The Administrative Conference of the United States makes recommendations to administrative agencies, the President, Congress, and the Judicial Conference of the United States regarding the improvement of Federal administrative procedures (5 U.S.C. 594). The membership of the Conference, when meeting in plenary session, constitutes the Assembly of the Conference (5 U.S.C. 595).

Agenda:The Assembly will discuss and consider the following matters:

Additional information about the proposed recommendations, as well as other materials related to the meeting, can be found at the “Research” and “Events” sections of the Conference's Web site (www.acus.gov).

Public Participation:The Conference welcomes the attendance of the public at the meeting, subject to space limitations, and will make every effort to accommodate persons with disabilities or special needs. Members of the public who wish to attend in person are asked to RSVP via email (comments@acus.gov), no later than two business days before the meeting, in order to facilitate entry. Members of the public who attend the meeting may be permitted to speak only with the consent of the Chairman and the unanimous approval of the members. If you need special accommodations due to disability, please inform the Designated Federal Officer noted above at least 7 days in advance of the meeting. Members of the public may also view the meeting virtually. A live Webcast of the meeting will be available at:http://www.acus.gov/events/57th-plenary-session/. In addition, the public may follow the meeting on our Twitter feed@acusgovorhashtag #57thPlenary.

Written Comments:Persons who wish to comment on any of the proposed recommendations may do so by submitting a written statement either by email tocomments@acus.gov(with “December 2012 Plenary Session Comments” in the subject line), or by mail addressed to: December 2012 Plenary Session Comments, Administrative Conference of the United States, Suite 706 South, 1120 20th Street NW., Washington, DC 20036. Written submissions must be received at least 5 business days prior to the meeting to assure consideration by the Assembly.

Proprietary information will not be accepted. All submitted comments will be available for public inspection.

The Independent Review Team report can be found at:http://science.house.gov/noaa-nesdis-independent-review-team-report.

The response from the Acting Secretary of Commerce can be found at:http://science.house.gov/sites/republicans.science.house.gov/files/documents/091812_doc_decision_memo.pdf

The NOAA Administrator's response to the IRT report can be found at:http://www.noaanews.noaa.gov/stories2012/pdfs/UNSEC%20satellite%20oversight%20decision%20memo%20final%20signed%20(2).pdf.

Information on NOAA's Weather mission can be found athttp://www.weather.gov/about.

Information on NOAA's satellite programs can be found at:http://www.nesdis.noaa.gov/SatInformation.html.

To enable contracting officers to verify that pass-through charges are not excessive, the provision at 52.215-22 requires offerors submitting a proposal for a contract, task order, or delivery order to provide the following information with its proposal: (1) The percent of effort the offeror intends to perform and the percent expected to be performed by each subcontractor. (2) If the offeror intends to subcontract more than 70 percent of the total cost of work to be performed—(i) The amount of the offeror's indirect costs and profit/fee applicable to the work to be performed by the subcontractor(s); and (ii) A description of the value added by the offeror as related to the work to be performed by the subcontractor(s). (3) If any subcontractor intends to subcontract to a lower-tier subcontractor more than 70 percent of the total cost of work to be performed under its subcontract—(i) The amount of the subcontractor's indirect costs and profit/fee applicable to the work to be performed by the lower-tier subcontractor(s); and (ii) A description of the value added by the subcontractor as related to the work to be performed by the lower-tier subcontractor(s).

The estimated annual reporting burden is slightly increased from that published in theFederal Registerat 75 FR 77741, on December 13, 2010. Based on data, from the Federal Procurement Data System, for fiscal year 2011, an upward adjustment is made to the estimated annual reporting burden.

Respondents:25,892.

Responses per Respondent:1.014676.

Total Responses:26,272.

Hours per Response:514464.

Total Burden Hours:13,516.

Obtaining Copies of Proposals:Requesters may obtain a copy of the information collection documents from the General Services Administration, Regulatory Secretariat (MVCB), 1275 First Street NE., Washington, DC 20417, telephone (202) 501-4755. Please cite OMB Control No. 9000-0173, Limitations on Pass-Through Charges, in all correspondence.

A. Purpose

The North Carolina Sales and Use Tax Act authorizes counties and incorporated cities and towns to obtain each year from the Commissioner of Revenue of the State of North Carolina a refund of sales and use taxes indirectly paid on building materials, supplies, fixtures, and equipment that become a part of or are annexed to any building or structure in North Carolina. However, to substantiate a refund claim for sales or use taxes paid on purchases of building materials, supplies, fixtures, or equipment by a contractor, the Government must secure from the contractor certified statements setting forth the cost of the property purchased from each vendor and the amount of sales or use taxes paid. Similar certified statements by subcontractors must be obtained by the general contractor and furnished to the Government. The information is used as evidence to establish exemption from State and local taxes.

Respondents:424.

Responses per Respondent:1.

Annual Responses:424.

Hours per Response:.17.

Total Burden Hours:72.

Obtaining Copies of Proposals:Requesters may obtain a copy of the information collection documents from the General Services Administration, Regulatory Secretariat (MVCB), 1275 First Street NE., Washington, DC 20417, telephone (202) 501-4755. Please cite OMB Control No. 9000-0059, North Carolina Sales Tax Certification, in all correspondence.

FAR Subpart 30.6 and the provision at 52.230-6 include pertinent rules and regulations related to the Cost Accounting Standards along with necessary administrative policies and procedures. These administrative policies require certain contractors to submit cost impact estimates anddescriptions in cost accounting practices and also to provide information on CAS-covered subcontractors.

The estimated annual reporting burden is increased from that published in theFederal Registerat 75 FR 3236, on January 20, 2010. Based on data from the Federal Procurement Data System for fiscal year 2011, an upward adjustment is made to the estimated annual reporting burden.

Number of Respondents:1,288.

Responses per Respondent:2.27.

Total Responses:2,924.

Average Burden Hours per Response:175.00.

Total Burden Hours:511,700.

Obtaining Copies of Proposals:Requesters may obtain a copy of the information collection documents from the General Services Administration, Regulatory Secretariat (MVCB), 1275 First Street NE., Washington, DC 20417, telephone (202) 501-4755. Please cite OMB Control Number 9000-0129, Cost Accounting Standards Administration, in all correspondence.

A. Purpose

FAR 16.203, Fixed-price contracts with economic price adjustment, and associated clauses at 52.216-2, 52.216-3, and 52.216-4 provide for upward and downward revision of the stated contract price upon occurrence of specified contingencies. In order for the contracting officer to be aware of price changes, the firm must provide pertinent information to the Government. The information is used to determine the proper amount of price adjustments required under the contract.

The estimated annual reporting burden is being adjusted upward since published in theFederal Registerat 74 FR 64085, on December 7, 2009. The upward adjustment is based on a revised number of respondents obtained from the Federal Procurement Data System—Next Generation (FPDS-NG) data for fixed-price contracts with economic price adjustments.

Respondents:11,945.

Responses per Respondent:1.

Annual Responses:11,945.

Hours per Response:.25.

Total Burden Hours:2,986.

Requesters may obtain a copy of the information collection documents from the General Services Administration, Regulatory Secretariat (MVCB), 1275 First Street NE., Washington, DC 20417, telephone (202) 501-4755. Please cite OMB Control No. 9000-0068, Economic Price Adjustment, in all correspondence.

The Office of the Secretary of Defense systems of records notices subject to the Privacy Act of 1974 (5 U.S.C. 552a), as amended, have been published in theFederal Registerand are available from the address inFOR FURTHER INFORMATION CONTACT.

The Office of the Secretary of Defense proposes to amend one system of records notice in its inventory of record systems subject to the Privacy Act of 1974 (5 U.S.C. 552a), as amended. The proposed amendment is not within the purview of subsection (r) of the Privacy Act of 1974 (5 U.S.C. 552a), as amended, which requires the submission of a new or altered system report.

The Defense Threat Reduction Agency systems of records notices subject to the Privacy Act of 1974 (5 U.S.C. 552a), as amended, have been published in theFederal Registerand are available from the address inFOR FURTHER INFORMATION CONTACT.

The proposed changes to the records systems being amended are set forth below. The proposed amendment is not within the purview of subsection (r) of the Privacy Act of 1974 (5 U.S.C. 552a), as amended, which requires the submission of a new or altered system report.

The Defense Finance and Accounting Service systems of records notices subject to the Privacy Act of 1974 (5 U.S.C. 552a), as amended, have been published in theFederal Registerand are available from the address inFOR FURTHER INFORMATION CONTACT.

The proposed changes to the record system being amended are set forth below. The proposed amendment is not within the purview of subsection (r) of the Privacy Act of 1974, (5 U.S.C. 552a), as amended, which requires the submission of a new or altered system report.

The Department of Army notices for systems of records subject to the Privacy Act of 1974 (5 U.S.C. 552a), as amended, have been published in theFederal Registerand are available from the address inFOR FURTHER INFORMATION CONTACT. The proposed system report, as required by 5 U.S.C. 552a(r) of the Privacy Act of 1974, as amended, was submitted on October 11, 2012, to the House Committee on Oversight and Government Reform, the Senate Committee on Governmental Affairs, and the Office of Management and Budget (OMB) pursuant to paragraph 4c of Appendix I to OMB Circular No. A-130, “Federal Agency Responsibilities for Maintaining Records About Individuals,” dated February 8, 1996 (February 20, 1996, 61 FR 6427).

The meeting is open to the public. Any interested person may attend, appear before, or file statements with the committee at the time and in the manner permitted by the committee.

Supporting documents which explain in detail the information that the EPA will be collecting are available in the public docket for this ICR. The docket can be viewed online atwww.regulations.govor in person at the EPA Docket Center, EPA West, Room 3334, 1301 Constitution Ave. NW., Washington, DC. The telephone number for the Docket Center is 202-566-1744. For additional information about EPA's public docket, visithttp://www.epa.gov/dockets.

Pursuant to section 3506(c)(2)(A) of the PRA, EPA is soliciting comments and information to enable it to: (i) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the Agency, including whether the information will have practical utility; (ii) evaluate the accuracy of the Agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (iii) enhance the quality, utility, and clarity of the information to be collected; and (iv) minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses. EPA will consider the comments received and amend the ICR as appropriate. The final ICR package will then be submitted to OMB for review and approval. At that time, EPA will issue anotherFederal Registernotice to announce the submission of the ICR to OMB and the opportunity to submit additional comments to OMB.Abstract:Title II of the Clean Air Act, (42 U.S.C. 7521 et seq.; CAA), charges the Environmental Protection Agency (EPA) with issuing certificates of conformity for those engines that comply with applicable emission standards. Such a certificate must be issued before engines may be legally introduced into commerce. Under this ICR, EPA collects information necessary to (1) issue certificates of compliance with emission statements, and (2) verify compliance with various programs and regulatory provisions pertaining to locomotives, locomotive engines, and locomotive remanufacturing kits (collectively referred to here as “engines” for simplicity). To apply for a certificate of conformity, manufacturers are required to submit descriptions of their planned production engines, including detailed descriptions of emission control systems and test data. This information is organized by “engine family” groups expected to have similar emission characteristics. There are recordkeeping requirements. Those manufacturers electing to participate in the Averaging, Banking and Trading (AB&T) Program are also required to submit information regarding the calculation, actual generation and usage of credits in an initial report, end-of-the-year report and final report. These reports are used for certification and enforcement purposes. Manufacturers must maintain records for eight years on the engine families included in the AB&T Program.

The Act also mandates EPA to verify that manufacturers have successfully translated their certified prototypes into mass produced engines, and that these engines comply with emission standards throughout their useful lives. Under the Production Line Testing Program (“PLT Program”), manufacturers are required to test a sample of engines as they leave the assembly line. This self-audit program allows manufacturers to monitor compliance with statistical certainty and minimize the cost of correcting errors through early detection. A similar audit program exists for the installation of locomotive remanufacturing kits. In-use testing allows manufacturers and EPA to verify compliance with emission standards throughout the locomotive's useful life. Through Selected Enforcement Audits, (SEAs), EPA verifies that test data submitted by engine manufacturers is reliable and testing is performed according to EPA regulations.

The information requested is collected by the Diesel Engine Compliance Center (DECC), Compliance Division (CD), Office of Transportation and Air Quality, Office of Air and Radiation, EPA. Besides DECC and CD, this information could be used by the Office of Enforcement and Compliance Assurance and the Department of Justice for enforcement purposes. Non-confidential business information submitted by respondents to this information collection may be disclosed over the Internet. That information is used by trade associations, environmental groups, and the public. Under this ICR, most of the information is collected in electronic format and stored in CD's databases.

Form Numbers:5900-125 (ABT template); 5900-135 (PLT/Installation Audit template), 5900-90 (Annual Production Report template)

Respondents/affected entities:Respondents are manufacturers of nonroad equipment and engines within the following North American Industry Classification System (NAICS) codes: 333618 (Other Engine Equipment Manufacturing), 336510 (Railroad Rolling Stock manufacturing), and 482111 (Line-haul Railroads).

Respondent's obligation to respond:Manufacturers must respond to this collection if they wish to sell their locomotives, locomotive engines and locomotive remanufacturing kits in the US, as prescribed by Section 206(a) of the CAA (42 U.S.C. 7521) and 40 CFR Part 1033. Certification reporting is mandatory (Section 206(a) of CAA (42 U.S.C. 7521) and 40 CFR Part 1033, Subpart C). PLT/Installation Audit reporting is mandatory (Section 206(b)(1) of CAA and 40 CFR Part 1033, Subpart D). Participation in ABT is voluntary, but once a manufacturer has elected to participate, it must submit the required information (40 CFR Part 1033, Subpart H). In-Use reporting is mandatory (40 CFR Part 1033, Subpart F).

Estimated number of respondents:10 (total).

Frequency of response:Quarterly, Annually, On Occasion, depending on the program.

Total estimated burden:21,129 hours per year. Burden is defined at 5 CFR 1320.03(b)

Total estimated cost:Estimated total annual costs: $2,349,724 (per year), includes an estimated $1,365,299 annualized capital or maintenance and operational costs.

Changes in Estimates:To date, there are no changes in the number of hours in the total estimated respondent burden compared with that identified in the ICR currently approved by OMB. However, EPA is evaluating information that may lead to a change in the estimates. After EPA has evaluated this information, estimates may rise due to an increase in the number of respondents.

Supporting documents which explain in detail the information that the EPA will be collecting are available in the public docket for this ICR. The docket can be viewed online atwww.regulations.govor in person at the EPA Docket Center, EPA West, Room 3334, 1301 Constitution Ave. NW., Washington, DC. The telephone number for the Docket Center is 202-566-1744. For additional information about EPA's public docket, visithttp://www.epa.gov/dockets.

Pursuant to section 3506(c)(2)(A) of the Paperwork Reduction Act, EPA is soliciting comments and information to enable it to: (i) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the Agency, including whether the information will have practical utility; (ii) evaluate the accuracy of the Agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (iii) enhance the quality, utility, and clarity of the information to be collected; and (iv) minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses. EPA will consider the comments received and amend the ICR as appropriate. The final ICR package will then be submitted to OMB for review and approval. At that time, EPA will issue anotherFederal Registernotice to announce the submission of the ICR to OMB and the opportunity to submit additional comments to OMB.

Abstract:The EPA tips and complaints web form is intended to provide an easy and convenient means by which members of the public can supply information to EPA regarding suspected violations of environmental law. The decision to provide a tip or complaint is entirely voluntary and use of the webform when supplying a tip or complaint is also entirely voluntary. Tippers need not supply contact information or other personal identifiers. Those who do supply such information, however, should know that this information may be shared by EPA with appropriate administrative, law enforcement, and judicial entities engaged in investigating or adjudicating the tip or complaint.

Form Numbers:None.

Respondents/affected entities:Respondents are expected to be members of the general public as well as employees of any company subject to federal environmental regulation. There is no specific industry or group of industries about which EPA expects tips or complaints.

Respondent's obligation to respond:voluntary.

Estimated number of respondents:630 per month (total).

Frequency of response:generally, a one-time response.

Total estimated burden:3,780 hours (per year). Burden is defined at 5 CFR 1320.03(b).

Total estimated cost:$75,146 (per year), includes $0 annualized capital or operation & maintenance costs.

