[Federal Register Volume 83, Number 199 (Monday, October 15, 2018)]
[Rules and Regulations]
[Pages 51819-51823]
[FR Doc No: 2018-21963]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2018-0358; Product Identifier 2017-NM-142-AD; Amendment
39-19463; AD 2018-21-05]
RIN 2120-AA64

Airworthiness Directives; Airbus SAS Airplanes

AGENCY: Federal Aviation Administration (FAA), Department of
Transportation (DOT).

ACTION: Final rule.

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SUMMARY: We are adopting a new airworthiness directive (AD) for certain
Airbus SAS Model A319-131, A319-132, A319-133, A320-231, A320-232,
A320-233, A321-131, A321-231, and A321-232 airplanes. This AD was
prompted by reports of fan cowl door (FCD) losses during take-off. This
AD requires modification and re-identification, or replacement, of
certain FCDs, and installation of a placard in the flight deck. We are
issuing this AD to address the unsafe condition on these products.

DATES: This AD is effective November 19, 2018.
    The Director of the Federal Register approved the incorporation by
reference of a certain publication listed in this AD as of November 19,
2018.

ADDRESSES: For service information identified in this final rule,
contact Airbus SAS, Airworthiness Office--EIAS, Rond-Point Emile
Dewoitine No: 2, 31700 Blagnac Cedex, France; telephone +33 5 61 93 36
96; fax +33 5 61 93 44 51; email [email protected];
internet http://www.airbus.com. You may view this service information
at the FAA, Transport Standards Branch, 2200 South 216th St., Des
Moines, WA. For information on the availability of this material at the
FAA, call<PHONE_NUMBER>. It is also available on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2018-
0358.

Examining the AD Docket

    You may examine the AD docket on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2018-
0358; or in person at Docket Operations between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays. The AD docket contains
this final rule, the regulatory evaluation, any comments received, and
other

information. The address for Docket Operations (phone:<PHONE_NUMBER>) is
U.S. Department of Transportation, Docket Operations, M-30, West
Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE,
Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: Sanjay Ralhan, Aerospace Engineer,
International Section, Transport Standards Branch, FAA, 2200 South
216th St., Des Moines, WA 98198; telephone and fax<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Discussion

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR
part 39 by adding an AD that would apply to certain Airbus SAS Model
A319-131, A319-132, A319-133, A320-231, A320-232, A320-233, A321-131,
A321-231, and A321-232 airplanes. The NPRM published in the Federal
Register on May 4, 2018 (83 FR 19648). The NPRM was prompted by reports
of FCD losses during take-off. The NPRM proposed to require
modification and re-identification, or replacement, of certain FCDs,
and installation of a placard in the flight deck.
    We are issuing this AD to address in-flight loss of an FCD, which
could result in damage to the airplane and injury to persons on the
ground.
    The European Aviation Safety Agency (EASA), which is the Technical
Agent for the Member States of the European Union, has issued EASA AD
2017-0178, dated September 15, 2017 (referred to after this as the
Mandatory Continuing Airworthiness Information, or ``the MCAI''), to
correct an unsafe condition for certain Airbus SAS Model A319-131,
A319-132, A319-133, A320-231, A320-232, A320-233, A321-131, A321-231,
and A321-232 airplanes. The MCAI states:

    Fan Cowl Door (FCD) losses during take-off were reported on
Airbus A320 family aeroplanes equipped with IAE [International Aero
Engines] V2500 engines. Investigations confirmed that in all cases,
the FCD were opened prior to the flight and were not correctly re-
secured. During the pre-flight inspection, it was not detected that
the FCD were not properly latched.
    This condition, if not corrected, could lead to in-flight loss
of an FCD, possibly resulting in damage to the aeroplane and/or
injury to persons on the ground.
    EASA issued AD 2016-0053 [which corresponds to FAA AD 2017-13-
10, Amendment 39-18940 (82 FR 29371, June 29, 2017) (``AD 2017-13-
10'')], requiring modification of the FCD installed on affected
aeroplanes, and installation of a placard in the cockpit, in
accordance with the instructions of Airbus Service Bulletin (SB)
A320-71-1069 (which in turns refers to Goodrich SB V2500-NAC-71-0331
for FCD modification and re-identification).
    The monolithic FCDs, installed on aeroplanes embodying Short
Brothers supplemental type certificate (STC) 10029547, are also
affected by this potential unsafe condition. Consequently, the STC
Holder, trading as Bombardier Short Brothers, developed a
modification, similar to the one designed by Airbus, and issued SB
V25MFC-71-1003. The modification consists of a new FCD front latch
and keeper assembly, having a specific key necessary to un-latch the
FCD. This key cannot be removed unless the FCD front latch is safely
closed. The key, after removal, must be stowed in the flight deck at
a specific location, as instructed in the applicable Aircraft
Maintenance Manual. The applicable Flight Crew Operating Manual has
been amended accordingly. After modification, the FCD is identified
with a different Part Number (P/N).
    Mixed FCD installation can be found on aeroplanes embodying
[EASA] STC 10029547 (i.e., Monolithic FCD and standard production
non-Monolithic FCD). For standard production non-Monolithic FCD,
Bombardier Short Brothers SB V25MFC-71-1003 specifies to accomplish
the instructions of Goodrich SB V2500-NAC-71-0331, as applicable.
    For the reasons described above, this [EASA] AD requires
modification and re-identification of FCD, and installation of a
placard in the cockpit.

