[Federal Register: January 23, 2008 (Volume 73, Number 15)]
[Notices]
[Page 4043-4044]
[DOCID:fr23ja08-102]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

Notice of Intent To Rule on Change in Use of Aeronautical
Property at Louisville International Airport, Louisville, KY

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

ACTION: Request for public comment.

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SUMMARY: The FAA is requesting public comment on the request by the
Louisville Regional Airport Authority to change a portion of airport
property from aeronautical to non-aeronautical use at the Louisville
International Airport, Louisville, Kentucky. The request consists
approximately of 1.045 acres of formal release, and 0.145 acres for
permanent easement. This action is taken under the provisions of
section 125 of the Wendell H. Ford Aviation Investment Reform Act for
the 21st Century (AIR 21).

DATES: Comments must be received on or before February 22, 2008.

ADDRESSES: Comments on this notice may be mailed or delivered in
triplicate to the FAA at the following address: Memphis Airports
District Office, 2862 Business Park Drive, Building G, Memphis, TN
38118.
    In addition, one copy of any comments submitted to the FAA must be
mailed or delivered to Mr. Charles T. Miller, Executive Director,
Louisville Regional Airport Authority, P.O. Box 9129, Louisville, KY
40209-0129.

FOR FURTHER INFORMATION CONTACT: Mr. Tommy L. Dupree, Program Manager,
Federal Aviation Administration, Memphis Airports District Office, 2862
Business Park Drive, Building G, Memphis, TN 38118,<PHONE_NUMBER>. The
application may be reviewed in person at this same location, by
appointment.

SUPPLEMENTARY INFORMATION: The FAA proposes to rule and invites public
comment on the request to release approximately 1.045 acres and grant a
permanent easement of 0.145 acres at the Louisville International
Airport, Louisville, KY. Under the provisions of AIR 21 (49 U.S.C.
47107(h)(2)).
    On January 14, 2008, the FAA determined that the request to release
property at the Louisville International Airport submitted by the
airport owner meets the procedural requirements of the Federal Aviation
Administration. The FAA may approve the request, in whole or in part,
no later than February 22, 2008.
    The following is a brief overview of the request:
    The Louisville Regional Airport Authority, owner of the Louisville
International Airport, is proposing to formally release approximately
1.045 acres and grant permanent easement of approximately 0.145 acres
of airport property so that property can be converted to use for
industrial development.
    Any person may inspect, by appointment, the request in person at
the FAA office listed above under FOR FURTHER INFORMATION CONTACT.
    In addition, any person may, upon appointment and request, inspect
the request, notice and other documents germane to the request in
person at the Louisville Regional Airport Authority, P.O. Box 9129,
Louisville, KY 40209-0129.

    Dated: Issued in Memphis, TN, on January 14, 2008.
Phillip J. Braden,
Manager, Memphis Airports District Office, Southern Region.
[FR Doc. 08-233 Filed 1-22-08; 8:45 am]

BILLING CODE 4910-13-M


[Federal Register Volume 78, Number 238 (Wednesday, December 11, 2013)]
[Notices]
[Pages 75420-75423]
[FR Doc No: 2013-29489]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70991; File No. SR-BOX-2013-57]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Interpretive Material To Rule 5050 To Eliminate the Cap on the
Number of Additional Series That May be Listed Per Expiration Month for
Each Quarterly Options Series in Exchange-Traded Fund Options

December 5, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on December 3, 2013, BOX Options Exchange LLC (the ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the self-regulatory organization. The Commission
is publishing this notice to solicit comments on the proposed rule from
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend interpretive material to Rule 5050
(Series of Options Contracts Open for Trading) to eliminate the cap on
the number of additional series that may be listed per expiration month
for each Quarterly Option Series (``QOS'') in exchange-traded fund
(``ETF'') options. The text of the proposed rule change is available
from the principal office of the Exchange, at the Commission's Public
Reference Room and also on the Exchange's Internet Web site at http://boxexchange.com.

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

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.

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

1. Purpose
    The Exchange is proposing to amend Interpretive Material (``IM'')
5050-4 to Rule 5050 (Series of Options Contracts Open for Trading) to
eliminate the cap on the number of additional series that may be listed
per expiration month for each QOS in ETF options.\3\ This is a
competitive filing that is based on proposals recently submitted by
NYSE Arca, Inc. (``NYSE Acra'') and NYSE MKT LLC (``NYSE MKT'') that
were recently noticed by the Commission.\4\ As set out in IM-5050-4,
the Exchange