Changes in estimates:There is expected to be an increase in the total estimated respondent burden compared with the ICR currently approved by OMB. This increase would reflect an increase in the number of tips and complaints being filed, not an increase in the time or burden associated with filing each tip or complaint. Growing awareness of the ease with which tips and complaints can be filed using the tips and complaints webform is expected to result in, perhaps, a 20% increase in usage.

This is a summary of the Commission's document in CC Docket No. 92-237, DA 12-1807 released November 9, 2012. The complete text in this document is available for public inspection and copying during normal business hours in the FCC Reference Information Center, Portals II, 445 12th Street SW., Room CY-A257, Washington, DC 20554. The document my also be purchased from the Commission's duplicating contractor, Best Copy and Printing, Inc., 445 12th Street SW., Room CY-B402, Washington, DC 20554, telephone (800) 378-3160 or (202) 863-2893, facsimile (202) 863-2898, or via the Internet athttp://www.bcpiweb.com.It is available on the Commission's Web site athttp://www.fcc.gov.

The North American Numbering Council (NANC) has scheduled a meeting to be held Thursday, December 13, 2012, from 10:00 a.m. until 2:00 p.m. The meeting will be held at the Federal Communications Commission, Portals II, 445 12th Street SW., Room TW-C305, Washington, DC. This meeting is open to members of the general public. The FCC will attempt to accommodate as many participants as possible. The public may submit written statements to the NANC, which must be received two business days before the meeting. In addition, oral statements at the meeting by parties or entities not represented on the NANC will be permitted to the extent time permits. Such statements will be limited to five minutes in length by any one party or entity, and requests to make an oral statement must be received two business days before the meeting.

People with Disabilities: To request materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an email tofcc504@fcc.govor call the Consumer and Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty). Reasonable accommodations for people with disabilities are available upon request. Include a description of the accommodation you will need, including as much detail as you can. Also include a way we can contact you if we need more information. Please allow at least five days advance notice; last minute requests will be accepted, but may be impossible to fill.

Proposed Agenda:Thursday, December 13, 2012, 10:00 a.m.*

On December 7, 2010, in document DA 10-2318, Chairman Julius Genachowski announced the establishment and appointment of members and Co-Chairpersons of the EAAC, an advisory committee required by the Twenty-First Century Communications and Video Accessibility Act (CVAA), Public Law 11-260, for the purpose of achieving equal access to emergency services by individuals with disabilities as part of our nation's migration to a national Internet protocol-enabled emergency network, also known as the next generation 9-1-1 system (NG9-1-1). The purpose of the EAAC is to determine the most effective and efficient technologies and methods by which to enable access to Next Generation 911 (NG 9-1-1) emergency services by individuals with disabilities, and to make recommendations to the Commission on how to achieve those effective and efficient technologies and methods. During the spring of 2011, the EAAC conducted a nationwide survey of individuals with disabilities and released a report on that survey on June 21, 2011. Following release of the survey report, the EAAC developed recommendations, which it submitted to the Commission on December 7, 2011, as required by the CVAA. At the November 2012 EAAC meeting, the agenda will include discussion of draft reports from the EAAC subcommittees and other activities needed to ensure access to 911 by individuals with disabilities.

The meeting site is fully accessible to people using wheelchairs or other mobility aids. Sign language interpreters, open captioning, and assistive listening devices will be provided on site. Other reasonable accommodations for people with disabilities are available upon request. In your request, include a description of the accommodation you will need and a way we can contact you if we need more information. Last minute requests will be accepted, but may be impossible to fill. Send an email to:fcc504@fcc.govor call the Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

To request materials in accessible formats for people with disabilities (Braille, large print, electronic files, audio format), send an email tofcc504@fcc.govor call the Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

Table of Contents I. Executive Summary II. Overview of Money Market Mutual Funds III. History of Reform Efforts and Role of the Financial Stability Oversight Council IV. Proposed Determination That MMFs Could Create or Increase the Risk of Significant Liquidity and Credit Problems Spreading Among Financial Companies and Markets V. Proposed Recommendations VI. Consideration of the Economic Impact of Proposed Reform Recommendations on Long-Term Economic Growth I. Executive Summary

Reforms to address the structural vulnerabilities of money market mutual funds (MMFs or funds) are essential to safeguard financial stability. MMFs are mutual funds that offer individuals, businesses, and governments a convenient and cost-effective means of pooled investing in money market instruments. MMFs are a significant source of short-term funding for businesses, financial institutions, and governments. However, the 2007-2008 financial crisis demonstrated that MMFs are susceptible to runs that can have destabilizing implications for financial markets and the economy. In the days after Lehman Brothers Holdings, Inc. failed and the Reserve Primary Fund, a $62 billion prime MMF, “broke the buck,” investors redeemed more than $300 billion from prime MMFs and commercial paper markets shut down for even the highest-quality issuers. The Treasury Department's guarantee of more than $3 trillion of MMF shares and a series of liquidity programs introduced by the Federal Reserve were needed to help stop the run on MMFs during the financial crisis and ultimately helped MMFs to continue to function as intermediaries in the financial markets.

The Securities and Exchange Commission (SEC) took important steps in 2010 by adopting regulations to improve the resiliency of MMFs (the “2010 reforms”). But the 2010 reforms did not address the structural vulnerabilities of MMFs that leave them susceptible to destabilizing runs. These vulnerabilities arise from MMFs' maintenance of a stable value per share and other factors as discussed below. MMFs' activities and practices give rise to a structural vulnerability to runs bycreating a “first-mover advantage” that provides an incentive for investors to redeem their shares at the first indication of any perceived threat to an MMF's value or liquidity. Because MMFs lack any explicit capacity to absorb losses in their portfolio holdings without depressing the market-based value of their shares, even a small threat to an MMF can start a run. In effect, first movers have a free option to put their investment back to the fund by redeeming shares at the customary stable share price of $1.00, rather than at a price that reflects the reduced market value of the securities held by the MMF.

The broader financial regulatory community has focused substantial attention on MMFs and the risks they pose. Both the President's Working Group on Financial Markets (PWG) and the Financial Stability Oversight Council (Council) called for additional reforms to address the structural vulnerabilities in MMFs, through the PWG's 2010 report onMoney Market Fund Reform Optionsand unanimous recommendations in the Council's 2011 and 2012 annual reports, respectively.

In October 2010, the SEC issued a formal request for public comment on the reforms initially described in the PWG report, and in May 2011 the SEC hosted a roundtable on MMFs and systemic risk in which several Council members and their representatives participated. However, in August 2012, SEC Chairman Schapiro announced that the SEC would not proceed with a vote to publish a notice of proposed rulemaking to solicit public comment on potential structural reforms of MMFs.

Under Section 120 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act),1 if the Council determines that the conduct, scope, nature, size, scale, concentration, or interconnectedness of a financial activity or practice conducted by bank holding companies or nonbank financial companies could create or increase the risk of significant liquidity, credit, or other problems spreading among bank holding companies and nonbank financial companies, the financial markets of the United States, or low-income, minority, or under-served communities, the Council may provide for more stringent regulation of such financial activity or practice by issuing recommendations to a primary financial regulatory agency to apply new or heightened standards or safeguards. The recommended standards and safeguards are required by Section 120 to take costs to long-term economic growth into account, and may include prescribing the conduct of the activity or practice in specific ways, such as applying particular capital or risk-management requirements.

The Council is proposing to use this authority to recommend that the SEC proceed with much-needed structural reforms of MMFs. There will be a 60-day public comment period on the proposed recommendations. The Council will then consider the comments and may issue a final recommendation to the SEC, which, pursuant to the Dodd-Frank Act, would be required to impose the recommended standards, or similar standards that the Council deems acceptable, or explain in writing to the Council within 90 days why it has determined not to follow the recommendation.

Pursuant to Section 120, the Council proposes to determine that MMFs' activities and practices could create or increase the risk of significant liquidity, credit, and other problems spreading among bank holding companies, nonbank financial companies, and U.S. financial markets. This is due to the conduct and nature of the activities and practices of MMFs that leave them susceptible to destabilizing runs; the size, scale, and concentration of MMFs and the important role they play in the financial markets; and the interconnectedness between MMFs, the financial system and the broader economy that can act as a channel for the transmission of risk and contagion and curtail the availability of liquidity and short-term credit.

Based on this proposed determination, the Council seeks comment on the proposed recommendations for structural reforms of MMFs that reduce the risk of runs and significant problems spreading through the financial system stemming from the practices and activities described above. The Council is proposing three alternatives for consideration:

•Alternative One: Floating Net Asset Value.Require MMFs to have a floating net asset value (NAV) per share by removing the special exemption that currently allows MMFs to utilize amortized cost accounting and/or penny rounding to maintain a stable NAV. The value of MMFs' shares would not be fixed at $1.00 and would reflect the actual market value of the underlying portfolio holdings, consistent with the requirements that apply to all other mutual funds.

•Alternative Two: Stable NAV with NAV Buffer and “Minimum Balance at Risk.” Require MMFs to have an NAV buffer with a tailored amount of assets of up to 1 percent to absorb day-to-day fluctuations in the value of the funds' portfolio securities and allow the funds to maintain a stable NAV. The NAV buffer would have an appropriate transition period and could be raised through various methods. The NAV buffer would be paired with a requirement that 3 percent of a shareholder's highest account value in excess of $100,000 during the previous 30 days—a minimum balance at risk (MBR)—be made available for redemption on a delayed basis. Most redemptions would be unaffected by this requirement, but redemptions of an investor's MBR itself would be delayed for 30 days. In the event that an MMF suffers losses that exceed its NAV buffer, the losses would be borne first by the MBRs of shareholders who have recently redeemed, creating a disincentive to redeem and providing protection for shareholders who remain in the fund. These requirements would not apply to Treasury MMFs, and the MBR requirement would not apply to investors with account balances below $100,000.

•Alternative Three: Stable NAV with NAV Buffer and Other Measures.Require MMFs to have a risk-based NAV buffer of 3 percent to provide explicit loss-absorption capacity that could be combined with other measures to enhance the effectiveness of the buffer and potentially increase the resiliency of MMFs. Other measures could include more stringent investment diversification requirements, increased minimum liquidity levels, and more robust disclosure requirements. The NAV buffer would have an appropriate transition period and could be raised through various methods. To the extent that it can be adequately demonstrated that more stringent investment diversification requirements, alone or in combination with other measures, complement the NAV buffer and further reduce the vulnerabilities of MMFs, the Council could include these measures in its final recommendation and would reduce the size of the NAV buffer required under this alternative accordingly.

These proposed recommendations are not necessarily mutually exclusive but could be implemented in combination to address the structural vulnerabilities that result in MMFs' susceptibility to runs. For example, MMFs could be permitted to use floating NAVs or, if they preferred to maintain a stable value, to implement the measures contemplated in Alternatives Two or Three.

Other reforms, not described above, may be able to achieve similar outcomes. Accordingly, the Council seeks public comment on the proposed recommendations and other potential reforms of MMFs. Comments on other reforms should consider the objectives of addressing the structural vulnerabilities inherent in MMFs and mitigating the risk of runs. For example, some stakeholders have suggested features that only would be implemented during times of market stress to reduce MMFs' vulnerability to runs, such as standby liquidity fees or gates. Commenters on such proposals should address concerns that such features might increase the potential for industry-wide runs in times of stress.

The Council recognizes that regulated and unregulated or less-regulated cash management products (such as unregistered private liquidity funds) other than MMFs may pose risks that are similar to those posed by MMFs, and that further MMF reforms could increase demand for non-MMF cash management products. The Council seeks comment on other possible reforms that would address risks that might arise from a migration to non-MMF cash management products. Further, the Council is not considering MMF reform in isolation. The Council and its members intend to use their authorities, where appropriate and within their jurisdictions, to address any risks to financial stability that may arise from various products within the cash management industry in a consistent manner. Such consistency would be designed to reduce or eliminate any regulatory gaps that could result in risks to financial stability if cash management products with similar risks are subject to dissimilar standards.

In accordance with Section 120 of the Dodd-Frank Act, the Council has consulted with the SEC staff. In addition, the standards and safeguards proposed by the Council take costs to long-term economic growth into account.

MMFs are a type of mutual fund registered under the Investment Company Act of 1940 (the Investment Company Act).2 Investors in MMFs fall into two categories: (i) Individual, or “retail” investors; and (ii) institutional investors, such as corporations, bank trust departments, pension funds, securities lending operations, and state and local governments, that use MMFs for a variety of cash management and investment purposes.3 MMFs are widely used by both retail and institutional investors for cash management purposes, although the industry has become increasingly dominated by institutional investors. MMFs marketed primarily to institutional investors account for almost two-thirds of assets today compared to about one-third of industry assets in 1996.4

MMFs are a convenient and cost-effective way for investors to achieve a diversified investment in various money market instruments, such as commercial paper (CP), short-term state and local government debt, Treasury bills, and repurchase agreements (repos). This diversification, in combination with principal stability, liquidity, and short-term market yields, has made MMFs an attractive investment vehicle. MMFs provide an economically significant service by acting as intermediaries between investors who desire low-risk, liquid investments and borrowers that issue short-term funding instruments. MMFs serve an important role in the asset management industry through their investors' use of MMFs as a cash-like product in asset allocation and as a temporary investment when they choose to divest of riskier investments such as stock or long-term bond mutual funds.

The MMF industry had approximately $2.9 trillion in assets under management (AUM) as of September 30, 2012, of which approximately $2.6 trillion is in funds that are registered with the SEC for sale to the public. This represents a decline from $3.8 trillion at the end of 2008.5 As of the end of 2011, there were 632 such funds, compared to 783 at the end of 2008.6

MMFs are categorized into four main types based on their investment strategies. Treasury MMFs, with about $400 billion in AUM, invest primarily in U.S. Treasury obligations and repos collateralized with U.S. Treasury securities. Government MMFs, with about $490 billion in AUM, invest primarily in U.S. Treasury obligations and securities issued by entities such as the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Banks (FHLBs), as well as in repo collateralized by such securities. In contrast, prime MMFs, with about $1.7 trillion in AUM, invest more substantially in private debt instruments, such as CP and certificates of deposit (CDs). Commensurate with the greater risks in their portfolios, prime MMFs generally pay higher yields than Treasury or government MMFs. Finally, tax-exempt MMFs, with about $280 billion in AUM, invest in short-term municipal securities and pay interest that is generally exempt from state and federal income taxes, as appropriate.

Like other mutual funds, MMFs must register under the Investment Company Act and are subject to its provisions. An MMF must comply with all of the same legal and regulatory requirements that apply to mutual funds generally, except that rule 2a-7 under the Investment Company Act7 allows MMFs to use special methods to value their portfolio securities and price their shares, subject to the conditions in the rule. These methods permit MMFs to maintain a stable NAV per share, typically $1.00. Pursuant to rule 2a-7, MMFs generally use the amortized cost method of valuation and the penny rounding method of pricing in order to effectively “round” their share prices. Under these methods, securities held by MMFs are valued at acquisition cost, with adjustments for amortization of premium or accretion of discount, instead of at fair market value, and the MMFs' price per share is rounded to the nearest penny. This permits an MMF to price its shares for purposes of sales and redemptions at $1.00 even though the fund's NAV based on the fair market value of its portfolio securities—rather than amortized cost—may vary by as much as 0.50 percent per share above or below $1.00. All other types of mutual funds, in contrast, must value their NAVs using the market value of the funds' portfolio securities and sell and redeem their shares based on that NAV without using penny rounding.

In order to protect investors from being treated unfairly, an MMF may continue to use these valuation andpricing methods only when the fund's stable $1.00 per share value fairly represents the fund's market-based share price. Rule 2a-7 requires an MMF to periodically calculate its market-based NAV, or “shadow price,” and compare this value to the fund's stable $1.00 share price. If there is a difference of more than 0.50 percent (or $0.005 per share), the fund's board of directors must consider promptly what action, if any, should be taken, including whether the fund should discontinue the use of these methods and re-price the securities of the fund at a value other than $1.00 per share, an event known as “breaking the buck” (i.e.,the fund would fail to maintain a stable NAV of $1.00).

