[Federal Register Volume 77, Number 127 (Monday, July 2, 2012)]
[Proposed Rules]
[Pages 39194-39201]
[FR Doc No: 2012-16009]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 120

[Docket No.: FAA-2012-0688; Notice No. 12-04]
RIN 2120-AK01

Combined Drug and Alcohol Testing Programs

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: This rulemaking would allow air carrier operators and commuter
or on-demand operators that also conduct commercial air tour operations
to combine the drug and alcohol testing required for each operation
into one testing program. The current rule requires those operators to
conduct separate testing programs for their air

tour operations. This results in an unnecessary duplication of effort.
The intended effect of this rulemaking is to decrease operating costs
by eliminating the requirement for duplicate programs while maintaining
the level of safety intended by the current drug and alcohol testing
regulations. This proposal would also clarify existing instructions
within the rule, correct an inadvertent typographical error, clarify an
existing requirement by rearranging its numerical order, and remove
language that describes a practice that has been discontinued.

DATES: Send comments on or before August 31, 2012.

ADDRESSES: Send comments identified by docket number FAA-2012-0688
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 (DOT), 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, between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays.
     Fax: Fax comments to Docket Operations at<PHONE_NUMBER>.
    Privacy: The FAA will post all comments it receives, without
change, to http://www.regulations.gov, including any personal
information the commenter provides. Using the search function of the
docket Web site, anyone can find and read the electronic form of all
comments received into any FAA docket, including the name of the
individual sending the comment (or signing the comment for an
association, business, labor union, etc.). DOT's complete Privacy Act
Statement can be found in the Federal Register published on April 11,
2000 (65 FR 19477-19478), as well as at http://DocketsInfo.dot.gov.
    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, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays.

FOR FURTHER INFORMATION CONTACT: For technical questions concerning
this action, contact Rafael Ramos, Office of Aerospace Medicine, Drug
Abatement Division, AAM-800, Federal Aviation Administration, 800
Independence Avenue SW., Washington, DC 20591; telephone (202) 267-
8442; facsimile<PHONE_NUMBER>; email<EMAIL_ADDRESS>    For legal questions concerning this action, contact Neal O'Hara,
Attorney, Regulations Division, AGC-240, Federal Aviation
Administration, 800 Independence Avenue SW., Washington, DC 20591;
telephone<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Authority for This Rulemaking

    The FAA's authority to issue rules on aviation safety is found in
Title 49 of the United States Code. Subtitle I, Section 106 describes
the authority of the FAA Administrator. Subtitle VII, Aviation
Programs, describes in more detail the scope of the Agency's authority.
    This rulemaking is promulgated under the authority described in
Subtitle VII, Part A Chapter 451, Section 45102--Alcohol and Controlled
Substances Testing. Under that section, the FAA is charged with
prescribing regulations for air carriers to establish and to conduct
pre-employment, reasonable suspicion, random and post-accident drug and
alcohol testing. Parts of this rule, for example those sections dealing
with contract air traffic controllers, were promulgated under the FAA's
general rulemaking authority in 40 U.S.C. 44701(a)(5). This regulation
is within the scope of that authority.

I. Overview of Proposed Rule

    Some part 121 air carrier operators and part 135 flight-for-hire
and on-demand operators also conduct commercial air tours. Parts 121
and 135 each contain requirements for drug and alcohol testing and,
until 2007, commercial air tour operators were required to be tested
for drugs and alcohol under those parts.
    In 2007, the National Air Tour Safety Standards rule (72 FR 6884,
February 13, 2007) established a separate subpart in part 91 to govern
commercial air tour operators. That rule contained requirements for
drug and alcohol testing for commercial air tour operations that were
separate from, and in addition to the testing required by parts 121 and
135. This proposal is intended to give part 121 and 135 operators with
commercial air tour operations the option of administering one drug and
alcohol testing program for both operations. The intent of this action
is to lessen the administrative burden on such operators. In addition,
this rulemaking would make it clear that operators must obtain a Letter
of Authorization from the local Flight Standards District Office in
order to conduct air tour operations. It would correct the omission of
a reference indicating that on-duty use of alcohol is grounds for
permanent disqualification from service. That reference was
inadvertently left out of the May 2009 Drug and Alcohol Testing Program
final rule. This rulemaking would reorganize existing rule text to
alleviate any confusion about the requirement that supervisory
training, as well as employee training, must be documented as part of
each employer's employee assistance program (EAP). Finally, this
rulemaking would make it clear that the agency's practice of approving
the employer's drug and alcohol testing plan has been discontinued

II. Background

    On May 14, 2009, the FAA published a final rule titled ``Drug and
Alcohol Testing Program'' (74 FR 22653) that moved the drug and alcohol
testing regulations into a new part 120.
    Part 120 of Title 14 prescribes, in pertinent part, a drug and
alcohol testing program designed to prevent accidents and injuries that
result from the use of prohibited drugs and the misuse of alcohol.
Specifically, the rule requires implementation of a drug and alcohol
testing program by three groups of operators:
    [ssquf] Part 119 certificate holders authorized to conduct part 121
operations.
    [ssquf] Part 119 certificate holders authorized to conduct 135
operations.
    [ssquf] Air Tour operators defined in Sec.  91.147.
    These requirements are meant to ensure that any person who performs
safety-sensitive functions, directly or by contract (including
subcontractor at any tier), is subject to drug and alcohol testing.
    Under the current rules, operators who are conducting part 121 or
part 135 operations and also conducting commercial air tour operations
must implement separate drug and alcohol testing programs as if each
operation is conducted by different companies. These operators are
petitioning the FAA for exemption from the requirement to maintain two
drug and alcohol testing programs. They are asking to have a single
FAA-regulated drug and alcohol testing program because having two such
programs often requires testing the same employees twice. This
duplication of testing unnecessarily adds administrative and financial
burdens for the operator. The operators also suggest that the
additional burden of

maintaining two separate testing programs yields no corresponding
increase in safety for the public.
    Between 2008 and 2010 the FAA has granted approximately 50
exemptions allowing operators to implement a single testing program.
Given the large number of exemptions that the Agency has granted, the
FAA believes it is appropriate to simply amend the existing rule. This
approach relieves operators from seeking an operator-specific
exemption. In granting these exemptions, the FAA has recognized that in
most cases, the same employees and equipment are used interchangeably
between the part 121 or 135 operation and commercial air tour
operation. Therefore, the FAA has found that when a part 119
certificate holder operates both a part 121 or a part 135 operation and
a Sec.  91.147 air tour operation, combining the two testing programs
maintains a level of safety equivalent to that provided by the current
regulations. Under one testing program employees are still subject to
drug and alcohol testing in accordance with part 120.

