[Federal Register: May 14, 2008 (Volume 73, Number 94)]
[Notices]
[Page 27869-27873]
[DOCID:fr14my08-111]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57803; File No. SR-NASD-2005-114]

Self-Regulatory Organizations; National Association of Securities
Dealers, Inc. (n/k/a Financial Industry Regulatory Authority, Inc.);
Order Approving Proposed Rule Change and Amendment Nos. 1, 2, 3, and 4
Thereto and Notice of Filing and Order Granting Accelerated Approval to
Amendment No. 5 Relating to the Regulation of Compensation, Fees and
Expenses in Public Offerings of Real Estate Investment Trusts and
Direct Participation Programs

May 8, 2008.

I. Introduction

    On September 28, 2005, the National Association of Securities
Dealers, Inc. (``NASD'') \1\ filed with the Securities and Exchange
Commission (``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'') \2\ and Rule 19b-4
thereunder,\3\ proposed amendments to NASD Rule 2810. On June 12, 2006,
NASD filed Amendment No. 1 to the proposed rule change.\4\ The proposed
rule change was published for comment in the Federal Register on July
17, 2006 (``Original Proposal''),\5\ and the Commission received six
comments.\6\
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    \1\ On July 26, 2007, the Commission approved a proposed rule
change filed by NASD to amend NASD's Certificate of Incorporation to
reflect its name change to Financial Industry Regulatory Authority,
Inc., or FINRA, in connection with the consolidation of the member
firm regulatory functions of NASD and NYSE Regulation, Inc. See
Securities Exchange Act Release No. 56146 (July 26, 2007), 72 FR
42190 (Aug. 1, 2007).
    \2\ 15 U.S.C. 78s(b)(1).
    \3\ 17 CFR 240.19b-4.
    \4\ Amendment No. 1 replaced and superseded the original rule
filing.
    \5\ See Securities Exchange Act Release No. 54118 (July 10,
2006), 71 FR 40569 (July 17, 2006) (SR-NASD-2005-114).
    \6\ See letters from the Committee on Federal Regulation of
Securities of the American Bar Association (Keith F. Higgins), dated
Aug. 22, 2006; North American Securities Administrators Association
(Patricia D. Struck), dated Aug. 11, 2006; Dominion Investor
Services, Inc. (Kevin P. Takacs), dated Aug. 7, 2006; Investment
Program Association (Rosemarie Thurston), dated Aug. 7, 2006; the
Securities Division of Office of the Secretary of the Commonwealth
of Massachusetts (Bryan Lantagne), dated Aug. 4, 2006; and Cambridge
Legacy Group (Frank Akridge, Jr.), dated Aug. 4, 2006.
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    On April 16, 2007, NASD submitted Amendment No. 2 to the proposed
rule change, and on November 9, 2007 and January 2, 2008, FINRA
submitted Amendment No. 3 and No. 4, respectively, to the proposed rule
change.\7\ The Commission published the proposed rule change, as
amended, for comment in the Federal Register on January 31, 2008
(``Revised Proposal''),\8\ and the Commission received six comments,
which are discussed below in Section III.\9\ On April 11, 2008, FINRA
submitted Amendment No. 5 to the proposed rule change.\10\
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    \7\ Each amendment replaced and superseded the earlier
amendment. Amendment No. 4 also responded to comments on the
Original Proposal.
    \8\ See Securities Exchange Act Release No. 57199 (Jan. 25,
2008), 73 FR 5885 (Jan. 31, 2008) (SR-NASD-2005-114).
    \9\ See letters from R.J. O'Brien Fund Management, LLC (Annette
A. Cazenave), dated Apr. 28, 2008 (``R.J. O'Brien''); Michael V.
Scillia, ASG Securities, Inc., dated Feb. 24, 2008 (``Scillia'');
Committee on Federal Regulation of Securities of the American Bar
Association (Keith F. Higgins), dated Feb. 22, 2006 (``ABA
Committee''); Snyder Kearney LLC, dated Feb. 21, 2008 (``Snyder'');
David Lerner, David Lerner Associates, Inc., dated Feb. 21, 2008
(``Lerner''); and Investment Program Association (Jack L.
Hollander), dated Feb. 21, 2006 (``IPA'').
    \10\ Amendment No. 5 responded to comments on the Revised
Proposal and proposed several amendments to the proposed rule
change.
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    This notice and order solicits comment from interested persons on
Amendment No. 5 and approves the proposed rule change, as amended, on
an accelerated basis. The text of the proposed rule change is available
at http://www.finra.org, the principal offices of FINRA, and the
Commission's Public Reference Room.

