[Federal Register Volume 79, Number 236 (Tuesday, December 9, 2014)]
[Rules and Regulations]
[Pages 72970-72975]
[FR Doc No: 2014-28868]

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

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Parts 117 and 121

[Docket No. FAA-2009-1093]
RIN 2120-AJ58

Flightcrew Member Duty and Rest Requirements

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notification of availability.

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

SUMMARY: The FAA is issuing a Final Supplemental Regulatory Impact
Analysis (Final SRIA) of its final rule that amended its existing
flight, duty and rest regulations applicable to certain certificate
holders and their flightcrew members. A copy of the Final SRIA may be
found in the docket for the rulemaking. The Final SRIA responds to
comments that were made in response to the Initial Supplemental
Regulatory Impact Analysis, and, where appropriate, incorporates new
information provided by the commenters. In addition, the Final SRIA
makes adjustments to the methodology used to estimate the costs and
benefits of applying the final flight, duty, and rest rule to cargo-
only operations, and includes additional sensitivity analyses. The
results of the Final SRIA concludes that the base-case benefits of
applying the flight, duty, and rest rule to cargo-only operations would
be about $3 million, and the high-case benefits of doing so would be
about $10 million. Conversely, the costs of applying the flight, duty,
and rest rule to cargo-only operations would be about $452 million.
Because the results of the analysis continue to indicate that the costs
of mandating all-cargo operation compliance with the new flight, duty,
and rest rule significantly outweigh the

benefits, the FAA has determined that no revisions to the final rule
are warranted.

DATES: Effective December 9, 2014.

FOR FURTHER INFORMATION CONTACT: For technical issues: Nan
Shellabarger, Aviation Policy and Plans (APO-1), Federal Aviation
Administration, 800 Independence Avenue SW., Washington, DC 20591;
telephone<PHONE_NUMBER>; email<EMAIL_ADDRESS>For legal
issues: Alex Zektser, Office of the Chief Counsel, International Law,
Legislation, and Regulations Division (AGC-200), Federal Aviation
Administration, 800 Independence Avenue SW., Washington, DC 20591;
telephone<PHONE_NUMBER>; email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: On January 4, 2012, the Federal Aviation
Administration (FAA) issued a final rule that was published in the
Federal Register as Flight Crew Member Duty and Rest Requirements. 77
FR 330-403. The regulations, which only apply to passenger operations
conducted under 14 CFR 121 (part 121), became effective on January 4,
2014. On December 21, 2011, the FAA also issued a Regulatory Impact
Analysis (original RIA) dated November 18, 2011 (FAA-2009-1093-2477).
The original RIA provides the basis for the FAA's decision to (1)
promulgate the final rule establishing new flight, duty, and rest
requirements for flight crews in passenger operations; and (2) exclude
flight crews in cargo-only operations from the new mandatory
requirements. While cargo-only operations are not required to meet the
new regulations, the rule permits these operators to opt in to the rule
if they so choose.
    On December 22, 2011 the Independent Pilots Association (IPA) filed
a timely petition for review in the United States Court of Appeals for
the District of Columbia Circuit. During the course of reviewing the
administrative record for the purpose of preparing the government's
brief, the FAA discovered errors in the original RIA that supports the
final rule. The errors were associated with the scope of costs related
to the implementation of the regulations for cargo-only operations.
These errors appeared to be of a sufficient amount that the FAA
concluded it was prudent to review the portion of the cost-benefit
analysis related to cargo-only operations and allow interested parties
an opportunity to comment on the corrected analysis.
    On May 17, 2012, the FAA asked the Court to remand the record to
the agency and to hold the case in abeyance while the agency corrected
the inadvertent errors it had discovered. The court granted the FAA's
motion on June 8, 2012. While the passenger operations rule is not at
issue in the court proceedings, the FAA, in an abundance of caution,
decided to have that portion of the original RIA reevaluated as well.
    The FAA contracted with the John A. Volpe National Transportation
Systems Center to review the original RIA for accuracy, correct any
errors identified, and prepare a supplemental regulatory evaluation of
the revised analysis. As a result of that review, the FAA issued an
Initial Supplemental RIA (Initial SRIA), which provided an expanded
discussion of the methodology and information sources used in the
rulemaking analysis, corrected reporting and calculation errors
identified in the original RIA, and presented a sensitivity analysis on
key assumptions used in the analysis. The Initial SRIA invited public
comment on: (1) Whether FAA was statutorily foreclosed from considering
costs and benefits as part the flight, duty, and rest rulemaking; and
(2) any other aspect of the initial SRIA.
    In response to the Initial SRIA, the FAA received comments from the
Independent Pilots Association (IPA); the Cargo Airline Association
(CAA); the Air Line Pilots Association, International (ALPA); Airlines
for America (A4A); the U.S. Airlines Pilots Association (USAPA); the
Airline Professionals Association, Teamsters Local 1224 (Teamsters
Local 1224); Atlas Air Worldwide Holdings, Inc. (Atlas Air); the
NetJets Association of Shared Aircraft Pilots (NetJets); and the
Coalition of Airline Pilots Associations (CAPA). The FAA has considered
these comments, and now issues the Final SRIA as a product of that
consideration.
    The FAA's discussion of public comments is divided into two parts.
Consideration of whether the FAA was statutorily foreclosed from
considering costs and benefits is set out in the next section of this
notice. Consideration of all other significant issues raised in the
comments is set out in the Final SRIA in the section entitled
Disposition of Issues Raised by Comments Received Regarding the Initial
Supplemental RIA. Because the FAA concludes that it is permitted to
consider costs and benefits and because the costs of mandating all-
cargo-operation compliance with the new flight, duty, and rest rule
significantly outweigh the benefits, the FAA has determined that no
revisions to the final rule are warranted.

A. Whether the FAA Is Statutorily-Foreclosed From Considering Costs and
Benefits

    In their comments, IPA, ALPA, and Teamsters Local 1224 argue that
section 212 of Public Law 111-216 \1\ prohibits the FAA from
considering costs as part of its flight, duty, and rest rulemaking.
These commenters rely on Whitman v. Am. Trucking Ass'n, 531 U.S. 457
(2001) for the proposition that Congress' commitment of authority to
consider costs must be express. Because Public Law 111-216 does not
explicitly state that the FAA may consider the costs of a flight, duty,
and rest rule, these commenters argue that the FAA is statutorily
foreclosed from considering the costs and benefits of this rule. IPA
and Teamsters Local 1224 also cite to unrelated statutory provisions
that explicitly discuss costs for the proposition that Congress will
explicitly specify when an agency must consider costs as part of
rulemaking. The statutes that these commenters cite to are: (1) Two FAA
statutes concerning airports (49 U.S.C. 44706(c) and (d)); and (2) a
Federal Motor Carrier Safety Administration (FMCSA) statute concerning
fatigue (49 U.S.C. 31136(c)(2)).
---------------------------------------------------------------------------

    \1\ Airline Safety and Federal Aviation Administration Extension
Act of 2010 (Public Law 111-216, 124 Stat. 2362 (49 U.S.C. 44701
note).
---------------------------------------------------------------------------

    ALPA argues that Public Law 111-216 prohibits consideration of
costs and benefits because it requires the FAA to issue a rule based
upon the ``best available scientific information . . . to address
problems related to pilot fatigue.'' \2\ ALPA asserts that the FAA's
decision to make compliance with the final rule voluntary for all-cargo
operations was based solely on cost considerations, and as such, failed
to satisfy these statutory mandates. ALPA and Teamsters Local 1224 also
state that section 212 of Public Law 111-216 includes a list of factors
that Congress wanted the FAA to consider and costs and benefits were
not included as factors for consideration. With regard to the fact that
this list included a statement directing the FAA to consider ``[a]ny
other factor the [FAA] Administrator considers appropriate,'' \3\ IPA
argues that ``Congress would not have relied on such a modest phrase as
`other matters [FAA] considers appropriate' to allow cost
considerations to cancel out the scientific information and safety
issues it specified.'' \4\
---------------------------------------------------------------------------

    \2\ ALPA Comment at 7.
    \3\ Public Law 111-216, sec. 212(a)(2)(M).
    \4\ IPA Comment at 74.

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

    IPA argues that the legislative history also shows that Congress
intended to foreclose the FAA from considering costs and benefits. In
support of its argument, IPA cites to a sentence in the H.R. Report No.
111-284, which states that an `` `updated rule will more adequately
reflect the operating environment of today's pilots and will reflect
scientific research on fatigue.' '' \5\ IPA asserts that costs do not
reflect the pilot's operating environment or scientific research on
fatigue and thus, they cannot be considered.
---------------------------------------------------------------------------

    \5\ IPA Comment at 71 (quoting H.R. Rep. No. 111-284, at 7).
---------------------------------------------------------------------------

    Conversely, CAA, A4A, and Atlas Air argue that the FAA is not
statutorily prohibited from considering the costs and benefits of the
flight, duty, and rest rule. CAA asserts that the statutory direction
for the FAA to issue regulations ``based on the best available
scientific information'' includes a ``scientifically sound cost-benefit
analysis,'' as benefits could not be calculated without the use of
scientific information.\6\ CAA, A4A, and Atlas Air, and A4A also point
out that Public Law 111-216 explicitly authorizes the FAA to consider
``[a]ny other matter the Administrator considers appropriate.'' \7\
These commenters assert that Congress would have considered it
appropriate for the FAA to consider costs because: (1) The FAA has long
used cost-benefit analysis in its rulemakings; and (2) Executive Order
13,563 explicitly requires the consideration of costs and benefits in
rulemaking.
---------------------------------------------------------------------------

    \6\ CAA Comment at 4.
    \7\ Id.; Atlas Air Comment at 6; A4A Comment at 2-3.
---------------------------------------------------------------------------

    Finally, CAA, Atlas Air, and A4A argue that statutory silence as to
the issue of costs and benefits does not prohibit an agency from
considering costs and benefits because an analysis of costs and
benefits must be specifically barred by statute. In support of this
position, these commenters cite to Entergy Corp. v. Riverkeeper, Inc.,
556 U.S. 208 (2009) and Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000).

