yield;
additional information will be furnished to you upon written request.''
\24\ For variable rate debt securities, the member would be required to
inform the customer that the coupon rate may vary and that the member
will provide additional information \25\ in writing about the variable
debt upon a customer's written request.\26\ Finally, when a member
sells to a customer a debt security that is callable and, at the time
of issuance, is not structured to include scheduled interest payments
(e.g., ``zero coupon bonds''), the member would be required to provide
to the customer the dollar equivalent of the debt security's

imputed interest until the next occurring call date (assuming that the
price at which the debt security may be called is paid to the
holder).\27\ Additionally, customers would have the right to make a
written request for certain additional cash flow information as well as
the disclosure document (see discussion below of proposed disclosure
document).\28\ Members would have three business days to provide a
written response to such requests, unless the request were made more
than six months after the settlement of a transaction, in which case a
member would have ten business days to respond.\29\
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    \19\ Proposed NASD Rule 2231(b)(5)(A); cf. MSRB Rule G-
15(a)(i)(C)(2)(e) (must disclose ``the basis on which interest is
paid,'' if the security pays interest on other than a semi-annual
basis).
    \20\ Proposed NASD Rule 2231(b)(5)(A).
    \21\ Proposed NASD Rule 2231(b)(5)(B); cf. SEC Rule 10b-10(a)(5)
(must disclose yield to maturity); SEC Rule 10b-10(a)(6) (must
disclose yield to maturity, type of call, call date and call price);
MSRB Rule G-15(a)(i)(C)(2)(a) (must disclose if securities are
callable, if callable through any means prior to maturity, must
disclose date and price of next pricing call, and must disclose
other call features, or in certain cases, provide notice that other
call features exist and additional information will be provided upon
request).
    \22\ Proposed NASD Rule 2231(b)(5)(B).
    \23\ Id.
    \24\ Id.
    \25\ Proposed NASD Rule 2231(b)(5)(C). The additional
information required to be provided upon written request would be:
(i) The amount of the next interest payment based on the current
coupon rate, (ii) a statement that this amount will change if the
coupon rate changes, (iii) how often the coupon rate may be
recalculated, (iv) an explanation of the event(s) that may trigger
the recalculation, and (v) the formula for recalculating such coupon
rate. Id.; cf. MSRB Rule G-15(a)(i)(D)(2) (for municipal
collateralized mortgage obligations, must include a statement that
the actual yield of such security may vary according to certain
variables and a statement that information concerning the factors
that affect yield will be furnished upon written request); MSRB Rule
G-15(a)(i)(C)(2)(a) (for callable securities if there are any call
features in addition to the next pricing call, must provide a
statement that ``additional call features exist that may affect
yield; complete information will be provided upon request''). FINRA
also notes that in registered offerings much of this information
would be set forth in the prospectus and the indenture concerning
the debt security, which would be publicly available to investors.
    \26\ Proposed NASD Rule 2231(b)(5)(C); cf. SEC Rule 10b-10(a)(4)
(for transactions in debt securities subject to redemption, must
provide ``a statement to the effect that such debt security may be
redeemed in whole or in part before maturity, that such redemption
could affect the yield represented and the fact that additional
information is available upon request* * *''); SEC Rule 10b-10(a)(7)
(for transactions in certain asset-backed securities, must disclose
that the actual yield may vary depending upon certain factors and
that additional information is available upon request).
    \27\ Proposed NASD Rule 2231(b)(5)(D); cf. SEC Rule 10b-10(a)(6)
(for debt security transactions effected on the basis of yield, must
disclose the ``dollar price calculated from the yield at which the
transaction was affected''); MSRB Rule G-15(a)(i)(A)(5)(a)(ii)
(``dollar price shall be computed''). This disclosure is intended to
provide investors with an easily understood figure reflecting
information similar to that considered by many institutional
investors who consider a security's compound accreted value
(``CAV'') when investing in certain bonds. CAV is, as of a
particular date, a computation of the aggregate of a security's
principal and interest.
    \28\ See proposed NASD Rule 2231(b)(5)(A)-(C) and proposed NASD
Rule 2340(e)(1).
    \29\ See proposed NASD Rule 2231(b)(5)(A)-(C) and proposed NASD
Rule 2340(e)(3).
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Proposed Disclosure Document