II. Description of the Proposed Rule Change

    As discussed in more detail in the Original Proposal and Revised
Proposal, FINRA is proposing to amend NASD Rule 2810 to address the
regulation of compensation, fees and expenses in public offerings of
direct participation programs (as defined in NASD Rule 2810(a)(4))
(``DPPs'') and unlisted real estate investment trusts (as defined in
NASD Rule 2340(d)(4)) (``REITs'') (collectively ``Investment
Programs'').\11\ Specifically, the proposed rule change addresses: (1)
Compensation limitations and the use and allocation of offering
proceeds; (2) disclosure regarding the liquidity of prior programs
offered by the same sponsor; (3) sales loads on reinvested dividends;
and (4) non-cash compensation provisions regarding the appropriate
location for training and education meetings. The proposed rule change
also adds REITs to provisions that already apply to DPPs, but does not
make any substantive changes to these sections.\12\
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    \11\ The DPPs and REITs that comprise Investment Programs
typically are structured so that several affiliated entities make up
the program. The affiliated entities include the sponsor, the trust
or limited partnership, and a broker-dealer.
    \12\ See proposed amendments to Rule 2810(b)(3)(A), Rule
2810(b)(4)(A), Rule 2810(b)(4)(B)(v), Rules 2810(b)(4)(D)-(G) and
Rule 2810(b)(5). The proposed amendment to Rule 2810(b)(4)(G) also
corrects a typographical error by citing ``subparagraph (C),''
instead of ``subparagraph (E)'' under the existing rule.
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III. Summary of Comments Received and FINRA Response

    In Amendment No. 5, FINRA responded to comments on the Revised
Proposal and proposed additional amendments to the proposed rule
change.

A. Registered Representatives Engaged in de minimis and Incidental
Sales Activities

    The proposed amendment to Rule 2810(b)(4)(C)(ii)(c) would exclude
from the underwriting compensation limit \13\ payments to registered
representatives, including dual employees, engaged in the solicitation,
marketing, distribution or sales of the offering whose functions in
connection with that offering are solely and exclusively clerical and
ministerial. The IPA suggested that this should be revised to permit a
de minimis exception for payments to registered representatives whose
functions are predominantly--i.e., at least 95 percent of the
employee's time--clerical or ministerial, but who

on rare occasions may go beyond performing solely clerical and
ministerial functions, such as answering questions.
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    \13\ The underwriting compensation payable to underwriters,
broker-dealers, or affiliates may not exceed ten percent of the
gross proceeds of the offering, regardless of the source from which
the compensation is derived. See current Rule 2810(b)(4)(B)(i) and
Notice to Members 82-51. As explained in the Revised Proposal, the
ten percent figure currently is FINRA policy. The proposed amendment
to Rule 2810(b)(4)(B)(ii) would expressly state that all items of
compensation shall not exceed ten percent of the gross proceeds of
the offering.
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    FINRA stated that the proposed amendment to Rule
2810(b)(4)(C)(ii)(c)(2) was intended to achieve clarity and ease of
administration by excluding only those registered representatives whose
functions are ``solely and exclusively clerical and ministerial.'' In
response to comments, FINRA has amended proposed Rule
2810(b)(4)(C)(ii)(c)(3) to include registered representatives engaged
in sales activities provided those activities are ``de minimis and
incidental to his or her clerical or ministerial functions.'' However,
FINRA stated that it did not intend to adopt a particular metric with
respect to this exception, such as percentage of time spent, as it
could serve as a tool to evade the purpose and spirit of the rule.
FINRA stated that it expected the ``de minimis and incidental''
exception to be a very narrow one for registered persons whose sales
activities are truly incidental to their job functions. FINRA noted
that the exception in the proposed amendment to Rule 2810(b)(4)(D) for
firms with ``ten or fewer registered representatives'' engaged in
wholesaling is intended to apply to those firms that are most likely to
have a need for personnel performing multiple functions.

B. Calculating Items of Underwriting Compensation

    Two commenters stated that proposed amendments to Rules
2810(b)(4)(C)(ii)(a)-(c) could result in double counting certain items
for purposes of the underwriting compensation limit.\14\ For example,
these commenters stated that payments received by a member that would
be counted as underwriting compensation under the proposed amendment to
Rule 2810(b)(4)(C)(ii)(a) would have to be counted again for purposes
of the proposed amendments to Rules 2810(b)(4)(C)(ii)(b)-(c) when the
member re-allows the payments to its registered representatives.
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    \14\ ABA Committee and IPA.
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    FINRA responded that it did not intend that items of compensation
already required to be counted under proposed amendments to Rule
2810(b)(4)(C)(ii)(a) be double-counted for purposes of the underwriting
compensation limit. In response to these comments, FINRA has revised
the proposed amendments to Rules 2801(b)(4)(C)(ii)(b)-(c).\15\
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    \15\ The ABA Committee also requested that the language in the
proposed amendment to Rule 2810(b)(4)(B)(ii) be modified slightly to
rearrange some commas and clarify that trail commissions are not
paid with offering proceeds. FINRA has revised the text accordingly.
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C. Allocation of Compensation to Dual Employees in Connection With More
Than One Offering