may list QOS for up to five currently listed options classes that are
either index options or options on ETFs. The Exchange may also list QOS
on any option classes that are selected by other securities exchanges
that employ a similar program under their respective rules. Currently,
for each QOS in ETF options that has been initially listed on the
Exchange, the Exchange may list up to 60 additional series per
expiration month.
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    \3\ A Quarterly Option Series is a series of an option class
that is approved for listing and trading on the Exchange in which
the series is opened for trading on any business day, and that
expires at the close of business on the last business day of a
calendar quarter. The Exchange lists series that expire at the end
of the next consecutive four (4) calendar quarters, as well as the
fourth quarter of the next calendar year. See Rule 100(a)(54) and
IM-5050-4(a).
    \4\ See Securities Exchange Act Release Nos. 70855 (November 13,
2013) 78 FR 69493 (November 19, 2013) (Notice of Filing and
Immediate Effectiveness of SR-NYSEArca-2013-120) and 070854
(November 13, 2013) 78 FR 69465 (November 19, 2013) (Notice of
Filing and Immediate Effectiveness of SR-NYSEMKT-2013-90).
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    The Exchange is proposing to amend IM-5050-4(d) to make the
treatment of QOS in ETF options consistent with the treatment of QOS in
index options. IM-6090-1 governs the QOS Program in index options.
Index options include options on industry/narrow-based indices and
options on market/broad-based indices.\5\ Options on ETFs are similar
to index options because ETFs hold securities based on an index or
portfolio of securities.\6\ The requirements and conditions of the QOS
Program in index options, moreover, parallel those of the QOS Program
in ETF options. For example, like the QOS Program in ETF options, the
QOS Program in index options permits QOS in up to five currently-listed
options classes; requires the listing of series that expire at the end
of the next (as of the listing date) consecutive four quarters, as well
as the fourth quarter of the next calendar year; requires the strike
price of each QOS to be fixed at a price per share; and establishes
parameters for the number of strike prices above and below the
underlying index. The QOS Program in index options, however, does not
place a cap on the number of additional series that the Exchange may
list per expiration month for each QOS in index options. Elimination of
the cap set out in IM-5050-4(d), therefore, would result in similar
regulatory treatment of similar options products.\7\
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    \5\ An ``industry index'' or ``narrow-based index'' is ``an
index designed to be representative of a particular industry or
group of related industries.'' See Rule 6010(i). A ``market index''
or ``broad-based index'' is ``an index designed to be representative
of a stock market as a whole or of a range of companies in unrelated
industries.'' See Rule 6010(j).
    \6\ See Rule 5020(h).
    \7\ The Exchange notes that Rule IM-6090-1(d), which governs the
addition of new series of Quarterly Options Series on index options,
states,
    The Exchange may open additional strike prices of a Quarterly
Options Series that are above the value of the underlying index
provided that the total number of strike prices above the value of
the underlying is no greater than five. The Exchange may open
additional strike prices of a Quarterly Options Series that are
below the value of the underlying index provided that the total
number of strike prices below the value of the underlying index is
no greater than five. The opening of any new Quarterly Options
Series shall not affect the series of options of the same class
previously opened.
    In practice, this means that the Exchange may add Quarterly
Options Series at strikes above and below the current index value,
so long as there are not more than five strikes above, and five
strikes below, the current index value after such additions are
made. The total number of Quarterly Options Series that can be
listed at any one time is, therefore, theoretically unlimited, so
long as there are no more than five strikes above (or below) a given
index value when new strikes are added.
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    The Exchange believes that the proposed revision to the QOS Program
would provide market participants with the ability to better tailor
their trading to meet their investment objectives, including hedging
securities positions, by permitting the Exchange to list additional QOS
in ETF options that meet such objectives. The Exchange has observed
that situations arise in which additional strike prices in smaller
intervals would be valuable to investors. However, due to the cap on
additional QOS series the Exchange cannot always provide these
important at-the-money strikes. Elimination of the cap would remedy
this issue.
    Currently, the Exchange lists quarterly expiration options on six
ETFs, but the cap restricts the number of strikes on these options,
which often results in a lack of strike continuity. For example, the
Exchange lists quarterly expiration options on SPDR Gold Trust
(``GLD''). On January 2, 2013, the Exchange initially listed December
31, 2013 quarterly expiration options (``December 2013 Quarterlies'')
on GLD, which closed the previous trading day at $162.02, with initial
strikes from $115 to $210, and additional strikes in $1 intervals from
$131 to $189. But during 2013, GLD has closed at a range of $115.94 to
$163.67 and is currently trading around $125. As a result of the cap,
the Exchange cannot offer December 2013 Quarterlies on GLD in $1
intervals within $10 of the closing price of GLD because the number of
strikes would exceed the cap of 60 additional strikes. Consequently,
the Exchange is not able to list important at-the-money strikes due to
the cap on additional strikes. While the Exchange has the ability to
delist strikes with no open interest so that it may list strikes that
are closer to the money, delisting is not always possible. If all of
the existing strikes have open interest, the Exchange cannot delist
strikes so that it may list strikes closer to the money.
    But the Exchange is not subject to a similar cap on the number of
additional weekly or monthly expiration options it can list on ETFs.\8\
So, for example, the Exchange can list additional weekly expiration
options on GLD in $1 and $0.50 intervals within $5 of the closing price
of GLD, and additional monthly expiration options in $1 intervals from
$85 to $178. Therefore, due to the cap, the Exchange cannot list, and
an investor cannot structure, an investment on a quarterly basis with
the same granularity that can be achieved on a weekly or monthly basis.
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    \8\ For Short Term Options Series (``weekly options''), IM-5050-
6(b) sets a maximum number of strikes, but the Exchange can exceed
this maximum number of strikes under certain circumstances.
Specifically, ``in the event that the underlying security has moved
such that there are no series that are at least 10% above or below
the current price of the underlying security and all existing series
have open interest, BOX may list additional series, in excess of the
30 allowed under IM-5050-6(b), that are between 10% and 30% above or
below the price of the underlying security.''
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    Similarly, the Exchange lists quarterly options on SPDR S&P 500 ETF
(``SPY''), which during 2013 closed at a range of $145.55 to $173.05.
Again, due to the cap, the Exchange cannot offer quarterly expiration
options on SPY in $1 intervals above $170 because the number of
additional strikes would exceed the cap of 60. Instead, the Exchange is
forced to list quarterly expiration options on SPY at $5 intervals
above $170, despite the fact that SPY has recently traded between $165
and $170. As such, if SPY would again increase to $170, then the
Exchange would only be able to offer options with a strike price $5
away from the price of the underlying ETF due to the cap on additional
strikes.
    On the other hand, in contrast to the limitations imposed on the
Exchange for quarterly expiration options on ETFs, the absence of a
similar cap on quarterly expiration options on indexes means that the
Exchange can list, and investors can achieve, more granularity in
index-based options. For example, S&P 500 Mini--SPX options (``SPX'')
are options on the S&P 500 index, as opposed to options on SPY, the ETF
based on that same S&P 500 index. SPX options are used to hedge SPY
positions and are traded at the equivalent of one point and one-half
point intervals. The SPX trades at 10 times the value of SPY, so that
if SPY trades at $168.70, SPX trades at $1687. Therefore, the strike
price for a quarterly expiration option on SPX, that is a hedge for a
quarterly expiration option on SPY at $170, would be $1700. The
Exchange can offer quarterly expiration options on SPX with strike
prices of $1670, $1680, $1690, and $1700 because there is no cap on
quarterly expiration index-based options. However, the Exchange cannot
similarly offer quarterly expiration options on SPY with similar strike
price

continuity because of the cap on quarterly expiration ETF-based
options.
    Elimination of the cap would also help market participants meet
their investment objectives by providing expanded opportunities to roll
ETF options into later quarters. For example, a market participant that
holds one or more contracts in a QOS in an ETF put option that has a
strike price of $120 and an expiration date of the last day of the
third quarter may wish to roll that position into the fourth quarter.
That is, the market participant may wish to close out the contracts set
to expire at the end of the third quarter and instead establish a
position in the same number of contracts in a QOS in a put option on
the same ETF with the same strike price of $120, but with an expiration
date of the last day of the fourth quarter. Because of the cap on
additional QOS in ETF options, however, the Exchange may not be able to
list additional QOS in the ETF. Elimination of the cap, though, would
allow the Exchange to meet the investment needs of market participants
in such situations.
    The Exchange has sufficient capacity to handle increased quote and
trade reporting traffic that might be expected to result from listing
additional QOS in ETF options. The Exchange notes that it has purchased
capacity from the Options Price Reporting Authority (``OPRA'') to
handle its options quote and trade reporting traffic.\9\ The Exchange
believes that it has acquired sufficient capacity to handle increased
quote and trade reporting traffic that might be expected to result from
listing additional QOS in ETF options.\10\ In the Exchange's view, it
would be inconsistent to prohibit the listing of additional QOS beyond
a specified cap when each exchange independently purchases capacity to
meet its quote and trade reporting traffic needs.
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    \9\ See Exchange Act Release No. 48822 (Nov. 21, 2003), 68 FR
66892 (Nov. 28, 2003) (SR-OPRA-2003-01) (requiring exchanges to
acquire options market data transmission capacity independently,
rather than jointly).
    \10\ The SEC has relied upon an exchange's representation that
it has sufficient capacity to support new options series in
approving a rule amendment permitting the listing of additional
option series. See Exchange Act Release No. 57410 (Jan. 17, 2008),
73 FR 12483, 12484 (Mar. 7, 2008) (SR-CBOE-2007-96) (amendments to
CBOE Rule 5.5(e)(3)) (``In approving the proposed rule change, the
Commission has relied upon the Exchange's representation that it has
the necessary systems capacity to support new options series that
will result from this proposal'').
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    Moreover, the Exchange has in place a quote mitigation plan that
helps it maintain sufficient capacity to handle quote traffic. The
plan, which has been approved by the Commission, reduces the number of
quotations that the Exchange disseminates by limiting disseminated
quotes to active options series only.\11\
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    \11\ See Rule 7250 (Quote Mitigation).
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    To help ensure that only active options series are listed, the
Exchange also has in place procedures to delist inactive series. IM-
5050-4(f) requires the Exchange to review QOS that are outside of a
range of five strikes above and five strikes below the current price of
the underlying ETF. Based on that review, the Exchange must delist
series with no open interest in both the call and the put series having
(i) a strike price higher than the highest price with open interest in
the put and/or call series for a given expiration month, and (ii) a
strike price lower than the lowest strike price with open interest in
the put and/or call series for a given expiration month.
    The Exchange's experience with listing additional QOS in ETF
options at the end of 2008 also indicates that it has sufficient
capacity to handle increased order and quote traffic that might be
expected to result from listing additional QOS in ETF options. The
Exchange established a temporary rule that permitted the Exchange to
list up to 100 additional series per expiration month for each QOS in
ETF option in the fourth quarter of 2008, and for the new expiration
month being added after the December 2008 QOS expiration.\12\ The
Exchange did not experience capacity constraints during this temporary
increase.
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    \12\ See Exchange Act Release No. 58996 (November 21, 2008), 73
FR 72878 (December 1, 2008) (SR-BSE-2008-55). The Exchange amended
the cap on additional series per expiration month for each QOS in
ETF options during the financial crisis in 2008. The amendment was
in response to requests for lower priced strikes on certain ETFs.
Other options exchanges amended their rules quarterly options series
rules to permit the listing of additional series in ETF options.
See, e.g., Exchange Act Release No. 59012 (November 24, 2008), 73 FR
73371 (December 2, 2008) (amendments to Commentary .08 to NYSE Arca
Rule 6.4)
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 2. Statutory Basis
    The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Securities Exchange Act of 1934
(the ``Act''),\13\ in general, and Section 6(b)(5) of the Act,\14\ in
particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general to protect investors and the
public interest.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to
remove impediments to and perfect the mechanism of a free and open
market because it will expand the investment options available to
investors and will allow for more efficient risk management. The
Exchange believes that removing the cap on the number of QOS in ETF
options permitted to be listed on the Exchange will result in a
continuing benefit to investors by giving them more flexibility to
closely tailor their investment and hedging decisions to their needs,
and therefore, the proposal is designed to protect investors and the
public interest. Additionally, by removing the cap, the proposed rule
change will make the treatment of QOS in ETF options consistent with
the treatment of QOS in index options, thus resulting in similar
regulatory treatment for similar options products.
    While the expansion of the number of QOS in ETF options is expected
to generate additional quote traffic, the Exchange believes that this
increased traffic will be manageable and will not present capacity
problems. As previously stated, the Exchange has in place a quote
mitigation plan that helps it maintain sufficient capacity to handle
quote traffic. To help ensure that only active options series are
listed, Exchange procedures are designed to delist inactive series,
ensuring that any additional quote traffic is a result of interest in
active series.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. In this regard and as indicated
above, the Exchange notes that the rule change is being proposed as a
competitive response to filings submitted by NYSE Arca and NYSE MKT
that were recently noticed by the Commission.\15\
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    \15\ See supra, note 4.
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    The Exchange believes that investors would benefit from the
introduction of additional QOS in ETF options by providing investors
with more flexibility to closely tailor their investment and hedging
decisions to their needs. Additionally, Exchange procedures for
delisting inactive series will ensure that only active series with
sufficient investor interest will be made available and maintained on
the Exchange.