In order to reduce the likelihood that an MMF would experience such a significant deviation, rule 2a-7 imposes upon MMFs certain “risk-limiting conditions” relating to portfolio maturity, credit quality, liquidity, and diversification. These risk-limiting conditions limit the funds' exposures to certain risks, such as credit, currency, and interest rate risks.8

The risk-limiting conditions, in their current form, include numerous changes to rule 2a-7 that were adopted by the SEC in 2010 as an initial response to the financial crisis. These 2010 reforms strengthened maturity limitations, increased MMFs' diversification and liquidity requirements, imposed stress-test requirements, improved the credit-quality standards for MMF portfolio securities, increased reporting and disclosure requirements on portfolio holdings, and provided new redemption and liquidation procedures to minimize contagion from a fund breaking the buck, as described below. The 2010 reforms were a necessary and important step in reducing MMF portfolio risk and increasing the resiliency of MMFs to redemptions.

Quality of portfolio securities.MMFs may purchase a security only if the security, at the time of acquisition, has received a specified credit rating from a nationally recognized statistical rating organization (“NRSRO”), generally the highest short-term rating (or is an unrated security of comparable quality as determined by the board of directors), and the fund's board of directors determines that the security presents minimal credit risks based on factors pertaining to credit quality in addition to any credit rating assigned to the security by an NRSRO.9 The 2010 reforms sought to reduce MMFs' exposure to risks from lower-rated securities—so-called “second-tier” securities—in several ways.10 First, the reforms reduced the limit on investments in these securities from 5 percent to 3 percent of the fund's total assets. Second, MMFs' allowable exposure to a single issuer of second-tier securities was reduced to 0.5 percent.11 Third, MMFs are only permitted to purchase second-tier securities with maturities of 45 days or less. The previous limit was 397 days. The reforms also tightened requirements relating to MMF holdings of repo that are collateralized with private debt instruments rather than cash equivalents or government securities.

Maturity limitations.MMFs generally are prohibited from acquiring any security with a remaining maturity greater than 397 days (certain features, like an unconditional “put,” can shorten a security's maturity for this and certain other purposes under rule 2a-7), and are subject to a maximum allowable dollar-weighted average portfolio maturity (WAM) and weighted average life (WAL). The 2010 reforms strengthened the maturity limitations by reducing the maximum allowable WAM of an MMF's portfolio from 90 days to 60 days, which reduces an MMF's exposure to interest-rate risk. In addition, the 2010 reforms introduced a new 120-day WAL limit, which lowers MMFs' exposure to credit-spread risk from floating- or variable-rate portfolio holdings by taking into account the securities' ultimate maturity.12

Diversification requirement.Generally, MMFs must limit their investments in the securities of any one issuer (other than government securities) to no more than 5 percent of fund assets at the time of purchase. They must also generally limit their investments in securities subject to a demand feature or a guarantee from any particular provider to no more than 10 percent of fund assets.

Liquidity requirements.The 2010 reforms added a requirement that each MMF maintain a minimum liquidity buffer. Each MMF must have at least 10 percent of its assets invested in “daily liquid assets” and at least 30 percent of its assets invested in “weekly liquid assets.”13 Daily liquid assets are cash, U.S. Treasury obligations, and securities that convert into cash (by maturing or through a put) within one business day. Weekly liquid assets are daily liquid assets, securities of an instrumentality of the U.S. Government that have a remaining maturity of 60 days or less, and securities that convert into cash within five business days. The amendments also reduced the amount of illiquid securities—those that cannot be disposed of within seven days without taking a discounted price—that an MMF can hold from 10 percent to 5 percent. These liquidity requirements are designed to help MMFs meet shareholder redemptions without selling portfolio securities into potentially distressed markets at discounted prices.

Stress-testing requirement.The 2010 reforms introduced a stress-testing requirement for MMFs, requiring that a fund's board of directors adopt procedures for periodic stress tests of the fund's ability to maintain a stable share price. The stress tests are based on certain hypothetical stress events and the results of these tests must be provided to the MMF's board.

Disclosure and reporting.The 2010 reforms introduced enhanced reporting and disclosure obligations that require funds to post portfolio information on their Web sites within five business days after the end of each month. MMFs are also required to submit to the SEC each month more detailed portfolio holdings information, including the shadow price, which is made availableto the public 60 days after the end of the month to which the information pertains. These requirements allow the SEC, investors, and others to better monitor fund risk taking.

Facilitation of orderly fund liquidation.The 2010 reforms introduced a new rule, rule 22e-3 under the Investment Company Act, that permits the board of directors of an MMF, upon notification to the SEC, to suspend redemptions and liquidate the fund if it has broken, or is in danger of breaking, the buck. The rule is designed to prevent shareholder harm from distressed sales of securities that can occur with rapid liquidations when a fund breaks the buck.

While the enhancements introduced in the 2010 reforms increase resiliency and limit MMFs' exposure to certain risks, they do not address MMFs' structural vulnerabilities. These vulnerabilities and the resulting risks to financial stability are described in more detail in the following sections.

Following the financial crisis, the Department of the Treasury (Treasury) released a roadmap for financial reform in June 200914 calling for: (i) The SEC to complete its near-term MMF reform efforts and (ii) the PWG to evaluate the need for structural reform of MMFs. The SEC addressed this first element when it adopted the 2010 reforms.

At the time of the adoption of the 2010 reforms, the SEC noted that these reforms served as a “first step” in addressing MMF reform.15 In October 2010, the PWG released a report outlining a set of additional policy options intended to address the risks to financial stability posed by MMFs' susceptibility to runs.16 This report stated that the 2010 reforms “alone could not be expected to prevent a run of the type experienced in September 2008.” This report was released for public comment and generated a large number of thoughtful and detailed responses, including suggestions by both academics and industry participants that MMFs maintain a capital buffer or impose a liquidity fee to help absorb losses and mitigate liquidity pressures. To further engage the public on reform, the SEC hosted a roundtable to discuss potential reform options in May 2011 that included Council members and their representatives, other regulators, trade groups, issuers of securities in which MMFs invest, MMF sponsors, and MMF investors. Throughout this period, the SEC engaged with stakeholders and regulators in an intensive effort to consider and refine various potential reform options.

Concurrently, the broader financial regulatory community in both the United States and abroad has made repeated calls for MMF reform. The Council, in both its 2011 and 2012 annual reports, highlighted the need for additional MMF reform to address structural vulnerabilities in the U.S. financial system. In 2012, the Council specifically recommended that the SEC publish structural reform proposals for public comment and ultimately adopt reforms that address MMFs' lack of loss-absorption capacity and susceptibility to runs. The Office of Financial Research, in its 2012 annual report, identified the run risk for MMFs as one of the “current threats to financial stability.”

Internationally, on October 9, 2012, the International Organization of Securities Commissions (IOSCO) issued policy recommendations for reforming MMFs. The IOSCO recommendations demonstrate the efforts by the G-20 and the Financial Stability Board to fulfill the mandate of strengthening the oversight and regulation of the “shadow banking system.”17 There are also other international efforts, along with IOSCO's, to consider aspects of MMF regulation where greater harmonization between jurisdictions and regulatory improvements could occur in an effort to avoid jurisdictional arbitrage.18

On August 22, 2012, SEC Chairman Schapiro announced that the majority of the SEC's Commissioners would not support seeking public comment on the SEC's staff proposal to reform the structure of MMFs. As a result, on September 27, 2012, the Chairperson of the Council, Treasury Secretary Geithner, sent a letter to Council members urging the Council to take action in the absence of the SEC doing so.

The Dodd-Frank Act established the Council “(A) to identify risks to the financial stability of the United States that could arise from the material financial distress or failure, or ongoing activities, of large, interconnected bank holding companies or nonbank financial companies, or that could arise outside the financial services marketplace; (B) to promote market discipline, by eliminating expectations on the part of shareholders, creditors, and counterparties of such companies that the Government will shield them from losses in the event of failure; and (C) to respond to emerging threats to the stability of the United States financial system.”19

To carry out its financial stability mission, the Council has various authorities, including the authority under Section 120 of the Dodd-Frank Act to issue recommendations to primary financial regulatory agencies to apply “new or heightened standards and safeguards” for a financial activity or practice conducted by bank holding companies or nonbank financial companies under the regulatory agency's jurisdiction. Prior to issuing such a recommendation, the Council must determine that “the conduct, scope, nature, size, scale, concentration, or interconnectedness” of the financial activity or practice “could create or increase the risk of significant liquidity, credit, or other problems spreading among bank holding companies and nonbank financial companies, financialmarkets of the United States, or low-income, minority or underserved communities.”20 The Council believes that MMFs are “predominantly engaged in financial activities”21 as defined in section 4(k) of the Bank Holding Company Act of 195622 and thus are “nonbank financial companies”23 for purposes of Title I of the Dodd-Frank Act.

Pursuant to Section 120 of the Dodd-Frank Act, the Council proposes to determine that the activities and practices of MMFs, for which the SEC is the primary financial regulatory agency, could create or increase the risk of significant liquidity, credit, or other problems spreading among bank holding companies, nonbank financial companies, and the financial markets of the United States. This proposed determination is set forth below in Section IV. The Council seeks public comment on this proposed determination.

To address the concerns regarding MMFs, the Council also seeks public comment on the proposed recommendations described in Section V. Comments are due 60 days after publication in theFederal Register. The Council will then consider the comments and may issue a final recommendation to the SEC, which, pursuant to the Dodd-Frank Act, would be required to impose the recommended standards, or similar standards that the Council deems acceptable, or explain in writing to the Council, not later than 90 days after the date on which the Council issues the final recommendation, why the SEC has determined not to follow the Council's recommendation. If the SEC accepts the Council's recommendation, it is expected that the SEC would implement the recommendation through a rulemaking, subject to public comment, that would consider the economic consequences of the implementing rule as informed by the SEC staff's own economic study and analysis.

The SEC, by virtue of its institutional expertise and statutory authority, is best positioned to implement reforms to address the risks that MMFs present to the economy. If the SEC moves forward with meaningful structural reforms of MMFs before the Council completes its Section 120 process, the Council expects that it would not issue a final Section 120 recommendation to the SEC.

In addition to the proposed recommendations to the SEC under its Section 120 authority, the Council and some of its members are actively evaluating alternative authorities in the event the SEC determines not to impose the standards recommended by the Council in any final recommendation.

For instance, under Title I of the Dodd-Frank Act, the Council has the authority and the duty to designate any nonbank financial company that could pose a threat to U.S. financial stability. Designated companies are subject to supervision by the Federal Reserve and enhanced prudential standards. Alternatively, the Council's authority to designate systemically important payment, clearing, or settlement activities under Title VIII of the Dodd-Frank Act could enable the application of heightened risk-management standards on an industry-wide basis. Additionally, other Council member agencies have the authority to take action to address certain of the risks posed by MMFs and similar cash-management products, as appropriate.

In order to issue a recommendation under Section 120 of the Dodd-Frank Act, the Council must determine that the conduct, scope, nature, size, scale, concentration, or interconnectedness of MMFs' activities or practices could create or increase the risk of significant liquidity, credit, or other problems spreading among bank holding companies and nonbank financial companies, or U.S. financial markets.

As further discussed below, the conduct and nature of MMFs' activities and practices make MMFs vulnerable to destabilizing runs, which may spread quickly among funds, impairing liquidity broadly and curtailing the availability of short-term credit.24 Because of the size, scale, concentration, and interconnectedness of MMFs' activities, the liquidity pressures on the MMF industry resulting from a run can cause this stress to propagate rapidly throughout the financial system and to the broader economy.

As was evidenced in the financial crisis, even small portfolio losses may cause a fund to break the buck. If investors perceive a risk of such an event, MMFs' lack of explicit loss-absorption capacity, the first-mover advantage enjoyed by redeeming investors, investor uncertainty regarding sponsor support, and the similarity of MMFs' portfolios can incite widespread runs on MMFs. Heavy redemptions may magnify losses for other funds and potentially cause them to break the buck and suspend redemptions under rule 22e-3, harming investors by impairing their liquidity. Further, due to the significant role MMFs play in the short-term credit markets, an industry-wide run on MMFs can reduce the availability of credit to borrowers. Ultimately, a run on MMFs can create or increase the risk of significant liquidity, credit, or other problems spreading among bank holding companies, nonbank financial companies, and U.S. financial markets.

• Conduct and nature of activities and practices: Several activities and practices of MMFs combine to create a vulnerability to runs, including: (i) Relying on the amortized cost method ofvaluation and/or penny rounding to maintain a stable $1.00 per share price; (ii) offering shares that may be redeemed on demand despite MMFs' limited same-day liquidity; (iii) investing in assets that are subject to interest-rate and credit risk without having explicit loss-absorption capacity; (iv) relying uponad hocdiscretionary support from sponsors, which has often shielded investors from losses and obscured portfolio risks; and (v) attracting a base of highly risk-averse investors that are prone to withdraw assets when even small losses appear possible. Together, these activities and practices foster MMFs' structural vulnerability to runs by creating a first-mover advantage that provides an incentive for investors to redeem their shares at the first indication of any perceived threat to an MMF's value or liquidity. Because MMFs lack any explicit capacity to absorb losses in their portfolio holdings without depressing the market-based value of their shares, even a small threat to an MMF can start a run.

• Size, scale, and concentration of activities and practices: The MMF industry is large, with $2.9 trillion in assets, and provides a substantial portion of the short-term funding available to a range of borrowers in the capital markets. The industry is also highly concentrated, as the top 20 MMF sponsors operate funds with 90 percent of aggregate MMF assets under management.

• Interconnectedness of activities and practices: MMFs are highly interconnected with the rest of the financial system and can transmit stress throughout the system because of their role as intermediaries, as significant investors in the short-term funding markets, as potential recipients of economic support from the financial institutions that sponsor them, and as important providers of cash-management services.

MMFs' vulnerability to runs results in part from the conduct and nature of the activities and practices of MMFs, their sponsors, and their investors.

The stable, rounded NAV per share. Unlike other mutual funds, most MMFs rely on valuation and rounding methods to maintain a stable NAV per share, typically $1.00. Rounding obscures the daily movements in the value of an MMF's portfolio and fosters an expectation that MMF share prices will not fluctuate. Importantly, rounding also exacerbates investors' incentives to run when there is risk that prices will fluctuate. When an MMF that has experienced a small loss satisfies redemption requests at the rounded $1.00 share price, the fund effectively subsidizes these redemptions by concentrating the loss among the remaining shareholders. As a result, redemptions from such a fund can further depress its shadow NAV and increase the risk that the MMF will break the buck. This contributes to a first-mover advantage, in which those who redeem early are more likely to receive the full $1.00 per share than those who wait. Thus, first movers have a free option to put their investment back to the fund by redeeming shares at the customary stable NAV of $1.00 per share (rather than at a share price reflecting the market value of the underlying securities held by the MMF). In the absence of an explicit mechanism to take losses in the value of the securities held by an MMF without depressing the fund's shadow NAV, the “first movers” leave other fund investors sharing in such losses.

Shares that can be redeemed on demand despite limited portfolio liquidity. MMFs perform maturity transformation by offering shares that investors may redeem on demand — providing shareholders unlimited daily liquidity — while also investing in relatively longer-term securities. MMFs invest not only in highly liquid instruments, such as securities that mature overnight and Treasury securities, but also in short-term instruments that are less liquid, including term CP and term repo. In the event of shareholder redemptions in excess of an MMF's available liquidity, a fund may be forced to sell less-liquid assets to meet redemptions. In times of stress, such sales may cause funds to suffer losses that must be absorbed by the fund's remaining investors, further reinforcing the first-mover advantage. Importantly, while the minimum liquidity requirements implemented in the SEC's 2010 reforms should make MMFs more resilient to market disruptions by increasing the funds' supply of liquid assets that can quickly be converted to cash, as noted below, these requirements are not designed to mitigate the first-mover advantage when a fund is at risk of suffering losses.