    Two commenters addressed proposed guidance with respect to
allocation of payments to dual employees for purposes of the
underwriting compensation limit where the dual employees receive
payments for services in connection with more than one offering.\16\
Footnote 36 of the Revised Proposal provided guidance (``Guidance'')
\17\ that if a dual employee receives compensation for services
provided in connection with more than one public offering, or for
private placements in addition to offerings of Investment Programs,
payments to such employees may be reasonably allocated between the
offerings based on the time periods in which the employee was engaged
in the offerings, if they are distinct, or based on the relative size
of the offerings.
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    \16\ ABA Committee and IPA.
    \17\ The Guidance appeared in the purpose section of the Revised
Proposal and not the proposed rule text.
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    The ABA Committee and IPA sought clarification as to whether the
Guidance would apply only to dual employees to whom the exceptions from
the underwriting compensation set forth in the proposed amendment to
Rule 2810(b)(4)(D) are available. FINRA responded that its Corporate
Financing Department (the ``Department'') will allocate compensation
among multiple offerings with regard to all relevant payments and
expenses, not just those for dual employees.
    The IPA also stated that the concepts addressed in the Guidance
should be incorporated into the proposed amendments to Rule 2810 with
general application to payments to dual employees among multiple
offerings, not just the exceptions in Proposed Rule 2810(b)(4)(D). The
ABA Committee suggested that the Guidance should allow the allocation
of the salary of any registered representative.
    FINRA responded that it will continue its longstanding practice,
with respect to a registered representative receiving compensation for
services provided in connection with more than one public offering, or
for private placements in addition to offerings of Investment Programs,
of allowing payments to such registered representatives to be allocated
between the offerings on a reasonable basis taking into account
relevant factors, including the time periods spent on particular
offerings, the relative sizes of the offerings and the number of
investors in each. FINRA noted that, in the course of its review of
particular offerings, information and representations by members with
respect to such factors will vary. As a result, FINRA determined not to
codify these factors and their respective weights in the proposed rule
change, but rather will continue its current review practices that
permit reasonable basis allocations.

D. Analysis of Employee Compensation

1. Per Employee Analysis in All Investment Programs
    The proposed amendment to Rule 2810(b)(4)(D) would have excepted
from the underwriting compensation limit, subject to the Department's
determination, some portion of the non-transaction-based payments to a
registered representative dual employee of an Investment Program with
``fewer than ten people engaged in wholesaling.'' The ABA Committee
suggested that the exception should instead be available to smaller
members that have fewer than ten registered representatives engaged in
wholesaling with respect to an Investment Program in order to avoid the
inclusion of persons who are not registered in the calculation.\18\
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    \18\ The ABA Committee also stated that the rule should be
amended to clarify that it applies to a dual employee of a ``member
and the sponsor, issuer or other affiliate.''
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    The IPA also asked FINRA to clarify the proposed rule to provide
that in determining whether there are fewer than ten people engaged in
wholesaling, only those persons engaged in wholesaling for a particular
Investment Program should be counted, rather than all registered
representatives who are employed by a sponsor or affiliate and engaged
in wholesaling some other product of the sponsor or affiliate.
    The Revised Proposal explained that the Department would engage in
the same detailed job function analysis with respect to certain
compensation associated with smaller Investment Programs as it would
with respect to certain compensation of the ten highest paid executives
in any Investment Program. Accordingly, a member could provide detailed
per-employee information to the Department from which the Department
could conclude that certain salary and other non-

