[Federal Register Volume 77, Number 91 (Thursday, May 10, 2012)]
[Notices]
[Pages 27499-27501]
[FR Doc No: 2012-11248]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30059; 812-13574-01]

Destra Capital Investments LLC and Destra Unit Investment Trust;
Notice of Application

May 3, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under (a) section 6(c) of the
Investment Company Act of 1940 (``Act'') for an exemption from sections
2(a)(32), 2(a)(35), 14(a), 19(b), 22(d) and 26(a)(2)(C) of the Act and
rules 19b-1 and rule 22c-1 thereunder and (b) sections 11(a) and 11(c)
of the Act for approval of certain exchange and rollover privileges.

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    Applicants: Destra Investments LLC (``Destra'') and Destra Unit
Investment Trust (``DUIT'').\1\
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    \1\ Applicants also request relief for future unit investment
trusts (collectively, with DUIT, the ``Trusts'') and series of the
Trusts (``Series'') that are sponsored by Destra or any entity
controlling, controlled by or under common control with Destra
(together with Destra, the ``Depositors''). Any future Trusts and
Series that rely on the requested order will comply with the terms
and conditions of the application. All existing entities that
currently intend to rely on the requested order are named as
applicants.
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SUMMARY: Summary of Application: Applicants request an order to permit
certain unit investment trusts to: (a) Impose sales charges on a
deferred basis and waive deferred sales charges in certain cases; (b)
offer unitholders certain exchange and rollover options; (c) publicly
offer units without requiring the Depositor to take for its own account
$100,000 worth of units; and (d) distribute capital gains resulting
from the sale of portfolio securities within a reasonable time after
receipt.

DATES: Filing Dates: The application was filed on September 15, 2008,
and amended on June 1, 2011, and February 8, 2012.
    Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on May 29, 2012, and should be accompanied by proof of
service on the applicants, in the form of an affidavit, or, for
lawyers, a certificate of service. Hearing requests should state the
nature of the writer's interest, the reason for the request, and the
issues contested. Persons who wish to be notified of a hearing may
request notification by writing to the Commission's Secretary.

ADDRESSES: Elizabeth M. Murphy, Secretary, Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants,
901 Warrenville Road, Suite 15, Lisle, Illinois 60532.

FOR FURTHER INFORMATION CONTACT: Lewis B. Reich, Senior Counsel, at
(202) 551-6919, or Jennifer L. Sawin, Branch Chief, at<PHONE_NUMBER>
(Office of Investment Company Regulation, Division of Investment
Management).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling<PHONE_NUMBER>.

Applicants' Representations

    1. DUIT is a unit investment trust (``UIT'') that is registered
under the Act. Any future Trust will be a registered UIT. Destra, a
Delaware limited liability company, is registered under the Securities
Exchange Act of 1934 as a broker-dealer and is the Depositor of DUIT.
Each Series will be created by a trust indenture between the Depositor
and a banking institution or trust company as trustee (``Trustee'').
    2. The Depositor acquires a portfolio of securities, which it
deposits with the Trustee in exchange for certificates representing
units of fractional undivided interest in the Series' portfolio
(``Units''). The Units are offered to the public through the Depositor
and dealers at a price which, during the initial offering period, is
based upon the aggregate market value of the underlying securities, or,
the aggregate offering side evaluation of the underlying securities if
the underlying securities are not listed on a securities exchange, plus
a front-end sales charge (and/or a deferred sales charge as described
below). The maximum sales charge may be reduced in compliance with rule
22d-1 under the Act in certain circumstances, which are disclosed in
the Series' prospectus.
    3. The Depositor may, but is not legally obligated to, maintain a
secondary market for Units of outstanding Series. Other broker-dealers
may or may not maintain a secondary market for Units of a Series. If a
secondary market is maintained, investors will be able to purchase
Units on the secondary market at the current public offering price plus
a front-end sales charge. If such a market is not maintained at any
time for any Series, holders of the Units (``Unitholders'') of that
Series may redeem their Units through the Trustee.

A. Proposed Deferred Sales Charge Program

    1. Applicants request an order to permit one or more Series to
impose a sales charge on a deferred basis (``DSC''). For each Series,
the Depositor would set a maximum sales charge per Unit, a portion of
which the Depositor may (and presently anticipates would be) collected
``up front'' (i.e., at the time an investor purchases the Units).\2\
The DSC would be collected subsequently in installment payments over
time as described in the application. The Depositor would not add any
amount for interest or any similar or related charge to adjust for such
deferral.
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    \2\ The maximum sales charge will not exceed the limits set
forth in NASD Conduct Rule 2830. Any reference to NASD Conduct Rule
2830 includes any successor or replacement rule that may be adopted
by the Financial Industry Regulatory Authority.
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    2. When a Unitholder redeems or sells Units, the Depositor intends
to deduct any unpaid DSC from the redemption or sale proceeds. When
calculating the amount due, the Depositor will assume that Units on
which the DSC has been paid in full are redeemed or sold first. With
respect to Units on which the DSC has not been paid in full, the
Depositor will assume that the Units held for the longest time are
redeemed or sold first. Applicants represent that the DSC collected at
the time of redemption or sale, together with the installment payments
and any amount collected up front, will not exceed the maximum sales
charge per Unit. Under certain circumstances, the Depositor may waive
the collection of any unpaid DSC in connection with redemptions or
sales of Units. These circumstances will be disclosed in the prospectus
for the relevant Series and implemented in accordance with rule 22d-1
under the Act.
    3. Each Series offering Units subject to a DSC will state the
maximum charge per Unit in its prospectus. In addition, the prospectus
for each such Series will include the table required by Form N-1A
(modified as appropriate to reflect the difference between UITs and
open-end management investment companies) and a schedule setting forth
the number and date of each installment payment, along with the
duration of the period for the collection of the DSC. The prospectus
also will disclose that portfolio securities may be sold to pay the DSC
if distribution income is

insufficient and that securities will be sold pro rata, if practicable,
otherwise a specific security will be designated for sale.

B. Exchange Option and Rollover Option

    1. Applicants request an order to the extent necessary to permit
Unitholders of a Series to exchange their Units for Units of another
Series (``Exchange Option'') and Unitholders of a Series that is
terminating to exchange their Units for Units of a new Series of the
same or similar type (``Rollover Option'') and to approve such
exchanges. The Exchange Option and Rollover Option would apply to all
exchanges of Units sold with a front-end sales charge or DSC.
    2. A Unitholder who purchases Units under the Exchange Option or
Rollover Option would pay a lower sales charge than that which would be
paid for the Units by a new investor. The reduced sales charge under
the Exchange Option and Rollover Option will be reasonably related to
the expenses incurred in connection with the administration of the DSC
program, which may include an amount that will fairly and adequately
compensate the Depositor and participating underwriters and brokers for
their services in providing the DSC program.