1. Overview of Cost-Benefit Analysis Legal Framework

    The process used by a federal executive-branch agency to conduct a
legislative rulemaking, such as the one at issue here, is governed by
statutes and executive orders. This process includes, among other
things, providing notice and an opportunity for the public to comment
on the proposed rule \8\ and considering the costs and benefits of
rulemaking.\9\ The requirement to consider the costs and benefits of a
rulemaking has been a longstanding feature of administrative law. This
requirement was first imposed on executive agencies in 1981 by
President Reagan's Executive Order 12291, which stated that
``[r]egulatory action shall not be undertaken unless the potential
benefits to society for the regulation outweigh the potential costs to
society; [and] . . . each agency shall, in connection with every major
rule, prepare, and to the extent permitted by law consider, a
Regulatory Impact Analysis.'' \10\ Each successive president after
President Reagan has retained the requirement of cost-benefit analysis
for significant rulemakings. Currently, this requirement is imposed by
Executive Orders 12866 and 13563.
---------------------------------------------------------------------------

    \8\ 5 U.S.C. 553.
    \9\ Executive Orders 12866 and 13563.
    \10\ Executive Order 12291, 46 FR 13193 (February 17, 1981).
---------------------------------------------------------------------------

    Executive Order 12866, issued on September 30, 1993, specifies that
``[i]n deciding whether and how to regulate, agencies should assess all
costs and benefits of available regulatory alternatives, including the
alternative of not regulating.'' \11\ The executive order first
requires an agency to determine whether a problem exists and whether
direct regulation is the best way of addressing that problem.\12\ If an
agency determines that a problem exists and that regulation is the best
way of addressing the problem, then the agency must design regulations
``in the most cost-effective manner to achieve the regulatory
objective.'' \13\ As part of this process the agency must ``assess both
the costs and the benefits of the intended regulation and, recognizing
that some costs and benefits are difficult to quantify, propose or
adopt a regulation only upon a reasoned determination that the benefits
of the intended regulation justify its costs.'' \14\
---------------------------------------------------------------------------

    \11\ Executive Order 12866, sec. 1(a).
    \12\ Id. sec.1(b)(1)-1(b)(3).
    \13\ Id. sec. 1(b)(5).
    \14\ Id. sec. 1(b)(6).
---------------------------------------------------------------------------

    Executive Order 13563 was issued in January 2011, and it reaffirms
the cost-benefit analysis required by Executive Order 12866.\15\
Specifically, Executive Order 13563 emphasizes that each agency must
``propose or adopt a regulation only upon a reasoned determination that
its benefits justify its costs (recognizing that some benefits and
costs are difficult to quantify).'' \16\ The executive order further
states that ``[i]n applying these principles, each agency is directed
to use the best available techniques to quantify anticipated present
and future benefits and costs as accurately as possible. Where
appropriate and permitted by law, each agency may consider (and discuss
qualitatively) values that are difficult or impossible to quantify,
including equity, human dignity, fairness, and distributive impacts.''
\17\
---------------------------------------------------------------------------

    \15\ See Executive Order 13563, sec. 1(b).
    \16\ Id.
    \17\ Id. sec. 1(c).
---------------------------------------------------------------------------

    In short, cost benefit analysis, as imposed by executive order, has
been a central feature of agency rulemaking. The FAA is no exception,
and since 1981, it has consistently used cost-benefit analysis in its
rulemakings.\18\ For example, in its last flight, duty, and rest
rulemaking, which took place in 1985, the FAA issued a final rule that
included a cost-benefit analysis.\19\ The FAA's cost benefit analysis
in that instance showed that ``the benefits of the amendments [in the
final rule] exceed any costs involved with showing compliance.'' \20\
---------------------------------------------------------------------------

    \18\ See, e.g., Commuter Operations and General Certification
and Operations Requirements, 60 FR 65832, 65911-12 (Dec. 20, 1995)
(conducting a cost-benefit analysis); Reduction of Fuel Tank
Flammability in Transport Category Airplanes, 73 FR 42444, 42486-88
(July 21, 2008) (same); Safety Management Systems for Part 121
Certificate Holders Notice of Proposed Rulemaking, 75 FR 68224 (Nov.
5, 2010). See also Pilot Certification and Qualification
Requirements Final Rule, 78 FR 42324 (July 15, 2013); Qualification,
Service, and Use of Crewmembers and Aircraft Dispatchers Final Rule,
78 FR 67800 (Nov. 12, 2013).
    \19\ 50 FR 29306, 29319 (July 18, 1985).
    \20\ Id.
---------------------------------------------------------------------------

2. Analysis of Public Law 111-216

    Next, we turn to an examination of whether Congress intended the
FAA to ignore its statutory and Executive Order rulemaking requirements
and not consider a cost-benefit analysis in its decision-making
process.
    First, we consider IPA, ALPA, and Teamsters Local 1224's argument
that the list of factors in Public Law 111-216 sec. 212(a)(2) was
intended to be exhaustive. Subsections 212(a)(2)(A) through (L) list 12
specific factors that Congress wanted the FAA to consider as part of a
flight, duty, and rest rulemaking.
    (A) Time of day of flights in a duty period.
    (B) Number of takeoff and landings in a duty period.
    (C) Number of time zones crossed in a duty period.
    (D) The impact of functioning in multiple time zones on different
daily schedules.
    (E) Research conducted on fatigue, sleep, and circadian rhythms.
    (F) Sleep and rest requirements recommended by the National
Transportation Safety Board and the National Aeronautics and Space
Administration.

    (G) International standards regarding flight schedules and duty
periods.
    (H) Alternative procedures to facilitate alertness in the cockpit.
    (I) Scheduling and attendance policies and practices, including
sick leave.
    (J) The effects of commuting, the means of commuting, and the
length of the commute.
    (K) Medical screening and treatment.
    (L) Rest environments.
    However, in subsection 212(a)(2)(M), Congress stated that the FAA
could also consider ``[a]ny other matters the [FAA] Administrator
considers appropriate.'' Because in sec. 212(a)(2)(M) Congress
expressly provided the FAA with the discretion to consider factors that
were not explicitly listed in sec. 212(a)(2)(A)-(L), we conclude that
Congress did not intend the list of factors in sec. 212(a)(2)(A)-(L) to
be exhaustive.
    We are also unpersuaded by IPA's argument that the language in sec.
212(a)(2)(M) does not include the consideration of costs. This
statutory section allows the FAA to consider ``[a]ny other matters the
Administrator considers appropriate.'' (emphasis added). Thus, by the
plain language of the statute, the FAA can consider any other matter
that the FAA Administrator considers appropriate for the flight, duty,
and rest rulemaking. Here, in light of the requirements in Executive
Orders 12866 and 13563, the FAA Administrator considered a cost-benefit
analysis to be a necessary and appropriate consideration for the
flight, duty, and rest rulemaking, thus making the analysis an
acceptable consideration under sec. 212(a)(2)(M).
    This means that, by the plain language of Public Law 111-216, sec.
212(a)(2)(M), the FAA was not foreclosed from satisfying its cost-
benefit-analysis obligations under Executive Orders 12866 and 13563.
Rather, by requiring the agency to ``conduct a rulemaking proceeding''
\21\ and allowing the agency to consider other matters, it is clear,
based on the plain language of the statute, that Congress intended that
the FAA follow its long-standing rulemaking process and comply with its
obligations under the Administrative Procedure Act and executive
orders, including Executive Order 12866 and 13563.
---------------------------------------------------------------------------

    \21\ Public Law 111-216, sec. 212(a)(2).
---------------------------------------------------------------------------

    Next, we turn to ALPA's argument that Public Law 111-216, sec.
212(a)(1) was intended to foreclose a cost-benefit analysis. That
section states ``[i]n accordance with paragraph [(a)](3),\22\ the
Administrator of the Federal Aviation Administration shall issue
regulations, based on the best available scientific information, to
specify limitations on the hours of flight and duty time allowed for
pilots to address problems relating to pilot fatigue.'' While sec.
212(a)(1) requires the FAA to conduct a flight, duty, and rest
rulemaking, sec. 212(a)(1) is silent as to the scope of the final rule
that must be issued under this statute. Because of this silence, a
flight, duty, and rest rule, such as the one at issue here, that
applies to a subset of pilots subject to FAA jurisdiction would not
violate sec. 212(a)(1), as this statutory provision does not require
the final flight, duty, and rest rule to apply to all pilots subject to
FAA's jurisdiction.
---------------------------------------------------------------------------

    \22\ Section 212(a)(3) requires that the FAA issue a notice of
proposed rulemaking within 180 days of enactment and issue a final
rule within a year of enactment.
---------------------------------------------------------------------------

