[Federal Register Volume 82, Number 120 (Friday, June 23, 2017)]
[Notices]
[Pages 28712-28715]
[FR Doc No: 2017-13103]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80972; File No. SR-Phlx-2017-39]

Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 1049,
Communications to Customers

June 19, 2017.
    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 June 8, 2017, NASDAQ PHLX LLC (``Phlx'' or ``Exchange'') 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 the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend Rule 1049, Communications to
Customers. The proposed rule change is intended to update and modernize
Rule 1049, to be retitled ``Options Communications,'' and to conform it
to rules of other options exchanges regarding communications to
customers. It makes both organizational and substantive changes that
have previously been made by other options exchanges.
    The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqphlx.cchwallstreet.com/, at the principal
office of the Exchange, 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, the Exchange 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. The Exchange 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
    The Exchange is a party to a 17d-2 agreement with the Financial
Industry Regulatory Authority, Inc. (``FINRA'') and other options
exchanges (the ``Options Multiparty 17d-2 Agreement'' or the ``17d-2
Agreement'').\3\ The 17d-2 Agreement allocates regulatory
responsibilities with respect to broker-dealers, and persons associated
therewith, that are members of more than one Participant (the ``Common
Members'') and conduct a public business for compliance with specified
common rules relating to the conduct by broker-dealers and associated
persons of accounts for listed options, index warrants, currency index
warrants, and currency warrants (collectively, ``Covered Securities'').
Pursuant to the 17d-2 Agreement, FINRA is the Designated Options
Examining Authority (``DOEA'') for its broker-dealer members that also
are members of Phlx. Thus, FINRA has certain examination and
enforcement responsibilities relating to compliance by Common Members
with the rules of Phlx that are substantially similar to the rules of
FINRA (the ``Common Rules'') identified in the 17d-2 Agreement.
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    \3\ See Agreement by and among Bats BZX Exchange, Inc., BOX
Options Exchange, LLC, the Chicago Board Options Exchange,
Incorporated, C2 Options Exchange, Incorporated, the International
Securities Exchange, LLC, Financial Industry Regulatory Authority,
Inc., Miami International Securities Exchange, LLC, the NYSE MKT
LLC, the NYSE Arca, Inc., The NASDAQ Stock Market LLC, NASDAQ BX,
Inc., the NASDAQ PHLX LLC, ISE Gemini, LLC, Bats EDGX Exchange,
Inc., ISE Mercury, LLC and MIAX PEARL, LLC, Pursuant to Rule 17d-2
under the Securities Exchange Act of 1934. See also Securities
Exchange Act Release No. 79929 (February 2, 2017), 82 FR 9757
(February 8, 2017).
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    Phlx Rule 1049, Communications to Customers, is not currently a
Common Rule under the 17d-2 Agreement. Rule 1049 sets forth a range of
requirements applicable to members, member organizations, or persons
associated with a member organization utilizing any advertisement,
educational material, sales literature or other communications to any
customer or member of the public. The purpose of this proposed rule
change is to update, clarify and conform Rule 1049 to the rules of
FINRA and other options exchanges regarding options communications to
customers that are included as Common Rules under the 17d-2 Agreement,
so that it too may qualify as a Common Rule under the 17d-2 Agreement.
The proposed rule change would make both organizational and substantive
changes that have previously been made by other exchanges in order to
conform to FINRA rules.\4\
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    \4\ See, e.g., FINRA Rule 2220, CBOE Rule 9.21, MIAX Rule 1322,
and ISE Rule 623.
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    Specifically, this proposed rule change is based upon, and makes
changes that have previously been made to, Chicago Board Options
Exchange (``CBOE'') Rule 9.21 (a Common Rule) over the past ten years,
on a cumulative basis, by SR-CBOE-2013-043;\5\ SR-CBOE-2010-035 \6\ and
SR-CBOE-2007-30.\7\ Current Phlx Rule 1049 is very similar in content
and organization to CBOE Rule 9.21 as it existed prior to approval of
SR-CBOE-2007-30. Upon implementation of the amendments proposed herein,
Exchange Rule 1049 would once again track CBOE Rule 9.21 nearly word
for word.\8\ The

