[Federal Register Volume 75, Number 225 (Tuesday, November 23, 2010)]
[Notices]
[Pages 71479-71485]
[FR Doc No: 2010-29447]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63325; File No. SR-FINRA-2010-039]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Amendment No. 1 to a Proposed Rule
Change and Order Granting Accelerated Approval of a Proposed Rule
Change, as Modified by Amendment No. 1, To Adopt FINRA Rules 2090 (Know
Your Customer) and 2111 (Suitability) in the Consolidated FINRA
Rulebook

November 17, 2010.

I. Introduction

    On July 30, 2010, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc.
(``NASD'')) filed with the Securities and Exchange Commission (``SEC''
or ``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (the ``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to adopt FINRA Rule 2090 (Know
Your Customer) and FINRA Rule 2111 (Suitability) in the consolidated
FINRA rulebook (``Consolidated FINRA Rulebook'').\3\ The Commission
published the proposed rule change in the Federal Register.\4\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The current FINRA rulebook consists of (1) FINRA Rules; (2)
NASD Rules; and (3) rules incorporated from NYSE (``Incorporated
NYSE Rules'') (together, the NASD Rules and Incorporated NYSE Rules
are referred to as the ``Transitional Rulebook''). While the NASD
Rules generally apply to all FINRA members, the Incorporated NYSE
Rules apply only to those members of FINRA that are also members of
the NYSE (``Dual Members''). The FINRA Rules apply to all FINRA
members, unless such rules have a more limited application by their
terms. For more information about the rulebook consolidation
process, see Information Notice, March 12, 2008 (``Rulebook
Consolidation Process''). For convenience, the Incorporated NYSE
Rules are referred to as the NYSE Rules.
    \4\ See Exchange Act Release No. 62718 (August 13, 2010), 75 FR
51310 (August 19, 2010). This release was later amended to correct
footnote cross-references. Exchange Act Release No. 62718A (August
20, 2010), 75 FR 52562 (August 26, 2010). The Commission also
published the corrected notice on its Web site.
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    The Commission received 22 comments in response to the proposed
rule change.\5\ On September 21, 2010, FINRA responded to the comments
\6\ and filed Amendment No. 1 to the proposed rule change.\7\ The
Commission is publishing this notice and order to solicit comments on
Amendment No. 1 and to approve the proposed rule change, as amended, on
an accelerated basis.
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    \5\ See Letters from Steven B. Caruso, Maddox Hargett & Caruso,
P.C. (Sept. 8, 2010) (``Caruso Letter''); Barry D. Estell, Attorney
(Sept. 9, 2010) (``Estell Letter''); Barbara Black, Charles Hartsock
Professor of Law and Director, Corporate Law Center, University of
Cincinnati College of Law, and Jill I. Gross, Professor of Law and
Director of Legal Skills and Director, Pace Investor Rights Clinic,
Pace University School of Law (Sept. 9, 2010) (``Black-Gross
Letter''); David P Neuman, Stoltmann Law Offices, PC (Sept. 9, 2010)
(``Neuman Letter''); Richard M. Layne (Sept. 9, 2010) (``Layne
Letter''); William A. Jacobson, Associate Clinical Professor of Law,
Cornell Law School, and Director, Cornell Securities Law Clinic
(Sept. 9, 2010) (``Jacobson Letter''); Scott R. Shewan, President,
Public Investors Arbitration Bar Association (Sept. 9, 2010)
(``PIABA Letter''); Pamela Lewis Marlborough, Associate General
Counsel, Advocacy & Oversight, TIAA-CREF (Sept. 9, 2010) (``TIAA-
CREF Letter''); Gary A. Sanders, Vice President, Securities and
State Government Relations, National Association of Insurance and
Financial Advisors (Sept. 9, 2010) (``NAIFA Letter''); Stephen
Krosschell, Goodman Nekvasil, P.A. (Sept. 9, 2010) (``Krosschell
Letter''); Sutherland Asbill & Brennan LLP, on behalf of the
Committee of Annuity Insurers (Sept. 9, 2010) (``CAI Letter''); Lisa
Catalano, Director, St. John's University School of Law Securities
Arbitration Clinic, (Sept. 9, 2010) (``Catalano Letter''); G. Mark
Brewer, Esquire (Sept. 9, 2010) (``Brewer Letter''); Bari Havlik,
SVP and Chief Compliance Officer, Charles Schwab & Co. Inc. (Sept.
9, 2010) (``Schwab Letter''); Peter J. Mougey, Levin, Papantonio,
Thomas, Mitchell, Echsner, Rafferty, Proctor, P.A. (Sept. 9, 2010)
(``Mougey Letter''); Al Van Kampen, Esquire (Sept. 10, 2010) (``Van
Kampen Letter''); James T. McHale, Managing Director and Associate
General Counsel, SIFMA (Sept. 14, 2010) (``SIFMA Letter''); John S.
Markle, Deputy General Counsel, TD Ameritrade (Sept. 15, 2010) (``TD
Ameritrade Letter''); Scott C. Ilgenfritz, Johnson, Pope, Bokor,
Ruppel & Burns, LLP (Sept. 24, 2010) (``Ilgenfritz Letter''); Dale
E. Brown, President and CEO, Financial Services Institute, Inc.
(Sept. 27, 2010) (``FSI Letter''); Timothy R. Wing, President and
CEO, CME Stock/Option Consulting Services, Inc. (Sept. 28, 2010)
(``CME/OCS Letter'').
    \6\ See Letter from James Wrona, Associate Vice President and
Associate General Counsel, FINRA to Elizabeth M. Murphy, Secretary,
Commission, dated October 21, 2010 (``FINRA Response'').
    \7\ See Amendment No. 1 to FINRA-2010-039, dated October 21,
2010 (``Amendment No. 1''). The text of Amendment No. 1 is available
on FINRA's Web site at http://www.finra.org/web/groups/industry/@ip/<EMAIL_ADDRESS>at the principal
office of FINRA, and on the Commission's Internet Web site (http://www.sec.gov/rules/sro/finra.shtml).
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II. Description of the Proposed Rule Change

    As part of the process of developing the Consolidated FINRA
Rulebook, FINRA proposed FINRA Rule 2090 (Know Your Customer) and FINRA
Rule 2111 (Suitability). The ``know your customer'' and suitability
obligations are critical to ensuring investor protection and fair
dealing with customers. FINRA's proposed rule change was designed to
retain the core features of these obligations (set forth in NYSE Rule
405(1) and NASD Rule 2310), while modifying both rules to strengthen
and clarify them.
    The proposed rule change built on a similar proposed rule change on
which

FINRA requested comment in FINRA Regulatory Notice 09-25 (May 2009).
The proposed rule change FINRA filed with the Commission included both
a comprehensive response to the comments FINRA received in response to
Regulatory Notice 09-25 and modifications to address those comments.