transaction-based compensation provided to the employee could be
allocated to issuer expenses.
    In response to these comments, FINRA has amended the exception to
clarify that for every program or REIT filed for review, the Department
will engage in the detailed per-employee analysis. The proposed
amendment to Rule 2810(b)(4)(D) would apply to ``ten or fewer
registered representatives'' engaged in wholesaling if they are dual
employees in a smaller Investment Program and to the ten highest paid
executives in any Investment Program.\19\ FINRA also clarified that the
rule would only apply to ``ten or fewer registered representatives [of
an Investment Program] engaged in wholesaling.'' FINRA also clarified
that the rule applied to a dual employee of a ``member and the sponsor,
issuer or other affiliate.'' \20\
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    \19\ The wholesaling exception discussed in the Revised Proposal
would have been available to an Investment Program with ``fewer than
ten people'' engaged in wholesaling. In response to comments, FINRA
stated that allowing the exception for ``ten or fewer'' registered
representatives rather than ``fewer than ten'' would be consistent
with the goal of clarity and ease of administration.
    \20\ Telephone conversation among Gary Goldsholle, Vice
President and Associate General Counsel, FINRA; Joseph Price, Vice
President, Corporate Financing, FINRA; Adam Arkel, Assistant General
Counsel, FINRA; Lourdes Gonzalez, Assistant Chief Counsel--Sales
Practices, Commission; and Michael Hershaft, Special Counsel,
Commission (May 7, 2008).
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    The ABA Committee also suggested that the calculation of the number
of persons engaged in wholesaling should only include those registered
representatives directly contacting other members to solicit new
selling agreements with respect to the specific Investment Program.
FINRA disagreed. As discussed in the Revised Proposal, the Department
expects to conduct accurate and efficient reviews of the individual's
job functions to determine whether the exceptions in proposed amendment
to Rule 2810(b)(4)(D) would be available. FINRA stated that it does not
believe it is useful or appropriate to conduct a two-step analysis of
each registered representative's functions (to analyze every registered
representative's activities to determine whether ten or fewer were
engaged in wholesaling with regard to a specific Investment Program,
and then to analyze the job functions of up to ten registered
representatives to determine what portion of payments to them should be
included in the underwriting compensation calculation).
2. Top Ten Executives
    The proposed amendment to Rule 2810(b)(4)(D) would except from the
underwriting compensation limit, subject to the Department's
determination, some portion of the non-transaction-based payments to a
registered representative dual employee who is one of the top ten
highest paid executives based on non-transaction-based compensation in
any Investment Program. The ABA Committee sought clarification as to
whether the executives to whom this exception would be available must
be registered representative dual employees. As discussed above, FINRA
has amended the exception to make this clarification.
    Two commenters stated that the exception should not require that
the dual employees must be executives or have executive titles.\21\
Further, both commenters suggested that the top-ten calculation should
be based on non-transaction-based compensation ``in connection with''
an Investment Program.\22\
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    \21\ ABA Committee and IPA.
    \22\ Id.
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    FINRA responded that the term ``executive'' is not intended as a
formal job designation or title, but rather as a characterization of
the registered representative dual employee's role in the Investment
Program. As explained in the Revised Proposal, the Department believes
that it can identify and evaluate a small group of individuals
performing executive job functions within an Investment Program.
However, FINRA disagreed with the suggestion of amending the rule to
base the top ten executive calculation on non-transaction-based
compensation ``in connection with'' a particular Investment Program. As
with firms with up to ten registered representatives engaged in
wholesaling, FINRA does not believe it is useful or appropriate to
conduct a two-step analysis for each executive (to determine the extent
to which each executive's compensation varies and is attributable to
particular programs in order to identify the relevant executives
eligible for the exception, and then to determine what portion of
payments to them should be included in the underwriting compensation
calculation).

E. Issuer Expenses

1. Overhead Expenses
    Both the ABA Committee and the IPA stated that the proposed
amendment to Rule 2810(b)(4)(C)(i) should be revised to clarify that
issuer expenses, not just overhead expenses, that are reimbursed or
paid for with offering proceeds must be included for purposes of the
cap on organization and offering expenses. FINRA has revised the
proposed amendment to Rule 2810(b)(4)(C)(i) to make this clarification.
2. Services for the Issuer
    The ABA Committee stated that the proposed amendment to Rule
2810(b)(4)(C)(i)(c) should clearly specify the scope of services
provided by employees or agents of the sponsor or issuer that must be
included for purposes of the cap on organization and offering expenses.
When proceeds of an offering are used to pay issuer expenses, these
payments or reimbursements must be identified in filings with the
Department. FINRA responded that if the rule limited the scope of
payments that could be made to employees or agents of the sponsor or
issuer for performing services for the issuer to only those activities
specifically described in the rule, some otherwise legitimate payments
or reimbursements using offering proceeds would be prohibited.
Accordingly, FINRA has not revised the proposed amendments to Rule
2810(b)(4)(C)(i)(c), other than to clarify that the proposed rule
refers to services for the issuer.