Applicants' Legal Analysis

A. DSC and Waiver of DSC

    1. Section 4(2) of the Act defines a ``unit investment trust'' as
an investment company that issues only redeemable securities. Section
2(a)(32) of the Act defines a ``redeemable security'' as a security
that, upon its presentation to the issuer, entitles the holder to
receive approximately his or her proportionate share of the issuer's
current net assets or the cash equivalent of those assets. Rule 22c-1
under the Act requires that the price of a redeemable security issued
by a registered investment company for purposes of sale, redemption or
repurchase be based on the security's current net asset value
(``NAV''). Because the collection of any unpaid DSC may cause a
redeeming Unitholder to receive an amount less than the NAV of the
redeemed Units, applicants request relief from section 2(a)(32) and
rule 22c-1.
    2. Section 22(d) of the Act and rule 22d-1 under the Act require a
registered investment company and its principal underwriter and dealers
to sell securities only at the current public offering price described
in the investment company's prospectus, with the exception of sales of
redeemable securities at prices that reflect scheduled variations in
the sales load. Section 2(a)(35) of the Act defines the term ``sales
load'' as the difference between the sales price and the portion of the
proceeds invested by the depositor or trustee. Applicants request
relief from section 2(a)(35) and section 22(d) to permit waivers,
deferrals or other scheduled variations of the sales load.
    3. Under section 6(c) of the Act, the Commission may exempt classes
of transactions, if and to the extent that such exemption is necessary
or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act. Applicants state that their proposal meets
the standards of section 6(c). Applicants state that the provisions of
section 22(d) are intended to prevent (a) riskless trading in
investment company securities due to backward pricing, (b) disruption
of orderly distribution by dealers selling shares at a discount, and
(c) discrimination among investors resulting from different prices
charged to different investors. Applicants assert that the proposed DSC
program will present none of these abuses. Applicants further state
that all scheduled variations in the sales load will be disclosed in
the prospectus of each Series and applied uniformly to all investors,
and that applicants will comply with all the conditions set forth in
rule 22d-1.
    4. Section 26(a)(2)(C) of the Act, in relevant part, prohibits a
trustee or custodian of a UIT from collecting from the trust as an
expense any payment to the trust's depositor or principal underwriter.
Because the Trustee's payment of the DSC to the Depositor may be deemed
to be an expense under section 26(a)(2)(C), applicants request relief
under section 6(c) from section 26(a)(2)(C) to the extent necessary to
permit the Trustee to collect installment payments and disburse them to
the Depositor. Applicants submit that the relief is appropriate because
the DSC is more properly characterized as a sales load.

B. Exchange Option and Rollover Option

    1. Sections 11(a) and 11(c) of the Act prohibit any offer of
exchange by a UIT for the securities of another investment company
unless the terms of the offer have been approved in advance by the
Commission. Applicants request an order under sections 11(a) and 11(c)
for Commission approval of the Exchange Option and the Rollover Option.

C. Net Worth Requirement

    1. Section 14(a) of the Act requires that a registered investment
company have $100,000 of net worth prior to making a public offering.
Applicants state that each Series will comply with this requirement
because the Depositor will deposit more than $100,000 of securities.
Applicants assert, however, that the Commission has interpreted section
14(a) as requiring that the initial capital investment in an investment
company be made without any intention to dispose of the investment.
Applicants state that, under this interpretation, a Series would not
satisfy section 14(a) because of the Depositor's intention to sell all
the Units of the Series.
    2. Rule 14a-3 under the Act exempts UITs from section 14(a) if
certain conditions are met, one of which is that the UIT invest only in
``eligible trust securities,'' as defined in the rule. Applicants state
that they may not rely on rule 14a-3 because certain Series
(collectively, ``Equity Series'') will invest all or a portion of their
assets in equity securities or shares of registered investment
companies which do not satisfy the definition of eligible trust
securities.
    3. Applicants request an exemption under section 6(c) of the Act to
the extent necessary to exempt the Equity Series from the net worth
requirement in section 14(a). Applicants state that the Series and the
Depositor will comply in all respects with the requirements of rule
14a-3, except that the Equity Series will not restrict their portfolio
investments to ``eligible trust securities.''

D. Capital Gains Distribution

    1. Section 19(b) of the Act and rule 19b-1 under the Act provide
that, except under limited circumstances, no registered investment
company may distribute long-term gains more than once every twelve
months. Rule 19b-1(c), under certain circumstances, exempts a UIT
investing in eligible trust securities (as defined in rule 14a-3) from
the requirements of rule 19b-1. Because the Equity Series do not limit
their investments to eligible trust securities, however, the Equity
Series will not qualify for the exemption in paragraph (c) of rule 19b-
1. Applicants therefore request an exemption under section 6(c) from
section 19(b) and rule 19b-1 to the extent necessary to permit capital
gains earned in connection with the sale of portfolio securities to be
distributed to Unitholders along with the Equity Series' regular
distributions. In all other respects, applicants will

comply with section 19(b) and rule 19b-1.
    2. Applicants state that their proposal meets the standards of
section 6(c). Applicants assert that any sale of portfolio securities
would be triggered by the need to meet Trust expenses, installment
payments, or by redemption requests, events over which the Depositor
and the Equity Series do not have control. Applicants further state
that, because principal distributions must be clearly indicated in
accompanying reports to Unitholders as a return of principal and will
be relatively small in comparison to normal dividend distributions,
there is little danger of confusion from failure to differentiate among
distributions.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will
be subject to the following conditions:

A. DSC Relief and Exchange and Rollover Options

    1. Whenever the Exchange Option or the Rollover Option is to be
terminated or its terms are to be amended materially, any holder of a
security subject to that privilege will be given prominent notice of
the impending termination or amendment at least 60 days prior to the
date of termination or the effective date of the amendment, provided
that: (a) No such notice need be given if the only material effect of
an amendment is to reduce or eliminate the sales charge payable at the
time of an exchange, to add one or more new Series eligible for the
Exchange Option or the Rollover Option, or to delete a Series which has
terminated; and (b) no notice need be given if, under extraordinary
circumstances, either (i) there is a suspension of the redemption of
Units of the Series under section 22(e) of the Act and the rules and
regulations promulgated thereunder, or (ii) a Series temporarily delays
or ceases the sale of its Units because it is unable to invest amounts
effectively in accordance with applicable investment objectives,
policies and restrictions.
    2. An investor who purchases Units under the Exchange Option or the
Rollover Option will pay a lower sales charge than that which would be
paid for the Units by a new investor.
    3. The prospectus of each Series offering exchanges or rollovers
and any sales literature or advertising that mentions the existence of
the Exchange Option or Rollover Option will disclose that the Exchange
Option and the Rollover Option are subject to modification, termination
or suspension without notice, except in certain limited cases.
    4. Any DSC imposed on a Series' Units will comply with the
requirements of subparagraphs (1), (2) and (3) of rule 6c-10(a) under
the Act.
    5. Each Series offering Units subject to a DSC will include in its
prospectus the disclosure required by Form N-1A relating to deferred
sales charges (modified as appropriate to reflect the differences
between UITs and open-end management investment companies) and a
schedule setting forth the number and date of each installment payment.

B. Net Worth Requirement

    1. Applicants will comply in all respects with the requirements of
rule 14a-3 under the Act, except that the Equity Series will not
restrict their portfolio investments to ``eligible trust securities.''