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

    The Exchange has neither solicited nor received comments on the
proposed rule change.

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

    Because the proposed rule change does not (i) significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-4(f)(6)
thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
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    The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Exchange stated that waiver of this requirement will
promote fair competition among the exchanges by allowing the Exchange
to treat QOS in ETF options in the same manner as QOS in index options
at the same time as NYSE Arca and NYSE MKT. The Exchange also stated
that the proposal would allow the Exchange to meet investor demand for
an expanded number of QOS in ETF options, allowing investors to meet
investment objectives, including hedging securities positions,
currently unavailable because of the limited number of QOS in ETF
options available. For these reasons, the Commission believes that the
proposed rule change presents no novel issues, and waiver will allow
the Exchange to remain competitive with other exchanges. Therefore, the
Commission designates the proposed rule change to be operative upon
filing.\18\
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    \18\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-BOX-2013-57 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-BOX-2013-57. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BOX-2013-57 and should be
submitted on or before January 2, 2014.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29489 Filed 12-10-13; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: December 5, 2007 (Volume 72, Number 233)]
[Proposed Rules]
[Page 68551]
[DOCID:fr05de07-26]

=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R05-OAR-2006-1021; FRL-8501-4]

Approval and Promulgation of Air Quality Implementation Plans;
Minnesota

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to approve State Implementation Plan (SIP)
revisions to the sulfur dioxide (SO2) requirements for
Northern States Power Company, doing business as Xcel Energy, Inver
Hills Generating Plant (Inver Hills), located in Inver Grove Heights,
Dakota County, Minnesota. The revisions make the limits of the sulfur
content in its fuel and its sulfur dioxide emissions more stringent,
and prohibit the burning of residual fuel oil. The revisions allow the
facility to use simpler methods to analyze the sulfur content of its
fuel. Because the sulfur dioxide emission limits are being reduced, the
air quality of Dakota County will be protected.

DATES: Comments must be received on or before January 4, 2008.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R05-
OAR-2006-1021, by one of the following methods:
    1. http://www.regulations.gov: Follow the on-line instructions for

submitting comments.
    2. E-mail<EMAIL_ADDRESS>    3. Fax:<PHONE_NUMBER>.
    4. Mail: John M. Mooney, Chief, Criteria Pollutant Section, Air
Programs Branch (AR-18J), U.S. Environmental Protection Agency, 77 West
Jackson Boulevard, Chicago, Illinois 60604.
    5. Hand Delivery: John M. Mooney, Chief, Criteria Pollutant
Section, Air Programs Branch (AR-18J), U.S. Environmental Protection
Agency, 77 West Jackson Boulevard, Chicago, Illinois 60604. Such
deliveries are only accepted during the Regional Office normal hours of
operation, and special arrangements should be made for deliveries of
boxed information. The Regional Office official hours of business are
Monday through Friday, 8:30 a.m. to 4:30 p.m. excluding Federal
holidays.
    Please see the direct final rule which is located in the Rules
section of this Federal Register for detailed instructions on how to
submit comments.

FOR FURTHER INFORMATION CONTACT: Matt Rau, Environmental Engineer,
Criteria Pollutant Section, Air Programs Branch (AR-18J), Environmental
Protection Agency, Region 5, 77 West Jackson Boulevard, Chicago,
Illinois 60604,<PHONE_NUMBER><EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: In the Final Rules section of this Federal
Register, EPA is approving the State's SIP submittal as a direct final
rule without prior proposal because the Agency views this as a
noncontroversial submittal and anticipates no adverse comments. A
detailed rationale for the approval is set forth in the direct final
rule. If no adverse comments are received in response to this rule, no
further activity is contemplated. If EPA receives adverse comments, the
direct final rule will be withdrawn and all public comments received
will be addressed in a subsequent final rule based on this proposed
rule. EPA will not institute a second comment period. Any parties
interested in commenting on this action should do so at this time.
Please note that if EPA receives adverse comment on an amendment,
paragraph, or section of this rule and if that provision may be severed
from the remainder of the rule, EPA may adopt as final those provisions
of the rule that are not the subject of an adverse comment. For
additional information, see the direct final rule which is located in
the Rules section of this Federal Register.

    Dated: November 20, 2007.
Bharat Mathur,
Acting Regional Administrator, Region 5.
[FR Doc. E7-23497 Filed 12-4-07; 8:45 am]

BILLING CODE 6560-50-P


[Federal Register: September 28, 2007 (Volume 72, Number 188)]
[Proposed Rules]
[Page 55126-55132]
[DOCID:fr28se07-38]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 275

[Release No. IA-2652; File No. S7-22-07]
RIN 3235-AJ97

Interpretive Rule Under the Advisers Act Affecting Broker-Dealers

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities and Exchange Commission is publishing for
comment an interpretive rule that would address the application of the
Investment Advisers Act of 1940 to certain activities of broker-
dealers. The proposal would reinstate three interpretive provisions of
a rule that was vacated by a recent court opinion. The first provision
would clarify that a broker-dealer that exercises investment discretion
with respect to an account or charges a separate fee, or separately
contracts, for advisory services provides investment advice that is not
``solely incidental to'' its business as a broker-dealer. The second
provision would clarify that a broker-dealer does not receive special
compensation within the meaning of section 202(a)(11)(C) of the
Advisers Act solely because it charges a commission for discount
brokerage services that is less than it charges for full-service
brokerage. The third provision would clarify that a registered broker-
dealer is an investment adviser solely with respect to those accounts
for which it provides services or receives compensation that subjects
it to the Advisers Act.

DATES: Comments should be received on or before November 2, 2007.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

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

File Number S7-22-07 on the subject line; or

     Use the Federal eRulemaking Portal (http://www.regulations.gov
). Follow the instructions for submitting comments.