A. Proposed FINRA Rule 2090

    The proposed ``Know Your Customer'' obligation in FINRA Rule 2090
encompasses the main ethical standard of NYSE Rule 405(1). As proposed,
the rule would require broker-dealers to use ``reasonable diligence,''
with regard to the opening and maintenance of every account, in order
to know and retain the essential facts concerning every customer.\8\
The obligation would arise at the beginning of the customer/broker
relationship, independent of whether the broker has made a
recommendation, and continue throughout the term of that relationship.
The proposed supplementary material would define ``essential facts'' as
those ``required to (a) Effectively service the customer's account, (b)
act in accordance with any special handling instructions for the
account, (c) understand the authority of each person acting on behalf
of the customer, and (d) comply with applicable laws, regulations, and
rules.'' \9\
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    \8\ See Proposed FINRA Rule 2090.
    \9\ See Proposed FINRA Rule 2090.01. FINRA proposed to change
the explanation of ``essential facts'' in response to comments.
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    The proposal would not incorporate the requirement in NYSE Rule
405(1) to learn the essential facts relative to ``every order.'' FINRA
proposed to exclude the ``every order'' language because of the
application of existing order-handling rules.\10\ In addition, the
reasonable-basis obligation under FINRA's suitability rule requires
broker-dealers and their associated persons to use reasonable diligence
to understand the securities and strategies they recommend.
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    \10\ See, e.g., SEC Regulation NMS (National Market System), 17
CFR 242.600-242.612; FINRA Rule 7400 Series (Order Audit Trail
System); NASD Rule 2320 (Best Execution and Interpositioning); NASD
Rule 2400 Series (Commissions, Mark-Ups and Charges); NASD IM-2110-2
(Trading Ahead of Customer Limit Order); and IM-2110-3 (Front
Running Policy). See also, FINRA Regulatory Notice 08-80 (December
2008) (proposed FINRA Rule 5310); FINRA Regulatory Notice 08-83
(December 2008) (proposed FINRA Rule 5270); and Exchange Act Release
No. 61168 (December 15, 2009) (proposed FINRA Rule 5320).
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    FINRA also proposed to delete NYSE Rule 405(2) through (3), NYSE
Supplementary Material 405.10 through .30, and NYSE Rule Interpretation
405/01 through/04 because they generally are duplicative of other
rules, regulations, or laws. For instance, NYSE Rule 405(2) requires
firms to supervise all accounts handled by registered representatives.
That provision is redundant because NASD Rule 3010 requires firms to
supervise their registered representatives.\11\
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    \11\ FINRA is proposing to adopt NASD Rule 3010 as FINRA Rule
3110, subject to certain amendments. See FINRA Regulatory Notice 08-
24 (May 2008).
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    NYSE Rule 405(3) generally requires persons designated by the
member to be informed of the essential facts relative to the customer
and to the nature of the proposed account prior to approving the
opening of the account. However, FINRA believes that a number of other
FINRA rules do, and proposed FINRA rules would, create substantially
similar obligations. For example, proposed FINRA Rule 2090 would
require members to know the essential facts as to each customer, and
NASD Rule 3110(c)(1)(C) requires the signature of the member, partner,
officer or manager who accepts the account.\12\
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    \12\ FINRA is proposing to adopt NASD Rule 3110(c)(1)(C) as
FINRA Rule 4512(a)(1)(D), subject to certain amendments. See
Exchange Act Release No. 63181 (October 26, 2010), 75 FR 67155
(November 1, 2010). Proposed FINRA Rule 4512(a)(1)(D) would clarify
that members maintain the signature of the partner, officer or
manager denoting that the account has been accepted in accordance
with the member's policies and procedures for acceptance of
accounts.
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    FINRA Rule 3310, which requires a firm to have procedures
reasonably designed to achieve compliance with the Bank Secrecy Act
(``BSA'') and the implementing regulations, also affect a firm's
account-opening obligations. One BSA regulation requires a firm to
verify the identity of a customer opening a new account.\13\ Another
BSA regulation requires a firm to engage in due diligence sufficient to
enable the firm to evaluate the risk of each customer and to determine
if transactions by the customer could be suspicious such that the firm
would need to file a suspicious activity report.\14\
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    \13\ See 31 CFR 103.122.
    \14\ See 31 CFR 103.19.
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    Moreover, before certain customers can purchase certain types of
investment products (such as options, futures or penny stocks) or
engage in certain strategies (such as day trading), the firm must
explicitly approve their accounts for such activity.\15\
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    \15\ See, e.g., Exchange Act Rule 15g-1 through 15g-9 (Penny
Stock Rules); FINRA Rule 2360 (Options); FINRA Rule 2370 (Security
Futures); FINRA Rule 2130 (Approval Procedures for Day-Trading
Accounts).
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    FINRA also believes that NYSE Supplementary Material 405.10 is
redundant of other FINRA proposed and existing requirements, and that
the cross references provided in NYSE Supplementary Material 405.20 and
.30 are no longer necessary. NYSE Supplementary Material 405.10
generally discusses the requirements that firms know their customers
and understand the authority of third parties to act on behalf of
customers that are legal entities. As discussed above, proposed FINRA
Rule 2090 and proposed FINRA Supplementary Material 2090.01 would
require firms to know the essential facts concerning every customer.
Moreover, NASD Rule 3110(c) (Customer Account Information), requires
firms to maintain a record identifying the person(s) authorized to
transact business on behalf of a customer that is a legal entity.\16\
NYSE Supplementary Material 405.20 and .30 provide cross references to
NYSE Rule 382 (Carrying Agreements) and NYSE Rule 414 (Index and
Currency Warrants), respectively, which are no longer necessary or
appropriate for inclusion in proposed FINRA Rule 2090.
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    \16\ FINRA is proposing to adopt NASD Rule 3110(c) as FINRA Rule
4512 (Customer Account Information), subject to certain amendments.
See Exchange Act Release No. 63181 (October 26, 2010), 75 FR 67155
(November 1, 2010).
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    FINRA believes that the associated NYSE Rule Interpretations also
are redundant. NYSE Rule Interpretations 405/01 (Credit Reference--
Business Background) and/02 (Approval of New Accounts/Branch Offices)
recommend that the credit references and business backgrounds of a new
account be cleared by a person other than the registered representative
opening the account and require a designated person to approve a new
account. These obligations are substantially similar to the
requirements in NASD Rule 3110(c)(1)(C) and FINRA Rule 3310, discussed
above.
    NYSE Rule Interpretation 405/03 (Fictitious Orders) provides that
firm ``personnel opening accounts and/or accepting orders for new or
existing accounts should make every effort to verify the legitimacy of
the account and the validity of every order.'' The interpretation
contemplates knowing the customer behind the order as part of the
process of ensuring that the order is bona fide. Proposed FINRA Rule
2090 and FINRA Rule 3310 together would similarly require firms to know
their customers.
    To the extent NYSE Rule Interpretation 405/03 seeks to guard
against the use of fictitious trades as a means of manipulating
markets, existing FINRA rules address currently these activities. FINRA
Rule 5210 (Publication

of Transactions and Quotations) prohibits members from publishing or
circulating or causing to publish or circulate, any notice, circular,
advertisement, newspaper article, investment service, or communication
of any kind which purports to report any transaction as a purchase or
sale of, or purports to quote the bid or asked price for, any security
unless the member believes that the transaction or quotation was bona
fide. FINRA Rule 5220 (Offers at Stated Prices) prohibits members from
making an offer to buy from or sell to any person any security at a
stated price unless the member is prepared to purchase or sell at that
price and under the conditions stated at the time of the offer to buy
or sell. Moreover, the use of fictitious transactions by a member or
associated person to manipulate the market would also violate FINRA's
rules regarding just and equitable principles of trade (FINRA Rule
2010) and fraud (FINRA Rule 2020).\17\
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    \17\ See, e.g., Terrance Yoshikawa, Exchange Act Release No.
53731 (April 26, 2006), 87 SEC Docket 2924, 2006 SEC LEXIS 948
(upholding finding that president of broker-dealer violated just and
equitable principles of trade and anti-fraud provisions by
fraudulently entering orders designed to manipulate the price of
securities).
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    NYSE Rule Interpretation 405/04 (Accounts in which Member
Organizations have an Interest) discusses requirements regarding
transactions initiated ``on the Floor'' for an account in which a
member organization has an interest. The interpretation is directed to
the NYSE marketplace. Section 11(a) of the Exchange Act and the rules
thereunder also address trading by members of exchanges, brokers and
dealers.
    For the reasons discussed above, FINRA believes NYSE Rule 405(1)
through (3), NYSE Supplementary Material 405.10 through .30, and NYSE
Rule Interpretations 405/01 through/04 are no longer necessary. They
will be eliminated from the current FINRA rulebook upon Commission
approval and implementation by FINRA of this proposed rule change.

B. Proposed FINRA Rule 2111

    The proposed suitability obligation in FINRA Rule 2111 would
require a broker-dealer or associated person to have ``a reasonable
basis to believe that a recommended transaction or investment strategy
involving a security or securities is suitable for the customer * *
*.'' \18\ This assessment would need to be ``based on the information
obtained through the reasonable diligence of the member or associated
person to ascertain the customer's investment profile[,]'' which
``includes, but is not limited to, the customer's age, other
investments, financial situation and needs, tax status, investment
objectives, investment experience, investment time horizon, liquidity
needs, risk tolerance, and any other information the customer may
disclose to the member or associated person in connection with such
recommendation.'' \19\
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    \18\ See Proposed FINRA Rule 2111(a).
    \19\ See Proposed FINRA Rule 2111(a). FINRA modified various
aspects of the proposed information-gathering requirements in
response to comments.
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    The proposed rule would explicitly cover a recommended investment
strategy. Although FINRA generally intends the term ``strategy'' to be
interpreted broadly, the proposed supplementary material would exclude
the following communications from the coverage of Rule 2111 as long as
they do not include (standing alone or in combination with other
communications) a recommendation of a particular security or
securities:
     General financial and investment information, including
(i) basic investment concepts, such as risk and return,
diversification, dollar cost averaging, compounded return, and tax
deferred investment, (ii) historic differences in the return of asset
classes (e.g., equities, bonds, or cash) based on standard market
indices, (iii) effects of inflation, (iv) estimates of future
retirement income needs, and (v) assessment of a customer's investment
profile;
     Descriptive information about an employer-sponsored
retirement or benefit plan, participation in the plan, the benefits of
plan participation, and the investment options available under the
plan;
     Asset allocation models that are (i) based on generally
accepted investment theory, (ii) accompanied by disclosures of all
material facts and assumptions that may affect a reasonable investor's
assessment of the asset allocation model or any report generated by
such model, and (iii) in compliance with NASD Interpretative Material
(``IM'') 2210-6 (Requirements for the Use of Investment Analysis Tools)
if the asset allocation model is an ``investment analysis tool''
covered by NASD IM-2210-6; \20\ and
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    \20\ FINRA is proposing to adopt NASD IM-2210-6 as FINRA Rule
2214 without material change. See Regulatory Notice 09-55 (September
2009).
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     Interactive investment materials that incorporate the
above.\21\
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    \21\ See Proposed FINRA Rule 2111.03. FINRA included this
exception in response to comments.
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    The proposal also would codify interpretations of the three main
suitability obligations, listed below:
     Reasonable basis (members must have reasonable grounds to
believe, based on reasonable diligence, that a recommendation is
suitable for at least some investors);
     Customer specific (members must have reasonable grounds to
believe a recommendation is suitable for the particular investor at
issue); and
     Quantitative (members must have a reasonable basis to
believe the number of transactions recommended to a customer within a
certain period is not excessive).\22\
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    \22\ See Proposed FINRA Rule 2111.03.
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    In addition, the proposal would modify the institutional-customer
exemption by focusing on whether there is a reasonable basis to believe
that the institutional customer is capable of evaluating investment
risks independently, both in general and with regard to particular
transactions and investment strategies,\23\ and is exercising
independent judgment in evaluating recommendations.\24\ The proposal
would require institutional customers to affirmatively indicate that
they are exercising independent judgment,\25\ and would harmonize the
definition of institutional customer in the suitability rule with the
definition of ``institutional account'' in NASD Rule 3110(c)(4).\26\
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    \23\ See Proposed FINRA Rule 2111(b). The requirement in
proposed FINRA Rule 2111(b) that the firm or associated person have
a reasonable basis to believe that ``the institutional customer is
capable of evaluating investment risks independently, both in
general and with regard to particular transactions and investment
strategies'' comes from NASD IM-2310-3. As FINRA explained in that
IM, ``[i]n some cases, the member may conclude that the customer is
not capable of making independent investment decisions in general.
In other cases, the institutional customer may have general
capability, but may not be able to understand a particular type of
instrument or its risk.'' FINRA further stated that, ``[i]f a
customer is either generally not capable of evaluating investment
risk or lacks sufficient capability to evaluate the particular
product, the scope of a member's customer-specific obligations under
the suitability rule would not be diminished by the fact that the
member was dealing with an institutional customer.'' FINRA also
stated that ``the fact that a customer initially needed help
understanding a potential investment need not necessarily imply that
the customer did not ultimately develop an understanding and make an
independent decision.''
    \24\ See Proposed FINRA Rule 2111(b).
    \25\ Id. FINRA noted that the institutional-customer exemption
applies only if both parts of the two-part test are met: (1) There
is a reasonable basis to believe that the institutional customer is
capable of evaluating investment risks independently, in general and
with regard to particular transactions and investment strategies,
and (2) the institutional customer affirmatively indicates that it
is exercising independent judgment in evaluating recommendations.
    \26\ See Proposed FINRA Rule 2111(b). FINRA is proposing to
adopt NASD Rule 3110(c)(4) as FINRA Rule 4512(c), without material
change. See Exchange Act Release No. 63181 (October 26, 2010), 75 FR
67155 (November 1, 2010).