    You may examine the MCAI in the AD docket on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2018-
0358.

Comments

    We gave the public the opportunity to participate in developing
this final rule. The following presents the comments received on the
NPRM and the FAA's response to each comment.

Support for the NPRM

    The Air Line Pilots Association, International (ALPA) supported the
NPRM.

Request To Extend Compliance Time

    United Airlines (UAL) requested that the compliance time stated in
the proposed AD be extended from 18 months to 36 months to match the
compliance time stated in AD 2017-13-10. UAL noted that both the
proposed AD and AD 2017-13-10 address the same unsafe condition, but on
different FCDs. UAL added that it has a mixture of FCD configurations,
which will be subject to different compliance times.
    We disagree with the commenter's request to extend the compliance
time to 36 months. We based the compliance time for this AD on the
compliance time required by the EASA MCAI, which was determined by
considering the urgency associated with the unsafe condition, the
availability of required parts, and the practical aspect of
accomplishing the required modification within a timeframe that
corresponds to the normal scheduled maintenance for most affected
operators. In addition, the manufacturer recommended that the service
bulletin be accomplished no later than March 28, 2019. We have not
changed this AD in this regard.

Conclusion

    We reviewed the relevant data and determined that air safety and
the public interest require adopting this final rule as proposed with
the changes described previously and minor editorial changes. We have
determined that these minor changes:
     Are consistent with the intent that was proposed in the
NPRM for addressing the unsafe condition; and
     Do not add any additional burden upon the public than was
already proposed in the NPRM.
    We also determined that these changes will not increase the
economic burden on any operator or increase the scope of this final
rule.

Related Service Information Under 1 CFR Part 51

    Bombardier Short Brothers, PLC has issued Service Bulletin V25MFC-
71-1003, dated September 28, 2016. The service information describes
procedures for installing modified latches on the left and right engine
FCDs, and re-identifying the FCDs. This service information is
reasonably available because the interested parties have access to it
through their normal course of business or by the means identified in
the ADDRESSES section.

Costs of Compliance

    We estimate that this AD affects 557 airplanes of U.S. registry. We
estimate the following costs to comply with this AD:

                                                 Estimated Costs
----------------------------------------------------------------------------------------------------------------
                                                                                Cost per      Cost on U.S.
                Action                         Labor cost           Parts cost        product        operators
----------------------------------------------------------------------------------------------------------------
Modification and re-identification (or  8 work-hours x $85 per            $1,500          $2,180      $1,214,260
 replacement), and placard               hour = $680.
 installation.
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Authority for This Rulemaking

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

Regulatory Findings

    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 the 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.

Adoption of the Amendment

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

PART 39--AIRWORTHINESS DIRECTIVES

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

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

Sec.  39.13   [Amended]

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

2018-21-05 Airbus SAS: Amendment 39-19463; Docket No. FAA-2018-0358;
Product Identifier 2017-NM-142-AD.

(a) Effective Date

    This AD is effective November 19, 2018.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to Airbus SAS Model A319-131, A319-132, A319-
133, A320-231, A320-232, A320-233, A321-131, A321-231, and A321-232
airplanes, certificated in any category, if modified by Bombardier
Short Brothers, PLC Supplemental Type Certificate (STC) ST03076NY.

(d) Subject

    Air Transport Association (ATA) of America Code 71, Powerplant.

(e) Reason

    This AD was prompted by reports of fan cowl door (FCD) losses
during takeoff. We are issuing this AD to prevent in-flight loss of
an FCD, which could result in damage to the airplane and injury to
persons on the ground.

(f) Compliance

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

(g) Modification and Re-Identification of FCDs

    Within 18 months after the effective date of this AD: Do the
modification and re-identification specified in paragraphs (g)(1)
and (g)(2) of this AD.
    (1) Modify each left-hand (LH) and right-hand (RH) FCD having a
part number listed as ``Old Part Number'' in table 1 to paragraphs
(g), (h), and (l) of this AD, in accordance with the Accomplishment
Instructions of Bombardier Short Brothers Service Bulletin V25MFC-
71-1003, dated September 28, 2016.
    (2) Re-identify each modified FCD with the part number listed as
``New Part Number'' in table 1 to paragraphs (g), (h), and (l) of
this AD, in accordance with the Accomplishment Instructions of
Bombardier Short Brothers Service Bulletin V25MFC-71-1003, dated
September 28, 2016.