    For the Commission, by the Division of Investment Management,
under delegated authority.
 Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-11248 Filed 5-9-12; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 76, Number 251 (Friday, December 30, 2011)]
[Proposed Rules]
[Pages 82202-82204]
[FR Doc No: 2011-33536]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2009-1100; Directorate Identifier 2009-NE-37-AD]
RIN 2120-AA64

Airworthiness Directives; International Aero Engines AG Turbofan
Engines

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: We propose to supersede an existing airworthiness directive
(AD), for all International Aero Engines AG (IAE) V2500-A1, V2525-D5
and V2528-D5 turbofan engines, and certain serial numbers (S/Ns) of IAE
V2522-A5, V2524-A5, V2527-A5, V2527E-A5, V2527M-A5, V2530-A5, and
V2533-A5 turbofan engines. The existing AD currently requires initial
and repetitive on-wing ultrasonic inspections (USIs) of certain high-
pressure compressor (HPC) stage 3 to 8 drums, and replacement of drum
attachment nuts. This proposed AD would expand the affected population
for initial and repetitive on-wing inspections of the HPC stage 3 to 8
drum, introduce an eddy current inspection (ECI) procedure, and require
additional cleaning and repetitive on-wing USI or ECI of some HPC stage
3 to 8 drums. We are proposing this AD to prevent failure of the HPC
stage 3 to 8 drum, uncontained engine failure, and damage to the
airplane.

DATES: We must receive comments on this proposed AD by February 28,
2012.

ADDRESSES: You may send comments, using the procedures found in 14 CFR
11.43 and 11.45, by any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC 20590.
     Hand Delivery: Deliver to Mail address above between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
    For service information identified in this AD, contact
International Aero Engines AG, 628 Hebron Avenue, Suite 400,
Glastonbury, CT 06033; phone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>; e-
mail<EMAIL_ADDRESS>Web site: https://www.iaeworld.com. You may
review copies of the referenced service information at the FAA, Engine
& Propeller Directorate, 12 New England Executive Park, Burlington, MA
01803. For information on the availability of this material at the FAA,
call<PHONE_NUMBER>.

Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov; or in person at the Docket Management Facility
between 9 a.m. and 5 p.m., Monday through Friday, except Federal
holidays. The AD docket contains this proposed AD, the regulatory
evaluation, any comments received, and other information. The street
address for the Docket Office (phone:<PHONE_NUMBER>) is in the
ADDRESSES section. Comments will be available in the AD docket shortly
after receipt.

FOR FURTHER INFORMATION CONTACT: Carlos Fernandes, Aerospace Engineer,
Engine Certification Office, FAA, Engine & Propeller Directorate, 12
New England Executive Park, Burlington, MA 01803; phone: (781) 238-
7189; fax:<PHONE_NUMBER>; email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Comments Invited

    We invite you to send any written relevant data, views, or
arguments about this proposed AD. Send your comments to an address
listed under the ADDRESSES section. Include ``Docket No. FAA-2009-1100;
Directorate Identifier 2009-NE-37-AD'' at the beginning of your
comments. We specifically invite comments on the overall regulatory,
economic, environmental, and energy aspects of this proposed AD. We
will consider all comments received by the closing date and may amend
this proposed AD because of those comments.
    We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We
will also post a report summarizing each substantive verbal contact we
receive about this proposed AD.

Discussion

    On September 15, 2010, we issued AD 2010-20-07, Amendment 39-16441
(75 FR 59067, September 27, 2010), for IAE V2500-A1, V2525-D5, and
V2528-D5 turbofan engines and certain S/Ns of IAE V2522-A5, V2524-A5,
V2527-A5, V2527E-A5, V2527M-A5, V2530-A5, and V2533-A5 turbofan
engines. That AD requires initial and repetitive on-wing USI of the HPC
stage 3 to 8 drum for cracks for certain S/Ns of V2500-A1, V2522-A5,
V2524-A5, V2527-A5,

V2527E-A5, V2527M-A5, V2530-A5, and V2533-A5 series turbofan engines.
As mandatory terminating action to the repetitive inspections, that AD
requires removal from service of the fully silver plated nuts attaching
the HPC stage 3 to 8 drum to the HPC stage 9 to 12 drum, removal of
silver residue from the HPC stage 3 to 8 drum, and FPI of the stage 3
to 8 drum within a specified time. For all other engines, that AD
requires removal from service of the fully silver plated nuts attaching
the HPC stage 3 to 8 drum to the HPC stage 9 to 12 drum, removal of
silver residue from the HPC stage 3 to 8 drum, and FPI of the HPC stage
3 to 8 drum at the next drum piece-part exposure. That AD resulted from
reports of 39 HPC stage 3 to 8 drums found cracked since March 2009. We
issued that AD to prevent failure of the HPC stage 3 to 8 drum,
uncontained engine failure, and damage to the airplane.

Actions Since Existing AD Was Issued

    Since we issued AD 2010-20-07 (75 FR 59067, September 27, 2010),
inspections have found 50 additional HPC drums with cracks. Some
reports have indicated that the FPI may miss small cracks. This has
necessitated the expansion of the compliance requirements.

Relevant Service Information

    We reviewed IAE Service Bulletin (SB) V2500-ENG-72-0615, Revision
3, dated September 20, 2011. That SB will replace IAE SB V2500-ENG-72-
0594, Revision 6, dated April 12, 2010 and IAE SB V2500-ENG-72-0603,
Revision 1, dated February 17, 2011. We have also reviewed IAE SB No.
V2500-ENG-72-0601, Revision 2, dated April 12, 2010. That SB describes
procedures for removing the silver residue from the HPC stage 3 to 8
drum. We have also reviewed IAE SB V2500-ENG-72-0615, Revision 3, dated
September 20, 2011 and IAE SB No. V2500-ENG-72-0608, Revision 3, dated
September 20, 2011. Those SBs describe procedures for performing USIs
of the HPC stage 3 to 8 drum. We have also reviewed IAE SB V2500-ENG-
72-0625, dated September 20, 2011 which introduces an ECI procedure
that will improve the ability to detect cracks of the HPC 3 to 8 drum.

FAA's Determination

    We are proposing this AD because we evaluated all the relevant
information and determined the unsafe condition described previously is
likely to exist or develop in other products of the same type design.

Proposed AD Requirements

    This proposed AD would retain certain requirements of AD 2010-20-
07. The proposed AD has the same applicability requirements as AD 2010-
20-07. This proposed AD, however, would expand the initial and
repetitive on-wing USIs of the HPC stage 3 to 8 drum for cracks to a
larger population of S/Ns of V2500-A1, V2522-A5, V2524-A5, V2527-A5,
V2527E-A5, V2527M-A5, V2530-A5, and V2533-A5 turbofan engines and all
V2525-D5 and V2528-D5 turbofan engines. This proposed AD would
introduce an ECI procedure that will improve the ability to detect
cracks of the HPC stage 3 to 8 drum. This proposed AD would require
repetitive on-wing USI of the HPC stage 3 to 8 drum after removal from
service of all of the fully silver plated nuts attaching the HPC stage
3 to 8 drum to the HPC stage 9 to 12 drum; removal of silver residue
from the HPC stage 3 to 8 drum; and FPI or ECI of the stage 3 to 8
drum. This proposed AD would also remove the mandatory terminating
action and replace it with an optional terminating action.