amendments, if adopted, would provide a more uniform approach to
communications to customers regarding standardized options. The
proposed changes are discussed below.
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    \5\ See Securities Exchange Act Release 69807 (June 20, 2013),
78 FR 38423 (June 26, 2013) (SR-CBOE-2013-043)
    \6\ See Securities Exchange Act Release No. 62034 (May 4, 2010),
75 FR 26303 (May 10, 2010) (SR-CBOE-2010-35). This was an interim
rule change relating to market letters which are no longer addressed
in CBOE rules and are thus not addressed in this proposed rule
change.
    \7\ See Securities Exchange Act Release No. 58823 (October 21,
2008), 73 FR 63747 (October 28, 2008) (SR-CBOE-2007-30).
    \8\ The only substantive difference between CBOE Rule 9.21 and
proposed Phlx Rule 1049 is with respect to index warrants. Current
Phlx Rule 1049 states at section (f) that the provisions of Rule
1049 are applicable to index warrants, and at Commentary .05 that,
for purposes of the rule the term ``option'' is deemed to include
index warrants and the term ``The Options Clearing Corporation'' is
deemed to mean the issuer(s) of such warrants. CBOE Rule 9.21 does
not contain comparable provisions. No changes are proposed with
respect to these provisions. Provisions relating to index warrants
were added to Rule 1049 by Phlx in 1994 as part of a comprehensive
proposed rule change establishing rules for the listing and trading
of stock index, currency and currency index warrants. See Securities
Exchange Act Release No. 36167 (August 29, 1995), 60 FR 46667
(September 7, 1995).
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Redesignation of Rule 1049(e) to Proposed Rule 1049(a) and New
Definitions
    Rule 1049(e) currently defines terms used in Rule 1049. Phlx
proposes to redesignate paragraph (e) as paragraph (a). Phlx also
proposes to delete the existing definitions of ``advertisement'',\9\
``educational material'' \10\ and ``sales literature'',\11\ and to add
new definitions of ``correspondence'', ``institutional communication''
and ``retail communication'' which collectively would constitute
``options communications'' under the revised rule. These new terms are
necessary because FINRA, in reframing its customer communications rule,
previously adopted these new terms to describe various categories of
communications. The term ``correspondence'' would include any written
(including electronic) communication distributed or made available to
25 or fewer retail customers within any 30 calendar-day period. The
term ``institutional communication'' would include any written
(including electronic) communication concerning options that is
distributed or made available only to institutional investors, but
would not include a member's internal communications.\12\ Finally,
``retail communication'' would be defined to mean any written
(including electronic) communication that is distributed or made
available to more than 25 retail investors within any 30 calendar-day
period.
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    \9\ The term ``advertisement'' is currently defined in Rule
1049(e) as including any sales material that reaches a mass audience
through public media such as newspapers, periodicals, magazines,
radio, television, telephone recording, motion picture, audio or
video device, telecommunications device, billboards, signs, or
through written communications to customers or the public not
required to be accompanied or preceded by one or more current
Options Disclosure Documents.
    \10\ The term ``educational material'' is currently defined in
Rule 1049(e)(ii) as including any explanatory material distributed
or made generally available to customers or the public that is
limited to information describing the general nature of the
standardized options markets or one or more strategies.
    \11\ The term ``sales literature'' is currently defined in Rule
1049(e)(iii) as including any written communication (not defined as
an ``advertisement'' or as ``educational material'') distributed or
made available to customers or the public that contains any
analysis, performance report, projection or recommendation with
respect to options, underlying securities or market conditions, any
standard forms of worksheets, or any seminar text which pertains to
options and which is communicated to customers or the public at
seminars, lectures or similar such events, or any Exchange-produced
materials pertaining to options.
    \12\ The term institutional investor would mean any qualified
investor as defined in Section 3(a)(54) of the Securities Exchange
Act of 1934.
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    The Exchange proposes corresponding amendments throughout Rule 1049
to the provisions referring to advertisement, educational material and