Investments with interest-rate and credit risk without explicit loss-absorption capacity. MMFs invest in securities with credit and interest-rate risk to increase the yields they offer to investors, but the funds do so without any formal capacity to absorb losses.25 The short maturities of these securities and their high credit quality generally limit portfolio risks, but MMFs on occasion have been exposed to potentially significant losses. For example, 29 MMFs participating in the Treasury's Temporary Guarantee Program for Money Market Funds reported losses in September and October 2008 that, absent sponsor support, would have exceeded 0.50 percent of assets, and losses among those funds averaged 2.2 percent of assets.26 As discussed in more detail below, the Reserve Primary Fund's experience demonstrates that the loss in value of a single security in an MMF's portfolio can cause the fund to break the buck. As a result of investors' expectations of a stable $1.00 per share NAV, even a small capital loss at an MMF can give its investors a strong incentive to redeem their shares.

Reliance on discretionary sponsor support. In the absence of capital, insurance, or any other formal mechanism to absorb losses when they do occur, MMFs historically have relied uponad hocdiscretionary support from their sponsors to maintain $1.00 per share prices.27 Unlike other types ofmutual funds, MMF sponsors have often supported their funds, with researchers documenting over 200 instances of such support since 1989.28

While MMF prospectuses must warn investors that their shares may lose value,29 the extensive record of sponsor intervention and its critical role historically in maintaining MMF price stability may have obscured some investors' appreciation of MMF risks and caused some investors to assume that MMF sponsors will absorb any losses, even though sponsors are under no obligation to do so. As such, it is not the sponsor support itself, but rather its discretionary nature that contributes to uncertainty among market participants about who will bear losses when they do occur. This uncertainty likely makes MMFs even more vulnerable to runs during periods of financial instability, when broader financial risks are most salient and when concerns arise about the health of the sponsors and their wherewithal to provide support to affiliated MMFs.

Highly risk-averse investors. Although MMFs invest in assets that may lose value and the funds are under no legal or regulatory requirement to redeem shares at $1.00, the industry's record of maintaining stable and rounded $1.00 per share NAVs combined with the funds' low-risk investment strategies has attracted highly risk-averse investors that are prone to withdraw assets rapidly when losses appear possible.30 This has been exacerbated by the outsized growth of institutional MMFs in recent decades. MMFs marketed primarily to institutional investors made up only about one-third of industry assets in 1996 but account for almost two-thirds of assets today.31 Institutional investors are typically more sophisticated than retail investors in obtaining and analyzing information about MMF portfolios and risks, have larger amounts at stake, and hence are quicker to respond to events that may threaten the stable NAV.

Interaction of these activities and practices. In combination, the activities and practices of MMFs described above tend to exacerbate each other's effects and increase MMFs' vulnerability to runs. For example, by relying on the amortized cost method of valuation and/or penny rounding to maintain a stable $1.00 per share NAV, offering shares that may be redeemed on demand despite limited same-day portfolio liquidity, and investing in assets with interest-rate and credit risk without explicit loss-absorption capacity, MMFs create a first-mover advantage for investors who redeem quickly during times of stress. If MMFs with rounded NAVs had lacked sponsor support over the past few decades, many might have broken the buck, causing investors to recalibrate their perception of MMF risks and resulting in a less risk-averse investor base. Or if funds maintained credible loss-absorption capacity, even a risk-averse investor base might be less likely to run because the funds would be better equipped to maintain a stable $1.00 per share NAV. As a result, policy responses that diminish these destabilizing interactions hold promise for mitigating the risks that MMFs pose—even if not all five of these activities and practices are fully addressed through reform.

MMFs' size, scale, and concentration increase both their vulnerability to runs and the damaging impact of runs on short-term credit markets, borrowers, and investors.

As discussed in Section II, the MMF industry is large, with $2.9 trillion in assets under management.32 MMFs are important providers of short-term funding to financial institutions, nonfinancial firms, and governments, and play a dominant role in some short-term funding markets. For example, as of September 30, 2012, MMFs owned 44 percent of U.S. dollar-denominated financial CP outstanding and about 30 percent of all uninsured dollar-denominated time deposits, including nearly two-thirds of the CDs that are tradable in financial markets.33 These funds also provided approximately one-third of the lending in the tri-party repo market and held significant portions of the outstanding short-term securities issued by state and local governments, the Treasury, and Federal agencies.34 Given the dominant role of MMFs in short-term funding markets, runs on these funds can therefore have severe implications for the availability of credit and liquidity in those markets.

In addition, because of the concentration of the MMF industry, even heavy withdrawals from (or shifts in portfolio holdings of) MMFs offered by a handful of asset management firms may reverberate through financial markets. As of September 30, 2012, the top five MMF sponsors managed funds with $1.3 trillion in assets (46 percent of industry assets), and the top 20 sponsors managed $2.6 trillion (90 percent).35

MMFs' extensive interconnectedness with financial firms, the financial system, and the U.S. economy cancreate a significant threat to broader financial stability because the shocks from a run on MMFs can rapidly propagate to other entities throughout the financial system.

Most of the short-term financing that MMFs provide to non-government entities is extended to financial firms. As of September 30, 2012, 86 percent of the funding that MMFs extended to private entities was in the form of financial sector obligations, including CDs, financial CP, asset-backed commercial paper (ABCP), repo, other MMF shares, and insurance company funding agreements.36 Among the top 50 private sector firms that received funding from prime MMFs in September 2012, only four were nonfinancial firms.37 Moreover, because 13 of the top 15 private-sector firms receiving funding were domiciled outside the United States, MMFs can also represent a potential channel for rapid transmission of global stress to the U.S. financial markets.

MMFs are further interconnected with the U.S. financial system because bank and savings and loan holding companies sponsor MMFs. Sponsors face potential risks because, historically, sponsors have absorbed nearly all MMF losses that threatened the funds' $1.00 per share NAVs, and sponsors would likely face pressure from investors and other market participants to continue to do so in the future. As of September 30, 2012, MMFs that are sponsored by subsidiaries of bank holding companies accounted for 41 percent of industry assets, and MMFs sponsored by subsidiaries of thrift holding companies accounted for another 11 percent of the industry's assets.38

The interconnectedness of the financial system and MMFs is exacerbated by the role of banks in providing liquidity enhancements and guarantees for securities held by MMFs. As of September 30, 2012, for example, three large U.S. banks provided liquidity or credit support for approximately $100 billion in securities held by MMFs, and European financial institutions provided liquidity or credit support for more than $115 billion in such securities.39 Tax-exempt MMFs hold many of these securities, which are largely obligations of state and local governments and other tax-exempt issuers.40 Due to these interconnections with financial firms, stress at MMFs can spread rapidly into the banking system and then more broadly through the financial system.

MMFs may also transmit risk to the broader economy through the payments system because MMFs are used as cash management vehicles by individual investors, businesses and other institutional investors, and governments. MMFs offer services such as check writing and other bank-like functions, particularly for retail investors. In addition, MMF shares outstanding are sizable relative to money stock measures. As of September 30, 2012, assets in MMFs registered with the SEC for sale to the public were 25 percent of the size of the Federal Reserve's M2 money stock measure, and prime fund assets alone were 14 percent of M2.41 Hence, a widespread run on MMFs could quickly pose liquidity problems for the millions of investors—households, businesses, and governments—that use MMFs for cash management, and such an event would resonate rapidly throughout the payments system.

Finally, not only are MMFs interconnected with the financial sector and payments system, but the funds themselves are also highly interconnected due to their common exposures. The largest prime funds generally provide funding to a relatively small group of firms with high credit quality,42 consistent with the requirements of rule 2a-7, leading to the potential for highly correlated losses. As of September 30, 2012, for example, financing for the top 50 firms accounted for 91 percent of prime MMF investments in private entities,43 while 10 firms accounted for 39 percent. In addition, 14 firms individually received funding from more than half of the 243 prime MMFs.44 The similarity of MMF portfolio holdings increases the contagion risk to the entire MMF industry and to the broader financial system in the event that one MMF encounters stress.

The financial crisis demonstrated how the conduct, nature, size, scale, concentration, and interconnectedness of MMFs' activities and practices described above can interact and amplify the transmission of risk of significant liquidity and credit problems in the financial system.

Run on prime MMFs. MMFs came under intense stress after the Reserve Primary Fund announced on September 16, 2008, that it would break the buck due to losses on the Lehman Brothers Holdings, Inc. (Lehman) debt instruments that the fund owned. These holdings represented just 1.2 percent of that fund's assets—well below the 5 percent limit applicable to such holdings—but, due to the lack of explicit loss-absorption capacity, that exposure was large enough to cause the fund to break the buck.45

The Reserve Primary Fund's loss immediately started a run on that fund, as investors sought to redeem approximately $40 billion from the fund in just two days.46 More importantly, the run quickly spread to other prime MMFs and illustrated several activities and practices that make MMFs vulnerable to runs as well as the contagion risk to the industry. The failure of Reserve Primary Fund's sponsor to deliver support for its fund may have heightened investors' uncertainty about the likelihood of discretionary sponsor support at other MMFs and, as a result, accelerated the run on the entire prime MMF industry.At least a dozen MMFs held Lehman securities at the time of the Lehman bankruptcy, and the Reserve Primary Fund's Lehman holdings were below the average holdings among MMFs with exposure to Lehman.47 However, the most serious phase of the run on MMFs occurred not in the two business days immediately after the Lehman bankruptcy, but in the two days following the Reserve Primary Fund's announcement that it had broken the buck.48

In addition, outflows from institutional prime MMFs following the Lehman bankruptcy tended to be larger among MMFs with sponsors that were themselves under stress, indicating that MMF investors redeemed shares when concerned about sponsors' potential inabilities to bolster ailing funds.49 These run dynamics were primarily prevalent among the more sophisticated, risk-averse institutional investors, as institutional funds accounted for 95 percent of the net redemptions from prime funds.50

Aggregate daily outflows from other prime MMFs tripled the day after the Reserve Primary Fund announced its loss.51 During the week of September 15, 2008, investors withdrew approximately $310 billion (15 percent of assets) from prime MMFs. The run slowed only after Treasury established the Temporary Guarantee Program for Money Market Funds and the Board of Governors of the Federal Reserve System established facilities aimed at stabilizing markets linked to MMFs.

Despite government intervention, the run in September 2008 led to rapid disinvestment by MMFs of short-term instruments which severely exacerbated stress in already strained financial markets. For example, in the three weeks following the Lehman bankruptcy, prime MMFs reduced their holdings of CP by $202 billion (29 percent) and repo by $75 billion (32 percent).52 The reduction in CP held by MMFs accounted for a substantial portion of the decline in outstanding CP during that period53 and contributed to a sharp rise in borrowing costs for CP issuers.54 MMFs managed by just a dozen firms accounted for almost three-quarters of the $202 billion decline in the industry's holdings of CP, and five MMF sponsors accounted for almost half of the decline.55

Impact on government MMFs. While the run in September 2008 centered on prime MMFs, government MMFs attracted inflows of $192 billion during the week following the Lehman bankruptcy.56 Some commenters have argued that these inflows provide evidence that MMFs are not structurally vulnerable to runs.57 However, the activities and practices discussed above do not lead investors to redeem their shares in all types of funds simultaneously, but rather they increase the possibility that losses at one or more MMFs may lead to widespread redemptions at other funds that share similar characteristics. Such contagion was evident among prime MMFs in 2008 due to, among other factors, the similarity of their portfolios. Government MMFs did not face similar run vulnerabilities at the time because they had significantly different portfolio holdings than the distressed prime funds and many government MMF investments were appreciating in value. Government MMFs nonetheless may pose the same structural risks, in that the funds' investors would have an incentive to redeem if they feared even small losses.

Importantly, the inflows to government funds in 2008 did not mitigate the damage caused by the run on prime MMFs. Government MMFs only purchase limited amounts of private debt securities and hence could not alleviate the reduction in the availability of credit for businesses and financial institutions that relied on MMFs for short-term financing.58

Furthermore, government MMFs also can be vulnerable to runs. In November 2008, Treasury agreed to assist with the liquidation of the Reserve Fund's U.S. Government Fund by serving as “a buyer of last resort” for securities held by the fund, which suspended redemptions in September 2008.59 In addition, during the last three business days in July 2011, amid large net redemptions from institutional MMFs (discussed below), outflows from government MMFs totaled 7 percent of assets and exceeded (as a percentage of assets) outflows from prime funds.60

The SEC's 2010 reforms are important, but further reform is needed. The SEC's 2010 reforms helped to make MMFs more resilient to certain short-term market risks and more transparent. However, they did not address certain activities and practices of MMFs that continue to make the funds vulnerable to runs. Moreover, MMFs remain concentrated and highly interconnected with one another, the U.S. banking system, and the broader financial system.

Of the activities and practices listed above that make MMFs susceptible to runs, the two most directly addressed in the SEC's 2010 reforms are liquidity risks associated with maturity transformation and MMF portfolios' exposures to credit and interest-rate risks. While the reforms reduced these risks, many of the credit and liquidity risks at issue in 2008 persist today. Importantly, if the rules adopted in 2010 had been in place in 2008, they would not have prevented the Reserve Primary Fund from breaking the buck due to its holdings of Lehman securities.

Moreover, the redemptions from many MMFs during the run in 2008 exceeded the liquidity buffers now mandated by the daily and weekly liquidity requirements that were adopted as part of the 2010 reforms. Atthe height of the run in 2008, 40 institutional prime MMFs (excluding the Reserve Primary Fund) had one-day outflows in excess of the new 10 percent daily liquidity requirement, and 13 of those funds' one-day outflows exceeded 20 percent of assets. In addition, 10 institutional prime funds had five-day outflows exceeding the new 30 percent weekly liquidity requirement, including eight funds with five-day outflows greater than 40 percent of assets.61 Notably, outflows in 2008 probably would have been considerably larger in the absence of the unprecedented government interventions to support MMFs and short-term funding markets.

Evidence from 2011. Heavy outflows from institutional prime MMFs in the summer of 2011 further highlighted MMFs' continued vulnerability to runs, even after the 2010 reforms. In the eight weeks ending on August 3, 2011, institutional prime funds experienced net outflows of $179 billion (16 percent of assets).62 Because the pace of outflows in 2011 was well below that experienced during the run in September 2008 (total net redemptions from prime institutional funds in two days in 2008 exceeded the eight-week outflow in 2011),63 MMFs were able to withstand redemption pressures without further repercussions.

The institutional investor redemptions were apparently in response to concerns about the funds' European holdings and the U.S. debt-ceiling impasse.64 Importantly, these outflows occurred despite the fact that the MMFs suffered no material losses during this episode.65 This is in stark contrast to August 2007, when many MMFs held distressed ABCP that ultimately lost significant value, yet institutional investors generally did not respond by redeeming MMF shares, likely because investors expected sponsors to absorb the losses.66 Redemptions in the summer of 2011 may indicate that institutional investors have become more reactive and run-prone since 2008, when the Reserve Primary Fund's sponsor was unable to provide support to prevent that fund from breaking the buck. Furthermore, the increase in certain MMFs' exposure to European securities in 2011 appears to have been motivated by increased risk-taking in an attempt to boost investment yields and revenues.67 This motive was also reportedly a significant factor in the investment policies that ultimately led the Reserve Primary Fund to break the buck.68

As described above, the conduct and nature of MMFs' activities and practices make MMFs vulnerable to runs that can spread quickly across the industry. As evidenced in the financial crisis, runs on MMFs can result in significant liquidity, credit and other problems in the short-term credit markets, particularly given the size and scale of the MMF industry's participation in those markets; cause or exacerbate substantial stresses in the financial system; and threaten financial stability. The interconnections among MMFs and the concentration of the MMF industry increase the likelihood that stresses at one MMF will spread to other MMFs, and MMFs' interconnectedness with other financial firms means that stresses in MMFs can spread rapidly to the larger financial system, further limiting system-wide liquidity and credit. Therefore, the Council proposes to determine that the conduct, nature, size, scale, concentration, and interconnectedness of MMFs' activities and practices could create or increase the risk of significant liquidity and credit problems spreading among bank holding companies, nonbank financial companies, and the financial markets of the United States.

The Council seeks comment on proposed recommendations to the SEC to address the structural vulnerabilities of MMFs discussed in Section IV. In particular, the Council aims to address the activities and practices of MMFs that make them vulnerable to destabilizing runs: (i) The lack of explicit loss-absorption capacity in the event of a drop in the value of a security held by an MMF and (ii) the first-mover advantage that provides an incentive for investors to redeem their shares at the first indication of any perceived threat to an MMF's value or liquidity.