[GRAPHIC] [TIFF OMITTED] TR15OC18.000

(h) Optional Compliance by Replacement or Installation

    (1) Replacement of the FCDs having a part number listed as ``Old
Part Number'' in table 1 to paragraphs (g), (h), and (l) of this AD,
with the FCDs having the corresponding part number listed as ``New
Part Number'' in table 1 to paragraphs (g), (h), and (l) of this AD,
is acceptable for compliance with the requirements of paragraph (g)
of this AD.
    (2) Installation on an engine of a LH and RH FCD having a part
number approved after the effective date of this AD is acceptable
for compliance with the requirements of paragraph (g) of this AD for
that engine only, provided the conditions specified in paragraphs
(h)(2)(i) and (h)(2)(ii) of this AD are met.
    (i) The part number is approved using a method approved by the
Manager, International Section, Transport Standards Branch, FAA; or
the European Aviation Safety Agency (EASA); or Bombardier Short
Brothers, PLC's EASA Design Organization Approval (DOA). If approved
by the DOA, the approval must include the DOA-authorized signature.
    (ii) The installation is accomplished using a method approved by
the Manager, International Section, Transport Standards Branch, FAA;
or EASA; or Bombardier Short Brothers, PLC's EASA DOA. If approved
by the DOA, the approval must include the DOA-authorized signature.

(i) Placard Installation

    For airplanes on which Airbus SAS modification 157718 has not
been embodied in production: Within 18 months after the effective
date of this AD, install a placard that specifies the FCD keys
stowage location in the flight deck on the box located at the bottom
of the 120VU panel, or at the bottom of the coat stowage, as
applicable to airplane configuration, using a method approved by the
Manager, International Section, Transport Standards Branch, FAA; or
EASA; or Bombardier Short Brothers, PLC's EASA DOA. If approved by
the DOA, the approval must include the DOA-authorized signature.

(j) Missing FCD Keys or Placard

    Flights with one or both FCD keys missing from the stowage
location in the fight deck, or with the placard (that specifies the
FCD keys stowage location) missing or damaged, are permitted for a
period not to exceed 10 calendar days from the date of discovery.

(k) Alternate Location of FCD Keys and Placard

    As an option to paragraph (i) of this AD, an alternate location
for the key stowage in the flight deck and installation of a placard
for identification of that stowage location are permitted as
specified in the operator's FAA-accepted maintenance or inspection
program, provided the keys can be retrieved from that flight deck
location when needed and the placard installation is done within 18
months after the effective date of this AD.

(l) Parts Installation Prohibition

    No person may install on any airplane an FCD with a part number
identified as ``Old Part Number'' in table 1 to paragraphs (g), (h),
and (l) of this AD, after the time specified in paragraph (l)(1) or
(l)(2) of this AD, as applicable.
    (1) For any airplane with an installed FCD having a part number
identified as ``Old Part Number'' in table 1 to paragraphs (g), (h),
and (l) of this AD: After modification of that airplane as required
by paragraph (g) of this AD or as specified in paragraph (h) of this
AD.
    (2) For any airplane without an installed FCD having a part
number identified as ``Old Part Number'' in table 1 to paragraphs
(g), (h), and (l) of this AD: After the effective date of this AD.

(m) Other FAA AD Provisions

    The following provisions also apply to this AD:
    (1) Alternative Methods of Compliance (AMOCs): The Manager,
International Section, Transport Standards Branch, FAA, has the
authority to approve AMOCs for this AD, if requested using the
procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19,
send your request to your principal inspector or local Flight
Standards District Office, as appropriate. If sending information
directly to the International Section, send it to the attention of
the person identified in paragraph (n)(2) of this AD. Information
may be emailed to: [email protected]. Before using any
approved AMOC, notify your appropriate principal inspector, or
lacking a principal inspector, the manager of the local flight
standards district office/certificate holding district office.
    (2) Contacting the Manufacturer: For any requirement in this AD
to obtain corrective actions from a manufacturer, the action must be
accomplished using a method approved by the Manager, International
Section, Transport Standards Branch, FAA; or EASA; or Bombardier
Short Brothers, PLC's EASA DOA. If approved by the DOA, the approval
must include the DOA-authorized signature.

(n) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information
(MCAI) EASA AD 2017-0178, dated September 15, 2017, for related
information. This MCAI may be found in the AD docket on the internet
at http://www.regulations.gov by searching for and locating Docket
No. FAA-2018-0358.
    (2) For more information about this AD, contact Sanjay Ralhan,
Aerospace Engineer, International Section, Transport Standards
Branch, FAA, 2200 South 216th St., Des Moines, WA 98198; telephone
and fax<PHONE_NUMBER>.