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    Finally, the suitability proposal would eliminate or modify a
number of the IMs associated with the existing suitability rule because
they are no longer necessary. Some of these IMs would be unnecessary in
light of the proposed changes to the scope of the suitability rule
(e.g., the proposed rule text would capture ``strategies'' currently
referenced in IM-2310-3),\27\ and others would be redundant because
they identify conduct explicitly covered by other rules (e.g.,
inappropriate sale of penny stocks referenced in IM-2310-1 is covered
by the Commission's penny stock rules,\28\ while fraudulent conduct
identified in IM-2310-2 is covered by Exchange Act and FINRA anti-fraud
provisions \29\).
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    \27\ See Proposed Rule 2111(a).
    \28\ See Exchange Act Rule 15g-1 through 15g-9.
    \29\ See Section 10(b) of the Act; FINRA Rule 2020.
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    Other IM provisions would be incorporated in some form into the
proposed rule or the supplementary material to the proposed rule. For
example, the exemption in IM-2310-3 dealing with institutional
customers has been modified and would be included in the text of
proposed FINRA Rule 2111.\30\ In addition, the explication of the three
main suitability obligations in IM-2310-2 and IM-2310-3 has been
consolidated into a single discussion in the proposed rule's
supplementary material.\31\ Similarly, the proposed rule's
supplementary material would include a modified form of the current
requirement in IM-2310-2 that a member refrain from recommending
purchases beyond a customer's capability.\32\ The supplementary
material also would incorporate the discussions in IM-2310-2 and IM-
2310-3 regarding the significance of the suitability rule in promoting
fair dealing with customers and ethical sales practices.\33\
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    \30\ See Proposed Rule 2111(a).
    \31\ See Proposed Rule 2111.05.
    \32\ See Proposed Rule 2111.06.
    \33\ See Proposed Rule 2111.01.
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    The only type of misconduct identified in the IMs that is neither
explicitly covered by other rules nor incorporated in some form into
the proposed new suitability rule is unauthorized trading, currently
discussed in IM-2310-2. However, it is well settled that unauthorized
trading violates just and equitable principles of trade under FINRA
Rule 2010 (previously NASD Rule 2110).\34\ Consequently, the
elimination of the discussion of unauthorized trading in the IMs
following the suitability rule does not alter the longstanding view
that unauthorized trading is serious misconduct and clearly violates
FINRA's rules.
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    \34\ See, e.g., Robert L. Gardner, 52 S.E.C. 343, 344 n.1
(1995), aff'd, 89 F.3d 845 (9th Cir. 1996) (table format); Keith L.
DeSanto, 52 S.E.C. 316, 317 n.1 (1995), aff'd, 101 F.3d 108 (2d Cir.
1996) (table format); Jonathan G. Ornstein, 51 S.E.C. 135, 137
(1992); Dep't of Enforcement v. Griffith, No. C01040025, 2006 NASD
Discip. LEXIS 30, at *11-12 (NAC Dec. 29, 2006); Dep't of
Enforcement v. Puma, No. C10000122, 2003 NASD Discip. LEXIS 22, at
*12 n.6 (NAC Aug. 11, 2003).
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    FINRA will announce the implementation date of the proposed rule
change in a Regulatory Notice to be published no later than 60 days
following Commission approval. The implementation date will be no later
than 270 days following publication of the Regulatory Notice announcing
Commission approval.

III. Summary of Comments and FINRA's Response

    As stated previously, the Commission received 22 comments in
response to the proposed rule change,\35\ and FINRA responded to the
comments both by letter \36\ and by filing an amendment to the proposed
rule change to address certain comments.\37\ Although commenters raised
numerous suitability-related issues that FINRA previously addressed in
its original rule filing with the Commission, a few commenters
identified new suitability-related concerns regarding the proposed rule
change, and some persuaded FINRA to amend the proposal. A discussion of
those comments and FINRA's response follows.
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    \35\ See supra, note 5.
    \36\ See supra, note 6.
    \37\ See supra, note 7.
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Request for Indeterminate Delay of the Proposal

     Comments
    Six commenters argued that FINRA's proposed rule changes should not
be acted on until after policymakers (e.g., Congress, the Commission,
and/or FINRA) determine whether broker-dealers must comply with
fiduciary obligations.\38\ In particular, these commenters cited the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
(``Dodd-Frank''), which, among other things, requires the SEC to study
the standards of care broker-dealers and investment advisers must
adhere to when dealing with clients (including a fiduciary duty). These
commenters advocated postponing FINRA's proposed rule changes until the
parameters of any SEC rulemaking resulting from the study are clear.
Other commenters strongly opposed any delay, citing the importance of
FINRA's proposal to investor protection.\39\
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    \38\ See TIAA-CREF Letter, CAI Letter, Schwab Letter, SIFMA
Letter, TD Ameritrade Letter, and FSI Letter.
    \39\ See Black-Gross Letter.
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     FINRA's Response
    FINRA stated that its proposal generally maintains the core
features of its current ``know your customer'' and suitability rules.
FINRA also indicated that the proposed changes to those rules would
provide greater protection to investors and greater certainty to
broker-dealers by streamlining various provisions to focus on critical
obligations that are not covered by other rules and by codifying in one
place significant interpretations of key requirements.
    FINRA also expressed the view that nothing in Dodd-Frank argues for
the discontinuance of these important sales-practice obligations or the
weakening of investor protection generally. FINRA stated that the
suitability obligations in proposed Rule 2111 would not be inconsistent
with a fiduciary duty if broker-dealers become subject to that duty at
some future date.\40\ In addition, FINRA noted that the suitability and
``know your customer'' standards are a material part of a fiduciary
duty in the context of advice or recommendations.
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    \40\ FINRA notes as well that the suitability rule is only one
of many FINRA business-conduct rules with which broker-dealers and
their associated persons must comply. Many FINRA rules prohibit,
limit, or require disclosure of conflicts of interest. Broker-
dealers and their associated persons, for instance, must comply with
just and equitable principles of trade, standards for communications
with the public, order-handling requirements, fair-pricing
standards, and various disclosure obligations regarding research,
trading, compensation, margin, and certain sales and distribution
activity, among others, in addition to suitability obligations.
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    In response to similar comments made with respect to FINRA's NTM
09-25, FINRA quoted a Commission release that noted ``investment
advisers under the Advisers Act'' that have fiduciary duties ``owe
their clients the duty to provide only suitable investment advice * *
*. To fulfill this suitability obligation, an investment adviser must
make a reasonable determination that the investment advice provided is
suitable for the client based on the client's financial situation and
investment objectives.'' \41\ FINRA also cited another Commission
release that

explained that ``[i]nvestment advisers are fiduciaries who owe their
clients a series of duties, one of which is the duty to provide only
suitable investment advice.'' \42\
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    \41\ 75 FR 51310, at 51314 (Aug. 19, 2010) and 75 FR 52562,
52567 (Aug. 26, 2010) citing SEC Release Nos. IC-22579, IA-1623, S7-
24-95, 1997 SEC LEXIS 673, at *26 (Mar. 24, 1997) (Status of
Investment Advisory Programs under the Investment Company Act of
1940). See also Shearson, Hammill & Co., 42 S.E.C. 811 (1965)
(finding willful violations of Section 206 of the Advisers Act when
investment adviser made unsuitable recommendations).
    \42\ 75 FR 51310, at 51314 (Aug. 19, 2010) and 75 FR 52562,
52567 (Aug. 26, 2010) citing Investment Advisers Act Release No.
1406, 1994 SEC LEXIS 797, at *4 (Mar. 16, 1994) (Suitability of
Investment Advice Provided by Investment Advisers).
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    As to timing, FINRA maintained that improvements to investor
protection and clarification of broker-dealer obligations should not be
postponed indefinitely simply because there could potentially be a rule
that may address similar issues at a future time. FINRA indicated that
delay also would be problematic because it would amount to an open-
ended postponement of the important benefits to customers and broker-
dealers noted above. As some commenters noted, Dodd-Frank does not
require that the Commission engage in rulemaking at the end of its
study and, even if the Commission proposes a rule, there is no
timetable for doing so.\43\
---------------------------------------------------------------------------

    \43\ See Black-Gross Letter.
---------------------------------------------------------------------------

Proposed FINRA Rule 2090

     Comments
    One commenter expressed concern regarding FINRA's proposed
elimination of Supplementary Material .20 to NYSE Rule 405, which
references the applicability of NYSE Rule 382 (Carrying Agreements) and
the allocation of responsibility between introducing and carrying
firms.\44\
---------------------------------------------------------------------------

    \44\ See SIFMA Letter.
---------------------------------------------------------------------------

     FINRA's Response
    FINRA stated that because NASD Rule 3230 (Clearing Agreements),
which generally would be applicable, similarly covers allocation issues
between introducing and carrying firms, reference to NYSE Rule 382 is
both outdated and unnecessary.

