[Federal Register: April 24, 2006 (Volume 71, Number 78)]
[Notices]
[Page 21049-21053]
[DOCID:fr24ap06-100]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-27290; 812-13012]

Bridgeway Funds, Inc., et al.; Notice of Application

April 18, 2006.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under (i) section 6(c) of
the Investment Company Act of 1940 (the ``Act'') granting an exemption
from sections 18(f) and 21(b) of the Act; (ii) section 12(d)(1)(J) of
the Act granting an exemption from section 12(d)(1) of the Act; (iii)
sections 6(c) and 17(b) of the Act granting an exemption from sections
17(a)(1) and 17(a)(3) of the Act; and (iv) section 17(d) of the Act and
rule 17d-1 under the Act to permit certain joint transactions.

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    Summary of Application: Applicants request an order that would
permit certain registered open-end management investment companies to
participate in a joint lending and borrowing facility.
    Applicants: Bridgeway Funds Inc. (``Bridgeway'') and Bridgeway
Capital Management, Inc. (the ``Adviser'').
    Filing Dates: The application was filed on August 28, 2003, and
amended on April 12, 2006.
    Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on May 15, 2006 and should be accompanied by proof of service
on the applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the

reason for the request, and the issues contested. Persons who wish to
be notified of a hearing may request notification by writing to the
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-1090; Applicants, 5615 Kirby Drive,
Ste 518, Houston, TX 77005-2448.

FOR FURTHER INFORMATION CONTACT: John Yoder, Senior Counsel, at (202)
551-6878, or Mary Kay Frech, Branch Chief, at<PHONE_NUMBER> (Division
of Investment Management, Office of Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Public Reference Desk, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington DC 20549-0102 (telephone<PHONE_NUMBER>).

Applicants' Representations

    Bridgeway is organized as a Maryland corporation and is registered
under the Act as an open-end management investment company.\1\
Bridgeway is comprised of multiple series (each a ``Fund'', and
together the ``Funds''). The Adviser is registered under the Investment
Advisers Act of 1940 and serves as investment adviser to the Funds.
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    \1\ Applicants request that the relief apply to any other
existing or future registered open-end management investment company
or series thereof that is advised by the Adviser or any person
controlling, controlled by, or under common control with the Adviser
or its successors (included in the term ``Funds''). The term
``successor'' is limited to entities that result from a
reorganization into another jurisdiction or a change in the type of
business organization. All existing Funds that currently intend to
rely on the requested order have been named as applicants. Any other
existing or future Fund that relies on the order in the future will
comply with the terms and conditions of the application.
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    2. Some Funds may lend money to banks or other entities by entering
into repurchase agreements or purchasing other short-term instruments.
Other Funds may need to borrow money from the same or similar banks or
other entities for temporary purposes to satisfy redemption requests,
to cover unanticipated cash shortfalls such as a trade ``fail'' in
which cash payment for a security sold by a Fund has been delayed, or
for other temporary purposes.
    3. If the Funds were to borrow money from banks, the Funds would
pay interest on the borrowed cash at a rate that would be higher than
the rate that would be earned by them on repurchase agreements and
other short-term instruments of the same maturity as the bank loan.
Applicants state that this differential represents the profit the banks
would earn for serving as a middleman between a borrower and lender.
    4. Applicants request an order that would permit the Funds to enter
into interfund lending agreements (``Interfund Lending Agreements'')
under which the Funds would lend and borrow money for temporary
purposes directly to and from each other through a credit facility
(``Interfund Loan''). Applicants believe that the credit facility would
reduce the Funds' borrowing costs and enhance their ability to earn
higher interest rates on short-term investments. Although the credit
facility would reduce the Funds' need to borrow from banks, the Funds
would be free to establish new lines of credit or other borrowing
arrangements with banks.
    5. Applicants anticipate that the credit facility would provide a
borrowing Fund with significant savings when the cash position of the
Fund is insufficient to meet temporary cash requirements. This
situation could arise when redemptions exceed expected volumes and
certain Funds have insufficient cash to satisfy such redemptions. When
a Fund liquidates portfolio securities to meet redemption requests, it
often does not receive payment in settlement for up to three days (or
longer for certain foreign transactions). The credit facility would
provide a source of immediate, short-term liquidity pending settlement
of the sale of portfolio securities.
    6. Applicants also propose using the credit facility when a sale of
securities fails due to circumstances beyond a Fund's control, such as
a delay in the delivery of cash to a Fund's custodian or improper
delivery instructions by the broker effecting the transaction. Sales
fails may present a cash shortfall if a Fund has undertaken to purchase
securities using the proceeds from the securities sold. Under such
circumstances, the Fund could fail on its intended purchase due to lack
of funds from the previous sale, resulting in additional cost to the
Fund, or sell a security on a same day settlement basis, earning a
lower return on the investment. Use of the credit facility under these
circumstances would enable the Fund to have access to immediate short-
term liquidity without incurring custodian overdraft or other charges.
    7. While bank borrowings could supply needed cash to cover
unanticipated redemptions and sales fails, under the proposed credit
facility a borrowing Fund would pay lower interest rates than those
offered by banks on short-term loans. In addition, Funds making short-
term cash loans directly to other Funds would earn interest at a rate
higher than they otherwise could obtain from investing their cash in
repurchase agreements. Thus, applicants believe that the proposed
credit facility would benefit both borrowing and lending Funds.
    8. The interest rate charged to the Funds on any Interfund Loan
(``Interfund Loan Rate'') would be the average of the ``Repo Rate'' and
the ``Bank Loan Rate,'' both as defined below. The Repo Rate for any
day would be the highest rate available to the Funds from investing in
overnight repurchase agreements. The Bank Loan Rate for any day would
be calculated by the Credit Facility Team (as defined below) each day
an Interfund Loan is made according to a formula established by a
Fund's board of directors (``Board'') designed to approximate the
lowest interest rate at which bank short-term loans would be available
to the Funds. The formula would be based upon a publicly available rate
(e.g., Federal funds plus 25 basis points) and would vary with this
rate so as to reflect changing bank loan rates. The Board of each Fund
would periodically review the continuing appropriateness of using the
publicly available rate, as well as the relationship between the Bank
Loan Rate and current bank loan rates that would be available to the
Funds. The initial formula and any subsequent modifications to the
formula would be subject to the approval of the Board.
    9. The credit facility would be administered by a representative of
Bridgeway's accounting department, an investment professional within
the Adviser (``Portfolio Manager''), and the compliance officer for
Bridgeway (collectively, the ``Credit Facility Team''). Under the
proposed credit facility, the portfolio managers for each participating
Fund could provide standing instructions to participate daily as a
borrower or lender. On each business day, the Credit Facility Team
would collect data on the uninvested cash and borrowing requirements of
all participating Funds from the Funds' custodian. Once it determined
the aggregate amount of cash available for loans and borrowing demand,
the Credit Facility Team would allocate loans among borrowing Funds
without any further communication from portfolio managers (other than
the Portfolio Manager as a member of the Credit Facility Team).
Applicants expect far more available uninvested cash each day than
borrowing demand. All

allocations would require approval of at least one member of the Credit
Facility Team who is not the Portfolio Manager. After the Credit
Facility Team has allocated cash for Interfund Loans, the Credit
Facility Team would invest any remaining cash in accordance with the
standing instructions of portfolio managers or return remaining amounts
to the Funds.
    10. The Credit Facility Team would allocate borrowing demand and
cash available for lending among the Funds on what the Credit Facility
Team believes to be an equitable basis, subject to certain
administrative procedures applicable to all Funds, such as the time of
filing requests to participate, minimum loan lot sizes, and the need to
minimize the number of transactions and associated administrative
costs. To reduce transaction costs, each loan normally would be
allocated in a manner intended to minimize the number of participants
necessary to complete the loan transaction. The method of allocation
and related administrative procedures would be approved by each Fund's
Board, including a majority of trustees who are not ``interested
persons'' of the Fund, as defined in section 2(a)(19) of the Act
(``Independent Directors''), to ensure that both borrowing and lending
Funds participate on an equitable basis.
    11. The Credit Facility Team would (a) monitor the interest rates
charged and other terms and conditions of the Interfund Loans; (b)
limit the borrowings and loans entered into by each Fund to ensure that
they comply with the Fund's investment policies and limitations; (c)
ensure equitable treatment of each Fund; and (d) make quarterly reports
to the Board concerning any transactions by the Funds under the credit
facility and the Interfund Loan Rate charged.
    12. The Adviser, through the Credit Facility Team, would administer
the credit facility as a disinterested fiduciary, and would receive no
additional fee for its services. The Adviser may collect standard
recordkeeping, bookkeeping and accounting fees associated with the
transfer of cash and/or securities in connection with repurchase and
lending transactions generally, including transactions effected through
the credit facility. Fees for these services would be no higher than
those applicable for comparable bank loan transactions.
    13. No Fund may participate in the credit facility unless: (a) The
Fund has obtained shareholder approval for its participation, if such
approval is required by law; (b) the Fund has fully disclosed all
material information concerning the credit facility in its prospectus
and/or statement of additional information (``SAI''); and (c) the
Fund's participation in the credit facility is consistent with its
investment policies, limitations, and organizational documents.
    14. In connection with the credit facility, applicants request an
order under (a) section 6(c) of the Act granting relief from sections
18(f) and 21(b) of the Act; (b) section 12(d)(1)(J) of the Act granting
relief from section 12(d)(1) of the Act; (c) sections 6(c) and 17(b) of
the Act granting relief from sections 17(a)(1) and 17(a)(3) of the Act;
and (d) under section 17(d) and rule 17d-1 under the Act to permit
certain joint arrangements.