F. Liquidity and Marketability Disclosure

    The IPA expressed concern that the proposed amendments to Rule
2810(b)(3)(D) would impose upon members a burdensome due diligence
review requirement with respect to the liquidity and marketability of
an Investment Program. In its response, FINRA recognized the burdens
associated with these requirements, but noted that the proposed
amendment to Rule 2810(b)(3)(D) is intended to permit members to rely
upon the liquidity and marketability information as provided to the
member by the sponsor or general partner of an Investment Program,
provided that the member does not know or have reason to know that the
information is inaccurate. Accordingly, FINRA has not revised the
proposed amendment to Rule 2810(b)(3)(D).

G. Reinvested Dividends

    One commenter expressed concern regarding the prohibition set forth
in the proposed amendment to Rule 2810(b)(4)(B)(vi) against sales loads
on reinvested dividends for Investment Programs.\23\ After considering
the comment, FINRA determined to maintain the prohibition on sales
loads on reinvested dividends. FINRA emphasized that commenters on the
Original Proposal supported this

amendment \24\ and the amendment is intended to conform Rule 2810 to
similar changes made to Rule 2830 with respect to sales loads on
reinvested dividends for sales of mutual funds. Further, so as to avoid
the indirect payment of sales loads on reinvested dividends for
Investment Programs, FINRA has amended proposed Rule 2810(b)(4)(B)(ii)
to clarify that the calculation of ``ten percent of the gross proceeds
of the offering'' excludes securities purchased through the
reinvestment of dividends.
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    \23\ Lerner.
    \24\ Massachusetts Securities Division and NASAA.
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H. Due Diligence Services

    One commenter sought guidance as to what levels of detail and
itemization, as required by the proposed amendment to Rule
2810(b)(4)(B)(vii), would be appropriate for an invoice prepared by a
law firm conducting on behalf of a member due diligence services that
are intended to be reimbursed as issuer expenses.\25\ FINRA responded
that industry best practices may be effective in establishing a
threshold for itemization rather than additional rulemaking. The
commenter also sought guidance as to whether it would be permissible
for the issuer or sponsor to reimburse the law firm directly, so that
the member need not go through the extra step of first itself paying
the law firm and then seeking reimbursement from the issuer or
sponsor.\26\ FINRA responded that a law firm could not provide bona
fide due diligence in an offering if its client was the issuer or
sponsor rather than the broker-dealer. The method of reimbursement for
due diligence services should be irrelevant so long as it does not
undermine the law firm's duties to its client, the broker-dealer.\27\

IV. Solicitation of Comments
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    \25\ Snyder.
    \26\ Id.
    \27\ FINRA also addressed two other comments. Scillia suggested
that the five percent limitation on issuer expenses that currently
exists in NASD Rule 2810 precludes offerings of smaller DPPs. FINRA
disagreed with this comment. FINRA stated that the five percent
limitation on issuer expenses pertains to the amount that may be
used from offering proceeds. An issuer can spend additional funds
from other sources. Thus, FINRA believes that the sponsor of a
smaller DPP or REIT can absorb the higher fixed overhead costs owing
to the small size of the offering. Finally, the five percent
limitation on issuer expenses in the proposed rule change is not new
and is consistent with the standards in existing NASD Rule 2810,
which was approved by the SEC. See e-mail from Gary Goldsholle, Vice
President and Associate General Counsel, FINRA, to Michael Hershaft,
Special Counsel, Commission (May 7, 2008).
    With respect to the letter from R.J. O'Brien, FINRA stated that
the comments were beyond the scope of the filing as the proposed
rule change does not impose any new requirements with respect to
commodity pool trail commissions. The issues raised in this letter
were addressed by the SEC in an approval order issued in a prior
rulemaking proceeding. See Securities Exchange Act Release No. 50335
(Sept. 9, 2004), 69 FR 55855 (Sept. 16, 2004) (SR-NASD-2004-136).
Id.
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    Interested persons are invited to submit written data, views and
arguments concerning Amendment No. 5, including whether Amendment No. 5
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-2005-114 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-2005-114. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of FINRA. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASD-2005-114 and should be
submitted on or before June 4, 2008.

V. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule
change is consistent with the provisions of Section 15A(b)(6) of the
Act,\28\ which require, among other things, that FINRA rules must be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, and, in general, to
protect investors and the public interest.\29\ The Commission notes
that the proposed rule change would codify FINRA's longstanding policy
of applying certain regulatory requirements in NASD Rule 2810 to REITs.
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    \28\ 15 U.S.C. 78o-3(b)(6).
    \29\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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    The Commission believes that clarifying the standards for
determining the fairness and reasonableness of compensation, treating
the use and allocation of offering proceeds in a more explicit and
objective manner, requiring disclosure regarding the liquidity of prior
programs offered by the same sponsor, prohibiting sales loads on
reinvested dividends and enabling bona fide training and education
meetings to take place at appropriate locations, are measures designed
to prevent fraudulent practices, promote just and equitable principles
of trade, and protect investors and the public interest.