sales literature, including deletion of Commentary .02A of Rule 1049,
which outlines what is permitted in an advertisement, and Commentary
.03 of Rule 1049, which concerns the content of educational material.
Relocation of Rule 1049(a) to Proposed Rule 1049(d)
    Rule 1049(a) currently contains an outline of the ``General Rule''
for options communications. Phlx proposes to redesignate Rule 1049(a)
as Rule 1049(d), and to incorporate limitations on the use of options
communications currently contained in Commentary .01 of Rule 1049 into
proposed Rule 1049(d).\13\ In addition, proposed Rule 1049(d)(iii)
would amend current Rule 1049(a)(iii) by clarifying the types of
cautionary statements and caveats that are prohibited. The Exchange is
proposing to relocate to Rule 1049(d), and slightly modify, language
currently found in Rule 1049 Commentary .01 governing acceptable
content of options communications. Section A of Rule 1049 Commentary
.04 currently sets forth the requirement that ``sales literature''
shall state that supporting documentation for any claims, comparisons,
recommendations, statistics or other technical data, will be supplied
upon request. The Exchange proposes to redesignate Section A of Rule
1049 Commentary .04 as proposed Rule 1049(d)(vii), which would have the
effect of making those conditions applicable to options communications
as defined in proposed Rule 1049 rather than to the deleted term
``sales literature.'' Proposed Rule 1049(d)(viii) would provide that
certain aspects of the General Rule set forth in paragraphs (vi) and
(vii) are inapplicable to institutional communications.
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    \13\ Current Rule 1049(d), which limits the dissemination of
written materials respecting options to persons who have not
received the current Options Disclosure Document (``ODD''), would be
deleted. Rules governing communications prior to or after delivery
of the current ODD would be set forth in new Rule 1049(e).
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Proposed Amendments to Rule 1049(b)
    Phlx proposes to amend Rule 1049(b) to include the types of
communications proposed to be added to the definition of ``options
communications'' in proposed Rule 1049(a). Current Rule 1049(b) which
imposes an obligation to obtain advance approval by a Registered
Options Principal (``ROP'') for most options communications, would be
replaced by new language set forth in Rule 1049(b)(i)-(iv). Rule
1049(b)(i) would preserve this requirement with respect to retail
communications. However, proposed Rule 1049(b)(ii) would remove
correspondence, as defined in Rule 1049(a), from the pre-approval
requirement. All correspondence would, however, be subject to general
supervision and review requirements.\14\ Additionally, proposed Rule
1049(b)(iii) would remove institutional communications, as defined in
Rule 1049(a), from the pre-approval requirement, but would require each
member or member organization to establish written procedures that are
appropriate to its business, size, structure, and customers for review
by a ROP of institutional communications used by the member or member
organization.
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    \14\ See Phlx Rule 1025.
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    Finally, proposed Rule 1049(b)(iv) would require copies of the
options communications to be retained by the member or member
organization in accordance with Rule 17a-4 \15\ under the Securities
Exchange Act of 1934. The names of the persons who prepared the options
communications, the names of the persons who approved the options
communications, and the source of any recommendations contained therein
would also be required to be retained by the member or member
organization and kept in the form and for the time periods required for
options communications by Rule 17a-4.
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    \15\ 17 CFR 240.17a-4.
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Proposed Amendments to Rule 1049(c)
    Rule 1049(c) currently requires members to obtain approval from the
Exchange for every advertisement and all educational material. This
requirement applies regardless of whether the options communications
are used before or after the delivery of a current ODD. Phlx proposes
to amend this provision to require Exchange approval only with respect
to retail communications of a member or member organization pertaining
to standardized options that is not accompanied or preceded by the
applicable current ODD. Such retail communications would be required to
be submitted at least ten calendar days prior to use (or such shorter
period as the Exchange may allow in particular instances). The Exchange
pre-approval requirement for options