Applicants' Legal Analysis

    1. Section 17(a)(3) generally prohibits any affiliated person, or
affiliated person of an affiliated person, from borrowing money or
other property from a registered investment company. Section 21(b)
generally prohibits any registered management company from lending
money or other property to any person if that person controls or is
under common control with the company. Section 2(a)(3)(C) of the Act
defines an ``affiliated person'' of another person, in part, to be any
person directly or indirectly controlling, controlled by, or under
common control with, the other person. Applicants state that the Funds
may be under common control by virtue of having the Adviser as their
common investment advisor and/or by reason of having common officers
and/or directors.
    2. Section 6(c) provides that an exemptive order may be granted
where an exemption is necessary or appropriate in the public interest
and consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the Act. Section 17(b)
authorizes the Commission to exempt a proposed transaction from section
17(a) provided that the terms of the transaction, including the
consideration to be paid or received, are fair and reasonable and do
not involve overreaching on the part of any person concerned, and the
transaction is consistent with the policy of the investment company as
recited in its registration statement and with the general purposes of
the Act. Applicants believe that the proposed arrangements satisfy
these standards for the reasons discussed below.
    3. Applicants submit that sections 17(a)(3) and 21(b) of the Act
were intended to prevent a party with strong potential adverse
interests to, and some influence over the investment decisions of, a
registered investment company from causing or inducing the investment
company to engage in lending transactions that unfairly inure to the
benefit of such party and that are detrimental to the best interests of
the investment company and its shareholders. Applicants assert that the
proposed credit facility transactions do not raise these concerns
because: (a) The Adviser through the Credit Facility Team would
administer the program as a disinterested fiduciary; (b) all Interfund
Loans would consist only of uninvested cash reserves that the Funds
otherwise would invest in short-term repurchase agreements or other
short-term instruments; (c) the Interfund Loans would not involve a
greater risk than such other investments; (d) the lending Fund would
receive interest at a rate higher than it could obtain through such
other investments; and (e) the borrowing Fund would pay interest at a
rate lower than otherwise available to it under its bank loan
agreements and avoid the up-front commitment fees associated with
committed lines of credit. Moreover, applicants believe that the other
conditions in the application would effectively preclude the
possibility of any Fund obtaining an undue advantage over any other
Fund.
    4. Section 17(a)(1) generally prohibits an affiliated person of a
registered investment company, or an affiliated person of an affiliated
person, from selling any securities or other property to the company.
Section 12(d)(1) generally makes it unlawful for a registered
investment company to purchase or otherwise acquire any security issued
by any other investment company except in accordance with the
limitations set forth in that section. Applicants state that the
obligation of a borrowing Fund to repay an Interfund Loan may
constitute a security under sections 17(a)(1) and 12(d)(1). Section
12(d)(1)(J) provides that the Commission may exempt persons or
transactions from any provision of section 12(d)(1) if and to the
extent such exemption is consistent with the public interest and the
protection of investors. Applicants contend that the standards under
sections 6(c), 17(b), and 12(d)(1)(J) are satisfied for all the reasons
set forth above in support of their request for relief from sections
17(a)(3) and 21(b) and for the reasons discussed below.
    5. Applicants state that section 12(d)(1) was intended to prevent
the pyramiding of investment companies in order to avoid imposing on
investors additional and duplicative costs and fees attendant upon
multiple layers of investment companies. Applicants submit that the
proposed credit facility does not involve these abuses.

Applicants note that there will be no duplicative costs or fees to the
Funds or shareholders, and that the Adviser will receive no additional
compensation for its services in administering the credit facility
through the Credit Facility Team. Applicants also note that the purpose
of the proposed credit facility is to provide economic benefits for all
of the participating Funds and their shareholders.
    6. Section 18(f)(1) prohibits open-end investment companies from
issuing any senior security except that a company is permitted to
borrow from any bank, if immediately after the borrowing, there is
asset coverage of at least 300 per centum for all borrowings of the
company. Under section 18(g) of the Act, the term ``senior security''
includes any bond, debenture, note or similar obligation or instrument
constituting a security and evidencing indebtedness. Applicants request
relief from section 18(f)(1) to the limited extent necessary to
implement the credit facility (because the lending Funds are not
banks).
    7. Applicants believe that granting relief under section 6(c) is
appropriate because the Funds would remain subject to the requirement
of section 18(f)(1) that all borrowings of the Fund, including combined
interfund and bank borrowings, have at least 300% asset coverage. Based
on the conditions and safeguards described in the application,
applicants also submit that to allow the Funds to borrow from other
Funds pursuant to the proposed credit facility is consistent with the
purposes and policies of section 18(f)(1).
    8. Section 17(d) and rule 17d-1 generally prohibit any affiliated
person of a registered investment company, or affiliated persons of an
affiliated person, when acting as principal, from effecting any joint
transactions in which the company participates unless the transaction
is approved by the Commission. Rule 17d-1 provides that in passing upon
applications filed under the rule, the Commission will consider whether
the participation of a registered investment company in a joint
enterprise on the basis proposed is consistent with the provisions,
policies, and purposes of the Act and the extent to which the company's
participation is on a basis different from or less advantageous than
that of other participants.
    9. Applicants submit that the purpose of section 17(d) is to avoid
overreaching by and unfair advantage to investment company insiders.
Applicants believe that the credit facility is consistent with the
provisions, policies, and purposes of the Act in that it offers both
reduced borrowing costs and enhanced returns on loaned funds to all
participating Funds and their shareholders. Applicants note that each
Fund would have an equal opportunity to borrow and lend on equal terms
consistent with its investment policies and fundamental limitations.
Applicants therefore believe that each Fund's participation in the
credit facility will be on terms that are no different from or less
advantageous than that of other participating Funds.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will
be subject to the following conditions:
    1. The Interfund Loan Rate to be charged to the Funds under the
credit facility will be the average of the Repo Rate and the Bank Loan
Rate.
    2. On each business day, the Credit Facility Team will compare the
Bank Loan Rate with the Repo Rate and will make cash available for
Interfund Loans only if the Interfund Loan Rate is (a) more favorable
to the lending Fund than the Repo Rate, and, if applicable, the yield
of any money market fund in which the lending Fund could otherwise
invest and (b) more favorable to the borrowing Fund than the Bank Loan
Rate.
    3. If a Fund has outstanding borrowings, any Interfund Loans to the
Fund (a) will be at an interest rate equal to or lower than any
outstanding bank loan; (b) will be secured at least on an equal
priority basis with at least an equivalent percentage of collateral to
loan value as any outstanding bank loan that requires collateral; (c)
will have a maturity no longer than any outstanding bank loan (and in
any event not over seven days); and (d) will provide that, if an event
of default occurs under any agreement evidencing an outstanding bank
loan to the Fund, that event of default will automatically (without
need for action or notice by the lending Fund) constitute an immediate
event of default under the Interfund Lending Agreement entitling the
lending Fund to call the Interfund Loan (and exercise all rights with
respect to any collateral) and that such call will be made if the
lending bank exercises its right to call its loan under its agreement
with the borrowing Fund.
    4. A Fund may make an unsecured borrowing through the credit
facility if its outstanding borrowing from all sources immediately
after the interfund borrowing total 10% or less than its total assets,
provided that if the Fund has a secured loan outstanding from any other
lender, including but not limited to another Fund, the Fund's interfund
borrowing will be secured on at least an equal priority basis with at
least an equivalent percentage of collateral to loan value as any
outstanding loan that requires collateral. If a Fund's total
outstanding borrowings immediately after an interfund borrowing would
be greater than 10% of its total assets, the Fund may borrow through
the credit facility on a secured basis only. A Fund may not borrow
through the credit facility or from any other source if its total
borrowings immediately after the interfund borrowing would be more than
33\1/3\% of its total assets or its maximum borrowing limit set forth
in the Fund's investment restrictions, whichever is less.
    5. Before any Fund that has outstanding interfund borrowings may,
through additional borrowings, cause its outstanding borrowings from
all sources to exceed 10% of its total assets, the Fund must first
secure each outstanding Interfund Loan by the pledge of segregated
collateral with a market value at least equal to 102% of the
outstanding principal value of the loan. If the total outstanding
borrowings of a Fund with outstanding Interfund Loans exceed 10% of its
total assets for any other reason (such as a decline in net asset value
or because of shareholder redemptions), the Fund will within one
business day thereafter (a) repay all its outstanding Interfund Loans;
(b) reduce its outstanding indebtedness to 10% or less of its total
assets; or (c) secure each outstanding Interfund Loan by the pledge of
segregated collateral with a market value at least equal to 102% of the
outstanding principal value of the loan until the Fund's total
outstanding borrowings cease to exceed 10% of its total assets, at
which time the collateral called for by this condition (5) shall no
longer be required. Until each Interfund Loan that is outstanding at
any time that a Fund's total outstanding borrowings exceeds 10% is
repaid or the Fund's total outstanding borrowings cease to exceed 10%
of its total assets, the Fund will mark the value of the collateral to
market each day and will pledge such additional collateral as is
necessary to maintain the market value of the collateral that secures
each outstanding Interfund Loan at least equal to 102% of the
outstanding principal value of the loan.
    6. No Fund may lend to another Fund through the credit facility if
the loan would cause its aggregate outstanding loans through the credit
facility to exceed 15% of its net assets at the time of the loan.
    7. A Fund's Interfund Loans to any one Fund shall not exceed 5% of
the lending Fund's net assets.
    8. The duration of Interfund Loans will be limited to the time
required to

