[Federal Register: March 7, 2008 (Volume 73, Number 46)]
[Rules and Regulations]
[Page 12277-12279]
[DOCID:fr07mr08-11]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 271

[EPA-R08-RCRA-2006-0127; FRL-8538-1]

Utah: Final Authorization of State Hazardous Waste Management
Program Revisions

AGENCY: Environmental Protection Agency (EPA).

ACTION: Immediate final rule.

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SUMMARY: The Solid Waste Disposal Act, as amended, commonly referred to
as the Resource Conservation and Recovery Act (RCRA), allows the
Environmental Protection Agency (EPA) to authorize States to operate
their hazardous waste management programs in lieu of the federal
program. Utah has applied to EPA for final authorization of the changes
to its hazardous waste program under RCRA. EPA has determined that
these changes satisfy all requirements needed to qualify for final
authorization and is authorizing the State's changes through this
immediate final action.

DATES: This final authorization will become effective on May 6, 2008,
unless the EPA receives adverse written comment by April 7, 2008. If
adverse comment is received, EPA will publish a timely withdrawal of
the immediate final rule in the Federal Register informing the public
that the rule will not take effect.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R08-
RCRA-2006-0127, by one of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov.
    Follow the on-line instructions for submitting comments.
     E-mail<EMAIL_ADDRESS>     Fax:<PHONE_NUMBER>.
     Mail: Send written comments to Carl Daly, Solid and
Hazardous Waste Program, EPA Region 8, Mailcode 8P-HW, 1595 Wynkoop
Street, Denver, Colorado 80202-1129.
     Hand Delivery or Courier: Deliver your comments to Carl
Daly, Solid and Hazardous Waste Program, EPA Region 8, Mailcode 8P-HW,
1595 Wynkoop Street, Denver, Colorado 80202-1129. Such deliveries are
only accepted during the Regional Office's normal hours of operation.
The public is advised to call in advance to verify the business hours.
Special arrangements should be made for deliveries of boxed
information.
    Instructions: Direct your comments to Docket ID No. EPA-R08-RCRA-
2006-0127. EPA's policy is that all comments received will be included
in the public docket without change, including any personal information
provided, unless the comment includes information claimed to be
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute. Do not submit information that you
consider to be CBI or otherwise protected through http://
www.regulations.gov, or e-mail. The federal Web site, http://
www.regulations.gov, is an ``anonymous access'' system, which means EPA
will not know your identity or contact information unless you provide
it in the body of your comment. If you send an e-mail comment directly
to EPA without going through http://www.regulations.gov, your e-mail
address will be automatically captured and included as part of the
comment that is placed in the public docket and made available on the
Internet. If you submit an electronic comment, EPA recommends that you
include your name and other contact information in the body of your
comment and with any disk or CD-ROM you submit. If EPA cannot read your
comment due to technical difficulties, and cannot contact you for
clarification, EPA may not be able to consider your comment. Electronic
files should avoid the use of special characters or any form of
encryption, and be free of any defects or viruses. For additional
information about EPA's public docket, visit the EPA Docket Center
homepage at http://www.epa.gov/epahome/dockets.htm.
    Docket: All documents in the docket are listed in the http://
www.regulations.gov index. Although listed in the index, some
information may not be publicly available, e.g., CBI or other
information whose disclosure is restricted by statute. Certain other
material, such as copyrighted material, will be publicly available only
in hard copy. Publicly available docket materials are available either
electronically through www.regulations.gov or in hard copy at: EPA
Region 8, from 9 a.m. to 4 p.m., 1595 Wynkoop Street, Denver, Colorado,
contact: Carl Daly, phone number<PHONE_NUMBER>, or the Utah Department
of Environmental Quality (UDEQ), from 8 a.m. to 5 p.m., 288 North 1460
West, Salt Lake City, Utah 84114-4880, contact: Susan Toronto, phone
number<PHONE_NUMBER>. The public is advised to call in advance to
verify the business hours.

FOR FURTHER INFORMATION CONTACT: Carl Daly, Solid and Hazardous Waste
Program, EPA Region 8, 1595 Wynkoop Street, Denver, Colorado 80202,
(303) 312-6416<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

A. Why Are Revisions to State Programs Necessary?

    States which have received final authorization from EPA under RCRA
section 3006(b), 42 U.S.C. 6926(b), must maintain a hazardous waste
program that is equivalent to, consistent with, and no less stringent
than the federal program. As the federal program changes, States must
change their programs and ask EPA to authorize the changes. Changes to
State programs may be necessary when federal or State statutory or
regulatory authority is modified or when certain other changes occur.
Most commonly, States must change their programs because of changes to
EPA's regulations in 40 Code of Federal Regulations (CFR) parts 124,
260 through 266, 268, 270, 273 and 279.

B. What Decisions Have We Made in This Rule?

    We conclude that Utah's application to revise its authorized
program meets all of the statutory and regulatory requirements
established by RCRA. Therefore, we grant Utah final authorization to
operate its hazardous waste program with the changes described in the
authorization application. Utah has responsibility for permitting
Treatment, Storage, and Disposal Facilities (TSDFs) within its borders,
except in Indian country, and for carrying out the aspects of the RCRA
program described in its revised program application, subject to the
limitations of the Hazardous and Solid Waste Amendments of 1984 (HSWA).
New federal requirements and prohibitions imposed by federal
regulations that EPA promulgates under the authority of HSWA take
effect in authorized States before they are authorized for the
requirements. Thus, EPA will implement those requirements and
prohibitions in Utah, including issuing permits, until Utah is
authorized to do so.

C. What Is the Effect of This Authorization Decision?

    This decision means that a facility in Utah subject to RCRA will
now have to comply with the authorized state requirements instead of
the equivalent federal requirements in order to comply with RCRA. Utah
has enforcement responsibilities under its state hazardous waste
program for violations of such program, but EPA retains its authority
under RCRA sections 3007, 3008, 3013, and 7003, which include, among
others, authority to: (1) Conduct

inspections; require monitoring, tests, analyses, or reports; (2)
enforce RCRA requirements; suspend or revoke permits; and, (3) take
enforcement actions regardless of whether Utah has taken its own
actions.
    This action does not impose additional requirements on the
regulated community because the regulations for which Utah is being
authorized by this action are already effective and are not changed by
this action.

D. Why Wasn't There a Proposed Rule Before This Rule?

    EPA did not publish a proposal before this rule because we view
this as a routine program change. We are providing an opportunity for
the public to comment now. In addition to this rule, in the proposed
rules section of today's Federal Register we are publishing a separate
document that proposes to authorize the State program changes.

E. What Happens if EPA Receives Comments That Oppose This Action?

    If EPA receives comments that oppose this authorization, we will
withdraw this rule by publishing a document in the Federal Register
before the rule becomes effective. EPA will base any further decision
on the authorization of the State program changes on the proposal
mentioned in the previous paragraph. We will then address all public
comments in a later final rule. You may not have another opportunity to
comment, therefore, if you want to comment on this authorization, you
must do so at this time.
    If we receive comments that oppose only the authorization of a
particular change to the Utah hazardous waste program, we will withdraw
that part of this rule but the authorization of the program changes
that the comments do not oppose will become effective on the date
specified above. The Federal Register withdrawal document will specify
which part of the authorization will become effective and which part is
being withdrawn.

F. For What Has Utah Previously Been Authorized?

    Utah initially received final authorization on October 10, 1984,
effective October 24, 1984 (49 FR 39683) to implement its base
hazardous waste management program. Utah received authorization for
revisions to its program on February 21, 1989 (54 FR 7417), effective
March 7, 1989; May 23, 1991 (56 FR 23648) and August 6, 1991 (56 FR
37291), both effective July 22, 1991; May 15, 1992 (57 FR 20770),
effective July 14, 1992; February 12, 1993 (58 FR 8232) and May 5, 1993
(58 FR 26689), both effective April 13, 1993; October 14, 1994 (59 FR
52084), effective December 13, 1994; May 20, 1997 (62 FR 27501),
effective July 21, 1997; January 13, 1999 (64 FR 02144), effective
March 15, 1999; October 16, 2000 (65 FR 61109), effective January 16,
2001, May 7, 2002 (67 FR 30599), effective July 7, 2002; and June 11,
2003 (68 FR 34829), effective June 11, 2003.