(o) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the
incorporation by reference (IBR) of the service information listed
in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
    (2) You must use this service information as applicable to do
the actions required by this AD, unless this AD specifies otherwise.
    (i) Bombardier Short Brothers Service Bulletin V25MFC-71-1003,
dated September 28, 2016.
    (ii) Reserved.
    (3) For service information identified in this AD, contact
Bombardier Short Brothers, PLC, Airworthiness, P.O. Box 241, Airport
Road, Belfast, BT3 9DZ Northern Ireland; telephone +44(0)2890-
462469; fax +44(0)2890-468444; email
[email protected]; internet http://www.bombardier.com.
    (4) You may view this service information at the FAA, Transport
Standards Branch, 2200 South 216th St., Des Moines, WA. For
information on the availability of this material at the FAA, call
206-231-3195.

    (5) You may view this service information that is incorporated
by reference at the National Archives and Records Administration
(NARA). For information on the availability of this material at
NARA, call<PHONE_NUMBER>, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Des Moines, Washington, on September 20, 2018.
John P. Piccola,
Acting Director, System Oversight Division, Aircraft Certification
Service.
[FR Doc. 2018-21963 Filed 10-12-18; 8:45 am]
 BILLING CODE 4910-13-P


[Federal Register Volume 86, Number 86 (Thursday, May 6, 2021)]
[Proposed Rules]
[Pages 24364-24368]
[FR Doc No: 2021-08301]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

[Release No. 34-91603; IC-34246; File No. S7-24-16]
RIN 3235-AL84

Reopening of Comment Period for Universal Proxy

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule; reopening of comment period.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is
reopening the comment period for its proposal to require the use of
universal proxy cards in all non-exempt solicitations in connection
with contested elections of directors (``Proposed Rules''). The
Proposed Rules were set forth in a release published in the Federal
Register on November 10, 2016 (Release No. 34-79164) (``2016
Release''), and the related comment period ended on January 9, 2017.
The reopening of this comment period is intended to allow interested
persons further opportunity to analyze and comment upon the Proposed
Rules in light of developments since the publication of the Proposed
Rules, including developments in corporate governance matters affecting
funds.

DATES: The comment period for the proposed rule published on November
10, 2016 (81 FR 79122), is reopened. Comments should be received on or
before June 7, 2021.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/submitcomments.htm).

Paper Comments

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

All submissions should refer to File Number S7-24-16. This file number
should be included on the subject line if email is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
internet website (http://www.sec.gov/rules/proposed.shtml). Comments
are also available for website viewing and printing in the Commission's
Public

Reference Room, 100 F Street NE, Washington, DC 20549-1090 on official
business days between the hours of 10 a.m. and 3 p.m. Due to pandemic
conditions, however, access to the Commission's public reference room
is not permitted at this time. All comments received will be posted
without change. Persons submitting comments are cautioned that we do
not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly.
    Studies, memoranda, or other substantive items may be added by the
Commission or staff to the comment file during this rulemaking. A
notification of the inclusion in the comment file of any such materials
will be made available on our website. To ensure direct electronic
receipt of such notifications, sign up through the ``Stay Connected''
option at www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: David M. Plattner, Special Counsel,
Christina Chalk, Senior Special Counsel, or Joshua Shainess, Special
Counsel, in the Office of Mergers and Acquisitions, at<PHONE_NUMBER>,
or Steven G. Hearne, Senior Special Counsel, in the Office of
Rulemaking, at<PHONE_NUMBER>, Division of Corporation Finance,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549.

SUPPLEMENTARY INFORMATION:

I. Background

    As described more fully in the 2016 Release,\1\ Section 14 of the
Securities Exchange Act of 1934 \2\ (``Exchange Act'') authorizes the
Commission to establish rules and regulations governing the
solicitation of any proxy or consent or authorization with respect to
any security registered pursuant to the Exchange Act. In regulating the
proxy process, the Commission has sought to facilitate the exercise of
voting rights shareholders have under state law.\3\ To allow
shareholders to exercise fully these rights in contested director
elections, the Commission proposed to amend the proxy rules to permit
shareholders to vote by proxy for any combination of candidates for the
board of directors, as they could if they attended the shareholder
meeting in person and cast a written ballot.\4\
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    \1\ See Universal Proxy, Release No. 34-79164 (Oct. 26, 2016)
[81 FR 79122 (Nov. 10, 2016)].
    \2\ 15 U.S.C. 78a et seq.
    \3\ Registrants only reporting pursuant to Exchange Act Section
15(d) are not subject to the federal proxy rules, while foreign
private issuers are exempt from the requirements of Section 14(a).
17 CFR 240.3a12-3(b).
    \4\ As part of this effort, the staff is also considering
recommending that the Commission propose amendments to the proxy
rules to facilitate vote confirmations for shareholders and improve
voting accuracy in the proxy system.
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    The Proposed Rules would establish new procedures for the
solicitation of proxies, the preparation and use of proxy cards, and
the dissemination of information about all director nominees in
contested elections. Among other things, the Proposed Rules would:
     Revise the consent requirement for a bona fide nominee and
eliminate the ``short slate rule;'' \5\
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    \5\ 17 CFR 240.14a-4(d)(1) and (4).
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     Create new 17 CFR 240.14a-19 (Rule 14a-19) which, if
adopted, would require the use of universal proxy cards--that is, proxy
cards that include the names of all duly nominated director candidates
for whom proxies are solicited--in all non-exempt solicitations for
contested elections;
     Establish procedural requirements for dissidents and
registrants to notify each other of their respective director nominees;
and
     Require dissidents in a contested election subject to Rule
14a-19 to solicit the holders of shares representing at least a
majority of the voting power of shares entitled to vote on the election
of directors.
    The Proposed Rules also include other improvements to the proxy
voting process, such as mandating that proxy cards include an
``against'' voting option when permitted under state laws and requiring
disclosure about the effect of a ``withhold'' vote in an election.
Finally, in the 2016 Release, the Commission declined to propose
extending the Proposed Rules to registered investment companies and
business development companies (``BDCs,'' and together with registered
investment companies, ``funds,'') at that time. Instead, the Commission
shared certain observations about the corporate governance of funds and
requested comment and data on several topics to determine whether to
extend the proposed universal proxy rules to funds in the future.

II. Reopening of Comment Period

    Since the publication of the Proposed Rules in 2016, there have
been important developments in proxy contests, corporate governance,
and shareholder activism. For example, there have been several contests
in the United States where one or both parties used a universal proxy
card since the 2016 Release.\6\ During the same time period, there has
been increased adoption of proxy access bylaws \7\ and use of virtual
shareholder meetings.\8\ Some registrants have adopted advance notice
bylaw provisions that require dissident nominees to consent to being
named in the registrant's proxy statement and on its proxy card.\9\
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    \6\ For example, both the dissident group and the registrant
used universal proxy cards at EQT Corporation's 2019 Annual Meeting.
See DEFC14A filed May 20, 2019 by dissidents and DEFC14A filed May
22, 2019 filed by EQT Corp. The registrant but not the dissident
group used a universal proxy card at the Sandridge Energy's 2018
Annual Meeting. See DEFC14A filed May 10, 2018 by Sandridge Energy,
Inc. and DEFC14A filed May 11, 2018 by dissidents.
    \7\ Holly J. Gregory, Rebecca Grapsas & Claire Holland, Proxy
Access: A Five-Year Review, Sidley Austin LLP (Feb. 4, 2020),
https://corpgov.law.harvard.edu/2020/02/04/proxy-access-a-five-year-review/ (noting that proxy access bylaws have been adopted by 76% of
S&P 500 companies and just over half of the companies in the Russell
1000).
    \8\ See the following report from Broadridge with statistics on
the increasing use of virtual shareholders meetings from 2016-2020:
https://www.broadridge.com/_assets/pdf/vsm-facts-and-figures-2020-brochure-january-2021.pdf.
    \9\ Tiffany Fobes Campion, Christopher R. Drewry and Joshua M.
Dubofsky, Universal Proxies: What Companies Need to Know, LATHAM &
WATKINS LLP (Dec. 5, 2018), https://corpgov.law.harvard.edu/2018/12/05/universal-proxies-what-companies-need-to-know/ (stating that more
than 80 companies have adopted such advance notice bylaw
provisions).
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    In addition, there have been developments in corporate governance
matters affecting funds, particularly registered closed-end funds and
BDCs. In the 2016 Release, the Commission observed that contested
elections at open-end funds \10\ are rare, because open-end funds
generally do not hold annual meetings and their shares can be redeemed
at net asset value (or in the case of ETFs, traded at or near net asset
value).\11\ The 2016 Release also noted that exchange-listed BDCs and
registered closed-end funds, unlike most open-end funds, typically do
hold annual shareholder meetings, and contested elections occur more
frequently for these funds.\12\ Contested elections of directors for
registered closed-end funds and BDCs have been more common in recent
years, as