receive payment for securities sold, but in no event more than seven
days. Loans effected within seven days of each other will be treated as
separate loan transactions for purposes of this condition.
    9. Each Interfund Loan may be called on one business day's notice
by a lending Fund and may be repaid on any day by a borrowing Fund.
    10. A Fund's participation in the credit facility must be
consistent with its investment policies and limitations and
organizational documents.
    11. The Credit Facility Team will calculate total Fund borrowing
and lending demand through the credit facility, and allocate Interfund
Loans on an equitable basis among the Funds without the intervention of
any portfolio manager of the Funds (other than the Portfolio Manager
acting in his or her capacity as a member of the Credit Facility Team).
All allocations will require approval of at least one member of the
Credit Facility Team who is not the Portfolio Manager. The Credit
Facility Team will not solicit cash for the credit facility from any
Fund or prospectively publish or disseminate loan demand data to
portfolio managers (except to the extent that the Portfolio Manager has
access to loan demand data in his or her capacity as a member of the
Credit Facility Team). The Credit Facility Team will invest any amounts
remaining after satisfaction of borrowing demand in accordance with the
standing instructions from portfolio managers or return remaining
amounts to the Funds.
    12. The Credit Facility Team will monitor the Interfund Loan Rate
charged and the other terms and conditions of the Interfund Loans and
will make a quarterly report to the Board concerning the participation
of the Funds in the credit facility and the terms and other conditions
of any extensions of credit under the facility.
    13. The Board of each Fund, including a majority of the Independent
Directors: (a) Will review no less frequently than quarterly the Fund's
participation in the credit facility during the preceding quarter for
compliance with the conditions of any order permitting the
transactions; (b) will establish the Bank Loan Rate formula used to
determine the interest rate on Interfund Loans and review no less
frequently than annually the continuing appropriateness of the Bank
Loan Rate formula; and (c) will review no less frequently than annually
the continuing appropriateness of the Fund's participation in the
credit facility.
    14. In the event an Interfund Loan is not paid according to its
terms and the default is not cured within two business days from its
maturity or from the time the lending Fund makes a demand for payment
under the provisions of the Interfund Lending Agreement, the Credit
Facility Team will promptly refer the loan for arbitration to an
independent arbitrator selected by the Board of any Fund involved in
the loan who will serve as arbitrator of disputes concerning Interfund
Loans.\2\ The arbitrator will resolve any problems promptly, and the
arbitrator's decision will be binding on both Funds. The arbitrator
will submit, at least annually, a written report to the Board setting
forth a description of the nature of any dispute and the actions taken
by the Funds to resolve the dispute.
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    \2\ If a dispute involves Funds with separate Boards, the
respective Boards will agree on an independent arbitrator that is
satisfactory to each Fund.
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    15. Each Fund will maintain and preserve for a period of not less
than six years from the end of the fiscal year in which any transaction
under the credit facility occurred, the first two years in an easily
accessible place, written records of all such transactions setting
forth a description of the terms of the transaction, including the
amount, the maturity and rate of interest on the loan, the rate of
interest available at the time on short-term repurchase agreements and
bank borrowings, the yield on any money market fund in which the
lending Fund could otherwise invest and such other information
presented to the Fund's Board in connection with the review required by
conditions 12 and 13.
    16. The Credit Facility Team will prepare and submit to the Board
for review an initial report describing the operations of the credit
facility and the procedures to be implemented to ensure that all Funds
are treated fairly. After the commencement of operations of the credit
facility, the Credit Facility Team will report on the operations of the
credit facility at the quarterly meetings of each Fund's Board. In
addition, for two years following the commencement of the credit
facility, the independent public accountant for each Fund shall prepare
an annual report that evaluates the Credit Facility Team's assertion
that it has established procedures reasonably designed to achieve
compliance with the conditions of the order. The report will be
prepared in accordance with the Statements on Standards for Attestation
Engagements No. 10 and it shall be filed pursuant to Item 77Q3 of Form
N-SAR, as such statements or form may be revised, amended, or
superseded from time to time. In particular, the report shall address
procedures designed to achieve the following objectives: (a) That the
Interfund Loan Rate will be higher than the Repo Rate and, if
applicable, the yield of the money market funds, but lower than the
Bank Loan Rate; (b) compliance with the collateral requirements as set
forth in the application; (c) compliance with the percentage
limitations on interfund borrowing and lending; (d) allocation of
interfund borrowing and lending demand in an equitable manner and in
accordance with procedures established by the Board; and (e) that the
interest rate on any Interfund Loan does not exceed the interest rate
on any third party borrowings of a borrowing Fund at the time of the
Interfund Loan. After the final report is filed, the Fund's external
auditors, in connection with their Fund audit examinations, will
continue to review the operation of the credit facility for compliance
with the conditions of the application and their review will form the
basis, in part, of the auditor's report on internal accounting controls
in Form N-SAR.
    17. No Fund will participate in the credit facility upon receipt of
requisite regulatory approval unless all material facts about its
intended participation are fully disclosed in the Fund's SAI.
    18. A Fund's borrowings through the credit facility, as measured on
the day when the most recent loan was made, will not exceed the greater
of 125% of the Fund's total net cash redemptions or 102% of sales fails
for the preceding seven calendar days.
    19. The Board of each Fund will satisfy the fund governance
standards as defined in rule 0-1(a)(7) under the Act by the compliance
date for the rule.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Nancy M. Morris,
Secretary.
 [FR Doc. E6-6068 Filed 4-21-06; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 81, Number 193 (Wednesday, October 5, 2016)]
[Notices]
[Pages 69185-69189]
[FR Doc No: 2016-24114]

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DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration

[Docket No. FMCSA-2015-0149]

Future Enhancements to the Safety Measurement System (SMS)

AGENCY: Federal Motor Carrier Safety Administration (FMCSA), U.S.
Department of Transportation (U.S. DOT).

ACTION: Notice; response to public comments; request for public
comments.

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SUMMARY: FMCSA proposes enhancements to information on the public
Safety Measurement System (SMS) Web site and responds to comments
received in response to FMCSA's Federal Register Notice, ``Proposal for
Future Enhancements to the Motor Carrier Safety Measurement System
(SMS),'' published on June 29, 2015. These enhancements are a
continuation of the Agency's efforts to provide law enforcement, the
motor carrier industry, and motor carriers with more informative safety
data. This notice explains the Agency's proposed enhancements to the
public SMS Web site, including two additional changes not originally
proposed, which were identified during the development of the SMS
Preview. FMCSA has provided information about the proposed enhancements
to the National Academies of Sciences to consider in the Correlation
Study required by Section 5221 of the Fixing America's Surface
Transportation (FAST) Act. The proposed enhancements will be available
for preview, at: https://csa.fmcsa.dot.gov/SMSPreview/ on October 4,
2016. The Agency seeks comments on these changes based on the preview.
The Agency will not implement the changes until after the Agency
satisfies the requirements of Section 5223 of the FAST Act.

DATES: Comments must be received by December 3, 2016. Question and
answer (Q&A) sessions for the public and industry are scheduled for the
following dates and times:

1. Wednesday, October 12, 2016, 10:00-11:30 a.m. Eastern Time (ET)
2. Thursday, October 13, 2016, 2:00-3:30 p.m. ET
3. Tuesday, October 18, 2016, 3:00-4:30 p.m. ET
4. Thursday, October 20, 2016, 11:00 a.m.-12:30 p.m. ET

    For more information on these sessions, see Section V.

ADDRESSES: You may submit comments bearing the Federal Docket
Management System Docket ID (FMCSA-2015-0149) using any of the
following methods:
    Federal eRulemaking Portal: Go to http://www.regulations.gov.
Follow the online instructions for submitting comments.
    Mail: Docket Management Facility; U.S. Department of
Transportation, 1200 New Jersey Avenue SE., West Building Ground Floor,
Room W12-140, Washington, DC 20590.
    Hand Delivery or Courier: West Building Ground Floor, Room W12-140,
1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5
p.m., ET, Monday through Friday, except Federal holidays.
    Fax: 1-202-493-2251.
    Each submission must include the Agency name and the docket number
for this notice. Note that DOT posts all comments received without
change to www.regulations.gov, including any personal information
included in a comment. Please see the Privacy Act heading below.
    Docket: For access to the docket to read background documents or
comments, go to www.regulations.gov at any time or visit Room W12-140
on the ground level of the West Building, 1200 New Jersey Avenue SE.,
Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays. The online Federal document

management system is available 24 hours each day, 365 days each year.
If you want acknowledgment that the Agency received your comments,
please include a self-addressed, stamped envelope or postcard or print
the acknowledgement page that appears after submitting comments online.
    Privacy Act: In accordance with 5 U.S.C. 553(c), DOT solicits
comments from the public to better inform its rulemaking process. DOT
posts these comments, without edit, including any personal information
the commenter provides, to www.regulations.gov, as described in the
system of records notice (DOT/ALL-14 FDMS), which can be reviewed at
www.dot.gov/privacy.