G. What Changes Are We Authorizing With This Action?

    On September 30, 2003, Utah submitted a complete program revision
application, seeking authorization of their changes in accordance with
40 CFR 271.21. We now make an immediate final decision, subject to
receipt of written comments that oppose this action, that Utah's
hazardous waste program revision satisfies all of the requirements
necessary to qualify for final authorization. Therefore, we grant Utah
final authorization for the following program changes (the federal
citation followed by the analog from the Utah Administrative Code
(R315), revised September 15, 2003): Hazardous Air Pollutant Standards;
Technical Corrections (65 FR 42292, 07/10/00)(Checklist 188), (66 FR
24270, 05/14/01)(Checklist 188.1), and (66 FR 35087, 07/03/
01)(Checklist 188.2)/R315-13-2-26, R315-3-4.3, and R315-8-
15.1(b)(1)&(3); Chlorinated Aliphatics Listing and LDRs for Newly
Identified Wastes (65 FR 67068, 11/08/00)(Checklist 189)/R315-2-10(f),
R315-13-1, R315-50-9, and R315-50-10; Mixture and Derived-From Rules
Revisions (66 FR 27266, 05/16/01)(Checklist 192A)/R315-2-
3(a)(2)(iii)&(iv), R315-2-3(c)(2)(i), R315-2-3(f); Land Disposal
Restrictions Correction (66 FR 27266, 05/16/01)(Checklist 192B)/R315-
13-1; Change of Official EPA Mailing Address (66 FR 34374, 06/28/
01)(Checklist 193)/R315-1-2(a); Mixture and Derived-From Rules Revision
II (66 FR 50332, 10/03/01)(Checklist 194)/R315-2-3(a)(2)(iv) through
(iv)(G); R315-2-3(f)(4); Inorganic Chemical Manufacturing Wastes
Identification and Listing (66 FR 58258, 11/20/01)(Checklist 195)/R315-
2-4(b)(15), R315-2-10(f), R315-13-1; and R315-50-9; CAMU Amendments (67
FR 02962, 01/22/02)(Checklist 196)/R315-1-1(b), and R315-8-21;
Hazardous Air Pollutant Standards for Combustors: Interim Standards (67
FR 06792, 02/13/02)(Checklist 197)/R315-3-2.10(e), R315-3-2.13, R315-3-
6.3, R315-3-6.6, R315-3-9.1(a)&(b), R315-7-22.1(b)(1)&(3), R315-8-
15.1(b)(1)&(4), and R315-14-7; Hazardous Air Pollutant Standards for
Combustors: Corrections (67 FR 06968, 02/14/02)(Checklist 198)/R315-3-
4.3 and R315-14-7; Vacatur of Mineral Processing Spent Materials Being
Reclaimed as Solid Wastes and TCLP Use with MGP waste (67 FR 11251, 03/
13/02)(Checklist 199)/R315-2-2(c)(3), R315-2-4(a)(17), and R315-2-
9(g)(1); Treatment Variance for Radioactively Contaminated Batteries
(67 FR 62618, 10/07/02)(Checklist 201)/R315-13-1.

H. Where Are the Revised State Rules Different From the Federal Rules?

    Utah did not adopt the exclusion for hazardous waste containing
radioactive waste at 40 CFR 261.3(h) in this rulemaking. This makes the
State more stringent. Utah did not change any previously more stringent
or broader-in-scope provisions to be equivalent to the federal rules.

I. Who Handles Permits After the Authorization Takes Effect?

    Utah will issue permits for all the provisions for which it is
authorized and will administer the permits it issues. EPA will continue
to administer any RCRA hazardous waste permits or portions of permits
which were issued prior to the effective date of this authorization
until Utah has equivalent instruments in place. We will not issue any
new permits or new portions of permits for the provisions listed in
section G after the effective date of this authorization. EPA
previously suspended issuance of permits for other provisions on the
effective date of Utah's final authorization for the RCRA base program
and each of the revisions listed in Item F. EPA will continue to
implement and issue permits for HSWA requirements for which Utah is not
yet authorized.

J. How Does Today's Action Affect Indian Country (18 U.S.C. 1151) in
Utah?

    This program revision does not extend to ``Indian country'' as
defined in 18 U.S.C. 1151. Indian country includes:
    1. Lands within the exterior boundaries of the following Indian
reservations located within or abutting the State of Utah:

a. Goshute Indian Reservation
b. Navajo Indian Reservation
c. Northwestern Band of Shoshoni Nation of Utah (Washakie) Indian
Reservation
d. Paiute Indian Tribe of Utah Indian Reservation
e. Skull Valley Band of Goshute Indians of Utah Indian Reservation

f. Uintah and Ouray Indian Reservation (see below)
g. Ute Mountain Indian Reservation;

    2. Any land held in trust by the United States for an Indian tribe;
and,
    3. Any other areas which are ``Indian country'' within the meaning
of 18 U.S.C. 1151.
    With respect to the Uintah and Ouray Indian Reservation, federal
courts have determined that certain lands within the exterior
boundaries of the Reservation do not constitute Indian country. This
State program revision approval will extend to those lands which the
courts have determined are not Indian country.

K. What Is Codification and Is EPA Codifying Utah's Hazardous Waste
Program as Authorized in This Rule?

    Codification is the process of placing a State's statutes and
regulations that comprise the State's authorized hazardous waste
program into the CFR. We do this by referencing the authorized State
rules in 40 CFR part 272. Utah's rules, up to and including those
revised on February 2, 1996, have previously been codified through the
incorporation-by-reference effective March 15, 1999 (66 FR 58964,
November 26, 2001). We reserve the amendment of 40 CFR part 272,
subpart TT for the codification of Utah's updated program until a later
date.

L. Statutory and Executive Order Reviews

    The Office of Management and Budget has exempted this action from
the requirements of Executive Order 12866 (58 FR 51735, October 4,
1993), and therefore this action is not subject to review by OMB. This
action authorizes State requirements for the purpose of RCRA 3006 and
imposes no additional requirements beyond those imposed by state law.
Accordingly, I certify that this action will not have a significant
economic impact on a substantial number of small entities under the
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Because this action
authorizes pre-existing requirements under state law and does not
impose any additional enforceable duty beyond that required by state
law, it does not contain any unfunded mandate or significantly or
uniquely affect small governments, as described in the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4). For the same reason, this
action also does not significantly or uniquely affect the communities
of Tribal governments, as specified by Executive Order 13175 (65 FR
67249, November 9, 2000). This action will not have substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government, as specified
in Executive Order 13132 (64 FR 43255, August 10, 1999), because it
merely authorizes state requirements as part of the State RCRA
hazardous waste program without altering the relationship or the
distribution of power and responsibilities established by RCRA. This
action also is not subject to Executive Order 13045 (62 FR 19885, April
23, 1997), because it is not economically significant and it does not
make decisions based on environmental health or safety risks. This rule
is not subject to Executive Order 13211, ``Actions Concerning
Regulations That Significantly Affect Energy Supply, Distribution, or
Use'' (66 FR 28355, May 22, 2001), because it is not a significant
regulatory action under Executive Order 12866.
    Under RCRA 3006(b), EPA grants a State's application for
authorization as long as the State meets the criteria required by RCRA.
It would thus be inconsistent with applicable law for EPA, when it
reviews a State authorization application, to require the use of any
particular voluntary consensus standard in place of another standard
that otherwise satisfies the requirements of RCRA. Thus, the
requirements of section 12(d) of the National Technology Transfer and
Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. As required
by section 3 of Executive Order 12988 (61 FR 4729, February 7, 1996),
in issuing this rule, EPA has taken the necessary steps to eliminate
drafting errors and ambiguity, minimize potential litigation, and
provide a clear legal standard for affected conduct. EPA has complied
with Executive Order 12630 (53 FR 8859, March 15, 1988) by examining
the takings implications of the rule in accordance with the ``Attorney
General's Supplemental Guidelines for the Evaluation of Risk and
Avoidance of Unanticipated Takings'' issued under the executive order.
This rule does not impose an information collection burden under the
provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et
seq.).
    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. EPA will submit a report containing this document and
other required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication in the Federal Register. A major rule cannot take effect
until 60 days after it is published in the Federal Register. This
action is not a ``major rule'' as defined by 5 U.S.C. 804(2). This
action will be effective May 6, 2008.

List of Subjects in 40 CFR Part 271

    Environmental protection, Administrative practice and procedure,
Confidential business information, Hazardous waste, Hazardous waste
transportation, Incorporation-by-Reference, Indian lands,
Intergovernmental relations, Penalties, Reporting and recordkeeping
requirements.

    Authority: This action is issued under the authority of sections
2002(a), 3006 and 7004(b) of the Solid Waste Disposal Act as amended
42 U.S.C. 6912(a), 6926, 6974(b).

    Dated: February 22, 2008.
Robert E. Roberts,
Regional Administrator, Region 8. 1
[FR Doc. E8-4251 Filed 3-6-08; 8:45 am]

BILLING CODE 6560-50-P


[Federal Register Volume 79, Number 246 (Tuesday, December 23, 2014)]
[Rules and Regulations]
[Pages 76880-76888]
[FR Doc No: 2014-29975]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 275

[Release No. IA-3984; File No. S7-23-07]
RIN 3235-AL56

Temporary Rule Regarding Principal Trades With Certain Advisory
Clients

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission is amending rule
206(3)-3T under the Investment Advisers Act of 1940, a temporary rule
that establishes an alternative means for investment advisers that are
registered with the Commission as broker-dealers to meet the
requirements of section 206(3) of the Investment Advisers Act when they
act in a principal capacity in transactions with certain of their
advisory clients. The amendment extends the date on which rule 206(3)-
3T will sunset from December 31, 2014 to December 31, 2016.

DATES: The amendments in this document are effective December 30, 2014
and the expiration date for 17 CFR 275.206(3)-3T is extended to
December 31, 2016.

FOR FURTHER INFORMATION CONTACT: Melissa S. Gainor, Senior Counsel,
Sarah A. Buescher, Branch Chief, or Daniel S. Kahl, Assistant Director,
at<PHONE_NUMBER> or<EMAIL_ADDRESS>Investment Adviser Regulation
Office, Division of Investment Management, U.S. Securities and Exchange
Commission, 100 F Street, NE., Washington, DC 20549-8549.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission is
adopting an amendment to temporary rule 206(3)-3T [17 CFR 275.206(3)-
3T] under the Investment Advisers Act of 1940 [15 U.S.C. 80b] that
extends the date on which the rule will sunset from December 31, 2014
to December 31, 2016.