Paper Comments

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

All submissions should refer to File Number S7-22-07. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (http://www.sec.gov/rules/proposed.shtml). Comments

are also available for public inspection and copying in the
Commission's Public Reference Room, 100 F Street, NE., Washington, DC
20549, on official business days from 10 a.m. to 3 p.m. All comments
received will be posted without change; we do not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: David W. Blass, Assistant Director, or
Vincent M. Meehan, Senior Counsel, at<PHONE_NUMBER> or
<EMAIL_ADDRESS>Office of Investment Adviser Regulation, Division of

Investment Management, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-5041.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission
(``Commission'' or ``SEC'') is proposing to amend rule 202(a)(11)-1 [17
CFR 275.202(a)(11)-1] under the Investment Advisers Act of 1940.

I. Introduction

    The Investment Advisers Act of 1940 (``Advisers Act'' or ``Act'')
\1\ regulates the activities of certain ``investment advisers,'' who
are defined in section 202(a)(11) of the Act as persons who receive
compensation for providing advice about securities as part of a regular
business. Section 202(a)(11)(C) excepts from the definition of
``investment adviser'' a broker or dealer ``whose performance of
[advisory] services is solely incidental to the conduct of his business
as a broker or dealer and who receives no special compensation
therefor.''
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    \1\ 15 U.S.C. 80b. Unless otherwise noted, when we refer to the
Advisers Act, or any paragraph of the Advisers Act, we are referring
to 15 U.S.C. 80b of the United States Code, where the Advisers Act
is codified.
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    In 2005, we adopted the original rule 202(a)(11)-1 under the
Advisers Act, the principal purpose of which was to deem broker-dealers
offering ``fee-based brokerage accounts'' as not subject to the
Advisers Act.\2\ The rule also included several interpretations of
section 202(a)(11)(C). On March 30, 2007, the Court of Appeals for the
District of Columbia Circuit (the ``Court''), in Financial Planning
Association v. SEC (the ``FPA decision''), vacated the original rule
202(a)(11)-1 on the grounds that the Commission did not have the
authority to except broker-dealers offering fee-based brokerage
accounts from the definition of ``investment adviser.'' \3\ Though the
Court did not question the validity of our interpretive positions, it
vacated the entire rule, leaving our interpretations potentially in
doubt.
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    \2\ See Certain Broker-Dealers Deemed Not to be Investment
Advisers, Investment Advisers Act Release No. 2376 (Apr. 12, 2005)
[70 FR 20424 (Apr. 19, 2005)] (``2005 Adopting Release''). Fee-based
brokerage accounts are similar to traditional full-service brokerage
accounts, which provide a package of services, including execution,
incidental investment advice, and custody. The primary difference
between the two types of accounts is that a customer in a fee-based
brokerage account pays a fee based upon the amount of assets on
account (an asset-based fee) and a customer in a traditional full-
service brokerage account pays a commission (or a mark-up or mark-
down) for each transaction.
    \3\ 482 F.3d 481 (D.C. Cir. 2007).
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    We have received requests from broker-dealers that we clarify the
status of our interpretive positions.\4\ Because of the significance of
the interpretations, and in order to provide the public with an
opportunity for meaningful comment on them in light of the FPA
decision, we are re-proposing the interpretive positions.\5\ Proposed
rule 202(a)(11)-1 would clarify that (i) a broker-dealer provides
investment advice that is not ``solely incidental to'' the conduct of
its business as a broker-dealer if it exercises investment discretion
(other than on a temporary or limited basis) with respect to an account
or charges a separate fee, or separately contracts, for advisory
services, (ii) a broker-dealer does not receive ``special
compensation'' solely because it charges different rates for its full-
service brokerage services and discount brokerage services, and (iii) a
registered broker-dealer is an investment adviser solely with respect
to accounts for which it provides services that subject it to the
Advisers Act. We discuss these proposed interpretive positions below.
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    \4\ See, e.g., Letter from Ira D. Hammerman, Senior Managing
Director and General Counsel, Securities Industry and Financial
Markets Association, to Robert E. Plaze, Associate Director,
Division of Investment Management and Catherine McGuire, Chief
Counsel, Division of Market Regulation (June 27, 2007). This letter
and the comment letters cited in this Release are available for
viewing and downloading at http://www.sec.gov/rules/proposed/s72599.shtml
.

    \5\ As a separate part of our response to the FPA decision, we
have adopted a temporary rule on an interim final basis that
establishes an alternative means for investment advisers who are
registered with us as broker-dealers to meet the requirements of
section 206(3) of the Advisers Act when they act, directly or
indirectly, in a principal capacity with respect to transactions
with certain of their advisory clients. See Temporary Rule Regarding
Principal Trades with Certain Advisory Clients, Investment Advisers
Act Release No. 2653 (Sept. 24, 2007).
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II. Discussion

A. ``Solely Incidental''

    Section 202(a)(11)(C) of the Advisers Act, as discussed above,
provides an exception from the Act for a broker-dealer ``whose
performance of [advisory services] is solely incidental to his business
as a broker-dealer and who receives no special compensation therefor.''
This exception amounts to a recognition that broker-dealers commonly
give a certain amount of advice to their customers in the course of
their regular business as broker-dealers and that ``it would be
inappropriate to bring them within the scope of the [Advisers Act]
merely because of this aspect of their business.'' \6\
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    \6\ Opinion of General Counsel Relating to Section 202(a)(11)(C)
of the Investment Advisers Act of 1940, Investment Advisers Act
Release No. 2 (Oct. 28, 1940) [11 FR 10996 (Sept. 27, 1946)]
(``Advisers Act Release No. 2'').
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    In the 2005 Proposing Release, we explained our understanding that
investment advice is ``solely incidental to'' the conduct of a broker-
dealer's business within the meaning of section 202(a)(11)(C) when the
advisory services rendered to an account are in connection with and
reasonably related to the brokerage services provided to that
account.\7\ We further explained that our understanding is consistent
with the legislative history of the Advisers Act, which indicates
Congress' intent to exclude broker-dealers providing advice as part of
traditional brokerage services. We also explained that it is consistent
with the Commission's contemporaneous construction of the Advisers Act
as excepting broker-dealers whose investment advice is given ``solely
as an incident of their regular business.'' \8\
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    \7\ Certain Broker-Dealers Deemed Not to be Investment Advisers,
Investment Advisers Act Release No. 2340 (Jan. 6, 2005) [70 FR 2716
(Jan. 14, 2005)] (``2005 Proposing Release'').
    \8\ Id.
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    Many commenters responding to the 2005 Proposing Release urged us
to clarify that certain practices are not