Proposed FINRA Rule 2111--Consistent Terminology and Expanded
Explanation of Key Terms

     Comments
    One commenter suggested that FINRA should maintain a standard
approach to the terminology used in the rule.\45\ The commenter gave as
an example the use of ``reasonable basis'' in one section and
``reasonable grounds'' in another. The commenter also noted that the
rule uses both ``reasonable diligence'' and ``adequate due diligence.''
Another commenter asked FINRA to provide greater clarity in
Supplementary Material regarding the terms ``investment profile'' and
``reasonable diligence.'' \46\
---------------------------------------------------------------------------

    \45\ See SIFMA Letter.
    \46\ Id.
---------------------------------------------------------------------------

     FINRA's Response
    In response to this and other comments, FINRA filed Amendment No.
1, which amended the proposal to use more consistent terminology, where
possible, and to provide more detailed explanations regarding key terms
or responsibilities. As amended, the rule would consistently use the
term ``reasonable basis'' rather than also using ``reasonable grounds''
and ``reasonable expectations,'' and the term ``reasonable diligence''
instead of also using ``due diligence'' and ``adequate diligence.''
\47\ In addition, Amendment No. 1 amends the proposal to add expanded
discussions regarding a ``customer's investment profile'' (see
discussion below of new Supplementary Material .04--Customer's
Investment Profile) and the ``reasonable diligence'' standards in the
context of a customer's investment profile (see below) and reasonable-
basis suitability.\48\
---------------------------------------------------------------------------

    \47\ See, e.g., Proposed Rule 2090 (replacing the term ``due
diligence'' with ``reasonable diligence''); Supplementary Material
.04 (Customer's Investment Profile) to Proposed Rule 2111 (using the
terms ``reasonable basis'' and ``reasonable diligence'');
Supplementary Material .05 (Components of Suitability Obligations)
to Proposed Rule 2111 (replacing the term ``adequate due diligence''
with the term ``reasonable diligence'' and replacing the term
``reasonable grounds'' with the term ``reasonable basis'');
Supplementary Material .06 (Customer's Financial Ability) to
Proposed Rule 2111 (replacing the term ``reasonable expectation''
with the term ``reasonable basis'').
    \48\ The Supplementary Material regarding reasonable-basis
suitability now contains the following expanded discussion of the
term ``reasonable diligence'': ``A member's or associated person's
reasonable diligence must provide the member or associated person
with an understanding of the potential risks and rewards associated
with the recommended security or strategy. The lack of such an
understanding when recommending a security or strategy violates the
suitability rule.''
---------------------------------------------------------------------------

Proposed FINRA Rule 2111--Information Gathering

     Comments
    Some commenters took issue with various aspects of the proposal's
information-gathering requirements. Several commenters stated that
obtaining each specified category of information is not warranted on
every occasion.\49\ Some asked that FINRA build flexibility into the
rule so that a firm would not have to collect information if it was
irrelevant based on the particular facts and circumstances.\50\
Alternatively, these commenters requested that FINRA establish an
effective date for the new rule that recognizes the difficulty
associated with developing, modifying, and implementing forms and
systems to request and capture the proposed new categories of
information.\51\
---------------------------------------------------------------------------

    \49\ See Schwab Letter, CAI Letter, SIFMA Letter, TD Ameritrade
Letter, and TIAA-CREF Letter.
    \50\ See CAI Letter, TD Ameritrade Letter, and TIAA-CREF Letter.
    \51\ See Schwab Letter, CAI Letter, SIFMA Letter, TD Ameritrade
Letter, and TIAA-CREF Letter.
---------------------------------------------------------------------------

    One commenter maintained that factors such as a customer's
investment experience, time horizon, and risk tolerance should be
considered when reviewing a customer's portfolio as a whole, and not
individual trades.\52\ In this commenter's view, requiring
consideration of such factors on a trade-by-trade basis would prevent
customers from creating a diverse portfolio made up of securities with
different levels of liquidity, risk, and time horizons.
---------------------------------------------------------------------------

    \52\ See FSI Letter.
---------------------------------------------------------------------------

     FINRA's Response
    FINRA noted that the factors it added to the rule are subsets of
broader categories of information identified in the current suitability
rule, and that case law and regulatory notices have long stressed the
significance of these factors to a suitability analysis. In response to
those comments requesting flexibility regarding the type of information
that firms must seek to obtain and comments requesting more guidance on
what is required, FINRA proposed in Amendment No. 1 to add
Supplementary Material .04 to FINRA Rule 2111.\53\ FINRA believes
proposed Supplementary Material .04 would provide flexibility regarding
the type of information that firms must seek to obtain and analyze in
connection with a recommendation under the proposed rule. However,
because FINRA believes the factors discussed in Rule 2111(a) generally
are relevant (and often crucial) to a suitability analysis, the
proposed rule would require firms to document with specificity their
reasonable basis for believing that a factor is not relevant in order
to be relieved of the obligation

to seek to obtain information about that factor.\54\
---------------------------------------------------------------------------

    \53\ Supplementary Material .04 to Proposed FINRA Rule 2111
would provide, ``.04 Customer's Investment Profile. A member or
associated person shall make a recommendation covered by this Rule
only if, among other things, the member or associated person has
sufficient information about the customer to have a reasonable basis
to believe that the recommendation is suitable for that customer.
The factors delineated in Rule 2111(a) regarding a customer's
investment profile generally are relevant to a determination
regarding whether a recommendation is suitable for a particular
customer, although the level of importance of each factor may vary
depending on the facts and circumstances of the particular case. A
member or associated person shall use reasonable diligence to obtain
and analyze all of the factors delineated in Rule 2111(a) unless the
member or associated person has a reasonable basis to believe,
documented with specificity, that one or more of the factors are not
relevant components of a customer's investment profile in light of
the facts and circumstances of the particular case.''
    \54\ FINRA noted that the efforts of a firm that seeks but does
not obtain information about a particular factor (as opposed to a
situation where the firm does not attempt to obtain the information
about a particular factor) would be judged by the ``reasonable
diligence'' standard. FINRA also noted that, when customer
information is unavailable despite a firm's reasonable diligence in
seeking to obtain the information, the firm must carefully consider
whether it has sufficient customer information to properly evaluate
the suitability of a recommendation to the customer. However, FINRA
noted further that if the firm used reasonable diligence, the
absence of some customer information that is not critical to the
analysis based on the facts and circumstances of the particular
situation generally would not preclude a recommendation from being
viewed as suitable as long as the broker had obtained and analyzed
other customer information that provided the broker with a
reasonable basis to believe that the recommendation was suitable for
that customer. FINRA Response, note 19.
---------------------------------------------------------------------------

    FINRA stated that proposed Supplementary Material .04 also led to
the addition of new Supplementary Material .02 to proposed Rule 2111
that reiterates FINRA's longstanding position that firms and their
associated persons cannot disclaim any obligations under the
suitability rule.\55\ Among other things, Supplementary Material .02
would clarify that firms and their associated persons cannot disclaim
their obligation to use reasonable diligence to obtain and analyze
relevant customer information.
---------------------------------------------------------------------------

    \55\ See e.g., Notice to Members 01-23 (Apr., 2001) (``[A]
broker-dealer cannot disclaim away its suitability obligations * *
*.'') Supplementary Material .02 to Proposed FINRA Rule 2111 reads
``.02 Disclaimers. A member or associated person cannot disclaim any
responsibilities under the suitability rule.''
---------------------------------------------------------------------------

    Finally, FINRA indicated that it disagrees with the premise that a
recommendation-by-recommendation analysis precludes consideration of a
customer's investment portfolio. FINRA contended that although its
suitability rule requires a recommendation-by-recommendation analysis,
the current and proposed suitability rules explicitly permit the
suitability analysis of a particular transaction to be performed within
the context of the investor's other security holdings or investments.
In fact, they requires that firms make reasonable efforts to gather and
analyze information regarding a customer's other securities holdings as
part of its suitability review.\56\
---------------------------------------------------------------------------

    \56\ This statement was confirmed in a telephone conversation
between James Wrona, Associate Vice President and Associate General
Counsel, FINRA, and Bonnie Gauch, Special Counsel, Division of
Trading and Markets, Commission, on November 15, 2010.
---------------------------------------------------------------------------

Proposed Rule 2111--Recommendations To Hold Securities

     Comments
    Several commenters urged FINRA to clarify in the rule that the rule
covers explicit recommendations to hold a security or securities.\57\
---------------------------------------------------------------------------

    \57\ See Brewer Letter, Catalano Letter, Estell Letter,
Ilgenfritz Letter, Jacobson Letter, Krosschell Letter, Layne Letter,
Mougey Letter, Neuman Letter, PIABA Letter, and Van Kampen Letter.
---------------------------------------------------------------------------

     FINRA's Response
    FINRA indicated that it previously had stated that eliminating in
the proposed rule the reference to ``purchase, sale or exchange'' used
in the current rule and adding in the proposed rule the term
``strategy'' meant that the proposed rule would cover explicit
recommendations to hold a security or securities.\58\ FINRA explained
that the rule recognizes that customers may rely on members' and
associated persons' investment expertise and knowledge, and it is thus
appropriate to hold members and associated persons responsible for the
recommendations that they make to customers, regardless of whether
those recommendations result in transactions or generate transaction-
based compensation.\59\
---------------------------------------------------------------------------

    \58\ Exchange Act Release No. 62718 (Aug. 13, 2010), 75 FR
51310, at 51316 (Aug. 19, 2010) and Exchange Act Release No. 62718A
(Aug. 20, 2010), 75 FR 52562, at 52568 (Aug. 26, 2010) (``The term
``strategy,'' moreover, would cover explicit recommendations to hold
a security or securities.'') FINRA further stated that the rule
would not cover implicit recommendations to hold a security or
securities.
    \59\ Id.
---------------------------------------------------------------------------

    For purposes of clarity, Amendment No. 1 would amend Supplementary
Material .03 to state that investment strategies would include, among
other things, an explicit recommendation to hold a security or
securities.