    We now turn to IPA, ALPA, and Teamsters Local 1224's argument that
an agency may not consider costs and benefits unless that agency's
statute explicitly instructs it to do so. We disagree with this
assertion and agree with CAA, A4A, and Atlas Air that statutory silence
as to costs means that an agency may consider costs and benefits.
    In 2000, the Court of Appeals for the D.C. Circuit conducted an
examination of the governing caselaw at that time, and concluded that
an agency is barred from considering costs ``only where there is clear
congressional intent to preclude consideration of cost.'' Michigan v.
EPA, 213 F.3d 663, 678 (D.C. Cir. 2000). While the Supreme Court has
issued several cases on this issue since that time, we do not believe
that these cases changed this fundamental principle of statutory
interpretation.
    In the most recent case to address this issue, Entergy Corp. v.
Riverkeeper, Inc., 556 U.S. 208 (2009), the Supreme Court examined a
statutory provision in the Clean Water Act. The statutory provision at
issue in that case directed the EPA to set regulatory standards for
cooling water intake structures that reflect `` `the best technology
available for minimizing adverse environmental impact.' '' Id. at 218
(quoting 33 U.S.C. 1326(b)). The statute made no explicit mention of a
cost-benefit analysis. Riverkeeper, 556 U.S. at 222. The Supreme Court
concluded that the statute's silence as to agency consideration of
costs and benefits ``is meant to convey nothing more than a refusal to
tie the agency's hands as to whether cost-benefit analysis should be
used, and if so to what degree.'' Id.
    In a case decided eight years prior to Riverkeeper, Whitman v. Am.
Trucking Ass'n, 531 U.S. 457 (2001), the Supreme Court examined a
different EPA statute. In Whitman, the court examined EPA's
consideration of costs under the Clean Air Act. While the provisions of
the Clean Air Act at issue in that case did not explicitly mandate cost
considerations, there were other provisions of the Clean Air Act that
did contain explicit cost-consideration requirements.\23\ In that
context, the fact that the Clean Air Act provisions at issue did not
have explicit cost considerations meant that Congress did not want the
agency to consider costs. Thus, as the Supreme Court subsequently
pointed out, Whitman ``stands for the rather unremarkable proposition
that sometimes statutory silence, when viewed in context, is best
interpreted as limiting agency discretion.'' \24\
---------------------------------------------------------------------------

    \23\ See Riverkeeper, 556 U.S. at 223 (explaining the rationale
for the Whitman decision).
    \24\ Id. (emphasis added).
---------------------------------------------------------------------------

    We agree with CAA, A4A, and Atlas Air that the situation in this
case is more analogous to Riverkeeper than it is to Whitman. Unlike the
Clean Air Act statute at issue in Whitman, there are no statutory
provisions in Public Law 111-216 that contain explicit cost-benefit
consideration requirements. Indeed, in addition to the flight, duty,
and rest rulemaking provisions of section 212, Public Law 111-216
contains seven other mandates for the FAA to conduct rulemaking
proceedings, none of which mention a cost benefit analysis.\25\
Consequently, the fact that section 212 of Public Law 111-216 does not
explicitly mention a cost-benefit analysis is meaningless, as this
analysis also is not explicitly mentioned anywhere in Public Law 111-
216. Thus, we conclude that, just like the statute in Riverkeeper,
Congress' omission of an

explicit cost-benefit discussion in Public Law 111-216, sec. 212 was
``meant to convey nothing more than a refusal to tie the agency's hands
as to whether cost-benefit analysis should be used, and if so to what
degree.'' Riverkeeper, 556 U.S. at 222.
---------------------------------------------------------------------------

    \25\ Those provisions are in Public Law 111-216, secs. 203(b)(2)
(requiring the Administrator to issue regulations to carry out this
subsection); 206(b)(1)-(2) (requiring the Administrator to issue an
NPRM and final rule based on the recommendations of an aviation
rulemaking committee regarding flight crewmember mentoring,
professional development, and leadership); 208(a) (requiring ``the
Administrator . . . [to] conduct a rulemaking proceeding to
require'' air carriers to provide ground and flight training to
flight crewmembers on aircraft stall recognition and recover, as
well as recognition of aircraft upset and recovery); 209(a)
(requiring the Administrator to issue a final rule with respect to
the NPRM published on Jan. 12, 2009 relating to training programs
for flight crewmembers and aircraft dispatchers); 215(a) (requiring
the Administrator to ``conduct a rulemaking proceeding to require
all part 121 air carriers to implement a safety management
system''); 216(a)(1) (requiring the Administrator to ``conduct a
rulemaking proceeding to develop and implement means and methods for
ensuring that flight crew members have proper qualifications and
experience''), and 217(a) (requiring the Administrator to ``conduct
a rulemaking proceeding to amend part 61 of title 14, Code of
Federal Regulations, to modify requirements for the issuance of an
airline transport pilot certificate'').
---------------------------------------------------------------------------

    Furthermore, we do not find IPA and Teamsters Local 1224's citation
to statutory language in unrelated statutes discussing cost
considerations to be persuasive. These commenters cite to the cost
considerations specified in the following statutes: (1) Two FAA
statutes concerning airports (49 U.S.C. 44706(c) and (d)); and (2) a
Federal Motor Carrier Safety Administration (FMCSA) statute concerning
fatigue (49 U.S.C. 31136(c)(2)).
    Here, the two airports statutes cited by IPA and Teamsters Local
1224 (49 U.S.C. 44706(c) and (d)) deal with the issuance of an airport
operating certificate to a person desiring to operate an airport. Both
of these statutes are completely unrelated to the flight, duty, and
rest rulemaking at issue in this case, as the flight, duty, and rest
rule is limited to 14 CFR part 121 air-carrier operations and does not
affect airport operating certificates. In addition, neither 49 U.S.C.
44706(c) nor 49 U.S.C. 44706(d) was enacted or changed by Public Law
111-216, and thus fall outside the scope of the Supreme Court's holding
in Whitman. Accordingly, the fact that Congress explicitly mentioned
costs in 49 U.S.C. 44706(c) and (d) is irrelevant for the purposes of
construing the meaning of Public Law 111-216, sec. 212(a).
    Furthermore, the mere fact that both of these statutes are
administered by the FAA is not dispositive. In Whitman, the Supreme
Court analyzed a Clean Air Act statute administered by the EPA and
concluded that the statute prohibited the consideration of costs.
Whitman, 531 U.S. at 457. In Riverkeeper, the Supreme Court analyzed a
Clean Water Act statute, also administered by the EPA, and reached a
different result: That the statute's silence as to costs meant that the
EPA could consider costs and benefits. See Riverkeeper, 556 U.S. at
222. If one cost-benefit statutory provision is carried over to all
other statutes administered by an agency, regardless of whether the
statutory provisions fall within the same Act or Public Law, then
Riverkeeper would have been decided differently, as the EPA-
administered Clean Air Act provisions would have controlled the
statutory construction of the EPA-administered Clean Water Act
provisions at issue in Riverkeeper.
    Similarly, the FMCSA statute cited by the commenters (49 U.S.C.
31136(c)(2)) was not enacted or changed by Public Law 111-216 and does
not apply to the FAA's flight, duty, and rest rulemaking. Section 31136
gives FMCSA the power to prescribe regulations for commercial motor
vehicle safety. Because the FAA does not have jurisdiction to regulate
in this area, this statute is not relevant for FAA purposes.
    Finally, we are unpersuaded by IPA's legislative history argument.
IPA points to a single sentence in the H.R. Report, which states that
an `` `updated rule will more adequately reflect the operating
environment of today's pilots and will reflect scientific research on
fatigue,' '' \26\ to assert that the FAA was limited to considering
scientific research on fatigue in its decision-making process. Neither
this sentence, nor the legislative history, provide any indication that
Congress intended for the FAA to ignore its statutory and executive
order obligations and not consider cost-benefit analysis in conducting
this rulemaking. Furthermore, the legislative history regarding all of
the rulemaking mandates in Public Law 111-216 makes no mention of
Congress's intent to foreclose FAA's consideration of costs and
benefits.\27\ To the contrary, as discussed earlier, Congress
explicitly instructed the FAA in section 212(a)(2)(M) of Public Law
111-216 to consider ``[a]ny other matters the [FAA] Administrator
considers appropriate.'' Accordingly, we find that Congress did not
intend to statutorily foreclose the FAA from considering costs and
benefits in the flight, duty, and rest rulemaking at issue here.
---------------------------------------------------------------------------

    \26\ IPA Comment at 71 (quoting H.R. Rep. No. 111-284, at 7).
    \27\ See H.R. Report No. 111-284 (House committee report making
no mention of a Congressional intent to foreclose a cost-benefit
analysis or override Executive Orders 12866 and 13563).
---------------------------------------------------------------------------

B. Summary of Final Supplemental RIA

    Turning to the Final Supplemental RIA (Final SRIA), the Final SRIA
responds to comments made in response to the Initial SRIA, and, where
appropriate, the Final SRIA incorporates information and suggestions
made by the commenters. The Final SRIA adjusts the methodology used to
estimate the benefits of applying the final rule to cargo-only
operations in the following ways (there are no changes to the benefits
estimates for passenger operations):
     Adjusts the aircraft models used in the base and high
case.
     Accounts for the possibility of non-crew passengers being
involved in a catastrophic accident for the high case.
     Accounts for the possibility of ground fatalities
resulting from a catastrophic accident for the high case.
     Accounts for additional medical costs of non-fatal
injuries for the base case.
     Revises the effectiveness rating of the final rule for the
sole cargo accident in the accident history analysis from 75 percent to
15 percent.\28\
---------------------------------------------------------------------------

    \28\ This change was made in response to CAA's comment
concerning the single all-cargo accident that would have been
mitigated by the provisions of this rule. As discussed more fully in
the Final SRIA, CAA correctly pointed out that the schedules of the
flightcrew members involved in the accident would have complied with
the provisions of this rule if this rule had applied to those
flightcrew members. Thus the FAA reduced the effectiveness rating to
15% in the final SRIA.
---------------------------------------------------------------------------

     Includes a section describing the non-quantified benefits
of the final rule.
    This Final SRIA adjusts the methodology used to estimate the costs
of applying the final rule in the following ways:
     Calculates the cost of the aircraft downtime separately
for passenger and cargo operations.
     Incorporates new data on the number of primary lineholders
relative to the number of flightcrew members for carriers in the
freight industry groups.
     Includes the costs of employer provided benefits for
airline employees in addition to wage costs when estimating labor costs
associated with the final rule for both passenger and cargo-only
operations.
    Moreover, the Final SRIA includes an additional sensitivity
analysis (found in Appendix B) to explore whether using a limited
number of alternative assumptions suggested in comments to the Initial
SRIA would impact the central conclusion that the costs of applying the
final rule to cargo-only operations vastly outweigh the estimated
benefits. The sensitivity analysis does not alter that central
conclusion. Table 1 and Table 2 summarize the differences between the
original RIA the Initial SRIA, and the Final SRIA.