FOR FURTHER INFORMATION CONTACT: For information concerning this
notice, contact Mr. David Yessen, Federal Motor Carrier Safety
Administration, 1200 New Jersey Avenue SE., Washington, DC 20590,
telephone<PHONE_NUMBER> or by email at<EMAIL_ADDRESS>If you have
questions on viewing or submitting material to the docket, contact
Docket Services at<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Public Participation and Request for Comments

    FMCSA encourages you to participate by submitting comments and
related materials.

A. Submitting Comments

    If you submit a comment, please include the docket number for this
notice (FMCSA-2015-0149), indicate the specific section of this
document to which each comment applies, and provide a reason for each
suggestion or recommendation. You may submit your comments and material
online or by fax, mail, or hand delivery, but please use only one of
these methods. FMCSA recommends that you include your name and a
mailing address, an email address, or a phone number in the body of
your document so that the Agency can contact you if it has questions
regarding your submission.
    To submit your comment online, go to http://www.regulations.gov and
put the docket number, ``FMCSA-2015-0149'' in the ``Keyword'' box, and
click ``Search.'' When the new screen appears, click on the ``Comment
Now!''' button and type your comment into the text box in the following
screen. Choose whether you are submitting your comment as an individual
or on behalf of a third party and then submit. If you submit your
comments by mail or hand delivery, submit them in an unbound format, no
larger than 8\1/2\ by 11 inches, suitable for copying and electronic
filing. If you submit comments by mail and would like to know that they
reached the facility, please enclose a stamped, self-addressed postcard
or envelope.
    FMCSA will consider all comments and materials received during the
comment period and may change the approach discussed in this notice
based on your comments.

B. Viewing Comments and Documents

    To view comments, as well as documents mentioned in this preamble
as being available in the docket, go to http://www.regulations.gov and
insert the docket number, ``FMCSA-2015-0149'' in the ``Keyword'' box
and click ``Search.'' Next, click the ``Open Docket Folder'' button and
choose the document listed to review. If you do not have access to the
internet, you may view the docket by visiting the Docket Management
Facility in Room W12-140 on the ground floor of the DOT West Building,
1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5
p.m., Monday through Friday, except Federal holidays.

II. Background

    On June 29, 2015 (80 FR 37037), FMCSA proposed the following SMS
enhancements and requested initial comments on them in advance of
providing motor carriers to preview how their safety performance data
would be presented on the SMS Web site.
    1. Changing some of the SMS Intervention Thresholds to better
reflect the Behavior Analysis and Safety Improvement Categories'
(BASICs) correlation to crash risk.
    2. Two changes to the Hazardous Materials (HM) Compliance BASIC:
    a. Segmenting the HM Compliance BASIC by Cargo Tank (CT) and non-CT
carriers; and
    b. Releasing motor carrier percentile rankings under the HM
Compliance BASIC to the public.
    3. Reclassifying violations for operating while Out of Service
(OOS) under the Unsafe Driving BASIC rather than the BASIC of the
underlying OOS violation.
    4. Increasing the maximum Vehicle Miles Travelled (VMT) used in the
Utilization Factor to more accurately reflect the operations of high-
utilization carriers.
    The Agency's analysis and explanations were provided in the June
29, 2015 notice. Stakeholders had 30 days to submit comments. The
comment period ended on July 29, 2015.
    After receiving and analyzing the comments in response to this
preview, FMCSA will provide the results to the National Academies of
Sciences to consider during the Correlation Study required by Sections
5221 and 5223 of the FAST Act, related to SMS and public display. The
study required by Section 5221 is required to be within 18 months of
the enactment of the Act.

III. Summary of Public Comments and Response

    FMCSA received 50 docket comments in response to the June 29, 2015
notice. However, only 30 of the submissions contained comments
specifically on the changes proposed in that notice. The commenters
included motor carriers, drivers, industry associations, and safety
advocates. Relevant input and feedback were received from the Advocates
for Highway and Auto Safety (Advocates), American Association for
Justice (AAJ), American Bus Association (ABA), American Trucking
Associations, Inc. (ATA), Con-way Freight, FedEx Corporation (FedEx),
Institute of Makers of Explosives (IME), National Motor Freight Traffic
Association, Inc. (NMFTA), National Propane Gas Association (NPGA),
National Transportation Safety Board (NTSB), Owner-Operator Independent
Drivers Association (OOIDA), Schneider National, Inc. (Schneider),
Snack Food Association (SFA), Transportation Intermediaries Association
(TIA), Werner Enterprises, Inc. (Werner), YRC Worldwide Inc., and
individuals who did not identify their organizations. Many stakeholders
provided comments on multiple proposed enhancements and topics.
Comments outside the scope of the June proposal are not discussed in
this notice.
    In addition, many stakeholders requested additional analysis on the
proposed enhancements to better inform their comments. Detailed
analysis on the proposed enhancements from the June notice, as well as
the additional enhancements proposed in this notice, are available in
the Foundational Document at: https://csa.fmcsa.dot.gov/Documents/SMS-Preview-Foundational-Document.pdf.
    Below is a summary of the comments received that address the
proposed changes and the Agency's responses:
1. Changing Some of the SMS Intervention Thresholds To Better Reflect
the BASICs' Correlation To Crash Risk
    Arleen Wells commented that the Vehicle Maintenance BASIC
Intervention Threshold should not go higher, but raising the percentage
for the Controlled Substances/Alcohol BASIC Intervention Threshold was
an

``excellent idea.'' George Hopkins felt that changing the Vehicle
Maintenance threshold is not productive, as many of the violations are
``not going to result in a crash.'' Another anonymous commenter
expressed concern that the proposed Vehicle Maintenance BASIC
Intervention Threshold change would hurt flatbed carriers.
    OOIDA questioned the Agency's logic for the Vehicle Maintenance
Intervention Threshold pointing out that ``The inclusion of an
additional 5% of motor carriers with lower Vehicle BASIC scores causes
the average number of accidents per power unit above the new threshold
to increase 7%. These numbers more than illustrate the randomness and
ineffectiveness of FMCSA's reliance on correlation rather than
causation.''
    However, Con-way Freight supported the adjustments to the BASIC
Intervention Thresholds to better prioritize carriers. SFA
``commend[ed] the Agency for taking these preliminary moves to more
closely correlate its enforcement interventions to actual crash risk.''
ATA, TIA, and Schneider supported adjusting the SMS Intervention
Thresholds. TIA ``applaud[ed] the proposed enhancements to the Safety
Measurement System (SMS), specifically, better adjusting some of the
SMS interventions.'' ATA recommended that the Agency adjust the
thresholds further to yield even better results. NTSB voiced concern
about whether the Agency has sufficient resources to reach the 41,000
carriers that will be at or above the proposed Intervention Thresholds.
    Regarding the Controlled Substances/Alcohol Intervention Threshold
change, an anonymous commenter advised, ``I am saddened by the proposal
to raise the threshold for controlled substances. I believe that it
sends the wrong message to the public and reflects poorly on the
industry.'' AAJ requested that the Controlled Substances/Alcohol BASIC
remain unchanged, emphasizing that the change ``ignores the real and
serious risks of impaired driving.'' AAJ cited a recent National
Highway Traffic Safety Administration (NHTSA) Drug and Alcohol Crash
Risk Study, which found that drivers with an alcohol level of 0.08%
were four times more likely to crash than sober drivers and that
marijuana users were about 25% more likely to be involved in a crash
than drivers with no evidence of marijuana use.\1\ Advocates did not
support the proposed change to the Controlled Substances/Alcohol BASIC
pointing out that ``Raising the intervention levels to 90% would then
only identify the bottom 10% of carriers, even though all carriers
above the 50th percentile are below average.''
---------------------------------------------------------------------------

    \1\ Compton, R.P. & Berning, A. (2015, February). Drug and
alcohol crash risk. (Traffic Safety Facts Research Note. DOT HS 812
117). Washington, DC: National Highway Traffic Safety
Administration.
---------------------------------------------------------------------------