III. Discussion of the Proposal

    This proposal would give part 121 and 135 operators the option to
combine the drug and alcohol testing programs for a part 121 or part
135 operation with the program for a part 91 commercial air tour
operation. It is expected that this proposal would relieve the existing
regulatory burden of requiring a part 121 or 135 operator to maintain a
separate testing program for its part 91 commercial air tour operation.
We believe that this will have a positive economic impact.
    This proposal would amend Sec. Sec.  120.117 and 120.225 to give a
part 121 or part 135 operator the option of including its commercial
air tour operation employees under Sec.  91.147 in a combined drug and
alcohol testing program.
    The removal of duplicate testing requirements would eliminate an
unnecessary financial burden for the operators while still ensuring the
level of safety required by the current rules. This proposal would also
benefit such operators by eliminating the need to request an exemption
from the FAA to combine drug and alcohol testing programs.
    The part 121 or 135 operator is ultimately responsible for
compliance with all requirements of part 120 for both the air carrier
and air tour operations. For example, under a combined program, if the
Sec.  91.147 air tour operator hires a new pilot to conduct only air
tour operations, and the operator fails to conduct the pre-employment
drug test, the part 121 or part 135 operator will be responsible for
the error. Any civil penalties for regulatory violations will be
assessed at the part 121 or part 135 operator level, not at the level
for a part 91 air tour operator. The part 121 or 135 air operator would
be responsible for and would accept all compliance responsibility,
regardless of the type of operation, when choosing to combine testing
programs. This is consistent with the exemptions issued to part 119
certificate holders allowing them to combine their part 121 or part 135
operation drug and alcohol testing program with their Sec.  91.147 air
tour drug and alcohol testing program.
    Current Sec.  91.147 specifies that operators intending to begin
commercial air tour operations must obtain a Letter of Authorization.
The current Sec.  120.117, which contains the drug and alcohol testing
requirements that apply to air tour operations, refers to a need for
operators intending to begin commercial air tours to ``register with
the FAA''. This proposal would change that reference in Sec.  120.117
to ``Obtain a Letter of Authorization'' in order to align it with the
wording of Sec.  91.147 and clarify the requirements--to make it clear
that operators must obtain a Letter of Authorization from their local
Flight Standards District Office if they intend to begin commercial air
tour operations. This correction would provide clarity to such
operators in the process of implementing their drug and alcohol testing
program.
    Finally, other errors in the Agency's 2009 Drug and Alcohol Testing
Program final rule have been brought to our attention. In Sec.
120.221(b), ``(c)'' was inadvertently omitted in the reference to
Sec. Sec.  120.19 and 120.37. The omitted reference would indicate that
one occurrence of on-duty alcohol use as described in Sec. Sec.
120.19(c) and 120.37(c) carries the consequence of permanent
disqualification from service. We are proposing to correct this error.
Additionally, when we combined part 121 appendices I and J to form part
120, we renumbered the requirements. This reorganization has created
some confusion. The requirement remains such that employers must
include documentation of the training given to both supervisors and
employees in their employee assistance programs. However, the
requirements are currently numbered in such a way that it appears that
employers need only retain employee training records. We propose to
reorder the wording to make the requirement clear that supervisory
training must be documented as well. Finally, in 2004, we discontinued
the practice of approving drug and alcohol testing plans. That language
was never removed from the Code of Federal Regulations. However, we are
proposing to remove it now.

IV. Regulatory Notices and Analyses

Introduction

    Changes to Federal regulations must undergo several economic
analyses. First, Executive Order 12866 and Executive Order 13563 direct
that each Federal agency shall propose or adopt a regulation only upon
a reasoned determination that the benefits of the intended regulation
justify its costs. Second, the Regulatory Flexibility Act of 1980 (Pub.
L. 96-354) requires agencies to analyze the economic impact of
regulatory changes on small entities. Third, the Trade Agreements Act
(Pub. L. 96-39) prohibits agencies from setting standards that create
unnecessary obstacles to the foreign commerce of the United States. In
developing U.S. standards, this Trade Act requires agencies to consider
international standards and, where appropriate, that they be the basis
of U.S. standards. Fourth, the Unfunded Mandates Reform Act of 1995
(Pub. L. 104-4) requires agencies to prepare a written assessment of
the costs, benefits, and other effects of proposed or final rules that
include a Federal mandate likely to result in the expenditure by State,
local, or tribal governments, in the aggregate, or by the private
sector, of $100 million or more annually (adjusted for inflation with
base year of 1995). This portion of the preamble summarizes the FAA's
analysis of the economic impacts of this proposed rule.

Regulatory Evaluation

    Department of Transportation Order DOT 2100.5 prescribes policies
and procedures for simplification, analysis, and review of regulations.
If the expected cost impact is so minimal that a proposed or final rule
does not warrant a full evaluation, this order permits that a statement
to that effect and the basis for it be included in the preamble if a
full regulatory evaluation of the cost and benefits is not prepared.
Such a determination has been made for this proposed rule. The
reasoning for this determination follows:
    (1) The proposed rule is voluntary. It does not impose new
regulatory requirements. For entities that choose to follow this
proposed rule, it is likely that regulatory requirements and costs
would be reduced.
    (2) The proposed rule is not an economically ``significant
regulatory

action'' as defined in section 3(f) of Executive Order 12866;
    (3) The proposed rule would not have a significant economic impact
on a substantial number of small entities;
    (4) The proposed rule would not have a significant effect on
international trade; and
    (5) The proposed rule would not impose an unfunded mandate on
state, local, or tribal governments, or on the private sector by
exceeding the monetary threshold identified.
    This rulemaking would allow part 119 certificate holders with
operations under part 121 or 135 who also conduct commercial air tour
operations under Sec.  91.147 to combine drug and alcohol testing
programs. The current rule requires the part 121 operator or part 135
operators to conduct a separate testing program for its air tour
operations resulting in an unnecessary duplication of effort. The
intended effect of this rulemaking is to decrease operating costs by
eliminating the requirement of duplicate programs while maintaining the
level of safety required by the current drug and alcohol testing
regulations. In addition, this rulemaking would allow the agency to
clarify that air tour operators must obtain a Letter of Authorization
from the local Flight Standards District Office. This rulemaking would
allow the agency to address the omission of a reference indicating that
on-duty use of alcohol is grounds for permanent disqualification from
service. The reference was inadvertently omitted from the May 2009 Drug
and Alcohol Testing Program final rule. This rulemaking would also
allow the agency to clarify the requirement that documentation of both
employee training as well as supervisory training must be a component
of each employer's employee assistance program (EAP). Finally, this
rulemaking would make it clear that the practice of agency approval of
the employer's drug and alcohol testing plan has been discontinued.
    Although the FAA cannot quantify the benefits of the proposed rule,
the FAA believes that the cost savings associated with reducing the
costs of compliance could be significant. The FAA therefore believes
that the proposed rule would be cost beneficial.

Regulatory Flexibility Determination

    The Regulatory Flexibility Act of 1980 (RFA) establishes ``as a
principle of regulatory issuance that agencies shall endeavor,
consistent with the objective of the rule and of applicable statutes,
to fit regulatory and informational requirements to the scale of the
businesses, organizations, and governmental jurisdictions subject to
regulation.'' To achieve that principle, the RFA requires agencies to
solicit and consider flexible regulatory proposals and to explain the
rationale for their actions. The RFA covers a wide-range of small
entities, including small businesses, not-for-profit organizations and
small governmental jurisdictions.
    Agencies must perform a review to determine whether a proposed or
final rule will have a significant economic impact on a substantial
number of small entities. If the agency determines that it will, the
agency must prepare a regulatory flexibility analysis as described in
the Act.
    However, if an agency determines that a proposed or final rule is
not expected to have a significant economic impact on a substantial
number of small entities, section 605(b) of the 1980 RFA provides that
the head of the agency may so certify and a regulatory flexibility
analysis is not required. The certification must include a statement
providing the factual basis for this determination, and the reasoning
should be clear.

Size Standards

    Size standards for small entities are published by the Small
Business Administration (SBA) on their Web site at http://www.sba.gov/size. The size standards used herein are from ``SBA U.S. Small Business
Administration, Table of Small Business Size Standards, Matched to
North American Industry Classification System Codes''. The Table is
effective November 5, 2010, and uses the 2007 NAICS codes. Scheduled
Passenger Air Transportation is listed in Sector 48-49--Transportation
and Warehousing; Subsector 481--Air Transportation; NAICS Code 48111.
Non-Scheduled Chartered Passenger Air Transportation is listed under
the same Sector and Subsector with NAICS code 481211. In both cases the
small entity size standard is 1,500 employees.
    It is estimated that most of the air carriers involved in this type
of activity are small entities. Therefore the proposed rule would
affect a substantial number of small entities.
    However, the proposed rule imposes no costs and may result in a
cost reduction for an entity that should choose to use the proposed
rule. Therefore, the FAA certifies that this proposed rule would not
have a significant economic impact on a substantial number of small
entities.

International Trade Impact Assessment

    The Trade Agreements Act of 1979 (Pub. L. 96-39), as amended by the
Uruguay Round Agreements Act (Pub. L. 103-465), prohibits Federal
agencies from establishing standards or engaging in related activities
that create unnecessary obstacles to the foreign commerce of the United
States. Pursuant to these Acts, the establishment of standards is not
considered an unnecessary obstacle to the foreign commerce of the
United States, so long as the standard has a legitimate domestic
objective, such as the protection of safety, and does not operate in a
manner that excludes imports that meet this objective. The statute also
requires consideration of international standards and, where
appropriate, that they be the basis for U.S. standards. The FAA has
assessed the potential effect of this proposed rule and determined that
it would have only a domestic impact, and therefore no effect on
international trade.