                      Table 1--Nominal Costs and Benefits (2012-2023), Passenger Operations
                                                [2011 $Millions]
----------------------------------------------------------------------------------------------------------------
                                                                   Original RIA    Initial SRIA     Final SRIA
----------------------------------------------------------------------------------------------------------------
Total Benefits_Base Case........................................            $376            $401            $401
Total Benefits_High Case........................................             716             757             757
Total Costs.....................................................             390             457             462
----------------------------------------------------------------------------------------------------------------

                        Table 2--Nominal Costs and Benefits (2012-2023), Cargo Operations
                                                [2011 $Millions]
----------------------------------------------------------------------------------------------------------------
                                                                   Original RIA    Initial SRIA     Final SRIA
----------------------------------------------------------------------------------------------------------------
Total Benefits_Base Case........................................          $20.35              $5              $3
Total Benefits_High Case........................................           32.55              31              10
Total Costs.....................................................          306                550             452
----------------------------------------------------------------------------------------------------------------

    The Final SRIA results in data that provides justification for the
exclusion of cargo operations from the final rule, and continues to
provide justification for the final rule on passenger operations.\29\
As discussed above, the FAA is not only required by Executive Orders
12866 and 13563 to consider the costs and benefits of making compliance
with this flight, duty, and rest rule mandatory for all-cargo
operations, but Congress specifically permitted FAA to consider ``[a]ny
other matters the Administrator considers appropriate.'' \30\ Because
the costs of mandating all-cargo-operation compliance significantly
exceed the benefits of doing so, the FAA has determined that no
revisions to the final rule are warranted.
---------------------------------------------------------------------------

    \29\ The costs of the final rule for passenger operations are
somewhat higher than the base case benefits estimate for those
operations but well below the high case estimate.
    We also note that saving just 85 lives in a 10 year period would
cause this rule to be cost beneficial.
    \30\ Public Law 111-216, sec. 212(a)(2)(M).

    Issued on December 3, 2014.
Mark W. Bury,
Assistant Chief Counsel for International Law, Legislation and
Regulations.
[FR Doc. 2014-28868 Filed 12-8-14; 8:45 am]
BILLING CODE P


[Federal Register Volume 82, Number 178 (Friday, September 15, 2017)]
[Notices]
[Pages 43436-43439]
[FR Doc No: 2017-19582]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81572; File No. SR-FINRA-2017-025]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Approving a Proposed Rule Change Relating to the
Definition of Non-Public Arbitrator

September 11, 2017.

I. Introduction

    On July 10, 2017, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend FINRA Rule 12100 of the
Code of Arbitration Procedure for Customer Disputes (``Customer Code'')
and FINRA Rule 13100 of the Code of Arbitration Procedure for Industry
Disputes (``Industry Code'' and, together with the Customer Code,
``Codes''). The proposed rule change would permit any person who is
disqualified from service as a public arbitrator, but otherwise
qualified to serve as an arbitrator, to serve as a non-public
arbitrator.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    The proposed rule change was published for comment in the Federal
Register on July 28, 2017.\3\ The public comment period closed on
August 18, 2017. The Commission received four comment letters in
response to the Notice, all of which supported the proposed rule
change.\4\ On August 30, 2017, FINRA responded to the comment letters
received in response to the Notice.\5\ This order approves the proposed
rule change.
---------------------------------------------------------------------------

    \3\ See Exchange Act Release No. 81196 (July 24, 2017), 82 FR
35248 (July 28, 2017) (File No. SR-FINRA-2017-025) (``Notice'').
    \4\ See Letters from Steven B. Caruso, Maddox Hargett Caruso,
P.C., dated July 24, 2017 (``Caruso Letter''); Glenn S. Gitomer,
McCausland Keen + Buckman, dated August 14, 2017 (``Gitomer
Letter''); Jill Gross, Professor of Law and Former Director, and
Elissa Germaine, Supervising Attorney, Adjunct Professor of Law, and
Director, Pace Law School's Investor Rights Clinic, dated August 17,
2017 (``Pace Letter''); Marnie C. Lambert, President, Public
Investors Arbitration Bar Association (``PIABA''), dated August 18,
2017 (``PIABA Letter''). Comment letters are available at https://www.sec.gov.
    \5\ See Letter from Margo A. Hassan, Associate Chief Counsel,
FINRA, to Brent J. Fields, Secretary, U.S. Securities and Exchange
Commission, dated August 30, 2017 (``FINRA Letter''). The FINRA
Letter is available on FINRA's Web site at http://www.finra.org, at
the principal office of FINRA, at the Commission's Web site at
https://www.sec.gov, and at the Commission's Public Reference Room.
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change \6\
---------------------------------------------------------------------------

    \6\ The subsequent description of the proposed rule change is
substantially excerpted from FINRA's description in the Notice. See
Notice, 82 FR at 35249.
---------------------------------------------------------------------------

    FINRA classifies arbitrators under the Codes as either ``non-
public'' or ``public.'' The non-public arbitrator definition lists
affiliations that might qualify a person to serve as a non-public
arbitrator at the forum.\7\ Conversely, the public arbitrator
definition describes criteria that disqualify an applicant from
inclusion on the public arbitrator roster.\8\
---------------------------------------------------------------------------

    \7\ See FINRA Rules 12100(r) and 13100(r).
    \8\ See FINRA Rules 12100(y) and 13100(x).
---------------------------------------------------------------------------

    In 2015, the Commission approved amendments to the definitions of
non-public arbitrator and public arbitrator in the Codes (``2015
amendments'').\9\ Among other things, the 2015 amendments: (i) Provided
that persons who worked in the financial industry for any duration
during their careers would always be classified as non-public
arbitrators; (ii) added new disqualifications to the public arbitrator
definition relating to an arbitrator's provision of services to parties
in securities arbitration and litigation and to revenues earned from
the financial industry by an arbitrator's co-workers; and (iii)
broadened the disqualifications to the public arbitrator definition
based on the activities or affiliations of an arbitrator's family
members.\10\
---------------------------------------------------------------------------

    \9\ See Exchange Act Rel. No. 74383 (Feb. 26, 2015), 80 FR 11695
(Mar. 4, 2015) (File No. SR-FINRA-2014-028) (``2015 Order'').
    \10\ See id. (stating that ``the intent of the proposed rule
change was to address concerns about arbitrator neutrality raised by
forum users'').
---------------------------------------------------------------------------

    Under the definitions as revised by the 2015 amendments, the non-
public arbitrator roster is composed of individuals who work, or
worked, in the financial industry, or provide services to the financial
industry or to parties engaged in securities arbitration and
litigation. The public arbitrator roster is composed of individuals who
do not have any significant affiliation with the financial industry.
The public arbitrators have never been employed by the financial
industry, do not provide services to the financial industry or to
parties engaged in securities arbitration and litigation, and do not
have immediate family members or co-workers who do so.\11\
---------------------------------------------------------------------------

    \11\ See 2015 Order.
---------------------------------------------------------------------------

    However, FINRA believes that the 2015 amendments to the arbitrator
definitions also created an ``eligibility gap'' whereby certain
otherwise qualified arbitrators \12\ could not serve in any capacity.
For example, FINRA states that over 800 public arbitrators were
disqualified from the public arbitrator roster under the revised public
arbitrator definition. More than 100 of these disqualified arbitrators
did not meet any of the criteria outlined in the non-public arbitrator
definition for service on the non-public arbitrator roster.
Accordingly, FINRA completely removed them from its arbitrator
rosters.\13\ In addition, FINRA stated that due to the 2015 amendments
it had to reject over 140 arbitrator applicants in 2016 who otherwise
met FINRA's minimum arbitrator qualifications.\14\
---------------------------------------------------------------------------

    \12\ Unless waived by FINRA at its discretion, arbitrator
applicants must have a minimum of five years of paid business and/or
professional experience and at least two years of college-level
credits. Qualification criteria can be found at http://www.finra.org/arbitration-and-mediation/finra-arbitrators. See
Notice, 82 FR at note 6.
    \13\ See Notice, 82 FR at 35249.
    \14\ Id.
---------------------------------------------------------------------------

    Therefore, FINRA is proposing to amend Rules 12100(r) in the
Customer Code and 13100(r) in the Industry Code to delete the specific
criteria for inclusion on the non-public arbitrator roster.
Specifically, the proposed rule would provide that the term ``non-
public arbitrator'' means a person who is otherwise qualified to serve
as an arbitrator, and is disqualified from service as a public
arbitrator. Accordingly, the proposed rule change would allow FINRA to
appoint individuals who cannot be classified as public arbitrators to
the non-public arbitrator roster if they meet FINRA's general
arbitrator qualification criteria.\15\
---------------------------------------------------------------------------

    \15\ Id.
---------------------------------------------------------------------------

III. Comment Summary

    As noted above, the Commission received four comment letters on the
proposed rule change, all of which supported the proposal.\16\ All four
commenters believe that the proposal would expand the pool of
arbitrators and provide greater choice of non-public arbitrators for
parties during the panel selection process.\17\ One

commenter stated that the proposal represents ``a fair, equitable and
reasonable approach that would facilitate the fairness and efficiency
of the participant experience in the FINRA arbitration forum.'' \18\
Another commenter stated that expanding the pool of available
arbitrators ``translates to greater party control over the process,
[which] increases parties['] perceptions of the fairness of the
forum.'' \19\ Similarly, another commenter stated that ``having as many
qualified, fair, and neutral arbitrators as possible will help advance
the integrity of the arbitration process.'' \20\
---------------------------------------------------------------------------