Costs of Compliance

    We estimate that this proposed AD would affect about 906 IAE V2500-
A1, V2522-A5, V2524-A5, V2525-D5, V2527-A5, V2527E-A5, V2527M-A5,
V2528-D5, V2530-A5, and V2533-A5 turbofan engines installed on
airplanes of U.S. registry. We estimate that 906 of these engines would
require USIs, and that it would take about 3 work-hours per engine to
perform one USI. We estimate that it would take about 2 work-hours per
engine to perform the FPI of the HPC stage 3 to 8 drum, and that the
average labor rate is $85 per work-hour. We also estimate that removal
of silver residue from the engine would cost about $2,600 per engine.
Required parts would cost about $795 per engine. We also estimate the
cost of replacing a drum if found cracked would be $189,000. We have no
way of determining the number of aircraft that might need this
replacement. Based on these figures, we estimate the total cost of the
proposed AD to U.S. operators to be $4,385,040.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, Section 106, describes the
authority of the FAA Administrator. Subtitle VII, Aviation Programs,
describes in more detail the scope of the Agency's authority.
    We are issuing this rulemaking under the authority described in
Subtitle VII, Part A, Subpart III, Section 44701, ``General
requirements.'' Under that section, Congress charges the FAA with
promoting safe flight of civil aircraft in air commerce by prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce. This regulation is within
the scope of that authority because it addresses an unsafe condition
that is likely to exist or develop on products identified in this
rulemaking action.

Regulatory Findings

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

List of Subjects in 14 CFR Part 39

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

The Proposed Amendment

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

PART 39--AIRWORTHINESS DIRECTIVES

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

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

Sec.  39.13  [Amended]

    2. The FAA amends Sec.  39.13 by removing airworthiness directive
(AD) 2010-20-07, Amendment 39-16441 (75 FR 59067, September 27, 2010),
and adding the following new AD:

International Aero Engines AG: Docket No. FAA-2009-1100; Directorate
Identifier 2009-NE-37-AD.

(a) Comments Due Date

    The FAA must receive comments on this AD action by February 28,
2012.

(b) Affected ADs

    This AD supersedes AD 2010-20-07, Amendment 39-16441 (75 FR
59067, September 27, 2010).

(c) Applicability

    This AD applies to:
    (1) All International Aero Engines AG (IAE) V2500-A1 turbofan
engines; and
    (2) All IAE V2525-D5 and V2528-D5 turbofan engines; and
    (3) IAE V2522-A5, V2524-A5, V2527-A5, V2527E-A5, V2527M-A5,
V2530-A5, and V2533-A5 turbofan engines with serial numbers (S/Ns)
up to and including V13181, and with S/Ns from V15000 up to and
including V15245.

(d) Unsafe Condition

    This AD results from reports of 50 additional high-pressure
compressor (HPC) stage 3 to 8 drums found cracked since AD 2010-20-
07 was issued. We are issuing this AD to prevent failure of the HPC
stage 3 to 8 drum, uncontained engine failure, and damage to the
airplane.

(e) Compliance

    You are responsible for having the actions required by this AD
performed within the compliance times specified unless the actions
have already been done.

(f) Initial Ultrasonic Inspections (USIs) of the HPC Stage 3 to 8 Drum

    (1) Using IAE Service Bulletin (SB) No. V2500-ENG-72-0615,
Revision 3, dated September 20, 2011, Accomplishment Instructions,
paragraph 3, perform an initial USI of the HPC stage 3 to 8 drum:
    (i) For IAE V2500-A1, V2522-A5, V2524-A5, V2527-A5, V2527E-A5,
V2527M-A5, V2530-A5, and V2533-A5 turbofan engines with S/Ns in
``Group A'' in Paragraph 1.A. in IAE SB No. V2500-ENG-72-0615,
Revision 3, dated September 20, 2011, before accumulating 5,000
cycles-since-new (CSN) or within 500 cycles from the effective date
of this AD, whichever occurs later.
    (ii) For IAE V2500-A1, V2522-A5, V2524-A5, V2527-A5, V2527E-A5,
V2527M-A5, V2530-A5, and V2533-A5 turbofan engines with S/Ns in
``Group B'' in Paragraph 1.A. in IAE SB No. V2500-ENG-72-0615,
Revision 3, dated September 20, 2011, before accumulating 12,500 CSN
or within 500 cycles from the effective date of this AD, whichever
occurs later, not to exceed 13,700 CSN.
    (2) For all IAE V2525-D5 and V2528-D5 turbofan engines, using
IAE SB No. V2500-ENG-72-0608, Revision 3 dated September 20, 2011,
Accomplishment Instructions, paragraph 3, perform an initial USI of
the HPC stage 3 to 8 drum before accumulating 12,500 CSN or within
500 cycles from the effective date of this AD, whichever occurs
later, not to exceed 13,700 CSN.
    (3) If cracks or crack indications are identified, remove the
drum from service before further flight.

(g) Removal of All Fully Silver Plated Nuts

    (1) At the next piece part exposure of the HPC stage 3 to 8 drum
after the effective date of this AD, but no later than 8 years from
the effective date of this AD, do the following before returning any
HPC stage 3 to 8 drum to service:
    (i) Remove from service all fully silver plated nuts, part
number (P/N) AS44862 or equivalent, that attach the HPC stage 3 to 8
drum to the HPC stage 9 to 12 drum.
    (ii) Remove the silver residue from the HPC stage 3 to 8 drum
using the IAE SB No. V2500-ENG-72-0601, Revision 2, dated April 12,
2010, Accomplishment Instructions, paragraph 3. Drums cleaned before
the effective date of this AD using engine manual task 72-41-11-110-
001 satisfy this requirement.
    (2) Perform an inspection using one of the following methods:
    (i) Fluorescent penetrant inspect (FPI) the HPC stage 3 to 8
drum for cracks, and remove from service any drum found cracked. You
can find guidance on performing an FPI of the HPC stage 3 to 8 drum
in IAE engine manual task 72-41-11-200-001.
    (ii) Eddy Current Inspect (ECI) the HPC stage 3 to 8 drum for
cracks, using IAE SB No. V2500-ENG-72-0625, dated September 20,
2011, and remove from service any drum found cracked.
    (3) If cracks or crack indications are identified, remove the
drum from service before further flight.

(h) Repetitive USIs of the HPC Stage 3 to 8 Drum

    Perform repetitive USIs of the HPC stage 3 to 8 drum for cracks
in accordance with paragraphs (f)(1) or (f)(2) of this AD as
follows:
    (1) Within every 750 cycles-since-last USI; or
    (2) Within 2,500 cycles-since-last FPI; or
    (3) Within 13,000 cycles-since-last ECI, whichever occurs
latest.