Unfunded Mandates Assessment

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) requires each Federal agency to prepare a written statement
assessing the effects of any Federal mandate in a proposed or final
agency rule that may result in an expenditure of $100 million or more
(adjusted annually for inflation) in any one year by State, local, and
tribal governments, in the aggregate, or by the private sector; such a
mandate is deemed to be a ``significant regulatory action''. The FAA
currently uses an inflation-adjusted value of $143.1 million in lieu of
$100 million. This proposed rule does not contain such a mandate;
therefore, the requirements of Title II do not apply.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires
that the FAA consider the impact of paperwork and other information
collection burdens imposed on the public. According to the 1995
amendments to the Paperwork Reduction Act (5 CFR 1320.8(b)(2)(vi)), an
agency may not collect or sponsor the collection of information, nor
may it impose an information collection requirement unless it displays
a currently valid Office of Management and Budget (OMB) control number.
    The FAA has determined that there would be no new information
collection associated with the proposed requirement that would allow
operators to combine drug and alcohol testing programs. Combining
programs would reduce the paperwork burden for drug and alcohol
testing.

International Compatibility

    In keeping with U.S. obligations under the Convention on
International Civil Aviation, it is FAA policy to conform to
International Civil Aviation Organization (ICAO) Standards and
Recommended Practices to the maximum extent practicable. The FAA has
reviewed the corresponding ICAO Standards and Recommended Practices and
has identified no differences with these proposed regulations.

Environmental Analysis

    FAA Order 1050.1E identifies FAA actions that are categorically
excluded from preparation of an environmental assessment or
environmental impact statement under the National Environmental Policy
Act in the absence of extraordinary circumstances. The FAA has
determined this rulemaking action qualifies for the categorical
exclusion identified in paragraph 312(d) and involves no extraordinary
circumstances.

Regulations Affecting Intrastate Aviation in Alaska

    Section 1205 of the FAA Reauthorization Act of 1996 (110 Stat.
3213) requires the Administrator, when modifying regulations in title
14 of the CFR in a manner affecting intrastate aviation in Alaska, to
consider the extent to which Alaska is not served by transportation
modes other than aviation, and to establish appropriate regulatory
distinctions. Because this proposed rule would only affect operators'
drug and alcohol testing programs and not their operations, it would
not affect intrastate aviation in Alaska.

V. Executive Order Determinations

A. Executive Order 13132, Federalism

    The FAA has analyzed this proposed rule under the principles and
criteria of Executive Order 13132, Federalism. The agency has
determined that this action would not have a substantial direct effect
on the States, or the relationship between the Federal Government and
the States, or on the distribution of power and responsibilities among
the various levels of government, and, therefore, would not have
Federalism implications.

B. Executive Order 13211, Regulations That Significantly Affect Energy
Supply, Distribution, or Use

    The FAA analyzed this proposed rule under Executive Order 13211,
Actions Concerning Regulations that Significantly Affect Energy Supply,
Distribution, or Use (May 18, 2001). The agency has determined that it
would not be a ``significant energy action'' under the executive order
and would not be likely to have a significant adverse effect on the
supply, distribution, or use of energy.

VI. Additional Information

A. Comments Invited

    The FAA invites interested persons to participate in this
rulemaking by submitting written comments, data, or views. The agency
also invites comments relating to the economic, environmental, energy,
or federalism impacts that might result from adopting the proposals in
this document. The most helpful comments reference a specific portion
of the proposal, explain the reason for any recommended change, and
include supporting data. To ensure the docket does not contain
duplicate comments, commenters should send only one copy of written
comments, or if comments are filed electronically, commenters should
submit only one time.
    The FAA will file in the docket all comments it receives, as well
as a report summarizing each substantive public contact with FAA
personnel concerning this proposed rulemaking. Before acting on this
proposal, the FAA will consider all comments it receives on or before
the closing date for comments. The FAA will consider comments filed
after the comment period has closed if it is possible to do so without
incurring expense or delay. The agency may change this proposal in
light of the comments it receives.
Proprietary or Confidential Business Information
    Commenters should not file proprietary or confidential business
information in the docket. Such information must be sent or delivered
directly to the person identified in the FOR FURTHER INFORMATION
CONTACT section of this document, and marked as proprietary or
confidential. If submitting information on a disk or CD-ROM, mark the
outside of the disk or CD-ROM, and identify electronically within the
disk or CD-ROM the specific information that is proprietary or
confidential.
    Under 14 CFR 11.35(b), if the FAA is aware of proprietary
information filed with a comment, the agency does not place it in the
docket. It is held in a separate file to which the public does not have
access, and the FAA places a note in the docket that it has received
it. If the FAA receives a request to examine or copy this information,
it treats it as any other request under the Freedom of Information Act
(5 U.S.C. 552). The FAA processes such a request under Department of
Transportation procedures found in 49 CFR part 7.

B. Availability of Rulemaking Documents

    An electronic copy of rulemaking documents may be obtained from the
Internet by--
    1. Searching the Federal eRulemaking Portal (http://www.regulations.gov);
    2. Visiting the FAA's Regulations and Policies web page at http://www.faa.gov/regulations_policies; or
    3. Accessing the Government Printing Office's web page at http://www.gpo.gov/fdsys.
    Copies may also be obtained by sending a request to the Federal
Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence
Avenue SW., Washington, DC 20591, or by calling<PHONE_NUMBER>.
Commenters must identify the docket or notice number of this
rulemaking.
    All documents the FAA considered in developing this proposed rule,
including economic analyses and technical reports, may be accessed from
the Internet through the Federal eRulemaking Portal referenced in item
(1) above.

List of Subjects in 14 CFR Part 120

    Alcoholism, Air carriers, Air traffic control, Airmen, Alcohol
abuse, Alcohol testing, Aviation safety, Charter flights, Commercial
air tour operators, Contract air traffic controllers, Drug abuse, Drug
testing, Operators, reporting and recordkeeping requirements, Safety,
Safety-sensitive, Transportation.

The Proposed Amendment

    In consideration of the foregoing, the Federal Aviation
Administration proposes to amend chapter I of title 14, Code of Federal
Regulations as follows:

PART 120--DRUG AND ALCOHOL TESTING PROGRAM

    1. The authority citation for part 120 continues to read as
follows:

    Authority:  49 U.S.C. 106(g), 40101-40103, 40113, 40120, 41706,
41721, 44106, 44701, 44702, 44703, 44709, 44710, 44711, 45101-45105,
46105, 46306.

    2. Amend Sec.  120.115 as follows:
    a. Revise paragraph (c)(1)(iii) and redesignate it as (c)(5);
    b. Revise paragraph (c)(5) and redesignate it as (c)(6);

Sec.  120.115  Employee Assistance Program (EAP).

* * * * *
    (c) * * *
    (5) Documentation of all training given to employees and
supervisory

personnel must be included in the training program.
    (6) The employer shall identify the employee and supervisor EAP
training in the employer's drug testing plan.
    3. Amend Sec.  120.117 as follows:
    a. Revise paragraphs (a) and (b);
    b. Revise paragraph (e) and redesignate it as (f);
    c. Add new paragraph (e).

Sec.  120.117  Implementing a drug testing program.

    (a) Each company must meet the requirements of this subpart. Use
the following chart to determine whether your company must obtain an
Antidrug and Alcohol Misuse Prevention Program Operations
Specification, Letter of Authorization or Drug and Alcohol Testing
Program Registration from the FAA:

------------------------------------------------------------------------
         If you are . . .                      You must . . .
------------------------------------------------------------------------
(1) A part 119 certificate holder   Obtain an Antidrug and Alcohol
 with authority to operate under     Misuse Prevention Program
 part 121 or 135.                    Operations Specification by
                                     contacting your FAA Principal
                                     Operations Inspector.
(2) An operator as defined in Sec.  Obtain a Letter of Authorization by
   91.147 of this chapter.           contacting the Flight Standards
                                     District Office nearest to your
                                     principal place of business.
(3) A part 119 certificate holder   Complete the requirements in
 with authority to operate under     sections 1 and 2 of this chart and
 part 121 or 135 and an operator     advise the Flight Standards
 as defined in Sec.   91.147 of      District Office and the Drug
 this chapter.                       Abatement Division that the Sec.
                                     91.147 operation will be included
                                     under the part 119 testing program.
(4) An air traffic control          Register with the FAA, Office of
 facility not operated by the FAA    Aerospace Medicine, Drug Abatement
 or by or under contract to the      Division (AAM-800), 800
 U.S. Military.                      Independence Avenue SW.,
                                     Washington, DC 20591.
(5) A part 145 certificate holder   Obtain an Antidrug and Alcohol
 who has your own drug testing       Misuse Prevention Program
 program.                            Operations Specification by
                                     contacting your Principal
                                     Maintenance Inspector or register
                                     with the FAA, Office of Aerospace
                                     Medicine, Drug Abatement Division
                                     (AAM-800), 800 Independence Avenue
                                     SW., Washington, DC 20591, if you
                                     opt to conduct your own drug
                                     testing program.
(6) A contractor who has your own   Register with the FAA, Office of
 drug testing program.               Aerospace Medicine, Drug Abatement
                                     Division (AAM-800), 800
                                     Independence Avenue SW.,
                                     Washington, DC 20591, if you opt to
                                     conduct your own drug testing
                                     program.
------------------------------------------------------------------------