communications used subsequent to the delivery of the ODD is being
eliminated because the ODD is designed to alert the customer to the
characteristics and risks associated with trading in options.
    Rule 1049(c) would also be amended to delete references to
``advertisements'' and ``educational material,'' which as discussed
above would no longer be defined, and to include instead the types of
communications added to the definition of ``options communications'' in
proposed Rule 1049(a). The Exchange is also proposing to add language
which would further exempt the ODD and a prospectus from Exchange
review as these documents have other further requirements under the
Securities Act of 1933.
Proposed Rule 1049(e)
    Proposed new Rule 1049(e) would set forth (i) standards for options
communications that are not preceded or accompanied by an ODD and (ii)
standards for options communications used prior to delivery of an ODD.
These requirements generally would clarify and restate the requirements
contained in the current Commentary .02A of Rule 1049 which, as noted
above, would be deleted.
Proposed Amendments to Rule 1049 Commentary Sections
    Proposed new Commentary .01 would include and amend the provisions
found in current Section A of Commentary .02 regarding how the Rule
1049(e)(i)(B) requirement that options communications contain contact
information for obtaining a copy of the ODD may be satisfied. As noted
above, the current provisions of Commentary .01 regarding limitations
on the use of options communications are proposed to be incorporated
into proposed Rule 1049(d).\16\
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    \16\ Commentary .01 Section A contains an example which is not
being incorporated into proposed Rule 1049(d), as it is not found in
CBOE Rule 9.21(d).
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    Proposed Commentary .02, Projections, would be revised to amend and
include the provisions currently located in Section B of Commentary
.04, which pertain to standards for ``Sales Literature'' that contains
projected performance figures. These provisions would be amended to
apply to options communications rather than to the deleted defined term
Sales Literature. As previously noted, the provisions of Commentary .02
that outline what is permitted in an advertisement are proposed to be
deleted, and the provisions relating to standards for options
communications used prior to delivery of the ODD are proposed to be
incorporated into proposed Rule 1049(e)(ii). Proposed Rule 1049(e)(i)
would limit all options communications that are not preceded or
accompanied by the ODD.
    Proposed Commentary .03, Historical Performance, would be revised
to amend and include the provisions currently found in Section C of
Commentary .04 pertaining to standards for sales literature that
contains historical performance figures. These provisions would be
amended to apply to options communications rather than to the deleted
defined term sales literature. Existing Commentary .03, which concerns
the content of educational material (another defined term proposed to
be deleted), is proposed to be deleted as noted above. Proposed Rule
1049(e)(i) would limit all options communications that are not preceded
or accompanied by the ODD.
    Proposed Commentary .04, Options Programs, would contain the
provisions of current Section D of Commentary .04, and would require
communications regarding an options program (i.e., an investment plan
employing the systematic use of one or more options strategies), the
cumulative history or unproven nature of the program and its underlying
assumptions to be disclosed. Commentary .04 currently sets forth the
standards applicable to ``Sales Literature.'' The Exchange proposes to
delete existing Sections E, F and G of Commentary .04 dealing with
worksheets and recordkeeping with respect to communications that
portray performance of past recommendations or actual transactions, in
favor of the new customer communications rules applicable to options
communications generally that are consistent with those of other
options exchanges.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\17\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\18\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and to protect investors and the public interest, by
conforming Rule 1049 more closely to the Common Rules regarding options
communications under the 17d-2 Agreement. By doing so, the proposal
also furthers the objectives of Section 6(b)(1) \19\ of the Act as the
amendments would better enable the Exchange to be so organized as to
have the capacity to be able to carry out the purposes of the Act and
to comply, and to enforce compliance by its members with the provisions
of the Act, the rules and regulations thereunder, and the rules of the
Exchange.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ 15 U.S.C. 78f(b)(1).
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    In its most recent approval order for the 17d-2 Agreement \20\ the
Commission noted that Section 19(g)(1) of the Act,\21\ among other
things, requires every self-regulatory organization (``SRO'')
registered as either a national securities exchange or national
securities association to examine for, and enforce compliance by, its
members and persons associated with its members with the Act, the rules
and regulations thereunder, and the SRO's own rules, unless the SRO is
relieved of this responsibility pursuant to Section 17(d) \22\ or
Section 19(g)(2) \23\ of the Act.
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    \20\ See Securities and Exchange Act Release No. 79929 (February
2, 2017).
    \21\ 15 U.S.C. 78s(g)(1).
    \22\ 15 U.S.C. 78q(d)(1).
    \23\ 15 U.S.C. 78s(g)(2).
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    Without this relief, the statutory obligation of each individual
SRO could result in a pattern of multiple examinations of broker-
dealers that maintain memberships in more than one SRO (``common
members''). In its decision, the Commission noted that such regulatory
duplication would add unnecessary expenses for common members and their
SROs. Finally, it observed that under paragraph (c) of Rule 17d-2, the
Commission may declare joint plans for the allocation of regulatory
responsibilities with respect to their common members effective if,
after providing for notice and comment, it determines that the plan is
necessary or appropriate in the public interest and for the protection
of investors, to foster cooperation and coordination among the SROs, to
remove impediments to, and foster the development of, a national market
system and a national clearance and settlement system, and is in
conformity with the factors set forth in Section 17(d) of the Act.
    The 17d-2 Plan covering the Common Rules is designed to eliminate
regulatory duplication and unnecessary expense for common members and
the SROs including Phlx, with respect to the Common Rules. By amending
Rule 1049 so that it, like CBOE Rule 9.21, is ``substantially similar''
to the FINRA rules of similar purpose and therefore eligible to become
a Common Rule for purposes of the 17d-2 Agreement, the Exchange is
eliminating regulatory duplication and unnecessary expense as
contemplated by Commission Rule 17d-