Proposed Rule 2111--Institutional Customers

     Comments
    One commenter requested that FINRA exempt from the ``affirmative
indication'' requirement of proposed Rule 2111(b) those institutional
investors that qualify as qualified institutional buyers (``QIBs'') for
purposes of Rule 144A under the Securities Act of 1933 (the
``Securities Act'').\60\ That commenter argued that ``[QIBs] are among
the most sophisticated counterparties in the institutional marketplace,
and member firms already have well established suitability procedures
for these customers that reflect their level of sophistication.''
---------------------------------------------------------------------------

    \60\ See SIFMA Letter. Rule 144A deals with the application of
Section 5 of the Securities Act to private resales of securities to
institutions. It does not limit the application of the antifraud or
other provisions of the federal securities laws.
---------------------------------------------------------------------------

    The same commenter also suggested that FINRA expand the coverage of
proposed Rule 2111(b) so that, in addition to meeting its customer-
specific suitability obligation, a member firm also meets its
quantitative suitability obligation if the conditions in Rule
2111(b)(1) and (2) are satisfied.\61\ That commenter stated that
imposing a quantitative suitability obligation in the institutional
delivery-versus-payment/receipt-versus-payment context makes little
sense. The commenter also stated that, because business institutions
typically have their own internal portfolio managers, handle custody
away from the broker-dealer and execute trades with multiple firms, no
single broker-dealer would see all of an institution's trades or its
entire investment portfolio, and thus no single broker-dealer would be
in a position to determine whether the institution's transactions are
so excessive or frequent as to constitute churning.
---------------------------------------------------------------------------

    \61\ See SIFMA Letter.
---------------------------------------------------------------------------

    In addition, this commenter requested that FINRA modify the
sentence in proposed Supplementary Material .05 providing that ``[w]ith
respect to having to indicate affirmatively that it is exercising
independent judgment in evaluating the member's or associated person's
recommendations, an institutional customer may indicate that it is
exercising independent judgment on a trade-by-trade basis, on an asset-
class-by-asset-class basis, or in terms of all potential transactions
for its account.'' \62\ The commenter believed this sentence was
confusing and subject to varying interpretations. The commenter stated
that it believed that ``the intent of Supplementary Material .05 is to
clarify that proposed Rule 2111(b)(2) allows member firms to establish
and document a clear understanding of the institutional customer's
independence at the outset of the relationship--that is, at the time of
account opening,'' and that if the intent were not as it believed, the
sentence would ``fundamentally alter the operation of the institutional
markets and could have a negative impact on execution quality.''
---------------------------------------------------------------------------

    \62\ Id.
---------------------------------------------------------------------------

     FINRA's Response
    FINRA stated, with respect to the comment that FINRA should exempt
firms from the requirement to obtain an ``affirmative indication'' from
QIBs, that it does not believe that a monetary threshold, whatever the
amount or context, is an adequate substitute for the proposed
requirement that the institutional customer affirmatively acknowledge
that it is exercising independent judgment as part of the determination
that an exemption from customer-specific suitability applies.

    With respect to the comment that FINRA should expand proposed Rule
2111(b) to provide that a member firm meets both its customer specific
obligation and its quantitative suitability obligation if it satisfies
the conditions in Rule 2111(b)(1) and (2), FINRA stated that it is
important that a firm not recommend an unsuitable number of
transactions in those circumstances where it has control over an
account. FINRA emphasized, however, that quantitative suitability
generally would apply only with regard to that portion of an
institutional customer's portfolio that the firm controls and only with
regard to the firm's recommended transactions.
    Finally, with respect to the request for clarification of the
sentence in Supplementary Material .05, FINRA stated that its intent
was to allow an institutional investor to indicate that it is
``exercising independent judgment on a trade-by-trade basis, on an
asset-class-by-asset-class basis, or in terms of all potential
transactions for its account,'' and that it believes the language of
the Supplementary Material is clear. Further, FINRA indicated that if a
broker-dealer believes that such action on a trade-by-trade basis would
fundamentally change its operations, it can decide as a business matter
to service only those institutional investors that are willing to make
the affirmative indication in terms of all potential transactions for
its account.

IV. Discussion and Commission Findings

    After careful review of the proposed rule change, the comments
received, and FINRA's response to the comments, the Commission finds
that the proposed rule change is consistent with the requirements of
the Act, and the rules and regulations thereunder that are applicable
to a national securities association.\63\ The Commission believes that
the proposed rule change is consistent with the provisions of Section
15A(b)(6) of the Act \64\ in that it is designed to prevent fraudulent
or manipulative acts and practices, promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest.
---------------------------------------------------------------------------

    \63\ In approving this proposal, the Commission has considered
the proposed rules' impact on efficiency, competition, and capital
formation. See 15 U.S.C. 17c(f).
    \64\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

    Specifically, the Commission believes the proposed rule change is
consistent with FINRA's obligations under the Exchange Act to prevent
fraudulent or manipulative acts and practices, and to promote just and
equitable principles of trade, because the proposed rule would
incorporate the NASD suitability rule and the NYSE ``know your
customer'' rule into the FINRA consolidated rulebook. The suitability
and ``know your customer'' obligations are critical to ensuring
investor protection and fair dealing with customers. The proposed rule
changes also would modify those rules to strengthen and clarify them,
and incorporate into the rules certain settled interpretive guidance
and case law.
    Additionally, the Commission believes that FINRA has adequately
responded to commenters' concerns both by its letter of October 21,
2010 and its filing of Amendment No. 1. Amendment No. 1 would
standardize the terminology used in the proposed rule change, provide
additional clarification with respect to certain aspects of the
proposed rule change, and provide broker-dealers with appropriate
flexibility without impairing the rules' investor protection goals.

V. Accelerated Approval

    The Commission finds good cause, pursuant to Section 19(b)(2) of
the Exchange Act,\65\ for approving the proposed rule change, as
modified by Amendment No. 1, prior to the 30th day after publication of
Amendment No. 1 in the Federal Register. The changes proposed in
Amendment No. 1 respond to specific concerns raised by commenters and
do not raise any additional issues. In particular, Amendment No. 1
would standardize the terminology used in the proposed rule change,
provide additional clarification with respect to certain aspects of the
proposed rule change, and provide broker-dealers with appropriate
flexibility without impairing the rule's investor protection goals.
---------------------------------------------------------------------------

    \65\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    Accordingly, the Commission finds that good cause exists to approve
the proposal, as modified by Amendment No.1, on an accelerated basis.

VI. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-FINRA-2010-039 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2010-039. 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 Web site
viewing and printing in the Commission's Public Reference Room, 100 F
Street, NE., Washington, DC 20549, on official business days between
the hours of 10 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-FINRA-2010-039
and should be submitted on or before December 14, 2010.

VII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\66\ that the proposed rule change (SR-FINRA-2008-039), as modified
by Amendment No. 1, be, and hereby is, approved on an accelerated
basis.
---------------------------------------------------------------------------

    \66\ Id.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\67\
---------------------------------------------------------------------------

    \67\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-29447 Filed 11-22-10; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: March 30, 2006 (Volume 71, Number 61)]
[Notices]
[Page 16135-16136]
[DOCID:fr30mr06-52]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. OR06-6-000 and Enbridge Offshore Facilities, LLC]

Notice of Petition for Declaratory Order

March 24, 2006.
    Take notice that on March 17, 2006, Enbridge Offshore Facilities,
LLC (Enbridge) filed in Docket No. OR06-6-000, a petition for
declaratory order, pursuant to Rule 207(a)(2) of the Commission's Rules
of Practice and Procedure (18 CFR 385.207(a)(2)). Enbridge requests
that the Commission issue an expedited decision on this petition no
later than mid-June 2006.
    Enbridge states that it is planning to construct a 20-inch
diameter, 26-mile crude oil pipeline Enbridge Oil Pipeline from
production facilities servicing the Neptune oil field in the Atwater
Valley area approximately 170 miles south of New Orleans, Louisiana in
the deepwater Gulf of Mexico, to Caesar Oil Pipeline. Enbridge Oil
Pipeline is expected to commence service in 2007. Enbridge Oil Pipeline
will also be available to serve fields to be developed in the future in
the western Atwater Valley and eastern Green Canyon areas.
    Enbridge states that the Enbridge Oil Pipeline will function in
effect as an extension of Caesar Oil Pipeline. The Commission has
approved contract carriage on Caesar Oil Pipeline,\1\ and Caesar Oil
Pipeline has entered into transportation agreements with producers in
the Neptune Field under which Caesar Oil Pipeline has agreed to
transport up to 60,000 barrels of oil per day from the Neptune Field on
contract carriage terms. Enbridge asserts that if those shippers and
others who may ship on Enbridge Oil Pipeline in the future are to be
assured that they can take advantage of their full contract rights to
ship on Caesar Oil Pipeline, they must also be able to contract for
rights to ship on Enbridge Oil Pipeline. Without such complementary
contractual rights to ship on Enbridge Oil Pipeline, shippers will be
concerned about the possibility that common-carrier type pro rata
allocation might be required on

Enbridge Oil Pipeline under the provisions of 43 U.S.C. 1334(e)-(f)
(2004). This would create a mismatch between the capacity for which
shippers have contracted on Caesar Oil Pipeline and the capacity to
which they have access on Enbridge Oil Pipeline to transport their oil
to Caesar Oil Pipeline.
---------------------------------------------------------------------------

    \1\ Caesar Oil Pipeline, 102 FERC ] 61,339 at PP 1, 37-38
(2003).
---------------------------------------------------------------------------