    (b) Use the following chart for implementing a drug testing program
if you are applying for a part 119 certificate with authority to
operate under parts 121 or 135 of this chapter, if you intend to begin
operations as defined in Sec.  91.147 of this chapter, or if you intend
to begin air traffic control operations (not operated by the FAA or by
or under contract to the U.S. Military). Use it to determine whether
you need to have an Antidrug and Alcohol Misuse Prevention Program
Operations Specification, Letter of Authorization or Drug and Alcohol
Testing Program Registration from the FAA. Your employees who perform
safety-sensitive functions must be tested in accordance with this
subpart. The chart follows:

------------------------------------------------------------------------
           If you . . .                        You must . . .
------------------------------------------------------------------------
(1) Apply for a part 119            (i) Have an Antidrug and Alcohol
 certificate with authority to       Misuse Prevention Program
 operate under parts 121 or 135.     Operations Specification,
                                    (ii) Implement an FAA drug testing
                                     program no later than the date you
                                     start operations, and
                                    (iii) Meet the requirements of this
                                     subpart.
(2) Intend to begin operations as   (i) Have a Letter of Authorization,
 defined in Sec.   91.147 of this   (ii) Implement an FAA drug testing
 chapter.                            program no later than the date you
                                     start operations, and
                                    (iii) Meet the requirements of this
                                     subpart.
(3) Apply for a part 119            (i) Have an Antidrug and Alcohol
 certificate with authority to       Misuse Prevention Program
 operate under parts 121 or 135      Operations Specification and a
 and intend to begin operations as   Letter of Authorization,
 defined in Sec.   91.147 of this   (ii) Implement your combined FAA
 chapter.                            drug testing program no later than
                                     the date you start operations, and
                                    (iii) Meet the requirements of this
                                     subpart.
(4) Intend to begin air traffic     (i) Register with the FAA, Office of
 control operations (at an air       Aerospace Medicine, Drug Abatement
 traffic control facility not        Division (AAM-800), 800
 operated by the FAA or by or        Independence Avenue SW.,
 under contract to the U.S.          Washington, DC 20591 prior to
 military).                          starting operations,
                                    (ii) Implement an FAA drug testing
                                     program no later than the date you
                                     start operations, and
                                    (iii) Meet the requirements of this
                                     subpart.
------------------------------------------------------------------------

* * * * *
    (e) Obtaining a Letter of Authorization from the FAA. (1) To obtain
a Letter of Authorization from the FAA, you must submit, in duplicate,
the following information to the Flight Standards District Office
nearest your principal place of business:
    (i) Company name.
    (ii) Telephone number.
    (iii) Address where your drug and alcohol testing program records
are kept.
    (iv) Type of safety-sensitive functions you perform for an employer
(such as flight instruction duties, aircraft dispatcher duties,
maintenance or preventive maintenance duties, ground security
coordinator duties, aviation screening duties, air traffic control
duties).
    (v) Whether you have 50 or more covered employees, or 49 or fewer
covered employees.
    (vi) A signed statement indicating that your company will comply
with this part and 49 CFR part 40.
    (2) This Letter of Authorization will satisfy the requirements for
both your drug testing program under this subpart and your alcohol
testing program under subpart F of this part.

    (3) Update the Letter of Authorization information as changes
occur. Send the updates, in duplicate, to the Flight Standards District
Office nearest your principal place of business.
    (4) If you are a part 119 certificate holder with authority to
operate under part 121 or 135 and intend to begin operations as defined
in Sec.  91.147 of this chapter, you must also advise the FAA's Drug
Abatement Division at the Federal Aviation Administration, Office of
Aerospace Medicine, Drug Abatement Division (AAM-800), 800 Independence
Avenue SW., Washington, DC 20591.
    (f) Obtaining a Drug and Alcohol Testing Program Registration from
the FAA. (1) To obtain a Drug and Alcohol Testing Program Registration
from the FAA, you must submit, in duplicate, the following information
to the Office of Aerospace Medicine, Drug Abatement Division:
    (i) Company name.
    (ii) Telephone number.
    (iii) Address where your drug and alcohol testing program records
are kept.
    (iv) Type of safety-sensitive functions you perform for an employer
(such as flight instruction duties, aircraft dispatcher duties,
maintenance or preventive maintenance duties, ground security
coordinator duties, aviation screening duties, air traffic control
duties).
    (v) Whether you have 50 or more covered employees, or 49 or fewer
covered employees.
    (vi) A signed statement indicating that: Your company will comply
with this part and 49 CFR part 40; and you intend to provide safety-
sensitive functions by contract (including subcontract at any tier) to
a part 119 certificate holder with authority to operate under part 121
or part 135 of this chapter, an operator as defined in Sec.  91.147 of
this chapter, or an air traffic control facility not operated by the
FAA or by or under contract to the U.S. military.
    (2) Send this information, in duplicate, to the Federal Aviation
Administration, Office of Aerospace Medicine, Drug Abatement Division
(AAM-800), 800 Independence Avenue SW., Washington, DC 20591.
    (3) This Drug and Alcohol Testing Program Registration will satisfy
the registration requirements for both your drug testing program under
this subpart and your alcohol testing program under subpart F of this
part.
    (4) Update the registration information as changes occur. Send the
updates, in duplicate, to the address specified in paragraph (f)(2) of
this section.
    4. Amend Sec.  120.221 by revising paragraph (b) to read as
follows:

Sec.  120.221  Consequences for employees engaging in alcohol-related
conduct.

* * * * *
    (b) Permanent disqualification from service. An employee who
violates Sec. Sec.  120.19(c) or 120.37(c), or who engages in alcohol
use that violates another alcohol misuse provision of Sec. Sec.  120.19
or 120.37, and who had previously engaged in alcohol use that violated
the provisions of Sec. Sec.  120.19 or 120.37 after becoming subject to
such prohibitions, is permanently precluded from performing for an
employer the safety-sensitive duties the employee performed before such
violation.
* * * * *
    5. Amend Sec.  120.225 as follows:
    a. Revise paragraphs (a) and (b);
    b. Revise paragraph (e) and redesignate it as (f);
    c. Add new paragraph (e).

Sec.  120.225  How to implement an alcohol testing program.

    (a) Each company must meet the requirements of this subpart. Use
the following chart to determine whether your company must obtain an
Antidrug and Alcohol Misuse Prevention Program Operations
Specification, Letter of Authorization or Drug and Alcohol Testing
Program Registration from the FAA:

------------------------------------------------------------------------
         If you are . . .                      You must . . .
------------------------------------------------------------------------
(1) A part 119 certificate holder   Obtain an Antidrug and Alcohol
 with authority to operate under     Misuse Prevention Program
 part 121 or 135.                    Operations Specification by
                                     contacting your FAA Principal
                                     Operations Inspector.
(2) An operator as defined in Sec.  Obtain a Letter of Authorization by
   91.147 of this chapter.           contacting the Flight Standards
                                     District Office nearest to your
                                     principal place of business.
(3) A part 119 certificate holder   Complete the requirements in
 with authority to operate under     sections 1 and 2 of this chart and
 part 121 or 135 and an operator     advise the Flight Standards
 as defined in Sec.   91.147 of      District Office and Drug Abatement
 this chapter.                       Division that the Sec.   91.147
                                     operation will be included under
                                     the part 119 testing program.
(4) An air traffic control          Register with the FAA, Office of
 facility not operated by the FAA    Aerospace Medicine, Drug Abatement
 or by or under contract to the      Division (AAM-800), 800
 U.S. Military.                      Independence Avenue SW.,
                                     Washington, DC 20591.
(5) A part 145 certificate holder   Obtain an Antidrug and Alcohol
 who has your own alcohol testing    Misuse Prevention Program
 program.                            Operations Specification by
                                     contacting your Principal
                                     Maintenance Inspector or register
                                     with the FAA Office of Aerospace
                                     Medicine, Drug Abatement Division
                                     (AAM-800), 800 Independence Avenue
                                     SW., Washington, DC 20591 if you
                                     opt to conduct your own alcohol
                                     testing program.
(6) A contractor who has your own   Register with the FAA, Office of
 alcohol testing program.            Aerospace Medicine, Drug Abatement
                                     Division (AAM-800), 800
                                     Independence Avenue SW.,
                                     Washington, DC 20591 if you opt to
                                     conduct your own alcohol testing
                                     program.
------------------------------------------------------------------------