    \16\ See supra note 4.
    \17\ Id.
    \18\ Caruso Letter.
    \19\ Pace Letter.
    \20\ PIABA Letter.
---------------------------------------------------------------------------

    In addition to supporting the proposed rule change, two of these
commenters also recommended additional changes to the FINRA arbitration
forum designed to ``ensure a fair and efficient arbitration pool.''
\21\
---------------------------------------------------------------------------

    \21\ PIABA Letter; see also Pace Letter.
---------------------------------------------------------------------------

    One commenter recommended that FINRA consider simplifying the
definition of ``public arbitrator'' \22\ in the Codes, which the
commenter thinks is ``also too complicated.'' \23\ In its response,
FINRA stated that in 2016 it did reconsider its definition of ``public
arbitrator'' in the Codes but determined not to change it.\24\
---------------------------------------------------------------------------

    \22\ See supra note 8.
    \23\ Pace Letter.
    \24\ See FINRA Letter; see also Notice at 82 FR 35249 (stating
that the intent of the proposed rule change was to address concerns
about arbitrator neutrality raised by forum users. For example,
``prior to the 2015 amendments, the Codes, with specified
exceptions, permitted former financial industry employees who ended
their industry affiliations to qualify as public arbitrators five
years after leaving the financial industry. Forum users raised
concerns about the neutrality of these individuals, and indicated
that they did not believe former industry employees should ever
serve as public arbitrators. In response to these concerns, the 2015
amendments eliminated the five-year cooling-off period, thereby
classifying all former financial industry employees as non-public
arbitrators'').
---------------------------------------------------------------------------

    The second commenter recommended that FINRA amend its policies to
lower or eliminate certain educational requirements for individuals to
become arbitrators.\25\ Currently, unless waived, by FINRA, arbitrators
must have at least two years of college-level credits in order to
become an arbitrator.\26\ The commenter believes that ``[w]hether
someone has taken college-level courses does not necessarily mean that
such person cannot grasp the concepts being discussed and considered
during the arbitration process.'' \27\ Alternatively, the commenter
thinks that one's ability to understand and pass FINRA's arbitrator
training course is sufficient to qualify as an arbitrator.\28\ In its
response, FINRA highlighted that it has authority to waive the
educational requirement in light of, for example, a candidate's number
of years of employment and type of employment (e.g., his or her field
of employment and his or her positions held). Notwithstanding its
discretion to waive the education requirement, FINRA consulted the
subcommittee responsible for reviewing the arbitrator application \29\
on the commenter's recommendation for its input.\30\ Based on these
factors, FINRA did not agree to revise the proposal at this time.\31\
---------------------------------------------------------------------------

    \25\ See PIABA Letter.
    \26\ See supra note 12.
    \27\ PIABA Letter.
    \28\ See id.
    \29\ The Neutral Roster Subcommittee of the National Arbitration
and Mediation Committee.
    \30\ See FINRA Letter.
    \31\ Id.
---------------------------------------------------------------------------

    The second commenter also recommended that FINRA continue its
efforts to address arbitrator demographic issues.\32\ In particular,
the commenter recommended that FINRA continue recruiting new
arbitrators to ``help increase the diversity of the pool.'' \33\
Similarly, this commenter recommended that FINRA continue recruiting
public arbitrators in small and mid-sized cities in order to expand the
pool of public arbitrators from which parties in these areas of the
country can make their selections.\34\ The commenter stated that ``many
constituents of FINRA arbitration . . . have had concerns about the
number of . . . arbitrators who are selected to serve in the arbitrator
pool outside of their nearest arbitrator site[.]'' \35\ The commenter
claims that these ``traveling arbitrators'' create scheduling issues
that delay the arbitration process and ``may not understand a
neighboring state's laws and procedures as much as a local
arbitrator.'' \36\
---------------------------------------------------------------------------

    \32\ See PIABA Letter.
    \33\ PIABA Letter.
    \34\ See PIABA Letter.
    \35\ PIABA Letter.
    \36\ Id.
---------------------------------------------------------------------------

    In its response, FINRA stated that it ``has been actively
recruiting new arbitrators, [especially in] locations with the greatest
need.'' \37\ FINRA also agreed, however, that it should ``continue [its
efforts] to increase its public arbitrator pool.'' \38\ In this regard,
FINRA identified its recruiting methods, including, among other things,
starting a program in which current FINRA arbitrators actively recruit
arbitrator candidates, hiring national recruiters, utilizing social
media platforms to circulate formal recruitment videos, focusing
recruitment efforts in locations where public arbitrators are most
needed, and targeting organizations to improve the diversity of its
pool, such as women-focused groups and LGBTQ communities.\39\ As a
result of these methods, FINRA identified the improvements in
recruiting that it has made since the 2015 amendment, including
increasing the total number of public arbitrators and increasing both
the percentage of new arbitrators who are women and the percentage of
new applicants who are African-American.\40\
---------------------------------------------------------------------------

    \37\ FINRA Letter.
    \38\ Id.
    \39\ See FINRA Letter.
    \40\ See FINRA Letter (stating that ``[FINRA r]ecruitment
efforts since July 2015 added approximately 596 arbitrators to the
public arbitrator roster. . . . FINRA's latest arbitrator
demographic survey . . . showed that FINRA had particular success in
adding women and African-Americans to the roster. In 2016, 33
percent of the arbitrators added were women and 14 percent were
African-American. This represents an important improvement from the
2015 survey results which showed that 26 percent of arbitrators
added were women and four percent were African-American'').
---------------------------------------------------------------------------

    FINRA also stated, however, that notwithstanding its efforts to
minimize the commenter's concerns about ``traveling arbitrators,''
FINRA uses arbitrators in neighboring hearing locations to expand
arbitrator pools in other locations, as needed. FINRA believes that
this option is necessary to ``ensure an effective ratio of available
arbitrators to open cases in each location.'' \41\
---------------------------------------------------------------------------

    \41\ FINRA Letter at note 2.
---------------------------------------------------------------------------

IV. Discussion and Commission Findings

    After careful review of the proposed rule change, the comment
letters, and FINRA's response, the Commission finds that the proposal
is consistent with the requirements of the Exchange Act and the rules
and regulations thereunder that are applicable to a national securities
association.\42\ Specifically, the Commission finds that the proposed
rule change is consistent with Section 15A(b)(6) of the Exchange
Act,\43\ which requires, among other things, that FINRA rules be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, and, in general, to
protect investors and the public interest.
---------------------------------------------------------------------------

    \42\ In approving this rule change, the Commission has
considered the rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
    \43\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

    The Commission agrees with FINRA that amending the definition of
public arbitrator as proposed would provide greater choice for parties
to an arbitration to choose a panel. As stated in the Notice, the 2015
amendments to

the definitions of public and non-public arbitrators disqualified over
100 existing arbitrators from service at the FINRA forum and caused
FINRA to reject over 140 prospective arbitrators in 2016.\44\ FINRA
stated that the disqualified arbitrators and rejected applicants would
otherwise have met FINRA's minimum arbitrator qualifications.\45\ The
Commission agrees with FINRA and the commenters that the proposal
amending the definition of non-public arbitrator would permit FINRA to
admit these otherwise qualified individuals to its roster of
arbitrators thus expanding parties' choice or arbitrators.\46\
---------------------------------------------------------------------------

    \44\ See supra notes 13 and 14.
    \45\ Id.
    \46\ See Caruso Letter, Gitomer Letter, Pace Letter, PIABA
Letter, and FINRA Letter.
---------------------------------------------------------------------------

    In addition, the Commission agrees with FINRA that the proposed
rule change will not result in any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Exchange
Act. In the Notice, FINRA stated that it proposed the 2015 amendments
to remove certain individuals from the public arbitrator roster and not
to prevent these individuals from serving in any capacity. As stated
above, however, the 2015 amendments resulted in the exclusion of
formerly qualified arbitrators and prospective arbitrators from the
FINRA roster entirely. The proposed rule change would permit these
previously eligible persons to again serve as non-public arbitrators.
The Commission agrees with FINRA's conclusion that increasing the
number of qualified arbitrators benefits all parties who come before
the forum because it ``may reduce costs that arise due to an
insufficient pool of qualified arbitrators such as the costs associated
with arbitrators traveling from other hearing locations.'' \47\ The
Commission also believes that ``the proposal would impose no direct or
indirect costs on persons previously eliminated from acting as
arbitrators, new candidates for arbitrator, or parties accessing the
forum'' \48\ because previously eliminated arbitrators will be
reinstated \49\ and any prospective applicant must invest the same cost
to apply to be an arbitrator notwithstanding the definitions of public
and non-public arbitrator.
---------------------------------------------------------------------------

    \47\ Notice, 82 FR at 35249-35250; see Caruso Letter, Gitomer
Letter, Pace Letter, and PIABA Letter.
    \48\ Notice, 82 FR at 35250.
    \49\ Telephone conversation between Kenneth L. Andrichik, Senior
Vice President, FINRA Office of Dispute Resolution, and Daniel
Fisher, Branch Chief, Division of Trading and Markets, Commission,
on September 8, 2017.
---------------------------------------------------------------------------

    To note, the Commission additionally recognizes that the FINRA
Dispute Resolution Task Force (``Task Force'') recommended that FINRA
``monitor the application of the [2015 amended definitions of public
and non-public arbitrators] in light of concerns that individuals with
substantial process and subject matter expertise are stricken from the
list of public arbitrators.'' \50\ The proposed rule change responds to
the Task Force's concerns.\51\
---------------------------------------------------------------------------