Accelerated Approval of Amendment No. 5

    The Commission finds good cause for approving Amendment No. 5 to
the proposed rule change prior to the thirtieth day after the amendment
is published for comment in the Federal Register pursuant to Section
19(b)(2) of the Act. Amendment No. 5 clarifies several provisions of
the proposed rule change, including calculating and allocating
compensation, requiring issuer compensation to be included in the cap
on organization and offering expenses, and providing greater
specificity regarding the prohibition on sales loads on reinvested
dividends. The Commission believes that these changes will provide
greater clarity with respect to the applicability of and compliance
with the proposed rule change, while continuing to protect investors
and the public interest. Accordingly, the Commission finds that the
accelerated approval of Amendment No. 5 is appropriate.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\30\ that the proposed rule change, as amended (SR-NASD-2005-114),
be, and hereby is, approved.
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    \30\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-10704 Filed 5-13-08; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 82, Number 185 (Tuesday, September 26, 2017)]
[Rules and Regulations]
[Pages 44715-44717]
[FR Doc No: 2017-20420]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2017-0767; Product Identifier 2017-NE-26-AD; Amendment
39-19049; AD 2017-19-19]
RIN 2120-AA64

Airworthiness Directives; Rolls-Royce plc Turbofan Engines

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule; request for comments.

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SUMMARY: We are adopting a new airworthiness directive (AD) for certain
Rolls-Royce plc (RR) Trent XWB-75, Trent XWB-79, Trent XWB-79B, and
Trent XWB-84, turbofan engines. This AD requires replacement of the
low-pressure compressor (LPC) case support inboard pins. This AD was
prompted by LPC case support inboard pins that may have reduced
integrity due to incorrect heat treatment. We are issuing this AD to
correct the unsafe condition on these products.

DATES: This AD becomes effective October 11, 2017.
    The Director of the Federal Register approved the incorporation by
reference of a certain publications listed in this AD as of October 11,
2017.
    We must receive comments on this AD by November 13, 2017.

ADDRESSES: You may send comments by any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.
     Mail: U.S. Department of Transportation, 1200 New Jersey
Avenue SE., West Building Ground Floor, Room W12-140, Washington, DC
20590-0001.
     Hand Delivery: Deliver to Mail address above between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
     Fax:<PHONE_NUMBER>.
    For service information identified in this AD, contact Rolls-Royce
plc, Corporate Communications, P.O. Box 31, Derby, England, DE24 8BJ;
phone: 011-44-1332-242424; fax: 011-44-1332-249936; email: http://www.rolls-royce.com/contact/civil_team.jsp; Internet: https://customers.rolls-royce.com/public/rollsroycecare. You may view this
service information at the FAA, Engine and Propeller Standards Branch,
Policy and Innovation Division, 1200 District Avenue, Burlington, MA
01803. For information on the availability of this material at the FAA,
call<PHONE_NUMBER>. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2017-
0767.

Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2017-
0767; or in person at the Docket Operations office between 9 a.m. and 5
p.m., Monday through Friday, except Federal holidays. The AD docket
contains this AD, the mandatory continuing airworthiness information
(MCAI), regulatory evaluation, any comments received, and other
information. The address for the Docket

Office (phone:<PHONE_NUMBER>) is in the ADDRESSES section. Comments will
be available in the AD docket shortly after receipt.

FOR FURTHER INFORMATION CONTACT: Robert Green, Aerospace Engineer, FAA,
ECO Branch, Compliance and Airworthiness Division, 1200 District
Avenue, Burlington, MA 01803; phone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>;
email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Comments Invited

    This AD is a final rule that involves requirements affecting flight
safety, and we did not precede it by notice and opportunity for public
comment. We invite you to send any written relevant data, views, or
arguments about this AD. Send your comments to an address listed under
the ADDRESSES section. Include ``Docket No. FAA-2017-0767; Directorate
Identifier 2017-NE-26-AD'' at the beginning of your comments. We
specifically invite comments on the overall regulatory, economic,
environmental, and energy aspects of this AD. We will consider all
comments received by the closing date and may amend this AD because of
those comments.
    We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We
will also post a report summarizing each substantive verbal contact
with FAA personnel concerning this AD.

Discussion

    The European Aviation Safety Agency (EASA), which is the Technical
Agent for the Member States of the European Community, has issued EASA
AD 2016-0242, dated December 7, 2016 (referred to hereinafter as ``the
MCAI''), to correct an unsafe condition for the specified products. The
MCAI states:

    It has recently been established that a certain population of
low pressure (LP) compressor case support pins and hollow dowels
have insufficient material properties and do not meet specification
requirements. This condition, if not corrected, could result in loss
of core to fan case concentricity, LP compressor blade rubs and
possible blade release, or engine under cowl fire. To address this
unsafe condition, RR published Alert NMSB TRENT XWB 72-AJ443 to
provide instructions to inspect and replace the affected non-
conforming components.