I. Background

    On September 24, 2007, we adopted, on an interim final basis, rule
206(3)-3T, a temporary rule under the Investment Advisers Act of 1940
(the ``Advisers Act'') that provides an alternative means for
investment advisers that are registered with us as broker-dealers to
meet the requirements of section 206(3) of the Advisers Act when they
act in a principal capacity in transactions with certain of their
advisory clients.\1\ The purpose of the rule was to permit broker-
dealers to sell to their non-discretionary advisory clients, following
the decision in Financial Planning Association v. SEC,\2\ certain
securities held in the proprietary accounts of their firms that might
not be available on an agency basis, or might be available on an agency
basis only on less attractive terms, while protecting clients from
conflicts of interest as a result of such transactions.\3\ In December
2009, we adopted rule 206(3)-3T as a final rule in the same form in
which it was adopted on an interim final basis in 2007, except that we
extended the rule's sunset date by one year to December 31, 2010.\4\ We
deferred final action on rule 206(3)-3T in December 2009 because we
needed additional time to understand how, and in what situations, the
rule was being used.\5\ In both December 2010 and December 2012, we
further extended the rule's sunset date, in each case for an additional
two-year period.\6\ We deferred final action on rule 206(3)-3T in 2010
in order to complete a study required by section 913 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (the ``Dodd-Frank
Act'').\7\ In 2012, we deferred final action on rule 206(3)-3T to
further consider the findings, conclusions, and recommendations of the
913 Study and the comments we had received from interested parties.\8\
In connection with each extension, we noted that our consideration of
the regulatory requirements applicable to broker-dealers and investment
advisers was ongoing and that an extension would allow the Commission
to consider more broadly the regulatory requirements applicable to
broker-dealers and investment advisers, including whether rule 206(3)-
3T should be substantively modified, supplanted, or permitted to
sunset.\9\
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    \1\ Rule 206(3)-3T [17 CFR 275.206(3)-3T]. All references to
rule 206(3)-3T and the various sections thereof in this release are
to 17 CFR 275.206(3)-3T and its corresponding sections. See also
Temporary Rule Regarding Principal Trades with Certain Advisory
Clients, Investment Advisers Act Release No. 2653 (Sep. 24, 2007)
[72 FR 55022 (Sep. 28, 2007)] (``2007 Principal Trade Rule
Release'').
    \2\ 482 F.3d 481 (D.C. Cir. 2007) (vacating rule 202(a)(11)-1
under the Advisers Act).
    \3\ See 2007 Principal Trade Rule Release, Sections I and VI.C.
    \4\ See Temporary Rule Regarding Principal Trades with Certain
Advisory Clients, Investment Advisers Act Release No. 2965 (Dec. 23,
2009) [74 FR 69009 (Dec. 30, 2009)] (``2009 Extension Release'');
Temporary Rule Regarding Principal Trades with Certain Advisory
Clients, Investment Advisers Act Release No. 2965A (Dec. 31, 2009)
[75 FR 742 (Jan. 6, 2010)] (making a technical correction to the
2009 Extension Release).
    \5\ See 2009 Extension Release, Section II.c.
    \6\ See Temporary Rule Regarding Principal Trades with Certain
Advisory Clients, Investment Advisers Act Release No. 3118 (Dec. 1,
2010) [75 FR 75650 (Dec. 6, 2010)] (proposing a two-year extension
of rule 206(3)-3T's sunset provision) (``2010 Extension Proposing
Release''); Temporary Rule Regarding Principal Trades with Certain
Advisory Clients, Investment Advisers Act Release No. 3128 (Dec. 28,
2010) [75 FR 82236 (Dec. 30, 2010)] (extending rule 206(3)-3T's
sunset provision from December 31, 2010 to December 31, 2012)
(``2010 Extension Release''); Temporary Rule Regarding Principal
Trades with Certain Advisory Clients, Investment Advisers Act
Release No. 3483 (Oct. 9, 2012) [77 FR 62185 (Oct. 12, 2012)]
(proposing a two-year extension of rule 206(3)-3T's sunset
provision); Temporary Rule Regarding Principal Trades with Certain
Advisory Clients, Investment Advisers Act Release No. 3522 (Dec. 20,
2012) [77 FR 76854 (Dec. 31, 2012)] (extending rule 206(3)-3T's
sunset provision from December 31, 2012 to December 31, 2014)
(``2012 Extension Release'').
    \7\ Public Law 111-203, 124 Stat. 1376 (2010). Under section 913
of the Dodd-Frank Act, we were required to conduct a study and
provide a report to Congress concerning the obligations of broker-
dealers and investment advisers, including standards of care
applicable to those intermediaries and their associated persons.
Section 913 also authorizes us to promulgate rules concerning the
legal or regulatory standards of care for broker-dealers, investment
advisers, and persons associated with these intermediaries for
providing personalized investment advice about securities to retail
customers, taking into account the findings, conclusions, and
recommendations of the study.
    The study mandated by section 913 of the Dodd-Frank Act was
prepared by the staff and delivered to Congress on January 21, 2011.
See Study on Investment Advisers and Broker-Dealers (``913 Study'')
(Jan. 21, 2011), available at http://www.sec.gov/news/studies/2011/913studyfinal.pdf. For a discussion regarding principal trading, see
section IV.C.1.(b) of the 913 Study. See also Commissioners Kathleen
L. Casey and Troy A. Paredes, Statement by SEC Commissioners:
Statement Regarding Study on Investment Advisers and Broker-Dealers
(Jan. 21, 2011), available at http://www.sec.gov/news/speech/2011/spch012211klctap.htm (opposing the release of the 913 Study to
Congress and stating that more rigorous analysis is required before
the Commission engages in any follow-on rulemaking).
    \8\ See 2012 Extension Release, Section II.
    \9\ See id.; 2010 Extension Release, Section II.

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    We have continued to consider the regulatory requirements
applicable to broker-dealers and investment advisers. In 2013, we
issued a request for data and other information, including quantitative
data and economic analysis, relating to the benefits and costs that
could result from alternative approaches regarding the standards of
conduct and other obligations of broker-dealers and investment
advisers.\10\ The staff has received over 200 comment letters in
response to the Request, several of which discussed rule 206(3)-3T, and
Commissioners and the staff have held numerous meetings with interested
parties.\11\
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    \10\ Duties of Brokers, Dealers, and Investment Advisers,
Investment Advisers Act Release No. 3558 (Mar. 1, 2013) [78 FR 14848
(Mar. 7, 2013)] (the ``Request'').
    \11\ See Comments on Study Regarding Obligations of Brokers,
Dealers, and Investment Advisers, File No. 4-606, available at
http://sec.gov/comments/4-606/4-606.shtml. See e.g., Comment Letter
of North American Securities Administrators Association, Inc. (Jul.
5, 2013) (``[T]he Commission should consider SEC Rule 206(3)-3T as
part of future fiduciary standard rulemaking.'').
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    On August 12, 2014, we proposed to extend the date on which rule
206(3)-3T will sunset for a limited amount of time, from December 31,
2014 to December 31, 2016.\12\ We received nine comment letters
addressing our proposal.\13\ Seven of these commenters generally
supported extending rule 206(3)-3T for at least two years,\14\ while
two commenters opposed a two-year extension.\15\ The comments we
received on our proposal are discussed below. After considering each of
the comments, we are extending the rule's sunset date by two years to
December 31, 2016, as proposed.
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    \12\ See Temporary Rule Regarding Principal Trades with Certain
Advisory Clients, Investment Advisers Act Release No. 3893 (Aug. 12,
2014), [79 FR 48709 (Aug. 18, 2014)] (``Proposing Release'').
    \13\ See Comment Letter of Chris Barnard (Aug. 22, 2014)
(``Barnard Letter''); Comment Letter of Better Markets, Inc. (Sept.
17, 2014) (``Better Markets Letter''); Comment Letter of Consumer
Federation of America (Sept. 17, 2014) (``Consumer Federation
Letter''); Comment Letter of Financial Services Institute (Sept. 17,
2014) (``FSI Letter''); Comment Letter of Financial Services
Roundtable (Sept. 16, 2014) (``FSR Letter''); Comment Letter of
Jeffrey W. Lynn (Aug. 24, 2014) (``Lynn Letter''); Comment Letter of
Thomas Michael Manis (Aug. 21, 2014) (``Manis Letter''); Comment
Letter of Securities Industry and Financial Markets Association
(``SIFMA'') (Sept. 17, 2014) (``SIFMA 2014 Letter''); Comment Letter
of Wells Fargo Advisors, LLC (Sept. 17, 2014) (``Wells Fargo
Letter''). We received one comment letter that did not directly
address the issues in the proposal. See Comment Letter of J. Wayne-
Lynn (Sept. 3, 2014). We also received one comment letter discussing
Title IX of the Dodd-Frank Act (including section 913), but not
specifically addressing the extension of the rule or principal
trading. See Comment Letter of Norman B. Arnoff, Esq. and Paul A.
Immerman, Esq. (Oct. 26, 2014).
    \14\ See Barnard Letter; FSI Letter; FSR Letter; Lynn Letter;
Manis Letter; SIFMA 2014 Letter; Wells Fargo Letter.
    \15\ See Better Markets Letter; Consumer Federation Letter.
---------------------------------------------------------------------------

II. Discussion

    We are amending rule 206(3)-3T only to extend the rule's sunset
date by two additional years.\16\ We are not adopting any substantive
amendments to the rule at this time. Absent further action by the
Commission, the rule would sunset on December 31, 2014. We are adopting
this extension because, as we discussed in the Proposing Release, we
continue to believe that the issues raised by principal trading,
including the restrictions in section 206(3) of the Advisers Act and
our experiences with, and observations regarding, the operation of rule
206(3)-3T, should be considered as part of our broader consideration of
the regulatory requirements applicable to broker-dealers and investment
advisers in connection with the Dodd-Frank Act.\17\
---------------------------------------------------------------------------