    Enbridge is concerned that in the absence of the declaratory order
that it seeks, the potential for common-carrier type pro rata
allocation on Enbridge Oil Pipeline will (1) result in shippers
refusing to transport volumes on Enbridge Oil Pipeline due to such
shippers' concern that they will be prevented from tendering their
contracted-for volumes to Caesar Oil Pipeline, and (2) encourage
shippers to build their own isolated, duplicative pipeline capacity as
insurance against having to restrict production from their fields as a
result of prorationing on Enbridge Oil Pipeline. Enbridge maintains
that such uncertainty and unnecessary expense would discourage
development of oil production and construction of efficient large-scale
pipelines in the deepwater Gulf of Mexico.
    Accordingly, Enbridge seeks the following:
    A Commission declaration that Enbridge Oil Pipeline will be
authorized to function as a contract carrier, hold on open season,
enter into long-term transportation contracts reflecting contract
carriage principles, give those contracts precedence in allocating
capacity, and contract for capacity that remains available after the
open season closes on a first-come, first-served basis, consistent with
the Commission's ruling in Caesar Oil Pipeline, 102 FERC ] 61,339, at
PP 1, 37 (2003).
    Any person desiring to intervene or to protest this filing must
file in accordance with Rules 211 and 214 of the Commission's Rules of
Practice and Procedure (18 CFR 385.211 and 385.214). Protests will be
considered by the Commission in determining the appropriate action to
be taken, but will not serve to make protestants parties to the
proceeding. Any person wishing to become a party must file a notice of
intervention or motion to intervene, as appropriate. Such notices,
motions, or protests must be filed in accordance on or before the date
as indicated below. Anyone filing an intervention or protest must serve
a copy of that document on the Applicant. Anyone filing an intervention
or protest on or before the intervention or protest date need not serve
motions to intervene or protests on persons other than the Applicant.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper using the ``eFiling'' link at http://www.ferc.gov.
 Persons unable to file electronically should submit an

original and 14 copies of the protest or intervention to the Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426.
    This filing is accessible on-line at http://www.ferc.gov, using the

``eLibrary'' link and is available for review in the Commission's
Public Reference Room in Washington, DC. There is an ``eSubscription''
link on the Web site that enables subscribers to receive e-mail
notification when a document is added to a subscribed docket(s). For
assistance with any FERC Online service, please e-mail
<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For

TTY, call<PHONE_NUMBER>.
    Comment Date: 5 p.m. eastern time on April 13, 2006.

Magalie R. Salas,
Secretary.
[FR Doc. E6-4645 Filed 3-29-06; 8:45 am]

BILLING CODE 6717-01-P


[Federal Register: February 6, 2006 (Volume 71, Number 24)]
[Notices]
[Page 6107-6110]
[DOCID:fr06fe06-90]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-27221]

Notice of Applications for Deregistration Under Section 8(f) of
the Investment Company Act of 1940

January 31, 2006.
    The following is a notice of applications for deregistration under
section 8(f) of the Investment Company Act of 1940 for the month of
January,

2006. A copy of each application may be obtained for a fee at the SEC's
Public Reference Branch (tel.<PHONE_NUMBER>). An order granting each
application will be issued unless the SEC orders a hearing. Interested
persons may request a hearing on any application by writing to the
SEC's Secretary at the address below and serving the relevant applicant
with a copy of the request, personally or by mail. Hearing requests
should be received by the SEC by 5:30 p.m. on February 27, 2006, and
should be accompanied by proof of service on the applicant, in the form
of an affidavit or, for lawyers, a certificate of service. Hearing
requests should state the nature of the writer's interest, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request notification by writing to the
Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090. For Further Information Contact: Diane L.
Titus at<PHONE_NUMBER>, SEC, Division of Investment Management, Office
of Investment Company Regulation, 100 F Street, NE., Washington, DC
20549-0504.

WPG Large Cap Growth Fund [File No. 811-1447]; WPG Tudor Fund [File No.
811-1745]; Weiss Peck & Greer Funds Trust [File No. 811-4404]

    Summary: Each applicant seeks an order declaring that it has ceased
to be an investment company. On April 29, 2005, each applicant
transferred its assets to a corresponding series of the RBB Fund, Inc.,
based on net asset value. Total expenses of $667,090 incurred in
connection with the reorganizations were paid by Robeco USA, L.L.C.,
applicants' investment adviser.
    Filing Date: The applications were filed on December 16, 2005.
    Applicants' Address: 909 Third Ave., 31st Floor, New York, NY
10022.

Security Municipal Bond Fund [File No. 811-3225]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. On October 14, 2005, applicant made a
liquidating distribution to its shareholders, based on net asset value.
Expenses of $14,017 incurred in connection with the liquidation were
paid by Security Management Company, LLC, applicant's investment
adviser.
    Filing Date: The application was filed on November 30, 2005.
    Applicant's Address: One Security Benefit Place, Topeka, KS 66636-
0001.

Aquila Fund [File No. 811-4083]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. On December 31, 2004, applicant made a
liquidating distribution to its shareholders, based on net asset value.
Expenses of $1,113 incurred in connection with the liquidation were
paid by Aquila Investment Management LLC, applicant's investment
adviser.
    Filing Date: The application was filed on December 19, 2005.
    Applicant's Address: 380 Madison Ave., New York, NY 10017.

Forward Funds, Inc. [File No. 811-8419]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. On June 30, 2005, each series of applicant
transferred its assets to corresponding series of Forward Funds, based
on net asset value. Expenses of $580,000 incurred in connection with
the reorganization were paid by Forward Management, LLC, applicant's
investment adviser.
    Filing Date: The application was filed on December 12, 2005.
    Applicant's Address: 433 California St., Suite 1100, San Francisco,
CA 94104.

Oppenheimer Multi-Sector Income Trust [File No. 811-5473]

    Summary: Applicant, a closed-end investment company, seeks an order
declaring that it has ceased to be an investment company. On July 22,
2005, applicant transferred its assets to Oppenheimer Strategic Income
Fund, based on net asset value. Expenses of $88,313 incurred in
connection with the reorganization were paid by applicant.
    Filing Date: The application was filed on December 13, 2005.
    Applicant's Address: 6803 S. Tucson Way, Centennial, CO 80112.

Oppenheimer Capital Preservation Fund [File No. 811-8799]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. On February 10, 2005, applicant transferred
its assets to Oppenheimer Cash Reserves, based on net asset value.
Expenses of $55,563 incurred in connection with the reorganization were
paid by applicant.
    Filing Date: The application was filed on December 20, 2005.
    Applicant's Address: 6803 S. Tucson Way, Centennial, CO 80112.

Quadrant Fund, Inc. [File No. 811-21704]

    Summary: Applicant, a closed-end investment company, seeks an order
declaring that it has ceased to be an investment company. On November
3, 2005, applicant made a liquidating distribution to its shareholders,
based on net asset value. Expenses of $75,000 incurred in connection
with the liquidation were paid by applicant and GMAC Institutional
Advisors LLC, applicant's investment adviser. Applicant has retained
approximately $123,000 to pay additional accrued expenses for which it
has not yet been billed.
    Filing Date: The application was filed on December 21, 2005.
    Applicant's Address: 116 Welsh Rd., Horsham, PA 19044.

Columbia National Municipal Bond Fund, Inc. [File No. 811-7832]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. On June 17, 2005, applicant made liquidating
distribution to its shareholders, based on net asset value. Applicant
paid approximately $27,510 in expenses incurred in connection with the
liquidation.
    Filing Dates: The application was filed on October 21, 2005 and
amended on January 11, 2006.
    Applicant's Address: One Financial Center, Boston, MA 02110.

Tax-Free Income Trust [File No. 811-7397]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. By October 18, 2005, applicant's two
shareholders had redeemed all their shares at net asset value. Expenses
of $4,890 incurred in connection with the liquidation were paid by
Ameriprise Financial, Inc., applicant's investment adviser.
    Filing Dates: The application was filed on November 18, 2005, and
amended on January 18, 2006.
    Applicant's Address: 901 Marquette Avenue South, Suite 2810,
Minneapolis, MN 55402-3268.

BQT Subsidiary Inc. [File No. 811-10451]

    Summary: Applicant, a closed-end investment company, seeks an order
declaring that it has ceased to be an investment company. On December
13, 2004, applicant made a liquidating distribution to its shareholders
based on net asset value. Applicant incurred no expenses in connection
with the liquidation.
    Filing Date: The application was filed on December 30, 2005.
    Applicant's Address: 100 Bellevue Parkway, Wilmington, DE 19809.

Sterling Capital Corporation [File No. 811-1537]

    Summary: Applicant, a closed-end investment company, seeks an order
declaring that it has ceased to be an investment company. On September
13, 2005, applicant transferred its assets to The Gabelli Equity Trust
Inc. (``Gabelli''). Applicant's shareholders received .7914 newly
issued shares of Gabelli common stock for each share of applicant,
which represented a 1.4% premium to applicant's net asset value.
Expenses of $121,000 incurred in connection with the reorganization
were paid by applicant. Applicant has transferred $250,000 in cash to a
liquidating trust to pay applicant's remaining liabilities. Any cash
remaining after applicant's liabilities are paid will be distributed
pro rata to applicant's former shareholders.
    Filing Date: The application was filed on December 15, 2005.
    Applicant's Address: 100 Wall St., 11th Floor, New York, NY 10005.

Lorent Investment Company [File No. 811-2935]

    Summary: Applicant, a closed-end investment company, seeks an order
declaring that it has ceased to be an investment company. Applicant has
never made a public offering of its securities and does not propose to
make a public offering. Applicant has fewer than one hundred beneficial
owners and will continue to operate as private investment vehicle in
reliance on section 3(c)(1) of the Act.
    Filing Dates: The application was filed on July 1, 2005, and
amended on August 16, 2005 and January 13, 2006.
    Applicant's Address: 500 West Harbor Dr., Suite 1213, San Diego, CA
92101.