    \50\ FINRA Dispute Resolution Task Force, Final Report and
Recommendations of the FINRA Dispute Resolution Task Force (dated
December 16, 2015) at page 17, available at http://www.finra.org/sites/default/files/Final-DR-task-force-report.pdf (``Task Force
Report'').
     In July 2014, FINRA formed the Task Force to ``suggest
strategies to enhance the transparency, impartiality, and efficiency
of FINRA's securities dispute resolution forum for all
participants.'' FINRA News Release, FINRA Announces Arbitration Task
Force (dated July 17, 2014), available at http://www.finra.org/newsroom/2014/finra-announces-arbitration-task-force.
    \51\ See Status Report on FINRA Dispute Resolution Task Force
Recommendations (dated February 8, 2017) at page 2, available at
https://www.finra.org/sites/default/files/DR_task_report_status_020817.pdf.
---------------------------------------------------------------------------

    The Commission also acknowledges that the commenters' unanimously
supported the proposal \52\ and recognizes commenters' recommendations
to make additional changes to the FINRA arbitration forum designed to
``ensure a fair and efficient arbitration pool.'' \53\ However, those
recommendations are outside the scope of this proposal.
---------------------------------------------------------------------------

    \52\ See supra note 4.
    \53\ PIABA Letter; see Pace Letter.
---------------------------------------------------------------------------

    With regard to one commenter's suggestion that FINRA also simplify
the definition of public arbitrator,\54\ the Commission acknowledges
FINRA's response that it weighed, and decided against, amending the
public arbitrator definition so soon after amending it in 2015.\55\
---------------------------------------------------------------------------

    \54\ See Pace Letter.
    \55\ See FINRA Letter.
---------------------------------------------------------------------------

    With regard to another commenter's recommendations to amend FINRA
policies to lower or eliminate its educational requirements for
individuals to become arbitrators, the Commission acknowledges an
individual's educational history is not necessarily determinative of
his or her ability to serve as an arbitrator.\56\ However, the
Commission also acknowledges that while the existing educational
requirement sets a presumptive minimum threshold that may exclude
otherwise appropriate candidates, FINRA has the authority to waive the
requirement based on a candidate's overall experience.\57\ The
Commission believes that FINRA's policies setting the minimum
credentials for its arbitrators along with FINRA's authority to waive
those minimums appropriately balance FINRA's interest in recruiting
arbitrators while maintaining the integrity of its arbitration forum.
---------------------------------------------------------------------------

    \56\ See PIABA Letter.
    \57\ See supra note 12; see also FINRA Letter.
---------------------------------------------------------------------------

    The Commission also acknowledges this commenter's request for FINRA
to recruit new arbitrators to expand the pool of public arbitrators in
small and mid-sized cities from which parties can make their
selections.\58\ In particular, the Commission acknowledges the
commenter's concern that selecting arbitrators to serve in an
arbitrator pool outside of their nearest arbitrator site can create
scheduling issues that delay the arbitration process.\59\ The
Commission also acknowledges, however, the ongoing recruitment efforts
that FINRA has established and continues to employ in order to achieve
this goal. In particular, the Commission notes FINRA's efforts to
actively recruit new arbitrators in ``locations with the greatest
need.'' \60\ For example, FINRA cites its 2017 recruitment efforts in
Birmingham, Phoenix, Orlando, Las Vegas, Portland, Philadelphia, and
Dallas--``smaller locations where public arbitrators are most needed.''
\61\
---------------------------------------------------------------------------

    \58\ See PIABA Letter.
    \59\ Id.
    \60\ FINRA Letter.
    \61\ Id.
---------------------------------------------------------------------------

    In addition, the Commission acknowledges the commenter's
recommendation that FINRA continue its efforts to recruit new
arbitrators in general to create a more diverse overall pool of
arbitrators.\62\ The Commission also acknowledges the steps that FINRA
has taken to help meet this goal. For instance, FINRA stated that it
has started a program in which current FINRA arbitrators actively
recruit arbitrator candidates, hired national recruiters, and utilized
social media platforms to circulate formal recruitment videos.\63\ In
addition, FINRA stated that it has focused its recruitment efforts on
demographics that are less represented in the current arbitrator pool,
targeting women-focused groups and LGBTQ communities.\64\ Moreover, the
Commission acknowledges the advances that FINRA has made in improving
the diversity of its arbitrator pool.\65\ In its response, FINRA
identified the improvements in recruiting that it has made since the
2015 amendments, including increasing the total number of public
arbitrators and increasing the

percentage of new arbitrators who are women and the percentage of new
arbitrators who are African-Americans.\66\
---------------------------------------------------------------------------

    \62\ See PIABA Letter.
    \63\ See FINRA Letter.
    \64\ Id.
    \65\ Id.
    \66\ Id.
---------------------------------------------------------------------------

    Taking into consideration the comments and FINRA's responses, the
Commission believes that the proposal is consistent with the Exchange
Act. The Commission believes that the proposal will help protect
investors and the public interest by, among other things, increasing
the size and diversity of the FINRA arbitrator pool from which parties
can select a panel. The Commission believes that expanding investor
choice in the arbitrator selection process improves efficiency and
enhances the integrity of the forum. In addition, the Commission
believes that FINRA's response to commenters, as discussed in more
detail above, appropriately addressed their concerns and adequately
explained FINRA's reasons for declining to modify its proposal.
Accordingly, the Commission believes that the approach proposed by
FINRA is appropriate and designed to protect investors and the public
interest, consistent with Section 15A(b)(6) of the Exchange Act and the
rules and regulations thereunder.

V. Conclusion

    It is therefore ordered pursuant to Section 19(b)(2) of the
Exchange Act \67\ that the proposal (SR-FINRA-2017-025), be and hereby
is approved.
---------------------------------------------------------------------------

    \67\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\68\
---------------------------------------------------------------------------

    \68\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-19582 Filed 9-14-17; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 88, Number 242 (Tuesday, December 19, 2023)]
[Notices]
[Pages 87789-87790]
[FR Doc No: 2023-27816]

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

DEPARTMENT OF HOMELAND SECURITY

Coast Guard

[Docket Number: USCG-2023-0922]

Designation of the New England Commission of Higher Education as
a Designated Entity and Appointment of Dr. Amy Donahue as a Member of
the Commission

AGENCY: Coast Guard, Department of Homeland Security (DHS).

ACTION: Notice.

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

SUMMARY: The Coast Guard announces the designation of the New England
Commission of Higher Education (NECHE) as a designated non-federal
entity for the purposes of participation in its management by an
authorized Coast Guard employee. Dr. Amy Donahue, the Provost of the
Coast Guard Academy, has been authorizated to serve as a member of
NECHE to provide oversight of, advice to, and coordination with, NECHE.
Dr. Donahue will not participate in the day-to-day operations of NECHE.

DATES: The designation and authorization are effective on November 21,
2023.

ADDRESSES: To view documents mentioned in this preamble as being
available in the docket, go to https://www.regulations.gov, type USCG-
2023-0922 in the search box and click ``Search.'' Next, in the Document
Type column, select ``Supporting & Related Material.''

FOR FURTHER INFORMATION CONTACT: If you have questions on this notice,
call or email Comamnder Jeffrey G. Janaro, Coast Guard Academy,
telephone<PHONE_NUMBER>, email [email protected].

SUPPLEMENTARY INFORMATION: The Coast Guard announces the designation of
the New England Commission of Higher Education (NECHE) as a
``designated entity'' under 10 U.S.C. 1589 and 1033. The Coast Guard
also announces the participation of the Coast Guard Academy Provost Dr.
Amy Donhue in the management of the entity as a Commisioner. Sections
1589 and 1033 allow the Secretary of the Department of Homeland
Security to specify certain non-federal entities as ``designated
entities'' in which a member of the armed forces or a civilian employee
may be authorized to participate in a specific capacity. The Secretary
delegated this authority to the Commandant of the Coast Guard through
the Department of Homeland Security Delegation No. 00170.1, Revision
No. 01.3 (paragraph II.14).
    A ``designated entity'' must meet the requirements of 10 U.S.C.
1033. In relevant part, section 1033 requires an entity to be a non-
profit oganization and perform one of the statutorily enumerated
functions, including accreditation of service academies and other
schools of the armed forces. NECHE is a voluntary non-government
association that provides accreditation to the U.S. Coast Guard
Academy. Therefore, NECHE is an entity that may be designated under 10
U.S.C. 1033 and, in turn, 10 U.S.C. 1589.
    Section 1589 also allows the Secretary concerned to authorize an
employee, including a civilian officer, to participate, without
compensation, in the managemenent of a designated entity for the
purposes of oversight, advice to, and coordination with that designated
entity. An employee's participation may not extend to the day to day
operations of the entity. The Coast Guard Academy announces the
authorization of Dr. Amy Donahue, the Provost of the Coast Guard
Academy, to participate in the management of NECHE within limits of 10
U.S.C. 1033 and 10 U.S.C. 1589. Specifically, and in

accordance with 10 U.S.C. 1589, Dr. Donahue will serve in her official
capacity, and without additional compensation, provide oversight,
advice, and coordination with NECHE. Dr. Donahue's participation will
not, however, extend to participation in the day-to-day operations of
the NECHE.
    The effective date of NECHE's designation and Dr. Donahue's
authorization is November 21, 2023. This notice is issued under the
authority in 10 U.S.C. 1033(c) and 1589(c).

E.J. Van Camp,
Captain, U.S. Coast Guard, Assistant Superintendent, U.S. Coast Guard
Academy.
[FR Doc. 2023-27816 Filed 12-18-23; 8:45 am]
BILLING CODE 9110-04-P


[Federal Register Volume 81, Number 251 (Friday, December 30, 2016)]
[Notices]
[Pages 96565-96566]
[FR Doc No: 2016-31701]

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

DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration

[Docket No. FMCSA-2016-0293]

Agency Information Collection Activities; Renewal of an Approved
Information Collection: Financial Responsibility--Motor Carriers,
Freight Forwarders, and Brokers

AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT.

ACTION: Notice and request for comments.