solely incidental to brokerage services. Proposed rule 202(a)(11)-1(a)
would re-codify two of the interpretations we announced in 2005
regarding activity that is not ``solely incidental'' to brokerage
services for purposes of section 202(a)(11)(C). The situations
addressed by these interpretations are not the only ones in which a
broker-dealer provides advice that is not solely incidental to its
business as a broker-dealer.\9\ Commenters are invited to suggest other
situations that should be addressed by the rule.
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    \9\ We have removed the text ``(among other things, and without
limitation)'' from the introductory paragraph to proposed rule
202(a)(11)-1(a), though we included that text in 2005. We believe it
is clear that the rule as we propose it today does not address all
the situations in which a broker-dealer can provide advice that is
not ``solely incidental'' to its business as a broker-dealer for
purposes of section 202(a)(11)(C).
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    1. Separate Contract or Fee for Advisory Services. Proposed rule
202(a)(11)-1(a)(1) would provide that a broker-dealer that separately
contracts with a customer for, or separately charges a fee for,
investment advisory services cannot be considered to be providing
advice that is solely incidental to its brokerage. We view a separate
contract specifically providing for the provision of investment
advisory services to reflect a recognition that the advisory services
are provided independent of brokerage services and, therefore, cannot
be considered solely incidental to the brokerage services.\10\
Similarly, we have long held the view that when a broker-dealer charges
its customers a separate fee for investment advice, it clearly is
providing advisory services and is subject to the Advisers Act.\11\ In
light of the FPA decision, brokerage firms and other interested parties
may be unsure about whether we continue to hold these views. In order
to provide certainty to those parties, the proposed rule would codify
our interpretations.
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    \10\ 2005 Adopting Release, supra note 2 at n.145, and
accompanying text.
    \11\ Final Extension of Temporary Rules, Investment Advisers Act
Release No. 626 (Apr. 27, 1978) [43 FR 19224 (May 4, 1978)]
(``Advisers Act Release No. 626''). See also Advisers Act Release
No. 2, supra note 6 (``a broker or dealer who is specially
compensated for the rendition of advice should be considered an
investment adviser and not be excluded from the purview of the
[Advisers] Act merely because he is also engaged in effecting market
transactions in securities'').
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    We request comment on our interpretation. In the 2005 Adopting
Release, we explained our understanding that many broker-dealers
already use the payment of a separate fee as a bright line test to
distinguish their brokerage activities from their advisory activities
and we have received no information since 2005 that would change our
understanding. Are we correct? Do broker-dealers also already consider
advisory services that are the subject of a separate contract not to be
solely incidental to the brokerage services they provide? Commenters
are invited to explain to us any situation in which a broker-dealer
could charge a separate fee for, or separately contract for, advisory
services in a manner that, consistent with the intent of the Advisers
Act, is ``solely incidental'' to the brokerage services provided. For
example, could a broker-dealer separately contract for advisory
services, but receive no ``special compensation'' therefore, for
purposes of section 202(a)(11)(C) of the Act?
    2. Discretionary Investment Advice. We have long acknowledged that
a broker-dealer's exercise of investment discretion over customer
accounts raises serious questions about whether those accounts must be
treated as subject to the Advisers Act--even where no special
compensation is received.\12\ In 2005, we adopted, and today we are re-
proposing, a rule that would clarify that any account over which a
broker-dealer exercises investment discretion is subject to the
Advisers Act. Specifically, rule 202(a)(11)-1(a) would clarify that
discretionary investment advice is not ``solely incidental to'' the
business of a broker-dealer within the meaning of section 202(a)(11)(C)
and, accordingly, brokers and dealers are not excepted from the Act for
any accounts over which they exercise investment discretion as that
term is defined in section 3(a)(35) of the Exchange Act (except that
investment discretion granted by a customer on a temporary or limited
basis is excluded).\13\
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    \12\ Advisers Act Release No. 626, supra note 11 (brokerage
relationships ``which include discretionary authority to act on a
client's behalf have many of the characteristics of the
relationships to which the protections of the Advisers Act are
important.'').
    \13\ We would view a broker-dealer's discretion to be temporary
or limited within the meaning of rule 202(a)(11)-1(d) when the
broker-dealer is given discretion: (i) As to the price at which or
the time to execute an order given by a customer for the purchase or
sale of a definite amount or quantity of a specified security; (ii)
on an isolated or infrequent basis, to purchase or sell a security
or type of security when a customer is unavailable for a limited
period of time not to exceed a few months; (iii) as to cash
management, such as to exchange a position in a money market fund
for another money market fund or cash equivalent; (iv) to purchase
or sell securities to satisfy margin requirements; (v) to sell
specific bonds and purchase similar bonds in order to permit a
customer to take a tax loss on the original position; (vi) to
purchase a bond with a specified credit rating and maturity; and
(vii) to purchase or sell a security or type of security limited by
specific parameters established by the customer.
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    We believe that a broker-dealer's authority to effect a trade
without first consulting a customer is qualitatively distinct from
simply providing advice as part of a package of brokerage services.
When a broker-dealer exercises investment discretion, it is not only
the source of investment advice, it also has the authority to make the
investment decision relating to the purchase or sale of securities on
behalf of its client. This, in our view, warrants the protection of the
Advisers Act because of the ``special trust and confidence inherent''
in such a relationship.\14\ Most commenters who addressed this aspect
of our 2005 proposal, including those representing investors, advisers,
and broker-dealers, generally agreed with us.
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    \14\ See Amendment and Extension of Temporary Exemption From the
Investment Advisers Act for Certain Brokers and Dealers, Investment
Advisers Act Release No. 471 (Aug. 20, 1975) [40 FR 38156 (Aug. 27,
1975)].
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    Under the proposed rule, the exception provided by section
202(a)(11)(C) of the Act is unavailable for any account over which a
broker-dealer exercises investment discretion, regardless of the form
of compensation and without regard to how the broker-dealer handles
other accounts. We believe our interpretation is appropriate for
several reasons.\15\ First, we believe it would apply the Advisers Act
to the sort of relationship with a broker-dealer that the Act was
intended to reach. Second, we believe the proposed rule is consistent
with the interpretation that a broker-dealer is an investment adviser
only with respect to those accounts for which the broker-dealer
provides services or receives compensation that subject the broker-
dealer to the Advisers Act. Finally, we believe the proposed rule would
provide a workable, bright-line test for the availability of the
section 202(a)(11)(C) exception.
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    \15\ 2005 Adopting Release, supra note 2, at n.165 and
accompanying text. In that release, we described our position as a
change to the staff's prior approach under which a discretionary
account is subject to the Act only if the broker-dealer has enough
other discretionary accounts to trigger the Act. For the reasons
discussed in this Release and in the 2005 Adopting Release, we
believe that the interpretation we are proposing today and adopted
in 2005 better effectuates the purposes of the Act.
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    We request comment on our proposed interpretive provision. Do
commenters agree with us that it addresses the sort of relationship
that the Advisers Act should reach? One commenter to our 2005 proposal
asserted it does not.\16\ This commenter argued that Congress, when it
adopted the Advisers Act, must have been aware that broker-dealers
exercised discretionary authority and, by not expressly stating that
brokers offering such accounts were subject to the Act, Congress
indicated its intent to

except such broker-dealers from the Act. We disagree. As we explained
in 2005, the Advisers Act does not address directly whether a broker-
dealer exercising investment discretion over a commission-based account
must comply with the Act. The Act applies unless the advisory services
are ``solely incidental to'' the broker-dealer's business and no
``special compensation'' is received. We remain unable to conclude that
in 1940 Congress would have understood investment discretion to be part
of the traditional package of services broker-dealers offered for
commissions. We are aware of nothing in the legislative history of
section 202(a)(11)(C) (or of the Act as a whole) or in the brokerage
practices in 1940 that would preclude our interpretation of that
section as being unavailable for all accounts over which broker-dealers
exercise investment discretion. Do commenters agree?
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    \16\ Comment Letter of Morgan, Lewis & Bockius LLP (Feb. 7,
2005).
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    We also are interested in understanding the impact on investors of
these distinctions. We also request comment on our reference in the
proposed rule to the definition of ``investment discretion'' in section
3(a)(35) of the Exchange Act. Is a different definition more
appropriate? If so, what definition should we use? Are we correct in
excluding investment discretion given on a temporary or limited basis?
Have we correctly identified the circumstances in which a broker-dealer
exercises temporary or limited discretion?
    3. Financial Planning. The rule we adopted in 2005 also contained a
provision stating that when a broker-dealer provides advice as part of
a financial plan or in connection with providing financial planning
services, a broker-dealer provides advice that is not solely incidental
if it (i) holds itself out to the public as a financial planner or as
providing financial planning services, (ii) delivers to its customer a
financial plan, or (iii) represents to the customer that the advice is
provided as part of a financial plan or financial planning
services.\17\
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    \17\ 2005 Adopting Release, supra note 2, at Section III(E).
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    We have decided not to propose this provision as part of this rule,
which many financial services firms found difficult to apply.\18\
Instead, we plan to consider issues relating to financial planning in
light of the results of a study we commissioned by the RAND Corporation
(``RAND Study'') comparing the levels of protection afforded customers
of broker-dealers and investment advisers under the federal securities
laws. The RAND Study is expected to be delivered to us no later than
December 2007, several months ahead of schedule.\19\
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    \18\ Our staff attempted to address some of the interpretive
issues that were raised by this provision in a staff interpretive
letter. Securities Industry Association, SEC Staff Letter (Dec. 16,
2005), available at http://www.sec.gov/divisions/investment/guidance.shtml.
 That letter is terminated.