    You may obtain further information by examining the MCAI in the AD
docket on the Internet at http://www.regulations.gov by searching for
and locating Docket No. FAA-2017-0767.

Related Service Information Under 1 CFR Part 51

    RR has issued Alert Non-Modification Service Bulletin (NMSB) No.
TRENT XWB 72-AJ443, Revision 1, dated December 21, 2016. The Alert NMSB
describes procedures for replacement of all non-conforming LPC case
support inboard pins. This service information is reasonably available
because the interested parties have access to it through their normal
course of business or by the means identified in the ADDRESSES section.

FAA's Determination and Requirements of This AD

    This product has been approved by EASA, and is approved for
operation in the United States. Pursuant to our bilateral agreement
with the European Community, EASA has notified us of the unsafe
condition described in the MCAI and service information referenced
above. We are issuing this AD because we evaluated all information
provided by EASA and determined the unsafe condition exists and is
likely to exist or develop on other products of the same type design.
This AD requires replacement of all non-conforming LPC case support
inboard pins.

FAA's Determination of the Effective Date

    No domestic operators use this product. Therefore, we find that
notice and opportunity for prior public comment are unnecessary and
that good cause exists for making this amendment effective in less than
30 days.

Costs of Compliance

    We estimate that this AD affects no engines installed on airplanes
of U.S. registry.
    We estimate the following costs to comply with this AD:

                                                 Estimated Costs
----------------------------------------------------------------------------------------------------------------
                                                                                Cost per      Cost on U.S.
               Action                         Labor cost            Parts cost        product        operators
----------------------------------------------------------------------------------------------------------------
Inboard pin replacement............  18 work-hours x $85 per                  $0       $1,530.00              $0
                                      hour = $1,530.00.
----------------------------------------------------------------------------------------------------------------

Authority for This Rulemaking

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

Regulatory Findings

    We determined that this AD will not have federalism implications
under Executive Order 13132. This AD will not have a substantial direct
effect on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.
    For the reasons discussed above, I certify this AD:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866,
    (2) Is not a ``significant rule'' under the DOT Regulatory Policies
and Procedures (44 FR 11034, February 26, 1979),

    (3) Will not affect intrastate aviation in Alaska to the extent
that it justifies making a regulatory distinction, and
    (4) Will not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 39

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

Adoption of the Amendment

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

PART 39--AIRWORTHINESS DIRECTIVES

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

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

Sec.  39.13  [Amended]

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

2017-19-19 Rolls-Royce plc: Amendment 39-19049; Docket No. FAA-2017-
0767; Product Identifier 2017-NE-26-AD.

(a) Effective Date

    This AD is effective October 11, 2017.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to Rolls-Royce plc (RR) Trent XWB-75, Trent XWB-
79, Trent XWB-79B, and Trent XWB-84 turbofan engines with an engine
serial number (ESN) listed in Appendix 1 of RR Alert Non
Modification Service Bulletin (NMSB) Trent XWB 72-AJ443, Revision 1,
dated December 21, 2016.

(d) Subject

    Joint Aircraft System Component (JASC) Code 7230, Turbine Engine
Compressor Section.

(e) Reason

    This AD was prompted by low-pressure compressor (LPC) case
support inboard pins that may have reduced integrity due to
incorrect heat treatment. We are issuing this AD to prevent failure
of the LPC case support inboard pins, loss of core to fan case
concentricity, LPC blade rubs and possible blade release, or an
engine under cowl fire.

(f) Compliance

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

(g) Required Actions

    (1) Before exceeding 1,500 flight cycles since new, or within 4
months after the effective date of this AD, whichever occurs later,
inspect each LPC case support inboard pin to identify the serial
number (S/N) using Section 3, the Accomplishment Instructions, of RR
Alert NMSB Trent XWB 72-AJ443, Revision 1, dated December 21, 2016.
    (i) If a pin having a S/N that begins with 235338 is installed,
replace the LPC case support inboard pin, and outboard hollow
dowels, nuts and bolts using Section 3, the Accomplishment
Instructions of RR Alert NMSB Trent XWB 72-AJ443, Revision 1, dated
December 21, 2016.
    (ii) If a pin having a S/N that begins with 237746 or 204520 is
installed, replace the LPC case support outboard hollow dowel, nuts
and bolts, using Section 3, the Accomplishment Instructions of RR
Alert NMSB Trent XWB 72-AJ443, Revision 1, dated December 21, 2016.