2, and facilitating more efficient regulatory compliance by its
members.\24\
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    \24\ CBOE Rule 9.21 and FINRA Rules 2360(b)(18) and 2354 are
designated as Common Rules under the 17d-2 Agreement.
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    Additionally, the modernization of Rule 1049 promotes just and
equitable principles of trade, removes impediments to and perfects the
mechanism of a free and open market and a national market system, and
protects investors and the public interest, because it is designed to
alert members to requirements with respect to options communications
and to bring clarity to its members and the public regarding the
Exchange's options communications rule. The Exchange therefore believes
that the proposed rule change will help ensure that investors are
protected from potentially false or misleading communications with the
public distributed by Exchange members.

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

    The Exchange does not believe that the amendments to Rule 1049
proposed herein will impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act inasmuch as the
amendments conform Rule 1049 more closely to the Common Rules regarding
options communications to customers under the 17d-2 Agreement.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \25\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\26\
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    \25\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \26\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-Phlx-2017-39 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2017-39. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet 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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; 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-Phlx-2017-39 and
should be submitted on or before July 14, 2017.
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    \27\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-13103 Filed 6-22-17; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 85, Number 121 (Tuesday, June 23, 2020)]
[Rules and Regulations]
[Pages 37547-37549]
[FR Doc No: 2020-13407]

========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents.

========================================================================

Federal Register / Vol. 85, No. 121 / Tuesday, June 23, 2020 / Rules
and Regulations

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2019-0990; Product Identifier 2019-NM-122-AD; Amendment
39-19919; AD 2020-12-10]
RIN 2120-AA64

Airworthiness Directives; The Boeing Company Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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SUMMARY: The FAA is adopting a new airworthiness directive (AD) for all
The Boeing Company Model 747-100, 747-100B, 747-100B SUD, 747-200B,
747-200C, 747-200F, 747-300, 747-400, 747-400D, 747-400F, 747SR, and
747SP series airplanes. This AD was prompted by reports of cracks of
the upper splice fittings. This AD requires repetitive detailed
inspections and open hole high frequency eddy current (HFEC)
inspections of the upper splice fittings for cracks and applicable on-
condition actions. The FAA is issuing this AD to address the unsafe
condition on these products.

DATES: This AD is effective July 28, 2020.
    The Director of the Federal Register approved the incorporation by
reference of a certain publication listed in this AD as of July 28,
2020.

ADDRESSES: For service information identified in this final rule,
contact Boeing Commercial Airplanes, Attention: Contractual & Data
Services (C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA
90740-5600; phone:<PHONE_NUMBER>; internet: https://www.myboeingfleet.com. You may view this service information at the
FAA, Airworthiness Products Section, Operational Safety 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 https://www.regulations.gov by searching for and
locating Docket No. FAA-2019-0990.