    \19\ See Commission Seeks Time for Investors and Brokers to
Respond to Court Decision on Fee-Based Accounts, SEC Press Release
No. 2007-95 (May 14, 2007). The results of the RAND Study are
expected to provide an important empirical foundation for the
Commission to consider what action to take to improve the way
investment advisers and broker-dealers provide financial services to
customers. One option that will be available to the Commission will
be making the RAND Study results available to the public and seeking
comments on them.
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B. Full-Service and Discount Brokerage Programs

    As part of our 2005 rulemaking, we adopted an interpretive
provision which clarified that a broker-dealer will not be considered
to have received ``special compensation'' for purposes of section
202(a)(11)(C) of the Advisers Act (and therefore will not be subject to
the Act) solely because the broker-dealer charges a commission, mark-
up, mark-down or similar fee for brokerage services that is greater or
less than one it charges another customer.\20\ We are re-proposing that
interpretive position today as proposed rule 202(a)(11)-1(b).\21\
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    \20\ Discount brokerage programs, including electronic trading
programs, give customers who do not want or need all the services
that traditionally are provided in a full-service brokerage account
the ability to trade securities at a reduced commission rate.
Electronic trading programs provide customers the ability to trade
on-line, typically without the assistance of a broker-dealer's
registered representative. Customers trading electronically may
devise their own investment or trading strategies, or may seek
advice separately from investment advisers.
    \21\ We have, however, modified the text of the rule to clarify
that it is an interpretation of the phrase ``special compensation.''
In addition, in the 2005 rulemaking, we stated that the interpretive
position was necessary to supersede past staff interpretations that
would lead to a full-service broker-dealer being subject to the
Advisers Act ``with respect to accounts for which it provides advice
incidental to its brokerage business merely because it offers
electronic trading or other forms of discount brokerage.'' 2005
Proposing Release at n.88 and accompanying text. Having revisited
those past staff interpretations, we conclude that they do not
necessarily lead to the conclusion that a broker-dealer's full-
service accounts are advisory accounts subject to the Advisers Act
merely because the broker-dealer also offers some form of discount
brokerage.
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    This interpretive position reflects the longstanding view that,
with respect to brokerage commissions or other transaction-based
compensation, broker-dealers receive ``special compensation'' where
there is a clearly definable charge for investment advice.\22\ But, if
a firm negotiates different fees with its customers for similar
transactions, the Commission would not conclude that the customer being
charged the higher fee is paying ``special compensation'' for
investment advice based solely on differences in charges, because
whether the pricing difference is based on the presence or absence of
investment advice is ``too hypothetical.'' \23\ Similarly, if, for
example, a broker-dealer had a general fee schedule for full service
brokerage that included access to brokerage personnel, and had a
separate fee schedule for automated transactions using an Internet Web
site, we would not, absent other factors, view the difference as
``special compensation.'' As one commenter to our 2005 proposal noted,
electronic brokerage programs offer ``lower expenses and less overhead,
[and it is] entirely appropriate, and necessarily competitive, for
firms to have reduced their fees for such services, and this reduction
is obviously in clients' best interests.'' \24\
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    \22\ See Advisers Act Release No. 626 supra note 11. As the
Commission's general counsel opined in a 1940 letter responding to
questions about ``special compensation,'' where the only difference
in the services provided to two brokerage customers is that one
receives advice and the other does not, and the firm always charges
a higher amount to the customer that receives the advice, the
customer paying the higher transaction amount is paying ``special
compensation.'' Advisers Act Release No. 2, supra note 6.
    \23\ This view is consistent with the staff position announced
in Advisers Act Release No. 626, supra note 11.
    \24\ See Comment Letter of Merrill, Lynch, Pierce, Fenner &
Smith (Feb. 7, 2005), at p. 7.
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    The Commission would not look outside the fee structure of a given
firm to determine whether special compensation exists. That is, just
because a ``discount'' firm offered lower rates than a ``full-service''
firm, we would not consider the ``full-service'' firm's charges
``special compensation.'' \25\ We request comment on this
interpretation. Do commenters support it? Should we consider any
modifications and, if so, which ones?
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    \25\ Id.
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C. Dual Registrants

    Finally, we adopted in 2005, and are re-proposing today, a rule
providing that a broker-dealer that is registered under both the
Exchange Act and the Advisers Act is an investment adviser solely with
respect to those accounts for which it provides advice or receives
compensation that subject the broker-dealer to the Advisers Act.\26\ We
received few comments regarding this provision of the original rule,
and we

are proposing it as adopted. The provision would codify a long-standing
interpretation of the Act that permits a broker-dealer also registered
under the Act to distinguish its brokerage customers from its advisory
clients.\27\
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    \26\ Proposed rule 202(a)(11)-1(c).
    \27\ 2005 Adopting Release, supra note 2. See also Advisers Act
Release No. 626, supra note 11.
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III. General Request for Comment

    The Commission is proposing the interpretive provisions described
above and we welcome your comments. We solicit comment, both specific
and general, on each component of the proposals. We request and
encourage any interested person to submit comments regarding:
     The proposals that are the subject of this release;
     Additional or different revisions; and
     Other matters that may have an effect on the proposals
contained in this release.
    Comment is also solicited from the point of view of broker-dealers
and investment advisers, their customers and clients, other regulatory
bodies (such as state securities regulators), and other interested
persons. Any person wishing to submit written comments on any aspect of
the proposal is requested to do so.

IV. Cost-Benefit Analysis

    The Commission is sensitive to the costs and benefits imposed by
its rules, and is considering the costs and benefits of proposed rule
202(a)(11)-1. Proposed rule 202(a)(11)-1 would clarify that if a
broker-dealer exercises investment discretion over customer accounts or
contracts with a customer for, or charges a separate fee for, advisory
services it is not providing advice that is ``solely incidental'' to
its business as a broker-dealer. The proposed rule also would clarify
that a broker-dealer does not receive ``special compensation'' solely
because it charges a commission rate to one customer that is greater or
less than one it charges another customer. Finally, proposed rule
202(a)(11)-1 would clarify that broker-dealers that also are registered
as investment advisers are subject to the Advisers Act solely with
respect to accounts for which they provide services or receive
compensation that subject them to the Act.
    As discussed above, in 2005 we adopted the original rule
202(a)(11)-1 under the Advisers Act. The original rule included, among
other things, the interpretive rules we are proposing today. On March
30, 2007, the Court vacated original rule 202(a)(11)-1, though the
Court did not question the validity of our interpretive positions. The
rules we are proposing today are substantially identical to those
interpretive positions. As requested by the Commission, the Court has
stayed the issuance of its mandate until October 1, 2007, and thus the
interpretive positions contained in original rule 202(a)(11)-1 remain
in effect. Accordingly, we would expect that advisers' conduct would
have conformed to the interpretive positions contained in original rule
202(a)(11)-1 and therefore the proposed rules, if adopted, would have
no effect on advisers' conduct.
    The principal benefit of the proposed rule would be to clarify the
validity of these interpretations in light of the FPA decision.\28\ We
believe that broker-dealers that currently rely on the interpretation
that a broker-dealer would not be deemed to be an investment adviser
solely because the broker-dealer charges a commission, mark-up, mark-
down, or similar fee for brokerage services that is greater or less
than one it charges another customer would benefit because it will be
clear that they can continue to offer the same services under the same
regulatory regime. Similarly, we believe that broker-dealers relying on
the interpretation that permits dually-registered broker-dealers to
distinguish their brokerage accounts from their advisory accounts would
benefit because it will be clear that they can continue to make these
distinctions among their accounts.
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    \28\ The Commission previously solicited comment on the benefits
of these interpretations. 2005 Proposing Release, supra note 7. See
also 2005 Adopting Release, supra note 2, for a discussion of the
benefits of each of these proposed interpretations.
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    We do not believe that the proposed rule would require broker-
dealers or investment advisers to incur new or additional costs.\29\ As
noted, proposed rule 202(a)(11)-1 would re-codify substantially
identical interpretations of section 202(a)(11)(C) that were contained
in the rule vacated by the FPA decision. Prior to that decision,
broker-dealers operated with the understanding that contracting with a
customer for, or charging a separate fee for, advisory services or
exercising investment discretion (other than on a temporary or limited
basis) would not be considered ``solely incidental'' to the brokerage
services they provide for purposes of section 202(a)(11)(C) of the
Advisers Act. Similarly, broker-dealers operated full-service and
discount brokerage programs relying on the interpretation that they
were not subject to the Act solely because they offered different rate
structures for those services. Furthermore, dually-registered broker-
dealers already distinguish their brokerage customers from their
advisory clients in reliance on our previous interpretation contained
in the vacated rule. We, therefore, believe the proposed rule would not
change existing obligations or relationships. Accordingly, we do not
believe that broker-dealers or investment advisers would need to take
steps or alter their business practices in such a way that would
require them to incur new or additional costs as a result of the
adoption of the proposed rule.
---------------------------------------------------------------------------