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

SUMMARY: In accordance with the Paperwork Reduction Act of 1995, FMCSA
announces its plan to submit the Information Collection Request (ICR)
described below to the Office of Management and Budget (OMB) for its
review and approval and invites public comment. The FMCSA requests
approval to extend an ICR titled, ``Financial Responsibility--Motor
Carriers, Freight Forwarders, and Brokers,'' which is used to provide
registered motor carriers, property brokers, and freight forwarders a
means of meeting financial responsibility filing requirements. This ICR
sets forth the financial responsibility documentation requirements for
motor carriers, freight forwarders, and brokers that arise as a result
of the Agency's jurisdictional statutes at 49 U.S.C. 13501 and 13531.
The Agency is revising this ICR due to the implementation of a Final
Rule entitled ``Unified Registration System'' (78 FR 52608, August 23,
2013) that extended the financial responsibility filing requirement to
exempt for-hire motor carriers and private interstate motor carriers of
hazardous materials.

DATES: We must receive your comments on or before February 28, 2017.

ADDRESSES: You may submit comments identified by Federal Docket
Management System (FDMS) Docket Number FMCSA-2016-0293 using any of the
following methods:
     Federal eRulemaking Portal: http://www.regulations.gov.
Follow the online instructions for submitting comments.
     Fax: 1-202-493-2251.
     Mail: Docket Operations; U.S. Department of
Transportation, 1200 New Jersey Avenue SE., West Building, Ground
Floor, Room W12-140, Washington, DC 20590-0001.
     Hand Delivery or Courier: U.S. Department of
Transportation, 1200 New Jersey Avenue SE., West Building, Ground
Floor, Room W12-140, Washington, DC, 20590-0001 between 9 a.m. and 5
p.m. e.t., Monday through Friday, except Federal holidays.
    Instructions: All submissions must include the Agency name and
docket number. For detailed instructions on submitting comments, see
the Public Participation heading below. Note that all comments received
will be posted without change to http://www.regulations.gov, including
any personal information provided. Please see the Privacy Act heading
below.
    Docket: For access to the docket to read background documents or
comments received, go to http://www.regulations.gov, and follow the
online instructions for accessing the dockets, or go to the street
address listed above.
    Privacy Act: Anyone is able to search the electronic form of all
comments received into any of our dockets by the name of the individual
submitting the comment (or signing the comment, if submitted on behalf
of an association, business, labor union, etc.). You may review DOT's
complete Privacy Act Statement for the Federal Docket Management System
published in the Federal Register on January 17, 2008 (73 FR 3316), or
you may visit http://edocket.access.gpo.gov/2008/pdfE8-794.pdf.
    Public Participation: The Federal eRulemaking Portal is available
24 hours each day, 365 days each year. You can obtain electronic
submission and retrieval help and guidelines under the ``help'' section
of the Federal eRulemaking Portal Web site. If you want us to notify
you that we received your comments, please include a self-addressed,
stamped envelope or postcard, or print the acknowledgement page that
appears after submitting comments online. Comments received after the
comment closing date will be included in the docket and will be
considered to the extent practicable.

FOR FURTHER INFORMATION CONTACT: Ms. Tura Gatling, Office of
Registration and Safety Information, Department of Transportation,
Federal Motor Carrier Safety Administration, 1200 New Jersey Avenue
SE., Washington, DC 20590-0001. Telephone Number:<PHONE_NUMBER>; Email
Address<EMAIL_ADDRESS>Office hours are from 8:00 a.m. to 5:00
p.m., E.T., Monday through Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION: The Secretary of Transportation (Secretary)
is authorized to register for-hire motor carriers of property and
passengers under the provisions of 49 U.S.C. 13902, surface freight
forwarders under the provisions of 49 U.S.C. 13903, and property
brokers under the provisions of 49 U.S.C. 13904. These persons may
conduct transportation services only if they are registered pursuant to
49 U.S.C. 13901. The Secretary has delegated authority pertaining to
these registration requirements to the FMCSA. The registration remains
valid only as long as these transportation entities maintain, on file
with the FMCSA, evidence of the required levels of financial
responsibility pursuant to 49 U.S.C. 13906. FMCSA regulations governing
the financial responsibility requirements for these entities are found
at 49 CFR part 387. The information collected from these forms are
summarized and displayed in the Licensing and Information system.

Forms for Endorsements, Certificates of Insurance and Other Evidence of
Bodily Injury and Property Damage (BI&PD) Liability and Cargo Liability
Financial Responsibility

    Forms BMC-91 and BMC-91X, entitled ``Motor Carrier Automobile
Bodily Injury and Property Damage Liability Certificate of Insurance,''
and Form BMC-82, entitled ``Motor Carrier Bodily Injury Liability and
Property Damage Liability Surety Bond Under 49 U.S.C. 13906,'' provide
evidence of the required coverage for bodily injury and property damage
(BI & PD) liability. A Form BMC-91X filing is required when a carrier's
insurance is provided by multiple companies instead of just one. Form
BMC-34, entitled ``Household Goods Motor Carrier Cargo Liability
Certificate of Insurance,'' and Form BMC-83, entitled ``Household Goods
Motor Carrier Cargo Liability Surety Bond Under 49 U.S.C. 13906,''
establish a carrier's compliance with the Agency's cargo liability
requirements. Only household goods (HHG) motor carriers are required to
file evidence of cargo insurance with FMCSA. 49 CFR 387.303(c). Form
BMC-90, entitled ``Endorsement for Motor Carrier Policies of Insurance
for Automobile Bodily Injury and Property Damage Liability Under
Section 13906, Title 49 of the United States Code,'' and Form BMC-32,
entitled ``Endorsement for Motor Common Carrier Policies of Insurance
for Cargo Liability Under 49 U.S.C. 13906,'' are executed by the
insurance company, attached to BI & PD or cargo liability insurance
policy, respectively, and forwarded to the motor carrier or freight
forwarder.

Requirement To Obtain Surety Bond or Trust Fund Agreement

    Form BMC-84, entitled ``Broker's or Freight Forwarder's Surety Bond
Under 49 U.S.C. 13906,'' and Form BMC-85, entitled ``Broker's or
Freight Forwarder's Trust Fund Agreement Under 49 U.S.C. 13906 or
Notice of Cancellation of the Agreement,'' are filed by brokers or
freight forwarders to comply with the requirement that they must have a
$75,000 surety bond or trust fund agreement in effect before FMCSA will
issue property broker or freight forwarder operating authority
registration.

Cancellation of Prior Filings

    Form BMC-35, entitled ``Notice of Cancellation Motor Carrier
Insurance under 49 U.S.C. 13906,'' Form BMC-36, entitled ``Motor
Carrier and Broker's Surety Bonds under 49 U.S.C. 13906 Notice of
Cancellation,'' and Form BMC-85, entitled ``Broker's or Freight
Forwarder's Trust Fund Agreement Under 49 U.S.C. 13906 or Notice of
Cancellation of the Agreement,'' can be used to cancel prior filings.

Self-Insurance

    Motor carriers can also apply to FMCSA to self-insure BI & PD and/
or cargo liability in lieu of filing certificates of insurance with the
FMCSA, as long as the carrier maintains a satisfactory safety rating
(see 49 CFR 387.309.) Form BMC-40 is the application used by carriers
to apply for self-insurance authority.
    Title: Financial Responsibility--Motor Carriers, Freight
Forwarders, and Brokers.
    OMB Control Number: 2126-0017.
    Type of Request: Renewal of a currently approved information
collection.
    Respondents: Motor carriers, freight forwarders, and brokers.
    Estimated Number of Respondents: 183,340.
    Estimated Time per Response: The estimated average burden per
response for Form BMC-40 is 40 hours. The estimated average burden per
response for the remaining insurance forms (BMC-34, 35, 36, 82, 83, 84,
85, 91, and 91X) is 10 minutes per form.
    Expiration Date: February 28, 2017.
    Frequency of Response: Certificates of insurance, surety bonds, and
trust fund agreements are required when the transportation entity first
registers with FMCSA and then when such coverages are changed or
replaced by these entities. Notices of cancellation are required only
when such certificates of insurance, surety bonds, and trust fund
agreements are cancelled. The BMC-40 is filed only when a carrier seeks
approval from FMCSA to self-insure its bodily injury and property
damage (BI & PD) and/or cargo liability coverage.
    Estimated Total Annual Burden: 45,168 hours [2 BMC-40 filings per
year x 40 hours to complete + 270,525 filings per year for all the
other forms x 10 minutes/60 minutes to complete = 45,168].
    Public Comments Invited: You are asked to comment on any aspect of
this information collection, including: (1) Whether the proposed
collection is necessary for the performance of FMCSA's functions; (2)
the accuracy of the estimated burden; (3) ways for FMCSA to enhance the
quality, usefulness, and clarity of the collected information; and (4)
ways that the burden could be minimized without reducing the quality of
the collected information. The agency will summarize or include your
comments in the request for OMB's clearance of this information
collection.

    Issued on: December 23, 2016.
G. Kelly Regal,
Associate Administrator for Office of Research and Information
Technology.
[FR Doc. 2016-31701 Filed 12-29-16; 8:45 am]
BILLING CODE 4910-EX-P


[Federal Register Volume 87, Number 193 (Thursday, October 6, 2022)]
[Notices]
[Pages 60717-60719]
[FR Doc No: 2022-21677]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95961; File No. SR-BOX-2022-19]

Self-Regulatory Organizations; BOX Exchange LLC; Order Approving
a Proposed Rule Change, as Modified by Amendment No. 1, To Amend
Article 4 of the Exchange's Bylaws To Establish a Staggered Board

September 30, 2022.