    \16\ The rule includes a reference to an ``investment grade debt
security,'' which is defined as ``a non-convertible debt security
that, at the time of sale, is rated in one of the four highest
rating categories of at least two nationally recognized statistical
rating organizations (as defined in section 3(a)(62) of the Exchange
Act).'' Rule 206(3)-3T(a)(2) and (c). Section 939A of the Dodd-Frank
Act requires that we ``review any regulation issued by [us] that
requires the use of an assessment of the credit-worthiness of a
security or money market instrument; and any references to or
requirements in such regulations regarding credit ratings.'' Once we
have completed that review, the statute provides that we modify any
regulations identified in our review to ``remove any reference to or
requirement of reliance on credit ratings and to substitute in such
regulations such standard of credit-worthiness'' as we determine
appropriate. We believe that the credit rating requirement in the
temporary rule would be better addressed after the Commission
completes its review of the regulatory standards of conduct that
apply to broker-dealers and investment advisers. See generally
Report on Review of Reliance on Credit Ratings (July 21, 2011),
available at http://www.sec.gov/news/studies/2011/939astudy.pdf
(staff study reviewing the use of credit ratings in Commission
regulations).
    \17\ See Proposing Release, Section II.
---------------------------------------------------------------------------

    Section 913 of the Dodd-Frank Act authorizes us to promulgate rules
concerning, among other things, the legal or regulatory standards of
conduct for broker-dealers, investment advisers, and persons associated
with these intermediaries when providing personalized investment advice
about securities to retail customers. Since the completion of the 913
Study in 2011, we have been considering the findings, conclusions, and
recommendations of the study and the comments we have received from
interested parties.\18\ The Commission and its staff have continued to
evaluate options regarding regulatory requirements applicable to
broker-dealers and investment advisers, taking into account the 913
Study's recommendations, the views of investors and other interested
market participants, potential economic and market impacts, and the
information we received in response to the Request. Staff has also been
conducting examinations of dual registrants and is assessing the impact
to investors of the different supervisory structures and legal
standards of conduct that govern the provision of brokerage and
investment advisory services, which may help inform our
considerations.\19\ Our consideration of the regulatory requirements
applicable to broker-dealers and investment advisers is ongoing. We
will not complete our consideration of these issues before December 31,
2014, the current sunset date for rule 206(3)-3T.
---------------------------------------------------------------------------

    \18\ Section 913(f) of the Dodd-Frank Act requires us to
consider the 913 Study in any rulemaking authorized by that section
of the Dodd-Frank Act. See also Comments on Study Regarding
Obligations of Brokers, Dealers, and Investment Advisers, File No.
4-606, available at http://sec.gov/comments/4-606/4-606.shtml.
    \19\ See National Exam Program, Office of Compliance Inspections
and Examinations, Examination Priorities for 2014 (Jan. 9, 2014),
available at http://www.sec.gov/about/offices/ocie/national-examination-program-priorities-2014.pdf.
---------------------------------------------------------------------------

    If we permit rule 206(3)-3T to sunset on December 31, 2014, after
that date investment advisers registered with us as broker-dealers that
currently rely on rule 206(3)-3T would be required to comply with
section 206(3)'s transaction-by-transaction written disclosure and
consent requirements without the benefit of the alternative means of
complying with these requirements provided by rule 206(3)-3T if they
want to engage in principal trades with non-discretionary advisory
account clients. This could limit the access of non-discretionary
advisory clients of advisory firms that are registered with us as
broker-dealers to certain securities.\20\ In addition, firms may be
required to make substantial changes to their disclosure documents,
client agreements, procedures, and systems.
---------------------------------------------------------------------------

    \20\ For a discussion of the costs and benefits underlying rule
206(3)-3T, see 2007 Principal Trade Rule Release, Section VI.C.
---------------------------------------------------------------------------

    As noted above, seven commenters generally supported our proposal
to extend rule 206(3)-3T, and two commenters opposed the two-year
extension. Commenters who supported the extension cited the disruption
to investors that would occur if the rule expired at this time,
asserting that investors would lose access to the securities currently
offered through principal trades, receive less favorable pricing on
such securities, or be forced to open brokerage accounts if they wished
to maintain access to certain

securities only available on a principal basis.\21\ Two commenters also
stated that the expiration of rule 206(3)-3T would reduce execution
quality for non-discretionary advisory account clients who would no
longer have access to a firm's principal accounts.\22\ Some commenters
further explained that, if the rule were allowed to expire, firms
relying on the rule would be required to make considerable changes to
their operations, client relationships, systems, policies and
procedures at substantial expense, without substantial benefits to
investors.\23\
---------------------------------------------------------------------------

    \21\ See e.g., FSR Letter (asserting that ``investors would be
harmed'' if the rule were allowed to expire because investors would
have limited access to certain securities); SIFMA 2014 Letter
(noting that the rule benefits investors by ``allowing firms to
offer investors a greater variety of securities from firm
inventories, execute trades in such securities more quickly, and
offer customers better prices on such securities''); Wells Fargo
Letter (arguing that the expiration of rule 206(3)-3T would ``limit
investor choice, negatively impact pricing and force clients to
incur additional expenses to access the wider range of securities
available through principal trading'').
    \22\ See FSR Letter; Wells Fargo Letter.
    \23\ See FSI Letter; FSR Letter; SIFMA 2014 Letter; Wells Fargo
Letter.
---------------------------------------------------------------------------

    Commenters supporting the extension agreed that extending the rule
while the Commission conducted its review of the obligations of broker-
dealers and investment advisers would be the least disruptive
option.\24\ However, several of these commenters questioned whether a
two-year extension provided the Commission with sufficient time to
complete its review and to engage in any subsequent Commission
action.\25\ These commenters recommended that the Commission adopt rule
206(3)-3T on a permanent basis or, at a minimum, that the Commission
extend the rule for five years.\26\ Some commenters suggested that
adopting the rule on a permanent basis or adopting a longer extension
of the rule would also have the benefit of reducing uncertainty for
investors and dual-registrant firms.\27\
---------------------------------------------------------------------------

    \24\ See Barnard Letter; FSI Letter; FSR Letter; SIFMA 2014
Letter; Wells Fargo Letter.
    \25\ See FSR Letter; SIFMA 2014 Letter; Wells Fargo Letter.
    \26\ See FSR Letter; SIFMA 2014 Letter; Wells Fargo Letter. See
also FSI Letter (recommending that the Commission adopt rule 206(3)-
3T on a permanent basis as part of a harmonization of the regulatory
requirements applicable to broker-dealers and investment advisers);
Lynn Letter (questioning the temporary nature of the rule).
    \27\ See FSR Letter; SIFMA 2014 Letter.
---------------------------------------------------------------------------

    Three commenters specifically addressed Commission consideration of
requests for exemptive orders as an alternative means of compliance
with section 206(3). These commenters strongly supported extending the
rule instead of Commission consideration of requests for exemptive
orders.\28\ Two commenters expressed concern about the potential
inefficiency and uncertainty created by the need to submit individual
requests for exemptive relief, and suggested that the Commission
consider a request for class exemptive relief if the rule were allowed
to sunset.\29\ One commenter urged the Commission to adopt a
streamlined process for exemptive requests that closely tracks the
procedures of the rule if the rule sunsets.\30\
---------------------------------------------------------------------------

    \28\ See FSR Letter; SIFMA 2014 Letter; Wells Fargo Letter.
    \29\ See FSR Letter; SIFMA 2014 Letter.
    \30\ See Wells Fargo Letter.
---------------------------------------------------------------------------

    Two commenters opposed extending the rule, arguing that the
Commission should not premise an extension of the rule on the need to
consider principal trading as part of the broader consideration of the
obligations of broker-dealers and investment advisers when the
Commission has not yet commenced any formal rulemaking under section
913 of the Dodd-Frank Act.\31\ These commenters questioned whether the
temporary rule provides adequate investor protection against abusive
trading practices.\32\ In this regard, the commenters asserted that
oral disclosure and consent may not promote informed investor decisions
in light of the limitations of such disclosures.\33\ In addition, the
commenters argued that there is no evidence that principal trades being
conducted in accordance with the rule are being conducted in investors'
best interests.\34\ One commenter also questioned whether the
Commission had considered evidence that had emerged since the rule was
first adopted in connection with the proposed extension.\35\
---------------------------------------------------------------------------

    \31\ See Better Markets Letter; Consumer Federation Letter.
    \32\ See Better Markets Letter (discussing conflicts associated
with principal trading and stating that ``it is likely that
investors are often unaware of instances where principal trades with
their brokers have caused harm, and these abuses go undetected'');
Consumer Federation Letter (stating that today's market realities
present ``more, and more complex, opportunities for principal
trading abuses'' than dumping alone and suggesting that the
Commission should update its understanding of these risks).
    \33\ See Better Markets Letter (``A client certainly will have
an easier time deciding whether or not to participate in the
principal transaction if it receives the details of the proposed
trade in writing, rather than having heard them once orally.'');
Consumer Federation Letter (arguing that the temporary rule
``reflects an over-reliance on disclosure and fails to incorporate
adequate measures to prevent principal trading abuses'').
    \34\ See id.
    \35\ See Consumer Federation Letter.
---------------------------------------------------------------------------