(i) Optional Terminating Action

    Accomplishment of paragraphs (h)(1) and (h)(2) of this AD,
eliminate the cleaning and inspection requirements of this AD and no
further actions are required.
    (1) Remove from service all fully silver plated nuts, P/N
AS44862 or equivalent, that attach the HPC stage 3 to 8 drum to the
HPC stage 9 to 12 drum.
    (2) Install a zero-time HPC stage 3 to 8 drum or a drum that has
never operated with fully silver plated nuts, P/N AS44862 or
equivalent, that attach the HPC stage 3 to 8 drum to the HPC stage 9
to 12 drum.

(j) Definitions

    For the purpose of this AD, piece-part exposure is removal of
the HPC stage 3 to 8 drum from the engine and removal of all blades
from the drum.

(k) Previous Credit

    (1) Initial or repetitive USIs of the HPC stage 3 to 8 drum
using IAE SB No. V2500-ENG-72-0594, Revision 3, dated August 7,
2009, or Revision 4, dated October 13, 2009, or Revision 5, dated
November 23, 2009, or Revision 6, dated April 12, 2010, before the
effective date of this AD, meets the inspection requirements of
paragraphs (f)(1) through (f)(3) of this AD.
    (2) Initial or repetitive USIs of the HPC stage 3 to 8 drum
using IAE SB No. V2500-ENG-72-0603, Original Issue, dated November
24 2009, or Revision 1, dated December 18, 2009, or Revision 2,
dated March 17, 2010, before the effective date of this AD, meets
the inspection requirements of paragraphs (f)(1) through (f)(3) of
this AD.
    (3) Initial or repetitive USIs of the HPC stage 3 to 8 drum
using IAE SB No. V2500-ENG-72-0608, Revision 3, dated September 20,
2011, before the effective date of this AD, meets the inspection
requirements of paragraphs (f)(1) through (f)(3) of this AD.
    (4) Initial or repetitive USIs of the HPC stage 3 to 8 drum
using IAE SB No. V2500-ENG-72-615, Revision 3, dated September 20,
2011, before the effective date of this AD, meets the inspection
requirements of paragraphs (f)(1) through (f)(3) of this AD.

(l) Alternative Methods of Compliance (AMOCs)

    The Manager, Engine Certification Office, may approve AMOCs for
this AD. Use the procedures found in 14 CFR 39.19 to make your
request.

(m) Related Information

    (1) For more information about this AD, contact Carlos
Fernandes, Aerospace Engineer, Engine Certification Office, FAA,
Engine & Propeller Directorate, 12 New England Executive Park,
Burlington, MA 01803; phone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>;
email<EMAIL_ADDRESS>    (2) For service information identified in this AD, contact
International Aero Engines AG, 628 Hebron Avenue, Suite 400,
Glastonbury, CT 06033; phone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>;
email<EMAIL_ADDRESS>Web site: https://www.iaeworld.com.
    (3) You may review copies of the referenced service information
at the FAA, Engine & Propeller Directorate, 12 New England Executive
Park, Burlington, MA. For information on the availability of this
material at the FAA, call<PHONE_NUMBER>.

    Issued in Burlington, Massachusetts, on December 23, 2011.
Peter A. White,
Manager, Engine & Propeller Directorate, Aircraft Certification
Service.
[FR Doc. 2011-33536 Filed 12-29-11; 8:45 am]
BILLING CODE 4910-13-P


[Federal Register: December 22, 2009 (Volume 74, Number 244)]
[Notices]
[Page 68084-68088]
[DOCID:fr22de09-74]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61168; File No. SR-FINRA-2009-090]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating To
Adopt FINRA Rule 5320 (Prohibition Against Trading Ahead of Customer
Orders) in the Consolidated FINRA Rulebook

December 15, 2009.
    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 December 10, 2009, Financial Industry Regulatory Authority, Inc.
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc.
(``NASD'')) 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. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    FINRA is proposing to adopt NASD Interpretive Material (IM) 2110-2
(Trading Ahead of Customer Limit Order) and NASD Rule 2111 (Trading
Ahead of Customer Market Orders) with significant changes in the
Consolidated FINRA Rulebook as new FINRA Rule 5320 (Prohibition Against
Trading Ahead of Customer Orders).
    The text of the proposed rule change is available on FINRA's Web
site at http://www.finra.org, on the Commission's Web site at http://
www.sec.gov, at the principal office of FINRA, and at the Commission's
Public Reference Room.

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

    In its filing with the Commission, 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
    As part of the process of developing a new consolidated rulebook
(``Consolidated FINRA Rulebook''),\3\ FINRA is proposing to adopt NASD
IM-2110-2 (Trading Ahead of Customer Limit Order) and NASD Rule 2111
(Trading Ahead of Customer Market Orders) with significant changes in
the Consolidated FINRA Rulebook as new FINRA Rule 5320 (Prohibition
Against Trading Ahead of Customer Orders).
---------------------------------------------------------------------------

    \3\ The current FINRA rulebook consists of (1) FINRA Rules; (2)
NASD Rules; and (3) rules incorporated from NYSE (``Incorporated
NYSE Rules'') (together, the NASD Rules and Incorporated NYSE Rules
are referred to as the ``Transitional Rulebook''). While the NASD
Rules generally apply to all FINRA members, the Incorporated NYSE
Rules apply only to those members of FINRA that are also members of
the NYSE (``Dual Members''). The FINRA Rules apply to all FINRA
members, unless such rules have a more limited application by their
terms. For more information about the rulebook consolidation
process, see Information Notice, March 12, 2008 (Rulebook
Consolidation Process).
---------------------------------------------------------------------------

Background
    IM-2110-2 generally prohibits a member from trading for its own
account in an NMS stock, as defined in Rule 600(b)(47) of SEC
Regulation NMS, or an OTC equity security (e.g., OTCBB and pink sheets
securities) at a price

that is equal to or better than an unexecuted customer limit order in
that security, unless the member immediately, in the event it trades
ahead, executes the customer limit order at the price at which it
traded for its own account or better.\4\
---------------------------------------------------------------------------

    \4\ For example, if a member buys 100 shares of a security at
$10 per share while holding customer limit orders in the same
security to buy at $10 per share equaling, in aggregate, 1,000
shares, the member is required to fill 100 shares of the customer
limit orders at $10 per share or better.
---------------------------------------------------------------------------