I. Introduction

    On June 17, 2022, BOX Exchange LLC (``Exchange'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to amend Article 4
of the Exchange's Bylaws (``Bylaws'') to establish a staggered board.
The proposed rule change was published for comment in the Federal
Register on July 6, 2022.\3\ On August 9, 2022, pursuant to Section
19(b)(2) of the Act,\4\ the Commission designated a longer period
within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
disapprove the proposed rule change.\5\ On September 28, 2022, the
Exchange filed Amendment No. 1 to the proposed rule change.\6\ The
Commission received no comments on the proposed rule change. This order
approves the proposed rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 95174 (June 29,
2022), 87 FR 40321 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 95446 (August 9,
2022), 87 FR 50142 (August 15, 2022). The Commission designated
October 4, 2022, as the date by which the Commission shall approve
or disapprove, or institute proceedings to determine whether to
disapprove, the proposed rule change.
    \6\ In Amendment No. 1, the Exchange clarified how the
transition to a staggered board would be implemented. Because
Amendment No. 1 does not materially alter the substance of the
proposed rule change, Amendment No. 1 is not subject to notice and
comment. Amendment No. 1 is available at: https://www.sec.gov/comments/sr-box-2022-19/srbox202219-20144374-309297.pdf (``Amendment
No. 1'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change 7
---------------------------------------------------------------------------

    \7\ For a more complete description of the changes proposed, see
Notice, supra note 3.
---------------------------------------------------------------------------

    The Exchange proposes to amend its Bylaws to establish a staggered
Board. Specifically, the Exchange proposes to amend Section 4.03
(``Term of Directors'') of the Bylaws to provide that Exchange
Directors will be divided into three classes, designated Class I, Class
II and Class III, which will be as nearly equal in number and
classification as the total number of such Directors then serving on
the Board permits. As proposed, each class of Directors will serve
staggered three-year terms, with the term of office of one class
expiring each year.\8\
---------------------------------------------------------------------------

    \8\ Currently, Directors serve one-year terms, and all Directors
are nominated and begin serving each year at the annual meeting of
Members. See Notice, supra note 3, at 40322 n.4.
---------------------------------------------------------------------------

    In order to commence such staggered three-year terms, the Exchange
proposes to amend Section 4.03 of the Bylaws to provide that Class I
Directors will initially serve a one-year term; Class II Directors will
initially serve a two-year term; and Class III Directors will initially
serve a three-year term.\9\ Thereafter, all Directors shall serve
staggered three-year terms, with the term of office of one class
expiring each year.\10\
---------------------------------------------------------------------------

    \9\ According to the Exchange, the 2022 annual meeting of the
Members of the Exchange has not yet occurred. If the proposed rule
change is approved before the 2022 annual meeting of Members, Class
I Directors, Class II Directors and Class III Directors would each
be nominated and selected in 2022 and the initial term of Class I
Directors would end at the 2023 annual meeting of Members, and a new
slate of Class I Directors would be nominated and selected in 2023
in accordance with the Bylaws. See Amendment 1, supra note 6, at 2.
In this circumstance, the term of Class II and Class III directors
would end at the Members annual meeting in 2024 and 2025,
respectively. See id. at 2 n.5.
    \10\ See Amendment 1, supra note 6 at 2.
---------------------------------------------------------------------------

    The Exchange further proposes to amend Section 4.03 of the Bylaws
to provide that, in the case of any new Director as contemplated by
Article IV, Section 4.02, such Director will be added to a class, as
determined by the Board at the time of such Director's initial election
or appointment, and will

have an initial term expiring at the same time as the term of the class
to which such Director has been added. In making such determinations,
the Board will balance the categories of Directors (e.g., Non-Industry,
Public, Participant, and Facility Directors) among the classes to the
extent possible. Pursuant to Section 4.02 of the Bylaws, the total
number of Directors is determined by the Board and must be between five
and eleven directors. Therefore, the Exchange proposes this provision
specify that if a new Director is added to the Board, the term of that
Director will correspond to the class to which that Director is
assigned at the time of election or appointment.\11\ In addition, the
Exchange proposes to amend Section 4.02 of the Bylaws to specify that
no decrease in the number of Directors will have the effect of
shortening the term of any incumbent Director.\12\
---------------------------------------------------------------------------

    \11\ See Notice, supra note 3, at 40322.
    \12\ For example, the Exchange notes that it could not determine
to reduce the size of the Board by eliminating the Director seat for
a Director who had two years of his or her term remaining. See
Notice, supra note 3, at 40322.
---------------------------------------------------------------------------

    The Exchange also proposes to make certain conforming edits to
other provisions of the Bylaws to clarify the responsibilities of the
Board's Nominating Committee and to address Director vacancies that may
arise. For example, the Exchange proposes to amend Section 4.06
(``Nominating Committee'') of the Bylaws to specify that the Board's
Nominating Committee will nominate individuals in advance of each
annual meeting of the Members to begin service as Directors ``for the
applicable class term then expiring (i.e., Class I, Class II or Class
III)'' at such annual meeting of the Members.\13\ The Exchange also
proposes to amend Section 4.06(d) (``Selection of Directors'') of the
Bylaws to provide that, prior to the first annual meeting of the
Members following adoption of the amended Section 4.06(d), each
Director position set forth in Section 4.02 shall be designated, as
determined by the Board, to one of the three classes for nomination by
the Nominating Committee to begin service at such annual meeting.
Thereafter, prior to each annual meeting of the Members, the Nominating
Committee will select nominees for each Director position ``for the
class with its term then expiring'' to begin service as Directors.\14\
Finally, the Exchange proposes to amend Section 4.10 (``Vacancies'') to
provide that a Director who is elected by the Board to fill a vacancy
(e.g., as a result of the death, resignation, removal, or increase in
the authorized number of Directors), will serve for the remainder of
the applicable class term. For example, according to the Exchange, if a
Director in Class II resigns, the Director elected to fill the vacancy
would serve for the remainder of the term of Class II Directors.\15\
---------------------------------------------------------------------------

    \13\ Similarly, the Exchange also proposes to amend the final
sentence of Section 4.06 to specify that at each annual meeting of
the Members, the individuals selected ``for the applicable class
term'' pursuant to Section 4.06 of the Bylaws would begin serving as
Directors. See Notice, supra note 3, at 40322 n.7.
    \14\ The Exchange proposes to amend Section 4.06(d)(i) to
include the same conforming edits to specify that the Nominating
Committee will meet for the purposes of selecting proposed Director
nominees ``for the class then expiring'' and that the Nominating
Committee will provide the names of all proposed Director nominees
``for the class then expiring'' to the Exchange's Secretary not
later than sixty days prior to the date of the annual meeting of the
Members. See Notice, supra note 3, at 40322 n.8.
    \15\ With respect to a vacancy arising from an increase in the
number of authorized Directors, pursuant to proposed Section 4.03 of
the Bylaws, the Director filling such vacancy would be assigned to a
class by the Board and would have an initial term expiring at the
same time as the term of the class to which such Director has been
added. See Notice, supra note 3, at 40322 n.9.
---------------------------------------------------------------------------

    The Exchange notes that it is not proposing any change to the
composition of the Board, such as the requirement that 20% of Directors
must be a Participant Directors or that a majority of Directors must be
Non-Industry Directors.\16\ Further, all nominations and elections of
Directors under the proposed staggered Board structure must be
consistent with the existing composition requirements in the Bylaws and
Directors may continue to serve consecutive terms.\17\
---------------------------------------------------------------------------

    \16\ See Notice, supra note 3, at 40323; Section 4.02 of the
Bylaws.
    \17\ See Notice, supra note 3, at 40323; Section 4.03 of the
Bylaws.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No.1, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\18\ In particular, the
Commission finds that the proposed rule change is consistent with
Section 6(b)(5) of the Act,\19\ which requires, among other things,
that the rules of a national securities exchange be designed 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. The Commission also finds
that the proposed rule change, as amended, is consistent with Section
6(b)(3) of the Exchange Act,\20\ which, among other things, requires
that the rules of a national securities exchange ensure fair
representation of its members in the selection of its directors and
administration of its affairs.
---------------------------------------------------------------------------

    \18\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \19\ 15 U.S.C. 78f(b)(5).
    \20\ 15 U.S.C. 78f(b)(3).
---------------------------------------------------------------------------

    As discussed above, the Exchange proposes to amend its Bylaws to
establish a staggered Board. The Commission believes that, by dividing
Directors into three classes with only one class selected by the
Nominating Committee each year to serve a three-year term, a staggered
Board may improve the function of the Board by ensuring continuity and
preserving institutional knowledge among its Directors. As the Exchange
notes, retaining a majority of the incumbent Directors year-to-year may
facilitate an orderly transition to new leadership. Moreover, according
to the Exchange, the existing composition requirements related to
Directors would remain the same under the proposed rule change and
categories of Directors shall be balanced among the classes. Further,
all Directors would be subject to the same requirements under the
proposed rule change (i.e., all Directors, regardless of type, would be
divided into one of three classes, each serving three-year terms). The
Commission also notes that the proposed staggered Board structure is
substantially similar to the staggered board structures of at least two
exchanges \21\ and therefore poses no novel regulatory issues. Finally,
the Commission believes that the proposed conforming changes to the
Bylaws are consistent with the Act because they serve to clarify the
responsibilities of the Board's Nominating Committee and to address
Director vacancies that may arise.
---------------------------------------------------------------------------

    \21\ See Amended and Restated By-Laws of Miami International
Securities Exchange LLC (``MIAX''), Section 2.3(b) and First Amended
and Restated Bylaws of Long-Term Stock Exchange, Inc. (``LTSE''),
Section 3.3(b). The bylaws of The Options Clearing Corporation
(``OCC''), another self-regulatory organization, also provide for a
similar staggered board consisting of three classes. See OCC By-
Laws, Article III, Section 3.
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\22\ that the proposed rule change (SR-BOX-2022-

19), as modified by Amendment No. 1, be, and hereby is, approved.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-21677 Filed 10-5-22; 8:45 am]
BILLING CODE 8011-01-P