    On balance, and after careful consideration of these comments, we
conclude that extending the rule for two years is the most appropriate
course of action at this time. First, with respect to investors, we
agree with those commenters that supported extending the rule that
permitting the rule to sunset before we complete our consideration of
the regulatory requirements applicable to broker-dealers and investment
advisers could produce substantial disruption for investors with
advisory accounts serviced by firms relying on the rule.\36\ These
investors might lose access to securities available through principal
transactions and be forced to convert their accounts in the interim,
only to face the possibility of future change--and the costs and
uncertainty such additional change may entail.\37\ We believe that rule
206(3)-3T benefits investors because it provides them with greater
access to a wider range of securities and includes provisions designed
to protect non-discretionary advisory clients.\38\
---------------------------------------------------------------------------

    \36\ See FSI Letter; FSR Letter; SIFMA 2014 Letter; Wells Fargo
Letter.
    \37\ As previously discussed in prior releases, firms have
explained that they may refrain from engaging in principal trading
with their advisory clients in the absence of the rule given the
practical difficulties of complying with section 206(3), and thus
may not offer principal trades through advisory accounts. See, e.g.,
2007 Principal Trade Rule Release, Section I.B; 2009 Extension
Release, Section I; 2010 Extension Release, Section II. See also
SIFMA 2014 Letter.
    \38\ Several commenters agreed that an extension of the rule
would continue to benefit investors. See SIFMA 2014 Letter (``If the
Rule were allowed to expire, most firms continue to report that they
would in most cases be unable to comply with Section 206(3) of the
Advisers Act . . . Thus, firms would be required to eliminate or
greatly reduce their offering of principal trades through advisory
accounts, to the detriment of investors.''); Wells Fargo Letter
(``If [rule 206(3)-3T] sunsets on December 31, 2014, our clients who
rely upon it will likely have access to a more limited universe of
principal securities likely at higher prices.''). But see Better
Markets Letter (contending that the Commission does not have the
authority to promulgate the rule, in part, because it cannot make
the necessary findings under section 206A). We disagree with this
commenter. For the reasons stated in this release we continue to
believe that the rule extension is necessary and appropriate in the
public interest and consistent with the protection of investors and
the purposes fairly intended by the policy and provisions of the
Advisers Act.
---------------------------------------------------------------------------

    We do not agree with commenters who suggest that the rule places
undue reliance on disclosure and consent, particularly oral disclosure
and consent, as a means of investor protection.\39\ Section 206(3) does
not prohibit advisers from engaging in principal transactions, but
rather prescribes a means by which an adviser must disclose and obtain
the consent of its clients to the conflicts of interest

involved.\40\ In light of these serious conflicts of interest and a
substantial risk that the proprietary interests of the adviser will
prevail over those of its clients, rule 206(3)-3T provides advisers an
alternative means to comply with the requirements of that section that
is consistent with the purposes, and our prior interpretations of,
section 206(3). The rule continues to provide the protection of
transaction-by-transaction disclosure and consent, either orally or in
writing, subject to several additional conditions designed to protect
investors.\41\ For example, the rule requires an adviser to provide
written, prospective disclosure regarding the conflicts arising from
principal trades and to obtain written, revocable consent from the
client prospectively authorizing the adviser to enter into principal
transactions. An adviser is also required under rule 206(3)-3T to send
a confirmation statement to the client for each principal trade,
disclosing the capacity in which the adviser has acted and indicating
that the client consented to the transaction. The written confirmation
statement serves as a reminder to clients of each transaction that the
adviser effects on a principal basis and that conflicts of interest are
inherent in such transactions.\42\ In addition, the rule requires an
adviser to deliver to the client an annual report itemizing principal
transactions to ensure that clients receive a periodic record of
principal trading activity in their accounts and to afford them the
opportunity to assess the frequency with which their adviser engages in
such trades.\43\
---------------------------------------------------------------------------

    \39\ See Better Markets Letter; Consumer Federation Letter.
    \40\ In particular, section 206(3) requires an adviser acting as
principal for its own account to disclose to an advisory client in
writing before the completion of the transaction the capacity in
which the adviser is acting and obtain the consent of the client to
such transaction.
    \41\ See 2007 Principal Trade Rule Release, Section II.B.
(expressing the belief that trade-by-trade disclosure and consent
``continues to be important to alert clients to the potential for
conflicted advice they may be receiving on individual
transactions'').
    \42\ See 2007 Principal Trade Rule Release, Section II.B.
    \43\ See id.
---------------------------------------------------------------------------

    Moreover, we note that the rule is limited to principal trades with
non-discretionary advisory account clients.\44\ As previously stated,
we are of the view that the risk of relaxing the procedural
requirements of section 206(3) of the Advisers Act when a client has
ceded substantial, if not complete, control over the account raises
significant risks that the client will not be, or is not in a position
to be, sufficiently involved in the management of the account to
protect himself or herself from overreaching by the adviser.\45\
---------------------------------------------------------------------------

    \44\ Specifically, rule 206(3)-3T applies to principal trades
with respect to accounts over which the client has not granted
investment discretion, ``except investment discretion granted by the
advisory client on a temporary or limited basis.'' Rule 206(3)-
3T(a)(1).
    \45\ See 2007 Principal Trade Rule Release, Section II.B.
---------------------------------------------------------------------------

    We believe that the requirements of rule 206(3)-3T, coupled with
regulatory oversight, will adequately protect non-discretionary
advisory clients for an additional limited period of time while we
consider more broadly the regulatory requirements applicable to broker-
dealers and investment advisers.\46\ Since its adoption and throughout
the period of the extension, the staff has examined and will continue
to examine firms that engage in principal transactions and will take
appropriate action to help ensure that firms are complying with section
206(3) or rule 206(3)-3T (as applicable), including possible
enforcement action.\47\ Several recent cases demonstrate our commitment
to enforcing firms' compliance with these requirements when they engage
in principal transactions with clients.\48\ As noted above, staff has
also been conducting examinations of dual registrants and is assessing
the impact to investors of the different supervisory structures and
legal standards of conduct that govern the provision of brokerage and
investment advisory services, which may help inform our
considerations.\49\
---------------------------------------------------------------------------

    \46\ In addition, rule 206(3)-3T(b) provides that the rule does
not relieve an investment adviser from acting in the best interests
of its clients, or from any obligation that may be imposed by
sections 206(1) or (2) of the Advisers Act or any other applicable
provisions of the federal securities laws. Further, the rule
requires that advisers seeking to rely on the rule also be
registered with the Commission as broker-dealers and that each
account for which the investment adviser relies on this rule be a
brokerage account subject to the Exchange Act, and the rules
thereunder, and the rules of the self-regulatory organization(s) of
which the broker-dealer is a member. Rule 206(3)-3T(a)(7).
    \47\ In the 2010 Extension Proposing Release, we discussed
certain compliance issues identified by the Office of Compliance
Inspections and Examinations. See 2010 Extension Proposing Release,
Section II. One matter identified in the staff's review resulted in
a settlement of an enforcement proceeding and other matters continue
to be reviewed by the staff. See In the Matter of Feltl & Company,
Inc., Investment Advisers Act Release No. 3325 (Nov. 28, 2011)
(settled order finding, among other things, violations of section
206(3) of the Advisers Act for certain principal transactions and
section 206(4) of the Advisers Act and rule 206(4)-7 thereunder for
failure to adopt written policies and procedures reasonably designed
to prevent violations of the Advisers Act and its rules).
    \48\ See In the Matter of Barclays Capital Inc., Investment
Advisers Act Release No. 3929 (Sept. 23, 2014) (settled order
finding, among other things, violations of section 206(3) of the
Advisers Act for engaging in transactions with advisory clients on a
principal basis without providing prior written disclosure to, or
obtaining consent from, the clients); In the Matter of Strategic
Capital Group LLC and N. Gary Price, Investment Advisers Act Release
No. 3924 (Sept. 18, 2014) (settled order finding, among other
things, violations of section 206(3) of the Advisers Act for
engaging in transactions with advisory clients on a principal basis
through an affiliated broker-dealer, without providing prior written
disclosure to, or obtaining consent from, the clients); In the
Matter of Dominick & Dominick LLC and Robert X. Reilly, Investment
Advisers Act Release No. 3881 (July 28, 2014) (settled order
finding, among other things, violations of section 206(3) of the
Advisers Act for engaging in transactions with advisory clients on a
principal basis without obtaining client consent before completing
the transactions); In the Matter of Paradigm Capital Management,
Inc. and Candace King Weir, Investment Advisers Act Release No. 3857
(June 16, 2014) (settled order finding, among other things,
violations of section 206(3) of the Advisers Act for engaging in
principal transactions with a hedge fund client through an
affiliated broker-dealer without providing effective disclosure to,
or obtaining consent from, the fund).
    \49\ See supra note 19 and accompanying text.
---------------------------------------------------------------------------

    We have also obtained information regarding principal trading
through other means. For example, as noted in the Proposing Release,
examination staff also requested and received materials from a sample
of dual registrants in 2014 to observe the use of the rule by these
firms.\50\ This examination showed that a number of the firms that were
contacted by staff relied on the rule and that those firms had adopted
written policies and procedures under rule 206(4)-7 that are designed
to comply with the requirements of the temporary rule.\51\ Based on the
review, it appeared to the staff that the firms relying on the rule had
processes in place for the purpose of effecting principal transactions
in compliance with the requirements of the temporary rule.
---------------------------------------------------------------------------