In considering options for further reform, the Council notes three key features of MMFs that make them appealing to investors: The stability of principal associated with the funds' stable $1.00 per share NAV, liquidity through shares that can be redeemed on demand, and market-based yields that often exceed those of short-term Treasury securities and rates on FDIC-insured bank deposits.

The activities and practices of MMFs that have made them appealing to investors also contribute to their vulnerability to runs. For example, both MMFs' reliance on rounding to maintain stable NAVs and the liquidity of MMF shares contribute to a first-mover advantage for redeeming investors. MMFs' practice of investing in short-term securities with interest-rate and credit risk to boost yields, without explicit loss-absorption capacity, makes them more vulnerable when losses do occur.

Therefore, reforms that would provide meaningful mitigation of the risks posed by MMFs would likely reduce their appeal to investors by altering one or more of their attractive features. The first proposed alternative would require funds to have a floating NAV by removing the valuation and pricing provisions in rule 2a-7 that currently allow funds to maintain a stable, rounded $1.00 NAV. Alternatives Two and Three would preserve, and potentially bolster, the principal stability that investors currently enjoy by preserving the stable NAV, but would likely reduce the higher yields and/or the liquidity that MMFs offer to investors. These reform alternatives, therefore, present trade-offs between stability, yield, and liquidity.

Different MMF investors may have different preferences. Accordingly, it may be optimal to offer both floating NAV funds and stable NAV funds with enhanced protections and to allow investors to determine which they prefer. The Council seeks comment on the merits of adopting such a flexible approach as well as the merits of recommending a single structural reform alternative.

Require MMFs to have a floating net asset value per share (NAV) by removing the special exemption that currently allows MMFs to utilize amortized cost accounting and/or penny rounding to maintain a stable NAV. The value of MMFs' shares would not be fixed at $1.00 and would reflect the actual market value of the underlying portfolio holdings, consistent with the requirements that apply to all other mutual funds.

Overview. This reform alternative would require MMFs to have a floating NAV instead of a stable NAV. The price per share would fluctuate based on small changes in the value of the MMF's portfolio, rather than remaining at $1.00 absent a break the buck event. As such, the value of MMFs' shares would reflect the market value of the underlying portfolio holdings, consistent with the valuation requirements that apply to all other mutual funds under the Investment Company Act. As discussed in more detail below, a requirement that MMFs use floating NAVs could make investors less likely to redeemen massewhen faced with the prospect of even modest losses by eliminating the “cliff effect” associated with breaking the buck. Regular fluctuations in MMF NAVs likely would cause investors to become accustomed to, and more tolerant of, fluctuations in NAVs. A floating NAV would also reduce the first-mover advantage that exists in MMFs today because investors would no longer be able to redeem their shares for $1.00 when the shares' market-based value is less than $1.00. This alternative does not contemplate requiring funds to have an NAV buffer.

Rule 2a-7 protections remain. Consistent with investors' expectations about the nature of their MMF investments, the risk limiting provisions of rule 2a-7 that govern the credit quality, maturity, liquidity, and diversification of MMFs' portfolios would continue to apply to any fund that called itself a “money market fund” or used a similar name.

Portfolio valuation. This alternative would require removing the provisions of rule 2a-7 that allow MMFs to use the penny rounding method of pricing and the amortized cost method of valuation for their portfolios, except to the extent other mutual funds may do so. Rather, MMFs would value their portfolios like all other mutual funds, including using amortized cost valuation only under certain limited circumstances.69

Share pricing. Under this alternative, each floating-NAV MMF would re-price its shares to $100.00 per share (or initially sell them at that price) to be more sensitive to fluctuations in the value of the portfolio's underlying securities than under a $1.00 share price. For example, a 5 basis point loss would not move the share price of a floating-NAV MMF with a share price of $1.00.70 If the fund's shares were priced at $100.00, in contrast, the fund's share price would decrease by 5 cents to $99.95. Hence, a $100.00 share price is more likely than a $1.00 share price to result in regular fluctuations in NAVs and therefore changes in investor expectations and behavior. Just like in any other mutual fund, shareholders would be able to purchase and redeem fractional shares, and as a result the re-pricing would not impact shareholder purchases and redemptions. For example, a shareholder could still purchase or redeem $50 of MMF shares regardless of the fund's price per share.

Removing exemptions under the Investment Company Act. Because MMFs would no longer seek to maintain a stable NAV, the SEC also would need to rescind two rules under the Investment Company Act that provide exemptions to MMFs to prevent a fund from breaking the buck:

•Orderly Liquidation.Rule 22e-3 currently allows an MMF to suspend redemptions and begin an orderly liquidation if the fund has broken or is about to break the buck. With a floating NAV, the need for MMF sponsors or boards of directors to suspend redemptions or otherwise intervene upon share price declines should be significantly reduced except under the most extreme market circumstances.71

•Sponsor Support.Rule 17a-9 allows affiliates of an MMF to purchase portfolio securities from an MMF and typically is used to support an MMF's stable price per share. Because a floating-NAV MMF is designed to fluctuate in value, allowing the type of affiliate support currently permitted under rule 17a-9 would appear to be unnecessary. This type of affiliate support is not permitted for any other type of mutual fund.

Transition. To reduce potential disruptions and facilitate the transition to a floating NAV for investors and issuers, existing MMFs could be grandfathered and allowed to maintain a stable NAV for a phase-out period, potentially lasting five years. Instead of requiring these grandfathered funds to transition to a floating NAV immediately, the SEC would prohibit any new share purchases in the grandfathered stable-NAV MMFs after a predetermined date, and any new investments would have to be made in floating-NAV MMFs. This would discourage significant and sudden investor redemptions that could occur out of fear that a fund would force existing shareholders to incur a loss immediately upon the fund's transition to a floating NAV.

An SEC requirement that all MMFs operate with a floating NAV could reduce financial instability and the risk of runs among MMFs in several ways.

Modified investor expectations. A floating NAV would make gains and losses on MMF investments a regular occurrence. It would accustom investors to changes in the value of their MMF shares and reduce the perception that shareholders do not bear any risk of loss when they invest in an MMF. Such beliefs can make MMFs prone to runs if shareholders suddenly become concerned that they may bear losses. Breaking the buck should no longer be a significant event because MMFs would simply fluctuate in value in the same manner as other mutual funds. Losses—which are inevitable in an investment product—would no longer be obscured by valuation and rounding conventions, but would be borne by shareholders and reflected in a fund's share price just like all other mutual funds.

Similar to other mutual funds. A floating NAV would allow MMFs to operate with the same price transparency as all other mutual funds. Currently, shadow prices for stable NAV funds are disclosed on a monthly basis with a 60-day delay. Under a floating NAV model, shareholders would not be required to obtain and analyze an MMF's portfolio to surmise the fund's mark-to-market value. Rather, investors would see day-to-day fluctuations in value in different market conditions and interest-rate environments, just as theydo today with all other mutual funds. This information should help all types of investors in MMFs make investment decisions that better match their risk-return preferences.

Investors bear risk. A floating NAV would remove uncertainty or confusion regarding who bears the risk of loss in an MMF. A floating NAV would reinforce the principle that investors, not fund sponsors or taxpayers, are expected to bear the pro rata risk of loss in MMFs, as they do with other investment vehicles.

Reduced first-mover advantage. Such a change would reduce, though not eliminate, the first-mover advantage currently present in MMFs because all redemptions would be priced at a fund's per share mark-to-market value. MMF shareholders would no longer have the opportunity to redeem shares at $1.00 when their market-based value falls below $1.00; so redemptions would no longer threaten to concentrate an MMF's loss over a shrinking shareholder base. In addition, even if some shareholders redeem due to a sudden change in perceived risk, a floating NAV results in a fairer allocation of losses among redeeming and remaining investors.

Though this first-mover advantage would be reduced, the incentive to redeem before others may remain, in part, because each MMF has a limited supply of liquid assets with which to meet redemptions. Shareholders still may have an incentive to redeem quickly from an MMF, just as they do from any mutual fund that is at risk of depleting its most liquid assets, because subsequent redemptions may force the fund to dispose of less liquid assets and potentially incur losses. In addition, while a floating NAV would remove the ability of a shareholder to redeem shares at $1.00 when the market value is less than $1.00, it would not remove a shareholder's incentive to redeem whenever the shareholder believes that the NAV will decline significantly in the future, consistent with the incentive that exists today for other types of mutual funds.

Evidence from other jurisdictions and U.S. ultra-short bond funds suggests that floating-NAV MMFs could experience redemption pressures under stressed market conditions.72 Such behavior could be more likely if a floating-NAV MMF continues to be used as a cash management product and investors do not fully adjust their expectations of the risks inherent in MMFs. This adjustment could fail to take place because, under normal market conditions, the value of a floating-NAV MMF, even re-priced to $100.00 per share, would likely not fluctuate to the same degree as other mutual funds because of the risk-limiting conditions applicable to MMFs.73 Investors may come to accept small, temporary variations in the value of their MMF shares, but still redeem at the prospect of larger declines.

Tax considerations. A floating NAV for MMFs also would present certain federal income tax issues for MMFs and their investors. The stable NAV of MMF shares under present law results in simpler tax-reporting rules for transactions in MMF shares than the rules for transactions in shares of all other types of mutual funds. Because all purchases and sales of MMF shares are at the same $1.00 price, these transactions generate no taxable gains or losses, obviating the need for shareholders to track the basis and holding period of particular shares. If the NAV of MMF shares were instead to fluctuate, there would be gains and losses to report. More specifically, because each redemption of MMF shares could produce a gain or loss for the shareholder, it would be necessary to determine for every redemption—(i) which share was redeemed, (ii) the tax basis (generally, the acquisition cost) of that share, and (iii) whether the holding period of that share was long term or short term. In addition, if a shareholder purchases shares in an MMF within thirty days before or after a redemption, the Tax Code's “wash sale” rules would limit the extent to which the shareholder could deduct any loss realized on the redemption.74

Because of the high volume of redemptions of shares of MMFs, however, and because of the minimal per share losses that may result from each redemption, the Council understands that the Treasury Department and the IRS will consider administrative relief for both shareholders and fund sponsors. Among the questions that the Council understands they plan to address are whether changes to tax rules and forms (including new assumptions and default methods) could simplify the measurement and reporting of gains and losses from floating-NAV MMFs. Today, the sponsors of non-MMF75 mutual funds must report the basis and holding period of redeemed shares both to the IRS and to redeeming shareholders (referred to as “basis reporting”). The Treasury Department and the IRS have indicated to the Council that they will consider the extent to which expansion or modification of basis reporting could help shareholders deal with floating-NAV MMFs. Finally, they will evaluate the possibility of some administrative relief from the wash sale rules forde minimislosses on floating-NAV MMF shares.

Accounting impacts. There also are accounting considerations relating to floating-NAV MMFs. U.S. generally accepted accounting principles (GAAP) currently include investments in MMFs as an example of a cash equivalent.76 Shareholders and their accountants would need to evaluate whether a floating-NAV MMF meets the characteristics of a cash equivalent under relevant accounting guidance.

Operational costs. MMFs also would have to change their operations to accommodate a floating NAV. MMFs and their transfer agents are currently required to have the capacity to transact at the fund's floating NAV,77 but a permanent change to a floating NAV may require additional operational changes.78 These costs may be mitigated, however, because MMFs are required periodically to determine their market-based NAV and currently have systems in place to do so. In addition,MMF sponsors may be able to adapt the systems used by their other mutual funds, which price at market value each day, to their floating-NAV MMFs. For example, funds may need to modify policies and procedures in order to calculate a daily floating NAV per share and to communicate that value to their distribution partners and shareholders on an ongoing basis. Both fund complexes and other intermediaries in the distribution chain may need to reprogram systems to accommodate a permanent floating NAV.

MMFs' current ability to transact at a stable NAV also generates other operational efficiencies that may be lost with a floating NAV. Some of these conveniences have evolved due to expectations that MMF share prices would never fluctuate and are not consistent with the actual risks in MMF portfolios. For example, a stable NAV facilitates same-day settlement of purchase and redemption transactions. MMFs would need to modify systems to allow same-day settlement to continue with a floating-NAV MMF or shift to next day settlement.79

Impact on industry size. Moving to a floating NAV may cause the MMF industry's AUM to contract. Some MMF investors may be unwilling or unable to conduct their cash management through an investment vehicle that does not offer a stable value.80 Some institutional investors may be prohibited by board-approved guidelines or firm policies from conducting cash management using MMFs that do not have a stable NAV and may be unwilling to change these policies. Other investors, such as some state and local governments, may be subject to statutory or regulatory requirements that permit them to invest certain assets only in funds that seek to maintain a stable net asset value.

These factors may reduce overall investor demand for MMFs, which would diminish the funds' capacity to invest in the short-term securities of financial institutions, businesses, and governments, possibly impacting their costs of funding.81 Elimination of the stable NAV would be a significant change for a multi-trillion dollar industry in which the stable $1.00 share price has been a core feature. It may take time for investors and short-term funding markets to adjust to such a change, and the ultimate long-term reaction to such a change is difficult to predict with any precision. In addition, if the transition to the new regulatory regime prompted investors to redeem suddenly and substantially, the transition itself could create financial instability. A longer transition period and the grandfathering of existing fund shareholdings are designed to lessen this risk.

The Council requests comment on this alternative as well as on all aspects of the discussion presented above. The Council also requests any quantitative analysis or data from commenters relating to this alternative.

Would requiring that all MMFs operate with a floating NAV make them less susceptible to runs? Would it reduce or increase the potential financial instability associated with MMFs? Would it enhance their resiliency?

Would floating the NAV alter investor expectations and make them substantially more willing to bear losses from their MMF investments? Alternatively, would shareholders become accustomed only to relatively small fluctuations in value but redeem heavily in the face of more significant losses?

Would some MMF sponsors support their MMFs despite the elimination of rule 17a-9 (for instance, by contributing capital) under this option and thereby prevent their share prices from deviating materially on a day-to-day basis? If so, would this mitigate the achievement of reform objectives? Should sponsor support of MMFs be prohibited?82

Would initially re-pricing MMF shares to $100.00 per share help sensitize investors to fluctuations in fund value and better change investor expectations? Should they be initially re-priced to a different value than $100.00 to best achieve this goal, for instance, $10.00?

Should existing MMFs be grandfathered for a limited phase-in period, as discussed above, or should they be grandfathered indefinitely? What length of time should be the optimal phase-in period? What length of time would be appropriate after which the SEC would prohibit any new share purchases in stable-NAV MMFs, and any new investments would have to be made in floating-NAV MMFs?

Should the current basis reporting rules applicable to other mutual funds be extended to MMFs in their present form, or can those rules be simplified in a manner that better reflects the comparatively larger volume of transactions in MMF shares and the greater likelihood that gains or losses arising from those transactions will be relatively small on a per-share basis? Are there changes to the basis-reporting rules, such as the use of rounding conventions, that would reduce compliance costs for MMFs while providing shareholders with the information they would need?

Are there classes of MMF shareholders to which current law does not require basis reporting but which may be unable to obtain this information from an MMF fund in the absence of an explicit regulatory requirement?

If the Treasury Department and the IRS were to provide administrative relief forde minimislosses on wash sales of shares in MMFs, what should be the terms of that relief?

How significant are the accounting and operational considerations relating to floating-NAV MMFs? To lessen possible issues arising from these considerations, what recommendations would commenters have for possible changes to accounting treatment for floating-NAV MMFs? What amount of operational costs would fund groups incur to implement a floating NAV for MMFs? To what extent are funds and their intermediaries currently prepared to operate floating-NAV MMFs on an ongoing basis due to the currentrequirement that MMFs be able to transact at a price other than the fund's stable price per share and as a result of the group's existing systems for their other mutual funds?

Would investors and their accountants consider floating-NAV MMFs to be cash equivalents under relevant accounting guidance without clarification by accounting standard setters? If not, what are the implications for a shareholder that treats MMF shares as an investment for accounting purposes? If not, and if there were relief on the potential accounting considerations, would these funds be an attractive investment to investors?

Should any types of MMFs be exempt from a requirement that they operate with a floating NAV, such as retail MMFs, Treasury MMFs, or government MMFs? If so, why? If there were an exemption for retail funds, how should the SEC define a retail MMF?