Pilgrim Government Securities Income Fund, Inc. [File No. 811-4031]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. On February 23, 2001, applicant transferred
its assets to ING GNMA Income Fund, Inc. (formerly Pilgrim GNMA Income
Fund, Inc.), based on net asset value. Expenses of $106,385 incurred in
connection with the reorganization were paid by applicant, the
acquiring fund, and applicant's investment adviser, ING Investments,
LLC.
    Filing Dates: The application was filed on October 19, 2001, and
amended on September 9, 2005 and January 24, 2006.
    Applicant's Address: 7337 East Doubletree Ranch Rd., Scottsdale, AZ
85258.

Pilgrim Silver Fund, Inc. [File No. 811-4111]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. On March 23, 2001, applicant transferred its
assets to ING Precious Metals Fund, Inc. (formerly Pilgrim Precious
Metals Fund, Inc.), based on net asset value. Expenses of $28,135
incurred in connection with the reorganization were paid by applicant,
the acquiring fund, and applicant's investment adviser, ING
Investments, LLC.
    Filing Dates: The application was filed on October 19, 2001, and
amended on September 9, 2005 and January 24, 2006.
    Applicant's Address: 7337 East Doubletree Ranch Rd., Scottsdale, AZ
85258.

Pilgrim SmallCap Asia Growth Fund, Inc. [File No. 811-7287]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. On March 23, 2001, applicant transferred its
assets to ING Asia-Pacific Equity Fund, a series of ING Advisory Funds,
Inc. (formerly Pilgrim Advisory Funds, Inc.), based on net asset value.
Expenses of $19,892 incurred in connection with the reorganization were
paid by applicant, the acquiring fund, and applicant's investment
adviser, ING Investments, LLC.
    Filing Dates: The application was filed on October 19, 2001, and
amended on September 9, 2005, and January 24, 2006.
    Applicant's Address: 7337 East Doubletree Ranch Rd., Scottsdale, AZ
85258.

Pilgrim Global Technology Fund, Inc. [File No. 811-9649]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. On March 23, 2001, applicant transferred its
assets to ING Global Information Technology Fund, a series of ING Funds
Trust (formerly Pilgrim Funds Trust), based on net asset value.
Expenses of $20,972 incurred in connection with the reorganization were
paid by applicant, the acquiring fund, and applicant's investment
adviser, ING Investments, LLC.
    Filing Dates: The application was filed on October 19, 2001, and
amended on September 9, 2005 and January 24, 2006.
    Applicant's Address: 7337 East Doubletree Ranch Rd., Scottsdale, AZ
85258.

Pilgrim High Yield Fund III [File No. 811-5496]; Pilgrim Global Income
Fund, Inc. [File No. 811-4675]; Pilgrim Global Corporate Leaders Fund,
Inc. [File No. 811-5113]; Pilgrim Worldwide Emerging Markets Fund, Inc.
[File No. 811-1838]

    Summary: Each applicant seeks an order declaring that it has ceased
to be an investment company. On March 31, 2000, February 23, 2001,
February 23, 2001 and April 27, 2001, respectively, each applicant
transferred its assets to a corresponding series of ING Mutual Funds
(formerly Pilgrim Mutual Funds), based on net asset value. Expenses
incurred in connection with the reorganizations were paid by
applicants, the acquiring funds, and applicants' investment adviser,
ING Investments, LLC.
    Filing Dates: The applications were filed on October 19, 2001, and
amended on September 9, 2005 and January 24, 2006.
    Applicants' Address: 7337 East Doubletree Ranch Rd., Scottsdale, AZ
85258.

Acacia Variable Annuity Separate Account (formerly Acacia National
Variable Annuity Separate Account II) [File No. 811-07627]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. Substantially all the assets of Applicant
were transferred by Acacia National Life Insurance Company (Acacia
National) to Ameritas Variable Life Insurance Company (Ameritas) under
an assumption and reinsurance agreement transaction approved by the
Securities and Exchange Commission in Release No. IC-25763, dated
October 4, 2002. The Board of Directors of the parent of Acacia
National approved the transfer of assets to Ameritas on December 3,
2001, and Applicant completed the transfer of its assets effective
November 1, 2004. Shareholder approval of the transfer was not
required. The fund surviving the transfer is Ameritas Variable Separate
Account VA. Ameritas paid all the expenses incurred in connection with
the transfer.
    Filing Date: The application was filed on November 29, 2005, as
amended.
    Applicant's Address: 7315 Wisconsin Avenue, Bethesda, MD 20814.

Acacia Variable Life Separate Account (formerly Acacia National
Variable Life Separate Account 1) [File No. 811-08998]

    Summary: Applicant seeks an order declaring that it has ceased to
be an investment company. Substantially all

the assets of Applicant were transferred by Acacia National Life
Insurance Company (Acacia National) to Ameritas Variable Life Insurance
Company (Ameritas) under an assumption and reinsurance agreement
transaction approved by the Securities and Exchange Commission in
Release No. IC-25763, dated October 4, 2002. The Board of Directors of
the parent of Acacia National approved the transfer of assets to
Ameritas on December 3, 2001, and Applicant completed the transfer of
its assets effective November 1, 2004. Shareholder approval of the
transfer was not required. The fund surviving the transfer is Ameritas
Variable Separate Account VL. Ameritas paid the expenses incurred in
connection with the transfer.
    Filing Date: The application was filed on November 29, 2005, as
amended.
    Applicant's Address: 7315 Wisconsin Avenue, Bethesda, MD 20814.

    For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Nancy M. Morris,
Secretary.
[FR Doc. E6-1575 Filed 2-3-06; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register: January 25, 2006 (Volume 71, Number 16)]
[Notices]
[Page 4125-4126]
[DOCID:fr25ja06-61]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. ER05-1181-003]

PJM Interconnection, LLC; Notice of Compliance Filing

January 18, 2006.
    Take notice that on January 11, 2006, PJM Interconnection, LLC
(PJM) in accordance with Commission Order issued December 1, 2005,
hereby extends the proposed effective date for the rates submitted in
this proceeding from February 1, 2006 to March 1, 2006. PJM states that
minor corrections have also been made to Statement AA.
    Any person desiring to intervene or to protest this filing must
file in accordance with Rules 211 and 214 of the Commission's Rules of
Practice and Procedure (18 CFR 385.211, 385.214). Protests will be
considered by the Commission in determining the appropriate action to
be taken, but will not serve to make protestants parties to the
proceeding. Any person wishing to become a party must file a notice of
intervention or motion to intervene, as appropriate. Such notices,
motions, or

protests must be filed on or before the comment date. Anyone filing a
motion to intervene or protest must serve a copy of that document on
the Applicant and all the parties in this proceeding.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper using the ``eFiling'' link at http://www.ferc.gov.
 Persons unable to file electronically should submit an

original and 14 copies of the protest or intervention to the Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426.
    This filing is accessible on-line at http://www.ferc.gov, using the

``eLibrary'' link and is available for review in the Commission's
Public Reference Room in Washington, DC. There is an ``eSubscription''
link on the Web site that enables subscribers to receive email
notification when a document is added to a subscribed docket(s). For
assistance with any FERC Online service, please email
<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For

TTY, call<PHONE_NUMBER>.
    Comment Date: 5 p.m. Eastern Time on February 1, 2006.

Magalie R. Salas,
Secretary.
[FR Doc. E6-833 Filed 1-24-06; 8:45 am]

BILLING CODE 6717-01-P


[Federal Register Volume 77, Number 98 (Monday, May 21, 2012)]
[Rules and Regulations]
[Pages 29901-29903]
[FR Doc No: 2012-12264]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

33 CFR Part 165

[Docket No. USCG-2012-0388]
RIN 1625-AA00

Safety Zone; Marysville Days Fireworks, St. Clair River,
Marysville, MI

AGENCY: Coast Guard, DHS.

ACTION: Temporary final rule.

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SUMMARY: The Coast Guard is establishing a temporary safety zone on the
St. Clair River, Marysville, Michigan. This zone is intended to
restrict vessels from a portion of the St. Clair River during the
preparation for and display of the Marysville Days Fireworks on June
29, 2012.

DATES: This rule is effective from 10:00 p.m. through 11:15 p.m. on
June 29, 2012.

ADDRESSES: Documents indicated in this preamble as being available in
the docket are part of docket USCG-2012-0388 and are available online
by going to http://www.regulations.gov, inserting USCG-2012-0388 in the
``Keyword'' box, and then clicking ``Search.'' They are also available
for inspection or copying at the Docket Management Facility (M-30),
U.S. Department of Transportation, West Building Ground Floor, Room
W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590, between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: If you have questions on this
temporary rule, call or email LT Adrian Palomeque, Prevention
Department, Sector Detroit, Coast Guard; telephone<PHONE_NUMBER>,
email<EMAIL_ADDRESS>If you have questions on viewing or
submitting material to the docket, call Renee V. Wright, Program
Manager, Docket Operations, telephone<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Regulatory Information

    The Coast Guard is issuing this temporary final rule without prior
notice and opportunity to comment pursuant to authority under section
4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This
provision authorizes an agency to issue a rule without prior notice and
opportunity to comment when the agency for good cause finds that those
procedures are ``impracticable, unnecessary, or contrary to the public
interest.'' Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good
cause exists for not publishing a notice of proposed rulemaking (NPRM)
with respect to this rule because waiting for a notice and comment
period to run would be impracticable. The final details for this year's
event were not received by the Coast Guard with sufficient time to run
a comment period before the start of this year's event. Thus, delaying
the effectiveness of this rule to await the running of a comment period
would inhibit the Coast Guard's ability to protect the public from the
hazards associated with maritime fireworks displays.
    Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause
exists for making this rule effective less than 30 days after
publication in the Federal Register. Delaying the effective date of
this rule would be impracticable for the same reasons discussed in the
preceding paragraph.