    \50\ Staff identified a representative sample set of dual
registrants based on Form ADV data, including firm disclosures on
Form ADV Part 2A, and requested materials from the firms that
included compliance policies and procedures, sample disclosures, and
data regarding the firm's principal transactions with advisory
accounts.
    \51\ 17 CFR 275.206(4)-7. See also 2007 Principal Trade Rule
Release (noting that an adviser relying on rule 206(3)-3T as an
alternative means of complying with section 206(3) must have adopted
and implemented written policies and procedures reasonably designed
to comply with the requirements of the rule).
---------------------------------------------------------------------------

    We continue to believe, on balance, that the disruption of allowing
the rule to expire is unwarranted as the Commission is engaging in a
comprehensive review process that may ultimately produce different
regulatory requirements.\52\ This disruption will be avoided if the
rule remains available while the staff and Commission continue to
review and consider the regulatory requirements applicable to broker-
dealers and investment advisers.
---------------------------------------------------------------------------

    \52\ See FSI Letter; FSR Letter; SIFMA 2014 Letter; Wells Fargo
Letter.
---------------------------------------------------------------------------

    For the reasons discussed above, we believe that the rule's sunset
date

should be extended for a limited period of time.\53\ That period of
time must be long enough to permit us to consider any rulemaking
prompted by our broader review of regulatory requirements applicable to
investment advisers and broker-dealers. The Commission and its staff
have continued to focus on evaluating options regarding regulatory
requirements applicable to broker-dealers and investment advisers. That
review is ongoing. We continue to believe that two years provides us
sufficient time to act regarding our broader review, while also
providing an appropriate balance that addresses commenters' concerns
regarding non-discretionary advisory clients' continued access to
certain securities and any new investor protection concerns that we may
identify through our examination program or otherwise.
---------------------------------------------------------------------------

    \53\ See Proposing Release, Section II.
---------------------------------------------------------------------------

III. Certain Administrative Law Matters

    The amendment to rule 206(3)-3T is effective on December 30, 2014.
The Administrative Procedure Act generally requires that an agency
publish a final rule in the Federal Register not less than 30 days
before its effective date.\54\ However, this requirement does not apply
if the rule is a substantive rule which grants or recognizes an
exemption or relieves a restriction, or if the rule is
interpretive.\55\ Rule 206(3)-3T is a rule that recognizes an exemption
and relieves a restriction and in part has interpretive aspects.
---------------------------------------------------------------------------

    \54\ 5 U.S.C. 553(d).
    \55\ Id.
---------------------------------------------------------------------------

IV. Paperwork Reduction Act

    Rule 206(3)-3T contains ``collection of information'' requirements
within the meaning of the Paperwork Reduction Act of 1995.\56\ The
Office of Management and Budget (``OMB'') last approved the collection
of information with an expiration date of July 31, 2017. An agency may
not conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a currently valid OMB
control number. The title for the collection of information is:
``Temporary rule for principal trades with certain advisory clients,
rule 206(3)-3T'' and the OMB control number for the collection of
information is 3235-0630. The Proposing Release solicited comments on
our PRA estimates, but we did not receive comment on them.\57\
---------------------------------------------------------------------------

    \56\ 44 U.S.C. 3501 et seq.
    \57\ See Proposing Release, Section IV.
---------------------------------------------------------------------------

    The amendment to the rule we are adopting today--to extend rule
206(3)-3T's sunset date for two years--does not affect the current
annual aggregate estimated hour burden of 139,358 hours.\58\ Therefore,
we are not revising the Paperwork Reduction Act burden and cost
estimates submitted to OMB as a result of this amendment.
---------------------------------------------------------------------------

    \58\ See Proposed Collection; Comment Request, 78 FR 72932 (Dec.
4, 2013); Submission for OMB Review; Comment Request, 79 FR 7481
(Feb. 7, 2014).
---------------------------------------------------------------------------

V. Economic Analysis

A. Introduction

    The Commission is sensitive to the economic effects, including the
benefits and costs and the effects on efficiency, competition, and
capital formation, that will result from extending rule 206(3)-3T's
sunset date for two years.\59\ The economic effects considered in
adopting this extension are discussed below.
---------------------------------------------------------------------------

    \59\ 15 U.S.C. 80b-2(c). Section 202(c) of the Advisers Act
mandates that the Commission, when engaging in rulemaking that
requires it to consider or determine whether an action is necessary
or appropriate in the public interest, consider, in addition to the
protection of investors, whether the action will promote efficiency,
competition, and capital formation.
---------------------------------------------------------------------------

    Rule 206(3)-3T provides an alternative means for investment
advisers that are registered with the Commission as broker-dealers to
meet the requirements of section 206(3) of the Advisers Act when they
act in a principal capacity in transactions with their non-
discretionary advisory clients. Other than extending the rule's sunset
date for two additional years, we are not modifying the rule from its
current form. We are extending rule 206(3)-3T in its current form to
avoid disruption to firms and clients that rely on the rule while the
Commission continues its ongoing consideration of the regulatory
requirements applicable to broker-dealers and investment advisers and
the recommendations from the 913 Study. In particular, extending the
current rule will permit firms to continue to offer, and clients to
have access to, certain securities on a principal basis without being
required to restructure their operations and client relationships,
adjust to a new set of rules, or abandon the operational systems
established to comply with the current rule--potentially only to have
to do so again when the rule expires or is modified, and once more if
the Commission adopts a new approach to principal trading in connection
with the broader consideration of the regulatory requirements
applicable to broker-dealers and investment advisers. We previously
considered and discussed the economic effects of rule 206(3)-3T in its
current form in the 2007 Principal Trade Rule Release, the 2009
Extension Release, the 2010 Extension Release, and the 2012 Extension
Release.\60\
---------------------------------------------------------------------------

    \60\ See 2007 Principal Trade Rule Release, Sections VI-VII;
2009 Extension Release, Sections V-VI; 2010 Extension Release,
Sections V-VI; 2012 Extension Release, Sections V-VI.
---------------------------------------------------------------------------

    At the outset, the Commission notes that, where possible, it has
sought to quantify the costs, benefits, and effects on efficiency,
competition, and capital formation expected to result from extending
rule 206(3)-3T and its reasonable alternatives. In many cases, however,
the Commission is unable to quantify the economic effects because it
lacks the information necessary to provide a reasonable estimate.\61\
The staff has also not found other quantitative data, including through
examinations and comment letters, which impacts the discussion of
economic effects in previous releases. We will continue to assess the
rule's operation and impacts along with intervening developments during
the period of the extension.
---------------------------------------------------------------------------

    \61\ In previous releases, the Commission has requested comment
on the economic effects of rule 206(3)-3T, the economic effects of
extending the rule, and the economic effects of alternatives. The
Commission has not received comments providing quantitative data
regarding the economic effects of extensions of rule 206(3)-3T or to
alternatives of the rule.
---------------------------------------------------------------------------

    The temporary rule currently in effect serves as the economic
baseline against which the costs and benefits, as well as the impact on
efficiency, competition, and capital formation, of the amendment are
discussed. The amendment, which will extend rule 206(3)-3T's sunset
date by an additional two years, will affect investment advisers that
are registered with the Commission as broker-dealers and engage in, or
may consider engaging in, principal transactions with non-discretionary
advisory clients, as well as the non-discretionary advisory clients of
these firms that engage in, or may consider engaging in, principal
transactions.
    Based on IARD data as of October 1, 2014, there are 96 dual
registrants that may be relying on the rule; however, evidence suggests
that the number of firms actually relying on the rule may be
smaller.\62\ One commenter questioned

whether the Commission could justify extending rule 206(3)-3T when it
did not have specific data regarding dual registrant firms' reliance on
the rule.\63\ This commenter further suggested that without this and
other data, the Commission could not confidently assert that the
extension of the rule would have the economic effects set forth in the
Proposing Release.\64\ We know from current and past comment letters,
as well as our examination findings, that both large and small advisers
have relied and continue to rely upon the rule since its implementation
in 2007.\65\ Additionally, one comment letter to the Request provided
survey results from a small sample of dual-registrant firms, showing
that the firms engaged in a significant dollar amount of principal
transactions in reliance on the rule in 2012.\66\ We believe that this
background information provides evidence indicating a reliance on the
rule by certain dual-registrant firms. Because the economic effects of
extending the rule and its reasonable alternatives will depend on the
extent to which eligible firms rely on the rule to engage in principal
transactions with non-discretionary advisory clients, however, we
recognize that the economic effects could vary significantly among
firms and their clients.
---------------------------------------------------------------------------

    \62\ Based on IARD data as of October 1, 2014, there are 291
SEC-registered advisers that are also registered as broker-dealers
that have non-discretionary accounts who could potentially rely on
the rule; however, only 96 of these dual registrants indicate they
currently engage in principal transactions on Form ADV. The actual
number of advisers that engage in principal transactions in reliance
on the temporary rule is likely smaller. The staff's recent outreach
to observe the use of the rule by firms found that some of the dual
registrants in the sample, which was derived based on Form ADV data,
did not rely on the rule.
    \63\ See Consumer Federation Letter.
    \64\ See id.
    \65\ See SIFMA 2014 Letter (stating that a significant number of
SIFMA member firms continue to rely on rule 206(3)-3T); Wells Fargo
Letter (noting that the firm managed approximately 275,000 non-
discretionary advisory accounts in which hundreds of principal
trades are made on a monthly basis for the benefit of investors).
Past comment letters have also stated that dual registrant firms
rely on the rule. For example, SIFMA's 2012 comment letter included
survey results from seven dual-registrant firms that, in the
aggregate, manage over $325 billion of assets in over 1.1 million
non-discretionary advisory accounts. The firms indicated that
459,507 non-discretionary advisory accounts (with aggregate assets
of over $125 billion) were eligible to engage in principal trading
in reliance on the rule. These firms also indicated that, during
2010-2012, the firms engaged in principal trades in reliance on rule
206(3)-3T with respect to 106,682 accounts and executed an average
of 12,009 principal trades per month in reliance on the rule.
Comment Letter of SIFMA (Nov. 13, 2012).
    \66\ See Comment Letter of SIFMA (Jul. 5, 2013). Ten firms
responded to SIFMA's survey and reported that they relied on the
temporary rule for $8 billion in principal transactions across
163,000 retail non-discretionary advisory accounts. In comparison,
the ten firms engaged in $36 billion in principal transaction with
498,000 retail advisory accounts under section 206(3) of the
Advisers Act and $809 billion in principal transactions with
2,480,000 retail brokerage accounts.
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B. Analysis of the Extension and Alternatives