    A member that has provided a customer disclosure under proposed
NASD Rule 2231 during the period since it last sent an account
statement to its customer also would be required to notify that
customer of the location and availability of a FINRA-authored
disclosure document that discusses investing in bonds, titled
``Important Information You Need to Know About Investing in Bonds.''
\30\
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    \30\ Proposed NASD Rule 2340(e). The proposed rule change would
redesignate current NASD Rule 2340(e), which governs FINRA's
exemptive authority with respect to its customer account statement
rule, as NASD Rule 2340(f).The proposed disclosure document
describes various types of corporate bonds and their common features
or provisions (e.g., coupon rate, face value, and maturity), as well
as risks investors should consider before investing in debt
securities, such as interest rate risk, call and reinvestment risk,
refunding risk (and sinking fund provisions), and default and credit
risk (including the differences between subordinated and non-
subordinated debt). The document also addresses other topics,
including bond pricing, the relationship between price and yield,
and the difference between a bond's yield to maturity and its yield
to call. FINRA believes the disclosure document should aid investors
in determining whether a bond is an appropriate investment given the
investor's investment objectives. Members would be permitted to
provide customers with the FINRA internet web site address where
this disclosure document is located, or the member's own internet
web site address, provided that this disclosure document, or an
internet hyperlink directly thereto, is easily accessible from the
internet address that is provided to customers. Members would be
required to provide a paper copy of this disclosure document upon
request, but would be permitted to provide this disclosure document
in electronic form (e.g., as an attachment to an e-mail) if the
customer requests that it be delivered in electronic form.
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Effective Date

    FINRA would announce the effective date of the proposed rule change
in a Regulatory Notice to be published no later than 60 days following
Commission approval. As proposed, the effective date would not be later
than nine months following publication of the Regulatory Notice
announcing Commission approval.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A of the Act in general, and Section 15A(b)(6)
of the Act \31\ in particular, which requires, among other things, that
FINRA's rules must be designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to remove impediments to and to perfect the mechanism of a free and
open market and a national market system and, in general, to protect
investors and the public interest. FINRA believes that the proposed
rule change is consistent with these requirements in that it would
provide investors with information with which they might better assess
the quality of their executions in debt securities transactions, the
fees charged, and whether the security purchased fits their investment
goals.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78o-3(b)(6)
---------------------------------------------------------------------------

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

    FINRA does not believe that the proposed rule change will result in
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

    FINRA's statement on comments received from members, participants,
or others is set forth in Exhibit 1a to Amendment No. 1 to SR-NASD-
2005-100. At the Commission staff's request, FINRA staff has agreed to
extend the comment period for the proposed rule change from 21 days to
45 days from its publication in the Federal Register.

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

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

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

File Number SR-NASD-2005-100 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASD-2005-100. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, all

written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of FINRA. 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-NASD-2005-100 and should be
submitted on or before December 3, 2007.
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    \32\ 32 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\32\
Nancy M. Morris,
Secretary.
[FR Doc. E7-20601 Filed 10-18-07; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register Volume 86, Number 170 (Tuesday, September 7, 2021)]
[Proposed Rules]
[Pages 49943-49945]
[FR Doc No: 2021-19104]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

33 CFR Part 100

[Docket Number USCG-2021-0679]
RIN 1625-AA08

Special Local Regulation; Tennessee River, Mile Markers 462.7-
465.5, Chattanooga, TN

AGENCY: Coast Guard, Department of Homeland Security (DHS).

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Coast Guard is proposing to establish a temporary special
local regulation for navigable waters on the Tennessee River from mile
462.7 to mile 465.5. The special local regulation is needed to protect
life and the marine environment from potential hazards created by the
Chattajack rowing event. Entry of vessels or persons into this zone is
prohibited unless specifically authorized by the Captain of the Port
Sector Ohio Valley or a designated representative. We invite your
comments on this proposed rulemaking.

DATES: Comments and related material must be received by the Coast
Guard on or before September 22, 2021.

ADDRESSES: You may submit comments identified by docket number USCG-
2021-0679 using the Federal eRulemaking Portal at https://www.regulations.gov. See the ``Public Participation and Request for
Comments'' portion of the SUPPLEMENTARY INFORMATION section for further
instructions on submitting comments.