    (b) Use the following chart for implementing an alcohol testing
program if you are applying for a part 119 certificate with authority
to operate under part 121 or 135 of this chapter, if you intend to
begin operations as defined in Sec.  91.147 of this chapter, or if you
intend to begin operations as defined air traffic control operations
(not operated by the FAA or by or under contract to the U.S. Military).
Use it to determine whether you need to have an Antidrug and Alcohol
Misuse Prevention Program Operations Specification, Letter of
Authorization or Drug and Alcohol Testing Program Registration from the
FAA. Your employees who perform safety-sensitive duties must be tested
in accordance with this subpart. The chart follows:

------------------------------------------------------------------------
           If you . . .                        You must . . .
------------------------------------------------------------------------
(1) Apply for a part 119            (i) Have an Antidrug and Alcohol
 certificate with authority to       Misuse Prevention Program
 operate under part 121 or 135.      Operations Specification,
                                    (ii) Implement an FAA alcohol
                                     testing program no later than the
                                     date you start operations, and
                                    (iii) Meet the requirements of this
                                     subpart.
(2) Intend to begin operations as   (i) Have a Letter of Authorization,
 defined in Sec.   91.147 of this   (ii) Implement an FAA alcohol
 chapter.                            testing program no later than the
                                     date you start operations, and
                                    (iii) Meet the requirements of this
                                     subpart.
(3) Apply for a part 119            (i) Have an Antidrug and Alcohol
 certificate with authority to       Misuse Prevention Program
 operate under parts 121 or 135      Operations Specification and a
 and intend to begin operations as   Letter of Authorization,
 defined in Sec.   91.147 of this   (ii) Implement your combined FAA
 chapter.                            alcohol testing program no later
                                     than the date you start operations,
                                     and
                                    (iii) Meet the requirements of this
                                     subpart.
(4) Intend to begin air traffic     (i) Register with the FAA, Office of
 control operations (at an air       Aerospace Medicine, Drug Abatement
 traffic control facility not        Division (AAM-800), 800
 operated by the FAA or by or        Independence Avenue SW.,
 under contract to the U.S.          Washington, DC 20591 prior to
 military).                          starting operations,
                                    (ii) Implement an FAA alcohol
                                     testing program no later than the
                                     date you start operations, and
                                    (iii) Meet the requirements of this
                                     subpart.
------------------------------------------------------------------------

* * * * *
    (e) Obtaining a Letter of Authorization from the FAA. (1) To obtain
a Letter of Authorization from the FAA, you must submit, in duplicate,
the following information to the Flight Standards District Office
nearest your principal place of business:
    (i) Company name.
    (ii) Telephone number.
    (iii) Address where your drug and alcohol testing program records
are kept.
    (iv) Type of safety-sensitive functions you perform for an employer
(such as flight instruction duties, aircraft dispatcher duties,
maintenance or preventive maintenance duties, ground security
coordinator duties, aviation screening duties, air traffic control
duties).
    (v) Whether you have 50 or more covered employees, or 49 or fewer
covered employees.
    (vi) A signed statement indicating that your company will comply
with this part and 49 CFR part 40.
    (2) This Letter of Authorization will satisfy the requirements for
both your drug testing program under subpart E of this part and your
alcohol testing program under this subpart.
    (3) Update the Letter of Authorization information as changes
occur. Send the updates, in duplicate, to the Flight Standards District
Office nearest your principal place of business.
    (4) If you are a part 119 certificate holder with authority to
operate under part 121 or 135 and intend to begin operations as defined
in Sec.  91.147 of this chapter, you must also advise the FAA's Drug
Abatement Division at the Federal Aviation Administration, Office of
Aerospace Medicine, Drug Abatement Division (AAM-800), 800 Independence
Avenue SW., Washington, DC 20591.
    (f) Obtaining a Drug and Alcohol Testing Program Registration from
the FAA. (1) To obtain a Drug and Alcohol Testing Program Registration
from the FAA you must submit, in duplicate, the following information
to the Office of Aerospace Medicine, Drug Abatement Division:
    (i) Company name.
    (ii) Telephone number.
    (iii) Address where your drug and alcohol testing program records
are kept.
    (iv) Type of safety-sensitive functions you perform for an employer
(such as flight instruction duties, aircraft dispatcher duties,
maintenance or preventive maintenance duties, ground security
coordinator duties, aviation screening duties, air traffic control
duties).
    (v) Whether you have 50 or more covered employees, or 49 or fewer
covered employees.
    (vi) A signed statement indicating that: Your company will comply
with this part and 49 CFR part 40; and you intend to provide safety-
sensitive functions by contract (including subcontract at any tier) to
a part 119 certificate holder with authority to operate under part 121
or part 135 of this chapter, an operator as defined in Sec.  91.147 of
this chapter, or an air traffic control facility not operated by the
FAA or by or under contract to the U.S. military.
    (2) Send this information, in duplicate, to the Federal Aviation
Administration, Office of Aerospace Medicine, Drug Abatement Division
(AAM-800), 800 Independence Avenue SW., Washington, DC 20591.
    (3) This Drug and Alcohol Testing Program Registration will satisfy
the registration requirements for both your drug testing program under
subpart E of this part and your alcohol testing program under this
subpart.
    (4) Update the registration information as changes occur. Send the
updates, in duplicate, to the address specified in paragraph (f)(2) of
this section.

    Issued in Washington, DC, on June 20, 2012.
Frederick E. Tilton,
Federal Air Surgeon.
[FR Doc. 2012-16009 Filed 6-29-12; 8:45 am]
BILLING CODE 4910-13-P


[Federal Register Volume 79, Number 27 (Monday, February 10, 2014)]
[Notices]
[Pages 7731-7735]
[FR Doc No: 2014-02834]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71485; File No. S7-27-11]

Order Extending Temporary Exemptions Under the Securities
Exchange Act of 1934 in Connection with the Revision of the Definition
of ``Security'' to Encompass Security-Based Swaps, and Request for
Comment

I. Introduction

    The Securities and Exchange Commission (``Commission'') is
extending certain temporary exemptive relief contained in a prior
Commission order (``Exchange Act Exemptive Order'') \1\ in connection
with the revision of the Exchange Act definition of ``security'' to
encompass security-based swaps. These temporary exemptions were
provided by the Commission on July 1, 2011 and are set to expire on
February 11, 2014 (``Expiring Temporary Exemptions'').
---------------------------------------------------------------------------

    \1\ See Order Granting Temporary Exemptions under the Securities
Exchange Act of 1934 in Connection with the Pending Revisions of the
Definition of ``Security'' to Encompass Security-Based Swaps,
Exchange Act Release No. 64795 (Jul. 1, 2011), 76 FR 39927 (Jul. 7,
2011) (``Exchange Act Exemptive Order'').
---------------------------------------------------------------------------

    As described in more detail below, the Commission is extending the
expiration date for the Expiring Temporary Exemptions. Specifically,
for those Expiring Temporary Exemptions that are not directly linked to
pending security-based swap rulemakings, the Commission is extending
the expiration date until the earlier of such time as the Commission
issues an order or rule determining whether any continuing exemptive
relief is appropriate for security-based swap activities with respect
to any of these Exchange Act provisions or until three years following
the effective date of this Order. For each Expiring Temporary Exemption
that is related to pending security-based swap rulemakings, the
Commission is extending the expiration date until the compliance date
for the related security-based swap-specific rulemaking.
    The approach for extending the exemptions related to security-based
swap rulemakings reflected in this Order is intended to facilitate a
timely phased-in determination regarding the application of the
relevant provisions of the Exchange Act to security-based swaps based
on the development of the relevant rules mandated by the Dodd-Frank
Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act'') \2\
as the Commission moves toward finalizing those rules. This approach
also provides the Commission flexibility while Dodd-Frank Act
rulemaking is still in progress to determine whether continuing relief
should be provided for any Exchange Act provisions that are not
directly linked to specific security-based swap rulemaking.
---------------------------------------------------------------------------