    As noted above, the temporary rule currently in effect serves as
the economic baseline against which the costs and benefits, as well as
the impact on efficiency, competition, and capital formation, of the
amendment are discussed. Because the extension of the sunset date in
the temporary rule that we are adopting today maintains the status quo,
we do not expect additional costs or benefits to result from the
extension. For the same reason, we also do not expect the extension to
have additional effects on efficiency, competition, or capital
formation. Extending the current rule will provide the Commission with
additional time to consider principal trading as part of the broader
consideration of the regulatory requirements applicable to broker-
dealers and investment advisers.
    Reasonable alternatives to extending the current rule that we
considered include allowing the rule to expire, adopting the rule on a
permanent basis, and extending the rule for a period other than two
years. If the rule is allowed to expire, then an adviser that is
registered as a broker-dealer would no longer have a lower cost and
more efficient alternative to the requirements under section 206(3) of
the Advisers Act like that provided by the temporary rule,\67\ and
consequently non-discretionary advisory account clients could lose
access to the principal accounts of firms that rely on the rule. As
noted in the 2012 Extension Release, greater access to a wider range of
securities may allow non-discretionary advisory clients to more
efficiently allocate capital and, in the long term, the more efficient
allocation of capital may lead to an increase in capital formation.\68\
If the rule expires, the loss of access by non-discretionary advisory
clients to a wider range of securities would reduce the ability of
these investors to efficiently allocate capital. A decrease in the
ability of investors to efficiently allocate capital could reduce any
resulting long-term gains to capital formation. Allowing the rule to
expire also would reduce the ability of investors to choose between
brokerage accounts and advisory accounts if the investor wishes to
maintain access to securities held in firm principal accounts, and may
force non-discretionary advisory account clients to bear the costs
associated with transferring to brokerage accounts (or lose access to a
firm's principal accounts). Firms may also bear the potentially
substantial costs associated with restructuring their operations and
client relationships or seeking exemptive relief from the provisions of
section 206(3) of the Advisers Act.
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    \67\ Section 206(3) of the Advisers Act requires an investment
adviser to provide written conflict-of-interest disclosure
describing its role as principal when transacting securities from
its own account and obtain client consent prior to transaction
completion. Rule 206(3)-3T provides a dual registrant firm the
option of providing transaction-by-transaction disclosures verbally
instead of in writing when engaging in principal transactions with
non-discretionary advisory clients as long as the firm satisfies
additional requirements before and after the transactions.
Additional requirements of the temporary rule include the provision
of a written prospective disclosure to clients describing the
conflicts arising from principal transactions, acquisition of
written revocable client consent prospectively authorizing such
transactions, the provision of transaction-by-transaction
confirmations, and the provision of annual reports itemizing the
clients' principal transactions thereafter.
    \68\ 2012 Extension Release, Section V.B.
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    If the rule is allowed to expire, and firms engage in principal
transactions with advisory account clients pursuant to the requirements
of section 206(3) of the Advisers Act, investors may be able to more
fully evaluate the conflicts of the principal transactions at the time
of trades. Two commenters who opposed the extension of rule 206(3)-3T
questioned whether preserving investor access to securities sold on a
principal basis is ultimately beneficial for investors given the
presence of conflicts of interest and the potential for abuse including
high trading costs.\69\ We believe that the requirements of rule
206(3)-3T, coupled with regulatory oversight, will adequately protect
non-discretionary advisory clients for the additional limited period of
the extension. As noted above, section 206(3) does not prohibit
advisers from engaging in principal transactions, but rather prescribes
a means by which an adviser must disclose and obtain the consent of its
clients to the conflicts of interest involved. Rule 206(3)-3T, which
provides advisers an alternative means to comply with the requirements
of that section, continues to provide the protection of transaction-by-
transaction disclosure and consent, either orally or in writing,
subject to several conditions, including: (i) Written, prospective
disclosure regarding the conflicts arising from principal trades; (ii)
written, revocable consent from the client prospectively authorizing
the adviser to enter into principal transactions; (iii) a written
confirmation statement sent to the client for each principal trade,
disclosing the capacity in which the adviser has acted and indicating
that the client consented to the transaction; and (iv) an annual report
itemizing principal transactions. We also continue to believe that non-
discretionary advisory client access to a wider range of securities is
beneficial. Many clients wish to access securities held in the

inventory of a diversified broker-dealer and clients may wish to access
these securities through their non-discretionary advisory accounts.\70\
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    \69\ See Better Markets Letter; Consumer Federation Letter.
    \70\ See 2007 Principal Trade Rule Release, Section I.B.
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    We previously received a comment suggesting that rule 206(3)-3T may
impede capital formation because it would lead to ``more numerous and
more severe violations . . . of the trust placed by individual
investors in their trusted investment adviser.'' \71\ While we
understand the view that numerous and severe violations of trust could
impede capital formation, the staff has not identified instances where
an adviser has used the temporary rule to ``dump'' unmarketable
securities or securities that the adviser believes may decline in value
into an advisory account, a harm that section 206(3) and the conditions
and limitations of rule 206(3)-3T are designed to redress.\72\ In
addition, non-discretionary advisory account clients benefit from the
protections of sales practice rules under the Securities Exchange Act
of 1934 (the ``Exchange Act'') and of relevant self-regulatory
organizations, and the fiduciary duty and other obligations imposed by
the Advisers Act.
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    \71\ See Comment Letter of National Association of Personal
Financial Advisors (Dec. 20, 2010).
    \72\ See 2010 Extension Proposing Release, Section II (noting
that the staff did not identify instances of ``dumping'' in
connection with OCIE's examinations regarding compliance with the
temporary rule).
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    We also previously received comments opposing the limitation of the
temporary rule to investment advisers that are registered with us as
broker-dealers, as well as to accounts that are subject to both the
Advisers Act and Exchange Act as providing a competitive advantage to
investment advisers that are registered with us as broker-dealers.\73\
Commenters on the Proposing Release did not address this specific issue
and we have no reason to believe that broker-dealers (or affiliated but
separate investment advisers and broker-dealers) are put at a
competitive disadvantage to advisers that are themselves also
registered as broker-dealers.\74\ We intend to continue to evaluate the
effects of the rule on efficiency, competition, and capital formation
in connection with our broader consideration of the regulatory
requirements applicable to broker-dealers and investment advisers.
---------------------------------------------------------------------------

    \73\ See Comment Letter of the Financial Planning Association
(Nov. 30, 2007); Comment Letter of the American Bar Association,
section of Business Law's Committee on Federal Regulation of
Securities (Apr. 18, 2008). See also 2009 Extension Release, Section
VI.
    \74\ See 2009 Extension Release, Section VI; 2010 Extension
Release, Section VI; 2012 Extension Release, Section V.
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    If the Commission allowed the rule to expire, firms would no longer
incur the costs associated with rule 206(3)-3T, including the
operational costs associated with complying with the rule.\75\ In the
2007 Principal Trade Rule Release, we presented estimates of the costs
of each of the rule's disclosure elements, including: prospective
disclosure and consent; transaction-by-transaction disclosure and
consent; transaction-by-transaction confirmations; and the annual
report of principal transactions. We also provided estimates for the
following related costs of compliance with rule 206(3)-3T: (i) The
initial distribution of prospective disclosure and collection of
consents; (ii) systems programming costs to ensure that trade
confirmations contain all of the information required by the rule; and
(iii) systems programming costs to aggregate already-collected
information to generate compliant principal transactions reports. We do
not believe the extension we are adopting today affects the cost
estimates associated with the rule.\76\ Furthermore, we believe that an
eligible adviser that begins to rely on rule 206(3)-3T today would bear
the same types of upfront and ongoing costs discussed in the 2007
Principal Trade Rule Release.\77\
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    \75\ See supra note 60.
    \76\ In the 2007 Principal Trade Rule Release, we estimated the
total overall costs, including estimated costs for all eligible
advisers and eligible accounts, relating to compliance with rule
206(3)-3T to be $37,205,569. See 2007 Principal Trade Rule Release,
Section VI.D.
    \77\ See id.
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    If the rule is adopted on a permanent basis, then there may be
additional economic effects. We recognize that a temporary rule, by
nature, creates uncertainty, which in turn, may result in a reduced
ability of firms to coordinate and plan future business activities.\78\
The uncertainty with respect to rule 206(3)-3T would be reduced if the
rule was adopted on a permanent basis or if the rule was allowed to
expire. Nonetheless, we believe that it would not be appropriate to
adopt the rule on a permanent basis (with any necessary substantive
amendments) while consideration of the regulatory requirements
applicable to broker-dealers and investment advisers is ongoing.
---------------------------------------------------------------------------