FOR FURTHER INFORMATION CONTACT: If you have questions about this
proposed rulemaking, call or email Petty Officer First Class Nicholas
Jones and Marine Safety Detachment Nashville, U.S. Coast Guard;
telephone<PHONE_NUMBER>, email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Table of Abbreviations

CFR Code of Federal Regulations
DHS Department of Homeland Security
FR Federal Register
NPRM Notice of proposed rulemaking
Sec.  Section
U.S.C. United States Code

II. Background, Purpose, and Legal Basis

    The Coast Guard was notified by Chattajack LLC of a proposed rowing
event on the Tennessee River. The event would take place on October 23,
2021 from 7 a.m. to 4 p.m. However, the requested river closure was for
the first 2 hours of the race, from 7 a.m. to 9 a.m.. The COTP has
determined that there is a need to protect the participants of the
rowing event due to the high concentration of rowers at the start of
the event between MM 462.7 and MM 465.5 on the Tennessee River. The
Coast Guard is issuing this rule under authority in 46 U.S.C. 70034
(previously 33 U.S.C. 1231). The COTP has determined that there is a
need to provide additional safety measures for the participants in the
Chattajack rowing event, and a temporary special local regulation is
needed. This propsed rule is needed to protect life and the marine
environment in the navigable waters within the temporary special local
regulation during the first two hours of the event.
    The purpose of this proposed rulemaking is to ensure the safety of
the participants in the Chattjack event within a 2.8 mile span of the
river where there will be a high concentration of rowers.. The Coast
Guard is proposing this rulemaking under authority in 46 U.S.C. 70034
(previously 33 U.S.C. 1231).
    Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause
exists for making this rule effective less than 30 days after
publication in the Federal Register. Delaying the effective date of
this rule would be contrary to the public interest as the temporary
special local regulation has to be established by October 23, 2021 to
provide for the safety of life on these navigable waters

III. Discussion of Proposed Rule

    This proposed rule would establish a special local regulation from
7 a.m. until 9 a.m. on October 23, 2021. The proposed temporary special
local regulation would cover all navigable waters of the Tennessee
River between miles 462.7 to 465.5. The duration of the regulated area
is intended to protect the rowers in the Chattajack event during the
period where there will be a high concentration of rowers. No vessel or
person would be permitted to enter the special local regulation without
obtaining permission from the COTP or a designated representative.
Persons or vessels seeking to enter the special local regulation must
request permission from the COTP or a designated representative on VHF-
FM radio channel 16 or phone at 1-800-253-7465. If permission is
granted, all persons and vessels shall comply with the instructions of
the COTP or designated representative. The COTP or a designated
representative will inform the public of the enforcement times and date
for this special local regulation through

Broadcast Notices to Mariners, Local Notices to Mariners, and/or Safety
Marine Information Broadcasts as appropriate.

IV. Regulatory Analyses

    We developed this proposed rule after considering numerous statutes
and Executive orders related to rulemaking. Below we summarize our
analyses based on a number of these statutes and Executive orders, and
we discuss First Amendment rights of protestors.

A. Regulatory Planning and Review

    Executive Orders 12866 and 13563 direct agencies to assess the
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits. This NPRM has not been designated a ``significant
regulatory action,'' under Executive Order 12866. Accordingly, the NPRM
has not been reviewed by the Office of Management and Budget (OMB).
    This regulatory action determination is based on the size,
location, duration, and time-of-day of the special local regulation.
The proppsed special local regulation would last for only two hours,
after which time vessels will be able to transit freely. Moreover, the
Coast Guard would issue a Broadcast Notice to Mariners via VHF-FM
marine channel 16 about the area, and the rule would allow vessels to
seek permission to enter the area.

B. Impact on Small Entities

    The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as
amended, requires Federal agencies to consider the potential impact of
regulations on small entities during rulemaking. The term ``small
entities'' comprises small businesses, not-for-profit organizations
that are independently owned and operated and are not dominant in their
fields, and governmental jurisdictions with populations of less than
50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this
proposed rule would not have a significant economic impact on a
substantial number of small entities.
    While some owners or operators of vessels intending to transit the
special local regulation may be small entities, for the reasons stated
in section IV.A above, this proposed rule would not have a significant
economic impact on any vessel owner or operator.
    If you think that your business, organization, or governmental
jurisdiction qualifies as a small entity and that this rule would have
a significant economic impact on it, please submit a comment (see
ADDRESSES) explaining why you think it qualifies and how and to what
degree this rule would economically affect it.
    Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996 (Pub. L. 104-121), we want to assist small
entities in understanding this proposed rule. If the rule would affect
your small business, organization, or governmental jurisdiction and you
have questions concerning its provisions or options for compliance,
please call or email the person listed in the FOR FURTHER INFORMATION
CONTACT section. The Coast Guard will not retaliate against small
entities that question or complain about this proposed rule or any
policy or action of the Coast Guard.