    Similarly, Rule 2111 generally prohibits a member that accepts and
holds a customer market order in a Nasdaq or exchange-listed security
from trading for its own account at prices that would satisfy a
customer market order, unless the firm immediately thereafter executes
the customer market order up to the size and at the same price at which
it traded for its own account or better. At present, Rule 2111 does not
apply to OTC equity securities.
    While there is no Incorporated NYSE Rule counterpart to IM-2110-2
and Rule 2111 (collectively referred to herein as ``customer order
protection'' rules), New York Stock Exchange LLC (``NYSE'') Rule 92
imposes similar requirements on NYSE members in NYSE-listed securities.
NYSE Rule 92 generally prohibits members or member organizations from
knowingly entering proprietary orders ahead of, or along with, customer
orders that are executable at the same price as the proprietary order.
    As discussed below, FINRA is proposing several changes to the
standards set forth in IM-2110-2 and Rule 2111 to simplify and clarify
these rules, as well as create an industry standard that incorporates
elements from existing FINRA and NYSE rules.
Integration of IM-2110-2 and Rule 2111
    FINRA is proposing to integrate IM-2110-2 and Rule 2111 into a
single rule (proposed Rule 5320) governing members' treatment of
customer orders and to apply the new rule to all equity securities
uniformly, other than the no-knowledge interpretation as detailed
below. In addition to streamlining and simplifying the rules, the
principal change resulting from the proposed combination of these rules
is to extend the application of Rule 2111 to OTC equity securities. As
noted above, Rule 2111 currently applies only to Nasdaq or exchange-
listed securities, while IM-2110-2 applies to both NMS stocks and OTC
equity securities. FINRA believes that the same concerns that arise
with respect to trading ahead of limit orders in OTC equity securities
also exist with respect to market orders and, therefore, an expansion
of the Rule 2111 protections to those securities is appropriate.
Large Orders and Institutional Accounts
    There are several exceptions to the customer order protection
rules. Most notably, members are permitted to negotiate terms and
conditions on the acceptance of certain large-sized orders (orders of
10,000 shares or more and greater than $100,000 in value) and orders
from institutional accounts as defined in NASD Rule 3110(c)
(collectively referred to as ``Institutional/Large-Sized Orders'').
Such terms and conditions would permit the member to continue to trade
along side or ahead of such customer orders if the customer agrees.
    FINRA is proposing to modify the steps necessary for a member to
avail itself of this exception for Institutional/Large-Sized Orders.
Specifically, under the proposed rule, a member would be permitted to
trade a security on the same side of the market for its own account at
a price that would satisfy a customer order provided that the member
provides clear and comprehensive written disclosure to each customer at
account opening and annually thereafter that: (a) Discloses that the
member may trade proprietarily at prices that would satisfy the
customer order, and (b) provides the customer with a meaningful
opportunity to opt in to the Rule 5320 protections with respect to all
or any portion of its order(s).\5\
---------------------------------------------------------------------------

    \5\ FINRA reminds members that, even where a customer has not
opted in to the protections under proposed Rule 5320, member conduct
must continue to be consistent with the guidance provided in the
Notice to Members 05-51 (August 2005). In Notice to Members 05-51,
FINRA, among other things, reminded members that adherence to just
and equitable principles of trade as mandated by Rule 2010
``requires that members handle and execute any order received from a
customer in a manner that does not disadvantage the customer or
place the member's financial interests ahead of those of its
customer.'' See also NASD Rule 2320 (Best Execution and
Interpositioning).
---------------------------------------------------------------------------

    If a customer does not opt in to the Rule 5320 protections with
respect to all or any portion of its order(s), the member may
reasonably conclude that such customer has consented to the member
trading a security on the same side of the market for its own account
at a price that would satisfy the customer's order.\6\
---------------------------------------------------------------------------

    \6\ As is always the case, customers retain the right to
withdraw consent at any time. Therefore, a member's reasonable
conclusion that a customer has consented to the member trading along
with such customer's order is subject to further instruction and
modification from the customer.
---------------------------------------------------------------------------

    In lieu of providing written disclosure to customers at account
opening and annually thereafter, the proposed rule would permit members
to provide clear and comprehensive oral disclosure to, and obtain
consent from, a customer on an order-by-order basis, provided that the
member documents who provided such consent and that such consent
evidences the customer's understanding of the terms and conditions of
the order. In addition, where a customer has opted in to the Rule 5320
protections, a member may still obtain consent on an order-by-order
basis to trade ahead of or along with an order from that customer,
provided that the member documents who provided such consent and that
such consent evidences the customer's understanding of the terms and
conditions of the order.\7\
---------------------------------------------------------------------------

    \7\ While a firm relying on this or any exception must be able
to proffer evidence of its eligibility for and compliance with the
exception, FINRA believes that when obtaining consent on an order-
by-order basis, members must, at a minimum, document not only the
terms and conditions of the order (e.g., the relative price and size
of the allocated order/percentage split with the customer), but also
the identity of the person at the customer who approved the trade-
along request. For example, the identity of the person must be noted
in a manner that will enable subsequent contact with that person if
a question as to the consent arises (i.e., first names only,
initials, and nicknames will not suffice).
---------------------------------------------------------------------------

No-Knowledge Exception
    Both the FINRA customer order protection requirements and NYSE Rule
92 have similar, but not identical, ``no-knowledge'' exceptions.
Specifically, NYSE Rule 92, by its terms, is limited to those
circumstances where the firm knowingly trades ahead of its customer.
Accordingly, under NYSE Rule 92, a firm may trade ahead of a customer
order as long as the person entering the proprietary order has no
knowledge of the unexecuted customer order.\8\ Similarly, FINRA
previously established a ``no-knowledge'' interpretation to its
customer order protection requirements. Under this interpretation, if a
firm implements and utilizes an effective system of internal controls,
such as appropriate information barriers that operate to prevent a non-
market-making proprietary desk from obtaining knowledge of customer
orders held at the firm's market-making desk, those ``walled off'' non-
market-making proprietary desks are permitted to trade at prices that
would satisfy the customer orders held by the market-making desk
without any requirement that such proprietary executions trigger an

obligation to fill pending customer orders at the same price.\9\
---------------------------------------------------------------------------

    \8\ Under NYSE Rule 92.10, a member or employee of a member or
member organization is ``presumed to have knowledge of a particular
customer order unless the member organization has implemented a
reasonable system of internal policies and procedures to prevent the
misuse of information about customer orders by those responsible for
entering proprietary orders.''
    \9\ See Notices to Members 95-43 (June 1995), 03-74 (November
2003) and 06-03 (January 2006).
---------------------------------------------------------------------------

    FINRA's no-knowledge interpretation was established at a time when
the majority of retail order flow was handled by the firm's market-
making desk and viewed as a critical source of liquidity for customer
orders. As a result, permitting firms to wall off the market-making
desk at that time was viewed as untenable fragmentation of liquidity to
the detriment of retail customers. However, as a result of changes in
market structure and general order routing protocols discussed below,
FINRA is proposing to expand and codify the current no-knowledge
interpretation, consistent with NYSE Rule 92, to include the market-
making desk with respect to NMS stocks.
    Today, many firms handle retail-sized customer orders in NMS stocks
on an automated basis, separate and apart from the firm's proprietary
trading desks, including the market-making desk, in which such orders
are routed through automated systems that search out the market centers
offering pools of liquidity that offer immediate execution at the
probable best available prices. Accordingly, some firms have determined
to structure their order handling practices to ``wall off'' customer
order flow from their market-making and other proprietary desks.\10\
FINRA does not believe that requiring walled-off trading desks to
integrate orders for compliance with proposed Rule 5320 will
necessarily enhance the execution quality for these orders in today's
environment. Thus, with respect to NMS stocks, FINRA believes that
expanding the current no-knowledge interpretation to include market-
making desks is appropriate and better reflects the realities of the
current trading environment.
---------------------------------------------------------------------------