    \78\ See FSR Letter; SIFMA 2014 Letter; Wells Fargo Letter. We
also received several comments in connection with prior extensions
of the rule urging us to make the rule permanent to avoid such
uncertainty. See e.g., Comment Letter of Winslow, Evans & Crocker
(Dec. 8, 2010); Comment Letter of Bank of America (Dec. 20, 2010).
---------------------------------------------------------------------------

    Another alternative we considered was to extend the rule for a
period other than two years. For example, extending the rule for
greater than two years would provide the Commission with additional
time to evaluate the impact of any potential rulemaking or other
process that may emerge from the broader consideration of fiduciary
obligations and other regulatory requirements applicable to broker-
dealers and investment advisers. Should our consideration of the
fiduciary obligations and other regulatory requirements applicable to
broker-dealers and investment advisers extend beyond the sunset date of
the temporary rule, such a longer period may be appropriate. Several
commenters specifically stated that the rule should be extended for at
least five years to provide the Commission with sufficient time to
complete its review of the obligations of broker-dealers and investment
advisers and to engage in any subsequent Commission action.\79\ On
balance, however, we continue to believe that the two-year extension of
rule 206(3)-3T appropriately addresses the concerns of firms and
clients relying on the rule while the Commission continues its ongoing
consideration of the standards applicable to investment advisers and
broker-dealers.
---------------------------------------------------------------------------

    \79\ See FSR Letter; SIFMA 2014 Letter; Wells Fargo Letter.
---------------------------------------------------------------------------

VI. Final Regulatory Flexibility Act Analysis

    The Commission has prepared the following Final Regulatory
Flexibility Analysis (``FRFA'') regarding the amendment to rule 206(3)-
3T in accordance with 5 U.S.C. 604. We prepared and included an Initial
Regulatory Flexibility Analysis (``IRFA'') in the Proposing
Release.\80\
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    \80\ See Proposing Release, Section VI.
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A. Need for the Rule Amendment

    We are adopting an amendment to extend rule 206(3)-3T's sunset date
for two years because we believe that it would not be appropriate to
require firms relying on the rule to restructure their operations and
client relationships before we complete our broader consideration of
the regulatory requirements applicable to broker-dealers and investment
advisers. The objective of the amendment to rule 206(3)-3T is to
continue to provide an alternative method for investment advisers that
are dually registered as broker-dealers to comply with section 206(3)
of the Advisers Act when acting in a principal capacity with certain of
their advisory clients. Absent further

action by the Commission, the rule will sunset on December 31, 2014.
    We are amending rule 206(3)-3T pursuant to sections 206A and 211(a)
of the Advisers Act [15 U.S.C. 80b-6a and 15 U.S.C. 80b-11(a)].

B. Significant Issues Raised by Public Comments

    We did not receive any comment letters related to our IRFA.

C. Small Entities Subject to the Rule

    Rule 206(3)-3T is an alternative method of complying with Advisers
Act section 206(3) and is available to all investment advisers that:
(i) Are registered as broker-dealers under the Exchange Act; and (ii)
effect trades with clients directly or indirectly through a broker-
dealer controlling, controlled by or under common control with the
investment adviser, including small entities. Under Advisers Act rule
0-7, for purposes of the Regulatory Flexibility Act an investment
adviser generally is a small entity if it: (i) Has assets under
management of less than $25 million; (ii) did not have total assets of
$5 million or more on the last day of its most recent fiscal year; and
(iii) does not control, is not controlled by, and is not under common
control with another investment adviser that has assets under
management of $25 million or more, or any person (other than a natural
person) that had total assets of $5 million or more on the last day of
its most recent fiscal year.\81\
---------------------------------------------------------------------------

    \81\ See 17 CFR 275.0-7.
---------------------------------------------------------------------------

    As noted in the Proposing Release, we estimated that as of June 1,
2014, 464 SEC-registered investment advisers were small entities.\82\
As discussed in the 2007 Principal Trade Rule Release, we opted not to
make the relief provided by rule 206(3)-3T available to all investment
advisers, and instead have restricted it to investment advisers that
also are registered as broker-dealers under the Exchange Act.\83\ We
therefore estimated for purposes of the IRFA that 12 of these small
entities (those that are both investment advisers and registered
broker-dealers) could rely on rule 206(3)-3T.\84\ We did not receive
any comments on these estimates.
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    \82\ IARD data as of June 1, 2014. As of October 1, 2014, based
on IARD data, we estimate that 480 SEC-registered investment
advisers were small entities.
    \83\ See 2007 Principal Trade Rule Release, Section VIII.B.
    \84\ IARD data as of June 1, 2014. As of October 1, 2014, based
on IARD data, we estimate that 7 of these small entities could rely
on rule 206(3)-3T.
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D. Reporting, Recordkeeping, and Other Compliance Requirements

    The provisions of rule 206(3)-3T impose certain reporting or
recordkeeping requirements and our amendment will extend the imposition
of these requirements for an additional two years. The two-year
extension will not alter these requirements.
    Rule 206(3)-3T is designed to provide an alternative means of
compliance with the requirements of section 206(3) of the Advisers Act.
Investment advisers taking advantage of the rule with respect to non-
discretionary advisory accounts are required to make certain
disclosures to clients on a prospective, transaction-by-transaction and
annual basis.
    Specifically, rule 206(3)-3T permits an adviser, with respect to a
non-discretionary advisory account, to comply with section 206(3) of
the Advisers Act by, among other things: (i) Making certain written
disclosures; (ii) obtaining written, revocable consent from the client
prospectively authorizing the adviser to enter into principal trades;
(iii) making oral or written disclosure and obtaining the client's
consent orally or in writing prior to the execution of each principal
transaction; (iv) sending to the client a confirmation statement for
each principal trade that discloses the capacity in which the adviser
has acted and indicating that the client consented to the transaction;
and (v) delivering to the client an annual report itemizing the
principal transactions. Advisers are already required to communicate
the content of many of the disclosures pursuant to their fiduciary
obligations to clients. Other disclosures are already required by rules
applicable to broker-dealers.
    Our amendment will only extend the rule's sunset date for two years
in its current form. Advisers currently relying on the rule already
should be making the disclosures described above.

E. Agency Action To Minimize Effect on Small Entities

    The Regulatory Flexibility Act directs us to consider significant
alternatives that would accomplish our stated objective, while
minimizing any significant adverse impact on small entities.\85\
Alternatives in this category would include: (i) Establishing different
compliance or reporting standards or timetables that take into account
the resources available to small entities; (ii) clarifying,
consolidating, or simplifying compliance requirements under the rule
for small entities; (iii) using performance rather than design
standards; and (iv) exempting small entities from coverage of the rule,
or any part of the rule.
---------------------------------------------------------------------------

    \85\ See 5 U.S.C. 603(c).
---------------------------------------------------------------------------

    We believe that special compliance or reporting requirements or
timetables for small entities, or an exemption from coverage for small
entities, may create the risk that the investors who are advised by and
effect securities transactions through such small entities would not
receive adequate disclosure. Moreover, different disclosure
requirements could create investor confusion if it creates the
impression that small investment advisers have different conflicts of
interest with their advisory clients in connection with principal
trading than larger investment advisers. We believe, therefore, that it
is important for the disclosure protections required by the rule to be
provided to advisory clients by all advisers, not just those that are
not considered small entities. Further consolidation or simplification
of the proposals for investment advisers that are small entities would
be inconsistent with our goal of fostering investor protection.
    We have endeavored through rule 206(3)-3T to minimize the
regulatory burden on all investment advisers eligible to rely on the
rule, including small entities, while meeting our regulatory
objectives. It was our goal to ensure that eligible small entities may
benefit from our approach to the rule to the same degree as other
eligible advisers. The condition that advisers seeking to rely on the
rule must also be registered with us as broker-dealers and that each
account with respect to which an adviser seeks to rely on the rule must
be a brokerage account subject to the Exchange Act, and the rules
thereunder, and the rules of the self-regulatory organization(s) of
which the broker dealer is a member, reflect what we believe is an
important element of our balancing between easing regulatory burdens
(by affording advisers an alternative means of compliance with section
206(3) of the Act) and meeting our investor protection objectives.\86\
Finally, we do not consider using performance rather than design
standards to be consistent with our statutory mandate of investor
protection in the present context.
---------------------------------------------------------------------------

    \86\ See 2007 Principal Trade Rule Release, Section II.B.7
(noting commenters that objected to this condition as disadvantaging
small broker-dealers (or affiliated but separate investment advisers
and broker-dealers)).
---------------------------------------------------------------------------

VII. Statutory Authority

    The Commission is amending rule 206(3)-3T pursuant to sections 206A

and 211(a) of the Advisers Act [15 U.S.C. 80b-6a and 80b-11(a)].

List of Subjects in 17 CFR Part 275

    Investment advisers, Reporting and recordkeeping requirements.

Text of Rule Amendment

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

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

0
1. The authority citation for Part 275 continues to read in part as
follows:

    Authority:  15 U.S.C. 80b-2(a)(11)(G), 80b-2(a)(11)(H), 80b-
2(a)(17), 80b-3, 80b-4, 80b-4a, 80b-6(4), 80b-6a, and 80b-11, unless
otherwise noted.
* * * * *

Sec.  275.206(3)-3T  [Amended]

0
2. In Sec.  275.206(3)-3T, amend paragraph (d) by removing the words
``December 31, 2014'' and adding in their place ``December 31, 2016.''

    By the Commission.

    Dated: December 17, 2014.
Brent J. Fields,
Secretary.
[FR Doc. 2014-29975 Filed 12-22-14; 8:45 am]
BILLING CODE 8011-01-P