C. Collection of Information

    This proposed rule would not call for a new collection of
information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520).

D. Federalism and Indian Tribal Governments

    A rule has implications for federalism under Executive Order 13132
(Federalism), if it has a substantial direct effect on the States, on
the relationship between the National Government and the States, or on
the distribution of power and responsibilities among the various levels
of government. We have analyzed this proposed rule under that Order and
have determined that it is consistent with the fundamental federalism
principles and preemption requirements described in Executive Order
13132.
    Also, this proposed rule does not have tribal implications under
Executive Order 13175 (Consultation and Coordination with Indian Tribal
Governments) because it would not have a substantial direct effect on
one or more Indian tribes, on the relationship between the Federal
Government and Indian tribes, or on the distribution of power and
responsibilities between the Federal Government and Indian tribes. If
you believe this proposed rule has implications for federalism or
Indian tribes, please call or email the person listed in the FOR
FURTHER INFORMATION CONTACT section.

E. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
requires Federal agencies to assess the effects of their discretionary
regulatory actions. In particular, the Act addresses actions that may
result in the expenditure by a State, local, or tribal government, in
the aggregate, or by the private sector of $100,000,000 (adjusted for
inflation) or more in any one year. Though this proposed rule would not
result in such an expenditure, we do discuss the effects of this rule
elsewhere in this preamble.

F. Environment

    We have analyzed this proposed rule under Department of Homeland
Security Directive 023-01, Rev. 1, associated implementing
instructions, and Environmental Planning COMDTINST 5090.1 (series),
which guide the Coast Guard in complying with the National
Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have made
a preliminary determination that this action is one of a category of
actions that do not individually or cumulatively have a significant
effect on the human environment. This proposed rule involves a special
local regulation lasting 30 minutes that would prohibit entry within
2.8 miles of the Tennessee River. Normally such actions are
categorically excluded from further review under paragraph L[61] and
L[63a] of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01,
Rev. 1. For instructions on locating the docket, see the ADDRESSES
section of this preamble. We seek any comments or information that may
lead to the discovery of a significant environmental impact from this
proposed rule.

G. Protest Activities

    The Coast Guard respects the First Amendment rights of protesters.
Protesters are asked to call or email the person listed in the FOR
FURTHER INFORMATION CONTACT section to coordinate protest activities so
that your message can be received without jeopardizing the safety or
security of people, places, or vessels.

V. Public Participation and Request for Comments

    We view public participation as essential to effective rulemaking,
and will consider all comments and material received during the comment
period. Your comment can help shape the outcome of this rulemaking. If
you submit a comment, please include the docket number for this
rulemaking, indicate the specific section of this document to which
each comment applies, and provide a reason for each suggestion or
recommendation.
    We encourage you to submit comments through the Federal eRulemaking
Portal at https://www.regulations.gov. If your material cannot be
submitted using https://www.regulations.gov, call or email the person
in the FOR FURTHER INFORMATION

CONTACT section of this document for alternate instructions.
    We accept anonymous comments. All comments received will be posted
without change to https://www.regulations.gov and will include any
personal information you have provided. For more about privacy and
submissions in response to this document, see DHS's eRulemaking System
of Records notice (85 FR 14226, March 11, 2020).
    Documents mentioned in this NPRM as being available in the docket,
and all public comments, will be in our online docket at https://www.regulations.gov and can be viewed by following that website's
instructions. Additionally, if you go to the online docket and sign up
for email alerts, you will be notified when comments are posted or a
final rule is published.

List of Subjects in 33 CFR Part 100

    Marine safety, Navigation (water), Reporting and recordkeeping
requirements, Waterways.

    For the reasons discussed in the preamble, the Coast Guard is
proposing to amend 33 CFR part 100 as follows:

PART 100--SAFETY OF LIFE ON NAVIGABLE WATERS

0
1. The authority citation for part 100 continues to read as follows:

    Authority: 46 U.S.C. 70041; 33 CFR 1.05-1.

0
2. Add Sec.  100.T08-0679 to read as follows:

Sec.  100.T08-0679  Tennessee River MM 462.7 to 465.5

    (a) Regulated area. The regulations in this section apply to the
following area: Tennessee River MM 462.7 to 465.5 extending the entire
width of the river.
    (b) Regulations. (1) All non-participants are prohibited from
entering, transiting through, anchoring in, or remaining within the
regulated area described in paragraph (a) of this section unless
authorized by the Captain of the Port Sector Ohio Valley (COTP) or
their designated representative.
    (2) To seek permission to enter, contact the COTP or the COTP's
representative by phone at<PHONE_NUMBER>. Those in the regulated area
must comply with all lawful orders or directions given to them by the
COTP or the designated representative.
    (3) The COTP will provide notice of the regulated area through
advanced notice via broadcast notice to mariners and local notice to
mariners.
    (c) Enforcement period. This section will be enforced from 7 a.m.
to 9 a.m. on October 23, 2021.