    \2\ The Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 124, Stat. 1376 (2010).
---------------------------------------------------------------------------

II. Discussion

A. Background

    Title VII of the Dodd-Frank Act amended the Exchange Act definition
of ``security'' to expressly encompass security-based swaps.\3\ The
expansion of the definition of the term ``security'' has changed the
scope of the Exchange Act regulatory provisions that apply to security-
based swaps and has raised certain complex questions that require
further consideration.
---------------------------------------------------------------------------

    \3\ Exchange Act Section 3(a)(10), 15 U.S.C. 78c(a)(10), as
revised by Section 761(a)(2) of the Dodd-Frank Act.
---------------------------------------------------------------------------

    On July 1, 2011, the Commission issued an order granting temporary
exemptive relief from compliance with certain provisions of the
Exchange Act in connection with the revision of the Exchange Act
definition of ``security'' to encompass security-based swaps.\4\ The
overall approach of the Exchange Act Exemptive Order was directed
toward maintaining the status quo during the implementation process for
the Dodd-Frank Act, by preserving the application of particular
Exchange Act requirements that were already applicable in connection
with instruments that became ``security-based swaps'' following the
effective date of the Dodd-Frank Act,\5\ but deferring the
applicability of additional Exchange Act requirements in connection
with those instruments explicitly being defined as ``securities'' as of
the effective date.\6\ The Expiring Temporary Exemptions generally
provide for the following exemptions from Exchange Act: (a) Temporary
exemptions in connection with security-based swap activity by certain
``eligible contract participants''; and (b) temporary exemptions
specific to security-based swap activities by registered brokers and
dealers.\7\ These Expiring Temporary Exemptions\8\ are

currently scheduled to expire on February 11, 2014.\9\
---------------------------------------------------------------------------

    \4\ See Exchange Act Exemptive Order.
    \5\ Id. The Title VII amendments of the Dodd-Frank Act generally
became effective on July 16, 2011 (360 days after the enactment of
the Dodd-Frank Act).
    \6\ See Exchange Act Exemptive Order at 5-6.
    \7\ See Exchange Act Exemptive Order at 39-44.
    \8\ The Exchange Act Exemptive Order provided a temporary
exemption from Sections 5 and 6 of the Exchange Act until the
earliest compliance date set forth in any of the final rules
regarding registration of security-based swap execution facilities.
The Exchange Act Exemptive Order also provided that no security-
based swap contract entered into on or after July 16, 2011 shall be
void or considered voidable by reason of Section 29(b) of the
Exchange Act because any person that is a party to the contract
violated a provision of the Exchange Act for which the Commission
has provided exemptive relief in the Exchange Act Exemptive Order,
until such time as the underlying exemptive relief expires. This
extension order does not affect either of these expiration dates.
    \9\ See Further Definition of ``Swap,'' ``Security-Based Swap,''
and ``Security-Based Swap Agreement''; Mixed Swaps; Security-Based
Swap Agreement Recordkeeping, Exchange Act Release No. 67453 (Jul.
18, 2012), 77 FR 48207 (Aug. 13, 2012) (``Product Definitions
Adopting Release'') (extending the expiration date of the Expiring
Temporary Exemptions to February 11, 2013) and Order Extending
Temporary Exemptions under the Securities Exchange Act of 1934 in
Connection with the Revision of the Definition of ``Security'' to
Encompass Security-Based Swaps, and Request for Comment, Exchange
Act Release No. 68864 (Feb. 7, 2013), 78 FR 10218 (Feb. 13, 2013)
(``Extension Release'') (extending the expiration date to February
11, 2014). Before issuing the Extension Release, the Commission
received a request to extend the Expiring Temporary Exemptions from
market participants, citing concerns that key issues and questions
regarding the application of the federal securities laws remained
unresolved and continuing concerns about the potential for
unnecessary disruption to the security-based swap market. See SIFMA
Request for Extension of the Expiration Date of the SEC's Exchange
Act Exemptive Order and SBS Interim final Rules (Dec. 20, 2012)
(``SIFMA Extension Request''), which is available at http://www.sec.gov/comments/s7-27-11/s72711-12.pdf.
---------------------------------------------------------------------------

    To date, the Commission has proposed substantially all of the rules
related to the new regulatory regime for derivatives under Title VII
and has begun the process of adopting these rules.\10\ Keeping with the
Dodd-Frank Act's stated objective of promoting financial stability in
the U.S. financial system, the Commission has expressed its intent to
move forward deliberatively in implementing the requirements of the
Dodd-Frank Act, while minimizing unnecessary disruption and costs to
the markets.\11\ Among the rules for this new regulatory framework that
the Commission has proposed are rules relating to (i) capital, margin,
and segregation requirements for security-based swap dealers and major
security-based swap participants,\12\ (ii) security-based swap trade
acknowledgement,\13\ and (iii) security-based swap execution facilities
registration requirements.\14\ In addition, the Commission has also
been mandated by the Dodd-Frank Act to promulgate recordkeeping and
reporting requirements for security-based swap dealers and major
security-based swap participants.\15\
---------------------------------------------------------------------------

    \10\ See Statement of General Policy on the Sequencing of the
Compliance Dates for Final Rules Applicable to Security-Based Swaps
Adopted Pursuant to the Securities Exchange Act of 1934 and the
Dodd-Frank Wall Street Reform and Consumer Protection Act, Exchange
Act Release No. 67177 (Jun. 11, 2012), 77 FR 35625 (Jun. 14, 2012).
See also Reopening of Comment Periods for Certain Rulemaking
Releases and Policy Statement Applicable to Security-Based Swaps
Proposed Pursuant to the Securities Exchange Act of 1934 and the
Dodd-Frank Wall Street Reform and Consumer Protection Act, Exchange
Act Release No. 69491 (May 1, 2013), 78 FR 30800 (May 23, 2013)
(``Reopening Release'') which reopened the comment period until July
22, 2013. See also e.g. Product Definitions Adopting Release;
Further Definition of ``Swap Dealer,'' ``Security-Based Swap
Dealer,'' ``Major Swap Participant,'' ``Major Security-Based Swap
Participant'' and ``Eligible Contract Participant'', Exchange Act
Release No. 66868 (Apr. 27, 2012), 77 FR 30596 (May 23, 2012);
Process for Submissions for Review of Security-Based Swaps for
Mandatory Clearing and Notice Filing Requirements for Clearing
Agencies; Technical Amendments to Rule 19b-4 and Form 19b-4
Applicable to all Self-Regulatory Organizations, Exchange Act
Release No. 67286 (Jun. 28, 2012), 88 FR 41602 (Jul. 13, 2012);
Clearing Agency Standards, Exchange Act Release No. 68080 (Oct. 22,
2012), 77 FR 66219 (Nov. 2, 2012).
    \11\ See Exchange Act Exemptive Order.
    \12\ See Capital, Margin, and Segregation Requirements for
Security-Based Swap Dealers and Major Security-Based Swap
Participants and Capital Requirements for Broker-Dealers, Exchange
Act Release No. 68071 (Oct. 18, 2012), 77 FR 70213 (Nov. 23, 2012)
(``Security-Based Swap Capital and Margin Rules''). See also
Reopening Release.
    \13\ See Trade Acknowledgement and Verification of Security-
Based Swap Transactions, Exchange Act Release No. 63727 (Jan. 14,
2011), 76 FR 3859 (Jan. 21, 2011) (``Trade Acknowledgement Rule'').
See also Reopening Release.
    \14\ See Registration and Regulation of Security-Based Swap
Execution Facilities, Exchange Act Release No. 63825 (Feb. 2, 2011),
76 FR 10948 (Feb. 28, 2011) (``Security-Based Swap Execution
Facility Rules''). See also Reopening Release.
    \15\ See 15 U.S.C. 78o-10(f).
---------------------------------------------------------------------------