Should MMFs be required to mark-to-market all assets in their portfolios under this option and be limited in using the amortized cost method of valuation to the same extent as other mutual funds? Why or why not? If the SEC required MMFs to use floating NAVs like other mutual funds, should it nonetheless continue to permit different valuation practices regarding portfolio securities for MMFs versus other mutual funds? How effective would this be during times of stress, when markets for such securities may be less liquid or transparent?

Should a floating NAV requirement be combined with any other regulatory reform options, such as redemption restrictions, to further lessen funds' susceptibility to runs? If so, which restrictions and why?

How would floating the NAV affect investor demand for MMFs? To what extent and why would investors discontinue investing in MMFs if they operated with a floating NAV? Where would investors shift their investments and how would this mitigate or increase risks to financial stability?

Require MMFs to have an NAV buffer with a tailored amount of assets of up to 1 percent to absorb day-to-day fluctuations in the value of the funds' portfolio securities and allow the funds to maintain a stable NAV. The NAV buffer would have an appropriate transition period and could be raised through various methods. The NAV buffer would be paired with a requirement that 3 percent of a shareholder's highest account value in excess of $100,000 during the previous 30 days—a minimum balance at risk (MBR)—be made available for redemption on a delayed basis. Most redemptions would be unaffected by this requirement, but redemptions of an investor's MBR itself would be delayed for 30 days. In the event that an MMF suffers losses that exceed its NAV buffer, the losses would be borne first by the MBRs of shareholders who have recently redeemed, creating a disincentive to redeem and providing protection for shareholders who remain in the fund. These requirements would not apply to Treasury MMFs, and the MBR requirement would not apply to investors with account balances below $100,000.

A second regulatory reform alternative would mandate that most MMFs: (i) Maintain an NAV buffer, which would be a tailored amount of assets of up to 1 percent in excess of those needed for a fund to maintain its $1.00 share price and which would absorb day-to-day fluctuations in the value of the fund's portfolio securities; and (ii) require that 3 percent of any shareholder's highest account value in excess of $100,000 during the previous 30 days (the MBR) be available for redemption with a 30-day delay. The MBR requirement would have no effect on any redemptions that leave an investor's remaining balance at least as large as the MBR; only redemptions of the MBR itself would be delayed. In the event that an MMF suffers losses that exceed its NAV buffer, those losses would be borne first by the MBRs of shareholders who have recently redeemed. These requirements would not apply to Treasury MMFs, and investors with balances of less than $100,000 would not be subject to the MBR requirement.

The NAV buffer and the MBR would be designed to reduce MMFs' susceptibility to runs by allowing a fund to absorb day-to-day fluctuations in the value of its portfolio securities, providing a disincentive for shareholders to redeem in times of stress, and allocating more fairly the costs to the fund that can result when shareholders do redeem. This alternative would be designed to address the structural vulnerabilities of MMFs while also allowing them to continue to maintain a stable NAV under most conditions.

Overview. MMFs would be required to maintain an NAV buffer, which would provide a fund with additional assets that would be available to absorb daily fluctuations in the value of the fund's portfolio securities. The NAV buffer would allow funds generally to maintain a $1.00 stable value per share and replace the provisions of rule 2a-7 that allow MMFs to use the penny-rounding method of pricing and the amortized cost method of valuation.

Size of the NAV buffer. The required minimum size of a fund's NAV buffer would be tailored based on the riskiness of the fund's assets, using the following formula:

(i) No buffer requirement for cash, Treasury securities, and Treasury repos (repos collateralized solely by cash and Treasury securities);

(ii) A 0.75 percent buffer requirement for other daily liquid assets (or for weekly liquid assets, in the case of tax-exempt funds);83 and

(iii) A 1.00 percent buffer requirement for all other assets.84

Funding the NAV buffer. An MMF would be permitted to use any funding method or combination of methods it found optimal to build the NAV buffer, and could vary these methods over time in response to market conditions and other considerations. An NAV buffer that may be raised from the capital markets, fund sponsors, and income from the fund itself would be designed to provide flexibility for funds to raisethe buffer at the lowest possible cost. We have identified three funding methods that would be possible with SEC relief from certain provisions of the Investment Company Act:

•Escrow account.An MMF's sponsor could establish and contribute assets to an escrow account pledged to support the fund's NAV. The escrow account would be limited to holding weekly liquid assets (i.e.,cash, Treasury securities, certain short-term government securities, and securities payable within five business days). These accounts would be similar to the segregated accounts established by some MMF sponsors during the financial crisis to support their funds' stable values,87 and therefore are a tested and, for some, familiar method of funding.

•Subordinated buffer shares.MMFs could issue a class of subordinated, non-redeemable equity securities (buffer shares) that would absorb first losses in the funds' portfolios and that could be sold to third parties or purchased by a fund's sponsor or affiliates. The buffer shares would be permitted to pay higher dividends than those paid to redeemable shares but would have a subordinated claim on the fund's assets. The fund's redeemable shares would offer a preferred claim on the fund's assets up to $1.00 per share (i.e.,the buffer shares would absorb losses before they affect the redeemable shareholder's $1.00 share value).88

•Retained earnings.An MMF could retain some earnings it otherwise would distribute to shareholders. The usefulness of this method of funding, however, would be greatly limited by the tax law requirements for maintaining the ability to avoid any fund-level tax. In addition to incurring tax on any amount retained, an MMF would be required to pay tax on the amounts that it does distribute if it fails to distribute substantially all of its earnings each year.

Transition period. In order to allow sufficient time for funds to raise the NAV buffer, an MMF would be required to put in place a buffer equal to one-half of the buffer described above one year after the effective date of any rule. The full required buffer would have to be in place two years after the effective date.

Overview. The NAV buffer would be coupled with a requirement that 3 percent of any shareholder's highest account value in excess of $100,000 during the previous 30 days (the shareholder's MBR) be available for redemption only with a 30-day delay. The MBR requirement would have no effect on any redemptions that leave an investor's remaining balance at least as large as the MBR. Shares other than those in the investor's MBR would be redeemable on demand, just as MMF shares are today; only redemptions of the MBR itself would be delayed. The MBR requirement, like the NAV buffer, would not apply to Treasury MMFs. In addition, the MBR requirement would not apply to investors with account balances of less than $100,000.

The MBR requirement would ensure that an investor who redeems from an MMF remains partially invested in the fund for 30 days and would share in any losses that the fund incurs during that time. This is designed to dampen investors' incentive to redeem quickly in a crisis, because they cannot entirely avoid imminent losses simply by redeeming. Furthermore, as discussed in more detail below, if the MMF suffers losses that exceed its NAV buffer, those losses would be borne first by the MBRs of shareholders who have recently redeemed. This allocation of losses would be designed to create a disincentive to redeem when an MMF is under stress and would provide some protection for shareholders who do not redeem.

Size of the MBR. An investor's MBR would be equal to 3 percent of the investor's “High Water Mark,” which would be the amount, if any, by which the highest balance in that investor's account over the previous 30 days exceeded $100,000. At any point in time, an investor's account balance available for immediate redemptions would be equal to the account balance less the MBR (the investor's “Available Balance”).90

MBR delay period. If an investor chooses to redeem more than the Available Balance (e.g.,all of the shares in the account), the fund would be required to delay redemption of the MBR for 30 days. The investor would receive the MBR redemption proceeds, priced at $1.00 per share, after the 30-day delay period, unless the MMF suffered a loss in excess of its NAV buffer during that period. The MBR requirement would have no effect on an investor's transactions in the fund as long as the remaining shares exceeded the MBR.

Subordination of the MBR. For those investors subject to an MBR requirement, a portion of the investor's MBR could be subject to first loss (subordinated) if the investor had made net redemptions in excess of $100,000 during the prior 30 days, with the extent of subordination approximately proportionate to the shareholder's cumulative net redemptions during the prior 30 days.91 In the event that an MMF suffered losses in excess of its NAV buffer, and only in such an event, the subordinated portions of shareholders' MBRs would absorb losses before other shares do.92

Illustrative examples.93 The following examples illustrate how an MBR requirement would operate:

I. Purpose

In accordance with Federal Acquisition Regulation 19.702, any contractor receiving a contract for more than the simplified acquisition threshold must agree in the contract that small business, small disadvantaged business, historically underutilized business zone (HUBZone) small business, veteran-owned small business, service-disabled veteran-owned small business, and women-owned small business concerns will have the maximum practicable opportunity to participate in contract performance consistent with its efficient performance. Further, contractors receiving a contract or a modification to a contract expected to exceed $650,000 ($1,500,000 for construction) must submit a subcontracting plan that provides maximum practicable opportunities for the above named concerns. Specific elements required to be included in the plan are specified in section 8(d) of the Small Business Act and are implemented in FAR Subpart 19.7.

In conjunction with the subcontracting plan requirements, contractors must submit an annual summary (semi-annual for DOD and NASA) of subcontracts awarded by prime and subcontractors for a specific Federal Government agency that required an Individual Subcontracting plan for the previous fiscal year. This is accomplished through the use of the Standard Form 295, Summary Subcontract Report, or the Summary Subcontract Report (SSR), the electronic equivalent of the of the Standard Form 295, submitted through the ElectronicSubcontracting Reporting System (eSRS).

Contractors must use the SSR in lieu of the SF 295, with the exception of those contracts noted in FAR 4.606(c)(5) which requires that actions, pursuant to other authority, will not be entered in Federal Procurement Data System (e.g., reporting of the information would compromise national security). Those contract actions noted in FAR 4.606(c)(5) will continue to use the Standard Form 295.

Based on information from eSRS and an estimate of the use of eSRS, an upward adjustment is being made to the number of respondents, but a downward adjustment is being made to the average burden hours for reporting and recordkeeping per response. As a result, a downward adjustment is being made to the estimated annual reporting burden since the notice regarding an extension to this clearance published in theFederal Registerat 75 FR 9603, on March 3, 2010.

Respondents:129,009.

Responses per Respondent:1.

Total Responses:129,009.

Average Burden Hours per Response:9.0.

Total Burden Hours:1,161,081.

Obtaining Copies of Proposals:Requesters may obtain a copy of the information collection documents from the General Services Administration, Regulatory Secretariat (MVCB), 1275 First Street NE., Washington, DC 20417, telephone (202) 501-4755. Please cite OMB Control Number 9000-0007, Summary Subcontract Report, in all correspondence.

In accordance with Public Law 105-392, the ACMH was established to provide advice to the Deputy Assistant Secretary for Minority Health in improving the health of each racial and ethnic minority group and on the development of goals and specific program activities of the Office of Minority Health.

Topics to be discussed during these meetings will include strategies to improve the health of racial and ethnic minority populations through the development of health policies and programs that will help eliminate health disparities, as well as other related issues.

Public attendance at this meeting is limited to space available. Individuals who plan to attend and need special assistance, such as sign language interpretation or other reasonable accommodations, should notify the designated contact person at least seven (7) business days prior to the meeting. Members of the public will have an opportunity to provide comments at the meeting. Public comments will be limited to three minutes per speaker. Individuals who would like to submit written statements should mail or fax their comments to the Office of Minority Health at least seven (7) business days prior to the meeting. Any members of the public who wish to have printed material distributed to ACMH committee members should submit their materials to the Executive Director, ACMH, Tower Building, 1101 Wootton Parkway, Suite 600, Rockville, Maryland 20852, prior to close of business November 26, 2012.

Section 520(b) of the FD&C Act (21 U.S.C. 360j(b), as amended by section 617 of FDASIA (Pub. L. 112-144), sets forth the requirements that must be met in order for a device to qualify for a custom device exemption (Ref. 1). Section 520(b) of the FD&C Act exempts “custom devices” from performance standard or premarket approval requirements under sections 514 and 515 of the FD&C Act (21 U.S.C. 360d and 360e), if these devices meet the enumerated statutory requirements, including, among others, the following for each device: (1) Is “created or modified in order to comply with the order of an individual physician or dentist (or any other specially qualified person designated under regulations promulgated by the Secretary after an opportunity for an oral hearing)”; (2) must not be “generally available in the United States in finished form through labeling or advertising by the manufacturer, importer, or distributor for commercial distribution”; (3) must be for the purpose of treating a “unique pathology or physiological condition that no other device is domestically available to treat”; and (4) must be manufactured for the “special needs of such physician or dentist (or other specially qualified person so designated) in the course of the professional practice of the physician or dentist (or other specially qualified person so designated)” or by an individual patient named in such order.

In addition to these new requirements for establishing a custom device, manufacturers will have limitations for use of a custom device only for the purpose of treating a “sufficiently rare condition, such that conducting clinical investigations on such device would be impracticable” and production of the device must be limited to no more than five units per year of a particular device type. Lastly, manufacturers will be required to submit an annual report explaining their use of the custom device exemption under section 617 of FDASIA.

FDA is seeking information on and examples of appropriate uses of the custom device exemption identified in section 520(b) of the FD&C Act. FDA encourages all stakeholders, including patients, physicians, dentists, and manufacturers, to submit comments on the appropriate use of this statutory provision.

FDA is particularly interested in receiving information relating to:

1. Input from patients, manufacturers, dentists, or physicians on where use of the custom device exemption is appropriate.

2. Specific instances where manufacturers, dentists, or physicians have used, would have liked to use, or plan to use the custom device exemption for treatment of a sufficiently rare condition.

3. Product areas other than orthopedic and dental devices where the custom device exemption may be useful.

4. The type of information manufacturers intend to require a physician, dentist, or other qualified person to submit to them when ordering a custom device.

5. How often a custom device is ordered due to unusual anatomical features of the individual physician/dentist, or due to a unique need in the physician's/dentist's practice not shared by health professionals of the same specialty (i.e., a special need of a physician or dentist).

This notice provides the first opportunity for the public to comment on these issues. The public will have a second opportunity to provide input when the Agency announces the availability of a draft guidance document and a draft regulation for implementing section 520(b) of the FD&C Act.

Interested persons may submit either written comments regarding this document to the Division of Dockets Management (seeADDRESSES) or electronic comments tohttp://www.regulations.gov. It is only necessary to send one set of comments. Identify comments with the docket number found in brackets in the heading of this document. Received comments may be seen in the Division of Dockets Management between 9 a.m. and 4 p.m., Monday through Friday, and will be posted to the docket athttp://www.regulations.gov.

The following reference has been placed on display in the Division of Dockets Management (seeADDRESSES) and may be seen by interested persons between 9 a.m. and 4 p.m., Monday through Friday, and are available electronically athttp://www.regulations.gov.

1. The Food and Drug Administration Safety and Innovation Act, available athttp://www.fda.gov/RegulatoryInformation/Legislation/FederalFoodDrugandCosmeticActFDCAct/SignificantAmendmentstotheFDCAct/FDASIA/ucm20027187.htm.

Notice is hereby given that, in a letter dated October 29, 2012, the President issued an emergency declaration under the authority of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121-5207 (the Stafford Act), as follows:

The Federal Emergency Management Agency (FEMA) hereby gives notice that pursuant to the authority vested in the Administrator, Department of Homeland Security, under Executive Order 12148, as amended, Thomas J. McCool, of FEMA is appointed to act as the Federal Coordinating Officer for this declared emergency.

The following areas of the Commonwealth of Pennsylvania have been designated as adversely affected by this declared emergency:

Notice is hereby given that, in a letter dated October 29, 2012, the President issued an emergency declaration under the authority of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121-5207 (the Stafford Act), as follows:

The Federal Emergency Management Agency (FEMA) hereby gives notice that pursuant to the authority vested in the Administrator, Department of Homeland Security, under Executive Order 12148, as amended, Donald L. Keldsen, of FEMA is appointed to act as the Federal Coordinating Officer for this declared emergency.

The following areas of the Commonwealth of Virginia have been designated as adversely affected by this declared emergency:

Notice is hereby given that, in a letter dated October 29, 2012, the President issued an emergency declaration under the authority of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121-5207 (the Stafford Act), as follows:

The Federal Emergency Management Agency (FEMA) hereby gives notice that pursuant to the authority vested in the Administrator, Department of Homeland Security, under Executive Order 12148, as amended, Dolph A. Diemont, of FEMA is appointed to act as the Federal Coordinating Officer for this declared emergency.