    FMCSA issued an amendment to the enforcement policy for its
Hazardous Materials Safety Permit (HMSP) program prior to the release
of the June notice on the proposed SMS enhancements. This amendment
uses the SMS results under the current Intervention Thresholds to
monitor carriers that have non-temporary HMSPs and prioritize them for
investigations focused on HM compliance. IME requested that the Agency
clarify whether the proposed Intervention Thresholds will replace the
current thresholds outlined in this amendment.
FMCSA Response
    FMCSA disagrees with OOIDA's assertion that the change to the
Vehicle Maintenance BASIC Intervention Threshold does not have a
correlation to crash risk. The baseline crash rate of 5.12 crashes per
100 Power Units (PUs) is not limited to the Vehicle Maintenance BASIC.
Rather, it applies to any of the seven BASICs that are at or above the
current Intervention Thresholds. Therefore, the 7% increase in crash
rate includes lowering the Vehicle Maintenance BASIC threshold from 80%
to 75%, as well as raising the Intervention Thresholds for the Driver
Fitness, HM Compliance, and Controlled Substances/Alcohol BASICs from
80% to 90%. In addition, FMCSA's SMS Effectiveness Test (ET) results
show that lowering the Intervention Threshold for the Vehicle
Maintenance BASIC will help identify more carriers with higher
correlations to crash rate.\2\ Carriers at or above the current
threshold for this BASIC have a crash rate of 5.78 crashes per 100 PUs.
Lowering the threshold for this BASIC to 75% will include those
carriers, as well as a new set of carriers with a crash rate of 5.61
crashes per 100 PUs. Both of these crash rates are much higher than the
national average of 3.43 crashes per 100 PUs.
---------------------------------------------------------------------------

    \2\ The Carrier Safety Measurement System (CSMS) Effectiveness
Test by Behavior Analysis and Safety Improvement Categories
(BASICs), January 2014, FMCSA, pg. 42. The full report is available
at: http://csa.fmcsa.dot.gov/Documents/CSMS_Effectiveness_Test_Final_Report.pdf.
---------------------------------------------------------------------------

    As for the anonymous commenter's concern about the flatbed bias,
the Agency examined this bias relating to cargo securement violations
in the last set of methodology enhancements. To address this bias, the
Agency replaced the Cargo-Related BASIC with the HM Compliance BASIC.
More information on this enhancement is available in the notice for the
previous methodology changes (77 FR 19298, March 27, 2012) and is also
in docket FMCSA-2012-0074.
    FMCSA values NTSB's concern about the Agency's resources; however,
this change to the Intervention Thresholds will identify a similar
number of carriers for interventions as the current SMS methodology.
Interventions include warning letters, Notices of Claim, Notices of
Violation, and investigations.
    FMCSA acknowledges the concerns raised by AAJ, Advocates, and the
anonymous commenter about the serious risks associated with impaired
driving due to use of controlled substances and alcohol. In response to
these concerns, the Agency conducted additional analysis to determine
the impact of removing the subset of carriers that would no longer be
prioritized under the proposed threshold for the Controlled Substances/
Alcohol BASIC of 90%. Using the SMS ET, the Agency found that carriers
with percentiles in the 80% to 90% range have a crash rate of 1.24
crashes per 100 PUs, which is about one third the crash rate of the
national average of 3.43 crashes per 100 PUs. Based on these results,
the Agency believes that there is no strong evidence to continue
identifying this subset of carriers for interventions. Raising the
Intervention Threshold for the Controlled Substances/Alcohol BASIC will
help to focus the Agency's resources on those carriers with the
greatest safety risk. However, the Agency will continue to assess this
BASIC and review comments and supplemental data to determine the best
path forward.
    Based on IME's request for clarification, the Agency notes that if
the proposed enhancements to the BASIC Intervention Thresholds are
implemented, they will also impact the amendment to the HMSP program's
enforcement policy that became effective August 18, 2015 (80 FR 35253,
June 19, 2015). Carriers are prioritized for these investigations if
they are at or above the Intervention Thresholds for the HM Compliance
BASIC or any other two BASICs over a consecutive two-month period.
Under this proposed enhancement, carriers will be

prioritized based on the proposed thresholds outlined in Table 1 below.

                                           Table 1--Comparison of Current and Proposed Intervention Thresholds
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Current Intervention Thresholds                Proposed Intervention Thresholds
                                                         -----------------------------------------------------------------------------------------------
                          BASIC                              Passenger                        General        Passenger                        General
                                                            carrier (%)   HM carrier (%)    carrier (%)     carrier (%)   HM carrier (%)    carrier (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Unsafe Driving, Crash Indicator, Hours-of-Service (HOS)               50              60              65              50              60              65
 Compliance.............................................
Vehicle Maintenance.....................................              65              75              80              60              70              75
Controlled Substances/Alcohol, Driver Fitness...........              65              75              80              75              85              90
HM Compliance...........................................             N/A              80             N/A             N/A              90             N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------

2. Two Changes to the HM Compliance BASIC
    a. Segmenting the HM Compliance BASIC by CT and non-CT carriers;
and
    b. Releasing motor carrier percentile rankings under the HM
Compliance BASIC to the public.
    David Vargyas, Con-way Freight, and ATA supported the segmentation
of CT and non-CT carriers. ATA noted that ``Under the current
methodology, non-CT carriers often have higher scores not because they
are less safe, but because they have a greater potential for HM
compliance violations than CT carriers.'' ATA noted that the preview
period will allow motor carriers to see how this proposed change will
actually impact them. In addition, several commenters requested
additional information on how CT and non-CT segments are defined.
Advocates requested that the Agency provide analysis to support its
claim that this change will improve the HM Compliance BASIC's ability
to prioritize carriers with HM compliance problems for interventions.
    Con-way Freight did not support making the HM Compliance BASIC
publically available, noting that ``The root cause of the release can
often be attributed to a violation in another BASIC, such as Unsafe
Driving, which has a more significant correlation to crash risk.'' IME
also opposed making the HM Compliance BASIC percentiles available to
the public. However, IME did not provide any new data to support this
position. FedEx stated that ``there other existing flaws with the HM
Compliance BASIC that make the BASIC less than accurate and which
result in biases favoring certain motor carriers over others.'' ATA
``strenuously objects'' to making the BASIC publically available and
noted that ``scores in this category are a reflection of compliance
with HM regulations, many of them relating to paperwork and placarding,
not individual motor carrier crash risk.''
    AAJ supported making the HM Compliance BASIC percentiles publically
available, noting that ``keeping this information accessible to the
motor carrier industry, consumers, and other safety stakeholders will
not only continue to assist people seeking to work with safe carriers,
but will help keep carriers with high crash risks off of the road.''
FMCSA Response
    The Foundational Document provides additional information on how CT
and non-CT segments are defined. It also includes detailed analysis on
this proposed enhancement and its safety impact and can be found at:
https://csa.fmcsa.dot.gov/Documents/SMS-Preview-Foundational-Document.pdf.
    The preview will reflect segmentation within the HM Compliance
BASIC by CT and non-CT carriers and is only available to carriers and
enforcement personnel, not the public. The Agency will consider the
feedback on this issue and will ensure that the display of the HM
Compliance BASIC is in accordance with the FAST Act requirements.
3. Reclassifying Violations for Operating While OOS Under the Unsafe
Driving BASIC Rather Than the BASIC of the Underlying OOS Violation
    Commenters including IME, ATA, Schneider, and ABA approved of
moving operating while OOS violations to the Unsafe Driving BASIC.
These stakeholders maintained that this change will more accurately
reflect the role that unsafe driving behavior plays in the violation of
an OOS Order. However, ATA noted that FMCSA's notice indicated that
adding these violations to the Unsafe Driving BASIC did not change the
average crash rate. Therefore, ATA concluded that this change did not
improve the BASIC's ability to identify unsafe carriers. Advocates also
expressed tentative agreement, noting that the Agency provided no data
or evidence illustrating the impact on the Unsafe Driving and other
BASICs.
FMCSA Response
    FMCSA acknowledges that moving OOS violations to the Unsafe Driving
BASIC will have minimal impact on this BASIC's ability to identify
carriers for interventions. However, the Agency believes that
consolidating these violations in one BASIC will help motor carriers
and enforcement more effectively identify and correct safety problems
related to the violation of an OOS Order.
    FMCSA proposes that this change be implemented retroactively, i.e.,
any such violations from the past 24 months on a carrier's SMS profile
will be moved into the Unsafe Driving BASIC, unless comments during the
preview period present evidence to change the Agency's position.
4. Increasing the Maximum VMT Used in the Utilization Factor To More
Accurately Reflect the Operations of High-Utilization Carriers
    Comments in support of expanding the range over which the
Utilization Factor applied from 200,000 to 250,000 VMT per average PU
were submitted by John Whisnant, ATA, NMFTA, Schneider, NPGA, and ABA.
NMFTA noted that ``The increase should improve the correlation between
the Unsafe Driving and Crash Indicator percentiles and actual crash
risk for these very high utilization-carriers.'' Advocates tentatively
supported this change but requested that the Agency provide more data.
    OOIDA pointed out that this enhancement helps large carriers the
most and that such enhancements are unavailable to small carriers.
Werner felt the notice ``lack[ed] explanation and data to support the
statement, `industry stakeholders noted that the current Utilization
Factor is not accurate for

some companies with extremely high utilization' '' and felt more
information was needed to comment on this proposal.
FMCSA Response
    In regard to OOIDA's concern, this proposed enhancement to the
Utilization Factor will benefit all high-utilization carriers
regardless of their size, as the Utilization Factor is based on the VMT
to average PU ratio, not the number of PUs. This approach allows the
SMS to account for carriers of different sizes and hold them to a
similar standard. As a result, large carriers and small carriers with
high VMT per average PU ratios can receive adjustments that reflect
their increased exposure.