compared to the few years preceding the 2016 Release.\13\ Other
corporate governance developments relating to funds since the 2016
Release include, for example, an increase in interest by closed-end
funds in including provisions in their governing documents requiring
that directors be elected by a majority of all shares outstanding,
rather than of shares voted, and funds opting into a state's control
share acquisition statute.\14\
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    \10\ References to open-end funds include both mutual funds and
exchange-traded funds (``ETFs'').
    \11\ Based on staff review of DEFC14A and DFAN14A filings for
open-end fund registrants, as was the case in 2016, we are unaware
of any contested election involving open-end funds since 2000. See
also 2016 Release at notes 182, 190, and accompanying text.
    \12\ Id. The Commission further explained that its understanding
at the time was that when dissident shareholders initiated a proxy
contest for electing directors, such dissidents normally solicited a
complete slate of nominees for all director positions up for
election, though the Commission noted some exceptions from that
general observation.
    \13\ Based on staff review of PREC14A and DEFC14A filings, for
calendar years 2017 through 2020, we estimate that there have been
46 contested director elections involving funds, representing over
two times the rate of such contests per year than that reported in
the 2016 Release (for 2014 through 2015). We estimate that there
were a total of 686 registered closed-end funds and 85 BDCs active
in 2020, based on staff review of filings from July 1, 2019, through
June 30, 2020. Excluding contests where the same dissident targeted
additional funds in the same fund complex in the same year, we
estimate that the rate of contested director elections involving
funds from 2017 to 2020 was about 25% higher than that reported in
the 2016 Release. We are aware of three contests involving funds in
2017 through 2020 in which the dissident sought fewer than the total
number of seats up for election (overall or for certain shareholders
voting as a separate class). Approximately 85% of funds involved in
a contested election had a classified board, based on FactSet
Corporate Governance data. Accordingly, dissident shareholders often
presented a full slate of nominees for the director seats up for
election, which, if elected, would have constituted a minority of
the board. Along with nominating directors, such dissidents
sometimes also presented proposals to declassify the board and
require that all directors be elected annually. As the Commission
observed in 2016, along with contested director elections, dissident
shareholders commonly included proposals consistent with reducing
the discount of the share price to the net asset value, such as
terminating the advisory contract and commencing a self-tender
offer.
    \14\ Control share acquisition statutes provide a company with
the right to prevent or restrict certain changes in corporate
control by altering or removing voting rights when a person acquires
control shares. In May 2020, the staff withdrew a prior staff
position discussing the intersection of control share acquisition
statutes and Section 18(i) of the Investment Company Act. Division
of Investment Management Staff Statement, May 27, 2020, avail. at
https://www.sec.gov/investment/control-share-acquisition-statutes.
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    In light of these developments since the 2016 Release, the
Commission is reopening the comment period for the Proposed Rules until
June 7, 2021 to provide the public with an additional opportunity to
analyze and comment upon the Proposed Rules. Commenters may submit, and
the Commission will consider, comments on any aspect of the Proposed
Rules. Comments are particularly helpful to us if accompanied by
quantified estimates or other detailed analysis and supporting data
regarding the issues in those comments. Where possible, when providing
data and information regarding funds, please provide distinct data and
information for open-end funds, registered closed-end funds, and BDCs.
In addition to the requests for comment included in the 2016 Release,
the Commission specifically seeks comments on the following:
    1. The Proposed Rules would require dissidents in a contested
election subject to proposed Rule 14a-19 to solicit the holders of
shares representing at least a majority of the voting power of shares
entitled to vote on the election of directors. Should we instead
require dissidents to solicit a greater percentage of the voting power?
For example, should the threshold be 67% or 75% of the voting power, or
some other percentage? What would be the incremental effects of a
higher minimum solicitation requirement on the cost of proxy contests?
    2. How should we consider the recent increase in the number of
companies with dual or multi-class stock structures in determining a
minimum solicitation requirement?
    3. Would a higher minimum solicitation threshold, such as 67% or
75%, prevent more nominal contests, in which the dissidents incur
little more than the basic required costs to pursue a contest, as
compared to the proposed majority solicitation requirement? Would it be
more likely to deter other contests than the proposed majority
solicitation requirement and, if so, what are the costs and benefits of
that outcome?
    4. Since the 2016 Release, there have been several high-profile
contested elections at registrants that were significantly larger than
the typical proxy contest target. To what extent does this development
affect any of the aspects, including the costs and benefits, of the
Proposed Rules? Should these contests affect our consideration of the
appropriate minimum solicitation requirement? If so, how?
    5. We request any estimates or data that would allow us to refine
our characterization of costs and benefits of nominal contests under
the current state of the proxy process and how such effects would
differ under the availability of a universal proxy card. In particular,
we request specific estimates of the costs that are incurred by
registrants in such contests, including the costs of disclosure,
solicitation, and board and management time; and the costs and benefits
to shareholders.
    6. As discussed above, there have been several contests in the
United States since the 2016 Release in which one or both parties used
a universal proxy card. Do the experiences of registrants,
shareholders, dissidents, and other participants in the proxy process
in these situations provide any new information about any of the
aspects, including the costs and benefits, of the Proposed Rules? To
what extent does the experience with advance notice bylaws that require
dissident nominees to consent to being included on the registrant's
proxy card (e.g., as part of the director questionnaire) affect any
aspects of the Proposed Rules?
    7. The Proposed Rules would require a dissident to provide notice
to a registrant of its intent to solicit proxies in support of director
nominees other than the registrant's nominees no later than 60 calendar
days prior to the anniversary of the previous year's annual meeting
date. Have there been any developments since the 2016 Release with
respect to the frequency with which contests are settled or withdrawn
after the proposed deadline for dissidents to provide notice of their
intent to solicit proxies for their own nominees? We request specific
data on the timing and frequency of such actions. Would such
settlements or withdrawals of proxy contests and the related actions of
registrants and dissidents be changed by the proposed notice
requirement and mandatory use of a universal proxy card and, if so, are
there any modifications we should make to the Proposed Rules in
response?
    8. In the 2016 Release, the Commission noted that the burden of
attending a meeting for the purpose of voting a split ticket may be
lower in the case of a virtual shareholder meeting, but that such
meetings were relatively rare and that the Commission was unaware of
any proxy contest that culminated in a virtual meeting. Virtual
shareholder meetings have increased in frequency since then,
particularly due to the unique circumstances presented by COVID-19 in
2020. To what extent should this development affect our assessment of
the Proposed Rules? Is the increase likely to continue if concerns
about COVID-19 are reduced or eliminated? Are increased virtual
meetings likely to affect the cost of split-ticket voting in the
future, even in the absence of a universal proxy card? Are virtual
meetings unlikely to be used in the case of a contest? How are virtual
meetings likely, or not, to affect the nature of proxy contests, such
as their frequency or targets, in the future?
    9. There have been several changes in the governance, activism, and
voting landscape in recent years, such as an increase in the adoption
of proxy access bylaws and other changes discussed above. To what
extent do any of these developments affect any of the aspects,
including the costs and benefits, of the Proposed Rules?