(h) Installation Prohibition

    After the effective date of this AD, do not install an engine
affected by this AD, unless it has been inspected in accordance with
the Accomplishment Instructions of RR Alert NMSB Trent XWB 72-AJ443,
Revision 1, dated December 21, 2016.

(i) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, FAA, ECO Branch, Compliance and Airworthiness
Division, has the authority to approve AMOCs for this AD, if
requested using the procedures found in 14 CFR 39.19. In accordance
with 14 CFR 39.19, send your request to your principal inspector or
local Flight Standards District Office, as appropriate. If sending
information directly to the manager of the ECO Branch, send it to
the attention of the person identified in paragraph (j)(1) of this
AD. You may email your request to<EMAIL_ADDRESS>    (2) Before using any approved AMOC, notify your appropriate
principal inspector, or lacking a principal inspector, the manager
of the local flight standards district office/certificate holding
district office.

(j) Related Information

    (1) For more information about this AD, contact Robert Green,
Aerospace Engineer, FAA, ECO Branch, Compliance and Airworthiness
Division, 1200 District Avenue, Burlington, MA 01803; phone: 781-
238-7754; fax:<PHONE_NUMBER>; email<EMAIL_ADDRESS>    (2) Refer to MCAI European Aviation Safety Agency (EASA) AD
2017-0242, dated December 7, 2016, for more information. You may
examine the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating it in Docket No.
FAA-2017-0767.

(k) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the
incorporation by reference (IBR) of the service information listed
in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
    (2) You must use this service information as applicable to do
the actions required by this AD, unless the AD specifies otherwise.
    (i) Rolls-Royce plc (RR) Alert Non-Modification Service Bulletin
Trent XWB 72-AJ443, Revision 1, dated December 21, 2016.
    (ii) Reserved.
    (3) For RR service information identified in this AD, contact
Rolls-Royce plc, Corporate Communications, P.O. Box 31, Derby,
England, DE24 8BJ; phone: 011-44-1332-242424; fax: 011-44-1332-
249936; email: http://www.rolls-royce.com/contact/civil_team.jsp;
Internet: https://customers.rolls-royce.com/public/rollsroycecare.
    (4) You may view this service information at FAA, Engine and
Propeller Standards Branch, Policy and Innovation Division, 1200
District Avenue, Burlington, MA 01803. For information on the
availability of this material at the FAA, call<PHONE_NUMBER>.
    (5) You may view this service information at the National
Archives and Records Administration (NARA). For information on the
availability of this material at NARA, call<PHONE_NUMBER>, or go to:
http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Burlington, Massachusetts, on September 13, 2017.
Robert J. Ganley,
Manager, Engine and Propeller Standards Branch, Aircraft Certification
Service.
[FR Doc. 2017-20420 Filed 9-25-17; 8:45 am]
 BILLING CODE 4910-13-P


[Federal Register Volume 80, Number 148 (Monday, August 3, 2015)]
[Notices]
[Pages 46080-46081]
[FR Doc No: 2015-19077]

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

SECURITIES AND EXCHANGE COMMISSION

Sunshine Act Meeting

    Notice is hereby given, pursuant to the provisions of the
Government in the Sunshine Act, Public Law 94-409, that the Securities
and Exchange Commission will hold an Open Meeting

on Wednesday, August 5, 2015 at 10:00 a.m., in the Auditorium, Room L-
002.
    The subject matter of the Open Meeting will be:
     The Commission will consider whether to adopt rules and
forms under the Securities Exchange Act of 1934 (``Exchange Act'')
providing for the registration of security-based swap dealers and major
security-based swap participants.
     The Commission will consider whether to propose a rule of
practice to provide a process for a registered security-based swap
dealer or major security-based swap participant to make an application
to the Commission for an order permitting an associated person who is
subject to a statutory disqualification to effect or be involved in
effecting security-based swaps on behalf of the security-based swap
dealer or major security-based swap participant.
     The Commission will consider whether to adopt a rule
requiring public companies to disclose the ratio of the annual total
compensation of the chief executive officer to the median of the annual
total compensation of the company's employees as required by section
953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection
Act.
    At times, changes in Commission priorities require alterations in
the scheduling of meeting items.
    For further information and to ascertain what, if any, matters have
been added, deleted, or postponed, please contact: The Office of the
Secretary at<PHONE_NUMBER>.

    Dated: July 29, 2015.
Brent J. Fields,
Secretary.
[FR Doc. 2015-19077 Filed 7-30-15; 4:15 pm]
BILLING CODE 8011-01-P