IV. Additional Enhancements

    In addition to the proposed enhancements outlined above, FMCSA
proposes two additional changes based on issues identified and analysis
conducted during the development of the preview. Detailed analysis on
these changes is available in the Foundational Document at: https://csa.fmcsa.dot.gov/Documents/SMS-Preview-Foundational-Document.pdf.
Carriers and other interested stakeholders can review these changes
during the preview and provide any additional comments or analysis for
the Agency to consider in its final decision.

1. Data Sufficiency Standards for the Crash Indicator BASIC

    In response to comments received to the Federal Register Notice of
January 23, 2015, which announced the results of FMCSA's study on the
feasibility of using a motor carrier's role in crashes in the
assessment of the company's safety (80 FR 3719), the Agency conducted
additional analyses. One of the areas reconsidered was the minimum
number of crashes used to establish the data sufficiency standard in
the Crash Indicator BASIC. Currently, the Agency assigns a percentile
to carriers in the Crash Indicator BASIC if they have at least two
reportable crashes in the last two years. The Agency proposes
increasing the minimum number of crashes required for a percentile from
two to three. According to the analysis conducted by FMCSA, the overall
crash rate of the Crash Indicator BASIC remains about the same as the
current Crash Indicator BASIC (6.33 vs. 6.34 crashes per 100 PUs).
While the number of crashes covered under this scenario is lower than
the number of crashes for the current Crash Indicator BASIC (14,838 vs.
15,638 crashes) the results suggest that the proposed change identifies
a similar group of carriers with high crash rates as the current Crash
Indicator BASIC. While this change does not substantively impact the
effectiveness of the Crash Indicator BASIC, the greater data
sufficiency standard of this BASIC would yield greater confidence that
this BASIC is identifying carriers with established patterns of crashes
thereby enabling the Agency to further focus its investigative
resources on carriers with more crash involvement.

2. Carriers With Recent Violations

    Currently, FMCSA assigns percentiles to carriers in the HOS
Compliance, Vehicle Maintenance, HM Compliance, and Driver Fitness
BASICs if they meet the following criteria: The most recent inspection
in the previous 24 months resulted in a violation. Recently, FMCSA
reviewed its data sufficiency standards to make them more effective at
prioritizing carriers that pose the greatest safety risk. Based on this
assessment, the Agency proposes assigning BASIC percentiles only to
carriers that have had an inspection with a violation in the past year.
This change will increase the Agency's focus on carriers with recent
violations and remove carriers with no violations in the past year from
prioritization.
    This change will reduce the number of carriers with a BASIC at or
above the Intervention Threshold. Based on recent SMS results, 1,243
carriers will no longer have a BASIC at or above the threshold as a
result of this change. After analyzing this subset of carriers using
the SMS ET, the Agency found that these carriers have a crash rate that
is 4.8 times lower than the national average (0.71 compared to the
national average of 3.43 crashes per 100 PUs). Therefore, removing
these carriers from prioritization will allow the Agency to focus its
intervention efforts on a set of carriers with a much higher crash rate
of 5.20 crashes per 100 PUs.

V. Preview of Proposed SMS Enhancements

    The preview will be available October 4, 2016, on the Compliance
Safety Accountability (CSA) Web site at: https://csa.fmcsa.dot.gov/SMSPreview/. Motor carriers will be able to log in through the CSA Web
site or the Portal to see how the proposed enhancements may impact
their SMS results. The public will also be able to view the
enhancements using example carriers. To support the preview, FMCSA will
hold a series of Q&A sessions for the industry and the public, where
participants will be able to ask questions about the proposed changes
and receive real-time responses. Before the Q&A sessions, participants
can view a video presentation outlining the proposed enhancements and
how to use the preview site and review slides and a transcript of that
presentation. All of these reference materials are available in the SMS
Preview Help Center at: https://csa.fmcsa.dot.gov/SMSPreview/HelpCenter/Index.aspx. Each session will end once all questions have
been answered. All sessions will have closed captioning. The sessions
are scheduled for the following dates and times:

1. Wednesday, October 12, 2016, 10:00-11:30 a.m. Eastern Time (ET)
2. Thursday, October 13, 2016, 2:00-3:30 p.m. ET
3. Tuesday, October 18, 2016, 3:00-4:30 p.m. ET
4. Thursday, October 20, 2016, 11:00 a.m.-12:30 p.m. ET

    FMCSA encourages all stakeholders to participate in these Q&A
sessions and submit questions ahead of time via the CSA Feedback form
at: https://csa.fmcsa.dot.gov/CSA_feedback.aspx?defaulttag=SMSPREVIEWQA. Interested parties should
register for one of these sessions through FMCSA's National Training
Center at: https://connectdotcqpub1.connectsolutions.com/content/connect/c1/7/en/events/catalog.html?folder-id=1124233886.

VI. Request for Comments

    FMCSA requests additional comments on the proposed SMS enhancements
outlined above. Commenters are requested to provide supporting data
wherever appropriate.

    Issued on: September 30, 2016.
T.F. Scott Darling, III,
Administrator.
[FR Doc. 2016-24114 Filed 10-4-16; 8:45 am]
 BILLING CODE 4910-EX-P


[Federal Register Volume 86, Number 163 (Thursday, August 26, 2021)]
[Notices]
[Pages 47703-47704]
[FR Doc No: 2021-18389]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

[Summary Notice No.--2022-2114]

Petition for Exemption; Summary of Petition Received; UPS Flight
Forward, Inc.

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

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: This notice contains a summary of a petition seeking relief
from specified requirements of Federal Aviation Regulations. The
purpose of this notice is to improve the public's awareness of, and
participation in, FAA's exemption process. Neither publication of this
notice nor the inclusion nor omission of information in the summary is
intended to affect the legal status of the petition or its final
disposition.

DATES: Comments on this petition must identify the petition docket
number and must be received on or before September 15, 2021.

ADDRESSES: Send comments identified by docket number FAA-2019-0652
using any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov and follow the online instructions for sending your
comments electronically.
     Mail: Send comments to Docket Operations, M-30; U.S.
Department of Transportation, 1200 New Jersey Avenue SE, Room W12-140,
West Building Ground Floor, Washington, DC 20590-0001.
     Hand Delivery or Courier: Take comments to Docket
Operations in Room W12-140 of the West Building Ground Floor at 1200
New Jersey Avenue SE, Washington, DC 20590-0001, between 9 a.m. and 5
p.m., Monday through Friday, except Federal holidays.
     Fax: Fax comments to Docket Operations at<PHONE_NUMBER>.
    Privacy: In accordance with 5 U.S.C. 553(c), DOT solicits comments
from the public to better inform its rulemaking process. DOT posts
these comments, without edit, including any personal information the
commenter provides, to http://www.regulations.gov, as described in the
system of records notice (DOT/ALL-14 FDMS), which can be reviewed at
http://www.dot.gov/privacy.
    Docket: Background documents or comments received may be read at
http://www.regulations.gov at any time. Follow the online instructions
for accessing the docket or go to the Docket Operations in Room W12-140
of the West Building Ground Floor at 1200 New Jersey Avenue SE,
Washington, DC 20590-0001, between 9 a.m. and 5 p.m., Monday through
Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Nia Daniels,<PHONE_NUMBER>, Office of
Rulemaking, Federal Aviation Administration, 800 Independence Avenue
SW, Washington, DC 20591.
    This notice is published pursuant to 14 CFR 11.85.

    Issued in Washington, DC.
Angela O. Anderson,
Director, Regulatory Support Division, Office of Rulemaking.

Petition for Exemption

    Docket No.: FAA-2019-0652.
    Petitioner: UPS Flight Forward, Inc.
    Sections of 14 CFR Affected: 91.205(c)(2) and (3).
    Description of Relief Sought: UPS Flight Forward, Inc. (UPS FF)
seeks an amendment to its current exemption from Title 14 Code of
Federal Regulations to include an exemption from Sec.  91.205(c)(2) and
(3), equipment requirements for visual flight rules night operations
with regard to position lights. UPS Flight Forward asserts that during
operations between periods of civil twilight the aircraft will utilize
lighted anti-collision lighting visible for at least 3 statute miles
having a flash rate sufficient to avoid a collision and that these
lights are sufficient to provide the same or greater level of safety
for flights under 400 ft.