    10. Are there any other developments since the 2016 Release that
should affect our consideration of adopting a universal proxy card
requirement? Are there any other developments that affect any of the
aspects, including the costs and benefits, of the Proposed Rules? Are
there any changes we should consider in the analytical methodologies
and estimates presented in the 2016 Release? Are there any other types
of changes we should consider in light of developments since the 2016
Release?
    11. Would any presentation and formatting requirements in addition
or as an alternative to those discussed in the 2016 Release be
appropriate or helpful for universal proxy cards used in contested
elections? For example, should we consider requiring a uniform format
for the voting options listed next to the nominees' names?
    12. Is there a need for the Proposed Rules to facilitate a
standardized presentation of all nominees on voting instruction forms
and electronic proxy voting platforms in the context of contested
elections?
    13. In the 2016 Release, the Commission proposed to exclude all
funds from the application of the Proposed Rules at that time,
regardless of whether the fund was structured as a closed-end fund or
an open-end fund. In light of the differences noted both in the 2016
Release and by commenters, as well as the fact there have been no
contests in open-end funds since 2000, but proxy contests for
registered closed-end funds have increased in recent years relative to
the years preceding the 2016 Release, we are considering whether we
should differentiate between open-end funds, registered closed-end
funds, BDCs, and other registrants. In particular, we are considering
whether we should apply the proposed universal proxy card requirements
to registered closed-end funds and BDCs. We request comment on the
extent to which the similarities or differences among open-end funds,
registered closed-end funds, and BDCs should result in similar or
differential application of the universal proxy rules.
    14. In the 2016 Release, the Commission discussed the use of
cluster and unitary boards by funds and whether dissident board members
on a board within such a fund complex could reduce the efficiencies of
such board structures. Commenters on the Proposed Rules also discussed
these concerns, particularly for open-end funds. How commonly do
registered closed-end funds and BDCs utilize a unitary structure, where
a single board oversees every fund in a fund complex? How frequently do
they use a cluster board structure, where two or more boards each
oversee a different set of funds in the complex? Do the same concerns
noted by commenters about a dissident director disrupting this cluster
board structure in open-end fund complexes apply to these registered
closed-end funds and BDCs? To the extent a universal proxy card
requirement would cause disruptions for open-end funds, closed-end
funds, or BDCs, are the costs of these disruptions justified by the
benefits to shareholders of the ability to vote by proxy as if they
were attending the shareholder meeting in person? To what extent would
disclosure to shareholders in the proxy materials regarding such
potential losses in efficiency be sufficient to mitigate the risk of
such disruptive outcomes?
    15. We have observed that a large fraction of the recent contests
at closed-end funds involve a dissident contesting elections of
multiple funds in the same fund complex. To what extent is any
potential disruption to unitary or cluster boards different in
situations where a dissident is seeking election of directors for
multiple funds in a complex? How, if at all, should such contests
affect our consideration of whether to extend the mandatory universal
proxy card requirement to some or all funds?
    16. In reviewing proxy contests since 2016, we observed that many
closed-end funds subject to a proxy contest utilized a classified board
structure, meaning that only a minority of the board was up for
election each year. Accordingly, even when dissidents ran a full slate
of directors, such directors, if elected, would still only represent a
minority of the board. How common is a classified board structure for
registered closed-end funds and BDCs? How, if at all, does such a
structure affect contested elections, or our assessment of whether the
Proposed Rules should apply to registered closed-end funds or BDCs? In
particular, does a classified board structure itself increase the
chance of dissident directors disrupting unitary and cluster boards,
regardless of whether funds with classified boards are subject to the
Proposed Rules?
    17. We request any data or examples that would help us to better
ascertain the degree of interest by shareholders in funds in splitting
their votes in contested elections.
    18. In the 2016 Release, the Commission noted that the types of
changes pursued by dissidents at registered closed-end funds and BDCs,
such as converting a closed-end fund to an open-end fund, have tended
to be binary in nature. Are there other types of goals or compromise
approaches that dissidents have pursued at such registrants in more
recent years? To what extent are mixed board outcomes, where some but
not all of a dissident's nominees are elected, an effective means of
achieving dissident goals in contests at registered closed-end funds
and BDCs?
    19. If we extended the Proposed Rules to some or all funds, would a
different minimum solicitation requirement be appropriate for these
registrants than for others? If so, what threshold would be
appropriate, and why? How, if at all, would the appropriate threshold
differ across open-end funds, registered closed-end funds and BDCs? How
does the concentration of ownership and types of holders of open-end
funds, registered closed-end funds and BDCs differ from other
registrants that may be the subject of proxy contests? Does the
solicitation process differ for contests at open-end funds, registered
closed-end funds or BDCs as compared to other registrants? How would
the costs and other effects of the minimum solicitation requirement
differ when applied to contests at these registrants as opposed to
other registrants?
    20. As discussed above, we have observed recent developments in the
area of corporate governance affecting funds, particularly registered
closed-end funds and BDCs. How, if at all, are such developments, or
other developments, relevant to our assessment of whether the Proposed
Rules should apply to registered closed-end funds and BDCs? Would a
universal proxy card facilitate shareholder voting in registered
closed-end fund and BDC elections?
    21. What would be the costs and benefits and other economic effects
of applying the Proposed Rules to registered closed-end funds and BDCs,
or more broadly to other kinds of funds? To what extent do any
developments since the 2016 Release affect the anticipated costs and
benefits? How, if at all, have any such developments changed the
differences in the likely economic effects of applying the Proposed
Rules to some or all funds as compared to operating companies?
    22. As noted above, we have not observed any proxy contests in
open-end funds since 2000. Would there be benefits to applying the
Proposed Rules to all funds, including open-end funds, to the extent
open-end funds do face proxy contests? What would be the costs of
applying the Proposed Rules to open-end funds in the absence of
contests?
    23. The Commission noted in the 2016 Release that in the absence of
the proposed universal proxy card requirement applying to funds, the
current rules would continue to apply,