    Dated: August 27, 2021.
A.M. Beach,
Captain, U.S. Coast Guard, Captain of the Port Sector Ohio Valley.
[FR Doc. 2021-19104 Filed 9-3-21; 8:45 am]
 BILLING CODE 9110-04-P


[Federal Register Volume 78, Number 214 (Tuesday, November 5, 2013)]
[Proposed Rules]
[Pages 66320-66321]
[FR Doc No: 2013-26357]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R05-OAR-2012-0779; FRL-9902-34-Region 5]

Approval and Promulgation of Air Quality Implementation Plans;
Ohio: Bellefontaine; Determination of Attainment for the 2008 Lead
Standard

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: On April 19, 2013, the Ohio Environmental Protection Agency,
submitted a request to EPA to make a determination under the Clean Air
Act that the Bellefontaine nonattainment area has attained the 2008
lead (Pb) national ambient air quality standard (NAAQS). In this
action, EPA is proposing to determine that the Bellefontaine
nonattainment area (area) has attained the 2008 Pb NAAQS. This
determination of attainment is based upon complete, quality-assured and
certified ambient air monitoring data for the 2010-2012 design period
showing that the area has monitored attainment of the 2008 Pb NAAQS. As
a result of this determination, the requirements for the area to submit
an attainment demonstration, together with reasonably available control
measures, a reasonable further progress (RFP) plan, and contingency
measures for failure to meet RFP and attainment deadlines will be
suspended as long as the area continues to attain the 2008 Pb NAAQS.

DATES: Comments must be received on or before December 5, 2013.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R05-
OAR-2012-0779, by one of the following methods:
    1. www.regulations.gov: Follow the on-line instructions for
submitting comments.
    2. Email<EMAIL_ADDRESS>    3. Fax:<PHONE_NUMBER>.
    4. Mail: Douglas Aburano, Chief, Attainment Planning and
Maintenance Section, Air Programs Branch (AR-18J), U.S. Environmental
Protection Agency, 77 West Jackson Boulevard, Chicago, Illinois 60604.
    5. Hand Delivery: Douglas Aburano, Chief, Attainment Planning and
Maintenance Section, Air Programs Branch (AR-18J), U.S. Environmental
Protection Agency, 77 West Jackson Boulevard, Chicago, Illinois 60604.
Such deliveries are only accepted during the Regional Office normal
hours of operation, and special arrangements should be made for
deliveries of boxed

information. The Regional Office official hours of business are Monday
through Friday, 8:30 a.m. to 4:30 p.m., excluding Federal holidays.
    Please see the direct final rule which is located in the Rules
section of this Federal Register for detailed instructions on how to
submit comments.

FOR FURTHER INFORMATION CONTACT: Sarah Arra, Environmental Scientist,
Attainment Planning and Maintenance Section, Air Programs Branch (AR-
18J), Environmental Protection Agency, Region 5, 77 West Jackson
Boulevard, Chicago, Illinois 60604,<PHONE_NUMBER><EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: In the Final Rules section of this Federal
Register, EPA is approving Ohio's state implementation plan submittal
as a direct final rule without prior proposal because the Agency views
this as a noncontroversial submittal and anticipates no adverse
comments. A detailed rationale for the approval is set forth in the
direct final rule. If no adverse comments are received in response to
this rule, no further activity is contemplated. If EPA receives adverse
comments, the direct final rule will be withdrawn and all public
comments received will be addressed in a subsequent final rule based on
this proposed rule. EPA will not institute a second comment period. Any
parties interested in commenting on this action should do so at this
time. Please note that if EPA receives adverse comment on an amendment,
paragraph, or section of this rule and if that provision may be severed
from the remainder of the rule, EPA may adopt as final those provisions
of the rule that are not the subject of an adverse comment. For
additional information, see the direct final rule which is located in
the Rules section of this Federal Register.

    Dated: October 21, 2013.
Susan Hedman,
Regional Administrator, Region 5.
[FR Doc. 2013-26357 Filed 11-4-13; 8:45 am]
BILLING CODE 6560-50-P