[FR Doc. 2021-18389 Filed 8-25-21; 8:45 am]
BILLING CODE 4910-13-P


[Federal Register: July 18, 2006 (Volume 71, Number 137)]
[Notices]
[Page 40762-40766]
[DOCID:fr18jy06-90]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54134; File No. SR-NASD-2005-079]

Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Notice of Filing of Amendments Nos. 1, 2 and 3 to
Proposed Rule Change To Revise Rule 10322 of the NASD Code of
Arbitration Procedure Which Pertains to Subpoenas and the Power To
Direct Appearances

July 12, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on March 29, 2006, May 12, 2006, and July 7, 2006,
the National Association of Securities Dealers, Inc. (``NASD'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
Amendments Nos. 1, 2, and 3, respectively, to the proposed rule change,
as described in Items I, II, and III below, which Items have been
prepared by NASD. On June 17, 2005, the NASD filed with the Commission
the proposed rule change. On July 13, 2005, the Commission published
for comment the proposed rule change in the Federal Register.\3\ NASD
filed Amendments Nos. 1, 2, and 3 to respond to the comments received,
after the publication of the proposed rule change in the Federal
Register, and to make revisions to the rule change as described
herein.\4\ The Commission is

publishing this notice to solicit comments on the proposed rule change,
as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 51981 (July 6, 2005), 70
FR40411 (July 13, 2005).
    \4\ Amendment No. 1 addresses comment letters received by the
Commission in response to the publication of the proposed rule
change in the Federal Register (for initial notice of proposed rule
change see Securities Exchange Act Release No. 51981 (July 6, 2005),
70 FR 40411 (July 13, 2005)) and proposes certain amendments in
response to these comments, including requiring that all subpoenas
be issued by an arbitrator. Amendment No. 2 revises the regulation
text and certain sections of the rule filing in order to clarify the
process for issuing a subpoena to both parties and non-parties.
Amendment No. 3 revises Amendment No. 2 to clarify current practice
for deciding discovery-related motions.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    NASD is proposing to revise Rule 10322 of the NASD Code of
Arbitration Procedure (``Code''), which pertains to subpoenas and the
power to direct appearances. Below is the text of the proposed rule
change.\5\ Proposed new language is Italic and proposed deletions are
in brackets.
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    \5\ The rules proposed in this filing will be renumbered as
appropriatefollowing Commission approval of the pending revisions to
the NASD Code of Arbitration Procedure for Customer Disputes; see
Securities Exchange Act Release No. 51856 (June 15, 2005), 70 FR
36442 (June 23, 2005) (SR-NASD-2003-158); and the NASD Code of
Arbitration Procedure for Industry Disputes; see Securities Exchange
Act Release No. 51857 (June 15, 2005), 70 FR 36430 (June 23, 2005)
(SR-NASD-2004-011).
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* * * * *

10322. Subpoenas and Power to Direct Appearances

    (a) [Subpoenas]
    To the fullest extent possible, parties should produce documents
and make witnesses available to each other without the use of
subpoenas. [The] [a]Arbitrators [and any counsel of record to the
proceeding] shall have the [power of the subpoena process as provided
by law. All parties shall be given a copy of a subpoena upon its
issuance. Parties shall produce witnesses and present proofs to the
fullest extent possible without resort to the subpoena process.]
authority to issue subpoenas for the production of documents or the
appearance of witnesses.
    (b) A party may make a written motion requesting that an arbitrator
issue a subpoena to a party or a non-party. The motion must include a
draft subpoena and must be filed with the Director, with an additional
copy for the arbitrator. The requesting party must serve the motion and
draft subpoena on each other party, at the same time and in the same
manner as on the Director. The requesting party may not serve the
motion or draft subpoena on a non-party.
    (c) If a party receiving a motion and draft subpoena objects to the
scope or propriety of the subpoena, that party shall, within 10 days of
service of the motion, file written objections with the Director, with
an additional copy for the arbitrator, and shall serve copies on all
other parties at the same time and in the same manner as on the
Director. The party that requested the subpoena may respond to the
objections. The arbitrator responsible for deciding discovery-related
motions shall rule promptly on the issuance and scope of the subpoena
regardless of whether any objections are made.
    (d) If the arbitrator issues a subpoena, the party that requested
the subpoena must serve the subpoena at the same time and in the same
manner on all parties and, if applicable, on any non-party receiving
the subpoena.
    (e) Any party that receives documents in response to a subpoena
served on a non-party shall provide notice to all other parties within
five days of receipt of the documents. Thereafter, any party may
request copies of such documents and, if such a request is made, the
documents must be provided within 10 days following receipt of the
request. The party requesting the documents shall be responsible for
the reasonable costs associated with the production of the copies.
    [(b) Power to Direct Appearances and Production of Documents]
    (f) [The] An arbitrator[(s)] shall be empowered without resort to
the subpoena process to direct the appearance of any person employed by
or associated with any member of the Association and/or the production
of any records in the possession or control of such persons or members.
Unless [the] an arbitrator[(s)] directs otherwise, the party requesting
the appearance of a person or the production of documents under this
Rule shall bear all reasonable costs of such appearance and/or
production.
* * * * *

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

    In its filing with the Commission, NASD 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 III below. NASD 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

Proposal

    As described in the original rule filing, NASD proposed to revise
Rule 10322 of the Code to provide for a 10-day notice requirement
before a party issues a subpoena to a non-party for pre-hearing
discovery. In addition, NASD proposed clarifying the requirements
regarding the service of subpoenas by specifying that a party that
issues a subpoena must serve a copy of the subpoena to all parties and
the entity receiving the subpoena on the same day.
    NASD is amending the proposal set forth in the original rule filing
to allow only arbitrators to issue subpoenas for both parties and non-
parties, whether for discovery or for the appearance at a hearing
before the arbitrators. In addition, NASD is proposing to require a
party to provide notice to all other parties that it has received
documents in response to a non-party subpoena and to provide copies of
those documents at the request of another party. NASD is also
clarifying that, in most cases, a public arbitrator will rule on all
motions requesting a subpoena. Lastly, NASD is proposing some minor
changes to the original proposal, including rewriting certain portions
of the rule text in plain English.

Comments on the Proposed Rule Change

    The Commission received 12 comment letters in response to the
publication of the proposed rule in the Federal Register.\6\ NASD's
response to the issues raised in these letters is set forth below.
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    \6\ Comment letters (``Comment Letters'') were submittedby
Richard Skora, dated July 12, 2005 (``Skora Letter''); Seth E.
Lipner, Deutsch & Lipner, dated July 13, 2005 (``Lipner Letter'');
Steve Buchwalter, Law Offices of Steve A. Buchwalter, P.C., dated
July 13, 2005 (``Buchwalter Letter''); Steven B. Caruso, Maddox
Hargett & Caruso, P.C., dated July 19, 2005 (``Caruso Letter'');
Dennis M. Pape, dated July 20, 2005 (``Pape Letter''); Al Van
Kampen, Rohde & Van Kampen PLLC, dated July 25, 2005 (``Van Kampen
Letter''); Phil Cutler, Cutler Nylander & Hayton, dated August 1,
2005 (``Cutler Letter''); Avery B. Goodman, A.B. Goodman Law Firm,
Ltd., dated August 1, 2005 and August 2, 2005 (``Goodman Letters'');
Jill Gross, Director, Barbara Black, Director, and Richard Downey,
Student Intern, Pace Investor Rights Project, dated August 2, 2005
(``Gross Letter''); Tim Canning, dated August 3, 2005 (``Canning
Letter''); and Rosemary J. Shockman, President, Public Investors
Arbitration Bar Association, dated August 4, 2005 (``Shockman
Letter'').
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    Several commenters to NASD's proposal stated that only arbitrators
should have the authority to issue subpoenas in arbitration.\7\ Some of
these commenters believed that this limitation should apply only to
discovery subpoenas while other commenters suggested that it apply to
all subpoenas. In support of their position, a number of these
commenters noted that the Federal