Examining the AD Docket

    You may examine the AD docket on the internet at https://www.regulations.gov by searching for and locating Docket No. FAA-2019-
0990; 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, any comments received, and other information. The
address for Docket Operations 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: Eric Lin, Aerospace Engineer, Airframe
Section, FAA, Seattle ACO Branch, 2200 South 216th St., Des Moines, WA
98198; phone and fax:<PHONE_NUMBER>; email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Discussion

    The FAA issued a notice of proposed rulemaking (NPRM) to amend 14
CFR part 39 by adding an AD that would apply to all The Boeing Company
Model 747-100, 747-100B, 747-100B SUD, 747-200B, 747-200C, 747-200F,
747-300, 747-400, 747-400D, 747-400F, 747SR, and 747SP series
airplanes. The NPRM published in the Federal Register on December 31,
2019 (84 FR 72260). The NPRM was prompted by reports of cracks of the
upper splice fittings. The NPRM proposed to require repetitive detailed
inspections and open hole HFEC inspections of the upper splice fittings
for cracks and applicable on-condition actions.
    The FAA is issuing this AD to address fatigue cracking of the body
station (BS) 2598 bulkhead structure, which could adversely affect the
structural integrity of the bulkhead and the horizontal stabilizer
support structure, and result in loss of controllability of the
airplane.

Comments

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

Request To Clarify the Unsafe Condition

    Boeing requested that the FAA clarify the unsafe condition
statement in the NPRM, and reword it to read similarly to the unsafe
condition statement in AD 2014-14-03, Amendment 39-17898 (79 FR 41120,
July 15, 2014) (``AD 2014-14-03''). Boeing pointed out that AD 2014-14-
03 was prompted by reports of cracking in similar areas of the bulkhead
structure at BS 2598. Boeing also pointed out that cracking of the
bulkhead splice fitting would not be expected to result in loss of the
horizontal stabilizer. Boeing also mentioned that the requested change
would maintain consistent wording between ADs that are prompted by
cracking in similar areas.
    The FAA agrees for the reasons provided and has reworded the unsafe
condition statement in this AD accordingly.

Change to the Service Information

    Since the NPRM was published, the manufacturer has published a new
revision to the service information. Boeing Alert Requirements Bulletin
747-53A2899 RB, Revision 1, dated April 7, 2020, corrects the bulletin
approval statement and clarifies the description of Group 2 airplanes.
The FAA has updated this AD to refer to Boeing Alert Requirements
Bulletin 747-53A2899 RB, Revision 1, dated April 7, 2020, as the
appropriate source of service information for the required actions, as
all substantive requirements remain unchanged. Additionally, the FAA
has added paragraph (i) to this AD to provide credit for actions
performed before the effective date of this AD using Boeing Alert
Requirements Bulletin 747-53A2899 RB, dated April 5, 2019. The FAA has
redesignated subsequent paragraphs accordingly.

Conclusion

    The FAA reviewed the relevant data, considered the comment
received, and determined that air safety and the public interest
require adopting this final rule with the changes described previously
and minor editorial changes. The FAA has 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.
    The FAA 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

    The FAA reviewed Boeing Alert Requirements Bulletin 747-53A2899 RB,
Revision 1, dated April 7, 2020. This service information describes
procedures for repetitive detailed inspections and open hole HFEC
inspections of the left and right upper splice fittings for cracks and
applicable on-condition actions. On-condition actions include repair.
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

    The FAA estimates that this AD affects 125 airplanes of U.S.
registry. The FAA estimates the following costs to comply with this AD:

                                      Estimated Costs for Required Actions
----------------------------------------------------------------------------------------------------------------
                                                                                Cost on U.S.
             Action                    Labor cost         Parts cost      Cost per product        operators
----------------------------------------------------------------------------------------------------------------
Repetitive detailed inspections   5 work-hours x $85               $0   $425 per inspection  $53,125 per
 and open hole HFEC inspections.   per hour = $425                       cycle.               inspection cycle.
                                   per inspection
                                   cycle.
----------------------------------------------------------------------------------------------------------------

    The FAA has received no definitive data that would enable the
agency to provide cost estimates for the on-condition actions specified
in this AD.

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.
    The FAA is 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

    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) Will not affect intrastate aviation in Alaska, and
    (3) 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):

AD 2020-12-10 The Boeing Company: Amendment 39-19919; Docket No.
FAA-2019-0990; Product Identifier 2019-NM-122-AD.

(a) Effective Date

    This AD is effective July 28, 2020.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to all The Boeing Company Model 747-100, 747-
100B, 747-100B SUD, 747-200B, 747-200C, 747-200F, 747-300, 747-400,
747-400D, 747-400F, 747SR, and 747SP series airplanes, certificated
in any category.