B. Extension of Temporary Exemptions

    The Commission believes it is necessary or appropriate in the
public interest, and consistent with the protection of investors to
extend the Expiring Temporary Exemptions in order to avoid any
potential market disruption stemming from the application of existing
rules to security-based swap activities. Although the Commission is
making significant progress in establishing and finalizing the new
regulatory regime for securities-based swaps, key issues and questions
regarding the application of the federal securities laws to security-
based swaps remain unresolved. However, because the Commission has
proposed substantially all of the rules related to the new regulatory
regime for derivatives under Title VII, the Commission is able to
better calibrate the need for extensions of the Expiring Temporary
Exemptions based on how those exemptions relate to ongoing rulemaking.
Accordingly, under this approach an extension of the Expiring Temporary
Exemptions will provide the Commission with additional time to consider
the potential impact of the revision of the Exchange Act definition of
``security'' on the scope of Exchange Act provisions applicable to
security-based swaps, as well as the appropriateness of applying
certain Exchange Act provisions to security-based swap activities in
light of the Commission's continuing rulemaking efforts.\16\
---------------------------------------------------------------------------

    \16\ This is also consistent with previous requests to extend
the Expiring Temporary Exemptions. See SIFMA Extension Request. The
Commission has also received a request for certain permanent
exemptions upon the expiration of the exemptions contained in the
Exchange Act Exemptive Order. See SIFMA SBS Exemptive Relief Request
(Dec. 5, 2011), which is available at http://www.sec.gov/comments/s7-27-11/s72711-10.pdf.
---------------------------------------------------------------------------

    While the Commission is generally extending the Expiring Temporary
Exemptions, it is refining the applicable expiration dates for these
exemptions by (1) extending the expiration date of certain Expiring
Temporary Exemptions that are generally not directly related to
specific security-based swap rulemakings until the earlier of such time
that the Commission issues an order or rule determining whether any
continuing exemptive relief is appropriate for security-based swap
activities with respect to any of these Exchange Act provisions or
until three years following the effective date of this Order, and (2)
extending the expiration date of other Expiring Temporary Exemptions
that are directly related to specific security-based swap rulemakings,
until the compliance date for the relevant security-based swap
rulemaking.\17\
---------------------------------------------------------------------------

    \17\ Subsequent to the issuance of the Exchange Act Exemptive
Order, the Commission adopted rules related to certain requirements
applicable to municipal advisors. See Registration of Municipal
Advisors, Exchange Act Release No. 70462 (Sep. 20, 2013), 78 FR
67467 (Nov. 12, 2013). The temporary exemptions provided in this
order do not apply to these recently adopted rules.
---------------------------------------------------------------------------

    This approach recognizes the continuing development of the new
regulatory regime for security-based swaps and takes into consideration
the interrelation of certain existing Exchange Act provisions with this
new regime. Specifically, the Commission believes it is necessary or
appropriate in the public interest, and consistent with the protection
of investors for the subset of Expiring Temporary Exemptions that are
related to certain ongoing rulemakings to be addressed within any such
rulemakings that are finalized in order to determine what, if any,
exemptions would be appropriate based on the structure of the
regulatory framework. The expiration dates of this subset of Expiring
Temporary Exemptions will be extended until they are addressed within
any relevant rulemakings relating to: (i) Capital, margin, and
segregation requirements

for security-based swap dealers and major security-based swap
participants, (ii) recordkeeping and reporting requirements for
security-based swap dealers and major security-based swap participants,
(iii) security-based swap trade acknowledgement rules, and/or (iv)
registration requirements for security-based swap execution facilities.
    In addition, with respect to the subset of Expiring Temporary
Exemptions that are not directly related to specific security-based
swap rulemakings, the Commission believes it would be appropriate for
these exemptions to continue for three years or until such time as the
Commission issues an order or rule determining whether any continuing
exemption is applicable to any of these provisions. This approach is
designed to limit the potential for market disruptions. Moreover, this
approach is designed to provide sufficient time for the Commission to
explore and potentially develop an appropriate framework for regulating
security based swap activities and to provide sufficient time for
public input regarding any such potential framework. Accordingly,
pursuant to its authority under Section 36 of the Exchange Act,\18\ the
Commission believes it is necessary or appropriate in the public
interest, and consistent with the protection of investors to extend the
Expiring Temporary Exemptions that are not related to specific
securities-based swap rulemakings until the earlier of the time that
the Commission issues an order or rule determining whether continuing
exemptive relief is appropriate or until three years after the
effective date of this Order.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78mm. Section 36 of the Exchange Act authorizes
the Commission to conditionally or unconditionally exempt, by rule,
regulation, or order any person, security, or transaction (or any
class or classes of persons, securities, or transactions) from any
provision or provisions of the Exchange Act or any rule or
regulation thereunder, to the extent such exemption is necessary or
appropriate in the public interest, and is consistent with the
protection of investors.
---------------------------------------------------------------------------

    The Commission is also, pursuant to its authority under Section 36,
extending the below outlined Expiring Temporary Exemptions, until the
earliest compliance dates established in applicable rulemakings.
1. Expiring Temporary Exemptions Relating to Security-Based Swap
Capital and Margin Rules
    The Commission is extending the Expiring Temporary Exemptions for
the following Exchange Act provisions until the earliest compliance
date set forth in any final security-based swap capital, margin, and
segregation rules: \19\
---------------------------------------------------------------------------

    \19\ In late 2012, the Commission proposed the Security-Based
Swap Capital and Margin Rules. The proposed rules, if adopted, will
clarify how certain Exchange Act provisions relating to the capital,
margin, and segregation requirements of registered broker-dealers
will apply to the security-based swap activities of registered
broker-dealers.
---------------------------------------------------------------------------

     Section 7,\20\ regarding the margin requirements for
broker-dealers; and Regulation T,\21\ a Federal Reserve Board
regulation regarding broker-dealer extension of credit.\22\
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78g.
    \21\ 12 CFR 220.1 et seq.
    \22\ Under the approach of preserving the status quo, the
Exchange Act Exemptive Order provided registered broker-dealers a
limited exemption from Section 7(c) and Regulation T only to the
extent that these provisions did not apply to the broker-dealer's
security-based swap positions or activities prior to expansion of
the definition of ``security'' to include security-based swaps.
---------------------------------------------------------------------------