    \10\ FINRA notes that such a determination must be made in
conformance with FINRA's best execution requirements. FINRA's best
execution requirements under NASD Rule 2320(a) generally require
that, when executing a customer transaction, members use reasonable
diligence to ascertain the best market for the subject security and
buy or sell in that market so that the price to the customer is as
favorable as possible under prevailing market conditions. FINRA
requested comment on proposed changes to NASD Rule 2320 in
Regulatory Notice 08-80 (December 2008). These changes would not
impact the fundamental operation of NASD Rule 2320(a).
---------------------------------------------------------------------------

    However, FINRA is not proposing to similarly expand the no-
knowledge interpretation with respect to OTC equity securities because
the same types of changes in market structure and order handling
practices have not occurred in that market; OTC equity securities are
generally not traded at market centers with the same depth of liquidity
and are not as susceptible to automated routing for best execution.
Accordingly, the current no-knowledge standard, as set forth in prior
Notices to Members, would continue to apply to OTC equity securities.
    To the extent a firm structures its order handling practices in NMS
stocks to ``wall off'' customer order flow from its market-making
desks, FINRA is proposing to require the firm to disclose that fact in
writing to its customers. This disclosure would include a description
of the manner in which customer orders are handled and the
circumstances under which the firm may trade proprietarily at its
market-making desk at prices that would satisfy a customer order. The
proposed disclosure would be required at account opening and on an
annual basis thereafter and may be combined with the disclosure and
negative consent statement permitted in connection with the proposed
Institutional/Large-Sized Order exception.
    In addition, firms that choose to structure their order handling
practices in NMS stocks to ``wall off'' customer order flow from their
market-making desks must obtain and use a unique market participant
identifier (MPID) for the market-making desk. For example, if customer
order flow is sent directly to an agency desk and is ``walled-off''
from the firm's market-making desk, those two desks must use different
MPIDs.
Odd Lot and Bona Fide Error Exception
    FINRA proposes applying the customer order protection requirements
to all customer orders (currently there is a blanket exclusion for odd
lots), but would provide an exception for a firm's proprietary trade
that (1) offsets a customer odd lot order (i.e., an order less than one
round lot, which is typically 100 shares); or (2) corrects a bona fide
error. With respect to bona fide errors, member firms would be required
to demonstrate and document the basis upon which a transaction meets
the bona fide error exception. For purposes of this rule, the
definition of a ``bona fide error'' is as defined in SEC Regulation
NMS's exemption for error correction transactions.\11\
---------------------------------------------------------------------------

    \11\ Securities Exchange Act Release No. 55884 (June 8, 2007),
72 FR 32926 (June 14, 2007) (Order Exempting Certain Error
Correction Transactions from Rule 611 of Regulation NMS under the
Securities Exchange Act of 1934).
---------------------------------------------------------------------------

Trading Outside Normal Market Hours
    FINRA proposes expanding the customer order protection requirements
to apply at all times that a customer order is executable by the
member, even outside the period of normal market hours (9:30 a.m. to 4
p.m.). Currently, the customer order protection requirements apply only
during normal market hours and after hours (4 p.m. to 6:30 p.m.). Thus,
customers would have the benefit of the customer order protection rules
at all times where such order is executable by the member firm, subject
to any applicable exceptions.
    FINRA will announce the implementation date of the proposed rule
change in a Regulatory Notice to be published no later than 90 days
following Commission approval.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\12\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade and, in general, to protect investors and the
public interest. FINRA believes that adopting the proposed rules as
part of the Consolidated FINRA Rulebook will continue to protect
investors by defining important parameters by which member firms must
abide when trading proprietarily while holding customer limit and
market orders.
---------------------------------------------------------------------------

    \12\ 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

    The proposed rule change was published for comment in Regulatory
Notice 09-15 (March 2009). A copy of the Regulatory Notice is attached
as Exhibit 2a. FINRA received five comment letters in response to the
Regulatory Notice and commenters generally supported the proposed
provisions.\13\ A list of the comment

letters received is attached as Exhibit 2b, and copies of each comment
letter received are attached as Exhibit 2c.
---------------------------------------------------------------------------

    \13\ Letter from Daniel C. Rome, Esq., General Counsel, Taurus
Compliance Consulting, LLC, to Marcia E. Asquith, Senior Vice
President and Corporate Secretary, FINRA, dated April 22, 2009;
letter from Manisha Kimmel, Executive Director, Financial
Information Forum, to Marcia E. Asquith, Senior Vice President and
Corporate Secretary, FINRA, dated April 24, 2009 (``FIF''); letter
from Ann Vlcek, Managing Director and Associate General Counsel,
Securities Industry and Financial Markets Association, to Marcia E.
Asquith, Senior Vice President and Corporate Secretary, FINRA, dated
April 30, 2009 (``SIFMA''); letter from R. Cromwell Coulson, Chief
Executive Officer, Pink OTC Markets Inc., to Marcia E. Asquith,
Senior Vice President and Corporate Secretary, FINRA, dated June 12,
2009 (``Pink OTC''), and letter from Jack Rubens to Marcia E.
Asquith, Senior Vice President and Corporate Secretary, FINRA, dated
September 14, 2009.
---------------------------------------------------------------------------

    Commenters generally supported FINRA's effort to integrate the
limit order protection rule and the market order protection rule into a
single rule; update and simplify the rules' provisions in light of
changes in market practices; and work toward a uniform industry
standard with respect to the customer order protection rule.
(a) Integration of Limit Order Protection and Market Order Protection
Into a Single Rule
    Commenters supported a uniform industry standard and the proposal
to apply market order protection to trading in OTC equity securities.
While some firms asked that FINRA consider the costs and time needed
for implementation (e.g., FIF requested a nine month implementation
period), others recommended that FINRA move forward without delay with
the rule proposal (e.g., SIFMA).
(b) Exception To Permit Trading Ahead of Certain Large Orders/
Institutional Accounts
    Commenters supported FINRA's approach because it provides members
with a measure of flexibility as to what method of disclosure and
consent is appropriate, thereby simplifying compliance, while also
providing adequate customer protection. For example, SIFMA believes
that negative consent plus disclosure adequately protects customers,
while affirmative consent is unduly resource-intensive and burdensome.
(c) Expansion of the No-Knowledge Exception To Include Market-Making
Desks
    Commenters supported the expansion of the ``no-knowledge''
exception to trading in NMS stocks at market-making desks. SIFMA and
FIF recommended allowing (but not requiring) firms to use separate
MPIDs. SIFMA argued that introducing numerous MPIDs may result in
complex and expensive reporting and may increase the likelihood of
operational and technical glitches in such reporting. Thus, SIFMA
prefers a policies and procedures approach to provide individual firms
with the flexibility to address surveillance in the best way for each
particular firm.
    Regarding the expansion of the ``no-knowledge'' exception to
include market-making desks for NMS stocks, SIFMA and Pink OTC support
the proposal but also argue that the proposal should also include
trading in OTC equity securities. SIFMA and Pink OTC also argue that
the differences in these two markets do not justify applying the rule
differently and further argues that, where there are differences, the
OTC market is evolving to the structure of NMS stocks.
    SIFMA and Pink OTC believe that extending the no-knowledge
exception to cover OTC equity securities would provide firms with the
flexibility to adapt their order routing practices as changes occur
without sacrificing customer protection and further argue that the
adoption of two different standards is inconsistent with the stated
intentions of harmonization between FINRA and NYSE, which is to bring
consistency. Pink OTC additionally believes that adoption of a
harmonious standard for NMS stocks and OTC equity securities would
facilitate compliance and programming efficiencies.
(d) Extension of the Application of the Rule to Trading During Extended
Hours
    SIFMA is concerned about the potential impact on systems and
procedures if proposed Rule 5320 applied to extended-hours trading.
SIFMA argues that customers who trade in extended hours are generally
sophisticated and should be treated like institutional and large
orders, even if smaller or submitted by an individual.
(e) Other Comments
    In response to the Regulatory Notice, Pink OTC also commented on
aspects of the current Manning rules that were not proposed to be
amended; particularly, the quantity of the minimum price improvement
increments (MPI), as well as several trading scenarios with respect to
which they believed that the timing for the triggering of the MPI
should be altered.
    Pink OTC argued that the proposed rules should be modified to
provide market makers with incentives to maintain priced quotations in
order to foster pricing competition among all market participants and
promote the institution and maintenance of liquid markets in OTC equity
securities. Specifically, Pink OTC recommended that (i) customer orders
qualify for price improvement generally only where defined quotation
sizes are used; (ii) market makers should be required to provide price
improvement only where the customer order is received before the firm
has began the process of executing a trade for its own account; and
(iii) publicly displayed proprietary quotes should be afforded time
priority over customer orders that are received after a market-maker's
proprietary quote is published.