The following areas of the State of West Virginia have been designated as adversely affected by this declared emergency:

Notice is hereby given that, in a letter dated October 29, 2012, the President issued an emergency declaration under the authority of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121-5207 (the Stafford Act), as follows:

The Federal Emergency Management Agency (FEMA) hereby gives notice thatpursuant to the authority vested in the Administrator, Department of Homeland Security, under Executive Order 12148, as amended, Regis Leo Phelan, of FEMA is appointed to act as the Federal Coordinating Officer for this declared emergency.

The following areas of the State of Delaware have been designated as adversely affected by this declared emergency:

You may obtain an electronic copy using the Internet by—

(1) Searching the electronic Federal Docket Management System (FDMS) Web page athttp://www.regulations.gov;

(2) Accessing the Government Printing Office's Web page athttp://www.gpoaccess.gov/fr/index.html;or

(3) Visiting TSA's Security Regulations Web page athttp://www.tsa.govand accessing the link for “Research Center” at the top of the page.

In addition, copies are available by writing or emailing the TSA Privacy Office in theFOR FURTHER INFORMATION CONTACTsection. Make sure to identify the docket number of this notice.

The Transportation Security Administration is responsible for security in all modes of transportation and performs passenger and baggage screening at the Nation's airports. Prior to the implementation of the TSA Secure Flight program, this screening was supplemented by aircraft operators who performed passenger watch list matching against the federal No Fly and Selectee Lists, as required under security directives issued by TSA in 2002. Aircraft operators also conducted this watch list matching process for certain non-traveling individuals1 authorized to enter the sterile area2 of an airport.

The National Commission on Terrorist Attacks Upon the United States (the 9/11 Commission) recommended that watch list matching be performed by TSA using the “larger set of watch lists maintained by the Federal Government.”3 In response, under section 4012(a)(1)-(2) of the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA),4 Congress directed TSA and DHS to assume from aircraft operators the function of comparing airline passenger information to data in the Terrorist Screening Database (TSDB) maintained by the Terrorist Screening Center (TSC).5 Consistent with this statutorydirective, TSA promulgated the Secure Flight Final Rule6 for the purpose of enhancing the security of air travel in the United States and to support the federal government's counter-terrorism efforts by assisting in the detection of individuals on federal government watch lists who seek to travel by air, and to facilitate the secure travel of the public. By November 2010, TSA fully assumed the watch list matching function from aircraft operators and air carriers.

TSA established the Secure Flight system of records and published the SORN in theFederal Registeron August 23, 2007.7 TSA altered and republished the SORN in theFederal Registeron November 9, 2007.8 TSA is amending the Secure Flight SORN again to reflect additions to TSA's screening capabilities as discussed below.

TSA uses Secure Flight to conduct watch list matching against the No Fly and Selectee List components of the TSDB. Where warranted by security considerations, Secure Flight also matches against the full TSDB and other government databases. In addition, Secure Flight matches against the list of individuals whom the Department of Health and Human Services, Centers for Disease Control and Prevention (CDC) has identified to DHS as persons who should not be permitted to board an aircraft due to public health concerns.9

TSA also uses Secure Flight to match air travelers and other individuals seeking access to airport sterile areas against a list of individuals who have each been assigned a unique redress number by the DHS Traveler Redress Inquiry Program (TRIP).10 TSA also may collect and use a passenger's “Known Traveler Number” if available. A Known Traveler Number is a unique number assigned to Known Travelers for whom the federal government has conducted a security threat assessment and determined do not pose a security threat.11 TSA did not use this capability when it initially assumed responsibility for passenger screening using Secure Flight. In October 2011, however, TSA announced the TSAPre✓TMpilot program.12 TSA initiated TSA Pre✓TMas a proof of concept at four U.S. airports, starting with individuals enrolled within U.S. Customs and Border Protection (CBP) Trusted Traveler programs13 and certain airline frequent flyer program members.14 The purpose of the proof of concept was to evaluate capabilities to identify air travelers who are lower risk and eligible for expedited security screening at the airport checkpoints, and to test expedited screening processes. The Known Travelers participating in the proof of concept volunteered information that permitted TSA to make risk assessments before the individual arrives at the airport.

Earlier this year, TSA began the transition of the TSAPre✓TMprogram—including individuals in CBP Trusted Traveler programs and certain airline frequent flyer program members—from proof of concept to an operational status.15 TSA is expanding the availability of TSAPre✓TMto additional U.S. airports and populations, such as eligible members of the U.S. Armed Forces and certain active security clearance holders.16 By identifying passengers who are low risk and providing them expedited screening, TSA Pre✓TMenables the agency to better focus its screening efforts on individuals who are more likely to pose a threat to civil aviation.

As part of the effort to identify individuals that are low risk, TSA also is creating and maintaining a watch list of individuals who are disqualified from eligibility from TSA Pre✓TM, for some period of time or permanently, because they have been involved in violations of security regulations of sufficient severity or frequency. Disqualifying violations of aviation security regulations may involve violations at the airport or on board aircraft, such as a loaded firearm that is discovered in carry-on baggage at the checkpoint, or a threat to use a destructive device against a transportation conveyance, facilities, or personnel. TheTSA Pre✓TMDisqualification List will be generated by TSA's Performance and Results Information System (PARIS).17

Consistent with its ongoing efforts to focus on passengers who are more likely to pose a threat to civil aviation, and following the failed terrorist attack on an international flight bound for Detroit on December 25, 2009, the Secure Flight program began matching passengers on international flights bound for the United States against a list of individuals requiring enhanced screening that is generated through CBP's Automated Targeting System (ATS).18 ATS uses threat-based intelligence scenarios designed to identify international travelers who are more likely to pose a threat and for whom enhanced screening is appropriate. TSA receives from CBP a continuously updated list of individuals identified through these scenario rules for use in Secure Flight passenger screening. Oversight is exercised by the DHS Offices of Privacy, Civil Rights and Civil Liberties, and General Counsel to ensure that the threat-based intelligence is appropriately applied. After they arrive in the United States, some of these international travelers also may receive enhanced screening prior tosubsequent domestic and international outbound flights for a period of time, again based on threat-based, intelligence-driven scenario rules.

TSA receives from CBP an Electronic System for Travel Authorization (ESTA) status code for international travelers. ESTA is an automated system used by CBP to determine the eligibility of visitors to travel to the United States under the Visa Waiver Program and whether the traveler poses any law enforcement or security risk. In order to eliminate multiple messages to the airlines from CBP and TSA on a single passenger, Secure Flight transmits the ESTA status code for international travelers to the aircraft operator as part of the boarding pass printing result.

Finally, TSA is adding a clause to subsection (a) of the Category of Individuals to ensure that, when requested by a U.S. government agency or institution, TSA may use Secure Flight to vet passengers on U.S. government operated, chartered, or leased flights. A corresponding change to routine use (3) is being made to permit disclosure of information to the U.S. government agency for screening status or operational response.

In accordance with the Privacy Act of 1974, 5 U.S.C. 552a, DHS/TSA is altering and republishing DHS/TSA SORN DHS/TSA-019, titled Secure Flight Records (72 FR 63711, November 9, 2007). Consistent with the discussion above, the following modifications are being made to the DHS/TSA-019 Secure Flight Records system of records:

• The Categories of Individuals section is updated as follows:

○ We have added a category of individuals to subsection (a) to ensure that U.S. government operated flights are covered, including flights leased or chartered by the U.S. government.

○ We have rewritten subsection (c) to clarify that it addresses individuals involved with chartered or leased aircraft “with a maximum take-off weight” over 12,500 pounds; and

○ We have added a new subsection (f) to expressly include individuals who are identified as Known Travelers.

• The Categories of Records section is updated as follows:

○ We have amended subsection (a) to note that TSA receives from aircraft operators the designator code used to verify certain travelers' frequent flyer status.

○ Subsection (a) also was amended to clarify that Secure Flight may receive Secure Flight Passenger Data (SFPD)19 for individuals who seek to charter, lease, operate, or be transported on aircraft “with a maximum take-off weight” over 12,500 pounds, and owners and/or operators of such aircraft,

○ We have revised subsection (d) to reflect that matching analyses and results may include lists generated by other classified and unclassified government watchlists. As discussed above such lists include CBP ATS, the TSA Pre✓TMDisqualification list, and the CDC Do Not Board list.

○ We have inserted a new subsection (h) to expressly include the Electronic System for Travel Authorization (ESTA) status code for international travelers as a category of records,

○ We have inserted a new subsection (i) to expressly include records about Known Travelers.

• The Purpose(s) section is updated to reflect that, in addition to assisting in the detection of individuals identified on federal government watch lists who seek to travel by air, Secure Flight also is used to identify air travelers who are lower risk and eligible for expedited security screening at the airport checkpoints.

• The Routine Uses section is updated as follows:

○ We have rewritten routine use (2) to conform to a standard DHS routine use pertaining to the sharing of information with contractors when necessary.

○ We have amended routine use (3) to more accurately reflect that TSA discloses the passenger screening status, not the watch list matching status, to airlines, airports, and the Department of Transportation, and to reflect that passenger screening information may be disclosed to U.S. government agencies that operate, charter, or lease aircraft. This would permit, for example, the Department of Defense (DoD) to request that passengers on a DoD operated or chartered flight be vetted through Secure Flight.

○ We have amended routine use (4) to make it consistent with routine use (3) providing for disclosure regarding individuals who pose or are suspected of posing a risk to transportation or national security.

○ We have deleted from routine use (9) the reference to the DHS Office of Inspector General since such disclosures would be accomplished pursuant to the Privacy Act under 5 U.S.C. 552a(b)(1) rather than pursuant to a routine use.

• The Disclosure to Consumer Reporting Agencies section is being changed to reflect that disclosures in connection with the Debt Collection Act of 1982 (Pub. L. 97-365) are not part of this system of records. Routine use 12 remains in place to permit disclosures in the event of a data breach.

• The Retention and Disposal section is amended to reflect that the retention schedule was approved by NARA. This section also was amended to reflect that lists of individuals in Secure Flight, such as Known Traveler lists and the TSA Pre✓TMDisqualification list, will be deleted or destroyed when superseded.

• The System Manager and Notification Procedure section has been updated to reflect updated contact information.

• The Records Access Procedures section has been updated to reflect the correct zip code for the TSA Freedom of Information Act Office.

• The Records Access Procedures section also was revised to clarify that individuals who believe they have been improperly denied entry by CBP may submit a redress request through DHS TRIP.

• The Record Source Categories section is updated to clarify that Secure Flight may receive information from all three branches of the Federal government, as well as from private entities (e.g.,airlines) that participate in the Known Traveler program.

• The Exemptions Claimed for the System category is updated to include non-travelers to whom a covered aircraft operator or covered airport seeks to issue an authorization to enter the sterile area of an airport.

The Privacy Act embodies fair information practice principles in a statutory framework governing the means by which the federal government agencies collect, maintain, use, and disseminate individuals' records. The Privacy Act applies to information that is maintained in a “system of records.” A “system of records” is a group of any records under the control of an agency for which information is retrieved by the name of an individual or by some identifying number, symbol, or other identifying particular assigned to the individual. In the Privacy Act, an individual is defined to encompass U.S. citizens and lawful permanent residents. As a matter of policy, DHS extends administrative Privacy Act protections to all individuals when systems of records maintain information on U.S. citizens, lawful permanent residents, and visitors. Individuals mayrequest access to their own records that are maintained in a system of records in the possession or under the control of DHS by complying with DHS Privacy Act regulations, 6 CFR Part 5.

The Privacy Act requires each agency to publish in theFederal Registera description denoting the type and character of each system of records that the agency maintains, and the routine uses that are contained in each system in order to make agency recordkeeping practices transparent, to notify individuals regarding the uses to their records are put, and to assist individuals to more easily find such files within the agency. Below is the description of the DHS/TSA-019 Secure Flight Records system of records.

In accordance with 5 U.S.C. 552a(r), DHS has provided a report of this system of records to the Office of Management and Budget and to Congress.

This notice informs the public that the Department of Housing and Urban Development has submitted to OMB arequest for approval of the Information collection described below. This notice is soliciting comments from members of the public and affecting agencies concerning the proposed collection of information to: (1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information; (3) Enhance the quality, utility, and clarity of the information to be collected; and (4) Minimize the burden of the collection of information on those who are to respond; including through the use of appropriate automated collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.

This notice also lists the following information:

Title of Proposed:OneCPD Technical Assistance and Capacity Building Needs Assessment.

OMB Approval Number:2506-New.

Form Numbers:None.

Description of the need for the information and proposed use:The OneCPD Needs Assessment will enhance a grantee's awareness of their functional capacity to effectively and efficiently administer and manage programs funded by CPD and enable HUD and the TA provider to better understand the scope of assistance needed by each grantee and to target appropriate TA resources to grantees. It will also enable HUD to identify trends in TA needs across grantees and assist in prioritizing the development of tools, products and group learning activities to benefit CPD grantees and subrecipients. Members of the affected public: Grantees and subrecipient organizations receiving funding to operate and manage programs administered by the Office of Community Planning and Development (CPD).

Estimation of the total number of hours needed to prepare the information collection including number of respondents, frequency of response, and hours of response: 180 respondents × 176.4 average hours per response = 31,752 hours annually.

Status:New collection.

This notice informs the public that the Department of Housing and Urban Development has submitted to OMB a request for approval of the Information collection described below. This notice is soliciting comments from members of the public and affecting agencies concerning the proposed collection of information to: (1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information; (3) Enhance the quality, utility, and clarity of the information to be collected; and (4) Minimize the burden of the collection of information on those who are to respond; including through the use of appropriate automated collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.

This notice also lists the following information:

Title of Proposed:Funding Availability for OneCPD Technical Assistance and Capacity Building Program.

OMB Approval Number:2506-New.

Form Numbers:SF-424, SF-424CB, SF-424CBW, LLL, 2880.

Description of the need for the information and proposed use:Application information is needed to determine competition winners, i.e., those technical assistance providers best able to assist CPD grantees and communities to develop efficient and effective programs and projects that increase the supply of affordable housing units, prevent and reduce homelessness, improve data collection and reporting, and use coordinated neighborhood and community development strategies to revitalize and strengthen their communities.

Status:New collection.

Section 1605(a) of the Recovery Act provides that none of the funds appropriated or made available by the Recovery Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States. Section 1605(b) provides that the Buy American requirement shall not apply in any case or category in which the head of a Federal department or agency finds that: (1) Applying the Buy American requirement would be inconsistent with the public interest; (2) iron, steel, and the relevant manufactured goods are not produced in the U.S. in sufficient and reasonably available quantities or of satisfactory quality, or (3) inclusion of iron, steel, and manufactured goods will increase the cost of the overall project by more than 25 percent. Section 1605(c) provides that if the head of a Federal department or agency makes a determination pursuant to section 1605(b), the head of the department or agency shall publish a detailed written justification in theFederal Register.

In accordance with section 1605(c) of the Recovery Act and OMB's implementing guidance published on April 23, 2009 (74 FR 18449), this notice advises the public that, on October 17, 2012, upon request of the Chesapeake Redevelopment and Housing Authority, HUD granted an exception to applicability of the Buy American requirements with respect to work, using CFRFC grant funds, in connection with the Schooner Cove and Peaceful Village projects. The exception was granted by HUD on the basis that the relevant manufactured goods (gas fired tankless water heaters) are not produced in the U.S. in sufficient and reasonably available quantities or of satisfactory quality.