including the short slate and bona fide nominee rules. Do commenters
believe that these rules are necessary or appropriate for any fund not
required to use a universal proxy card? Or does the lack of proxy
contests in open-end funds indicate that it would be appropriate to
rescind these rules even if we do not extend the application of the
Proposed Rules to open-end funds?
    24. There are registered closed-end funds and BDCs that, like open-
end funds, do not hold annual meetings to elect directors because of
their state of incorporation or type of corporate entity, or because
they are not listed on an exchange. If we were to exclude open-end
funds from the Proposed Rules because of the lack of annual meetings,
should the exclusion apply to registered closed-end funds and BDCs that
do not hold annual meetings? Should such funds continue to be subject
to the short slate and bona fide nominee rules?
    25. Are there any other developments since 2016 we should consider
in our assessment of whether the Proposed Rules should apply to open-
end funds, closed-end funds or BDCs? What are the economic effects of
any such developments?
    We request and encourage any interested person to submit comments
regarding the Proposed Rules, specific issues discussed in this release
or the 2016 Release, and other matters that may have an effect on the
Proposed Rules. We request comment from the point of view of
registrants, shareholders, directors, and other market participants. We
note that comments are of particular assistance to us if accompanied by
supporting data and analysis of the issues addressed in those comments,
particularly quantitative information as to the costs and benefits. If
alternatives to the Proposed Rules are suggested, supporting data and
analysis and quantitative information as to the costs and benefits of
those alternatives are of particular assistance. Commenters are urged
to be as specific as possible. All comments received to date on the
Proposed Rules will be considered and need not be resubmitted. If any
commenters who have already submitted a letter wish to provide
supplemental or updated comments, we encourage them to do so.

    By the Commission.

    Dated: April 16, 2021.
J. Lynn Taylor,
Assistant Secretary.

[FR Doc. 2021-08301 Filed 5-5-21; 8:45 am]
BILLING CODE 8011-01-P