     Section 15(c)(3),\23\ which provides the Commission with
rulemaking authority in connection with broker-dealer financial
responsibility; Exchange Act Rule 15c3-1,\24\ including Appendices A-G
(Exchange Act Rules 15c3-1a through 15c3-1g) \25\ regarding net capital
requirements for brokers and dealers; Exchange Act Rule 15c3-3,\26\
including 15c3-3a,\27\ regarding broker-dealer reserves and custody of
securities; and Exchange Act Rule 15c3-4,\28\ regarding internal risk
management control systems for OTC derivatives dealers.\29\
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78o(c)(3).
    \24\ 17 CFR 240.15c3-1.
    \25\ 17 CFR 240.15c3-1a through 15c3-1g.
    \26\ 17 CFR 240.15c3-3.
    \27\ 17 CFR 240.15c3-3a.
    \28\ 17 CFR 240.15c3-4.
    \29\ Under the approach of preserving the status quo, the
Exchange Act Exemptive Order provided registered broker-dealers a
limited exemption from Section 15(c)(3) and Rules 15c3-1 and 15c3-3
only to the extent that these provisions did not apply to the
broker-dealer's security-based swap positions or activities prior to
expansion of the definition of ``security'' to include security-
based swaps. However, the limited exemption from Rule 15c3-3 is not
available for registered broker-dealers' activities and positions
related to cleared security-based swaps, to the extent that a
broker-dealer is a member of a clearing agency that functions as a
central counterparty for security-based swaps, and holds customer
funds or securities in connection with cleared security-based swaps.
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2. Expiring Temporary Exemptions Relating to Security-Based Swap
Recordkeeping Rules
    The Commission is extending the Expiring Temporary Exemptions for
the following Exchange Act provisions until the earliest compliance
date set forth in any final rules regarding recordkeeping and reporting
requirements for security-based swap dealers and major security-based
swap participants: \30\
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    \30\ See 15 U.S.C. 78o-10(f).
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     Section 17(a),\31\ regarding broker-dealer obligations to
make, keep and furnish information; Section 17(b),\32\ regarding
broker-dealer records subject to examination; Exchange Act Rules 17a-3
through 17a-5,\33\ regarding records to be made and preserved by
broker-dealers and reports to be made by broker-dealers; Exchange Act
Rule 17a-11,\34\ regarding notifications that broker-dealers are
required to make; and Exchange Act Rule 17a-13,\35\ regarding quarterly
security counts to be made by certain exchange members and broker-
dealers.\36\
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    \31\ 15 U.S.C. 78q(a).
    \32\ 15 U.S.C. 78q(b).
    \33\ 17 CFR 240.17a-3 through 17a-5.
    \34\ 17 CFR 240.17a-11.
    \35\ 17 CFR 240.17a-13.
    \36\ Under the approach of preserving the status quo, the
Exchange Act Exemptive Order provided registered broker-dealers a
limited exemption from Sections 17(a) and (b), Rules 17a-3 through
17a-5, and Rule 17a-13 only to the extent that these provisions did
not apply to the broker-dealer's security-based swap positions or
activities prior to expansion of the definition of ``security'' to
include security-based swaps.
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3. Expiring Temporary Exemptions Relating to Broker-Dealer Registration
Requirements
    The Commission is extending the Expiring Temporary Exemptions that
relate to the registration requirements under section 15(a)(1) of the
Exchange Act \37\ and the other requirements of the Exchange Act and
the rules and regulations thereunder that apply to a broker or dealer
that is not registered with the Commission \38\ until the later of the
compliance dates set forth in (i) any final rules regarding capital,
margin and segregation requirements for security-based swap dealers and
major security-based swap participants \39\ or (ii) any final rules
regarding recordkeeping and reporting requirements for security-based
swap dealers and major security-based swap participants.\40\
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    \37\ 15 U.S.C. 78o(a)(1).
    \38\ The Exchange Act Exemptive Order excluded from the
exemption (1) the ``broker'' registration requirements of Section
15(a)(1) (and other Exchange Act requirements that apply to a non-
registered broker) for broker activities involving security-based
swaps by persons that are members of a clearing agency that
functions as a central counterparty for security-based swaps and
that holds customer funds and securities in connection with
security-based swaps; and (2) the ``dealer'' registration
requirements of Section 15(a)(1) (and other Exchange Act
requirements that apply to a non-registered dealer) for security-
based swaps dealing activities unless those activities involve
counterparties that meet the definition of an eligible contract
participant.
    \39\ See supra note 19.
    \40\ See 15 U.S.C. 78o-10(f).

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4. Expiring Temporary Exemption Relating to Trade Acknowledgement Rule
    The Commission is extending the Expiring Temporary Exemption for
Exchange Act Rule 10b-10,\41\ regarding confirmation of transactions,
until the earliest compliance date set forth in any final rules
regarding trade acknowledgement and verification of security-based swap
transactions.\42\
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    \41\ 17 CFR 240.10b-10.
    \42\ In January 2011, the Commission proposed the Trade
Acknowledgement Rule which would govern the way in which certain
security-based swap transactions would be acknowledged and verified
by the parties. Under the proposed rule, security-based swap dealers
and major security-based swap participants would have to provide to
their counterparties a trade acknowledgement detailing information
specific to the transaction. The Commission also proposed a limited
exemption from the requirements of Exchange Act Rule 10b-10 for
security-based swap dealers and major security-based swap
participants that confirm their security-based swap transactions in
compliance with the Trade Acknowledgement Rule. The proposed
exemption is intended to avoid the duplicative requirements of
having to comply with both Exchange Act Rule 10b-10 and the proposed
Trade Acknowledgement Rule.
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5. Expiring Temporary Exemption Relating to Regulation ATS
    The Commission is extending the Expiring Temporary Exemption for
Regulation ATS,\43\ regarding the regulatory requirements that apply to
alternative trading systems, until the earliest compliance date set
forth in any final rules regarding the registration of the security-
based swap execution facilities.\44\
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    \43\ 17 CFR 242.300 et seq.
    \44\ In February 2011, the Commission proposed the Security-
Based Swap Execution Facility Rules which, if adopted, will create a
registration framework for security-based swap execution facilities,
as well as, establish rules governing these entities.
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III. Solicitation of Comments

    The Commission believes that it would be useful to continue to
provide interested parties the opportunity to comment on any aspect of
the temporary exemptions contained in the Exchange Act Exemptive Order,
this Order extending the Expiring Temporary Exemptions, and any
additional relief that should be granted upon the expiration of the
extension of the Expiring Temporary Exemptions, including:
    1. Is the distinction between whether an exemption is ``not
directly linked'' to any security-based swap rulemaking or is
``related'' to security-based swap rulemaking appropriate in connection
with the extension of the Expiring Temporary Exemptions? Are there
additional Expiring Temporary Exemptions that should be linked to the
adoption of any specific security-based swap rulemakings?
    2. Is additional exemptive relief necessary or appropriate in light
of the ongoing implementation of the Dodd-Frank Act? Are there
particular Exchange Act provisions, for which relief has already been
granted, that do not warrant a continuing exemption? Are there
particular Exchange Act provisions, for which relief has not previously
been granted, that warrant exemptions?
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/exorders.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number S7-27-11 on the subject line; or
     Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.
Paper Comments
     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F St. NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number S7-27-11. This file number
should be included on the subject line if email is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (http://www.sec.gov/rules/exorders.shtml). Comments
are also available for Web site viewing and printing in the
Commission's Public Reference Room, 100 F St. NE., Washington, DC 20549
on official business days between the hours of 10 a.m. and 3 p.m. 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.

IV. Conclusion

    It Is Hereby Ordered, pursuant to Section 36 of the Exchange Act,
that the Expiring Temporary Exemptions contained in the Exchange Act
Exemptive Order in connection with the revisions of the Exchange Act
definition of ``security'' to encompass security-based swaps are
extended until the earlier of three years following the effective date
of this Order or, until such time that the Commission issues an order
or rule determining whether continuing exemptive relief is appropriate
for security-based swap activities with respect to any of the Expiring
Temporary Exemptions, except as set forth below:
    (a) The following exemptions are extended until the compliance date
set forth in any final rules regarding capital, margin and segregation
requirements for security-based swap dealers and major security-based
swap participants:
    (1) Section 7;
    (2) Section 15(c)(3);
    (3) Regulation T, 12 CFR 220.1 et seq.;
    (4) Rule 15c3-1;
    (5) Rule 15c3-3; and
    (6) Rule 15c3-4.
    (b) The following exemptions are extended until the compliance date
set forth in any final rules regarding recordkeeping and reporting
requirements for security-based swap dealers and major security-based
swap participants:
    (1) Section 17(a);
    (2) Section 17(b);
    (3) Rule 17a-3;
    (4) Rule 17a-4;
    (5) Rule 17a-5;
    (6) Rule 17a-11; and
    (7) Rule 17a-13.
    (c) The exemption pertaining to Rule 10b-10 is extended until the
compliance date set forth in any final rules regarding trade
acknowledgement and verification of security-based swap transactions.
    (d) The exemption pertaining to Regulation ATS, 17 CFR 242.300 et
seq., is extended until the compliance date set forth in any final
rules regarding the registration of security-based swap execution
facilities.
    (e) The following exemptions are extended until the later of the
compliance dates set forth in (i) any final rules regarding capital,
margin and segregation requirements for security-based swap dealers and
major security-based swap participants and (ii) any final rules
regarding recordkeeping and reporting requirements for security-based
swap dealers and major security-based swap participants:
    (1) Exemptions pertaining to the ``broker'' registration
requirements of section 15(a)(1) of the Exchange Act, and the other
requirements of the Exchange Act and the rules and regulations
thereunder that apply to a broker that is not registered with the
Commission, solely in connection with broker activities involving
security-based swaps, and
    (2) Exemptions pertaining to the ``dealer'' registration
requirements of section 15(a)(1) of the Exchange Act, and the other
requirements of the

Exchange Act and the rules and regulations thereunder that apply to a
dealer that is not registered with the Commission, solely in connection
with dealing activities involving security-based swaps with
counterparties that meet the definition of eligible contract
participant as set forth in section 1a(12) of the Commodity Exchange
Act.

    By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2014-02834 Filed 2-7-14; 8:45 am]
BILLING CODE 8011-01-P