The Commission instituted this investigation on September 7, 2011, based on a complaint filed by Litepanels, Inc. and Litepanels, Ltd. (collectively, “Litepanels”). 76 FR 55416 (Sept. 7, 2011). The complaint alleged violations of section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337) in the importation into the United States, the sale for importation, and the sale within the United States after importation of certain LED photographic lighting devices and components thereof that infringe certain claims of U.S. Patent Nos. 7,429,117 (terminated from the investigation); 7,510,290 (terminated from the investigation); 7,972,022 (“the '022 patent”); 7,318,652 (“the '652 patent”); and 6,948,823 (“the '823 patent”). The Notice of Institution named respondents Flolight, LLC. of Campbell, California; Prompter People, Inc. of Campbell, California; IKAN Corporation of Houston, Texas; Advanced Business Computer Services, LLC d/b/a Cool Lights, USA of Reno, Nevada; Elation Lighting, Inc. of Los Angeles, California; Fotodiox, Inc. of Waukegan, Illinois; Fuzhou F&V Photographic Equipment Co., Ltd. of Fujian, China; Yuyao Lishuai Photo-Facility Co., Ltd. of Zhejiang Province, China; Yuyao Fotodiox Photo Equipment Co., Ltd. of Zhejiang Province, China; Shantou Nanguang Photographic Equipment Co., Ltd. of Guangdong Province, China; Visio Light, Inc. of Taipei, Taiwan; Tianjin Wuqing Huanyu Film and TV Equipment Factory of Tianjin, China; Stellar Lighting Systems of Los Angeles, California; and Yuyao Lily Collection Co., Ltd. of Yuyao, China. The Commission Investigative Attorney (“IA”) of the Office of Unfair Import Investigations also participated in this investigation.

On September 7, 2012, the ALJ issued the subject final ID finding a violation of section 337. The ALJ held that a violation occurred in the importation into the United States, the sale for importation, or the sale within the United States after importation of certain LED photographic lighting devices and components thereof that infringe one or more of claims 1, 57-58, and 60 of the '022 patent; claims 1, 2, 5, 16, 18, 19, 25 and 27 of the '652 patent; and claim 19 of the '823 patent. ID at ii. The ALJ further held that no violation of section 337 occurred in the importation into the United States, the sale for importation, or the sale within the United States after importation of certain LED photographic lighting devices and components thereof that infringe claims 17 and 28 of the '823 patent because claims 17 and 28 are anticipated.Id.at ii, 81.

Litepanels petitions for review of the ALJ's construction of the preamble of claim 17 of the '823 patent and asserts that the ALJ incorrectly found that independent claim 17 and dependent claim 28 of the '823 patent were invalid based on his incorrect construction. The IA petitioned for review of the ALJ's finding that claims 17, 19 and 28 of the '823 patent are infringed based on the construction of the term “an integrated power source” of independent claim 17. Respondents petitioned for review of most of the ALJ's invalidity findings (including public use, and obviousness), the construction of “focusing element” of claim 1 of the '652 patent, and the exclusion of claim charts.

The Commission has determined to review the ID in part. The Commission has determined to review (1) the ALJ's construction of the preamble of the asserted independent claims of the '652 patent, the '823 patent and the '022 patent; (2) the ALJ's findings of infringement; (3) the ALJ's findings of obviousness and anticipation; (4) the ALJ's construction of “an integrated power source” of claim 17 of the '823 patent; and (5) the ALJ's findings on the technical prong of domestic industry. The Commission has determined not to review the remainder of the ID.

The parties are requested to brief their positions on the issues under review with reference to the applicable law and the evidentiary record. In connection with its review, the Commission is particularly interested in responses to the following questions:

(1) If the Commission were to determine that the preambles of the asserted independent claims of the '652 patent, the '823 patent and the '022 patent are limitations and should be interpreted based on their plain and ordinary meaning (seeID at 44), what impact, if any, does this have on the ALJ's findings regarding anticipation and obviousness for the asserted patents? Please cite to record evidence that supports your position.

(2) If the Commission were to determine that the preambles of the asserted independent claims of the '652 patent, the '823 patent and the '022 patent are limitations and should be interpreted based on their plain and ordinary meaning (seeID at 44), do the accused products and domestic industry products meet the preamble limitation of each of the asserted independent claims? Please cite to record evidence to support your position. Have the Respondents waived the ability to challenge a finding that the preambles of the asserted independent claims, interpreted based on their plain and ordinary meaning, are met by the accused products?

In connection with the final disposition of this investigation, the Commission may issue an order that could result in the exclusion of the subject articles from entry into the United States. Accordingly, the Commission is interested in receiving written submissions that address the form of remedy, if any, that should be ordered. The Commission is particularly interested in responses to the following questions:

(1) Please discuss the technical and qualitative interchangeability of Litepanels and its licensees' products with the products that would be excluded under a general exclusion order. Please discuss the evidence that supports your position.

(2) Discuss whether Litepanels and its licensees have sufficient capability to meet the demand for any products that would be excluded under a general exclusion order. Please discuss the evidence that supports your position, including evidence regarding current manufacturing capacity and product interchangeability.

(3) What lead time would be required for existing manufacturers to modify their allegedly infringing products to be noninfringing? Please discuss the evidence that supports your position.

(4) Please discuss specific evidence pertaining to any specialized requirements of the film, video, photographic industries, or any other industries, that cannot be met by the products of Litepanels or its licensees, but are only met by the products that would be excluded under a general exclusion order.

(5) Please provide specific evidence regarding the impact, if any, of a general exclusion order on public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers.

If the Commission contemplates some form of remedy, it must consider the effects of that remedy upon the public interest. The factors the Commission will consider include the effect that an exclusion order and/or cease and desist orders would have on (1) the public health and welfare, (2) competitive conditions in the U.S. economy, (3) U.S. production of articles that are like or directly competitive with those that are subject to investigation, and (4) U.S. consumers. The Commission is therefore interested in receiving written submissions that address the aforementioned public interest factors in the context of this investigation.

If the Commission orders some form of remedy, the U.S. Trade Representative, as delegated by the President, has 60 days to approve or disapprove the Commission's action.SeePresidential Memorandum of July 21, 2005, 70 FR 43251 (July 26, 2005). During this period, the subject articles would be entitled to enter the United States under bond, in an amount determined by the Commission and prescribed by the Secretary of the Treasury. The Commission is therefore interested in receiving submissions concerning the amount of the bond that should be imposed if a remedy is ordered.

Written Submissions:The parties to the investigation are requested to file written submissions on the issues identified in this notice. Parties to the investigation, interested government agencies, and any other interested persons are encouraged to file written submissions on the issues of remedy, the public interest, and bonding, as well as respond to the questions posed herein relating to remedy and the public interest. Such submissions should address the recommended determination by the ALJ on remedy and bonding. Complainant and IA are also requested to submit proposed remedial orders for the Commission's consideration.

Complainant is also requested to state the dates that the '853, '022 and '652 patents expire and the HTSUS numbers under which the accused products are imported. The written submissions and proposed remedial orders must be filed no later than close of business on Wednesday, November 28, 2012. Reply submissions must be filed no later than the close of business on Wednesday, December 5, 2012. No further submissions on these issues will be permitted unless otherwise ordered by the Commission.

Persons filing written submissions must file the original document electronically on or before the deadlines stated above and submit 8 true paper copies to the Office of the Secretary by noon the next day pursuant to section210.4(f) of the Commission's Rules of Practice and Procedure (19 CFR 210.4(f)). Submissions should refer to the investigation number (“Inv. No. 337-TA-804”) in a prominent place on the cover page and/or the first page. (SeeHandbook for Electronic Filing Procedures,http://www.usitc.gov/secretary/fed_reg_notices/rules/handbook_on_electronic_filing.pdf). Persons with questions regarding filing should contact the Secretary (202-205-2000).

Any person desiring to submit a document to the Commission in confidence must request confidential treatment. All such requests should be directed to the Secretary to the Commission and must include a full statement of the reasons why the Commission should grant such treatment.See19 CFR 201.6. Documents for which confidential treatment by the Commission is properly sought will be treated accordingly. A redacted non-confidential version of the document must also be filed simultaneously with the any confidential filing. All non-confidential written submissions will be available for public inspection at the Office of the Secretary and on EDIS.

The authority for the Commission's determination is contained in section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337), and in sections 210.42-46 and 210.50 of the Commission's Rules of Practice and Procedure (19 CFR 210.42-46 and 210.50).

The Commission instituted this investigation on October 13, 2011, based on a complaint filed by Openwave Systems Inc. of Redwood City, California (“Openwave”). 76 FR63657-58 (Oct. 13, 2011). The complaint alleged violations of section 337 of the Tariff Act of 1930, as amended 19 U.S.C. 1337, in the importation into the United States, the sale for importation, and the sale within the United States after importation of certain devices for mobile data communication by reason of infringement of certain claims of United States Patent Nos. 6,233,608; 6,289,212; 6,405,037; 6,430,409; and 6,625,447. The notice of investigation named Research In Motion Ltd. of Ontario, Canada; Research In Motion Corp. of Irving, Texas; and Apple Inc. of Cupertino, California as respondents. During pendency of the investigation, Openwave changed its name to Unwired Planet, Inc.

On October 12, 2012, Openwave filed an unopposed motion to terminate the investigation in its entirety based upon withdrawal of the complaint. No responses to the motion were filed.

That same day, the ALJ issued the subject ID (Order No. 60) terminating the investigation. The ALJ found that the motion complied with the requirements of Commission Rule 210.21(a) (19 CFR 210.21(a)) and that no extraordinary circumstances prohibited granting the motion. None of the parties petitioned for review of the ID. The Commission has determined not to review the ID.

The Commission notes that in Order No. 57 the ALJ denied a request by the parties to terminate the investigation prior to the evidentiary hearing based upon Openwave's stipulation that, under the ALJ's claim construction, the accused products do not infringe the asserted claims. The Commission clarifies that it encourages early disposition of investigations on dispositive issues, when possible, before the evidentiary hearing in the interest of mitigating litigation costs and conserving resources of the parties and the Commission.See, e.g., Certain Drill Bits and Products Containing the Same,Inv. No. 337-TA-844, 77FR51825-26 (Aug. 27, 2012) (affirming grant of summary determination of no importation on the merits and terminating investigation).

The authority for the Commission's determination is contained in section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337), and in section 210.42 of the Commission's Rules of Practice and Procedure (19 CFR 210.42).

The Commission instituted this enforcement proceeding on September 6, 2011, based on an enforcement complaint filed by Richtek Technology Corp. of Hsinchu, Taiwan and Richtek USA, Inc. of San Jose, California (collectively “Richtek”). 76FR55109-10. The complaint alleged violations of the August 13, 2010 consent orders issued in the underlying investigation by the continued practice of prohibited activities such as importing, offering for sale, and selling for importation into the United States DC-DC controllers or products containing the same that infringe one or more of U.S. Patent Nos. 7,315,190 (“the '190 patent”); 6,414,470 (“the '470 patent”); and 7,132,717 (“the '717 patent”); or that contain or use Richtek's asserted trade secrets. The Commission's notice of institution of enforcement proceedings named uPI and Sapphire Technology Limited (“Sapphire”) of Shatin, Hong Kong as respondents.

On April 11, 2012, the Commission issued notice of its determination not to review the ALJ's ID terminating the investigation as to Sapphire based on a settlement agreement.

On June 8, 2012, the ALJ issued his EID finding a violation of the Consent Order by uPI. He found importation and sale of accused products that infringe all asserted claims of the patents at issue, and importation and sale of formerly accused products that contain or use Richtek's asserted trade secrets. He found that uPI's products developed after the consent order issued did not misappropriate Richtek's asserted trade secrets. Also, he recommended enforcement measures for uPI's violation that included the following: (1) Modifying the Consent Order to clarify that the Order applies (and has always applied) to all uPI affiliates, past, present, or future; and (2) imposing a civil penalty of $750,000 against uPI. On June 25, 2012, uPI and Richtek each filed a petition for review of the EID; on July 3, 2012, Richtek, uPI, and the Commission investigative attorney (“IA”) each filed a response to the opposing party's petition.

On August 9, 2012, the Commission issued notice of its determination to review the following: (1) The ALJ's finding of infringement of the '470 patent; (2) the ALJ's finding of infringement of the '190 patent; and (3) the ALJ's determination that uPI violated the Consent Order on 75 days. 77 FR 49022-23 (Aug. 15, 2012). The determinations made in the EID that were not reviewed became final determinations of the Commission by operation of rule.See19 CFR 210.75(b)(3). The Commission also requested the parties to respond to certain questions concerning the issues under review and requested written submissions on the issues of remedy, the public interest, and bonding from the parties and interested non-parties.

On August 23 and 30, 2012, respectively, complainant Richtek, respondent uPI, and the IA each filed a brief and a reply brief on the issues for which the Commission requested written submissions.

Having reviewed the record in this investigation, including the EID and the parties' written submissions, the Commission has determined to affirm-in-part, reverse-in-part, modify-in-part, and vacate-in-part the EID's findings under review. Specifically, the Commission has affirmed the ALJ's finding that uPI violated the consent order, and determined that the number of violation days is 62 days. The Commission has also affirmed the ALJ's finding of direct infringement of claims 1-11 and 26-27 of the '190 patent with respect to uPI's formerly accused products. In addition, the Commission has vacated the ALJ's finding that uPI does not induce infringement of claims 1-11 and 26-27 of the '190 patent.

The Commission has also determined to reverse the ALJ's finding that claims 29 and 34 of the '470 patent are directly infringed by respondent uPI's accused DC-DC controllers and products containing the same, and has determined that Richtek waived any allegations of indirect infringement with respect to the '470 patent. This action results in a finding of no violation of the Consent Order with respect to the '470 patent.

Further, the Commission has vacated as moot the portion of the EID relating to the '717 patent because the asserted claims 1-3 and 6-9 have been cancelled following issuance of Ex Parte Reexamination Certificate No. U.S. 7,132,717 C1 on October 3, 2012.

Further, the Commission has made its determination on the issues of remedy, the public interest, and bonding. The Commission has determined to impose a civil penalty of $620,000 on respondent uPI for violation of the Consent Order on 62 days. The Commission has also determined to modify the Consent Order to clarify that the consent order applies (and has always applied) to all uPI affiliates, past, present, or future. Further, the Commission has modified the Consent Order to remove the portions relating to the '717 patent based on issuance of the reexamination certificate.

The Commission has terminated the enforcement proceeding. The authority for the Commission's determination is contained in section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337, and in section 210.75 of the Commission's Rules of Practice and Procedure, 19 CFR 210.75.

Attachment to the labor force, usually measured as amount of past wages earned, is used to determine eligibility for state unemployment compensation programs. The data in the ETA 218, Benefit Rights and Experience Report, includes numbers of individuals who were and were not monetarily eligible, those eligible for the maximum benefits, those eligible based on classification by potential duration categories, and those exhausting their full entitlement as classified by actual duration categories. These data are used by the National Office in solvency studies, cost estimating and modeling, and assessment of state benefit formulas.

The Department is particularly interested in comments which:

• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;

• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;

• Enhance the quality, utility, and clarity of the information to be collected; and

• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submissions of responses.

Type of Review:Extension without changes.

Title:Benefit Rights and Experience Report.

OMB Number:1205-0177.

Affected Public:State Workforce Agencies.

Total Annual Burden Cost for Respondents:There is no burden cost for respondents.

In accordance with Executive Order 13506 establishing the White House Council on Women and Girls, the Women@NASA Program was created to provide mentoring opportunities in science, technology, engineering, and math (STEM) disciplines for female students. To support the White HouseEducate To Innovatecampaign, the Women@NASA Program was expanded to offer an equivalent program for young males called NASA Building Outstanding Young Scientists (BOYS). Both programs are designed to engage underrepresented rising 5th-8th grade students in a one-on-one virtual mentoring experience, under parental/adult supervision, one hour per week for a five-week period. Participants will be selected from a diverse set of geographical locations across the USA.

This clearance request pertains to the collection of information associated with the administration of electronic application forms, parental consent forms, and pre and post parent/student surveys. Surveys are designed to gauge participant interest in STEM subjects before and after the virtual mentoring experience, measure the program impact, access the effectiveness of the virtual mentoring approach and identify opportunities for improvement.

Electronic.

Title:NASA Girls and Boys Virtual Mentoring Program.

OMB Number:2700-XXXX.

Type of review:New Information Collection.

Affected Public:Individuals or households.

Estimated Number of Respondents:4,800.

Estimated Time per Response:Variable.

Estimated Total Annual Burden Hours:2,600.

Estimated Total Annual Cost:$170,000.

Comments are invited on: (1) Whether the proposed collection of information is necessary for the proper performance of the functions of NASA, including whether the information collected has practical utility; (2) the accuracy of NASA's estimate of the burden (including hours and cost) of the proposed collection of information; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including automated collection techniques or the use of other forms of information technology.

Comments submitted in response to this notice will be summarized and included in the request for OMB approval of this information collection. They will also become a matter of public record.