    \29\ The Commission previously solicited comment on the costs of
these interpretations. 2005 Proposing Release, supra note 7. See
also 2005 Adopting Release, supra note 2, for a discussion of the
costs associated with each of these proposed interpretations.
---------------------------------------------------------------------------

    We request comment on the assumptions on which we base our
preliminary conclusion that broker-dealers and investment advisers
would not incur new or additional costs if we determined to adopt the
rule as proposed. We encourage commenters to discuss any costs and
benefits that we did not consider in our discussion above. We request
commenters to provide analysis and empirical data to support their
statements regarding any costs or benefits associated with proposed
rule 202(a)(11)-1.

V. Paperwork Reduction Act

    Proposed rule 202(a)(11)-1 would not impose any new ``collections
of information'' within the meaning of the Paperwork Reduction Act of
1995.\30\ The proposed rule would not create any new filing, reporting,
recordkeeping, or disclosure reporting requirements for broker-dealers
or investment advisers. The proposed rule would re-codify three
interpretive provisions. First, the rule would clarify that a broker-
dealer that exercises investment discretion with respect to an account
or contracts with a customer for, or charges a separate fee for,
advisory services provides investment advice that is not ``solely
incidental to'' its business as a broker-dealer. Second, the rule would
clarify that a broker-dealer does not receive ``special compensation''
solely because it charges a commission rate to one customer that is
greater or less than one it charges another customer. Third, the rule
would clarify that a registered broker-dealer is an investment adviser
solely with respect to those accounts for which it provides services or
receives compensation that subject it to the Advisers Act. We believe
the proposed

rule contains no new ``collections of information'' under the Paperwork
Reduction Act that requires the approval of the Office of Management
and Budget under 44 U.S.C. 3501. An agency may not conduct or sponsor,
and a person is not required to respond to, a collection of information
unless it displays a currently valid OMB control number.
---------------------------------------------------------------------------

    \30\ 44 U.S.C. 3501 to 3520.
---------------------------------------------------------------------------

    In our 2005 releases, we estimated that the interpretive provisions
we adopted then in the original rule 202(a)(11)-1, and which we are re-
proposing today as revised rule 202(a)(11)-1, would have the effect of
requiring certain broker-dealers that contract with customers for, or
charge a separate fee for, advisory services or provide discretionary
brokerage to register under the Advisers Act.\31\ We estimated that the
rule, which we are proposing today as rule 202(a)(11)-1(a), therefore
increased the number of respondents under several existing collections
of information, and, correspondingly, increased the annual aggregate
burden under those existing collections of information.\32\
Accordingly, we submitted to the Office of Management and Budget
(``OMB''), in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11, and
the OMB approved, amending these collections of information for which
we estimated the annual aggregate burden likely increased as a result
of the 2005 adoption of rule 202(a)(11)-1. The titles of the affected
collections of information are: ``Form ADV,'' ``Form ADV-W and Rule
203-2,'' ``Rule 203-3 and Form ADV-H,'' ``Form ADV-NR,'' ``Rule 204-
2,'' ``Rule 204-3,'' ``Rule 204A-1,'' ``Rule 206(4)-3,'' ``Rule 206(4)-
4,'' ``Rule 206(4)-6,'' and ``Rule 206(4)-7,'' all under the Advisers
Act. The approved collections of information numbers appear under OMB
control numbers 3235-0049, 3235-0313, 3235-0538, 3235-0240, 3235-0278,
3235-0047, 3235-0596, 3235-0242, 3235-0345, 3235-0571, and 3235-0585,
respectively.
---------------------------------------------------------------------------

    \31\ See 2005 Proposing Release, supra note 7, at Section VII;
2005 Adopting Release, supra note 2, at Section VIII.
    \32\ In 2005, as today, we estimated that the provisions now
contained in proposed rule 202(a)(11)-1(b) and 202(a)(11)-1(c) did
not contain any collections of information within the meaning of the
Paperwork Reduction Act.
---------------------------------------------------------------------------

    We have determined not to modify these burden estimates because we
continue to believe they were appropriate and, with respect to the
proposals in this release, that there is no additional paperwork
burden.
    We request comment on whether our assumption that there is no
additional paperwork burden is correct.

VI. Initial Regulatory Flexibility Analysis

    Section 3(a) of the Regulatory Flexibility Act requires the
Commission to undertake an Initial Regulatory Flexibility Analysis of
the proposed rule on small entities unless the Commission certifies
that the proposed rule, if adopted, would not have a significant
economic impact on a substantial number of small entities.\33\ Pursuant
to section 605(b) of the Regulatory Flexibility Act, the Commission
hereby certifies that proposed rule 202(a)(11)-1 would not, if adopted,
have a significant impact on a substantial number of small
entities.\34\
---------------------------------------------------------------------------

    \33\ 5 U.S.C. 603(a).
    \34\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    Proposed rule 202(a)(11)-1 would re-codify three interpretive
provisions. First, the rule would clarify that a broker-dealer that
exercises investment discretion with respect to an account or contracts
with customers for, or charges a separate fee for, advisory services
provides investment advice that is not ``solely incidental to'' its
business as a broker-dealer. Second, the rule would clarify that a
broker-dealer does not receive ``special compensation'' solely because
it charges a commission rate to one customer that is greater or less
than one it charges another customer. Third, the rule would clarify
that a registered broker-dealer is an investment adviser solely with
respect to those accounts for which it provides services or receives
compensation that subject it to the Advisers Act. Proposed rule
202(a)(11)-1 would re-codify substantially identical interpretations of
section 202(a)(11)(C) of the Advisers Act that we adopted in 2005.
Therefore, we do not believe that the proposed rule would have an
economic impact on broker-dealers or investment advisers, regardless of
whether these broker-dealers or investment advisers are small entities,
because these entities would likely have conformed to the interpretive
positions previously adopted. Accordingly, the Commission certifies
that proposed rule 202(a)(11)-1 would not have a significant economic
impact on a substantial number of small entities.
    The Commission encourages written comments regarding this
certification. We request that commenters describe the nature of any
impact on small businesses and provide empirical data to support the
extent of the impact.

VII. Statutory Authority

    The Commission is proposing to amend Rule 202(a)(11)-1 pursuant to
section 211(a) of the Advisers Act.

Text of Rule

List of Subjects in 17 CFR Part 275

    Investment advisers, Reporting and recordkeeping requirements.