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. In particular, the Commission notes
that, under the proposal, if a member provides disclosure to the
customer at account opening and annually thereafter, Institutional/
Large-Sized Orders would not be subject to Manning protection, unless
the customer affirmatively opted in to the proposed Rule 5320. The
Commission specifically requests comment on whether such negative
consent requirement is appropriate and sufficiently protects
institutional accounts and customers with large orders. Should
affirmative, written consent be required instead? Further, is
disclosure at account opening and annually thereafter sufficient to
protect customer orders? 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-FINRA-2009-090 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2009-090. 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 the 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-FINRA-2009-090 and should be
submitted on or before January 12, 2010.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-30336 Filed 12-21-09; 8:45 am]

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[Federal Register Volume 79, Number 107 (Wednesday, June 4, 2014)]
[Notices]
[Pages 32264-32265]
[FR Doc No: 2014-12877]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. CP14-487-000]

ANR Pipeline Company; Notice of Application

    Take notice that on May 13, 2014, ANR Pipeline (ANR), 717 Texas
Street, Houston, Texas 77002-2761, filed an application pursuant to
sections 7(b) and 7(c) of the Natural Gas Act and sections 157.5, 157.7
and 157.18 of the Commission's regulations for authorization to
implement its proposed 2014 Storage Realignment to reduce the capacity
at two storage fields (South Chester Storage Field and Central Charlton
Storage Field) and authority to realign and revise the capacity
parameters at five storage fields (the Lincoln-Freeman Storage Field,
the Goodwell Storage Field, Reed City Storage Field, Winfield Storage
Field, Loreed Storage Field) while maintaining the same aggregate level
of working capacity on the system. Additionally,

ANR is requesting authorization to increase the deliverability at the
Muttonville Storage Field from 400 million cubic feet (MMcf) per day to
450 MMcf per day. All of these storage fields are located in Michigan.
ANR's proposal is more fully set forth in the application which is on
file with the Commission and open to public inspection. The filing may
also be viewed on the Web at http://www.ferc.gov using the ``eLibrary''
link. Enter the docket number excluding the last three digits in the
docket number field to access the document. For assistance, contact
FERC at<EMAIL_ADDRESS>or call toll-free,<PHONE_NUMBER> or
TTY,<PHONE_NUMBER>.
    Any questions regarding this application should be directed to
Linda Farquhar, Manager, Project Determinations & Regulatory
Administration, ANR Pipeline Company, 717 Texas Street, Suite 2400,
Houston, Texas, or call<PHONE_NUMBER>, or by email linda--farquhar
@transcanada.com.
    Pursuant to section 157.9 of the Commission's rules, 18 CFR 157.9,
within 90 days of this Notice the Commission staff will either:
complete its environmental assessment (EA) and place it into the
Commission's public record (eLibrary) for this proceeding; or issue a
Notice of Schedule for Environmental Review. If a Notice of Schedule
for Environmental Review is issued, it will indicate, among other
milestones, the anticipated date for the Commission staff's issuance of
the final environmental impact statement (FEIS) or EA for this
proposal. The filing of the EA in the Commission's public record for
this proceeding or the issuance of a Notice of Schedule for
Environmental Review will serve to notify federal and state agencies of
the timing for the completion of all necessary reviews, and the
subsequent need to complete all federal authorizations within 90 days
of the date of issuance of the Commission staff's FEIS or EA.
    There are two ways to become involved in the Commission's review of
this project. First, any person wishing to obtain legal status by
becoming a party to the proceedings for this project should, on or
before the comment date stated below file with the Federal Energy
Regulatory Commission, 888 First Street NE., Washington, DC 20426, a
motion to intervene in accordance with the requirements of the
Commission's Rules of Practice and Procedure (18 CFR 385.214 or
385.211) and the Regulations under the NGA (18 CFR 157.10). A person
obtaining party status will be placed on the service list maintained by
the Secretary of the Commission and will receive copies of all
documents filed by the applicant and by all other parties. A party must
submit 7 copies of filings made in the proceeding with the Commission
and must mail a copy to the applicant and to every other party. Only
parties to the proceeding can ask for court review of Commission orders
in the proceeding.
    However, a person does not have to intervene in order to have
comments considered. The second way to participate is by filing with
the Secretary of the Commission, as soon as possible, an original and
two copies of comments in support of or in opposition to this project.
The Commission will consider these comments in determining the
appropriate action to be taken, but the filing of a comment alone will
not serve to make the filer a party to the proceeding. The Commission's
rules require that persons filing comments in opposition to the project
provide copies of their protests only to the party or parties directly
involved in the protest.
    Persons who wish to comment only on the environmental review of
this project should submit an original and two copies of their comments
to the Secretary of the Commission. Environmental commentors will be
placed on the Commission's environmental mailing list, will receive
copies of the environmental documents, and will be notified of meetings
associated with the Commission's environmental review process.
Environmental commentors will not be required to serve copies of filed
documents on all other parties. However, the non-party commentors will
not receive copies of all documents filed by other parties or issued by
the Commission (except for the mailing of environmental documents
issued by the Commission) and will not have the right to seek court
review of the Commission's final order.
    The Commission strongly encourages electronic filings of comments,
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 5 copies of the protest or intervention to the
Federal Energy regulatory Commission, 888 First Street NE., Washington,
DC 20426.
    Comment Date: June 18, 2014.

    Dated: May 28, 2014.
Kimberly D. Bose,
Secretary.
[FR Doc. 2014-12877 Filed 6-3-14; 8:45 am]
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