Arbitration Act (``FAA'') provides only arbitrators, and not attorneys,
with the authority to issue subpoenas.\8\ Furthermore, one commenter
noted that only arbitrators have the authority to issue subpoenas under
the Uniform Arbitration Act and the Revised Uniform Arbitration Act.\9\
Lastly, two commenters noted that, under the laws of several states,
attorneys do not have the authority to issue subpoenas.\10\
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    \7\ See Lipner, Buchwalter, Van Kampen, Canning, and Shockman
Letters.
    \8\ There is a split of opinion among the federal appellate
courts as towhether arbitrators may issue discovery subpoenas or
only subpoenas for attendance or production of documents at a
hearing. Compare In re Matter of Arbitration Between Security Life
Ins. Co. of America, 228 F.3d 865, 870-871 (8th Cir. 2000)
(``Although the efficient resolution of disputes through arbitration
necessarily entails a limited discovery process, we believe this
interest in efficiency is furthered by permitting a party to review
and digest relevant documentary evidence prior to the arbitration
hearing. We thus hold that implicit in an arbitration panel's power
to subpoena relevant documents for production at a hearing is the
power to order the production of relevant documents for review by a
party prior to the hearing.'') with Hay Group, Inc. v. E.B.S.
Acquisition Corp., 360 F.3d 404, 407 (3rd Cir. 2004) (``The power to
require a non-party `to bring' items `with him' clearly applies only
to situations in which the non-party accompanies the items to the
arbitration proceeding, not to situations in which the items are
simply sent or brought by a courier. In addition * * * a non-party
may be compelled `to bring' items `with him' only when the non-party
is summoned `to attend before [the arbitrator] as a witness.' '').
Furthermore, while the Fourth Circuit, like the Third Circuit, found
that the FAA does not grant an arbitrator the authority to subpoena
a non-party for purposes of pre-hearing discovery, it did establish
the possibility that a party might, ``under unusual circumstances,''
petition the district court to compel pre-arbitration discovery upon
a showing of ``special need or hardship.'' Comsat Corp. v. Nat'l
Science Found., 190 F.3d 269 (4th Cir. 1999).
    \9\ See Lipner Letter.
    \10\ See Lipner Letter and Van Kampen Letter.
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    NASD has determined that the proposed rule should be revised to
allow only arbitrators to issue subpoenas to both parties and non-
parties, whether for discovery or for the appearance at a hearing
before the arbitrators, but for reasons other than those suggested by
the commenters. NASD believes that providing arbitrators with greater
control over the issuance of subpoenas will help to protect investors,
associated persons, and other parties from abuse in the discovery
process. In addition, the establishment of a uniform, nationwide rule
will reduce potential confusion for parties and their counsel regarding
whether they have the ability to issue subpoenas, minimize gamesmanship
in the subpoena process, and make the rule easier to administer.
    Under current practice, the arbitrator responsible for deciding
discovery-related motions typically is the chairperson of the panel.
Thus, except in certain intra-industry cases or unless the public
customer agrees otherwise, the arbitrator ruling on a motion requesting
a subpoena will be a public arbitrator.\11\ In those situations where
the chairperson is unable to rule promptly on the motion for a
subpoena, another public arbitrator on the panel shall decide the
motion except when the public customer agrees otherwise.\12\ A non-
public arbitrator will rule on a motion requesting a subpoena only in
those intra-industry cases where the panel is composed exclusively of
non-public arbitrators or where the public customer agrees
otherwise.\13\ Additionally, the arbitrator responsible for deciding
discovery-related motions may elect to refer any discovery-related
issue to the full panel.\14\ NASD has proposed to codify the current
practice described above in the pending revisions to the NASD Code of
Arbitration Procedure for Customer Disputes \15\ and the NASD Code of
Arbitration Procedure for Industry Disputes.\16\
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    \11\ See NASD Rules 10308(c)(5) and 10321(e).
    \12\ See NASD Rule 10321(e).
    \13\ See NASD Rule 10321(e).
    \14\ See NASD Rule 10321(e).
    \15\ See Securities Exchange Act Release No. 51856 (June 15,
2005), 70 FR 36442 (June 23, 2005) (SR-NASD-2003-158).
    \16\ See Securities Exchange Act Release No. 51857 (June 15,
2005), 70 FR 36430 (June 23, 2005) (SR-NASD-2004-011).
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    One commenter who does not support the proposed rule change stated
that arbitrators should be required to give written explanations of all
discovery decisions.\17\ In addition, this commenter indicated that
NASD should enforce current Rule 10322 with respect to the requirement
that parties produce witnesses and present documents to the fullest
extent possible without resort to the subpoena process.
---------------------------------------------------------------------------

    \17\ See Skora Letter.
---------------------------------------------------------------------------

    NASD disagrees that arbitrators should be required to give written
explanations of all discovery decisions, because such a requirement
would significantly increase the time and costs associated with the
discovery process. Furthermore, NASD believes that this issue is
outside the scope of this rulemaking.\18\ With respect to the
commenter's assertion regarding the enforcement of Rule 10322, NASD
does expect all parties to cooperate to the fullest extent possible
without the use of subpoenas, and arbitrators may sanction parties for
discovery abuse or make a disciplinary referral, as appropriate, at the
end of the case if such cooperation is not provided.
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    \18\ Telephone conversation between Jean I. Feeney, Vice
President and Chief Counsel, Dispute Resolution, NASD, and Lourdes
Gonzalez, Assistant Chief Counsel, Division of Market Regulation,
Commission, (May 1, 2005).
---------------------------------------------------------------------------

    One commenter suggested several changes to the proposed rule.\19\
First, the commenter stated that the term ``fullest'' (which is in
current Rule 10322) should be included in paragraph (a) of the proposed
rule to ensure that parties do not avoid their discovery
responsibilities in arbitration. Second, the commenter asserted that
the proposal should specify that service of a subpoena must be made in
precisely the same manner on everyone. Third, the commenter indicated
that a party that receives documents in response to a non-party
subpoena should be required to provide copies of the documents to
opposing counsel within five calendar days of receipt of the documents.
---------------------------------------------------------------------------

    \19\ See Caruso Letter.
---------------------------------------------------------------------------

    NASD agrees with this commenter that the term ``fullest'' should be
added in paragraph (a) of the rule to emphasize that, to the fullest
extent possible, parties should produce documents and make witnesses
available to each other without the use of subpoenas. NASD also agrees
that the method of service of a subpoena should be the same on all
parties and the non-party receiving the subpoena and proposes to amend
paragraph (d) of the rule to reflect this requirement. Lastly, NASD
agrees that documents received in response to a non-party subpoena
should be made available to other parties. NASD does not believe,
however, that a party that receives documents in response to a non-
party subpoena should be required automatically to provide copies to
another party, which may have no interest in them or may not want to
incur potentially significant copying costs. Therefore, NASD proposes
to require a party to provide notice to all other parties that it has
received documents in response to a non-party subpoena and to provide
copies of those documents at the request of another party.\20\ Once a
party receives a request for copies of documents that were received in
response to a non-party subpoena, that party will have ten calendar
days to provide the copies to the requesting party. NASD believes that
a ten calendar day time frame is more appropriate than the one
suggested by the commenter because it will allow enough time to copy a
potentially voluminous amount of records, and it is also a time frame
that is frequently used in the proposed Code revision.
---------------------------------------------------------------------------

    \20\ A party would have five calendar days after the receipt
ofsubpoenaed documents from a non-party to provide notice to all
other parties.

---------------------------------------------------------------------------

    One commenter who does not support the rule proposal indicated that
it would, in effect, only impact member firms since customers rarely
need documents from non-parties in arbitration.\21\ In addition, this
commenter expressed concern that arbitrators will not review subpoenas
promptly.
---------------------------------------------------------------------------

    \21\ See Pape Letter.
---------------------------------------------------------------------------

    NASD disagrees with this commenter. The proposed rule will apply
equally to all parties that use NASD's forum. Even though broker-
dealers may use non-party subpoenas more often than do customers or
associated persons, the proposed rule will be applied to all parties
equally, thereby ensuring that NASD's forum is fair for everyone. NASD
does not believe that the proposal will significantly delay the
discovery process, as arbitrators will receive training specifically
addressing subpoenas in the event that the SEC approves the proposed
rule change. Furthermore, parties that volunteer to use NASD's
discovery arbitrator pilot program may recognize a further reduction in
the time needed for the review of subpoenas, especially in complex
cases that involve numerous subpoenas.
    One commenter, who supports the proposal, raised an issue that was
not addressed in the original rule filing.\22\ This commenter stated
that NASD should revise Rule 10322 to establish a witness fee for non-
parties and to prevent employees of a party from being reimbursed by an
opposing party for testifying.
---------------------------------------------------------------------------

    \22\ See Goodman Letter.
---------------------------------------------------------------------------

    NASD disagrees with this commenter because the reimbursement of
witnesses for testifying at a hearing historically has not been a
significant issue in NASD's forum. Consequently, NASD is only proposing
non-substantive changes to the paragraph of the rule addressing costs
involving the appearance of witnesses or the production of documents.
    One commenter supports the rule, but indicates that parties should
be given at least ten days to oppose the issuance of a subpoena.\23\
This commenter also stated that a non-party subpoena should be issued
only if the documents relate to the matter in controversy and are not
available from the parties.
---------------------------------------------------------------------------

    \23\  See Canning Letter.
---------------------------------------------------------------------------

    NASD notes that a provision giving ten days to object to the
issuance of a subpoena is contained in the amended rule proposal.
Arbitrators will use their discretion to determine whether to issue a
subpoena, or whether to limit the scope of a subpoena before it is
issued.
    Lastly, NASD notes that some issues raised by several commenters,
such as the issuance of a subpoena by an attorney before a panel has
ruled on an objection to the subpoena, are not addressed herein as they
became moot as a result of the revisions to the amended rule proposal
discussed above.\24\
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    \24\ See Lipner, Caruso, Gross, Canning, and Shockman Letters.
---------------------------------------------------------------------------

2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act, which requires, among other
things, that NASD's rules be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. NASD believes that the proposed rule will make the
arbitration subpoena process more orderly and efficient, thereby
improving the forum for all parties.

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

    NASD does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.

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

    Written comments on the proposed changes in the initial rule filing
were solicited by the Commission in response to the publication of SR-
NASD-2005-079, which proposed to amend Rule 10322 of the NASD Code of
Arbitration Procedure primarily to provide for a 10-day notice
requirement before a party issues a subpoena to a non-party for pre-
hearing discovery.\25\ The Commission received 12 comment letters in
response to the Federal Register publication of SR-NASD-2005-079.\26\
The comments are summarized above.
---------------------------------------------------------------------------

    \25\ See Securities Exchange Act Release No. 51981, supra note
3.
    \26\ See Comment Letters, supra note 6.
---------------------------------------------------------------------------

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

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

IV. Solicitation of Comments

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

Electronic Comments

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

File Number SR-NASD-2005-079 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASD-2005-079. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, all

written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549. Copies of such filing will also be available for
inspection and copying at the principal office of NASD. 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 the File Number SR-NASD-2005-079 and should
be submitted on or before August 8, 2006.

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-11325 Filed 7-17-06; 8:45 am]

BILLING CODE 8010-01-P