(d) Subject

    Air Transport Association (ATA) of America Code 53, Fuselage.

(e) Unsafe Condition

    This AD was prompted by reports of cracking in particular areas
of the bulkhead structure at body station (BS) 2598. The FAA is
issuing this AD to address fatigue cracking of the BS 2598 bulkhead
structure, which could adversely affect the structural integrity of
the bulkhead and the horizontal stabilizer support structure, and
result in loss of controllability of the airplane.

(f) Compliance

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

(g) Required Actions

    Except as specified by paragraph (h) of this AD: At the
applicable times specified in the ``Compliance'' paragraph of Boeing
Alert Requirements Bulletin 747-53A2899 RB, Revision 1, dated April
7, 2020, do all applicable actions identified in, and in accordance
with, the Accomplishment Instructions of Boeing Alert Requirements
Bulletin 747-53A2899 RB, Revision 1, dated April 7, 2020.

    Note 1 to paragraph (g):  Guidance for accomplishing the actions
required by this AD can be found in Boeing Alert Service Bulletin
747-53A2899, Revision 1, dated April 7, 2020, which is referred to
in Boeing Alert Requirements Bulletin 747-53A2899 RB, Revision 1,
dated April 7, 2020.

(h) Exceptions to Service Information Specifications

    (1) For purposes of determining compliance with the requirements
of this AD: Where Boeing Alert Requirements Bulletin 747-53A2899 RB,
Revision 1, dated April 7, 2020, uses the phrase ``the original
issue date of Requirements Bulletin 747-53A2899 RB,'' this AD
requires using ``the effective date of this AD.''
    (2) Where Boeing Alert Requirements Bulletin 747-53A2899 RB,
Revision 1, dated

April 7, 2020, specifies contacting Boeing for repair instructions:
This AD requires doing the repair using a method approved in
accordance with the procedures specified in paragraph (j) of this
AD.

(i) Credit for Previous Actions

    This paragraph provides credit for the actions specified in
paragraph (g) of this AD, if those actions were performed before the
effective date of this AD using Boeing Alert Requirements Bulletin
747-53A2899 RB, dated April 5, 2019.

(j) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Seattle ACO 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
manager of the certification office, send it to the attention of the
person identified in paragraph (k)(1) of this AD. Information may be
emailed to<EMAIL_ADDRESS>    (2) 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.
    (3) An AMOC that provides an acceptable level of safety may be
used for any repair, modification, or alteration required by this AD
if it is approved by The Boeing Company Organization Designation
Authorization (ODA) that has been authorized by the Manager, Seattle
ACO Branch, FAA, to make those findings. To be approved, the repair
method, modification deviation, or alteration deviation must meet
the certification basis of the airplane, and the approval must
specifically refer to this AD.

(k) Related Information

    (1) For more information about this AD, contact Eric Lin,
Aerospace Engineer, Airframe Section, FAA, Seattle ACO Branch, 2200
South 216th St., Des Moines, WA 98198; phone and fax:<PHONE_NUMBER>;
email<EMAIL_ADDRESS>    (2) Service information identified in this AD that is not
incorporated by reference is available at the addresses specified in
paragraphs (l)(3) and (4) of this AD.

(l) 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 the AD specifies otherwise.
    (i) Boeing Alert Requirements Bulletin 747-53A2899 RB, Revision
1, dated April 7, 2020.
    (ii) [Reserved]
    (3) For service information identified in this AD, contact
Boeing Commercial Airplanes, Attention: Contractual & Data Services
(C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740-
5600; phone:<PHONE_NUMBER>; internet: https://www.myboeingfleet.com.
    (4) You may view this service information at the FAA,
Airworthiness Products Section, Operational Safety Branch, 2200
South 216th St., Des Moines, WA. For information on the availability
of this material at the FAA, call<PHONE_NUMBER>.
    (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, email<EMAIL_ADDRESS>or go to: https://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued on June 11, 2020.
Gaetano A. Sciortino,
Deputy Director for Strategic Initiatives, Compliance & Airworthiness
Division, Aircraft Certification Service.
[FR Doc. 2020-13407 Filed 6-22-20; 8:45 am]
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