Background and Purpose

    On June 29, 2012, fireworks will be launched from a point on land
near the Marysville Municipal Park, adjacent to the St. Clair River, to
commemorate Marysville Day. The fireworks display will occur between
10:00 p.m. and 11:15 p.m., June 29, 2012. The Captain of the Port
Detroit has determined that these fireworks will pose certain hazards
to the boating public. Such hazards include obstructions to the
waterway that may cause marine casualties, the explosive danger of
fireworks, and debris falling into the water that may cause death,
serious bodily harm, or property damage. Establishing a safety zone to
control vessel movement around the location of the launch platform will
help ensure the safety of persons and property in the vicinity of this
event and help minimize the associated risks.

Discussion of Rule

    For the reasons discussed above, the Captain of the Port Detroit
has determined that a temporary safety zone is necessary to ensure the
safety of spectators and vessels during the setup, loading, and
launching of the Marysville Days Fireworks Display. This safety zone is
effective and will be enforced from 10:00 p.m. through 11:15 p.m. on
June 29, 2012. The temporary safety zone will encompass all waters on
St. Clair River within a 600 foot radius of the fireworks launch site
located on land at position 42[deg]54'25'' N, 082[deg]27'58'' W. All
geographic coordinates are North American Datum of 1983 (NAD 83).
    All persons and vessels shall comply with the instructions of the
Coast Guard Captain of the Port or the designated on scene
representative. Entry into, transiting, or anchoring within the safety
zone is prohibited unless authorized by the Captain of the Port Detroit
or his designated on scene representative. The Captain of the Port or
his designated on scene representative may be contacted via VHF Channel
16.

Regulatory Analyses

    We developed this rule after considering numerous statutes and
executive orders related to rulemaking. Below we summarize our analyses
based on 13 of these statutes or executive orders.

Regulatory Planning and Review

    This rule is not a significant regulatory action under section 3(f)
of Executive Order 12866, Regulatory Planning and Review, and does not
require an assessment of potential costs and benefits under section
6(a)(3) of that Order. The Office of Management and Budget has not
reviewed it under that Order. It is not ``significant'' under the
regulatory policies and procedures of the Department of Homeland
Security (DHS). We conclude that this rule is not a significant
regulatory action because we anticipate that it will have minimal
impact on the economy, will not interfere with other agencies, will not
adversely alter the budget of any grant or loan recipients, and will
not raise any novel legal or policy issues. The safety zone around the
launch platform will be relatively small and exist for only a minimal
time. Thus, restrictions on vessel movement within any particular area
of the St. Clair River are expected to be minimal. Under certain
conditions, moreover, vessels may still transit through the safety zone
when permitted by the Captain of the Port.

Small Entities

    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have
considered whether this rule would have a significant economic impact
on a substantial number of small entities. The term ``small entities''
comprises small businesses, not-for-profit organizations that are
independently owned and operated and are not dominant in their fields,
and governmental jurisdictions with populations of less than 50,000.
    The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will
not have a significant economic impact on a substantial number of small
entities.
    This rule will affect the following entities, some of which may be
small entities: The owners and operators of vessels intending to
transit or anchor in this portion of St. Clair River between 10:00 p.m.
through 11:15 p.m. on June 29, 2011.
    This safety zone will not have a significant economic impact on a
substantial number of small entities for the same reasons discussed in
the above Regulatory Planning and Review section.

Assistance for Small Entities

    Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996 (Pub. L. 104-121), we offer to assist small
entities in understanding the rule so that they can better evaluate its
effects on them and participate in the rulemaking process.
    Small businesses may send comments on the actions of Federal
employees who enforce, or otherwise determine compliance with, Federal
regulations to the Small Business and Agriculture Regulatory
Enforcement Ombudsman and the Regional Small Business Regulatory
Fairness Boards. The Ombudsman evaluates these actions annually and
rates each agency's responsiveness to small business. If you wish to
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR
(1-888-734-3247). The Coast Guard will not retaliate against small
entities that question or complain about this rule or any policy or
action of the Coast Guard.

Collection of Information

    This rule calls for no new collection of information under the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

Federalism

    A rule has implications for federalism under Executive Order 13132,
Federalism, if it has a substantial direct effect on State or local
governments and would either preempt State law or impose a substantial
direct cost of compliance on them. We have analyzed this rule under
that Order and have determined that it does not have implications for
federalism.

Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
requires Federal agencies to assess the effects of their discretionary
regulatory actions. In particular, the Act addresses actions that may
result in the expenditure by a State, local, or tribal government, in
the aggregate, or by the private sector of $100,000,000 (adjusted for
inflation) or more in any one year. Though this rule will not result in
such an expenditure, we do discuss the effects of this rule elsewhere
in this preamble.

Taking of Private Property

    This rule will not cause a taking of private property or otherwise
have taking implications under Executive Order 12630, Governmental
Actions and Interference with Constitutionally Protected Property
Rights.

Civil Justice Reform

    This rule meets applicable standards in sections 3(a) and 3(b)(2)
of Executive Order 12988, Civil Justice Reform, to minimize litigation,
eliminate ambiguity, and reduce burden.

Protection of Children

    We have analyzed this rule under Executive Order 13045, Protection
of Children from Environmental Health Risks and Safety Risks. This rule
is not an economically significant rule and does not create an
environmental risk to health or risk to safety that may
disproportionately affect children.

Indian Tribal Governments

    This rule does not have tribal implications under Executive Order
13175, Consultation and Coordination with Indian Tribal Governments,
because it does not have a substantial direct effect on one or more
Indian tribes, on the relationship between the Federal Government and
Indian tribes, or on the distribution of power and responsibilities
between the Federal Government and Indian tribes.

Energy Effects

    We have analyzed this rule under Executive Order 13211, Actions
Concerning Regulations That Significantly Affect Energy Supply,
Distribution, or Use. We have determined that it is not a ``significant
energy action'' under that order because it is not a ``significant
regulatory action'' under Executive Order 12866 and is not likely to
have a significant adverse effect on the supply, distribution, or use
of energy. The Administrator of the Office of Information and
Regulatory Affairs has not designated it as a significant energy
action. Therefore, it does not require a Statement of Energy Effects
under Executive Order 13211.

Technical Standards

    The National Technology Transfer and Advancement Act (NTTAA) (15
U.S.C. 272 note) directs agencies to use voluntary consensus standards
in their regulatory activities unless the agency provides Congress,
through the Office of Management and Budget, with an explanation of why
using these standards would be inconsistent with applicable law or
otherwise impractical. Voluntary consensus standards are technical
standards (e.g., specifications of materials, performance, design, or
operation; test methods; sampling procedures; and related management
systems practices) that are developed or adopted by voluntary consensus
standards bodies.
    This rule does not use technical standards. Therefore, we did not
consider the use of voluntary consensus standards.

Environment

    We have analyzed this rule under Department of Homeland Security
Management Directive 023-01 and Commandant Instruction M16475.lD, which
guide the Coast Guard in complying with the National Environmental
Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded
this action is one of a category of actions that do not individually or
cumulatively have a significant effect on the human environment. This
rule is categorically excluded, under figure 2-1, paragraph (34)(g) of
the Instruction because it involves the establishment of a temporary
safety zone. An environmental analysis checklist and a categorical
exclusion determination will be available in the docket where indicated
under ADDRESSES.

List of Subjects in 33 CFR Part 165

    Harbors, Marine safety, Navigation (water), Reporting and
recordkeeping requirements, Security measures, Waterways.

    For the reasons discussed in the preamble, the Coast Guard amends
33 CFR Part 165 as follows:

PART 165-- REGULATED NAVIGATION AREAS AND LIMITED ACCESS AREAS

0
1. The authority citation for part 165 continues to read as follows:

    Authority:  33 U.S.C. 1231; 46 U.S.C. Chapter 701, 3306, 3703;
50 U.S.C. 191, 195; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Pub.
L. 107-295, 116 Stat. 2064; Department of Homeland Security
Delegation No. 0170.1.

0
2. Add Sec.  165.T09-0388 to read as follows:

Sec.  165.T09-0388  Safety zone; Marysville Days Fireworks, St. Clair
River, Marysville, MI.

    (a) Location. The safety zone will encompass all U.S. waters of the
St. Clair River within a 600 foot radius of the fireworks launch site
located on land at position 42[deg]54'25'' N, 082[deg]27'58'' W. All
geographic coordinates are North American Datum of 1983 (NAD 83).
    (b) Effective and Enforcement Period. This safety zone is effective
and will be enforced from 10:00 p.m. through 11:15 p.m. on June 29,
2012.
    (c) Regulations.
    (1) In accordance with the general regulations in Sec.  165.23 of
this part, entry into, transiting, or anchoring within this safety zone
is prohibited unless authorized by the Captain of the Port Detroit or
his designated on-scene representative.
    (2) This safety zone is closed to all vessel traffic, except as may
be permitted by the Captain of the Port Detroit or his designated on-
scene representative.
    (3) The ``on-scene representative'' of the Captain of the Port is
any Coast Guard commissioned, warrant, or petty officer who has been
designated by the Captain of the Port to act on his behalf. The on-
scene representative of the Captain of the Port will be aboard either a
Coast Guard or Coast Guard Auxiliary vessel. The Captain of the Port or
his designated on scene representative may be contacted via VHF Channel
16.
    (4) Vessel operators desiring to enter or operate within the safety
zone shall contact the Captain of the Port Detroit or his on-scene
representative to obtain permission to do so.
    (5) Vessel operators given permission to enter or operate in the
safety zone must comply with all directions given to them by the
Captain of the Port or his on-scene representative.

    Dated: May 7, 2012.
J.E. Ogden,
Captain, U.S. Coast Guard, Captain of the Port Detroit.
[FR Doc. 2012-12264 Filed 5-18-12; 8:45 am]
BILLING CODE 9110-04-P