    For the reasons set out in the preamble, Title 17, Chapter II of
the Code of Federal Regulations is proposed to be amended as follows:

PART 275--RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940

    1. The general authority citation for part 275 is revised to read
as follows:

    Authority: 15 U.S.C. 80b-2(a)(11)(G), 80b-2(a)(17), 80b-3, 80b-
4, 80b-4a, 80b-6(4), 80b-6a, and 80b-11, unless otherwise noted.
* * * * *
    2. Section 275.202(a)(11)-1 is revised to read as follows:

Sec.  275.202(a)(11)-1  Certain broker-dealers.

    (a) Solely incidental. A broker or dealer provides advice that is
not solely incidental to the conduct of its business as a broker or
dealer within the meaning of section 202(a)(11)(C) of the Advisers Act
(15 U.S.C. 80b-2(a)(11)(C)) if the broker or dealer:
    (1) Charges a separate fee, or separately contracts, for advisory
services; or
    (2) Exercises investment discretion (as that term is defined in
section 3(a)(35) of the Securities Exchange Act of 1934 (``Exchange
Act'') (15 U.S.C. 78c(a)(35))), except investment discretion granted by
a customer on a temporary or limited basis, over such account.
    (b) Special compensation. A broker or dealer registered pursuant to
section 15 of the Exchange Act (15 U.S.C. 78o) does not receive special
compensation within the meaning of section 202(a)(11)(C) of the
Advisers Act solely because the broker or dealer charges a commission,
mark-up, mark-down, or similar fee for brokerage services that is
greater than or less than one it charges another customer.
    (c) Special rule. A broker or dealer registered with the Commission
under Section 15 of the Exchange Act is an investment adviser solely
with respect to those accounts for which it provides services or
receives compensation that subject the broker-dealer to the Advisers
Act.

    By the Commission.

    Dated: September 24, 2007.
Nancy M. Morris,
Secretary.
 [FR Doc. E7-19269 Filed 9-27-07; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 78, Number 232 (Tuesday, December 3, 2013)]
[Rules and Regulations]
[Pages 72567-72568]
[FR Doc No: 2013-28866]

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

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2013-0499; Directorate Identifier 2013-NE-20-AD;
Amendment 39-17673; AD 2013-23-18]
RIN 2120-AA64

Airworthiness Directives; General Electric Company Turbofan
Engines

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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SUMMARY: We are adopting a new airworthiness directive (AD) for certain
General Electric Company (GE) GE90-110B1 and -115B turbofan engines.
This AD was prompted by multiple events of a leaking variable bypass
valve (VBV) actuator fuel supply tube. This AD requires replacement of
this VBV actuator fuel supply tube with a part eligible for
installation. We are issuing this AD to prevent failure of the affected
fuel supply tube, fuel leakage, engine fire, and damage to the
airplane.

DATES: This AD is effective January 7, 2014.

Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov; or in person at the Docket Management Facility
between 9 a.m. and 5 p.m., Monday through Friday, except Federal
holidays. The AD docket contains this AD, the regulatory evaluation,
any comments received, and other information. The address for the
Docket Office (phone:<PHONE_NUMBER>) is Document Management Facility,
U.S. Department of Transportation, Docket Operations, M-30, West
Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE.,
Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: Jason Yang, Aerospace Engineer, Engine
Certification Office, FAA, Engine & Propeller Directorate, 12 New
England Executive Park, Burlington, MA 01803; phone:<PHONE_NUMBER>; fax:
781-238-7199; email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Discussion

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR
part 39 by adding an AD that would apply to the specified products. The
NPRM published in the Federal Register on July, 25, 2013 (78 FR 44899,
July 25, 2013). The NPRM proposed to require replacement of the
affected VBV actuator fuel supply tube, part number 2165M22P01, with a
part eligible for installation.

Comments

    We gave the public the opportunity to participate in developing
this AD. The following presents the comments received on the proposal
and the FAA's response to each comment.

Agreement With the Proposed AD

    The Boeing Company and FedEx Express agreed with the AD as
proposed.

Request To Change the Compliance Time

    GE requested that we change the compliance time in this AD from
``at the next shop visit, after the effective date of this AD'' to ``as
soon as possible without effect on revenue service, but before April 1,
2014.'' No justification was provided for the change.
    We do not agree. Replacement of the VBV actuator fuel supply tube
at the next shop visit maintains an acceptable level of safety for the
fleet, based on safety risk analysis. We have no data to support that a
more aggressive replacement schedule is required to maintain that
acceptable level of safety. We did not change the AD.

Conclusion

    We reviewed the relevant data, considered the comments received,
and determined that air safety and the public interest require adopting
this AD as proposed.

Costs of Compliance

    We estimate that this AD will affect about 59 engines installed on
airplanes of U.S. registry. We also estimate that it will take about
eight hours per engine to replace the VBV actuator fuel supply tube.
The cost of this part is about $14,310. The average labor rate is $85
per hour. Based on these figures, we estimate the cost of this AD on
U.S. operators to be $884,410.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. Subtitle VII: Aviation Programs,
describes in more detail the scope of the Agency's authority.
    We are issuing this rulemaking under the authority described in
Subtitle VII, Part A, Subpart III, Section 44701: ``General
requirements.'' Under that section, Congress charges the FAA with
promoting safe flight of civil aircraft in air commerce by prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce. This regulation is within
the scope of that authority because it addresses an unsafe condition
that is likely to exist or develop on products identified in this
rulemaking action.

Regulatory Findings

    This AD will not have federalism implications under Executive Order
13132. This AD will not have a substantial direct effect on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government.
    For the reasons discussed above, I certify that this AD:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866,
    (2) Is not a ``significant rule'' under DOT Regulatory Policies and
Procedures (44 FR 11034, February 26, 1979),
    (3) Will not affect intrastate aviation in Alaska to the extent
that if justifies making a regulatory distinction, and
    (4) Will not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 39

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

Adoption of the Amendment

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

PART 39--AIRWORTHINESS DIRECTIVES

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

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

Sec.  39.13  [Amended]

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

2013-23-18 General Electric Company: Amendment 39-17673; Docket No.
FAA-2013-0499; Directorate Identifier 2013-NE-20-AD.

(a) Effective Date

    This AD is effective January 7, 2014.

(b) Affected ADs

    None.

(c) Applicability

    This AD applies to General Electric Company (GE) GE90-110B1 and
-115B turbofan engines with variable bypass valve (VBV) actuator
fuel supply tube, part number (P/N) 2165M22P01, installed.

(d) Unsafe Condition

    This AD was prompted by multiple events of a leaking VBV
actuator fuel supply tube. We are issuing this AD to prevent failure
of the affected fuel supply tube, fuel leakage, engine fire, and
damage to the airplane.

(e) Compliance

    (1) Comply with this AD within the compliance times specified,
unless already done.
    (2) At the next shop visit, after the effective date of this AD,
replace the VBV actuator fuel supply tube, P/N 2165M22P01, with a
part eligible for installation.

(f) Definition

    For the purpose of this AD, a shop visit is the induction of an
engine into the shop for maintenance or overhaul. The separation of
engine flanges solely for the purposes of transporting the engine
without subsequent engine maintenance does not constitute an engine
shop visit.

(g) Installation Prohibition

    After the effective date of this AD, do not install any VBV
actuator fuel supply tube, P/N 2165M22P01, onto any engine.

(h) Alternative Methods of Compliance (AMOCs)

    The Manager, Engine Certification Office, FAA, may approve AMOCs
for this AD. Use the procedures in 14 CFR 39.19 to make your
request.

(i) Related Information

    For more information about this AD, contact Jason Yang,
Aerospace Engineer, Engine Certification Office, FAA, 12 New England
Executive Park, Burlington, MA 01803; phone:<PHONE_NUMBER>; fax: 781-
238-7199; email<EMAIL_ADDRESS>
(j) Material Incorporated by Reference

    None.

    Issued in Burlington, Massachusetts, on November 14, 2013.
Frank P. Paskiewicz,
Acting Director, Aircraft Certification Service.
[FR Doc. 2013-28866 Filed 12-2-13; 8:45 am]
BILLING CODE 4910-13-P